4. Restructuring and Asset Impairments

Cadmium Telluride Module Manufacturing and Corporate Restructuring

In November 2016, our board of directors approved a set of initiatives intended to accelerate our transition to Series 6 module manufacturing and restructure our operations to reduce costs and better align the organization with our long-term strategic plans. Accordingly, we expect to upgrade and replace our legacy manufacturing fleet over the next several years with Series 6 manufacturing equipment, thereby enabling the production of solar modules with a larger form factor, better product attributes, and a lower cost structure.

As part of these initiatives, we incurred net charges of $41.8 million during the year ended December 31, 2017, which included (i) $27.6 million of charges, primarily related to net losses on the disposition of previously impaired Series 4 and Series 5 manufacturing equipment, (ii) $7.6 million of severance benefits to terminated employees, and (iii) $6.7 million of net miscellaneous charges, primarily related to contract terminations, the write-off of operating supplies, and other Series 4 manufacturing exit costs.

The commencement of this operational transition in November 2016 represented an expectation that certain of our module manufacturing assets would be sold or otherwise disposed of significantly before the end of their previously estimated useful lives. As a result, we compared the undiscounted future cash flows of our module manufacturing assets to the carrying value of the asset group and determined that the group was not recoverable. Accordingly, we measured the fair value of the asset group using a combination of income and cost valuation techniques and recorded impairment losses of $640.3 million for the year ended December 31, 2016. Such impairment losses included $120.7 million of charges related to stored Series 4 manufacturing equipment originally intended for use in previously planned manufacturing capacity expansions. During the year ended December 31, 2016, we also incurred charges of $14.1 million for severance benefits to terminated employees as we substantially reduced our workforce at our domestic and international facilities, including reductions in administrative and other staff, and $8.1 million for the closure of ancillary foreign operations, the write-off of operating supplies, and other miscellaneous charges.

Substantially all amounts associated with these restructuring and asset impairment charges related to our modules segment and were classified as “Restructuring and asset impairments” on the consolidated statements of operations. The following table summarizes our CdTe module manufacturing and corporate restructuring activity for the years ended December 31, 2017 and 2016 (in thousands):



	Asset Impairments			Severance			Other			Total
Charges to income	$	640,340		$	14,056		$	8,111		$	662,507
Cash payments	—			(6,191		)	(151		)	(6,342		)
Non-cash amounts	(640,340		)	—			(7,410		)	(647,750		)
Ending liability balance at December 31, 2016	—			7,865			550			8,415
Charges to income	27,606			7,577			6,664			41,847
Cash payments	—			(14,986		)	(6,442		)	(21,428		)
Non-cash amounts	(27,606		)	—			(772		)	(28,378		)
Ending liability balance at December 31, 2017	$	—		$	456		$	—		$	456

Crystalline Silicon Module Manufacturing Restructuring

In June 2016, our executive management elected to reallocate our crystalline silicon module production capacity to support next generation CdTe module offerings. As a result, we ended production of our crystalline silicon modules to focus on our core CdTe module technology and utility-scale PV solar power systems. The majority of our crystalline silicon module manufacturing associates were expected to be redeployed in other manufacturing operations.

In connection with these restructuring activities, we incurred charges of $81.4 million during the year ended December 31, 2016, which included (i) $35.9 million of impairment charges related to certain crystalline silicon module manufacturing equipment considered abandoned for accounting purposes, (ii) $35.8 million of impairment charges for developed technology intangible assets associated with our crystalline silicon module technology, (iii) $8.4 million of miscellaneous charges related to certain contract manufacturing agreements and the write-off of operating supplies, and (iv) $1.3 million of charges for severance benefits to terminated employees. All amounts associated with these charges related to our modules segment and were classified as “Restructuring and asset impairments” on the consolidated statements of operations.

Other Restructuring

During the year ended December 31, 2012, we recognized a liability for the expected repayment of certain customs tax benefits as part of a prior restructuring activity. In December 2017, we reversed this liability as a result of meeting certain investment certificate criteria associated with the commencement of operations at our previously announced manufacturing plant in Vietnam and recorded a $4.7 million benefit to “Restructuring and asset impairments.”