NOTE 6—RESTRUCTURING

In 2014 we completed a major review of our cost structure, and we are implementing a plan, which we refer to as the McDermott Profitability Initiative (“MPI”), to increase our profitability and flexibility through reduced fixed and variable costs. The plan includes headcount reductions, centralization of operational activities, other cost reduction initiatives and certain asset impairments. For the quarter ended March 31, 2015, expenses incurred under the MPI totaled $8.6 million.

During 2013 and 2014, we implemented a restructuring of our Americas operations, which involved our Morgan City, Louisiana, Houston, Texas, New Orleans, Louisiana and some Brazil locations. The restructuring involved, among other things, reductions of management, administrative, fabrication and engineering personnel, and the discontinued utilization of the Morgan City facility. For the quarter ended March 31, 2015, expenses incurred under the Americas restructuring totaled $1.8 million.

We completed a Corporate restructuring by the end of 2014. Costs associated with our Corporate restructuring activities primarily included severance, relocation and other personnel-related costs and costs for advisors, as well as costs for certain executive management changes which became effective during the fourth quarter of 2013.

The following table presents amounts incurred during the three months ended March 31, 2015 and 2014, as well as amounts incurred from the inception of our restructuring efforts up to March 31, 2015 and amounts expected to be incurred in the future by major type of cost and by segment.

	Incurred in the three months ended March 31, 2015		Incurred in the three months ended March 31, 2014		Incurred from inception to March 31, 2015		Estimate of remaining amounts to be incurred		Total
	(In thousands)
Americas Restructuring
Impairments and write offs	$	-	$	-	$	12,923	$	-	$	12,923
Severance and other personnel-related costs		881		2,029		14,261		-		14,261
Morgan City environmental reserve		-		-		5,925		-		5,925
Morgan City yard-related expenses		914		1,602		11,764		4,002		15,766
Other		-		-		158		-		158
	$	1,795	$	3,631	$	45,031	$	4,002	$	49,033

Corporate Restructuring
Severance and other personnel-related costs	$	-	$	908	$	2,599	$	-	$	2,599
Legal and other advisor fees		-		1,586		3,204		-		3,204
Other		-		-		798		-		798
	$	-	$	2,494	$	6,601	$	-	$	6,601

MPI
Severance and other personnel-related costs
AEA segment	$	1,252	$	-	$	1,252	$	3,877	$	5,129
MEA segment		607		-		607		3,300		3,907
ASA segment		1,800		-		1,800		5,329		7,129
Corporate and other		719		-		719		6,967		7,686
Asset impairment
ASA segment		4,168		-		4,168		-		4,168
Legal and other advisor fees
Corporate		48		-		4,051		-		4,051
	$	8,594	$	-	$	12,597	$	19,473	$	32,070

Total	$	10,389	$	6,125	$	64,229	$	23,475	$	87,704

In the first quarter of 2015, we reclassified certain MPI-related legal and other advisory fees of $4.0 million incurred in 2014 from Corporate restructuring costs to MPI costs.

The following table presents a roll forward of accrued liabilities associated with our restructuring activities:

	December 31, 2014		Accruals		Payments			March 31, 2015
	(In thousands)
Morgan City environmental reserve	$	3,675	$	-	$	(715	)	$	2,960
Morgan City yard-related expenses and other		373		833		(141	)		1,065
Total	$	4,048	$	833	$	(856	)	$	4,025