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 (the “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 three and six months ended June 30, 2015, expenses incurred under the MPI totaled $13 million and $21.5 million, respectively.

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 three and six months ended June 30, 2015, expenses incurred under the Americas restructuring totaled $2.4 million and $4.2 million, respectively.

We completed a Corporate restructuring during 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 that became effective during the fourth quarter of 2013.

The following table presents amounts incurred during the three and six months ended June 30, 2015, as well as amounts incurred from the inception of our restructuring efforts up to June 30, 2015 and amounts expected to be incurred in the future by major type of cost and by segment.

	Incurred in the three months ended June 30, 2015		Incurred in the three months ended June 30, 2014			Incurred in the six months ended June 30, 2015		Incurred in the six months ended June 30, 2014			Incurred from inception to June 30, 2015		Estimate of remaining amounts to be incurred		Total
	(In thousands)
Americas Restructuring
Impairments and write offs	$	-	$	(1,340	)	$	-	$	(1,340	)	$	12,923	$	-	$	12,923
Severance and other personnel-related costs		1,621		1,225			2,502		3,254			15,882		-		15,882
Morgan City environmental reserve		-		-			-		-			5,925		-		5,925
Morgan City yard-related expenses		820		1,047			1,734		2,649			12,584		707		13,291
Other		-		-			-		-			158		-		158
		2,441		932			4,236		4,563			47,472		707		48,179

Corporate Restructuring
Severance and other personnel-related costs		-		-			-		908			2,599		-		2,599
Legal and other advisor fees		-		331			-		1,917			3,204		-		3,204
Other		-		-			-		-			798		-		798
		-		331			-		2,825			6,601		-		6,601

MPI
Severance and other personnel-related costs
AEA		898		-			2,150		-			2,150		6,379		8,529
MEA		304		-			911		-			911		500		1,411
ASA		1,786		-			3,586		-			3,586		1,100		4,686
Corporate and other		400		-			1,119		-			1,119		5,000		6,119
Asset impairment and disposal							-					-
ASA		3,303		-			7,471		-			7,471				7,471
Legal and other advisor fees							-					-
Corporate		2,732		-			2,780		-			6,783		2,200		8,983
Other							-					-				-
ASA		3,527		-			3,527		-			3,527		-		3,527
Corporate and other		-		-			-		-			-		948		948
		12,950		-			21,544		-			25,547		16,127		41,674

Total	$	15,391	$	1,263		$	25,780	$	7,388		$	79,620	$	16,834	$	96,454

In the first quarter of 2015, we reclassified certain MPI-related legal and other advisory fees of $4 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			June 30, 2015
	(In thousands)
Morgan City environmental reserve	$	3,675	$	-	$	(1,374	)	$	2,301
Morgan City yard-related expenses and other		373		338		(283	)		428
MPI-related accruals		-		3,080		-			3,080

Total	$	4,048	$	3,418	$	(1,657	)	$	5,809