NOTE 4—RESTRUCTURING

In 2014 we completed a major review of our cost structure, and implemented a plan, which we referred to as the McDermott Profitability Initiative (the “MPI”), to increase our profitability and flexibility through reduced fixed and variable costs. The plan included personnel reductions, centralization of operational activities, other cost reduction initiatives and certain asset impairments.

In addition, the Company continued its efforts to improve its cost structure by initiating the Additional Overhead Reduction program (“AOR”) during fourth quarter 2015. AOR actions are expected to be substantially complete in the first quarter of 2016 and include personnel reductions affecting direct operating expense and SG&A. Under AOR, we expect to incur approximately $5 million in restructuring costs.

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.

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 restructuring costs incurred in 2015, 2014 and 2013, and costs expected to be incurred in the future, by major type of cost and by segment.

	Year ended December 31,							Incurred From inception to		Estimate of Remaining amounts
	2015		2014			2013		December 31, 2015		to be incurred		Total
	(In thousands)
Americas Restructuring
Impairments and write offs	$	-	$	(1,240	)	$	14,163	$	12,923	$	-	$	12,923
Severance and other personnel-related costs		601		3,735			9,645		13,981		-		13,981
Morgan City environmental accrual		-		-			5,925		5,925		-		5,925
Morgan City yard-related expenses		1,707		6,675			4,175		12,557		-		12,557
Other		-		-			158		158		-		158
		2,308		9,170			34,066		45,544		-		45,544

Corporate Restructuring
Severance and other personnel-related costs		-		938			1,661		2,599		-		2,599
Legal and other advisor fees		-		3,204			-		3,204		-		3,204
Other		-		798			-		798		-		798
		-		4,940			1,661		6,601		-		6,601
MPI
Severance and other personnel-related costs
AEA		6,646		-			-		6,646		-		6,646
MEA		856		-			-		856		-		856
ASA		6,104		-			-		6,104		2,100		8,204
Corporate and other		1,611		-			-		1,611		-		1,611
Asset impairment and disposal
ASA		7,471		-			-		7,471		-		7,471
Legal and other advisor fees
Corporate		7,414		4,003			-		11,417		810		12,227
Other
AEA		692		-			-		692		-		692
ASA		5,934		-			-		5,934		3,090		9,024
Corporate and other		983		-			-		983		-		983
		37,711		4,003			-		41,714		6,000		47,714
AOR
Severance and other personnel-related costs
AEA		-		-			-		-		1,600		1,600
ASA		-		-			-		-		2,000		2,000
Corporate		-		-			-		-		600		600
Legal and other advisor fees
Corporate		800		-			-		800		800		1,600
		800		-			-		800		5,000		5,800

Total	$	40,819	$	18,113		$	35,727	$	94,659	$	11,000	$	105,659

By segment
AEA	$	9,646	$	9,170		$	34,066	$	52,882	$	1,600	$	54,482
MEA		856		-			-		856		-		856
ASA		19,509		-			-		19,509		7,190		26,699
Corporate		10,808		8,943			1,661		21,412		2,210		23,622
Total	$	40,819	$	18,113		$	35,727	$	94,659	$	11,000	$	105,659

In 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/ Reversals			December 31, 2015
	(In thousands)
Morgan City environmental accrual	$	3,675	$	-	$	(2,173	)	$	1,502
Morgan City yard-related expenses and other		373		542		(875	)		40
Restructuring related accruals		-		9,124		(6,288	)		2,836
Total	$	4,048	$	9,666	$	(9,336	)	$	4,378