Restructuring

During the fourth quarter of 2011, we announced the approval of projects to restructure our manufacturing operations to increase efficiency and lower our cost of manufacturing. We began implementing these projects in the fourth quarter of 2011, and we expect to substantially complete these projects by the end of 2013.

Certain projects are subject to a variety of labor and employment laws, rules, and regulations, which could result in a delay in implementing projects at some locations. Real estate market conditions may impact the timing of our ability to sell some of the manufacturing facilities we have designated for closure and disposal. This may delay the completion of the restructuring projects beyond 2013.

The total expected restructuring costs as of June 30, 2012 were $89.0 million, which is an increase of approximately $3.5 million from the total expected costs at December 31, 2011. This increase was primarily the result of an environmental remediation obligation related to a manufacturing site and the related testing and monitoring that will be required subsequent to the remediation. In addition, asset impairments and loss on disposal associated with the sale of three non-core businesses during 2012 contributed $1.1 million to the increase in expected restructuring costs.

The total expected restructuring costs, the costs recognized in prior periods, the restructuring costs recognized during the six months ended June 30, 2012, and the remaining restructuring costs as of June 30, 2012 are as follows:



	Total Expected Costs at June 30, 2012		Costs Recognized in Prior Periods		Costs Recognized During the Six Months Ended June 30, 2012		Remaining Costs to be Recognized at June 30, 2012
	(in thousands)
Employee severance costs	$	52,617	$	42,530	$	3,880	$	6,207
Asset impairments	28,437		25,144		1,487		1,806
Other restructuring costs	7,949		408		3,142		4,399
Total	$	89,003	$	68,082	$	8,509	$	12,412

Segments:
Energy	$	62,292	$	51,873	$	3,754	$	6,665
Water	21,240		15,321		4,120		1,799
Corporate unallocated	5,471		888		635		3,948
Total	$	89,003	$	68,082	$	8,509	$	12,412

Other restructuring costs includes expenses to exit the facilities once the operations in those facilities have ceased. Costs associated with restructuring activities are generally presented as restructuring expense in the Consolidated Statements of Operations, except for certain costs associated with inventory write-downs, which are classified within cost of revenues, and accelerated depreciation expense, which is recognized according to the use of the asset.

The following table summarizes the activity within the restructuring related balance sheet accounts during the six months ended June 30, 2012:



	Accrued Employee Severance			Asset Impairments & Net Loss (Gain) on Sale or Disposal			Other Accrued Costs			Total
	(in thousands)
Beginning balance, January 1, 2012	$	28,168		$	—		$	399		$	28,567
Costs incurred and charged to expense	3,880			1,487			3,142			8,509
Cash payments	(8,772		)	—			(326		)	(9,098		)
Non-cash items	—			(1,487		)	—			(1,487		)
Effect of change in exchange rates	(450		)	—			251			(199		)
Ending balance, June 30, 2012	$	22,826		$	—		$	3,466		$	26,292

Asset impairments are determined at the asset group level. There was an asset impairment of approximately $900,000 recognized during the six months ended June 30, 2012 related to the valuation of a property that was reclassified from held for sale to held and used.

The current and long-term portions of the restructuring related liability balance as of June 30, 2012 were $23.7 million and $2.6 million, which are classified within other current liabilities and other long-term liabilities, respectively, on the Consolidated Balance Sheets.

There were no significant long-lived assets that were recorded at fair value at June 30, 2012 and 2011, respectively.

As a result of our restructuring activities, we anticipate annualized savings in 2012 of approximately $15 million, primarily in the second half of the year. We expect to achieve annualized cost savings of approximately $30 million by the end of 2013. Revenues and net operating income from the activities we will exit are not material to our operating segments or consolidated results.