Note 11. Special Charges

In the third quarter of 2016, we initiated a plan to restructure and realign our businesses by implementing headcount reductions, facility consolidations and other actions in order to improve overall operating efficiency across Textron. In connection with this plan, we recorded special charges of $12 million in the second quarter of 2017 and $27 million in the first half of 2017. Since the inception of the 2016 plan, we have incurred a total of $76 million of severance costs, $59 million of asset impairments and $15 million in contract terminations and other costs. Of these amounts, $61 million was incurred at Textron Systems, $57 million at Textron Aviation, $26 million at Industrial and $6 million at Bell and Corporate. This plan is largely complete with additional pre-tax charges in the range of $5 million to $20 million expected in the second half of 2017, primarily related to contract terminations, facility consolidation and relocation costs. The total headcount reduction under this plan is expected to be approximately 2,000 positions, representing approximately 5% of our workforce.

In connection with the acquisition of Arctic Cat, as discussed in Note 2, we initiated a restructuring plan in the first quarter of 2017 to integrate this business into our Textron Specialized Vehicles business within the Industrial segment to reduce operating redundancies and maximize efficiencies. As a result of this plan, we recorded $19 million of restructuring charges in the first quarter of 2017, largely related to change-of-control provisions. In addition, we recorded $4 million of acquisition-related transaction and integration costs in the first half of 2017. We expect to complete this plan in the second half of 2017 and estimate that we will incur total special charges of approximately $30 million related to Arctic Cat.

Special charges recorded in the second quarter and first half of 2017 for both of these plans are as follows:

(In millions)		Severance Costs		Asset Impairments		Contract Terminations and Other		Acquisition Integration/ Transaction Costs		Total Special Charges
For the three months ended July 1, 2017

Industrial	$	—	$	—	$	3	$	1	$	4
Textron Aviation		4		7		—		—		11
Textron Systems		1		4		(7)		—		(2)

	$	5	$	11	$	(4)	$	1	$	13

For the six months ended July 1, 2017

Industrial	$	19	$	—	$	6	$	4	$	29
Textron Aviation		5		17		—		—		22
Textron Systems		1		4		(6)		—		(1)

	$	25	$	21	$	—	$	4	$	50


An analysis of our restructuring reserve activity for both plans in the first half of 2017 is summarized below:

(In millions)						Severance Costs		Contract Terminations and Other		Total

Balance at December 31, 2016					$	50	$	13	$	63
Provision for Arctic Cat plan						19		—		19
Provision for 2016 plan						6		8		14
Reversals*						—		(8)		(8)
Cash paid						(59)		(9)		(68)


Balance at July 1, 2017					$	16	$	4	$	20

*Primarily related to favorable contract negotiations in the Textron Systems segment.

We expect cash payments for both restructuring plans to be approximately $40 million in the second half of 2017. Severance costs generally are paid on a lump-sum basis and include outplacement costs, which are paid in accordance with normal payment terms.