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Realignment and Transformation Programs | 3 Months Ended
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Mar. 31, 2020
Restructuring and Related Activities [Abstract] |
Realignment and Transformation Programs | Realignment and Transformation Programs In the second quarter of 2018, we launched and committed resources to our Flowserve 2.0 Transformation ("Flowserve 2.0 Transformation"), a program designed to transform our business model to drive operational excellence, reduce complexity, accelerate growth, improve organizational health and better leverage our existing global platform. For the three months ended March 31, 2020 and 2019, we incurred Flowserve 2.0 Transformation related expenses of $5.6 million and $8.4 million, respectively. The Flowserve 2.0 Transformation expenses incurred primarily consist of professional services, project management and related travel costs recorded in selling, general and administrative ("SG&A") expenses. In 2015, we initiated realignment programs to better align costs and improve long-term efficiency, including manufacturing optimization through the consolidation of facilities, reduction in our workforce and divestiture of certain non-strategic assets (“Realignment Programs”). The Realignment Programs consist of both restructuring and non-restructuring charges. Restructuring charges represent costs associated with the relocation or reorganization of certain business activities and facility closures and include related severance costs. Non-restructuring charges are primarily employee severance associated with workforce reductions to reduce redundancies. Expenses are primarily reported in cost of sales ("COS") or SG&A, as applicable, in our condensed consolidated statements of income. These Realignment Programs have been substantially completed as of March 31, 2020 and we have incurred charges of $362.4 million to date. Generally, the aforementioned charges will be paid in cash, except for asset write-downs, which are non-cash charges. The following is a summary of total charges, net of adjustments, related to the Realignment and Flowserve 2.0 Transformation program charges:
| Three Months Ended March 31, 2020 |  |  |  |  |  |  |  |
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | Eliminations and All Other |  | Consolidated Total
Realignment Charges |  |  |  |  |  |  |  |  |
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 1,680 |  |  | $ | (105) |  |  | $ | 1,575 |  |  | $ | — |  |  | $ | 1,575 |
SG&A | 104 |  |  | 10 |  |  | 114 |  |  | (16) |  |  | 98 |
| $ | 1,784 |  |  | $ | (95) |  |  | $ | 1,689 |  |  | $ | (16) |  |  | $ | 1,673 |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |  |  |  |
COS | $ | 126 |  |  | $ | 7,759 |  |  | $ | 7,885 |  |  | $ | — |  |  | $ | 7,885 |
SG&A | 485 |  |  | 50 |  |  | 535 |  |  | 645 |  |  | 1,180 |
| $ | 611 |  |  | $ | 7,809 |  |  | $ | 8,420 |  |  | $ | 645 |  |  | $ | 9,065 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 1,806 |  |  | $ | 7,654 |  |  | $ | 9,460 |  |  | $ | — |  |  | $ | 9,460 |
SG&A | 589 |  |  | 60 |  |  | 649 |  |  | 629 |  |  | $ | 1,278 |
Total | $ | 2,395 |  |  | $ | 7,714 |  |  | $ | 10,109 |  |  | $ | 629 |  |  | $ | 10,738 |
Transformation Charges |  |  |  |  |  |  |  |  |
SG&A | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5,643 |  |  | $ | 5,643 |
| $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5,643 |  |  | $ | 5,643 |
Total Realignment and Transformation Charges |  |  |  |  |  |  |  |  |
COS | $ | 1,806 |  |  | $ | 7,654 |  |  | $ | 9,460 |  |  | $ | — |  |  | $ | 9,460 |
SG&A | 589 |  |  | 60 |  |  | 649 |  |  | 6,272 |  |  | 6,921 |
Total | $ | 2,395 |  |  | $ | 7,714 |  |  | $ | 10,109 |  |  | $ | 6,272 |  |  | $ | 16,381 |
| Three Months Ended March 31, 2019 |  |  |  |  |  |  |  |
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | Eliminations and All Other |  | Consolidated Total
Realignment Charges |  |  |  |  |  |  |  |  |
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 2,622 |  |  | $ | 456 |  |  | $ | 3,078 |  |  | $ | — |  |  | $ | 3,078 |
SG&A(1) | (18,471) |  |  | 338 |  |  | (18,133) |  |  | — |  |  | (18,133) |
| $ | (15,849) |  |  | $ | 794 |  |  | $ | (15,055) |  |  | $ | — |  |  | $ | (15,055) |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |  |  |  |
COS | $ | 2,396 |  |  | $ | 26 |  |  | $ | 2,422 |  |  | $ | — |  |  | $ | 2,422 |
SG&A | 174 |  |  | — |  |  | 174 |  |  | 529 |  |  | 703 |
| $ | 2,570 |  |  | $ | 26 |  |  | $ | 2,596 |  |  | $ | 529 |  |  | $ | 3,125 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 5,018 |  |  | $ | 482 |  |  | $ | 5,500 |  |  | $ | — |  |  | $ | 5,500 |
SG&A | (18,297) |  |  | 338 |  |  | (17,959) |  |  | 529 |  |  | $ | (17,430) |
Total | $ | (13,279) |  |  | $ | 820 |  |  | $ | (12,459) |  |  | $ | 529 |  |  | $ | (11,930) |
Transformation Charges |  |  |  |  |  |  |  |  |
SG&A | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8,413 |  |  | $ | 8,413 |
| $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8,413 |  |  | $ | 8,413 |
Total Realignment and Transformation Charges |  |  |  |  |  |  |  |  |
COS | $ | 5,018 |  |  | $ | 482 |  |  | $ | 5,500 |  |  | $ | — |  |  | $ | 5,500 |
SG&A | (18,297) |  |  | $ | 338 |  |  | (17,959) |  |  | 8,942 |  |  | (9,017) |
Total | $ | (13,279) |  |  | $ | 820 |  |  | $ | (12,459) |  |  | $ | 8,942 |  |  | $ | (3,517) |
_______________________________ (1) Primarily consists of gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs. The following is a summary of total inception to date charges, net of adjustments, related to the Realignment Programs:
| Inception to Date |  |  |  |  |  |  |  |
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | Eliminations and All Other |  | Consolidated Total
Realignment Charges |  |  |  |  |  |  |  |  |
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 111,871 |  |  | $ | 29,573 |  |  | $ | 141,444 |  |  | $ | — |  |  | $ | 141,444 |
SG&A | 20,404 |  |  | 10,021 |  |  | 30,425 |  |  | 301 |  |  | 30,726 |
Income tax expense(1) | 14,700 |  |  | 1,800 |  |  | 16,500 |  |  | — |  |  | 16,500 |
| $ | 146,975 |  |  | $ | 41,394 |  |  | $ | 188,369 |  |  | $ | 301 |  |  | $ | 188,670 |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |  |  |  |
COS | $ | 80,048 |  |  | $ | 23,219 |  |  | $ | 103,267 |  |  | $ | 263 |  |  | $ | 103,530 |
SG&A(2) | 41,893 |  |  | 7,780 |  |  | 49,673 |  |  | 20,575 |  |  | 70,248 |
| $ | 121,941 |  |  | $ | 30,999 |  |  | $ | 152,940 |  |  | $ | 20,838 |  |  | $ | 173,778 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 191,919 |  |  | $ | 52,792 |  |  | $ | 244,711 |  |  | $ | 263 |  |  | $ | 244,974 |
SG&A(2) | 62,297 |  |  | 17,801 |  |  | 80,098 |  |  | 20,876 |  |  | 100,974 |
Income tax expense(1) | 14,700 |  |  | 1,800 |  |  | 16,500 |  |  | — |  |  | 16,500 |
Total | $ | 268,916 |  |  | $ | 72,393 |  |  | $ | 341,309 |  |  | $ | 21,139 |  |  | $ | 362,448 |
____________________________ (1) Income tax expense includes exit taxes as well as non-deductible costs. (2) Includes gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs. Restructuring charges represent costs associated with the relocation or reorganization of certain business activities and facility closures and include costs related to employee severance at closed facilities, contract termination costs, asset write-downs and other costs. Severance costs primarily include costs associated with involuntary termination benefits. Contract termination costs include costs related to the termination of operating leases or other contract termination costs. Asset write-downs include accelerated depreciation of fixed assets, accelerated amortization of intangible assets, divestiture of certain non-strategic assets and inventory write-downs. Other costs generally include costs related to employee relocation, asset relocation, vacant facility costs (i.e., taxes and insurance) and other charges. The following is a summary of restructuring charges, net of adjustments, for the Realignment Programs:
| Three Months Ended March 31, 2020 |  |  |  |  |  |  |  |
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs/ (Gains) |  | Other |  | Total
COS | $ | 1,683 |  |  | $ | — |  |  | $ | (3) |  |  | $ | (105) |  |  | $ | 1,575 |
SG&A | 139 |  |  | — |  |  | (3) |  |  | (38) |  |  | 98 |
Total | $ | 1,822 |  |  | $ | — |  |  | $ | (6) |  |  | $ | (143) |  |  | $ | 1,673 |
| Three Months Ended March 31, 2019 |  |  |  |  |  |  |  |
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs |  | Other |  | Total
COS | $ | 1,679 |  |  | $ | 39 |  |  | $ | 233 |  |  | $ | 1,127 |  |  | $ | 3,078 |
SG&A(1) | 316 |  |  | — |  |  | (18,502) |  |  | 53 |  |  | (18,133) |
Total | $ | 1,995 |  |  | $ | 39 |  |  | $ | (18,269) |  |  | $ | 1,180 |  |  | $ | (15,055) |
_______________________ (1) Primarily consists of gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs.
The following is a summary of total inception to date restructuring charges, net of adjustments, related to the Realignment Programs:
| Inception to Date |  |  |  |  |  |  |  |
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs |  | Other |  | Total
COS | $ | 89,026 |  |  | $ | 965 |  |  | $ | 22,550 |  |  | $ | 28,903 |  |  | $ | 141,444 |
SG&A | 34,095 |  |  | 43 |  |  | (16,743) |  |  | 13,331 |  |  | 30,726 |
Income tax expense(1) | — |  |  | — |  |  | — |  |  | 16,500 |  |  | 16,500 |
Total | $ | 123,121 |  |  | $ | 1,008 |  |  | $ | 5,807 |  |  | $ | 58,734 |  |  | $ | 188,670 |
_______________________________ (1) Income tax expense includes exit taxes as well as non-deductible costs. The following represents the activity, primarily severance, related to the restructuring reserve for the Realignment Programs for the three months ended March 31, 2020 and 2019:
(Amounts in thousands) |  | 2020 |  | 2019
Balance at January 1 | $ | 6,703 |  |  | $ | 11,927 |
Charges, net of adjustments | 1,658 |  |  | 3,213 |
Cash expenditures | (1,827) |  |  | (3,221) |
Other non-cash adjustments, including currency | (216) |  |  | (314) |
Balance at March 31 | $ | 6,318 |  |  | $ | 11,605 |

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -URI http://asc.fasb.org/topic&trid=2175745 + Details
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