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Realignment and Transformation Programs | 9 Months Ended
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Sep. 30, 2020
Restructuring and Related Activities [Abstract] |
Realignment and Transformation Programs | Realignment and Transformation Programs In the second quarter of 2020, we identified and initiated certain realignment activities resulting from our Flowserve 2.0 Transformation Program (defined below) to right-size our organizational operations based on the current business environment, with the overall objective to reduce our workforce costs, including manufacturing optimization through the consolidation of certain facilities ("2020 Realignment Program"). The realignment activities consist of restructuring and non-restructuring charges. Restructuring charges represent costs associated with the relocation of certain business activities and facility closures and include related severance costs. Non-restructuring charges are primarily employee severance associated with the workforce reductions. Expenses are primarily reported in cost of sales ("COS") or selling, general and administrative ("SG&A"), as applicable, in our condensed consolidated statements of income. We anticipate a total investment in these activities of approximately $75 million and that the majority of the charges will be incurred in 2020. There are certain other realignment activities that are currently being evaluated, but have not yet been finalized. The realignment programs initiated in 2015 ("2015 Realignment Programs"), which consisted of both restructuring and non-restructuring charges, were substantially complete as of March 31, 2020, resulting in $362.4 million of total charges incurred through the completion of the 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. The Flowserve 2.0 Transformation expenses incurred primarily consist of professional services, project management and related travel costs recorded in SG&A expenses. 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 our realignment activities and Flowserve 2.0 Transformation charges. Realignment charges incurred in 2020 related to our 2020 Realignment Program and realignment charges incurred in 2019 related to our 2015 Realignment Programs:
| Three Months Ended September 30, 2020
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | All Other |  | Consolidated Total
Realignment Charges |  |  |  |  |  |  |  |  |
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 5,469 |  |  | $ | 590 |  |  | $ | 6,059 |  |  | $ | — |  |  | $ | 6,059 |
SG&A | (10) |  |  | (2) |  |  | (12) |  |  | — |  |  | (12) |
| $ | 5,459 |  |  | $ | 588 |  |  | $ | 6,047 |  |  | $ | — |  |  | $ | 6,047 |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 1,210 |  |  | $ | (1,366) |  |  | $ | (156) |  |  | $ | (245) |  |  | $ | (401) |
SG&A | 1,097 |  |  | 75 |  |  | 1,172 |  |  | 613 |  |  | 1,785 |
| $ | 2,307 |  |  | $ | (1,291) |  |  | $ | 1,016 |  |  | $ | 368 |  |  | $ | 1,384 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 6,679 |  |  | $ | (776) |  |  | $ | 5,903 |  |  | $ | (245) |  |  | $ | 5,658 |
SG&A | 1,087 |  |  | 73 |  |  | 1,160 |  |  | 613 |  |  | $ | 1,773 |
Total | $ | 7,766 |  |  | $ | (703) |  |  | $ | 7,063 |  |  | $ | 368 |  |  | $ | 7,431 |
Transformation Charges |  |  |  |  |  |  |  |  |
SG&A | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,746 |  |  | $ | 4,746 |
| $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,746 |  |  | $ | 4,746 |
Total Realignment and Transformation Charges |  |  |  |  |  |  |  |  |
COS | $ | 6,679 |  |  | $ | (776) |  |  | $ | 5,903 |  |  | $ | (245) |  |  | $ | 5,658 |
SG&A | 1,087 |  |  | 73 |  |  | 1,160 |  |  | 5,359 |  |  | 6,519 |
Total | $ | 7,766 |  |  | $ | (703) |  |  | $ | 7,063 |  |  | $ | 5,114 |  |  | $ | 12,177 |
| Three Months Ended September 30, 2019
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | All Other |  | Consolidated Total
Realignment Charges |  |  |  |  |  |  |  |  |
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 197 |  |  | $ | 811 |  |  | $ | 1,008 |  |  | $ | — |  |  | $ | 1,008 |
SG&A | 37 |  |  | — |  |  | 37 |  |  | — |  |  | 37 |
| $ | 234 |  |  | $ | 811 |  |  | $ | 1,045 |  |  | $ | — |  |  | $ | 1,045 |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 2,409 |  |  | $ | 3 |  |  | $ | 2,412 |  |  | $ | — |  |  | $ | 2,412 |
SG&A | 343 |  |  | — |  |  | 343 |  |  | 994 |  |  | 1,337 |
| $ | 2,752 |  |  | $ | 3 |  |  | $ | 2,755 |  |  | $ | 994 |  |  | $ | 3,749 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 2,606 |  |  | $ | 814 |  |  | $ | 3,420 |  |  | $ | — |  |  | $ | 3,420 |
SG&A | 380 |  |  | — |  |  | 380 |  |  | 994 |  |  | $ | 1,374 |
Total | $ | 2,986 |  |  | $ | 814 |  |  | $ | 3,800 |  |  | $ | 994 |  |  | $ | 4,794 |
Transformation Charges |  |  |  |  |  |  |  |  |
SG&A | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5,058 |  |  | $ | 5,058 |
| $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5,058 |  |  | $ | 5,058 |
Total Realignment and Transformation Charges |  |  |  |  |  |  |  |  |
COS | $ | 2,606 |  |  | $ | 814 |  |  | $ | 3,420 |  |  | $ | — |  |  | $ | 3,420 |
SG&A | 380 |  |  | $ | — |  |  | 380 |  |  | 6,052 |  |  | 6,432 |
Total | $ | 2,986 |  |  | $ | 814 |  |  | $ | 3,800 |  |  | $ | 6,052 |  |  | $ | 9,852 |
| Nine Months Ended September 30, 2020
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | All Other |  | Consolidated Total
Realignment Charges |  |  |  |  |  |  |  |  |
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 18,800 |  |  | $ | 318 |  |  | $ | 19,118 |  |  | $ | — |  |  | $ | 19,118 |
SG&A | 221 |  |  | (5) |  |  | 216 |  |  | — |  |  | 216 |
| $ | 19,021 |  |  | $ | 313 |  |  | $ | 19,334 |  |  | $ | — |  |  | $ | 19,334 |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 13,339 |  |  | $ | 7,876 |  |  | $ | 21,215 |  |  | $ | 303 |  |  | $ | 21,518 |
SG&A | 10,899 |  |  | 4,459 |  |  | 15,358 |  |  | 16,107 |  |  | 31,465 |
| $ | 24,238 |  |  | $ | 12,335 |  |  | $ | 36,573 |  |  | $ | 16,410 |  |  | $ | 52,983 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 32,139 |  |  | $ | 8,194 |  |  | $ | 40,333 |  |  | $ | 303 |  |  | $ | 40,636 |
SG&A | 11,120 |  |  | 4,454 |  |  | 15,574 |  |  | 16,107 |  |  | 31,681 |
Total | $ | 43,259 |  |  | $ | 12,648 |  |  | $ | 55,907 |  |  | $ | 16,410 |  |  | $ | 72,317 |
Transformation Charges |  |  |  |  |  |  |  |  |
SG&A | — |  |  | — |  |  | — |  |  | 16,007 |  |  | 16,007 |
| $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 16,007 |  |  | $ | 16,007 |
Total Realignment and Transformation Charges |  |  |  |  |  |  |  |  |
COS | $ | 32,139 |  |  | $ | 8,194 |  |  | $ | 40,333 |  |  | $ | 303 |  |  | $ | 40,636 |
SG&A | 11,120 |  |  | 4,454 |  |  | 15,574 |  |  | 32,114 |  |  | 47,688 |
Total | $ | 43,259 |  |  | $ | 12,648 |  |  | $ | 55,907 |  |  | $ | 32,417 |  |  | $ | 88,324 |
| Nine Months Ended September 30, 2019
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | All Other |  | Consolidated Total
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 1,892 |  |  | $ | 1,291 |  |  | $ | 3,183 |  |  | $ | — |  |  | $ | 3,183 |
SG&A(1) | (17,072) |  |  | 413 |  |  | (16,659) |  |  | — |  |  | (16,659) |
| $ | (15,180) |  |  | $ | 1,704 |  |  | $ | (13,476) |  |  | $ | — |  |  | $ | (13,476) |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 9,531 |  |  | $ | 72 |  |  | $ | 9,603 |  |  | $ | — |  |  | $ | 9,603 |
SG&A | 770 |  |  | 34 |  |  | 804 |  |  | 2,237 |  |  | 3,041 |
| $ | 10,301 |  |  | $ | 106 |  |  | $ | 10,407 |  |  | $ | 2,237 |  |  | $ | 12,644 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 11,423 |  |  | $ | 1,363 |  |  | $ | 12,786 |  |  | $ | — |  |  | $ | 12,786 |
SG&A | (16,302) |  |  | 447 |  |  | (15,855) |  |  | 2,237 |  |  | (13,618) |
Total | $ | (4,879) |  |  | $ | 1,810 |  |  | $ | (3,069) |  |  | $ | 2,237 |  |  | $ | (832) |
Transformation Charges |  |  |  |  |  |  |  |  |
SG&A | — |  |  | — |  |  | — |  |  | 21,044 |  |  | 21,044 |
| $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 21,044 |  |  | $ | 21,044 |
Total Realignment and Transformation Charges |  |  |  |  |  |  |  |  |
COS | $ | 11,423 |  |  | $ | 1,363 |  |  | $ | 12,786 |  |  | $ | — |  |  | $ | 12,786 |
SG&A | (16,302) |  |  | 447 |  |  | (15,855) |  |  | 23,281 |  |  | 7,426 |
Total | $ | (4,879) |  |  | $ | 1,810 |  |  | $ | (3,069) |  |  | $ | 23,281 |  |  | $ | 20,212 |
_______________________________ (1) Primarily consists of gains from the sales of non-strategic manufacturing facilities that were included in our 2015 Realignment Programs. The following is a summary of total inception to date charges, net of adjustments, related to the 2020 Realignment Program initiated in 2020:
| Inception to Date
(Amounts in thousands) | FPD |  | FCD |  | Subtotal–Reportable Segments |  | All Other |  | Consolidated Total
Realignment Charges |  |  |  |  |  |  |  |  |
Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 17,119 |  |  | $ | 423 |  |  | $ | 17,542 |  |  | $ | — |  |  | $ | 17,542 |
SG&A | 116 |  |  | 22 |  |  | 138 |  |  | — |  |  | 138 |
| $ | 17,235 |  |  | $ | 445 |  |  | $ | 17,680 |  |  | $ | — |  |  | $ | 17,680 |
Non-Restructuring Charges |  |  |  |  |  |  |  |  |
COS | $ | 13,213 |  |  | $ | 1,551 |  |  | $ | 14,764 |  |  | $ | 303 |  |  | $ | 15,067 |
SG&A | 10,413 |  |  | 4,387 |  |  | 14,800 |  |  | 15,465 |  |  | 30,265 |
| $ | 23,626 |  |  | $ | 5,938 |  |  | $ | 29,564 |  |  | $ | 15,768 |  |  | $ | 45,332 |
Total Realignment Charges |  |  |  |  |  |  |  |  |
COS | $ | 30,332 |  |  | $ | 1,974 |  |  | $ | 32,306 |  |  | $ | 303 |  |  | $ | 32,609 |
SG&A | 10,529 |  |  | 4,409 |  |  | 14,938 |  |  | 15,465 |  |  | 30,403 |
Total | $ | 40,861 |  |  | $ | 6,383 |  |  | $ | 47,244 |  |  | $ | 15,768 |  |  | $ | 63,012 |
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 our restructuring activities. Restructuring charges incurred in 2020 related to our 2020 Realignment Program and restructuring charges incurred in 2019 related to our 2015 Realignment Programs:
| Three Months Ended September 30, 2020
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs |  | Other |  | Total
COS | $ | 4,704 |  |  | $ | — |  |  | $ | 331 |  |  | $ | 1,024 |  |  | $ | 6,059 |
SG&A | (16) |  |  | — |  |  | 3 |  |  | 1 |  |  | (12) |
Total | $ | 4,688 |  |  | $ | — |  |  | $ | 334 |  |  | $ | 1,025 |  |  | $ | 6,047 |
| Three Months Ended September 30, 2019
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs |  | Other |  | Total
COS | $ | (729) |  |  | $ | 3 |  |  | $ | 19 |  |  | $ | 1,715 |  |  | $ | 1,008 |
SG&A | (9) |  |  | — |  |  | 5 |  |  | 41 |  |  | 37 |
Total | $ | (738) |  |  | $ | 3 |  |  | $ | 24 |  |  | $ | 1,756 |  |  | $ | 1,045 |
| Nine Months Ended September 30, 2020
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs |  | Other |  | Total
COS | $ | 16,959 |  |  | $ | — |  |  | $ | 1,322 |  |  | $ | 837 |  |  | $ | 19,118 |
SG&A | 228 |  |  |  |  | 25 |  |  | (37) |  |  | 216 |
Total | $ | 17,187 |  |  | $ | — |  |  | $ | 1,347 |  |  | $ | 800 |  |  | $ | 19,334 |
| Nine Months Ended September 30, 2019
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs/ (Gains) |  | Other |  | Total
COS | $ | 1,099 |  |  | $ | 51 |  |  | $ | (799) |  |  | $ | 2,832 |  |  | $ | 3,183 |
SG&A(1) | 1,609 |  |  | — |  |  | (18,496) |  |  | 228 |  |  | (16,659) |
Total | $ | 2,708 |  |  | $ | 51 |  |  | $ | (19,295) |  |  | $ | 3,060 |  |  | $ | (13,476) |
_______________________________ (1) Primarily consists of gains from the sales of non-strategic manufacturing facilities that were included in our 2015 Realignment Programs. The following is a summary of total inception to date restructuring charges, net of adjustments, related to our 2020 Realignment Program initiated in 2020:
| Inception to Date
(Amounts in thousands) | Severance |  | Contract Termination |  | Asset Write-Downs |  | Other |  | Total
COS | $ | 15,276 |  |  | $ | — |  |  | $ | 1,325 |  |  | $ | 941 |  |  | $ | 17,542 |
SG&A | 110 |  |  | — |  |  | 27 |  |  | 1 |  |  | 138 |
Total | $ | 15,386 |  |  | $ | — |  |  | $ | 1,352 |  |  | $ | 942 |  |  | $ | 17,680 |
The following represents the activity, primarily severance charges from reductions in force, related to the restructuring reserves for the nine months ended September 30, 2020 and 2019:
(Amounts in thousands) | 2020 |  | 2019
Balance at January 1 | $ | 6,703 |  |  | $ | 11,927 |
Charges, net of adjustments | 17,986 |  |  | 5,817 |
Cash expenditures | (4,772) |  |  | (8,196) |
Other non-cash adjustments, including currency | 425 |  |  | (461) |
Balance at September 30 | $ | 20,342 |  |  | $ | 9,087 |

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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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