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Realignment and Transformation Programs

3 Months Ended

Mar. 31, 2021

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 $90 million and the majority of the charges were incurred in 2020 with the remainder to be incurred through the second quarter of 2021. There are certain other realignment activities that are currently being evaluated, but have not yet been finalized.

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 consisted of professional services, project management and related travel costs recorded in SG&A expenses. As of the first quarter of 2021, the Flowserve 2.0 Transformation efforts were substantially completed. For the three months ended March 31, 2021, there were no Flowserve 2.0 Transformation charges.

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, incurred in 2021 related to our 2020 Realignment Program and the total charges incurred in 2020 are related to our 2020 Realignment Program and Flowserve 2.0 Transformation:

			Three Months Ended March 31, 2021
(Amounts in thousands)			FPD						FCD						Subtotal–Reportable Segments						All Other						Consolidated Total
Realignment Charges
Restructuring Charges
COS			$	4,027					$	299					$	4,326					$	—					$	4,326
SG&A			—						(9)						(9)						—						(9)
			$	4,027					$	290					$	4,317					$	—					$	4,317
Non-Restructuring Charges
COS			$	3,892					$	598					$	4,490					$	590					$	5,080
SG&A			157						868						1,025						3,280						4,305
			$	4,049					$	1,466					$	5,515					$	3,870					$	9,385
Total Realignment Charges
COS			$	7,919					$	897					$	8,816					$	590					$	9,406
SG&A			157						859						1,016						3,280						4,296
Total			$	8,076					$	1,756					$	9,832					$	3,870					$	13,702

			Three Months Ended March 31, 2020
(Amounts in thousands)			FPD						FCD						Subtotal–Reportable Segments						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					$	6,325					$	6,451					$	—					$	6,451
SG&A			485						50						535						645						1,180
			$	611					$	6,375					$	6,986					$	645					$	7,631
Total Realignment Charges
COS			$	1,806					$	6,220					$	8,026					$	—					$	8,026
SG&A			589						60						649						629						$	1,278
Total			$	2,395					$	6,280					$	8,675					$	629					$	9,304
Transformation Charges
SG&A			$	—					$	—					$	—					$	5,643					$	5,643
			$	—					$	—					$	—					$	5,643					$	5,643
Total Realignment and Transformation Charges
COS			$	1,806					$	6,220					$	8,026					$	—					$	8,026
SG&A			589						$	60					649						6,272						6,921
Total			$	2,395					$	6,280					$	8,675					$	6,272					$	14,947

The following is a summary of total inception to date charges, net of adjustments, related to the 2020 Realignment Program:

			Inception to Date
(Amounts in thousands)			FPD						FCD						Subtotal–Reportable Segments						All Other						Consolidated Total
Realignment Charges
Restructuring Charges
COS			$	21,856					$	1,526					$	23,382					$	—					$	23,382
SG&A			51						316						367						—						367
			$	21,907					$	1,842					$	23,749					$	—					$	23,749
Non-Restructuring Charges
COS			$	23,095					$	125					$	23,220					$	642					$	23,862
SG&A			10,838						5,422						16,260						21,162						37,422
			$	33,933					$	5,547					$	39,480					$	21,804					$	61,284
Total Realignment Charges
COS			$	44,951					$	1,651					$	46,602					$	642					$	47,244
SG&A			10,889						5,738						16,627						21,162						37,789
Total			$	55,840					$	7,389					$	63,229					$	21,804					$	85,033

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 related to our 2020 Realignment Program:

			Three Months Ended March 31, 2021
(Amounts in thousands)			Severance						Contract Termination						Asset Write-Downs						Other						Total
COS			$	1,373					$	—					$	2,190					$	763					$	4,326
SG&A			—						—						—						(9)						(9)
Total			$	1,373					$	—					$	2,190					$	754					$	4,317

			Three Months Ended March 31, 2020
(Amounts in thousands)			Severance						Contract Termination						Asset Write-Downs						Other						Total
COS			$	1,683					$	—					$	(3)					$	(105)					$	1,575
SG&A			139						—						(3)						(38)						98
Total			$	1,822					$	—					$	(6)					$	(143)					$	1,673

The following is a summary of total inception to date restructuring charges, net of adjustments, related to our 2020 Realignment Program :

			Inception to Date
(Amounts in thousands)			Severance						Contract Termination						Asset Write-Downs						Other						Total
COS			$	16,617					$	52					$	3,602					$	3,111					$	23,382
SG&A			84						—						14						269						367
Total			$	16,701					$	52					$	3,616					$	3,380					$	23,749

The following represents the activity, primarily severance charges from reductions in force, related to the restructuring reserves for the three months ended March 31, 2021 and 2020:

(Amounts in thousands)			2021						2020
Balance at January 1			$	18,255					$	6,703
Charges, net of adjustments			2,127						1,658
Cash expenditures			(8,296)						(1,827)
Other non-cash adjustments, including currency			(617)						(216)
Balance at March 31			$	11,469					$	6,318

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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

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