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Realignment and Transformation Programs

6 Months Ended

Jun. 30, 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 $95 million and the majority of the charges were incurred in 2020 with the remainder to be incurred through 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 December 31, 2020, the Flowserve 2.0 Transformation efforts were substantially completed. For the six months ended June 30, 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 June 30, 2021
(Amounts in thousands)			FPD						FCD						Subtotal–Reportable Segments						All Other						Consolidated Total
Realignment Charges
Restructuring Charges
COS			$	2,016					$	171					$	2,187					$	—					$	2,187
SG&A			667						—						667						—						667
			$	2,683					$	171					$	2,854					$	—					$	2,854
Non-Restructuring Charges
COS			$	1,558					$	80					$	1,638					$	—					$	1,638
SG&A			338						(129)						209						915						1,124
			$	1,896					$	(49)					$	1,847					$	915					$	2,762
Total Realignment Charges
COS			$	3,574					$	251					$	3,825					$	—					$	3,825
SG&A			1,005						(129)						876						915						1,791
Total			$	4,579					$	122					$	4,701					$	915					$	5,616

			Three Months Ended June 30, 2020
(Amounts in thousands)			FPD						FCD						Subtotal–Reportable Segments						All Other						Consolidated Total
Realignment Charges
Restructuring Charges
COS			$	11,650					$	(167)					$	11,483					$	—					$	11,483
SG&A			126						3						129						—						129
			$	11,776					$	(164)					$	11,612					$	—					$	11,612
Non-Restructuring Charges
COS			$	12,003					$	2,917					$	14,920					$	548					$	15,468
SG&A			9,316						4,333						13,649						14,852						28,501
			$	21,319					$	7,250					$	28,569					$	15,400					$	43,969
Total Realignment Charges
COS			$	23,653					$	2,750					$	26,403					$	548					$	26,951
SG&A			9,442						4,336						13,778						14,852						$	28,630
Total			$	33,095					$	7,086					$	40,181					$	15,400					$	55,581
Transformation Charges
SG&A			$	—					$	—					$	—					$	5,618					$	5,618
			$	—					$	—					$	—					$	5,618					$	5,618
Total Realignment and Transformation Charges
COS			$	23,653					$	2,750					$	26,403					$	548					$	26,951
SG&A			9,442						$	4,336					13,778						20,470						34,248
Total			$	33,095					$	7,086					$	40,181					$	21,018					$	61,199

			Six Months Ended June 30, 2021
(Amounts in thousands)			FPD						FCD						Subtotal–Reportable Segments						All Other						Consolidated Total
Realignment Charges
Restructuring Charges
COS			$	6,043					$	470					$	6,513					$	—					$	6,513
SG&A			667						(9)						658						—						658
			$	6,710					$	461					$	7,171					$	—					$	7,171
Non-Restructuring Charges
COS			$	5,449					$	678					$	6,127					$	590					$	6,717
SG&A			495						739						1,234						4,195						5,429
			$	5,944					$	1,417					$	7,361					$	4,785					$	12,146
Total Realignment Charges
COS			$	11,492					$	1,148					$	12,640					$	590					$	13,230
SG&A			1,162						730						1,892						4,195						6,087
Total			$	12,654					$	1,878					$	14,532					$	4,785					$	19,317

			Six Months Ended June 30, 2020
(Amounts in thousands)			FPD						FCD						Subtotal–Reportable Segments						All Other						Consolidated Total
Restructuring Charges
COS			$	13,331					$	(272)					$	13,059					$	—					$	13,059
SG&A(1)			230						(3)						227						—						227
			$	13,561					$	(275)					$	13,286					$	—					$	13,286
Non-Restructuring Charges
COS			$	12,128					$	9,242					$	21,370					$	548					$	21,918
SG&A			9,801						4,384						14,185						15,497						29,682
			$	21,929					$	13,626					$	35,555					$	16,045					$	51,600
Total Realignment Charges
COS			$	25,459					$	8,970					$	34,429					$	548					$	34,977
SG&A			10,031						4,381						14,412						15,497						29,909
Total			$	35,490					$	13,351					$	48,841					$	16,045					$	64,886
Transformation Charges
SG&A			$	—					$	—					$	—					$	11,261					$	11,261
			$	—					$	—					$	—					$	11,261					$	11,261
Total Realignment Charges
COS			$	25,459					$	8,970					$	34,429					$	548					$	34,977
SG&A			10,031						4,381						14,412						26,758						41,170
Total			$	35,490					$	13,351					$	48,841					$	27,306					$	76,147

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			$	23,872					$	1,697					$	25,569					$	—					$	25,569
SG&A			718						316						1,034						—						1,034
			$	24,590					$	2,013					$	26,603					$	—					$	26,603
Non-Restructuring Charges
COS			$	24,653					$	205					$	24,858					$	642					$	25,500
SG&A			11,176						5,293						16,469						22,077						38,546
			$	35,829					$	5,498					$	41,327					$	22,719					$	64,046
Total Realignment Charges
COS			$	48,525					$	1,902					$	50,427					$	642					$	51,069
SG&A			11,894						5,609						17,503						22,077						39,580
Total			$	60,419					$	7,511					$	67,930					$	22,719					$	90,649

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 June 30, 2021
(Amounts in thousands)			Severance						Contract Termination						Asset Write-Downs						Other						Total
COS			$	(154)					$	—					$	(849)					$	3,190					$	2,187
SG&A			168						—						—						499						667
Total			$	14					$	—					$	(849)					$	3,689					$	2,854

			Three Months Ended June 30, 2020
(Amounts in thousands)			Severance						Contract Termination						Asset Write-Downs						Other						Total
COS			$	10,572					$	—					$	994					$	(83)					$	11,483
SG&A			126						—						3						—						129
Total			$	10,698					$	—					$	997					$	(83)					$	11,612

			Six Months Ended June 30, 2021
(Amounts in thousands)			Severance						Contract Termination						Asset Write-Downs						Other						Total
COS			$	1,219					$	—					$	1,341					$	3,953					$	6,513
SG&A			168												—						490						658
Total			$	1,387					$	—					$	1,341					$	4,443					$	7,171

			Six Months Ended June 30, 2020
(Amounts in thousands)			Severance						Contract Termination						Asset Write-Downs						Other						Total
COS			$	12,255					$	—					$	991					$	(187)					$	13,059
SG&A			265						—						—						(38)						227
Total			$	12,520					$	—					$	991					$	(225)					$	13,286

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			$	16,463					$	52					$	2,753					$	6,301					$	25,569
SG&A			252						—						14						768						1,034
Total			$	16,715					$	52					$	2,767					$	7,069					$	26,603

The following represents the activity, primarily severance charges from reductions in force, related to the restructuring reserves for the six months ended June 30, 2021 and 2020:

(Amounts in thousands)			2021						2020
Balance at January 1			$	18,255					$	6,703
Charges, net of adjustments			5,830						12,270
Cash expenditures			(14,388)						(2,713)
Other non-cash adjustments, including currency			(461)						(118)
Balance at June 30			$	9,236					$	16,142

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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.

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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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