REALIGNMENT PROGRAMS

In the first quarter of 2015, we initiated a realignment program ("R1 Realignment Program") to reduce and optimize certain non-strategic QRCs and manufacturing facilities from the SIHI acquisition. We anticipate a total investment in this program of approximately $50 million related to identified initiatives that are primarily restructuring, including related severance costs and primarily incurred by IPD. R1 Realignment Program charges of $33.6 million were recorded in IPD, $0.7 million in EPD and $5.5 million was reported in income tax expense in our consolidated statement of income for the year ended December 31, 2015. We anticipate that the majority of any remaining charges will be incurred in 2016.

In the second quarter of 2015, we initiated a second realignment program ("R2 Realignment Program") to better align costs and improve long-term efficiency, including further manufacturing optimization through the consolidation of facilities, a reduction in our workforce and the transfer of activities from high-cost regions to lower-cost facilities. We anticipate a total investment in this program of approximately $350 million, subject to final evaluation. We anticipate that the majority of the charges will be incurred in 2016.

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 COS or SG&A, as applicable, in our consolidated statements of income.

Total realignment charges, net of adjustments, were $117.0 million, $1.6 million and $10.7 million for the year ended December 31, 2015, 2014 and 2013, respectively. Generally, the aforementioned charges will be paid in cash, except for asset write-downs, which are non-cash charges. The total restructuring reserve related to our realignment programs was $58.3 million and $1.1 million at December 31, 2015 and 2014, respectively.

R1 Realignment Program

The following is a summary of total charges, net of adjustments, related to the R1 Realignment Program for the year ended December 31, 2015. In addition to the charges below $5.5 million was reported in income tax expense in our consolidated statement of income for the year ended December 31, 2015:



(Amounts in thousands)
Restructuring Charges
COS	$	20,446
SG&A	9,259
	$	29,705
Non-Restructuring Charges
COS	$	700
SG&A	3,872
	$	4,572
Total Realignment Program Charges
COS	$	21,146
SG&A	13,131
	$	34,277

The following represents the activity, primarily severance, related to the restructuring reserve for the R1 Realignment Program:



(Amounts in thousands)
Balance at December 31, 2014	$	—
Charges	29,705
Cash expenditures	(383		)
Other non-cash adjustments, including currency	(4,166		)
Balance at December 31, 2015	$	25,156

R2 Realignment Program

The following is a summary of charges, net of adjustments, related to the R2 Realignment Program for the year ended December 31, 2015. In addition to the charges below, $3.4 million was reported in income tax expense in our consolidated statement of income for the year ended December 31, 2015:



(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	9,963	$	—	9,301		19,264		$	—	$	19,264
SG&A	7,475		—		7,611		15,086		—		15,086
	$	17,438	$	—	$	16,912	$	34,350	$	—	$	34,350
Non-Restructuring Charges
COS	$	10,266	$	7,461	$	8,583	$	26,310	$	—	$	26,310
SG&A	5,831		2,976		3,413		12,220		—		12,220
	$	16,097	$	10,437	$	11,996	$	38,530	$	—	$	38,530
Total Realignment Program Charges
COS	$	20,229	$	7,461	$	17,884	$	45,574	$	—	$	45,574
SG&A	13,306		2,976		11,024		27,306		—		27,306
	$	33,535	$	10,437	$	28,908	$	72,880	$	—	$	72,880

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 termination of operating leases or other contract termination costs. Asset write-downs include accelerated depreciation of fixed assets, accelerated amortization of intangible assets and inventory write-downs. Other costs generally includes 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 R2 Realignment Program the year ended December 31, 2015:



(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	16,893	$	424	$	1,764	$	183	$	19,264
SG&A	14,328		43		33		682		15,086
Total	$	31,221	$	467	$	1,797	$	865	$	34,350

The following represents the activity, primarily severance, related to the restructuring reserve for the R2 Realignment Program:



(Amounts in thousands)
Balance at December 31, 2014	$	—
Charges	34,350
Cash expenditures	(1,791		)
Other non-cash adjustments, including currency	589
Balance at December 31, 2015	$	33,148