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. 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, the transfer of activities from high-cost regions to lower-cost facilities and the divestiture of certain non-strategic assets.

The R1 Realignment Program and the R2 Realignment Program (collectively 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 selling, general and administrative expense ("SG&A"), as applicable, in our condensed consolidated statements of income. We anticipate a total investment in these programs of approximately $400 million, including projects still under final evaluation. We anticipate that the majority of any remaining charges will be incurred throughout 2016 and 2017.

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 Programs:



	Three Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division			Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	3,335	$	2,294		$	2,180		$	7,809	$	—	$	7,809
SG&A	6,411		77			177			6,665		32		6,697
	$	9,746	$	2,371		$	2,357		$	14,474	$	32	$	14,506
Non-Restructuring Charges
COS	$	1,038	$	2,489		$	(141	)	$	3,386	$	—	$	3,386
SG&A	1,199		(208		)	126			1,117		1,129		2,246
	$	2,237	$	2,281		$	(15	)	$	4,503	$	1,129	$	5,632
Total Realignment Charges
COS	$	4,373	$	4,783		$	2,039		$	11,195	$	—	$	11,195
SG&A	7,610		(131		)	303			7,782		1,161		$	8,943
	$	11,983	$	4,652		$	2,342		$	18,977	$	1,161	$	20,138



	Three Months Ended June 30, 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	$	110	$	5,311	$	1,019	$	6,440	$	—	$	6,440
SG&A	122		2,690		2,342		5,154		—		5,154
Income tax expense	—		500		—		500		—		500
	$	232	$	8,501	$	3,361	$	12,094	$	—	$	12,094
Non-Restructuring Charges
COS	$	7,069	$	927	$	5,091	$	13,087	$	—	$	13,087
SG&A	2,160		1,262		3,924		7,346		—		7,346
	$	9,229	$	2,189	$	9,015	$	20,433	$	—	$	20,433
Total Realignment Charges
COS	$	7,179	$	6,238	$	6,110	$	19,527	$	—	$	19,527
SG&A	2,282		3,952		6,266		12,500		—		$	12,500
Income tax expense	—		500		—		500		—		$	500
	$	9,461	$	10,690	$	12,376	$	32,527	$	—	$	32,527



	Six Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	4,855	$	2,110	$	2,287	$	9,252	$	—	$	9,252
SG&A	8,818		1,789		336		10,943		32		10,975
	$	13,673	$	3,899	$	2,623	$	20,195	$	32	$	20,227
Non-Restructuring Charges
COS	$	1,137	$	4,283	$	3,719	$	9,139	$	15	$	9,154
SG&A	978		400		1,590		2,968		1,259		4,227
	$	2,115	$	4,683	$	5,309	$	12,107	$	1,274	$	13,381
Total Realignment Charges
COS	$	5,992	$	6,393	$	6,006	$	18,391	$	15	$	18,406
SG&A	9,796		2,189		1,926		13,911		1,291		15,202
	$	15,788	$	8,582	$	7,932	$	32,302	$	1,306	$	33,608



	Six Months Ended June 30, 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	$	110	$	18,639	$	1,019	$	19,768	$	—	$	19,768
SG&A	122		10,245		2,342		12,709		—		12,709
Income tax expense	—		5,500		—		5,500		—		5,500
	$	232	$	34,384	$	3,361	$	37,977	$	—	$	37,977
Non-Restructuring Charges
COS	$	7,069	$	927	$	5,091	$	13,087	$	—	$	13,087
SG&A	2,160		1,894		3,924		7,978		—		7,978
	$	9,229	$	2,821	$	9,015	$	21,065	$	—	$	21,065
Total Realignment Charges
COS	$	7,179	$	19,566	$	6,110	$	32,855	$	—	$	32,855
SG&A	2,282		12,139		6,266		20,687		—		20,687
Income tax expense	—		5,500		—		5,500		—		5,500
	$	9,461	$	37,205	$	12,376	$	59,042	$	—	$	59,042

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)	Engineered Product Division		Industrial Product Division (1)		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	14,818	$	22,556	$	11,588	$	48,962	$	—	$	48,962
SG&A	16,293		11,048		7,947		35,288		32		35,320
Income tax expense	—		8,900		—		8,900		—		8,900
	$	31,111	$	42,504	$	19,535	$	93,150	$	32	$	93,182
Non-Restructuring Charges
COS	$	11,403	$	12,444	$	12,302	$	36,149	$	15	$	36,164
SG&A	7,509		6,548		5,003		19,060		1,259		20,319
	$	18,912	$	18,992	$	17,305	$	55,209	$	1,274	$	56,483
Total Realignment Charges
COS	$	26,221	$	35,000	$	23,890	$	85,111	$	15	$	85,126
SG&A	23,802		17,596		12,950		54,348		1,291		55,639
Income tax expense	—		8,900		—		8,900		—		8,900
	$	50,023	$	61,496	$	36,840	$	148,359	$	1,306	$	149,665

____________________________

(1) Includes $39.1 million of restructuring charges, primarily COS, related to the R1 Realignment Program.

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, 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 June 30, 2016
(Amounts in thousands)	Severance			Contract Termination		Asset Write-Downs		Other		Total
COS	$	3,311		$	—	$	1,615	$	2,883	$	7,809
SG&A	(1,897		)	—		2,608		5,986		6,697
Total	$	1,414		$	—	$	4,223	$	8,869	$	14,506



	Three Months Ended June 30, 2015
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	6,284	$	—	$	107	$	49	$	6,440
SG&A	4,444		—		634		76		5,154
Income tax expense	—		—		—		500		500
Total	$	10,728	$	—	$	741	$	625	$	12,094



	Six Months Ended June 30, 2016
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	3,372	$	—	$	2,533	$	3,347	$	9,252
SG&A	1,856		—		2,644		6,475		10,975
Total	$	5,228	$	—	$	5,177	$	9,822	$	20,227



	Six Months Ended June 30, 2015
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	19,612	$	—	$	107	$	49	$	19,768
SG&A	11,999		—		634		76		12,709
Income tax expense	—		—		—		5,500		5,500
Total	$	31,611	$	—	$	741	$	5,625	$	37,977

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 (1)
COS(1)	$	37,344	$	609	$	6,021	$	4,988	$	48,962
SG&A	25,376		43		2,688		7,213		35,320
Income tax expense	—		—		—		8,900		8,900
Total	$	62,720	$	652	$	8,709	$	21,101	$	93,182

_______________________________

(1) Includes $39.1 million of restructuring charges, primarily COS, related to the R1 Realignment Program.

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



(Amounts in thousands)	R1 Realignment Program			R2 Realignment Program			Total
Balance at December 31, 2015	$	25,156		$	33,147		$	58,303
Charges	976			3,792			4,768
Cash expenditures	(1,294		)	(3,999		)	(5,293		)
Other non-cash adjustments, including currency	(877		)	(1,162		)	(2,039		)
Balance at March 31, 2016	$	23,961		$	31,778		$	55,739
Charges	2,371			2,681			5,052
Cash expenditures	(3,305		)	(1,348		)	(4,653		)
Other non-cash adjustments, including currency	(5,370		)	(4,424		)	(9,794		)
Balance at June 30, 2016	$	17,657		$	28,687		$	46,344