XML 23 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Revenue Recognition
 9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
The majority of our revenues relate to customer orders that typically contain a single commitment of goods or services which have lead times under a year. Longer lead time, more complex contracts with our customers typically have multiple commitments of goods and services, including any combination of designing, developing, manufacturing, modifying, installing and commissioning of flow management equipment and providing services and parts related to the performance of such products. Control transfers over time when the customer is able to direct the use of and obtain substantially all of the benefits of our work as we perform.
Our primary method for recognizing revenue over time is the percentage of completion ("POC") method. Revenue from products and services transferred to customers over time accounted for approximately 23% and 21% of total revenue for the three month periods ended September 30, 2020 and 2019, respectively, and 22% and 19% for the nine month period ended September 30, 2020 and 2019, respectively. If control does not transfer over time, then control transfers at a point in time. We recognize revenue at a point in time at the level of each performance obligation based on the evaluation of certain indicators of control transfer, such as title transfer, risk of loss transfer, customer acceptance and physical possession. Revenue from products and services transferred to customers at a point in time accounted for approximately 77% and 79% of total revenue for the three month period ended September 30, 2020 and 2019, respectively, and 78% and 81% for the nine month period ended September 30, 2020 and 2019, respectively. Refer to Note 2 to our consolidated financial statements included in our 2019 Annual Report for a more comprehensive discussion of our policies and accounting practices of revenue recognition.
Disaggregated Revenue
We conduct our operations through two business segments based on the type of product and how we manage the business:
•Flowserve Pump Division ("FPD") for custom, highly-engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems and replacement parts and related services; and
•Flow Control Division ("FCD") for engineered and industrial valves, control valves, actuators and controls and related services.
Our revenue sources are derived from our original equipment manufacturing and our aftermarket sales and services. Our original equipment revenues are generally related to originally designed, manufactured, distributed and installed equipment that can range from pre-configured, short-cycle products to more customized, highly-engineered equipment ("Original Equipment"). Our aftermarket sales and services are derived from sales of replacement equipment, as well as maintenance, advanced diagnostic, repair and retrofitting services ("Aftermarket"). Each of our two business segments generate Original Equipment and Aftermarket revenues.

The following table presents our customer revenues disaggregated by revenue source:
Three Months Ended September 30, 2020
(Amounts in thousands)FPDFCDTotal
Original Equipment$280,951 $198,472 $479,423 
Aftermarket388,584 56,294 444,878 
$669,535 $254,766 $924,301 
Three Months Ended September 30, 2019
FPDFCDTotal
Original Equipment$256,664 $251,447 $508,111 
Aftermarket426,134 61,464 487,598 
$682,798 $312,911 $995,709 

Nine Months Ended September 30, 2020
(Amounts in thousands)FPDFCDTotal
Original Equipment$805,150 $588,448 $1,393,598 
Aftermarket1,173,065 176,163 1,349,228 
$1,978,215 $764,611 $2,742,826 
Nine Months Ended September 30, 2019
FPDFCDTotal
Original Equipment$706,092 $710,144 $1,416,236 
Aftermarket1,259,431 195,850 1,455,281 
$1,965,523 $905,994 $2,871,517 

Our customer sales are diversified geographically. The following table presents our revenues disaggregated by geography, based on the shipping addresses of our customers:
Three Months Ended September 30, 2020
(Amounts in thousands)FPDFCDTotal
North America(1)$245,282 $96,435 $341,717 
Latin America(1)47,346 6,065 53,411 
Middle East and Africa 83,330 29,045 112,375 
Asia Pacific151,227 66,836 218,063 
Europe142,350 56,385 198,735 
$669,535 $254,766 $924,301 
Three Months Ended September 30, 2019
FPDFCDTotal
North America(1)$279,583 $133,881 $413,464 
Latin America(1)51,338 7,682 59,020 
Middle East and Africa87,982 23,721 111,703 
Asia Pacific129,047 85,952 214,999 
Europe134,848 61,675 196,523 
$682,798 $312,911 $995,709 
Nine Months Ended September 30, 2020
(Amounts in thousands)FPDFCDTotal
North America (1)$782,403 $326,271 $1,108,674 
Latin America(1)136,443 18,480 154,923 
Middle East and Africa 277,231 77,404 354,635 
Asia Pacific391,796 185,946 577,742 
Europe390,342 156,510 546,852 
$1,978,215 $764,611 $2,742,826 
Nine Months Ended September 30, 2019
FPDFCDTotal
North America (1)$797,092 $401,921 $1,199,013 
Latin America(1)134,716 23,574 158,290 
Middle East and Africa249,694 69,484 319,178 
Asia Pacific367,204 223,864 591,068 
Europe416,817 187,151 603,968 
$1,965,523 $905,994 $2,871,517 
__________________________________

(1) North America represents the United States and Canada; Latin America includes Mexico.

On September 30, 2020, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $435 million. We estimate recognition of approximately $130 million of this amount as revenue in the remainder of 2020 and an additional $305 million in 2021 and thereafter.

Contract Balances
We receive payment from customers based on a contractual billing schedule and specific performance requirements as established in our contracts. We record billings as accounts receivable when an unconditional right to consideration exists. A contract asset represents revenue recognized in advance of our right to receive payment under the terms of a contract. A contract liability represents our right to receive payment in advance of revenue recognized for a contract.
The following tables present beginning and ending balances of contract assets and contract liabilities, current and long-term, for the nine months ended September 30, 2020 and 2019:
(Amounts in thousands) Contract Assets, net (Current)Long-term Contract Assets, net(1)Contract Liabilities (Current)Long-term Contract Liabilities(2)
Beginning balance, January 1, 2020$272,914 9,280 $221,095 $1,652 
Revenue recognized that was included in contract liabilities at the beginning of the period— — (159,376)(1,198)
Revenue recognized in the period in excess of billings654,967 — — — 
Billings arising during the period in excess of revenue recognized— — 137,986 309 
Amounts transferred from contract assets to receivables(606,564)191 — — 
Currency effects and other, net(11,187)(6,585)(1,325)15 
Ending balance, September 30, 2020$310,130 $2,886 $198,380 $778 
(Amounts in thousands)Contract Assets, net (Current)Long-term Contract Assets, net(1)Contract Liabilities (Current)Long-term Contract Liabilities(2)
Beginning balance, January 1, 2019$229,297 $10,967 $201,702 $1,370 
Revenue recognized that was included in contract liabilities at the beginning of the period— — (129,265)— 
Revenue recognized in the period in excess of billings584,784 — — — 
Billings arising during the period in excess of revenue recognized— — 148,552 — 
Amounts transferred from contract assets to receivables(544,533)(3,414)— — 
Currency effects and other, net(11,249)539 3,254 248 
Ending balance, September 30, 2019$258,299 $8,092 $224,243 $1,618 
_____________________________________
(1) Included in other assets, net.
(2) Included in retirement obligations and other liabilities.