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 COS or SG&A, as applicable, in our condensed consolidated statements of income. We anticipate a total investment in these programs of approximately $360 million, including projects still under final evaluation. We anticipate that the majority of any remaining charges will be incurred throughout 2018.

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:



	December 31, 2017
(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division			Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	8,101	$	7,177	$	8,666		$	23,944	$	—	$	23,944
SG&A	523		1,120		(455		)	1,188		261		1,449
Income tax expense(1)	1,000		—		—			1,000		—		1,000
	$	9,624	$	8,297	$	8,211		$	26,132	$	261	$	26,393
Non-Restructuring Charges
COS	$	10,263	$	6,806	$	2,934		$	20,003	$	—	$	20,003
SG&A	6,853		10,191		3,325			20,369		5,490		25,859
	$	17,116	$	16,997	$	6,259		$	40,372	$	5,490	$	45,862
Total Realignment Charges
COS	$	18,364	$	13,983	$	11,600		$	43,947	$	—	$	43,947
SG&A	7,376		11,311		2,870			21,557		5,751		27,308
Income tax expense(1)	1,000		—		—			1,000		—		1,000
Total	$	26,740	$	25,294	$	14,470		$	66,504	$	5,751	$	72,255



	December 31, 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	$	24,748	$	20,202	$	4,688	$	49,638	$	—	$	49,638
SG&A	10,342		6,338		1,941		18,621		18		18,639
Income tax expense(1)	6,000		2,800		600		9,400		—		9,400
	$	41,090	$	29,340	$	7,229	$	77,659	$	18	$	77,677
Non-Restructuring Charges
COS	5,894		6,022		$	3,350	$	15,266	$	8	$	15,274
SG&A	3,462		2,062		1,426		6,950		4,432		11,382
	$	9,356	$	8,084	$	4,776	$	22,216	$	4,440	$	26,656
Total Realignment Charges
COS	$	30,642	$	26,224	$	8,038	$	64,904	$	8	$	64,912
SG&A	13,804		8,400		3,367		25,571		4,450		30,021
Income tax expense(1)	6,000		2,800		600		9,400		—		9,400
Total	$	50,446	$	37,424	$	12,005	$	99,875	$	4,458	$	104,333

____________________________________

(1) Income tax expense includes exit taxes as well as non-deductible costs.

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	$	42,812	$	47,825	$	22,655	$	113,292	$	—	$	113,292
SG&A	18,340		16,717		9,097		44,154		279		44,433
Income tax expense(2)	10,400		9,300		1,800		21,500		—		21,500
	$	71,552	$	73,842	$	33,552	$	178,946	$	279	$	179,225
Non-Restructuring Charges
COS	$	26,423	$	20,989	$	14,867	$	62,279	$	8	$	62,287
SG&A	16,846		18,401		8,164		43,411		9,922		53,333
	$	43,269	$	39,390	$	23,031	$	105,690	$	9,930	$	115,620
Total Realignment Charges
COS	$	69,235	$	68,814	$	37,522	$	175,571	$	8	$	175,579
SG&A	35,186		35,118		17,261		87,565		10,201		97,766
Income tax expense(2)	10,400		9,300		1,800		21,500		—		21,500
Total	$	114,821	$	113,232	$	56,583	$	284,636	$	10,209	$	294,845

___________________________

(1) Includes $49.5 million of restructuring charges, primarily COS, related to the R1 Realignment Program.

(2) Income tax expense includes exit taxes as well as non-deductible costs.

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:



	December 31, 2017
(Amounts in thousands)	Severance			Contract Termination		Asset Write-Downs		Other		Total
COS	$	10,241		$	293	$	6,400	$	7,010	$	23,944
SG&A	(897		)	—		249		2,097		1,449
Income tax expense(1)	—			—		—		1,000		1,000
Total	$	9,344		$	293	$	6,649	$	10,107	$	26,393

_____________________________________

(1) Income tax expense includes exit taxes as well as non-deductible costs.



	December 31, 2016
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	37,972	$	—	$	5,429	$	6,237	$	49,638
SG&A	7,247		—		1,384		10,008		18,639
Income tax expense(1)	—		—		—		9,400		9,400
Total	$	45,219	$	—	$	6,813	$	25,645	$	77,677

_____________________________________

(1) Income tax expense includes exit taxes as well as non-deductible costs.

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)	$	82,185	$	902	$	15,317	$	14,888	$	113,292
SG&A	29,870		43		1,677		12,843		44,433
Income tax expense(2)	—		—		—		21,500		21,500
Total	$	112,055	$	945	$	16,994	$	49,231	$	179,225

_______________________________

(1) Includes $49.5 million of restructuring charges, primarily COS, related to the R1 Realignment Program.

(2) Income tax expense includes exit taxes as well as non-deductible costs.

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		$	33,148		$	58,304
Charges	11,066			46,805			57,871
Cash expenditures	(24,087		)	(38,869		)	(62,956		)
Other non-cash adjustments, including currency	459			6,649			7,108
Balance at December 31,2016	$	12,594		$	47,733		$	60,327
Charges	(3,425		)	22,168			18,743
Cash expenditures	(10,542		)	(27,849		)	(38,391		)
Other non-cash adjustments, including currency	3,378			(4,827		)	(1,449		)
Balance at December 31, 2017	$	2,005		$	37,225		$	39,230