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Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2018	Feb. 13, 2019	Jun. 30, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	FLOWSERVE CORP
Entity Central Index Key	0000030625
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth	false
Entity Shell Company	false
Entity Public Float			$ 2,439,873,483
Entity Common Stock, Shares Outstanding		130,982,978

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 619,683	$ 703,445
Accounts receivable, net	792,434	856,711
Contract assets, net	228,579	0
Inventories, net	633,871	884,273
Prepaid expenses and other	108,578	114,316
Total current assets	2,383,145	2,558,745
Property, plant and equipment, net	610,096	671,796
Goodwill	1,197,640	1,218,188
Deferred taxes	44,682	51,974
Other intangible assets, net	190,550	210,049
Other assets, net	190,164	199,722
Total assets	4,616,277	4,910,474
Current liabilities:
Accounts payable	418,893	443,113
Accrued liabilities	391,406	724,196
Contract liabilities	202,458	0
Debt due within one year	68,218	75,599
Total current liabilities	1,080,975	1,242,908
Long-term debt due after one year	1,414,829	1,499,658
Retirement obligations and other liabilities	459,693	496,954
Commitments and contingencies (See Note 13)
Shareholders’ equity:
Common shares, $1.25 par value, Shares authorized - 305,000, Shares issued - 176,793 and 176,793, respectively	220,991	220,991
Capital in excess of par value	494,551	488,326
Retained earnings	3,543,007	3,503,947
Treasury shares, at cost — 46,237 and 46,471 shares, respectively	(2,049,404)	(2,059,558)
Deferred compensation obligation	7,117	6,354
Accumulated other comprehensive loss	(573,947)	(505,473)
Total Flowserve Corporation shareholders’ equity	1,642,315	1,654,587
Noncontrolling interests	18,465	16,367
Total equity	1,660,780	1,670,954
Total liabilities and equity	$ 4,616,277	$ 4,910,474

Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2018	Dec. 31, 2017
Shareholders’ equity:
Common shares, par value (in dollars per share)	$ 1.25	$ 1.25
Common stock, shares authorized (in shares)	305,000	305,000
Common shares, shares issued (in shares)	176,793	176,793
Treasury shares, shares (in shares)	46,237	46,471

Consolidated Statements of Income - USD ($)
$ in Thousands

3 Months Ended

12 Months Ended

Dec. 31, 2018

Sep. 30, 2018

Jun. 30, 2018

Mar. 31, 2018

Dec. 31, 2017

Sep. 30, 2017

Jun. 30, 2017

Mar. 31, 2017

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Income Statement [Abstract]

Sales

$ 986,900

$ 952,700

$ 973,100

$ 920,000

$ 1,034,100

$ 883,400

$ 877,100

$ 866,300

$ 3,832,666

$ 3,660,831

$ 3,990,487

Cost of sales

(2,644,830)

(2,571,878)

(2,753,689)

Gross profit

321,800

308,500

286,100

271,400

304,400

267,500

245,000

268,400

1,187,836

1,088,953

1,236,798

Selling, general and administrative expense

(943,714)

(901,727)

(965,376)

(Loss) gain on sale of businesses

(7,727)

141,317

(7,664)

Net earnings from affiliates

11,143

12,592

12,926

Operating income

247,538

341,135

276,684

Interest expense

(58,160)

(59,730)

(60,137)

Interest income

6,465

3,429

2,804

Other expense, net

(19,569)

(21,827)

(6,439)

Earnings before income taxes

78,600

44,400

28,300

25,000

67,000

68,400

103,000

24,600

176,274

263,007

212,912

Provision for income taxes

(51,224)

(258,679)

(77,380)

Net earnings, including noncontrolling interests

125,050

4,328

135,532

Less: Net earnings attributable to noncontrolling interests

(5,379)

(1,676)

(3,077)

Net earnings attributable to Flowserve Corporation

$ 63,100

$ 28,200

$ 13,200

$ 15,100

$ (105,900)

$ 47,600

$ 41,900

$ 19,100

$ 119,671

$ 2,652

$ 132,455

Net earnings per share attributable to Flowserve Corporation common shareholders:

Basic (in dollars per share)

$ 0.48

^[1]

$ 0.22

^[1]

$ 0.10

^[1]

$ 0.12

^[1]

$ (0.81)

^[1]

$ 0.36

^[1]

$ 0.32

^[1]

$ 0.15

^[1]

$ 0.91

$ 0.02

$ 1.02

Diluted (in dollars per share)

$ 0.48

^[1]

$ 0.21

^[1]

$ 0.10

^[1]

$ 0.12

^[1]

$ (0.81)

^[1]

$ 0.36

^[1]

$ 0.32

^[1]

$ 0.15

^[1]

$ 0.91

$ 0.02

$ 1.01

[1]	Earnings per share is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in weighted average quarterly shares outstanding.

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net earnings, including noncontrolling interests	$ 125,050	$ 4,328	$ 135,532
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of deferred taxes of $2,120, $19,593 and $(8,628) in 2018, 2017 and 2016, respectively	(63,146)	98,830	(71,994)
Pension and other postretirement effects, net of deferred taxes of $3,103, $(14,228) and $9,737 in 2018, 2017 and 2016, respectively	(4,892)	20,775	(16,069)
Cash flow hedging activity, net of deferred taxes of $(38) and $(296) in 2017 and 2016, respectively	232	148	2,220
Other comprehensive (loss) income	(67,806)	119,753	(85,843)
Comprehensive income, including noncontrolling interests	57,244	124,081	49,689
Comprehensive income attributable to noncontrolling interests	(6,047)	(2,114)	(3,787)
Comprehensive income attributable to Flowserve Corporation	$ 51,197	$ 121,967	$ 45,902

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Foreign curency translation, taxes	$ 0	$ 19,593	$ (8,628)
Pension and other postretirement effects, taxes	3,103	(14,228)	9,737
Cash flow hedging activity, taxes	$ 0	$ (38)	$ (296)

Consolidated Statement of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Capital in Excess of Par Value	Retained Earnings	Treasury Stock	Deferred Compensation Obligation	Accumulated Other Comprehensive Loss	Noncontrolling Interests
Balance — (in shares) at Dec. 31, 2015		176,793			47,703
Balance — at Dec. 31, 2015	$ 1,664,382	$ 220,991	$ 494,961	$ 3,565,958	$ (2,106,785)	$ 10,233	$ (538,232)	$ 17,256
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock activity under stock plans	(5,313)		(33,571)		$ 28,258
Stock activity under stock plans (in shares)					723
Stock-based compensation	30,213		30,203	10
Tax benefit associated with stock-based compensation	255		255
Net earnings	135,532			132,455				3,077
Cash dividends declared	(100,027)			(100,027)
Other comprehensive loss, net of tax	(85,843)						(86,556)	713
Purchase of shares from and dividends paid to noncontrolling interests	(85)							(85)
Other, net	(1,726)					(1,726)
Balance — (in shares) at Dec. 31, 2016		176,793			46,980
Balance — at Dec. 31, 2016	1,637,388	$ 220,991	491,848	3,598,396	$ (2,078,527)	8,507	(624,788)	20,961
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock activity under stock plans	(4,510)		(23,479)		$ 18,969
Stock activity under stock plans (in shares)					509
Stock-based compensation	22,820		22,820
Tax benefit associated with stock-based compensation	103		103
Net earnings	4,328			2,652				1,676
Cash dividends declared	(100,067)			(100,067)
Other comprehensive loss, net of tax	119,753						119,315	438
Purchase of shares from and dividends paid to noncontrolling interests	(6,708)							(6,708)
Other, net	$ (2,153)					(2,153)
Balance — (in shares) at Dec. 31, 2017	176,793	176,793			46,471
Balance — at Dec. 31, 2017	$ 1,670,954	$ 220,991	488,326	3,503,947	$ (2,059,558)	6,354	(505,473)	16,367
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock activity under stock plans	(3,533)		(13,687)		$ 10,154
Stock activity under stock plans (in shares)					234
Stock-based compensation	19,912		19,912
Tax benefit associated with stock-based compensation	0
Net earnings	125,050			119,671				5,379
Cash dividends declared	(100,253)			(100,253)
Other comprehensive loss, net of tax	(67,806)						(68,474)	668
Purchase of shares from and dividends paid to noncontrolling interests	(3,949)							(3,949)
Other, net	$ 763					763
Balance — (in shares) at Dec. 31, 2018	176,793	176,793			46,237
Balance — at Dec. 31, 2018	$ 1,660,780	$ 220,991	$ 494,551	$ 3,543,007	$ (2,049,404)	$ 7,117	$ (573,947)	$ 18,465

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash flows — Operating activities:
Net earnings, including noncontrolling interests	$ 125,050	$ 4,328	$ 135,532
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	95,820	101,438	99,897
Amortization of intangible and other assets	16,653	17,016	16,855
Loss (gain) on disposition of businesses	7,727	(141,317)	7,664
Stock-based compensation	19,912	22,820	30,213
Provision for U.S. Tax Cuts and Jobs Act of 2017 and Latin America accounts receivable reserve	(5,654)	115,320	73,452
Foreign currency, asset impairment and other non-cash adjustments	36,052	33,087	(8,127)
Change in assets and liabilities:
Accounts receivable, net	(25,448)	60,216	36,927
Inventories, net	(29,314)	48,642	52,892
Contract assets, net	(23,693)	0	0
Prepaid expenses and other assets, net	(7,869)	32,935	(45,475)
Contract liabilities	33,710	0	0
Accounts payable	(4,823)	12,403	(71,008)
Accrued liabilities and income taxes payable	(18,248)	(3,383)	(88,770)
Retirement obligations and other	(44,314)	(43,431)	16,372
Net deferred taxes	15,270	50,992	(15,948)
Net cash flows provided by operating activities	190,831	311,066	240,476
Cash flows — Investing activities:
Capital expenditures	(83,993)	(61,602)	(89,699)
Proceeds from disposal of assets	6,190	5,435	3,294
(Payments for) proceeds from disposition of businesses	(3,663)	232,767	(5,064)
Net cash flows (used) provided by investing activities	(81,466)	176,600	(91,469)
Cash flows — Financing activities:
Payments on long-term debt	(60,000)	(60,000)	(60,000)
Payments of deferred loan costs	0	(1,503)	0
Proceeds under other financing arrangements	3,377	7,359	35,680
Payments under other financing arrangements	(9,853)	(19,030)	(12,636)
Payments related to tax withholding for stock-based compensation	(3,061)	(6,238)	(10,405)
Payments of dividends	(99,416)	(99,233)	(97,746)
Other	(4,331)	(6,708)	1,386
Net cash flows used by financing activities	(173,284)	(185,353)	(143,721)
Effect of exchange rate changes on cash	(19,843)	33,970	(4,568)
Net change in cash and cash equivalents	(83,762)	336,283	718
Cash and cash equivalents at beginning of year	703,445	367,162	366,444
Cash and cash equivalents at end of year	619,683	703,445	367,162
Income taxes paid (net of refunds)	87,009	59,409	151,191
Interest paid	$ 54,576	$ 56,808	$ 57,393

Significant Accounting Policies and Accounting Developments

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Significant Accounting Policies and Accounting Developments

SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING DEVELOPMENTS

We are principally engaged in the worldwide design, manufacture, distribution and service of industrial flow management equipment. We provide long lead time, custom and other highly-engineered pumps; standardized, general-purpose pumps; mechanical seals; engineered and industrial valves; and related automation products and solutions primarily for oil and gas, chemical, power generation, water management and other general industries requiring flow management products and services. Equipment manufactured and serviced by us is predominantly used in industries that deal with difficult-to-handle and corrosive fluids, as well as environments with extreme temperatures, pressure, horsepower and speed. Our business is affected by economic conditions in the United States ("U.S.") and other countries where our products are sold and serviced, by the cyclical nature and competitive environment of our industries served, by the relationship of the U.S. dollar to other currencies and by the demand for and pricing of our customers’ end products.

Principles of Consolidation — The consolidated financial statements include the accounts of our company and our wholly and majority-owned subsidiaries. In addition, we would consolidate any variable interest entities for which we are deemed to be the primary beneficiary. Noncontrolling interests of non-affiliated parties have been recognized for all majority-owned consolidated subsidiaries. Intercompany profits/losses, transactions and balances among consolidated entities have been eliminated from our consolidated financial statements. Investments in unconsolidated affiliated companies, which represent noncontrolling ownership interests between 20% and 50%, are accounted for using the equity method, which approximates our equity interest in their underlying equivalent net book value under accounting principles generally accepted in the U.S. ("U.S. GAAP"). Investments in interests where we own less than 20% of the investee are accounted for by the cost method, whereby income is only recognized in the event of dividend receipt. Investments accounted for by the cost method are tested for impairment if an impairment indicator is present.

Use of Estimates — The process of preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses. We believe our estimates and assumptions are reasonable; however, actual results may differ materially from such estimates. The most significant estimates and assumptions are used in determining:


•	Timing and amount of revenue recognition;


•	Deferred taxes, tax valuation allowances and tax reserves;


•	Reserves for contingent loss;


•	Pension and postretirement benefits; and


•	Valuation of goodwill, indefinite-lived intangible assets and other long-lived assets.

Argentina Highly Inflationary — Effective July 1, 2018, Argentina was designated as hyperinflationary, and as a result, we began using the U.S. dollar as our functional currency in Argentina. Our Argentinian subsidiary's sales for the year ended December 31, 2018 represented approximately 1% of consolidated sales and its assets at December 31, 2018 represented approximately 1% of total consolidated assets. Assets primarily consisted of U.S. dollar-denominated monetary assets and Argentinian peso-denominated non-monetary assets at December 31, 2018. In addition, certain of our operations in other countries sell equipment and parts that are typically denominated in U.S. dollars directly to Argentinian customers.

Revenue Recognition — Our contracts with customers often have multiple commitments to provide goods and/or 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. We recognize revenue when (or as) we satisfy a performance obligation by transferring control to a customer. We recognize revenue either over time or at a point in time, depending on the specific facts and circumstances for each contract, including the terms and conditions of the contract as agreed with the customer and the nature of the products or services to be provided.

Our primary method for recognizing revenue over time is the percentage of completion (“POC”) method, whereby progress towards completion is measured by applying an input measure based on costs incurred to date relative to total estimated costs at completion. If control of the products and/or services does not transfer over time, then control transfers at a point in time. We determine the point in time that control transfers to a customer based on the evaluation of specific indicators, such as title transfer, risk of loss transfer, customer acceptance and physical possession. For a detailed discussion related to revenue recognition refer to Note 2.

Cash and Cash Equivalents — We place temporary cash investments with financial institutions and, by policy, invest in those institutions and instruments that have minimal credit risk and market risk. These investments, with an original maturity of three months or less when purchased, are classified as cash equivalents. They are highly liquid and principal values are not subject to significant risk of change due to interest rate fluctuations.

Allowance for Doubtful Accounts and Credit Risk — The allowance for doubtful accounts is established based on estimates of the amount of uncollectible accounts receivable, which is determined principally based upon the aging of the accounts receivable, but also customer credit history, industry and market segment information, economic trends and conditions and credit reports. Customer credit issues, customer bankruptcies or general economic conditions may also impact our estimates.

Credit risks are mitigated by the diversity of our customer base across many different geographic regions and industries and by performing creditworthiness analyses on our customers. Additionally, we mitigate credit risk through letters of credit and advance payments received from our customers. We do not believe that we have any other significant concentrations of credit risk.

Inventories and Related Reserves — Inventories are stated at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Reserves for excess and obsolete inventories are based upon our assessment of market conditions for our products determined by historical usage and estimated future demand. Due to the long life cycles of our products, we carry spare parts inventories that have historically low usage rates and provide reserves for such inventory based on demonstrated usage and aging criteria.

Income Taxes, Deferred Taxes, Tax Valuation Allowances and Tax Reserves — We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are calculated using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. We record valuation allowances to reflect the estimated amount of deferred tax assets that may not be realized based upon our analysis of existing deferred tax assets, net operating losses and tax credits by jurisdiction and expectations of our ability to utilize these tax attributes through a review of past, current and estimated future taxable income and establishment of tax strategies.

We provide deferred taxes for the temporary differences associated with our investment in foreign subsidiaries that have a financial reporting basis that exceeds tax basis, unless we can assert permanent reinvestment in foreign jurisdictions. Financial reporting basis and tax basis differences in investments in foreign subsidiaries consist of both unremitted earnings and losses, as well as foreign currency translation adjustments.

The amount of income taxes we pay is subject to ongoing audits by federal, state, and foreign tax authorities, which often result in proposed assessments. We establish reserves for open tax years for uncertain tax positions that may be subject to challenge by various tax authorities. The consolidated tax provision and related accruals include the impact of such reasonably estimable losses and related interest and penalties as deemed appropriate.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

Legal and Environmental Contingencies — Legal and environmental reserves are recorded based upon a case-by-case analysis of the relevant facts and circumstances and an assessment of potential legal obligations and costs. Amounts relating to legal and environmental liabilities are recorded when it is probable that a loss has been incurred and such loss is reasonably estimable. Assessments of legal and environmental costs are based on information obtained from our independent and in-house experts and our loss experience in similar situations. Estimates are updated as applicable when new information regarding the facts and circumstances of each matter becomes available. Legal fees associated with legal and environmental liabilities are expensed as incurred.

Estimates of liabilities for unsettled asbestos-related claims are based on known claims and on our experience during the preceding two years for claims filed, settled and dismissed, with adjustments for events deemed unusual and unlikely to recur, and are included in retirement obligations and other liabilities in our consolidated balance sheets. A substantial majority of our asbestos-related claims are covered by insurance or indemnities. Estimated indemnities and receivables from insurance carriers for unsettled claims and receivables for settlements and legal fees paid by us for asbestos-related claims are estimated using our historical experience with insurance recovery rates and estimates of future recoveries, which include estimates of coverage and financial viability of our insurance carriers. Estimated receivables are included in other assets, net in our consolidated balance sheets. We have claims pending against certain insurers that, if resolved more favorably than estimated future recoveries, would result in discrete gains in the applicable quarter. We are currently unable to estimate the impact, if any, of unasserted asbestos-related claims, although future claims would also be subject to existing indemnities and insurance coverage.

Warranty Accruals — Warranty obligations are based upon product failure rates, materials usage, service delivery costs, an analysis of all identified or expected claims and an estimate of the cost to resolve such claims. The estimates of expected claims are generally a factor of historical claims and known product issues. Warranty obligations based on these factors are adjusted based on historical sales trends for the preceding 24 months.

Insurance Accruals — Insurance accruals are recorded for wholly or partially self-insured risks such as medical benefits and workers’ compensation and are based upon an analysis of our claim loss history, insurance deductibles, policy limits and other relevant factors that are updated annually and are included in accrued liabilities in our consolidated balance sheets. The estimates are based upon information received from actuaries, insurance company adjusters, independent claims administrators or other independent sources. Receivables from insurance carriers are estimated using our historical experience with insurance recovery rates and estimates of future recoveries, which include estimates of coverage and financial viability of our insurance carriers. Estimated receivables are included in accounts receivable, net and other assets, net, as applicable, in our consolidated balance sheets.

Pension and Postretirement Obligations — Determination of pension and postretirement benefits obligations is based on estimates made by management in consultation with independent actuaries and investment advisors. Inherent in these valuations are assumptions including discount rates, expected rates of return on plan assets, retirement rates, mortality rates and rates of compensation increase and other factors all of which are reviewed annually and updated if necessary. Current market conditions, including changes in rates of return, interest rates and medical inflation rates, are considered in selecting these assumptions.

Actuarial gains and losses and prior service costs are recognized in accumulated other comprehensive loss as they arise and we amortize these costs into net pension expense over the remaining expected service period.

Property, Plant and Equipment and Depreciation — Property, plant and equipment are stated at historical cost, less accumulated depreciation. If asset retirement obligations exist, they are capitalized as part of the carrying amount of the asset and depreciated over the remaining useful life of the asset. The useful lives of leasehold improvements are the lesser of the remaining lease term or the useful life of the improvement. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and any resulting gains or losses are included in income from operations for the period. Depreciation is computed by the straight-line method based on the estimated useful lives of the depreciable assets, or in the case of assets under capital leases, over the related lease turn. Generally, the estimated useful lives of the assets are:



Buildings and improvements	10 to 40 years
Machinery, equipment and tooling	3 to 14 years
Software, furniture and fixtures and other	3 to 7 years

Costs related to routine repairs and maintenance are expensed as incurred.

Internally Developed Software — We capitalize certain costs associated with the development of internal-use software. Generally, these costs are related to significant software development projects and are amortized over their estimated useful life, typically three to five years, upon implementation of the software.

Intangible Assets — Intangible assets, excluding trademarks (which are considered to have an indefinite life), consist primarily of engineering drawings, patents, existing customer relationships, software, distribution networks and other items that are being amortized over their estimated useful lives generally ranging from four to 40 years. These assets are reviewed for impairment whenever events and circumstances indicate impairment may have occurred.

Valuation of Goodwill, Indefinite-Lived Intangible Assets and Other Long-Lived Assets — The value of goodwill and indefinite-lived intangible assets is tested for impairment as of December 31 each year or whenever events or circumstances indicate such assets may be impaired. The identification of our reporting units began at the operating segment level and considered whether components one level below the operating segment levels should be identified as reporting units for purpose of testing goodwill for impairment based on certain conditions. These conditions included, among other factors, (i) the extent to which a component represents a business and (ii) the aggregation of economically similar components within the operating segments and resulted in four reporting units. Other factors that were considered in determining whether the aggregation of components was appropriate included the similarity of the nature of the products and services, the nature of the production processes, the methods of distribution and the types of industries served.

An impairment loss for goodwill is recognized if the implied fair value of goodwill is less than the carrying value. We estimate the fair value of our reporting units based on an income approach, whereby we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. A discounted cash flow analysis requires us to make various judgmental assumptions about future sales, operating margins, growth rates and discount rates, which are based on our budgets, business plans, economic projections, anticipated future cash flows and market participants. Assumptions are also made for varying perpetual growth rates for periods beyond the long-term business plan period.

We did not record an impairment of goodwill in 2018, 2017 or 2016; however, the estimated fair value of our EPO and IPD reporting units reduced significantly in 2016 and 2015 due to broad-based capital spending declines and heightened pricing pressure experienced in the oil and gas markets which are anticipated to continue in the near to mid-term. The EPO reporting unit is a component of our EPD reporting segment and is primarily focused on long lead time, custom and other highly-engineered pump products and systems. As of December 31, 2018, our EPO reporting unit had approximately $158 million of goodwill and its estimated fair value exceeded its carrying value by approximately 60% as compared to approximately $159 million of goodwill and its estimated fair value exceeded its carrying value by approximately 82% as of December 31, 2017. In addition, our IPD reporting unit had approximately $311 million of goodwill and its fair value exceeded its carrying value by approximately 40% as of December 31, 2018 as compared to approximately $319 million of goodwill and its fair value exceeded its carrying value by approximately 66% as of December 31, 2017. Key assumptions used in determining the estimated fair value of our EPO and IPD reporting units included the annual operating plan and forecasted operating results, successful execution of our current Flowserve Transformation 2.0 program and identified strategic initiatives, a constant cost of capital, continued stabilization and mid to long-term improvement of the macro-economic conditions of the oil and gas market, and a relatively stable global gross domestic product. Although we have concluded that there is no impairment on the goodwill associated with our EPO and IPD reporting units as of December 31, 2018, we will continue to closely monitor their performance and related market conditions for future indicators of potential impairment and reassess accordingly.

We considered our market capitalization in our evaluation of the fair value of our goodwill. Our market capitalization decreased slightly as compared with 2017 and did not indicate a potential impairment of our goodwill as of December 31, 2018.

Impairment losses for indefinite-lived intangible assets are recognized whenever the estimated fair value is less than the carrying value. Fair values are calculated for trademarks using a "relief from royalty" method, which estimates the fair value of a trademark by determining the present value of estimated royalty payments that are avoided as a result of owning the trademark. This method includes judgmental assumptions about sales growth and discount rates that have a significant impact on the fair value and are substantially consistent with the assumptions used to determine the fair value of our reporting units discussed above. We did not record a material impairment of our trademarks in 2018, 2017 or 2016.

The recoverable value of other long-lived assets, including property, plant and equipment and finite-lived intangible assets, is reviewed when indicators of potential impairments are present. The recoverable value is based upon an assessment of the estimated future cash flows related to those assets, utilizing assumptions similar to those for goodwill. Additional considerations related to our long-lived assets include expected maintenance and improvements, changes in expected uses and ongoing operating performance and utilization.

Deferred Loan Costs — Deferred loan costs, consisting of fees and other expenses associated with debt financing, are amortized over the term of the associated debt using the effective interest method. Additional amortization is recorded in periods where optional prepayments on debt are made.

Fair Values of Financial Instruments — Our financial instruments are presented at fair value in our consolidated balance sheets, with the exception of our long-term debt. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models may be applied.

Assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Hierarchical levels, as defined by Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures," are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities. An asset or a liability’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. Hierarchical levels are as follows:

Level I — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level II — Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level III — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Recurring fair value measurements are limited to investments in derivative instruments and certain equity securities. The fair value measurements of our derivative instruments are determined using models that maximize the use of the observable market inputs including interest rate curves and both forward and spot prices for currencies, and are classified as Level II under the fair value hierarchy. The fair values of our derivative instruments are included in Note 7. The fair value measurements of our investments in equity securities are determined using quoted market prices and are classified as Level I. The fair values of our investments in equity securities, and changes thereto, are immaterial to our consolidated financial position and results of operations.

Derivatives and Hedging Activities — We have a foreign currency derivatives and hedging policy outlining the conditions under which we can enter into financial derivative transactions. We do not use derivative instruments for trading or speculative purposes. All derivative instruments are recognized on the balance sheet at their fair values.

We employ a foreign currency economic hedging strategy to mitigate certain financial risks resulting from foreign currency exchange rate movements that impact foreign currency denominated receivables and payables, firm committed transactions and forecasted sales and purchases. The changes in the fair values are recognized immediately in other expense, net in the consolidated statements of income. See Note 7 for further discussion of forward exchange contracts.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and expect all counterparties to meet their obligations. If necessary, we would adjust the values of our derivative contracts for our or our counterparties’ credit risks.

Foreign Currency Translation — Assets and liabilities of our foreign subsidiaries are translated to U.S. dollars at exchange rates prevailing at the balance sheet date, while income and expenses are translated at average rates for each month. Translation gains and losses are reported as a component of accumulated other comprehensive loss. Transactional currency gains and losses arising from transactions in currencies other than our sites’ functional currencies are included in our consolidated results of operations.

Transaction and translation gains and losses arising from intercompany balances are reported as a component of accumulated other comprehensive loss when the underlying transaction stems from a long-term equity investment or from debt designated as not due in the foreseeable future. Otherwise, we recognize transaction gains and losses arising from intercompany transactions as a component of income. Where intercompany balances are not long-term investment related or not designated as due beyond the foreseeable future, we may mitigate risk associated with foreign currency fluctuations by entering into forward exchange contracts.

Stock-Based Compensation — Stock-based compensation is measured at the grant-date fair value. The exercise price of stock option awards and the value of restricted share, restricted share unit and performance-based unit awards (collectively referred to as "Restricted Shares") are set at the closing price of our common stock on the New York Stock Exchange on the date of grant, which is the date such grants are authorized by our Board of Directors. Restricted share units and performance-based units refer to restricted awards that do not have voting rights and accrue dividends, which are forfeited if vesting does not occur.

The intrinsic value of Restricted Shares, which is typically the product of share price at the date of grant and the number of Restricted Shares granted, is amortized on a straight-line basis to compensation expense over the periods in which the restrictions lapse based on the expected number of shares that will vest. We account for forfeitures as they occur resulting in the reversal of cumulative expense previously recognized.

Earnings Per Share — We use the two-class method of calculating Earnings Per Share ("EPS"), which determines earnings per share for each class of common stock and participating security as if all earnings for the period had been distributed. Unvested restricted share awards that earn non-forfeitable dividend rights qualify as participating securities and, accordingly, are included in the basic computation as such. Our unvested restricted shares participate on an equal basis with common shares; therefore, there is no difference in undistributed earnings allocated to each participating security. Accordingly, the presentation below is prepared on a combined basis and is presented as earnings per common share. The following is a reconciliation of net earnings of Flowserve Corporation and weighted average shares for calculating basic net earnings per common share.

Earnings per weighted average common share outstanding was calculated as follows:



	Year Ended December 31,
	2018		2017		2016
	(Amounts in thousands, except per share data)
Net earnings of Flowserve Corporation	$	119,671	$	2,652	$	132,455
Dividends on restricted shares not expected to vest	—		—		6
Earnings attributable to common and participating shareholders	$	119,671	$	2,652	$	132,461
Weighted average shares:
Common stock	130,794		130,600		130,147
Participating securities	29		103		285
Denominator for basic earnings per common share	130,823		130,703		130,432
Effect of potentially dilutive securities	448		655		543
Denominator for diluted earnings per common share	131,271		131,358		130,975
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.91	$	0.02	$	1.02
Diluted	0.91		0.02		1.01

Diluted earnings per share is based upon the weighted average number of shares as determined for basic earnings per share plus shares potentially issuable in conjunction with stock options, restricted share units and performance share units.

Research and Development Expense — Research and development costs are charged to expense when incurred. Aggregate research and development costs included in SG&A were $39.6 million, $38.6 million and $42.8 million in 2018, 2017 and 2016, respectively. Costs incurred for research and development primarily include salaries and benefits and consumable supplies, as well as rent, professional fees, utilities and the depreciation of property and equipment used in research and development activities.

Accounting Developments

Pronouncements Implemented

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" (the "New Revenue Standard" or "ASC 606"), which supersedes most of the revenue recognition requirements in "Revenue Recognition (Topic 605)" ("Topic 605"). On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method for transition, applying the guidance to those contracts which were not completed as of that date. According to our method of transition we adjusted for the cumulative effect of the changes made to our consolidated balance sheet and recorded a cumulative effect adjustment to increase retained earnings by approximately $20 million, mostly associated with the increase in POC method revenue, as a result of initially applying the standard. We have modified our accounting policies and practices, business processes, systems and controls to support compliance with the New Revenue Standard. Revenue recognition and related financial information for this Annual Report are based on the requirements of ASC 606. Accordingly, periods prior to January 1, 2018 are presented in accordance with Topic 605. Refer to Note 2 for a discussion on our adoption of the New Revenue Standard.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The ASU requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value with changes in fair value recognized in net income. The ASU also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet has been eliminated by this ASU. In February 2018, the FASB issued ASU No. 2018-03, "Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10)" to clarify certain aspects of ASU No. 2016-01. Our adoption of ASU No. 2016-01 and ASU No. 2018-03 effective January 1, 2018 did not have an impact on our consolidated financial condition and results of operations.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - A consensus of the FASB Emerging Issues Task Force.” The update was issued with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230 and other topics. Our adoption of ASU No. 2016-15 effective January 1, 2018 did not have a material impact on our consolidated statement of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory." The ASU guidance requires the recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. Our adoption of ASU No. 2016-16 effective January 1, 2018 did not have a material impact on our consolidated financial condition and results of operations.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The ASU requires entities to disaggregate the current service cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement and present the other components of net benefit cost elsewhere in the income statement and outside of operating income. Entities are required to retrospectively apply the requirement for a separate presentation in the income statement of service costs and other components of net benefit cost. We adopted the income statement presentation aspects of this new guidance on a retrospective basis. The following is a reconciliation of the effect of the reclassification of the net post-retirement benefit cost from cost of sales ("COS") and selling, general and administrative expenses ("SG&A") to other expense, net in our consolidated statement of income for the years ended December 31, 2017 and 2016:



December 31, 2017
(Amounts in thousands)	As Previously Reported			Adjustments(1)			As Reported
Cost of sales	$	(2,575,454	)	$	3,576		$	(2,571,878	)
Gross profit	1,085,377			3,576			1,088,953
Selling, general and administrative expense	(903,864		)	2,137			(901,727		)
Operating income	335,422			5,713			341,135
Other expense, net	(16,114		)	(5,713		)	(21,827		)

December 31, 2016
Cost of sales	$	(2,759,254	)	$	5,565		$	(2,753,689	)
Gross profit	1,231,233			5,565			1,236,798
Selling, general and administrative expense	(968,530		)	3,154			(965,376		)
Operating income	267,965			8,719			276,684
Other expense, net	2,280			(8,719		)	(6,439		)

_______________________________________

(1) We elected the practical expedient that allows us to use the amounts disclosed in prior comparative periods’ pension and postretirement plan footnotes as the basis for the retrospective application of the new income statement presentation requirements. Refer to Note 12 for additional information on the components of the net periodic cost for retirement and postretirement benefits plans.

In May 2017, the FASB issued ASU No. 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting." The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards, to which an entity would be required to apply modification accounting. The ASU is applied prospectively to awards modified on or after the effective date. Our adoption of ASU No. 2017-09 effective January 1, 2018 did not have an impact on our consolidated financial condition and results of operations.

Pronouncements Not Yet Implemented

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The ASU requires that organizations that lease assets recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases. The ASU will affect the presentation of lease-related expenses on the income statement and statement of cash flows and will increase the required disclosures related to leases. This ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years with early adoption permitted.

During our evaluation of ASU No. 2016-02 and all related ASU's, we formed a project team to assess the critical components and requirements of the new guidance, which included a review of our leasing contracts and a completeness assessment over our lease population. To support the requirements of the new standard, we have implemented a lease administration system and modified changes to our business processes, systems and controls. Effective January 1, 2019, we adopted the new standard under the modified retrospective approach, applying the current-period adjustment method. Under the transition guidance of the modified retrospective approach there are a number of optional practical expedients that we have elected to apply, of which among other things include, the carryforward of the historical lease classification under the previous standard, the hindsight practical expedient which will result in the shortening of lease terms for certain existing leases and corresponding leasehold improvements and a policy election to keep leases with an initial term of 12 months or less off of the balance sheet.

While we are still in the process of final evaluation, we expect the adoption of the standard will result in recognition of additional net lease assets and lease liabilities of approximately $220 million as of January 1, 2019. We do not currently believe that the standard will have a material impact on our results of operations. Additionally, we believe the new standard will not have a notable impact on our liquidity and will have no impact on our debt-covenant compliance under our current agreements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments." The ASU requires, among other things, the use of a new current expected credit loss ("CECL") model in order to determine our allowances for doubtful accounts with respect to accounts receivable and contract assets. The CECL model requires that we estimate our lifetime expected credit loss with respect to our receivables and contract assets and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. We will also be required to disclose information about how we developed the allowances, including changes in the factors that influenced our estimate of expected credit losses and the reasons for those changes. The amendments of the ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact of ASU No. 2016-13 on our consolidated financial condition and results of operations.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendments in this ASU allow companies to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The amendments of the ASU are effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact of ASU No. 2017-04 on our consolidated financial condition and results of operations.

On July 13, 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatory Redeemable Noncontrolling Interests with a Scope Exception.” The ASU amends guidance in FASB Accounting Standards Codification ("ASC") 260, Earnings Per Share, FASB ASC 480, Distinguishing Liabilities from Equity, and FASB ASC 815, Derivatives and Hedging. The amendments in Part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments in Part II of the ASU re-characterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the codification, to a scope exception. The amendments in this ASU must be applied to annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The adoption of ASU No. 2017-11 will not have an impact on our consolidated financial condition and results of operations.

On August 28, 2017, the FASB issued ASU No. 2017-12 and all related ASU's, "Derivatives and Hedging (Topic 815): Targeted improvements of Accounting for Hedging Activities." The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships. Additionally, the ASU simplifies the hedge accounting requirements and improve the disclosures of hedging arrangements. The amendments in this ASU must be applied to annual reporting periods beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2017-12 on our consolidated financial condition and results of operations.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Comprehensive Income (“AOCI”)." The ASU and its amendments were issued as a result of the enactment of the U.S. Tax Cuts and Jobs Act of 2017. The amendments of this ASU address the available options to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change (or portion thereof) is recorded. Additionally, the ASU outlines the disclosure requirements for releasing income tax effects from AOCI. The ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We are currently evaluating the impact of ASU No. 2018-02 on our consolidated financial condition and results of operations.

In July 2018, the FASB issued ASU No. 2018-07, "Compensation - Stock Compensation (Topic 718) - Improvements to Non-employee Share-based Payment Accounting." The amendments of this ASU apply to all share-based payment transactions to non-employees, in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations, accounted under ASC 505-50, Equity-Based Payments to Non-Employees. Under the amendments of ASU 2018-07, most of the guidance on compensation to nonemployees would be aligned with the requirements for shared based payments granted to employees, Topic 718. The ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The adoption of ASU No. 2018-07 will not have an impact on our consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." The amendments of the ASU modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosure information requirements for assets and liabilities measured at fair value in the statement of financial position or disclosed in the notes to financial statements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. We are currently evaluating the impact of ASU No. 2018-13 on our consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The ASU amends the disclosure requirements by adding, clarifying, or removing certain disclosures for sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020 and the amendments should be applied retrospectively to all periods presented. We are currently evaluating the impact of ASU No. 2018-14 on our consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU No. 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The ASU addresses how entities should account for costs associated with implementing a cloud computing arrangement that is considered a service contract. Per the amendments of the ASU, implementation costs incurred in a cloud computing arrangement that is a service contract should be accounted for in the same manner as implementation costs incurred to develop or obtain software for internal use as prescribed by guidance in ASC350-40. The ASU requires that implementation costs incurred in a cloud computing arrangement be capitalized rather than expensed. Further, the ASU specifies the method for the amortization of costs incurred during implementation, and the manner in which the unamortized portion of these capitalized implementation costs should be evaluated for impairment. The ASU also provides guidance on how to present such implementation costs in the financial statements and also creates additional disclosure requirements. The amendments are effective for fiscal years beginning after December 15, 2019, including interim periods. Early adoption of the ASU requirements is permitted, including adoption in any interim period. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently evaluating the impact of ASU No. 2018-15 on our consolidated financial condition and results of operations.

In October 2018, the FASB issued ASU No. 2018-17, "Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("VIEs")." The standard reduces the cost and complexity of financial reporting associated with VIEs. The new standard amends the guidance for determining whether a decision-making fee is a VIE. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety as currently required in GAAP. The amendments of this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the impact of ASU No. 2018-17 on our consolidated financial condition and results of operations.

In November 2018, the FASB issued ASU No. 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606." The ASU clarifies the interaction between the guidance for certain collaborative arrangements and the New Revenue Standard. The amendments of the ASU provide guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the New Revenue Standard. The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. Parts of the collaborative arrangement that are not in the purview of the revenue recognition standard should be presented separately. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of ASU No. 2018-18 on our consolidated financial condition and results of operations.

Revenue Recognition

12 Months Ended

Dec. 31, 2018

Revenue Recognition and Deferred Revenue [Abstract]

Revenue Recognition

REVENUE RECOGNITION

We enter into contracts with customers often having 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. We evaluate the commitments in our contracts with customers to determine if the commitments are both capable of being distinct and distinct in the context of the contract in order to identify performance obligations.

We recognize revenue when (or as) we satisfy a performance obligation by transferring control of the performance obligation to a customer. Control of a performance obligation may transfer to the customer either over time or at a point in time depending on an evaluation of the specific facts and circumstances for each contract, including the terms and conditions of the contract as agreed with the customer, as well as the nature of the products or services to be provided. Our larger contracts are typically completed within a one to three-year period, while many other contracts, such as “short cycle” contracts, have a shorter timeframe for revenue recognition.

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. This typically occurs when products have no alternative use and we have a right to payment for performance completed to date, including a reasonable profit margin. Our contracts often include cancellation provisions that require the customer to reimburse us for costs incurred up to the date of cancellation, and some contracts also provide for reimbursement of profit upon cancellation in addition to costs incurred to date.

Our primary method for recognizing revenue over time is the POC method. We measure progress towards completion by applying an input measure based on costs incurred to date relative to total estimated costs at completion (i.e., the cost-to-cost method). This method provides a reasonable depiction of the transfer of control of products and services to customers as it ensures our efforts towards satisfying a performance obligation, as reflected by costs incurred, are included in the measure of progress used for recognition of revenue. Costs generally include direct labor, direct material and manufacturing overhead. Costs that do not contribute towards control transfer are generally immaterial, but are excluded from the measure of progress in the event they are significant.

Historically, revenue recognized under the POC method has been 5% to 10% of our consolidated sales. Under the New Revenue Standard, we have experienced an increase in the amount of revenue recognized over time. This increase is primarily due to the application of the new “transfer of control” model for revenue recognition. Under this model, revenue for performance obligations subject to contractual transfer of control during the manufacturing process are recognized over time. This includes contracts with cancellation provisions that require reimbursement for costs incurred plus a reasonable margin and for which the performance obligation has no alternative use. Revenue from products and services transferred to customers over time accounted for approximately 22%, 4% and 6% of total revenue for the years ended December 31, 2018, 2017 and 2016, 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 78%, 96% and 94% of total revenue for the years ended December 31, 2018, 2017 and 2016, respectively.

A contract modification, or “change order,” occurs when the existing enforceable rights and obligations of a contract change, such as a change in the scope, price or terms and conditions. We account for a change order as a new accounting contract when the change order is limited to adding new, distinct products and services that are priced in an amount consistent with standalone selling price. Other change orders are accounted for as a modification of the existing accounting contract. When a change order occurs for a contract having in-process over time performance obligations, the effect of the change order on the transaction price and the measure of progress for the performance obligations to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Freight charges billed to customers are included in sales and the related shipping costs are included in cost of sales in our consolidated statements of income. If shipping activities are performed after a customer obtains control of a product, we apply a policy election to account for shipping as an activity to fulfill the promise to transfer the product to the customer.

We apply a policy election to exclude transaction taxes collected from customers from sales when the tax is both imposed on and concurrent with a specific revenue-producing transaction.

In certain instances, we provide guaranteed completion dates under the terms of our contracts. Failure to meet contractual delivery dates can result in late delivery penalties or liquidated damages. In the event that the transaction price of such a contract is probable of experiencing a significant reversal due to a penalty, we constrain a portion of the transaction price. This reduction to the transaction price could potentially cause estimated total contract costs to exceed the transaction price, in which case we record a provision for the estimated loss in the period the loss is first projected. In circumstances where the transaction price still exceeds total projected costs, the estimated penalty generally reduces profitability of the contract at the time of subsequent revenue recognition.

Our incremental costs to obtain a contract are limited to sales commissions. We apply the practical expedient to expense commissions as incurred for contracts having a duration of one year or less. Sales commissions related to contracts with a duration of greater than one year are immaterial to our financial statements and are also expensed as incurred.

We have not identified any material costs to fulfill a contract that qualify for capitalization under ASC 340-40.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for recognition of revenue. Many of our contracts have multiple performance obligations as the promise to transfer the individual goods or services, or certain groups of goods and services, is separately identifiable from other promises in the contract.

We allocate the transaction price of each contract to the performance obligations on the basis of standalone selling price and recognize revenue when, or as, control of each performance obligation transfers to the customer. For standard products, we identify the standalone selling price based on directly observable information. For customized or unique products and services, we apply the cost plus margin approach to estimate the standalone selling price. Under this method, we forecast our expected costs of satisfying a performance obligation and then add an appropriate standalone market margin for that distinct good or service.

We have elected to use the practical expedient to not adjust the transaction price of a contract for the effects of a significant financing component if, at the inception of the contract, we expect that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

A material product warranty exists when a customer has specifically requested or negotiated a warranty period that is significantly longer than our standard warranty period (i.e., a “service-type warranty”) and where the warranty obligation is material in the context of the contract. It is not common for our contracts to contain material product warranties. However, when such a warranty exists, we account for it as a separate performance obligation. We estimate the standalone selling price of the warranty obligation utilizing a cost plus margin approach and allocate a portion of the transaction price to the warranty performance obligation on the basis of estimated standalone selling price. We recognize revenue for warranty performance obligations over time on a straight line basis over the extended warranty period.

A material right option is a benefit provided to a customer in a current contract, such as an option to receive future products or services for free or at a significant discount, that is incremental to benefits widely available to similar customers that do not enter into a specific contract. It is not common for our contracts to contain material right options. However, when a material right option exists, it is accounted for as a separate performance obligation and a portion of the transaction price is allocated to the performance obligation based on the estimated standalone selling price of the option. Revenue is recognized when (or as) the customer exercises the right to acquire future products and/or services.

On December 31, 2018, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations related to contracts having an original expected duration in excess of one year was approximately $450 million. We estimate recognition of approximately $361 million of this amount as revenue in 2019 and an additional $89 million in 2020 and thereafter.

Revenue recognized for performance obligations satisfied (or partially satisfied) in prior periods for the year ended December 31, 2018 was not material.

ASC 606 Adoption Impact

We applied ASC 606 only to contracts that were not substantially complete as of January 1, 2018 and reflected the aggregate impact of all contract modifications (“change orders”) that occurred before the beginning of the earliest period presented when accounting for modified contracts at transition. The following table presents the cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2018 related to the adoption of the New Revenue Standard:



	December 31, 2017	Adjustments due to adoption of New Revenue Standard		January 1, 2018
(Amounts in thousands)	December 31, 2017	Adjustments due to adoption of New Revenue Standard		January 1, 2018
Accounts receivable, net of allowance for doubtful accounts(1)	856,711	(49,247	)	807,464
Contract assets, net(2)	—	219,361		219,361
Inventories, net(3)	884,273	(238,573	)	645,700
Prepaid expenses and other	114,316	(4,457	)	109,859
Total current assets	2,558,745	(72,916	)	2,485,829
Deferred taxes	51,974	(2,706	)	49,268
Other assets, net	199,722	2,004		201,726
Total assets	4,910,474	(73,618	)	4,836,856
Accounts payable	443,113	11,784		454,897
Accrued liabilities(4)	724,196	(290,445	)	433,751
Contract liabilities(5)	—	178,515		178,515
Total current liabilities	1,242,908	(100,146	)	1,142,762
Retirement obligations and other liabilities	496,954	6,568		503,522
Retained earnings	3,503,947	19,642		3,523,589
Total equity	1,670,954	19,960		1,690,914
Total liabilities and equity	4,910,474	(73,618	)	4,836,856

_____________________________________

(1) Adjusted for contract assets accounted for under delivery based methods, previously reported in receivables, net.

(2) Represents our revenue recognized in advance of our contractual right to bill the customer.

(3) Adjusted for contract assets accounted under the over time method, previously reported in inventories, net.

(4) Adjusted for deferred revenue previously reported in accrued liabilities and reclassified to contract assets and contract liabilities.

(5) Represents contractual billings in excess of revenue recognized at the contract level, previously reported in accrued liabilities.

The modified retrospective approach requires a dual reporting presentation to be disclosed in the year of adoption. The dual reporting requirement outlines the impact amount by which a financial statement line is affected in the current reporting period by the adoption of the New Revenue Standard as compared with the previous standard in effect before the adoption.

The following tables present the dual reporting requirements:



	December 31, 2018
(Amounts in thousands, except percentages)	Balances without Adoption of New Revenue Standard			Effect of Change			As Reported
Sales	$	3,761,470		$	71,196		$	3,832,666
Cost of sales	(2,598,904		)	(45,926		)	(2,644,830		)
Gross profit	1,162,566			25,270			1,187,836
Gross profit margin	30.9		%				31.0		%
Selling, general and administrative expense	(942,648		)	(1,066		)	(943,714		)
Loss on sale of business	(7,727		)	—			(7,727		)
Net earnings from affiliates	11,143			—			11,143
Operating income	223,334			24,204			247,538
Operating income as a percent of sales	5.9		%				6.5		%
Interest expense	(58,160		)	—			(58,160		)
Interest income	6,465			—			6,465
Other expense, net	(22,066		)	2,497			(19,569		)
Earnings before income taxes	149,573			26,701			176,274
Provision for income taxes	(47,309		)	(3,915		)	(51,224		)
Net earnings, including noncontrolling interests	102,264			22,786			125,050
Less: Net earnings attributable to noncontrolling interests	(5,379		)	—			(5,379		)
Net earnings attributable to Flowserve Corporation	$	96,885		$	22,786		$	119,671



	December 31, 2018
(Amounts in thousands)	Balances without Adoption of New Revenue Standard	Effect of Change		As Reported
Accounts receivable, net	852,055	(59,621	)	792,434
Contract assets, net	—	228,579		228,579
Inventories, net	895,677	(261,806	)	633,871
Prepaid expenses and other	121,796	(13,218	)	108,578
Total current assets	2,489,211	(106,066	)	2,383,145
Other assets, net	183,493	6,671		190,164
Total assets	4,715,916	(99,639	)	4,616,277
Accounts payable	406,569	12,324		418,893
Accrued liabilities	750,505	(359,099	)	391,406
Contract liabilities	—	202,458		202,458
Total current liabilities	1,225,292	(144,317	)	1,080,975
Retained earnings	3,500,566	42,441		3,543,007
Total equity	1,618,802	41,978		1,660,780
Total liabilities and equity	4,715,916	(99,639	)	4,616,277

Disaggregated Revenue

We conduct our operations through three business segments based on the type of product and how we manage the business:


•	Engineered Product Division ("EPD") for long lead time, custom and other highly-engineered pumps and pump systems, mechanical seals, auxiliary systems and replacement parts and related services;


•	Industrial Product Division ("IPD") for engineered and pre-configured industrial pumps and pump systems and related products and 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 three business segments generate Original Equipment and Aftermarket revenues.

The following table presents our customer revenues disaggregated by revenue source:



	December 31, 2018
(Amounts in thousands)	EPD		IPD		FCD		Total
Original Equipment	$	529,005	$	463,157	$	943,893	$	1,936,055
Aftermarket	1,331,484		296,842		268,285		1,896,611
	$	1,860,489	$	759,999	$	1,212,178	$	3,832,666

	December 31, 2017 (1)
(Amounts in thousands)	EPD		IPD		FCD		Total
Original Equipment	$	511,060	$	457,992	$	906,890	$	1,875,942
Aftermarket	1,227,022		281,664		276,203		1,784,889
	$	1,738,082	$	739,656	$	1,183,093	$	3,660,831

	December 31, 2016 (1)
(Amounts in thousands)	EPD		IPD		FCD		Total
Original Equipment	$	683,871	$	534,957	$	975,786	$	2,194,614
Aftermarket	1,279,215		264,966		251,692		1,795,873
	$	1,963,086	$	799,923	$	1,227,478	$	3,990,487

_____________________________________

(1) Prior periods are presented in accordance with Topic 605.

Our customer sales are diversified geographically. The following table presents our revenues disaggregated by geography, based on the shipping addresses of our customers:



	December 31, 2018
(Amounts in thousands)	EPD		IPD		FCD		Total
North America(1)	$	715,571	$	322,066	$	540,316	$	1,577,953
Latin America(1)	190,605		28,771		22,405		241,781
Middle East and Africa	280,461		49,023		138,240		467,724
Asia Pacific	408,104		94,455		279,109		781,668
Europe	265,748		265,684		232,108		763,540
	$	1,860,489	$	759,999	$	1,212,178	$	3,832,666

	December 31, 2017 (2)
(Amounts in thousands)	EPD		IPD		FCD		Total
North America(1)	$	667,572	$	301,841	$	477,275	$	1,446,688
Latin America(1)	140,418		28,559		33,207		202,184
Middle East and Africa	301,998		54,535		155,447		511,980
Asia Pacific	351,178		93,834		239,197		684,209
Europe	276,916		260,887		277,967		815,770
	$	1,738,082	$	739,656	$	1,183,093	$	3,660,831

	December 31, 2016 (2)
(Amounts in thousands)	EPD		IPD		FCD		Total
North America(1)	$	795,919	$	328,026	$	478,462	$	1,602,407
Latin America(1)	204,123		34,112		49,440		287,675
Middle East and Africa	320,529		58,389		169,212		548,130
Asia Pacific	351,153		128,289		233,027		712,469
Europe	291,362		251,107		297,337		839,806
	$	1,963,086	$	799,923	$	1,227,478	$	3,990,487

_____________________________________

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

(2) Prior periods are presented in accordance with Topic 605.

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 bill the customer under the terms of a contract. A contract liability represents our contractual billings in advance of revenue recognized for a contract.

The following table presents opening and closing balances of contract assets and contract liabilities, current and long-term, for the year ended December 31, 2018:



( 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, 2018	$	219,361		$	3,990		$	178,515		$	3,925
Revenue recognized that was included in contract liabilities at the beginning of the period	—			—			(123,458		)	(1,360		)
Increase due to revenue recognized in the period in excess of billings	846,922			6,668			—			—
Increase due to billings arising during the period in excess of revenue recognized	—			—			152,664			(481		)
Amounts transferred from contract assets to receivables	(815,213		)	(2,503		)	—			—
Currency effects and other, net	(22,491		)	2,812			(5,263		)	(714		)
Ending balance, December 31, 2018	$	228,579		$	10,967		$	202,458		$	1,370

_____________________________________

(1) Included in other assets, net.

(2) Included in retirement obligations and other liabilities.

Dispositions	12 Months Ended
Dispositions	Dec. 31, 2018
Business Combinations [Abstract]
Dispositions	DISPOSITIONS IPD Business Divestiture On June 29, 2018, pursuant to a plan of sale approved by management, we executed an agreement to divest two IPD locations and associated product lines, including the related assets and liabilities. This transaction did not meet the criteria for classification of assets held for sale as of June 30, 2018 due to a contingency that could have potentially impacted the final terms and/or timing of the divestiture. The sale transaction was completed on August 9, 2018. During the twelve months ended December 31, 2018, we recorded a pre-tax charge of $25.1 million, including a pre-tax charge of $17.4 million in the second quarter of 2018 and a loss on sale of the business of $7.7 million in the third quarter of 2018. The second quarter of 2018 pre-tax charge related to write-downs of inventory and long-lived assets to their estimated fair value, of which $7.7 million was recorded in COS and $9.7 million was recorded in SG&A. The third quarter of 2018 pre-tax charge primarily related to working capital changes since the second quarter of 2018 and net cash transferred at the closing date of $3.7 million. The sale included a manufacturing facility in Germany and a related assembly facility in France. In 2017, net sales related to the business totaled approximately $42 million, although the business produced an operating loss in each of the last two fiscal years. Vogt Effective July 6, 2017, we sold our FCD's Vogt product line and related assets and liabilities to a privately held company for $28.0 million of cash received at closing. The sale resulted in a pre-tax gain of $11.1 million recorded in gain on sale of business in the consolidated statements of income. In 2016, net sales related to the Vogt business totaled approximately $17 million, with earnings before interest and taxes of approximately $4 million. Gestra AG Effective May 2, 2017, we sold our FCD's Gestra AG ("Gestra") business to a leading provider of steam system solutions for $203.6 million (€178.3 million), which included $180.8 million (€158.3 million) of cash received at closing (net of divested cash and subsequent working capital adjustments) and $24.0 million (€20.0 million) of previous escrow amounts collected in the fourth quarter of 2017. The sale resulted in a pre-tax gain of $130.2 million ($79.4 million after-tax) recorded in gain on sale of business in the consolidated statements of income. The sale included Gestra’s manufacturing facility in Germany as well as related operations in the U.S., the United Kingdom ("U.K."), Spain, Poland, Italy, Singapore and Portugal. In 2016, Gestra recorded revenues of approximately $101 million (€92 million) with earnings before interest and taxes of approximately $17 million (€15 million).

Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2017 are as follows:



	EPD			IPD			FCD			Total
	(Amounts in thousands)
Balance as of December 31, 2016	$	473,831		$	299,765		$	431,458		$	1,205,054
Dispositions	—			(1,900		)	(36,880		)	(38,780		)
Currency translation and other	8,378			21,435			22,101			51,914
Balance as of December 31, 2017	$	482,209		$	319,300		$	416,679		$	1,218,188
Currency translation and other	(3,338		)	(8,032		)	(9,178		)	(20,548		)
Balance as of December 31, 2018	$	478,871		$	311,268		$	407,501		$	1,197,640

The following table provides information about our intangible assets for the years ended December 31, 2018 and 2017:



		December 31, 2018					December 31, 2017
	Useful Life (Years)	Ending Gross Amount		Accumulated Amortization			Ending Gross Amount		Accumulated Amortization
	(Amounts in thousands, except years)
Finite-lived intangible assets:
Engineering drawings(1)	10-22	$	89,796	$	(75,239	)	$	90,442	$	(71,761	)
Existing customer relationships(2)	5-10	82,235		(47,016		)	84,291		(41,279		)
Patents	9-16	26,251		(26,136		)	26,876		(26,231		)
Other	4-40	88,138		(37,145		)	88,887		(34,251		)
		$	286,420	$	(185,536	)	$	290,496	$	(173,522	)
Indefinite-lived intangible assets(3)		$	91,251	$	(1,585	)	$	94,665	$	(1,590	)

____________________________________


(1)	Engineering drawings represent the estimated fair value associated with specific acquired product and component schematics.


(2)	Existing customer relationships acquired prior to 2011 had a useful life of five years.


(3)	Accumulated amortization for indefinite-lived intangible assets relates to amounts recorded prior to the implementation date of guidance issued in ASC 350.

The following schedule outlines actual amortization expense recognized during 2018 and an estimate of future amortization based upon the finite-lived intangible assets owned at December 31, 2018:



	Amortization Expense
	(Amounts in thousands)
Actual for year ended December 31, 2018	$	14,068
Estimated for year ended December 31, 2019	16,178
Estimated for year ended December 31, 2020	15,030
Estimated for year ended December 31, 2021	10,982
Estimated for year ended December 31, 2022	9,692
Estimated for year ended December 31, 2023	7,132
Thereafter	41,874

Amortization expense for finite-lived intangible assets was $15.3 million in 2017 and $13.9 million in 2016.

Inventories

12 Months Ended

Dec. 31, 2018

Inventory Disclosure [Abstract]

Inventories

INVENTORIES

Inventories, net consisted of the following:



	December 31,
	2018			2017
	(Amounts in thousands)
Raw materials	$	310,204		$	358,827
Work in process(1)	191,660			548,250
Finished goods(2)	205,814			215,849
Less: Progress billings	—			(160,044		)
Less: Excess and obsolete reserve	(73,807		)	(78,609		)
Inventories, net	$	633,871		$	884,273

____________________________________

(1) In the second quarter of 2017, we recorded a $16.9 million charge for costs incurred related to a contract to supply oil and gas platform equipment to an end user in Latin America. This charge was primarily related to our IPD reporting segment and resulted in a decrease to work in process.

(2) In the second quarter of 2018, we recorded a $7.7 million charge related to the divestiture of two IPD locations and related product lines, which resulted in a decrease to finished goods. Refer to Note 3 for further discussion.

During 2018, 2017 and 2016, we recognized expenses of $16.2 million, $22.9 million and $14.6 million, respectively, for excess and obsolete inventory. These expenses are included in COS in our consolidated statements of income.

As part of the adoption of the New Revenue Standard, certain work in process inventory and progress billings associated with POC contracts were recognized as cost of sales or reclassified to contract assets or contract liabilities. Refer to Note 2 for further discussion.

Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Plans

STOCK-BASED COMPENSATION PLANS

We maintain the Flowserve Corporation Equity and Incentive Compensation Plan (the "2010 Plan"), which is a shareholder-approved plan authorizing the issuance of up to 8,700,000 shares of our common stock in the form of incentive stock options, non-statutory stock options, restricted shares, restricted share units and performance-based units (collectively referred to as "Restricted Shares"), stock appreciation rights and bonus stock. Of the 8,700,000 shares of common stock authorized under the 2010 Plan, 2,089,079 were available for issuance as of December 31, 2018. The long-term incentive program was amended to allow Restricted Shares granted after January 1, 2016 to employees who retire and have achieved at least 55 years of age and ten years of service to continue to vest over the original vesting period ("55/10 Provision").

Stock Options — Options granted to officers, other employees and directors allow for the purchase of common shares at the market value of our stock on the date the options are granted. Options generally become exercisable after three years. Options generally expire ten years from the date of the grant or within a short period of time following the termination of employment or cessation of services by an option holder. No stock options were granted during the year ended December 31, 2018, compared to the 114,943 stock options granted for the same period in 2017. No stock options were granted for the same period in 2016. As of December 31, 2018, 114,943 stock options were outstanding, with a grant date fair value of $2.0 million, which is expected to be recognized over a weighted-average period of approximately one year. No stock options were vested during years ended December 31, 2018, 2017 or 2016.

Information related to stock options issued to officers, other employees and directors under all plans is presented in the following table:



	2018			2017			2016
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Number of shares under option:
Outstanding — beginning of year	114,943	$	48.63	—	$	—	84,261		$	17.42
Granted	—	—		114,943	48.63		—		—
Exercised	—	—		—	—		(84,261	)	17.42
Canceled	—	—		—	—		—		—
Outstanding — end of year	114,943	$	48.63	114,943	$	48.63	—		$	—
Exercisable — end of year	—	$	—	—	$	—	—		$	—

The weighted average remaining contractual life of options outstanding at December 31, 2018 and 2017 was 8.3 years and 9.3 years, respectively. The total intrinsic value of stock options exercised for the year ended December 31, 2016 was $2.4 million.

Restricted Shares — Generally, the restrictions on Restricted Shares do not expire for a minimum of one year and a maximum of three years, and shares are subject to forfeiture during the restriction period. Most typically, Restricted Share grants have staggered vesting periods over one to three years from grant date. The intrinsic value of the Restricted Shares, which is typically the product of share price at the date of grant and the number of Restricted Shares granted, is amortized on a straight-line basis to compensation expense over the periods in which the restrictions lapse.

Awards of Restricted Shares are valued at the closing market price of our common stock on the date of grant. The unearned compensation is amortized to compensation expense over the vesting period of the restricted shares, except for awards related to the 55/10 Provision which are expensed when granted. Unearned compensation is amortized to compensation expense over the vesting period of the Restricted Shares. As of December 31, 2018 and 2017, we had $24.3 million and $16.7 million, respectively, of unearned compensation cost related to unvested Restricted Shares, which is expected to be recognized over a weighted-average period of approximately one year. These amounts will be recognized into net earnings in prospective periods as the awards vest. The total fair value of Restricted Shares vested during the years ended December 31, 2018, 2017 and 2016 was $14.3 million, $30.5 million and $38.8 million, respectively.

We recorded stock-based compensation for Restricted Shares as follows:



	Year Ended December 31,
	2018			2017		2016
	(Amounts in millions)
Stock-based compensation expense	$	19.9		$	22.8	$	30.2
Related income tax benefit	(4.5		)	(5.2)		(10.4)
Net stock-based compensation expense	$	15.4		$	17.6	$	19.8

The following table summarizes information regarding Restricted Shares:



	Year Ended December 31, 2018
	Shares		Weighted Average Grant-Date Fair Value
Number of unvested Restricted Shares:
Outstanding — beginning of year	1,203,852		$	47.10
Granted	932,392		44.14
Vested	(308,747	)	46.38
Canceled	(297,283	)	49.09
Outstanding — ending of year	1,530,214		$	45.06

Unvested Restricted Shares outstanding as of December 31, 2018, includes approximately 767,000 units with performance-based vesting provisions. Performance-based units are issuable in common stock and vest upon the achievement of pre-defined performance targets. Performance-based units granted prior to 2017 have performance targets based on our average annual return on net assets over a three-year period as compared with the same measure for a defined peer group for the same period. Performance-based units granted in 2017 and 2018 have performance targets based on our average return on invested capital and our total shareholder return ("TSR") over a three-year period. Most units were granted in three annual grants since January 1, 2016 and have a vesting percentage between 0% and 200% depending on the achievement of the specific performance targets. Except for shares granted under the 55/10 Provision, compensation expense is recognized ratably over a cliff-vesting period of 36 months based on the fair value of our common stock on the date of grant, as adjusted for actual forfeitures. During the performance period, earned and unearned compensation expense is adjusted based on changes in the expected achievement of the performance targets for all performance-based units granted except for the TSR-based units. Vesting provisions range from 0 to approximately 1,534,000 shares based on performance targets. As of December 31, 2018, we estimate vesting of approximately 615,000 shares based on expected achievement of performance targets.

Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

DERIVATIVES AND HEDGING ACTIVITIES

Our risk management and foreign currency derivatives and hedging policy specifies the conditions under which we may enter into derivative contracts. See Note 1 for additional information on our purpose for entering into derivatives and our overall risk management strategies. We enter into foreign exchange forward contracts to hedge our cash flow risks associated with transactions denominated in currencies other than the local currency of the operation engaging in the transaction.

Foreign exchange contracts had a notional values of $280.9 million and $235.6 million at December 31, 2018 and 2017, respectively. At December 31, 2018, the length of foreign exchange contracts currently in place ranged from 4 days to 21 months. During the second quarter of 2017, we discontinued our program to designate forward exchange contracts. The discontinuance of this program had no impact on our financial position as of December 31, 2017.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties.

The fair values of foreign exchange contracts are summarized below:



	Year Ended December 31,
	2018		2017
	(Amounts in thousands)
Current derivative assets	$	535	$	2,489
Noncurrent derivative assets	5		177
Current derivative liabilities	3,285		284
Noncurrent derivative liabilities	2		56

Current and noncurrent derivative assets are reported in our consolidated balance sheets in prepaid expenses and other and other assets, net, respectively. Current and noncurrent derivative liabilities are reported in our consolidated balance sheets in accrued liabilities and retirement obligations and other liabilities, respectively.

The impact of net changes in the fair values of foreign exchange contracts are summarized below:



	Year Ended December 31,
	2018			2017		2016
	(Amounts in thousands)
(Loss) gain recognized in income	$	(3,154	)	$	2,122	$	5,693

Gains and losses recognized in our consolidated statements of income for foreign exchange contracts are classified as Other expense, net.

In March 2015, we designated €255.7 million of our €500.0 million 2022 EUR Senior Notes discussed in Note 11 as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency. We used the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the carrying value of the 2022 EUR Senior Notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss on our consolidated balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in Other expense, net in our consolidated statements of income. We evaluate the effectiveness of our net investment hedge on a prospective basis at the beginning of each quarter. We did not record any ineffectiveness for the years ended December 31, 2018, 2017 or 2016.