þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2014
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or
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Indiana
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45-2080495
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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1 International Drive, Rye Brook, NY 10573
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||
(address of principal executive offices and zip code)
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(914) 323-5700
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(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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ITEM
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PAGE
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PART I
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1
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1A.
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1B.
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2
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3
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4
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*
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PART II
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5
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6
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7
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7A.
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8
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9
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9A.
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9B.
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PART III
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10
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11
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12
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13
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14
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PART IV
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15
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*
|
Included pursuant to Instruction 3 of Item 401(b) of Regulation S-K.
|
•
|
Accelerate Profitable Growth.
To achieve our goal of accelerating growth, we have identified the following five priorities:
|
•
|
Emerging Market Growth
-
We seek to accelerate our growth in priority emerging markets through increased focus on product localization and channel development.
|
▪
|
Innovation
- We seek to enhance the Company’s innovation efforts with increased focus on disruptive technologies that can significantly improve customers’ water productivity, quality and resilience.
|
•
|
Industry vertical marketing
- We are strengthening vertical marketing capabilities for key end markets to bring the full breadth of the Company’s portfolio to bear on critical customer challenges.
|
•
|
Commercial team effectiveness
- We continue to strengthen our regional commercial teams, including through the global adoption of improved commercial information technology tools, such as customer relationship management software.
|
•
|
Mergers and acquisitions
- We continue to evaluate and, where appropriate, will act upon attractive acquisition candidates to accelerate our growth, including into new markets.
|
•
|
Build a Continuous Improvement Culture.
We seek to embed continuous improvement into our culture and simplify our organizational structure to make the Company more agile, more profitable, and create room to re-invest in growth. To accomplish this, we will continue to strengthen our lean six sigma and global strategic sourcing capabilities, and continue to optimize our cost structure by eliminating unnecessary costs and inefficient overhead.
|
•
|
Build Superior Leadership and Talent Development
.
We seek to continue to invest in attracting, developing and retaining world-class talent with an increased focus on leadership and talent development programs. We will continue to align individual performance to the objectives of the Company and its shareholders
.
|
•
|
Build a Culture of Execution and Accountability.
We seek to ensure the impact of these strategic focus areas by holding our people accountable and streamlining our performance management and goal deployment systems.
|
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Revenue
|
|||||||||||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||
|
$ Amount
|
|
% of Total
|
|
$ Amount
|
|
% of Total
|
|
$ Amount
|
|
% of Total
|
|||||||||
United States
|
$
|
1,477
|
|
|
38
|
%
|
|
$
|
1,434
|
|
|
38
|
%
|
|
$
|
1,400
|
|
|
37
|
%
|
Europe
|
1,379
|
|
|
35
|
%
|
|
1,387
|
|
|
36
|
%
|
|
1,338
|
|
|
35
|
%
|
|||
Asia Pacific
|
478
|
|
|
12
|
%
|
|
467
|
|
|
12
|
%
|
|
469
|
|
|
12
|
%
|
|||
Other
|
582
|
|
|
15
|
%
|
|
549
|
|
|
14
|
%
|
|
584
|
|
|
16
|
%
|
|||
Total
|
$
|
3,916
|
|
|
|
|
$
|
3,837
|
|
|
|
|
$
|
3,791
|
|
|
|
|
Property, Plant & Equipment
|
|||||||||||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||
|
$ Amount
|
|
% of Total
|
|
$ Amount
|
|
% of Total
|
|
$ Amount
|
|
% of Total
|
|||||||||
United States
|
$
|
180
|
|
|
39
|
%
|
|
$
|
186
|
|
|
38
|
%
|
|
$
|
183
|
|
|
38
|
%
|
Europe
|
206
|
|
|
45
|
%
|
|
225
|
|
|
46
|
%
|
|
219
|
|
|
45
|
%
|
|||
Asia Pacific
|
53
|
|
|
11
|
%
|
|
45
|
|
|
9
|
%
|
|
65
|
|
|
13
|
%
|
|||
Other
|
22
|
|
|
5
|
%
|
|
32
|
|
|
7
|
%
|
|
20
|
|
|
4
|
%
|
|||
Total
|
$
|
461
|
|
|
|
|
$
|
488
|
|
|
|
|
$
|
487
|
|
|
|
•
|
possibility of unfavorable circumstances arising from host country laws or regulations;
|
•
|
currency exchange rate fluctuations and restrictions on currency repatriation;
|
•
|
potential negative consequences from changes to taxation policies;
|
•
|
disruption of operations from labor and political disturbances;
|
•
|
changes in tariff and trade barriers and import and export licensing requirements; and
|
•
|
insurrection or war.
|
•
|
our decision to repatriate non-U.S. earnings for which we have not previously provided for U.S. taxes;
|
•
|
the jurisdictions in which profits are determined to be earned and taxed;
|
•
|
sustainability of historical income tax rates in the jurisdictions in which we conduct business;
|
•
|
the resolution of issues arising from tax audits with various tax authorities; and
|
•
|
changes in the valuation of our deferred tax assets and liabilities, and changes in deferred tax valuation allowances.
|
•
|
increase our vulnerability to general adverse economic and industry conditions;
|
•
|
limit our ability to obtain additional financing or borrow additional funds;
|
•
|
limit our ability to pay future dividends;
|
•
|
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
|
•
|
require that a substantial portion of our cash flow from operations be used for the payment of interest on our indebtedness instead of funding working capital, capital expenditures, acquisitions or other general corporate purposes; and
|
•
|
increase the amount of interest expense that we must pay because some of our borrowings are at variable interest rates, which, as interest rates increase, would result in higher interest expense.
|
•
|
actual or anticipated fluctuations in our operating results due to factors related to our business;
|
•
|
success or failure of our business strategy;
|
•
|
our quarterly or annual earnings, or those of other companies in our industry;
|
•
|
our ability to obtain financing as needed;
|
•
|
announcements by us or our competitors of significant new business awards;
|
•
|
announcements by us or our competitors of significant acquisitions or dispositions;
|
•
|
changes in accounting standards, policies, guidance, interpretations or principles;
|
•
|
changes in earnings estimates by securities analysts or our ability to meet those estimates;
|
•
|
our ability to execute restructuring and realignment actions;
|
•
|
the operating and stock price performance of other comparable companies;
|
•
|
natural or environmental disasters that investors believe may affect us;
|
•
|
overall market fluctuations;
|
•
|
fluctuations in the budgets of federal, state and local governmental entities around the world;
|
•
|
results from any material litigation or government investigation;
|
•
|
changes in laws and regulations affecting our business; and
|
•
|
general economic conditions and other external factors.
|
Location
|
|
State or
Country
|
|
Principal Business Activity
|
|
Approx.
Square
Feet
|
|
Owned or
Expiration
Date
of Lease
|
|
Water Infrastructure
|
|||||||||
Emmaboda
|
|
Sweden
|
|
Administration and Manufacturing
|
|
1,194,000
|
|
|
Owned
|
Stockholm
|
|
Sweden
|
|
Administration and Research & Development
|
|
172,000
|
|
|
2019
|
Shenyang
|
|
China
|
|
Manufacturing
|
|
125,000
|
|
|
Owned
|
Bridgeport
|
|
NJ
|
|
Administration and Manufacturing
|
|
136,000
|
|
|
2015
|
Yellow Springs
|
|
OH
|
|
Administration and Manufacturing
|
|
112,000
|
|
|
Owned
|
Quenington
|
|
UK
|
|
Manufacturing
|
|
86,000
|
|
|
2015
|
Applied Water
|
|||||||||
Morton Grove
|
|
IL
|
|
Administration and Manufacturing
|
|
530,000
|
|
|
Owned
|
Montecchio
|
|
Italy
|
|
Administration and Manufacturing
|
|
379,000
|
|
|
Owned
|
Nanjing
|
|
China
|
|
Manufacturing
|
|
363,000
|
|
|
Owned
|
Auburn
|
|
NY
|
|
Manufacturing
|
|
273,000
|
|
|
Owned
|
Lubbock
|
|
TX
|
|
Manufacturing
|
|
229,000
|
|
|
Owned
|
Cheektowaga
|
|
NY
|
|
Manufacturing
|
|
145,000
|
|
|
Owned
|
Corporate Headquarters
|
|||||||||
Rye Brook
|
|
NY
|
|
Administration
|
|
67,000
|
|
|
2023
|
NAME
|
|
AGE
|
|
CURRENT TITLE
|
|
OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS
|
Patrick K. Decker
|
|
50
|
|
President and Chief Executive Officer (2014)
|
|
• President and Chief Executive Officer, Harsco Corp. (diversified, worldwide industrial company) (2012)
• President, Flow Control Segment, Tyco International Ltd. (industrial products and services company) (2003)
|
|
|
|
|
|
|
|
Michael T. Speetzen
|
|
45
|
|
Senior VP and Chief Financial Officer (2011)
|
|
• VP of Finance, Fluid and Motion Control, ITT Corporation (global manufacturing company) (2009)
|
|
|
|
|
|
|
|
Tomas Brannemo
|
|
43
|
|
Senior VP and President, Transport (2014)
|
|
• VP, Transport (2013)
• VP Strategy and Aftermarket and Service (2010)
• VP and Director of Business Unit Aftermarket and Service (2010)
• VP Marketing and Sales, Customer Support, Volvo Construction Equipment, AB Volvo (multinational manufacturing company) (2008)
|
|
|
|
|
|
|
|
Christopher R. McIntire
|
|
51
|
|
Senior VP and President, Analytics and Treatment (2013)
|
|
• Senior VP and President, Analytics (2011)
• President and Chief Operating Officer, Nova Analytics (manufacturing and analytical instruments) (2006)
|
|
|
|
|
|
|
|
Robyn T. Mingle
|
|
49
|
|
Senior VP and Chief Human Resources Officer (2011)
|
|
• Senior VP of Human Resources, Hovnanian Enterprises, Inc. (real estate company) (2003)
|
|
|
|
|
|
|
|
Kenneth Napolitano
|
|
53
|
|
Senior VP and President, Applied Water Systems (2012)
|
|
• Senior VP and President, Residential and Commercial Water (2011)
• President, Residential and Commercial Water (2009)
|
|
|
|
|
|
|
|
Colin R. Sabol
|
|
47
|
|
Senior VP and President, Dewatering (2013)
|
|
• Senior VP and Chief Strategy and Growth Officer (2011)
• VP of Marketing and Business Development, Fluid and Motion Control, ITT Corporation (global manufacturing company)(2009)
|
|
|
|
|
|
|
|
NAME
|
|
AGE
|
|
CURRENT TITLE
|
|
OTHER BUSINESS EXPERIENCE DURING PAST 5 YEARS
|
Claudia S. Toussaint
|
|
51
|
|
Senior VP, General Counsel and Corporate Secretary (2014)
|
|
• Senior VP, General Counsel and Secretary, Barnes Group Inc. (international industrial and aerospace manufacturing) (2012)
• General Counsel, Flow Control Segment, Tyco International Ltd. (industrial products and services company) (2012)
• Senior VP, General Counsel and Secretary, Barnes Group Inc. (international industrial and aerospace manufacturing) (2010)
• Senior VP, General Counsel and Secretary, Embarq (multinational communications company) (2009)
|
NAME
|
|
TITLE
|
Markos I. Tambakeras
|
|
Chairman, Xylem Inc., Former Chairman, President and Chief Executive Officer, Kennametal, Inc.
|
|
|
|
Curtis J. Crawford, Ph.D.
|
|
President and Chief Executive Officer, XCEO, Inc.
|
|
|
|
Patrick K. Decker
|
|
President and Chief Executive Officer, Xylem Inc.
|
|
|
|
Robert F. Friel
|
|
Chairman, President and Chief Executive Officer, PerkinElmer, Inc.
|
|
|
|
Victoria D. Harker
|
|
Chief Financial Officer, Gannett Co., Inc.
|
|
|
|
Sten E. Jakobsson
|
|
Former President and Chief Executive Officer, ABB AB
|
|
|
|
Steven R. Loranger
|
|
Former Chairman, President and Chief Executive Officer, ITT Corporation
|
|
|
|
Edward J. Ludwig
|
|
Former Chairman, President and Chief Executive Officer, Becton, Dickinson and Company
|
|
|
|
Surya N. Mohapatra, Ph.D.
|
|
Former Chairman, President and Chief Executive Officer, Quest Diagnostics Incorporated
|
|
|
|
Jerome A. Peribere
|
|
President and Chief Executive Officer, Sealed Air Corporation
|
|
|
|
James P. Rogers
|
|
Former Chairman, Chief Executive Officer, Eastman Chemical Company
|
|
High
|
|
Low
|
|
Dividend
|
||||||
Fiscal Year ended December 31, 2014
|
|
|
|
|
|
||||||
First Quarter
|
$
|
39.79
|
|
|
$
|
32.62
|
|
|
$
|
0.1280
|
|
Second Quarter
|
40.00
|
|
|
34.50
|
|
|
0.1280
|
|
|||
Third Quarter
|
39.43
|
|
|
34.77
|
|
|
0.1280
|
|
|||
Fourth Quarter
|
39.23
|
|
|
31.80
|
|
|
0.1280
|
|
|||
|
|
|
|
|
|
||||||
Fiscal Year ended December 31, 2013
|
|
|
|
|
|
||||||
First Quarter
|
$
|
29.49
|
|
|
$
|
26.39
|
|
|
$
|
0.1164
|
|
Second Quarter
|
29.19
|
|
|
25.56
|
|
|
0.1164
|
|
|||
Third Quarter
|
29.79
|
|
|
23.61
|
|
|
0.1164
|
|
|||
Fourth Quarter
|
34.93
|
|
|
26.99
|
|
|
0.1164
|
|
(a)
|
Average price paid per share is calculated on a settlement basis.
|
(b)
|
On August 18, 2012, the Board of Directors authorized the repurchase of up to two million shares of common stock with no expiration date. The program's objective is to offset dilution associated with various Xylem employee stock plans by acquiring shares in the open market from time to time. There were no shares purchased under this program during the three months ended
December 31, 2014
and there are 1.0 million shares (approximately $40 million based on the closing share price on
December 31, 2014
) that may still be purchased under this plan.
|
|
XYL
|
|
S&P 500
|
|
S&P 1500
Industrials
Index
|
||||||
October 13, 2011
|
$
|
100
|
|
|
$
|
100
|
|
|
$
|
100
|
|
October 31, 2011
|
110
|
|
|
104
|
|
|
106
|
|
|||
December 31, 2011
|
106
|
|
|
105
|
|
|
108
|
|
|||
December 31, 2012
|
114
|
|
|
121
|
|
|
124
|
|
|||
December 31, 2013
|
148
|
|
|
161
|
|
|
175
|
|
|||
December 31, 2014
|
165
|
|
|
183
|
|
|
192
|
|
|
Year Ended
December 31,
|
||||||||||||||||||
(in millions, except per share data)
|
2014
|
|
2013
|
|
2012
|
|
2011 (b)
|
|
2010 (c)
|
||||||||||
Results of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
3,916
|
|
|
$
|
3,837
|
|
|
$
|
3,791
|
|
|
$
|
3,803
|
|
|
$
|
3,202
|
|
Gross profit
|
1,513
|
|
|
1,499
|
|
|
1,502
|
|
|
1,461
|
|
|
1,214
|
|
|||||
Gross margin
|
38.6
|
%
|
|
39.1
|
%
|
|
39.6
|
%
|
|
38.4
|
%
|
|
37.9
|
%
|
|||||
Operating income
|
463
|
|
|
363
|
|
|
443
|
|
|
395
|
|
|
388
|
|
|||||
Operating margin
|
11.8
|
%
|
|
9.5
|
%
|
|
11.7
|
%
|
|
10.4
|
%
|
|
12.1
|
%
|
|||||
Net income
|
337
|
|
|
228
|
|
|
297
|
|
|
279
|
|
|
329
|
|
|||||
Per Share Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
1.84
|
|
|
$
|
1.23
|
|
|
$
|
1.60
|
|
|
$
|
1.51
|
|
|
$
|
1.78
|
|
Diluted
|
1.83
|
|
|
1.22
|
|
|
1.59
|
|
|
1.50
|
|
|
1.78
|
|
|||||
Basic shares outstanding (a)
|
183.1
|
|
|
185.2
|
|
|
185.8
|
|
|
185.1
|
|
|
184.6
|
|
|||||
Diluted shares outstanding (a)
|
184.2
|
|
|
186.0
|
|
|
186.2
|
|
|
185.3
|
|
|
184.6
|
|
|||||
Cash dividends per share
|
$
|
0.5120
|
|
|
$
|
0.4656
|
|
|
$
|
0.4048
|
|
|
$
|
0.1012
|
|
|
$
|
—
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
663
|
|
|
$
|
533
|
|
|
$
|
504
|
|
|
$
|
318
|
|
|
$
|
131
|
|
Working capital*
|
882
|
|
|
930
|
|
|
859
|
|
|
834
|
|
|
759
|
|
|||||
Total assets
|
4,864
|
|
|
4,896
|
|
|
4,679
|
|
|
4,400
|
|
|
3,742
|
|
|||||
Total debt
|
1,288
|
|
|
1,241
|
|
|
1,205
|
|
|
1,206
|
|
|
4
|
|
*
|
The Company calculates Working capital as follows: net accounts receivable + inventories - accounts payable - customer advances.
|
(a)
|
On October 31, 2011, the Spin-off from ITT was completed through a tax-free stock dividend to ITT’s shareholders. ITT shareholders received one share of Xylem common stock for each share of ITT common stock. As a result on October 31, 2011, we had 184.6 million shares of common stock outstanding and this share amount is being utilized to calculate earnings per share and diluted earnings per share for all prior periods presented.
|
(b)
|
In 2011, we acquired YSI Incorporated, which contributed revenue of $35 million in 2011 and $371 million of total assets on date of acquisition.
|
(c)
|
In 2010, we acquired Godwin Pumps of America, Inc. and Nova Analytics Corporation. These businesses in the aggregate contributed revenue of $247 million in 2010 and $1,070 million of total assets on date of acquisition.
|
•
|
Water Infrastructure
serves the water infrastructure sector with pump systems that transport water from oceans, groundwater, aquifers, lakes, rivers and seas; with filtration, ultraviolet and ozone systems that provide treatment, making the water fit to use; and pumping solutions that move the wastewater to treatment facilities where our mixers, biological treatment, monitoring and control systems provide the primary functions in the treatment process. We provide analytical instrumentation used to measure water quality, flow, and level in wastewater, surface water, and coastal environments.
|
•
|
Applied Water
serves the usage applications sector with water pressure boosting systems for heating, ventilation and air conditioning and for fire protection systems to the residential and commercial building services markets. In addition, our pumps, heat exchangers, valves and controls provide cooling to power plants and manufacturing facilities, as well as circulation for food and beverage processing. We also provide boosting systems for farming irrigation, pumps for dairy operations, and rainwater reuse systems for small scale crop and turf irrigation.
|
•
|
"organic revenue" and "organic orders" defined as revenue and orders, respectively, excluding the impact of foreign currency fluctuations and contributions from acquisitions and divestitures. Divestitures include sales of insignificant portions of our business that did not meet the criteria for classification as a discontinued
|
•
|
"constant currency" defined as financial results adjusted for currency translation impacts by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the U.S. dollar.
|
•
|
"adjusted net income" and "adjusted earnings per share" defined as net income and earnings per share, respectively, adjusted to exclude non-recurring separation costs from the Spin-off (not excluded after 2012), restructuring and realignment costs, gain on sale of business, special charges and tax-related special items. A reconciliation of adjusted net income is provided below.
|
(in millions, except per share data)
|
|
2014
|
|
2013
|
|
2012
|
||||||
Net income
|
|
$
|
337
|
|
|
$
|
228
|
|
|
$
|
297
|
|
Separation costs, net of tax (a)
|
|
—
|
|
|
—
|
|
|
16
|
|
|||
Restructuring and realignment, net of tax
|
|
31
|
|
|
46
|
|
|
17
|
|
|||
Special charges, net of tax
|
|
—
|
|
|
23
|
|
|
—
|
|
|||
Tax-related special items
|
|
5
|
|
|
14
|
|
|
—
|
|
|||
Gain on sale of business, net of tax
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted net income
|
|
$
|
362
|
|
|
$
|
311
|
|
|
$
|
330
|
|
Weighted average number of shares - Diluted
|
|
184.2
|
|
|
186.0
|
|
|
186.2
|
|
|||
Adjusted earnings per share
|
|
$
|
1.97
|
|
|
$
|
1.67
|
|
|
$
|
1.77
|
|
(a)
|
Costs of $4 million ($2 million, net of tax) during 2013, associated with non-recurring separation activities are not excluded from adjusted net income.
|
•
|
"operating expenses excluding separation, restructuring and realignment costs and special charges" defined as operating expenses, adjusted to exclude non-recurring separation costs from the Spin-off (not excluded after 2012), restructuring and realignment costs and special charges.
|
•
|
"adjusted segment operating income" defined as segment operating income, adjusted to exclude non-recurring separation costs from the Spin-off (not excluded after 2012), restructuring and realignment costs, and "adjusted segment operating margin" defined as adjusted segment operating income divided by total segment revenue.
|
•
|
“realignment costs” defined as non-recurring costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, relocation, travel and other costs.
|
•
|
“special charges" defined as costs incurred by the Company associated with the settlement of legal proceedings with Xylem Group LLC and certain costs incurred for the change in chief executive officer made during the third quarter of 2013, as well as costs incurred in the fourth quarter of 2013 for the contractual indemnification of federal tax obligations to ITT and costs associated with a legal judgment arising from a historical acquisition matter.
|
•
|
"free cash flow" defined as net cash provided by operating activities less capital expenditures, as well as adjustments for other significant items that impact current results that management believes are not related to our ongoing operations and performance. Our definition of free cash flow does not consider certain non-discretionary cash payments, such as debt. The following table provides a reconciliation of free cash flow.
|
(in millions)
|
|
2014
|
|
2013
|
|
2012
|
||||||
Net cash provided by operating activities
|
|
$
|
416
|
|
|
$
|
324
|
|
|
$
|
396
|
|
Capital expenditures
|
|
(119
|
)
|
|
(126
|
)
|
|
(112
|
)
|
|||
Separation cash payments (a)
|
|
—
|
|
|
—
|
|
|
28
|
|
|||
Free cash flow
|
|
$
|
297
|
|
|
$
|
198
|
|
|
$
|
312
|
|
(a)
|
Separation cash payments associated with non-recurring separation activities are included in the 2013 free cash flow. Separation cash payments are excluded from free cash flow in 2012 and include capital expenditures associated with the Spin-off of $4 million.
|
•
|
Net income of
$337 million
, or
$1.83
per diluted share (
$362 million
or
$1.97
per diluted share on an adjusted basis)
|
•
|
Free cash flow of
$297 million
, and net cash from operating activities of
$416 million
|
•
|
Orders of $
4,021 million
(a
3.9%
increase from
2013
on a constant currency basis)
|
•
|
We repurchased $130 million in shares under the $250 million share repurchase program approved by our Board of Directors in 2013 as part of our strategy to enhance shareholder return
|
•
|
Dividends paid to shareholders increased
10.0%
in
2014
.
|
(in millions)
|
|
2014
|
|
2013
|
|
2012
|
|
2014 v. 2013
|
|
2013 v. 2012
|
||||||||
Revenue
|
|
$
|
3,916
|
|
|
$
|
3,837
|
|
|
$
|
3,791
|
|
|
2.1
|
%
|
|
1.2
|
%
|
Gross profit
|
|
1,513
|
|
|
1,499
|
|
|
1,502
|
|
|
0.9
|
%
|
|
(0.2
|
)%
|
|||
Gross margin
|
|
38.6
|
%
|
|
39.1
|
%
|
|
39.6
|
%
|
|
(50
|
)bp
|
|
(50
|
)bp
|
|||
Operating expenses excluding separation, restructuring and realignment costs and special charges (a)
|
|
1,007
|
|
|
1,048
|
|
|
1,013
|
|
|
(3.9
|
)%
|
|
3.5
|
%
|
|||
Expense to revenue ratio
|
|
25.7
|
%
|
|
27.3
|
%
|
|
26.7
|
%
|
|
(160
|
)bp
|
|
60
|
bp
|
|||
Restructuring and realignment costs
|
|
43
|
|
|
64
|
|
|
24
|
|
|
(32.8
|
)%
|
|
166.7
|
%
|
|||
Separation costs (a)
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
%
|
|
NM
|
|
|||
Special charges
|
|
—
|
|
|
24
|
|
|
—
|
|
|
NM
|
|
|
NM
|
|
|||
Total operating expenses
|
|
1,050
|
|
|
1,136
|
|
|
1,059
|
|
|
(7.6
|
)%
|
|
7.3
|
%
|
|||
Operating income
|
|
463
|
|
|
363
|
|
|
443
|
|
|
27.5
|
%
|
|
(18.1
|
)%
|
|||
Operating margin
|
|
11.8
|
%
|
|
9.5
|
%
|
|
11.7
|
%
|
|
230
|
bp
|
|
(220
|
)bp
|
|||
Interest and other non-operating expense (income), net
|
|
53
|
|
|
65
|
|
|
55
|
|
|
(18.5
|
)%
|
|
18.2
|
%
|
|||
Gain on sale of business
|
|
11
|
|
|
—
|
|
|
—
|
|
|
NM
|
|
|
—
|
%
|
|||
Income tax expense
|
|
84
|
|
|
70
|
|
|
91
|
|
|
20.0
|
%
|
|
(23.1
|
)%
|
|||
Tax rate
|
|
19.8
|
%
|
|
23.5
|
%
|
|
23.4
|
%
|
|
(370
|
)bp
|
|
10
|
bp
|
|||
Net income
|
|
$
|
337
|
|
|
$
|
228
|
|
|
$
|
297
|
|
|
47.8
|
%
|
|
(23.2
|
)%
|
(a)
|
Separation costs of $4 million ($2 million, net of tax) during 2013 are included within the $1,048 million of operating expenses.
|
(in millions)
|
$ Change
|
|
% Change
|
|||
2013 Revenue
|
$
|
3,837
|
|
|
|
|
Organic Growth
|
134
|
|
|
3.5
|
%
|
|
Acquisitions/(Divestitures)
|
(6
|
)
|
|
(0.2
|
)%
|
|
Constant Currency
|
128
|
|
|
3.3
|
%
|
|
Foreign currency translation (a)
|
(49
|
)
|
|
(1.3
|
)%
|
|
Total change in revenue
|
79
|
|
|
2.1
|
%
|
|
2014 Revenue
|
$
|
3,916
|
|
|
|
(a)
|
Foreign currency impact primarily due to weakness in the value of the Canadian Dollar, Australian Dollar, Argentine Peso, Swedish Krona and Norwegian Krone against the U.S. Dollar, partially offset by strength in the value of the British Pound against the U.S. Dollar.
|
(in millions)
|
2014
|
|
2013
|
|
As Reported Change
|
|
Constant Currency Change
|
||||||
Water Infrastructure
|
$
|
2,442
|
|
|
$
|
2,384
|
|
|
2.4
|
%
|
|
4.4
|
%
|
Applied Water
|
1,474
|
|
|
1,453
|
|
|
1.4
|
%
|
|
1.6
|
%
|
||
Total
|
$
|
3,916
|
|
|
$
|
3,837
|
|
|
2.1
|
%
|
|
3.3
|
%
|
(in millions)
|
2014
|
|
2013
|
|
Change
|
|||||
Selling, General and Administrative (SG&A)
|
$
|
920
|
|
|
$
|
986
|
|
|
(6.7
|
)%
|
SG&A as a % of revenue
|
23.5
|
%
|
|
25.7
|
%
|
|
(220
|
)bp
|
||
Research and Development (R&D)
|
104
|
|
|
104
|
|
|
—
|
%
|
||
R&D as a % of revenue
|
2.7
|
%
|
|
2.7
|
%
|
|
—
|
|
||
Restructuring and asset impairment charges
|
26
|
|
|
42
|
|
|
(38.1
|
)%
|
||
Separation Costs
|
—
|
|
|
4
|
|
|
NM
|
|
||
Operating expenses
|
$
|
1,050
|
|
|
$
|
1,136
|
|
|
(7.6
|
)%
|
Expense to revenue ratio
|
26.8
|
%
|
|
29.6
|
%
|
|
(280
|
)bp
|
(in millions)
|
2014
|
|
2013
|
|
Change
|
|||||
Water Infrastructure
|
$
|
321
|
|
|
$
|
263
|
|
|
22.1
|
%
|
Applied Water
|
193
|
|
|
175
|
|
|
10.3
|
%
|
||
Segment operating income
|
514
|
|
|
438
|
|
|
17.4
|
%
|
||
Corporate and other
|
(51
|
)
|
|
(75
|
)
|
|
(32.0
|
)%
|
||
Total operating income
|
$
|
463
|
|
|
$
|
363
|
|
|
27.5
|
%
|
Operating margin
|
|
|
|
|
|
|||||
Water Infrastructure
|
13.1
|
%
|
|
11.0
|
%
|
|
210
|
bp
|
||
Applied Water
|
13.1
|
%
|
|
11.6
|
%
|
|
150
|
bp
|
||
Total Xylem
|
11.8
|
%
|
|
9.5
|
%
|
|
230
|
bp
|
(in millions)
|
2014
|
|
2013
|
|
Change
|
|||||
Water Infrastructure
|
|
|
|
|
|
|||||
Operating income
|
$
|
321
|
|
|
$
|
263
|
|
|
22.1
|
%
|
Restructuring and realignment costs
|
29
|
|
|
48
|
|
|
(39.6
|
)%
|
||
Special charges
|
—
|
|
|
4
|
|
|
NM
|
|
||
Adjusted operating income
|
$
|
350
|
|
|
$
|
315
|
|
|
11.1
|
%
|
Adjusted operating margin
|
14.3
|
%
|
|
13.2
|
%
|
|
110
|
bp
|
||
Applied Water
|
|
|
|
|
|
|||||
Operating income
|
193
|
|
|
175
|
|
|
10.3
|
%
|
||
Restructuring and realignment costs
|
13
|
|
|
16
|
|
|
(18.8
|
)%
|
||
Adjusted operating income
|
$
|
206
|
|
|
$
|
191
|
|
|
7.9
|
%
|
Adjusted operating margin
|
14.0
|
%
|
|
13.1
|
%
|
|
90
|
bp
|
||
Total Xylem
|
|
|
|
|
|
|||||
Operating income
|
$
|
463
|
|
|
$
|
363
|
|
|
27.5
|
%
|
Restructuring and realignment costs
|
43
|
|
|
64
|
|
|
(32.8
|
)%
|
||
Special charges
|
—
|
|
|
24
|
|
|
NM
|
|
||
Adjusted operating income
|
$
|
506
|
|
|
$
|
451
|
|
|
12.2
|
%
|
Adjusted operating margin
|
12.9
|
%
|
|
11.8
|
%
|
|
110
|
bp
|
(in millions)
|
$ Change
|
|
% Change
|
|||
2012 Revenue
|
$
|
3,791
|
|
|
|
|
Organic Growth
|
(39
|
)
|
|
(1.0
|
)%
|
|
Acquisitions
|
82
|
|
|
2.2
|
%
|
|
Constant Currency
|
43
|
|
|
1.1
|
%
|
|
Foreign currency translation (a)
|
3
|
|
|
0.1
|
%
|
|
Total change in revenue
|
46
|
|
|
1.2
|
%
|
|
2013 Revenue
|
$
|
3,837
|
|
|
|
(a)
|
Foreign currency impact primarily due to strength in the value of the Euro and Swedish Krona against the U.S. Dollar, partially offset by weakness in the value of the Australian Dollar, South African Rand, Canadian Dollar and British Pound against the U.S. Dollar.
|
(in millions)
|
2013
|
|
2012
|
|
As Reported Change
|
|
Constant Currency Change
|
||||||
Water Infrastructure
|
$
|
2,384
|
|
|
$
|
2,349
|
|
|
1.5
|
%
|
|
1.7
|
%
|
Applied Water
|
1,453
|
|
|
1,442
|
|
|
0.8
|
%
|
|
0.3
|
%
|
||
Total
|
$
|
3,837
|
|
|
$
|
3,791
|
|
|
1.2
|
%
|
|
1.1
|
%
|
(in millions)
|
2013
|
|
2012
|
|
Change
|
|||||
Selling, General and Administrative (SG&A)
|
$
|
986
|
|
|
$
|
914
|
|
|
7.9
|
%
|
SG&A as a % of revenue
|
25.7
|
%
|
|
24.1
|
%
|
|
160bp
|
|
||
Research and Development (R&D)
|
104
|
|
|
106
|
|
|
(1.9
|
)%
|
||
R&D as a % of revenue
|
2.7
|
%
|
|
2.8
|
%
|
|
(10)bp
|
|
||
Restructuring and asset impairment charges
|
42
|
|
|
17
|
|
|
147.1
|
%
|
||
Separation Costs
|
4
|
|
|
22
|
|
|
(81.8
|
)%
|
||
Operating expenses
|
$
|
1,136
|
|
|
$
|
1,059
|
|
|
7.3
|
%
|
Expense to revenue ratio
|
29.6
|
%
|
|
27.9
|
%
|
|
170bp
|
|
(in millions)
|
2013
|
|
2012
|
||||
Rebranding and marketing costs
|
$
|
—
|
|
|
$
|
8
|
|
Advisory and professional fees
|
—
|
|
|
7
|
|
||
Information and technology costs
|
2
|
|
|
3
|
|
||
Employee retention and hiring costs
|
—
|
|
|
1
|
|
||
Lease termination and other real estate costs
|
2
|
|
|
1
|
|
||
Other
|
—
|
|
|
2
|
|
||
Total separation costs in operating income
|
4
|
|
|
22
|
|
||
Income tax benefit
|
(2
|
)
|
|
(6
|
)
|
||
Total separation costs, net of tax
|
$
|
2
|
|
|
$
|
16
|
|
(in millions)
|
2013
|
|
2012
|
|
Change
|
|||||
Water Infrastructure
|
$
|
263
|
|
|
$
|
334
|
|
|
(21.3
|
)%
|
Applied Water
|
175
|
|
|
178
|
|
|
(1.7
|
)%
|
||
Segment operating income
|
438
|
|
|
512
|
|
|
(14.5
|
)%
|
||
Corporate and other
|
(75
|
)
|
|
(69
|
)
|
|
8.7
|
%
|
||
Total operating income
|
$
|
363
|
|
|
$
|
443
|
|
|
(18.1
|
)%
|
Operating margin
|
|
|
|
|
|
|||||
Water Infrastructure
|
11.0
|
%
|
|
14.2
|
%
|
|
(320)bp
|
|
||
Applied Water
|
12.0
|
%
|
|
12.3
|
%
|
|
(30)bp
|
|
||
Total Xylem
|
9.5
|
%
|
|
11.7
|
%
|
|
(220)bp
|
|
(in millions)
|
2013
|
|
2012
|
|
Change
|
|||||
Water Infrastructure
|
|
|
|
|
|
|||||
Operating income
|
$
|
263
|
|
|
$
|
334
|
|
|
(21.3
|
)%
|
Separation costs
|
—
|
|
|
4
|
|
|
NM
|
|
||
Restructuring and realignment costs
|
48
|
|
|
19
|
|
|
152.6
|
%
|
||
Special charges
|
4
|
|
|
—
|
|
|
NM
|
|
||
Adjusted operating income
|
$
|
315
|
|
|
$
|
357
|
|
|
(11.8
|
)%
|
Adjusted operating margin
|
13.2
|
%
|
|
15.2
|
%
|
|
(200)bp
|
|
||
Applied Water
|
|
|
|
|
|
|||||
Operating income
|
175
|
|
|
178
|
|
|
(1.7
|
)%
|
||
Separation costs
|
—
|
|
|
2
|
|
|
NM
|
|
||
Restructuring and realignment costs
|
16
|
|
|
5
|
|
|
220.0
|
%
|
||
Adjusted operating income
|
$
|
191
|
|
|
$
|
185
|
|
|
3.2
|
%
|
Adjusted operating margin
|
13.1
|
%
|
|
12.8
|
%
|
|
30bp
|
|
||
Total Xylem
|
|
|
|
|
|
|||||
Operating income
|
$
|
363
|
|
|
$
|
443
|
|
|
(18.1
|
)%
|
Separation costs*
|
—
|
|
|
22
|
|
|
NM
|
|
||
Restructuring and realignment costs
|
64
|
|
|
24
|
|
|
166.7
|
%
|
||
Special charges
|
24
|
|
|
—
|
|
|
NM
|
|
||
Adjusted operating income*
|
$
|
451
|
|
|
$
|
489
|
|
|
(7.8
|
)%
|
Adjusted operating margin*
|
11.8
|
%
|
|
12.9
|
%
|
|
(110)bp
|
|
*
|
Costs associated with non-recurring separation activities of $4 million ($2 million, net of tax) during 2013 are not excluded from adjusted operating income.
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Operating activities
|
$
|
416
|
|
|
$
|
324
|
|
|
$
|
396
|
|
Investing activities
|
(86
|
)
|
|
(199
|
)
|
|
(147
|
)
|
|||
Financing activities
|
(147
|
)
|
|
(100
|
)
|
|
(74
|
)
|
|||
Foreign exchange (a)
|
(53
|
)
|
|
4
|
|
|
11
|
|
|||
Total
|
$
|
130
|
|
|
$
|
29
|
|
|
$
|
186
|
|
(a)
|
2014 impact is primarily due to the weakness of the Euro against the US Dollar.
|
(in millions)
|
2015
|
|
2016 - 2017
|
|
2018 - 2019
|
|
Thereafter
|
|
Total
|
||||||||||
Debt and capital lease obligations (1)
|
$
|
89
|
|
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
600
|
|
|
$
|
1,289
|
|
Interest payments (2)
|
51
|
|
|
80
|
|
|
59
|
|
|
58
|
|
|
248
|
|
|||||
Operating lease obligations
|
63
|
|
|
81
|
|
|
37
|
|
|
25
|
|
|
206
|
|
|||||
Purchase obligations (3)
|
54
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
61
|
|
|||||
Other long-term obligations reflected on the balance sheet
|
1
|
|
|
2
|
|
|
2
|
|
|
21
|
|
|
26
|
|
|||||
Total commitments
|
$
|
258
|
|
|
$
|
770
|
|
|
$
|
98
|
|
|
$
|
704
|
|
|
$
|
1,830
|
|
(1)
|
Refer to
Note 14
, “Credit Facilities and Long-Term Debt,” in the notes to the consolidated financial statements for discussion of the use and availability of debt and revolving credit agreements. Amounts represent principal payments of long-term debt including current maturities and exclude unamortized discounts.
|
(2)
|
Amounts represent estimate of future interest payments on long-term debt outstanding as of
December 31, 2014
.
|
(3)
|
Represents unconditional purchase agreements that are enforceable and legally binding and that specify all significant terms to purchase goods or services, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase agreements that are cancellable without penalty have been excluded.
|
NM
|
Not meaningful. During 2013, an amendment to one of the Company's U.S business unit's pension plans modified the benefit formula. Similar to all other U.S. pension plans, pension benefits for future service was changed to be based on years of service and not be impacted by future compensation increases.
|
|
2014
|
|
2013
|
|
2012
|
|||
Expected long-term rate of return on plan assets
|
7.38
|
%
|
|
7.40
|
%
|
|
7.42
|
%
|
Actual rate of return on plan assets
|
18.13
|
%
|
|
10.17
|
%
|
|
10.09
|
%
|
|
Page No.
|
Audited Consolidated Financial Statements:
|
|
Notes to Consolidated Financial Statements:
|
|
Year Ended December 31,
|
2014
|
|
2013
|
|
2012
|
||||||
Revenue
|
$
|
3,916
|
|
|
$
|
3,837
|
|
|
$
|
3,791
|
|
Cost of revenue
|
2,403
|
|
|
2,338
|
|
|
2,289
|
|
|||
Gross profit
|
1,513
|
|
|
1,499
|
|
|
1,502
|
|
|||
Selling, general and administrative expenses
|
920
|
|
|
986
|
|
|
914
|
|
|||
Research and development expenses
|
104
|
|
|
104
|
|
|
106
|
|
|||
Separation costs
|
—
|
|
|
4
|
|
|
22
|
|
|||
Restructuring and asset impairment charges
|
26
|
|
|
42
|
|
|
17
|
|
|||
Operating income
|
463
|
|
|
363
|
|
|
443
|
|
|||
Interest expense
|
54
|
|
|
55
|
|
|
55
|
|
|||
Other non-operating income (expense), net
|
1
|
|
|
(10
|
)
|
|
—
|
|
|||
Gain from sale of business
|
11
|
|
|
—
|
|
|
—
|
|
|||
Income before taxes
|
421
|
|
|
298
|
|
|
388
|
|
|||
Income tax expense
|
84
|
|
|
70
|
|
|
91
|
|
|||
Net income
|
$
|
337
|
|
|
$
|
228
|
|
|
$
|
297
|
|
Earnings per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
1.84
|
|
|
$
|
1.23
|
|
|
$
|
1.60
|
|
Diluted
|
$
|
1.83
|
|
|
$
|
1.22
|
|
|
$
|
1.59
|
|
Weighted average number of shares:
|
|
|
|
|
|
||||||
Basic
|
183.1
|
|
|
185.2
|
|
|
185.8
|
|
|||
Diluted
|
184.2
|
|
|
186.0
|
|
|
186.2
|
|
|||
Dividends declared per share
|
$
|
0.5120
|
|
|
$
|
0.4656
|
|
|
$
|
0.4048
|
|
Year Ended December 31,
|
2014
|
|
2013
|
|
2012
|
||||||
Net income
|
$
|
337
|
|
|
$
|
228
|
|
|
$
|
297
|
|
Other comprehensive income, before tax:
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
(206
|
)
|
|
15
|
|
|
48
|
|
|||
Net change in cash flow hedges:
|
|
|
|
|
|
||||||
Unrealized (losses) gains
|
(22
|
)
|
|
1
|
|
|
4
|
|
|||
Amount of loss (gain) reclassified into net income
|
6
|
|
|
—
|
|
|
(3
|
)
|
|||
Net change in postretirement benefit plans:
|
|
|
|
|
|
||||||
Net (loss) gain
|
(110
|
)
|
|
34
|
|
|
(84
|
)
|
|||
Prior service credit (cost)
|
17
|
|
|
4
|
|
|
(1
|
)
|
|||
Amortization of prior service (credit) cost
|
(1
|
)
|
|
1
|
|
|
1
|
|
|||
Amortization of net actuarial loss
|
11
|
|
|
17
|
|
|
11
|
|
|||
Settlement
|
1
|
|
|
—
|
|
|
2
|
|
|||
Foreign exchange
|
20
|
|
|
2
|
|
|
(8
|
)
|
|||
Other comprehensive (loss) income, before tax
|
(284
|
)
|
|
74
|
|
|
(30
|
)
|
|||
Income tax (benefits) expense related to other comprehensive (loss) income
|
(18
|
)
|
|
22
|
|
|
(23
|
)
|
|||
Other comprehensive (loss) income, net of tax
|
(266
|
)
|
|
52
|
|
|
(7
|
)
|
|||
Comprehensive income
|
$
|
71
|
|
|
$
|
280
|
|
|
$
|
290
|
|
December 31,
|
2014
|
|
2013
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
663
|
|
|
$
|
533
|
|
Receivables, less allowances for discounts and doubtful accounts of $34 and $31 in 2014 and 2013, respectively
|
771
|
|
|
817
|
|
||
Inventories
|
486
|
|
|
475
|
|
||
Prepaid and other current assets
|
144
|
|
|
143
|
|
||
Deferred income tax assets
|
38
|
|
|
41
|
|
||
Total current assets
|
2,102
|
|
|
2,009
|
|
||
Property, plant and equipment, net
|
461
|
|
|
488
|
|
||
Goodwill
|
1,635
|
|
|
1,718
|
|
||
Other intangible assets, net
|
431
|
|
|
488
|
|
||
Other non-current assets
|
235
|
|
|
193
|
|
||
Total assets
|
$
|
4,864
|
|
|
$
|
4,896
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
338
|
|
|
$
|
332
|
|
Accrued and other current liabilities
|
481
|
|
|
479
|
|
||
Short-term borrowings and current maturities of long-term debt
|
89
|
|
|
42
|
|
||
Total current liabilities
|
908
|
|
|
853
|
|
||
Long-term debt
|
1,199
|
|
|
1,199
|
|
||
Accrued postretirement benefits
|
388
|
|
|
348
|
|
||
Deferred income tax liabilities
|
158
|
|
|
191
|
|
||
Other non-current accrued liabilities
|
84
|
|
|
64
|
|
||
Total liabilities
|
2,737
|
|
|
2,655
|
|
||
Commitment and Contingencies (Note 19)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Common Stock — par value $0.01 per share:
|
|
|
|
||||
Authorized 750.0 shares, issued 188.9 and 187.6 shares in 2014 and 2013, respectively
|
2
|
|
|
2
|
|
||
Capital in excess of par value
|
1,796
|
|
|
1,753
|
|
||
Retained earnings
|
648
|
|
|
405
|
|
||
Treasury stock – at cost 6.6 shares and 3.0 shares in 2014 and 2013, respectively
|
(220
|
)
|
|
(86
|
)
|
||
Accumulated other comprehensive income
|
(99
|
)
|
|
167
|
|
||
Total stockholders’ equity
|
2,127
|
|
|
2,241
|
|
||
Total liabilities and stockholders’ equity
|
$
|
4,864
|
|
|
$
|
4,896
|
|
Year Ended December 31,
|
2014
|
|
2013
|
|
2012
|
||||||
Operating Activities
|
|
|
|
|
|
||||||
Net income
|
$
|
337
|
|
|
$
|
228
|
|
|
$
|
297
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation
|
95
|
|
|
99
|
|
|
94
|
|
|||
Amortization
|
47
|
|
|
51
|
|
|
48
|
|
|||
Deferred income taxes
|
(29
|
)
|
|
(14
|
)
|
|
1
|
|
|||
Share-based compensation
|
18
|
|
|
27
|
|
|
22
|
|
|||
Restructuring and asset impairment charges, net
|
26
|
|
|
42
|
|
|
17
|
|
|||
Gain from sale of business
|
(11
|
)
|
|
—
|
|
|
—
|
|
|||
Other, net
|
2
|
|
|
15
|
|
|
2
|
|
|||
Payments of restructuring
|
(26
|
)
|
|
(35
|
)
|
|
(9
|
)
|
|||
Contributions to postretirement benefit plans
|
(35
|
)
|
|
(43
|
)
|
|
(46
|
)
|
|||
Changes in assets and liabilities (net of acquisitions):
|
|
|
|
|
|
||||||
Changes in receivables
|
(37
|
)
|
|
(47
|
)
|
|
2
|
|
|||
Changes in inventories
|
(49
|
)
|
|
(39
|
)
|
|
5
|
|
|||
Changes in accounts payable
|
17
|
|
|
4
|
|
|
(4
|
)
|
|||
Changes in accrued liabilities
|
3
|
|
|
18
|
|
|
(28
|
)
|
|||
Changes in accrued taxes
|
25
|
|
|
20
|
|
|
(17
|
)
|
|||
Net changes in other assets and liabilities
|
33
|
|
|
(2
|
)
|
|
12
|
|
|||
Net Cash — Operating activities
|
416
|
|
|
324
|
|
|
396
|
|
|||
Investing Activities
|
|
|
|
|
|
||||||
Capital expenditures
|
(119
|
)
|
|
(126
|
)
|
|
(112
|
)
|
|||
Proceeds from the sale of property, plant and equipment
|
2
|
|
|
6
|
|
|
5
|
|
|||
Acquisitions of businesses and assets, net of cash acquired
|
—
|
|
|
(81
|
)
|
|
(41
|
)
|
|||
Proceeds from sale of business
|
30
|
|
|
—
|
|
|
—
|
|
|||
Other, net
|
1
|
|
|
2
|
|
|
1
|
|
|||
Net Cash — Investing activities
|
(86
|
)
|
|
(199
|
)
|
|
(147
|
)
|
|||
Financing Activities
|
|
|
|
|
|
||||||
Net transfer to former parent
|
—
|
|
|
—
|
|
|
(9
|
)
|
|||
Issuance of short-term debt
|
52
|
|
|
39
|
|
|
13
|
|
|||
Principal payments of debt and capital lease obligations
|
—
|
|
|
(2
|
)
|
|
(14
|
)
|
|||
Repurchase of common stock
|
(134
|
)
|
|
(73
|
)
|
|
(13
|
)
|
|||
Proceeds from exercise of employee stock options
|
26
|
|
|
22
|
|
|
24
|
|
|||
Excess tax benefit from share based compensation
|
2
|
|
|
1
|
|
|
—
|
|
|||
Dividends paid
|
(94
|
)
|
|
(87
|
)
|
|
(75
|
)
|
|||
Other, net
|
1
|
|
|
—
|
|
|
—
|
|
|||
Net Cash — Financing activities
|
(147
|
)
|
|
(100
|
)
|
|
(74
|
)
|
|||
Effect of exchange rate changes on cash
|
(53
|
)
|
|
4
|
|
|
11
|
|
|||
Net change in cash and cash equivalents
|
130
|
|
|
29
|
|
|
186
|
|
|||
Cash and cash equivalents at beginning of year
|
533
|
|
|
504
|
|
|
318
|
|
|||
Cash and cash equivalents at end of year
|
$
|
663
|
|
|
$
|
533
|
|
|
$
|
504
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid during the year for:
|
|
|
|
|
|
||||||
Interest
|
$
|
51
|
|
|
$
|
51
|
|
|
$
|
53
|
|
Income taxes (net of refunds received)
|
$
|
81
|
|
|
$
|
65
|
|
|
$
|
104
|
|
|
Common
Stock |
|
Additional
Paid-In Capital |
|
Retained
Earnings |
|
Accumulated Other
Comprehensive Income (Loss) |
|
Treasury Stock
|
|
Total
|
||||||||||||
Balance at January 1, 2012
|
2
|
|
|
1,663
|
|
|
44
|
|
|
122
|
|
|
—
|
|
|
1,831
|
|
||||||
Net income
|
|
|
|
|
297
|
|
|
|
|
|
|
297
|
|
||||||||||
Other comprehensive loss, net
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
(7
|
)
|
||||||||||
Dividends declared ($0.4048 per share)
|
|
|
|
|
(77
|
)
|
|
|
|
|
|
(77
|
)
|
||||||||||
Stock incentive plan activity
|
|
|
43
|
|
|
|
|
|
|
|
|
43
|
|
||||||||||
Repurchase of common stock
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
(13
|
)
|
||||||||||
Balance at December 31, 2012
|
$
|
2
|
|
|
$
|
1,706
|
|
|
$
|
264
|
|
|
$
|
115
|
|
|
$
|
(13
|
)
|
|
$
|
2,074
|
|
Net income
|
|
|
|
|
228
|
|
|
|
|
|
|
228
|
|
||||||||||
Other comprehensive income, net
|
|
|
|
|
|
|
52
|
|
|
|
|
52
|
|
||||||||||
Dividends declared ($0.4656 per share)
|
|
|
|
|
(87
|
)
|
|
|
|
|
|
(87
|
)
|
||||||||||
Stock incentive plan activity
|
|
|
47
|
|
|
|
|
|
|
|
|
47
|
|
||||||||||
Repurchase of common stock
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
(73
|
)
|
||||||||||
Balance at December 31, 2013
|
$
|
2
|
|
|
$
|
1,753
|
|
|
$
|
405
|
|
|
$
|
167
|
|
|
$
|
(86
|
)
|
|
$
|
2,241
|
|
Net income
|
|
|
|
|
337
|
|
|
|
|
|
|
337
|
|
||||||||||
Other comprehensive income, net
|
|
|
|
|
|
|
(266
|
)
|
|
|
|
(266
|
)
|
||||||||||
Dividends declared ($0.5120 per share)
|
|
|
|
|
(94
|
)
|
|
|
|
|
|
(94
|
)
|
||||||||||
Stock incentive plan activity
|
|
|
43
|
|
|
|
|
|
|
|
|
43
|
|
||||||||||
Repurchase of common stock
|
|
|
|
|
|
|
|
|
(134
|
)
|
|
(134
|
)
|
||||||||||
Balance at December 31, 2014
|
$
|
2
|
|
|
$
|
1,796
|
|
|
$
|
648
|
|
|
$
|
(99
|
)
|
|
$
|
(220
|
)
|
|
$
|
2,127
|
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2014
|
|
2013
|
|
2012
|
||||||
By component:
|
|
|
|
|
|
|
||||||
Severance and other charges
|
|
$
|
26
|
|
|
$
|
38
|
|
|
$
|
17
|
|
Lease related charges
|
|
1
|
|
|
2
|
|
|
—
|
|
|||
Reversal of restructuring accruals
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Total restructuring charges
|
|
26
|
|
|
40
|
|
|
17
|
|
|||
Asset impairment
|
|
—
|
|
|
2
|
|
|
—
|
|
|||
Total restructuring and asset impairment charges
|
|
$
|
26
|
|
|
$
|
42
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
||||||
By segment:
|
|
|
|
|
|
|
||||||
Water Infrastructure
|
|
$
|
19
|
|
|
$
|
33
|
|
|
$
|
14
|
|
Applied Water
|
|
6
|
|
|
9
|
|
|
3
|
|
|||
Corporate and other
|
|
1
|
|
|
—
|
|
|
—
|
|
(in millions)
|
|
2014
|
|
2013
|
||||
Restructuring accruals - January 1
|
|
$
|
13
|
|
|
$
|
9
|
|
Restructuring charges
|
|
26
|
|
|
40
|
|
||
Cash payments
|
|
(26
|
)
|
|
(35
|
)
|
||
Other
|
|
(1
|
)
|
|
(1
|
)
|
||
Restructuring accruals - December 31
|
|
$
|
12
|
|
|
$
|
13
|
|
|
|
|
|
|
||||
By segment:
|
|
|
|
|
||||
Water Infrastructure
|
|
$
|
5
|
|
|
$
|
6
|
|
Applied Water
|
|
3
|
|
|
3
|
|
||
Regional selling locations (a)
|
|
3
|
|
|
4
|
|
||
Corporate and other
|
|
1
|
|
|
—
|
|
(a)
|
Regional selling locations consist primarily of selling and marketing organizations that incurred restructuring expense which was allocated to the segments. The liabilities associated with restructuring expense were not allocated to the segments.
|
|
|
2014
|
|
2013
|
||
Planned reductions - January 1
|
|
51
|
|
|
54
|
|
Additional planned reductions
|
|
320
|
|
|
513
|
|
Actual reductions
|
|
(238
|
)
|
|
(516
|
)
|
Planned reductions - December 31
|
|
133
|
|
|
51
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Rebranding and marketing costs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Advisory and professional fees
|
—
|
|
|
—
|
|
|
7
|
|
|||
Information and technology costs
|
—
|
|
|
2
|
|
|
3
|
|
|||
Employee retention and hiring costs
|
—
|
|
|
—
|
|
|
1
|
|
|||
Lease termination and other real estate costs
|
—
|
|
|
2
|
|
|
1
|
|
|||
Other
|
—
|
|
|
—
|
|
|
2
|
|
|||
Total separation costs in operating income
|
—
|
|
|
4
|
|
|
22
|
|
|||
Tax-related separation cost
|
—
|
|
|
—
|
|
|
—
|
|
|||
Income tax benefit
|
—
|
|
|
(2
|
)
|
|
(6
|
)
|
|||
Total separation costs, net of tax
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Interest income
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
4
|
|
Income from joint ventures
|
2
|
|
|
2
|
|
|
4
|
|
|||
Other expense – net (a)
|
(3
|
)
|
|
(15
|
)
|
|
(8
|
)
|
|||
Total other non-operating income (expense), net
|
$
|
1
|
|
|
$
|
(10
|
)
|
|
$
|
—
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Income components:
|
|
|
|
|
|
||||||
Domestic
|
$
|
118
|
|
|
$
|
49
|
|
|
$
|
106
|
|
Foreign
|
303
|
|
|
249
|
|
|
282
|
|
|||
Total pre-tax income
|
$
|
421
|
|
|
$
|
298
|
|
|
$
|
388
|
|
Income tax expense components:
|
|
|
|
|
|
||||||
Current:
|
|
|
|
|
|
||||||
Domestic – federal
|
$
|
44
|
|
|
$
|
37
|
|
|
$
|
27
|
|
Domestic – state and local
|
7
|
|
|
1
|
|
|
7
|
|
|||
Foreign
|
62
|
|
|
46
|
|
|
56
|
|
|||
Total Current
|
113
|
|
|
84
|
|
|
90
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Domestic – federal
|
$
|
(14
|
)
|
|
$
|
(6
|
)
|
|
$
|
10
|
|
Domestic – state and local
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||
Foreign
|
(15
|
)
|
|
(8
|
)
|
|
(7
|
)
|
|||
Total Deferred
|
(29
|
)
|
|
(14
|
)
|
|
1
|
|
|||
Total income tax provision
|
$
|
84
|
|
|
$
|
70
|
|
|
$
|
91
|
|
Effective income tax rate
|
19.8
|
%
|
|
23.5
|
%
|
|
23.4
|
%
|
|
Year Ended December 31,
|
|||||||
|
2014
|
|
2013
|
|
2012
|
|||
Tax provision at U.S. statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase (decrease) in tax rate resulting from:
|
|
|
|
|
|
|||
State income taxes
|
1.0
|
|
|
0.7
|
|
|
1.2
|
|
Settlements of tax examinations
|
0.4
|
|
|
—
|
|
|
0.2
|
|
Valuation allowance
|
22.9
|
|
|
39.4
|
|
|
8.9
|
|
Tax exempt interest
|
(26.3
|
)
|
|
(43.0
|
)
|
|
(18.2
|
)
|
Foreign tax rate differential
|
(4.2
|
)
|
|
(4.1
|
)
|
|
(3.4
|
)
|
Repatriation of foreign earnings, net of foreign tax credits
|
(1.7
|
)
|
|
5.1
|
|
|
0.4
|
|
Tax incentives
|
(6.2
|
)
|
|
(8.1
|
)
|
|
—
|
|
Other – net
|
(1.1
|
)
|
|
(1.5
|
)
|
|
(0.7
|
)
|
Effective income tax rate
|
19.8
|
%
|
|
23.5
|
%
|
|
23.4
|
%
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Deferred tax assets:
|
|
|
|
||||
Employee benefits
|
$
|
124
|
|
|
$
|
114
|
|
Accrued expenses
|
25
|
|
|
20
|
|
||
Loss and other tax credit carryforwards
|
456
|
|
|
374
|
|
||
Inventory
|
6
|
|
|
6
|
|
||
Other
|
3
|
|
|
1
|
|
||
|
$
|
614
|
|
|
$
|
515
|
|
Valuation allowance
|
(427
|
)
|
|
(349
|
)
|
||
Net deferred tax asset
|
$
|
187
|
|
|
$
|
166
|
|
Deferred tax liabilities:
|
|
|
|
||||
Intangibles
|
$
|
173
|
|
|
$
|
180
|
|
Investment in foreign subsidiaries
|
8
|
|
|
15
|
|
||
Property, plant, and equipment
|
22
|
|
|
19
|
|
||
Other
|
30
|
|
|
42
|
|
||
Total deferred tax liabilities
|
$
|
233
|
|
|
$
|
256
|
|
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Valuation allowance — January 1
|
$
|
349
|
|
|
$
|
229
|
|
|
$
|
195
|
|
Change in assessment
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||
Current year operations
|
82
|
|
|
120
|
|
|
34
|
|
|||
Valuation allowance — December 31
|
$
|
427
|
|
|
$
|
349
|
|
|
$
|
229
|
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Current assets
|
$
|
38
|
|
|
$
|
41
|
|
Non-current assets
|
79
|
|
|
64
|
|
||
Current liabilities
|
(5
|
)
|
|
(4
|
)
|
||
Non-current liabilities
|
(158
|
)
|
|
(191
|
)
|
||
Total net deferred tax liabilities
|
$
|
(46
|
)
|
|
$
|
(90
|
)
|
(in millions)
|
December 31, 2014
|
|
First Year of Expiration
|
||
U.S. net operating loss
|
$
|
8
|
|
|
December 31, 2024
|
State net operating loss
|
53
|
|
|
December 31, 2015
|
|
U.S. tax credits
|
38
|
|
|
December 31, 2020
|
|
Foreign net operating loss
|
1,496
|
|
|
December 31, 2015
|
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Unrecognized tax benefits — January 1
|
$
|
30
|
|
|
$
|
8
|
|
|
$
|
5
|
|
Additions for:
|
|
|
|
|
|
||||||
Current year tax positions
|
9
|
|
|
23
|
|
|
1
|
|
|||
Prior year tax positions
|
7
|
|
|
—
|
|
|
2
|
|
|||
Reductions for:
|
|
|
|
|
|
||||||
Settlements
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|||
Unrecognized tax benefits — December 31
|
$
|
44
|
|
|
$
|
30
|
|
|
$
|
8
|
|
Jurisdiction
|
|
Earliest
Open Year
|
Canada
|
|
2009
|
Germany
|
|
2005
|
Italy
|
|
2009
|
Luxembourg
|
|
2010
|
Poland
|
|
2007
|
Sweden
|
|
2009
|
Switzerland
|
|
2010
|
United Kingdom
|
|
2011
|
United States
|
|
2009
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Net Income (in millions)
|
$
|
337
|
|
|
$
|
228
|
|
|
$
|
297
|
|
Shares (in thousands):
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
183,030
|
|
|
185,082
|
|
|
185,459
|
|
|||
Add: Participating securities (a)
|
47
|
|
|
134
|
|
|
325
|
|
|||
Weighted average common shares outstanding — Basic
|
183,077
|
|
|
185,216
|
|
|
185,784
|
|
|||
Plus incremental shares from assumed conversions: (b)
|
|
|
|
|
|
||||||
Dilutive effect of stock options
|
643
|
|
|
264
|
|
|
213
|
|
|||
Dilutive effect of restricted stock
|
529
|
|
|
558
|
|
|
233
|
|
|||
Weighted average common shares outstanding — Diluted
|
184,249
|
|
|
186,038
|
|
|
186,230
|
|
|||
Basic earnings per share
|
$
|
1.84
|
|
|
$
|
1.23
|
|
|
$
|
1.60
|
|
Diluted earnings per share
|
$
|
1.83
|
|
|
$
|
1.22
|
|
|
$
|
1.59
|
|
(a)
|
Restricted stock awards containing rights to non-forfeitable dividends which participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Finished goods
|
$
|
194
|
|
|
$
|
189
|
|
Work in process
|
42
|
|
|
31
|
|
||
Raw materials
|
250
|
|
|
255
|
|
||
Total inventories
|
$
|
486
|
|
|
$
|
475
|
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Land, buildings and improvements
|
$
|
252
|
|
|
$
|
263
|
|
Machinery and equipment
|
655
|
|
|
685
|
|
||
Equipment held for lease or rental
|
207
|
|
|
192
|
|
||
Furniture and fixtures
|
87
|
|
|
93
|
|
||
Construction work in progress
|
41
|
|
|
49
|
|
||
Other
|
23
|
|
|
22
|
|
||
Total property, plant and equipment, gross
|
1,265
|
|
|
1,304
|
|
||
Less accumulated depreciation
|
804
|
|
|
816
|
|
||
Total property, plant and equipment, net
|
$
|
461
|
|
|
$
|
488
|
|
(in millions)
|
Water
Infrastructure |
|
Applied Water
|
|
Total
|
||||||
Balance as of December 31, 2012
|
$
|
1,085
|
|
|
$
|
562
|
|
|
$
|
1,647
|
|
Activity in 2013
|
|
|
|
|
|
||||||
Goodwill acquired
|
48
|
|
|
—
|
|
|
48
|
|
|||
Foreign currency and other
|
16
|
|
|
7
|
|
|
23
|
|
|||
Balance as of December 31, 2013
|
$
|
1,149
|
|
|
$
|
569
|
|
|
$
|
1,718
|
|
Activity in 2014
|
|
|
|
|
|
||||||
Goodwill divested (a)
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
|||
Foreign currency and other
|
(51
|
)
|
|
(26
|
)
|
|
(77
|
)
|
|||
Balance as of December 31, 2014
|
$
|
1,098
|
|
|
$
|
537
|
|
|
$
|
1,635
|
|
(a)
|
On July 2, 2014, we divested our Wolverhampton, U.K.-based pneumatic and hydraulic valves business which had
$6 million
of goodwill associated with the business. Refer to
Note 3
"Acquisitions and Divestitures" for additional information.
|
(in millions)
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||||||||||
|
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Intangibles
|
|
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Intangibles
|
||||||||||||
Customer and distributor relationships
|
$
|
331
|
|
|
$
|
(122
|
)
|
|
$
|
209
|
|
|
$
|
352
|
|
|
$
|
(104
|
)
|
|
$
|
248
|
|
Proprietary technology
|
106
|
|
|
(41
|
)
|
|
65
|
|
|
109
|
|
|
(36
|
)
|
|
73
|
|
||||||
Trademarks
|
36
|
|
|
(17
|
)
|
|
19
|
|
|
35
|
|
|
(16
|
)
|
|
19
|
|
||||||
Patents and other
|
19
|
|
|
(17
|
)
|
|
2
|
|
|
20
|
|
|
(17
|
)
|
|
3
|
|
||||||
Indefinite-lived intangibles
|
136
|
|
|
—
|
|
|
136
|
|
|
145
|
|
|
—
|
|
|
145
|
|
||||||
Other intangibles
|
$
|
628
|
|
|
$
|
(197
|
)
|
|
$
|
431
|
|
|
$
|
661
|
|
|
$
|
(173
|
)
|
|
$
|
488
|
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
|
2014
|
|
2013
|
|
2012
|
||||||
Derivatives in Cash Flow Hedges
|
|
|
|
|
|
|
||||||
Foreign Exchange Contracts
|
|
|
|
|
|
|
||||||
Amount of (loss) gain recognized in OCI (a)
|
|
$
|
(22
|
)
|
|
$
|
1
|
|
|
$
|
4
|
|
Amount of loss (gain) reclassified from OCI into revenue (a)
|
|
5
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
Amount of loss (gain) reclassified from OCI into cost of revenue (a)
|
|
1
|
|
|
2
|
|
|
(1
|
)
|
(a)
|
Effective portion
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Derivatives designated as hedging instruments
|
|
|
|
||||
Assets
|
|
|
|
||||
Other current assets
|
$
|
1
|
|
|
$
|
1
|
|
Liabilities
|
|
|
|
||||
Other current liabilities
|
(13
|
)
|
|
—
|
|
||
Total fair value
|
$
|
(12
|
)
|
|
$
|
1
|
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Compensation and other employee-benefits
|
$
|
186
|
|
|
$
|
215
|
|
Customer-related liabilities
|
66
|
|
|
63
|
|
||
Accrued warranty costs
|
31
|
|
|
36
|
|
||
Accrued taxes
|
77
|
|
|
45
|
|
||
Other accrued liabilities
|
121
|
|
|
120
|
|
||
Total accrued and other current liabilities
|
$
|
481
|
|
|
$
|
479
|
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Short-term borrowings and current maturities of long-term debt
|
$
|
89
|
|
|
$
|
42
|
|
Long-term debt:
|
|
|
|
||||
3.550% Senior Notes due 2016 (a)
|
600
|
|
|
600
|
|
||
4.875% Senior Notes due 2021 (a)
|
600
|
|
|
600
|
|
||
Unamortized discount (b)
|
(1
|
)
|
|
(1
|
)
|
||
Long-term debt
|
1,199
|
|
|
1,199
|
|
||
Total debt (c)
|
$
|
1,288
|
|
|
$
|
1,241
|
|
(a)
|
The fair value of our Senior Notes (as defined below) was determined using quoted prices in active markets for identical securities, which are considered Level 1 inputs. The fair value of our Senior Notes due 2016 (as defined below) was
$621 million
and
$635 million
as of
December 31, 2014
and
2013
, respectively. The fair value of our Senior Notes due 2021 (as defined below) was
$653 million
and
$629 million
as of
December 31, 2014
and
2013
, respectively.
|
(b)
|
The unamortized discount is recognized as a reduction in the carrying value of the Senior Notes in the Consolidated Balance Sheets and is being amortized to interest expense in our Consolidated Income Statements over the expected remaining terms of the Senior Notes.
|
(in millions)
|
Defined Contribution
|
||
2014
|
$
|
36
|
|
2013
|
35
|
|
|
2012
|
30
|
|
(in millions)
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||||||||||
|
Pension
|
|
Other
|
|
Total
|
|
Pension
|
|
Other
|
|
Total
|
||||||||||||
Fair value of plan assets
|
$
|
584
|
|
|
$
|
—
|
|
|
$
|
584
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
524
|
|
Projected benefit obligation
|
(872
|
)
|
|
(58
|
)
|
|
(930
|
)
|
|
(777
|
)
|
|
(63
|
)
|
|
(840
|
)
|
||||||
Funded status
|
$
|
(288
|
)
|
|
$
|
(58
|
)
|
|
$
|
(346
|
)
|
|
$
|
(253
|
)
|
|
$
|
(63
|
)
|
|
$
|
(316
|
)
|
Amounts recognized in the balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other non-current assets
|
$
|
55
|
|
|
$
|
—
|
|
|
$
|
55
|
|
|
$
|
46
|
|
|
$
|
—
|
|
|
$
|
46
|
|
Accrued and other current liabilities
|
(10
|
)
|
|
(3
|
)
|
|
(13
|
)
|
|
(11
|
)
|
|
(3
|
)
|
|
(14
|
)
|
||||||
Accrued postretirement benefits
|
(333
|
)
|
|
(55
|
)
|
|
(388
|
)
|
|
(288
|
)
|
|
(60
|
)
|
|
(348
|
)
|
||||||
Net amount recognized
|
$
|
(288
|
)
|
|
$
|
(58
|
)
|
|
$
|
(346
|
)
|
|
$
|
(253
|
)
|
|
$
|
(63
|
)
|
|
$
|
(316
|
)
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net actuarial losses
|
$
|
(297
|
)
|
|
$
|
(30
|
)
|
|
$
|
(327
|
)
|
|
$
|
(228
|
)
|
|
$
|
(20
|
)
|
|
$
|
(248
|
)
|
Prior service cost
|
—
|
|
|
17
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
(297
|
)
|
|
$
|
(13
|
)
|
|
$
|
(310
|
)
|
|
$
|
(228
|
)
|
|
$
|
(20
|
)
|
|
$
|
(248
|
)
|
|
Domestic Plans
|
|
International Plans
|
||||||||||||
|
December 31,
|
|
December 31,
|
||||||||||||
(in millions)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Change in benefit obligation:
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at beginning of year
|
$
|
74
|
|
|
$
|
83
|
|
|
$
|
703
|
|
|
$
|
707
|
|
Service cost
|
2
|
|
|
3
|
|
|
12
|
|
|
14
|
|
||||
Interest cost
|
3
|
|
|
3
|
|
|
27
|
|
|
28
|
|
||||
Benefits paid
|
(3
|
)
|
|
(3
|
)
|
|
(30
|
)
|
|
(32
|
)
|
||||
Actuarial (gain) loss
|
13
|
|
|
(8
|
)
|
|
144
|
|
|
(9
|
)
|
||||
Plan amendments, settlements and curtailments
|
—
|
|
|
(4
|
)
|
|
(2
|
)
|
|
(2
|
)
|
||||
Foreign currency translation/other
|
(1
|
)
|
|
—
|
|
|
(70
|
)
|
|
(3
|
)
|
||||
Benefit obligation at end of year
|
$
|
88
|
|
|
$
|
74
|
|
|
$
|
784
|
|
|
$
|
703
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at beginning of year
|
$
|
58
|
|
|
51
|
|
|
$
|
466
|
|
|
$
|
426
|
|
|
Employer contributions
|
4
|
|
|
4
|
|
|
28
|
|
|
36
|
|
||||
Actual return on plan assets
|
3
|
|
|
6
|
|
|
92
|
|
|
42
|
|
||||
Benefits paid
|
(3
|
)
|
|
(3
|
)
|
|
(30
|
)
|
|
(32
|
)
|
||||
Plan amendments, settlements and curtailments
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
||||
Foreign currency translation/other
|
(2
|
)
|
|
—
|
|
|
(30
|
)
|
|
(5
|
)
|
||||
Fair value of plan assets at end of year
|
$
|
60
|
|
|
$
|
58
|
|
|
$
|
524
|
|
|
$
|
466
|
|
Funded (unfunded) status of the plans
|
$
|
(28
|
)
|
|
$
|
(16
|
)
|
|
$
|
(260
|
)
|
|
$
|
(237
|
)
|
(in millions)
|
2014
|
|
2013
|
||||
Change in benefit obligation:
|
|
|
|
||||
Benefit obligation at beginning of year
|
$
|
63
|
|
|
$
|
65
|
|
Service cost
|
1
|
|
|
1
|
|
||
Interest cost
|
3
|
|
|
3
|
|
||
Benefits paid
|
(3
|
)
|
|
(3
|
)
|
||
Actuarial loss (gain)
|
12
|
|
|
(2
|
)
|
||
Plan amendment
|
(18
|
)
|
|
—
|
|
||
Other
|
—
|
|
|
(1
|
)
|
||
Benefit obligation at the end of year
|
$
|
58
|
|
|
$
|
63
|
|
|
December 31,
|
||||||
(in millions)
|
2014
|
|
2013
|
||||
Projected benefit obligation
|
$
|
453
|
|
|
$
|
404
|
|
Accumulated benefit obligation
|
419
|
|
|
375
|
|
||
Fair value of plan assets
|
110
|
|
|
106
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Domestic defined benefit pension plans:
|
|
|
|
|
|
||||||
Service cost
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
3
|
|
|
3
|
|
|
3
|
|
|||
Expected return on plan assets
|
(4
|
)
|
|
(4
|
)
|
|
(4
|
)
|
|||
Amortization of prior service cost
|
—
|
|
|
1
|
|
|
1
|
|
|||
Amortization of net actuarial loss
|
2
|
|
|
2
|
|
|
2
|
|
|||
Net periodic benefit cost
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
5
|
|
International defined benefit pension plans:
|
|
|
|
|
|
||||||
Service cost
|
$
|
12
|
|
|
$
|
14
|
|
|
$
|
11
|
|
Interest cost
|
27
|
|
|
28
|
|
|
29
|
|
|||
Expected return on plan assets
|
(32
|
)
|
|
(31
|
)
|
|
(30
|
)
|
|||
Amortization of net actuarial loss
|
7
|
|
|
13
|
|
|
8
|
|
|||
Settlement
|
1
|
|
|
—
|
|
|
2
|
|
|||
Net periodic benefit cost
|
$
|
15
|
|
|
$
|
24
|
|
|
$
|
20
|
|
Total net periodic benefit cost
|
$
|
18
|
|
|
$
|
29
|
|
|
$
|
25
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Domestic defined benefit pension plans:
|
|
|
|
|
|
||||||
Net loss (gain)
|
$
|
14
|
|
|
$
|
(11
|
)
|
|
$
|
8
|
|
Prior service cost (credit)
|
1
|
|
|
(4
|
)
|
|
1
|
|
|||
Amortization of prior service cost
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Amortization of net actuarial loss
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|||
Losses (gains) recognized in other comprehensive (loss) income
|
$
|
13
|
|
|
$
|
(18
|
)
|
|
$
|
6
|
|
International defined benefit pension plans:
|
|
|
|
|
|
||||||
Net loss (gain)
|
$
|
84
|
|
|
$
|
(21
|
)
|
|
$
|
62
|
|
Amortization of net actuarial loss
|
(7
|
)
|
|
(13
|
)
|
|
(8
|
)
|
|||
Settlement
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Foreign currency translation/other
|
(20
|
)
|
|
(2
|
)
|
|
8
|
|
|||
Losses (gains) recognized in other comprehensive (loss) income
|
$
|
56
|
|
|
$
|
(36
|
)
|
|
$
|
60
|
|
Total losses (gains) recognized in other comprehensive (loss) income
|
$
|
69
|
|
|
$
|
(54
|
)
|
|
$
|
66
|
|
Total losses (gains) recognized in comprehensive income
|
$
|
87
|
|
|
$
|
(25
|
)
|
|
$
|
91
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Service cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
3
|
|
|
3
|
|
|
3
|
|
|||
Amortization of prior service credit
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Amortization of net actuarial loss
|
2
|
|
|
2
|
|
|
1
|
|
|||
Net periodic benefit cost
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
5
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Net loss (gain)
|
$
|
12
|
|
|
$
|
(2
|
)
|
|
$
|
14
|
|
Prior service credit
|
(18
|
)
|
|
—
|
|
|
—
|
|
|||
Amortization of prior service credit
|
1
|
|
|
—
|
|
|
—
|
|
|||
Amortization of net actuarial loss
|
(2
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|||
(Gains) losses recognized in other comprehensive (loss) income
|
$
|
(7
|
)
|
|
$
|
(4
|
)
|
|
$
|
13
|
|
Total (gains) losses recognized in comprehensive income
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
18
|
|
|
2014
|
|
2013
|
|
2012
|
||||||||||||
|
U.S.
|
|
Int’l
|
|
U.S.
|
|
Int’l
|
|
U.S.
|
|
Int’l
|
||||||
Benefit Obligation Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Discount rate
|
4.01
|
%
|
|
3.14
|
%
|
|
4.79
|
%
|
|
4.23
|
%
|
|
4.13
|
%
|
|
4.04
|
%
|
Rate of future compensation increase
|
NM
|
|
|
3.34
|
%
|
|
NM
|
|
|
3.48
|
%
|
|
4.50
|
%
|
|
3.50
|
%
|
Net Periodic Benefit Cost Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Discount rate
|
4.79
|
%
|
|
4.23
|
%
|
|
4.13
|
%
|
|
4.04
|
%
|
|
4.87
|
%
|
|
4.76
|
%
|
Expected long-term return on plan assets
|
8.00
|
%
|
|
7.30
|
%
|
|
8.00
|
%
|
|
7.33
|
%
|
|
8.00
|
%
|
|
7.35
|
%
|
Rate of future compensation increase
|
NM
|
|
|
3.48
|
%
|
|
4.50
|
%
|
|
3.50
|
%
|
|
4.50
|
%
|
|
3.58
|
%
|
NM
|
Not meaningful. During 2013, an amendment to one of the Company's U.S. business unit's pension plans modified the benefit formula. Similar to all other U.S. pension plans, pension benefits for future service will be based on years of service and not impacted by future compensation increases.
|
|
2014
|
|
2013
|
|
2012
|
|||
Expected long-term rate of return on plan assets
|
7.38
|
%
|
|
7.40
|
%
|
|
7.42
|
%
|
Actual rate of return on plan assets
|
18.13
|
%
|
|
10.17
|
%
|
|
10.09
|
%
|
|
2014
|
|
2013
|
|
Target
Allocation
Ranges
|
||
Equity securities
|
28.8
|
%
|
|
31.7
|
%
|
|
20-40%
|
Fixed income
|
37.3
|
%
|
|
24.7
|
%
|
|
20-60%
|
Hedge funds
|
25.0
|
%
|
|
23.5
|
%
|
|
20-60%
|
Private equity
|
3.2
|
%
|
|
4.2
|
%
|
|
0-15%
|
Insurance contracts and other
|
5.7
|
%
|
|
15.9
|
%
|
|
0-30%
|
•
|
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
•
|
Level 2 inputs are other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices (in non-active markets or in active markets for
|
•
|
Level 3 inputs are unobservable inputs for the assets or liabilities.
|
•
|
Equity securities — Equities (including common and preferred shares, domestic listed and foreign listed, closed end mutual funds and exchange traded funds) are generally valued at the closing price reported on the major market on which the individual securities are traded at the measurement date. Equity securities held by the Company that are publicly traded in active markets are classified within Level 1 of the fair value hierarchy. Those equities that are held in proprietary funds pooled with other investor accounts are generally classified within Level 2 of the hierarchy.
|
•
|
Fixed income — United States government securities are generally valued using quoted prices of securities with similar characteristics. Corporate bonds and notes are generally valued by using pricing models (e.g. discounted cash flows), quoted prices of securities with similar characteristics or broker quotes. Fixed income securities are generally classified in Level 2 of the fair value hierarchy, however, bond funds listed on active markets are classified in Level 1.
|
•
|
Hedge funds — Hedge funds are pooled funds that employ a range of investment strategies including equity and fixed income, credit driven, macro and multi oriented strategies. The valuation of limited partnership interests in hedge funds may require significant management judgment. The NAV reported by the asset manager is adjusted when it is determined that NAV is not representative of fair value. In making such an assessment, a variety of factors is reviewed, including, but not limited to, the timeliness of NAV as reported by the asset manager and changes in general economic and market conditions subsequent to the last NAV reported by the asset manager. Depending on how these investments can be redeemed and the extent of any adjustments to NAV, hedge funds are classified within either Level 2 (redeemable within 90 days) or Level 3 (redeemable beyond 90 days) of the fair value hierarchy.
|
•
|
Private equity — Private equity includes a diversified range of strategies, including buyout funds, distressed funds, venture and growth equity funds and mezzanine funds. The valuation of limited partnership interests in private equity funds may require significant management judgment. The NAV reported by the asset manager is adjusted when it is determined that NAV is not representative of fair value. In making such an assessment, a variety of factors is reviewed, including, but not limited to, the timeliness of NAV as reported by the asset manager and changes in general economic and market conditions subsequent to the last NAV reported by the asset manager. These funds are generally classified within Level 3 of the fair value hierarchy.
|
•
|
Insurance contracts and other — Primarily comprised of insurance contracts and cash. Insurance contracts are valued at book value, which approximates fair value, and is calculated using the prior year balance adjusted for investment returns and cash flows and are generally classified as Level 3. Cash and cash equivalents are held in accounts with brokers or custodians for liquidity and investment collateral and are classified as Level 1.
|
|
December 31,
|
||||||||||||||||||||||||||||||
|
2014
|
|
2013
|
||||||||||||||||||||||||||||
(in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||||
Asset Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Global stock funds/securities
|
$
|
123
|
|
|
$
|
112
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
123
|
|
|
$
|
108
|
|
|
$
|
11
|
|
|
$
|
4
|
|
Index funds
|
42
|
|
|
4
|
|
|
38
|
|
|
—
|
|
|
40
|
|
|
3
|
|
|
37
|
|
|
—
|
|
||||||||
Emerging markets funds
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||||||
Fixed income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate bonds
|
79
|
|
|
53
|
|
|
22
|
|
|
4
|
|
|
95
|
|
|
40
|
|
|
48
|
|
|
7
|
|
||||||||
Government bonds
|
139
|
|
|
87
|
|
|
52
|
|
|
—
|
|
|
35
|
|
|
35
|
|
|
—
|
|
|
—
|
|
||||||||
Hedge funds
|
146
|
|
|
11
|
|
|
85
|
|
|
50
|
|
|
123
|
|
|
9
|
|
|
95
|
|
|
19
|
|
||||||||
Private equity
|
19
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||||||
Insurance contracts and other
|
33
|
|
|
16
|
|
|
—
|
|
|
17
|
|
|
83
|
|
|
62
|
|
|
4
|
|
|
17
|
|
||||||||
Total
|
$
|
584
|
|
|
$
|
286
|
|
|
$
|
208
|
|
|
$
|
90
|
|
|
$
|
524
|
|
|
$
|
260
|
|
|
$
|
195
|
|
|
$
|
69
|
|
(in millions)
|
Equity
Securities
|
|
Fixed Income
|
|
Hedge funds
|
|
Private Equity
|
|
Other
|
|
Total
|
||||||||||||
Balance, December 31, 2012
|
$
|
3
|
|
|
$
|
9
|
|
|
$
|
20
|
|
|
$
|
24
|
|
|
$
|
4
|
|
|
$
|
60
|
|
Purchases, sales, settlements
|
—
|
|
|
(3
|
)
|
|
10
|
|
|
(4
|
)
|
|
12
|
|
|
15
|
|
||||||
Unrealized loss
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
4
|
|
||||||
Realized gains
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Net transfers
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||||
Currency impact
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Balance, December 31, 2013
|
4
|
|
|
7
|
|
|
19
|
|
|
22
|
|
|
17
|
|
|
69
|
|
||||||
Purchases, sales, settlements
|
(3
|
)
|
|
(3
|
)
|
|
27
|
|
|
(6
|
)
|
|
—
|
|
|
15
|
|
||||||
Unrealized gains
|
—
|
|
|
1
|
|
|
5
|
|
|
4
|
|
|
—
|
|
|
10
|
|
||||||
Currency impact
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Balance, December 31, 2014
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
50
|
|
|
$
|
19
|
|
|
$
|
17
|
|
|
$
|
90
|
|
(in millions)
|
Pension
|
|
Other Benefits
|
||||
2015
|
$
|
33
|
|
|
$
|
3
|
|
2016
|
33
|
|
|
3
|
|
||
2017
|
35
|
|
|
3
|
|
||
2018
|
35
|
|
|
3
|
|
||
2019
|
36
|
|
|
4
|
|
||
Years 2020 - 2024
|
184
|
|
|
19
|
|
(shares in thousands)
|
Shares
|
|
Weighted
Average
Exercise
Price / Share
|
|
Weighted Average
Remaining
Contractual
Term (Years)
|
|||
Outstanding at January 1, 2014
|
3,504
|
|
|
$
|
26.80
|
|
|
6.4
|
Granted
|
543
|
|
|
$
|
38.16
|
|
|
10.0
|
Exercised
|
(941
|
)
|
|
$
|
27.43
|
|
|
4.9
|
Forfeited
|
(117
|
)
|
|
$
|
28.78
|
|
|
6.8
|
Outstanding at December 31, 2014
|
2,989
|
|
|
$
|
28.60
|
|
|
6.5
|
Options exercisable at December 31, 2014
|
1,924
|
|
|
$
|
26.50
|
|
|
5.5
|
Vested and non-vested expected to vest as of December 31, 2014
|
2,903
|
|
|
$
|
28.42
|
|
|
6.4
|
|
2014
|
|
2013
|
|
2012
|
||||||
Dividend yield
|
1.34
|
%
|
|
1.69
|
%
|
|
1.52
|
%
|
|||
Volatility
|
28.49
|
%
|
|
31.10
|
%
|
|
33.40
|
%
|
|||
Risk-free interest rate
|
1.82
|
%
|
|
1.28
|
%
|
|
1.42
|
%
|
|||
Expected term (in years)
|
5.60
|
|
|
6.62
|
|
|
7.00
|
|
|||
Weighted-average fair value per share
|
$
|
9.71
|
|
|
$
|
7.58
|
|
|
$
|
8.10
|
|
(shares in thousands)
|
Shares
|
|
Weighted Average
Grant Date Fair
Value / Share
|
|||
Outstanding at January 1, 2014
|
52
|
|
|
$
|
27.49
|
|
Granted
|
84
|
|
|
$
|
37.87
|
|
Vested
|
—
|
|
|
$
|
—
|
|
Forfeited
|
(12
|
)
|
|
$
|
33.11
|
|
Outstanding at December 31, 2014
|
124
|
|
|
$
|
33.95
|
|
(in thousands of shares)
|
2014
|
|
2013
|
|
2012
|
|||
Beginning Balance, January 1
|
184,557
|
|
|
185,658
|
|
|
184,641
|
|
Stock incentive plan activity
|
1,226
|
|
|
1,203
|
|
|
1,367
|
|
Repurchase of common stock
|
(3,483
|
)
|
|
(2,304
|
)
|
|
(350
|
)
|
Ending Balance, December 31
|
182,300
|
|
|
184,557
|
|
|
185,658
|
|
(in millions)
|
Foreign Currency Translation
|
|
Postretirement Benefit Plans
|
|
Derivative Instruments
|
|
Total
|
||||||||
Balance at January 1, 2012
|
$
|
288
|
|
|
$
|
(166
|
)
|
|
$
|
—
|
|
|
$
|
122
|
|
Foreign currency translation adjustment
|
48
|
|
|
|
|
|
|
48
|
|
||||||
Changes in postretirement benefit plans
|
|
|
(93
|
)
|
|
|
|
(93
|
)
|
||||||
Income tax expense on changes in postretirement benefit plans
|
|
|
27
|
|
|
|
|
27
|
|
||||||
Amortization of prior service cost and net actuarial loss on postretirement benefit plans into:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
|
|
5
|
|
|
|
|
5
|
|
||||||
Selling, general and administrative expenses
|
|
|
5
|
|
|
|
|
5
|
|
||||||
Other non-operating (expense) income, net
|
|
|
4
|
|
|
|
|
4
|
|
||||||
Income tax expense on amortization of postretirement benefit plan items
|
|
|
(4
|
)
|
|
|
|
(4
|
)
|
||||||
Unrealized gain on foreign exchange agreements
|
|
|
|
|
4
|
|
|
4
|
|
||||||
Income tax expense on unrealized gain on foreign exchange agreements
|
|
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Reclassification of unrealized gain on foreign exchange agreements into revenue
|
|
|
|
|
(2
|
)
|
|
(2
|
)
|
||||||
Reclassification of unrealized gain on foreign exchange agreements into cost of revenue
|
|
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Tax on reclassification of unrealized gain on foreign exchange agreements
|
|
|
|
|
1
|
|
|
1
|
|
||||||
Balance at December 31, 2012
|
$
|
336
|
|
|
$
|
(222
|
)
|
|
$
|
1
|
|
|
$
|
115
|
|
Foreign currency translation adjustment
|
15
|
|
|
|
|
|
|
15
|
|
||||||
Changes in postretirement benefit plans
|
|
|
40
|
|
|
|
|
40
|
|
||||||
Income tax expense on changes in postretirement benefit plans
|
|
|
(17
|
)
|
|
|
|
(17
|
)
|
||||||
Amortization of prior service cost and net actuarial loss on postretirement benefit plans into:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
|
|
7
|
|
|
|
|
7
|
|
||||||
Selling, general and administrative expenses
|
|
|
7
|
|
|
|
|
7
|
|
||||||
Research and development expenses
|
|
|
1
|
|
|
|
|
1
|
|
||||||
Other non-operating (expense) income, net
|
|
|
3
|
|
|
|
|
3
|
|
||||||
Income tax expense on amortization of postretirement benefit plan items
|
|
|
(5
|
)
|
|
|
|
(5
|
)
|
||||||
Unrealized gain on foreign exchange agreements
|
|
|
|
|
1
|
|
|
1
|
|
||||||
Reclassification of unrealized gain on foreign exchange agreements into revenue
|
|
|
|
|
(2
|
)
|
|
(2
|
)
|
||||||
Reclassification of unrealized loss on foreign exchange agreements into cost of revenue
|
|
|
|
|
2
|
|
|
2
|
|
||||||
Balance at December 31, 2013
|
$
|
351
|
|
|
$
|
(186
|
)
|
|
$
|
2
|
|
|
$
|
167
|
|
(in millions)
|
Foreign Currency Translation
|
|
Postretirement Benefit Plans
|
|
Derivative Instruments
|
|
Total
|
||||||||
Balance at January 1, 2014
|
$
|
351
|
|
|
$
|
(186
|
)
|
|
$
|
2
|
|
|
$
|
167
|
|
Foreign currency translation adjustment
|
(206
|
)
|
|
|
|
|
|
(206
|
)
|
||||||
Changes in postretirement benefit plans
|
|
|
(92
|
)
|
|
|
|
(92
|
)
|
||||||
Income tax expense on changes in postretirement benefit plans
|
|
|
20
|
|
|
|
|
20
|
|
||||||
Foreign currency translation adjustment for postretirement benefit plans
|
|
|
20
|
|
|
|
|
20
|
|
||||||
Amortization of prior service cost and net actuarial loss on postretirement benefit plans into:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
|
|
4
|
|
|
|
|
4
|
|
||||||
Selling, general and administrative expenses
|
|
|
5
|
|
|
|
|
5
|
|
||||||
Other non-operating (expense) income, net
|
|
|
1
|
|
|
|
|
1
|
|
||||||
Income tax expense on amortization of postretirement benefit plan items
|
|
|
(3
|
)
|
|
|
|
(3
|
)
|
||||||
Unrealized loss on foreign exchange agreements
|
|
|
|
|
(22
|
)
|
|
(22
|
)
|
||||||
Income tax benefit on unrealized loss on foreign exchange agreements
|
|
|
|
|
1
|
|
|
1
|
|
||||||
Reclassification of unrealized loss on foreign exchange agreements into revenue
|
|
|
|
|
5
|
|
|
5
|
|
||||||
Reclassification of unrealized loss on foreign exchange agreements into cost of revenue
|
|
|
|
|
1
|
|
|
1
|
|
||||||
Balance at December 31, 2014
|
$
|
145
|
|
|
$
|
(231
|
)
|
|
$
|
(13
|
)
|
|
$
|
(99
|
)
|
(in millions)
|
Total
|
||
2014
|
$
|
73
|
|
2013
|
77
|
|
|
2012
|
73
|
|
(in millions)
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
||||||||||||
Minimum rental payments
|
$
|
63
|
|
|
$
|
48
|
|
|
$
|
33
|
|
|
$
|
24
|
|
|
$
|
13
|
|
|
$
|
25
|
|
(in millions)
|
2014
|
|
2013
|
||||
Warranty accrual – January 1
|
$
|
37
|
|
|
$
|
40
|
|
Net changes for product warranties in the period
|
27
|
|
|
34
|
|
||
Settlement of warranty claims
|
(31
|
)
|
|
(37
|
)
|
||
Foreign currency and other
|
(2
|
)
|
|
—
|
|
||
Warranty accrual – December 31
|
$
|
31
|
|
|
$
|
37
|
|
(in millions)
|
|
2014
|
|
2013
|
|
2012
|
||||||
Sales to unconsolidated affiliates
|
|
$
|
16
|
|
|
$
|
15
|
|
|
$
|
12
|
|
Purchases from unconsolidated affiliates
|
|
18
|
|
|
20
|
|
|
20
|
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Water Infrastructure
|
$
|
2,442
|
|
|
$
|
2,384
|
|
|
$
|
2,349
|
|
Applied Water
|
1,474
|
|
|
1,453
|
|
|
1,442
|
|
|||
Total
|
$
|
3,916
|
|
|
$
|
3,837
|
|
|
$
|
3,791
|
|
Operating income:
|
|
|
|
|
|
||||||
Water Infrastructure
|
$
|
321
|
|
|
$
|
263
|
|
|
$
|
334
|
|
Applied Water
|
193
|
|
|
175
|
|
|
178
|
|
|||
Corporate and other
|
(51
|
)
|
|
(75
|
)
|
|
(69
|
)
|
|||
Total operating income
|
463
|
|
|
363
|
|
|
443
|
|
|||
Interest expense
|
54
|
|
|
55
|
|
|
55
|
|
|||
Other non-operating income (expense)
|
1
|
|
|
(10
|
)
|
|
—
|
|
|||
Gain from sale of business
|
11
|
|
|
—
|
|
|
—
|
|
|||
Income before taxes
|
$
|
421
|
|
|
$
|
298
|
|
|
$
|
388
|
|
Depreciation and amortization:
|
|
|
|
|
|
||||||
Water Infrastructure
|
$
|
100
|
|
|
$
|
104
|
|
|
$
|
95
|
|
Applied Water
|
25
|
|
|
26
|
|
|
28
|
|
|||
Regional selling locations (a)
|
12
|
|
|
13
|
|
|
12
|
|
|||
Corporate and other
|
5
|
|
|
7
|
|
|
7
|
|
|||
Total
|
$
|
142
|
|
|
$
|
150
|
|
|
$
|
142
|
|
Capital expenditures:
|
|
|
|
|
|
||||||
Water Infrastructure
|
$
|
73
|
|
|
$
|
67
|
|
|
$
|
66
|
|
Applied Water
|
28
|
|
|
31
|
|
|
25
|
|
|||
Regional selling locations (b)
|
10
|
|
|
12
|
|
|
15
|
|
|||
Corporate and other
|
8
|
|
|
16
|
|
|
6
|
|
|||
Total
|
$
|
119
|
|
|
$
|
126
|
|
|
$
|
112
|
|
(a)
|
Depreciation and amortization expense incurred by the Regional selling locations was included in an overall allocation of Regional selling location costs to the segments; however, a certain portion of that expense was not specifically identified to a segment. That is the expense captured in this Regional selling location line.
|
(b)
|
Represents capital expenditures incurred by the Regional selling locations not allocated to the segments.
|
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Pumps, accessories, parts and service
|
$
|
3,094
|
|
|
$
|
3,076
|
|
|
$
|
3,054
|
|
Other (a)
|
822
|
|
|
761
|
|
|
737
|
|
|||
Total
|
$
|
3,916
|
|
|
$
|
3,837
|
|
|
$
|
3,791
|
|
(a)
|
Other includes treatment equipment, analytical instrumentation, heat exchangers, valves and controls.
|
|
Total Assets
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Water Infrastructure
|
$
|
2,128
|
|
|
$
|
2,224
|
|
|
$
|
2,169
|
|
Applied Water
|
1,114
|
|
|
1,122
|
|
|
1,131
|
|
|||
Regional selling locations (a)
|
961
|
|
|
983
|
|
|
797
|
|
|||
Corporate and other (b)
|
661
|
|
|
567
|
|
|
582
|
|
|||
Total
|
$
|
4,864
|
|
|
$
|
4,896
|
|
|
$
|
4,679
|
|
(a)
|
The Regional selling locations have assets that consist primarily of cash, accounts receivable and inventory which are not allocated to the segments.
|
(b)
|
Corporate and other consists of items pertaining to our corporate headquarters function, which principally consist of deferred tax assets and certain property, plant and equipment.
|
|
Revenue
|
||||||||||
|
Year Ended December 31,
|
||||||||||
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
United States
|
$
|
1,477
|
|
|
$
|
1,434
|
|
|
$
|
1,400
|
|
Europe
|
1,379
|
|
|
1,387
|
|
|
1,338
|
|
|||
Asia Pacific
|
478
|
|
|
467
|
|
|
469
|
|
|||
Other
|
582
|
|
|
549
|
|
|
584
|
|
|||
Total
|
$
|
3,916
|
|
|
$
|
3,837
|
|
|
$
|
3,791
|
|
(in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Balance at beginning of year
|
$
|
22
|
|
|
$
|
25
|
|
|
$
|
29
|
|
Additions charged to expense
|
9
|
|
|
8
|
|
|
4
|
|
|||
Deductions/other
|
(7
|
)
|
|
(11
|
)
|
|
(8
|
)
|
|||
Balance at end of year
|
$
|
24
|
|
|
$
|
22
|
|
|
$
|
25
|
|
|
|
2014 Quarter Ended
|
||||||||||||||
(In millions, except per share amounts)
|
|
Dec. 31
|
|
Sept. 30
|
|
June 30
|
|
Mar. 31
|
||||||||
Revenue
|
|
$
|
1,042
|
|
|
$
|
963
|
|
|
$
|
1,005
|
|
|
$
|
906
|
|
Gross profit
|
|
407
|
|
|
376
|
|
|
388
|
|
|
342
|
|
||||
Operating income
|
|
141
|
|
|
130
|
|
|
116
|
|
|
76
|
|
||||
Net income
|
|
$
|
96
|
|
|
$
|
106
|
|
|
$
|
86
|
|
|
$
|
49
|
|
Earnings per share:
|
||||||||||||||||
Basic
|
|
$
|
0.53
|
|
|
$
|
0.58
|
|
|
$
|
0.47
|
|
|
$
|
0.27
|
|
Diluted
|
|
$
|
0.52
|
|
|
$
|
0.58
|
|
|
$
|
0.47
|
|
|
$
|
0.27
|
|
|
|
2013 Quarter Ended
|
||||||||||||||
(In millions, except per share amounts)
|
|
Dec. 31
|
|
Sept. 30
|
|
June 30
|
|
Mar. 31
|
||||||||
Revenue
|
|
$
|
1,033
|
|
|
$
|
965
|
|
|
$
|
960
|
|
|
$
|
879
|
|
Gross profit
|
|
410
|
|
|
384
|
|
|
371
|
|
|
334
|
|
||||
Operating income
|
|
129
|
|
|
98
|
|
|
70
|
|
|
66
|
|
||||
Net income
|
|
$
|
68
|
|
|
$
|
73
|
|
|
$
|
46
|
|
|
$
|
41
|
|
Earnings per share:
|
||||||||||||||||
Basic
|
|
$
|
0.37
|
|
|
$
|
0.39
|
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
Diluted
|
|
$
|
0.37
|
|
|
$
|
0.39
|
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
(a)
|
(1)
|
The Index to Consolidated Financial Statements of the Registrant under Item 8 of this Report is incorporated herein by reference as the list of Financial Statements required as part of this Report.
|
|
(2)
|
Financial Statement Schedules — All financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
|
|
(3)
|
Exhibits — The exhibit list in the Exhibit Index is incorporated by reference as the list of exhibits required as part of this Report.
|
|
XYLEM INC.
|
|
(Registrant)
|
|
|
|
/s/ John P. Connolly
|
|
John P. Connolly
|
|
Vice President, Controller and Chief Accounting Officer
|
|
(Principal Accounting Officer)
|
February 26, 2015
|
|
/s/ Patrick K. Decker
|
|
|
Patrick K. Decker
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
February 26, 2015
|
|
/s/ Michael T. Speetzen
|
|
|
Michael T. Speetzen
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
February 26, 2015
|
|
/s/ Markos I. Tambakeras
|
|
|
Markos I. Tambakeras, Chairman
|
|
|
|
February 26, 2015
|
|
/s/ Curtis J. Crawford
|
|
|
Curtis J. Crawford, Director
|
|
|
|
February 26, 2015
|
|
/s/ Robert F. Friel
|
|
|
Robert F. Friel, Director
|
|
|
|
February 26, 2015
|
|
/s/ Victoria D. Harker
|
|
|
Victoria D. Harker, Director
|
|
|
|
February 26, 2015
|
|
/s/ Sten E. Jakobsson
|
|
|
Sten E. Jakobsson, Director
|
|
|
|
February 26, 2015
|
|
/s/ Steven R. Loranger
|
|
|
Steven R. Loranger, Director
|
|
|
|
February 26, 2015
|
|
/s/ Edward J. Ludwig
|
|
|
Edward J. Ludwig, Director
|
|
|
|
February 26, 2015
|
|
/s/ Surya N. Mohapatra
|
|
|
Surya N. Mohapatra, Director
|
|
|
|
February 26, 2015
|
|
/s/ Jerome A. Peribere
|
|
|
Jerome A. Peribere, Director
|
|
|
|
February 26, 2015
|
|
/s/ James P. Rogers
|
|
|
James P. Rogers, Director
|
Exhibit
Number
|
Description
|
Location
|
|
(10.8
|
)
|
Xylem 1997 Annual Incentive Plan
|
Incorporated by reference to Exhibit 10.8 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.9
|
)
|
Xylem Annual Incentive Plan for Executive Officers
|
Incorporated by reference to Exhibit 10.9 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.10
|
)
|
Xylem Retirement Savings Plan
|
Incorporated by reference to Exhibit 10.1 of Xylem Inc.’s Form 10-Q filed on July 30, 2013 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.11
|
)
|
Xylem Supplemental Retirement Savings Plan
|
Incorporated by reference to Exhibit 10.11 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.12
|
)
|
Xylem Deferred Compensation Plan
|
Incorporated by reference to Exhibit 4.5 of Xylem Inc.’s Registration Statement on
Form S-8 filed on October 28, 2011 (CIK
No. 1524472, File No. 333-177607).
|
|
|
|
|
(10.13
|
)
|
Xylem Deferred Compensation Plan for
Non-Employee Directors
|
Incorporated by reference to Exhibit 10.13 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.14
|
)
|
Xylem Enhanced Severance Pay Plan
|
Incorporated by reference to Exhibit 10.29 of Xylem Inc.’s Form 10-Q Quarterly Report filed on May 3, 2012 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.15
|
)
|
Xylem Special Senior Executive Severance Pay Plan
|
Incorporated by reference to Exhibit 10.1 of Xylem Inc.’s Form 10-Q Quarterly Report filed on October 28, 2014 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.16
|
)
|
Xylem Senior Executive Severance Pay Plan
|
Incorporated by reference to Exhibit 10.16 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.17
|
)
|
Form of Xylem 2011 Omnibus Incentive Plan 2011 Non-Qualified Stock Option Award Agreement — Founders Grant
|
Incorporated by reference to Exhibit 10.17 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.18
|
)
|
Form of Xylem 2011 Omnibus Incentive Plan Non-Qualified Stock Option Award Agreement — General Grant
|
Incorporated by reference to Exhibit 10.18 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.19
|
)
|
Form of Xylem 2011 Omnibus Incentive Plan-Performance Share Unit Agreement
|
Incorporated by reference to Exhibit 10.3 of Xylem Inc.'s Form 10-Q Quarterly Report filed on April 30, 2013 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.20
|
)
|
Form of Director’s Indemnification Agreement
|
Incorporated by reference to Exhibit 10.24 of Xylem Inc.’s Form 10-Q Quarterly Report filed on November 21, 2011 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
Exhibit
Number
|
Description
|
Location
|
|
(10.21
|
)
|
Form of Xylem 2011 Omnibus Incentive Plan 2012 Restricted Stock Unit Agreement
|
Incorporated by reference to Exhibit 10.2 of Xylem Inc.'s Form 10-Q Quarterly Report filed on April 30, 2013 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.22
|
)
|
Form of Xylem 2011 Omnibus Incentive Plan 2012 Non-Qualified Stock Option Award Agreement
|
Incorporated by reference to Exhibit 10.1 of Xylem Inc.'s Form 10-Q Quarterly Report filed on April 30, 2013 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.23
|
)
|
Letter Agreement between Xylem Inc. and Patrick K. Decker
|
Incorporated by reference to Exhibit 10.1 of Xylem Inc.'s Form 10-Q Quarterly Report filed on April 29, 2014 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.24
|
)
|
Restricted Stock Unit Grant Agreement between Xylem Inc. and Patrick K. Decker
|
Incorporated by reference to Exhibit 10.1 of Xylem Inc.'s Form 8-K Current Report filed on March 20, 2014 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.25
|
)
|
Research and Development Facility Agreement - Xylem Water Technologies Risk-Sharing Financing Facility First Amended and Restated Finance Contract, dated December 4, 2013, among the European Investment Bank, Xylem Holdings S.a.r.l. and Xylem International S.a.r.l., as borrowers, and Xylem Inc., as guarantor.
|
Incorporated by reference to Exhibit 10.30 of Xylem Inc.’s Form 10-K Annual Report filed on February 27, 2014 (CIK No. 1524472, File No. 1-35229).
|
|
|
|
|
(10.26
|
)
|
Agreement dated June 28, 2014, Amending the Research and Development Facility Agreement - Xylem Water Technologies Risk-Sharing Financing Facility First Amended and Restated Finance Contract, dated December 4, 2013, among the European Investment Bank, Xylem Holdings S.á r.l. and Xylem International S.á r.l., as borrowers, and Xylem Inc., as guarantor.
|
Incorporated by reference to Exhibit 10.1 of Xylem Inc.’s Form 10-Q Quarterly Report filed on July 29, 2014 (CIK No. 1524472, File No. 1-35229)
|
|
|
|
|
(11.0
|
)
|
Statement re computation of per share earnings
|
Information required to be presented in Exhibit 11 is provided under "Earnings Per Share" in Note 8 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification 260,
Earnings Per Share
.
|
|
|
|
|
(12.0
|
)
|
Statements re computation of ratios
|
Filed herewith.
|
|
|
|
|
(21.0
|
)
|
Subsidiaries of the Registrant
|
Filed herewith.
|
|
|
|
|
(23.1
|
)
|
Consent of Independent Registered Public Accounting Firm
|
Filed herewith.
|
|
|
|
|
(31.1
|
)
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith.
|
|
|
|
|
(31.2
|
)
|
Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith.
|
|
|
|
Exhibit
Number
|
Description
|
Location
|
|
(32.1
|
)
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
|
|
|
|
|
(32.2
|
)
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
|
|
|
|
|
(101
|
)
|
The following materials from Xylem Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Income Statements, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
|
Submitted electronically with this report.
|
1.
|
Grant of Options
. In accordance with, and subject to, the terms and conditions of the Plan and this Agreement, the Company hereby confirms the grant on
[Month][day], [year],
(the “
Grant Date
”) to the Optionee of the option to purchase from the Company all or any part of an aggregate of
[#,###]
shares (the “
Options
”), at the purchase price of
$[##.##]
per share (the “
Exercise Price
”). All Options shall be Nonqualified Stock Options.
|
2.
|
Terms and Conditions
. It is understood and agreed that the Options are subject to the following terms and conditions:
|
(a)
|
Expiration Date
. The Options shall expire on
[Month] [day], [year + 10],
or, if the Optionee’s employment terminates before that date, on the date specified in subsection 2(e) below.
|
(b)
|
Exercise of Options
. The Options may not be exercised until it has become vested.
|
(c)
|
Vesting
. Subject to subsections 2(a), 2(d), and 2(e), the Options shall vest in three installments as follows:
|
(i)
|
1/3 of the Options shall vest on
[Month] [day], [year + 1],
|
(ii)
|
1/3 of the Options shall vest on
[Month] [day], [year + 2],
and
|
(iii)
|
1/3 of the Options shall vest on
[Month] [day], [year + 3].
|
(d)
|
Effect of Acceleration Event.
Subject to subsections 2(a) and 2(e), any unvested Options shall vest in full upon Acceleration Event.
|
(e)
|
Effect of Termination of Employment
. Options may only vest while the Grantee is actively employed by the Company or an Affiliate. If the Optionee’s employment terminates before
[Month] [day], [year + 10],
the following would apply to any outstanding Options:
|
(i)
|
Termination due to Death or Disability (as defined below)
. Any unvested Options shall immediately become 100% vested upon the Optionee’s termination of employment. Any vested Options shall expire on the earlier of
[Month] [day], [year + 10]
, or the date
three years
after the Optionee’s termination of active employment.
|
(i)
|
Termination due to Retirement (as defined below)
. A prorated portion (as defined below), of any unvested Options shall immediately vest upon the Optionee’s termination of employment. Any vested Options shall expire on the earlier of
[Month] [day], [year + 10],
or the date
three years
after the Optionee’s termination of employment.
|
(ii)
|
Termination other than Death, Disability and Retirement
. Any unvested Options shall automatically expire on the date of the Optionee’s termination of employment. Any vested portion of the Options shall expire on the earlier of
[Month] [day], [year + 10]
, or the date
three months
after the Optionee’s termination of employment.
|
(iii)
|
Notwithstanding the foregoing, if an Optionee’s employment is terminated on or within
two years
after an Acceleration Event (A) by the Company (or an Affiliate, as the case may be) for other than Cause (as determined by the Committee), and not because of the Optionee’s death, Disability, or Retirement, or (B) by the Optionee because the Optionee in good faith believed that as a result of such Acceleration Event he or she was unable effectively to discharge his or her present duties or the duties of the position the Optionee occupied just prior to the occurrence of such Acceleration Event, any unvested Options shall immediately become 100% vested upon the Optionee’s termination of employment and vested Options shall expire on the earlier of
[Month] [day], [year + 10]
, or the date
seven months
after the Optionee’s termination of employment.
|
(f)
|
Payment of Exercise Price
. Permissible methods for payment of the Exercise Price upon exercise of the Options are described in Section 6.6 of the Plan, or, if the Plan is amended, successor provisions. In addition to the methods of exercise permitted by Section 6.6 of the Plan, the Optionee may exercise all or part of the Options by way of (i) broker-assisted cashless exercise in a manner consistent with the Federal Reserve Board's Regulation T, unless the Committee determines that such exercise method is prohibited by law, or (ii) net-settlement, whereby the Optionee directs the Company to withhold shares that otherwise would be issued upon exercise of the Options having an aggregate Fair Market Value on the date of the exercise
|
(g)
|
Tax Withholding
. The Company shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, all applicable federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to the exercise of the Options. The Optionee may elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares that otherwise would be issued upon exercise of the Options, with the number of shares withheld having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction (rounding up to the nearest whole share). Any such election shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
|
(h)
|
Automatic Exercise in Certain Circumstances.
Subject to subsection 2(i) of this Agreement, to the extent any portion of the Options held by active participants are otherwise exercisable but remain unexercised at the close of business on
[Month] [day], [year + 10]
, and if on such date the Fair Market Value of the shares subject to such exercisable but unexercised portion of these Options exceeds the aggregate consideration that would have been required to be paid to purchase such shares had such portion of the Options been exercised, the Optionee will automatically be paid, in cancellation of such portion of the Options, an amount of Company shares having a Fair Market Value equal to such excess (rounding up to the nearest whole share), if any; provided, however, that such an exercise shall not occur to the extent the Optionee (and, if applicable, the Optionee’s authorized legal representative) may waive in writing the applicability of this subsection 2(h).
|
(i)
|
Compliance with Laws and Regulations.
Notwithstanding anything to the contrary herein, the Company shall not be obligated to issue any shares pursuant to this Agreement, at any time, if the offering of the shares covered by this Agreement, or the exercise of the Options by the Optionee, violates or is not in compliance with any laws, rules or regulations of the United States or any state or country. The Optionee understands that, to the extent applicable, the laws of the country in which the Optionee is working at the time of grant, vesting, and/or exercise of the Options (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent exercise of the Options or may subject the Optionee to additional procedural or regulatory requirements for which the Optionee is solely responsible and that the Optionee will have to independently fulfill. The Company reserves the right to impose other requirements on the Optionee’s participation in the Plan, awards thereunder, and any shares acquired under the Plan, to the extent the Company determines it is necessary or advisable to comply with applicable law or facilitate the administration of the Plan.
|
(j)
|
Optionee Bound by Plan and Rules
. The Optionee hereby acknowledges receipt of a copy of the Plan and this Agreement and agrees to be bound by the terms and provisions thereof as amended from time to time. The Optionee agrees to be bound by any rules and regulations for administering the Plan as may be adopted by the Committee during the life of the Options. Terms used herein and not otherwise defined shall be as defined in the Plan.
|
(k)
|
Governing Law
. This Agreement is issued, and the Options evidenced hereby are granted, in White Plains, New York and shall be governed and construed in accordance with the laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
|
|
Years Ended December 31,
|
||||||||||||||||||
(In Millions Except Ratios)
|
2014
|
|
2013
|
|
2012
|
|
2011(a)
|
|
|
2010(a)
|
|
||||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest Expense, Including Amortization of Deferred Finance Fees
|
$
|
54
|
|
|
$
|
55
|
|
|
$
|
55
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest Portion of Rental Expense (b)
|
24
|
|
|
25
|
|
|
24
|
|
|
21
|
|
|
18
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Fixed Charges
|
78
|
|
|
80
|
|
|
79
|
|
|
38
|
|
|
18
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings Before Income Taxes, Discontinued Operations and Fixed Charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Pre-tax income (before income or loss from equity investees)
|
421
|
|
|
298
|
|
|
388
|
|
|
379
|
|
|
387
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed Charges
|
78
|
|
|
80
|
|
|
79
|
|
|
38
|
|
|
18
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Earnings Available For Fixed Charges
|
$
|
499
|
|
|
$
|
378
|
|
|
$
|
467
|
|
|
$
|
417
|
|
|
$
|
405
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of Earnings to Fixed Charges:
|
6.4
|
|
|
4.7
|
|
|
5.9
|
|
|
10.9
|
|
|
22.7
|
|
(a)
|
For all comparative periods presented above, these periods are prior to the Spin-off from ITT and the issuance of $1.2 billion aggregate principal amount of senior notes which were issued in September 2011. Interest on the Senior Notes accrues from September 20, 2011.
|
(b)
|
Calculated as 33% of rent expense, which is a reasonable approximation of the interest factor.
|
Name
|
Jurisdiction of Organization
|
Name Under Which Doing Business
|
Aanderaa Data Instruments AS
|
Norway
|
|
Anadolu Flygt Pompa Pazarlama Ve Ticaret AS
|
Turkey
|
|
ASE AS
|
Norway
|
|
Bellingham & Stanley Ltd.
|
England & Wales
|
|
Bombas Flygt de Venezuela S.A.
|
Venezuela
|
|
CMS Research Corporation
|
Alabama
|
|
Design Analysis Associates, Inc.
|
Utah
|
|
Evolutionary Concepts, Inc.
|
California
|
|
Faradyne Motors (Suzhou) Co. Ltd.
|
China
|
|
Flow Control LLC
|
Delaware
|
|
Flowtronex PSI, LLC
|
Nevada
|
|
Fluid Handling, LLC
|
Delaware
|
|
Flygt AS
|
Norway
|
|
Godwin Holdings Ltd.
|
England & Wales
|
|
Goulds Water Technology Philippines, Inc
|
Philippines
|
|
Grindex AB
|
Sweden
|
|
Grindex Pumps LLC
|
Delaware
|
|
Heartland Pump Rental and Sales, Inc.
|
Illinois
|
|
Jabsco Marine Italia s.r.l.
|
Italy
|
|
Jabsco S. de R.L. De C.V.
|
Mexico
|
|
Lowara s.r.l.
|
Italy
|
Lowara
|
Lowara Vogel Polska SP ZOO
|
Poland
|
|
MJK Automation ApS
|
Denmark
|
|
MultiTrode Inc.
|
Florida
|
|
Multitrode Pty Ltd
|
Australia
|
|
Multitrode UK Limited
|
England & Wales
|
|
NHK Jabsco Co, Ltd.
|
Japan
|
|
Nova Analytics Europe LLC
|
Delaware
|
|
O.I. Corporation
|
Oklahoma
|
OI Analytical
|
PCI Membrane Systems, Inc.
|
Delaware
|
|
Pension Trustee Management Ltd
|
England & Wales
|
|
Portacel Inc.
|
Pennsylvania
|
|
Secomam S.A.S.
|
France
|
|
Sensortechnik Meinsberg GmbH
|
Germany
|
|
SI Analytics GmbH
|
Germany
|
|
Texas Turbine LLC
|
Delaware
|
Xylem Texas Turbine LLC
|
Water Asset Management, Inc.
|
Delaware
|
|
Water Company Ltd
|
England & Wales
|
|
Water Process Limited
|
United Kingdom
|
|
Wissenschaftich Technische Werkstaetten GmbH
|
Germany
|
|
Name
|
Jurisdiction of Organization
|
Name Under Which Doing Business
|
Xylem (China) Company Limited
|
China
|
|
Xylem (Hong Kong) Limited
|
Hong Kong
|
|
Xylem (Nanjing) Co., Ltd
|
China
|
|
Xylem (Wuxi) Flow Control Equipment Co., Ltd.
|
China
|
|
Xylem Analytics Australia Pty Ltd.
|
Australia
|
|
Xylem Analytics Germany GmbH
|
Germany
|
|
Xylem Analytics LLC
|
Delaware
|
|
Xylem Analytics UK LTD
|
England
|
|
Xylem ATI,LLC
|
Delaware
|
|
Xylem Australia Holdings PTY LTD
|
New South Wales
|
|
Xylem Brasil Soluções para Água Ltda
|
Brazil
|
|
Xylem Canada Company
|
Nova Scotia
|
|
Xylem Delaware, Inc.
|
Delaware
|
|
Xylem Denmark Holdings ApS
|
Denmark
|
|
Xylem Dewatering Canada Ltd
|
Federally Chartered
|
|
Xylem Dewatering Solutions UK Ltd
|
England & Wales
|
|
Xylem Dewatering Solutions, Inc.
|
New Jersey
|
Godwin Pumps of America
|
Xylem Europe GmbH
|
Switzerland
|
|
Xylem Financing S.a.r.l
|
Luxembourg
|
|
Xylem Flow Control Limited
|
England & Wales
|
|
Xylem Germany GmbH
|
Frankfurt am Main
|
|
Xylem Global S.a.r.l
|
Luxembourg
|
|
Xylem Holdings S.a.r.l.
|
Luxembourg
|
|
Xylem Industriebeteiligungen GmbH
|
Germany
|
|
Xylem Industries S.a.r.l.
|
Luxembourg
|
|
Xylem International S.a.r.l.
|
Luxembourg
|
|
Xylem IP Holdings LLC
|
Delaware
|
|
Xylem IP Management S.a.r.l
|
Luxembourg
|
|
Xylem Luxembourg S.a r.l.
|
Luxembourg
|
|
Xylem Management GmbH
|
Germany
|
|
Xylem Manufacturing Austria GmbH
|
Austria
|
|
Xylem PCI Membranes Polska S.P. Z.O.O.
|
Poland
|
|
Xylem Russia LLC
|
Russia
|
|
Xylem Service Hungary Kft
|
Hungary
|
|
Xylem Service Italia Srl Luxemburg Branch
|
Italy
|
|
Xylem Services Austria GmbH
|
Austria
|
|
Xylem Services GmbH
|
Germany
|
|
Xylem Services Italia Srl
|
Italy
|
|
Xylem Technologies GmbH
|
Frankfurt am Main
|
|
Xylem Water Holdings Limited
|
United Kingdom
|
|
Xylem Water Limited
|
England & Wales
|
|
Xylem Water Services Limited
|
United Kingdom
|
|
Xylem Water Solutions (Hong Kong) Limited
|
Hong Kong
|
|
Xylem Water Solutions Argentina S.A.
|
Argentina
|
|
Name
|
Jurisdiction of Organization
|
Name Under Which Doing Business
|
Xylem Water Solutions Australia Limited
|
New South Wales
|
|
Xylem Water Solutions Austria GmbH
|
Austria
|
|
Xylem Water Solutions Belgium
|
Belgium
|
|
Xylem Water Solutions Chile S.A.
|
Chile
|
|
Xylem Water Solutions Colombia Ltda
|
Colombia
|
|
Xylem Water Solutions Denmark ApS
|
Denmark
|
|
Xylem Water Solutions Deutschland GmbH
|
Germany
|
Flygt
|
Xylem Water Solutions España, S.A.
|
Spain
|
|
Xylem Water Solutions Florida LLC
|
Delaware
|
|
Xylem Water Solutions France SAS
|
France
|
|
Xylem Water Solutions Global Services AB
|
Sweden
|
|
Xylem Water Solutions Herford GmbH
|
Germany
|
|
Xylem Water Solutions Holdings France SAS
|
France
|
|
Xylem Water Solutions India Private Limited
|
India
|
|
Xylem Water Solutions Ireland Ltd.
|
Ireland
|
|
Xylem Water Solutions Italia S.R.L
|
Italy
|
Flygt
|
Xylem Water Solutions Korea Co., Ltd.
|
Korea
|
|
Xylem Water Solutions Lietuva, UAB
|
Lithuania
|
|
Xylem Water Solutions Magyarorszag KRT
|
Hungary
|
|
Xylem Water Solutions Malyasia SDN. BHD.
|
Malaysia
|
|
Xylem Water Solutions Manufacturing AB
|
Sweden
|
|
Xylem Water Solutions Metz SAS
|
France
|
|
Xylem Water Solutions Mexico S.de R.L. de C.V.
|
Mexico
|
|
Xylem Water Solutions Middle East Region FZCO
|
Dubai
|
|
Xylem Water Solutions Muscat LLC
|
Oman
|
|
Xylem Water Solutions Nederland BV
|
Netherlands
|
Flygt
|
Xylem Water Solutions New Zealand Limited
|
New Zealand
|
|
Xylem Water Solutions Norge AS
|
Norway
|
|
Xylem Water Solutions Panama s.r.l.
|
Panama
|
|
Xylem Water Solutions Peru S.A.
|
Peru
|
|
Xylem Water Solutions Polska Sp.z.o.o.
|
Poland
|
|
Xylem Water Solutions Portugal Unipessoal Lda.
|
Portugal
|
|
Xylem Water Solutions Rugby Limited
|
United Kingdom
|
|
Xylem Water Solutions Schweiz GmbH
|
Switzerland
|
|
Xylem Water Solutions Singapore PTE Ltd.
|
Singapore
|
|
Xylem Water Solutions South Africa (Pty) Ltd.
|
South Africa
|
|
Xylem Water Solutions South Africa Holdings LLC
|
Delaware
|
|
Xylem Water Solutions Suomi Oy
|
Finland
|
|
Xylem Water Solutions Sweden AB
|
Sweden
|
|
Xylem Water Solutions U.S.A., Inc.
|
Delaware
|
|
Xylem Water Solutions UK Holdings Limited
|
United Kingdom
|
|
Xylem Water Solutions UK Limited
|
United Kingdom
|
|
Xylem Water Solutions Zelienople LLC
|
Delaware
|
|
Xylem Water Solutions(Shenyang) CO., Ltd
|
China
|
|
Name
|
Jurisdiction of Organization
|
Name Under Which Doing Business
|
Xylem Water Systems (California), Inc.
|
California
|
|
Xylem Water Systems Australia PTY ltd.
|
New South Wales
|
|
Xylem Water Systems Hungary KFT
|
Hungary
|
|
Xylem Water Systems International, Inc.
|
Delaware
|
|
Xylem Water Systems Japan Corporation
|
Japan
|
|
Xylem Water Systems Mexico S. DE R.L. DE C.V.
|
Mexico
|
|
Xylem Water Systems Philippines Holding, Inc.
|
Delaware
|
|
Xylem Water Systems Texas Holdings LLC
|
Delaware
|
|
Xylem Water Systems U.S.A., LLC
|
Delaware
|
|
Yellow Springs Instrument LTD
|
Japan
|
|
YSI (Beijing) Co., Ltd.
|
China
|
|
YSI (China) Limited
|
Hong Kong
|
|
YSI (Hong Kong) Ltd.
|
Hong Kong
|
|
YSI (UK) Limited
|
England
|
|
YSI Environmental South Asia Private Ltd.
|
India
|
|
YSI Incorporated
|
Ohio
|
|
YSI Instrumentos E Servicos Ambientais Ltda.
|
Brazil
|
|
YSI International, Inc.
|
Ohio
|
|
YSI Nanotech Limited
|
Japan
|
|
YSI Trading (Shanghai) Company, Ltd.
|
China
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Xylem Inc. for the period ended
December 31, 2014
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
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/s/ Patrick K. Decker
|
|
Patrick K. Decker
President and Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Xylem Inc. for the period ended
December 31, 2014
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Michael T. Speetzen
|
|
Michael T. Speetzen
Senior Vice President and
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Patrick K. Decker
|
|
Patrick K. Decker
|
|
President and Chief Executive Officer
|
|
February 26, 2015
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Michael T. Speetzen
|
|
Michael T. Speetzen
|
|
Senior Vice President and Chief Financial Officer
|
|
February 26, 2015
|
|