|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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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Large accelerated filer
|
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þ
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Accelerated filer
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¨
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|
|
|
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Non-accelerated filer
|
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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|
|
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|
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Emerging growth company
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¨
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ITEM
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PAGE
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PART I – Financial Information
|
|
||
Item 1
|
-
|
|
|
|
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||
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||
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||
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Item 2
|
-
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||
Item 3
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-
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||
Item 4
|
-
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||
PART II – Other Information
|
|
||
Item 1
|
-
|
||
Item 1A
|
-
|
||
Item 2
|
-
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||
Item 3
|
-
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||
Item 4
|
-
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||
Item 5
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-
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||
Item 6
|
-
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||
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Three Months
|
|
Six Months
|
||||||||||||
For the period ended June 30,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue
|
$
|
1,164
|
|
|
$
|
932
|
|
|
$
|
2,235
|
|
|
$
|
1,779
|
|
Cost of revenue
|
705
|
|
|
563
|
|
|
1,364
|
|
|
1,081
|
|
||||
Gross profit
|
459
|
|
|
369
|
|
|
871
|
|
|
698
|
|
||||
Selling, general and administrative expenses
|
270
|
|
|
227
|
|
|
542
|
|
|
446
|
|
||||
Research and development expenses
|
44
|
|
|
27
|
|
|
86
|
|
|
52
|
|
||||
Restructuring and asset impairment charges, net
|
6
|
|
|
6
|
|
|
18
|
|
|
12
|
|
||||
Operating income
|
139
|
|
|
109
|
|
|
225
|
|
|
188
|
|
||||
Interest expense
|
21
|
|
|
20
|
|
|
41
|
|
|
34
|
|
||||
Other non-operating income, net
|
3
|
|
|
1
|
|
|
2
|
|
|
1
|
|
||||
Gain from sale of business
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Income before taxes
|
121
|
|
|
90
|
|
|
191
|
|
|
155
|
|
||||
Income tax expense
|
21
|
|
|
19
|
|
|
35
|
|
|
18
|
|
||||
Net income
|
100
|
|
|
71
|
|
|
156
|
|
|
137
|
|
||||
Less: Net income attributable to non-controlling interests
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Net income attributable to Xylem
|
$
|
99
|
|
|
$
|
71
|
|
|
$
|
155
|
|
|
$
|
137
|
|
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.55
|
|
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$
|
0.39
|
|
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$
|
0.87
|
|
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$
|
0.77
|
|
Diluted
|
$
|
0.55
|
|
|
$
|
0.39
|
|
|
$
|
0.86
|
|
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$
|
0.76
|
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Weighted average number of shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
179.6
|
|
|
179.1
|
|
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179.6
|
|
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178.8
|
|
||||
Diluted
|
180.6
|
|
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179.9
|
|
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180.6
|
|
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179.6
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|
||||
Dividends declared per share
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$
|
0.1800
|
|
|
$
|
0.1549
|
|
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$
|
0.3600
|
|
|
$
|
0.3098
|
|
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Three Months
|
|
Six Months
|
||||||||||||
For the period ended June 30,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income
|
$
|
100
|
|
|
$
|
71
|
|
|
$
|
156
|
|
|
$
|
137
|
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
30
|
|
|
(29
|
)
|
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59
|
|
|
(17
|
)
|
||||
Net change in derivative hedge agreements:
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (loss)
|
3
|
|
|
(4
|
)
|
|
5
|
|
|
—
|
|
||||
Amount of gain reclassified into net income
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
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(1
|
)
|
||||
Net change in postretirement benefit plans:
|
|
|
|
|
|
|
|
||||||||
Amortization of net actuarial loss into net income
|
2
|
|
|
2
|
|
|
5
|
|
|
5
|
|
||||
Other comprehensive income (loss), before tax
|
34
|
|
|
(32
|
)
|
|
69
|
|
|
(13
|
)
|
||||
Income tax (benefit) expense related to items of other comprehensive income
|
(22
|
)
|
|
8
|
|
|
(29
|
)
|
|
1
|
|
||||
Other comprehensive income (loss), net of tax
|
56
|
|
|
(40
|
)
|
|
98
|
|
|
(14
|
)
|
||||
Comprehensive income
|
$
|
156
|
|
|
$
|
31
|
|
|
$
|
254
|
|
|
$
|
123
|
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
|
|
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|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
288
|
|
|
$
|
308
|
|
Receivables, less allowances for discounts and doubtful accounts of $28 and $30 in 2017 and 2016, respectively
|
944
|
|
|
843
|
|
||
Inventories
|
554
|
|
|
522
|
|
||
Prepaid and other current assets
|
175
|
|
|
166
|
|
||
Total current assets
|
1,961
|
|
|
1,839
|
|
||
Property, plant and equipment, net
|
627
|
|
|
616
|
|
||
Goodwill
|
2,717
|
|
|
2,632
|
|
||
Other intangible assets, net
|
1,184
|
|
|
1,201
|
|
||
Other non-current assets
|
218
|
|
|
186
|
|
||
Total assets
|
$
|
6,707
|
|
|
$
|
6,474
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
442
|
|
|
$
|
457
|
|
Accrued and other current liabilities
|
515
|
|
|
521
|
|
||
Short-term borrowings and current maturities of long-term debt
|
243
|
|
|
260
|
|
||
Total current liabilities
|
1,200
|
|
|
1,238
|
|
||
Long-term debt
|
2,168
|
|
|
2,108
|
|
||
Accrued postretirement benefits
|
427
|
|
|
408
|
|
||
Deferred income tax liabilities
|
329
|
|
|
352
|
|
||
Other non-current accrued liabilities
|
201
|
|
|
161
|
|
||
Total liabilities
|
4,325
|
|
|
4,267
|
|
||
Commitments and contingencies (Note 17)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Common Stock – par value $0.01 per share:
|
|
|
|
||||
Authorized 750.0 shares, issued 191.9 shares and 191.4 shares in 2017 and 2016, respectively
|
2
|
|
|
2
|
|
||
Capital in excess of par value
|
1,894
|
|
|
1,876
|
|
||
Retained earnings
|
1,117
|
|
|
1,033
|
|
||
Treasury stock – at cost 12.4 shares and 11.9 shares in 2017 and 2016, respectively
|
(428
|
)
|
|
(403
|
)
|
||
Accumulated other comprehensive loss
|
(220
|
)
|
|
(318
|
)
|
||
Total stockholders’ equity
|
2,365
|
|
|
2,190
|
|
||
Non-controlling interests
|
17
|
|
|
17
|
|
||
Total equity
|
2,382
|
|
|
2,207
|
|
||
Total liabilities and stockholders’ equity
|
$
|
6,707
|
|
|
$
|
6,474
|
|
For the six months ended June 30,
|
2017
|
|
2016
|
||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
156
|
|
|
$
|
137
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation
|
55
|
|
|
41
|
|
||
Amortization
|
61
|
|
|
24
|
|
||
Share-based compensation
|
11
|
|
|
10
|
|
||
Restructuring and asset impairment charges
|
18
|
|
|
12
|
|
||
Gain from sale of business
|
(5
|
)
|
|
—
|
|
||
Other, net
|
4
|
|
|
8
|
|
||
Payments for restructuring
|
(17
|
)
|
|
(6
|
)
|
||
Changes in assets and liabilities (net of acquisitions):
|
|
|
|
||||
Changes in receivables
|
(70
|
)
|
|
(19
|
)
|
||
Changes in inventories
|
(13
|
)
|
|
(39
|
)
|
||
Changes in accounts payable
|
(19
|
)
|
|
9
|
|
||
Other, net
|
(30
|
)
|
|
(52
|
)
|
||
Net Cash – Operating activities
|
151
|
|
|
125
|
|
||
Investing Activities
|
|
|
|
||||
Capital expenditures
|
(77
|
)
|
|
(62
|
)
|
||
Acquisition of business, net of cash acquired
|
(6
|
)
|
|
(70
|
)
|
||
Proceeds from sale of business
|
11
|
|
|
—
|
|
||
Other, net
|
3
|
|
|
5
|
|
||
Net Cash – Investing activities
|
(69
|
)
|
|
(127
|
)
|
||
Financing Activities
|
|
|
|
||||
Short-term debt issued
|
33
|
|
|
89
|
|
||
Short-term debt repaid
|
(65
|
)
|
|
(77
|
)
|
||
Long-term debt issued
|
—
|
|
|
540
|
|
||
Long-term debt repaid
|
—
|
|
|
(608
|
)
|
||
Repurchase of common stock
|
(25
|
)
|
|
(3
|
)
|
||
Proceeds from exercise of employee stock options
|
7
|
|
|
16
|
|
||
Dividends paid
|
(65
|
)
|
|
(56
|
)
|
||
Other, net
|
—
|
|
|
1
|
|
||
Net Cash – Financing activities
|
(115
|
)
|
|
(98
|
)
|
||
Effect of exchange rate changes on cash
|
13
|
|
|
6
|
|
||
Net change in cash and cash equivalents
|
(20
|
)
|
|
(94
|
)
|
||
Cash and cash equivalents at beginning of year
|
308
|
|
|
680
|
|
||
Cash and cash equivalents at end of period
|
$
|
288
|
|
|
$
|
586
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest
|
$
|
46
|
|
|
$
|
34
|
|
Income taxes (net of refunds received)
|
$
|
47
|
|
|
$
|
49
|
|
(in millions)
|
Amount
|
||
Cash
|
$
|
56
|
|
Receivables
|
104
|
|
|
Inventories
|
79
|
|
|
Prepaid and other current assets
|
20
|
|
|
Property, plant and equipment
|
181
|
|
|
Intangible assets
|
795
|
|
|
Other long-term assets
|
6
|
|
|
Accounts payable
|
(69
|
)
|
|
Accrued and other current liabilities
|
(91
|
)
|
|
Deferred income tax liabilities
|
(212
|
)
|
|
Accrued post retirement benefits
|
(84
|
)
|
|
Other non-current accrued liabilities
|
(60
|
)
|
|
Total identifiable net assets
|
725
|
|
|
|
|
||
Goodwill
|
1,058
|
|
|
Non-controlling interest
|
(17
|
)
|
|
Total consideration
|
$
|
1,766
|
|
Category
|
|
Life
|
|
Amount (in millions)
|
||
Customer and Distributor Relationships
|
|
2 - 18 years
|
|
$
|
556
|
|
Tradenames
|
|
10 - 25 years
|
|
98
|
|
|
Internally Developed Network Software
|
|
7 years
|
|
60
|
|
|
FCC Licenses
|
|
Indefinite lived
|
|
24
|
|
|
Technology
|
|
5 - 15 years
|
|
39
|
|
|
Other
|
|
1 - 16 years
|
|
18
|
|
|
Total
|
|
|
|
$
|
795
|
|
(in millions)
|
Three Months Ended June 30, 2016
|
Six Months Ended June 30, 2016
|
||||
Revenue
|
$
|
1,167
|
|
$
|
2,242
|
|
Net income
|
$
|
85
|
|
$
|
183
|
|
•
|
Amortization expense of acquired intangibles
|
•
|
Adjustments to the depreciation of property, plant and equipment reflecting the impact of the calculated fair value of those assets in accordance with purchase accounting
|
•
|
Amortization of the fair value adjustment for warranty liabilities
|
•
|
Adjustments to interest expense to remove historical Sensus interest costs and reflect Xylem's current debt profile
|
•
|
The related tax impact of the above referenced adjustments
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
By component:
|
|
|
|
|
|
|
|
||||||||
Severance and other charges
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
14
|
|
|
$
|
12
|
|
Reversal of restructuring accruals
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Total restructuring charges
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
13
|
|
|
$
|
12
|
|
Asset impairment
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Total restructuring and asset impairment charges
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
18
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
||||||||
By segment:
|
|
|
|
|
|
|
|
||||||||
Water Infrastructure
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
7
|
|
Applied Water
|
2
|
|
|
1
|
|
|
10
|
|
|
3
|
|
||||
Sensus & Analytics
|
1
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
Corporate and other
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
(in millions)
|
|
2017
|
|
2016
|
||||
Restructuring accruals - January 1
|
|
$
|
15
|
|
|
$
|
3
|
|
Restructuring charges
|
|
13
|
|
|
12
|
|
||
Cash payments
|
|
(17
|
)
|
|
(6
|
)
|
||
Foreign currency and other
|
|
—
|
|
|
—
|
|
||
Restructuring accruals - June 30
|
|
$
|
11
|
|
|
$
|
9
|
|
|
|
|
|
|
||||
By segment:
|
|
|
|
|
||||
Water Infrastructure
|
|
$
|
1
|
|
|
$
|
5
|
|
Applied Water
|
|
4
|
|
|
1
|
|
||
Sensus & Analytics
|
|
3
|
|
|
—
|
|
||
Regional selling locations (a)
|
|
3
|
|
|
1
|
|
||
Corporate and other
|
|
—
|
|
|
2
|
|
(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.
|
|
|
2017
|
|
2016
|
||
Planned reductions - January 1
|
|
188
|
|
|
82
|
|
Additional planned reductions
|
|
105
|
|
|
223
|
|
Actual reductions and reversals
|
|
(185
|
)
|
|
(203
|
)
|
Planned reductions - June 30
|
|
108
|
|
|
102
|
|
(in millions)
|
|
Water Infrastructure
|
|
Applied Water
|
|
Sensus & Analytics
|
|
Corporate
|
|
Total
|
||||||||||
Actions Commenced in 2017:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total expected costs
|
|
$
|
14
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
21
|
|
Costs incurred during Q1 2017
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|||||
Costs incurred during Q2 2017
|
|
3
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||
Total expected costs remaining
|
|
$
|
11
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Actions Commenced in 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total expected costs
|
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
10
|
|
|
$
|
2
|
|
|
$
|
38
|
|
Costs incurred during 2016
|
|
11
|
|
|
10
|
|
|
6
|
|
|
2
|
|
|
29
|
|
|||||
Costs incurred during Q1 2017
|
|
2
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|||||
Costs incurred during Q2 2017
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|||||
Total expected costs remaining
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income attributable to Xylem (in millions)
|
$
|
99
|
|
|
$
|
71
|
|
|
$
|
155
|
|
|
$
|
137
|
|
Shares (in thousands):
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
179,571
|
|
|
179,020
|
|
|
179,557
|
|
|
178,790
|
|
||||
Add: Participating securities (a)
|
28
|
|
|
46
|
|
|
31
|
|
|
38
|
|
||||
Weighted average common shares outstanding — Basic
|
179,599
|
|
|
179,066
|
|
|
179,588
|
|
|
178,828
|
|
||||
Plus incremental shares from assumed conversions: (b)
|
|
|
|
|
|
|
|
||||||||
Dilutive effect of stock options
|
640
|
|
|
459
|
|
|
600
|
|
|
396
|
|
||||
Dilutive effect of restricted stock units and performance share units
|
362
|
|
|
365
|
|
|
438
|
|
|
377
|
|
||||
Weighted average common shares outstanding — Diluted
|
180,601
|
|
|
179,890
|
|
|
180,626
|
|
|
179,601
|
|
||||
Basic earnings per share
|
$
|
0.55
|
|
|
$
|
0.39
|
|
|
$
|
0.87
|
|
|
$
|
0.77
|
|
Diluted earnings per share
|
$
|
0.55
|
|
|
$
|
0.39
|
|
|
$
|
0.86
|
|
|
$
|
0.76
|
|
(a)
|
Restricted stock unit awards containing rights to non-forfeitable dividends that participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.
|
(b)
|
Incremental shares from stock options, restricted stock units and performance share units are computed by the treasury stock method. The weighted average shares listed below were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented or were otherwise excluded under the treasury stock method. The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of restricted stock units and performance share units, reduced by the repurchase of shares with the proceeds from the assumed exercises and unrecognized compensation expense for outstanding awards. Performance share units will be included in the treasury stock calculation of diluted earnings per share upon achievement of underlying performance or market conditions at the end of the reporting period. See
Note 14
, "Share-Based Compensation Plans" to the condensed consolidated financial statements for further detail on the performance share units.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
(in thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Stock options
|
1,854
|
|
|
2,068
|
|
|
1,813
|
|
|
2,161
|
|
Restricted stock units
|
464
|
|
|
582
|
|
|
427
|
|
|
591
|
|
Performance share units
|
530
|
|
|
409
|
|
|
467
|
|
|
334
|
|
(in millions)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Finished goods
|
$
|
233
|
|
|
$
|
220
|
|
Work in process
|
52
|
|
|
42
|
|
||
Raw materials
|
269
|
|
|
260
|
|
||
Total inventories
|
$
|
554
|
|
|
$
|
522
|
|
(in millions)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Land, buildings and improvements
|
$
|
317
|
|
|
$
|
299
|
|
Machinery and equipment
|
774
|
|
|
731
|
|
||
Equipment held for lease or rental
|
233
|
|
|
218
|
|
||
Furniture and fixtures
|
104
|
|
|
95
|
|
||
Construction work in progress
|
77
|
|
|
76
|
|
||
Other
|
20
|
|
|
19
|
|
||
Total property, plant and equipment, gross
|
1,525
|
|
|
1,438
|
|
||
Less accumulated depreciation
|
898
|
|
|
822
|
|
||
Total property, plant and equipment, net
|
$
|
627
|
|
|
$
|
616
|
|
(in millions)
|
Water
Infrastructure
|
|
Applied Water
|
|
Sensus & Analytics
|
|
Total
|
||||||||
Balance as of January 1, 2017
|
$
|
1,074
|
|
|
$
|
505
|
|
|
$
|
1,053
|
|
|
$
|
2,632
|
|
Activity in 2017
|
|
|
|
|
|
|
|
||||||||
Divested/Acquired
|
—
|
|
|
(2
|
)
|
|
(5
|
)
|
|
(7
|
)
|
||||
Foreign currency and other
|
34
|
|
|
15
|
|
|
43
|
|
|
92
|
|
||||
Balance as of June 30, 2017
|
$
|
1,108
|
|
|
$
|
518
|
|
|
$
|
1,091
|
|
|
$
|
2,717
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
(in millions)
|
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Intangibles
|
|
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Intangibles
|
||||||||||||
Customer and distributor relationships
|
$
|
906
|
|
|
$
|
(205
|
)
|
|
$
|
701
|
|
|
$
|
891
|
|
|
$
|
(168
|
)
|
|
$
|
723
|
|
Proprietary technology and patents
|
158
|
|
|
(69
|
)
|
|
89
|
|
|
156
|
|
|
(61
|
)
|
|
95
|
|
||||||
Trademarks
|
142
|
|
|
(34
|
)
|
|
108
|
|
|
139
|
|
|
(23
|
)
|
|
116
|
|
||||||
Software
|
258
|
|
|
(136
|
)
|
|
122
|
|
|
218
|
|
|
(118
|
)
|
|
100
|
|
||||||
Other
|
25
|
|
|
(18
|
)
|
|
7
|
|
|
26
|
|
|
(13
|
)
|
|
13
|
|
||||||
Indefinite-lived intangibles
|
157
|
|
|
—
|
|
|
157
|
|
|
154
|
|
|
—
|
|
|
154
|
|
||||||
Other Intangibles
|
$
|
1,646
|
|
|
$
|
(462
|
)
|
|
$
|
1,184
|
|
|
$
|
1,584
|
|
|
$
|
(383
|
)
|
|
$
|
1,201
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cash Flow Hedges
|
|
|
|
|
|
|
|
||||||||
Foreign Exchange Contracts
|
|
|
|
|
|
|
|
||||||||
Amount of gain (loss) recognized in OCI (a)
|
$
|
3
|
|
|
$
|
(4
|
)
|
|
$
|
5
|
|
|
$
|
—
|
|
Amount of gain reclassified from OCI into revenue (a)
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
||||
Amount of (gain) loss reclassified from OCI into cost of revenue (a)
|
—
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Investment Hedges
|
|
|
|
|
|
|
|
||||||||
Cross Currency Swaps
|
|
|
|
|
|
|
|
||||||||
Amount of gain (loss) recognized in OCI (a)
|
$
|
(23
|
)
|
|
$
|
11
|
|
|
$
|
(31
|
)
|
|
$
|
—
|
|
Foreign Currency Denominated Debt
|
|
|
|
|
|
|
|
||||||||
Amount of gain (loss) recognized in OCI (a)
|
$
|
(34
|
)
|
|
$
|
10
|
|
|
$
|
(48
|
)
|
|
$
|
(5
|
)
|
(a)
|
Effective portion
|
(in millions)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Derivatives designated as hedging instruments
|
|
|
|
||||
Assets
|
|
|
|
||||
Cash Flow Hedges
|
|
|
|
||||
Other current assets
|
$
|
3
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
||||
Cash Flow Hedges
|
|
|
|
||||
Other current liabilities
|
$
|
(1
|
)
|
|
$
|
—
|
|
Net Investment Hedges
|
|
|
|
||||
Other non-current liabilities
|
$
|
(40
|
)
|
|
$
|
(6
|
)
|
(in millions)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Compensation and other employee benefits
|
$
|
182
|
|
|
$
|
182
|
|
Customer-related liabilities
|
99
|
|
|
80
|
|
||
Accrued taxes
|
66
|
|
|
63
|
|
||
Accrued warranty costs
|
58
|
|
|
64
|
|
||
Other accrued liabilities
|
110
|
|
|
132
|
|
||
Total accrued and other current liabilities
|
$
|
515
|
|
|
$
|
521
|
|
(in millions)
|
June 30,
2017 |
|
December 31,
2016 |
||||
4.875% Senior Notes due 2021 (a)
|
$
|
600
|
|
|
$
|
600
|
|
2.250% Senior Notes due 2023 (a)
|
571
|
|
|
522
|
|
||
3.250% Senior Notes due 2026 (a)
|
500
|
|
|
500
|
|
||
4.375% Senior Notes due 2046 (a)
|
400
|
|
|
400
|
|
||
Commercial paper
|
99
|
|
|
65
|
|
||
Research and development facility agreement
|
42
|
|
|
38
|
|
||
Research and development finance contract
|
120
|
|
|
110
|
|
||
Term loan
|
103
|
|
|
157
|
|
||
Debt issuance costs and unamortized discount (b)
|
(24
|
)
|
|
(24
|
)
|
||
Total debt
|
2,411
|
|
|
2,368
|
|
||
Less: short-term borrowings and current maturities of long-term debt
|
243
|
|
|
260
|
|
||
Total long-term debt
|
$
|
2,168
|
|
|
$
|
2,108
|
|
(a)
|
The fair value of our Senior Notes 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 2021 was
$650 million
and
$651 million
as of
June 30, 2017
and
December 31, 2016
, respectively. The fair value of our Senior Notes due 2023 was
$609 million
and
$555 million
as of
June 30, 2017
and December 31, 2016, respectively. The fair value of our Senior Notes due 2026 was
$500 million
and
$487 million
as of
June 30, 2017
and December 31, 2016, respectively.The fair value of our Senior Notes due 2046 was
$416 million
and
$397 million
as of
June 30, 2017
and December 31, 2016, respectively.
|
(b)
|
The debt issuance costs and unamortized discount are recognized as a reduction in the carrying value of the Senior Notes in the Condensed Consolidated Balance Sheets and are being amortized to interest expense in our Condensed Consolidated Income Statements over the expected remaining terms of the Senior Notes.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Domestic defined benefit pension plans:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
Interest cost
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Expected return on plan assets
|
(1
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(2
|
)
|
||||
Amortization of net actuarial loss
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Net periodic benefit cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
2
|
|
International defined benefit pension plans:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
5
|
|
Interest cost
|
5
|
|
|
6
|
|
|
10
|
|
|
12
|
|
||||
Expected return on plan assets
|
(8
|
)
|
|
(8
|
)
|
|
(16
|
)
|
|
(17
|
)
|
||||
Amortization of net actuarial loss
|
2
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
Net periodic benefit cost
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Total net periodic benefit cost
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
Share units
(in thousands)
|
|
Weighted
Average
Exercise
Price / Share
|
|
Weighted Average
Remaining
Contractual
Term (Years)
|
|
Aggregate Intrinsic Value
(in millions)
|
|||||
Outstanding at January 1, 2017
|
2,126
|
|
|
$
|
33.71
|
|
|
6.9
|
|
|
||
Granted
|
498
|
|
|
48.33
|
|
|
|
|
|
|||
Exercised
|
(217
|
)
|
|
31.70
|
|
|
|
|
|
|||
Forfeited and expired
|
(47
|
)
|
|
42.00
|
|
|
|
|
|
|||
Outstanding at June 30, 2017
|
2,360
|
|
|
$
|
36.81
|
|
|
7.2
|
|
$
|
44
|
|
Options exercisable at June 30, 2017
|
1,423
|
|
|
$
|
32.89
|
|
|
6.0
|
|
$
|
32
|
|
Vested and expected to vest as of June 30, 2017
|
2,239
|
|
|
$
|
36.32
|
|
|
7.1
|
|
$
|
43
|
|
Volatility
|
25.40
|
|
%
|
|
Risk-free interest rate
|
2.07
|
|
%
|
|
Dividend yield
|
1.49
|
|
%
|
|
Expected term (in years)
|
5.1
|
|
|
|
Weighted-average fair value / share
|
$
|
10.65
|
|
|
|
Share units
(in thousands)
|
|
Weighted
Average
Grant Date
Fair Value /Share
|
|||
Outstanding at January 1, 2017
|
899
|
|
|
$
|
37.67
|
|
Granted
|
332
|
|
|
49.26
|
|
|
Vested
|
(353
|
)
|
|
38.27
|
|
|
Forfeited
|
(42
|
)
|
|
40.74
|
|
|
Outstanding at June 30, 2017
|
836
|
|
|
$
|
36.05
|
|
|
Share units
(in thousands)
|
|
Weighted
Average
Grant Date
Fair Value /Share
|
|||
Outstanding at January 1, 2017
|
250
|
|
|
$
|
37.11
|
|
Granted
|
110
|
|
|
48.33
|
|
|
Vested
|
—
|
|
|
—
|
|
|
Forfeited
|
(67
|
)
|
|
38.40
|
|
|
Outstanding at June 30, 2017
|
293
|
|
|
$
|
41.01
|
|
|
Share units
(in thousands)
|
|
Weighted
Average
Grant Date
Fair Value /Share
|
|||
Outstanding at January 1, 2017
|
108
|
|
|
$
|
46.15
|
|
Granted
|
110
|
|
|
45.43
|
|
|
Vested
|
—
|
|
|
—
|
|
|
Forfeited
|
(9
|
)
|
|
44.14
|
|
|
Outstanding at June 30, 2017
|
209
|
|
|
$
|
47.20
|
|
Volatility
|
30.5
|
%
|
Risk-free interest rate
|
1.51
|
%
|
Dividend yield
|
1.49
|
%
|
(in millions)
|
Foreign Currency Translation
|
|
Postretirement Benefit Plans
|
|
Derivative Instruments
|
|
Total
|
||||||||
Balance at April 1, 2017
|
$
|
(103
|
)
|
|
$
|
(175
|
)
|
|
$
|
2
|
|
|
$
|
(276
|
)
|
Foreign currency translation adjustment
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
||||
Tax on foreign currency translation adjustment
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||
Amortization of net actuarial loss on postretirement benefit plans into:
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Other non-operating income
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Income tax impact on amortization of postretirement benefit plan items
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Unrealized gain on derivative hedge agreements
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
||||
Reclassification of unrealized gain on derivative hedge agreements into revenue
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Balance at June 30, 2017
|
$
|
(51
|
)
|
|
$
|
(173
|
)
|
|
$
|
4
|
|
|
$
|
(220
|
)
|
(in millions)
|
Foreign Currency Translation
|
|
Postretirement Benefit Plans
|
|
Derivative Instruments
|
|
Total
|
||||||||
Balance at January 1, 2017
|
$
|
(140
|
)
|
|
$
|
(177
|
)
|
|
$
|
(1
|
)
|
|
$
|
(318
|
)
|
Foreign currency translation adjustment
|
59
|
|
|
—
|
|
|
—
|
|
|
59
|
|
||||
Tax on foreign currency translation adjustment
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
||||
Amortization of net actuarial loss on postretirement benefit plans into:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Selling, general and administrative expenses
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||
Other non-operating income
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Income tax impact on amortization of postretirement benefit plan items
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Unrealized gain on derivative hedge agreements
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
||||
Reclassification of unrealized loss on derivative hedge agreements into cost of revenue
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Reclassification of unrealized gain on derivative hedge agreements into revenue
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Balance at June 30, 2017
|
$
|
(51
|
)
|
|
$
|
(173
|
)
|
|
$
|
4
|
|
|
$
|
(220
|
)
|
(in millions)
|
2017
|
|
2016
|
||||
Warranty accrual – January 1
|
$
|
99
|
|
|
$
|
33
|
|
Net charges for product warranties in the period
|
17
|
|
|
13
|
|
||
Settlement of warranty claims
|
(24
|
)
|
|
(15
|
)
|
||
Foreign currency and other
|
2
|
|
|
1
|
|
||
Warranty accrual - June 30
|
$
|
94
|
|
|
$
|
32
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Water Infrastructure
|
$
|
482
|
|
|
$
|
484
|
|
|
$
|
901
|
|
|
$
|
924
|
|
Applied Water
|
361
|
|
|
366
|
|
|
694
|
|
|
699
|
|
||||
Sensus & Analytics
|
321
|
|
|
82
|
|
|
640
|
|
|
156
|
|
||||
Total
|
$
|
1,164
|
|
|
$
|
932
|
|
|
$
|
2,235
|
|
|
$
|
1,779
|
|
Operating Income:
|
|
|
|
|
|
|
|
||||||||
Water Infrastructure
|
$
|
74
|
|
|
$
|
66
|
|
|
$
|
114
|
|
|
$
|
117
|
|
Applied Water
|
49
|
|
|
51
|
|
|
85
|
|
|
90
|
|
||||
Sensus & Analytics
|
29
|
|
|
4
|
|
|
54
|
|
|
7
|
|
||||
Corporate and other
|
(13
|
)
|
|
(12
|
)
|
|
(28
|
)
|
|
(26
|
)
|
||||
Total operating income
|
$
|
139
|
|
|
$
|
109
|
|
|
$
|
225
|
|
|
$
|
188
|
|
Interest expense
|
$
|
21
|
|
|
$
|
20
|
|
|
$
|
41
|
|
|
$
|
34
|
|
Other non-operating income
|
3
|
|
|
1
|
|
|
2
|
|
|
1
|
|
||||
Gain from sale of business
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Income before taxes
|
$
|
121
|
|
|
$
|
90
|
|
|
$
|
191
|
|
|
$
|
155
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
||||||||
Water Infrastructure
|
$
|
15
|
|
|
$
|
16
|
|
|
$
|
31
|
|
|
$
|
33
|
|
Applied Water
|
6
|
|
|
6
|
|
|
12
|
|
|
12
|
|
||||
Sensus & Analytics
|
30
|
|
|
5
|
|
|
61
|
|
|
10
|
|
||||
Regional selling locations (a)
|
4
|
|
|
4
|
|
|
8
|
|
|
6
|
|
||||
Corporate and other
|
2
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
Total
|
$
|
57
|
|
|
$
|
33
|
|
|
$
|
116
|
|
|
$
|
65
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
||||||||
Water Infrastructure
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
27
|
|
|
$
|
32
|
|
Applied Water
|
3
|
|
|
3
|
|
|
10
|
|
|
11
|
|
||||
Sensus & Analytics
|
15
|
|
|
2
|
|
|
32
|
|
|
2
|
|
||||
Regional selling locations (b)
|
3
|
|
|
5
|
|
|
8
|
|
|
15
|
|
||||
Corporate and other
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
Total
|
$
|
34
|
|
|
$
|
24
|
|
|
$
|
77
|
|
|
$
|
62
|
|
(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 expense is captured in this Regional selling location line.
|
(b)
|
Represents capital expenditures incurred by the Regional selling locations not allocated to the segments.
|
(in millions)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Water Infrastructure
|
$
|
1,218
|
|
|
$
|
1,179
|
|
Applied Water
|
1,010
|
|
|
990
|
|
||
Sensus & Analytics
|
3,200
|
|
|
3,102
|
|
||
Regional selling locations (a)
|
1,057
|
|
|
965
|
|
||
Corporate and other (b)
|
222
|
|
|
238
|
|
||
Total
|
$
|
6,707
|
|
|
$
|
6,474
|
|
(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 cash, deferred tax assets, pension assets and certain property, plant and equipment.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Water Infrastructure
serves the water infrastructure sector with pump systems that transport water from 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. In the Water Infrastructure segment, we provide the majority of our sales directly
|
•
|
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. In the Applied Water segment, we provide the majority of our sales through long-standing relationships with many of the leading independent distributors in the markets we serve, with the remainder going directly to customers.
|
•
|
Sensus & Analytics
primarily
serves the utility infrastructure solutions and services sector by delivering communications, smart metering, measurement and control technologies and services that allow customers to more effectively use their distribution networks for the delivery of critical resources such as water, electricity and natural gas. In the Sensus & Analytics segment, we also provide analytical instrumentation used to measure water quality, flow and level in wastewater, surface water and coastal environments. Additionally, we sell software and services including cloud-based analytics, remote monitoring and data management, and we also sell smart lighting products and solutions that improve efficiency and public safety efforts across communities. In the Sensus & Analytics segment we generate our sales through a combination of long-standing relationships with leading distributors and dedicated channel partners as well as direct sales depending on the regional availability of distribution channels and the type of product.
|
•
|
Orders of
$1,212 million
, up
31.3%
from
$923 million
in the prior year, up
8.1
% on an organic basis
|
•
|
Earnings per share of
$0.55
, up
41.0%
from the prior year (
$0.59
, up
22.9%
on an adjusted basis)
|
•
|
Cash flow from operating activities of
$151 million
for the
six months ended June 30, 2017
, up
20.8%
from the prior year, and free cash flow, excluding Sensus acquisition related costs, of $
96 million
as compared to
$63 million
in the prior year
|
•
|
"organic revenue" and "organic orders" defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation 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 operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the same currency conversion rate.
|
•
|
"constant currency" defined as financial results adjusted for foreign 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 restructuring and realignment costs, Sensus acquisition related costs, gain from sale of business and special charges and tax-related special items, as applicable. A reconciliation of adjusted net income is provided below.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(In millions, except for per share data)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income attributable to Xylem
|
$
|
99
|
|
|
$
|
71
|
|
|
$
|
155
|
|
|
$
|
137
|
|
Restructuring and realignment, net of tax of $5 and $7 for 2017 and net of tax benefit of $3 and $5 for 2016
|
7
|
|
|
8
|
|
|
16
|
|
|
15
|
|
||||
Sensus acquisition related costs, net of tax of $1 and $5 for 2017
|
3
|
|
|
—
|
|
|
9
|
|
|
—
|
|
||||
Special charges, net of tax of $0 and $2 for 2017 and net of tax benefit of $4 and $5 for 2016
|
—
|
|
|
5
|
|
|
3
|
|
|
8
|
|
||||
Tax-related special items
|
(3
|
)
|
|
3
|
|
|
(3
|
)
|
|
(11
|
)
|
||||
Gain from sale of business, net of tax of $2 for 2017
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
||||
Adjusted net income
|
$
|
106
|
|
|
$
|
87
|
|
|
$
|
177
|
|
|
$
|
149
|
|
Weighted average number of shares - Diluted
|
180.6
|
|
|
179.9
|
|
|
180.6
|
|
|
179.6
|
|
||||
Adjusted earnings per share
|
$
|
0.59
|
|
|
$
|
0.48
|
|
|
$
|
0.98
|
|
|
$
|
0.83
|
|
•
|
"operating expenses excluding restructuring and realignment costs, Sensus acquisition related costs and special charges" defined as operating expenses, adjusted to exclude restructuring and realignment costs, Sensus acquisition related costs and special charges.
|
•
|
"adjusted operating income" defined as operating income, adjusted to exclude restructuring and realignment costs, Sensus acquisition related costs and special charges, and "adjusted operating margin" defined as adjusted operating income divided by total revenue.
|
•
|
“realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs.
|
•
|
"Sensus acquisition related costs" defined as costs incurred by the Company associated with the acquisition of Sensus that are being reported within operating income. These costs include integration costs and costs related to the recognition of the backlog intangible asset recorded in purchase accounting.
|
•
|
“special charges" defined as costs incurred by the Company, such as non-cash impairment charges, initial acquisition costs not related to Sensus and other special non-operating items, as well as interest expense related to the early extinguishment of debt during Q2 2016.
|
•
|
"tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, significant reserves for cash repatriation, excess tax benefits/losses and other discrete tax adjustments.
|
•
|
"free cash flow" defined as net cash from operating activities, as reported in the statement of cash flow, less capital expenditures, as well as adjustments for other significant items that impact current results which 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.
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
(In millions)
|
2017
|
|
2016
|
||||
Net cash provided by operating activities
|
$
|
151
|
|
|
$
|
125
|
|
Capital expenditures
|
(77
|
)
|
|
(62
|
)
|
||
Free cash flow
|
$
|
74
|
|
|
$
|
63
|
|
Cash paid for Sensus related acquisition costs
|
$
|
(22
|
)
|
|
$
|
—
|
|
Free cash flow, excluding Sensus acquisition related costs
|
$
|
96
|
|
|
$
|
63
|
|
•
|
“EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude restructuring and realignment costs, Sensus acquisition related costs, gain from sale of business and special charges.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net Income
|
$
|
100
|
|
|
$
|
71
|
|
|
$
|
156
|
|
|
$
|
137
|
|
Income tax expense
|
21
|
|
|
19
|
|
|
35
|
|
|
18
|
|
||||
Interest expense (income), net
|
20
|
|
|
19
|
|
|
40
|
|
|
33
|
|
||||
Depreciation
|
27
|
|
|
21
|
|
|
55
|
|
|
41
|
|
||||
Amortization
|
30
|
|
|
12
|
|
|
61
|
|
|
24
|
|
||||
Stock compensation
|
5
|
|
|
5
|
|
|
11
|
|
|
10
|
|
||||
EBITDA
|
$
|
203
|
|
|
$
|
147
|
|
|
$
|
358
|
|
|
$
|
263
|
|
Restructuring and realignment
|
12
|
|
|
11
|
|
|
23
|
|
|
20
|
|
||||
Sensus acquisition related costs
|
2
|
|
|
—
|
|
|
9
|
|
|
—
|
|
||||
Special charges
|
—
|
|
|
1
|
|
|
5
|
|
|
5
|
|
||||
Gain from sale of business
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
||||
Adjusted EBITDA
|
$
|
217
|
|
|
$
|
159
|
|
|
$
|
390
|
|
|
$
|
288
|
|
•
|
Industrial market revenue was up slightly on an organic basis through the first half of the year. We expect oil and gas and mining markets to stabilize through the balance of the year, and we expect market conditions in the United States to improve modestly throughout the year. As a result, we expect organic revenue of low-single-digits for 2017.
|
•
|
Public utility revenue declined 4% organically through the first half of the year primarily due to a difficult comparison to double-digit growth in the United States in the prior year. We expect organic revenue growth in the low-single-digits for 2017 with project activity fueling growth in emerging markets, primarily in China and India, and growth in the UK from the AMP6 investment cycle. We also anticipate revenue from Sensus to contribute mid-single-digit growth over their historical performance, driven by expected project deployments and traction from new products. On a pro forma basis that includes Sensus, we expect organic revenue growth of low-to-mid-single-digits for 2017.
|
•
|
In the commercial markets, growth was 3% through the first half of the year driven by growth in the United States and Asia Pacific. In 2017 we expect organic revenue growth in the low to mid-single-digit range as we see the United States market stabilizing while the European market is experiencing growth related to new energy efficient products and sales channel investments.
|
•
|
In residential markets, growth was 14% for the first half of the year driven by strength in the United States and Asia Pacific. In 2017 we expect full year organic revenue performance will be up in the high-single-digits. We continue to expect the United States market to be competitive given the replacement nature of the sector we serve. We expect growth from the European market, which looks to be modestly stronger as increased residential building permitting provides an indicator of sales. Additionally, we expect to benefit from market share gains from channel disruption throughout the remainder of the year.
|
|
Water Infrastructure
|
|
Applied Water
|
|
Sensus & Analytics
|
|
Total Xylem
|
||||||||||||||||
(In millions)
|
$ Change
|
% Change
|
|
$ Change
|
% Change
|
|
$ Change
|
% Change
|
|
$ Change
|
% Change
|
||||||||||||
2016 Revenue
|
$
|
484
|
|
|
|
$
|
366
|
|
|
|
$
|
82
|
|
|
|
$
|
932
|
|
|
||||
Organic growth
|
7
|
|
1.4
|
%
|
|
2
|
|
0.5
|
%
|
|
1
|
|
1.2
|
%
|
|
10
|
|
1.1
|
%
|
||||
Acquisitions/Divestitures
|
—
|
|
NM
|
|
|
(2
|
)
|
(0.5
|
)%
|
|
238
|
|
290.2
|
%
|
|
236
|
|
25.3
|
%
|
||||
Constant currency
|
7
|
|
1.4
|
%
|
|
—
|
|
—
|
%
|
|
239
|
|
291.5
|
%
|
|
246
|
|
26.4
|
%
|
||||
Foreign currency translation (a)
|
(9
|
)
|
(1.9
|
)%
|
|
(5
|
)
|
(1.4
|
)%
|
|
—
|
|
—
|
%
|
|
(14
|
)
|
(1.5
|
)%
|
||||
Total change in revenue
|
(2
|
)
|
(0.4
|
)%
|
|
(5
|
)
|
(1.4
|
)%
|
|
239
|
|
291.5
|
%
|
|
232
|
|
24.9
|
%
|
||||
2017 Revenue
|
$
|
482
|
|
|
|
$
|
361
|
|
|
|
$
|
321
|
|
|
|
$
|
1,164
|
|
|
|
Water Infrastructure
|
|
Applied Water
|
|
Sensus & Analytics
|
|
Total Xylem
|
||||||||||||||||
(In millions)
|
$ Change
|
% Change
|
|
$ Change
|
% Change
|
|
$ Change
|
% Change
|
|
$ Change
|
% Change
|
||||||||||||
2016 Revenue
|
$
|
924
|
|
|
|
$
|
699
|
|
|
|
$
|
156
|
|
|
|
$
|
1,779
|
|
|
||||
Organic growth
|
(8
|
)
|
(0.9
|
)%
|
|
8
|
|
1.1
|
%
|
|
3
|
|
1.9
|
%
|
|
3
|
|
0.2
|
%
|
||||
Acquisitions/Divestitures
|
—
|
|
—
|
%
|
|
(3
|
)
|
(0.4
|
)%
|
|
481
|
|
308.3
|
%
|
|
478
|
|
26.9
|
%
|
||||
Constant currency
|
(8
|
)
|
(0.9
|
)%
|
|
5
|
|
0.7
|
%
|
|
484
|
|
310.3
|
%
|
|
481
|
|
27.0
|
%
|
||||
Foreign currency translation (a)
|
(15
|
)
|
(1.6
|
)%
|
|
(10
|
)
|
(1.4
|
)%
|
|
—
|
|
—
|
%
|
|
(25
|
)
|
(1.4
|
)%
|
||||
Total change in revenue
|
(23
|
)
|
(2.5
|
)%
|
|
(5
|
)
|
(0.7
|
)%
|
|
484
|
|
310.3
|
%
|
|
456
|
|
25.6
|
%
|
||||
2017 Revenue
|
$
|
901
|
|
|
|
$
|
694
|
|
|
|
$
|
640
|
|
|
|
$
|
2,235
|
|
|
(a)
|
Foreign currency translation impact due to fluctuations in the value of various currencies against the U.S. Dollar, the largest being the British Pound and the Euro.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||||||||||
(In millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Selling, general and administrative expenses ("SG&A")
|
$
|
270
|
|
|
$
|
227
|
|
|
18.9
|
|
%
|
|
$
|
542
|
|
|
$
|
446
|
|
|
21.5
|
|
%
|
SG&A as a % of revenue
|
23.2
|
%
|
|
24.4
|
%
|
|
(120
|
)
|
bp
|
|
24.3
|
%
|
|
25.1
|
%
|
|
(80
|
)
|
bp
|
||||
Research and development expenses ("R&D")
|
44
|
|
|
27
|
|
|
63.0
|
|
%
|
|
86
|
|
|
52
|
|
|
65.4
|
|
%
|
||||
R&D as a % of revenue
|
3.8
|
%
|
|
2.9
|
%
|
|
90
|
|
bp
|
|
3.8
|
%
|
|
2.9
|
%
|
|
90
|
|
bp
|
||||
Restructuring and asset impairment charges, net
|
6
|
|
|
6
|
|
|
—
|
|
%
|
|
18
|
|
|
12
|
|
|
50.0
|
|
%
|
||||
Operating expenses
|
$
|
320
|
|
|
$
|
260
|
|
|
23.1
|
|
%
|
|
$
|
646
|
|
|
$
|
510
|
|
|
26.7
|
|
%
|
Expense to revenue ratio
|
27.5
|
%
|
|
27.9
|
%
|
|
(40
|
)
|
bp
|
|
28.9
|
%
|
|
28.7
|
%
|
|
20
|
|
bp
|
(in millions)
|
|
Water Infrastructure
|
|
Applied Water
|
|
Sensus & Analytics
|
|
Corporate
|
|
Total
|
||||||||||
Actions Commenced in 2017:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total expected costs
|
|
$
|
14
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
21
|
|
|
Costs incurred during Q1 2017
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|||||
Costs incurred during Q2 2017
|
|
3
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||
Total expected costs remaining
|
|
$
|
11
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Actions Commenced in 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total expected costs
|
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
10
|
|
|
$
|
2
|
|
|
$
|
38
|
|
Costs incurred during 2016
|
|
11
|
|
|
10
|
|
|
6
|
|
|
2
|
|
|
29
|
|
|||||
Costs incurred during Q1 2017
|
|
2
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|||||
Costs incurred during Q2 2017
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|||||
Total expected costs remaining
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||||||||||
(In millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||||
Water Infrastructure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating income
|
$
|
74
|
|
|
$
|
66
|
|
|
12.1
|
|
%
|
|
$
|
114
|
|
|
$
|
117
|
|
|
(2.6
|
)
|
%
|
Operating margin
|
15.4
|
%
|
|
13.6
|
%
|
|
180
|
|
bp
|
|
12.7
|
%
|
|
12.7
|
%
|
|
—
|
|
bp
|
||||
Restructuring and realignment costs
|
5
|
|
|
6
|
|
|
(16.7
|
)
|
%
|
|
9
|
|
|
9
|
|
|
—
|
|
%
|
||||
Special charges
|
—
|
|
|
—
|
|
|
NM
|
|
|
|
—
|
|
|
2
|
|
|
NM
|
|
|
||||
Adjusted operating income
|
$
|
79
|
|
|
$
|
72
|
|
|
9.7
|
|
%
|
|
$
|
123
|
|
|
$
|
128
|
|
|
(3.9
|
)
|
%
|
Adjusted operating margin
|
16.4
|
%
|
|
14.9
|
%
|
|
150
|
|
bp
|
|
13.7
|
%
|
|
13.9
|
%
|
|
(20
|
)
|
bp
|
||||
Applied Water
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating income
|
$
|
49
|
|
|
$
|
51
|
|
|
(3.9
|
)
|
%
|
|
$
|
85
|
|
|
$
|
90
|
|
|
(5.6
|
)
|
%
|
Operating margin
|
13.6
|
%
|
|
13.9
|
%
|
|
(30
|
)
|
bp
|
|
12.2
|
%
|
|
12.9
|
%
|
|
(70
|
)
|
bp
|
||||
Restructuring and realignment costs
|
5
|
|
|
3
|
|
|
66.7
|
|
%
|
|
9
|
|
|
6
|
|
|
50.0
|
|
%
|
||||
Special charges
|
—
|
|
|
—
|
|
|
NM
|
|
|
|
5
|
|
|
—
|
|
|
NM
|
|
|
||||
Adjusted operating income
|
$
|
54
|
|
|
$
|
54
|
|
|
—
|
|
%
|
|
$
|
99
|
|
|
$
|
96
|
|
|
3.1
|
|
%
|
Adjusted operating margin
|
15.0
|
%
|
|
14.8
|
%
|
|
20
|
|
bp
|
|
14.3
|
%
|
|
13.7
|
%
|
|
60
|
|
bp
|
||||
Sensus & Analytics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating income
|
$
|
29
|
|
|
$
|
4
|
|
|
625.0
|
|
%
|
|
$
|
54
|
|
|
$
|
7
|
|
|
671.4
|
|
%
|
Operating margin
|
9.0
|
%
|
|
4.9
|
%
|
|
410
|
|
bp
|
|
8.4
|
%
|
|
4.5
|
%
|
|
390
|
|
bp
|
||||
Sensus acquisition related costs
|
3
|
|
|
—
|
|
|
NM
|
|
|
|
9
|
|
|
—
|
|
|
NM
|
|
|
||||
Restructuring and realignment costs
|
2
|
|
|
2
|
|
|
—
|
|
%
|
|
5
|
|
|
3
|
|
|
66.7
|
|
%
|
||||
Special charges
|
—
|
|
|
1
|
|
|
NM
|
|
|
|
—
|
|
|
3
|
|
|
NM
|
|
|
||||
Adjusted operating income
|
$
|
34
|
|
|
$
|
7
|
|
|
385.7
|
|
%
|
|
$
|
68
|
|
|
$
|
13
|
|
|
423.1
|
|
%
|
Adjusted operating margin
|
10.6
|
%
|
|
8.5
|
%
|
|
210
|
|
bp
|
|
10.6
|
%
|
|
8.3
|
%
|
|
230.0
|
|
bp
|
||||
Corporate and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating loss
|
$
|
(13
|
)
|
|
$
|
(12
|
)
|
|
8.3
|
|
%
|
|
$
|
(28
|
)
|
|
$
|
(26
|
)
|
|
7.7
|
|
%
|
Restructuring and realignment costs
|
—
|
|
|
—
|
|
|
NM
|
|
|
|
—
|
|
|
2
|
|
|
NM
|
|
|
||||
Sensus acquisition related costs
|
1
|
|
|
—
|
|
|
NM
|
|
|
|
5
|
|
|
—
|
|
|
NM
|
|
|
||||
Adjusted operating loss
|
$
|
(12
|
)
|
|
$
|
(12
|
)
|
|
—
|
|
%
|
|
$
|
(23
|
)
|
|
$
|
(24
|
)
|
|
(4.2
|
)
|
%
|
Total Xylem
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating income
|
$
|
139
|
|
|
$
|
109
|
|
|
27.5
|
|
%
|
|
$
|
225
|
|
|
$
|
188
|
|
|
19.7
|
|
%
|
Operating margin
|
11.9
|
%
|
|
11.7
|
%
|
|
20
|
|
bp
|
|
10.1
|
%
|
|
10.6
|
%
|
|
(50
|
)
|
bp
|
||||
Restructuring and realignment costs
|
12
|
|
|
11
|
|
|
9.1
|
|
%
|
|
23
|
|
|
20
|
|
|
15.0
|
|
%
|
||||
Sensus acquisition related costs
|
4
|
|
|
—
|
|
|
NM
|
|
|
|
14
|
|
|
—
|
|
|
NM
|
|
|
||||
Special charges
|
—
|
|
|
1
|
|
|
NM
|
|
|
|
5
|
|
|
5
|
|
|
—
|
|
%
|
||||
Adjusted operating income
|
$
|
155
|
|
|
$
|
121
|
|
|
28.1
|
|
%
|
|
$
|
267
|
|
|
$
|
213
|
|
|
25.4
|
|
%
|
Adjusted operating margin
|
13.3
|
%
|
|
13.0
|
%
|
|
30
|
|
bp
|
|
11.9
|
%
|
|
12.0
|
%
|
|
(10
|
)
|
bp
|
|
Six Months Ended
|
||||||||||
|
June 30,
|
||||||||||
(In millions)
|
2017
|
|
2016
|
|
Change
|
||||||
Operating activities
|
$
|
151
|
|
|
$
|
125
|
|
|
$
|
26
|
|
Investing activities
|
(69
|
)
|
|
(127
|
)
|
|
58
|
|
|||
Financing activities
|
(115
|
)
|
|
(98
|
)
|
|
(17
|
)
|
|||
Foreign exchange (a)
|
13
|
|
|
6
|
|
|
7
|
|
|||
Total
|
$
|
(20
|
)
|
|
$
|
(94
|
)
|
|
$
|
74
|
|
(a)
|
The impact is primarily due to the strengthening of the Euro against the U.S. Dollar.
|
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PERIOD
|
|
TOTAL NUMBER OF SHARES PURCHASED
|
|
AVERAGE PRICE PAID PER SHARE (a)
|
|
TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS (b)
|
|
APPROXIMATE DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS (b)
|
4/1/17 - 4/30/17
|
|
—
|
|
—
|
|
—
|
|
$433
|
5/1/17 - 5/31/17
|
|
0.4
|
|
51.82
|
|
0.4
|
|
$413
|
6/1/17 - 6/30/17
|
|
—
|
|
—
|
|
—
|
|
$413
|
(a)
|
Average price paid per share is calculated on a settlement basis.
|
(b)
|
On August 24, 2015, our Board of Directors authorized the repurchase of up to
$500 million
in shares with no expiration date. The program's objective is to deploy our capital in a manner that benefits our shareholders and maintains our focus on growth. For the three months ended
June 30, 2017
, we repurchased
0.1 million
shares for
$7 million
. There are up to
$413 million
in shares that may still be purchased under this plan as of
June 30, 2017
.
|
|
|
XYLEM INC.
|
|
|
(Registrant)
|
|
|
|
|
|
/s/ E. Mark Rajkowski
|
|
|
E. Mark Rajkowski
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
Exhibit
Number
|
Description
|
Location
|
(101.0)
|
The following materials from Xylem Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Income Statements, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements
|
The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
|
1.
|
Purpose
|
2.
|
Covered Employees
|
3.
|
Severance Pay Upon Termination of Employment
|
•
|
is terminated for Cause; “
Cause
” means (i) the Executive’s willful and continued failure to substantially perform his or her duties with the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness) or (ii) the Executive willfully engaging in conduct that demonstrably and materially injures the Company or its Affiliates, monetarily or otherwise. “Willful” means the action is done or omitted in bad faith or without reasonable belief that the action or omission was in the best interests of the Company,
|
•
|
accepts employment or refuses comparable employment with a purchaser as provided in Section 7, "Divestiture", or
|
•
|
voluntarily terminates employment with the Company prior to the Scheduled Termination Date.
|
•
|
voluntarily resigning or retiring, or
|
•
|
failing to return from an approved leave of absence (including a medical leave of absence).
|
4.
|
Schedule of Severance Pay
|
5.
|
Form of Payment of Severance Pay
|
6.
|
Benefits During Severance Period
|
7.
|
Divestiture
|
8.
|
Disqualifying Conduct
|
9.
|
Release
|
10.
|
Administration of Plan
|
11.
|
Termination or Amendment
|
12.
|
Offset
|
13.
|
Miscellaneous
|
14.
|
Adoption and Amendments
|
15.
|
Section 409A
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Xylem Inc. for the period ended
June 30, 2017
;
|
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/ Patrick K. Decker
|
|
Patrick K. Decker
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Xylem Inc. for the period ended
June 30, 2017
;
|
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/ E. Mark Rajkowski
|
|
E. Mark Rajkowski
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
|
|
August 1, 2017
|
|
(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/ E. Mark Rajkowski
|
|
E. Mark Rajkowski
|
|
Senior Vice President and Chief Financial Officer
|
|
August 1, 2017
|
|