x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Indiana | 45-2080495 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | þ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
ITEM | PAGE | ||
PART I – Financial Information | |||
Item 1 | - | ||
Item 2 | - | ||
Item 3 | - | ||
Item 4 | - | ||
PART II – Other Information | |||
Item 1 | - | ||
Item 1A | - | ||
Item 2 | - | ||
Item 3 | - | ||
Item 4 | - | ||
Item 5 | - | ||
Item 6 | - | ||
Three Months, | Six Months, | ||||||||||||||
For the period ended June 30, | 2013 | 2012 | 2013 | 2012 | |||||||||||
Revenue | $ | 960 | $ | 966 | $ | 1,839 | $ | 1,891 | |||||||
Cost of revenue | 589 | 583 | 1,134 | 1,145 | |||||||||||
Gross profit | 371 | 383 | 705 | 746 | |||||||||||
Selling, general and administrative expenses | 252 | 220 | 488 | 451 | |||||||||||
Research and development expenses | 28 | 28 | 54 | 56 | |||||||||||
Restructuring charges | 20 | — | 25 | — | |||||||||||
Separation costs | 1 | 6 | 2 | 11 | |||||||||||
Operating income | 70 | 129 | 136 | 228 | |||||||||||
Interest expense | 14 | 13 | 27 | 27 | |||||||||||
Other non-operating income (expense), net | 1 | (1 | ) | (1 | ) | (2 | ) | ||||||||
Income before taxes | 57 | 115 | 108 | 199 | |||||||||||
Income tax expense | 11 | 26 | 21 | 47 | |||||||||||
Net income | $ | 46 | $ | 89 | $ | 87 | $ | 152 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.25 | $ | 0.48 | $ | 0.47 | $ | 0.82 | |||||||
Diluted | $ | 0.25 | $ | 0.48 | $ | 0.47 | $ | 0.82 | |||||||
Weighted average number of shares: | |||||||||||||||
Basic | 185.4 | 185.8 | 185.6 | 185.6 | |||||||||||
Diluted | 186.1 | 186.2 | 186.3 | 186.1 | |||||||||||
Dividends declared per share | $ | 0.1164 | $ | 0.1012 | $ | 0.2328 | $ | 0.2024 |
Three Months, | Six Months, | ||||||||||||||
For the period ended June 30, | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net income | $ | 46 | $ | 89 | $ | 87 | $ | 152 | |||||||
Other comprehensive income, before tax: | |||||||||||||||
Foreign currency translation adjustment | (21 | ) | (70 | ) | (64 | ) | (21 | ) | |||||||
Net change in cash flow hedges: | |||||||||||||||
Unrealized (losses) gains | — | (2 | ) | (2 | ) | 2 | |||||||||
Amount of gain reclassified into net income | — | (1 | ) | (1 | ) | (1 | ) | ||||||||
Net change in postretirement benefit plans: | |||||||||||||||
Amortization of net actuarial loss | 5 | 3 | 9 | 5 | |||||||||||
Settlement | — | — | — | 2 | |||||||||||
Other comprehensive loss, before tax | (16 | ) | (70 | ) | (58 | ) | (13 | ) | |||||||
Income tax expense related to items of other comprehensive income | 1 | 1 | 2 | 3 | |||||||||||
Other comprehensive loss, net of tax | (17 | ) | (71 | ) | (60 | ) | (16 | ) | |||||||
Comprehensive income | $ | 29 | $ | 18 | $ | 27 | $ | 136 |
June 30, 2013 | December 31, 2012 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 360 | $ | 504 | |||
Receivables, less allowances for discounts and doubtful accounts of $27 and $34 in 2013 and 2012, respectively | 792 | 776 | |||||
Inventories, net | 471 | 443 | |||||
Prepaid and other current assets | 113 | 110 | |||||
Deferred income tax assets | 43 | 41 | |||||
Total current assets | 1,779 | 1,874 | |||||
Property, plant and equipment, net | 470 | 487 | |||||
Goodwill | 1,674 | 1,647 | |||||
Other intangible assets, net | 498 | 484 | |||||
Other non-current assets | 190 | 187 | |||||
Total assets | $ | 4,611 | $ | 4,679 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 311 | $ | 332 | |||
Accrued and other current liabilities | 420 | 443 | |||||
Short-term borrowings and current maturities of long-term debt | 5 | 6 | |||||
Total current liabilities | 736 | 781 | |||||
Long-term debt | 1,199 | 1,199 | |||||
Accrued postretirement benefits | 393 | 400 | |||||
Deferred income tax liabilities | 179 | 173 | |||||
Other non-current accrued liabilities | 52 | 52 | |||||
Total liabilities | 2,559 | 2,605 | |||||
Commitments and contingencies (Note 17) | |||||||
Stockholders’ equity: | |||||||
Common Stock – par value $0.01 per share: | |||||||
Authorized 750.0 shares, issued 186.4 shares and 186.2 shares in 2013 and 2012, respectively | 2 | 2 | |||||
Capital in excess of par value | 1,718 | 1,706 | |||||
Retained earnings | 308 | 264 | |||||
Treasury stock – at cost 1.1 shares and 0.5 shares in 2013 and 2012, respectively | (31 | ) | (13 | ) | |||
Accumulated other comprehensive income | 55 | 115 | |||||
Total stockholders’ equity | 2,052 | 2,074 | |||||
Total liabilities and stockholders’ equity | $ | 4,611 | $ | 4,679 |
For the six months ended June 30, | 2013 | 2012 | |||||
Operating Activities | |||||||
Net income | $ | 87 | $ | 152 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 49 | 44 | |||||
Amortization | 25 | 23 | |||||
Share-based compensation | 12 | 10 | |||||
Restructuring charges | 25 | — | |||||
Other, net | 7 | (5 | ) | ||||
Payments for restructuring | (11 | ) | — | ||||
Changes in assets and liabilities (net of acquisitions): | |||||||
Changes in receivables | (31 | ) | (16 | ) | |||
Changes in inventories | (44 | ) | (44 | ) | |||
Changes in accounts payable | (4 | ) | 12 | ||||
Other, net | (53 | ) | (51 | ) | |||
Net Cash – Operating activities | 62 | 125 | |||||
Investing Activities | |||||||
Capital expenditures | (60 | ) | (57 | ) | |||
Acquisitions, net of cash acquired | (81 | ) | — | ||||
Proceeds from the sale of property, plant and equipment | 3 | 3 | |||||
Other, net | — | 1 | |||||
Net Cash – Investing activities | (138 | ) | (53 | ) | |||
Financing Activities | |||||||
Repurchase of common stock | (18 | ) | (3 | ) | |||
Proceeds from exercise of employee stock options | 1 | 16 | |||||
Dividends paid | (43 | ) | (39 | ) | |||
Other, net | — | (5 | ) | ||||
Net Cash – Financing activities | (60 | ) | (31 | ) | |||
Effect of exchange rate changes on cash | (8 | ) | (1 | ) | |||
Net change in cash and cash equivalents | (144 | ) | 40 | ||||
Cash and cash equivalents at beginning of year | 504 | 318 | |||||
Cash and cash equivalents at end of period | $ | 360 | $ | 358 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 26 | $ | 26 | |||
Income taxes (net of refunds received) | $ | 52 | $ | 54 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
By component: | |||||||||||||||
Severance and other charges | $ | 20 | $ | — | $ | 25 | $ | — | |||||||
Reversal of restructuring accruals | — | — | — | — | |||||||||||
Total restructuring charges | $ | 20 | $ | — | 25 | — | |||||||||
By segment: | |||||||||||||||
Water Infrastructure | $ | 16 | $ | — | $ | 21 | $ | — | |||||||
Applied Water | 4 | — | 4 | — | |||||||||||
Corporate and other | — | — | — | — |
(in millions) | 2013 | 2012 | ||||||
Restructuring accruals - January 1 | $ | 9 | $ | 1 | ||||
Severance and other | 25 | — | ||||||
Cash payments | (11 | ) | — | |||||
Other | (1 | ) | (1 | ) | ||||
Restructuring accruals - June 30 | $ | 22 | $ | — | ||||
By segment: | ||||||||
Water Infrastructure | $ | 20 | $ | — | ||||
Applied Water | 2 | — | ||||||
Corporate and other | — | — |
2013 | 2012 | |||||
Planned reductions - January 1 | 54 | — | ||||
Additional planned reductions | 317 | — | ||||
Actual reductions | (233 | ) | — | |||
Planned reductions - June 30 | 138 | — |
(in millions) | Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Advisory fees and other | $ | — | $ | 2 | $ | — | $ | 5 | |||||||
Rebranding and marketing costs | — | 2 | — | 4 | |||||||||||
Information and technology costs | — | 1 | 1 | 1 | |||||||||||
Employee retention and hiring costs | — | 1 | — | 1 | |||||||||||
Lease termination and other real estate costs | 1 | — | 1 | — | |||||||||||
Total separation costs in operating income | 1 | 6 | 2 | 11 | |||||||||||
Income tax benefit | — | (2 | ) | — | (3 | ) | |||||||||
Total separation costs, net of tax | $ | 1 | $ | 4 | $ | 2 | $ | 8 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (in millions) | $ | 46 | $ | 89 | $ | 87 | $ | 152 | |||||||
Shares (in thousands): | |||||||||||||||
Weighted average common shares outstanding | 185,265 | 185,546 | 185,419 | 185,254 | |||||||||||
Add: Participating securities (a) | 138 | 303 | 186 | 370 | |||||||||||
Weighted average common shares outstanding — Basic | 185,403 | 185,849 | 185,605 | 185,624 | |||||||||||
Plus incremental shares from assumed conversions: (b) | |||||||||||||||
Dilutive effect of stock options | 187 | 218 | 183 | 253 | |||||||||||
Dilutive effect of restricted stock | 531 | 181 | 490 | 177 | |||||||||||
Weighted average common shares outstanding — Diluted | 186,121 | 186,248 | 186,278 | 186,054 | |||||||||||
Basic earnings per share | $ | 0.25 | $ | 0.48 | $ | 0.47 | $ | 0.82 | |||||||
Diluted earnings per share | $ | 0.25 | $ | 0.48 | $ | 0.47 | $ | 0.82 |
(a) | Restricted stock 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 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 because they were 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 and performance share awards, reduced by the repurchase of shares with the proceeds from the assumed exercises, unrecognized compensation expense for outstanding awards and the estimated tax benefit of the assumed exercises. Performance share units will be included in the treasury stock calculation of diluted earnings per share upon achievement of underlying performance conditions. See Note 15, "Stock-Based Compensation Plans" for further detail on the performance share units. |
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | |||||||
Stock options | 4,481 | 4,510 | 4,306 | 4,408 | |||||||
Restricted stock | 862 | 993 | 810 | 918 | |||||||
Performance shares | 119 | — | 80 | — |
(in millions) | June 30, 2013 | December 31, 2012 | |||||
Finished goods | $ | 191 | $ | 182 | |||
Work in process | 32 | 30 | |||||
Raw materials | 248 | 231 | |||||
Total inventories, net | $ | 471 | $ | 443 |
(in millions) | June 30, 2013 | December 31, 2012 | |||||
Land, buildings and improvements | $ | 249 | $ | 255 | |||
Machinery and equipment | 651 | 653 | |||||
Equipment held for lease or rental | 184 | 183 | |||||
Furniture and fixtures | 86 | 90 | |||||
Construction work in progress | 49 | 40 | |||||
Other | 21 | 19 | |||||
Total property, plant and equipment, gross | 1,240 | 1,240 | |||||
Less accumulated depreciation | 770 | 753 | |||||
Total property, plant and equipment, net | $ | 470 | $ | 487 |
(in millions) | Water Infrastructure | Applied Water | Total | ||||||||
Balance as of January 1, 2013 | $ | 1,085 | $ | 562 | $ | 1,647 | |||||
Activity in 2013 | |||||||||||
Goodwill acquired (a) | 48 | — | 48 | ||||||||
Foreign currency and other | (16 | ) | (5 | ) | (21 | ) | |||||
Balance as of June 30, 2013 | $ | 1,117 | $ | 557 | $ | 1,674 |
June 30, 2013 | December 31, 2012 | ||||||||||||||||||||||
(in millions) | Carrying Amount | Accumulated Amortization | Net Intangibles | Carrying Amount | Accumulated Amortization | Net Intangibles | |||||||||||||||||
Customer and distributor relationships | $ | 343 | $ | (88 | ) | $ | 255 | $ | 317 | $ | (75 | ) | $ | 242 | |||||||||
Proprietary technology | 107 | (32 | ) | 75 | 105 | (29 | ) | 76 | |||||||||||||||
Trademarks | 33 | (14 | ) | 19 | 33 | (14 | ) | 19 | |||||||||||||||
Patents and other | 20 | (17 | ) | 3 | 21 | (17 | ) | 4 | |||||||||||||||
Indefinite-lived intangibles | 146 | — | 146 | 143 | — | 143 | |||||||||||||||||
$ | 649 | $ | (151 | ) | $ | 498 | $ | 619 | $ | (135 | ) | $ | 484 |
(in millions; except number of instruments) | |||||||||||||
Foreign Currency Derivative | Number of Instruments | Notional Sold | Sell Notional Currency | Notional Purchased | Buy Notional Currency | ||||||||
Sell AUD/ Buy EUR forward | 8 | 14.6 | Australian Dollar (AUD) | 11.3 | Euro (EUR) | ||||||||
Sell CAD/ Buy EUR Forward | 10 | 11.2 | Canadian Dollar (CAD) | 8.4 | Euro (EUR) | ||||||||
Sell GBP/ Buy EUR forward | 5 | 5.0 | British Pound Sterling (GBP) | 5.8 | Euro (EUR) | ||||||||
Sell USD/ Buy EUR forward | 5 | 22.5 | United States Dollar (USD) | 17.2 | Euro (EUR) | ||||||||
Buy SEK/ Sell EUR forward | 5 | 82.8 | Euro (EUR) | 705.0 | Swedish Krona (SEK) |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Derivatives in Cash Flow Hedges | |||||||||||||||
Foreign Exchange Contracts | |||||||||||||||
Amount of (loss) gain recognized in OCI (a) | $ | — | $ | (2 | ) | $ | (2 | ) | $ | 2 | |||||
Amount of (gain) reclassified from OCI into revenue (a) | — | — | (1 | ) | — | ||||||||||
Amount of (gain) reclassified from OCI into cost of revenue (a) | — | (1 | ) | — | (1 | ) |
(a) | Effective portion |
(in millions) | June 30, 2013 | December 31, 2012 | |||||
Derivatives designated as hedging instruments | |||||||
Assets | |||||||
Other current assets | $ | 2 | $ | — | |||
Liabilities | |||||||
Other current liabilities | (3 | ) | — |
(in millions) | June 30, 2013 | December 31, 2012 | |||||
Compensation and other employee-benefits | $ | 191 | $ | 201 | |||
Customer-related liabilities | 59 | 60 | |||||
Accrued warranty costs | 37 | 40 | |||||
Accrued taxes | 20 | 50 | |||||
Other accrued liabilities | 113 | 92 | |||||
Total accrued and other current liabilities | $ | 420 | $ | 443 |
(in millions) | June 30, 2013 | December 31, 2012 | |||||
Short-term borrowings and current maturities of long-term debt | $ | 5 | $ | 6 | |||
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 | $ | 1,204 | $ | 1,205 |
(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 was $632 million and $639 million as of June 30, 2013 and December 31, 2012, respectively. The fair value of our Senior Notes due 2021 was $636 million and $680 million as of June 30, 2013 and December 31, 2012, respectively. |
(b) | The unamortized discount is recognized as a reduction in the carrying value of the Senior Notes (as defined below) in the Condensed Consolidated Balance Sheets and is 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) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Domestic defined benefit pension plans: | |||||||||||||||
Net periodic benefit cost: | |||||||||||||||
Service cost | $ | — | $ | — | $ | 1 | $ | 1 | |||||||
Interest cost | 1 | 1 | 2 | 2 | |||||||||||
Expected return on plan assets | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||
Amortization of net actuarial loss | 1 | 1 | 2 | 1 | |||||||||||
Net periodic benefit cost | $ | 1 | $ | 1 | $ | 3 | $ | 2 | |||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income: | |||||||||||||||
Amortization of net actuarial loss | (1 | ) | (1 | ) | (2 | ) | (1 | ) | |||||||
Change recognized in other comprehensive income | $ | (1 | ) | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | |||
International defined benefit pension plans: | |||||||||||||||
Net periodic benefit cost: | |||||||||||||||
Service cost | $ | 4 | $ | 2 | $ | 7 | $ | 5 | |||||||
Interest cost | 7 | 7 | 14 | 14 | |||||||||||
Expected return on plan assets | (8 | ) | (7 | ) | (16 | ) | (15 | ) | |||||||
Amortization of net actuarial loss | 3 | 2 | 6 | 4 | |||||||||||
Settlement | — | — | — | 2 | |||||||||||
Net periodic benefit cost | $ | 6 | $ | 4 | $ | 11 | $ | 10 | |||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income: | |||||||||||||||
Amortization of net actuarial loss | (3 | ) | (2 | ) | (6 | ) | (4 | ) | |||||||
Settlement | — | — | — | (2 | ) | ||||||||||
Change recognized in other comprehensive income | $ | (3 | ) | $ | (2 | ) | $ | (6 | ) | $ | (6 | ) | |||
Totals: | |||||||||||||||
Net periodic benefit cost | $ | 7 | $ | 5 | $ | 14 | $ | 12 | |||||||
Recognized in other comprehensive income | (4 | ) | (3 | ) | (8 | ) | (7 | ) | |||||||
Total recognized in comprehensive income | $ | 3 | $ | 2 | $ | 6 | $ | 5 |
(in thousands, except for per share amounts) | Shares | Weighted Average Grant Date Fair Value /Share | ||||
Outstanding at January 1, 2013 | 1,588 | $ | 26.92 | |||
Granted | 481 | $ | 27.47 | |||
Vested | (261 | ) | $ | 29.48 | ||
Forfeited | (36 | ) | $ | 28.39 | ||
Outstanding at June 30, 2013 | 1,772 | $ | 26.64 |
(in thousands, except for per share amounts) | Shares | Weighted Average Grant Date Fair Value /Share | ||||
Outstanding at January 1, 2013 | — | $ | — | |||
Granted | 119 | $ | 27.49 | |||
Vested | — | $ | — | |||
Forfeited | — | $ | — | |||
Outstanding at June 30, 2013 | 119 | $ | 27.49 |
(in thousands, except for per share amounts) | Shares | Weighted Average Exercise Price /Share | Weighted Average Remaining Contractual Term (Years) | |||||
Outstanding at January 1, 2013 | 4,083 | $ | 26.46 | 6.4 | ||||
Granted | 813 | $ | 27.43 | 10.0 | ||||
Exercised | (62 | ) | $ | 21.00 | 2.5 | |||
Forfeited | (187 | ) | $ | 29.33 | 0.4 | |||
Outstanding at June 30, 2013 | 4,647 | $ | 26.54 | 6.8 | ||||
Options exercisable at June 30, 2013 | 2,249 | $ | 26.29 | 4.7 |
Dividend yield | 1.69% |
Volatility | 31.10% |
Risk-free interest rate | 1.27% |
Expected term (in years) | 6.63 |
Weighted-average fair value / share | $7.58 |
(in millions) | Foreign Currency Translation | Postretirement Benefit Plans | Derivative Instruments | Total | |||||||||||
Balance at April 1, 2013 | $ | 293 | $ | (219 | ) | $ | (2 | ) | $ | 72 | |||||
Foreign currency translation adjustment | (21 | ) | — | — | (21 | ) | |||||||||
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 expense, net | — | 1 | — | 1 | |||||||||||
Income tax expense on amortization of postretirement benefit plan items | — | (1 | ) | — | (1 | ) | |||||||||
Balance at June 30, 2013 | $ | 272 | $ | (215 | ) | $ | (2 | ) | $ | 55 |
(in millions) | Foreign Currency Translation | Postretirement Benefit Plans | Derivative Instruments | Total | |||||||||||
Balance at January 1, 2013 | $ | 336 | $ | (222 | ) | $ | 1 | $ | 115 | ||||||
Foreign currency translation adjustment | (64 | ) | — | — | (64 | ) | |||||||||
Amortization of net actuarial loss on postretirement benefit plans into: | |||||||||||||||
Cost of revenue | — | 2 | — | 2 | |||||||||||
Selling, general and administrative expenses | — | 5 | — | 5 | |||||||||||
Other non-operating expense, net | — | 2 | — | 2 | |||||||||||
Income tax expense on amortization of postretirement benefit plan items | — | (2 | ) | — | (2 | ) | |||||||||
Unrealized loss on foreign exchange agreements | — | — | (2 | ) | (2 | ) | |||||||||
Reclassification of unrealized gain on foreign exchange agreements into revenue | — | — | (1 | ) | (1 | ) | |||||||||
Balance at June 30, 2013 | $ | 272 | $ | (215 | ) | $ | (2 | ) | $ | 55 |
(in millions) | 2013 | 2012 | |||||
Warranty accrual – January 1 | $ | 40 | $ | 42 | |||
Net changes for product warranties in the period | 17 | 15 | |||||
Settlement of warranty claims | (19 | ) | (16 | ) | |||
Other | (1 | ) | (1 | ) | |||
Warranty accrual – June 30 | $ | 37 | $ | 40 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Revenue: | |||||||||||||||
Water Infrastructure | $ | 596 | $ | 609 | $ | 1,147 | $ | 1,193 | |||||||
Applied Water | 381 | 373 | 726 | 728 | |||||||||||
Eliminations | (17 | ) | (16 | ) | (34 | ) | (30 | ) | |||||||
Total | $ | 960 | $ | 966 | $ | 1,839 | $ | 1,891 | |||||||
Operating Income: | |||||||||||||||
Water Infrastructure | $ | 41 | $ | 93 | $ | 83 | $ | 167 | |||||||
Applied Water | 45 | 52 | 85 | 92 | |||||||||||
Corporate and other | (16 | ) | (16 | ) | (32 | ) | (31 | ) | |||||||
Total | $ | 70 | $ | 129 | $ | 136 | $ | 228 | |||||||
Depreciation and Amortization: | |||||||||||||||
Water Infrastructure | $ | 28 | $ | 24 | $ | 56 | $ | 50 | |||||||
Applied Water | 6 | 7 | 14 | 14 | |||||||||||
Corporate and other | 3 | 2 | 4 | 3 | |||||||||||
Total | $ | 37 | $ | 33 | $ | 74 | $ | 67 | |||||||
Capital Expenditures: | |||||||||||||||
Water Infrastructure | $ | 21 | $ | 21 | $ | 38 | $ | 41 | |||||||
Applied Water | 8 | 3 | 19 | 13 | |||||||||||
Corporate and other | 2 | 2 | 3 | 3 | |||||||||||
Total | $ | 31 | $ | 26 | $ | 60 | $ | 57 |
Total Assets | |||||||
(in millions) | June 30, 2013 | December 31, 2012 | |||||
Water Infrastructure | $ | 2,908 | $ | 2,844 | |||
Applied Water | 1,290 | 1,253 | |||||
Corporate and other | 413 | 582 | |||||
Total | $ | 4,611 | $ | 4,679 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Water Infrastructure serves the supply 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. 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. |
• | Orders of $1,009 million, or 4% growth from $970 million in the second quarter of the prior year |
• | Net income of $46 million, or $0.25 per diluted share ($0.36 on an adjusted basis) for the second quarter of 2013 |
• | Cash flow from operating activities of $62 million for the six months ended June 30, 2013 |
• | "organic revenue" and "organic orders" defined as revenue and orders, respectively, excluding the impact of foreign currency fluctuations, intercompany transactions 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 fluctuations assumes no change in exchange rates from the prior period. |
• | "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. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(In millions, except for per share data) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net income | $ | 46 | $ | 89 | $ | 87 | $ | 152 | |||||||
Separation costs, net of tax (a) | — | 4 | — | 8 | |||||||||||
Restructuring and realignment, net of tax | 20 | — | 29 | — | |||||||||||
Tax-related special items | — | (1 | ) | — | (1 | ) | |||||||||
Adjusted net income | $ | 66 | $ | 92 | $ | 116 | $ | 159 | |||||||
Weighted average number of shares - Diluted | 186.1 | 186.2 | 186.3 | 186.1 | |||||||||||
Adjusted earnings per share | $ | 0.36 | $ | 0.49 | $ | 0.62 | $ | 0.85 |
(a) | Costs of $1 million ($1 million, net of tax) and $2 million ($2 million, net of tax) for the three and six months ended June 30, 2013, respectively, associated with non-recurring separation activities are not excluded from adjusted net income. |
• | "operating expenses excluding separation, restructuring and realignment costs" defined as operating expenses, adjusted to exclude non-recurring separation costs from the Spin-off (not excluded in 2013), restructuring and realignment costs. |
• | "adjusted segment operating income" defined as segment operating income, adjusted to exclude non-recurring separation costs from the Spin-off (not excluded in 2013), restructuring and realignment costs and "adjusted segment operating margin" defined as adjusted segment operating income divided by total segment revenue. |
• | "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 |
Six Months Ended | |||||||
June 30, | |||||||
(In millions) | 2013 | 2012 | |||||
Net cash provided by operating activities | $ | 62 | $ | 125 | |||
Capital expenditures | (60 | ) | (57 | ) | |||
Separation cash payments (a) | — | 18 | |||||
Free cash flow | $ | 2 | $ | 86 |
(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 $2 million. |
• | “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. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
(In millions) | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||
Revenue | $ | 960 | $ | 966 | (0.6 | ) | % | $ | 1,839 | $ | 1,891 | (2.7 | ) | % | |||||||||
Gross Profit | 371 | 383 | (3.1 | ) | % | 705 | 746 | (5.5 | ) | % | |||||||||||||
Gross Margin | 38.6 | % | 39.6 | % | (100 | ) | bp | 38.3 | % | 39.5 | % | (120 | ) | bp | |||||||||
Operating expenses excluding separation, restructuring and realignment costs (a) | 273 | 248 | 10.1 | % | 529 | 507 | 4.3 | % | |||||||||||||||
Expense to revenue ratio | 28.4 | % | 25.7 | % | 270 | bp | 28.8 | % | 26.8 | % | 200 | bp | |||||||||||
Restructuring and realignment costs | 28 | — | NM* | 40 | — | NM* | |||||||||||||||||
Separation costs (a) | — | 6 | NM* | — | 11 | NM* | |||||||||||||||||
Total operating expenses | 301 | 254 | 18.5 | % | 569 | 518 | 9.8 | % | |||||||||||||||
Operating Income | 70 | 129 | (45.7 | ) | % | 136 | 228 | (40.4 | ) | % | |||||||||||||
Operating Margin | 7.3 | % | 13.4 | % | (610 | ) | bp | 7.4 | % | 12.1 | % | (470 | ) | bp | |||||||||
Interest and other non-operating expense, net | 13 | 14 | (7.1 | ) | % | 28 | 29 | (3.4 | ) | % | |||||||||||||
Income tax expense | 11 | 26 | (57.7 | ) | % | 21 | 47 | (55.3 | ) | % | |||||||||||||
Tax rate | 20.3 | % | 23.3 | % | (300 | ) | bp | 19.7 | % | 23.9 | % | (420 | ) | bp | |||||||||
Net Income | $ | 46 | $ | 89 | (48.3 | ) | % | $ | 87 | $ | 152 | (42.8 | ) | % |
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
(In millions) | Change | % Change | Change | % Change | |||||||||
2012 Revenue | $ | 966 | $ | 1,891 | |||||||||
Organic growth | (33 | ) | (3.4 | )% | (100 | ) | (5.3 | )% | |||||
Acquisitions | 23 | 2.4 | % | 46 | 2.4 | % | |||||||
Constant Currency | (10 | ) | (1.0 | )% | (54 | ) | (2.9 | )% | |||||
Foreign currency translation (a) | 4 | 0.4 | % | 2 | 0.1 | % | |||||||
Total change in revenue | (6 | ) | (0.6 | )% | (52 | ) | (2.7 | )% | |||||
2013 Revenue | $ | 960 | $ | 1,839 |
(a) | Foreign currency impact primarily due to fluctuations in the value of the Euro, British Pound, Swedish Krona and South African Rand against the U.S. Dollar. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||
(In millions) | 2013 | 2012 | As Reported Change | Constant Currency Change | 2013 | 2012 | As Reported Change | Constant Currency Change | |||||||||||||||||||
Water Infrastructure | $ | 596 | $ | 609 | (2.1 | )% | (2.5 | )% | $ | 1,147 | $ | 1,193 | (3.9 | )% | (3.9 | )% | |||||||||||
Applied Water | 381 | 373 | 2.1 | % | 1.3 | % | 726 | 728 | (0.3 | )% | (1.0 | )% | |||||||||||||||
Eliminations | (17 | ) | (16 | ) | (34 | ) | (30 | ) | |||||||||||||||||||
Total | $ | 960 | $ | 966 | (0.6 | )% | (1.0 | )% | $ | 1,839 | $ | 1,891 | (2.7 | )% | (2.9 | )% |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
(In millions) | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||
Selling, general and administrative expenses (SG&A) | $ | 252 | $ | 220 | 14.5 | % | $ | 488 | $ | 451 | 8.2 | % | |||||||||||
SG&A as a % of revenue | 26.3 | % | 22.8 | % | 350 | bp | 26.5 | % | 23.8 | % | 270 | bp | |||||||||||
Research and development expenses (R&D) | 28 | 28 | — | % | 54 | 56 | (3.6 | ) | % | ||||||||||||||
R&D as a % of revenue | 2.9 | % | 2.9 | % | — | bp | 2.9 | % | 3.0 | % | (10 | ) | bp | ||||||||||
Restructuring charges | 20 | — | NM* | 25 | — | NM* | |||||||||||||||||
Separation costs | 1 | 6 | (83.3 | ) | % | 2 | 11 | (81.8 | ) | % | |||||||||||||
Operating expenses | $ | 301 | $ | 254 | 18.5 | % | $ | 569 | $ | 518 | 9.8 | % | |||||||||||
Expense to revenue ratio | 31.4 | % | 26.3 | % | 510 | bp | 30.9 | % | 27.4 | % | 350 | bp |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Advisory fees and other | $ | — | $ | 2 | $ | — | $ | 5 | |||||||
Rebranding and marketing costs | — | 2 | — | 4 | |||||||||||
Information and technology costs | — | 1 | 1 | 1 | |||||||||||
Employee retention and hiring costs | — | 1 | — | 1 | |||||||||||
Lease termination and other real estate costs | 1 | — | 1 | — | |||||||||||
Total separation costs in operating income | 1 | 6 | 2 | 11 | |||||||||||
Income tax (benefit) expense | — | (2 | ) | — | (3 | ) | |||||||||
Total separation costs, net of tax | $ | 1 | $ | 4 | $ | 2 | $ | 8 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
(In millions) | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||
Water Infrastructure | $ | 41 | $ | 93 | (55.9 | ) | % | $ | 83 | $ | 167 | (50.3 | ) | % | |||||||||
Applied Water | 45 | 52 | (13.5 | ) | % | 85 | 92 | (7.6 | ) | % | |||||||||||||
Segment operating income | 86 | 145 | (40.7 | ) | % | 168 | 259 | (35.1 | ) | % | |||||||||||||
Corporate and other | (16 | ) | (16 | ) | — | % | (32 | ) | (31 | ) | 3.2 | % | |||||||||||
Total operating income | $ | 70 | $ | 129 | (45.7 | ) | % | $ | 136 | $ | 228 | (40.4 | ) | % | |||||||||
Operating margin | |||||||||||||||||||||||
Water Infrastructure | 6.9 | % | 15.2 | % | (830 | ) | bp | 7.2 | % | 14.0 | % | (680 | ) | bp | |||||||||
Applied Water | 11.8 | % | 13.9 | % | (210 | ) | bp | 11.7 | % | 12.6 | % | (90 | ) | bp | |||||||||
Total Xylem | 7.3 | % | 13.4 | % | (610 | ) | bp | 7.4 | % | 12.1 | % | (470 | ) | bp |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
(In millions) | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||
Water Infrastructure | |||||||||||||||||||||||
Operating income | $ | 41 | $ | 93 | (55.9 | ) | % | $ | 83 | $ | 167 | (50.3 | ) | % | |||||||||
Separation costs | — | 1 | NM* | — | 3 | NM* | |||||||||||||||||
Restructuring and realignment costs | 22 | — | NM* | 32 | — | NM* | |||||||||||||||||
Adjusted operating income** | $ | 63 | $ | 94 | (33.0 | ) | % | $ | 115 | $ | 170 | (32.4 | ) | % | |||||||||
Adjusted operating margin** | 10.6 | % | 15.4 | % | (480 | ) | bp | 10.0 | % | 14.2 | % | (420 | ) | bp | |||||||||
Applied Water | |||||||||||||||||||||||
Operating income | $ | 45 | $ | 52 | (13.5 | ) | % | $ | 85 | $ | 92 | (7.6 | ) | % | |||||||||
Separation costs | — | — | NM* | — | 1 | NM* | |||||||||||||||||
Restructuring and realignment costs | 6 | — | NM* | 8 | — | NM* | |||||||||||||||||
Adjusted operating income** | $ | 51 | $ | 52 | (1.9 | ) | % | $ | 93 | $ | 93 | — | % | ||||||||||
Adjusted operating margin** | 13.4 | % | 13.9 | % | (50 | ) | bp | 12.8 | % | 12.8 | % | — | bp | ||||||||||
Total Xylem | |||||||||||||||||||||||
Operating income | $ | 70 | $ | 129 | (45.7 | ) | % | $ | 136 | $ | 228 | (40.4 | ) | % | |||||||||
Separation costs | — | 6 | NM* | 2 | 11 | NM* | |||||||||||||||||
Restructuring and realignment costs | 28 | — | NM* | 40 | — | NM* | |||||||||||||||||
Adjusted operating income** | $ | 98 | $ | 135 | (27.4 | ) | % | $ | 176 | $ | 239 | (26.4 | ) | % | |||||||||
Adjusted operating margin** | 10.2 | % | 14.0 | % | (380 | ) | bp | 9.6 | % | 12.6 | % | (300 | ) | bp |
Six Months Ended | |||||||||||
June 30, | |||||||||||
(In millions) | 2013 | 2012 | Change | ||||||||
Operating activities | $ | 62 | $ | 125 | $ | (63 | ) | ||||
Investing activities | (138 | ) | (53 | ) | (85 | ) | |||||
Financing activities | (60 | ) | (31 | ) | (29 | ) | |||||
Foreign exchange | (8 | ) | (1 | ) | (7 | ) | |||||
Total | $ | (144 | ) | $ | 40 | $ | (184 | ) |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
(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) | MAXIMUM NUMBER OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS (b) | ||||
4/1/13 - 4/30/13 | — | — | — | 1.1 | ||||
5/1/13 - 5/31/13 | 0.1 | $28.35 | 0.1 | 1.0 | ||||
6/1/13 - 6/30/13 | — | — | — | 1.0 |
(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. |
XYLEM INC. | ||
(Registrant) | ||
/s/ John P. Connolly_____ | ||
John P. Connolly | ||
Vice President, Controller and Chief Accounting Officer | ||
(Principal Accounting Officer) |
Exhibit Number | Description | Location |
(3.1) | Amended and Restated Articles of Incorporation of Xylem Inc. | Incorporated by reference to Exhibit 3.1 of Xylem Inc.’s Form 8-K Current Report filed on October 13, 2011 (CIK No. 1524472, File No. 1-35229). |
(3.2) | By-laws of Xylem Inc. | Incorporated by reference to Exhibit 3.1 of Xylem Inc.’s Form 8-K Current Report filed on May 10, 2013 (CIK No. 1524472, File No. 1-35229). |
(4.1) | Indenture, dated as of September 20, 2011, between Xylem Inc., ITT Corporation, as initial guarantor, and Union Bank, N.A., as trustee | Incorporated by reference to Exhibit 4.2 of ITT Corporation’s Form 8-K Current Report filed on September 21, 2011 (CIK No. 216228, File No. 1-5672). |
(4.2) | Form of Xylem Inc. 3.550% Senior Notes due 2016 | Incorporated by reference to Exhibit 4.5 of Xylem Inc.'s Form S-4 Registration Statement filed on May 24, 2012 (CIK No. 1524472, File No. 333-181643). |
(4.3) | Form of Xylem Inc. 4.875% Senior Notes due 2021 | Incorporated by reference to Exhibit 4.6 of Xylem Inc.'s Form S-4 Registration Statement filed on May 24, 2012 (CIK No. 1524472, File No. 333-181643). |
(10.1) | Xylem Retirement Savings Plan | Filed herewith. |
(11) | Statement Re-Computation of Per Share Earnings | Information required to be presented in Exhibit 11 is provided under “Earnings Per Share” in Note 7 to the Condensed Consolidated Financial Statements in Part I, Item 1 “Condensed Consolidated Financial Statements” of this Report in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification 260, Earnings Per Share. |
(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. |
(101.0) | The following materials from Xylem Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, 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 | Submitted electronically with this Report. |
2.1 | "Accounts" shall mean, with respect to any Member or Deferred Member, his After-Tax Account, Before-Tax Account, Company Core Account, Company Floor Account, Company Matching Account, Prior Company Matching Account, Prior ESOP Account, Prior Plan Account, Rollover Account, and Special Company Contribution Account. |
2.2 | "Actual Contribution Percentage" or “ACP” shall mean, with respect to a specified group of employees referred to in Section 4.5, the average of the ratios, calculated separately for each employee in that group, of: |
(a) | the After‑Tax Savings and Company Matching Contributions (excluding Company Matching Contributions forfeited under Section 4.1 or 4.5) made by or on behalf of the Member for the Plan Year; to |
(b) | the Employee's Statutory Compensation for a Plan Year. |
2.3 | "Actual Deferral Percentage" or “ADP” shall mean, for Plan Years beginning before January 1, 2012, with respect to a specified group of employees referred to in Section 4.1(d), the average of the ratios, calculated separately for each employee in that group, of: |
(a) | the amount of Before-Tax Contributions made on the employee's behalf for a Plan Year under Section 4.1(a) (including Before-Tax Contributions returned to a Highly Compensated Employee under Section 4.1(c)(ii) and Before-Tax Contributions returned to any employee under Section 4.1(c)(iii)); to |
(b) | the employee's Statutory Compensation for a Plan Year. |
2.4 | "After-Tax Account" shall mean that portion of the Trust Fund, which, with respect to any Member or Deferred Member, is attributable to: |
(a) | After-Tax Savings made to the Plan under Section 4.2; and |
(b) | any amounts that are attributable to after-tax contributions made to the ISP or any qualified profit sharing or other defined contribution plan previously in effect at a Participating Corporation or Participating Division and that are transferred to the Plan on the Member's behalf |
2.5 | "After-Tax Savings" shall mean the contributions made by a Member pursuant to Section 4.2. |
2.6 | "Associated Company" shall mean any division, subsidiary or affiliated company of Xylem not participating in the Plan designated by the Board of Directors or by the Benefits Administration Committee, pursuant to authority delegated to it by the Board of Directors, as an Associated Company for purposes of the Plan during the period for which such designation exists; provided, however, that any such division, subsidiary or affiliated company not participating in the Plan which is: |
(a) | a component member of a controlled group of corporations (as defined in Section 414(b) of the Code), which controlled group of corporations includes as a component member Xylem; |
(b) | any trade or business under common control (as defined in Section 414(c) of the Code) with Xylem; |
(c) | any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes Xylem; or |
(d) | any other entity required to be aggregated with Xylem pursuant to regulations under Section 414(o) of the Code, |
2.7 | "Before-Tax Account" shall mean that portion of the Trust Fund, which, with respect to any Member or Deferred Member, is attributable to: |
(a) | Before-Tax Contributions made to the Plan under Section 4.1(a); and |
(b) | Catch-Up Contributions made to the Plan under Section 4.1(b); and |
- | any amounts that are attributable to before-tax contributions (including catch-up contributions) made to the ISP or any qualified profit sharing or other defined contribution plan previously in effect at a Participating Corporation or Participating Division and that are transferred to the Plan on the Member's behalf |
2.9 | "Before-Tax Savings" shall mean: |
(a) | Before-Tax Contributions made on a Member's behalf under Section 4.1(a); and |
(b) | Catch-Up Contributions made on a Member's behalf under Section 4.1(b). |
2.10 | "Beneficiary" shall mean such primary beneficiary or beneficiaries as may be designated from time to time by the Member or Deferred Member, in accordance with procedures prescribed by the Benefits Administration Committee for such purpose, to receive, in the event of the Member's or Deferred Member's death, the value of his Accounts at the time of his death. If more than one Beneficiary is designated, the percentage payable to each Beneficiary must be designated. A Member may also designate a contingent Beneficiary to receive |
2.11 | "Benefits Administration Committee" shall mean the Benefits Administration Committee established from time to time pursuant to Article 13 for the purposes of administering the Plan. |
2.12 | "Board of Directors" shall mean the Board of Directors of Xylem or of any successor by merger, purchase or otherwise. |
2.13 | "Catch-Up Contributions" shall mean Before-Tax Savings made to the Plan pursuant to Section 4.1(b) that constitute catch-up contributions under Section 414(v) of the Code. |
2.14 | "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. References to any section of the Code shall include any successor provision thereto. |
2.15 | "Company" shall mean Xylem Inc. or any successor by merger, purchase or otherwise with respect to its Employees, any Participating Division with respect to its Employees, and any Participating Corporation with respect to its Employees. |
2.16 | "Company Core Account" shall mean that portion of the Trust Fund which, with respect to any Member or Deferred Member, is attributable to Company Core Contributions and any investment earnings and gains or losses thereon. |
2.17 | "Company Core Contributions" shall mean Company Core Contributions made pursuant to Section 5.2. |
2.18 | "Company Floor Account" shall mean that portion of the Trust Fund which, with respect to any Member or Deferred Member, is attributable to his "Company Floor Account" under the ISP that was transferred from the ISP to the Plan and any investment earnings and gains or losses on such account in the Plan. |
2.19 | "Company Matching Account" shall mean that portion of the Trust Fund which, with respect to any Member or Deferred Member, is attributable to Company Matching Contributions and any investment earnings and gains or losses thereon. |
2.20 | "Company Matching Contributions" shall mean Company Matching Contributions made pursuant to Section 5.1. |
2.21 | "Contributing Member" shall mean a Member who is making Before-Tax Savings and/or After-Tax Savings. |
2.22 | "Deferred Member" shall mean: |
(a) | a Member who has terminated employment with the Company and all Associated Companies and who has not received a complete distribution of his Accounts; |
(b) | the spouse Beneficiary of a deceased Member or Deferred Member; or |
(c) | an alternate payee designated as such pursuant to a domestic relations order as qualified by the Plan. |
2.23 | "Disability" shall mean, with respect to a Member, the total disability of such Member as defined under any long term disability plan maintained by the Company for employees who are similarly situated as of the date the disability occurs. If a Member qualifies for benefits under such plan, then he shall be deemed to be totally disabled as determined by the insurance company that insures such plan. A Member who does not qualify for benefits under such plan because he has elected not to participate in such plan or because of a plan limitation shall be deemed to be totally disabled if the insurance company insuring such plan determines that he would have qualified for benefits under such plan if he had elected to participate therein or if he otherwise would have qualified absent the plan limitation. For purposes of this Plan, the effective date of disability shall be the later of the date of disability as defined in the applicable disability plan or the date as of which the applicable insurance company issues its determination of total disability. |
2.24 | "Earnings" shall mean the amount of income, if any, to be returned with any excess deferrals, excess contributions, or excess aggregate contributions under Section 4.1 or 4.5 for the Plan Year, as determined in accordance with applicable law and regulations prescribed by the Secretary of the Treasury under the provisions of Sections 402(g), 401(k) and 401(m) of the Code. |
2.25 | "Effective Date" shall mean October 31, 2011 with respect to Xylem and any Participating Corporations and Participating Divisions that enter the Plan as of such date. With respect to Participating Corporations and Participating Divisions that began their participation in the Plan after such date, "Effective Date" shall mean the date as of which such Participating Corporation or Participating Division begins its participation in the Plan. |
2.26 | "Employee" shall mean any person regularly employed by the Company who is paid from a payroll maintained in the continental United States, Hawaii, Puerto Rico, or the US Virgin Islands, and who receives regular and stated compensation other than a pension or retainer. |
(a) | any individual who is accruing service under a qualified retirement plan maintained by the Company or any Associated Company or any other retirement plan of the Company or any Associated Company as shall be specified by the Board of Directors from time to time and any individual who is eligible to participate in a retirement plan of the Company or any Associated Company that is maintained outside of the United States; |
(b) | any individual whose terms and conditions of employment are determined by a collective bargaining agreement with the Company, which does not make this Plan applicable to him; |
(c) | any individual who is a Leased Employee; |
(d) | any individual who is engaged by the Company to perform services for the Company or an Associated Company in a relationship (i) that the Company characterizes as other than an employment relationship, or (ii) that the individual has agreed is not an employment relationship and has waived his rights to coverage as an employee, such as where the Company engages the individual to perform services as an independent contractor, even if a determination is made by the Internal Revenue Service or other governmental agency or court, after the individual is engaged to perform such services, that the individual is an employee of the Company or an Associated Company for purposes of the Code; |
(e) | any individual: |
(i) | who is regularly employed by the Company in a permanent position (as distinguished from a temporary assignment); and |
(ii) | whose primary place of employment with the Company is outside of the United States; and |
(iii) | who has his primary residence outside of the United States; |
(f) | any individual: |
(i) | who is paid from a payroll maintained in the continental United States, Hawaii, Puerto Rico or the U. S. Virgin Islands; and |
(ii) | who is not a United States citizen or a resident alien (as defined in Section 7701(b) of the Code); and |
(iii) | who is employed by the Company or an Associated Company on a temporary assignment in the United States; |
(g) | any individual who is a nonresident alien with no U. S. source income; and |
(h) | any individual who is a bona fide resident of Puerto Rico. |
2.27 | "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. |
2.28 | "ESOP" shall mean that portion of the Plan that consists of amounts invested in the Xylem Stock Fund. |
2.29 | "Exelis Stock" shall mean common stock of Exelis Inc. |
2.30 | "Exelis Stock Fund" shall mean the Investment Fund under the Plan that is invested in Exelis Stock. |
2.31 | "Highly Compensated Employee" shall mean, with respect to any Plan Year, any employee who (a) in the Plan Year or the "look-back year" (which shall be the immediately preceding Plan Year) was a 5-percent owner (as defined in Section 415(i) of the Code), or (b) in the "look-back year" (which shall be the immediately preceding Plan Year) earned annual Statutory Compensation from the Company or an Associated Company that exceeds a dollar amount that is indexed annually and is determined pursuant to Section 414(q)(1)(B) of the Code. |
2.32 | "Hours Worked" shall mean hours for which an employee is compensated by the Company or by an Associated Company whether or not he has worked, such as paid holidays, paid vacation, paid sick leave and paid time off, and back pay for the period for which it was awarded, and each such hour shall be computed as only one hour, even though he is compensated at more than the straight time rate. With respect to any period for which an employee is compensated but has not worked, hours counted shall be included on the basis of the |
2.33 | "Investment Fund" shall mean the separate funds in which contributions to the Plan are invested in accordance with Article 7. |
2.34 | "ISP" shall mean the ITT Salaried Investment and Savings Plan (including certain provisions that were included in a predecessor plan that was named the Pre-Distribution ITT Plan) that was maintained by ITT Corporation as in existence prior to October 31, 2011 and the sponsorship of which was transferred to Exelis Inc. effective October 31, 2011. |
2.35 | "ITT Stock" shall mean common stock of ITT Corporation. |
2.36 | "ITT Stock Fund" shall mean the Investment Fund offered under the Plan that is invested in ITT Stock. |
2.37 | "Leased Employee" shall mean any person (other than a common law employee of the Company or an Associated Company) who, pursuant to an agreement between the Company and any other person ("leasing organization") has performed services for the Company or an Associated Company or any related persons determined in accordance with Section 414(n)(6) of the Code on a substantially full-time basis for a period of at least one year and such services are performed under the primary direction of or control by the Company or an Associated Company. In the case of any person who is a Leased Employee (or who would qualify as a Leased Employee but for the requirement that substantially full-time service be performed for one year) before or after a period of service as an employee, the entire period during which he has performed services as a Leased Employee shall be counted as service as an employee for all purposes of the Plan, except that he shall not, by reason of that status, become a Member of the Plan. |
2.38 | "Loan Valuation Date" shall mean the business day on which a Member's proper application for a loan under the Plan is received by the Savings Plan Administrator, or its designee. |
2.39 | "Member" shall mean any person who has become a Member as provided in Article 3. |
2.40 | "Non-U.S. Citizen Employee" shall mean any person regularly employed by the Company who is considered an employee for purposes of the Company's employee benefit plans and who is: |
(a) | not a citizen of the United States or a resident alien; |
(b) | paid from a payroll maintained in the continental United States, Hawaii, Puerto Rico or the US Virgin Islands; and |
(c) | employed by the Company in a permanent position (as distinguished from a temporary assignment). |
2.41 | "Participating Corporation" shall mean any subsidiary or affiliated company of Xylem or designated division(s) or unit(s) only of such subsidiary or affiliate which, by appropriate action of the Board of Directors or by a designated officer of Xylem pursuant to authorization delegated to him by the Board of Directors has been designated as a Participating Corporation in the Plan as to all of its employees or as to the employees of one or more of its operating or other units and the board of directors of which shall have taken appropriate action to adopt this Plan. |
2.42 | "Participating Division" shall mean any division of Xylem or designated unit(s) only of such division which by appropriate action of the Board of Directors or by a designated officer of Xylem pursuant to authorization delegated to him by the Board of Directors has been designated as a Participating Division in this Plan. |
2.43 | "PFTIC" shall mean the Xylem Pension Fund Trust and Investment Committee or its successor established from time to time pursuant to Section 12.1. |
2.44 | "Plan" shall mean the Xylem Retirement Savings Plan as set forth herein or as amended from time to time. |
2.45 | "Plan Year" shall mean the calendar year, provided that the first Plan Year shall be the period from October 31, 2011 through December 31, 2011. |
2.46 | "Prior Company Contribution Account" shall mean that portion of the Trust Fund, which, with respect to any Member or Deferred Member, is attributable to his "Company Matching Contribution Account" under the ISP that was transferred from the ISP to the Plan, and any other employer contributions made to a plan previously in effect at a Participation Corporation or Participation Division and that are transferred to the Plan on the member's behalf, plus investment earnings and gains or losses on such account in the Plan. |
2.47 | "Prior ESOP Account" shall mean that portion of the Trust Fund, which, with respect to any Member or Deferred Member, is attributable to his "Prior ESOP Account" under the ISP that was transferred from the ISP to the Plan, plus investment earnings and gains or losses. |
2.48 | "Prior Plan Account" shall mean that portion of the Trust Fund which, with respect to any Member or Deferred Member, is attributable to his "Prior Plan Account" under the ISP that was transferred from the ISP to the Plan, plus investment earnings and gains or losses. |
2.49 | "Rollover Account" shall mean the portion of the Trust Fund, which, with respect to a Member or Deferred Member, is attributable to |
(a) | Rollover Contributions made to the Plan under Section 4.4; and |
(b) | any amounts that are attributable to rollover contributions made to the ISP or to a qualified profit sharing or other defined contribution plan previously in effect at a Participating Corporation or Participating Division and that are transferred to the Plan on the Member's behalf |
2.50 | "Rollover Contributions" shall mean the contributions made by a Member pursuant to Section 4.4. |
2.51 | "Salary" shall mean an Employee's total remuneration from the Company for services rendered while a Member during a particular time period, including annual base salary, overtime, shift differentials, commissions, regularly occurring incentive pay, and differential wage payments (as defined in Section 3401(h)(2) of the Code), all as determined prior to any deferral election pursuant to Section 4.1(a), any deferral election pursuant to Section 125 of the Code, and any deferral election for a qualified transportation fringe under Section 132(f) of the Code and excluding: |
(a) | foreign service allowances, separation pay, or, in accordance with rules uniformly applicable to all Members similarly situated and as interpreted by the Benefits Administration Committee, special bonuses, special commissions, and other special pay or allowances of similar nature; and |
(b) | the cost of any public or private employee benefit plan, including the Plan. |
2.52 | "Savings" shall mean the After-Tax Savings contributed by a Member and the Before-Tax Savings contributed on a Member's behalf. |
2.53 | "Self-Directed Brokerage Account" or "SDA" shall mean an Investment Fund that is a self-directed brokerage account established by a Member, as described in Section 7.1(b). |
2.54 | "Service" shall mean the period of elapsed time beginning on the date an employee commences employment with the Company or any Associated Company or predecessor company of Xylem, and ending on his most recent Severance Date, subject to the following: |
(a) | Notwithstanding anything contained herein to the contrary, with respect to an Employee who is employed by the Company on October 31, 2011, such Employee shall be credited with "Service" he had earned under the ISP prior to October 31, 2011. |
(i) | was an employee of ITT Corporation or one of its subsidiaries on October 30, 2011; |
(ii) | remained an employee of ITT Corporation or one of its subsidiaries (as in existence on October 31, 2011) or became an employee of Exelis Inc. on October 31, 2011; and |
(iii) | becomes an Employee immediately following termination of employment with ITT Corporation or one of its subsidiaries or Exelis Inc. and prior to March 1, 2012 |
(b) | If an Employee terminates employment and is later reemployed within 12 months of the earlier of (i) his date of termination, or (ii) the first day of an absence from service immediately preceding his date of termination, the period between his Severance Date and his date of reemployment shall be included in his Service. |
(c) | If an Employee terminates and is later reemployed, the period of service prior to his Severance Date shall be included in his Service, regardless of the length of his absence from employment. |
(d) | Under the circumstances hereinafter stated and upon such conditions as the Benefits Administration Committee shall determine on a basis uniformly applicable to all Employees similarly situated, the period of Service of an Employee shall be deemed not to be interrupted by an absence of the type hereinafter stated and the period of such absence shall be included in determining the length of an Employee's Service: |
(i) | if a leave of absence has been authorized by the Company or any subsidiary or affiliate of the Company, for the period of such authorized leave of absence only; or |
(ii) | if an Employee enters service in the uniformed services of the United States and if such individual's right to re-employment is protected by the Uniformed Services Employment and Reemployment Rights Act of 1994 or any similar law then in effect and if the individual returns to regular employment within the period during which the right to reemployment is protected by any such law. Notwithstanding any provisions of this Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. |
(e) | If a Member dies while performing qualified military service (as defined in Section 414(u) of the Code) and while his reemployment rights are protected by the Uniformed Services Employment and Reemployment Rights Act of 1994, his period of time in qualified military service through the date of his death shall be included in his Service. |
2.55 | "Severance Date" shall mean with respect to employment with the Company and all Associated Companies: |
(a) | Except as provided in (b) below, the earlier of: |
(i) | the date an Employee quits, is discharged, retires or dies; or |
(ii) | the first anniversary of the date on which he is first absent from service, with or without pay, for any reason other than discharge, retirement or death, such as vacation, sickness, disability, layoff or leave of absence. |
(b) | If Service is interrupted for maternity or paternity reasons, meaning an interruption of Service by reason of the pregnancy of the Employee; the birth of a child of the Employee; the placement of a child with the Employee by reason of adoption; or for purposes of caring for a newborn child of the Employee immediately following the birth or adoption of the newborn, then the Severance Date shall be the earlier of: |
(i) | the date he quits, is discharged, retires or dies; or |
(ii) | the second anniversary of the date on which he is first absent from service. |
2.56 | "Special Company Contribution Account" shall mean that portion of the Trust Fund which, with respect to any Member or Deferred Member, is attributable to Special Company Contributions and any investment earnings and gains or losses thereon. |
2.57 | "Special Company Contributions" shall mean Special DC Credit Contributions and Transition Credit Contributions made pursuant to Appendix A. |
2.58 | "Statutory Compensation" shall mean total wages and other compensation paid to or for the Member by the Company or by an Associated Company as reported on the Member's Form W-2, Wage and Tax Statement, plus elective contributions under Sections 125, 132(f)(4), 402(g)(3) and 414(v) of the Code. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, the maximum amount of Statutory Compensation, taken into account under the Plan for any Plan Year for any Member shall not exceed $200,000, as adjusted by the Secretary of the Treasury to reflect cost-of-living adjustments in accordance with Section 401(a)(17)(B) of the Code. Statutory Compensation shall also include: |
(a) | salary continuation payments for military service as described in Treasury Regulation Section 1.415(c)-2(e)(4); |
(b) | compensation paid after severance from employment as described in Treasury Regulation Section 1.415(c)-2(e)(3)(i), (ii) and (iii)(A); |
(c) | foreign income as described in Treasury Regulation Section 1.415(c)-2(g)(5)(i), excluding amounts described in Treasury Regulation Section 1.415(c)-2(g)(5)(ii); and |
(d) | differential wage payments (as defined in Section 3401(h)(2) of the Code) paid by the Company or an Associated Company with respect to any period during which an individual is performing service in the uniformed services (as defined in Section 3401(h)(2)(A) of the Code. |
2.59 | "Target Retirement Fund" shall mean a fund managed by a provider designated by the PFTIC that is designed for investors who will retire at or around a specified date. The allocation to different asset classes will change over time and the fund will become increasingly conservative as the specified retirement date approaches. |
2.60 | "Termination of Employment" shall mean severance from the employment of the Company and all Associated Companies for any reason, including, but not limited to, retirement, death, disability, resignation or dismissal by the Company or an Associated Company; provided, however, that transfer in employment between the Company and any Associated Company shall not be deemed to be "Termination of Employment." With respect to any leave of absence and any period of service in the uniformed services of the United States, Section 2.55 shall govern. |
2.61 | "Trust Fund" shall mean the aggregate funds held by the Trustee under the trust agreement or agreements established for the purposes of this Plan, consisting of the funds as described in Article 7. |
2.62 | "Trustee" shall mean the Trustee or Trustees at any time acting as such under the trust agreement or agreements established for the purposes of this Plan. |
2.63 | "Valuation Date" shall mean the date or dates, as applicable, on which the Trust Fund is valued in accordance with Article 8. |
2.64 | "Vested Share" shall mean, with respect to a Member or Deferred Member, that portion of his Accounts in which the Member or Deferred Member has a nonforfeitable interest as provided in Article 6. |
2.65 | "Withdrawal Valuation Date" shall mean, with respect to withdrawals made pursuant to Section 9.2, the business day on which a Member's proper request for a withdrawal in a form or manner approved by the Benefits Administration Committee is received and processed by the Savings Plan Administrator or its designee. With respect to withdrawals made pursuant to Section 9.3, Withdrawal Valuation Date shall mean the business day on which a Member's proper request for a withdrawal under the Plan, as received and processed by the Savings Plan Administrator or its designee, is approved by the Benefits Administration Committee. |
2.66 | "Xylem" shall mean Xylem Inc., an Indiana corporation, or any successor by merger, purchase or otherwise. |
2.67 | "Xylem Stock" shall mean common stock of Xylem. |
2.68 | "Xylem Stock Fund" shall mean the Investment Fund under the Plan that is invested in Xylem Stock. |
3.1 | Eligibility |
(a) | An Employee whose employment with the Company is not on a temporary or less than full-time basis and who is not a Non-U.S. Citizen Employee shall be eligible to become a Member on the later of the Effective Date or the date he first becomes an Employee. |
(b) | An Employee whose employment with the Company is on a temporary or less than full-time basis and who is not a Non-U.S. Citizen Employee shall be eligible to become a Member on the later of the Effective Date or the day following the date he completes 1,000 Hours Worked in a twelve-consecutive-month computation period, provided he is then an Employee. The first computation period shall be the twelve-month period measured from the date on which such Employee's Service commences. Subsequent computation periods shall be the Plan Year, beginning with the Plan Year that contains the first anniversary of the date on which the Employee's Service commenced. |
(c) | An Employee who is a Non-U.S. Citizen Employee who works in the U.S. on an expatriate basis shall be eligible to become a Member on the later of: |
(i) | the Effective Date; or |
(ii) | the day following the date as of which he has worked in the U.S. as an employee for at least 36 consecutive months |
3.2 | Membership |
3.3 | Certain Member Elections |
(a) | He may designate one or more Beneficiaries. |
(b) | He may designate a different rate of Before-Tax Savings than the rate that will otherwise automatically apply pursuant to Section 4.1(a). |
(c) | He may elect to make Catch-Up Contributions pursuant to Section 4.1(b). |
(d) | He may elect to make After-Tax Savings pursuant to Section 4.2. |
(e) | He may make an investment election as described in Section 7.2 |
(f) | He may make a dividend election as described in Section 8.7 |
3.4 | Rehired Member |
3.5 | Transferred Members |
3.6 | Termination of Membership |
4.1 | Member Before-Tax Contributions. |
(a) | Commencement and Amount of Before-Tax Contributions |
(i) | Effective as of the first day of the next available pay period (based on administrative processing deadlines) an Employee who has become a Member pursuant to Article 3 shall have his Salary reduced by 6 percent and that amount shall be contributed on his behalf to the Plan by the Company as Before-Tax Contributions until and unless the Member elects, in accordance with the procedures prescribed by the Benefits Administration Committee, to either receive such Salary directly from the Company in cash or to reduce his Salary in some other percentage. Such reduction in Salary shall be applied to Salary that could have been subsequently received by the Member. Any such specified percentage of Salary shall be in a multiple of 1 percent and the maximum percentage shall be 50 percent. Notwithstanding the preceding sentence, if in any Plan Year a Member makes After-Tax Savings in accordance with Section 4.2 in addition to Before-Tax Contributions in accordance with this Section, the maximum percentage of Salary such Member may contribute for such Plan Year as Savings shall not exceed 50 percent. |
(A) | If such individual was making Regular Before-Tax Savings and/or After-Tax Savings under the ISP immediately prior to October 31, 2011 in an amount equal to a total of 6 percent or more of his Salary, such individual shall become a Member of the Plan on October 31, 2011 and effective as of the first day of the next available pay period (based on administrative processing deadlines) such individual's election of Regular Before-Tax Savings and/or After-Tax Savings under the ISP immediately prior to October 31, 2011 shall be deemed to have been made under the Plan and shall continue in the same amount until and unless the Member makes another Before-Tax Savings and/or After Tax Savings election in accordance with procedures prescribed by the Benefits Administration Committee. |
(B) | If such individual was not making Regular Before-Tax and/or After-Tax Savings under the ISP immediately prior to October 31, 2011 in an amount equal to a total of 6 percent or more of his Salary, such individual shall become a Member of the Plan on October 31, 2011 and, effective as of the first day of the next available pay period (based on administrative processing deadlines): |
(1) | such individual's After-Tax Savings election under the ISP immediately prior to October 31, 2011, if any, shall be deemed to have been made under the Plan until and unless the Member makes another election in accordance with procedures prescribed by the Benefits Administration Committee; and |
(2) | such individual shall be deemed to have elected to make Before-Tax Contributions under the Plan equal to 6 percent of his Salary or, if less, the amount necessary to have the total of his Savings equal 6 percent of his Salary, until and unless the Member makes another election in accordance with procedures prescribed by the Benefits Administration Committee. |
(ii) | In order to comply with Section 415 of the Code, the Benefits Administration Committee may impose an additional limit on any Member's Before-Tax Contributions based on the Benefits Administration Committee's reasonable projection of the total "annual addition" (as defined in Section 5.4) that will be credited to a Member's Accounts for a Plan Year. |
(iii) | Prior to January 1, 2012, in order to comply with Section 40l(k)(3) of the Code, the Benefits Administration Committee may impose a limitation on the extent to which a Member who is a Highly Compensated Employee may reduce his Salary in accordance herewith, based on the Benefits Administration Committee's reasonable projection of Before-Tax Contributions rates of Members who are not Highly Compensated Employees. |
(iv) | A Member may elect to change the rate of Before-Tax Contributions under this paragraph (a) as of the first day of any pay period by making an election in the form or manner approved by the Benefits Administration Committee for such purpose. The changed rate shall be effective as soon as administratively possible following the date the election is received by the Benefits Administration Committee. |
(b) | Catch-Up Contributions |
(i) | A Member's Catch-Up Contributions shall not be taken into account for purposes of applying the maximum percentage limitation described in (a) above or the limitations under Sections 402(g) and 415 of the Code and Members' Catch-Up Contributions shall not be taken into account in applying the Actual Deferral Percentage test of (d) below. |
(ii) | The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of making such Catch-Up Contributions. |
(iii) | The determination of whether a Before-Tax Contribution under this Section constitutes a Catch-Up Contribution for any Plan Year shall be determined as of the end of such Plan Year, in accordance with Section 414(v) of the Code. Before-Tax Contributions that are intended to be Catch-Up Contributions for a Plan Year but which do not qualify as Catch-Up Contributions as of the end of the Plan Year shall be treated for all purposes under the Plan as Before-Tax Contributions. |
(iv) | The Company shall take a Member's Catch-Up Contributions into account for purposes of determining the amount of Company Matching Contributions under Section 5.1 for a Plan Year. |
(v) | A Member's Catch-Up Contributions shall be subject to the same withdrawal and distribution restrictions as Before-Tax Contributions. |
(vi) | In the event that the sum of a Member's Catch-Up Contributions and similar contributions to any other qualified defined contribution plan maintained by the Company or an Associated Company exceeds the dollar limit on catch-up contributions under Section 414(v) of the Code for any calendar year as in effect for such calendar year, the Member shall be deemed to have elected a return of the Catch-Up Contributions in excess of the limit under Section 414(v) of the Code and such amount shall be treated in the same manner as "excess deferrals" under (c) below. |
(vii) | If a Member makes catch-up contributions under a qualified defined contribution plan and/or Code Section 403(b) plan maintained by an employer other than the Company or an Associated Company for any calendar year and those contributions when added to his Catch-Up |
(c) | Application of Maximum Dollar Limit on Before-Tax Contributions |
(i) | Prevention of Excess Deferrals Under Plan. If a Member's Before-Tax Contributions in a calendar year reach the dollar limit on elective deferrals under Section 401(a)(30) of the Code in any calendar year, the Member's election to make Before-Tax Contributions will be canceled. Such Member may elect at any time to make After-Tax Savings in accordance with Section 4.2. As of the first pay period of the calendar year following the cancellation of a Member's Before-Tax Contributions in accordance with first sentence of this paragraph, the Member's election of Before-Tax Contributions shall again become effective in accordance with his previous election, unless the Member elects otherwise in accordance with Section 4.3. |
(ii) | Treatment of Excess Deferrals under Plan and Plans of Associated Companies. In the event that the sum of a Member's Before-Tax Contributions and similar contributions to any other qualified defined contribution plan maintained by the Company or an Associated Company exceeds the dollar limit on elective deferrals under Section 402(g) of the Code for any calendar year as in effect for such calendar year, a Member who is eligible to make Catch-Up Contributions to the Plan will be deemed to have such excess deferrals reclassified as Catch-Up Contributions, subject to the limitations of (b) above. To the extent that the reclassification described in the preceding sentence is not applicable, or is insufficient to fully resolve the issue of the excess deferrals, the Member shall be deemed to have elected a return of the Before-Tax Contributions in excess of the limit under Section 402(g) of the Code from this Plan. The excess deferrals, together with Earnings, shall be returned to the Member no later than April 15 following the end of the calendar year in which the excess deferrals were made. The amount of excess deferrals to be returned for any calendar year shall be reduced by any Before-Tax Contributions previously returned to the Member under (d) below for that calendar year. In the event any Before-Tax Contributions returned under this paragraph were matched by Company Matching Contributions, those Company Matching Contributions, together with Earnings, shall be forfeited and used to reduce future Company contributions. |
(iii) | Treatment of Member-Allocated Excess Deferrals. If a Member makes tax-deferred contributions under another qualified defined contribution plan and/or a Code Section 403(b) plan maintained by an employer other than the Company or an Associated Company for any calendar year and those contributions when added to his Before-Tax Contributions exceed the dollar limit on elective deferrals under Section 402(g) of the Code for that calendar year, the Member may allocate all or a portion of such excess deferrals to this Plan. In that event, a Member who is eligible to make Catch-Up Contributions to the Plan will be deemed to have such excess deferrals reclassified as Catch-Up Contributions, subject to the limitations of (b) above. To the extent that the reclassification described in the preceding sentence is not applicable, or is insufficient to fully resolve the issue of the excess deferrals, such excess |
(iv) | Notwithstanding the foregoing, in the case of any Member who (A) ceases to be an Employee during a Plan Year; (B) is employed during such Plan Year by an employer which is not the Company or an Associated Company; and (C) exceeds the limitation on elective deferrals enumerated in Section 402(g) of the Code based on the Member's participation in the Plan and participation in a plan maintained by the subsequent employer; the Plan shall not distribute to the Member any Before-Tax Contributions (or any income thereon) arising solely as a result of such Member's exceeding the limit under Section 402(g) of the Code for the Plan Year, unless the exceeding of such limit is based solely on the Member's participation in this Plan without considering any other plan. |
(d) | ADP Test on Before-Tax Contributions |
(i) | The excess contributions shall first be treated as Catch-Up Contributions to the extent possible under Section 4.1(b). |
(ii) | Any remaining excess contributions, together with Earnings thereon, will be allocated to the Highly Compensated Employees with the greatest dollar amount of such contributions in the following manner: |
(A) | The amount to be allocated shall be the lesser of (1) the total excess contributions or (2) such amount as will cause the dollar amount of such Highly Compensated Employee's Before-Tax Contributions to equal the dollar amount of the Before-Tax Contributions of the Highly Compensated Employee with the next highest dollar amount of Before-Tax Contributions. |
(B) | The process described in (A) above shall be repeated, if necessary, until the total excess contributions shall have been allocated. At any stage in this allocation process, if two or more Highly Compensated Employees have the same dollar amount remaining of Before-Tax Contributions, the allocation shall be made to both of them in equal amounts. |
(iii) | The excess contributions allocated to Highly Compensated Employees under (ii) above shall be distributed to such Members before the close of the Plan Year following the Plan Year in which the excess contributions were made, and to the extent practicable, within 2½ months of the close of the Plan Year in which the excess contributions were made. Alternatively, under rules adopted by the Benefits Administration Committee, such Members may elect to recharacterize such excess contributions as After-Tax Savings provided such election to recharacterize the excess contributions is made within 2½ months after the close of the Plan Year in which the excess contributions were made or within such shorter period as the Benefits Administration Committee may prescribe. When the total excess contributions shall have been allocated and distributed or recharacterized in the manner described above, the Plan shall be deemed to satisfy the tests set forth in this Section, regardless of whether the final Average Deferral Percentage of the Highly Compensated Employees in fact satisfy such tests. In the event any Before-Tax Contributions distributed under this Section were matched by Company Matching Contributions, those Company Matching Contributions, together with Earnings, shall be forfeited and used to reduce Company contributions. |
4.2 | Member After-Tax Savings |
(a) | By authorizing payroll deductions, each Member may elect, subject to (b) below, to contribute to the Trust Fund as After-Tax Savings any whole percentage from 1 percent to 50 percent of his Salary in such payroll period, subject to the following: |
(i) | The total amount of After-Tax Savings for any Plan Year may not exceed 50 percent of his Salary reduced by the rate of Before-Tax Savings being made pursuant to Section 4.1(a). |
(ii) | In order to comply with Section 415 of the Code, the Benefits Administration Committee may impose an additional limit on any Member's After-Tax Savings based on the Benefits Administration Committee's reasonable projection of the total "annual addition" (as defined in Section 5.4) that will credited to a Member's Accounts for a Plan Year. |
(b) | In order to comply with Section 40l(m) and/or 415 of the Code, the Benefits Administration Committee may impose an additional limit on the extent to which a Member who is a Highly Compensated Employee may contribute to the Trust Fund as After-Tax Savings, based on the Benefits Administration Committee's reasonable projection of After-Tax Savings rates of Members who are not Highly Compensated Employees and the necessity of satisfying the test described in Section 4.5. |
4.3 | Suspension and Resumption of Member Savings |
(a) | A Member may suspend his Savings under Section 4.1 and/or Section 4.2 as of any business day by making an election in a form or manner approved by the Benefits Administration Committee for such purpose. Such suspension will become effective as soon as administratively possible following the date the election is received by the Benefits Administration Committee or its designee. If a Member takes a withdrawal from his Before-Tax Account under Section 9.3(b), his Savings shall be suspended for a period of six months. Such suspension will become effective as soon as administratively possible following the Withdrawal Valuation Date. No Company Matching Contributions shall be made under Section 5.1 during the period of a Member's suspension although he will continue to be considered a Member and he will be entitled to Company Core Contributions and any Special Company Contributions that may be payable during the period of suspension. |
(b) | A Member who suspends his Savings in accordance with the first sentence of (a) above may resume his Savings under Section 4.1 and/or under Section 4.2 as of any pay period after the date the suspension commenced by making an election in a form or manner approved by the Benefits Administration Committee for such purpose. |
(c) | A Member whose Savings are suspended in accordance with the third sentence of (a) above may resume his Savings under Section 4.1 and/or under Section 4.2 as of the first day of any pay period following the six-month suspension by making an election in a form or manner approved by the Benefits Administration Committee for such purpose. A resumption elected pursuant to this Section 4.3 shall occur as soon as administratively possible after the election is received by the Savings Plan Administrator or its designee. |
4.4 | Rollover Contributions |
(a) | With the permission of the Benefits Administration Committee, and without regard to any limitation on contributions under this Article 4 or Section 5.4, the Plan may accept from or on behalf of a Member, but not a Deferred Member, a Rollover Contribution in cash, consisting of any amount, including after-tax amounts but excluding any amount attributable to Roth contributions, previously received (or deemed to be received) by him from an "eligible retirement plan." Such Rollover Contributions shall be subject to the following: |
(i) | For purposes of this Section, "eligible retirement plan" means: |
(A) | another employer's qualified plan described in Section 401(a) of the Code (or another Xylem qualified defined contribution plan, provided that the Rollover Contribution represents the rollover of all or a portion of a full distribution of the individual's account balance in such plan due to the sale or closing of a business unit sponsoring such plan); |
(B) | an annuity plan described in Section 403(a) of the Code; |
(C) | an annuity contract described in Section 403(b) of the Code; |
(D) | an eligible Plan under Section 457(b) of the Code that is maintained by a state, political subdivision of a state or any agency or instrumentality of a state or political subdivision of a state; or |
(E) | an individual retirement account or individual retirement annuity of the Member described in Section 408(a) or 408(b) of the Code that contains only amounts that were originally distributed from a qualified plan described in Section 401(a) or 403(a) of the Code (i.e., a "conduit IRA"). |
(b) | Such Rollover Contribution may be received in either of the following ways: |
(i) | The Plan may accept such amount as a direct rollover of an eligible rollover distribution, including after-tax amounts provided such after-tax amounts are received directly from a plan that is qualified under Section 401(a) of the Code or an annuity contract described in Section 403(b) of the Code. |
(ii) | The Plan may accept such amount directly from the Member provided such amount: |
(A) | was distributed to the Member by an eligible retirement plan; |
(B) | is received by the Plan on or before the 60th day after the day it was received by the Member; |
(C) | would otherwise be includible in gross income; and |
(D) | is not attributable to Roth contributions. |
4.5 | ACP Test on After-Tax Savings and Company Matching Contributions |
(a) | The payment or forfeiture of the excess aggregate contributions, together with Earnings thereon, shall be made before the close of the Plan year following the Plan Year for which the excess aggregate contributions were made and, to the extent practicable, any payment or forfeiture will be made within 2½ months following the end of the Plan Year for which the contributions were made. |
(b) | The total amount of excess aggregate contributions, together with Earnings thereon, shall be allocated to the Highly Compensated Employees with the greatest dollar amount of such contributions in the following manner: |
(i) | The amount to be allocated shall be the lesser of (A) the total excess aggregate contributions, or (B) such amount as will cause the dollar amount of such Highly Compensated Employee's After Tax Savings, and, if applicable, Company Matching Contributions, to equal the dollar amount of the After Tax Savings, and, if applicable, Company Matching Contributions, of the Highly Compensated Employee with the next highest dollar amount of After Tax Savings, and, if applicable, Company Matching Contributions. |
(ii) | The process described in (i) above shall be repeated, if necessary, until the total excess aggregate contributions shall have been allocated. At any stage in the allocation process herein described, if two or more Highly Compensated Employees have the same dollar amount remaining of After Tax Savings, and, if applicable, Company Matching Contributions, the allocation shall be made to both of them in equal amounts. |
(c) | The excess aggregate contributions allocated to Highly Compensated Employees under (b) above, together with Earnings thereon, shall be paid or returned to a Member from the following categories of contributions (adjusted to reflect earnings or losses attributable thereto): |
(i) | first, unmatched After-Tax Savings; |
(ii) | second, matched After-Tax Savings; and |
(iii) | third, Company Matching Contributions, if applicable. |
(d) | A Member's Actual Contribution Percentage shall be determined after a Member's excess Before-Tax Contributions are either recontributed to the Plan as After-Tax Savings or paid to the Member. |
5.1 | Company Matching Contributions |
5.2 | Company Non-Matching Contributions |
(i) | With respect to a Member whose age plus Service as of the first day of the Plan Year total less than 50, the Company shall make Company Core Contributions each pay period equal to 3 percent of the Member's Salary for such pay period. |
(ii) | With respect to a Member whose age plus Service as of the first day of the Plan Year total 50 or more, the Company shall make Company Core Contributions each pay period equal to 4 percent of the Member's Salary for such pay period. |
(b) | Special Company Contributions |
(c) | Qualified Nonelective Contributions |
5.4 | Maximum Annual Additions. |
(a) | The annual addition to a Member's Accounts for any Plan Year, which shall be considered the "limitation year" for purposes of Section 415 of the Code, when added to the Member's annual addition for that Plan Year under any other qualified defined contribution plan of the Company or any Associated Company, shall not exceed an amount which is equal to the lesser of (i) 100% of his Statutory Compensation for that Plan Year, or (ii) $40,000, as adjusted in accordance with Section 415(d) of the Code. |
(b) | For purposes of this Section, the "annual addition" to a Member's Accounts under this Plan or any other qualified defined contribution plan (including a deemed qualified defined contribution plan under a qualified defined benefit plan) maintained by the Company or an Associated Company shall be determined in accordance with (i) and (ii) below. |
(i) | The annual addition shall include all of the following amounts that have been allocated to the Member's Accounts under this Plan or any other qualified defined contribution plan (including a deemed qualified defined contribution plan under a qualified defined benefit plan) maintained by the Company or an Associated Company: |
(A) | the total Company contributions made on the Member's behalf by the Company and all Associated Companies, including any Company Matching Contributions distributed or forfeited under the provisions of Section 4.1 or 4.5; |
(B) | all Before-Tax Contributions and After-Tax Savings, including Before-Tax Contributions distributed as excess contributions under Section 4.1(d) and After-Tax Savings distributed as excess aggregate contributions under the provisions of Section 4.5; |
(C) | forfeitures, if applicable; and |
(D) | solely for purposes of the dollar limit under clause (ii) of paragraph (a) above, amounts described in Sections 415(1)(1) and 419A(d)(2) of the Code allocated to the Member. |
(ii) | The annual addition shall not include: |
(A) | Rollover Contributions; |
(B) | loan repayments made under Article 10; |
(C) | Before Tax Contributions distributed as excess deferrals under Section 4.1(c); and |
(D) | Catch-Up Contributions. |
(c) | To the extent that the annual additions to a Member's Accounts exceed the limitation set forth in Section 415(c)(2) of the Code, corrections shall be made in a manner consistent with the provisions of the Employee Plans Compliance Resolution System as set forth in Revenue Procedure 2008-50 or any subsequent guidance. In the event that a Member of the Plan is a participant in any other defined contribution plan (whether or not terminated), maintained by the Company or any Associated Company, the total amount of annual additions to such Member's accounts under all such defined contribution plans shall not exceed the limitations set forth in this Section 5.4. The Benefits Administration |
5.5 | Contributions for a Period in Uniformed Services |
(a) | Notwithstanding any provision of this Plan to the contrary, contributions, benefits, and service credit with respect to qualified uniformed service duty will be provided in accordance with Section 414(u) of the Code. A Member who is reemployed and is credited with Service for the purpose of vesting because of a period of service in the uniformed services of the United States may elect to contribute to the Plan the Before-Tax Savings and/or After-Tax Savings that could have been contributed to the Plan in accordance with the provisions of the Plan had he remained continuously employed by the Company throughout such period of absence ("make-up contributions"). For purposes of determining the amount of make-up contributions a Member may make, his Salary for the period of absence shall be deemed to be the rate of Salary he would have received had he remained employed as an Employee for that period or, if such rate is not reasonably certain, on the basis of the Member's Salary during the 12-month period immediately preceding such period of absence (or if shorter, the period of employment immediately preceding such period). Any Before-Tax Savingsand/or After-Tax Savings so determined shall be limited as provided in Sections 4.1(c), 4.1(d) and 4.5 with respect to the Plan Year or Years to which such contributions relate rather than the Plan Year in which payment is made. The make-up contributions may be made over a period not to exceed three times the period of military leave or five years, if less, but in no event later than the Member's Termination of Employment (unless he is subsequently rehired). The make-up period shall start on the later of (i) the Member's date of reemployment, or (ii) the date the Benefits Administration Committee notifies the Employee of his rights under this Section. Earnings (or losses) on make-up contributions shall be credited commencing with the date the make-up contribution is made. |
(b) | With respect to a Member who makes the election described in paragraph (a) above, the Company shall make Company Matching Contributions on the make-up contributions in the amount described in Section 5.1, as in effect for the Plan Year to which such make-up contributions relate. Company Matching Contributions under this paragraph shall be made to the Plan at the same time as Company Matching Contributions are required to be made for Before-Tax Savings and/or After-Tax Savings made during the same period as the make-up contributions are actually made. Earnings (or losses) on Company Matching Contributions shall be credited commencing with the date the contributions are made. Any limitations on Company Matching Contributions described in Section 4.5 shall be applied with respect to the Plan Year or Years to which such contributions relate rather than the Plan Year or Years in which payment is made. |
(c) | The Company shall make Company Core Contributions and Special Company Contributions (and any other non-matching employer contributions that may have been required under a predecessor plan) ("make-up Company contributions") in the amounts described in Section 5.2 (or the provisions of a predecessor plan) as in effect for the Plan Year to which such make-up Company contributions relate. For purposes of determining the amount of such make-up Company contributions, a Member's Salary for the period of absence shall be deemed to be the rate of Salary he would have received had he remained employed as an Employee for that period or, if such rate is not reasonably certain, on the basis of the Member's Salary during the 12-month period immediately preceding such period of absence (or if shorter, the period of employment immediately preceding such period). Make-up Company contributions under this paragraph shall be made as soon as practicable after the Member's reemployment and shall be deemed to have been made to the Plan at the same time as such contributions would have been made but for the Member's absence. Earnings (or losses) on make-up Company contributions shall be credited commencing with the date the make-up Company contributions are made. |
(d) | All contributions under this Section, other than make-up Catch-Up Contributions, are considered "annual additions," as defined in Section 415(c)(2) of the Code, and shall be limited in accordance with the provisions of Section 5.4 with respect to the Plan Year or Years to which such contributions relate rather than the Plan Year in which payment is made. |
(e) | Notwithstanding any other provisions of this Section, the maximum amount of make-up contributions made by or on behalf of a Member shall be reduced by the actual amount of Company Core Contribution, Special Company Contributions, Before-Tax Savings, After-Tax Savings, and Company Matching Contributions, as applicable, made by or on behalf of the Member during his period of service in the uniformed services as a result of differential wage payments (as defined in Section 3401(h) of the Code) that were made to the Member or for any other reason. |
5.6 | Return of Contributions |
(a) | If the Commissioner of Internal Revenue, on timely application made after the initial establishment of the Plan, determines that the Plan is not qualified under Section 401(a) of the Code or refuses, in writing, to issue a determination as to whether the Plan is so qualified, the Company's contributions made on or after the date on which that determination or refusal is applicable shall be returned to the Company. The return shall be made within one year after the denial of qualification. The provisions of this paragraph shall apply only if the application for the determination is made by the date prescribed by the Secretary of the Treasury. |
(b) | If all or part of the Company's deductions for contributions to the Plan are disallowed by the Internal Revenue Service, the portion of the contributions to which that disallowance applies shall be returned to the Company without interest but reduced by any investment loss attributable to those contributions, provided that the contribution is returned within one year after the disallowance of deduction. For this purpose, all contributions made by the Company are expressly declared to be conditioned upon their deductibility under Section 404 of the Code. |
(c) | The Company may recover, without interest, the amount of its contributions to the Plan made on account of a mistake of fact, reduced by any investment loss attributable to those contributions, if recovery is made within one year after the date of those contributions. |
(d) | In the event that Before-Tax Savings made under Section 4.1(a) are returned to the Company in accordance with the provisions of this Section, the elections to reduce Salary that were made by Members on whose behalf those contributions were made shall be void retroactively to the beginning of the period for which those contributions were made. The Before-Tax Savings so returned shall be distributed in cash to those Members for whom those contributions were made, provided, however, that if the contributions are returned under the provisions of paragraph (a) above, the amount of Before-Tax Savings to be distributed to Members shall be adjusted to reflect any investment gains or losses attributable to those contributions. |
5.7 | Contributions Not Contingent Upon Profits |
6.1 | Full Vesting of all Accounts in Plan |
7.1 | Investment Funds |
(a) | Accounts in the Plan shall be invested by the Trustee in one or more Investment Funds as authorized by the PFTIC. Such Investment Funds shall include: |
(i) | the Xylem Stock Fund; |
(ii) | such Target Retirement Funds as the PFTIC shall select; and |
(iii) | for such period after the Effective Date as shall be determined by the PFTIC, the Exelis Stock Fund and the ITT Stock Fund. |
(b) | In addition to the Investment Funds selected by the PFTIC, a Member may establish a self-directed brokerage account ("SDA"), subject to the following terms and conditions: |
(i) | Common stock of the Company is not a permitted investment in the SDA. |
(ii) | Account fees associated with a Member's SDA, as well as commissions, special handling fees, and any other transaction charges associated with transactions in the Member's SDA will be charged to the Member's SDA. |
(c) | In any Investment Fund, the Trustee temporarily may hold cash or make short-term investments in obligations of the United States Government, commercial paper, an interim investment fund for tax-qualified employee benefit plans established by the Trustee, unless otherwise provided in the applicable trust agreement or by applicable law, or other investments of a short-term nature. Notwithstanding the foregoing, the Trustee in its discretion may hold such amounts in cash, consistent with its obligations as Trustee, as it deems advisable in accordance with the provisions of the trust agreement. |
(d) | For the purpose of determining the value of Xylem Stock, Exelis Stock, or ITT Stock hereunder, in the event such stock is traded on a national securities exchange, such stock shall be valued as of the closing quoted selling price of such stock on the New York Stock Exchange composite tape on the business day such stock is delivered to the Trustee. In the event such Xylem Stock, Exelis Stock, or ITT Stock is not traded on a national securities exchange, such shares shall be valued in good faith by an independent appraiser selected by the Trustee and meeting requirements similar to those in the regulations prescribed under Section l70(a)(1) of the Code. |
(e) | The Plan is intended to constitute a plan described in Section 404(c) of ERISA. Consequently, each Member is solely responsible for the selection of his investment options. The Trustees, the Benefits Administration Committee, the Company, the PFTIC, and the officers, supervisors, and other employees of the Company are not empowered to advise a Member as to the manner in which his Accounts shall be invested. The fact that an Investment Fund is available to Members for investment under the Plan shall not be construed as a recommendation for investment in the Investment Fund. |
(f) | The Trustee, or such other custodian as the PFTIC may designate, shall maintain the Xylem Stock Fund. It is specifically contemplated that the Xylem Stock Fund will operate as an employee stock ownership plan ("ESOP") that is designed to invest primarily in Xylem Stock, within the meaning of Section 4975(e)(7) of the Code. Consistent with the Xylem Stock Fund's status as an ESOP, the Trustee may keep such amounts of cash, securities or other property as it, in its sole discretion, shall deem necessary or advisable as part of the Trust Fund, all within the limitations specified in the trust agreement. |
(g) | Dividends, interest, and other distributions received on the assets held by the Trustee in respect to the Investment Funds shall be reinvested in the respective Investment Fund, provided, however, with respect to the Xylem Stock Fund, dividends, interest, and other distributions received on the assets held by the Trustee in respect to the Xylem Stock Fund shall be reinvested in the Xylem Stock Fund, except as otherwise may be provided in Section 8.7 with respect to dividends on Xylem Stock. |
7.2 | Investment of Contributions |
(a) | Subject to the following provisions of this Section 7.2, a Member shall make one investment election, in multiples of 1%, covering his Savings, Company Matching Contributions, Company Core Contributions, and Special Company Contributions made to his Accounts, to have such contributions invested in any one or more of the Investment Funds. If no investment election is made, such contributions shall be invested in the Target Retirement Fund that is appropriate based on the Member's year of birth (or such other Investment Fund as may be designated by the PFTIC), unless and until the Member elects to have all or part of his contributions invested in or transferred to other funds pursuant to Sections 7.3 and 7.4. |
(b) | A Member cannot elect to direct the investment of any contributions into the Exelis Stock Fund or the ITT Stock Fund prospectively. Amounts invested in the Exelis Stock Fund or the ITT Stock Fund as a result of the restructuring of ITT coincident with the establishment of the Plan are the only amounts that may be invested in such funds. A Member may elect at any time to direct the amounts invested in the Exelis Stock Fund or the ITT Stock Fund into any other Investment Fund in the Plan, subject to the provisions of this Section 7.2 and Section 7.4. |
(c) | Except as provided in Section 7.4(d), no more than 20% of a Member's Accounts may be invested in the Xylem Stock Fund. A Member's investment election with respect to future contributions cannot direct more than 20% to be invested in the Xylem Stock Fund. |
(d) | Contributions may not be initially invested in a Member's SDA. Any amounts to be invested in a Member's SDA must be transferred into the SDA pursuant to Section 7.4. |
(e) | A Member making a Rollover Contribution pursuant to Section 4.4 or a transfer contribution pursuant to Section 4.6 may make a separate initial investment election under this Section 7.2. Such Rollover Contribution or transfer contribution shall be invested, in multiples of 1%, in any one or more of the Investment Funds as elected by the Member. Notwithstanding the preceding sentence, Rollover Contributions or transfer contributions may not be initially invested in the Xylem Stock Fund, the Exelis Stock Fund, ITT Stock Fund, or a Member's SDA. A Member may subsequently transfer or reallocate his Rollover Contributions or transfer contributions to the Xylem Stock Fund or the Member's SDA pursuant to Section 7.4. If a Member has not made an election with respect to the initial investment of his Rollover Contributions or transfer contributions, such Rollover Contributions or transfer contributions shall be invested in the Target Retirement Fund that is appropriate based on the Member's year of birth (or such other Investment Fund as may be designated by the PFTIC). |
(f) | A Member may enroll in a managed account program under which investment professionals will monitor the Member's Plan Accounts and manage all investment elections and transactions. The terms of the program shall supersede any contrary provisions of this Plan with respect to Members enrolled therein and any fees charged to the Member will be determined under the terms of the program. |
(g) | A Member's Prior ESOP Account shall be invested entirely in the Xylem Stock Fund, Exelis Stock Fund, and ITT Stock Fund, as applicable, except when a Member elects to have all or part of his Prior ESOP Account transferred to or invested in another Investment Fund pursuant to this Article 7. |
7.3 | Changes in Investment Election for Future Contributions |
7.4 | Redistribution of Investments |
(a) | On any business day, by making an advance election in a form or manner approved by the Benefits Administration Committee for such purpose, a Member or Deferred Member may elect to reallocate (or transfer, as the case may be) on any Valuation Date all or part, in multiples of 1%, of his Accounts among the Investment Funds, provided however no more than 20% of a Member's Accounts may be invested in the SDA or the Xylem Stock Fund after such reallocation or transfer and no amounts may be reallocated or transferred into the Exelis Stock Fund or the ITT Stock Fund, except as provided in Section 7.4(d). The reallocation or transfer shall be effective as soon as administratively practicable after the Valuation Date. |
(b) | The PFTIC may establish such rules and restrictions regarding the redistribution of investments as it deems appropriate, including restrictions on the maximum number of transfers in a calendar month. |
(c) | Any amounts invested in a fund of guaranteed investment contracts or an investment fund covered by a prospectus or other document of similar import or effect shall be subject to any and all terms of such contracts, prospectus or other documents of similar import or effect, including any limitations therein placed on the exercise of any rights otherwise granted to a Member or Deferred Member under any other provisions of this Plan with respect to such amounts. |
(d) | No more than 20% of a Member's Accounts may be invested in the Xylem Stock Fund. Notwithstanding the preceding sentence, a Member with more than 20% of his Accounts invested in the ITT Stock Fund under the ISP on October 31, 2011 (or such other date as may be designated by the PFTIC) may elect to direct that amounts invested in the Exelis Stock Fund and/or the ITT Stock Fund be transferred to the Xylem Stock Fund without regard to the 20% limit, provided however that such Member may not make any further investments in, or transfers into, the Xylem Stock Fund until the 20% limitation described in the preceding sentence has been complied with. |
7.5 | Valuation Date |
7.6 | Voting of Xylem Stock |
7.7 | Blackout Periods |
8.1 | Before-Tax Savings, After-Tax Savings and Rollover Contributions |
8.2 | Company Matching Contributions |
8.3 | Company Core Contributions and Special Company Contributions |
8.4 | Credits to Members' Accounts |
8.5 | Valuation of Assets |
8.6 | Allocation of Assets |
8.7 | Dividends Paid with respect to Stock in the ESOP |
(a) | Dividend Election |
(b) | Default Election |
(c) | Effect and Duration of Election |
(d) | Cash Payment |
9.1 | General Conditions for Withdrawals |
9.2 | Withdrawals from Certain Accounts |
(a) | all or a portion of his After-Tax Account; |
(b) | all or a portion of his Prior Plan Account; |
(c) | all or a portion of his Rollover Account; |
(d) | all or a portion of his Prior ESOP Account; |
(e) | all or a portion of his Company Floor Account and Prior Company Contribution Account; |
(f) | all or a portion of his Company Matching Account provided the Member has attained age 59½ as of the proposed Withdrawal Valuation Date; |
(g) | all or a portion of his Company Core Account provided the Member has attained age 59½ as of the proposed Withdrawal Valuation Date; and |
(h) | all or a portion of his Special Company Contribution Account provided the Member has attained age 59½ as of the proposed Withdrawal Valuation Date. |
9.3 | Withdrawal from Before-Tax Account |
(a) | Subject to the provisions of Sections 9.1, a Member who has attained age 59½ as of a Withdrawal Valuation Date may withdraw all or any portion of his Before-Tax Account. |
(b) | Subject to the provisions of Section 9.1, a Member who has not attained age 59½ as of a Withdrawal Valuation Date and who has withdrawn all amounts available under Section 9.2 may withdraw all or |
(i) | As a condition for receiving a withdrawal pursuant to the provisions of this Section 9.3(b), there must exist with respect to the Member an immediate and heavy financial need to draw upon his Accounts. For purposes of this subparagraph (b), the Benefits Administration Committee shall presume the existence of an immediate and heavy financial need if the requested withdrawal is on account of any of the following: |
(A) | expenses for (or necessary to obtain) medical care that would be deductible under Section 213(d) of the Code (determined without regard to whether the expenses exceed 7.5 percent of adjusted gross income); |
(B) | costs directly related to the purchase of a principal residence of the Member (excluding mortgage payments); |
(C) | payment of tuition and related educational fees, and room and board expenses, for the next 12 months of post-secondary education of the Member, his spouse, children or dependents (as defined in Section 152 of the Code and determined without regard to Sections 152(b)(1), (b)(2) and (d)(1)(B) of the Code); |
(D) | payment of amounts necessary to prevent eviction of the Member from his principal residence or to avoid foreclosure on the mortgage of his principal residence; |
(E) | payments for burial or funeral expenses for the Member's deceased parent, spouse, children or dependents (as defined in Section 152 of the Code and without regard to Section 152(d)(1)(B) of the Code); |
(F) | expenses for the repair of damages to the Member's principal residence that would qualify for the casualty deduction under Section 165 of the Code (determined without regard to whether the loss exceeds 10 percent of the Member's adjusted gross income); or |
(G) | the inability of the Member to meet such other expenses, debts, or other obligations recognized by the Internal Revenue Service as giving rise to immediate and heavy financial need for purposes of Section 401(k) of the Code. |
(ii) | As a condition for receiving a withdrawal pursuant to the provisions of this Section 9.3(b), the Member must demonstrate that the requested withdrawal is necessary to satisfy the financial need described in (i) above. For purposes of this subparagraph, the Benefits Administration Committee shall presume that the withdrawal is necessary to satisfy the immediate and heavy financial need if the following requirements are met: |
(A) | The Member has obtained all distributions (other than hardship distributions) available under all other retirement plans maintained by the Company and all Associated Companies, including this Plan and including distribution of all cash dividends currently available to the Member under Section 8.7 of the Plan and all non-taxable loans available under all retirement plans maintained by the Company and all Associated Companies, including this Plan, provided that the loan repayments do not result in an additional financial hardship for the Member. |
(B) | The Member agrees to cease all Before-Tax Savings and After-Tax Savings under this Plan and under any other plans of the Company or of any Associated Company for a period of not less than six months following the hardship withdrawal. |
9.4 | Form of Payment |
9.5 | Death after Withdrawal Election |
9.6 | Direct Rollover |
10.1 | General Conditions for Loans |
(a) | specifies the amount and the term of the loan; |
(b) | agrees to the annual percentage rate of interest; |
(c) | agrees to the finance charge; |
(d) | promises to repay the loan; and |
(e) | authorizes the Company to make regular payroll deductions to repay the loan, with the loan repayments computed based on the frequency of the Member's payroll payments. |
10.2 | Amounts Available for Loans |
(a) | 50% of his Accounts; or |
(b) | $50,000, reduced by the excess of (i) the Member's highest outstanding loan balance(s) from this Plan or any other plan sponsored by the Company or any Associated Company, if any, during the one-year period ending on the day before the day the loan is made, over (ii) the outstanding balance of loans to the Member from such plans on the date on which the loan is made. |
10.3 | Account Ordering for Loans |
10.4 | Interest Rate for Loans |
10.5 | Term and Repayment of Loan |
(a) | The term of any loan shall be for a period of from 1 to 60 whole months, at the election of the Member, provided that a Member who is using a loan to acquire his own principal residence may elect to repay a loan over a period of whole months between 1 and 180. Except as provided in (b) or (c) below, payments of principal and interest will be made by after-tax payroll deductions or in a manner agreed to by the Member and the Benefits Administration Committee in substantially level amounts, but no less frequently than quarterly, in an amount sufficient to amortize the loan over the repayment period. A Member who is actively employed by the Company cannot elect to cease payroll deductions for repayment of a loan. Except as set forth below with respect to Members who enter the uniformed services of the United States, no extension of the loan term shall be permitted after the loan is made. Repayment of the loan is made to the Member's Accounts from which the loan amount was deducted in the inverse order to the Account Ordering for Loans described in Section 10.3. Repayments are invested in the Member's Accounts in accordance with his current investment election. Loan repayments are not credited with investment experience under the Plan until the first business day following the day on which such repayments are received by the Trust Fund. |
(b) | If a Member with an outstanding loan takes a leave of absence to enter the uniformed services of the United States, and such Member will receive military differential wage payments (as defined in Section 3401(h) of the Code) in an amount equal to or greater than his loan repayment, his after-tax payroll deduction loan repayments shall continue during such leave of absence. If a Member with an outstanding loan takes a leave of absence to enter the uniformed services of the United States and such Member will not receive military differential wage payments sufficient to cover his loan repayments, his after-tax payroll deduction loan repayments shall be suspended during the period of leave unless the Member elects to make payments directly by certified check or money order. If payments are suspended, upon the Member's reemployment from the uniformed services, the period of repayment shall be extended by the number of months of the period of service in the uniformed services or, if greater, the number of months that would remain if the original loan term were five years plus the number of months in the period of absence; provided, however, if the Member incurs a Termination of Employment and requests a distribution pursuant to Article 11, the loan shall be canceled, and the outstanding loan balance shall be distributed pursuant to Article 11. The Member shall resume payments in the same amount as before the leave with the balance of the loan (including any interest that accrued during the period of uniformed service) due upon the expiration of the repayment period. Alternatively, the Member may elect to have the remaining balance (including any interest that accrued during the period of uniformed service) reamortized in substantially level installments over the extended term of the loan. |
(c) | If a Member with an outstanding loan takes an authorized leave of absence without pay or reduced pay that is less than the required loan payments, for reasons other than to enter the uniformed services of the United States, loan payments may be suspended at the request of the Member, for a period of up to 12 months or until the end of the term of the loan, if earlier. Upon a Member's reemployment from the leave of absence, the Member shall resume payments either in the same amount as before the leave with the full balance due upon the expiration of the repayment period or by reamortizing the loan in substantially level installments over the remaining term of the loan. |
10.6 | Frequency of Loan Requests |
10.7 | Prepayment of Loans |
10.8 | Outstanding Loan Balance at Termination of Employment |
10.9 | Loan Default |
10.10 | Incorporation by Reference |
10.11 | Death after Loan Application |
10.12 | Transfer of Loans |
11.1 | General |
(a) | Upon Termination of Employment, a Member may apply for distribution of the value of his Accounts. Alternatively, upon Termination of Employment, a Member whose Accounts exceed $5,000 may elect to defer distribution of his Accounts until December 31 of the year in which he attains age 70½. If a Member terminates employment with no Accounts, he shall be deemed to have received a full distribution of his benefit at the time of his Termination of Employment. If a Member whose Accounts exceed $5,000 does not apply for a distribution of his Accounts within 90 days of his Termination of Employment, he shall be deemed to be a Deferred Member. A Deferred Member may elect a partial distribution of any portion of his Accounts in a lump sum amount at any time, and from time to time, after his Termination of Employment, provided said Deferred Member is not receiving installment payments pursuant to an election under Section 11.3. All distributions under this Section 11.1(a) will be deemed to be deducted from each of the Deferred Member's Investment Funds on a pro rata basis, provided, however, that no amount shall be deemed to be deducted from the Xylem Stock Fund until all amounts have been withdrawn from all of the other Investment Funds, and provided further that amounts invested in an SDA are not available as a source of any partial distributions described herein. Notwithstanding the foregoing, however, a Deferred Member may reallocate the balance in his SDA to other Investment Funds in the Plan as provided in Article 7 and such Investment Funds may then be available as a source for partial distributions under this Section. |
(b) | Upon the death of a Member or Deferred Member, the value of such Member's or Deferred Member's Accounts shall be distributed to his Beneficiary, subject to the following: |
(i) | If the Member's or Deferred Member's Beneficiary is not the spouse of such Member or Deferred Member, the Member's or Deferred Member's Accounts shall be distributed to the Beneficiary in accordance with said Beneficiary's election under Section 11.3; provided the entire value of the Member's Accounts is distributed no later than five years from the Member's or Deferred Member's date of death. Such nonspouse Beneficiary may also elect partial distributions of the Member's benefit in lump sums from time to time during this five-year period, provided that the entire value of the Member's Accounts is distributed no later than five years from the Member's or Deferred Member's date of death. |
(ii) | If the Member's or Deferred Member's Beneficiary is his spouse and the value of the Accounts to be distributed to the spouse Beneficiary exceeds $5,000, such spouse Beneficiary may elect to defer receipt of the Member's or Deferred Member's Accounts until the December 31 Valuation Date of the year in which the Member or Deferred Member would have reached age 70½. If a spouse Beneficiary's Accounts exceed $5,000 and the spouse Beneficiary does not apply for a distribution of his Accounts within 90 days of the Member's or Deferred Member's death, such spouse Beneficiary will be deemed to be a Deferred Member. Such spouse Beneficiary will receive distribution of the Accounts as of the date the Member or Deferred Member would have attained age 65, provided such spouse Beneficiary files application for such distribution. A spouse Beneficiary may, however, file application for distribution of such Accounts at any time prior to the December 31 Valuation Date of the year in which the Member or Deferred Member would have reached age 70½. In addition to the methods of distribution in Section 11.3, a spouse Beneficiary of a deceased Member or Deferred Member may elect a partial distribution of any portion of his Accounts in a lump-sum amount at any time, and from time to time and subject to the provisions of (a) above. |
(c) | Notwithstanding any provision of the Plan to the contrary, distributions shall commence as follows: |
(i) | A Member or Deferred Member who is a "5-percent owner" as defined in Section 416(i) of the Code must commence distribution of his Accounts no later than December 31 of the year in which he attains age 70½. |
(ii) | A Member or Deferred Member who is not a "5-percent owner" as defined in Section 416(i) of the Code must commence distribution of his Accounts after his Termination of Employment by December 31 of the later of the calendar year in which the Member attains age 70½ or the calendar year in which the Member's Termination of Employment occurs. |
(iii) | The Accounts of a Member or a Deferred Member who has attained age 70½ shall be paid under the payment method described in Section 11.3(c)(ii) below. |
(d) | Notwithstanding the provisions of (a), (b), or (c), above, or Section 11.3 below, a Member or Deferred Member (or Beneficiary) may elect to commence distribution of the value of the Member's Accounts held in the ESOP portion of the Plan not later than one year after the end of the Plan Year: |
(i) | in which the Member separates from service on or after attaining age 65 or by reason of Disability or death; or |
(ii) | which is the fifth Plan Year following the Plan Year in which the Member otherwise separates from service, unless the Member is reemployed by the Company or any Associated Company before such year. |
(e) | Notwithstanding the foregoing, in the event a Member or Deferred Member fails to file a claim for benefits in accordance with the preceding sentence, the Member or Deferred Member shall be deemed to have elected to defer distribution of his Accounts to as soon as administratively practicable following the date the Member terminated employment or attained age 70½, if later; provided that in no event shall payment commence later than the April 1 following the calendar year in which the Member terminated employment or attained age 70½, if later. |
11.2 | Valuation Date and Conditions of Distribution |
(a) | The value of any distribution will be determined as of the Valuation Date on which a completed application for the distribution by the Member, Deferred Member or Beneficiary is received and processed by the Savings Plan Administrator (or its designee) or the next business day. |
(b) | Application by the Member, Deferred Member or Beneficiary must be in a form or manner approved by the Benefits Administration Committee or its designee. |
(c) | Generally, all funds distributed will be paid as soon as practicable following the applicable Valuation Date. If part of the distribution is to be paid in stock, the stock certificate will be distributed after the check representing the cash distribution has been distributed. |
11.3 | Methods of Distribution |
(a) | All distributions from other than the Xylem Stock Fund shall be made in cash. |
(b) | Unless the Member, Deferred Member or Beneficiary elects to take Xylem Stock for distributions from the Xylem Stock Fund, a distribution from such fund shall be in cash. In all cases, fractional shares shall be paid in cash. |
(c) | All distributions shall be made in the form of a lump sum payment, unless the Member, Deferred Member or Beneficiary elects otherwise, as provided below. All distributions shall be made as soon as practicable after receipt of the application by the Member, Deferred Member or Beneficiary in accordance with Section 11.2(b). However, with prior notice in a form or manner approved by the Benefits Administration Committee, distribution may be made in one of the installment methods of payment described in (i) or (ii) below, subject to the restrictions provided below or in Section 11.1(b). |
(i) | Provided the value of the Member's, Deferred Member's or Beneficiary's Accounts is at least $5,000, and the first payment is at least $1,000, by payment in annual installments over a |
(A) | The amount of the annual installments to be paid to each Member or Deferred Member (or Beneficiary in the event of the Member's or Deferred Member's death) making such an election shall be based upon the value of his Accounts as of the Valuation Date coinciding with or next following the date of receipt by the Savings Plan Administrator or its designee of his completed application and each anniversary thereof, and shall be determined by multiplying such value by a fraction, the numerator of which shall be one and the denominator of which shall be the number of unpaid annual installments. |
(B) | Any Member or Deferred Member who is no more than 70 years old and who elects annual installment payments may, at any time thereafter, elect, by filing a request with the Savings Plan Administrator or its designee, to cancel annual installment payments. The Valuation Date applicable to such election shall be the business day coinciding with or next following the date on which his completed request is received and processed by the Savings Plan Administrator or its designee. Such Member or Deferred Member may at any time thereafter, make another payment election under the Plan, provided that he may elect only a lump sum payment or partial distributions. |
(C) | If a Member or Deferred Member's Beneficiary is not his spouse, and the Member is deceased, annual installment payments to such Beneficiary may not extend beyond the end of the calendar year which contains the fifth anniversary of the death of the Member or Deferred Member. |
(ii) | Provided the value of the Member's, Deferred Member's or Beneficiary's Accounts is at least $5,000, and the first payment is at least $1,000, by payment in annual installments over the Member's or Deferred Member's life expectancy or, if the Member or Deferred Member is married, and so elects, over the joint life expectancies of the Member or Deferred Member and the Member's or Deferred Member's spouse, as actuarially determined at the time of commencement of the initial installment and as redetermined annually thereafter. The amount of such installments will be based on the value of his Accounts as of the Valuation Date coinciding with or next following the date of receipt by the Savings Plan Administrator or its designee of his application and each anniversary thereof, and shall be determined by multiplying such value by a fraction, the numerator of which shall be one and the denominator of which shall be the number of years and fraction thereof of his life expectancy based on his age and the mortality table adopted by the Benefits Administration Committee for such purpose at the time the installment is payable. Any Member or Deferred Member who is no more than 70 years old and who elects annual installment payments over his life expectancy may at any time thereafter elect to cancel such payments by filing a request with the Savings Plan Administrator or its designee. Such Member or Deferred Member may, at any time thereafter, make another payment election under the Plan. Life expectancy installments described in this paragraph are not available to a Beneficiary who is not the spouse of a Member or Deferred Member. |
(d) | If a Member or Deferred Member elects a distribution other than installments as provided in (c)(i) or (c)(ii) above and the Member or Deferred Member dies after the Valuation Date applicable to such distribution but prior to negotiation of any check(s) comprising any portion of such distribution, then the distribution otherwise payable in cash shall be paid to his estate. If more than one check comprises the cash portion of such distribution and the Member or Deferred Member negotiates the first check but dies prior to the negotiation of any subsequent check, then any subsequent check shall be paid |
(e) | If a Member or Deferred Member elects installment distributions as provided in (c)(i) or (c)(ii) above and the Member or Deferred Member dies before all the installments are paid, then the following provisions shall apply: |
(i) | If the Member's or Deferred Member's Beneficiary is not his spouse, and if an installment is paid with a Valuation Date that occurred prior to the date of death of the Member or Deferred Member and prior to the Member's or Deferred Member's negotiation of the check comprising all or a portion of such installment, then such installment (or portion thereof) shall be paid to his estate; the remaining value of the Member's or Deferred Member's Accounts shall be paid to his Beneficiary at one time. |
(ii) | If the Member's or Deferred Member's Beneficiary is not his spouse, such Beneficiary may request annual installment payments, provided that the number of installments does not extend beyond the end of the calendar year which contains the fifth anniversary of the death of the Member or Deferred Member. |
(iii) | If the Member's or Deferred Member's Beneficiary is his spouse, then such spouse Beneficiary may continue receiving payment of the deceased Member's or Deferred Member's Accounts pursuant to the same method of distribution elected by the Member or Deferred Member, except that the spouse's life expectancy shall be substituted for the life expectancy of the Member. The spouse Beneficiary may, at any time while receiving payment of such Accounts, elect, by filing a request with the Savings Plan Administrator or its designee, to cancel installment payments. Such spouse Beneficiary may at any time thereafter, elect a lump sum payment or partial distributions, subject to the provisions of Section 401(a)(9) of the Code. |
(f) | The Accounts of a Member who, following Termination of Employment, fails to apply for distribution of such Accounts, shall be paid in cash (or, if the Member so elects shares of Xylem Stock) in the form of a lump sum payment, provided that the value of such Accounts is $5,000 or less on a Valuation Date no earlier than the next business day following his Termination of Employment, without regard to the value of the Member's Accounts at the time of an earlier distribution. |
(i) | enter into a written agreement with each IRA provider setting forth the terms and conditions applicable to the establishment and maintenance of the IRA in conformity with applicable law; |
(ii) | furnish Members with notice of the Plan's automatic rollover provisions, including, but not limited to, a description of the nature of the investment product in which the assets of the IRA will be invested and how the fees and expenses attendant to the IRA will be allocated, and a statement that a Member may roll over the assets of the IRA to another eligible retirement plan. Such notice shall be provided to Members in such time and form as shall be prescribed by the Benefits Administration Committee in accordance with applicable law; |
(iii) | keep records, when appropriate, of a Member's after-tax basis in the amount transferred to the IRA; and |
(iv) | fulfill such other requirements of the safe harbor contained in Department of Labor Regulation §2550.404a-2 and, if applicable, the conditions of Department of Labor Prohibited Transaction Class Exemption 2004-16. |
11.4 | Death of Beneficiary |
11.5 | Proof of Death and Right of Beneficiary or Other Person |
11.6 | Completion of Appropriate Notice. |
(a) | the Benefits Administration Committee clearly informs the Member that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option); and |
(b) | the Member, after receiving the notice under Sections 411 and 417 of the Code, affirmatively elects a distribution. |
11.7 | Direct Rollover of Certain Distributions |
(a) | "Distributee" means: |
(i) | a Member or Deferred Member; |
(ii) | a Member's or Deferred Member's spouse Beneficiary; |
(iii) | a Member's or Deferred Member's spouse or former spouse who is the alternate payee under a qualified domestic relations order as defined in Section 414(p) of the Code with regard to the interest of the spouse or former spouse; and |
(iv) | a nonspouse Beneficiary. |
(b) | "Eligible rollover distribution" is any withdrawal or distribution of all or any portion of an individual's vested account balance owing to the credit of a distributee, except that the following distributions shall not be eligible rollover distributions: |
(i) | any distribution that is one of a series of substantially equal periodic payments made for the life or life expectancy of the distributee, or for a specified period of ten years or more; |
(ii) | any distribution required under Section 401(a)(9) of the Code; |
(iii) | after-tax amounts (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities) unless such amount is rolled over or transferred (i.e., directly rolled) to an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, or a Roth individual retirement account described in Section 408A(b) of the Code; or transferred (i.e., directly rolled) to a qualified plan described in Section 401(a) of the Code or to an annuity plan described in Section 403(b) of the Code provided such plan agrees to separately account for such after-tax amount and earnings thereon; |
(iv) | any in-service withdrawal that is made on account of hardship; and |
(v) | any other distribution that is not an eligible rollover distribution under the Code or regulations thereunder. |
(c) | "Eligible retirement plan" means any of the following types of plans that accept the distributee's eligible rollover distribution: |
(i) | a qualified plan described in Section 401(a) of the Code; |
(ii) | an annuity plan described in Section 403(a) of the Code; |
(iii) | an individual retirement account or individual retirement annuity described in Section 408(a) or 408(b) of the Code, respectively; |
(iv) | an annuity contract described in Section 403(b) of the Code; |
(v) | an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a |
(vi) | a Roth IRA described in Section 408A of the Code |
(d) | "Direct rollover" means a payment by the Plan directly to the eligible retirement plan specified by the distributee in cash and/or shares. |
11.8 | Elective Transfers from Plan |
(a) | Elective Transfer. An elective transfer of a Member's or Deferred Member's Accounts between this Plan and another qualified plan maintained by a transferee shall be available only if the transfer meets the requirements of Section 414(l) of the Code and each of the following requirements have been met: |
(i) | Voluntary Election |
(A) | Member Election |
(B) | Benefit Retention Alternative |
(C) | Spousal Election |
(D) | Notice Requirement |
(ii) | Amount of Benefit Transferred |
(iii) | Benefit Under the Transferee Plan |
11.9 | Elective Transfer to Plan |
11.10 | Minimum Required Distributions |
(a) | The portion of any distribution that constitutes a required minimum distribution under Section 401(a)(9) of the Code shall be the lesser of: |
(i) | the quotient obtained by dividing the Member's Accounts by the distribution period in the Uniform Lifetime Table set forth in Treasury Regulation Section 1.401(a)(9)-9, using the Member's age as of the Member's birthday in the distribution calendar year; or |
(ii) | if the Member's sole designated beneficiary for the distribution calendar year is the Member's spouse, and the spouse is more than ten years younger than the Member, the quotient obtained by dividing the Member's Accounts by the number in the Joint and Last Survivor Table set forth in Treasury Regulation Section 1.401(a)(9)-9, using the Member's and spouse's attained ages as of the Member's and the spouse's birthdays in the distribution calendar year. |
(b) | For purposes of paragraph (a) above, the following definitions apply: |
(i) | "Designated beneficiary" means the individual who is designated as the Beneficiary and is the designated beneficiary under Section 401(a)(9) of the Code and applicable Treasury |
(ii) | "Distribution calendar year" means a calendar year for which a minimum distribution is required. For a Member who is a 5-percent owner in active service, the first distribution calendar year is the calendar year in which the Member attains age 70½. For a Member who is not a 5-percent owner, the first distribution calendar year is the later of the calendar year in which the Member attains age 70½ or the year in which the Member terminates employment. |
(iii) | "Life expectancy" means life expectancy as computed by use of the Single Life Table in Treasury Regulation Section 1.401(a)(9)-9, Q & A-1. |
(iv) | "Member's Accounts" means the balance of the Member's Accounts as of the last Valuation Date in the calendar year immediately preceding the distribution calendar year ("valuation calendar year") increased by the amount of contributions made and allocated or forfeitures allocated to the Member's Accounts as of dates in the valuation calendar year after such last Valuation Date and decreased by distributions made in the valuation calendar year after such last Valuation Date. The Member's Accounts for the valuation calendar year include any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year. |
12.1 | Appointment of PFTIC |
(a) | Treasurer; |
(b) | Assistant Treasurer; |
(c) | Vice President, Total Rewards; |
(d) | Director, Global Benefits; |
(e) | Director, Financial Planning and Analysis; and |
(f) | Manager, Benefits Accounting & Administration. |
12.2 | Duties of PFTIC |
12.3 | Meetings |
12.4 | Compensation and Bonding |
12.5 | Trust Fund |
12.6 | Benefit Statements |
12.7 | Fiscal Year |
13.1 | Plan Administrator |
13.2 | Appointment of Benefits Administration Committee |
(a) | Treasurer; |
(b) | Assistant Treasurer; |
(c) | Vice President, Total Rewards; |
(d) | Director, Global Benefits; |
(e) | Director, Financial Planning and Analysis; and |
(f) | Manager, Benefits Accounting & Administration. |
(a) | The Benefits Administration Committee is designated a named fiduciary within the meaning of Section 402(a) of ERISA and shall have authority and responsibility for general supervision of the administration of the Plan. For purposes of the regulations under Section 404(c) of ERISA, the Benefits Administration Committee shall be the designated fiduciary responsible for safeguarding the confidentiality of all information relating to the purchase, sale and holding of employer securities and the exercise of shareholder rights appurtenant thereto. The Benefits Administration Committee shall safeguard such information pursuant to written procedures providing for such confidentiality. In addition, for purposes of avoiding any situation for undue employer influence in the exercise of any shareholder rights, the Benefits Administration Committee shall appoint an independent fiduciary, who shall not be affiliated with any sponsor of the Plan, to ensure the maintenance of confidentiality pursuant to the regulations under Section 404(c) of ERISA. |
(b) | The Benefits Administration Committee shall have total and complete discretion to interpret the Plan, including, but not limited to, the discretion to (i) decide all questions arising in the administration, interpretation and application of the Plan including the power to construe and interpret the Plan; (ii) decide all questions relating to an individual's eligibility to participate in the Plan and/or eligibility for benefits and the amounts thereof; (iii) decide all facts relevant to the determination of eligibility for benefits or participation; and (iv) determine the amount, form and timing of any distribution to be made hereunder. In making its decisions, the Benefits Administration Committee shall be entitled to, but need not rely upon, information supplied by a Member, Deferred Member, Beneficiary, or representative thereof. |
(c) | The members of the Benefits Administration Committee shall elect a Chairman from their number and a Secretary who may be, but need not be, one of the members of the Benefits Administration Committee; may appoint from their number such committees with such powers as they shall determine; may authorize one or more of their number or any agent to execute or deliver any instrument or make |
(d) | Subject to the limitations of the Plan, the Benefits Administration Committee from time to time shall establish rules or regulations for the administration of the Plan and the transaction of its business. The Benefits Administration Committee shall have full discretionary authority, except as to matters which the Board of Directors from time to time may reserve to itself, to interpret the Plan and to make factual determinations regarding any and all matters arising hereunder, including but not limited to, the right to determine eligibility for benefits, the right to construe the terms of the Plan and the right to remedy possible ambiguities, inequities, inconsistencies or omissions. The Benefits Administration Committee shall also have the right to exercise powers otherwise exercisable by the Board of Directors hereunder to the extent that the exercise of such powers does not involve the management of Plan assets nor, in the judgment of the Benefits Administration Committee, a substantial number of persons. In addition, where the number of persons is deemed to be substantial, the Benefits Administration Committee shall have the further right to exercise such powers as may be delegated to the Benefits Administration Committee by the Board of Directors. |
(e) | Subject to applicable federal and state Law, all interpretations, determinations and decisions of the Benefits Administration Committee or the Board of Directors in respect of any matter hereunder shall be final, conclusive and binding on all parties affected thereby. |
13.4 | Meetings |
14.1 | Amendment of Plan |
14.2 | Termination of Plan |
(a) | The Plan is entirely voluntary on the part of the Company. The Board of Directors reserves the right at any time to terminate the Plan or to suspend, reduce or partially or completely discontinue contributions thereto. In the event of such termination or partial termination of the Plan or complete discontinuance of contributions, the interests of Members and Deferred Members shall automatically become nonforfeitable. |
(b) | Upon termination of the Plan, Before-Tax Savings, with earnings thereon, shall be distributed to Members only if (i) neither the Company nor an Associated Company establishes or maintains a successor defined contribution plan, and (ii) payment is made to the Members in the form of a lump-sum distribution (as defined in Section 402(e)(4)(D) of the Code, without regard to subclauses (I) through (IV) of clause (i) thereof). For purposes of this paragraph, a "successor defined contribution plan" is a defined contribution plan (other than an employee stock ownership plan as defined in Section 4975(e)(7) of the Code ("ESOP") or a simplified employee pension as defined in Section 408(k) of the Code ("SEP")) which exists at the time the Plan is terminated or within the 12-month period beginning on the date all assets are distributed. However, in no event shall a defined contribution plan be deemed a successor plan if fewer than 2 percent of the employees who are eligible to participate in the Plan at the time of its termination are or were eligible to participate under another defined contribution plan of the Company or an Associated Company (other than an ESOP or a SEP, as herein defined) at any time during the period beginning 12 months before and ending 12 months after the date of the Plan's termination. |
14.3 | Merger or Consolidation of Plan |
15.1 | Applicability |
15.2 | Instructions to Trustee |
15.3 | Trustee Action on Member Instructions |
15.4 | Action With Respect to Members Not Instructing the Trustee or Not Issuing Valid Instructions |
15.5 | Investment of Plan Assets after Tender Offer |
16.1 | Relief from Liability |
16.2 | Payment of Expenses |
(a) | Direct charges and expenses arising out of the purchase or sale of securities and taxes levied on or measured by such transactions, and any investment management fees, with respect to any Investment Fund, may be paid in part by the Company. Any such charges, expenses, taxes and fees not paid by the Company shall be paid from the Investment Fund with respect to which they are incurred. |
(b) | An annual charge to the Trust Fund of up to 0.25% of the market value of the assets held by such Trust Fund may be charged and applied to satisfy expenses incurred in conjunction with Plan administration, including, but not limited to, Trustee, recordkeeping, and audit fees; the Company shall pay all other expenses reasonably incurred in administering the Plan, including expenses of the Benefits Administration Committee, the PFTIC and the Trustee, such compensation to the Trustee as from time to time may be agreed between the PFTIC and Trustee, fees for legal services, any investment management fees not paid pursuant to Section 16.2(a), and all taxes, if any. |
16.3 | Source of Payment |
16.4 | Inalienability of Benefits |
16.5 | No Right to Employment |
16.6 | Inability to Locate Member or Beneficiary |
16.7 | Uniform Action |
16.8 | Headings |
16.9 | Use of Pronouns |
16.10 | Construction |
17.1 | Definitions |
(a) | "applicable determination date" means the last day of the preceding Plan Year; |
(b) | "top-heavy ratio" means the ratio of (i) the value of the aggregate of the Accounts under the Plan for key employees to (ii) the value of the aggregate of the Accounts under the Plan for all key employees and non-key employees; |
(c) | "key employee" means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Company or Associated Company having Statutory Compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner (as defined in Section 416(i)(1)(B)(i) of the Code) of the Company or Associated Company, or a 1-percent owner (as defined in Section 416(i)(1)(B)(ii) of the Code) of the Company or Associated Company having Statutory Compensation of more than $150,000. The determination of who is a key employee will be made in accordance with Section 416(i) of the Code and the applicable regulations and other guidance of general applicability issued thereunder; |
(d) | "non-key employee" means any Employee who is not a key employee; |
(e) | "applicable Valuation Date" means the Valuation Date coincident with or immediately preceding the last day of the preceding Plan Year; |
(f) | "required aggregation group" means any other qualified plan(s) of the Company or an Associated Company (including plans that terminated within the five-year period ending on the applicable determination date) in which there are Members who are key employees or which enable(s) the Plan to meet the requirements of Section 401(a)(4) or 410 of the Code; and |
(g) | "permissive aggregation group" means each plan in the required aggregation group and any other qualified plan(s) of the Company or an Associated Company in which all members are non-key employees, if the resulting aggregation group continues to meet the requirements of Sections 401(a)(4) and 410 of the Code. |
17.2 | Determination of Top Heavy Status |
(a) | the Accounts under the Plan will be combined with the account balances or the present value of accrued benefits under each other plan in the required aggregation group and, in the Company's discretion, may be combined with the account balances or the present value of accrued benefits under any other qualified plan in the permissive aggregation group; |
(b) | the Accounts for an employee as of the applicable determination date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the one-year period (five-year period in the case of a distribution made for a reason other than severance from employment, death, or disability) ending on the applicable determination date; |
(c) | distributions under any plan that terminated within the five-year period ending on the applicable determination date shall be taken into account if such plan contained key employees and, therefore, would have been part of the required aggregation group; and |
(d) | if an individual has not performed services for the Company or an Associated Company at any time during the one-year period ending on the applicable determination date, such individual's accounts and the present value of his or her accrued benefits shall not be taken into account. |
17.3 | Minimum Requirements |
18.1 | Applicability of Article |
18.2 | Establishment of Procedures |
18.3 | Determination of Qualified Domestic Relations Order Status |
18.4 | Establishment of Segregated Accounts and Payment Procedures |
(a) | Separate Account for Deferred Amounts |
(b) | Temporary Holding Account |
(c) | Payment from Temporary Holding Account in Certain Cases |
(d) | Payment from Separate Account and Temporary Holding Account to Alternate Payee of Order if Determined to be a Qualified Domestic Relations Order |
18.5 | Subsequent Determination or Order to be Applied Prospectively |
18.6 | Withdrawals, Distributions and Loans by or to Members. |
(a) | Withdrawals and Distributions |
(b) | Loans |
18.7 | Earliest Commencement Date |
18.8 | Definitions |
(a) | Alternate Payee shall mean any spouse, former spouse, child or other dependent of a Member who is recognized by a Domestic Relations Order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to such Member. |
(b) | Domestic Relations Order shall mean any judgment, decree or order (including approval of a property settlement agreement) which: |
(i) | relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child, or other dependent of a Member; and |
(ii) | is made pursuant to a state domestic relations law (including a community property law). |
(c) | Qualified Domestic Relations Order shall mean a Domestic Relations Order which meets the requirements of Section 414(p)(1) of the Code. |
A. | Special DC Credit Contribution |
(i) | was an "Employee" (as defined under the provisions of the ITT Salaried Retirement Plan as in effect immediately prior to October 31, 2011) on October 30, 2011 and becomes a Member of the Plan on October 31, 2011; and |
(ii) | was not a participant in the ITT Salaried Retirement Plan in 2011 as a result of the restructuring of the ITT Corporation |
B. | Transition Credit Contributions |
(i) | each Employee who was an employee of ITT Corporation or one of its subsidiaries on October 30, 2011 and who becomes a Member of the Plan on October 31, 2011; |
(ii) | each individual who was an employee of ITT Corporation or one of its subsidiaries on October 30, 2011, who remained an employee of ITT Corporation or one of its subsidiaries after October 30, 2011, and who becomes an Employee immediately following termination of employment with ITT Corporation or one of its subsidiaries and prior to March 1, 2012; and. |
(iii) | each individual who was an employee of ITT Corporation or one of its subsidiaries on October 30, 2011, who became an employee of Exelis Inc. on October 31, 2011, and who becomes an Employee immediately following termination of employment with Exelis Inc. and prior to March 1, 2012. |
2 | Amount |
(i) | With respect to a Member whose age and Service as of the first day of the applicable Plan Year, as defined below, total 60 to 69 points, the Company shall make a Transition Credit Contribution equal to three percent of the Member's Salary for the Plan Year. |
(ii) | With respect to a Member whose age and Service as of the first day of the applicable Plan Year, as defined below, total 70 or more points, the Company shall make a Transition Credit Contribution equal to five percent of the Member's Salary for the Plan Year. |
3. | Timing and Frequency |
4. | Duration |
(i) | October 31, 2016; |
(ii) | a Member's commencement of his traditional pension plan (TPP) benefit from the ITT Salaried Retirement Plan; |
(iii) | a change in control of Xylem; |
(iv) | a Member's termination of employment (regardless of whether the Member is subsequently reemployed); or |
(v) | a Member's death. |
A. | Subject to Section 11.3 with respect to Accounts that are less than $5,000 and in addition to the distribution forms enumerated in Section 11.3 of the Plan, upon incurring a Termination of Employment a Member or Deferred Member described above may elect to receive those amounts transferred from the Allis-Chalmers Plan to the ISP in the distribution forms described herein: |
1. | In installments at intervals not more frequently than once per calendar quarter over a period of years not exceeding the joint life expectancy of the Member or Deferred Member and his spouse, as determined under Section 72 of the Code and the regulations thereunder. |
2. | In installments at intervals not more frequently than once per calendar quarter over a period of years which does not extend beyond the Member's or Deferred Member's life expectancy, calculated as follows: |
(i) | the fixed payment shall be determined annually at the time payments are to commence, and as of the first day of each succeeding Plan Year, by multiplying the amount transferred to the ISP from the Allis-Chalmers Plan by a fraction, the numerator of which is one, and the denominator is the Member's or Deferred Member's life expectancy as of the date of such determination, as determined under Section 72 of the Code and the regulations thereunder; and |
(ii) | then dividing the amount determined under (i) above, by the number of payments to be paid to the Member or Deferred Member during that Plan Year. |
3. | By purchasing an annuity contract for the benefit of the Member or Deferred Member from a legal reserve life insurance company selected by the Company. If the Member or Deferred Member is married, such annuity contract shall be in the form of a qualified joint and survivor annuity unless the Member or Deferred Member, with his spouse's consent unless it is established to the satisfaction of the Benefits Administration Committee that the spouse cannot be located, elects another form of annuity contract and does not revoke such election within the 90-day period ending on the first day of the first period for which an amount is received as an annuity. Any election by a Member or Deferred Member to waive a qualified joint and survivor annuity must be in writing. The spouse's consent must be in writing, must acknowledge the effect of such election and be witnessed by a notary public. A qualified joint and survivor annuity means an annuity for the life of the Member or Deferred Member with a survivor annuity for the life of the spouse which is not less than 50 percent and not more than 100 percent of the annuity which is payable during the joint lives of the Member or Deferred Member and the spouse, and which is the actuarial equivalent of a single life annuity for the life of the Member or Deferred Member. |
4. | A Member or Deferred Member may elect to receive the benefits to which this Appendix B applies in any combination of the forms enumerated herein. |
B. | Subject to Section 11.3 with respect to Accounts that are less than $5,000 and in addition to the distribution forms enumerated in Section 11.3 of the Plan, in the event a Member or Deferred Member dies before his benefit attributable to amounts transferred from the Allis-Chalmers Plan to the ISP, or any portion thereof, has been paid to him, the unpaid balance of such amount shall be paid to his designated Beneficiary as follows: |
1. | If the beneficiary is an individual or individuals, the amount described in paragraph (B) above shall be paid to such Beneficiary in one of the methods described in paragraph (A) above, as elected by such Beneficiary. In the case of a Beneficiary who elects to receive installments or an annuity, payments thereunder shall not extend beyond the life expectancy of the Beneficiary. |
2. | If the Beneficiary is other than an individual or individuals, the Member's or Deferred Member's benefit subject to this Appendix B shall be paid in a lump sum payment. |
C. | Subject to Section 11.3 with respect to Accounts that are less than $5,000 and in addition to the distribution forms enumerated in Section 11.3 of the Plan, in the event a Member or Deferred Member dies after installments have commenced, the remainder of his distributable benefit will be paid to his Beneficiary in a single lump sum except that such Beneficiary may elect to receive such benefit in the installment forms described in paragraph (A) above. If the Beneficiary so elects, installments shall be over a period of years not exceeding the number of years that installments would have continued to be paid to the Member or Deferred Member had he lived, provided the Member or Deferred Member had been receiving installments under subsection (A)(1) and over a period of years which does not extend beyond the Member's or Deferred Member's life expectancy on the day before the date of his death, provided the Member or Deferred Member has been receiving installments under subsection (A)(2). |
D. | Notwithstanding anything in this Appendix B to the contrary, single sum payments shall be made, installments shall commence, and annuity contracts shall be purchased not later than one year after the date of the Member's or Deferred Member's death. In the event a Beneficiary dies before he has received the entire amount payable to him under this Appendix B, the Beneficiary's beneficiary shall be paid the balance of the amount payable hereunder in a single lump sum payment within one year of the Beneficiary's death. |
A. | Subject to Section 11.3 with respect to Accounts that are less than $5,000 and in addition to the distribution forms enumerated in Section 11.3 of the Plan, upon incurring a Termination of Employment after attaining age 50 and 10 years of Service or attaining age 65, a Member described above may elect to receive those amounts transferred from the Higbie Plan to the ISP in the distribution forms described herein. Such amounts shall commence, as selected by the Member, as of the earlier of the Valuation Date next following a Member's Termination of Employment on or after his age 65 or any Valuation Date selected by the Member following the Member's attainment of age 50 and 10 years of Service but prior to the Valuation Date next following his age 65: |
1. | In approximately equal monthly or annual installments over a period not to exceed 10 years. |
2. | By purchasing an annuity contract for the benefit of the Member or Deferred Member from a legal reserve life insurance company selected by the Company. If the Member elects to receive his benefits hereunder in the form of an annuity and if the Member is married on the date benefits commence, such annuity contract shall be in the form of a 50 percent qualified joint and survivor annuity unless the Member, with his spouse's consent unless it is established to the satisfaction of the Benefits Administration Committee that the spouse cannot be located, elects another form of annuity contract and does not revoke such election within the 90-day period ending on the first day of the first period for which an amount is received as an annuity. Any election by a Member or Deferred Member to waive a qualified joint and survivor annuity must be in writing. The spouse's consent must be in writing, must acknowledge the effect of such election and be witnessed by a notary public. A qualified joint and survivor annuity means an annuity for the life of the Member with a survivor annuity for the life of the spouse which is not less than 50 percent and not more than 100 percent of the annuity which is payable during the joint lives of the Member and the spouse, and which is the actuarial equivalent of a single life annuity for the life of the Member. In the event the Member elects to receive his benefit hereunder in the form of an annuity other than a joint and survivor annuity with his spouse as Beneficiary, the value of the benefit payable to the Member under the annuity shall never be less than 51 percent of the total value of the benefits payable under the annuity to the Member and his Beneficiary. |
B. | In the event of the death of a Member or Deferred Member prior to commencing benefits hereunder, such benefit shall be paid to his Beneficiary as of the Valuation Date coincident with or next following the Member's or Deferred Member's date of death in a single sum payment or in installment payments, if the Member or Deferred Member has named one Beneficiary and has so elected, such amount shall be payable in 120 equal, as near as may be, monthly installments, with any funds remaining at the death of the Beneficiary to go to the Beneficiary's estate in one lump sum, or if no Beneficiary survives the Member or Deferred Member, such amounts shall be payable to the Member's or Deferred Member's estate in a single lump sum. In either case, the Member or Deferred Member may name one or more contingent Beneficiaries to take in full at such |
C. | In the event of the death of a Member who is receiving installments pursuant to paragraph (A)(1) hereof and who has designated a Beneficiary to receive installment payments pursuant to paragraph (B) hereof, such Member's installment payments shall continue until the July 31 next following the Member's death and thereafter shall be payable pursuant to paragraph (B) above in 120 equal, as near as may be, monthly installments, with any amounts remaining at the death of the Beneficiary to go to the Beneficiary's estate in a single lump sum. |
A. | Subject to Section 11.3 with respect to a Accounts that are less than $5,000 and in addition to the distribution forms enumerated in Section 11.3 of the Plan, upon incurring a Termination of Employment, a Member or Deferred Member described above may elect to receive those amounts transferred from the GM Plan to the ISP in the distribution forms described herein: |
1. | In installment payments on a monthly, quarterly, semi-annual, or annual basis. Installments are to be paid in whole dollar amounts, with $1,200 as the minimum annual installment. A Member or Deferred Member may change the timing, amount, or discontinue installment payments. Installment payments will commence: |
(i) | for monthly payments, the first of the month next following the month in which the Member's or Deferred Member's election is received by the Plan; and |
(ii) | for quarterly, semi-annual, and annual payments, not sooner than the month next following the month in which the Plan receives the Member's or Deferred Member's election. |
2. | A Member or Deferred Member who has incurred a Termination of Employment may elect to withdraw a portion of the amounts hereunder at any time, but no more frequently than once per calendar year. In addition to any partial withdrawal, a Member or Deferred Member may elect, at any time, to receive a complete distribution of the amounts with respect to which this Appendix D applies. |
B. | A Member or Deferred Member shall be permitted to defer commencement of benefits hereunder until the April 1 next following the date such Member or Deferred Member attains age 70½. |
A. | Subject to Section 11.3 with respect to a Accounts that are less than $5,000 and in addition to the distribution forms enumerated in Section 11.3 of the Plan, upon incurring a Termination of Employment a Member or Deferred Member described above may elect to receive those amounts transferred from the Goulds Plan to the Plan in installment payments on a monthly or quarterly basis, as the Member elects, over a term certain. The maximum length of the term certain shall be the joint life expectancy of the Member and his designated beneficiary. If the installments are to be distributed over the life expectancy of the Member or the joint life of the Member and his Beneficiary, the life expectancy or joint life expectancies, as applicable of such persons shall be calculated at the time distributions commence and shall not thereafter be recalculated. The initial value of the obligation for the installment payments shall be equal to the amount of the Member's Account balance. Distributions must satisfy the requirements of Section 401(a)(9)(G) of the Code. |
A. | Each Member who was employed at Brakes as of September 25, 1998, the closing date of the sale of Brakes, was 100% vested in his Accounts as of such date. |
B. | Each Member who was employed at ESI as of September 28, 1998, the closing date of the sale of ESI, was 100% vested in his Accounts as of such date. |
C. | Effective September 25, 1998, a Member employed at Brakes was permitted, between September 25, 1998 and the date of the trust to trust transfer of his Accounts to the qualified retirement plan sponsored by Continental AG, to reallocate the investment of amounts in his Company Contribution Account into any other fund offered by the ISP, regardless of the age of the Member. |
D. | Effective September 28, 1998, a Member employed at ESI was permitted, between September 28, 1998 and the date of the trust to trust transfer of his Accounts to the qualified retirement plan sponsored by Valeo,to reallocate the investment of amounts in his Company Contribution Account into any other fund offered by the ISP, regardless of the age of the Member. Amounts that were invested in the ITT Stock Fund on the date of the trust to trust transfer to the qualified retirement plan sponsored by Valeo were transferred in kind. |
A. | Each individual who was a salaried employee of WPCC on February 28, 1999 was an Employee for purposes of the ISP as of March 1, 1999. |
B. | In accordance with the terms and conditions of the Stock Purchase Agreement for WPCC dated January 3, 1999, an individual who became an Employee of ITT Corporation on March 1, 1999 as a result of ITT Corporation's acquisition of WPCC was credited with all uninterrupted service rendered by such salaried employee while employed by WPCC prior to March 1, 1999. Such service was credited solely for the purposes of determining eligibility and vesting under the ISP and only to the extent such service was credited by WPCC under a qualified retirement plan for these purposes. |
A. | Each Member who was employed at PDC as of March 13, 1998, was permitted to request an elective transfer to the ISP or a complete distribution through March 12, 2000. On or after March 13, 2000, such a Member was not be permitted to elect a transfer or distribution of his Accounts until the Member terminates employment with the buyer of PDC, dies or becomes Disabled. Effective March 13, 1998, such a Member also was not permitted to request a loan or a withdrawal (other than a full distribution prior to March 13, 2000) from his Accounts. |
B. | Each Member who was employed at Pomona as of September 25, 1998, was permitted to request an elective transfer to the ISP or a complete distribution through September 24, 2000. On or after September 25, 2000, such a Member was not be permitted to elect a transfer or distribution of his Accounts until the Member terminates employment with the buyer of Pomona, dies or becomes Disabled. Effective September 25, 1998, such a Member also was not permitted to request a loan or a withdrawal (other than a full distribution prior to September 25, 2000) from his Accounts. |
C. | Each Member who was employed at PCUC as of January 22, 1999, was permitted to request an elective transfer to the ISP or a complete distribution pursuant to Article 11 of his Accounts through January 21, 2001. On or after January 22, 2001, such a Member was not be permitted to elect a transfer or distribution of his Accounts until the Member terminates employment with the buyer of PCUC, dies or becomes Disabled. Effective January 22, 1999, such a Member also was not permitted to request a loan or a withdrawal (other than a full distribution prior to January 22, 2001) from his Accounts. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Xylem Inc.; |
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/ Gretchen W. McClain____ | |
Gretchen W. McClain President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Xylem Inc.; |
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/ Gretchen W. McClain____ | |
Gretchen W. McClain | |
President and Chief Executive Officer | |
July 30, 2013 |
(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 | |
July 30, 2013 |
Derivative Financial Instruments
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Jun. 30, 2013
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments Risk Management Objective of Using Derivatives We are exposed to certain risks arising from both our business operations and economic conditions and principally manage our exposures to these risks through management of our core business activities. Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates that may impact revenues, expenses, cash receipts and payments. We enter into derivative financial instruments to protect the value or fix the amount of certain cash flows in terms of the functional currency of the business unit with that exposure. Cash Flow Hedges of Foreign Exchange Risk We are exposed to fluctuations in various foreign currencies against our functional currencies. We use foreign currency derivatives including currency forward agreements to manage our exposure to fluctuations in the various exchange rates. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. Beginning in 2012, certain business units within our segments with exposure to foreign currency exchange risks have designated certain currency forward agreements as cash flow hedges of forecasted intercompany inventory purchases and sales. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is recorded in other comprehensive income and is subsequently reclassified into either revenue or cost of revenue (hedge of sales classified into revenue and hedge of purchases classified into cost of revenue) in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of the change in fair value of the derivative is recognized directly in selling, general and administrative expenses. Our policy is to de–designate cash flow hedges at the time forecasted transactions are recognized as assets or liabilities on a business unit’s balance sheet and report subsequent changes in fair value through selling, general and administrative expenses where the gain or loss due to movements in currency rates on the underlying asset or liability is recorded. If it becomes probable that the originally forecasted transaction will not occur, the gain or loss related to the hedge recorded within other comprehensive income is recognized into net income. Listed in the table below are the outstanding foreign currency derivatives that were used to hedge foreign exchange risks as of June 30, 2013.
The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Income Statements and Statements of Comprehensive Income.
As of June 30, 2013, $2 million of the net unrealized losses on cash flow hedges is expected to be reclassified into earnings in the next 12 months. The ineffective portion of the change in fair value of a cash flow hedge is excluded from effectiveness testing and is recognized immediately in selling, general and administrative expenses in the Condensed Consolidated Income Statements. For the three and six months ended June 30, 2013 and 2012, the amounts were not material. The fair values of our foreign exchange contracts currently included in our hedging program were as follows:
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Goodwill and Other Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | |||
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Jun. 30, 2013
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Changes in the carrying value of goodwill by operating segment | ||||
Balance as of December 31, 2012 | $ 1,647 | |||
Goodwill acquired | 48 | [1] | ||
Foreign currency and other | (21) | |||
Balance as of March 31, 2013 | 1,674 | |||
Water Infrastructure
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Changes in the carrying value of goodwill by operating segment | ||||
Balance as of December 31, 2012 | 1,085 | |||
Goodwill acquired | 48 | [1] | ||
Foreign currency and other | (16) | |||
Balance as of March 31, 2013 | 1,117 | |||
Applied Water
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Changes in the carrying value of goodwill by operating segment | ||||
Balance as of December 31, 2012 | 562 | |||
Goodwill acquired | 0 | [1] | ||
Foreign currency and other | (5) | |||
Balance as of March 31, 2013 | $ 557 | |||
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Restructuring Charges
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Jun. 30, 2013
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring, Impairment, and Other Activities Disclosure | Restructuring Charges During the three and six months ended June 30, 2013, we recognized restructuring charges of $20 million and $25 million, respectively. We incurred these charges primarily in an effort to reorganize our structure in Europe and North America to address declines in sales volumes and optimize our cost structure. The charges relate to the reduction in structural costs, including the elimination of headcount and consolidation of facilities within both our Water Infrastructure and Applied Water segments. There were no restructuring charges recognized during the three and six months ended June 30, 2012. The following table presents the components of restructuring expense for the three and six months ended June 30, 2013 and 2012.
The following table displays a rollforward of the restructuring accruals, presented on our Condensed Consolidated Balance Sheet within accrued and other current liabilities, for the six months ended June 30, 2013 and 2012.
The following is a rollforward of employee position eliminations associated with restructuring activities for the six months ended June 30, 2013 and 2012.
Total expected costs associated with actions that commenced during the six months ended June 30, 2013 are approximately $25 million for Water Infrastructure and approximately $6 million for Applied Water. These costs primarily comprise severance charges. We currently expect these actions to continue through the first quarter of 2014. |
Segment Information
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information Our business is organized into two reportable segments: Water Infrastructure and Applied Water. The Water Infrastructure segment, comprising our Water Solutions and Analytics operating units, focuses on the transportation, treatment and testing of water, offering a range of products including water and wastewater pumps, treatment and testing equipment, and controls and systems. The Applied Water segment serves many of the primary uses of water and focuses on the residential, commercial, industrial and agricultural markets. Corporate and other consists of corporate office expenses including compensation, benefits, occupancy, depreciation, and other administrative costs, as well as charges related to certain matters, such as the Spin-off and environmental matters that are managed at a corporate level and are not included in the business segments in evaluating performance or allocating resources. The accounting policies of each segment are the same as those described in the summary of significant accounting policies (see Note 1 in the 2012 Annual Report). The following tables contain financial information for each reportable segment.
The following table contains the total assets for each reportable segment.
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. |
Stock-Based Compensation Plans (Details 2) (USD $)
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6 Months Ended |
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Jun. 30, 2013
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Weighted-average assumptions for annual March 2012 grants | |
Dividend yield | 1.69% |
Volatility | 31.10% |
Risk-free interest rate | 1.27% |
Expected term | 6 years 7 months 17 days |
Weighted-average fair value / share (usd per share) | $ 7.58 |
Derivative Financial Instruments (Details)
In Millions, unless otherwise specified |
Jun. 30, 2013
Sell CAD/ Buy EUR forward
EUR (€)
Instruments
|
Jun. 30, 2013
Sell CAD/ Buy EUR forward
HUF
|
Jun. 30, 2013
Sell USD/ Buy EUR forward
EUR (€)
Instruments
|
Jun. 30, 2013
Sell USD/ Buy EUR forward
SEK
|
Jun. 30, 2013
Buy SEK Sell EUR Forward [Member]
USD ($)
Instruments
|
Jun. 30, 2013
Buy SEK Sell EUR Forward [Member]
EUR (€)
|
Jun. 30, 2013
Sell AUD/ Buy EUR forward
EUR (€)
Instruments
|
Jun. 30, 2013
Sell AUD/ Buy EUR forward
PLN
|
Jun. 30, 2013
Sell GBP/ Buy EUR forward
CAD
Instruments
|
Jun. 30, 2013
Sell GBP/ Buy EUR forward
EUR (€)
|
---|---|---|---|---|---|---|---|---|---|---|
Derivative Financial Instruments | ||||||||||
Number of Instruments | 10 | 10 | 5 | 5 | 5 | 5 | 8 | 8 | 5 | 5 |
Notional Sold | € 11.2 | € 22.5 | $ 82.8 | € 14.6 | 5.0 | |||||
Notional Purchased | 8.4 | 17.2 | € 705.0 | 11.3 | € 5.8 |
Accrued and Other Current Liabilities
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued and Other Current Liabilities | Accrued and Other Current Liabilities
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Earnings Per Share (Details) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
|
Jun. 30, 2012
|
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Basic and diluted net earnings per share: | ||||||||||||
Net income | $ 46 | $ 89 | $ 87 | $ 152 | ||||||||
Shares | ||||||||||||
Weighted average common shares outstanding | 185,265 | 185,546 | 185,419 | 185,254 | ||||||||
Add: Participating securities | 138 | [1] | 303 | [1] | 186 | [1] | 370 | [1] | ||||
Weighted average common shares outstanding - Basic (in shares) | 185,403 | 185,849 | 185,605 | 185,624 | ||||||||
Plus incremental shares from assumed conversions: | ||||||||||||
Weighted average common shares outstanding - Diluted (in shares) | 186,121 | 186,248 | 186,278 | 186,054 | ||||||||
Basic earnings per share (usd per share) | $ 0.25 | $ 0.48 | $ 0.47 | $ 0.82 | ||||||||
Diluted earnings per share (usd per share) | $ 0.25 | $ 0.48 | $ 0.47 | $ 0.82 | ||||||||
Stock Options
|
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Plus incremental shares from assumed conversions: | ||||||||||||
Dilutive effect of common shares | 187 | [2] | 218 | [2] | 183 | [2] | 253 | [2] | ||||
Restricted Stock
|
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Plus incremental shares from assumed conversions: | ||||||||||||
Dilutive effect of common shares | 531 | [2] | 181 | [2] | 490 | [2] | 177 | [2] | ||||
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Derivative Financial Instruments (Details 1) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Derivative Financial Instruments | ||||||||||
Amount of gain (loss) recognized in OCI on derivative | $ 0 | $ (2) | $ (2) | [1] | $ 2 | [1] | ||||
Amount of (gain) loss reclassified from OCI into revenue | (1) | [1] | 0 | [1] | ||||||
Amount of gain (loss) reclassified from OCI into cost of revenue | 0 | [1] | (1) | [1] | ||||||
Foreign Exchange Contract
|
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Derivative Financial Instruments | ||||||||||
Amount of gain (loss) recognized in OCI on derivative | 0 | [1] | (2) | [1] | ||||||
Amount of (gain) loss reclassified from OCI into revenue | 0 | [1] | 0 | [1] | ||||||
Amount of gain (loss) reclassified from OCI into cost of revenue | $ 0 | [1] | $ (1) | [1] | ||||||
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Commitments and Contingencies (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in product warranty accrual | We warrant numerous products, the terms of which vary widely. In general, we warrant products against defect and specific non-performance. The table below provides the changes in our product warranty accrual.
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Separation Costs (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Separation Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-recurring separation costs incurred | The components of non-recurring separation costs incurred as a result of the Spin-off are presented below.
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Restructuring Charges (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of restructuring and asset imparment charges | During the three and six months ended June 30, 2013, we recognized restructuring charges of $20 million and $25 million, respectively. We incurred these charges primarily in an effort to reorganize our structure in Europe and North America to address declines in sales volumes and optimize our cost structure. The charges relate to the reduction in structural costs, including the elimination of headcount and consolidation of facilities within both our Water Infrastructure and Applied Water segments. There were no restructuring charges recognized during the three and six months ended June 30, 2012. The following table presents the components of restructuring expense for the three and six months ended June 30, 2013 and 2012.
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Restructuring Accruals | The following table displays a rollforward of the restructuring accruals, presented on our Condensed Consolidated Balance Sheet within accrued and other current liabilities, for the six months ended June 30, 2013 and 2012.
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Planned Employee Reductions Associatied with Restructuring | The following is a rollforward of employee position eliminations associated with restructuring activities for the six months ended June 30, 2013 and 2012.
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Separation Costs (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
|
Jun. 30, 2012
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Separation Costs [Abstract] | ||||
Advisory fees and other | $ 0 | $ 2 | $ 0 | $ 5 |
Rebranding and marketing costs | 0 | 2 | 0 | 4 |
Information and technology costs | 0 | 1 | 1 | 1 |
Employee Retention And Hiring Costs | 0 | 1 | 0 | 1 |
Lease Termination And Other Real Estate Costs | 1 | 0 | 1 | 0 |
Total separation costs in operating income | 1 | 6 | 2 | 11 |
Income tax (benefit) expense | 0 | (2) | 0 | (3) |
Total separation costs, net of tax | $ 1 | $ 4 | $ 2 | $ 8 |
Credit Facilities and Long-Term Debt (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Credit Facilities and Long-Term Debt |
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Background and Basis of Presentation (Details)
|
6 Months Ended |
---|---|
Jun. 30, 2013
Segment
|
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Background and Basis of Presentation (Textual) [Abstract] | |
Number of operating segment | 2 |
Earnings Per Share (Details 1)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
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Stock Options
|
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Incremental shares from stock options and restricted stock: | ||||
Stock Options/ Restricted Shares | 4,481 | 4,510 | 4,306 | 4,408 |
Restricted Stock
|
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Incremental shares from stock options and restricted stock: | ||||
Stock Options/ Restricted Shares | 862 | 993 | 810 | 918 |
Performance Based Shares
|
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Incremental shares from stock options and restricted stock: | ||||
Stock Options/ Restricted Shares | 119 | 0 | 80 | 0 |
Goodwill and Other Intangible Assets (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the carrying value of goodwill by operating segment | Changes in the carrying value of goodwill by reportable segment for the six months ended June 30, 2013 are as follows:
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Other Intangible Assets | Information regarding our other intangible assets is as follows:
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Postretirement Benefit Plans (Details Textual) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
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Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block | ||||
Other Postretirement Benefit Expense | $ 2 | $ 1 | $ 3 | $ 2 |
Postretirement Benefit Plans (Textual) [Abstract] | ||||
Employer Contribution to definer benefit Plan | 21 | 19 | ||
Minimum
|
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Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block | ||||
Additional contributions | 18 | 18 | ||
Maximum
|
||||
Defined Benefit Plans And Other Postretirement Benefit Plans Table Text Block | ||||
Additional contributions | $ 28 | $ 28 |
Commitments and Contingencies (Details Textual) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Estimated environmental matters | $ 10 | $ 11 |
Restructuring Charges (Accrual Rollfoward) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
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Restructuring Reserve [Roll Forward] | ||||
Restructuring accruals | $ 9 | $ 1 | ||
Severance and other | 20 | 0 | 25 | 0 |
Cash payments | (11) | 0 | ||
Other | (1) | (1) | ||
Restructuring accruals | 22 | 0 | 22 | 0 |
Water Infrastructure
|
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Restructuring Reserve [Roll Forward] | ||||
Severance and other | 16 | 0 | 21 | 0 |
Restructuring accruals | 20 | 0 | 20 | 0 |
Applied Water
|
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Restructuring Reserve [Roll Forward] | ||||
Severance and other | 4 | 0 | 4 | 0 |
Restructuring accruals | 2 | 0 | 2 | 0 |
Corporate and other
|
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Restructuring Reserve [Roll Forward] | ||||
Severance and other | 0 | 0 | 0 | 0 |
Restructuring accruals | $ 0 | $ 0 | $ 0 | $ 0 |
Background and Basis of Presentation (Policies)
|
6 Months Ended |
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Jun. 30, 2013
|
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Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The interim condensed consolidated financial statements reflect our financial position and results of operations in conformity with accounting principles generally accepted in the United States of America ("GAAP"). All transactions between our businesses have been eliminated. The unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such SEC rules. We believe that the disclosures made are adequate to make the information presented not misleading. We consistently applied the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2012 ("2012 Annual Report") in preparing these unaudited condensed consolidated financial statements, with the exception of accounting standard updates described in Note 2. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2012 Annual Report. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Estimates are revised as additional information becomes available. Estimates and assumptions are used for, but not limited to, postretirement obligations and assets, revenue recognition, income tax contingency accruals and valuation allowances, goodwill impairment testing and contingent liabilities. Actual results could differ from these estimates. Additionally, our interim condensed consolidated financial statements may not be indicative of our future performance. Our quarterly financial periods end on the Saturday closest to the last day of the calendar quarter, except for the fourth quarter which ends on December 31. For ease of presentation, the condensed consolidated financial statements included herein are described as ending on the last day of the calendar quarter. |
Recently Issued Accounting Pronouncements
|
6 Months Ended |
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Jun. 30, 2013
|
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Accounting Changes and Error Corrections [Abstract] | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Pronouncements Not Yet Adopted In July 2013, the Financial Accounting Standards Board (“FASB”) issued guidance on the financial statement presentation of an unrecognized tax benefit. The guidance requires that an unrecognized tax benefit or a portion of an unrecognized tax benefit, be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. If an applicable deferred tax asset is not available or a company does not expect to use the applicable deferred tax asset, the unrecognized tax benefit should be presented in an entity's financial statements as a liability and should not be combined with a deferred tax asset. This guidance is effective for fiscal years beginning after December 15, 2013. We are currently evaluating the impact of the guidance on our financial condition and results of operations. In March 2013, the FASB issued guidance on the release of a cumulative translation adjustment ("CTA") related to an entity's investment in a foreign entity into income. The guidance requires such CTA to be released when there has been a: (1) sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, (2) loss of a controlling financial interest in an investment in a foreign entity or (3) step acquisition for a foreign entity. This guidance is effective for fiscal years beginning after December 15, 2013. The impact of the guidance on our financial condition and results of operations will depend on the occurrence and the significance of transactions that meet the criteria described above. In February 2013, the FASB issued guidance related to the measurement and disclosure of obligations resulting from joint and several liability arrangements. The new guidance requires companies to measure obligations resulting from joint and several liability arrangements as the sum of (1) the amount the company agreed to pay on the basis of its arrangement among co-obligors and (2) any additional amount the company expects to pay on behalf of its co-obligors. Additionally, the new guidance requires the disclosure of a description of the joint and several arrangement and the total outstanding amount of the obligation for all joint parties. This guidance is effective for fiscal years beginning after December 15, 2013. We are currently evaluating the impact of the guidance on our financial condition and results of operations. Recently Adopted Pronouncements In February 2013, the FASB issued guidance regarding new disclosures for items reclassified out of accumulated other comprehensive income ("AOCI"). The guidance requires entities to present information about items reclassified out of AOCI by component. Additionally, entities are required to present either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements, significant amounts reclassified out of AOCI by the respective line items of net income. This guidance is effective for fiscal years beginning after December 15, 2012. The adoption of this guidance did not have a material impact on our financial statement presentation and disclosures. In July 2012, the FASB provided companies with the option to make an initial qualitative evaluation, based on events and circumstances, to determine the likelihood of an impairment of an indefinite-lived intangible asset. The results of this qualitative assessment determine whether it is necessary to perform the currently required quantitative comparison of the indefinite-lived intangible asset's fair value to its carrying amount. If it is more likely than not that the fair value of the intangible asset is less than its carrying amount, a company would be required to perform the quantitative assessment. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted. The adoption of the guidance did not have a material impact on our financial condition and results of operations. |
Separation Costs
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Jun. 30, 2013
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Separation Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Separation Costs | Separation Costs The components of non-recurring separation costs incurred as a result of the Spin-off are presented below.
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Acquisitions
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6 Months Ended |
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Jun. 30, 2013
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Business Combinations [Abstract] | |
Acquisitions | Acquisitions During the three and six months ended June 30, 2013, we spent $3 million and $84 million ($81 million, net of cash acquired) on acquisitions, respectively. As the acquisitions were not material, individually or in the aggregate, to results of operations, pro forma results of operations reflecting results prior to the acquisitions and certain other disclosure items have not been presented. PIMS On February 5, 2013 we acquired PIMS Group ("PIMS"), a wastewater services company based in the United Kingdom, for approximately $57 million, including a cash payment of $55 million and the assumption of certain liabilities. PIMS is a supplier of wastewater installation and maintenance services for the private sector, municipal and industrial markets. The company had approximately 220 employees and generated revenue of approximately $38 million for its fiscal year ended April 30, 2012. Our condensed consolidated financial statements include PIMS' results of operations prospectively from February 5, 2013. MultiTrode On March 1, 2013 we acquired MultiTrode Pty Ltd ("MultiTrode"), a water and wastewater technology and services company based in Australia, for approximately $26 million. MultiTrode offers advanced monitoring and control technologies to municipal and private water and waste water authorities as well as industrial clients. The company has approximately 60 employees and generated revenue of approximately $13 million in fiscal 2012. Our condensed consolidated financial statements include MultiTrode's results of operations prospectively from March 1, 2013. |
Acquisitions (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | 0 Months Ended | 12 Months Ended | |||
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Jun. 30, 2013
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Jun. 30, 2013
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Jun. 30, 2012
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Feb. 05, 2013
PIMS Group
Employees
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Dec. 31, 2012
MultiTrode Pty Ltd
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Mar. 01, 2013
MultiTrode Pty Ltd
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Feb. 05, 2013
MultiTrode Pty Ltd
Employees
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Business Acquisition [Line Items] | |||||||
Cash payment to acquire business | $ 3 | $ 84 | $ 55 | ||||
Total spent on business acquisitions | 81 | 0 | |||||
Purchase price | 57 | 26 | |||||
Number of employees | 220 | 60 | |||||
Revenue from acquired entity | $ 38 | $ 13 |
Earnings Per Share (Tables)
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and diluted net earnings per share | The following is a summary of the calculation of basic and diluted net earnings per share.
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Derivative Financial Instruments (Tables)
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Jun. 30, 2013
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding foreign currency derivatives used to hedge foreign exchange risks | Listed in the table below are the outstanding foreign currency derivatives that were used to hedge foreign exchange risks as of June 30, 2013.
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Effect of derivative financial instruments | The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Income Statements and Statements of Comprehensive Income.
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Fair values of foreign exchange contracts | The fair values of our foreign exchange contracts currently included in our hedging program were as follows:
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Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Warranties | ||
Warranty accrual - January 1 | $ 40 | $ 42 |
Net changes for product warranties in the period | 17 | 15 |
Settlement of warranty claims | (19) | (16) |
Standard Product Warranty Accrual Other | (1) | (1) |
Warranty accrual - June 30 | $ 37 | $ 40 |
Accumulated Other Comprehensive Income (Loss) (Tables)
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Jun. 30, 2013
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table provides the components of accumulated other comprehensive income for the three months ended June 30, 2013:
The following table provides the components of accumulated other comprehensive income for the six months ended June 30, 2013:
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Goodwill and Other Intangible Assets (Details Textual) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Goodwill and Other Intangible Assets (Textual) [Abstract] | ||||
Impairment of goodwill | $ 0 | |||
Impairment of the indefinite-lived intangibles | 0 | |||
Amortization expense related to finite-lived intangible assets | $ 10 | $ 9 | $ 19 | $ 17 |