þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2017 | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ireland | 98-1141328 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification number) | |
43 London Wall, London, EC2M 5TF, United Kingdom | ||
(Address of principal executive offices) | ||
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o | ||||
(Do not check if a smaller reporting company) | ||||||||
Page | ||
PART I FINANCIAL INFORMATION | ||
ITEM 1. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II OTHER INFORMATION | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 2. | ||
ITEM 6. | ||
Three months ended | Six months ended | ||||||||||||
In millions, except per-share data | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Net sales | $ | 1,265.3 | $ | 1,301.2 | $ | 2,448.8 | $ | 2,491.2 | |||||
Cost of goods sold | 782.1 | 819.4 | 1,543.3 | 1,578.1 | |||||||||
Gross profit | 483.2 | 481.8 | 905.5 | 913.1 | |||||||||
Selling, general and administrative | 241.7 | 249.7 | 495.6 | 499.8 | |||||||||
Research and development | 28.7 | 28.7 | 58.7 | 57.2 | |||||||||
Operating income | 212.8 | 203.4 | 351.2 | 356.1 | |||||||||
Other (income) expense: | |||||||||||||
Equity income of unconsolidated subsidiaries | (0.4 | ) | (1.1 | ) | (0.6 | ) | (1.5 | ) | |||||
Loss on early extinguishment of debt | 101.4 | — | 101.4 | — | |||||||||
Net interest expense | 25.3 | 35.4 | 60.3 | 71.6 | |||||||||
Income from continuing operations before income taxes | 86.5 | 169.1 | 190.1 | 286.0 | |||||||||
Provision for income taxes | 18.2 | 36.4 | 41.1 | 61.5 | |||||||||
Net income from continuing operations | 68.3 | 132.7 | 149.0 | 224.5 | |||||||||
(Loss) income from discontinued operations, net of tax | (5.2 | ) | 10.1 | 1.9 | 25.7 | ||||||||
Gain from sale of discontinued operations, net of tax | 200.6 | — | 200.6 | — | |||||||||
Net income | $ | 263.7 | $ | 142.8 | $ | 351.5 | $ | 250.2 | |||||
Comprehensive income, net of tax | |||||||||||||
Net income | $ | 263.7 | $ | 142.8 | $ | 351.5 | $ | 250.2 | |||||
Changes in cumulative translation adjustment (inclusive of divestiture of business reclassified to gain from sale of $374.2 for the three and six months ended June 30, 2017) | 392.6 | (25.8 | ) | 468.3 | 2.2 | ||||||||
Changes in market value of derivative financial instruments, net of tax | (0.9 | ) | 10.9 | 0.7 | (3.8 | ) | |||||||
Comprehensive income | $ | 655.4 | $ | 127.9 | $ | 820.5 | $ | 248.6 | |||||
Earnings per ordinary share | |||||||||||||
Basic | |||||||||||||
Continuing operations | $ | 0.37 | $ | 0.73 | $ | 0.82 | $ | 1.24 | |||||
Discontinued operations | 1.08 | 0.06 | 1.11 | 0.14 | |||||||||
Basic earnings per ordinary share | $ | 1.45 | $ | 0.79 | $ | 1.93 | $ | 1.38 | |||||
Diluted | |||||||||||||
Continuing operations | $ | 0.37 | $ | 0.73 | 0.81 | 1.23 | |||||||
Discontinued operations | 1.06 | 0.05 | 1.10 | 0.14 | |||||||||
Diluted earnings per ordinary share | $ | 1.43 | $ | 0.78 | $ | 1.91 | $ | 1.37 | |||||
Weighted average ordinary shares outstanding | |||||||||||||
Basic | 181.7 | 180.9 | 181.9 | 180.8 | |||||||||
Diluted | 183.8 | 183.0 | 183.9 | 182.8 | |||||||||
Cash dividends paid per ordinary share | $ | 0.345 | $ | 0.33 | $ | 0.69 | $ | 0.66 | |||||
June 30, 2017 | December 31, 2016 | |||||
In millions, except per-share data | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 177.8 | $ | 238.5 | ||
Accounts and notes receivable, net of allowances of $28.0 and $25.6, respectively | 764.5 | 764.0 | ||||
Inventories | 565.4 | 524.2 | ||||
Other current assets | 247.1 | 253.4 | ||||
Current assets held for sale | — | 891.9 | ||||
Total current assets | 1,754.8 | 2,672.0 | ||||
Property, plant and equipment, net | 550.9 | 538.6 | ||||
Other assets | ||||||
Goodwill | 4,314.2 | 4,217.4 | ||||
Intangibles, net | 1,624.3 | 1,631.8 | ||||
Other non-current assets | 424.9 | 182.1 | ||||
Non-current assets held for sale | — | 2,292.9 | ||||
Total other assets | 6,363.4 | 8,324.2 | ||||
Total assets | $ | 8,669.1 | $ | 11,534.8 | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Current maturities of long-term debt and short-term borrowings | $ | 0.3 | $ | 0.8 | ||
Accounts payable | 407.8 | 436.6 | ||||
Employee compensation and benefits | 143.8 | 166.1 | ||||
Other current liabilities | 496.5 | 511.5 | ||||
Current liabilities held for sale | — | 356.2 | ||||
Total current liabilities | 1,048.4 | 1,471.2 | ||||
Other liabilities | ||||||
Long-term debt | 1,698.9 | 4,278.4 | ||||
Pension and other post-retirement compensation and benefits | 268.4 | 253.4 | ||||
Deferred tax liabilities | 546.5 | 609.5 | ||||
Other non-current liabilities | 203.4 | 162.0 | ||||
Non-current liabilities held for sale | — | 505.9 | ||||
Total liabilities | 3,765.6 | 7,280.4 | ||||
Equity | ||||||
Ordinary shares $0.01 par value, 426.0 authorized, 181.5 and 181.8 issued at June 30, 2017 and December 31, 2016, respectively | 1.8 | 1.8 | ||||
Additional paid-in capital | 2,876.3 | 2,920.8 | ||||
Retained earnings | 2,292.7 | 2,068.1 | ||||
Accumulated other comprehensive loss | (267.3 | ) | (736.3 | ) | ||
Total equity | 4,903.5 | 4,254.4 | ||||
Total liabilities and equity | $ | 8,669.1 | $ | 11,534.8 | ||
Six months ended | ||||||
In millions | June 30, 2017 | June 30, 2016 | ||||
Operating activities | ||||||
Net income | $ | 351.5 | $ | 250.2 | ||
Income from discontinued operations, net of tax | (1.9 | ) | (25.7 | ) | ||
Gain from sale of discontinued operations, net of tax | (200.6 | ) | — | |||
Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations | ||||||
Equity income of unconsolidated subsidiaries | (0.6 | ) | (1.5 | ) | ||
Depreciation | 42.0 | 43.5 | ||||
Amortization | 48.6 | 48.5 | ||||
Deferred income taxes | (16.7 | ) | (26.3 | ) | ||
Share-based compensation | 26.0 | 22.3 | ||||
Loss on early extinguishment of debt | 101.4 | — | ||||
Excess tax benefits from share-based compensation | — | (3.2 | ) | |||
Gain on sale of assets | — | (0.7 | ) | |||
Changes in assets and liabilities, net of effects of business acquisitions | ||||||
Accounts and notes receivable | 28.5 | 78.1 | ||||
Inventories | (21.3 | ) | 8.9 | |||
Other current assets | (10.2 | ) | (68.0 | ) | ||
Accounts payable | (46.8 | ) | (31.5 | ) | ||
Employee compensation and benefits | (30.7 | ) | (12.1 | ) | ||
Other current liabilities | (49.5 | ) | 50.7 | |||
Other non-current assets and liabilities | (8.8 | ) | (12.3 | ) | ||
Net cash provided by (used for) operating activities of continuing operations | 210.9 | 320.9 | ||||
Net cash provided by (used for) operating activities of discontinued operations | (55.6 | ) | 48.6 | |||
Net cash provided by (used for) operating activities | 155.3 | 369.5 | ||||
Investing activities | ||||||
Capital expenditures | (37.6 | ) | (64.0 | ) | ||
Proceeds from sale of property and equipment | 3.8 | 7.6 | ||||
Proceeds from sale of businesses, net | 2,765.6 | — | ||||
Acquisitions, net of cash acquired | (59.5 | ) | — | |||
Other | — | (3.7 | ) | |||
Net cash provided by (used for) investing activities of continuing operations | 2,672.3 | (60.1 | ) | |||
Net cash provided by (used for) investing activities of discontinued operations | (6.5 | ) | (8.0 | ) | ||
Net cash provided by (used for) investing activities | 2,665.8 | (68.1 | ) | |||
Financing activities | ||||||
Net repayments of short-term borrowings | (0.5 | ) | — | |||
Net repayments of commercial paper and revolving long-term debt | (975.5 | ) | (139.8 | ) | ||
Repayments of long-term debt | (1,659.3 | ) | (0.7 | ) | ||
Premium paid on early extinguishment of debt | (94.9 | ) | — | |||
Excess tax benefits from share-based compensation | — | 3.2 | ||||
Shares issued to employees, net of shares withheld | 29.5 | 8.3 | ||||
Repurchases of ordinary shares | (100.0 | ) | — | |||
Dividends paid | (126.1 | ) | (119.7 | ) | ||
Net cash provided by (used for) financing activities | (2,926.8 | ) | (248.7 | ) | ||
Effect of exchange rate changes on cash and cash equivalents | 45.0 | (5.7 | ) | |||
Change in cash and cash equivalents | (60.7 | ) | 47.0 | |||
Cash and cash equivalents, beginning of period | 238.5 | 126.3 | ||||
Cash and cash equivalents, end of period | $ | 177.8 | $ | 173.3 | ||
In millions | Ordinary shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Total | |||||||||||||
Number | Amount | |||||||||||||||||
Balance - December 31, 2016 | 181.8 | $ | 1.8 | $ | 2,920.8 | $ | 2,068.1 | $ | (736.3 | ) | $ | 4,254.4 | ||||||
Net income | — | — | — | 351.5 | — | 351.5 | ||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 469.0 | 469.0 | ||||||||||||
Dividends declared | — | — | — | (126.9 | ) | — | (126.9 | ) | ||||||||||
Share repurchase | (1.5 | ) | — | (100.0 | ) | — | — | (100.0 | ) | |||||||||
Exercise of options, net of shares tendered for payment | 1.0 | — | 36.5 | — | — | 36.5 | ||||||||||||
Issuance of restricted shares, net of cancellations | 0.3 | — | — | — | — | — | ||||||||||||
Shares surrendered by employees to pay taxes | (0.1 | ) | — | (7.0 | ) | — | — | (7.0 | ) | |||||||||
Share-based compensation | — | — | 26.0 | — | — | 26.0 | ||||||||||||
Balance - June 30, 2017 | 181.5 | $ | 1.8 | $ | 2,876.3 | $ | 2,292.7 | $ | (267.3 | ) | $ | 4,903.5 | ||||||
In millions | Ordinary shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Total | |||||||||||||
Number | Amount | |||||||||||||||||
Balance - December 31, 2015 | 180.5 | $ | 1.8 | $ | 2,860.3 | $ | 1,791.7 | $ | (645.0 | ) | $ | 4,008.8 | ||||||
Net income | — | — | — | 250.2 | — | 250.2 | ||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | (1.6 | ) | (1.6 | ) | ||||||||||
Dividends declared | — | — | — | (121.7 | ) | — | (121.7 | ) | ||||||||||
Exercise of options, net of shares tendered for payment | 0.4 | — | 13.8 | — | — | 13.8 | ||||||||||||
Issuance of restricted shares, net of cancellations | 0.3 | — | — | — | — | — | ||||||||||||
Shares surrendered by employees to pay taxes | (0.1 | ) | — | (5.5 | ) | — | — | (5.5 | ) | |||||||||
Share-based compensation | — | — | 22.3 | — | — | 22.3 | ||||||||||||
Balance - June 30, 2016 | 181.1 | $ | 1.8 | $ | 2,890.9 | $ | 1,920.2 | $ | (646.6 | ) | $ | 4,166.3 | ||||||
• | All excess tax benefits and deficiencies arising from employee share-based payment awards, and dividends on those awards, will be recognized within income taxes in the period in which they occur rather than within additional paid-in-capital. Our adoption of this requirement under the new standard had no material impact for the three and six months ended June 30, 2017. |
• | The Company no longer presents excess tax benefits within cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows; instead these are now reflected within cash flows from operating activities. The Company elected to apply this change prospectively. |
• | The Company elected not to change its policy on accounting for forfeitures and continues to estimate the total number of awards for which the requisite service period will not be rendered. |
• | The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of our diluted earnings per share for the three and six months ended June 30, 2017. This increased diluted weighted average common shares outstanding by less than 350,000 shares for the three and six months ended June 30, 2017. |
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Net sales | $ | 93.8 | $ | 433.6 | $ | 450.3 | $ | 820.6 | |||||
Cost of goods sold | 71.8 | 316.3 | 339.7 | 599.1 | |||||||||
Gross profit | 22.0 | 117.3 | 110.6 | 221.5 | |||||||||
Selling, general and administrative | 23.8 | 98.8 | 103.3 | 180.3 | |||||||||
Research and development | 1.5 | 5.1 | 5.7 | 9.9 | |||||||||
Operating (loss) income | $ | (3.3 | ) | $ | 13.4 | $ | 1.6 | $ | 31.3 | ||||
(Loss) income from discontinued operations before income taxes | $ | (3.2 | ) | $ | 13.3 | $ | 2.5 | $ | 31.5 | ||||
Provision for income taxes | 2.0 | 3.2 | 0.6 | 5.8 | |||||||||
(Loss) income from discontinued operations, net of tax | $ | (5.2 | ) | $ | 10.1 | $ | 1.9 | $ | 25.7 | ||||
Gain from sale of discontinued operations before income taxes | $ | 203.0 | $ | — | $ | 203.0 | $ | — | |||||
Provision for income taxes | 2.4 | — | 2.4 | — | |||||||||
Gain from sale of discontinued operations, net of tax | $ | 200.6 | $ | — | $ | 200.6 | $ | — | |||||
In millions | June 30, 2017 | December 31, 2016 | ||||
Accounts and notes receivable, net | $ | — | $ | 365.4 | ||
Inventories | — | 491.5 | ||||
Other current assets | — | 35.0 | ||||
Current assets held for sale | $ | — | $ | 891.9 | ||
Property, plant and equipment, net | $ | — | $ | 361.5 | ||
Goodwill | — | 996.4 | ||||
Intangibles, net | — | 703.5 | ||||
Asbestos-related insurance receivable | — | 108.5 | ||||
Other non-current assets | — | 123.0 | ||||
Non-current assets held for sale | $ | — | $ | 2,292.9 | ||
Accounts payable | $ | — | $ | 151.4 | ||
Employee compensation and benefits | — | 61.5 | ||||
Other current liabilities | — | 143.3 | ||||
Current liabilities held for sale | $ | — | $ | 356.2 | ||
Pension and other post-retirement compensation and benefits | $ | — | $ | 32.2 | ||
Deferred tax liabilities | — | 162.8 | ||||
Asbestos-related liabilities | — | 228.3 | ||||
Other non-current liabilities | — | 82.6 | ||||
Non-current liabilities held for sale | $ | — | $ | 505.9 | ||
3. | Share Plans |
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Restricted stock units | $ | 5.5 | $ | 3.6 | $ | 11.3 | $ | 10.6 | |||||
Stock options | 2.0 | 1.8 | 6.5 | 7.2 | |||||||||
Performance share units | 2.1 | 0.8 | 8.2 | 4.5 | |||||||||
Total share-based compensation expense | $ | 9.6 | $ | 6.2 | $ | 26.0 | $ | 22.3 | |||||
2017 Annual Grant | ||
Risk-free interest rate | 1.61 | % |
Expected dividend yield | 2.38 | % |
Expected share price volatility | 26.9 | % |
Expected term (years) | 6.3 | |
4. | Restructuring |
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Severance and related costs | $ | 12.8 | $ | 11.3 | $ | 33.4 | $ | 11.9 | |||||
Other | — | 0.8 | 0.3 | 0.7 | |||||||||
Total restructuring costs | $ | 12.8 | $ | 12.1 | $ | 33.7 | $ | 12.6 | |||||
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Water | $ | 5.8 | $ | 7.5 | $ | 12.9 | $ | 6.9 | |||||
Electrical | 3.7 | 3.7 | 13.0 | 3.9 | |||||||||
Other | 3.3 | 0.9 | 7.8 | 1.8 | |||||||||
Consolidated | $ | 12.8 | $ | 12.1 | $ | 33.7 | $ | 12.6 | |||||
In millions | June 30, 2017 | ||
Beginning balance | $ | 25.4 | |
Costs incurred | 33.4 | ||
Cash payments and other | (23.1 | ) | |
Ending balance | $ | 35.7 | |
5. | Earnings Per Share |
Three months ended | Six months ended | ||||||||||||
In millions, except per-share data | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Net income | $ | 263.7 | $ | 142.8 | $ | 351.5 | $ | 250.2 | |||||
Net income from continuing operations | $ | 68.3 | $ | 132.7 | $ | 149.0 | $ | 224.5 | |||||
Weighted average ordinary shares outstanding | |||||||||||||
Basic | 181.7 | 180.9 | 181.9 | 180.8 | |||||||||
Dilutive impact of stock options, restricted stock units and performance share units | 2.1 | 2.1 | 2.0 | 2.0 | |||||||||
Diluted | 183.8 | 183.0 | 183.9 | 182.8 | |||||||||
Earnings per ordinary share | |||||||||||||
Basic | |||||||||||||
Continuing operations | $ | 0.37 | $ | 0.73 | $ | 0.82 | $ | 1.24 | |||||
Discontinued operations | 1.08 | 0.06 | 1.11 | 0.14 | |||||||||
Basic earnings per ordinary share | $ | 1.45 | $ | 0.79 | $ | 1.93 | $ | 1.38 | |||||
Diluted | |||||||||||||
Continuing operations | $ | 0.37 | $ | 0.73 | $ | 0.81 | $ | 1.23 | |||||
Discontinued operations | 1.06 | 0.05 | 1.10 | 0.14 | |||||||||
Diluted earnings per ordinary share | $ | 1.43 | $ | 0.78 | $ | 1.91 | $ | 1.37 | |||||
Anti-dilutive stock options excluded from the calculation of diluted earnings per share | 1.7 | 1.2 | 1.9 | 2.0 | |||||||||
6. | Supplemental Balance Sheet Information |
In millions | June 30, 2017 | December 31, 2016 | ||||
Inventories | ||||||
Raw materials and supplies | $ | 240.0 | $ | 223.5 | ||
Work-in-process | 76.9 | 67.3 | ||||
Finished goods | 248.5 | 233.4 | ||||
Total inventories | $ | 565.4 | $ | 524.2 | ||
Other current assets | ||||||
Cost in excess of billings | $ | 113.6 | $ | 107.7 | ||
Prepaid expenses | 93.6 | 68.7 | ||||
Prepaid income taxes | 31.9 | 67.2 | ||||
Other current assets | 8.0 | 9.8 | ||||
Total other current assets | $ | 247.1 | $ | 253.4 | ||
Property, plant and equipment, net | ||||||
Land and land improvements | $ | 69.6 | $ | 66.2 | ||
Buildings and leasehold improvements | 348.1 | 335.0 | ||||
Machinery and equipment | 984.2 | 932.5 | ||||
Construction in progress | 44.3 | 68.6 | ||||
Total property, plant and equipment | 1,446.2 | 1,402.3 | ||||
Accumulated depreciation and amortization | 895.3 | 863.7 | ||||
Total property, plant and equipment, net | $ | 550.9 | $ | 538.6 | ||
Other non-current assets | ||||||
Deferred income taxes | $ | 37.3 | $ | 39.0 | ||
Prepaid income taxes | 252.2 | — | ||||
Deferred compensation plan assets | 46.3 | 47.9 | ||||
Other non-current assets | 89.1 | 95.2 | ||||
Total other non-current assets | $ | 424.9 | $ | 182.1 | ||
Other current liabilities | ||||||
Dividends payable | $ | 62.6 | $ | 61.8 | ||
Accrued warranty | 41.0 | 38.9 | ||||
Accrued rebates | 88.2 | 78.2 | ||||
Billings in excess of cost | 35.3 | 22.5 | ||||
Income taxes payable | — | 87.3 | ||||
Accrued restructuring | 35.7 | 25.4 | ||||
Other current liabilities | 233.7 | 197.4 | ||||
Total other current liabilities | $ | 496.5 | $ | 511.5 | ||
Other non-current liabilities | ||||||
Income taxes payable | $ | 35.2 | $ | 36.1 | ||
Self-insurance liabilities | 49.8 | 49.8 | ||||
Deferred compensation plan liabilities | 46.3 | 47.9 | ||||
Other non-current liabilities | 72.1 | 28.2 | ||||
Total other non-current liabilities | $ | 203.4 | $ | 162.0 | ||
7. | Goodwill and Other Identifiable Intangible Assets |
In millions | December 31, 2016 | Acquisitions/divestitures | Foreign currency translation/other | June 30, 2017 | ||||||||
Water | $ | 1,994.6 | $ | 27.7 | $ | 58.2 | $ | 2,080.5 | ||||
Electrical | 2,222.8 | 5.3 | 5.6 | 2,233.7 | ||||||||
Total goodwill | $ | 4,217.4 | $ | 33.0 | $ | 63.8 | $ | 4,314.2 | ||||
June 30, 2017 | December 31, 2016 | ||||||||||||||||||
In millions | Cost | Accumulated amortization | Net | Cost | Accumulated amortization | Net | |||||||||||||
Finite-life intangibles | |||||||||||||||||||
Customer relationships | $ | 1,507.6 | $ | (392.2 | ) | $ | 1,115.4 | $ | 1,478.0 | $ | (346.7 | ) | $ | 1,131.3 | |||||
Trade names | 1.9 | (1.5 | ) | 0.4 | 1.8 | (1.4 | ) | 0.4 | |||||||||||
Proprietary technology and patents | 142.8 | (100.0 | ) | 42.8 | 141.3 | (100.3 | ) | 41.0 | |||||||||||
Total finite-life intangibles | 1,652.3 | (493.7 | ) | 1,158.6 | 1,621.1 | (448.4 | ) | 1,172.7 | |||||||||||
Indefinite-life intangibles | |||||||||||||||||||
Trade names | 465.7 | — | 465.7 | 459.1 | — | 459.1 | |||||||||||||
Total intangibles, net | $ | 2,118.0 | $ | (493.7 | ) | $ | 1,624.3 | $ | 2,080.2 | $ | (448.4 | ) | $ | 1,631.8 | |||||
Q3-Q4 | ||||||||||||||||||
In millions | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | ||||||||||||
Estimated amortization expense | $ | 48.7 | $ | 95.4 | $ | 88.5 | $ | 83.4 | $ | 77.1 | $ | 70.0 | ||||||
8. | Debt |
In millions | Average interest rate at June 30, 2017 | Maturity Year | June 30, 2017 | December 31, 2016 | ||||
Commercial paper | — | 2019 | $ | — | $ | 398.7 | ||
Revolving credit facilities | — | 2019 | — | 576.8 | ||||
Senior notes - fixed rate (1) | 1.875% | 2017 | 350.0 | 350.0 | ||||
Senior notes - fixed rate (1) | 2.900% | 2018 | 255.3 | 500.0 | ||||
Senior notes - fixed rate (1) | 2.650% | 2019 | 250.0 | 250.0 | ||||
Senior notes - fixed rate - Euro (1) | 2.450% | 2019 | 567.0 | 520.7 | ||||
Senior notes - fixed rate (1) | 3.625% | 2020 | 74.0 | 400.0 | ||||
Senior notes - fixed rate (1) | 5.000% | 2021 | 103.8 | 500.0 | ||||
Senior notes - fixed rate (1) | 3.150% | 2022 | 88.3 | 550.0 | ||||
Senior notes - fixed rate (1) | 4.650% | 2025 | 19.3 | 250.0 | ||||
Other | N/A | N/A | 0.3 | 0.8 | ||||
Unamortized debt issuance costs and discounts | N/A | N/A | (8.8 | ) | (17.8 | ) | ||
Total debt | 1,699.2 | 4,279.2 | ||||||
Less: Current maturities and short-term borrowings | (0.3 | ) | (0.8 | ) | ||||
Long-term debt | $ | 1,698.9 | $ | 4,278.4 | ||||
(1) Senior notes are guaranteed as to payment by Pentair plc and PISG | ||||||||
Q3-Q4 | ||||||||||||||||||||||||
In millions | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | ||||||||||||||||
Contractual debt obligation maturities | $ | 0.3 | $ | 255.3 | $ | 1,167.0 | $ | 74.0 | $ | 103.8 | $ | 88.3 | $ | 19.3 | $ | 1,708.0 | ||||||||
9. | Derivatives and Financial Instruments |
Level 1: | Valuation is based on observable inputs such as quoted market prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2: | Valuation is based on inputs such as quoted market prices for similar assets or liabilities in active markets or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
Level 3: | Valuation is based upon other unobservable inputs that are significant to the fair value measurement. | |
• | short-term financial instruments (cash and cash equivalents, accounts and notes receivable, accounts and notes payable and variable-rate debt) — recorded amount approximates fair value because of the short maturity period; |
• | long-term fixed-rate debt, including current maturities — fair value is based on market quotes available for issuance of debt with similar terms, which are inputs that are classified as Level 2 in the valuation hierarchy defined by the accounting guidance; and |
• | foreign currency contract agreements — fair values are determined through the use of models that consider various assumptions, including time value, yield curves, as well as other relevant economic measures, which are inputs that are classified as Level 2 in the valuation hierarchy defined by the accounting guidance. |
June 30, 2017 | December 31, 2016 | ||||||||||||
In millions | Recorded Amount | Fair Value | Recorded Amount | Fair Value | |||||||||
Variable rate debt | $ | 0.3 | $ | 0.3 | $ | 976.3 | $ | 976.3 | |||||
Fixed rate debt | 1,707.7 | 1,735.0 | 3,320.7 | 3,427.1 | |||||||||
Total debt | $ | 1,708.0 | $ | 1,735.3 | $ | 4,297.0 | $ | 4,403.4 | |||||
June 30, 2017 | ||||||||||||
In millions | Level 1 | Level 2 | Level 3 | Total | ||||||||
Recurring fair value measurements | ||||||||||||
Foreign currency contract liabilities | $ | — | $ | (29.1 | ) | $ | — | $ | (29.1 | ) | ||
Deferred compensation plan assets (1) | 40.5 | 5.8 | — | 46.3 | ||||||||
Total recurring fair value measurements | $ | 40.5 | $ | (23.3 | ) | $ | — | $ | 17.2 | |||
December 31, 2016 | ||||||||||||
In millions | Level 1 | Level 2 | Level 3 | Total | ||||||||
Recurring fair value measurements | ||||||||||||
Foreign currency contract assets | $ | — | $ | 5.5 | $ | — | $ | 5.5 | ||||
Foreign currency contract liabilities | — | (5.4 | ) | — | (5.4 | ) | ||||||
Deferred compensation plan assets (1) | 41.6 | 6.3 | — | 47.9 | ||||||||
Total recurring fair value measurements | $ | 41.6 | $ | 6.4 | $ | — | $ | 48.0 | ||||
Nonrecurring fair value measurements (2) | ||||||||||||
(1) | Deferred compensation plan assets include mutual funds, common/collective trusts and cash equivalents for payment of certain non-qualified benefits for retired, terminated and active employees. The fair value of mutual funds and cash equivalents were based on quoted market prices in active markets. The underlying investments in the common/collective trusts primarily include intermediate and long-term debt securities, corporate debt securities, equity securities and fixed income securities. The overall fair value of the common/collective trusts are based on observable inputs. |
(2) | During the fourth quarter of 2016, we completed our annual intangible assets impairment review. As a result, we recorded a pre-tax non-cash impairment charge of $13.3 million for a trade name intangible in 2016. The impairment charge reduced the carrying value of the impacted trade name intangible to $0. The fair value of trade names is measured using the relief-from-royalty method. This method assumes the trade name has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital. |
10. | Income Taxes |
11. | Benefit Plans |
U.S. pension plans | |||||||||||||
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Service cost | $ | 2.6 | $ | 2.8 | $ | 5.2 | $ | 5.6 | |||||
Interest cost | 4.1 | 4.1 | 8.2 | 8.2 | |||||||||
Expected return on plan assets | (2.9 | ) | (2.9 | ) | (5.8 | ) | (5.8 | ) | |||||
Net periodic benefit cost | $ | 3.8 | $ | 4.0 | $ | 7.6 | $ | 8.0 | |||||
Non-U.S. pension plans | Non-U.S. pension plans | ||||||||||||
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Service cost | $ | 1.8 | $ | 2.1 | $ | 3.6 | $ | 4.2 | |||||
Interest cost | 0.9 | 1.1 | 1.8 | 2.2 | |||||||||
Expected return on plan assets | (0.3 | ) | (0.4 | ) | (0.6 | ) | (0.8 | ) | |||||
Net periodic benefit cost | $ | 2.4 | $ | 2.8 | $ | 4.8 | $ | 5.6 | |||||
12. | Shareholders’ Equity |
13. | Segment Information |
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Net sales | |||||||||||||
Water | $ | 753.7 | $ | 761.7 | $ | 1,436.6 | $ | 1,427.4 | |||||
Electrical | 513.2 | 540.6 | 1,015.4 | 1,065.2 | |||||||||
Other | (1.6 | ) | (1.1 | ) | (3.2 | ) | (1.4 | ) | |||||
Consolidated | $ | 1,265.3 | $ | 1,301.2 | $ | 2,448.8 | $ | 2,491.2 | |||||
Segment income (loss) | |||||||||||||
Water | $ | 161.0 | $ | 153.6 | $ | 277.0 | $ | 254.8 | |||||
Electrical | 112.8 | 111.6 | 216.3 | 224.4 | |||||||||
Other | (18.6 | ) | (24.2 | ) | (54.6 | ) | (60.3 | ) | |||||
Consolidated | $ | 255.2 | $ | 241.0 | $ | 438.7 | $ | 418.9 | |||||
Three months ended | Six months ended | ||||||||||||
In millions | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||
Segment income | $ | 255.2 | $ | 241.0 | $ | 438.7 | $ | 418.9 | |||||
Restructuring and other | (17.4 | ) | (12.2 | ) | (38.3 | ) | (12.8 | ) | |||||
Intangible amortization | (24.6 | ) | (24.3 | ) | (48.6 | ) | (48.5 | ) | |||||
Loss of early extinguishment of debt | (101.4 | ) | — | (101.4 | ) | — | |||||||
Net interest expense | (25.3 | ) | (35.4 | ) | (60.3 | ) | (71.6 | ) | |||||
Income from continuing operations before income taxes | $ | 86.5 | $ | 169.1 | $ | 190.1 | $ | 286.0 | |||||
14. | Commitments and Contingencies |
In millions | June 30, 2017 | ||
Beginning balance | $ | 38.9 | |
Service and product warranty provision | 28.3 | ||
Payments | (28.3 | ) | |
Acquisitions | 1.6 | ||
Foreign currency translation | 0.5 | ||
Ending balance | $ | 41.0 | |
15. | Supplemental Guarantor Information |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | — | $ | — | $ | — | $ | 1,265.3 | $ | — | $ | 1,265.3 | ||||||
Cost of goods sold | — | — | — | 782.1 | — | 782.1 | ||||||||||||
Gross profit | — | — | — | 483.2 | — | 483.2 | ||||||||||||
Selling, general and administrative | 4.3 | 0.1 | 0.1 | 237.2 | — | 241.7 | ||||||||||||
Research and development | — | — | — | 28.7 | — | 28.7 | ||||||||||||
Operating income (loss) | (4.3 | ) | (0.1 | ) | (0.1 | ) | 217.3 | — | 212.8 | |||||||||
Loss (earnings) from continuing operations of investment in subsidiaries | (72.6 | ) | (72.7 | ) | (210.9 | ) | — | 356.2 | — | |||||||||
Other (income) expense: | ||||||||||||||||||
Equity income of unconsolidated subsidiaries | — | — | — | (0.4 | ) | — | (0.4 | ) | ||||||||||
Loss on early extinguishment of debt | — | — | 91.0 | 10.4 | — | 101.4 | ||||||||||||
Net interest expense | — | — | 21.9 | 3.4 | — | 25.3 | ||||||||||||
Income (loss) from continuing operations before income taxes | 68.3 | 72.6 | 97.9 | 203.9 | (356.2 | ) | 86.5 | |||||||||||
Provision for income taxes | — | — | — | 18.2 | — | 18.2 | ||||||||||||
Net income (loss) from continuing operations | 68.3 | 72.6 | 97.9 | 185.7 | (356.2 | ) | 68.3 | |||||||||||
Loss from discontinued operations, net of tax | — | — | — | (5.2 | ) | — | (5.2 | ) | ||||||||||
Gain from sale of discontinued operations, net of tax | — | — | — | 200.6 | — | 200.6 | ||||||||||||
Earnings (loss) from discontinued operations of investment in subsidiaries | 195.4 | 195.4 | 195.4 | — | (586.2 | ) | — | |||||||||||
Net income (loss) | $ | 263.7 | $ | 268.0 | $ | 293.3 | $ | 381.1 | $ | (942.4 | ) | $ | 263.7 | |||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | 263.7 | $ | 268.0 | $ | 293.3 | $ | 381.1 | $ | (942.4 | ) | $ | 263.7 | |||||
Changes in cumulative translation adjustment | 392.6 | 392.6 | 392.6 | 392.6 | (1,177.8 | ) | 392.6 | |||||||||||
Changes in market value of derivative financial instruments, net of tax | (0.9 | ) | (0.9 | ) | (0.9 | ) | (0.9 | ) | 2.7 | (0.9 | ) | |||||||
Comprehensive income (loss) | $ | 655.4 | $ | 659.7 | $ | 685.0 | $ | 772.8 | $ | (2,117.5 | ) | $ | 655.4 | |||||
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | — | $ | — | $ | — | $ | 2,448.8 | $ | — | $ | 2,448.8 | ||||||
Cost of goods sold | — | — | — | 1,543.3 | — | 1,543.3 | ||||||||||||
Gross profit | — | — | — | 905.5 | — | 905.5 | ||||||||||||
Selling, general and administrative | (3.8 | ) | 0.2 | 0.4 | 498.8 | — | 495.6 | |||||||||||
Research and development | — | — | — | 58.7 | — | 58.7 | ||||||||||||
Operating income (loss) | 3.8 | (0.2 | ) | (0.4 | ) | 348.0 | — | 351.2 | ||||||||||
Loss (earnings) from continuing operations of investment in subsidiaries | (145.2 | ) | (145.4 | ) | (312.3 | ) | — | 602.9 | — | |||||||||
Other (income) expense: | ||||||||||||||||||
Equity income of unconsolidated subsidiaries | — | — | — | (0.6 | ) | — | (0.6 | ) | ||||||||||
Loss on early extinguishment of debt | — | — | 91.0 | 10.4 | — | 101.4 | ||||||||||||
Net interest expense | — | — | 50.3 | 10.0 | — | 60.3 | ||||||||||||
Income (loss) from continuing operations before income taxes | 149.0 | 145.2 | 170.6 | 328.2 | (602.9 | ) | 190.1 | |||||||||||
Provision for income taxes | — | — | — | 41.1 | — | 41.1 | ||||||||||||
Net income (loss) from continuing operations | 149.0 | 145.2 | 170.6 | 287.1 | (602.9 | ) | 149.0 | |||||||||||
Loss from discontinued operations, net of tax | — | — | — | 1.9 | — | 1.9 | ||||||||||||
Gain from sale of discontinued operations, net of tax | — | — | — | 200.6 | — | 200.6 | ||||||||||||
Earnings (loss) from discontinued operations of investment in subsidiaries | 202.5 | 202.5 | 202.5 | — | (607.5 | ) | — | |||||||||||
Net income (loss) | $ | 351.5 | $ | 347.7 | $ | 373.1 | $ | 489.6 | $ | (1,210.4 | ) | $ | 351.5 | |||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | 351.5 | $ | 347.7 | $ | 373.1 | $ | 489.6 | $ | (1,210.4 | ) | $ | 351.5 | |||||
Changes in cumulative translation adjustment | 468.3 | 468.3 | 468.3 | 468.3 | (1,404.9 | ) | 468.3 | |||||||||||
Changes in market value of derivative financial instruments, net of tax | 0.7 | 0.7 | 0.7 | 0.7 | (2.1 | ) | 0.7 | |||||||||||
Comprehensive income (loss) | $ | 820.5 | $ | 816.7 | $ | 842.1 | $ | 958.6 | $ | (2,617.4 | ) | $ | 820.5 | |||||
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | 0.1 | $ | — | $ | 51.0 | $ | 126.7 | $ | — | $ | 177.8 | ||||||
Accounts and notes receivable, net | 3.4 | — | — | 761.1 | — | 764.5 | ||||||||||||
Inventories | — | — | — | 565.4 | — | 565.4 | ||||||||||||
Other current assets | 2.3 | 1.9 | — | 239.9 | 3.0 | 247.1 | ||||||||||||
Total current assets | 5.8 | 1.9 | 51.0 | 1,693.1 | 3.0 | 1,754.8 | ||||||||||||
Property, plant and equipment, net | — | — | — | 550.9 | — | 550.9 | ||||||||||||
Other assets | ||||||||||||||||||
Investments in subsidiaries | 4,821.0 | 4,819.2 | 7,078.4 | — | (16,718.6 | ) | — | |||||||||||
Goodwill | — | — | — | 4,314.2 | — | 4,314.2 | ||||||||||||
Intangibles, net | — | — | — | 1,624.3 | — | 1,624.3 | ||||||||||||
Other non-current assets | 195.4 | 1.2 | 570.6 | 985.8 | (1,328.1 | ) | 424.9 | |||||||||||
Total other assets | 5,016.4 | 4,820.4 | 7,649.0 | 6,924.3 | (18,046.7 | ) | 6,363.4 | |||||||||||
Total assets | $ | 5,022.2 | $ | 4,822.3 | $ | 7,700.0 | $ | 9,168.3 | $ | (18,043.7 | ) | $ | 8,669.1 | |||||
Liabilities and Equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Current maturities of long-term debt and short-term borrowings | $ | — | $ | — | $ | — | $ | 0.3 | $ | — | $ | 0.3 | ||||||
Accounts payable | 0.3 | — | — | 407.5 | — | 407.8 | ||||||||||||
Employee compensation and benefits | 0.1 | — | — | 143.7 | — | 143.8 | ||||||||||||
Other current liabilities | 83.4 | 1.3 | 21.4 | 387.4 | 3.0 | 496.5 | ||||||||||||
Total current liabilities | 83.8 | 1.3 | 21.4 | 938.9 | 3.0 | 1,048.4 | ||||||||||||
Other liabilities | ||||||||||||||||||
Long-term debt | — | — | 2,834.0 | 193.0 | (1,328.1 | ) | 1,698.9 | |||||||||||
Pension and other post-retirement compensation and benefits | — | — | — | 268.4 | — | 268.4 | ||||||||||||
Deferred tax liabilities | — | — | — | 546.5 | — | 546.5 | ||||||||||||
Other non-current liabilities | 34.9 | — | — | 168.5 | — | 203.4 | ||||||||||||
Total liabilities | 118.7 | 1.3 | 2,855.4 | 2,115.3 | (1,325.1 | ) | 3,765.6 | |||||||||||
Equity | 4,903.5 | 4,821.0 | 4,844.6 | 7,053.0 | (16,718.6 | ) | 4,903.5 | |||||||||||
Total liabilities and equity | $ | 5,022.2 | $ | 4,822.3 | $ | 7,700.0 | $ | 9,168.3 | $ | (18,043.7 | ) | $ | 8,669.1 | |||||
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Operating activities | ||||||||||||||||||
Net cash provided by (used for) operating activities | $ | 165.8 | $ | 347.1 | $ | 378.1 | $ | 474.7 | $ | (1,210.4 | ) | $ | 155.3 | |||||
Investing activities | ||||||||||||||||||
Capital expenditures | — | — | — | (37.6 | ) | — | (37.6 | ) | ||||||||||
Proceeds from sale of property and equipment | — | — | — | 3.8 | — | 3.8 | ||||||||||||
Proceeds from sale of businesses, net | — | — | 2,765.6 | — | — | 2,765.6 | ||||||||||||
Acquisitions, net of cash acquired | — | — | — | (59.5 | ) | — | (59.5 | ) | ||||||||||
Net intercompany loan activity | — | — | 170.1 | 256.2 | (426.3 | ) | — | |||||||||||
Net cash provided by (used for) investing activities of continuing operations | — | — | 2,935.7 | 162.9 | (426.3 | ) | 2,672.3 | |||||||||||
Net cash provided by (used for) investing activities of discontinued operations | — | — | — | (6.5 | ) | — | (6.5 | ) | ||||||||||
Net cash provided by (used for) investing activities | — | — | 2,935.7 | 156.4 | (426.3 | ) | 2,665.8 | |||||||||||
Financing activities | ||||||||||||||||||
Net repayments of short-term borrowings | — | — | — | (0.5 | ) | — | (0.5 | ) | ||||||||||
Net repayments of commercial paper and revolving long-term debt | — | — | (298.7 | ) | (676.8 | ) | — | (975.5 | ) | |||||||||
Repayments of long-term debt | — | — | (1,567.8 | ) | (91.5 | ) | — | (1,659.3 | ) | |||||||||
Premium paid on early extinguishment of debt | — | — | (86.0 | ) | (8.9 | ) | — | (94.9 | ) | |||||||||
Net change in advances to subsidiaries | (5.7 | ) | (347.1 | ) | (1,356.7 | ) | 72.8 | 1,636.7 | — | |||||||||
Shares issued to employees, net of shares withheld | 2.8 | — | — | 26.7 | — | 29.5 | ||||||||||||
Repurchases of ordinary shares | (100.0 | ) | — | — | — | — | (100.0 | ) | ||||||||||
Dividends paid | (62.8 | ) | — | — | (63.3 | ) | — | (126.1 | ) | |||||||||
Net cash provided by (used for) financing activities | (165.7 | ) | (347.1 | ) | (3,309.2 | ) | (741.5 | ) | 1,636.7 | (2,926.8 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 46.4 | (1.4 | ) | — | 45.0 | |||||||||||
Change in cash and cash equivalents | 0.1 | — | 51.0 | (111.8 | ) | — | (60.7 | ) | ||||||||||
Cash and cash equivalents, beginning of period | — | — | — | 238.5 | — | 238.5 | ||||||||||||
Cash and cash equivalents, end of period | $ | 0.1 | $ | — | $ | 51.0 | $ | 126.7 | $ | — | $ | 177.8 | ||||||
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | — | $ | — | $ | — | $ | 1,301.2 | $ | — | $ | 1,301.2 | ||||||
Cost of goods sold | — | — | — | 819.4 | — | 819.4 | ||||||||||||
Gross profit | — | — | — | 481.8 | — | 481.8 | ||||||||||||
Selling, general and administrative | — | — | — | 249.7 | — | 249.7 | ||||||||||||
Research and development | — | — | — | 28.7 | — | 28.7 | ||||||||||||
Operating income | 203.4 | — | 203.4 | |||||||||||||||
Loss (earnings) from continuing operations of investment in subsidiaries | (132.6 | ) | (132.6 | ) | (161.4 | ) | — | 426.6 | — | |||||||||
Other (income) expense: | ||||||||||||||||||
Equity income of unconsolidated subsidiaries | — | — | — | (1.1 | ) | — | (1.1 | ) | ||||||||||
Net interest expense | — | — | 28.8 | 6.6 | — | 35.4 | ||||||||||||
Income (loss) from continuing operations before income taxes | 132.6 | 132.6 | 132.6 | 197.9 | (426.6 | ) | 169.1 | |||||||||||
Provision (benefit) for income taxes | (0.1 | ) | — | — | 36.5 | — | 36.4 | |||||||||||
Net income (loss) from continuing operations | 132.7 | 132.6 | 132.6 | 161.4 | (426.6 | ) | 132.7 | |||||||||||
Income from discontinued operations, net of tax | — | — | — | 10.1 | — | 10.1 | ||||||||||||
Earnings (loss) from discontinued operations of investment in subsidiaries | 10.1 | 10.1 | 10.1 | — | (30.3 | ) | — | |||||||||||
Net income (loss) | $ | 142.8 | $ | 142.7 | $ | 142.7 | $ | 171.5 | $ | (456.9 | ) | $ | 142.8 | |||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | 142.8 | $ | 142.7 | $ | 142.7 | $ | 171.5 | $ | (456.9 | ) | $ | 142.8 | |||||
Changes in cumulative translation adjustment | (25.8 | ) | (25.8 | ) | (25.8 | ) | (25.8 | ) | 77.4 | (25.8 | ) | |||||||
Changes in market value of derivative financial instruments, net of tax | 10.9 | 10.9 | 10.9 | 10.9 | (32.7 | ) | 10.9 | |||||||||||
Comprehensive income (loss) | $ | 127.9 | $ | 127.8 | $ | 127.8 | $ | 156.6 | $ | (412.2 | ) | $ | 127.9 | |||||
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | — | $ | — | $ | — | $ | 2,491.2 | $ | — | $ | 2,491.2 | ||||||
Cost of goods sold | — | — | — | 1,578.1 | — | 1,578.1 | ||||||||||||
Gross profit | — | — | — | 913.1 | — | 913.1 | ||||||||||||
Selling, general and administrative | 7.1 | — | 0.9 | 491.8 | — | 499.8 | ||||||||||||
Research and development | — | — | — | 57.2 | — | 57.2 | ||||||||||||
Operating income (loss) | (7.1 | ) | — | (0.9 | ) | 364.1 | — | 356.1 | ||||||||||
Loss (earnings) from continuing operations of investment in subsidiaries | (231.5 | ) | (231.5 | ) | (288.6 | ) | — | 751.6 | — | |||||||||
Other (income) expense: | ||||||||||||||||||
Equity income of unconsolidated subsidiaries | — | — | — | (1.5 | ) | — | (1.5 | ) | ||||||||||
Net interest expense | — | — | 56.2 | 15.4 | — | 71.6 | ||||||||||||
Income (loss) from continuing operations before income taxes | 224.4 | 231.5 | 231.5 | 350.2 | (751.6 | ) | 286.0 | |||||||||||
Provision (benefit) for income taxes | (0.1 | ) | — | — | 61.6 | — | 61.5 | |||||||||||
Net income (loss) from continuing operations | 224.5 | 231.5 | 231.5 | 288.6 | (751.6 | ) | 224.5 | |||||||||||
Income from discontinued operations, net of tax | — | — | — | 25.7 | — | 25.7 | ||||||||||||
Earnings (loss) from discontinued operations of investment in subsidiaries | 25.7 | 25.7 | 25.7 | — | (77.1 | ) | — | |||||||||||
Net income (loss) | $ | 250.2 | $ | 257.2 | $ | 257.2 | $ | 314.3 | $ | (828.7 | ) | $ | 250.2 | |||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | 250.2 | $ | 257.2 | $ | 257.2 | $ | 314.3 | $ | (828.7 | ) | $ | 250.2 | |||||
Changes in cumulative translation adjustment | 2.2 | 2.2 | 2.2 | 2.2 | (6.6 | ) | 2.2 | |||||||||||
Changes in market value of derivative financial instruments, net of tax | (3.8 | ) | (3.8 | ) | (3.8 | ) | (3.8 | ) | 11.4 | (3.8 | ) | |||||||
Comprehensive income (loss) | $ | 248.6 | $ | 255.6 | $ | 255.6 | $ | 312.7 | $ | (823.9 | ) | $ | 248.6 | |||||
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | — | $ | 238.5 | $ | — | $ | 238.5 | ||||||
Accounts and notes receivable, net | 0.1 | — | — | 763.9 | — | 764.0 | ||||||||||||
Inventories | — | — | — | 524.2 | — | 524.2 | ||||||||||||
Other current assets | 1.2 | 4.1 | 1.1 | 237.8 | 9.2 | 253.4 | ||||||||||||
Current assets held for sale | — | — | — | 891.9 | — | 891.9 | ||||||||||||
Total current assets | 1.3 | 4.1 | 1.1 | 2,656.3 | 9.2 | 2,672.0 | ||||||||||||
Property, plant and equipment, net | — | — | — | 538.6 | — | 538.6 | ||||||||||||
Other assets | ||||||||||||||||||
Investments in subsidiaries | 4,509.5 | 4,471.4 | 9,295.5 | — | (18,276.4 | ) | — | |||||||||||
Goodwill | — | — | — | 4,217.4 | — | 4,217.4 | ||||||||||||
Intangibles, net | — | — | — | 1,631.8 | — | 1,631.8 | ||||||||||||
Other non-current assets | 2.2 | 35.2 | 717.8 | 1,568.9 | (2,142.0 | ) | 182.1 | |||||||||||
Non-current assets held for sale | — | — | — | 2,292.9 | — | 2,292.9 | ||||||||||||
Total other assets | 4,511.7 | 4,506.6 | 10,013.3 | 9,711.0 | (20,418.4 | ) | 8,324.2 | |||||||||||
Total assets | $ | 4,513.0 | $ | 4,510.7 | $ | 10,014.4 | $ | 12,905.9 | $ | (20,409.2 | ) | $ | 11,534.8 | |||||
Liabilities and Equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Current maturities of long-term debt and short-term borrowings | $ | — | $ | — | $ | — | $ | 0.8 | $ | — | $ | 0.8 | ||||||
Accounts payable | 0.7 | — | 0.1 | 435.8 | — | 436.6 | ||||||||||||
Employee compensation and benefits | 0.8 | — | — | 165.3 | — | 166.1 | ||||||||||||
Other current liabilities | 95.2 | 1.2 | 26.7 | 379.2 | 9.2 | 511.5 | ||||||||||||
Current liabilities held for sale | — | — | — | 356.2 | — | 356.2 | ||||||||||||
Total current liabilities | 96.7 | 1.2 | 26.8 | 1,337.3 | 9.2 | 1,471.2 | ||||||||||||
Other liabilities | ||||||||||||||||||
Long-term debt | 148.1 | — | 5,515.9 | 756.4 | (2,142.0 | ) | 4,278.4 | |||||||||||
Pension and other post-retirement compensation and benefits | — | — | — | 253.4 | — | 253.4 | ||||||||||||
Deferred tax liabilities | — | — | — | 609.5 | — | 609.5 | ||||||||||||
Other non-current liabilities | 13.8 | — | — | 148.2 | — | 162.0 | ||||||||||||
Non-current liabilities held for sale | — | — | — | 505.9 | — | 505.9 | ||||||||||||
Total liabilities | 258.6 | 1.2 | 5,542.7 | 3,610.7 | (2,132.8 | ) | 7,280.4 | |||||||||||
Equity | 4,254.4 | 4,509.5 | 4,471.7 | 9,295.2 | (18,276.4 | ) | 4,254.4 | |||||||||||
Total liabilities and equity | $ | 4,513.0 | $ | 4,510.7 | $ | 10,014.4 | $ | 12,905.9 | $ | (20,409.2 | ) | $ | 11,534.8 | |||||
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Operating activities | ||||||||||||||||||
Net cash provided by (used for) operating activities | $ | 269.2 | $ | 241.3 | $ | 268.6 | $ | 419.2 | $ | (828.8 | ) | $ | 369.5 | |||||
Investing activities | ||||||||||||||||||
Capital expenditures | — | — | — | (64.0 | ) | — | (64.0 | ) | ||||||||||
Proceeds from sale of property and equipment | — | — | — | 7.6 | — | 7.6 | ||||||||||||
Net intercompany loan activity | — | — | 431.2 | (65.4 | ) | (365.8 | ) | — | ||||||||||
Other | — | — | — | (3.7 | ) | — | (3.7 | ) | ||||||||||
Net cash provided by (used for) investing activities of continuing operations | — | — | 431.2 | (125.5 | ) | (365.8 | ) | (60.1 | ) | |||||||||
Net cash provided by (used for) investing activities of discontinued operations | — | — | — | (8.0 | ) | — | (8.0 | ) | ||||||||||
Net cash provided by (used for) investing activities | — | — | 431.2 | (133.5 | ) | (365.8 | ) | (68.1 | ) | |||||||||
Financing activities | ||||||||||||||||||
Net repayments of commercial paper and revolving long-term debt | — | — | (123.1 | ) | (16.7 | ) | — | (139.8 | ) | |||||||||
Repayments of long-term debt | — | — | — | (0.7 | ) | — | (0.7 | ) | ||||||||||
Net change in advances to subsidiaries | (157.8 | ) | (241.3 | ) | (579.5 | ) | (215.9 | ) | 1,194.5 | — | ||||||||
Excess tax benefits from share-based compensation | — | — | — | 3.2 | — | 3.2 | ||||||||||||
Shares issued to employees, net of shares withheld | 8.3 | — | — | — | — | 8.3 | ||||||||||||
Dividends paid | (119.7 | ) | — | — | — | — | (119.7 | ) | ||||||||||
Net cash provided by (used for) financing activities | (269.2 | ) | (241.3 | ) | (702.6 | ) | (230.1 | ) | 1,194.5 | (248.7 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 2.8 | (8.5 | ) | — | (5.7 | ) | ||||||||||
Change in cash and cash equivalents | — | — | — | 47.1 | (0.1 | ) | 47.0 | |||||||||||
Cash and cash equivalents, beginning of period | — | — | 0.1 | 126.2 | — | 126.3 | ||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | — | $ | 0.1 | $ | 173.3 | $ | (0.1 | ) | $ | 173.3 | |||||
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Water — The Water segment designs, manufactures and services innovative products and solutions to meet filtration, separation, flow and water management challenges in agriculture, aquaculture, foodservice, food and beverage processing, swimming pools, water supply and disposal and a variety of industrial applications. |
• | Electrical — The Electrical segment designs, manufactures and services products that protect some of the world’s most sensitive equipment, as well as heat management solutions designed to provide thermal protection to temperature sensitive fluid applications and engineered electrical and fastening products for electrical, mechanical and civil applications. |
• | Despite the favorable long-term outlook for our end-markets, we experience differing levels of volatility depending on the end-market and may continue to do so over the medium and longer term. During 2016 and the first six months of 2017, our core sales have been challenged by broad-based industrial capital expenditure and maintenance deferrals. Although we saw early signs of recovery in the first six months of 2017, we expect this challenge to continue throughout 2017. |
• | We continue to experience declines in project orders, particularly within the energy and infrastructure businesses. We expect headwinds in the energy and infrastructure businesses to continue throughout 2017. |
• | We continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business to offset the negative earnings impact of core revenue decline and foreign exchange. We expect these actions will contribute to margin growth in 2017. |
• | Our results were negatively impacted due to unfavorable foreign currency effects in 2016 and continuing in the first six months of 2017. We expect this trend to continue throughout 2017. |
• | We have identified specific product and geographic market opportunities that we find attractive and continue to pursue, both within and outside the United States. We are reinforcing our businesses to more effectively address these opportunities through research and development and additional sales and marketing resources. Unless we successfully penetrate these markets, our core sales growth will likely be limited or may decline. |
• | We have experienced material and other cost inflation. We strive for productivity improvements, and we implement increases in selling prices to help mitigate this inflation. We expect the current economic environment will result in continuing price volatility for many of our raw materials, and we are uncertain as to the timing and impact of these market changes. |
• | Reducing long-term debt and overall leverage through improved cash flow performance; |
• | Driving operating excellence through lean enterprise initiatives, with specific focus on sourcing and supply management, cash flow management and lean operations; |
• | Achieving differentiated revenue growth through new products and global and market expansion; |
• | Optimizing our technological capabilities to increasingly generate innovative new products; and |
• | Focusing on developing global talent in light of our global presence. |
Three months ended | |||||||||||
In millions | June 30, 2017 | June 30, 2016 | $ change | % / point change | |||||||
Net sales | $ | 1,265.3 | $ | 1,301.2 | $ | (35.9 | ) | (2.8 | )% | ||
Cost of goods sold | 782.1 | 819.4 | (37.3 | ) | (4.6 | )% | |||||
Gross profit | 483.2 | 481.8 | 1.4 | 0.3 | % | ||||||
% of net sales | 38.2 | % | 37.0 | % | 1.2 | pts | |||||
Selling, general and administrative | 241.7 | 249.7 | (8.0 | ) | (3.2 | )% | |||||
% of net sales | 19.1 | % | 19.2 | % | (0.1 | ) pts | |||||
Research and development | 28.7 | 28.7 | — | — | |||||||
% of net sales | 2.3 | % | 2.2 | % | 0.1 | pts | |||||
Operating income | 212.8 | 203.4 | 9.4 | 4.6 | % | ||||||
% of net sales | 16.8 | % | 15.6 | % | 1.2 | pts | |||||
Loss on early extinguishment of debt | 101.4 | — | 101.4 | N.M. | |||||||
Net interest expense | 25.3 | 35.4 | (10.1 | ) | (28.5 | )% | |||||
Income from continuing operations before income taxes | 86.5 | 169.1 | (82.6 | ) | (48.8 | )% | |||||
Provision for income taxes | 18.2 | 36.4 | (18.2 | ) | (50.0 | )% | |||||
Effective tax rate | 21.0 | % | 21.5 | % | (0.5 | ) pts | |||||
Six months ended | |||||||||||
In millions | June 30, 2017 | June 30, 2016 | $ change | % / point change | |||||||
Net sales | $ | 2,448.8 | $ | 2,491.2 | $ | (42.4 | ) | (1.7 | )% | ||
Cost of goods sold | 1,543.3 | 1,578.1 | (34.8 | ) | (2.2 | )% | |||||
Gross profit | 905.5 | 913.1 | (7.6 | ) | (0.8 | )% | |||||
% of net sales | 37.0 | % | 36.7 | % | 0.3 | pts | |||||
Selling, general and administrative | 495.6 | 499.8 | (4.2 | ) | (0.8 | )% | |||||
% of net sales | 20.2 | % | 20.1 | % | 0.1 | pts | |||||
Research and development | 58.7 | 57.2 | 1.5 | 2.6 | % | ||||||
% of net sales | 2.4 | % | 2.3 | % | 0.1 | pts | |||||
Operating income | 351.2 | 356.1 | (4.9 | ) | (1.4 | )% | |||||
% of net sales | 14.3 | % | 14.3 | % | —% | ||||||
Loss on early extinguishment of debt | 101.4 | — | 101.4 | N.M | |||||||
Net interest expense | 60.3 | 71.6 | (11.3 | ) | (15.8 | )% | |||||
Income from continuing operations before income taxes | 190.1 | 286.0 | (95.9 | ) | (33.5 | )% | |||||
Provision for income taxes | 41.1 | 61.5 | (20.4 | ) | (33.2 | )% | |||||
Effective tax rate | 21.6 | % | 21.5 | % | 0.1 | pts | |||||
Three months ended June 30, 2017 | Six months ended June 30, 2017 | |||
over the prior year period | over the prior year period | |||
Volume | (3.6 | )% | (2.7 | )% |
Price | 0.5 | 0.8 | ||
Core growth | (3.1 | ) | (1.9 | ) |
Acquisition | 1.1 | 0.8 | ||
Currency | (0.8 | ) | (0.6 | ) |
Total | (2.8 | )% | (1.7 | )% |
• | continued slowdown in capital spending, particularly in the energy and infrastructure businesses, driving lower project core sales volume; |
• | large job adjustments to net sales of $9.7 million in the first half of 2017; and |
• | unfavorable foreign currency effects for the three and six months ended June 30, 2017. |
• | core sales growth in our residential & commercial business, primarily as a result of increased volumes in the U.S.; |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | increased sales related to business acquisitions that occurred in the fourth quarter of 2016 and the first quarter of 2017. |
• | higher contribution margin as a result of savings generated from our Pentair Integrated Management System ("PIMS") initiatives including lean and supply management practices; |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | favorable mix as a result of the decline in lower margin project sales in the second quarter and first half of 2017, compared to the second quarter and first half of 2016. |
• | lower project core sales volumes in the Electrical segment, which resulted in decreased leverage on fixed expenses included in cost of goods sold; and |
• | large job adjustments negatively impacting gross profit by $16.4 million in the first half of 2017. |
• | cost control and savings generated from back-office consolidation, reduction in personnel and other lean initiatives. |
• | increased investment in sales and marketing to drive growth. |
• | restructuring costs of $33.7 million in the first six months of 2017, compared to $12.6 million in the first six months of 2016; and |
• | increased investment in sales and marketing to drive growth. |
• | benefit from the reversal of a $13.3 million indemnification liability in the first quarter of 2017 related to our 2012 transaction with Tyco (now known as Johnson Controls International plc); and |
• | cost control and savings generated from back-office consolidation, reduction in personnel and other lean initiatives. |
• | the impact of lower debt levels during the second quarter and first half of 2017, compared to the second quarter and first half of 2016. In May 2017, the proceeds from the sale of the Valves & Controls business were utilized to repay all commercial paper and revolving long term debt and for the early extinguishment of $1,659.3 million of certain series of fixed rate debt. |
• | increased overall interest rates in effect on our outstanding debt during the second quarter and first half of 2017, compared to the second quarter and first half of 2016. |
• | non-recurring benefits related to resolution of tax disputes and expiration of statutes of limitations during the first half of 2016 that did not recur in the first half of 2017; and |
Three months ended | Six months ended | ||||||||||||||||||
In millions | June 30, 2017 | June 30, 2016 | % / point change | June 30, 2017 | June 30, 2016 | % / point change | |||||||||||||
Net sales | $ | 753.7 | $ | 761.7 | (1.1 | )% | $ | 1,436.6 | $ | 1,427.4 | 0.6 | % | |||||||
Segment income | 161.0 | 153.6 | 4.8 | % | 277.0 | 254.8 | 8.7 | % | |||||||||||
% of net sales | 21.4 | % | 20.2 | % | 1.2 | pts | 19.3 | % | 17.9 | % | 1.4 | pts | |||||||
Three months ended June 30, 2017 | Six months ended June 30, 2017 | |||
over the prior year period | over the prior year period | |||
Volume | (2.8 | )% | (1.0 | )% |
Price | 0.9 | 1.1 | ||
Core growth | (1.9 | ) | 0.1 | |
Acquisition | 1.3 | 0.9 | ||
Currency | (0.5 | ) | (0.4 | ) |
Total | (1.1 | )% | 0.6 | % |
• | core sales declines in our food & beverage vertical due to customer delays in capital spending; and |
• | unfavorable foreign currency effects during the three months ended June 30, 2017. |
• | core sales growth in our residential & commercial business, primarily as a result of increased volumes in the U.S.; |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | increased sales related to business acquisitions that occurred in the fourth quarter of 2016 and the first quarter of 2017. |
• | core sales growth in our residential & commercial business, primarily as a result of increased volumes in the U.S.; |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | increased sales related to business acquisitions that occurred in the fourth quarter of 2016 and the first quarter of 2017. |
• | core sales declines in our industrial and food & beverage verticals due to customer delays in capital spending; |
• | unfavorable foreign currency effects during the six months ended June 30, 2017; and |
• | large job adjustments to net sales of $9.7 million in the first half of 2017. |
Three months ended June 30, 2017 | Six months ended June 30, 2017 | |||
over the prior year period | over the prior year period | |||
Growth | (0.6) pts | (0.7) pts | ||
Acquisition | (0.1 | ) | (0.1 | ) |
Inflation | (1.0 | ) | (1.2 | ) |
Productivity/Price | 2.9 | 3.4 | ||
Total | 1.2 | pts | 1.4 | pts |
• | savings generated from our PIMS initiatives including lean and supply management practices; |
• | cost control and savings generated from back-office consolidation, reduction in personnel and other lean initiatives; and |
• | selective increases in selling prices to mitigate inflationary cost increases. |
• | lower core sales volume in our industrial and food & beverage verticals, which resulted in decreased leverage on operating expenses. |
Three months ended | Six months ended | ||||||||||||||||||
In millions | June 30, 2017 | June 30, 2016 | % / point change | June 30, 2017 | June 30, 2016 | % / point change | |||||||||||||
Net sales | $ | 513.2 | $ | 540.6 | (5.1 | )% | $ | 1,015.4 | $ | 1,065.2 | (4.7 | )% | |||||||
Segment income | 112.8 | 111.6 | 1.1 | % | 216.3 | 224.4 | (3.6 | )% | |||||||||||
% of net sales | 22.0 | % | 20.6 | % | 1.4 | pts | 21.3 | % | 21.1 | % | 0.2 | pts | |||||||
Three months ended June 30, 2017 | Six months ended June 30, 2017 | |||
over the prior year period | over the prior year period | |||
Volume | (4.7 | )% | (4.8 | )% |
Price | — | 0.2 | ||
Core growth | (4.7 | ) | (4.6 | ) |
Acquisition | 0.8 | 0.7 | ||
Currency | (1.2 | ) | (0.8 | ) |
Total | (5.1 | )% | (4.7 | )% |
• | core sales declines in the energy and infrastructure businesses, driven by lower project core sales volume for the three and six months ended June 30, 2017; and |
• | unfavorable foreign currency effects during the three and six months ended June 30, 2017. |
• | core sales growth in our industrial and residential & commercial businesses; and |
• | increased sales related to a business acquisition that occurred in the first quarter of 2017. |
Three months ended June 30, 2017 | Six months ended June 30, 2017 | |||
over the prior year period | over the prior year period | |||
Growth | 1.1 pts | (0.3) pts | ||
Inflation | (1.9 | ) | (1.9 | ) |
Productivity/Price | 2.2 | 2.4 | ||
Total | 1.4 | pts | 0.2 | pts |
• | savings generated from our PIMS initiatives including lean and supply management practices; |
• | favorable mix as a result of the decline in lower margin project sales in the second quarter and first half of 2017, compared to the second quarter and first half of 2016; |
• | cost control and savings generated from back-office consolidation, reduction in personnel and other lean initiatives; and |
• | higher core sales in our industrial and residential & commercial businesses during the three and six months ended June 30, 2017, which resulted in increased leverage on operating expenses. |
• | inflationary increases related to labor costs and certain raw materials; and |
• | lower core sales volumes in our energy and infrastructure businesses, which resulted in decreased leverage on operating expenses. |
Q3-Q4 | ||||||||||||||||||||||||
In millions | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | ||||||||||||||||
Debt obligations | $ | 0.3 | $ | 255.3 | $ | 1,167.0 | $ | 74.0 | $ | 103.8 | $ | 88.3 | $ | 19.3 | $ | 1,708.0 | ||||||||
Interest obligations on fixed-rate debt | $ | 29.9 | $ | 39.3 | $ | 31.9 | $ | 11.4 | $ | 6.2 | $ | 3.6 | $ | 2.4 | $ | 124.7 | ||||||||
Six months ended | ||||||
In millions | June 30, 2017 | June 30, 2016 | ||||
Net cash provided by (used for) operating activities of continuing operations | $ | 210.9 | $ | 320.9 | ||
Capital expenditures of continuing operations | (37.6 | ) | (64.0 | ) | ||
Proceeds from sale of property and equipment of continuing operations | 3.8 | 7.6 | ||||
Free cash flow from continuing operations | $ | 177.1 | $ | 264.5 | ||
Net cash provided by (used for) operating activities of discontinued operations | (55.6 | ) | 48.6 | |||
Capital expenditures of discontinued operations | (6.8 | ) | (10.6 | ) | ||
Proceeds from sale of property and equipment of discontinued operations | 0.3 | 1.9 | ||||
Free cash flow | $ | 115.0 | $ | 304.4 | ||
• | execution of the proposed spin-off will require significant time and attention from management, which may distract management from the operation of our businesses and the execution of other initiatives that may have been beneficial to us; |
• | our employees may also be distracted due to uncertainty about their future roles with each of the separate companies pending the completion of the spin-off; |
• | some of our suppliers or customers may delay or defer decisions or may end their relationships with us or our Electrical business; |
• | we will be required to pay certain costs and expenses relating to the spin-off, such as legal, accounting and other professional fees, whether or not it is completed; |
• | we may experience negative reactions from the financial markets if we fail to complete the spin-off or fail to complete it on a timely basis. |
• | diversion of management time and attention from daily operations; |
• | difficulties integrating acquired businesses, technologies and personnel into our business; |
• | difficulties in obtaining and verifying the financial statements and other business information of acquired businesses; |
• | inability to obtain required regulatory approvals; |
• | potential loss of key employees, key contractual relationships or key customers of acquired companies or of ours; |
• | assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including risks related to the U.S. Foreign Corrupt Practices Act (the "FCPA"); and |
• | dilution of interests of holders of our shares through the issuance of equity securities or equity-linked securities. |
• | changes in general economic and political conditions in countries where we operate, particularly in emerging markets; |
• | relatively more severe economic conditions in some international markets than in the United States; |
• | the difficulty of enforcing agreements and collecting receivables through foreign legal systems; |
• | the difficulty of communicating and monitoring standards and directives across our global network of after-market service centers and manufacturing facilities; |
• | trade protection measures and import or export licensing requirements and restrictions; |
• | the possibility of terrorist action affecting us or our operations; |
• | the threat of nationalization and expropriation; |
• | the imposition of tariffs, exchange controls or other trade restrictions; |
• | difficulty in staffing and managing widespread operations in non-U.S. labor markets; |
• | changes in tax treaties, laws or rulings that could have an adverse impact on our effective tax rate; |
• | limitations on repatriation of earnings; |
• | the difficulty of protecting intellectual property in non-U.S. countries; and |
• | changes in and required compliance with a variety of non-U.S. laws and regulations. |
• | actual or anticipated fluctuations in our operating results due to factors related to our business; |
• | success or failure of our business strategy; |
• | our quarterly or annual earnings, or those of other companies in our industry; |
• | our ability to obtain third-party financing as needed; |
• | announcements by us or our competitors of significant acquisitions or dispositions; |
• | changes in accounting standards, policies, guidance, interpretations or principles; |
• | changes in earnings estimates by us or securities analysts or our ability to meet those estimates; |
• | the operating and share price performance of other comparable companies; |
• | investor perception of us; |
• | natural or other environmental disasters that investors believe may affect us; |
• | overall market fluctuations; |
• | results from any material litigation, including asbestos claims, government investigations or environmental liabilities; |
• | changes in laws and regulations affecting our business; and |
• | general economic conditions and other external factors. |
(a) | (b) | (c) | (d) | |||||||
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Dollar value of shares that may yet be purchased under the plans or programs | ||||||
April 1 - April 29 | 1,974 | $ | 62.98 | — | $ | 800,000,049 | ||||
April 30 - May 27 | 1,534,604 | $ | 65.34 | 1,529,887 | $ | 700,000,054 | ||||
May 28 - June 30 | 782 | $ | 66.37 | — | $ | 700,000,054 | ||||
Total | 1,537,360 | 1,529,887 | ||||||||
(a) | The purchases in this column include 1,974 shares for the period April 1 - April 29, 4,717 shares for the period April 30 - May 27 and 782 shares for the period May 28 - June 30 deemed surrendered to us by participants in our 2012 Stock and Incentive Plan (the "2012 Plan") and earlier stock incentive plans that are now outstanding under the 2012 Plan (collectively "the Plans") to satisfy the exercise price or withholding of tax obligations related to the exercise of stock options and vesting of restricted and performance shares. |
(b) | The average price paid in this column includes shares deemed surrendered to us by participants in the Plans to satisfy the exercise price for the exercise price of stock options and withholding tax obligations due upon stock option exercises and vesting of restricted and performance shares. |
(c) | The number of shares in this column represents the number of shares repurchased as part of our publicly announced plans to repurchase our ordinary shares up to a maximum dollar limit of $1.0 billion. |
(d) | In December 2014, our Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $1.0 billion. This authorization expires on December 31, 2019. We have $700.0 million remaining availability for repurchases under the 2014 authorization. |
Pentair plc | ||
Registrant | ||
By | /s/ John L. Stauch | |
John L. Stauch | ||
Executive Vice President and Chief Financial Officer | ||
By | /s/ Mark C. Borin | |
Mark C. Borin | ||
Senior Vice President, Chief Accounting Officer and Treasurer | ||
3.1 | Amended and Restated Memorandum and Articles of Association of Pentair plc (Incorporated by reference to Exhibit 3.1 in the Current Report on Form 8-K of Pentair plc filed with the Commission on May 9, 2017 (File No. 001-11625)). | |
4.1 | Seventh Supplemental Indenture, dated as of May 26, 2017, among Pentair Finance S.A., Pentair plc, Pentair Investments Switzerland GmbH and Wells Fargo Bank, National Association as trustee (Incorporated by reference to Exhibit 4.1 in the Current Report on Form 8-K of Pentair plc filed with the Commission on May 31, 2017 (File No. 001-11625)). | |
4.2 | Sixth Supplemental Indenture, dated as of May 26, 2017, among Pentair, Inc., Pentair plc, Pentair Investments Switzerland GmbH and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.2 in the Current Report on Form 8-K of Pentair plc filed with the Commission on May 31, 2017 (File No. 001-11625)). | |
4.3 | Fifth Supplemental Indenture, dated as of May 26, 2017, among Pentair Finance S.A., Pentair plc, Pentair Investments Switzerland GmbH and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.3 in the Current Report on Form 8-K of Pentair plc filed with the Commission on May 31, 2017 (File No. 001-11625)). | |
10.1 | Confidential Separation Agreement, dated as of May 2, 2017, between Pentair Management Company and Dennis J. Cassidy, Jr. (Incorporated by reference to Exhibit 10.1 in the Current Report on Form 8-K of Pentair plc filed with the Commission on June 5, 2017 (File No. 001-11625)). | |
31.1 | Certification of Chief Executive Officer. | |
31.2 | Certification of Chief Financial Officer. | |
32.1 | Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following materials from Pentair plc’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and 2016, (ii) the Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016, (iv) the Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2017 and 2016, and (v) Notes to Condensed Consolidated Financial Statements. | |
1. | I have reviewed this quarterly report on Form 10-Q of Pentair plc; |
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. |
Date: | July 25, 2017 | /s/ Randall J. Hogan |
Randall J. Hogan | ||
Chairman and Chief Executive Officer | ||
1. | I have reviewed this quarterly report on Form 10-Q of Pentair plc; |
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. |
Date: | July 25, 2017 | /s/ John L. Stauch |
John L. Stauch | ||
Executive 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; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Date: | July 25, 2017 | /s/ Randall J. Hogan |
Randall J. Hogan | ||
Chairman and Chief Executive Officer | ||
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Date: | July 25, 2017 | /s/ John L. Stauch |
John L. Stauch | ||
Executive Vice President and Chief Financial Officer | ||
Document and Entity Information |
6 Months Ended |
|---|---|
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Jun. 30, 2017
shares
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| Document Information [Line Items] | |
| Entity Registrant Name | PENTAIR plc |
| Entity Central Index Key | 0000077360 |
| Current Fiscal Year End Date | --12-31 |
| Entity Filer Category | Large Accelerated Filer |
| Document Type | 10-Q |
| Document Period End Date | Jun. 30, 2017 |
| Document Fiscal Year Focus | 2017 |
| Document Fiscal Period Focus | Q2 |
| Amendment Flag | false |
| Trading Symbol | PNR |
| Entity Common Stock, Shares Outstanding | 181,479,171 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|
| Accounts and notes receivable, allowances | $ 28.0 | $ 25.6 |
| Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
| Common Stock, Shares Authorized | 426,000,000.0 | 426,000,000 |
| Common shares, issued | 181,500,000 | 181,800,000 |
Basis of Presentation and Responsibility for Interim Financial Statements |
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| Accounting Policies [Abstract] | |||||||||||||||||
| Basis of Presentation and Responsibility for Interim Financial Statements | Basis of Presentation and Responsibility for Interim Financial Statements The accompanying unaudited condensed consolidated financial statements of Pentair plc (formerly Pentair Ltd.) and its subsidiaries ("we," "us," "our," "Pentair," or "the Company") have been prepared following the requirements of the U.S. Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America can be condensed or omitted. We are responsible for the unaudited condensed consolidated financial statements included in this document. The financial statements include all normal recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. As these are condensed financial statements, one should also read our consolidated financial statements and notes thereto, which are included in our Annual Report on Form 10-K for the year ended December 31, 2016. Revenues, expenses, cash flows, assets and liabilities can and do vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year. Our fiscal year ends on December 31. We report our interim quarterly periods on a calendar quarter basis. Proposed Separation On May 9, 2017, we announced that our Board of Directors approved a plan to separate our Water business and Electrical business into two independent, publicly-traded companies (the "Proposed Separation"). The Proposed Separation is expected to occur through a tax-free spin-off of the Electrical business to Pentair shareholders. Completion of the Proposed Separation is subject to certain customary conditions, including, among other things, final approval of the transaction by Pentair’s Board of Directors, receipt of tax opinions and rulings and effectiveness of appropriate filings with the SEC. Upon completion of the Proposed Separation, it is anticipated that Electrical’s jurisdiction of organization will be Ireland, but that it will manage its affairs so that it will be centrally managed and controlled in the United Kingdom (the "U.K.") and therefore will have its tax residency in the U.K. The disclosures and financial statements within these condensed consolidated financial statements include the results of operations, financial condition and cash flows of the Electrical business as continuing operations. We expect to complete the Proposed Separation in the second quarter of 2018; however, there can be no assurance regarding the ultimate timing of the Proposed Separation or that the Proposed Separation will be completed. New accounting standards In March 2016, the Financial Accounting Standards Board ("FASB") issued a new accounting standard for share-based payments. The guidance simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of excess tax benefits in the Condensed Consolidated Statements of Cash Flows. We adopted the new standard in the first quarter of 2017. The impact of the adoption resulted in the following:
In February 2016, the FASB issued new accounting requirements regarding accounting for leases, which require an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The requirements are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and early adoption is permitted. We have not yet determined the potential effects on our financial condition or results of operations. In May 2014, the FASB issued new accounting requirements for the recognition of revenue from contracts with customers. The new requirements also include additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The requirements are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company intends to adopt the new revenue guidance as of January 1, 2018 and expects to utilize the modified retrospective transition method of adoption, with adjustment to beginning retained earnings for the cumulative effect of the change. In preparation for adoption of the new guidance, the Company has reviewed representative samples of contracts and other forms of agreements with customers globally and is in the process of quantifying the impact of adopting the new revenue standard. Based on its procedures to date, the Company does not believe the adoption of the new standard will have a material impact on its results of operations, financial condition or cash flows. The new standard will result in enhanced disclosures in the footnotes to our consolidated financial statements to provide additional quantitative and qualitative information related to disaggregation of revenue, changes in contract assets and liabilities and remaining performance obligations. Adoption of this standard will require changes to our business processes, systems and controls to support the additional required disclosures. We are in the process of identifying such changes. |
Discontinued Operations |
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| Disposal Groups, Including Discontinued Operations, Disclosure | Discontinued Operations On April 28, 2017, we completed the sale of the Valves & Controls business to Emerson Electric Co. for $3.15 billion, subject to final working capital adjustments. The sale resulted in a gain, net of tax, of $200.6 million. The results of the Valves & Controls business have been presented as discontinued operations and the related assets and liabilities have been classified as held for sale for all periods presented. The Valves & Controls business was previously disclosed as a stand-alone reporting segment. Transaction costs of $42.5 million and $53.7 million related to the sale of Valves & Controls were incurred during the three and six months ended June 30, 2017, respectively, and were recorded within Gain from sale of discontinued operations before income taxes presented below. Results of discontinued operations are summarized below:
The carrying amounts of major classes of assets and liabilities that were classified as held for sale on the Condensed Consolidated Balance Sheets were as follows:
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Share Plans |
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| Share Plans | Share Plans Total share-based compensation expense for the three and six months ended June 30, 2017 and 2016 was as follows:
In the first quarter of 2017, we issued our annual share-based compensation grants under the Pentair plc 2012 Stock and Incentive Plan to eligible employees. The total number of awards issued was approximately 1.4 million, of which 0.3 million were restricted stock units, 0.9 million were stock options and 0.2 million were performance share units. The weighted-average grant date fair value of the restricted stock units, stock options and performance share units issued was $58.93, $12.57 and $58.41, respectively. We estimated the fair value of each stock option award issued in the annual share-based compensation grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:
These estimates require us to make assumptions based on historical results, observance of trends in our share price, changes in option exercise behavior, future expectations and other relevant factors. If other assumptions had been used, share-based compensation expense, as calculated and recorded under the accounting guidance, could have been affected. We based the expected life assumption on historical experience as well as the terms and vesting periods of the options granted. For purposes of determining expected share price volatility, we considered a rolling average of historical volatility measured over a period approximately equal to the expected option term. The risk-free interest rate for periods that coincide with the expected life of the options is based on the U.S. Treasury Department yield curve in effect at the time of grant. |
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Restructuring |
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| Restructuring | Restructuring During the six months ended June 30, 2017 and the year ended December 31, 2016, we continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. Initiatives during the six months ended June 30, 2017 included the reduction in hourly and salaried headcount of approximately 300 employees, consisting of approximately 150 in Water and 150 in Electrical. Initiatives during the year ended December 31, 2016 included the reduction in hourly and salaried headcount of approximately 650 employees, consisting of approximately 300 in Water and 350 in Electrical. Restructuring related costs included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) included costs for severance and other restructuring costs as follows:
Other restructuring costs primarily consist of asset impairment and various contract termination costs. Restructuring costs by reportable segment were as follows:
Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the six months ended June 30, 2017:
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Earnings Per Share |
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| Earnings Per Share | Earnings Per Share Basic and diluted earnings per share were calculated as follows:
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Supplemental Balance Sheet Information |
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| Disclosure Supplemental Balance Sheet Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Balance Sheet Information | Supplemental Balance Sheet Information
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Goodwill and Other Identifiable Intangible Assets |
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| Goodwill and Other Identifiable Intangible Assets | Goodwill and Other Identifiable Intangible Assets The changes in the carrying amount of goodwill by segment were as follows:
Identifiable intangible assets consisted of the following:
Intangible asset amortization expense was $24.6 million and $24.3 million for the three months ended June 30, 2017 and 2016, respectively, and $48.6 million and $48.5 million for the six months ended June 30, 2017 and 2016, respectively. Estimated future amortization expense for identifiable intangible assets during the remainder of 2017 and the next five years is as follows:
During the first six months of 2017, we completed acquisitions with purchase prices totaling $59.5 million in cash, net of cash acquired. Identifiable intangible assets acquired included $19.1 million of definite-lived customer relationships with an estimated useful life of 11 years. The pro-forma impact of these acquisitions was not material |
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Debt |
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| Debt | Debt Debt and the average interest rates on debt outstanding were as follows:
In October 2014, Pentair plc, Pentair Investments Switzerland GmbH ("PISG"), Pentair Finance S.à r.l. ("PFSA") and Pentair, Inc. entered into an amended and restated credit agreement (the "Credit Facility"), with Pentair plc and PISG as guarantors and PFSA and Pentair, Inc. as borrowers. The Credit Facility had a maximum aggregate availability of $2,100.0 million and a maturity date of October 3, 2019. Borrowings under the Credit Facility generally bear interest at a variable rate equal to the London Interbank Offered Rate ("LIBOR") plus a specified margin based upon PFSA's credit ratings. PFSA must pay a facility fee ranging from 9.0 to 25.0 basis points per annum (based upon PFSA's credit ratings) on the amount of each lender's commitment and letter of credit fee for each letter of credit issued and outstanding under the Credit Facility. In August 2015, Pentair plc, PISG and PFSA entered into a First Amendment to the Credit Facility (the "First Amendment"), which, among other things, increased the Leverage Ratio (as defined below). In September 2015, Pentair plc, PISG and PFSA entered into a Second Amendment to the Credit Facility (the "Second Amendment"), which, among other things, increased the maximum aggregate availability to $2,500.0 million. Additionally, in September 2016, Pentair plc, PISG and PFSA entered into a Third Amendment to the Credit Facility (the "Third Amendment," and collectively with the First Amendment and the Second Amendment, the "Amendments"), which, among other things, increased the Leverage Ratio to the amounts specified below, and amended the definition of EBITDA to include earnings from discontinued operations for operations subject to a sale agreement until such disposition actually occurs. In May 2017, we repurchased aggregate principal of certain series of outstanding notes totaling $1,659.3 million. All costs associated with the repurchases were recorded as Loss on early extinguishment of debt, including $6.5 million of unamortized deferred financing costs. PFSA is authorized to sell short-term commercial paper notes to the extent availability exists under the Credit Facility. PFSA uses the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. PFSA had no commercial paper outstanding as of June 30, 2017 and $398.7 million as of December 31, 2016, all of which was classified as long-term debt as we have the intent and the ability to refinance such obligations on a long-term basis under the Credit Facility. Our debt agreements contain certain financial covenants, the most restrictive of which are in the Credit Facility (as updated for the Amendments), including that we may not permit (i) the ratio of our consolidated debt plus synthetic lease obligations to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization, non-cash share-based compensation expense, and up to a lifetime maximum $25.0 million of costs, fees and expenses incurred in connection with certain acquisitions, investments, dispositions and the issuance, repayment or refinancing of debt, ("EBITDA") for the four consecutive fiscal quarters then ended (the "Leverage Ratio") to exceed (a) 4.00 to 1.00 as of the last day of the period of four consecutive fiscal quarters ending on June 30, 2017; and (b) 3.50 to 1.00 as of the last day of any period of four consecutive fiscal quarters ending thereafter, and (ii) the ratio of our EBITDA for the four consecutive fiscal quarters then ended to our consolidated interest expense, including consolidated yield or discount accrued as to outstanding securitization obligations (if any), for the same period to be less than 3.00 to 1.00 as of the end of each fiscal quarter. For purposes of the Leverage Ratio, the Credit Facility provides for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates. As of June 30, 2017, we were in compliance with all financial covenants in our debt agreements. Total availability under the Credit Facility was $2,500.0 million as of June 30, 2017, which was limited to $2,070.4 million by the maximum Leverage Ratio in the Credit Facility’s credit agreement. In addition to the Credit Facility, we have various other credit facilities with an aggregate availability of $35.1 million, of which there were no outstanding borrowings at June 30, 2017. Borrowings under these credit facilities bear interest at variable rates. We have $350.0 million of fixed rate senior notes maturing in September 2017. We classified this debt as long-term as of June 30, 2017 as we have the intent and ability to refinance such obligation on a long-term basis under the Credit Facility. Debt outstanding, excluding unamortized issuance costs and discounts, at June 30, 2017 matures on a calendar year basis as follows:
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Derivatives and Financial Instruments |
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| Derivatives and Financial Instruments |
Derivative financial instruments We are exposed to market risk related to changes in foreign currency exchange rates. To manage the volatility related to this exposure, we periodically enter into a variety of derivative financial instruments. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in foreign currency rates. The derivative contracts contain credit risk to the extent that our bank counterparties may be unable to meet the terms of the agreements. The amount of such credit risk is generally limited to the unrealized gains, if any, in such contracts. Such risk is minimized by limiting those counterparties to major financial institutions of high credit quality. Foreign currency contracts We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. We manage our economic and transaction exposure to certain market-based risks through the use of foreign currency derivative financial instruments. Our objective in holding these derivatives is to reduce the volatility of net earnings and cash flows associated with changes in foreign currency exchange rates. The majority of our foreign currency contracts have an original maturity date of less than one year. At June 30, 2017 and December 31, 2016, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $377.9 million and $475.6 million, respectively. The impact of these contracts on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) is not material for any period presented. Gains or losses on foreign currency contracts designated as hedges are reclassified out of Accumulated Other Comprehensive Loss ("AOCI") and into Selling, general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) upon settlement. Such reclassifications during the three and six months ended June 30, 2017 and 2016 were not material. Net investment hedge We have net investments in foreign subsidiaries that are subject to changes in the foreign currency exchange rate. In September 2015, we designated the €500 million 2.45% Senior Notes due 2019 (the "2019 Euro Notes") as a net investment hedge for a portion of our net investment in our Euro denominated subsidiaries. The gains/losses on the 2019 Euro Notes have been included as a component of the cumulative translation adjustment account within AOCI. As of June 30, 2017 and December 31, 2016, we had a deferred foreign currency loss of $2.2 million and a gain of $44.2 million, respectively, in AOCI associated with the net investment hedge activity. Fair value measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:
In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Fair value of financial instruments The following methods were used to estimate the fair values of each class of financial instruments:
The recorded amounts and estimated fair values of total debt, excluding unamortized issuance costs and discounts, were as follows:
Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:
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Income Taxes |
6 Months Ended |
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Jun. 30, 2017 | |
| Income Taxes | Income Taxes We manage our affairs so that we are centrally managed and controlled in the U.K. and therefore have our tax residency in the U.K. The provision for income taxes consists of provisions for U.K. and international income taxes. We operate in an international environment with operations in various locations outside the U.K. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates. The effective income tax rate for the six months ended June 30, 2017 was 21.6%, compared to 21.5% for 2016. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The liability for uncertain tax positions was $37.8 million and $71.1 million at June 30, 2017 and December 31, 2016, respectively. The $33.3 million reduction in uncertain tax positions between December 31, 2016 and June 30, 2017 is primarily due to the settlement of tax controversies with the Internal Revenue Service and the payment of resulting tax liabilities. We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Net interest expense, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), which is consistent with our past practices. |
Benefit Plans |
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| Benefit Plans | Benefit Plans Components of net periodic benefit cost for our pension plans for the three and six months ended June 30, 2017 and 2016 were as follows:
Components of net periodic benefit cost for our other post-retirement plans for the three and six months ended June 30, 2017 and 2016 were not material. |
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Shareholders' Equity |
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| Shareholders' Equity | Shareholders’ Equity Share repurchases In December 2014, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $1.0 billion. The authorization expires on December 31, 2019. During the six months ended June 30, 2017, we repurchased 1.5 million of our shares for $100.0 million pursuant to this authorization. As of June 30, 2017, we had $700.0 million available for share repurchases under this authorization. Dividends payable On December 6, 2016, the Board of Directors approved a plan to increase the 2017 annual cash dividend to $1.38, which is intended to be paid in four equal quarterly installments. Additionally, on May 9, 2017 the Board of Directors declared a quarterly cash dividend of $0.345 payable on August 4, 2017 to shareholders of record at the close of business on July 21, 2017. As a result, the balance of dividends payable included in Other current liabilities on our Consolidated Balance Sheets was $62.6 million and $61.8 million at June 30, 2017 and December 31, 2016, respectively. |
Segment Information |
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| Segment Information | Segment Information During the first quarter of 2017, we reorganized our business segments to reflect a new operating structure, resulting in a change to our reporting segments in 2017. The prior period information was recast to be comparable to the current year presentation. We evaluate performance based on net sales and segment income (loss) and use a variety of ratios to measure performance of our reporting segments. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Segment income (loss) represents equity income of unconsolidated subsidiaries and operating income exclusive of intangible amortization, certain acquisition related expenses, costs of restructuring activities, "mark-to-market" gain/loss for pension and other post-retirement plans, impairments and other unusual non-operating items. Financial information by reportable segment is as follows:
The following table presents a reconciliation of consolidated segment income to consolidated income from continuing operations before income taxes:
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| Commitments and Contingencies | Commitments and Contingencies Warranties and guarantees In connection with the disposition of our businesses or product lines, we may agree to indemnify purchasers for various potential liabilities relating to the sold business, such as pre-closing tax, product liability, warranty, environmental, or other obligations. The subject matter, amounts and duration of any such indemnification obligations vary for each type of liability indemnified and may vary widely from transaction to transaction. Generally, the maximum obligation under such indemnifications is not explicitly stated and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations. We recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. In connection with the disposition of the Valves & Controls business, we agreed to indemnify Emerson Electric Co. for certain pre-closing tax liabilities. During the second quarter of 2017, we recorded a liability representing the fair value of our expected future obligation for this matter. We provide service and warranty policies on our products. Liability under service and warranty policies is based upon a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience warrant. The changes in the carrying amount of service and product warranties of continuing operations for the six months ended June 30, 2017 were as follows:
Stand-by letters of credit, bank guarantees and bonds In certain situations, Tyco International Ltd., Pentair Ltd.'s former parent company ("Tyco"), guaranteed performance by the flow control business of Pentair Ltd. ("Flow Control") to third parties or provided financial guarantees for financial commitments of Pentair Ltd. In situations where Flow Control and Tyco were unable to obtain a release from these guarantees in connection with the spin-off of Pentair Ltd., we will indemnify Tyco for any losses it suffers as a result of such guarantees. In disposing of assets or businesses, we often provide representations, warranties and indemnities to cover various risks including unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not have the ability to reasonably estimate the potential liability due to the inchoate and unknown nature of these potential liabilities. However, we have no reason to believe that these uncertainties would have a material adverse effect on our financial position, results of operations or cash flows. In the ordinary course of business, we are required to commit to bonds, letters of credit and bank guarantees that require payments to our customers for any non-performance. The outstanding face value of these instruments fluctuates with the value of our projects in process and in our backlog. In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs. As of June 30, 2017 and December 31, 2016, the outstanding value of bonds, letters of credit and bank guarantees totaled $210.4 million and $331.0 million, respectively. |
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Financial Statements of Parent Company Guarantor |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Statements of Parent Company Guarantor | Pentair plc (the "Parent Company Guarantor") and PISG (the "Subsidiary Guarantor"), fully and unconditionally, guarantee the Notes of PFSA (the "Subsidiary Issuer"). The Subsidiary Guarantor is a Switzerland limited liability company and 100 percent-owned subsidiary of the Parent Company Guarantor. The Subsidiary Issuer is a Luxembourg private limited liability company and 100 percent-owned subsidiary of the Subsidiary Guarantor. The guarantees provided by the Parent Company Guarantor and Subsidiary Guarantor are joint and several. The following supplemental financial information sets forth the Company’s Condensed Consolidating Statement of Operations and Comprehensive Income (Loss), Condensed Consolidating Balance Sheets and Condensed Consolidating Statement of Cash Flows by relevant group within the Company: Pentair plc and PISG as the guarantors, PFSA as issuer of the debt and all other non-guarantor subsidiaries. Condensed consolidating financial information for Pentair plc, PISG and PFSA on a stand-alone basis is presented using the equity method of accounting for subsidiaries. Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) Three months ended June 30, 2017
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) Six months ended June 30, 2017
Condensed Consolidating Balance Sheet June 30, 2017
Condensed Consolidating Statement of Cash Flows Six months ended June 30, 2017
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) Three months ended June 30, 2016
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) Six months ended June 30, 2016
Condensed Consolidating Balance Sheet December 31, 2016
Condensed Consolidating Statement of Cash Flows Six months ended June 30, 2016
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Discontinued Operations (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disposal Groups, Including Discontinued Operations | The carrying amounts of major classes of assets and liabilities that were classified as held for sale on the Condensed Consolidated Balance Sheets were as follows:
esults of discontinued operations are summarized below:
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Share Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Compensation Expense | Total share-based compensation expense for the three and six months ended June 30, 2017 and 2016 was as follows:
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| Assumptions Used in Calculating Estimated Fair Value of Stock Option Award | We estimated the fair value of each stock option award issued in the annual share-based compensation grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:
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Restructuring (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring Related Costs | Restructuring related costs included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) included costs for severance and other restructuring costs as follows:
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| Restructuring Costs By Segment [Table Text Block] | Restructuring costs by reportable segment were as follows:
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| Restructuring Accrual Activity Recorded on Consolidated Balance Sheets | Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the six months ended June 30, 2017:
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Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic and Diluted Earnings Per Share | Basic and diluted earnings per share were calculated as follows:
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Supplemental Balance Sheet Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Supplemental Balance Sheet Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Balance Sheet Information |
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Goodwill and Other Identifiable Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Carrying Amount of Goodwill by Segment | The changes in the carrying amount of goodwill by segment were as follows:
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| Detail of Identifiable Intangible Assets | Identifiable intangible assets consisted of the following:
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| Estimated Future Amortization Expense for Identifiable Intangible Assets | Estimated future amortization expense for identifiable intangible assets during the remainder of 2017 and the next five years is as follows:
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Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt and Average Interest Rates on Debt Outstanding | Debt and the average interest rates on debt outstanding were as follows:
|
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| Debt Outstanding Matures on Calendar Year Basis | Debt outstanding, excluding unamortized issuance costs and discounts, at June 30, 2017 matures on a calendar year basis as follows:
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Derivatives and Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recorded Amounts and Estimated Fair Values of Long-term Debt and Derivative Financial Instruments | The recorded amounts and estimated fair values of total debt, excluding unamortized issuance costs and discounts, were as follows:
|
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| Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:
|
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Benefit Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Net Benefit Costs |
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Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Information by Reportable Segment | Financial information by reportable segment is as follows:
|
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| Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block] | The following table presents a reconciliation of consolidated segment income to consolidated income from continuing operations before income taxes:
|
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Commitments and Contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||
| Changes in Carrying Amount of Service and Product Warranties | The changes in the carrying amount of service and product warranties of continuing operations for the six months ended June 30, 2017 were as follows:
|
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Financial Statements of Parent Company Guarantor (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) | Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) Three months ended June 30, 2017
ondensed Consolidating Statement of Operations and Comprehensive Income (Loss) Six months ended June 30, 2017
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) Three months ended June 30, 2016
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) Six months ended June 30, 2016
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| Schedule of Condensed Consolidating Balance Sheet | Condensed Consolidating Balance Sheet June 30, 2017
Condensed Consolidating Balance Sheet December 31, 2016
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| Schedule of Condensed Consolidating Statement of Cash Flows | Condensed Consolidating Statement of Cash Flows Six months ended June 30, 2017
Condensed Consolidating Statement of Cash Flows Six months ended June 30, 2016
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Discontinued Operations Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Aug. 18, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
| Proceeds from sale of businesses, net | $ 2,765.6 | $ 0.0 | |||
| Gain from sale of discontinued operations, net of tax | $ 200.6 | $ 0.0 | 200.6 | $ 0.0 | |
| Discontinued Operations, Disposed of by Sale [Member] | |||||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
| Proceeds from sale of businesses, net | $ 3,150.0 | ||||
| Discontinued Operations [Member] | |||||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
| Deal related costs and expenses | $ 42.5 | $ 53.7 | |||
Discontinued Operations Income Statement (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
| Net sales | $ 93.8 | $ 433.6 | $ 450.3 | $ 820.6 |
| Cost of goods sold | 71.8 | 316.3 | 339.7 | 599.1 |
| Gross profit | 22.0 | 117.3 | 110.6 | 221.5 |
| Selling, general and administrative | 23.8 | 98.8 | 103.3 | 180.3 |
| Research and development | 1.5 | 5.1 | 5.7 | 9.9 |
| Operating (loss) income | (3.3) | 13.4 | 1.6 | 31.3 |
| (Loss) income from discontinued operations before income taxes | (3.2) | 13.3 | 2.5 | 31.5 |
| Provision for income taxes | 2.0 | 3.2 | 0.6 | 5.8 |
| (Loss) income from discontinued operations, net of tax | (5.2) | 10.1 | 1.9 | 25.7 |
| Gain from sale of discontinued operations before income taxes | (203.0) | 0.0 | (203.0) | 0.0 |
| Provision for income taxes | 2.4 | 0.0 | 2.4 | 0.0 |
| Gain from sale of discontinued operations, net of tax | $ (200.6) | $ 0.0 | $ (200.6) | $ 0.0 |
Discontinued Operations Balance Sheet (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|
| Discontinued Operations and Disposal Groups [Abstract] | ||
| Accounts and notes receivable, net | $ 0.0 | $ 365.4 |
| Inventories | 0.0 | 491.5 |
| Other current assets | 0.0 | 35.0 |
| Current assets held for sale | 0.0 | 891.9 |
| Property, plant and equipment, net | 0.0 | 361.5 |
| Goodwill | 0.0 | 996.4 |
| Intangibles, net | 0.0 | 703.5 |
| Asbestos-related insurance receivable | 0.0 | 108.5 |
| Other non-current assets | 0.0 | 123.0 |
| Non-current assets held for sale | 0.0 | 2,292.9 |
| Accounts payable | 0.0 | 151.4 |
| Employee compensation and benefits | 0.0 | 61.5 |
| Other current liabilities | 0.0 | 143.3 |
| Current liabilities held for sale | 0.0 | 356.2 |
| Pension and other post-retirement compensation and benefits | 0.0 | 32.2 |
| Deferred tax liabilities | 0.0 | 162.8 |
| Asbestos-related liabilities | 0.0 | 228.3 |
| Other non-current liabilities | 0.0 | 82.6 |
| Non-current liabilities held for sale | $ 0.0 | $ 505.9 |
Share Plans - Assumptions Used in Calculating Estimated Fair Value of Stock Option Award in Annual Grant (Detail) |
6 Months Ended |
|---|---|
Jun. 30, 2017 | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Risk-free interest rate | 1.61% |
| Expected dividend yield | 2.38% |
| Expected share price volatility | 26.90% |
| Expected term (years) | 6 years 3 months 18 days |
Share Plans - Share-based Compensation Cost by Award Type (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Share-based Compensation | $ 9.6 | $ 6.2 | $ 26.0 | $ 22.3 |
| Restricted Stock Units (RSUs) [Member] | ||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Share-based Compensation | 5.5 | 3.6 | 11.3 | 10.6 |
| Equity Option [Member] | ||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Share-based Compensation | 2.0 | 1.8 | 6.5 | 7.2 |
| Performance Shares [Member] | ||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Share-based Compensation | $ 2.1 | $ 0.8 | $ 8.2 | $ 4.5 |
Restructuring - Additional Information (Detail) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2016
USD ($)
|
Jun. 30, 2017
USD ($)
Person
|
Jun. 30, 2016
USD ($)
|
Dec. 31, 2016
Person
|
|
| Restructuring Cost and Reserve [Line Items] | |||||
| Number of employees | Person | 300 | 650 | |||
| Total restructuring costs | $ 12.8 | $ 12.1 | $ 33.7 | $ 12.6 | |
| Water Unit [Member] | |||||
| Restructuring Cost and Reserve [Line Items] | |||||
| Number of employees | Person | 150 | 300 | |||
| Total restructuring costs | 5.8 | 7.5 | $ 12.9 | 6.9 | |
| Electrical Unit [Member] | |||||
| Restructuring Cost and Reserve [Line Items] | |||||
| Number of employees | Person | 150 | 350 | |||
| Total restructuring costs | 3.7 | 3.7 | $ 13.0 | 3.9 | |
| Corporate and Other [Member] | |||||
| Restructuring Cost and Reserve [Line Items] | |||||
| Total restructuring costs | $ 3.3 | $ 0.9 | $ 7.8 | $ 1.8 | |
Restructuring - Restructuring Related Costs Included in Selling, General & Administrative expenses on Consolidated Statements of Income (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Restructuring Cost and Reserve [Line Items] | ||||
| Restructuring costs | $ 12.8 | $ 12.1 | $ 33.7 | $ 12.6 |
| Severance and related costs | ||||
| Restructuring Cost and Reserve [Line Items] | ||||
| Restructuring costs | 12.8 | 11.3 | 33.4 | 11.9 |
| Other | ||||
| Restructuring Cost and Reserve [Line Items] | ||||
| Restructuring costs | $ 0.0 | $ 0.8 | $ 0.3 | $ 0.7 |
Restructuring - Restructuring Accrual Activity recorded on Condensed Consolidated Balance Sheets (Detail) $ in Millions |
6 Months Ended |
|---|---|
|
Jun. 30, 2017
USD ($)
| |
| Restructuring Reserve [Roll Forward] | |
| Beginning balance | $ 25.4 |
| Costs incurred | 33.4 |
| Cash payments and other | (23.1) |
| Ending balance | $ 35.7 |
Goodwill and Other Identifiable Intangible Assets - Changes in Carrying Amount of Goodwill by Segment (Detail) $ in Millions |
6 Months Ended |
|---|---|
|
Jun. 30, 2017
USD ($)
| |
| Goodwill [Roll Forward] | |
| Beginning Balance | $ 4,217.4 |
| Goodwill, Purchase Accounting Adjustments | 33.0 |
| Foreign currency translation/other | 63.8 |
| Ending Balance | 4,314.2 |
| Water Unit [Member] | |
| Goodwill [Roll Forward] | |
| Beginning Balance | 1,994.6 |
| Goodwill, Purchase Accounting Adjustments | 27.7 |
| Foreign currency translation/other | 58.2 |
| Ending Balance | 2,080.5 |
| Electrical Unit [Member] | |
| Goodwill [Roll Forward] | |
| Beginning Balance | 2,222.8 |
| Goodwill, Purchase Accounting Adjustments | 5.3 |
| Foreign currency translation/other | 5.6 |
| Ending Balance | $ 2,233.7 |
Goodwill and Other Identifiable Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2017 |
Mar. 31, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Goodwill And Other Intangible Assets [Line Items] | |||||
| Payments to Acquire Businesses, Net of Cash Acquired | $ 59.5 | $ 59.5 | $ 0.0 | ||
| Intangible asset amortization expense | $ 24.6 | $ 24.3 | 48.6 | $ 48.5 | |
| Indefinite-lived Intangible Assets Acquired | $ 19.1 | ||||
| Finite-Lived Intangible Asset, Useful Life | 11 years | ||||
Goodwill and Other Identifiable Intangible Assets - Estimated Future Amortization Expense for Identifiable Intangible Assets (Detail) $ in Millions |
Jun. 30, 2017
USD ($)
|
|---|---|
| Finite-Lived Intangible Assets [Line Items] | |
| Q3-4 2017 | $ 48.7 |
| 2018 | 95.4 |
| 2019 | 88.5 |
| 2020 | 83.4 |
| 2021 | 77.1 |
| 2022 | $ 70.0 |
Debt - Debt Outstanding Matures on Calendar Year Basis (Detail) $ in Millions |
Jun. 30, 2017
USD ($)
|
|---|---|
| Debt Instrument [Line Items] | |
| Q3-Q4 2017 | $ 0.3 |
| 2018 | 255.3 |
| 2019 | 1,167.0 |
| 2020 | 74.0 |
| 2021 | 103.8 |
| 2022 | 88.3 |
| Thereafter | 19.3 |
| Total debt, excluding unamortized issuance costs and discounts | $ 1,708.0 |
Derivatives and Financial Instruments - Additional Information (Detail) - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
|
| Derivative [Line Items] | ||
| Impaired Assets to be Disposed of by Method Other than Sale, Carrying Value of Asset | $ 0 | |
| Debt, Long-term and Short-term, Combined Amount | $ 1,699,200,000 | 4,279,200,000 |
| Gain (Loss) on Derivative Used in Net Investment Hedge, Net of Tax | (2,200,000) | 44,200,000 |
| Foreign Exchange Contract [Member] | ||
| Derivative [Line Items] | ||
| Derivative, Notional Amount | $ 377,900,000 | $ 475,600,000 |
Derivatives and Financial Instruments - Recorded Amounts and Estimated Fair Values of Long-term Debt and Derivative Financial Instruments (Detail) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|
| Derivative [Line Items] | ||
| Total debt, excluding unamortized issuance costs and discounts | $ 1,708.0 | |
| Recorded Amount | ||
| Derivative [Line Items] | ||
| Variable rate debt | 0.3 | $ 976.3 |
| Fixed rate debt | 1,707.7 | 3,320.7 |
| Total debt, excluding unamortized issuance costs and discounts | 1,708.0 | 4,297.0 |
| Fair Value | ||
| Derivative [Line Items] | ||
| Variable rate debt | 0.3 | 976.3 |
| Fixed rate debt | 1,735.0 | 3,427.1 |
| Total debt, excluding unamortized issuance costs and discounts | $ 1,735.3 | $ 4,403.4 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
|
| Income Taxes [Line Items] | |||
| Effective Income Tax Rate Reconciliation, Percent | 21.6202% | 21.50% | |
| Total gross liability for unrecognized tax benefits | $ 37.8 | $ 71.1 | |
| Significant Change in Unrecognized Tax Benefits, Nature of Event | 33.3 | ||
Benefit Plans - Components of Net Periodic Benefit Cost (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Domestic Plan [Member] | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Service cost | $ 2.6 | $ 2.8 | $ 5.2 | $ 5.6 |
| Interest cost | 4.1 | 4.1 | 8.2 | 8.2 |
| Expected return on plan assets | (2.9) | (2.9) | (5.8) | (5.8) |
| Net periodic benefit cost | 3.8 | 4.0 | 7.6 | 8.0 |
| Foreign Plan [Member] | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Service cost | 1.8 | 2.1 | 3.6 | 4.2 |
| Interest cost | 0.9 | 1.1 | 1.8 | 2.2 |
| Expected return on plan assets | (0.3) | (0.4) | (0.6) | (0.8) |
| Net periodic benefit cost | $ 2.4 | $ 2.8 | $ 4.8 | $ 5.6 |
Segment Information - Financial Information by Reportable Segment (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
| Segment Reporting Information [Line Items] | ||||
| Net sales | $ 1,265.3 | $ 1,301.2 | $ 2,448.8 | $ 2,491.2 |
| Segment Income (Loss) | 255.2 | 241.0 | 438.7 | 418.9 |
| Water Unit [Member] | ||||
| Segment Reporting Information [Line Items] | ||||
| Net sales | 753.7 | 761.7 | 1,436.6 | 1,427.4 |
| Segment Income (Loss) | 161.0 | 153.6 | 277.0 | 254.8 |
| Electrical Unit [Member] | ||||
| Segment Reporting Information [Line Items] | ||||
| Net sales | 513.2 | 540.6 | 1,015.4 | 1,065.2 |
| Segment Income (Loss) | 112.8 | 111.6 | 216.3 | 224.4 |
| Other | ||||
| Segment Reporting Information [Line Items] | ||||
| Net sales | (1.6) | (1.1) | (3.2) | (1.4) |
| Segment Income (Loss) | $ (18.6) | $ (24.2) | $ (54.6) | $ (60.3) |
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
|---|---|---|
| Loss Contingencies [Line Items] | ||
| Letters of credit outstanding | $ 210.4 | $ 331.0 |
Commitments and Contingencies - Changes in Carrying Amount of Service and Product Warranties (Detail) $ in Millions |
6 Months Ended |
|---|---|
|
Jun. 30, 2017
USD ($)
| |
| Movement in Standard Product Warranty Accrual [Roll Forward] | |
| Beginning balance | $ 38.9 |
| Service and product warranty provision | 28.3 |
| Payments | (28.3) |
| Standard and Extended Product Warranty Accrual, Additions from Business Acquisition | 1.6 |
| Product Warranty Accrual, Currency Translation, Increase (Decrease) | 0.5 |
| Ending balance | $ 41.0 |
Financial Statements of Parent Company Guarantor - Additional Information (Detail) |
12 Months Ended |
|---|---|
Dec. 31, 2016 | |
| Subsidiary Issuer | |
| Condensed Financial Statements, Captions [Line Items] | |
| Ownership percentage | 100.00% |
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