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Xylem Inc. reports strong fourth quarter and full year 2015 results

February 4, 2016

Company also announces $69 million acquisition of Tideland Signal Corporation and
a 10-percent increase in its quarterly cash dividend

  • Fourth quarter 2015 adjusted net income was $108 million or $0.60 per share; GAAP net income was $114 million or $0.63 per share
  • Full-year 2015 adjusted net income was $336 million or $1.85 per share; Full-year GAAP net income was $340 million or $1.87 per share
  • Xylem delivered $994 million in fourth quarter 2015 revenue, growth of two percent organically
  • Balanced capital deployment continues with strategic acquisition of Tideland, $50 million in share repurchases and quarterly cash dividend increase
  • Xylem projects full-year 2016 organic revenue growth of two to four percent and adjusted earnings per share of $1.95 to $2.05

RYE BROOK, N.Y.--(BUSINESS WIRE)--Feb. 4, 2016-- Xylem Inc. (NYSE:XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported fourth quarter 2015 net income of $114 million, or $0.63 per share. Excluding the impact of restructuring, realignment and other special items, the Company delivered adjusted net income of $108 million or $0.60 per share in the quarter, a three-percent increase over the prior year period excluding foreign exchange translation impact. Fourth quarter revenue was $994 million, up two percent organically, reflecting continued growth in the municipal and construction markets. Fourth quarter adjusted operating margin was flat year-over-year as continued improvements from cost savings initiatives were offset by headwinds from inflation as well as geographic and product mix.

For the full year 2015, Xylem generated $3.65 billion in revenue, up two percent organically. Full-year reported net income was $340 million, or $1.87 per share, with an operating margin of 12.3 percent. Adjusted net income, which excludes the impact of restructuring, realignment and other special items, was $336 million, or $1.85 per share, a five-percent increase over the prior year excluding foreign exchange translation impact. Xylem delivered a full-year 2015 adjusted operating margin of 12.9 percent, flat to prior year. The Company generated $347 million in free cash flow, an increase of 17 percent versus last year, representing a conversion of 105 percent of net income.

“We closed out 2015 with strong results, delivering on our financial commitments, executing well in the marketplace and advancing our long-term growth initiatives,” said Patrick Decker, President and Chief Executive Officer of Xylem. “We made significant progress in decidedly mixed market conditions. We are encouraged by the continuing strength we see in the public utility sector, particularly in the U.S. and key emerging markets where pent-up demand for water and wastewater infrastructure helped us to generate eight-percent growth in this end market globally in the quarter. This strength offset declines in heavy industry, specifically oil and gas and mining, where our exposure is limited.”

Xylem today also announced the acquisition of Tideland, a leading producer of analytics solutions in the coastal and ocean management sectors. Based in Texas, the business also has key locations in the Netherlands, United Kingdom and Singapore, and provides marine navigation and environmental monitoring systems and products to a variety of ports and harbors, offshore energy companies, and coastal and marine authorities.

Decker continued, “This latest acquisition adds another complementary set of offerings to our analytics portfolio. That, in combination with the $50 million in share repurchases in the fourth quarter and 10-percent increase in our quarterly dividend announced today, illustrates our continued focus on executing a balanced capital deployment strategy. As we look ahead in 2016, we remain focused on advancing our key growth initiatives, including driving sales excellence, increasing our research and development investment, and accelerating business simplification to accelerate Xylem’s growth and enhance shareholder value.”

Xylem announced that its Board of Directors declared a dividend in the amount of $0.1549 per share, an increase of 10 percent. The dividend is payable on March 16, 2016 to shareholders of record as of February 18, 2016.

Full-year 2016 Outlook

Xylem forecasts full-year 2016 revenue of approximately $3.7 billion, including approximately one-percent growth from recently completed acquisitions and projected unfavorable impacts of foreign exchange translation. On an organic basis, Xylem’s revenue growth is anticipated to be in the range of two to four percent.

Full-year 2016 adjusted operating income is expected to be in the range of $493 to $515 million, resulting in adjusted earnings per share of $1.95 to $2.05. This represents an increase of five to 11 percent from Xylem’s 2015 adjusted results. Excluding projected unfavorable impacts of foreign exchange translation, Xylem’s adjusted earnings per share growth is anticipated to be in the range of eight to 13 percent. The Company’s adjusted earnings outlook excludes projected restructuring and realignment costs of approximately $25 million for the year.

Fourth Quarter Segment Results

Water Infrastructure

Xylem’s Water Infrastructure segment consists of its businesses serving clean water delivery, wastewater transport and treatment, dewatering and analytical instrumentation.

  • Fourth quarter 2015 revenue was $629 million, up one percent organically compared with the fourth quarter 2014, reflecting robust growth in the public utilities sector, particularly in the U.S. where Xylem delivered a strong double-digit increase. This strength was partially offset by continuing declines in the oil and gas and mining sectors.
  • Fourth quarter adjusted operating income for the segment, which excludes $2 million of restructuring and realignment, was $110 million, a three-percent decline over the same period in 2014. Adjusted operating margin for the Water Infrastructure segment increased 70 basis points to 17.5 percent as cost reductions and volume leverage more than offset inflation and unfavorable mix.

Applied Water

Xylem’s Applied Water segment consists of its portfolio of businesses in residential and commercial building services, industrial and agricultural applications.

  • Fourth quarter 2015 Applied Water revenue was $365 million, a three-percent organic increase year-over-year. The Company delivered a strong performance in the U.S. residential market as well as industrial water market applications in the U.S. and Europe. This strength was partially offset by declines in certain emerging markets as well as a soft irrigation sector.
  • Fourth quarter adjusted operating income for the segment, which excludes $2 million of restructuring and realignment costs, was $49 million, two percent lower than the comparable period last year. Applied Water segment adjusted operating margin declined 10 basis points to 13.4 percent due to unfavorable foreign exchange translation impact. Excluding the unfavorable impact of foreign exchange translation, adjusted operating margin increased 10 basis points as cost reductions and volume leverage more than offset inflation as well as unfavorable mix and other cost increases.

Supplemental information on Xylem’s fourth quarter and full-year 2015 earnings and reconciliations for certain non-GAAP items is posted at investors.xyleminc.com.

About Xylem

Xylem (XYL) is a leading global water technology provider, enabling customers to transport, treat, test and efficiently use water in public utility, residential and commercial building services, industrial and agricultural settings. The company does business in more than 150 countries through a number of market-leading product brands, and its people bring broad applications expertise with a strong focus on finding local solutions to the world’s most challenging water and wastewater problems. Xylem is headquartered in Rye Brook, New York, with 2015 revenue of $3.7 billion and approximately 12,500 employees worldwide. Xylem was named to the Dow Jones Sustainability Index, North America for the last four years for advancing sustainable business practices and solutions worldwide, and the Company has satisfied the requirements to be a constituent of the FTSE4Good Index Series each year since 2013.

The name Xylem is derived from classical Greek and is the tissue that transports water in plants, highlighting the engineering efficiency of our water-centric business by linking it with the best water transportation of all -- that which occurs in nature. For more information, please visit us at www.xyleminc.com.

Forward-Looking Statements

This press release contains information that may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” “believe,” “target,” “will,” “could,” “would,” “should” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking.

These forward-looking statements include statements about the capitalization of Xylem Inc. (the “Company”), the Company’s restructuring and realignment, future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals. All statements that address operating or financial performance, events or developments that we expect or anticipate will occur in the future – including statements relating to orders, revenues, operating margins and earnings per share growth, and statements expressing general views about future operating results – are forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such forward-looking statements.

Factors that could cause results to differ materially from those anticipated include: economic, political and other risks associated with our international operations, including military actions, economic sanctions or trade embargoes that could affect customer markets, and non-compliance with laws, including foreign corrupt practice laws, export and import laws and competition laws; potential for unexpected cancellations or delays of customer orders in our reported backlog; our exposure to fluctuations in foreign currency exchange rates; competition and pricing pressures in the markets we serve; the strength of housing and related markets; ability to retain and attract key members of management; our relationship with and the performance of our channel partners; our ability to successfully identify, complete and integrate acquisitions; our ability to borrow or to refinance our existing indebtedness and availability of liquidity sufficient to meet our needs; changes in the value of goodwill or intangible assets; risks relating to product defects, product liability and recalls; governmental investigations; security breaches or other disruptions of our information technology systems; litigation and contingent liabilities; and other factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission.

All forward-looking statements made herein are based on information currently available to the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS (Unaudited)

(In Millions, except per share data)

 
Year Ended December 31,   2015  

2014

  2013
Revenue   $ 3,653 $ 3,916 $ 3,837
Cost of revenue 2,249   2,403   2,338  
Gross profit 1,404 1,513 1,499
Selling, general and administrative expenses 854 920 990
Research and development expenses 95 104 104
Restructuring and asset impairment charges 6   26   42  
Operating income 449 463 363
Interest expense 55 54 55
Other non-operating income (expense), net 1 (10 )
Gain from sale of business 9   11    
Income before taxes 403 421 298
Income tax expense 63   84   70  
Net income $ 340   $ 337   $ 228  
Earnings per share:
Basic $ 1.88 $ 1.84 $ 1.23
Diluted $ 1.87 $ 1.83 $ 1.22
Weighted average number of shares:
Basic 180.9 183.1 185.2
Diluted 181.7 184.2 186.0
Dividends declared per share $ 0.5632 $ 0.5120 $ 0.4656
 
 

XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Millions, except per share amounts)

 
December 31,   2015   2014
ASSETS  
Current assets:
Cash and cash equivalents $ 680 $ 663

Receivables, less allowances for discounts and doubtful accounts of $33 and $34
in 2015 and 2014, respectively

749 771
Inventories 433 486
Prepaid and other current assets 143   144  
Total current assets 2,005 2,064
Property, plant and equipment, net 439 461
Goodwill 1,584 1,635
Other intangible assets, net 435 470
Other non-current assets 194   203  
Total assets $ 4,657   $ 4,833  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 338 $ 338
Accrued and other current liabilities 407 476
Short-term borrowings and current maturities of long-term debt 78   89  
Total current liabilities 823 903
Long-term debt 1,196 1,195
Accrued postretirement benefits 335 388
Deferred income tax liabilities 118 136
Other non-current accrued liabilities 101   84  
Total liabilities 2,573   2,706  
 
Stockholders’ equity:
Common Stock — par value $0.01 per share:

Authorized 750.0 shares, issued 190.2 and 188.9 shares in 2015 and 2014,
respectively

2 2
Capital in excess of par value 1,834 1,796
Retained earnings 885 648

Treasury stock – at cost 11.8 shares and 6.6 shares in 2015 and 2014,
respectively

(399 ) (220 )
Accumulated other comprehensive loss (238 ) (99 )
Total stockholders’ equity 2,084   2,127  
Total liabilities and stockholders’ equity $ 4,657   $ 4,833  
 
 

XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Millions)

 
Year Ended December 31,   2015   2014   2013
Operating Activities  
Net income $ 340 $ 337 $ 228

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation 88 95 99
Amortization 45 47 51
Deferred income taxes (9 ) (29 ) (14 )
Share-based compensation 15 18 27
Restructuring and asset impairment charges, net 6 26 42
Gain from sale of businesses (9 ) (11 )
Other, net 12 2 15
Payments for restructuring (14 ) (26 ) (35 )
Contributions to postretirement benefit plans (25 ) (35 ) (43 )
Changes in assets and liabilities (net of acquisitions):
Changes in receivables (24 ) (37 ) (47 )
Changes in inventories 23 (49 ) (39 )
Changes in accounts payable 20 17 4
Changes in accrued liabilities (11 ) 3 18
Changes in accrued taxes (3 ) 25 20
Net changes in other assets and liabilities   10   33   (2 )
Net Cash — Operating activities   464   416   324  
Investing Activities
Capital expenditures (117 ) (119 ) (126 )
Proceeds from the sale of property, plant and equipment 2 6
Acquisitions of businesses and assets, net of cash acquired (18 ) (81 )
Proceeds from sale of business 1 30
Other, net   2   1   2  
Net Cash — Investing activities   (132 ) (86 ) (199 )
Financing Activities
(Repayment) issuance of short-term debt (3 ) 52 39
Principal payments of debt and capital lease obligations (2 )
Repurchase of common stock (179 ) (134 ) (73 )
Proceeds from exercise of employee stock options 21 26 22
Excess tax benefit from share based compensation 2 2 1
Dividends paid (102 ) (94 ) (87 )
Other, net   (1 ) 1    
Net Cash — Financing activities   (262 ) (147 ) (100 )
Effect of exchange rate changes on cash   (53 ) (53 ) 4  
Net change in cash and cash equivalents 17 130 29
Cash and cash equivalents at beginning of year   663   533   504  
Cash and cash equivalents at end of year   $ 680   $ 663   $ 533  
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 52 $ 51 $ 51
Income taxes (net of refunds received) $ 75 $ 81 $ 65
 
 
Xylem Inc. Non-GAAP Measures
 
Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operations as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:
 

“Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales of portions of our business that did not meet the criteria for classification as a discontinued operation or insignificant portions of our business that we did not classify as a discontinued operation. The period-over-period change resulting from foreign currency fluctuations assumes no change in exchange rates from the prior period.

 
“Constant currency” defined as financial results adjusted for currency translation impacts by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the U.S. dollar.
 

“EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude restructuring and realignment costs, gain on sale of business and special charges.

 
"Adjusted Operating Income", "Adjusted Segment Operating Income", and “Adjusted EPS” defined as operating income, segment operating income and earnings per share, adjusted to exclude restructuring and realignment costs, gain on sale of businesses, special charges and tax-related special items, as applicable.
 
“Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as adjustments for other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of free cash flows does not consider non-discretionary cash payments, such as debt.
 
“Realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs.
 
“Special charges" defined as costs incurred by the Company, such as legal and professional fees, associated with the Korea matters, as well as costs incurred for the contractual indemnification of tax obligations to ITT.
 
“Tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts and other discrete tax adjustments.
 
 
Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Orders
($ Millions)
                                   
(As Reported - GAAP) (As Adjusted - Organic) Constant Currency
  (A)   (B)   (C)   (D)   (E) = B+C+D   (F) = E/A

(G) = (E-C)/A

 

Change

% Change

 

Change % Change
Orders Orders

2015 v. 2014

2015 v. 2014

Acquisitions/
Divestitures

FX Contribution

Adj. 2015 v. 2014

Adj. 2015 v. 2014

2015 2014

Year Ended
December 31

 
Xylem Inc. 3,711 4,021 (310 ) -8 % 9 320 19 0 % 0 %
 
Water Infrastructure 2,296 2,511 (215 ) -9 % (1 ) 240 24 1 % 1 %
Applied Water 1,415 1,510 (95 ) -6 % 10 80 (5 ) 0 % -1 %
 

Quarter Ended
December 31

 
Xylem Inc. 913 970 (57 ) -6 % (1 ) 63 5 1 % 1 %
 
Water Infrastructure 559 596 (37 ) -6 % (1 ) 48 10 2 % 2 %
Applied Water 354 374 (20 ) -5 % - 15 (5 ) -1 % -1 %
 

Quarter Ended
September 30

 
Xylem Inc. 939 1,027 (88 ) -9 % - 88 - 0 % 0 %
 
Water Infrastructure 590 664 (74 ) -11 % - 68 (6 ) -1 % -1 %
Applied Water 349 363 (14 ) -4 % - 20 6 2 % 2 %
 

Quarter Ended
June 30

 
Xylem Inc. 944 1,031 (87 ) -8 % 5 92 10 1 % 0 %
 
Water Infrastructure 585 654 (69 ) -11 % - 69 - 0 % 0 %
Applied Water 359 377 (18 ) -5 % 5 24 11 3 % 2 %
 

Quarter Ended
March 31

 
Xylem Inc. 915 993 (78 ) -8 % 5 77 4 0 % 0 %
 
Water Infrastructure 562 597 (35 ) -6 % - 55 20 3 % 3 %
Applied Water 353 396 (43 ) -11 % 5 21 (17 ) -4 % -6 %
 
Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Revenue
($ Millions)
                                   
(As Reported - GAAP) (As Adjusted - Organic)

Constant Currency

  (A)   (B)   (C)   (D)   (E) = B+C+D   (F) = E/A

(G) = (E-C)/A

 
Change % Change

 

Change % Change
Revenue Revenue 2015 v. 2014 2015 v. 2014

Acquisitions/
Divestitures

FX Contribution Adj. 2015 v. 2014 Adj. 2015 v. 2014
2015 2014

Year Ended
December 31

 
Xylem Inc. 3,653 3,916 (263 ) -7 % 10 313 60 2 % 1 %
 
Water Infrastructure 2,231 2,442 (211 ) -9 % (1 ) 234 22 1 % 1 %
Applied Water 1,422 1,474 (52 ) -4 % 11 79 38 3 % 2 %
 

Quarter Ended
December 31

 
Xylem Inc. 994 1,042 (48 ) -5 % (1 ) 70 21 2 % 2 %
 
Water Infrastructure 629 672 (43 ) -6 % (1 ) 54 10 1 % 2 %
Applied Water 365 370 (5 ) -1 % - 16 11 3 % 3 %
 

Quarter Ended
September 30

 
Xylem Inc. 902 963 (61 ) -6 % - 81 20 2 % 2 %
 
Water Infrastructure 551 602 (51 ) -8 % - 61 10 2 % 2 %
Applied Water 351 361 (10 ) -3 % - 20 10 3 % 3 %
 

Quarter Ended
June 30

 
Xylem Inc. 920 1,005 (85 ) -8 % 6 89 10 1 % 0 %
 
Water Infrastructure 551 616 (65 ) -11 % - 65 - 0 % 0 %
Applied Water 369 389 (20 ) -5 % 6 24 10 3 % 1 %
 

Quarter Ended
March 31

 
Xylem Inc. 837 906 (69 ) -8 % 5 73 9 1 % 0 %
 
Water Infrastructure 500 552 (52 ) -9 % - 54 2 0 % 0 %
Applied Water 337 354 (17 ) -5 % 5 19 7 2 % 1 %
 
 
Xylem Inc. Non-GAAP Reconciliation
Adjusted Operating Income
($ Millions)
                                         
Q1 Q2 Q3 Q4 YTD
2015   2014 2015   2014 2015   2014 2015   2014 2015   2014
Total Revenue
• Total Xylem 837 906 920 1,005 902 963 994 1,042 3,653 3,916
• Water Infrastructure 500 552 551 616

 

551 602

 

629 672 2,231 2,442
• Applied Water 337 354 369 389

 

351 361

 

365 370 1,422 1,474
                                         
Operating Income
• Total Xylem 83 76 104 116 120 130 142 141 449 463
• Water Infrastructure 47 46 65 76

 

83 95

 

108 104 303 321
• Applied Water 46 41 51 53

 

46 51

 

47 48 190 193
• Total Segments 93 87 116 129 129 146 155 152 493 514
 
Operating Margin
• Total Xylem 9.9 % 8.4 % 11.3 % 11.5 % 13.3 % 13.5 % 14.3 % 13.5 % 12.3 % 11.8 %
• Water Infrastructure 9.4 % 8.3 % 11.8 % 12.3 % 15.1 % 15.8 % 17.2 % 15.5 % 13.6 % 13.1 %
• Applied Water 13.6 % 11.6 % 13.8 % 13.6 % 13.1 % 14.1 % 12.9 % 13.0 % 13.4 % 13.1 %
• Total Segments   11.1 %   9.6 %   12.6 %   12.8 %   14.3 %   15.2 %   15.6 %   14.6 %   13.5 %   13.1 %
 
Special Charges
• Total Xylem 1 - - - - - - - 1 -
• Water Infrastructure 1 - - - - - - - 1 -
• Applied Water - - - - - - - - - -
• Total Segments 1 - - - - - - - 1 -
 
Restructuring & Realignment Costs
• Total Xylem 6 18 6 9 4 4 4 12 20 43
• Water Infrastructure 5 12 4 5 2 3 2 9 13 29
• Applied Water 1 6 2 4 2 1 2 2 7 13
• Total Segments 6 18 6 9 4 4 4 11 20 42
                                         
Adjusted Operating Income*
• Total Xylem 90 94 110 125 124 134 146 153 470 506
• Water Infrastructure 53 58 69 81

 

85 98

 

110 113 317 350
• Applied Water 47 47 53 57

 

48 52

 

49 50 197 206
• Total Segments 100 105 122 138 133 150 159 163 514 556
 
Adjusted Operating Margin*
• Total Xylem 10.8 % 10.4 % 12.0 % 12.4 % 13.7 % 13.9 % 14.7 % 14.7 % 12.9 % 12.9 %
• Water Infrastructure 10.6 % 10.5 % 12.5 % 13.1 % 15.4 % 16.3 % 17.5 % 16.8 % 14.2 % 14.3 %
• Applied Water 13.9 % 13.3 % 14.4 % 14.7 % 13.7 % 14.4 % 13.4 % 13.5 % 13.9 % 14.0 %
• Total Segments   11.9 %   11.6 %   13.3 %   13.7 %   14.7 %   15.6 %   16.0 %   15.6 %   14.1 %   14.2 %
 
*Adjusted Operating Income excludes restructuring & realignment costs and special charges.
 
Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
 
                           
Q4 2014 Q4 2015

As Reported

 

Adjustments

Adjusted

As Reported

 

Adjustments

Adjusted

Total Revenue 1,042 1,042 994 994
Operating Income 141 12 a 153 142 4 a 146
Operating Margin 13.5 % 14.7 % 14.3 % 14.7 %
Interest Expense (13 ) (13 ) (14 ) (14 )
Other Non-Operating Income (Expense) - - - -
Gain from sale of business   -       -     -       -  
Income before Taxes 128 12 140 128 4 132
Provision for Income Taxes   (32 )   6   c   (26 )   (14 )   (10 ) c   (24 )
Net Income   96     18     114     114     (6 )   108  
Diluted Shares     183.3           183.4         180.0           180.0  

Diluted EPS

  $ 0.52     $ 0.10     $ 0.62       $ 0.63     $ (0.03 )   $ 0.60  
 

Year-over-year currency translation impact on current
year diluted EPS

      $ (0.05 )   $ 0.01     $ (0.04 )
Diluted EPS at Constant Currency                 $ 0.68     $ (1.32 )   $ 0.64  
 
                     
Q4 YTD 2014 Q4 YTD 2015

As Reported

Adjustments

Adjusted

As Reported

Adjustments

Adjusted

Total Revenue 3,916 3,916 3,653 3,653
Operating Income 463 43 a 506 449 21 a 470
Operating Margin 11.8 % 12.9 % 12.3 % 12.9 %
Interest Expense (54 ) (54 ) (55 ) (55 )
Other Non-Operating Income (Expense) 1 1 - 4 b 4
Gain from sale of businesses   11     (11 )   -     9     (9 )   0  
Income before Taxes 421 32 453 403 16 419
Provision for Income Taxes   (84 )   (7 ) c   (91 )   (63 )   (20 ) c   (83 )
Net Income   337     25     362     340     (4 )   336  
Diluted Shares     184.2           184.2         181.7           181.7  
Diluted EPS   $ 1.83     $ 0.14     $ 1.97       $ 1.87     $ (0.02 )   $ 1.85  
 

Year-over-year currency translation impact on current
year diluted EPS

      $ (0.22 )   $ -     $ (0.22 )
Diluted EPS at Constant Currency                 $ 2.09     $ (0.02 )   $ 2.07  
 
a Restructuring & realignment costs in 2014 and 2015 and special charges in 2015
b Special charges
c Net tax impact of restructuring & realignment costs and special charges, and tax-related special items
 
 
Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
($ Millions)
 
  Q1   Q2   Q3   Q4   Year Ended
  2015       2014     2015       2014     2015       2014     2015       2014     2015       2014  
 
Net Cash - Operating Activities $ 39 $ 22 $ 84 $ 76 $ 137 $ 155 $ 204 $ 163 $ 464 $ 416
 
Capital Expenditures (37 ) (25 ) (20 ) (23 ) (21 ) (29 ) (39 ) (42 ) (117 ) (119 )
                   
Free Cash Flow $ 2   $ (3 ) $ 64   $ 53   $ 116   $ 126   $ 165   $ 121   $ 347   $ 297  
 
Net Income 64 49 74 86 88 106 114 96 340 337
 
Gain from sale of businesses   9     -     -     -     -     11     -     -     9     11  
 
Net Income, excluding gain on sale of businesses $ 55   $ 49   $ 74   $ 86   $ 88   $ 95   $ 114   $ 96   $ 331   $ 326  
 
Free Cash Flow Conversion   4 %   -6 %   86 %   62 %   132 %   133 %   145 %   126 %   105 %   91 %

Source: Xylem Inc.

Xylem Inc.
Media
Kelly McAndrew, +1 (914) 323-5969
Kelly.McAndrew@xyleminc.com
or
Investors
Phil DeSousa, +1 (914) 323-5930
Phil.DeSousa@xyleminc.com

Xylem