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Xylem Reports Second Quarter 2020 Results, Appoints Two New Board Members

July 30, 2020
  • Reported net income of $31 million or $0.17 per share; adjusted net income of $73 million or $0.40 per share
  • Revenue declined 14% on a reported basis, and 12% organically, impacted by COVID-19
  • Strong cash performance with free cash flow of $137 million, up 117%; and operating cash flow of $181 million, up 47%

RYE BROOK, N.Y.--(BUSINESS WIRE)-- Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported second quarter 2020 net income of $31 million, or $0.17 per share. Excluding the impact of restructuring, realignment and special charges, the Company delivered adjusted net income of $73 million or $0.40 per share in the quarter.

Second quarter revenue was $1.2 billion, down 14 percent on a reported basis and 12 percent organically, declining less than previously expected primarily driven by the resilience of the wastewater utility business. Orders were down 11 percent on a reported basis and 9 percent, organically. Reported operating margin in the quarter was 4.7 percent, down 800 basis points versus the prior year. Adjusted operating margin was 9.3 percent, down 500 basis points compared to the prior year. Both were driven largely by the pandemic’s impact on volume in the quarter.

Xylem ended the quarter with $181 million of operating cash flow, and $137 million of free cash flow, more than doubling from the prior year, driven by strong working capital performance and reduced capital spending. The Company’s liquidity remains strong, at approximately $2.4 billion from healthy cash generation and issuance of a $1 billion green bond in June.

“The quick action from our teams in the first and second quarters allowed us to adapt swiftly, and positioned us well to mitigate the near-term impacts of the pandemic,” said Patrick Decker, Xylem’s president and CEO. “Our financial and supply chain strengths have enabled us to stand behind our customers and the essential services they have been delivering during the pandemic to the communities we all serve.”

“Clearly, there are still near-term market challenges and macro uncertainty. That said, we are optimistic on the basis of modestly improving trajectories in some of our key markets,” continued Decker. “We’ve delivered significant commercial momentum alongside very strong cash performance. And we are well positioned both to be resilient in a range of short-term scenarios, and to capitalize on the market’s recovery over the longer term.”

Outlook

Xylem withdrew 2020 guidance earlier this year due to the uncertainties caused by COVID-19. The Company is not reinstating full-year guidance, but is providing a framework for the third quarter which includes expectation that organic revenue will be down in the range of 8 to 12 percent – down 10 to 14 percent on a reported basis – and adjusted operating margin will be in the range of 11.0 percent to 11.5 percent. This represents sequential improvement in both organic revenue and adjusted operating margin from the second quarter to the third quarter.

Appointments to Board of Directors

Xylem also announced that Lila Tretikov and Uday Yadav have been elected to the Company’s Board of Directors.

Ms. Tretikov currently serves as corporate vice president of technology in the Office of the CTO at Microsoft Corporation. In that role, she applies a cross-disciplinary approach to the development and commercialization of advanced-technology products that apply innovation to solve complex problems.

Mr. Yadav is the president and chief operating officer of Eaton's Electrical Sector, which reported $13.3 billion in revenue for 2019. He brings over 20 years of international and industrial experience and global P&L leadership serving diverse sectors including heavy industry, aerospace, and automotive. He has deep experience in deploying new product and service solutions, and developing new business models.

“We are pleased to welcome Lila and Uday to the Board of Directors,” said Robert Friel, chair of Xylem’s Board. “Both have outstanding leadership experience and global perspectives that are complimentary to the Board. Lila’s background in technology and innovation will add insights to the Company’s focus on the digital transformation of the water sector. Uday combines operational discipline with expertise in industrial transformation across international markets. We look forward to working with both of them as we continue to grow the company and create value for our shareholders.”

Further commenting on the appointments, Decker added, “In addition to their outstanding qualifications, Lila and Uday’s appointments further deepen the diversity of our Board, which is important to the long-term sustainability of our business. All of Xylem’s stakeholders will benefit from Lila and Uday’s rich experience as we bring innovation to bear on solving the world’s toughest water challenges.”

Second Quarter Segment Results

Water Infrastructure

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

  • Second quarter 2020 revenue was $501 million, down 8 percent organically, and down 11 percent as reported, compared with second quarter 2019. Utilities spending in critical wastewater infrastructure remained relatively resilient in the quarter, offset by soft industrial and construction market rental activity in North America dewatering.
  • Second quarter reported operating income for the segment was $73 million. Adjusted operating income for the segment, which excludes $8 million of restructuring and realignment costs, was $81 million. Reported operating margin for the segment was 14.6 percent, down 290 basis points versus prior year. Adjusted operating margins of 16.2 percent were down 290 basis points versus prior year from lower sales volume, unfavorable mix and higher inflation partially offset by productivity benefits.

Applied Water

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

  • Second quarter 2020 revenue was $337 million, a 13 percent decline organically year-over-year, a 14 percent decline as reported, driven by volume weakness across industrial, commercial and residential end markets from COVID-19 related site restrictions and limited activity levels primarily in the United States.
  • Second quarter reported operating income for the segment was $41 million and adjusted operating income, which excludes $4 million of restructuring and realignment costs, was $45 million. The segment’s reported operating margin was 12.2 percent, down 350 basis points versus prior year, and adjusted operating margin was 13.4 percent, down 340 basis points versus prior year. Volume declines and inflation were partially offset by productivity benefits and price realization.

Measurement & Control Solutions

Xylem’s Measurement & Control Solutions segment consists of its portfolio of businesses in smart metering, network technologies, advanced infrastructure analytics and analytic instrumentation.

  • Second quarter 2020 revenue was $322 million, down 17 percent organically and as reported versus the prior year driven by significant impacts from COVID-19 site restrictions delaying large project deployments and meter replacement activity.
  • Reported operating income for the segment was negative $46 million, and adjusted operating income, which excludes $31 million of restructuring and realignment costs and $10 million of special charges, was negative 5 million. The segment reported operating margin was -14.3 percent, down 21 percent versus prior year. Adjusted operating margin contracted to -1.6 percent, down 10.3 percent from prior year primarily driven by volume declines which were partly offset by cost reductions.

Supplemental information on Xylem’s first quarter 2020 earnings and reconciliations for certain non-GAAP items is posted at www.xylem.com/investors.

About Lila Tretikov

Lila Tretikov is a corporate vice president of technology in the Office of the CTO at Microsoft Corporation, and a leading expert on artificial intelligence and business transformation. She brings a diverse background of business, technology, design, and policy. In her role at Microsoft, Lila applies a cross-disciplinary approach to creating solutions that address some of the world's most challenging problems and empower humanity through technology.

Prior to Microsoft, Tretikov was chief executive officer of Terrawatt and senior vice president of Engie, a global organization based in France, with a mission to alter the Earth's ecology through energy transition to CO2-negative systems. She was also chief executive of Wikimedia Foundation, an organization supporting Wikipedia. She has authored numerous patents and articles in the field of technology-enabled business transformations. She previously served on the Board of Rackspace, a publicly traded cloud technology company, and several private companies.

Tretikov attended Moscow State Lomonosov University, where she studied Mathematics, and the University of California, Berkeley, where she studied Artificial Intelligence and Visual Art.

About Uday Yadav

Uday Yadav is president and chief operating officer, Electrical Sector, for Eaton, a power management company. In this role, Yadav is responsible for the company’s global electrical business and has corporate responsibility for Eaton’s Europe, Middle East and Africa region. Previously, Yadav served as president and chief operating officer of the company’s Industrial Sector and had corporate responsibility for the company’s operations in the Asia Pacific, Central and South American regions.

Since joining Eaton in 1999, Yadav has held leadership positions in all of Eaton’s operating groups, as well as corporate-wide roles. He has served as president of Eaton’s Aerospace segment; executive vice president, Eaton Business System; president, Hydraulics - Asia Pacific; vice president of Supply Chain Management for the Fluid Power Group; local managing director for Eaton in India; and held in-market roles based in China, Europe and the United States. Prior to joining Eaton, Yadav worked with Lucas Engineering and Systems and Aeroquip Vickers, based in the UK.

Yadav holds a double degree with honors in engineering and business from Nottingham Trent University in the United Kingdom.

About Xylem

Xylem (XYL) is a leading global water technology company committed to solving critical water and infrastructure challenges with technological innovation. Our more than 16,000 diverse employees delivered revenue of $5.25 billion in 2019. We are creating a more sustainable world by enabling our customers to optimize water and resource management, and helping communities in more than 150 countries become water-secure. Join us at www.xylem.com.

Forward-Looking Statements

This press release contains information that may constitute “forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “contemplate,” “predict,” “forecast,” “believe,” “target,” “will,” “could,” “would,” “should,” “potential,” “may” and similar expressions identify forward-looking statements. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These forward-looking statements include any statements that are not historical in nature, including any 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. Many of these risks and uncertainties are currently amplified by and may continue to be amplified by, or in the future may be amplified by, the novel coronavirus (“COVID-19”) pandemic.

Factors that could cause results to differ materially from those anticipated include: overall economic and business conditions; uncertainty of the magnitude, duration, geographic reach and impact on the global economy of the COVID-19 pandemic; the current, and uncertain future, impact of the COVID-19 pandemic on our business, growth, projections, financial condition, operations, cash flows, and liquidity, including the impact of adverse economic conditions caused by the COVID-19 pandemic on our performance or customer markets; actual or potential other epidemics, pandemics or global health crises; geopolitical and other risks associated with our international operations, including military actions, protectionism, economic sanctions or trade barriers including tariffs and embargoes that could affect customer markets and our business, and non-compliance with laws, including foreign corrupt practice laws, data privacy, 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; disruption, competition and pricing pressures in the markets we serve; industrial, governmental and private sector spending; the strength of housing and related markets; weather conditions; ability to retain and attract talent and key members of management; our relationship with and the performance of our supply chain including 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; uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; changes in the value of goodwill or intangible assets; the preliminary nature of our cost and savings estimates related to restructuring, realignment and related charges, including the timing of such charges and savings, which are subject to change as the Company makes decisions and refines estimates over time; timing delays in implementing restructuring, realignment and strategic initiatives; our ability to realize all of the cost savings anticipated in connection with restructuring and realignment; management and employee distraction resulting from restructuring actions; our ability to continue making strategic investments for growth; risks relating to product defects, product security, product liability and recalls; claims or investigations by governmental or regulatory bodies; cybersecurity attacks, breaches or other disruptions of information technology systems on which we rely; our sustainability initiatives; the anticipated use of proceeds from our green bond offering, including any failure to allocate the net proceeds to eligible green projects, or to meet or continue to meet the investment requirements of certain environmentally focused investors; litigation and contingent liabilities; and other factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in subsequent filings we have made or may make with the Securities and Exchange Commission. All forward-looking statements made herein are based on information currently available to the Company as of the date of this press release. 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
CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)
(in millions, except per share data)

 

 

Three Months

 

Six Months

For the period ended June 30,

2020

 

2019

 

2020

 

2019

Revenue

$

1,160

 

 

$

1,345

 

 

$

2,283

 

 

$

2,582

 

Cost of revenue

726

 

 

819

 

 

1,440

 

 

1,582

 

Gross profit

434

 

 

526

 

 

843

 

 

1,000

 

Selling, general and administrative expenses

288

 

 

294

 

 

585

 

 

597

 

Research and development expenses

44

 

 

47

 

 

93

 

 

98

 

Restructuring and asset impairment charges

48

 

 

14

 

 

50

 

 

25

 

Operating income

54

 

 

171

 

 

115

 

 

280

 

Interest expense

18

 

 

18

 

 

34

 

 

36

 

Other non-operating (expense) income, net

(1)

 

 

3

 

 

(4)

 

 

5

 

Gain from sale of business

 

 

 

 

 

 

1

 

Income before taxes

35

 

 

156

 

 

77

 

 

250

 

Income tax expense

4

 

 

17

 

 

8

 

 

32

 

Net income

$

31

 

 

$

139

 

 

$

69

 

 

$

218

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.17

 

 

$

0.77

 

 

$

0.38

 

 

$

1.21

 

Diluted

$

0.17

 

 

$

0.77

 

 

$

0.38

 

 

$

1.20

 

Weighted average number of shares:

 

 

 

 

 

 

 

Basic

180.0

 

 

180.0

 

 

180.1

 

 

179.9

 

Diluted

180.6

 

 

181.2

 

 

181.0

 

 

181.1

 

 
 

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except per share amounts)

 

 

June 30,
2020

 

December 31,
2019

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,577

 

 

$

724

 

Receivables, less allowances for discounts, returns and doubtful accounts of $35 and $35 in 2020 and 2019, respectively

956

 

 

1,036

 

Inventories

595

 

 

539

 

Prepaid and other current assets

173

 

 

151

 

Total current assets

3,301

 

 

2,450

 

Property, plant and equipment, net

635

 

 

658

 

Goodwill

2,820

 

 

2,839

 

Other intangible assets, net

1,108

 

 

1,174

 

Other non-current assets

580

 

 

589

 

Total assets

$

8,444

 

 

$

7,710

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

498

 

 

$

597

 

Accrued and other current liabilities

663

 

 

628

 

Short-term borrowings and current maturities of long-term debt

212

 

 

276

 

Total current liabilities

1,373

 

 

1,501

 

Long-term debt

3,031

 

 

2,040

 

Accrued postretirement benefits

446

 

 

445

 

Deferred income tax liabilities

304

 

 

310

 

Other non-current accrued liabilities

425

 

 

447

 

Total liabilities

5,579

 

 

4,743

 

 

 

 

 

Stockholders’ equity:

 

 

 

Common Stock – par value $0.01 per share:

 

 

 

Authorized 750.0 shares, issued 194.5 shares and 193.9 shares in 2020 and 2019, respectively

2

 

 

2

 

Capital in excess of par value

2,012

 

 

1,991

 

Retained earnings

1,838

 

 

1,866

 

Treasury stock – at cost 14.5 shares and 13.7 shares in 2020 and 2019, respectively

(587)

 

 

(527)

 

Accumulated other comprehensive loss

(409)

 

 

(375)

 

Total stockholders’ equity

2,856

 

 

2,957

 

Non-controlling interests

9

 

 

10

 

Total equity

2,865

 

 

2,967

 

Total liabilities and stockholders’ equity

$

8,444

 

 

$

7,710

 

 
 

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)

 

For the six months ended June 30,

2020

 

2019

Operating Activities

 

 

 

Net income

$

69

 

 

$

218

 

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

 

 

 

Depreciation

58

 

 

58

 

Amortization

68

 

 

69

 

Share-based compensation

16

 

 

16

 

Restructuring and asset impairment charges

50

 

 

25

 

Gain from sale of business

 

 

(1)

 

Other, net

18

 

 

4

 

Payments for restructuring

(12)

 

 

(12)

 

Changes in assets and liabilities (net of acquisitions):

 

 

 

Changes in receivables

48

 

 

(68)

 

Changes in inventories

(63)

 

 

(10)

 

Changes in accounts payable

(86)

 

 

(23)

 

Other, net

13

 

 

(70)

 

Net Cash – Operating activities

179

 

 

206

 

Investing Activities

 

 

 

Capital expenditures

(95)

 

 

(129)

 

Acquisitions of businesses, net of cash acquired

 

 

(18)

 

Proceeds from sale of business

 

 

(2)

 

Other, net

7

 

 

3

 

Net Cash – Investing activities

(88)

 

 

(146)

 

Financing Activities

 

 

 

Short-term debt issued, net

359

 

 

257

 

Short-term debt repaid

(422)

 

 

(113)

 

Long-term debt issued, net

987

 

 

 

Repurchase of common stock

(60)

 

 

(39)

 

Proceeds from exercise of employee stock options

5

 

 

8

 

Dividends paid

(95)

 

 

(87)

 

Other, net

 

 

(1)

 

Net Cash – Financing activities

774

 

 

25

 

Effect of exchange rate changes on cash

(12)

 

 

2

 

Net change in cash and cash equivalents

853

 

 

87

 

Cash and cash equivalents at beginning of year

724

 

 

296

 

Cash and cash equivalents at end of period

$

1,577

 

 

$

383

 

Supplemental disclosure of cash flow information:

 

 

 

Cash paid during the period for:

 

 

 

Interest

$

45

 

 

$

45

 

Income taxes (net of refunds received)

$

11

 

 

$

74

 

 
 
 

Xylem Inc. Non-GAAP Measures

Management reviews key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, working capital and backlog, among others. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and to 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, including but not limited to, dividends, acquisitions, share repurchases and debt repayment. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. 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 operating activities as determined in accordance with GAAP. We consider the following items to represent the non-GAAP measures we consider to be key performance indicators, as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

“Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the same currency conversion rate.

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

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

"Adjusted Operating Income", "Adjusted Segment Operating Income", "Adjusted Net Income" and “Adjusted EPS” defined as operating income, segment operating income, net income and earnings per share, adjusted to exclude restructuring and realignment costs, gain or loss from sale of businesses, special charges and tax-related special items, as applicable.

"Adjusted Operating Margin" and "Adjusted Segment Operating Margin" defined as adjusted operating income and adjusted segment operating income divided by total revenue and segment revenue, respectively.

“Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures, and "Free Cash Flow Conversion" defined as Free Cash Flow divided by net income, excluding the gain on sale of businesses and non-cash impairment charges. Our definitions of "free cash flow" and "free cash flow conversion" does not consider certain 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 acquisition and integration related costs, non-cash impairment charges and other special non-operating items, such as pension adjustments.

“Tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, excess tax benefits/losses and other discrete tax adjustments.

 
 
 

Xylem Inc. Non-GAAP Measures
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 Acquisitions /
Divestitures
Change % Change
Orders Orders 2020 v. 2019 2020 v. 2019 FX Impact Adj. 2020 v. 2019 Adj. 2020 v. 2019

2020

2019

Six Months Ended June 30
 
Xylem Inc.

2,493

2,707

(214)

(8%)

-

59

(155)

(6%)

(6%)

 
Water Infrastructure

1,112

1,118

(6)

(1%)

-

42

36

3%

3%

Applied Water

698

793

(95)

(12%)

-

10

(85)

(11%)

(11%)

Measurement & Control Solutions

683

796

(113)

(14%)

-

7

(106)

(13%)

(13%)

 
Quarter Ended June 30
 
Xylem Inc.

1,232

1,392

(160)

(11%)

-

36

(124)

(9%)

(9%)

 
Water Infrastructure

598

586

12

2%

-

27

39

7%

7%

Applied Water

326

399

(73)

(18%)

-

6

(67)

(17%)

(17%)

Measurement & Control Solutions

308

407

(99)

(24%)

-

3

(96)

(24%)

(24%)

 
Quarter Ended March 31
 
Xylem Inc.

1,261

1,315

(54)

(4%)

-

23

(31)

(2%)

(2%)

 
Water Infrastructure

514

532

(18)

(3%)

-

15

(3)

(1%)

(1%)

Applied Water

372

394

(22)

(6%)

-

4

(18)

(5%)

(5%)

Measurement & Control Solutions

375

389

(14)

(4%)

-

4

(10)

(3%)

(3%)

 
 

Xylem Inc. Non-GAAP Measures
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 Acquisitions /
Divestitures
Change % Change
Revenue Revenue 2020 v. 2019 2020 v. 2019 FX Impact Adj. 2020 v. 2019 Adj. 2020 v. 2019

2020

2019

Six Months Ended June 30
 
Xylem Inc.

2,283

2,582

(299)

(12%)

-

44

(255)

(10%)

(10%)

 
Water Infrastructure

939

1,043

(104)

(10%)

-

28

(76)

(7%)

(7%)

Applied Water

675

773

(98)

(13%)

-

9

(89)

(12%)

(12%)

Measurement & Control Solutions

669

766

(97)

(13%)

-

7

(90)

(12%)

(12%)

 
Quarter Ended June 30
 
Xylem Inc.

1,160

1,345

(185)

(14%)

-

25

(160)

(12%)

(12%)

 
Water Infrastructure

501

561

(60)

(11%)

-

16

(44)

(8%)

(8%)

Applied Water

337

394

(57)

(14%)

-

6

(51)

(13%)

(13%)

Measurement & Control Solutions

322

390

(68)

(17%)

-

3

(65)

(17%)

(17%)

 
Quarter Ended March 31
 
Xylem Inc.

1,123

1,237

(114)

(9%)

-

19

(95)

(8%)

(8%)

 
Water Infrastructure

438

482

(44)

(9%)

-

12

(32)

(7%)

(7%)

Applied Water

338

379

(41)

(11%)

-

3

(38)

(10%)

(10%)

Measurement & Control Solutions

347

376

(29)

(8%)

-

4

(25)

(7%)

(7%)

 
 
 

Xylem Inc. Non-GAAP Measures
Adjusted Operating Income
($ Millions)

 
 
Q1 Q2 YTD

2020

2019

 

2020

2019

 

2020

2019

Total Revenue
• Total Xylem

1,123

1,237

1,160

1,345

2,283

2,582

• Water Infrastructure

438

482

501

561

#

939

1,043

• Applied Water

338

379

337

394

#

675

773

• Measurement & Control Solutions

347

376

322

390

669

766

 
Operating Income
• Total Xylem

61

109

54

171

115

280

• Water Infrastructure

39

51

73

98

#

112

149

• Applied Water

47

56

41

62

#

88

118

• Measurement & Control Solutions

(12)

16

(46)

26

(58)

42

• Total Segments

74

123

68

186

142

309

 
Operating Margin
• Total Xylem

5.4%

8.8%

4.7%

12.7%

5.0%

10.8%

• Water Infrastructure

8.9%

10.6%

14.6%

17.5%

11.9%

14.3%

• Applied Water

13.9%

14.8%

12.2%

15.7%

13.0%

15.3%

• Measurement & Control Solutions

(3.5%)

4.3%

(14.3%)

6.7%

(8.7%)

5.5%

• Total Segments

6.6%

9.9%

5.9%

13.8%

6.2%

12.0%

 
Special Charges
• Total Xylem

-

4

11

-

11

4

• Water Infrastructure

-

-

-

-

-

-

• Applied Water

-

-

-

-

-

-

• Measurement & Control Solutions

-

4

10

-

10

4

• Total Segments

-

4

10

-

10

4

 
Restructuring & Realignment Costs
• Total Xylem

9

20

43

21

52

41

• Water Infrastructure

5

9

8

9

13

18

• Applied Water

2

3

4

4

6

7

• Measurement & Control Solutions

2

8

31

8

33

16

• Total Segments

9

20

43

21

52

41

 
Adjusted Operating Income
• Total Xylem

70

133

108

192

178

325

• Water Infrastructure

44

60

81

107

125

167

• Applied Water

49

59

45

66

94

125

• Measurement & Control Solutions

(10)

28

(5)

34

(15)

62

• Total Segments

83

147

121

207

204

354

 
Adjusted Operating Margin
• Total Xylem

6.2%

10.8%

9.3%

14.3%

7.8%

12.6%

• Water Infrastructure

10.0%

12.4%

16.2%

19.1%

13.3%

16.0%

• Applied Water

14.5%

15.6%

13.4%

16.8%

13.9%

16.2%

• Measurement & Control Solutions

(2.9%)

7.4%

(1.6%)

8.7%

(2.2%)

8.1%

• Total Segments

7.4%

11.9%

10.4%

15.4%

8.9%

13.7%

 
 
Xylem Inc. Non-GAAP Measures
Adjusted Diluted EPS
($ Millions, except per share amounts)
 
 
 
Q2 2020 Q2 2019
As Reported Adjustments Adjusted As Reported Adjustments Adjusted
Total Revenue

 

1,160

 

-

 

1,160

 

1,345

 

-

 

1,345

Operating Income

 

54

 

54

a

 

108

 

171

 

21

a

 

192

Operating Margin

 

4.7%

 

9.3%

 

12.7%

 

14.3%

Interest Expense

 

(18)

 

-

 

(18)

 

(18)

 

-

 

(18)

Other Non-Operating Income (Expense)

 

(1)

 

2

b

 

1

 

3

 

-

 

3

Income before Taxes

 

35

 

56

 

91

 

156

 

21

 

177

Provision for Income Taxes

 

(4)

 

(14)

c

 

(18)

 

(17)

 

(17)

c

 

(34)

Net Income Attributable to Xylem

 

31

 

42

 

73

 

139

 

4

 

143

Diluted Shares

 

180.6

 

180.6

 

181.2

 

181.2

Diluted EPS

$

0.17

$

0.23

$

0.40

$

0.77

$

0.02

$

0.79

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

$

(0.01)

$

-

$

(0.01)

Diluted EPS at Constant Currency

$

0.18

$

0.23

$

0.41

 
 
 
Q2 YTD 2020 Q2 YTD 2019
As Reported Adjustments Adjusted As Reported Adjustments Adjusted
Total Revenue

 

2,283

 

-

 

2,283

 

2,582

 

-

 

2,582

Operating Income

 

115

 

63

a

 

178

 

280

 

45

a

 

325

Operating Margin

 

5.0%

 

7.8%

 

10.8%

 

12.6%

Interest Expense

 

(34)

 

-

 

(34)

 

(36)

 

-

 

(36)

Other Non-Operating Income (Expense)

 

(4)

 

3

b

 

(1)

 

5

 

-

 

5

Gain/(Loss) From Sale of Businesses

 

-

 

-

 

-

 

1

 

(1)

 

-

Income before Taxes

 

77

 

66

 

143

 

250

 

44

 

294

Provision for Income Taxes

 

(8)

 

(20)

c

 

(28)

 

(32)

 

(25)

c

 

(57)

Net Income Attributable to Xylem

 

69

 

46

 

115

 

218

 

19

 

237

Diluted Shares

 

181.0

 

181.0

 

181.1

 

181.1

Diluted EPS

$

0.38

$

0.25

$

0.63

$

1.20

$

0.11

$

1.31

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

$

(0.02)

$

(0.01)

$

(0.03)

Diluted EPS at Constant Currency

$

0.40

$

0.26

$

0.66

 
a Quarter-to-date: Restructuring & realignment costs of $43 million in 2020 and $21 million in 2019.; special charges of $11 million ($10 million of intangible asset impairment charges and $1 million of other charges) in 2020.
 
Year-to-date: Restructuring & realignment costs of $52 million and $41 million in 2020 and 2019, respectively; special charges of $11 million ($10 million of intangible asset impairment charges and $1 million of other charges) and $4 million of special charges in 2019 ($1 million of acquisition related costs and $3 million of asset impairment).
 
b Special charges consist of pension costs related to the UK pension plan that has been transferred to an annuity in 2020 as part of the planned buyout activities.
 
c Quarter-to-date: Net tax impact on restructuring & realignment costs of $10 million and $4 million in 2020 and 2019, respectively; $3 million of tax on special charges in 2020; and $1 million and $13 million of negative impact from tax related special benefit adjustments in 2020 and 2019, respectively.
 
Year-to-date: Net tax impact on restructuring & realignment costs of $12 million and $8 million in 2020 and 2019, respectively; $3 million of tax impact on special charges in 2020; and $5 million and $17 million of negative impact from tax related special benefit adjustments in 2020 and 2019, respectively.
 
 

Xylem Inc. Non-GAAP Measures
Net Cash - Operating Activities vs. Free Cash Flow
($ Millions)

 
Q1 Q2 Year-to-Date

2020

 

2019

 

2020

 

2019

 

2020

 

2019

 
Net Cash - Operating Activities

$ (2)

$ 83

$ 181

$ 123

$ 179

$ 206

 
Capital Expenditures - PP&E

(32)

(53)

(24)

(40)

(56)

(93)

Capital Expenditures - Software

(19)

(16)

(20)

(20)

(39)

(36)

Capital Expenditures

(51)

(69)

(44)

(60)

(95)

(129)

 
Free Cash Flow

$ (53)

$ 14

$ 137

$ 63

$ 84

$ 77

 
Net Income

38

79

31

139

69

$ 218

 
Gain/(Loss) from sale of businesses

-

1

-

-

-

1

 
Restructuring Charges - non-cash impairment

-

-

(17)

-

(17)

-

 
Special Charges - non-cash impairment

-

(3)

(10)

-

(10)

(3)

 
Net Income, excluding gain on sale of businesses and non-cash impairment charges

$ 38

$ 81

$ 58

$ 139

$ 96

$ 220

 
Operating Cash Flow Conversion

(5%)

105%

584%

88%

259%

94%

 
Free Cash Flow Conversion

(139%)

17%

236%

45%

88%

35%

 

 

Media
Houston Spencer +1 (914) 323-5723
houston.spencer@xyleminc.com

Investors
Matt Latino +1 (914) 323-5821
matthew.latino@xyleminc.com

Source: Xylem Inc.

Xylem