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Xylem Reports Fourth Quarter and Full-year 2019 Earnings

6 febbraio 2020
  • Full-year 2019 reported net income of $401 million or $2.21 per share; adjusted full-year net income of $547 million or $3.02 per share
  • Full-year free cash flow conversion was 124%
  • Fourth quarter 2019 reported net income was $118 million or $0.65 per share; adjusted net income of $161 million or $0.89 per share
  • Announces 8% increase in cash dividend, representing the company’s ninth consecutive annual dividend increase
  • Provides 2020 organic revenue growth guidance range of 1% to 3% and adjusted earnings per share range of $2.96 to $3.16

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 full-year 2019 revenue of $5.25 billion, up one percent on a reported basis and four percent on an organic basis. Full-year reported net income was $401 million, or $2.21 per share, with a reported operating margin of 9.3 percent. Adjusted net income, which excludes the impact of restructuring, realignment and special charges, was $547 million, or $3.02 per share. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was 19.5 percent, flat year-over-year. Xylem delivered full-year 2019 adjusted operating margin of 13.9 percent, up 20 basis points versus the prior year. The Company generated $613 million in free cash flow, representing a 124 percent conversion.

In the fourth quarter 2019, Xylem generated net income of $118 million, or $0.65 per share, and adjusted net income of $161 million, or $0.89 per share, which excludes the impact of restructuring, realignment and special charges. Fourth quarter revenue was $1.37 billion reflecting ongoing softness in Industrial and Commercial end markets. Adjusted EBITDA declined 10 basis points to 20.5 percent. Reported operating margin in the quarter was 14.2 percent and adjusted operating margin declined 10 basis points year-over-year to 15.0 percent.

“Our teams continued to capitalize on Xylem’s portfolio of industry-leading technologies throughout 2019, again delivering mid-single-digit growth in the Utilities market globally, including double-digit growth in China and India,” said Patrick Decker, president and CEO of Xylem. “However, soft Industrial and Commercial markets in the second half slowed our overall revenue growth and margin progress for the year. In response to those challenges, we effectively contained costs, significantly improved working capital, and exceeded our free cash flow conversion commitments.”

“We’ve entered 2020 with strong operational discipline, solid foundations underpinning continued growth, and an energized global team leading the industry on sustainability,” Decker continued. “We’re confident we can manage through soft conditions persisting through the first half, and we foresee a moderate second-half recovery in our short-cycle businesses in parallel with ramp-ups in several large Utilities projects in our backlog. We expect a return to mid-single-digit growth in the second half of the year.”

Xylem announced that its Board of Directors declared a dividend in the amount of $0.26 per share, an increase of 8 percent. The dividend is payable on March 26, 2020, to shareholders of record as of February 27, 2020.

Full-year 2020 Outlook

Xylem forecasts full-year 2020 organic revenue in the range of $5.3 to $5.35 billion, up one to three percent.

Full-year 2020 adjusted operating margin is expected to be in the range of 14.0 to 14.5 percent, resulting in adjusted earnings per share of $2.96 to $3.16. This represents an increase of one to eight percent from Xylem’s 2019 adjusted results, excluding the impact of foreign exchange translation and a reduction in non-cash pension income. The Company’s adjusted earnings outlook excludes projected restructuring and realignment costs in the range of $35 million to $45 million for the year. 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.

Fourth Quarter Segment Results

Water Infrastructure

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

  • Fourth quarter 2019 revenue was $603 million, up one percent organically compared with fourth quarter 2018. This increase was driven by solid results in the Utilities end market in the Emerging Markets and Europe. This was largely offset by declines in its short-cycle industrial dewatering business.
  • Fourth quarter reported operating income for the segment was $119 million. Adjusted operating income for the segment, which excludes $6 million of restructuring and realignment, was $125 million. Reported operating margin for the Water Infrastructure segment was 19.7 percent, up 20 basis points versus the prior year, and adjusted operating margin was 20.7 percent, flat with prior year. Strong productivity benefits and cost control offset inflation, lower volumes, and unfavorable mix from our high-margin Dewatering business.

Applied Water

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

  • Fourth quarter 2019 Applied Water revenue was $392 million, a two percent decline organically year-over-year. Volume weakness in the Commercial and Industrial end markets continued in the quarter, with particular softness in the United States and Europe, partly offset by modest growth in Emerging Markets.
  • Fourth quarter reported operating income for the segment was $62 million and adjusted operating income, which excludes $3 million of restructuring and realignment costs, was $65 million, a six percent decrease versus the comparable period last year. The segment reported operating margin was 15.8 percent, down 60 basis points versus the prior year period. Adjusted operating margin declined 60 basis points to 16.6 percent. Strong productivity and price realization in the segment was more than offset by inflation, unfavorable mix, and lower volumes.

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.

  • Fourth quarter 2019 Measurement & Control Solutions revenue was $376 million, up two percent organically versus the prior year, driven by higher energy project deployments in the United States, and stronger international water metrology demand.
  • Fourth quarter reported operating income for the segment was $27 million, and adjusted operating income, which excludes $2 million of restructuring and realignment costs, was $29 million. Measurement & Control Solutions segment reported operating margin was 7.2 percent. Adjusted operating margin of 7.7 percent increased 20 basis points over the prior year period. Productivity benefits and price realization offset inflation and mix headwinds to modestly expand margins.

Supplemental information on Xylem’s fourth quarter 2019 earnings and reconciliations for certain non-GAAP items is posted at www.xylem.com/investors.

About Xylem

Xylem (XYL) is a leading global water technology company committed to developing innovative technology solutions to the world’s water challenges. The Company’s products and services move, treat, analyze, monitor and return water to the environment in public utility, industrial, residential and commercial building services settings. Xylem also provides a leading portfolio of smart metering, network technologies and advanced infrastructure analytics solutions for water, electric and gas utilities. The Company’s more than 16,000 employees bring broad applications expertise with a strong focus on identifying comprehensive, sustainable solutions. Headquartered in Rye Brook, New York, with 2019 revenue of $5.25 billion, Xylem does business in more than 150 countries through a number of market-leading product brands.

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.xylem.com.

Forward-Looking Statements

This press release contains information that may constitute “forward-looking statements" within the meaning of the Private Securities Litigation 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,” “forecast,” “believe,” “target,” “will,” “could,” “would,” “should” 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 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: overall economic and business conditions; 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; actual or potential pandemics; 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; 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; 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, 2018 ("2018 Annual Report") and with subsequent filings we make with the Securities and Exchange Commission ("SEC").

All forward-looking statements made herein are based on information currently available to the Company as of the date of this Report. 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,

2019

 

2018

 

2017

Revenue

$

5,249

 

 

$

5,207

 

 

$

4,707

 

Cost of revenue

3,203

 

 

3,181

 

 

2,860

 

Gross profit

2,046

 

 

2,026

 

 

1,847

 

Selling, general and administrative expenses

1,158

 

 

1,161

 

 

1,089

 

Research and development expenses

191

 

 

189

 

 

181

 

Restructuring and asset impairment charges

63

 

 

22

 

 

25

 

Goodwill impairment charge

148

 

 

 

 

 

Operating income

486

 

 

654

 

 

552

 

Interest expense

67

 

 

82

 

 

82

 

Other non-operating (expense) income, net

(4

)

 

13

 

 

6

 

Gain (loss) on sale of businesses

1

 

 

 

 

(10

)

Income before taxes

416

 

 

585

 

 

466

 

Income tax expense

15

 

 

36

 

 

136

 

Net income

401

 

 

549

 

 

330

 

Less: Net loss attributable to non-controlling interests

 

 

 

 

(1

)

Net income attributable to Xylem

$

401

 

 

$

549

 

 

$

331

 

Earnings per share:

 

 

 

 

 

Basic

$

2.23

 

 

$

3.05

 

 

$

1.84

 

Diluted

$

2.21

 

 

$

3.03

 

 

$

1.83

 

Weighted average number of shares:

 

 

 

 

 

Basic

180.0

 

179.8

 

179.6

Diluted

181.2

 

181.1

 

180.9

XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Millions, except per share amounts)

December 31,

2019

 

2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

724

 

 

$

296

 

Receivables, less allowances for discounts, returns and doubtful accounts of $35

and $35 in 2019 and 2018, respectively

1,036

 

 

1,031

 

Inventories

539

 

 

595

 

Prepaid and other current assets

151

 

 

172

 

Total current assets

2,450

 

 

2,094

 

Property, plant and equipment, net

658

 

 

656

 

Goodwill

2,839

 

 

2,976

 

Other intangible assets, net

1,174

 

 

1,232

 

Other non-current assets

589

 

 

264

 

Total assets

$

7,710

 

 

$

7,222

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

597

 

 

$

586

 

Accrued and other current liabilities

628

 

 

546

 

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

276

 

 

257

 

Total current liabilities

1,501

 

 

1,389

 

Long-term debt, net

2,040

 

 

2,051

 

Accrued postretirement benefits

445

 

 

400

 

Deferred income tax liabilities

310

 

 

303

 

Other non-current accrued liabilities

447

 

 

297

 

Total liabilities

4,743

 

 

4,440

 

 

 

 

 

Stockholders’ equity:

 

 

 

Common stock — par value $0.01 per share:

 

 

 

Authorized 750.0 shares, issued 193.9 and 192.9 shares in 2019 and 2018,

respectively

2

 

 

2

 

Capital in excess of par value

1,991

 

 

1,950

 

Retained earnings

1,866

 

 

1,639

 

Treasury stock – at cost 13.7 shares and 13.2 shares in 2019 and 2018,

respectively

(527

)

 

(487

)

Accumulated other comprehensive loss

(375

)

 

(336

)

Total stockholders’ equity

2,957

 

 

2,768

 

Non-controlling interest

10

 

 

14

 

Total equity

2,967

 

 

2,782

 

Total liabilities and stockholders’ equity

$

7,710

 

 

$

7,222

 

XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions) (Unaudited)

Year Ended December 31,

2019

 

2018

 

2017

Operating Activities

 

 

 

 

 

Net income

$

401

 

 

$

549

 

 

$

330

 

Adjustments to reconcile net income to net cash provided by

operating activities:

 

 

 

 

 

Depreciation

117

 

 

117

 

 

109

 

Amortization

140

 

 

144

 

 

125

 

Deferred income taxes

(77

)

 

(47

)

 

(33

)

Share-based compensation

29

 

 

30

 

 

21

 

Restructuring and asset impairment charges

63

 

 

22

 

 

25

 

Goodwill impairment charge

148

 

 

 

 

 

(Gain)/loss from sale of businesses

(1

)

 

 

 

10

 

Other, net

9

 

 

9

 

 

19

 

Payments for restructuring

(30

)

 

(21

)

 

(28

)

Contributions to postretirement benefit plans

(19

)

 

(41

)

 

(33

)

Changes in assets and liabilities (net of acquisitions):

 

 

 

 

 

Changes in receivables

(23

)

 

(103

)

 

(79

)

Changes in inventories

47

 

 

(97

)

 

27

 

Changes in accounts payable

29

 

 

51

 

 

50

 

Changes in accrued liabilities

15

 

 

(6

)

 

28

 

Changes in accrued taxes

(13

)

 

 

 

104

 

Net changes in other assets and liabilities

4

 

 

(21

)

 

11

 

Net Cash — Operating activities

839

 

 

586

 

 

686

 

Investing Activities

 

 

 

 

 

Capital expenditures

(226

)

 

(237

)

 

(170

)

Proceeds from the sale of property, plant and equipment

 

 

 

 

1

 

Acquisitions of businesses and assets, net of cash acquired

(18

)

 

(433

)

 

(33

)

Proceeds from sale of businesses

 

 

22

 

 

16

 

Cash received from investments

11

 

 

11

 

 

10

 

Cash paid for investments

(7

)

 

(11

)

 

(11

)

Cash received from cross currency swaps

9

 

 

 

 

 

Other, net

 

 

5

 

 

6

 

Net Cash — Investing activities

(231

)

 

(643

)

 

(181

)

Financing Activities

 

 

 

 

 

Short-term debt issued, net

281

 

 

335

 

 

 

Short-term debt repaid, net

(254

)

 

(52

)

 

(282

)

Long-term debt issued, net

 

 

1

 

 

 

Long-term debt repaid, net

 

 

(120

)

 

 

Repurchase of common stock

(40

)

 

(59

)

 

(25

)

Proceeds from exercise of employee stock options

13

 

 

7

 

 

16

 

Dividends paid

(174

)

 

(152

)

 

(130

)

Other, net

(3

)

 

 

 

 

Net Cash — Financing activities

(177

)

 

(40

)

 

(421

)

Effect of exchange rate changes on cash

(3

)

 

(21

)

 

22

 

Net change in cash and cash equivalents

428

 

 

(118

)

 

106

 

Cash and cash equivalents at beginning of year

296

 

 

414

 

 

308

 

Cash and cash equivalents at end of year

$

724

 

 

$

296

 

 

$

414

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

Interest

$

77

 

 

$

78

 

 

$

78

 

Income taxes (net of refunds received)

$

107

 

 

$

75

 

 

$

57

 

 

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 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 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.

“Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as adjustments for other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of "free cash flow" does not consider certain non-discretionary cash payments, such as debt.

“Realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs.

“Sensus Acquisition Related Costs" defined as costs incurred by the Company associated with the acquisition of Sensus that are being reported within operating income. These costs include integration costs, acquisition costs, costs related to the recognition of the backlog intangible asset amortization recorded in purchase accounting.

“Special charges" defined as costs incurred by the Company, such as acquisition and integration related costs not included in "Sensus Acquisition Related Costs", non-cash impairment charges and other special non-operating items.

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

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 Acquisitions /
Divestitures
Change % Change
Orders Orders 2019 v. 2018 2019 v. 2018 FX Impact Adj. 2019 v. 2018 Adj. 2019 v. 2018

2019

2018

Year Ended December 31
 
Xylem Inc.

5,339

5,437

(98)

-2%

17

129

48

1%

1%

 
Water Infrastructure

2,234

2,255

(21)

-1%

-

74

53

2%

2%

Applied Water

1,556

1,557

(1)

0%

-

29

28

2%

2%

Measurement & Control Solutions

1,549

1,625

(76)

-5%

17

26

(33)

-2%

-3%

 
Quarter Ended December 31
 
Xylem Inc.

1,286

1,383

(97)

-7%

4

16

(77)

-6%

-6%

 
Water Infrastructure

530

584

(54)

-9%

-

10

(44)

-8%

-8%

Applied Water

387

395

(8)

-2%

-

3

(5)

-1%

-1%

Measurement & Control Solutions

369

404

(35)

-9%

4

3

(28)

-7%

-8%

 
Quarter Ended September 30
 
Xylem Inc.

1,346

1,356

(10)

-1%

4

24

18

1%

1%

 
Water Infrastructure

586

537

49

9%

-

13

62

12%

12%

Applied Water

376

377

(1)

0%

-

6

5

1%

1%

Measurement & Control Solutions

384

442

(58)

-13%

4

5

(49)

-11%

-12%

 
Quarter Ended June 30
 
Xylem Inc.

1,392

1,378

14

1%

7

33

54

4%

3%

 
Water Infrastructure

586

580

6

1%

-

16

22

4%

4%

Applied Water

399

401

(2)

0%

-

8

6

1%

1%

Measurement & Control Solutions

407

397

10

3%

7

9

26

7%

5%

 
Quarter Ended March 31
 
Xylem Inc.

1,315

1,320

(5)

0%

2

56

53

4%

4%

 
Water Infrastructure

532

554

(22)

-4%

-

35

13

2%

2%

Applied Water

394

384

10

3%

-

12

22

6%

6%

Measurement & Control Solutions

389

382

7

2%

2

9

18

5%

4%

 
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 Acquisitions /
Divestitures
Change % Change
Revenue Revenue 2019 v. 2018 2019 v. 2018 FX Impact Adj. 2019 v. 2018 Adj. 2019 v. 2018

2019

2018

Year Ended December 31
 
Xylem Inc.

5,249

5,207

42

1%

22

124

188

4%

3%

 
Water Infrastructure

2,177

2,176

1

0%

-

70

71

3%

3%

Applied Water

1,541

1,534

7

0%

-

29

36

2%

2%

Measurement & Control Solutions

1,531

1,497

34

2%

22

25

81

5%

4%

 
Quarter Ended December 31
 
Xylem Inc.

1,371

1,386

(15)

-1%

4

17

6

0%

0%

 
Water Infrastructure

603

609

(6)

-1%

-

11

5

1%

1%

Applied Water

392

402

(10)

-2%

-

3

(7)

-2%

-2%

Measurement & Control Solutions

376

375

1

0%

4

3

8

2%

1%

 
Quarter Ended September 30
 
Xylem Inc.

1,296

1,287

9

1%

4

24

37

3%

3%

 
Water Infrastructure

531

541

(10)

-2%

-

13

3

1%

1%

Applied Water

376

378

(2)

-1%

-

6

4

1%

1%

Measurement & Control Solutions

389

368

21

6%

4

5

30

8%

7%

 
Quarter Ended June 30
 
Xylem Inc.

1,345

1,317

28

2%

9

32

69

5%

5%

 
Water Infrastructure

561

546

15

3%

-

16

31

6%

6%

Applied Water

394

388

6

2%

-

8

14

4%

4%

Measurement & Control Solutions

390

383

7

2%

9

8

24

6%

4%

 
Quarter Ended March 31
 
Xylem Inc.

1,237

1,217

20

2%

5

51

76

6%

6%

 
Water Infrastructure

482

480

2

0%

-

30

32

7%

7%

Applied Water

379

366

13

4%

-

12

25

7%

7%

Measurement & Control Solutions

376

371

5

1%

5

9

19

5%

4%

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

Q1

 

Q2

 

Q3

 

Q4

 

YTD

 

 

 

 

 

 

 

 

2019

2018

 

2019

2018

 

2019

2018

 

2019

2018

 

2019

2018

 

 

 

 

 

Total Revenue
• Total Xylem

1,237

1,217

1,345

1,317

1,296

1,287

1,371

1,386

5,249

5,207

• Water Infrastructure

482

480

561

546

531

541

603

609

2,177

2,176

• Applied Water

379

366

394

388

376

378

392

402

1,541

1,534

• Measurement & Control Solutions

376

371

390

383

389

368

376

375

1,531

1,497

 
Operating Income
• Total Xylem

109

113

171

171

11

176

195

194

486

654

• Water Infrastructure

51

49

98

92

97

99

119

119

365

359

• Applied Water

56

50

62

61

61

59

62

66

241

236

• Measurement & Control Solutions

16

33

26

31

(136)

31

27

23

(67)

118

• Total Segments

123

132

186

184

22

189

208

208

539

713

 
Operating Margin
• Total Xylem

8.8%

9.3%

12.7%

13.0%

0.8%

13.7%

14.2%

14.0%

9.3%

12.6%

• Water Infrastructure

10.6%

10.2%

17.5%

16.8%

18.3%

18.3%

19.7%

19.5%

16.8%

16.5%

• Applied Water

14.8%

13.7%

15.7%

15.7%

16.2%

15.6%

15.8%

16.4%

15.6%

15.4%

• Measurement & Control Solutions

4.3%

8.9%

6.7%

8.1%

-35.0%

8.4%

7.2%

6.1%

-4.4%

7.9%

• Total Segments

9.9%

10.8%

13.8%

14.0%

1.7%

14.7%

15.2%

15.0%

10.3%

13.7%

 
Special Charges
• Total Xylem

4

6

-

1

155

1

-

4

159

12

• Water Infrastructure

-

-

-

-

-

-

-

2

-

2

• Applied Water

-

-

-

-

-

-

-

-

-

-

• Measurement & Control Solutions

4

2

-

1

155

-

-

2

159

5

• Total Segments

4

2

-

1

155

-

-

4

159

7

 
Restructuring & Realignment Costs
• Total Xylem

20

16

21

10

30

11

11

11

82

48

• Water Infrastructure

9

5

9

5

7

5

6

5

31

20

• Applied Water

3

3

4

2

3

2

3

3

13

10

• Measurement & Control Solutions

8

8

8

3

20

4

2

3

38

18

• Total Segments

20

16

21

10

30

11

11

11

82

48

 
Adjusted Operating Income
• Total Xylem

133

135

192

182

196

188

206

209

727

714

• Water Infrastructure

60

54

107

97

#

104

104

#

125

126

396

381

• Applied Water

59

53

66

63

#

64

61

#

65

69

254

246

• Measurement & Control Solutions

28

43

34

35

#

39

35

#

29

28

130

141

• Total Segments

147

150

207

195

207

200

219

223

780

768

 
Adjusted Operating Margin
• Total Xylem

10.8%

11.1%

14.3%

13.8%

15.1%

14.6%

15.0%

15.1%

13.9%

13.7%

• Water Infrastructure

12.4%

11.3%

19.1%

17.8%

19.6%

19.2%

20.7%

20.7%

18.2%

17.5%

• Applied Water

15.6%

14.5%

16.8%

16.2%

17.0%

16.1%

16.6%

17.2%

16.5%

16.0%

• Measurement & Control Solutions

7.4%

11.6%

8.7%

9.1%

10.0%

9.5%

7.7%

7.5%

8.5%

9.4%

• Total Segments

11.9%

12.3%

15.4%

14.8%

16.0%

15.5%

16.0%

16.1%

14.9%

14.7%

 
Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
 
 
Q4 2019 Q4 2018

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjustments

 

Adjusted

Total Revenue

1,371

-

1,371

1,386

-

1,386

Operating Income

195

11

a

206

194

15

a

209

Operating Margin

14.2%

15.0%

14.0%

15.1%

Interest Expense

(15)

-

(15)

(19)

-

(19)

Other Non-Operating Income (Expense)

(2)

8

b

6

4

1

5

Gain/(Loss) From Sale of Businesses

-

-

-

-

-

-

Income before Taxes

178

19

197

179

16

195

Provision for Income Taxes

(60)

24

c

(36)

46

(82)

c

(36)

Net Income Attributable to Xylem

118

43

161

225

(66)

159

Diluted Shares

181.2

181.2

181.0

181.0

Diluted EPS

$ 0.65

$ 0.24

$ 0.89

$ 1.24

$ (0.36)

$ 0.88

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

$ (0.02)

$ -

$ (0.02)

Diluted EPS at Constant Currency

$ 0.67

$ 0.24

$ 0.91

 
 
 
Q4 YTD 2019 Q4 YTD 2018

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjustments

Adjusted

Total Revenue

5,249

-

5,249

5,207

5,207

Operating Income

486

241

a

727

654

60

a

714

Operating Margin

9.3%

13.9%

12.6%

13.7%

Interest Expense

(67)

-

(67)

(82)

-

(82)

Other Non-Operating Income (Expense)

(4)

19

b

15

13

1

14

Gain/(Loss) From Sale of Businesses

1

(1)

-

-

-

-

Income before Taxes

416

259

675

585

61

646

Provision for Income Taxes

(15)

(113)

c

(128)

(36)

(88)

c

(124)

Net Income Attributable to Xylem

401

146

547

549

(27)

522

Diluted Shares

181.2

181.2

181.1

181.1

Diluted EPS

$ 2.21

$ 0.81

$ 3.02

$ 3.03

$ (0.15)

$ 2.88

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

$ (0.09)

$ (0.02)

$ (0.11)

Diluted EPS at Constant Currency

$ 2.30

$ 0.83

$ 3.13

 
 
 

a

Quarter: Restructuring & realignment costs of $11 million in both 2019 and 2018 and special charges of $4 million in 2018 ($2 million of acquisition related costs and $2 million of asset impairment).

 

 

 

 

Year-to-date: Restructuring & realignment costs of $82 million and $48 million in 2019 and 2018, respectively; special charges of $155 million of intangible asset and goodwill impairment and $4 million of acquisition related costs in 2019 and $10 million of acquisition related costs and $2 million of asset impairment costs in 2018.

 

b

Special charges related to incremental pension costs as a result of the planned buyout of our UK pension plan of $6 million for the fourth quarter and $17 million year-to-date and $2 million of other special charges.

 

 

 

 

c

Quarter: Net tax impact on restructuring & realignment costs of $2 million in both 2019 and 2018; $4 million of tax impact on special charges in 2019 and tax-related special items of $30 million positive impact from expense adjustments in 2019 and and $80 million negative impact from benefit adjustments in 2018.

 

Year-to-date: Net tax impact on restructuring & realignment costs of $19 million and $12 million in 2019 and 2018, respectively; $6 million and $1 million of tax impact on special charges in 2019 and 2018, respectively and tax-related special items of $88 million and $75 million negative impact from benefit adjustments in 2019 and 2018, respectively.

 
Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
($ Millions)
 
 
Q1 Q2 Q3 Q4 Year-to-Date

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

 
Net Cash - Operating Activities

$ 83

$ 63

$ 123

$ 138

$ 245

$ 187

$ 388

$ 198

$ 839

$ 586

 
Capital Expenditures

(69)

(61)

(60)

(50)

(46)

(60)

(51)

(66)

(226)

(237)

 
Free Cash Flow

$ 14

$ 2

$ 63

$ 88

$ 199

$ 127

$ 337

$ 132

$ 613

$ 349

 
Cash paid for Sensus acquisition related costs

-

(1)

-

-

-

-

-

-

-

(1)

 
Free Cash Flow, excluding Sensus Acquisition Related Costs

$ 14

$ 3

$ 63

$ 88

$ 199

$ 127

$ 337

$ 132

$ 613

$ 350

 
Net Income

79

79

139

115

65

130

118

225

401

549

 
Gain/(Loss) from sale of businesses

1

-

-

(2)

-

2

-

-

1

-

 
Special Charges - non-cash impairment

(3)

-

-

-

(155)

-

-

(2)

(158)

(2)

 
Significant deferred tax benefit/(charge)

-

-

-

-

97

-

(33)

84

64

84

 
Net Income, excluding gain on sale of businesses, non-cash impairment charges and significant deferred tax items

$ 81

$ 79

$ 139

$ 117

$ 123

$ 128

$ 151

$ 143

$ 494

$ 467

`
Free Cash Flow Conversion

17%

4%

45%

75%

162%

99%

223%

92%

124%

75%

 
Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter
 
($ Millions)
 

2019

Q1 Q2 Q3 Q4 Total
 
Net Income

79

139

65

118

401

 
Income Tax Expense

15

17

(77)

60

15

 
Interest Expense (Income), net

17

18

14

13

62

Depreciation

29

29

30

29

117

Amortization

35

34

35

36

140

EBITDA

175

237

67

256

735

 
Share-based Compensation

9

7

7

6

29

 
Restructuring & Realignment

20

21

30

11

82

 
Loss/(Gain) from sale of business

(1)

-

-

-

(1)

 
Special Charges

4

-

166

8

178

 
Adjusted EBITDA

207

265

270

281

1,023

 
Revenue

1,237

1,345

1,296

1,371

5,249

 
Adjusted EBITDA Margin

16.7%

19.7%

20.8%

20.5%

19.5%

 

2018

Q1 Q2 Q3 Q4 Total
 
Net Income

79

115

130

225

549

 
Income Tax Expense

16

35

31

(46)

36

 
Interest Expense (Income), net

20

20

20

18

78

Depreciation

29

29

29

30

117

Amortization

38

36

34

36

144

EBITDA

182

235

244

263

924

 
Share-based Compensation

9

7

7

7

30

 
Restructuring & Realignment

16

9

11

11

47

 
Loss/(Gain) from sale of business

-

2

(2)

-

-

 
Special Charges

6

1

1

4

12

 
Adjusted EBITDA

213

254

261

285

1,013

 
Revenue

1,217

1,317

1,287

1,386

5,207

 
Adjusted EBITDA Margin

17.5%

19.3%

20.3%

20.6%

19.5%

 

 

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