Xylem Inc. reports solid top-line and adjusted earnings growth in third quarter 2015

• Third quarter 2015 revenue was $902 million, an increase of two percent on an organic basis
• Third quarter 2015 adjusted net income was $90 million or $0.49 per share, which excluding foreign exchange translation impact, was up four percent over third quarter 2014 results; GAAP net income was $88 million or $0.48 per share, down 17 percent year-over-year
• Company reaffirms organic revenue growth and adjusted EPS guidance for full-year 2015

RYE BROOK, N.Y.--(BUSINESS WIRE)--Oct. 29, 2015-- Xylem Inc. (NYSE:XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported third quarter 2015 net income of $88 million, or $0.48 per share. Excluding restructuring and realignment charges and other special items, adjusted net income was $90 million or $0.49 per share, down eight percent from the comparable period in 2014, but up four percent excluding foreign exchange translation impact. Third quarter revenue was $902 million, an increase of two percent organically, reflecting strength in the public utility end market. Third quarter operating margin, adjusted to exclude restructuring and realignment charges, was 13.7 percent, down 20 basis points from the prior year, however, this result was flat year-over-year excluding foreign exchange translation.

“Our team delivered solid results this quarter, with project deliveries driving better than expected performance,” said Patrick Decker, Xylem President and Chief Executive Officer. “We are continuing to see signs of increasing strength in the public utility end market and mixed conditions in industrials. We continue to grow and expand our business in emerging markets, where we generated a nine-percent increase in organic revenue in the quarter. While we did see some growth deceleration in the commercial building and industrial sectors, these regions, such as China and India, are continuing to increase investments in water and wastewater infrastructure. In India, for example, we recently secured a $39 million order for a custom pumping system that will provide drinking water and irrigation to arid areas that currently do not have stable water sources.”

Decker continued, “We are executing a balanced capital deployment strategy. During the quarter, we opportunistically repurchased $75 million in shares and, last week, we added a new business to our analytics portfolio that strengthens our offering. We will continue to maintain a sharp focus on execution across all aspects of our business as we close out the year.”

During the third quarter 2015, Xylem repurchased 2.3 million shares of common stock under its stock repurchase programs. As of September 30, 2015, Xylem had approximately $475 million remaining under its current stock repurchase authorizations.

Full-year 2015 Outlook

Xylem continues to expect full-year 2015 revenue of approximately $3.7 billion, a decrease of six to seven percent from the full-year 2014 results. On an organic basis, Xylem also continues to expect to generate revenue growth of approximately one to two percent.

Expectations for full-year 2015 adjusted earnings per share continue to be in the range of $1.82 to $1.87. Excluding the projected unfavorable impact of foreign exchange translation, Xylem’s adjusted earnings per share growth expectations are in the range of four to seven percent over the comparable full-year 2014 results. The Company’s outlook for projected restructuring and realignment costs of $20 million for the year is unchanged.

Third 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.

• Third quarter 2015 Water Infrastructure revenue was $551 million, up two percent relative to the prior year period on an organic basis. This increase was driven by five-percent growth in the public utility end market, reflecting strong growth in the United States and Europe, as well as continued infrastructure investment activity in emerging markets.
• Third quarter adjusted segment operating income was $85 million, down $13 million from the prior year result, reflecting the unfavorable impact of foreign exchange translation. Operating income for the quarter was $83 million, down $12 million from last year. Adjusted operating margin for the quarter decreased 90 basis points to 15.4 percent as the impact of strong procurement and lean cost savings was more than offset by investment in strategic growth initiatives, unfavorable mix and inflation.

Applied Water

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

• Third quarter 2015 revenue was $351 million, an increase of three percent organically compared with the third quarter 2014. Growth in residential and commercial building applications, as well as industrial project deliveries helped to drive this improvement. Xylem’s business in emerging markets showed continued strength, despite the expected slow-down in China, and North America and Europe each delivered modest growth.
• Adjusted segment operating income was $48 million in the third quarter, down $4 million from the comparable period last year, reflecting the unfavorable impact of foreign exchange translation. Operating income was $46 million, which was $5 million lower than last year. Adjusted operating margin for the quarter decreased 70 basis points to 13.7 percent as strong procurement and lean cost savings were more than offset by the impacts of foreign exchange translation, unfavorable mix and inflation.

Supplemental information on Xylem’s third quarter earnings and reconciliations for non-GAAP items are posted at http://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 2014 revenues of $3.9 billion and approximately 12,500 employees worldwide. Xylem was named to the Dow Jones Sustainability Index 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.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, 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 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, revenue, 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; weather conditions; ability to retain and attract key members of management; our relationship with and the performance of our channel partners; 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 under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 and with subsequent filings we make with the Securities and Exchange Commission.

All forward-looking statements made herein are based on information 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.