UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2019
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
(Address of principal executive offices) | (Zip Code) | |||
(914 ) 323-5700
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange of which registered | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
Item 2.02 | Results of Operations and Financial Condition |
On October 31, 2019, Xylem Inc. issued a press release announcing its financial results for the third quarter ended September 30, 2019. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
Exhibit No. | Description |
Press Release issued by Xylem Inc. on October 31, 2019. | |
104.0 | The cover page from Xylem Inc.'s Quarterly Report on Form 8-K for the period ended September 30, 2019 formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
XYLEM INC. | ||||
Date: October 31, 2019 | By: | /s/ E. Mark Rajkowski | ||
E. Mark Rajkowski | ||||
Senior Vice President & Chief Financial Officer (Authorized Officer of Registrant) | ||||
EXHIBIT INDEX
Exhibit No. | Description |
Press Release issued by Xylem Inc. on October 31, 2019. | |
104.0 | The cover page from Xylem Inc.'s Quarterly Report on Form 8-K for the period ended September 30, 2019 is formatted in Inline XBRL. |
Exhibit 99.1
Xylem Inc.
1 International Drive, Rye Brook N.Y. 10573
Tel +1.914.323.5700 Fax +1.914.323.5752
Contacts: | Media | Investors | ||
Houston Spencer +1 (914) 323-5723 | Matt Latino +1 (914) 323-5821 | |||
Houston.Spencer@xyleminc.com | Matthew.Latino@xyleminc.com | |||
Xylem reports third quarter earnings growth and margin expansion
• | Third quarter 2019 reported net income was $65 million or $0.36 per share; Adjusted net income for the quarter was $149 million or $0.82 per share, up 10% excluding foreign exchange translation |
• | Delivered $1.3 billion in revenue for the third quarter, up 3% organically |
• | Lowers full-year 2019 organic revenue growth guidance range to 3% to 4% and adjusted earnings per share to $3.01 to $3.03 |
RYE BROOK, N.Y., October 31, 2019 - Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported third quarter 2019 net income of $65 million, or $0.36 per share. Excluding the impact of restructuring and realignment, impairment charges and one-time tax benefits, the Company delivered adjusted net income of $149 million, or $0.82 per share in the quarter. Excluding the impact of foreign exchange translation, adjusted earnings per share was up 10 percent. Third quarter revenue was $1.3 billion, up 3 percent organically led by healthy growth in the utilities end-market moderated by slower-than-expected growth in industrial and commercial markets. Reported operating margin in the quarter was 0.8 percent and adjusted operating margin was 15.1 percent, up 50 basis points compared to the prior year.
“Solid demand and disciplined execution in our largest markets drove margin expansion and delivery on our earnings commitments," said Patrick Decker, president and CEO of Xylem. "Steady revenue growth in our utilities business has been partially offset, however, by notable weakening in industrial and commercial end-markets.”
“The near-term softness in those market environments has caused us to lower our organic revenue and earnings guidance," Decker continued. "Nevertheless, we expect to exit the year with sizable backlogs as our core utilities business remains healthy and the digital transformation of the water sector continues to gather pace. This gives us confidence in our ability to continue to outperform the market in 2020, and deliver mid-single-digit growth over the long term."
Full-year 2019 Outlook
Xylem is updating its forecasted full-year 2019 revenue outlook to be in the range of $5.24 to $5.27 billion. On an organic basis, Xylem’s revenue growth is adjusted to a range of 3 to 4 percent (approximately 1 percent on a reported basis) from previous guidance of 5 to 6 percent.
Xylem is revising its full-year 2019 adjusted operating margin outlook from 14.5 to 14.9 percent to 13.8 to 14.0 percent. The full-year adjusted earnings per share is now expected to be $3.01 to $3.03, lowered from previous guidance of $3.12 to $3.22, but reflecting an increase of approximately 5 percent versus
prior year - the equivalent of 7 to 8 percent excluding foreign exchange effects. The Company’s adjusted earnings outlook excludes projected restructuring and realignment and goodwill impairment costs. 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.
Third Quarter Segment Results
Water Infrastructure
Xylem’s Water Infrastructure segment consists of its portfolio of businesses primarily serving wastewater operations for utility and industrial customers through transport, dewatering and treatment applications.
• | Third quarter 2019 revenue was $531 million, up 1 percent organically compared with third quarter 2018. Healthy growth in the utilities market, particularly in the U.S., more than offset declines in our short-cycle industrial business. |
• | Third quarter reported operating income for the segment was $97 million and adjusted operating income, which excludes $7 million of restructuring and realignment costs, was $104 million. The segment’s reported operating margin was 18.3 percent and adjusted operating margin was 19.6 percent, up 40 basis points versus the prior year due to higher net productivity and price realization, partially offset by the impact of lower volumes and mix. |
Applied Water
Xylem’s Applied Water segment consists of its portfolio of businesses primarily serving the end users of water through industrial water management, commercial building services and residential applications.
• | Third quarter 2019 Applied Water revenue was $376 million, a 1 percent increase organically year-over-year. Versus strong prior year comparisons, both industrial and commercial end-markets were slower than expected, influenced by U.S. project delays. |
• | Third quarter reported operating income for the segment was $61 million and adjusted operating income, which excludes $3 million of restructuring and realignment costs, was $64 million. The segment’s reported operating margin was 16.2 percent and adjusted operating margin was 17.0 percent, an 90 basis point increase over prior year period due to higher price realization and productivity more than off-setting inflation. |
Measurement & Control Solutions
Xylem’s Measurement & Control Solutions segment consists of its portfolio of businesses primarily serving the clean water and energy operations for utility and industrial customers through smart metering, network technologies, advanced infrastructure analytics and analytic instrumentation applications.
• | Third quarter 2019 Measurement & Control Solutions revenue was $389 million, up 8 percent organically versus the prior year. Revenue growth was driven by execution in the metrology water business. |
• | Third quarter reported operating income for the segment was a loss of $136 million, and adjusted operating income, which excludes $20 million of restructuring and realignment costs and a $155 million impairment charge, was $39 million. The segment’s reported operating margin was -35 percent. Adjusted operating margin was 10 percent, up 50 basis points versus the prior year, driven by productivity and volume gains, as well as increased price realization, which was partially offset by higher growth investments. |
Supplemental information on Xylem’s third 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 approximately 17,000 employees bring broad applications expertise with a strong focus on identifying comprehensive, sustainable solutions. Headquartered in Rye Brook, New York, with 2018 revenue of $5.2 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, political and other risks associated with our international operations, including military actions, 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; competition and pricing pressures in the markets we serve; 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 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 liability and recalls; claims or investigations by governmental or regulatory bodies; 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, 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
CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)
(in millions, except per share data)
Three Months | Nine Months | ||||||||||||||
For the periods ended September 30, | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenue | $ | 1,296 | $ | 1,287 | $ | 3,878 | $ | 3,821 | |||||||
Cost of revenue | 787 | 782 | 2,369 | 2,337 | |||||||||||
Gross profit | 509 | 505 | 1,509 | 1,484 | |||||||||||
Selling, general and administrative expenses | 273 | 279 | 870 | 868 | |||||||||||
Research and development expenses | 44 | 46 | 142 | 137 | |||||||||||
Restructuring and asset impairment charges | 33 | 4 | 58 | 19 | |||||||||||
Goodwill impairment charge | 148 | — | 148 | — | |||||||||||
Operating income | 11 | 176 | 291 | 460 | |||||||||||
Interest expense | 16 | 21 | 52 | 63 | |||||||||||
Other non-operating (expense) income, net | (7 | ) | 4 | (2 | ) | 9 | |||||||||
Gain from sale of business | — | 2 | 1 | — | |||||||||||
(Loss) income before taxes | (12 | ) | 161 | 238 | 406 | ||||||||||
Income tax (benefit) expense | (77 | ) | 31 | (45 | ) | 82 | |||||||||
Net income | $ | 65 | $ | 130 | $ | 283 | $ | 324 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.36 | $ | 0.73 | $ | 1.57 | $ | 1.80 | |||||||
Diluted | $ | 0.36 | $ | 0.72 | $ | 1.56 | $ | 1.79 | |||||||
Weighted average number of shares: | |||||||||||||||
Basic | 180.1 | 179.7 | 179.9 | 179.8 | |||||||||||
Diluted | 181.2 | 181.1 | 181.2 | 181.2 | |||||||||||
XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except per share amounts)
September 30, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 453 | $ | 296 | |||
Receivables, less allowances for discounts and doubtful accounts of $33 and $35 in 2019 and 2018, respectively | 1,078 | 1,031 | |||||
Inventories | 580 | 595 | |||||
Prepaid and other current assets | 152 | 172 | |||||
Total current assets | 2,263 | 2,094 | |||||
Property, plant and equipment, net | 641 | 656 | |||||
Goodwill | 2,811 | 2,976 | |||||
Other intangible assets, net | 1,180 | 1,232 | |||||
Other non-current assets | 620 | 264 | |||||
Total assets | $ | 7,515 | $ | 7,222 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 521 | $ | 586 | |||
Accrued and other current liabilities | 634 | 546 | |||||
Short-term borrowings and current maturities of long-term debt | 306 | 257 | |||||
Total current liabilities | 1,461 | 1,389 | |||||
Long-term debt | 2,030 | 2,051 | |||||
Accrued postretirement benefits | 385 | 400 | |||||
Deferred income tax liabilities | 310 | 303 | |||||
Other non-current accrued liabilities | 434 | 297 | |||||
Total liabilities | 4,620 | 4,440 | |||||
Stockholders’ equity: | |||||||
Common Stock – par value $0.01 per share: | |||||||
Authorized 750.0 shares, issued 193.8 shares and 192.9 shares in 2019 and 2018, respectively | 2 | 2 | |||||
Capital in excess of par value | 1,983 | 1,950 | |||||
Retained earnings | 1,791 | 1,639 | |||||
Treasury stock – at cost 13.7 shares and 13.2 shares in 2019 and 2018, respectively | (526 | ) | (487 | ) | |||
Accumulated other comprehensive loss | (364 | ) | (336 | ) | |||
Total stockholders’ equity | 2,886 | 2,768 | |||||
Non-controlling interest | 9 | 14 | |||||
Total equity | 2,895 | 2,782 | |||||
Total liabilities and stockholders’ equity | $ | 7,515 | $ | 7,222 | |||
XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
For the nine months ended September 30, | 2019 | 2018 | |||||
Operating Activities | |||||||
Net income | $ | 283 | $ | 324 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 88 | 87 | |||||
Amortization | 104 | 108 | |||||
Share-based compensation | 23 | 23 | |||||
Restructuring and asset impairment charges | 58 | 19 | |||||
Goodwill impairment charge | 148 | — | |||||
Gain from sale of business | (1 | ) | — | ||||
Other, net | 7 | 2 | |||||
Payments for restructuring | (21 | ) | (18 | ) | |||
Changes in assets and liabilities (net of acquisitions): | |||||||
Changes in receivables | (73 | ) | (76 | ) | |||
Changes in inventories | (2 | ) | (115 | ) | |||
Changes in accounts payable | (30 | ) | 51 | ||||
Changes in accrued taxes | (140 | ) | 20 | ||||
Other, net | 7 | (37 | ) | ||||
Net Cash – Operating activities | 451 | 388 | |||||
Investing Activities | |||||||
Capital expenditures | (175 | ) | (171 | ) | |||
Acquisition of businesses, net of cash acquired | (18 | ) | (433 | ) | |||
Proceeds from sale of assets and business | (2 | ) | 22 | ||||
Cash received from investments | 3 | — | |||||
Other, net | 7 | 3 | |||||
Net Cash – Investing activities | (185 | ) | (579 | ) | |||
Financing Activities | |||||||
Short-term debt issued, net | 317 | 410 | |||||
Short-term debt repaid | (254 | ) | (50 | ) | |||
Repurchase of common stock | (39 | ) | (58 | ) | |||
Proceeds from exercise of employee stock options | 10 | 7 | |||||
Dividends paid | (131 | ) | (114 | ) | |||
Other, net | (2 | ) | — | ||||
Net Cash – Financing activities | (99 | ) | 195 | ||||
Effect of exchange rate changes on cash | (10 | ) | (14 | ) | |||
Net change in cash and cash equivalents | 157 | (10 | ) | ||||
Cash and cash equivalents at beginning of year | 296 | 414 | |||||
Cash and cash equivalents at end of period | $ | 453 | $ | 404 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 46 | $ | 47 | |||
Income taxes (net of refunds received) | $ | 94 | $ | 60 | |||
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, 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, 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 | ||||||||||||||||||||
Orders | Orders | Change 2019 v. 2018 | % Change 2019 v. 2018 | Acquisitions/ Divestitures | FX Impact | Change Adj. 2019 v. 2018 | % Change Adj. 2019 v. 2018 | |||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||
Nine Months Ended September 30 | ||||||||||||||||||||||||||
Xylem Inc. | 4,053 | 4,054 | (1 | ) | 0 | % | 13 | 113 | 125 | 3 | % | 3 | % | |||||||||||||
Water Infrastructure | 1,704 | 1,671 | 33 | 2 | % | — | 64 | 97 | 6 | % | 6 | % | ||||||||||||||
Applied Water | 1,169 | 1,162 | 7 | 1 | % | — | 26 | 33 | 3 | % | 3 | % | ||||||||||||||
Measurement & Control Solutions | 1,180 | 1,221 | (41 | ) | -3 | % | 13 | 23 | (5 | ) | 0 | % | -1 | % | ||||||||||||
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 | ||||||||||||||||||||
Revenue | Revenue | Change 2019 v. 2018 | % Change 2019 v. 2018 | Acquisitions / Divestitures | FX Impact | Change Adj. 2019 v. 2018 | % Change Adj. 2019 v. 2018 | |||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||
Nine Months Ended September 30 | ||||||||||||||||||||||||||
Xylem Inc. | 3,878 | 3,821 | 57 | 1 | % | 18 | 107 | 182 | 5 | % | 4 | % | ||||||||||||||
Water Infrastructure | 1,574 | 1,567 | 7 | 0 | % | — | 59 | 66 | 4 | % | 4 | % | ||||||||||||||
Applied Water | 1,149 | 1,132 | 17 | 2 | % | — | 26 | 43 | 4 | % | 4 | % | ||||||||||||||
Measurement & Control Solutions | 1,155 | 1,122 | 33 | 3 | % | 18 | 22 | 73 | 7 | % | 5 | % | ||||||||||||||
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 | YTD | |||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Total Revenue | ||||||||||||||||||||||||
• Total Xylem | 1,237 | 1,217 | 1,345 | 1,317 | 1,296 | 1,287 | 3,878 | 3,821 | ||||||||||||||||
• Water Infrastructure | 482 | 480 | 561 | 546 | 531 | 541 | 1,574 | 1,567 | ||||||||||||||||
• Applied Water | 379 | 366 | 394 | 388 | 376 | 378 | 1,149 | 1,132 | ||||||||||||||||
• Measurement & Control Solutions | 376 | 371 | 390 | 383 | 389 | 368 | 1,155 | 1,122 | ||||||||||||||||
Operating Income | ||||||||||||||||||||||||
• Total Xylem | 109 | 113 | 171 | 171 | 11 | 176 | 291 | 460 | ||||||||||||||||
• Water Infrastructure | 51 | 49 | 98 | 92 | 97 | 99 | 246 | 240 | ||||||||||||||||
• Applied Water | 56 | 50 | 62 | 61 | 61 | 59 | 179 | 170 | ||||||||||||||||
• Measurement & Control Solutions | 16 | 33 | 26 | 31 | (136 | ) | 31 | (94 | ) | 95 | ||||||||||||||
• Total Segments | 123 | 132 | 186 | 184 | 22 | 189 | 331 | 505 | ||||||||||||||||
Operating Margin | ||||||||||||||||||||||||
• Total Xylem | 8.8 | % | 9.3 | % | 12.7 | % | 13.0 | % | 0.8 | % | 13.7 | % | 7.5 | % | 12.0 | % | ||||||||
• Water Infrastructure | 10.6 | % | 10.2 | % | 17.5 | % | 16.8 | % | 18.3 | % | 18.3 | % | 15.6 | % | 15.3 | % | ||||||||
• Applied Water | 14.8 | % | 13.7 | % | 15.7 | % | 15.7 | % | 16.2 | % | 15.6 | % | 15.6 | % | 15.0 | % | ||||||||
• Measurement & Control Solutions | 4.3 | % | 8.9 | % | 6.7 | % | 8.1 | % | (35.0 | )% | 8.4 | % | (8.1 | )% | 8.5 | % | ||||||||
• Total Segments | 9.9 | % | 10.8 | % | 13.8 | % | 14.0 | % | 1.7 | % | 14.7 | % | 8.5 | % | 13.2 | % | ||||||||
Special Charges | ||||||||||||||||||||||||
• Total Xylem | 4 | 6 | — | 1 | 155 | 1 | 159 | 8 | ||||||||||||||||
• Water Infrastructure | — | — | — | — | — | — | — | — | ||||||||||||||||
• Applied Water | — | — | — | — | — | — | — | — | ||||||||||||||||
• Measurement & Control Solutions | 4 | 2 | — | 1 | 155 | — | 159 | 3 | ||||||||||||||||
• Total Segments | 4 | 2 | — | 1 | 155 | — | 159 | 3 | ||||||||||||||||
Restructuring & Realignment Costs | ||||||||||||||||||||||||
• Total Xylem | 20 | 16 | 21 | 10 | 30 | 11 | 71 | 37 | ||||||||||||||||
• Water Infrastructure | 9 | 5 | 9 | 5 | 7 | 5 | 25 | 15 | ||||||||||||||||
• Applied Water | 3 | 3 | 4 | 2 | 3 | 2 | 10 | 7 | ||||||||||||||||
• Measurement & Control Solutions | 8 | 8 | 8 | 3 | 20 | 4 | 36 | 15 | ||||||||||||||||
• Total Segments | 20 | 16 | 21 | 10 | 30 | 11 | 71 | 37 | ||||||||||||||||
Adjusted Operating Income | ||||||||||||||||||||||||
• Total Xylem | 133 | 135 | 192 | 182 | 196 | 188 | 521 | 505 | ||||||||||||||||
• Water Infrastructure | 60 | 54 | 107 | 97 | 104 | 104 | 271 | 255 | ||||||||||||||||
• Applied Water | 59 | 53 | 66 | 63 | 64 | 61 | 189 | 177 | ||||||||||||||||
• Measurement & Control Solutions | 28 | 43 | 34 | 35 | 39 | 35 | 101 | 113 | ||||||||||||||||
• Total Segments | 147 | 150 | 207 | 195 | 207 | 200 | 561 | 545 | ||||||||||||||||
Adjusted Operating Margin | ||||||||||||||||||||||||
• Total Xylem | 10.8 | % | 11.1 | % | 14.3 | % | 13.8 | % | 15.1 | % | 14.6 | % | 13.4 | % | 13.2 | % | ||||||||
• Water Infrastructure | 12.4 | % | 11.3 | % | 19.1 | % | 17.8 | % | 19.6 | % | 19.2 | % | 17.2 | % | 16.3 | % | ||||||||
• Applied Water | 15.6 | % | 14.5 | % | 16.8 | % | 16.2 | % | 17.0 | % | 16.1 | % | 16.4 | % | 15.6 | % | ||||||||
• Measurement & Control Solutions | 7.4 | % | 11.6 | % | 8.7 | % | 9.1 | % | 10.0 | % | 9.5 | % | 8.7 | % | 10.1 | % | ||||||||
• Total Segments | 11.9 | % | 12.3 | % | 15.4 | % | 14.8 | % | 16.0 | % | 15.5 | % | 14.5 | % | 14.3 | % | ||||||||
Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
($ Millions, except per share amounts)
Q3 2019 | Q3 2018 | ||||||||||||||||||||||
As Reported | Adjustments | Adjusted | As Reported | Adjustments | Adjusted | ||||||||||||||||||
Total Revenue | 1,296 | — | 1,296 | 1,287 | — | 1,287 | |||||||||||||||||
Operating Income | 11 | 185 | a | 196 | 176 | 12 | a | 188 | |||||||||||||||
Operating Margin | 0.8 | % | 15.1 | % | 13.7 | % | 14.6 | % | |||||||||||||||
Interest Expense | (16 | ) | — | (16 | ) | (21 | ) | — | (21 | ) | |||||||||||||
Other Non-Operating Income (Expense) | (7 | ) | 11 | b | 4 | 4 | — | 4 | |||||||||||||||
Gain/(Loss) from sale of businesses | — | — | — | 2 | (2 | ) | — | ||||||||||||||||
Income (Loss) before Taxes | (12 | ) | 196 | 184 | 161 | 10 | 171 | ||||||||||||||||
Provision for Income Taxes | 77 | (112 | ) | c | (35 | ) | (31 | ) | (1 | ) | c | (32 | ) | ||||||||||
Net Income attributable to Xylem | 65 | 84 | 149 | 130 | 9 | 139 | |||||||||||||||||
Diluted Shares | 181.2 | 181.2 | 181.1 | 181.1 | |||||||||||||||||||
Diluted EPS | $ | 0.36 | $ | 0.46 | $ | 0.82 | $ | 0.72 | $ | 0.05 | $ | 0.77 | |||||||||||
Year-over-year currency translation impact on current year diluted EPS | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | ||||||||||||||
Diluted EPS at Constant Currency | $ | 0.38 | $ | 0.47 | $ | 0.85 | |||||||||||||||||
Q3 YTD 2019 | Q3 YTD 2018 | ||||||||||||||||||||||
As Reported | Adjustments | Adjusted | As Reported | Adjustments | Adjusted | ||||||||||||||||||
Total Revenue | 3,878 | — | 3,878 | 3,821 | 3,821 | ||||||||||||||||||
Operating Income | 291 | 230 | a | 521 | 460 | 45 | a | 505 | |||||||||||||||
Operating Margin | 7.5 | % | 13.4 | % | 12.0 | % | 13.2 | % | |||||||||||||||
Interest Expense | (52 | ) | — | (52 | ) | (63 | ) | — | (63 | ) | |||||||||||||
Other Non-Operating Income (Expense) | (2 | ) | 11 | b | 9 | 9 | — | 9 | |||||||||||||||
Gain/(Loss) from sale of businesses | 1 | (1 | ) | — | — | — | — | ||||||||||||||||
Income (Loss) before Taxes | 238 | 240 | 478 | 406 | 45 | 451 | |||||||||||||||||
Provision for Income Taxes | 45 | (137 | ) | c | (92 | ) | (82 | ) | (6 | ) | c | (88 | ) | ||||||||||
Net Income attributable to Xylem | 283 | 103 | 386 | 324 | 39 | 363 | |||||||||||||||||
Diluted Shares | 181.2 | 181.2 | 181.2 | 181.2 | |||||||||||||||||||
Diluted EPS | $ | 1.56 | $ | 0.57 | $ | 2.13 | $ | 1.79 | $ | 0.21 | $ | 2.00 | |||||||||||
Year-over-year currency translation impact on current year diluted EPS | $ | (0.07 | ) | $ | (0.02 | ) | $ | (0.09 | ) | ||||||||||||||
Diluted EPS at Constant Currency | $ | 1.63 | $ | 0.59 | $ | 2.22 | |||||||||||||||||
a | Quarter: Restructuring & realignment costs of $30 million and $11 million in 2019 and 2018, respectively; special charges of $155 million of intangible asset and goodwill impairment in 2019 and $1 million of acquisition related costs in 2018. |
Year-to-date: Restructuring & realignment costs of $71 million and $37 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 $8 million of acquisition related costs in 2018. | |
b | Special charges related to incremental pension costs as a result of the planned buyout of our UK pension plan. |
c | Quarter: Net tax impact on restructuring & realignment costs of $9 million and $3 million in 2019 and 2018, respectively; $2 million of tax impact on special charges in 2019 and tax-related special items of $101 million negative impact from benefit adjustments in 2019 and and $2 million positive impact from expense adjustments in 2018. |
Year-to-date: Net tax impact on restructuring & realignment costs of $17 million and $10 million in 2019 and 2018, respectively; $2 million and $1 million of tax impact on special charges in 2019 and 2018, respectively and tax-related special items of $118 million negative impact from benefit adjustments in 2019 and $5 million positive impact from expense adjustments in 2018. | |
Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
($ Millions)
Q1 | Q2 | Q3 | Year-to-Date | ||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
Net Cash - Operating Activities | $ | 83 | $ | 63 | $ | 123 | $ | 138 | $ | 245 | $ | 187 | $ | 451 | $ | 388 | |||||||||||||||
Capital Expenditures | (69 | ) | (61 | ) | (60 | ) | (50 | ) | (46 | ) | (60 | ) | (175 | ) | (171 | ) | |||||||||||||||
Free Cash Flow | $ | 14 | $ | 2 | $ | 63 | $ | 88 | $ | 199 | $ | 127 | $ | 276 | $ | 217 | |||||||||||||||
Cash paid for Sensus acquisition related costs | — | (1 | ) | — | — | — | — | — | (1 | ) | |||||||||||||||||||||
Free Cash Flow, excluding Sensus Acquisition Related Costs | $ | 14 | $ | 3 | $ | 63 | $ | 88 | $ | 199 | $ | 127 | $ | 276 | $ | 218 | |||||||||||||||
Net Income | 79 | 79 | 139 | 115 | 65 | 130 | 283 | 324 | |||||||||||||||||||||||
Gain/(Loss) from sale of businesses | 1 | — | — | (2 | ) | — | 2 | 1 | — | ||||||||||||||||||||||
Special Charges - non-cash impairment | (3 | ) | — | — | — | (155 | ) | — | (158 | ) | — | ||||||||||||||||||||
Significant deferred tax benefit/(charge) | — | — | — | — | 97 | — | 97 | — | |||||||||||||||||||||||
Net Income, excluding gain on sale of businesses, non-cash impairment charges and significant deferred tax items | $ | 81 | $ | 79 | $ | 139 | $ | 117 | $ | 123 | $ | 128 | $ | 343 | $ | 324 | |||||||||||||||
Free Cash Flow Conversion | 17 | % | 4 | % | 45 | % | 75 | % | 162 | % | 99 | % | 80 | % | 67 | % | |||||||||||||||