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): April 30, 2013

 

 

XYLEM INC.

(Exact name of registrant as specified in its charter)

 

 

 

Indiana		001-35229		45-2080495
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

1133 Westchester Avenue, Suite N200 White Plains, New York		10604
(Address of principal executive offices)		(Zip Code)

(914) 323-5700

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name or former address, if changed since last report)

 

 

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))

 

 

 

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Item 2.02

Results of Operations and Financial Condition

Attached hereto as Exhibit 99.1 and incorporated herein by reference is the news release issued by Xylem Inc. on April 30, 2013, announcing the financial results for the first quarter ended March 31, 2013. 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 (the “Securities Act”), or the Exchange Act.

 

Item 7.01

Regulation FD Disclosure

Attached hereto as Exhibit 99.2 and incorporated herein by reference is an earnings presentation posted on Xylem Inc.’s website on April 30, 2013, summarizing Xylem Inc.’s financial results for the first quarter ended March 31, 2013. This information is furnished pursuant to Item 7.01 Regulation FD Disclosure. This information shall not be deemed filed for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits

(d) Exhibits.

 

Exhibit No.		Description
99.1		News Release issued by Xylem Inc. on April 30, 2013.
99.2		Presentation summarizing first quarter financial results posted by Xylem Inc. on April 30, 2013.

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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: April 30, 2013		By:		/s/ Michael T. Speetzen
				Michael T. Speetzen
				Senior Vice President and Chief Financial Officer (Authorized Officer of Registrant)

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		News Release issued by Xylem Inc. on April 30, 2013.
99.2		Presentation summarizing first quarter financial results posted by Xylem Inc. on April 30, 2013.

Exhibit 99.1

 

Xylem

1133 Westchester Ave., White Plains, NY 10604

Tel +1.914.323.5700 Fax +1.914.696.2960

 

Contacts:		Media		Investors
		Tom Glover +1-914-323-5891		Phil DeSousa +1-914-323-5930
		tom.glover@xyleminc.com		phil.desousa@xyleminc.com

Xylem Inc. reports first quarter 2013 results, affirms full-year guidance

 

•

First quarter 2013 adjusted net income was $50 million or $0.27 per share, down $0.09 from first quarter 2012; GAAP net income was $41 million or $0.22 per share, down $0.12

 

•

First quarter 2013 revenue was $879 million, down $46 million from first quarter 2012

 

•

Xylem maintains FY 2013 EPS of $1.79-$1.89 on revenue midpoint of $3.9 billion

WHITE PLAINS, N.Y., April 30, 2013 – Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported first quarter 2013 net income of $41 million, or $0.22 per share. Adjusted net income was $50 million, or $0.27 per share, excluding the impact of special items that include restructuring and realignment charges, and special tax items. First quarter revenue was $879 million, down $46 million from the first quarter 2012, reflective of on-going European economic challenges, U.S. industrial weakness and lower shipments for treatment projects. First quarter 2013 adjusted operating margins were down 230 basis points, down 320 basis points as reported, resulting from lower volume, acquisition costs and continued investments in growth initiatives.

“We were pleased to deliver earnings in line with our expectations despite weaker revenue for the quarter than we had anticipated,” said Gretchen McClain, president and chief executive officer of Xylem Inc. “We’re addressing continued market challenges in several key regions of the world, especially Europe, and are taking assertive cost actions to reposition ourselves as a more competitive and efficient organization, and to create more value for our customers. We continue to pursue attractive acquisitions that will help to strengthen our portfolio. During the first quarter, we completed two acquisitions — PIMS, which bolsters our attractive service business; and MultiTrode, which enhances our global water and wastewater monitoring and control offering.”

“Exciting new product launches are winning in the market place, leading to share gains in key market segments,” McClain said. “We were proud to launch several innovative products this quarter, including new dewatering solutions from our Godwin and Flygt brands, as well as new analytical lab instruments from our YSI and OI

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Analytical brands. As we look ahead to the remainder of 2013, we are focused on introducing additional new products, and continuing to expand geographically. Through these and other customer-focused solutions, we will continue to position Xylem as a global leader in the water industry.”

Xylem affirms full year guidance, forecasting full year 2013 revenue growth of 3 to 4 percent to approximately $3.9 billion. Full year 2013 adjusted net income is forecast to grow 1 to 7 percent to $333 to $352 million, for adjusted earnings per share of $1.79 to $1.89 per share. The company anticipates that restructuring and realignment costs will range from $60 to $70 million for the year.

First 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.

 

•

First quarter 2013 revenue was $551 million, down 6 percent compared with the first quarter 2012, reflecting U.S. industrial weakness, European economic challenges and decreased treatment shipments.

 

•

First quarter adjusted segment operating income was $52 million. Adjusted operating margin was 9.4 percent, reflecting lower volumes, acquisition impacts and continued investments.

Applied Water

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

 

•

First quarter 2013 revenue was $345 million, down 3 percent compared with the first quarter 2012, reflecting weak industrial demand and European economic challenges, offset by strength in U.S. residential and agricultural end markets.

 

•

First quarter adjusted segment operating income was $42 million, up 2 percent versus the same period in 2012. Adjusted operating margin was 12.2 percent, reflecting strong operational performance.

Supplemental information on Xylem’s first quarter earnings and reconciliations for certain non-GAAP items are posted at investors.xyleminc.com.

About Xylem

Xylem (NYSE: 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 White Plains, N.Y., with 2012 annual revenues of $3.8 billion and approximately 12,700 employees worldwide. In 2012, Xylem was named to the Dow Jones Sustainability World Index for advancing sustainable business practices and solutions worldwide.

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

Forward-Looking Statements

This document contains information that may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” 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, but are not limited to, statements about the separation of Xylem Inc. (the “Company”) from ITT Corporation in 2011, capitalization of the Company, future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to orders, sales, operating margins and earnings per share growth, and statements expressing general views about future operating results — are forward-looking statements.

Caution should be taken not to place undue reliance on any such forward-looking statements because they involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements. 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. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those set forth in Item 1A in our Annual Report on Form 10-K, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission.

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XYLEM INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)

(in millions, except per share data)

 

For the three months ended March 31,		2013				2012
Revenue		$	879			$	925
Cost of revenue			545				562
Gross profit			334				363
Selling, general and administrative expenses			236				231
Research and development expenses			26				28
Restructuring charges			5				—
Separation costs			1				5
Operating income			66				99
Interest expense			13				14
Other non-operating (expense), net			(2	)			(1	)
Income before taxes			51				84
Income tax expense			10				21
Net income		$	41			$	63
Earnings per share:
Basic		$	0.22			$	0.34
Diluted		$	0.22			$	0.34
Weighted average number of shares:
Basic			185.8				185.4
Diluted			186.4				185.9
Dividends declared per share		$	0.1164			$	0.1012

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XYLEM INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

 

		March 31, 2013				December 31, 2012
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	375			$	504
Receivables, less allowances for discounts and doubtful accounts of $27 and $34 in 2013 and 2012, respectively			767				776
Inventories, net			461				443
Prepaid and other current assets			111				110
Deferred income tax assets			43				41
Total current assets			1,757				1,874
Property, plant and equipment, net			474				487
Goodwill			1,669				1,647
Other intangible assets, net			504				484
Other non-current assets			185				187
Total assets		$	4,589			$	4,679
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	309			$	332
Accrued and other current liabilities			406				443
Short-term borrowings and current maturities of long-term debt			6				6
Total current liabilities			721				781
Long-term debt			1,199				1,199
Accrued postretirement benefits			397				400
Deferred income tax liabilities			179				173
Other non-current accrued liabilities			53				52
Total liabilities			2,549				2,605
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common Stock — authorized 750.0 shares, par value $0.01 per share:
Issued 186.3 shares and 186.2 shares in 2013 and 2012, respectively			2				2
Capital in excess of par value			1,711				1,706
Retained earnings			283				264
Treasury stock – at cost 1.0 shares and 0.5 shares in 2013 and 2012, respectively			(28	)			(13	)
Accumulated other comprehensive income			72				115
Total stockholders’ equity			2,040				2,074
Total liabilities and stockholders’ equity		$	4,589			$	4,679

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XYLEM INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)

 

For the three months ended March 31,		2013				2012
Operating Activities
Net income		$	41			$	63
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			25				23
Amortization			12				11
Share-based compensation			6				5
Restructuring charges			5				—
Payments for restructuring			(4	)			—
Changes in assets and liabilities (net of acquisitions):
Changes in receivables			1				7
Changes in inventories			(29	)			(31	)
Changes in accounts payable			(8	)			14
Other, net			(29	)			(31	)
Net Cash — Operating activities			20				61
Investing Activities
Capital expenditures			(30	)			(31	)
Acquisitions, net of cash acquired			(78	)			—
Proceeds from the sale of property, plant and equipment			3				2
Net Cash — Investing activities			(105	)			(29	)
Financing Activities
Repurchase of common stock			(15	)			(1	)
Proceeds from exercise of employee stock options			—				16
Dividends paid			(22	)			(19	)
Other, net			1				(6	)
Net Cash — Financing activities			(36	)			(10	)
Effect of exchange rate changes on cash			(8	)			7
Net change in cash and cash equivalents			(129	)			29
Cash and cash equivalents at beginning of year			504				318
Cash and cash equivalents at end of period		$	375			$	347
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest		$	11			$	11
Income taxes (net of refunds received)		$	27			$	18

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Xylem Inc. Non-GAAP Measures

Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operations as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:

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

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

“EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude for non-recurring separation costs associated with the Xylem spin-off from ITT Corporation (not excluded for 2013) as well as non-recurring restructuring and realignment costs.

“Adjusted Operating Income”, “Adjusted Segment Operating Income”, and “Adjusted EPS” defined as operating income and earnings per share, adjusted to exclude non-recurring separation costs associated with the Xylem spin-off from ITT Corporation (not excluded for 2013), non-recurring restructuring and realignment costs and tax-related special items.

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

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Xylem Inc. Non-GAAP Reconciliation

Reported vs. Organic & Constant Currency Order Growth

($ Millions)

 

		(As Reported - GAAP)																(As Adjusted - Organic)																				Constant Currency
						(A)				(B)								(C)				(D)				(E)				(F) = B+C+D+E				(G) = F/A				(H) = (B + D) / A
		Orders				Orders				Change 2013 v. 2012				% Change 2013 v. 2012				Acquisitions / Divestitures				FX Contribution				Eliminations				Change Adj. 2013 v.  2012				% Change Adj. 2013 v. 2012
		2013				2012
Quarter Ended March 31, 2013
Xylem Inc.			962				1,004				(42	)			-4.2	%			(26	)			2				—				(66	)			-6.6	%			-4.0	%
Water Infrastructure			601				638				(37	)			-5.8	%			(26	)			2				—				(61	)			-9.6	%			-5.5	%
Applied Water			378				382				(4	)			-1.0	%			—				—				(1	)			(5	)			-1.3	%			-1.0	%

Note: Due to rounding the sum of segment amounts may not agree to Xylem totals.

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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)				(F) = B+C+D+E				(G) = F/A				(H) = (B + D) / A
		Revenue				Revenue				Change 2013 v. 2012				% Change 2013 v. 2012				Acquisitions / Divestitures				FX Contribution				Eliminations				Change Adj. 2013 v.  2012				% Change Adj. 2013 v. 2012
		2013				2012
Quarter Ended March 31, 2013
Xylem Inc.			879				925				(46	)			-5.0	%			(23	)			2				—				(67	)			-7.2	%			-4.8	%
Water Infrastructure			551				584				(33	)			-5.7	%			(23	)			1				—				(55	)			-9.4	%			-5.5	%
Applied Water			345				355				(10	)			-2.8	%			—				—				(2	)			(12	)			-3.4	%			-2.8	%

Note: Due to rounding the sum of segment amounts may not agree to Xylem totals.

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Xylem Inc. Non-GAAP Reconciliation

Adjusted Operating Income

($ Millions)

 

		Q1
		‘13				‘12
Total Revenue
• Total Xylem			879				925
• Water Infrastructure			551				584
• Applied Water			345				355
Operating Income
• Total Xylem			66				99
• Water Infrastructure			42				75
• Applied Water			40				40
Operating Margin
• Total Xylem			7.5	%			10.7	%
• Water Infrastructure			7.6	%			12.8	%
• Applied Water			11.6	%			11.3	%
Separation Costs
• Total Xylem			—				5
• Water Infrastructure			—				2
• Applied Water			—				1
Restructuring & Realignment Costs
• Total Xylem			12				—
• Water Infrastructure			10				—
• Applied Water			2				—
Adjusted Operating Income*
• Total Xylem			78				104
• Water Infrastructure			52				77
• Applied Water			42				41
Adjusted Operating Margin*
• Total Xylem			8.9	%			11.2	%
• Water Infrastructure			9.4	%			13.2	%
• Applied Water			12.2	%			11.5	%

 

*	Adjusted Operating Income excludes restructuring & realignment costs in 2013 and excludes non-recurring separation costs in 2012.

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Xylem Inc. Non-GAAP Reconciliation

Adjusted Diluted EPS

($ Millions, except per share amounts)

 

		Q1 2012												Q1 2013
		As Reported				Adjustments				Adjusted				As Reported				Adjustments				Adjusted
Total Revenue			925								925				879								879
Operating Income			99				5a				104				66				12c				78
Operating Margin			10.7	%							11.2	%			7.5	%							8.9	%
Interest Expense			(14	)							(14	)			(13	)							(13	)
Other Non-Operating Income (Expense)			(1	)							(1	)			(2	)							(2	)
Income before Taxes			84				5				89				51				12				63
Provision for Income Taxes			(21	)			(1	)b			(22	)			(10	)			(3	)d			(13	)
Net Income			63				4				67				41				9				50
Diluted Shares			185.9								185.9				186.4								186.4
Diluted EPS		$	0.34			$	0.02			$	0.36			$	0.22			$	0.05			$	0.27

 

a	One time separation costs

b	Net tax impact of separation costs

c	Restructuring & realignment costs

d	Tax impact of restructuring & realignment costs

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Xylem Inc. Non-GAAP Reconciliation

Net Cash - Operating Activities vs. Free Cash Flow

Three Months Ended March 31, 2013 and 2012

($ Millions)

 

		Three Months Ended
		2013				2012
Net Cash - Operating Activities			20				61
Capital Expenditures			(30	)			(31	)
Free Cash Flow, including separation costs			(10	)			30
Cash Paid for Separation Costs (incl. Capex)			—				11
Free Cash Flow, excluding separation costs*			(10	)			41
Net Income			41				63
Separation Costs, net of tax (incl. tax friction)			—				4
Net Income, excluding separation costs*			41				67
Free Cash Flow Conversion			-24	%			61	%

 

*	Separation costs are not excluded in 2013

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Xylem Inc. Non-GAAP Reconciliation

Guidance

($ Millions, except per share amounts)

 

2013 Guidance														Illustration of Mid Point Guidance
		FY ‘12												FY ‘13
		As Reported				Adjustments				Adjusted				As Projected				Adjustments				Adjusted
Total Revenue			3,791								3,791				3,925								3,925
Segment Operating Income			512				30a				542				484				65d				549
Segment Operating Margin			13.5	%							14.3	%			12.3	%							14.0	%
Corporate Expense			69				(16	)b			53				59				—				59
Operating Income			443				46				489				425				65				490
Operating Margin			11.7	%							12.9	%			10.8	%							12.5	%
Interest Expense			(55	)							(55	)			(55	)							(55	)
Other Non-Operating Income (Expense)			—								—				(2	)							(2	)
Income before Taxes			388				46				434				368				65				433
Provision for Income Taxes			(91	)			(13	)c			(104	)			(72	)			(19	)c			(91	)
Net Income			297				33				330				296				46				342
Diluted Shares			186.2								186.2				186.4								186.4
Diluted EPS		$	1.59			$	0.18			$	1.77			$	1.59			$	0.25			$	1.84

 

a	One time separation, restructuring and realignment costs incurred at the segment level

b	One time separation, restructuring and realignment costs incurred at the corporate level

c	Net tax impact of above items, plus the addition of special tax items

d	Restructuring and realignment costs incurred at the segment level

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Xylem Inc. Non-GAAP Reconciliation

Adjusted Operating Income

($ Millions)

 

																						Mid Point Guidance
		2008				2009				2010				2011				2012				2013E
Revenue			3,291				2,849				3,202				3,803				3,791				3,925
Operating Income			315				276				388				395				443				425
Operating Margin			9.6	%			9.7	%			12.1	%			10.4	%			11.7	%			10.8	%
Restructuring & Realignment			41				31				15				—				24				65
Separation Costs			—				—				—				87				22				—
Adjusted Operating Income			356				307				403				482				489				490
Adjusted Operating Margin			10.8	%			10.8	%			12.6	%			12.7	%			12.9	%			12.5	%
Standalone Costs			—				—				—				5				28				—
Adj. Operating Income, excl. Standalone Costs			356				307				403				487				517				490
Adjusted Operating Margin, excl. Standalone Costs			10.8	%			10.8	%			12.6	%			12.8	%			13.6	%			12.5	%

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