Xylem Inc. reports fourth quarter and full year 2012 results, announces 15 percent dividend increase
Xylem Inc. reports fourth quarter and full year 2012 results, announces 15
percent dividend increase
* Fourth quarter 2012 adjusted net income was $88 million or $0.47 per
share, up 21 percent on a normalized^1 basis over fourth quarter 2011;
GAAP EPS were $0.39 per share, up 39 percent; FY 2012 adjusted earnings
were $1.77 per share, up 7 percent on a normalized basis; GAAP EPS were
$1.59, up 6 percent
* Fourth quarter 2012 revenue was $969 million, down 3 percent; FY 2012
revenue was $3.8 billion, up 3 percent in constant currencies, flat as
reported
* Fourth quarter 2012 adjusted operating margins up 140 basis points, up 70
points as reported
* Full year free cash flow was $312 million, 100 percent of adjusted net
earnings
* Company issues full-year 2013 financial guidance, sees FY 2013 adjusted
earnings of $1.80-$1.90 per share, earnings growth of 2 to 7 percent on
revenue growth of 3 to 4 percent
* Xylem Board of Directors approves a 15 percent increase in the dividend
for first quarter 2013
Business Wire
WHITE PLAINS, N.Y. -- February 7, 2013
Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to
solving the world’s most challenging water issues, today reported fourth
quarter 2012 net income of $73 million, or $0.39 per share, up 39 percent from
the fourth quarter 2011. Excluding the impact of one-time separation costs and
other adjustments associated with Xylem’s 2011 spinoff from ITT Corporation as
well as restructuring and realignment costs, adjusted net income was $88
million or $0.47 per share, up 8 cents or 21 percent on a normalized basis
from 2011. Fourth quarter revenue was $969 million, down 3 percent, reflective
of weakness in industrial and public utility markets. Fourth quarter adjusted
operating margins improved 140 basis points driven by efficiency and cost
control measures.
_______________________
^1 The 2011 normalized earnings per share reflect adjustments (including
one-time separation costs, interest expense, stand-alone costs, and special
tax items) to our GAAP results to better illustrate year-over-year
performance. The normalized earnings are intended to give a representation of
our performance had Xylem been a stand-alone company in 2011.
"Our fourth quarter results show the impact of strategic steps we’ve taken to
improve our financial performance, streamlining operations and taking
aggressive cost control measures in the face of challenging market
conditions,” said Gretchen McClain, president and chief executive officer of
Xylem Inc. "While recognizing and addressing uncertainties in the market, we
stayed focused on the needs of our customers, as illustrated during our
response to the flooding following Hurricane Sandy. We have continued to
invest for future growth, deploying assets to accelerate new product
technology and expanding our growth in emerging markets. We also continue to
acquire attractive businesses to supplement our growth platforms of analytics,
dewatering and services. Our most recent acquisition, PIMS Group of the U.K.,
is our third since becoming an independent company, and will strengthen our
aftermarket and service offering.”
For the full year 2012, Xylem revenues were $3.8 billion, up 3 percent in
constant currencies over 2011, flat as reported. Full year reported net income
was $297 million, or $1.59 per share. Adjusted net income, excluding the
impact of the spinoff and other one-time items, was $330 million or $1.77 per
share. Full year 2012 adjusted operating margins were 12.9 percent, up 100
basis points on a normalized basis. Free cash flow was $312 million, 100
percent of adjusted net earnings.
Xylem forecasts 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 2 to 7 percent to $335 to $354 million, for adjusted earnings per share
of $1.80 to $1.90 per share. The company anticipates that restructuring and
realignment costs will range from $60 to $70 million for the year.
“As a global company, we continually evaluate our actions based on end markets
and regional economic conditions,” McClain said. “That’s why we’re taking
action in Europe and elsewhere to best position our people and our facilities
to meet the needs of our customers and provide economic benefit. Through these
steps and with our applications expertise, market-leading brands, a large
installed base and unmatched distribution in more than 150 countries around
the world, our Xylem portfolio is well-positioned to deliver differentiated
growth over the long term.”
Xylem today also announced that its Board of Directors declared a dividend in
the amount of $0.1164 per share for the first quarter of 2013, an increase of
15 percent, payable on March 20, 2013 to shareholders of record on February
20, 2013.
“The increased cash dividend returns value to our shareholders, and is made
possible through everything we’ve done to maintain a strong balance sheet,
improve operating performance significantly and grow cash flow,” McClain said.
Fourth 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.
* Fourth quarter 2012 revenue was $637 million, down 6 percent compared with
the fourth quarter 2011, reflecting weakness in the public utility and
industrial dewatering markets.
* Fourth quarter adjusted segment operating income, which excludes $1
million of one-time separation-related costs and $15 million of
restructuring and realignment costs, was $105 million, up 1 percent over
the same period in 2011. Adjusted operating margin for the quarter grew
120 basis points, though after factoring in separation, restructuring and
realignment costs, posted a decline of 40 basis points.
Applied Water
Xylem’s Applied Water segment consists of its portfolio of businesses in
residential and commercial building services, industrial and agricultural
applications.
* Fourth quarter 2012 revenue was $346 million, up 3 percent compared with
the fourth quarter 2011, with growth coming in residential and commercial
building services and irrigation.
* Fourth quarter adjusted segment operating income, which excludes $5
million of restructuring and realignment costs, was $40 million, 29
percent higher than the comparable period last year. Adjusted operating
margin grew 240 basis points; including separation costs, as well as
restructuring and realignment costs, operating margin grew 210 basis
points.
Supplemental information on Xylem’s fourth quarter and full year 2012 earnings
and reconciliations for certain non-GAAP items is 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 12,500
employees worldwide. In 2012, Xylem was named to the Dow Jones Sustainability
World Index for advancing sustainable business practices and solutions
worldwide.
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.
XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions, except per share amounts)
December 31, 2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 504 $ 318
Receivables, less allowances for discounts and
doubtful accounts of $34 and $37 in 2012 and 2011, 776 756
respectively
Inventories, net 443 433
Prepaid and other current assets 110 97
Deferred income tax assets 41 45
Total current assets 1,874 1,649
Property, plant and equipment, net 487 463
Goodwill 1,647 1,610
Other intangible assets, net 484 505
Other non-current assets 187 170
Total assets $ 4,679 $ 4,397
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 332 $ 322
Accrued and other current liabilities 443 490
Short-term borrowings and current maturities of 6 5
long-term debt
Total current liabilities 781 817
Long-term debt 1,199 1,201
Accrued postretirement benefits 400 316
Deferred income tax liabilities 173 165
Other non-current accrued liabilities 52 67
Total liabilities 2,605 2,566
Stockholders’ equity:
Common Stock — par value $0.01 per share:
Authorized 750.0 shares, issued 184.6 shares 2 2
Capital in excess of par value 1,706 1,663
Retained earnings 264 44
Treasury stock – at cost 0.5 shares and 0 shares in (13 ) —
2012 and 2011, respectively
Accumulated other comprehensive income 115 122
Total stockholders’ equity 2,074 1,831
Total liabilities and stockholders’ equity $ 4,679 $ 4,397
XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED INCOME STATEMENTS
(In Millions, except per share data)
Year Ended December 31, 2012 2011 2010
Revenue $ 3,791 $ 3,803 $ 3,202
Cost of revenue 2,289 2,342 1,988
Gross profit 1,502 1,461 1,214
Selling, general and administrative 914 877 737
expenses
Research and development expenses 106 100 74
Separation costs 22 87 —
Restructuring and asset impairments 17 2 15
charges, net
Operating income 443 395 388
Interest expense 55 17 —
Other non-operating income, net — 5 —
Income before taxes 388 383 388
Income tax expense 91 104 59
Net income $ 297 $ 279 $ 329
Earnings per share:
Basic $ 1.60 $ 1.51 $ 1.78
Diluted $ 1.59 $ 1.50 $ 1.78
Weighted average number of shares – Basic 185.8 185.1 184.6
Weighted average number of shares – 186.2 185.3 184.6
Diluted
XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In Millions)
Year Ended December 31, 2012 2011 2010
Operating Activities
Net income $ 297 $ 279 $ 329
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 142 137 92
Deferred income taxes 1 8 (31 )
Share-based compensation 22 13 9
Non-cash separation costs — 10 —
Restructuring and asset impairment 17 2 15
charges, net
Payments of restructuring (9 ) (7 ) (22 )
Contributions to postretirement benefit (46 ) (16 ) (3 )
plans
Changes in assets and liabilities (net of
acquisitions):
Changes in receivables 2 (61 ) (45 )
Changes in inventories 5 (18 ) 7
Changes in accounts payable (4 ) (9 ) 41
Changes in accrued liabilities (28 ) 53 12
Changes in accrued taxes (17 ) 56 (17 )
Net changes in other assets and 14 2 8
liabilities
Net Cash — Operating activities 396 449 395
Investing Activities
Capital expenditures (112 ) (126 ) (94 )
Proceeds from the sale of property, plant 5 11 4
and equipment
Acquisitions of businesses and assets, (41 ) (309 ) (1,004 )
net of cash acquired
Other, net 1 1 1
Net Cash — Investing activities (147 ) (423 ) (1,093 )
Financing Activities
Net transfer to former parent (9 ) (995 ) 745
Issuance of short-term debt 13 5 —
Issuance of senior notes, net of discount — 1,198 —
Principal payments of debt and capital (14 ) (8 ) —
lease obligations
Purchase of Xylem common stock (13 ) — —
Proceeds from exercise of employee stock 24 1 —
options
Payments of debt issuance costs — (10 ) —
Dividends paid (75 ) (19 ) —
Net Cash — Financing activities (74 ) 172 745
Effect of exchange rate changes on cash 11 (11 ) 3
Net change in cash and cash equivalents 186 187 50
Cash and cash equivalents at beginning of 318 131 81
year
Cash and cash equivalents at end of year $ 504 $ 318 $ 131
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $ 53 $ — $ —
Income taxes (net of refunds received) $ 104 $ 64 $ 110
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 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, non-recurring restructuring and realignment costs and
tax-related special items.
“Normalized EPS” defined as adjusted earnings per share, as well as
adjustments to reflect the incremental current period amount of interest
expense and stand alone costs in the prior comparable period.
“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.
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) = (G) = (H) = (B
B+C+D+E F/A + D) / A
Change %
Change
Change % Adj. Adj.
Change
2012 2012 Acquisitions FX 2012 v. 2012
v. v. / v.
Orders Orders 2011 2011 Divestitures Contribution Eliminations 2011 2011
2012 2011
Year Ended
December 31,
2012
Xylem Inc. 3,782 3,847 (65) -1.7% (95) 114 - (46) -1.2% 1.3%
Water 2,421 2,454 (33) -1.3% (95) 87 1 (40) -1.6% 2.2%
infrastructure
Applied Water 1,423 1,452 (29) -2.0% - 31 (8) (6) -0.4% 0.1%
Quarter Ended
December 31,
2012
Xylem Inc. 926 905 21 2.3% (7) 6 - 20 2.2% 3.0%
Water 602 589 13 2.2% (7) 5 1 12 2.0% 3.1%
infrastructure
Applied Water 337 330 7 2.1% - 1 - 8 2.4% 2.4%
Quarter Ended
September 30,
2012
Xylem Inc. 882 966 (84) -8.7% (21) 39 - (66) -6.8% -4.7%
Water 564 621 (57) -9.2% (21) 29 - (49) -7.9% -4.5%
infrastructure
Applied Water 334 358 (24) -6.7% - 12 (5) (17) -4.7% -3.4%
Quarter Ended
June 30, 2012
Xylem Inc. 970 998 (28) -2.8% (30) 51 - (7) -0.7% 2.3%
Water 617 632 (15) -2.4% (30) 40 - (5) -0.8% 4.0%
infrastructure
Applied Water 370 383 (13) -3.4% - 13 (2) (2) -0.5% 0.0%
Quarter Ended
March 31, 2012
Xylem Inc. 1,004 978 26 2.7% (37) 18 - 7 0.7% 4.5%
Water 638 612 26 4.2% (37) 13 - 2 0.3% 6.4%
infrastructure
Applied Water 382 381 1 0.3% - 5 (1) 5 1.3% 1.6%
Note: Due to rounding the sum of segment amounts may not agree to Xylem totals.
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) = (G) = (H) = (B
B+C+D+E F/A + D) / A
Change % Change %
Change Change
2012 2012 Acquisitions FX Adj. Adj.
v. v. / 2012 2012
Revenue Revenue 2011 2011 Divestitures Contribution Eliminations v. 2011 v.
2011
2012 2011
Year Ended
December 31,
2012
Xylem Inc. 3,791 3,803 (12 ) -0.3 % (94 ) 108 - 2 0.1 % 2.5 %
Water 2,425 2,416 9 0.4 % (94 ) 80 (1 ) (6 ) -0.2 % 3.7 %
infrastructure
Applied Water 1,424 1,444 (20 ) -1.4 % - 32 (3 ) 9 0.6 % 0.8 %
Quarter Ended
December 31,
2012
Xylem Inc. 969 1,003 (34 ) -3.4 % (7 ) 7 - (34 ) -3.4 % -2.7 %
Water 637 679 (42 ) -6.2 % (7 ) 5 (1 ) (45 ) -6.6 % -5.4 %
Infrastructure
Applied Water 346 336 10 3.0 % - 2 - 12 3.6 % 3.6 %
Quarter Ended
September 30,
2012
Xylem Inc. 931 939 (8 ) -0.9 % (21 ) 38 - 9 1.0 % 3.2 %
Water 595 584 11 1.9 % (21 ) 28 - 18 3.1 % 6.7 %
infrastructure
Applied Water 350 368 (18 ) -4.9 % - 12 (2 ) (8 ) -2.2 % -1.6 %
Quarter Ended
June 30, 2012
Xylem Inc. 966 971 (5 ) -0.5 % (32 ) 49 - 12 1.2 % 4.5 %
Water 609 602 7 1.2 % (32 ) 37 (1 ) 11 1.8 % 7.3 %
infrastructure
Applied Water 373 385 (12 ) -3.1 % - 13 (1 ) - 0.0 % 0.3 %
Quarter Ended
March 31, 2012
Xylem Inc. 925 890 35 3.9 % (34 ) 14 - 15 1.7 % 5.5 %
Water 584 551 33 6.0 % (34 ) 10 1 10 1.8 % 7.8 %
infrastructure
Applied Water 355 355 - 0.0 % - 5 - 5 1.4 % 1.4 %
Note: Due to rounding the sum of segment amounts may not agree to Xylem totals.
Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
2012 and 2011
($ Millions, except per share amounts)
Q1 Q2 2012 Q3 2012 Q4 2012 YTD
2012 2012
Net Income 63 89 72 73 297
Separation
Costs, Net of 4 4 3 5 16
Tax
Restructuring
& - - 4 13 17
Realignment,
Net of Tax
Adjusted Net
Income before 67 93 79 91 330
Special Tax
Items
Special Tax - (1 ) 4 (3 ) -
Items
Adjusted Net 67 92 83 88 330
Income
Diluted
Earnings per $ 0.34 $ 0.48 $ 0.38 $ 0.39 $ 1.59
Share
Separation
Costs per $ 0.02 $ 0.02 $ 0.02 $ 0.03 $ 0.09
Share
Restructuring
& Realignment $ 0.00 $ 0.00 $ 0.02 $ 0.07 $ 0.09
Costs per
Share
Adjusted
Diluted EPS
before $ 0.36 $ 0.50 $ 0.42 $ 0.49 $ 1.77
Special Tax
Items
Special Tax
Items per $ 0.00 ($0.01 ) $ 0.02 ($0.02 ) $ 0.00
Share
Adjusted $ 0.36 $ 0.49 $ 0.44 $ 0.47 $ 1.77
Diluted EPS
Q1 Q2 2011 Q3 2011 Q4 2011 YTD
2011 2011
Net Income 78 72 77 52 279
Separation
Costs, Net of 2 27 25 18 72
Tax
Adjusted Net
Income before 80 99 102 70 351
Special Tax
Items
Special Tax - 4 (1 ) 4 7
Items
Adjusted Net 80 103 101 74 358
Income
Diluted
Earnings per $ 0.42 $ 0.39 $ 0.42 $ 0.28 $ 1.50
Share
Separation
Costs per $ 0.01 $ 0.15 $ 0.13 $ 0.10 $ 0.39
Share
Adjusted
Diluted EPS
before $ 0.43 $ 0.54 $ 0.55 $ 0.38 $ 1.89
Special Tax
Items
Special Tax
Items per $ 0.00 $ 0.02 ($0.01 ) $ 0.02 $ 0.04
Share
Adjusted $ 0.43 $ 0.56 $ 0.54 $ 0.40 $ 1.93
Diluted EPS
Note: YTD EPS amounts may not equal the sum of the quarterly EPS amounts due to
rounding.
Xylem Inc. Non-GAAP Reconciliation
Adjusted Operating Income
($ Millions)
Q4 YTD
'12 '11 '12 '11
Total Revenue
• Total Xylem 969 1,003 3,791 3,803
• Water 637 679 2,425 2,416
Infrastructure
• Applied Water 346 336 1,424 1,444
Operating Income
• Total Xylem 104 100 443 395
• Water 89 98 342 343
Infrastructure
• Applied Water 35 27 170 160
Operating Margin
• Total Xylem 10.7% 10.0% 11.7% 10.4%
• Water 14.0% 14.4% 14.1% 14.2%
Infrastructure
• Applied Water 10.1% 8.0% 11.9% 11.1%
Separation Costs
• Total Xylem 7 20 22 87
• Water 1 6 4 16
Infrastructure
• Applied Water - 4 2 13
Restructuring &
Realignment Costs
• Total Xylem 19 - 24 -
• Water 15 - 19 -
Infrastructure
• Applied Water 5 - 5 -
Adjusted Operating
Income*
• Total Xylem 130 120 489 482
• Water 105 104 365 359
Infrastructure
• Applied Water 40 31 177 173
Adjusted Operating
Margin*
• Total Xylem 13.4% 12.0% 12.9% 12.7%
• Water 16.5% 15.3% 15.1% 14.9%
Infrastructure
• Applied Water 11.6% 9.2% 12.4% 12.0%
*Adjusted Operating Income excludes non-recurring separation, restructuring &
realignment costs
Xylem Inc. Non-GAAP Reconciliation
Normalized and Adjusted Diluted EPS
($ Millions, except per share amounts)
Q4 2011 Q4 2012
As Adjustments Adjusted Adjustments Normalized As Adjustments Adjusted
Reported Reported
Total Revenue 1,003 1,003 1,003 969 969
Operating 100 20 a 120 (2 ) c 118 104 26 f 130
Income
Operating 10.0 % 12.0 % 11.8 % 10.7 % 13.4 %
Margin
Interest (15 ) (15 ) (15 ) (14 ) (14 )
Expense
Other
Non-Operating - - - (1 ) (1 )
Income
(Expense)
Income before 85 20 105 (2 ) 103 89 26 115
Taxes
Provision for (33 ) 2 b (31 ) 0 e (31 ) (16 ) (11 ) g (27 )
Income Taxes
Net Income 52 22 74 (2 ) 72 73 15 88
Diluted 185.3 185.3 185.3 186.5 186.5
Shares
Diluted EPS $ 0.28 $ 0.12 $ 0.40 $ (0.01 ) $ 0.39 $ 0.39 $ 0.08 $ 0.47
YTD 2011 YTD 2012
As Adjustments Adjusted Adjustments Normalized As Adjustments Adjusted
Reported Reported
Total Revenue 3,803 3,803 3,803 3,791 3,791
Operating 395 87 a 482 (28 ) c 454 443 46 f 489
Income
Operating 10.4 % 12.7 % 11.9 % 11.7 % 12.9 %
Margin
Interest (17 ) (17 ) (39 ) d (56 ) (55 ) (55 )
Expense
Other
Non-Operating 5 5 5 - -
Income
(Expense)
Income before 383 87 470 (67 ) 403 388 46 434
Taxes
Provision for (104 ) (8 ) b (112 ) 16 e (96 ) (91 ) (13 ) g (104 )
Income Taxes
Net Income 279 79 358 (51 ) 307 297 33 330
Diluted 185.3 185.3 185.3 186.2 186.2
Shares
Diluted EPS $ 1.50 $ 0.43 $ 1.93 $ (0.27 ) $ 1.66 $ 1.59 $ 0.18 $ 1.77
a One time separation costs
b Net tax impact of above items, plus the addition of 2011 special tax items
c Incremental stand alone costs incurred in 2012
d Incremental interest expense on long-term debt incurred in 2012
e Incremental interest expense and stand alone costs incurred in 2012 tax
affected using the 2011 effective tax rate, as adjusted
f One time separation, restructuring & realignment costs
g Tax impact of one time separation, restructuring & realignment costs and
special tax items
Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
Years Ended December 31, 2012 and 2011
($ Millions)
Year Ended
2012 2011
Net Cash - Operating Activities 396 449
Capital Expenditures (112 ) (126 )
Free Cash Flow, including separation costs 284 323
Cash Paid for Separation Costs (incl. Capex) 28 65
Free Cash Flow, excluding separation costs 312 388
Net Income 297 279
Separation Costs, net of tax (incl. tax friction) 16 72
Net Income, excluding separation costs 313 351
Free Cash Flow Conversion 100 % 111 %
Xylem Inc. Non-GAAP Reconciliation
Guidance
($ Millions, except per share amounts)
Illustration of Mid Point Guidance
2013 Guidance
FY '12 FY '13
As Adjustments Adjusted As Adjustments Adjusted
Reported Projected
Total Revenue 3,791 3,791 3,915 3,915
Segment
Operating 512 30 a 542 487 65 d 552
Income
Segment
Operating 13.5 % 14.3 % 12.4 % 14.1 %
Margin
Corporate 69 (16 ) b 53 59 - 59
Expense
Operating 443 46 489 428 65 493
Income
Operating 11.7 % 12.9 % 10.9 % 12.6 %
Margin
Interest (55 ) (55 ) (55 ) (55 )
Expense
Other
Non-Operating - - (2 ) (2 )
Income
(Expense)
Income before 388 46 434 371 65 436
Taxes
Provision for (91 ) (13 ) c (104 ) (73 ) (19 ) c (92 )
Income Taxes
Net Income 297 33 330 298 46 344
Diluted 186.2 186.2 186.4 186.4
Shares
Diluted EPS $ 1.59 $ 0.18 $ 1.77 $ 1.60 $ 0.25 $ 1.85
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
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 3,915
Operating 315 276 388 395 443 428
Income
Operating 9.6 % 9.7 % 12.1 % 10.4 % 11.7 % 10.9 %
Margin
Restructuring 41 31 15 - 24 65
& Realignment
Separation - - - 87 22 -
Costs
Adjusted
Operating 356 307 403 482 489 493
Income
Adjusted
Operating 10.8 % 10.8 % 12.6 % 12.7 % 12.9 % 12.6 %
Margin
Standalone - - - 5 28 -
Costs
Adj.
Operating
Income, excl. 356 307 403 487 517 493
Standalone
Costs
Adjusted
Operating
Margin, excl. 10.8 % 10.8 % 12.6 % 12.8 % 13.6 % 12.6 %
Standalone
Costs
Contact:
Xylem Inc.
Media:
Tom Glover, +1-914-323-5891
tom.glover@xyleminc.com
or
Investors:
Phil DeSousa, +1-914-323-5930
phil.desousa@xyleminc.com
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