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Xylem reports fourth quarter and full-year 2020 earnings

Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported fourth quarter revenue of $1.37 billion, and full-year 2020 revenue of $4.88 billion, exceeding expectations on strengthening end-market performance, despite COVID-19 related impacts.

Fourth quarter reported operating margin was 13.0 percent, and adjusted operating margin was 13.8 percent, each declining 120 basis points year-over-year. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin declined 170 basis points to 18.8 percent. COVID-related impacts and inflation drove the margin decline, exceeding productivity improvements and cost savings. Xylem generated net income of $148 million, or $0.82 per share, and adjusted net income of $145 million, or $0.81 per share, which excludes the impact of restructuring, realignment and special charges.

For the full year, Xylem delivered reported operating margin of 7.5 percent, down 180 basis points versus the prior year, and adjusted operating margin of 10.8 percent, down 310 basis points for the same period. Adjusted EBITDA margin was 16.3 percent, down 320 basis points year-over-year. The margin declines for the full year were driven by the same factors as in the fourth quarter. Full-year reported net income was $254 million, or $1.40 per share, with a reported operating margin of 7.5 percent. Adjusted net income, which excludes the impact of restructuring, realignment and special charges, was $374 million, or $2.06 per share. The Company generated $824 million of operating cash flow, representing a 324 percent conversion, and $641 million of free cash flow, representing a 181 percent conversion.

“Our team again delivered solid operational performance, exceeding expectations across all major indicators, including revenue, margin, and EPS,” said Patrick Decker, president and CEO of Xylem. “We drove better-than-anticipated top-line improvements in all segments, taking full advantage of stabilizing demand, demonstrated by sequential gains globally, and with particularly strong performance in Europe and China. Our improved bottom-line performance reflects effective cost containment and supply chain execution through the pandemic, and over-delivery on our free cash flow conversion commitments on the back of disciplined working capital management.”

“That performance gives us positive momentum entering 2021,” Decker continued, “as our end markets showed encouraging signs of recovery in the fourth quarter, with healthy orders trends and significant backlog growth. We also delivered strong performance with our industry-leading digital portfolio, as the pandemic continues to accelerate customer adoption of digital technologies across the water sector. This clearly positions Xylem well in both the near and long term.”

Xylem announced that its Board of Directors declared a dividend in the amount of $0.28 per share, an increase of 8 percent. The dividend is payable on March 18, 2021, to shareholders of record as of February 18, 2021.

Full-year 2021 Outlook

Xylem forecasts full-year 2021 revenue in the range of $5.16 to $5.26 billion, up 6 to 8 percent on a reported basis and up 3 to 5 percent on an organic basis.

Full-year 2021 adjusted EBITDA margin is expected to be in the range of 16.7 to 17.7 percent and adjusted operating margin is expected to be in the range of 11.5 to 12.5 percent. This results in adjusted earnings per share of $2.35 to $2.60, which represents an increase of 14 to 26 percent from Xylem’s 2020 adjusted results. The Company’s adjusted earnings outlook excludes projected restructuring and realignment costs of approximately $50 to $60 million for the year. Further 2021 planning assumptions are included in Xylem’s fourth quarter 2020 earnings materials posted at www.xylem.com/investors. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort.

Fourth Quarter Segment Results

Water Infrastructure

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

  • Fourth quarter 2020 revenue was $616 million, flat organically compared with fourth quarter 2019. This result, achieved despite difficult market conditions, was driven by modest growth in the wastewater utility end market in Europe, Asia and Canada offset by softness in the U.S. industrial market.
  • Fourth quarter reported operating income for the segment was $117 million. Adjusted operating income for the segment, which excludes $7 million of restructuring and realignment, was $124 million, a less than one percent decrease versus the comparable period last year. Reported operating margin for the segment was 19.0 percent, down 70 basis points versus the prior year, and adjusted operating margin was 20.1 percent, down 60 basis points versus prior year. Adjusted EBITDA margin was 22.2 percent, down 70 basis points from the prior year. Productivity benefits, cost control and modest price realization were more than offset by inflation, increased reserves, and unfavorable volume and mix impacts.

Applied Water

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

  • Fourth quarter 2020 Applied Water revenue was $395 million, a one percent decline organically year-over-year. Volume weakness in industrial end markets continued in the quarter, with particular softness in the U.S. and Middle East, partly offset by robust growth in the residential market in the U.S. and China.
  • Fourth quarter reported operating income for the segment was $61 million and adjusted operating income, which excludes $1 million of restructuring and realignment costs, was $62 million, a 5 percent decrease versus the comparable period last year. The segment reported operating margin was 15.4 percent, down 40 basis points versus the prior year period. Adjusted operating margin declined 90 basis points to 15.7 percent. Adjusted EBITDA margin was 17.2 percent, down 170 basis points from the prior year. Productivity benefits, favorable mix and modest price realization were more than offset by inflation and lower volumes.

Measurement & Control Solutions

Xylem’s Measurement & Control Solutions segment consists of its portfolio of businesses in smart metering, network technologies, advanced infrastructure analytics and analytic instrumentation.

  • Fourth quarter 2020 Measurement & Control Solutions revenue was $362 million, down 5 percent organically versus the prior year, lapping large project deployments in the U.S. and Middle East. Strong sequential improvement reflects healthy demand in the test business and Advanced Infrastructure Analytics, both of which were up high single digits.
  • Fourth quarter reported operating income for the segment was $14 million, and adjusted operating income, which excludes $2 million of restructuring and realignment costs, was $16 million, a 45 percent decrease versus the comparable period last year. The Measurement & Control Solutions segment reported operating margin was 3.9 percent, down 330 basis points versus the prior year period. Adjusted operating margin of 4.4 percent also decreased 330 basis points over the prior year period. Adjusted EBITDA margin was 14.6 percent, down 350 basis points from the prior year. Strong productivity results and cost savings programs partly offset lower volume, inflation and unfavorable mix.

Supplemental information on Xylem’s fourth quarter 2020 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 solving critical water and infrastructure challenges with innovation. Our more than 16,000 diverse employees delivered revenue of $4.88 billion in 2020. We are creating a more sustainable world by enabling our customers to optimize water and resource management, and helping communities in more than 150 countries become water-secure. Join us at www.xylem.com.

Forward-Looking Statements

This press release contains “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” "contemplate," "predict," “project,” “forecast,” “likely,” “believe,” “target,” “will,” “could,” “would,” “should,” "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that: are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or goals; or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by the coronavirus (“COVID-19”) pandemic. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: overall industry and economic conditions, including industrial, governmental and private sector spending and the strength of the residential and commercial real estate markets; geopolitical, regulatory, economic and other risks associated with international operations; continued uncertainty around the COVID-19 pandemic’s magnitude, duration and impacts on our business, operations, growth, and financial condition, as well as uncertainty around approved vaccines and the pace of recovery when the pandemic subsides; actual or potential other epidemics, pandemics or global health crises; manufacturing and operating cost increases due to inflation, prevailing price changes, tariffs and other factors; fluctuations in foreign currency exchange rates; disruption, competition and pricing pressures in the markets we serve; cybersecurity incidents or other disruptions of information technology systems on which we rely, or involving our products; disruptions in operations at our facilities or that of third parties upon which we rely; availability of products, parts and raw materials from our supply chain; availability, regulation and interference with radio spectrum used by some of our products; our ability to retain and attract senior management and other key talent; uncertainty related to restructuring and realignment actions and related charges and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; difficulty predicting our financial results, including uncertainties due to the nature of our short- and long-cycle businesses; volatility in our results due to weather conditions; risks relating to products, including defects, security, warranty and liability claims, and recalls; our ability to borrow or refinance our existing indebtedness and the availability of liquidity sufficient to meet our needs; risk of future impairments to goodwill and other intangible assets; failure to comply with laws or regulations, including those pertaining to anti-corruption, data privacy and security, export and import, competition, and the environment; changes in our effective tax rates or tax expenses; legal, governmental or regulatory claims, investigations or proceedings and associated contingent liabilities; and other factors set forth in “Part I Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in subsequent filings we may make with the Securities and Exchange Commission. All forward-looking statements made herein are based on information currently available to us as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS (Unaudited)

(In Millions, except per share data)

 

Year Ended December 31,

2020

2019

2018

Revenue

$

4,876

$

5,249

$

5,207

Cost of revenue

3,046

3,203

3,181

Gross profit

1,830

2,046

2,026

Selling, general and administrative expenses

1,143

1,158

1,161

Research and development expenses

187

191

189

Restructuring and asset impairment charges

75

63

22

Goodwill impairment charge

58

148

Operating income

367

486

654

Interest expense

77

67

82

Other non-operating (expense) income, net

(5

)

(4

)

13

Gain on sale of businesses

1

Income before taxes

285

416

585

Income tax expense

31

15

36

Net income

254

401

549

Earnings per share:

Basic

$

1.41

$

2.23

$

3.05

Diluted

$

1.40

$

2.21

$

3.03

Weighted average number of shares:

Basic

180.1

180.0

179.8

Diluted

181.1

181.2

181.1

 

XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Millions, except per share amounts)

 

December 31,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$

1,875

$

724

Receivables, less allowances for discounts, returns and credit losses of $46 and $35 in 2020 and 2019, respectively

923

1,036

Inventories

558

539

Prepaid and other current assets

167

151

Total current assets

3,523

2,450

Property, plant and equipment, net

657

658

Goodwill

2,854

2,839

Other intangible assets, net

1,093

1,174

Other non-current assets

623

589

Total assets

$

8,750

$

7,710

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

569

$

597

Accrued and other current liabilities

787

628

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

600

276

Total current liabilities

1,956

1,501

Long-term debt, net

2,484

2,040

Accrued post-retirement benefits

519

445

Deferred income tax liabilities

242

310

Other non-current accrued liabilities

573

447

Total liabilities

5,774

4,743

Stockholders’ equity:

Common stock — par value $0.01 per share:

Authorized 750.0 shares, issued 194.9 and 193.9 shares in 2020 and 2019, respectively

2

2

Capital in excess of par value

2,037

1,991

Retained earnings

1,930

1,866

Treasury stock – at cost 14.5 shares and 13.7 shares in 2020 and 2019, respectively

(588

)

(527

)

Accumulated other comprehensive loss

(413

)

(375

)

Total stockholders’ equity

2,968

2,957

Non-controlling interest

8

10

Total equity

2,976

2,967

Total liabilities and stockholders’ equity

$

8,750

$

7,710

 

XYLEM INC. AND SUBSIDIARIES

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

 

Year Ended December 31,

2020

2019

2018

Operating Activities

Net income

$

254

$

401

$

549

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

117

117

117

Amortization

134

140

144

Deferred income taxes

(31

)

(77

)

(47

)

Share-based compensation

26

29

30

Restructuring and asset impairment charges

75

63

22

Goodwill impairment charge

58

148

Gain from sale of businesses

(1

)

Other, net

46

9

9

Payments for restructuring

(36

)

(30

)

(21

)

Contributions to post-retirement benefit plans

(27

)

(19

)

(41

)

Changes in assets and liabilities (net of acquisitions):

Changes in receivables

109

(23

)

(103

)

Changes in inventories

(5

)

47

(97

)

Changes in accounts payable

(39

)

29

51

Changes in accrued liabilities

101

15

(6

)

Changes in accrued taxes

20

(13

)

Net changes in other assets and liabilities

22

4

(21

)

Net Cash — Operating activities

824

839

586

Investing Activities

Capital expenditures

(183

)

(226

)

(237

)

Acquisitions of businesses and assets, net of cash acquired

(18

)

(433

)

Proceeds from sale of businesses

22

Cash received from investments

200

11

11

Cash paid for investments

(200

)

(7

)

(11

)

Cash received from cross-currency swaps

12

9

Other, net

2

5

Net Cash — Investing activities

(169

)

(231

)

(643

)

Financing Activities

Short-term debt issued, net

359

281

335

Short-term debt repaid, net

(640

)

(254

)

(52

)

Long-term debt issued, net

985

1

Long-term debt repaid, net

(120

)

Repurchase of common stock

(61

)

(40

)

(59

)

Proceeds from exercise of employee stock options

20

13

7

Dividends paid

(188

)

(174

)

(152

)

Other, net

(2

)

(3

)

Net Cash — Financing activities

473

(177

)

(40

)

Effect of exchange rate changes on cash

23

(3

)

(21

)

Net change in cash and cash equivalents

1,151

428

(118

)

Cash and cash equivalents at beginning of year

724

296

414

Cash and cash equivalents at end of year

$

1,875

$

724

$

296

Supplemental disclosure of cash flow information:

Cash paid during the year for:

Interest

$

77

$

77

$

78

Income taxes (net of refunds received)

$

41

$

107

$

75

 

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 items to represent the non-GAAP measures we consider to be key performance indicators, as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

“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 or discontinuance 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” and "Adjusted Segment EBITDA" reflects the adjustments to EBITDA and segment EBITDA, respectively, to exclude share-based compensation charges, restructuring and realignment costs, gain or loss from sale of businesses and special charges.

"Adjusted EBITDA Margin" and "Adjusted Segment EBITDA margin" defined as adjusted EBITDA and adjusted segment EBITDA divided by total revenue and segment revenue, respectively.

"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.

"Adjusted Operating Margin" and "Adjusted Segment Operating Margin" defined as adjusted operating income and adjusted segment operating income divided by total revenue and segment revenue, respectively.

“Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures, and "Free Cash Flow Conversion" defined as Free Cash Flow divided by net income, excluding the gain on sale of businesses, non-cash impairment charges and significant deferred tax items. Our definitions of "free cash flow" and "free cash flow conversion" do 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.

“Special charges" defined as costs incurred by the Company, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for pension costs.

“Tax-related special items" defined as tax items, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for pension costs.

 
Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Orders
($ Millions)
 

(As Reported - GAAP)

(As Adjusted - Organic)

Constant Currency

(A)

(B)

(C)

(D)

(E) = B+C+D

(F) = E/A

(G) = (E - C) / A

 

Change

% Change

Acquisitions / Divestitures

Change

% Change

Orders

Orders

2020 v. 2019

2020 v. 2019

FX Impact

Adj. 2020 v. 2019

Adj. 2020 v. 2019

2020

2019

Year Ended December 31
 
Xylem Inc.

5,033

5,339

(306

)

(6

%)

4

18

(284

)

(5

%)

(5

%)

 
Water Infrastructure

2,134

2,234

(100

)

(4

%)

-

20

(80

)

(4

%)

(4

%)

Applied Water

1,483

1,556

(73

)

(5

%)

-

-

(73

)

(5

%)

(5

%)

Measurement & Control Solutions

1,416

1,549

(133

)

(9

%)

4

(2

)

(131

)

(8

%)

(9

%)

 
Quarter Ended December 31
 
Xylem Inc.

1,294

1,286

8

1

%

4

(31

)

(19

)

(1

%)

(2

%)

 
Water Infrastructure

464

530

(66

)

(12

%)

-

(18

)

(84

)

(16

%)

(16

%)

Applied Water

410

387

23

6

%

-

(7

)

16

4

%

4

%

Measurement & Control Solutions

420

369

51

14

%

4

(6

)

49

13

%

12

%

 
Quarter Ended September 30
 
Xylem Inc.

1,246

1,346

(100

)

(7

%)

-

(10

)

(110

)

(8

%)

(8

%)

 
Water Infrastructure

558

586

(28

)

(5

%)

-

(4

)

(32

)

(5

%)

(5

%)

Applied Water

375

376

(1

)

(0

%)

-

(3

)

(4

)

(1

%)

(1

%)

Measurement & Control Solutions

313

384

(71

)

(18

%)

-

(3

)

(74

)

(19

%)

(19

%)

 
Quarter Ended June 30
 
Xylem Inc.

1,232

1,392

(160

)

(11

%)

-

36

(124

)

(9

%)

(9

%)

 
Water Infrastructure

598

586

12

2

%

-

27

39

7

%

7

%

Applied Water

326

399

(73

)

(18

%)

-

6

(67

)

(17

%)

(17

%)

Measurement & Control Solutions

308

407

(99

)

(24

%)

-

3

(96

)

(24

%)

(24

%)

 
Quarter Ended March 31
 
Xylem Inc.

1,261

1,315

(54

)

(4

%)

-

23

(31

)

(2

%)

(2

%)

 
Water Infrastructure

514

532

(18

)

(3

%)

-

15

(3

)

(1

%)

(1

%)

Applied Water

372

394

(22

)

(6

%)

-

4

(18

)

(5

%)

(5

%)

Measurement & Control Solutions

375

389

(14

)

(4

%)

-

4

(10

)

(3

%)

(3

%)

Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Revenue
($ Millions)
 

(As Reported - GAAP)

(As Adjusted - Organic)

Constant

Currency

(A)

(B)

(C)

(D)

(E) = B+C+D

(F) = E/A

(G) = (E - C) / A

Change

% Change

Acquisitions /

Change

% Change

Revenue

Revenue

2020 v. 2019

2020 v. 2019

Divestitures

FX Impact

Adj. 2020 v. 2019

Adj. 2020 v. 2019

2020

2019

Year Ended December 31
 
Xylem Inc.

4,876

5,249

(373

)

(7

%)

2

7

(364

)

(7

%)

(7

%)

 
Water Infrastructure

2,079

2,177

(98

)

(5

%)

-

9

(89

)

(4

%)

(4

%)

Applied Water

1,434

1,541

(107

)

(7

%)

-

(1

)

(108

)

(7

%)

(7

%)

Measurement & Control Solutions

1,363

1,531

(168

)

(11

%)

2

(1

)

(167

)

(11

%)

(11

%)

 
Quarter Ended December 31
 
Xylem Inc.

1,373

1,371

2

0

%

2

(28

)

(24

)

(2

%)

(2

%)

 
Water Infrastructure

616

603

13

2

%

-

(15

)

(2

)

(0

%)

(0

%)

Applied Water

395

392

3

1

%

-

(7

)

(4

)

(1

%)

(1

%)

Measurement & Control Solutions

362

376

(14

)

(4

%)

2

(6

)

(18

)

(5

%)

(5

%)

 
Quarter Ended September 30
 
Xylem Inc.

1,220

1,296

(76

)

(6

%)

-

(9

)

(85

)

(7

%)

(7

%)

 
Water Infrastructure

524

531

(7

)

(1

%)

-

(4

)

(11

)

(2

%)

(2

%)

Applied Water

364

376

(12

)

(3

%)

-

(3

)

(15

)

(4

%)

(4

%)

Measurement & Control Solutions

332

389

(57

)

(15

%)

-

(2

)

(59

)

(15

%)

(15

%)

 
Quarter Ended June 30
 
Xylem Inc.

1,160

1,345

(185

)

(14

%)

-

25

(160

)

(12

%)

(12

%)

 
Water Infrastructure

501

561

(60

)

(11

%)

-

16

(44

)

(8

%)

(8

%)

Applied Water

337

394

(57

)

(14

%)

-

6

(51

)

(13

%)

(13

%)

Measurement & Control Solutions

322

390

(68

)

(17

%)

-

3

(65

)

(17

%)

(17

%)

 
Quarter Ended March 31
 
Xylem Inc.

1,123

1,237

(114

)

(9

%)

-

19

(95

)

(8

%)

(8

%)

 
Water Infrastructure

438

482

(44

)

(9

%)

-

12

(32

)

(7

%)

(7

%)

Applied Water

338

379

(41

)

(11

%)

-

3

(38

)

(10

%)

(10

%)

Measurement & Control Solutions

347

376

(29

)

(8

%)

-

4

(25

)

(7

%)

(7

%)

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

Q1

Q2

Q3

Q4

YTD

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Total Revenue
• Total Xylem

1,123

1,237

1,160

1,345

1,220

1,296

1,373

1,371

4,876

5,249

• Water Infrastructure

438

482

501

561

524

531

616

603

2,079

2,177

• Applied Water

338

379

337

394

364

376

395

392

1,434

1,541

• Measurement & Control Solutions

347

376

322

390

332

389

362

376

1,363

1,531

 
Operating Income
• Total Xylem

61

109

54

171

73

11

179

195

367

486

• Water Infrastructure

39

51

73

98

89

97

117

119

318

365

• Applied Water

47

56

41

62

56

61

61

62

205

241

• Measurement & Control Solutions

(12

)

16

(46

)

26

(62

)

(136

)

14

27

(106

)

(67

)

• Total Segments

74

123

68

186

83

22

192

208

417

539

 
Operating Margin
• Total Xylem

5.4

%

8.8

%

4.7

%

12.7

%

6.0

%

0.8

%

13.0

%

14.2

%

7.5

%

9.3

%

• Water Infrastructure

8.9

%

10.6

%

14.6

%

17.5

%

17.0

%

18.3

%

19.0

%

19.7

%

15.3

%

16.8

%

• Applied Water

13.9

%

14.8

%

12.2

%

15.7

%

15.4

%

16.2

%

15.4

%

15.8

%

14.3

%

15.6

%

• Measurement & Control Solutions

(3.5

%)

4.3

%

(14.3

%)

6.7

%

(18.7

%)

(35.0

%)

3.9

%

7.2

%

(7.8

%)

(4.4

%)

• Total Segments

6.6

%

9.9

%

5.9

%

13.8

%

6.8

%

1.7

%

14.0

%

15.2

%

8.6

%

10.3

%

 
Special Charges
• Total Xylem

-

4

11

-

70

155

-

-

81

159

• Water Infrastructure

-

-

-

-

-

-

-

-

-

-

• Applied Water

-

-

-

-

-

-

-

-

-

-

• Measurement & Control Solutions

-

4

10

-

69

155

-

-

79

159

• Total Segments

-

4

10

-

69

155

-

-

79

159

 
Restructuring & Realignment Costs
• Total Xylem

9

20

43

21

15

30

10

11

77

82

• Water Infrastructure

5

9

8

9

8

7

7

6

28

31

• Applied Water

2

3

4

4

2

3

1

3

9

13

• Measurement & Control Solutions

2

8

31

8

5

20

2

2

40

38

• Total Segments

9

20

43

21

15

30

10

11

77

82

 
Adjusted Operating Income
• Total Xylem

70

133

108

192

158

196

189

206

525

727

• Water Infrastructure

44

60

81

107

97

104

124

125

346

396

• Applied Water

49

59

45

66

58

64

62

65

214

254

• Measurement & Control Solutions

(10

)

28

(5

)

34

12

39

16

29

13

130

• Total Segments

83

147

121

207

167

207

202

219

573

780

 
Adjusted Operating Margin
• Total Xylem

6.2

%

10.8

%

9.3

%

14.3

%

13.0

%

15.1

%

13.8

%

15.0

%

10.8

%

13.9

%

• Water Infrastructure

10.0

%

12.4

%

16.2

%

19.1

%

18.5

%

19.6

%

20.1

%

20.7

%

16.6

%

18.2

%

• Applied Water

14.5

%

15.6

%

13.4

%

16.8

%

15.9

%

17.0

%

15.7

%

16.6

%

14.9

%

16.5

%

• Measurement & Control Solutions

(2.9

%)

7.4

%

(1.6

%)

8.7

%

3.6

%

10.0

%

4.4

%

7.7

%

1.0

%

8.5

%

• Total Segments

7.4

%

11.9

%

10.4

%

15.4

%

13.7

%

16.0

%

14.7

%

16.0

%

11.8

%

14.9

%

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

Q4 2020

Q4 2019

As Reported

Adjustments

Adjusted

As Reported

Adjustments

Adjusted

Total Revenue

1,373

-

1,373

1,371

-

1,371

Operating Income

179

10

a

189

195

11

a

206

Operating Margin

13.0

%

13.8

%

14.2

%

15.0

%

Interest Expense

(21

)

-

(21

)

(15

)

-

(15

)

Other Non-Operating Income (Expense)

-

1

b

1

(2

)

8

b

6

Gain/(Loss) From Sale of Business

-

-

-

-

-

-

Income before Taxes

158

11

169

178

19

197

Provision for Income Taxes

(10

)

(14

)

c

(24

)

(60

)

24

c

(36

)

Net Income Attributable to Xylem

148

(3

)

145

118

43

161

Diluted Shares

181.5

181.5

181.2

181.2

Diluted EPS

$

0.82

$

(0.01

)

$

0.81

$

0.65

$

0.24

$

0.89

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

$

0.04

$

0.00

$

0.04

Diluted EPS at Constant Currency

$

0.78

$

(0.01

)

$

0.77

 
 
 

Q4 YTD 2020

Q4 YTD 2019

As Reported

Adjustments

Adjusted

As Reported

Adjustments

Adjusted

Total Revenue

4,876

-

4,876

5,249

-

5,249

Operating Income

367

158

a

525

486

241

a

727

Operating Margin

7.5

%

10.8

%

9.3

%

13.9

%

Interest Expense

(77

)

-

(77

)

(67

)

-

(67

)

Other Non-Operating Income (Expense)

(5

)

5

b

-

(4

)

19

b

15

Gain/(Loss) From Sale of Businesses

-

-

-

1

(1

)

-

Income before Taxes

285

163

448

416

259

675

Provision for Income Taxes

(31

)

(43

)

c

(74

)

(15

)

(113

)

c

(128

)

Net Income Attributable to Xylem

254

120

374

401

146

547

Diluted Shares

181.1

181.1

181.2

181.2

Diluted EPS

$

1.40

$

0.66

$

2.06

$

2.21

$

0.81

$

3.02

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

$

0.02

$

0.01

$

0.03

Diluted EPS at Constant Currency

$

1.38

$

0.65

$

2.03

aQuarter-to-date: Restructuring & realignment costs of $10 million in 2020 and $11 million in 2019.
 
Year-to-date: Restructuring & realignment costs of $77 million and $82 million in 2020 and 2019, respectively; special charges of $81 million ($79 million of intangible asset and goodwill impairment charges and $2 million of other charges) and $159 million of special charges in 2019 ($158 million of goodwill and asset impairment charges and $1 million of acquisition related costs).
 
bSpecial non-operating charges consist of pension costs related to the UK pension plan that has been transferred to an annuity in 2020 as part of the planned buyout activities ($1 million and $5 million in 2020, and $6 million and $17 million in 2019, quarter-to-date and year-to-date, respectively). Also, $2 million of other non-operating charges in 2019, both quarter-to-date and year-to-date.
 
cQuarter-to-date: Net tax impact on restructuring & realignment costs of $2 million in both 2020 and 2019, respectively; $1 million of tax on special charges in 2020 and $4 million in 2019; and $11 million and $30 million of positive impact from tax related special Expense adjustments in 2020 and 2019, respectively.
 
Year-to-date:  Net tax impact on restructuring & realignment costs of $17 million and $19 million in 2020 and 2019, respectively; $10 million and $6 million of tax impact on special charges in 2020 and 2019; and $16 million and $88 million of negative impact from tax related special benefit adjustments in 2020 and 2019, respectively.  
 
Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
($ Millions)
 
 

Q1

Q2

Q3

Q4

Year-to-Date

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

 
Net Cash - Operating Activities

$

(2

)

$

83

$

181

$

123

$

275

$

245

$

370

$

388

$

824

$

839

 
Capital Expenditures - PP&E

(32

)

(53

)

(24

)

(40

)

(24

)

(28

)

(29

)

(29

)

(109

)

(150

)

Capital Expenditures - Software

(19

)

(16

)

(20

)

(20

)

(17

)

(18

)

(18

)

(22

)

(74

)

(76

)

Capital Expenditures

(51

)

(69

)

(44

)

(60

)

(41

)

(46

)

(47

)

(51

)

(183

)

(226

)

 
Free Cash Flow

$

(53

)

$

14

$

137

$

63

$

234

$

199

$

323

$

337

$

641

$

613

 
Net Income

38

79

31

139

37

65

148

118

254

$

401

 
Gain/(Loss) from sale of businesses

-

1

-

-

-

-

-

-

-

1

 
Restructuring & Realignment Charges - non-cash impairment

-

-

(17

)

-

(3

)

-

(1

)

-

(21

)

-

 
Special Charges - non-cash impairment

-

(3

)

(10

)

-

(69

)

(155

)

-

-

(79

)

(158

)

 
Significant deferred tax benefit/(charge)

-

-

-

-

-

97

-

(33

)

-

64

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

$

38

$

81

$

58

$

139

$

109

$

123

$

149

$

151

$

354

$

494

 
Operating Cash Flow Conversion

(5

%)

105

%

584

%

88

%

743

%

377

%

250

%

329

%

324

%

209

%

 
Free Cash Flow Conversion

(139

%)

17

%

236

%

45

%

215

%

162

%

217

%

223

%

181

%

124

%

 
Xylem Inc. Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA by Quarter
 

($ Millions)

2020

Q1

Q2

Q3

Q4

Total

 
Net Income

38

31

37

148

254

 
Income Tax Expense

4

4

13

10

31

 
Interest Expense (Income), net

14

16

20

20

70

Depreciation

29

29

30

29

117

Amortization

35

33

33

33

134

EBITDA

120

113

133

240

606

 
Share-based Compensation

8

8

3

7

26

 
Restructuring & Realignment

9

43

15

10

77

 
Special Charges

1

13

71

1

86

 
Adjusted EBITDA

138

177

222

258

795

 
Revenue

1,123

1,160

1,220

1,373

4,876

 
Adjusted EBITDA Margin

12.3

%

15.3

%

18.2

%

18.8

%

16.3

%

 

2019

Q1

Q2

Q3

Q4

Total

 
Net Income

79

139

65

118

401

 
Income Tax Expense (Benefit)

15

17

(77

)

60

15

 
Interest Expense (Income), net

17

18

14

13

62

Depreciation

29

29

30

29

117

Amortization

35

34

35

36

140

EBITDA

175

237

67

256

735

 
Share-based Compensation

9

7

7

6

29

 
Restructuring & Realignment

20

21

30

11

82

 
Loss/(Gain) from sale of business

(1

)

-

-

-

(1

)

 
Special Charges

4

-

166

8

178

 
Adjusted EBITDA

207

265

270

281

1,023

 
Revenue

1,237

1,345

1,296

1,371

5,249

 
Adjusted EBITDA Margin

16.7

%

19.7

%

20.8

%

20.5

%

19.5

%

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

2020

Q1

Q2

Q3

Q4

Total

 
Pre-Tax Income

37

71

85

116

309

 
Interest Expense (Income), net

-

(1

)

-

-

(1

)

Depreciation

11

11

11

11

44

Amortization

4

5

2

2

13

EBITDA

52

86

98

129

365

 
Share-based Compensation

-

1

-

1

2

 
Restructuring & Realignment

5

8

8

7

28

 
Adjusted EBITDA

57

95

106

137

395

 
Revenue

438

501

524

616

2,079

 
Adjusted EBITDA Margin

13.0

%

19.0

%

20.2

%

22.2

%

19.0

%

 

2019

Q1

Q2

Q3

Q4

Total

 
Pre-Tax Income

50

96

97

117

360

 
Interest Expense (Income), net

(1

)

1

(1

)

-

(1

)

Depreciation

11

12

11

10

44

Amortization

4

4

4

5

17

EBITDA

64

113

111

132

420

 
Share-based Compensation

1

-

-

1

2

 
Restructuring & Realignment

9

9

7

5

30

 
Adjusted EBITDA

74

122

118

138

452

 
Revenue

482

561

531

603

2,177

 
Adjusted EBITDA Margin

15.4

%

21.7

%

22.2

%

22.9

%

20.8

%

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

2020

Q1

Q2

Q3

Q4

Total

 
Pre-Tax Income

47

42

55

60

204

 
Interest Expense (Income), net

-

-

-

-

-

Depreciation

5

5

6

5

21

Amortization

1

-

1

1

3

EBITDA

53

47

62

66

228

 
Share-based Compensation

1

1

-

1

3

 
Restructuring & Realignment

2

4

2

1

9

 
Adjusted EBITDA

56

52

64

68

240

 
Revenue

338

337

364

395

1,434

 
Adjusted EBITDA Margin

16.6

%

15.4

%

17.6

%

17.2

%

16.7

%

 

2019

Q1

Q2

Q3

Q4

Total

 
Pre-Tax Income

57

62

62

63

244

 
Interest Expense (Income), net

-

-

-

(1

)

(1

)

Depreciation

5

5

5

6

21

Amortization

1

1

-

1

3

EBITDA

63

68

67

69

267

 
Share-based Compensation

1

-

1

1

3

 
Restructuring & Realignment

3

4

3

4

14

 
Adjusted EBITDA

67

72

71

74

284

 
Revenue

379

394

376

392

1,541

 
Adjusted EBITDA Margin

17.7

%

18.3

%

18.9

%

18.9

%

18.4

%

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

2020

Q1

Q2

Q3

Q4

Total

 
Pre-Tax Income

(13

)

(46

)

(62

)

14

(107

)

 
Interest Expense (Income), net

-

-

-

-

-

Depreciation

9

8

9

9

35

Amortization

27

26

27

27

107

EBITDA

23

(12

)

(26

)

50

35

 
Share-based Compensation

2

1

1

1

5

 
Restructuring & Realignment

2

31

5

2

40

 
Special Charges

-

10

69

-

79

 
Adjusted EBITDA

27

30

49

53

159

 
Revenue

347

322

332

362

1,363

 
Adjusted EBITDA Margin

7.8

%

9.3

%

14.8

%

14.6

%

11.7

%

 

2019

Q1

Q2

Q3

Q4

Total

 
Pre-Tax Income

16

26

(137

)

28

(67

)

 
Interest Expense (Income), net

-

-

-

-

-

Depreciation

9

9

9

10

37

Amortization

27

26

27

27

107

EBITDA

52

61

(101

)

65

77

 
Share-based Compensation

1

2

1

1

5

 
Restructuring & Realignment

8

8

20

2

38

 
Loss/(Gain) from sale of business

(1

)

-

-

-

(1

)

 
Special Charges

4

-

155

-

159

 
Adjusted EBITDA

64

71

75

68

278

 
Revenue

376

390

389

376

1,531

 
Adjusted EBITDA Margin

17.0

%

18.2

%

19.3

%

18.1

%

18.2

%

Contacts:

Media
Houston Spencer +1 (914) 323-5723
houston.spencer@xyleminc.com

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