Xylem Inc. reports third quarter 2012 results

Xylem Inc. reports third quarter 2012 results

Third quarter adjusted net income was $83 million or $0.44 per share; $72 million or $0.38 per share as reported

Third quarter revenue up 3 percent in constant currencies to $931 million; down 1 percent as reported on negative impact of currency translation; emerging market revenue up 9 percent in constant currencies

Gross margin climbs 130 basis points to 40.2 percent as Customer Excellence and cost reduction initiatives drive profitability; adjusted operating margin was 12.9 percent

Company completes second acquisition in 2012 with the purchase of Heartland Pump, bolstering industrial dewatering portfolio

WHITE PLAINS, N.Y.--(BUSINESS WIRE)-- Xylem Inc. (NYS: XYL) , a leading global water technology company focused on solving the world's most challenging water issues, today reported third quarter revenue of $931 million, up 3 percent on a constant currency basis, down 1 percent as reported from the third quarter 2011. Third quarter net income was $72 million or $0.38 per share, down $0.04 per share from the same period last year. Adjusting for one-time separation costs resulting from the Xylem spinoff from ITT Corporation on October 31, 2011, and special items, net income was $83 million or $0.44 per share, down $0.01 per share over the third quarter 2011 on a normalized basis.*

"As we mark our first anniversary as a stand-alone water company, our performance showcases both the strength of our global portfolio, with 9 percent constant currency revenue growth in the emerging markets, and our strategic focus on margin expansion through the execution of our Customer Excellence sales initiative and cost discipline," said Gretchen McClain, President and Chief Executive Officer of Xylem. "We're also seeing the benefit of our investments in acquisitions. Just last week we completed the purchase of Heartland Pump, which expands our U.S. reach in dewatering rental and service, and grows our presence in industrial markets. And our two other recent acquisitions, YSI and MJK Automation, both continue to perform well and help establish our Analytics business as a long-term growth platform."

McClain said the company continues to move forward with restructuring and realignment initiatives, and now foresees approximately $20 million in aggregated costs during 2012 to position the business for future growth. The company maintains its outlook for full-year 2012 revenue of $3.8 billion, and has revised the mid-point of its 2012 earnings guidance to $1.76 from $1.77 per share to reflect the $0.01 per share dilutive impact of the Heartland Pump acquisition.

Business Segment Results

Water Infrastructure

Xylem's Water Infrastructure businesses provide equipment and services focused on the transport, treatment and testing of water and wastewater in the public utility and industrial markets.

• Third quarter 2012 segment revenue was $595 million, up 7 percent in constant currencies, and up 2 percent as reported, with growth in public utility activity in all regions more than offsetting weakness in industrial.

• Third quarter adjusted segment operating margin was 15.0 percent. Stand-alone costs negatively impacted operating margin 50 basis points for the third quarter of 2012.

Applied Water

Xylem's Applied Water businesses provide equipment and services in the residential and commercial building services, general industrial and agricultural markets.

• Third quarter 2012 segment revenue was $350 million, down 2 percent in constant currencies, and 5 percent as reported, reflecting comparison to a particularly strong third quarter 2011, and ongoing weakness in commercial building services.

• Third quarter adjusted segment operating margin was 12.6 percent. Stand-alone costs negatively impacted operating margin 60 basis points for the third quarter of 2012.

More detail available

Supplemental information on Xylem's third quarter earnings and reconciliations for certain non-GAAP items is posted at investors.xyleminc.com.

About Xylem

Xylem (NYS: 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. Launched in 2011 from the spinoff of the water-related businesses of ITT Corporation, Xylem is headquartered in White Plains, N.Y., with 2011 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, the terms and the effect of the separation, the nature and impact of the separation, 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.

*The 2011 normalized earnings per share reflect adjustments (including 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.