WHITE PLAINS, N.Y. (Feb. 28, 2012) – Xylem Inc. reported fourth quarter revenue of $1.0 billion, up 7 percent from the fourth quarter 2010, and net income of $52 million or $0.28 per share. Xylem was spun off from ITT Corporation on October 31, 2011. Excluding the impact of one-time separation costs and other special items, adjusted net income was $74 million or $0.40 per share, up 2 cents or 5 percent from the normalized earnings in the fourth quarter 2010.
"We drove solid business performance in 2011. We delivered revenue and earnings growth that reflected the strength of our core water and wastewater portfolio, as well as increased activity in the emerging markets, and solid returns from investments in our analytical instrumentation and dewatering businesses,” said Gretchen McClain, president and chief executive officer of Xylem. "All of this was accomplished as we worked through the successful launch of our new company. It is a testament to the dedication of our 12,500 employees who focus on solving our customers’ water challenges.”
For the fourth quarter, Xylem achieved adjusted operating margin of 12.0 percent, including incremental stand-alone costs of $5 million, which reduced margin by 50 basis points. Operating margin in the fourth quarter of 2010 was 11.9 percent.
For the full year 2011, Xylem revenue was $3.8 billion, up 19 percent over 2010. Excluding the impact of acquisitions and positive foreign currency translation, full-year organic revenue growth was 7 percent. Adjusted operating margin was 12.7 percent, up 60 basis points compared to 2010. The $5 million of incremental stand-alone cost incurred in the fourth quarter reduced full-year operating margin by 10 basis points. Full-year reported net income was $279 million, or $1.50 per share. Adjusted net income, excluding the impact of the spinoff and other special items, was $358 million or $1.93 per share, up 45 cents or 30 percent from the normalized earnings in 2010. Strong performance from acquired businesses and working capital improvements helped generate $388 million of free cash flow during the year, which excludes $65 million of cash paid for spinoff-related costs. This represents a 111 percent conversion of adjusted net income.
Fourth Quarter and Full-Year 2011 Segment Results
Xylem’s Water Infrastructure businesses provide equipment and services to water and wastewater transport and treatment, dewatering and analytical instrumentation markets.
• Fourth-quarter 2011 revenue was $679 million, an increase of 9 percent compared with the fourth quarter 2010, up 6 percent organically. This reflects solid growth in dewatering and the emerging markets, particularly in treatment and analytical instrumentation.
• Orders for the quarter increased 15 percent, 10 percent organically, to $589 million from the comparable period in 2010.
• Fourth-quarter segment operating income, which included $6 million of spinoff-related costs, was $98 million. Adjusted operating income for the period, excluding the impact of the spinoff costs, was $104 million, up $3 million relative to the same period in 2010.
• Full-year segment revenue was $2.42 billion, up 25 percent over the prior year. Full-year reported segment operating income was $343 million. Full-year adjusted operating income for the Water Infrastructure segment was $359 million, an increase of 30 percent or $83 million over the full year 2010.
Xylem’s Applied Water businesses provide equipment and services in the residential and commercial building services, industrial and agricultural markets.
• Fourth quarter 2011 Applied Water segment revenue was $336 million, up 3 percent compared with the fourth quarter 2010, with growth in sales of energy-efficient solutions like the e-SV pump used in a wide range of applications, more than offsetting relative weakness in building services in the developed markets.
• Orders of $330 million were essentially flat vs. the comparable period in 2010.
• Fourth quarter segment operating income, which included $4 million of spinoff-related expenses, was $27 million. Excluding the impact of these special items, segment operating income was $31 million, up 15 percent or $4 million relative to the same period in 2010.
• Full-year segment revenue was $1.44 billion, up 9 percent over the prior year. Full-year reported segment operating income was $160 million, including $13 million of spinoff- related expenses. Full-year adjusted segment operating income was $173 million, an increase of 9 percent or $15 million over 2010.
Xylem forecasts full-year 2012 revenue in the range of $3.9 billion – $4.0 billion, representing year over year organic growth of 4 percent to 6 percent. Operating margins are anticipated to be in the range of 12.7 to 13.3 percent, excluding spinoff-related costs, but including incremental stand-alone costs of $25 to $30 million as Xylem completes its first full year as an independent company. These stand-alone costs will offset operating margin by 60 to 80 basis points. Full-year 2012 adjusted net income is forecast to be $334 million to $362 million, for adjusted earnings per share of $1.80 to $1.95 for the full year 2012, which reflects expected growth of 8 to 17 percent over normalized 2011. Reported net income, which includes one-time separation costs, is anticipated to range from $319 million to $350 million, or $1.72 to $1.89.
“We’ve begun 2012 in a strong competitive and financial position,” McClain said. “We remain mindful of the pockets of weak economic activity in Europe, and less rapid growth in some of the emerging markets. With our applications expertise, customer focus, market-leading brands, large installed base and superior distribution in more than 150 countries, our portfolio is fundamentally well-positioned to continue growing at a rate faster than the global market. Further, we will continue investing in attractive opportunities, deploying resources to continue growing our core businesses through new product development and innovative applications, while maintaining our ability to make attractive acquisitions.”
03/21/2012
