01—Abstract
Summary
Summary of the 10-K filed February 25, 2013. Cited figures are marked; the original filing is the authoritative source.
Xylem Inc. (XYL), a water equipment and services provider spun off from ITT Corporation on October 31, 2011, reported 2012 revenue of $3,791 milliona, down 0.3% from $3,803 million in 2011, though revenue grew 2.5% on a constant currency basis, driven by acquisitions and emerging-market strength.
Operating income rose 12.2% to $443 millionb, largely reflecting reduced separation costs, while net income was $297 million, or $1.59 per diluted share ($1.77 adjusted). Free cash flow was $312 million and net cash from operating activities was $396 million. Orders were $3,782 million, and backlog was $647 million at December 31, 2012, with more than 90% expected to convert to revenue in 2013.
The company operates two segments: Water Infrastructure (revenue $2,425 millionc before eliminations, operating income $342 million) and Applied Water (revenue $1,424 million, operating income $170 million). Approximately 63% of 2012 revenue came from outside the United States. Management projects low-single-digit revenue growth for 2013 and plans restructuring and realignment actions, primarily in Europe, with expected costs of roughly $60 to $70 million in 2013.
Total debt was $1,205 milliond at year-end, and the company announced the acquisition of PIMS Group in the United Kingdom in February 2013 for approximately $57 million. The company paid quarterly dividends of $0.1012 per share in 2012 and declared $0.1164 per share in the first quarter of 2013. Its $600 million credit facility and €120 million R&D facility with the European Investment Bank were both undrawn at year-end, and the Company was in compliance with all covenants on its Senior Notes.
02—Key points
Key Highlights
- 2012 revenue of $3,791 million, down 0.3% from $3,803 million; up 2.5% on a constant currency basis
- Operating income of $443 million, up 12.2%, primarily reflecting reduced separation costs ($22 million in 2012 vs. $87 million in 2011)
- Net income of $297 million, or $1.59 per diluted share; adjusted net income of $330 million, or $1.77 per diluted share
- Free cash flow of $312 million and net cash from operating activities of $396 million
- Orders of $3,782 million, a 1.7% decrease as reported and a 1.3% increase on a constant currency basis; backlog of $647 million at December 31, 2012
- Management projects low-single-digit revenue growth in 2013, with approximately $60 to $70 million in restructuring and realignment costs planned, mainly in Europe
- Acquisition of PIMS Group (UK wastewater services) completed February 5, 2013 for approximately $57 million
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Xylem kept $0.08.
- Revenue$3.79B100.0%
- Cost of revenue−$2.29B60.4%
- Gross profit$1.50B39.6%
- Operating costs−$1.06B27.9%
- Operating income$443.0M11.7%
- Interest, other & tax−$146.0M3.9%
- Net income$297.0M7.8%
Where FY2012 revenue went
$3.79B- Cost of revenue: $2.29B, 60% of revenue
- SG&A: $914.0M, 24% of revenue
- Net income: $297.0M, 7.8% of revenue
- R&D: $106.0M, 2.8% of revenue
- Other operating costs: $39.0M, 1.0% of revenue
- Interest, other & tax: $146.0M, 3.9% of revenue
Kept 7.8% as net incomeOther operating costs $39.0M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 25, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $3.79B$3.80B | −0.3% |
| Cost of Revenue | $2.29B$2.34B | −2.3% |
| Gross Profit | $1.50B$1.46B | +2.8% |
| R&D Expenses | $106.00M$100.00M | +6.0% |
| SG&A Expenses | $914.00M$877.00M | +4.2% |
| Operating Income | $443.00M$395.00M | +12.2% |
| Interest Expense | $55.00M$17.00M | +223.5% |
| Net Income | $297.00M$220.00M | +35.0% |
| EPS (Basic) | $1.60$1.51 | +6.0% |
| EPS (Diluted) | $1.59$1.50 | +6.0% |
| Shares Outstanding (Basic) | 185.78M185.06M | +0.4% |
| Shares Outstanding (Diluted) | 186.23M185.32M | +0.5% |
05—Questions
Frequently Asked Questions
How did Xylem perform financially in 2012?
Revenue was $3,791 million, down 0.3% from $3,803 million in 2011, but grew 2.5% on a constant currency basis. Operating income rose 12.2% to $443 million, and net income was $297 million, or $1.59 per diluted share. Gross margin improved to 39.6% from 38.4%.
What are the main risks to Xylem's outlook?
Key risks include weak public utility capital spending in developed markets, continued economic weakness in Europe, drought conditions in North America that reduced dewatering and irrigation demand, and foreign currency fluctuations, since about 63% of revenue came from outside the United States. The filing also cites restructuring execution risk and inflation in labor and materials.
How is Xylem's debt structured and how much liquidity does it have?
Total debt was $1,205 million at December 31, 2012, consisting mainly of $600 million of 3.550% Senior Notes due 2016 and $600 million of 4.875% Senior Notes due 2021. The $600 million Four Year Competitive Advance and Revolving Credit Facility and the €120 million (about $158 million) R&D Facility Agreement with the European Investment Bank were both undrawn at year-end. Cash and cash equivalents were $504 million.
What did Xylem say about its dividend and share repurchases?
Xylem paid dividends of $0.1012 per share in each quarter of 2012, totaling $0.4048 per share for the year. In the first quarter of 2013, it declared a dividend of $0.1164 per share. The Board authorized repurchases of up to two million shares in August 2012 to offset dilution from employee stock plans, and the company repurchased 0.3 million shares in November 2012.
How did the separation from ITT affect Xylem's results?
The October 31, 2011 spin-off from ITT Corporation generated non-recurring separation costs of $22 million in 2012 and $87 million in 2011. Because Xylem's pre-spin-off results were carved out from ITT, the filing notes that historical financial information may not reflect what Xylem would have reported as a standalone company.
06—Continue