Xylem Inc. Reports Third Quarter 2016 Earnings

Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world's most challenging water issues, today reported third quarter 2016 net income of $73 million, or $0.41 per share, a decrease of 15 percent year-over-year reflecting higher restructuring, realignment and acquisition-related costs. Adjusted net income in the quarter was $97 million or $0.54 per share, a 10-percent increase over the prior year period. Third quarter revenue was $897 million, which was down one percent from third quarter 2015 and flat organically. The robust revenue growth in the public utility end market was offset by weaker conditions in the industrial sector. Reported operating margin in the quarter declined 110 basis points to 12.2 percent. On an adjusted basis, operating margin grew 90 basis points to 14.6 percent as strong execution on productivity initiatives more than offset inflation and targeted investments in strategic growth initiatives.

"I am pleased with our team's performance this quarter as they executed well in a mixed market environment, while successfully advancing on our capital deployment strategy as well," said Patrick Decker, Xylem President and Chief Executive Officer. "We continued to capitalize on a strong public utility end market, where we grew 10 percent globally and 25 percent in the U.S. in the quarter. This growth helped offset the softness in the broader industrial sector. We continue to drive cost savings from global procurement and lean and six sigma initiatives. In addition, we are accelerating certain restructuring actions to mitigate the weaker industrial sector and enable us to continue to drive margin expansion. Our productivity and business simplification initiatives will be key contributors as we continue to invest for stronger growth in the marketplace while further expanding operating margins to enhance our long-term earnings growth."

"Yesterday, we completed the acquisition of Sensus, which expands our offerings to customers around the globe and reshapes the growth profile of Xylem as we significantly increase our exposure to the fast-growing public utility end market. This addition also enhances our ability to bring systems intelligence solutions to the marketplace in the water and energy industries. We are well into executing the integration planning of this business, operating as one business today and focused on realizing cost synergies and driving the substantial revenue synergies we expect from this combination."

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