- Advances Xylem’s strategy to be a leading provider of systems
intelligence solutions in the global water sector
- Brings strong portfolio of smart water technologies in fast-growing
segments and attractive, non-water adjacencies
- Sensus’ leading-edge technology and R&D capabilities accelerates
Xylem’s innovation initiatives
- Sensus’ FlexNet® network technology
provides platform for Xylem’s products and solutions, and for future
growth
- Xylem reaffirms 2016 earnings outlook; expects acquisition to be
accretive to adjusted earnings in 2017
Company Website:
http://www.xyleminc.com
RYE BROOK, N.Y. -- (Business Wire)
Xylem Inc. (NYSE:XYL), a leading global water technology company
dedicated to solving the world’s most challenging water issues, today
announced that it has signed a definitive agreement to acquire Sensus
for approximately $1.7 billion in cash.
Sensus, owned by investment funds affiliated with The Jordan Company and
GS Capital Partners 2000, is a leading provider of smart meters, network
technologies, and advanced data analytics services for the water,
electric and gas industries. It has more than 80 million metering
devices installed globally, and its distinctive FlexNet®
communications network technology uses licensed spectrum in the U.S. and
other geographies and provides secure connectivity solutions that
support multiple applications.
Sensus generated $837 million in adjusted revenue and $159 million in
adjusted earnings before interest, taxes, depreciation and amortization
(EBITDA) in fiscal 2016, which ended March 31, 2016. The $1.7 billion
cash purchase price is 10.7x Sensus’ fiscal year 2016 adjusted EBITDA.
Xylem expects to achieve at least $50 million in annual cost synergies
to be substantially realized within three years of closing as Xylem
extends its proven global procurement and continuous improvement
initiatives into this business, with significant additional revenue
synergy potential. The transaction is expected to be accretive to
Xylem’s adjusted earnings in 2017.
“With Sensus, we will acquire a strategically valuable asset that will
accelerate our ability to bring systems intelligence solutions to
customers across the water and energy industries, establish a foundation
for future growth and create significant shareholder value,” said
Patrick Decker, Xylem President and Chief Executive Officer. “This will
be an important milestone in our strategy to move Xylem’s portfolio of
solutions up the technology curve. The combination of Xylem’s
world-class brands and products with Sensus’ leading-edge smart
technologies will create a differentiated offering that will better meet
our customers’ evolving needs, including greater energy efficiency,
water conservation, and improved life-cycle costs.
“Sensus has a very broad product portfolio in metering and is well
positioned in the advanced metering infrastructure (AMI) segment,”
continued Mr. Decker. “The AMI segment is growing at nearly twice the
rate of the total metering space, driven in part by regulations and
customers’ growing need for real-time data and reduced operational
costs. Our expansive customer relationships will be able to extend the
reach of Sensus’ products and technologies to new markets globally,
particularly in emerging markets. As a combined company, we expect Xylem
to grow faster and be more profitable.”
Mr. Decker added, “This move will also advance the innovation strategy
we outlined at our Investor Day last year. Combining the advanced
technology and R&D expertise and capabilities of both companies, we
anticipate accelerating our delivery of innovative solutions to our
customers, particularly in the area of advanced analytics across the
water, wastewater and outdoor water sectors. Sensus’ network platform,
FlexNet®, can support many of Xylem’s connected product
offerings and enable expansion into adjacent Internet of Things markets.
We also see natural opportunities to extend the company’s advanced data
analytics platform, which provides actionable insights for customers, to
Xylem products. Both platforms provide a powerful foundation for future
organic and inorganic growth opportunities.”
In addition to its strong presence in the smart water sector, Sensus
generates approximately 24 percent of its revenues from sales to
electric and gas utilities. The projected growth rate of smart metering,
particularly AMI, is even higher in these sectors than in water, and
Sensus is well positioned to capture that growth with its
network-enabled solutions.
Mr. Decker concluded, “We are very pleased with the opportunity to add
the world-class talent of Sensus to Xylem. As a unified company, we look
forward to providing customers with an even more compelling offering
that will add measurable value to their operations, and create
significant incremental value for our shareholders.”
Randy Bays, President of Sensus, said, “Xylem is a highly respected
company and we are confident that, together, we will have the resources
and scale to continue advancing differentiated technology and delivering
innovative solutions to our customers around the world. We look forward
to working with the Xylem team to ensure a smooth transition and
completing the combination as quickly as possible.”
Speaking on behalf of the Xylem Board of Directors, Xylem Chairman
Markos I. Tambakeras said, “This is an excellent transaction and we are
enthusiastic about the future combination of these two companies. We
have full confidence in the management team’s ability to execute a
smooth integration and significantly enhance shareholder value.”
Sensus has approximately 3,300 employees and major locations in the
U.S., United Kingdom, Germany, Slovakia, and China. Nearly 70 percent of
2016 revenues were generated in the U.S.
Xylem will finance the all-cash transaction with the deployment of
approximately $400 million of Xylem’s non-U.S. cash, new and existing
credit facilities, and a combination of short- and long-term debt. There
is no change to Xylem’s full-year 2016 adjusted earnings outlook.Xylem
expects to maintain quarterly dividend payments to shareholders.
The transaction is subject to customary closing conditions and
regulatory review, including approval by the Federal Communications
Commission of the transfer of certain spectrum licenses. The transaction
is expected to close in the fourth quarter of 2016.
Supplemental information on Xylem’s definitive agreement to acquire
Sensus and reconciliations for non-GAAP items are posted at http://investors.xyleminc.com.
Advisors
Lazard is serving as financial advisor to Xylem and Gibson, Dunn &
Crutcher LLP is serving as legal counsel. Credit Suisse and Goldman,
Sachs & Co. are serving as financial advisors and Mayer Brown LLP as
legal advisor to Sensus.
Conference Call/Webcast
Xylem management will host a conference call with investors to discuss
the proposed acquisition of Sensus on Monday, August 15, at 8:30 a.m.
(ET). The call can be accessed by calling (973) 935-2945 (ID #65483412)
or by visiting http://investors.xyleminc.com.
A replay of the briefing will be available on http://investors.xyleminc.com
and via telephone until Monday, August 29, 2016, at 11:30 p.m. (ET). The
telephone replay will be available at (800) 585-8367 or (404) 537-3406
(ID #65483412).
About Xylem
Xylem (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. Xylem is headquartered in Rye Brook, New York, with 2015
revenue of $3.7 billion and more than 12,500 employees worldwide. Xylem
was named to the Dow Jones Sustainability Index, North America for the
last four years for advancing sustainable business practices and
solutions worldwide, and the Company has satisfied the requirements to
be a constituent of the FTSE4Good Index Series each year since 2013.
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.xylem.com.
Forward-Looking Statements
This press release 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,” “forecast,” “believe,” “target,” “will,” “could,” “would,”
“should” 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 statements about the
capitalization of Xylem Inc. (the “Company”), the Company’s
restructuring and realignment, future strategic plans and/or
acquisitions and other statements that describe the Company’s business
strategy, outlook, objectives, plans, intentions or goals. All
statements that address operating or financial performance, events or
developments that we expect or anticipate will occur in the future –
including statements relating to orders, revenues, operating margins and
earnings per share growth, statements relating to potential or
anticipated acquisitions of assets or stock of a target company and
statements expressing general views about future operating results – are
forward-looking statements. Forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could
cause actual results to differ materially from those expressed or
implied in, or reasonably inferred from such forward-looking statements.
The consummation of any transaction described in this release is subject
to certain conditions that must be satisfied pursuant to the relevant
transaction documents. There can be no assurances that such conditions
will be satisfied.
Factors that could cause results to differ materially from those
anticipated include: economic, political and other risks associated with
our international operations, including military actions, economic
sanctions or trade embargoes that could affect customer markets, and
non-compliance with laws, including foreign corrupt practice laws,
export and import laws and competition laws; potential for unexpected
cancellations or delays of customer orders in our reported backlog; our
exposure to fluctuations in foreign currency exchange rates; competition
and pricing pressures in the markets we serve; the strength of housing
and related markets; ability to retain and attract key members of
management; our relationship with and the performance of our channel
partners; our ability to successfully identify, complete and integrate
acquisitions; adverse or unanticipated actions or omissions taken by any
regulatory or other governmental authority, including, but not limited
to, the refusal by the FTC, the DOJ, the SEC or the FCC to approve, in
whole or in part, certain of our planned transactions or acquisitions;
our ability to borrow or to refinance our existing indebtedness and
availability of liquidity sufficient to meet our needs; changes in the
value of goodwill or intangible assets; risks relating to product
defects, product liability and recalls; governmental investigations;
security breaches or other disruptions of our information technology
systems; litigation and contingent liabilities; and other factors set
forth in Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2015, and those described from time to time in subsequent
reports filed with the Securities and Exchange Commission.
Forward-looking statements made herein are based on information
currently available to the Company. 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.
Non-GAAP Measures
Management reviews key performance indicators including revenue, gross
margins, segment operating income and margins, orders growth, free cash
flow, 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 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. However, other than
with respect to total revenue, we only provide guidance on a non-GAAP
basis and do not provide reconciliations of such forward-looking
measures to GAAP due to the inherent difficulty in forecasting certain
amounts that would be included in GAAP earnings, such as, integration
and acquisition-related costs, special charges and tax related special
items. 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 non-GAAP measures, which
may not be comparable to similarly titled measures reported by other
companies, to be key performance indicators:
“Adjusted revenue" defined as revenue, adjusted to exclude
the impact of non-cash deferred revenue recognized.
“EBITDA” defined as earnings before interest, taxes,
depreciation, amortization expense, and share-based compensation. “Adjusted
EBITDA” reflects the adjustments to EBITDA to exclude the impact of
non-cash revenue as well as the reversal of a product warranty reserve,
restructuring and realignment charges, management fees and other
non-recurring charges.
|
| |
Sensus Worldwide Limited Non-GAAP Reconciliation*
|
Adjusted Revenue, EBITDA and Adjusted EBITDA
|
($ Millions)
|
| |
|
Year-ended 3/31/2016 |
| |
|
Reconciliation of Adjusted Revenue: | | |
| |
|
GAAP Revenue | |
861
| |
| |
|
Non-cash deferred revenue
| |
(24
|
)
|
| |
|
Adjusted Revenue | |
837
|
|
| |
|
Reconciliation EBITDA and Adjusted EBITDA: | | |
| |
|
GAAP Pre-Tax Income | |
99
| |
| |
|
Interest Expense (Income), net
| |
37
| |
Depreciation
| |
22
| |
Amortization
| |
34
| |
| |
|
EBITDA | |
192
| |
| |
|
Non-cash deferred revenue
| |
(24
|
)
|
| |
|
Reversal of product warranty reserve
| |
(27
|
)
|
| |
|
Restructuring & realignment costs
| |
7
| |
| |
|
Management fees
| |
6
| |
| |
|
Other non-recurring charges
| |
5
| |
| |
|
Adjusted EBITDA | |
159
|
|
| |
|
Adjusted EBITDA Margin
| |
19.0
|
%
|
| |
|
| |
|
* GAAP revenue and income amounts from Sensus audited 3/31/2016
Financial Statements
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160815005488/en/
Contacts:
Xylem Inc.
Media:
Kelly McAndrew +1 914-323-5969
Kelly.McAndrew@xyleminc.com
or
Investors:
Phil
DeSousa, +1 914-323-5930
Phil.DeSousa@xyleminc.com
Source: Xylem Inc.
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