Q4 2011 Earnings Release February 28, 2012 Exhibit 99.2 |
Forward Looking Statements 2 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, revenues, 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 our Registration Statement on Form 10, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission. |
2011 Performance Summary 3 Strong Strategic Execution … Positioned Well for 2012 Advanced our Strategic Position • Solidified Leading Position in Analytical Instrumentation with YSI Acquisition • Built Out High Growth Dewatering Platform • Introduced New Product and Strategic Partnerships • Double-Digit Growth in Emerging Markets Strong 2011 Financial Performance • Solid Revenue Growth +19% … Organic +7%* • Expanded Operating Margin +60 bps to 12.7%* • Double-Digit “Normalized” EPS Growth +30%* • Strong Free Cash Flow Conversion Solid Fundamentals … Positioned Well for 2012 • Large Installed Base, Diversified Portfolio, and Stable End Markets • Focused Strategic Initiatives Separation Complete … Selected to the S&P 500 * See Appendix for Non-GAAP Reconciliations |
2011 Xylem Performance 4 Broad Based Growth and Margin Expansion +19% +7% +24% OM% 11.9% 12.0% 12.1% 12.7% See appendix for non-GAAP reconciliations * Excludes Q4 & FY 2011 non-recurring separation costs of $20M and $87M, respectively Q4 Performance • Total growth +7%: US/Europe ea. up ~3%, EM up 20+% • Organic revenue growth +5% • Total orders $905M +8%; organic order growth +6% FY Performance • Total growth +19%: US/EM ea. up 20+%; Europe up ~13% • Organic revenue growth +7% • Total orders $3,847 +19%; organic order growth +7% • Q4 Op Margin +10 bps; FY Op Margin +60 bps • Commercial & Operational Excellence drive price and cost savings • Acquisitions accretive; Purchase accounting headwind (Q4) • Significant inflation • Impact of stand alone costs ~$5M, -50 bps (Q4) and -10 bps (FY), included in Op Margin • Increased organic investments (Dollars, In Millions) (Dollars, In Millions) +8% Revenue Operating Income * |
2011 Xylem Performance 5 Delivered Double-Digit Normalized EPS Growth • Q4’11 EPS $0.28; $0.40 Adj. • 1x separation costs • Special tax items • 5% Normalized EPS Growth • Strong operational performance • Purchase accounting dilution • FY’11 EPS $1.50; $1.93 Adj. • 1x separation costs • Special tax items • 30% Normalized EPS Growth • Strong operational performance • Organic investments & acquisitions driving significant growth * See Appendix for Non-GAAP Reconciliations 5% Normalized 5% Normalized EPS Growth EPS Growth 30% 30% Normalized Normalized EPS Growth EPS Growth Q4’11 EPS* 2011 EPS* |
6 Strategic Acquisitions Bolstered Strong Application Portfolio OM% 16.2% 15.3% 14.3% 14.9% * Excludes Q4 and FY Non-Recurring Separation Costs of $6M and $16M, respectively 2011 Water Infrastructure Performance • Transport +3% (Q4); +6% (FY) • Global dewatering strength • Stability from large installed base • Treatment +21% (Q4); +13% (FY) • Emerging market strength • Project timing • Test +1% (Q4); +6% (FY) • Europe flat; US & emerging market strength • Q4 Op Margin 15.3% • Price & cost savings exceed inflation • Purchase accounting headwind • Stand alone costs • Unfavorable mix/lower restructuring offset • FY Op Margin 14.9% • Price & cost savings exceed inflation • Unfavorable FX • Unfavorable mix/lower restructuring offset (Organic Revenue Growth by Application) See Appendix for Non-GAAP Reconciliations (Dollars, In Millions) (Dollars, In Millions) Revenue Operating Income * Organic Growth Organic Growth Q4 +6% / Q4 +6% / FY+7% FY+7% +30% +3% +9% +25% |
7 Energy Efficient Solutions Fueled Growth OM% 8.3% 9.2% 11.9% 12.0% * Excludes Q4 and FY Non-Recurring Separation Costs of $4M and $13M, respectively 2011 Applied Water Performance (Organic Revenue Growth by Application) • Building Services +2% (Q4); +6% (FY) • New energy efficient solutions • Q4: Destocking • Industrial Water +5% (Q4); +7% (FY) • Improved market conditions • Favorable across all regions • Irrigation +9% (Q4); +12% (FY) • Favorable weather conditions in US • Q4 Op Margin 9.2% • Price & cost savings exceeded inflation • Continued organic investments • Stand alone costs • Non-restructuring severance costs • FY Op Margin 12.0% • Price & cost savings exceeded inflation • Continued organic investments See Appendix for Non-GAAP Reconciliations (Dollars, In Millions) (Dollars, In Millions) Organic Growth Organic Growth Q4 +3% / Q4 +3% / FY+7% FY+7% +9% +3% +15% +9% Operating Income * Operating Income * Revenue Revenue |
2011 Xylem Financial Position 8 Strong Cash Flow … Healthy Balance Sheet ... Providing Flexibility • Free Cash Flow Growth • Favorable acquisition performance • Working Capital improvement of 20 bps as a % Sales • Continued investment $126M Capex > 1 reinvestment ratio • Strong cash position • Debt/Adj EBITDA ratio of 1.9x • 33% Net Debt to Net Capital • $600M Revolving Credit Facility Available • Access to Commercial Paper FCF% 91% 111% W/C%** 22.3% 22.1% December 31, 2011 Cash 318 Debt 1,206 Net Debt 888 Shareholders’ Equity 1,827 Net Capital 2,715 Net Debt to Net Capital 33% * See Appendix for Non-GAAP Reconciliations (Dollars, In Millions) (Dollars, In Millions) (Dollars, In Millions) * See Appendix for Non-GAAP Reconciliations ** (AR+INV-AP / Revenue (Adjusted for Acquisitions) Free Cash Flow * Free Cash Flow * Working Capital ** Working Capital ** Capital Summary/Liquidity Capital Summary/Liquidity 2010 2011 770 856 2010 2011 301 388 |
2012 Guidance |
Key Macro Economic Indicators 10 Navigating Through Tougher Macro Economic Conditions Emerging GDP Emerging GDP Europe GDP Europe GDP US GDP US GDP Source: MAPI, U.S. Census Bureau , ITR, Company Estimates Public Water & Sewer: Billions of dollars US Private Residential Construction Spending: Seasonally Adjusted Annual Rate in Billions of Dollars Industrial Production Index: 2007 = 100. S.A. JP Morgan Developing Country Composite Index US Public Water & Sewer Facility Construction US Public Water & Sewer Facility Construction US Private Residential Construction Spending US Private Residential Construction Spending Architectural Billing Index (ABI) Architectural Billing Index (ABI) US Total Industrial Production US Total Industrial Production Europe Union Industrial Production Index Europe Union Industrial Production Index 12 Month Moving Average Developing Country Composite Index Developing Country Composite Index Stable Improving Flat Softening Improving Moderating |
• Global dewatering applications • Emerging market strength • 2H OEM activity Down Low Single Digit to Flat End Markets 11 Xylem Well Positioned Up Low to Mid Single Digit Up Low to Mid Single Digit Up Low Single Digit Projected ‘12 XYL Growth • Increasing operation & maintenance spend • Rising global tariffs • Weakness in developed market Capex • Emerging market strength • Green building legislation 2H benefits • New products drive share gains • Installed base provides stability • US Construction slightly improving • European new construction weakness • Tough compare vs. strong 2011 • Favorable long-term market expectation (~ 40% of ’11 Revenue) (~ 36% of ’11 Revenue) (~ 12% of ’11 Revenue) (~ 9% of ’11 Revenue) (~ 3% of ’11 Revenue) Industrial Public Utility Commercial Residential Agriculture Up Mid Single Digit |
2012 Key Focus Areas 12 Creating Customer Value and Building Credibility Advancing our Strategic Position Deploying Innovation and New Product Applications & Services Continued Strong Execution • Build out of high growth dewatering platform globally • Leverage leading position in analytical instrumentation • Build upon our presence in fast-growing emerging markets • Continue to advance our disciplined acquisition pipeline • Energy efficient technology and new product launches • Leverage our applications expertise to solve high-order water infrastructure challenges • Focus on Commercial Excellence: price realization through differentiated customer value • Strong productivity (Lean, LCR sourcing) while enabling reinvestment for long-term growth • Disciplined execution through proven management operating system |
Capital Deployment Strategy Update 13 Clear Strategy … Strong Balance Sheet Organic Investments Robust Acquisition Pipeline Dividend Policy • Funding through strong cash performance • Strong balance sheet provides flexibility • Target within peer range • Confidence in cash flow generation • Capex of ~$130M, >1 reinvestment ratio • R&D, ~3% of revenue • Core product development • Global dewatering and analytical instrumentation expansion • Emerging market expansion |
2012 Financial Guidance Summary 14 2012 Financial Outlook Growth 2012E vs. 2011 Total Revenue $3.9B - $4.0B 4% - 6% (Organic) Water Infrastructure $2.5B - $2.6B 5% - 7% (Organic) Applied Water $1.4B - $1.5B 2% - 6% (Organic) Segment Margin* 14.5% - 15.0% +50 to +100 bps Operating Margin* 12.7% - 13.3% Flat to +60 bps (incl. incremental stand alone costs $25M-$30M) EPS * $1.80 - $1.95 -7% to +1% on Adjusted Basis +8% to +17% on Normalized Basis Free Cash Flow Conversion 95% Excluding one-time separation costs * See Appendix for Non-GAAP Reconciliations |
2012 Revenue Outlook 15 Strong Underlying Growth … FX Shift from Tailwind to Headwind (Dollars, In Billions) 2011 2012 Comments Organic Growth 7% 4-6% - 1H’12 tough compare vs. strong 1H’11 - 2H’12 stronger than 1H FX (Translation) 4% (3)% ~65% international revenues Top foreign currencies: Euro, CAD, AUD, GBP, SEK Acquisition 8% 2% 2012 represents YSI 2011 represents incremental Godwin, Nova, OI Analytics and YSI Total Growth 19% 3-5% Quarterly Revenue Profile (% of FY Revenue) Q1 Q2 Q3 Q4 2009-2011 Composite 22% 25% 25% 28% Xylem Xylem |
2012 Revenue Outlook 16 Revenue Growth Driven by End Market Conditions & Xylem Initiatives (Dollars, In Billions) 2011 2012 Comments Organic Growth 7% 5-7% Public Utility up low to mid single digit Industrial up mid single digit FX (Translation) 4% (3)% Top foreign currencies: Euro, CAD, AUD, GBP, SEK Acquisition 14% 3% 2012 represents YSI 2011 represents incremental Godwin, Nova, OI Analytics and YSI Total Growth 25% 5-7% 2011 2012 Comments Organic Growth 7% 2-6% Commercial up low to mid single digit Residential up low single digit Industrial up mid single digit FX (Translation) 2% (2)% Top foreign currencies: Euro, CAD, AUD, GBP Total Growth 9% 0-4% Water Infrastructure Water Infrastructure Applied Water Applied Water |
2012 Margin Outlook 17 Solid Margin Performance … On Track to Meet Long Term Objective Includes Stand Alone Costs of ~70 bps Includes Stand Alone Costs of ~10 bps • Segment Op Margin 14.5% - 15.0% • Comm’l & Oper’l Excellence Initiatives • Acquisition margin accretive • Organic growth investments • Inflation ~3% • Operating Margin 12.7% - 13.3% • Includes stand alone costs ~$25M-$30M See appendix for non-GAAP reconciliations *Excludes non-recurring separation costs of $87M and $15M-$20M for 2011 and 2012, respectively ** Adjusted for non recurring separation costs and stand alone costs Driving Consistent Improvements … On Track to Meet Long Term Objective Op Margin Expansion (Ex. Stand Alone Costs) ** Op Margin Expansion (Ex. Stand Alone Costs) ** Segment Margin * Segment Margin * Operating Margin * Operating Margin * |
2012 Xylem Performance 18 Delivering Double-Digit EPS Growth Illustration of Mid Point Guidance • Operational performance $0.21, includes YSI contribution, FX and tax headwind • Projected structural tax rate ~25% • Nine months incremental interest expense normalization • Full year impact of stand alone costs … in line with expectations * See Appendix for Non-GAAP Reconciliations Includes unfavorable tax rate change of 1% 13% 13% Normalized Normalized EPS Growth EPS Growth 2012 EPS * Outlook 2012 EPS * Outlook |
Summary 19 2011 … A Year in the Making • A Leader in the Global Water Industry • Executed Significant Strategic Advancement • Delivered Strong Financial Performance • Xylem, new independent company Positioned to Deliver in 2012 • Solid Foundation and Fundamentals • Strong Financial Position • Strong Growth Opportunities |
Appendix |
Separation Costs 21 ($M) Q1’11 Q2’11 Q3’11 Q4’11 FY’11 IT Costs $ - $ 7 $ 10 $ 2 $ 19 Advisory fees 2 6 9 1 18 Employee retention & hiring costs 1 4 4 5 14 Rebranding & marketing costs - - 3 10 13 Lease termination & other real estate costs - - 10 - 10 Non-cash asset impairments - - 8 - 8 Other - 1 2 2 5 Total separation costs in Op Income 3 18 46 20 87 Tax-related separation (benefit) costs - 14 (9) 1 6 Income tax benefit (1) (5) (12) (3) (21) Total separation costs, net of tax $ 2 $ 27 $ 25 $ 18 $ 72 |
Quarterly Financial Performance 22 ($M, Except EPS) Q1’10 Q2’10 Q3’10 Q4’10 FY’10 Q1’11 Q2’11 Q3’11 Q4’11 FY’11 Revenue 686 775 806 935 3,202 890 971 939 1,003 3,803 COGS 431 484 497 576 1,988 553 592 574 623 2,342 Gross Profit 255 291 309 359 1,214 337 379 365 380 1,461 SG&A 164 170 183 220 737 210 219 215 233 877 R&D 18 17 18 21 74 24 26 23 27 100 Separation Costs - - - - - 3 18 46 20 87 Restructuring & Asset Impairment Charges, net 4 3 1 7 15 - - 2 - 2 Op Income 69 101 107 111 388 100 116 79 100 395 Interest Expense - - - - - - 1 1 15 17 Other Non-Op -2 -1 3 - - 1 - 4 - 5 Income before Tax 67 100 110 111 388 101 115 82 85 383 Tax 11 15 19 14 59 23 43 5 33 104 Net Income 56 85 91 97 329 78 72 77 52 279 EPS – Diluted * $0.30 $0.46 $0.49 $0.53 $1.78 $0.42 $0.39 $0.42 $0.28 $1.50 * On October 31, 2011, Xylem Inc. completed the spin-off through a tax-free stock dividend to ITT Corporation’s shareholders. ITT Corporation shareholders received one share of our common stock for each share of ITT common stock. As a result on October 31, 2011, we had 184.6 million shares of common stock outstanding and this share amount is being utilized to calculate earnings per share for all periods presented prior to the spin-off. |
Non-GAAP Measures 23 Management views key performance indicators including revenue, segment operating income and margins, orders growth, and backlog, among others. In addition, we consider certain 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. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenues, operating income, net income or net cash from continuing operations 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: “Organic revenue” and “Organic Orders” defined as revenue or orders, as applicable, excluding the impact of foreign currency fluctuations, intercompany transactions, and contributions from acquisitions and divestitures. Divestitures include sales of portions of our business that did not meet the criteria for classification as a discontinued operation or insignificant portions of our business that we did not classify as a discontinued operation. The period-over-period change resulting from foreign currency fluctuations assumes no change in exchange rates from the prior period. “EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude for one-time separation costs associated with the Xylem spin- off from ITT Corporation. “Operating Income * ” and “Adjusted EPS” defined as operating income and earnings per share, adjusted to exclude one-time separation costs associated with the Xylem spin-off from ITT Corporation and tax-related special items. “Normalized EPS” defined as earnings per share, adjusted to exclude one-time separation costs associated with the Xylem spin- off from ITT Corporation and tax-related special items, as well to reflect the incremental current period amount of interest expense and stand alone costs in the prior comparable period. “Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures and other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of free cash flows does not consider non-discretionary cash payments, such as debt. |
Non-GAAP Reconciliation: Organic Orders 24 (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A Change % Change Change % Change Orders Orders 2011 v. 2010 2011 v. 2010 FX Contribution Eliminations Adj. 2011 v. 2010 Adj. 2011 v. 2010 2011 2010 Year Ended December 31, 2011 Xylem Inc. 3,847 3,237 610 18.8% (272) (120) - 218 6.7% Water infrastructure 2,454 1,941 513 26.4% (272) (96) 1 146 7.5% Applied Water 1,452 1,352 100 7.4% - (27) (1) 72 5.3% Quarter Ended December 31, 2011 Xylem Inc. 905 836 69 8.3% (24) 5 - 50 6.0% Water infrastructure 589 514 75 14.6% (24) 4 (5) 50 9.7% Applied Water 330 331 (1) -0.3% - 1 (1) (1) -0.3% Quarter Ended September 30, 2011 Xylem Inc. 966 810 156 19.3% (41) (42) - 73 9.0% Water infrastructure 621 504 117 23.2% (41) (33) 5 48 9.5% Applied Water 358 322 36 11.2% - (10) - 26 8.1% Quarter Ended June 30, 2011 Xylem Inc. 998 822 176 21.4% (91) (70) - 15 1.8% Water infrastructure 632 498 134 26.9% (91) (55) 2 (10) -2.0% Applied Water 383 341 42 12.3% - (17) 1 26 7.6% Quarter Ended March 31, 2011 Xylem Inc. 978 769 209 27.2% (116) (13) - 80 10.4% Water infrastructure 612 425 187 44.0% (116) (12) (1) 58 13.6% Applied Water 381 358 23 6.4% - (1) (1) 21 5.9% Acquisitions / Divestitures Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic Order Growth ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) |
Non-GAAP Reconciliation: Organic Revenue 25 (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A Change % Change Change % Change Revenue Revenue 2011 v. 2010 2011 v. 2010 FX Contribution Eliminations Adj. 2011 v. 2010 Adj. 2011 v. 2010 2011 2010 Year Ended December 31, 2011 Xylem Inc. 3,803 3,202 601 18.8% (264) (111) - 226 7.1% Water infrastructure 2,416 1,930 486 25.2% (264) (87) 2 137 7.1% Applied Water 1,444 1,327 117 8.8% - (28) (1) 88 6.6% Quarter Ended December 31, 2011 Xylem Inc. 1,003 935 68 7.3% (27) 6 - 47 5.0% Water Infrastructure 679 622 57 9.2% (27) 5 1 36 5.8% Applied Water 336 327 9 2.8% - 1 (1) 9 2.8% Quarter Ended September 30, 2011 Xylem Inc. 939 806 133 16.5% (42) (39) - 52 6.5% Water infrastructure 584 488 96 19.7% (42) (30) 1 25 5.1% Applied Water 368 331 37 11.2% - (10) 1 28 8.5% Quarter Ended June 30, 2011 Xylem Inc. 971 775 196 25.3% (85) (65) - 46 5.9% Water infrastructure 602 443 159 35.9% (85) (50) 1 25 5.6% Applied Water 385 346 39 11.3% - (18) - 21 6.1% Quarter Ended March 31, 2011 Xylem Inc. 890 686 204 29.7% (110) (13) - 81 11.8% Water infrastructure 551 377 174 46.2% (110) (12) (1) 51 13.5% Applied Water 355 323 32 9.9% - (1) (1) 30 9.3% Acquisitions / Divestitures Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic Revenue ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) |
Q4 '10 Q4 '11 As Reported Adjustments Normalized As Reported Adjustments Adjusted Total Revenue 935 935 1,003 1,003 Operating Income 111 (5) a 106 100 20 g 120 Operating Margin 11.9% b 11.4% 9.9% 11.9% Interest Income (Expense) - (14) (14) (13) (13) Other Income (Expense) - - (1) (1) Income before Taxes 111 (19) 92 85 20 105 Provision for Income Taxes (14) (9) f (23) (33) 2 h (31) Net Income 97 (28) 69 52 22 74 Diluted Shares 184.6 184.6 185.3 185.3 Diluted EPS 0.53 $ (0.15) $ 0.38 $ 0.28 $ 0.12 $ 0.40 $ FY '10 FY '11 As Reported Adjustments Normalized As Reported Adjustments Adjusted 3,202 3,202 3,803 3,803 Operating Income 388 (5) a 383 395 87 d 482 12.1% b 11.9% 10.4% 12.7% Interest Income (Expense) - (14) (14) (17) (17) Other Income (Expense) - - 5 5 Income before Taxes 388 (19) 369 383 87 470 Provision for Income Taxes (59) (37) c (96) (104) (7) e (111) Net Income 329 (56) 273 279 80 359 Diluted Shares 184.6 184.6 185.3 185.3 Diluted EPS 1.78 $ (0.30) $ 1.48 $ 1.50 $ 0.43 $ 1.93 $ a Equals incremental stand alone costs incurred in 2011 of $5M b Represents incremental interest expense on long-term debt that was incurred in 2011 c Represents net tax impact of above items, less 2010 special tax items of $43M d Represents one-time separation costs incurred in 2011 e Represents the tax benefit on one time separation costs of $15M, less special tax items of $7M f Represents net tax impact on stand alone and interest expenses, less Q4 2010 special tax items of $15M g One time separation costs incurred in Q4 2010 h Represents net tax impact of one time separation costs ($ Millions, except per share amounts) Xylem Inc. Non-GAAP Reconciliation Normalized and Adjusted Operating Income and Earnings Per Share (EPS) Non-GAAP Reconciliation: EPS 26 |
Non-GAAP Reconciliation: EPS 27 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Net Income 78 72 77 52 279 Separation costs, net of tax 2 27 25 18 72 Adjusted Net Income before Special Tax Items 80 99 102 70 351 Special Tax Items 4 (1) 4 7 Adjusted Net Income 80 103 101 74 358 Diluted Earnings per Share $0.42 $0.39 $0.42 $0.28 $1.50 Separation costs per Share $0.01 $0.15 $0.13 $0.10 $0.39 Adjusted diluted EPS before Special Tax Items $0.43 $0.54 $0.55 $0.38 $1.89 Special Tax Items per Share $0.00 $0.02 ($0.01) $0.02 $0.04 Adjusted diluted EPS $0.43 $0.56 $0.54 $0.40 $1.93 Q1 2010 Q2 2010 Q3 2010 Q4 2010 FY 2010 Net Income 56 85 91 97 329 Separation costs, net of tax - - - - - Adjusted Net Income before Special Tax Items 56 85 91 97 329 Special Tax Items (6) (11) (11) (15) (43) Adjusted Net Income 50 74 80 82 286 Diluted Earnings per Share $0.30 $0.46 $0.49 $0.53 $1.78 Adjusted diluted EPS before Special Tax Items $0.30 $0.46 $0.49 $0.53 $1.78 Special Tax Items per Share ($0.03) ($0.06) ($0.05) ($0.09) ($0.23) Adjusted diluted EPS $0.27 $0.40 $0.44 $0.44 $1.55 Xylem Inc. Non-GAAP Reconciliation Adjusted Diluted EPS 2011 and 2010 ($ Millions, except per share amounts) |
28 Non-GAAP Reconciliation: Segment Operating Income Adjusted Segment Operating Income Q1 Q2 Q3 Q4 FY '11 '10 '11 '10 '11 '10 '11 '10 '11 '10 Total Revenue • Water Infrastructure 551 377 602 443 584 488 679 622 2,416 1,930 • Applied Water 355 323 385 346 368 331 336 327 1,444 1,327 Operating Income • Water Infrastructure 64 45 94 57 87 73 98 101 343 276 • Applied Water 46 40 50 51 37 40 27 27 160 158 Separation Costs • Water Infrastructue - - 2 - 8 - 6 - 16 - • Applied Water - - - - 9 - 4 - 13 - Adjusted Operating Income • Water Infrastructue 64 45 96 57 95 73 104 101 359 276 • Applied Water 46 40 50 51 46 40 31 27 173 158 Operating Margin • Water Infrastructure 11.6% 11.9% 15.6% 12.9% 14.9% 14.9% 14.4% 16.2% 14.2% 14.3% • Applied Water 13.0% 12.4% 13.0% 14.7% 10.0% 12.0% 8.0% 8.3% 11.1% 11.9% Adjusted Operating Margin* • Water Infrastructure 11.6% 11.9% 15.9% 12.9% 16.3% 14.9% 15.3% 16.2% 14.9% 14.3% • Applied Water 13.0% 12.4% 13.0% 14.7% 12.5% 12.0% 9.2% 8.3% 12.0% 11.9% *Adjusted Operating Income excludes non-recurring separation costs (Dollars, In Millions) |
29 Non-GAAP Reconciliation: Adj. Operating Margin Rollforward Xylem Water Infrastructure Applied Water Q4'10 Margin 11.9% 16.2% 8.3% Price 1.6% 0.5% 3.7% Vol/Mix/Other -0.9% -1.2% -1.6% Stand Alone Costs -0.5% -0.3% 0.0% Cost Improvements 3.5% 3.1% 3.6% Acquisitions -0.5% -0.9% 0.0% Inflation -2.8% -1.9% -4.5% FX -0.3% -0.2% -0.3% Q4'11 Margin 12.0% 15.3% 9.2% Xylem Water Infrastructure Applied Water FY'10 Margin 12.1% 14.3% 11.9% Price 1.3% 0.4% 2.7% Vol/Mix/Other -0.1% 0.3% -1.0% Stand Alone Costs -0.1% -0.1% 0.0% Cost Improvements 3.1% 3.1% 3.1% Acquisitions 0.2% 0.0% 0.0% Inflation -3.3% -2.3% -4.6% FX -0.5% -0.8% -0.1% FY'11 Margin 12.7% 14.9% 12.0% Adjusted Operating Margin Rollforward Xylem Inc. Non-GAAP Reconciliation Operating Margin Rollforward |
Non-GAAP Reconciliation: Free Cash Flow 30 2011 2010 Net Cash - Operating Activities 449 395 Capital Expenditures (126) (94) Free Cash Flow, including separation costs 323 301 Separation Costs (Cash Paid incl. Capex) 65 - Free Cash Flow, excluding separation costs 388 301 Net Income 279 329 Separation Costs 72 0 Adjusted Net Income 351 329 Free Cash Flow Conversion 111% 91% Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow Years ended 2011 & 2010 ($ Millions) Year Ended |
31 Non-GAAP Reconciliation: Xylem EBITDA & Adj. EBITDA Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 101 115 �� 82 85 383 Interest, net - - 1 16 17 Depreciation 22 25 25 21 93 Amortization 11 10 11 12 44 Stock Compensation 3 2 2 6 13 EBITDA 137 152 121 140 550 Separation Costs 3 18 46 20 87 Adjusted EBITDA 140 170 167 160 637 Revenues 890 971 939 1,003 3,803 Adjusted EBITDA Margin 15.7% 17.5% 17.8% 16.0% 16.7% Xylem Inc. Non-GAAP Reconciliation Adjusted EBITDA by Quarter ($ Millions) 2011 |
32 Non-GAAP Reconciliation: Water Infrastructure EBITDA & Adj. EBITDA Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 65 93 88 99 345 Interest, net (1) - (1) Depreciation 16 19 19 14 68 Amortization 9 9 9 9 36 Stock Compensation - - 1 1 2 EBITDA 90 121 116 123 450 Separation Costs - 2 8 6 16 Adjusted EBITDA 90 123 124 129 466 Revenues 551 602 584 679 2,416 Adjusted EBITDA Margin 16.3% 20.4% 21.2% 19.0% 19.3% Xylem Inc. Non-GAAP Reconciliation Adjusted EBITDA by Quarter ($ Millions) 2011 Water Infrastructure |
33 Non-GAAP Reconciliation: Applied Water EBITDA & Adj. EBITDA Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 46 51 37 25 159 Interest, net - - - - - Depreciation 6 6 6 7 25 Amortization 2 1 2 1 6 Stock Compensation - - 1 1 2 EBITDA 54 58 46 34 192 Separation Costs - - 9 4 13 Adjusted EBITDA 54 58 55 38 205 Revenues 355 385 368 336 1,444 Adjusted EBITDA Margin 15.2% 15.1% 14.9% 11.3% 14.2% Xylem Inc. Non-GAAP Reconciliation Adjusted EBITDA by Quarter ($ Millions) 2011 Applied Water |
Illustration of Mid Point Guidance 2012 Guidance FY '11 FY '12 As Reported Adjustments Adjusted Adjustments Normalized As Reported Adjustments Adjusted Total Revenue 3,803 3,803 3,803 3,950 3,950 Segment Operating Income 503 29 a 532 (8) d 524 577 8 h 585 Segment Operating Margin 13.2% 14.0% 13.8% 14.6% 14.8% Corporate Expense 108 (58) b 50 20 e 70 81 (10) h 71 Operating Income 395 87 482 (28) 454 496 18 514 Operating Margin 10.4% 12.7% 11.9% 12.6% 13.0% Interest Expense (17) (17) (39) f (56) (51) (51) Other Non-Operating Income (Expense) 5 5 5 - - Income before Taxes 383 87 470 (67) 403 445 18 463 Provision for Income Taxes (104) (7) c (111) 16 g (95) (111) (5) i (116) Net Income 279 80 359 (51) 308 334 13 347 Diluted Shares 185.3 185.3 185.8 185.8 Diluted EPS 1.50 $ 0.43 $ 1.93 $ (0.27) $ 1.66 1.80 0.07 1.87 a One time separation costs incurred at the segment level b One time separation costs incurred at the corporate level c Net tax impact of above items, plus the addition of 2011 special tax items d Incremental stand alone costs to be incurred in 2012 at the segment level ($8M) e Incremental stand alone costs to be incurred in 2012 at the corporate level ($20M) f Incremental interest expense on long-term debt to be incurred in 2012 g Tax impact of incremental interest expense and stand alone costs to be incurred in 2012 h Expected one time separation costs of $8M and $10M to be incurred at the segments and headquarters, respectively. i Tax impact of one time separation costs expected to be incurred in 2012. ($ Millions, except per share amounts) Guidance Xylem Inc. Non-GAAP Reconciliation Non-GAAP Reconciliation: Guidance 34 |
35 NYSE: XYL http://investors.xyleminc.com Phil De Sousa, Investor Relations Officer (914) 323-5930 Janice Tedesco, Investor Relations Coordinator (914) 323-5931 |