Q2 2012 Earnings Release August 2, 2012 |
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 Item 1A of our Annual Report on Form 10-K, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission. |
Q2’12 Xylem Results 3 Strong Operating Performance Strong Operating Performance * See Appendix for Non-GAAP Reconciliations Financial Performance Summary Financial Performance Summary Orders Revenue Gross Margin Operating Margin * EPS * Free Cash Flow * $970M $966M 39.6% 14.0% 54% Conversion $0.49 $86M Book to Bill 1.00 +4% (Constant Currency)* +60 bps 14.8% ex. Stand-Alone Costs, +100 bps +4% Normalized Growth |
Business Update 4 Advancing Our Strategic Position • Growing the Analytical Instrumentation Platform • Expanding Dewatering Services into Attractive Markets in Brazil Deploying Innovative New Product Applications and Services • Strong Order Rate for Treatment in Q2’12 • New Generation YSI EXO Sonde Continued Strong Execution • Q2’12 Emerging Markets Growth of 22% (Constant Currency Basis) • Driving Customer Excellence and Cost Reduction Initiatives Strengthening Foundation & Positioning for Future Growth Strengthening Foundation & Positioning for Future Growth • MJK Automation Acquisition Xylem Total Care - Energy Audits Identify Customer Savings & Retrofit Opportunities • |
1H’12 Organic Revenue Performance 5 End Market (% of 2011 Revenue) 1H’12 Organic Growth vs. PY Industrial (~40%) Public Utility (~36%) Commercial (~12%) Residential (~9%) Agriculture (~3%) 1H’12 Organic Growth vs. PY Mid Single Low Single Low Single Mid Single Major Geographic Region (% of 2011 Revenue) Organic Growth vs. PY U.S. (~36%) + Industrial & Residential Strength + Commercial Up (Moderating) – Public Utility (Dewatering & Projects) Europe (~37%) – Industrial Down Slightly – Residential & Commercial Weakness = Public Utility Flat Emerging Markets (19%) + Up Across All Regions Total Growth +3% -1% +11% +1% U.S. U.S. & & EM EM Strength Strength Partially Partially Offset Offset by by Europe Europe … … Public Public Utility Utility Stable Stable |
Full Year Outlook 6 Challenging Market Dynamics • Slower Growth in the Developed Markets • FX Headwinds Continue Productivity & Strong Execution Continues While Investing for Growth • Disciplined Capital Deployment • Maintaining Operating Margin Expansion Target Accelerating Restructuring & Realignment Actions In Face of Economic Uncertainty Updating 2012 Guidance, Reflecting Lower Organic Growth • Full Year Revenue ~$3.8B; Organic Growth 1% to 3% • Adjusted EPS Mid Point of $1.77* • *See appendix for non-GAAP reconciliations • Investing $15M to $20M Navigating Through a Tougher Macro Environment Navigating Through a Tougher Macro Environment |
Q2’12 Xylem Performance 7 Revenue Up 4%* … Revenue Up 4%* … Op Margin Before Stand Alone Costs + 100 Bps Op Margin Before Stand Alone Costs + 100 Bps - 1% • *See appendix for non-GAAP reconciliations (Dollars, In Millions) (Dollars, In Millions) +1% Incremental Margin ~36% (Ex. FX & Stand Alone Costs) Q2 Growth Organic +1% Acquisition +3% Constant Currency +4% FX -5% Total -1% Cost Reductions +3.1% Price +1.4% Acquisitions +0.4% Vol/Mix/Invest - 1.1% Organic Performance By End Market By Geography + Industrial + U.S. + Public Utility Europe Commercial + Emerging Markets Residential Agriculture Revenue Operating Income * 971 966 134 135 Q2'11 Op Margin* 13.8% 3.8% 0.0% 2.8% 14.8% 0.8% 14.0% Operations FX Inflation Q2'11 Op Margin Before Stand- Alone Costs* Stand- Alone Costs Q2’12 Op Margin* |
Q2’12 Xylem Performance 8 Core Operations & YSI Drive Significant Earnings Growth Core Operations & YSI Drive Significant Earnings Growth Interest ($0.06) Stand-Alone ($0.03) Separation Costs $0.15 Special Tax $0.02 Q2’12 EPS * 4% Normalized EPS Growth * See Appendix for Non-GAAP Reconciliations Operational Performance: + + Separation Costs ($0.02) Special Tax $0.01 $0.39 $0.08 $0.47 $0.02 $0.49 $0.48 Q2’11 GAAP EPS Adjustments Normalized Q2’11 EPS Operational Performance Adjusted Q2’12EPS Adjustments Q2’12 GAAP EPS $0.01 Core Operations $0.04 YSI Acquisition $0.03 Operating Tax Rate ($0.01) FX Translation ($0.04) |
Q2’12 Water Infrastructure Performance 9 Resilient Portfolio … Resilient Portfolio … Outstanding YSI Performance Outstanding YSI Performance +1% * See appendix for non-GAAP reconciliations Revenue Operating Income * Operating Income * (Dollars, In Millions) (Dollars, In Millions) -2% Price & Productivity More Than Offset Inflation/Mix (Constant Currency) • Transport +6% + Public Utility … Emerging Markets Up, Europe Flat + Industrial … Up in Most Regions, U.S. Flat – Drought Condition Impact on Dewatering • Treatment -11% – Lower Project Deliveries; Key Wins for 2013 • Test +58% (Incl. YSI Acquisition $32M) – Europe Weaker Q2 Growth Organic +2% Acquisition +5% Constant Currency +7% FX -6% Total +1% 602 609 96 94 15.9% 2.4% 0.4% 2.6% 16.1% 0.7% 15.4% Q2'11 Op Margin* Operations FX Inflation Q2'11 Op Margin Before Stand-Alone Stand- Alone Q2’12 Op Margin* Cost Reductions Price Acquisitions Vol/Mix/Invest +2.6% +1.0% +0.5% - 1.7% |
Q2’12 Applied Water Performance 10 Productivity & Price Initiatives Drive Strong Op Margin Expansion Productivity & Price Initiatives Drive Strong Op Margin Expansion * See appendix for non-GAAP reconciliations (Dollars, In Millions) (Dollars, In Millions) (Constant Currency) • – Commercial … Slowing Institutional Spend – Residential … Europe Down + U.S. Up Mid Single Digits • + Double-Digit U.S. Growth – Europe Weaker • + U.S. Up Double Digits -3% +4% Significant Margin Expansion Significant Margin Expansion +140 bps before Stand Alone +140 bps before Stand Alone Q2 Growth Q2 Growth Q2 Growth Q2 Growth Constant Currency Flat Flat Organic Acquisition FX Total -% -3% -3% Revenue Revenue Operating Income * Operating Income * Cost Reductions +3.8% Price +2.1% Vol/Mix/Invest - 1.0% 50 52 385 373 Q2'11 Op Margin Operations FX Inflation Q2'12 Op Margin Before Stand-Alone Stand- Alone Q2'12 Op Margin * 13.0% 14.4% 13.9% 0.6% 2.9% 0.5% 4.9% Building Services -2% Industrial Water +4% Irrigation -4% Q2'11 Q2'12 Q2'11 Q2'12 |
Xylem Financial Position 11 FY FY Cash Cash Flow Flow On On Track Track … … Strong Balance Sheet Provides Flexibility Strong Balance Sheet Provides Flexibility • Free Cash Flow $86M • ‘12 Includes $36M and $26M of Incremental Tax & Interest Pmts • Working Capital Investment $10M • Capex > 1 Reinvestment Ratio • Strong Cash Position • No Significant Debt Maturities Until 2016 • 30% Net Debt to Net Capital • 1.3x Net Debt/Adj. TTM EBITDA • $600M Revolving Credit Facility - Unutilized • Access to Commercial Paper - Unutilized FCF% 75% 54% W/C%** 24.8% 23.6% June 30, 2012 Cash 358 Debt 1,206 Net Debt 848 Stockholders’ Equity 1,948 Net Capital 2,796 Net Debt to Net Capital 30% (Dollars, In Millions) (Dollars, In Millions) (Dollars, In Millions) * See Appendix for Non-GAAP Reconciliations ** (AR+INV-AP)/ TTM Revenue (Adjusted for Acquisitions) Free Cash Flow * Free Cash Flow * Working Capital Working Capital Capital Summary/Liquidity Capital Summary/Liquidity 134 86 86 900 910 910 Q2’11 YTD Q2’12 YTD Q2’11 Q2’12 |
2012 Guidance |
End Market Performance 13 Challenging Challenging Market Market Dynamics Dynamics … … Europe Europe Weaker Weaker Industrial Public Utility Commercial Residential Agriculture Up Low - Mid Single Digit Flat - Up Low Single Digit Up Low Single Digit Up Low Single Digit Down Low Single Digit - Flat • Weaker Europe • Drought Conditions Continue • Moderate Sequential Growth (2H vs. 1H) • US/Europe MRO Stable • Shippable 2012 project backlog down (Capex) • Moderate Sequential Growth (2H vs. 1H) • Energy Efficient Solutions • Flat to Up Slightly (2H vs. 1H) • U.S. Stable … Weaker Europe • Flat to Up Slightly (2H vs. 1H) • Favorable U.S. Conditions Continue vs. Previous vs. Previous Outlook Outlook 2H Planning Assumptions 2H Planning Assumptions FY’ 12 vs. PY |
Guidance Roll-Forward 14 Lower Revenue Outlook … Cost Savings Plan Mitigates EPS Impact Mid-Point Roll-Forward Revenue EPS Note Previous Guidance $3.95B $1.87 Based on Organic Growth 4%-6% FX Translation ($50M) ($0.03) Euro Rate at $1.22 (Previously $1.31) MJK Acquisition $6M ($0.01) Not Included in Prior Guidance Market Dynamics ($105M) ($0.16) Organic Growth 1%-3%; -3 pt. Revision Cost Savings Actions - Paced Investments, Discretionary Costs $0.10 Revised Guidance ~3.8B $1.77 3% Operational EPS Reduction Previous Guidance FX Translation MJK Acquisition Reset FX & MJK Operational Performance Revised Guidance $1.87 $1.83 $1.77 $0.03 $0.01 $0.06 EPS Midpoint Illustration - - 3% 3% |
2012 Financial Guidance Summary 15 * See Appendix for Non-GAAP Reconciliations Revenue Xylem Consolidated Water Infrastructure Applied Water Segment Margin * Operating Margin * EPS * Free Cash Flow Conversion Guidance Assumptions: Stand-Alone Costs Operating Tax Rate Share Count Items Excluded from Guidance: (1) Separation Costs (2) Restructuring & Realignment Costs ~$3.8B ~$2.4B ~$1.4B 14.2% - 14.6% 12.7% - 13.3% $1.72 - $1.82 95% $25M - $30M ~25% ~186.3M $15M - $20M $15M - $20M Constant Currency Organic Acquisition 3% to 5% 1% to 3% 2% 5% to 7% 1% to 3% 4% 0% to 3% 0% to 3% 0% +20 to +60 bps +0 to +60 bps +4% to +10% on Normalized Basis Excluding one-time separation costs Included in EPS Guidance; In Line with Expectations Excludes Special Tax Items In Line with Expectations $9M-$10M Annual Savings Beginning 2013 2012 Full Year 2012 Full Year Financial Outlook Financial Outlook Growth Growth 2012E vs. 2011 2012E vs. 2011 |
Resilient Portfolio, Discipline & Strategic Focus … … Provides Provides Confidence Confidence in in 2H 2H Execution Execution and and Ability Ability to to Position Position For For 2013 2013 16 • Resilient Portfolio … Despite Challenging End Market Conditions • Management Discipline …Proactive Actions (~$100M of Restructuring & Realignment ‘08-’12) • Operational Excellence … Driving Productivity Initiatives • Continued Investment Driving Growth in Core Business • (2012E At Mid-Point Guidance) Revenue Revenue Revenue Up ~$510M … +15% Op Income Up ~$165M … ~46% Incremental Margin ~32% Incl. Stand- Alone Costs 12.7% 13.0% Expansion +290 Bps On Comp Basis 2008 2009 2010 2011 2012E 2,849 3,202 3,803 ~3.8B 3,291 2008 2009 2010 10.8% 10.8% 12.6% 12.8% 13.7% 2011 2012E Operating Margin * * Excludes the impact of restructuring and stand alone costs for all periods. See Appendix for Non-GAAP Reconciliations Key Acquisitions … Transitioning Portfolio to Higher Profitability Levels |
Key Takeaways 17 Strong Q2 Operating Performance Executing Long-Term Strategy … MJK Bolt-On Acquisition & New Product Applications Stable Business Performance In Challenging Macro Environment Top-Line Challenges … Driven by Europe Resilient Portfolio & Large Installed Base Dampens Unfavorable Macro Conditions Positioning Cost Structure for Stronger Operating Leverage Customer Excellence & Operational Discipline Taking Actions and Investing for Future Growth Strong Financial Position & Strong Cash Flow Generation Flexibility to Execute Long-Term Strategy |
Appendix |
2012 EPS Outlook 19 Mid Point 7% Earnings Growth On Normalized Basis Illustration of Mid Point Guidance * See Appendix for Non-GAAP Reconciliations Includes unfavorable tax rate change of 1% Operational Performance: + Core Operations $0.15 + Acquisitions (YSI & MJK) $0.08 – Operating Tax Rate ($0.02) – FX Translation ($0.10) Adjusted FY'11 EPS* Incremental Interest Expense Incremental Stand- Alone Costs Normalized FY'11 EPS* Operational Performance Adjusted FY'12 EPS* $1.93 $1.66 $1.77 $0.16 $0.11 $0.11 7% Normalized 7% Normalized EPS Growth EPS Growth |
Quarterly Financial Performance 20 ($M, Except EPS) Q1’10 Q2’10 Q3’10 Q4’10 FY’10 Q1’11 Q2’11 Q3’11 Q4’11 FY’11 Q1’12 Q2’12 Revenue 686 775 806 935 3,202 890 971 939 1,003 3,803 925 966 COGS 431 484 497 576 1,988 553 592 574 623 2,342 562 583 Gross Profit 255 291 309 359 1,214 337 379 365 380 1,461 363 383 SG&A 164 170 183 220 737 210 219 215 233 877 231 220 R&D 18 17 18 21 74 24 26 23 27 100 28 28 Separation Costs - - - - - 3 18 46 20 87 5 6 Restructuring & Asset Impairment Charges, net 4 3 1 7 15 - - 2 - 2 - - Op Income 69 101 107 111 388 100 116 79 100 395 99 129 Interest Expense - - - - - - 1 1 15 17 14 13 Other Non-Op -2 -1 3 - - 1 - 4 - 5 (1) (1) Income before Tax 67 100 110 111 388 101 115 82 85 383 84 115 Tax 11 15 19 14 59 23 43 5 33 104 21 26 Net Income 56 85 91 97 329 78 72 77 52 279 63 89 EPS – Diluted * $0.30 $0.46 $0.49 $0.53 $1.78 $0.42 $0.39 $0.42 $0.28 $1.50 $0.34 $0.48 * 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, periods presented prior to the spin-off. we had 184.6 million shares of common stock outstanding and this share amount is being utilized to calculate earnings per share for all |
Non-GAAP Measures 21 Xylem Inc. Non- GAAP Measures Management views 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 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 revenue, operating income, net income, earnings per share (basic and diluted) or net cash from 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: defined as revenue and orders, respectively, 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. “Organic revenue" and "Organic orders” “Constant currency” defined as financial results adjusted for currency by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the U.S. dollar. “EBITDA” “Operating Income * ”, "Adjusted Operating Income" and “Adjusted EPS” defined as operating income and earnings per share, adjusted to exclude restructuring and “Normalized EPS” defined as adjusted earnings per share, as well as adjustments 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 as well as adjustments for other significant “Adjusted EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. reflects the adjustment to EBITDA to exclude for one-time separation costs associated with the Xylem spin-off from ITT Corporation. 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. realignment and one- time separation costs associated with the Xylem spin- off from ITT Corporation and tax- related special items. |
Non-GAAP Reconciliation: Organic & Constant Currency Revenue Growth 22 Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (B + D) / A Change % Change Change % Change Revenue Revenue 2012 v. 2011 2012 v. 2011 FX Contribution Eliminations Adj. 2012 v. 2011 Adj. 2012 v. 2011 2012 2011 Six Months Ended June 30 Xylem Inc. 1,891 1,861 30 1.6% (66) 63 - 27 1.5% 5.0% Water infrastructure 1,193 1,153 40 3.5% (66) 47 - 21 1.8% 7.5% Applied Water 728 740 (12) -1.6% - 18 (1) 5 0.7% 0.8% Quarter Ended June 30 Xylem Inc. 966 971 (5) -0.5% (32) 49 - 12 1.2% 4.5% Water infrastructure 609 602 7 1.2% (32) 37 (1) 11 1.8% 7.3% Applied Water 373 385 (12) -3.1% - 13 (1) - 0.0% 0.3% Quarter Ended March 31 Xylem Inc. 925 890 35 3.9% (34) 14 - 15 1.7% 5.5% Water infrastructure 584 551 33 6.0% (34) 10 1 10 1.8% 7.8% Applied Water 355 355 - 0.0% - 5 - 5 1.4% 1.4% Note: Due to rounding the sum of segment amounts may not agree to Xylem totals. Acquisitions / Divestitures Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic & Constant Currency Revenue ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) |
Non-GAAP Reconciliation: Organic & Constant Currency Order Growth 23 Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (B + D) / A Change % Change Change % Change Orders Orders 2012 v. 2011 2012 v. 2011 FX Contribution Eliminations Adj. 2012 v. 2011 Adj. 2012 v. 2011 2012 2011 Six Months Ended June 30 Xylem Inc. 1,974 1,976 (2) -0.1% (67) 69 - - 0.0% 3.4% Water infrastructure 1,255 1,244 11 0.9% (67) 53 - (3) -0.2% 5.1% Applied Water 752 764 (12) -1.6% - 18 (3) 3 0.4% 0.8% Quarter Ended June 30 Xylem Inc. 970 998 (28) -2.8% (30) 51 - (7) -0.7% 2.3% Water infrastructure 617 632 (15) -2.4% (30) 40 - (5) -0.8% 4.0% Applied Water 370 383 (13) -3.4% - 13 (2) (2) -0.5% 0.0% Quarter Ended March 31 Xylem Inc. 1,004 978 26 2.7% (37) 18 - 7 0.7% 4.5% Water infrastructure 638 612 26 4.2% (37) 13 - 2 0.3% 6.4% Applied Water 382 381 1 0.3% - 5 (1) 5 1.3% 1.6% Note: Due to rounding the sum of segment amounts may not agree to Xylem totals. Acquisitions / Divestitures Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic & Constant Currency Order Growth ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) |
Non-GAAP Reconciliation: Adjusted Diluted EPS 24 Q1 2012 Q2 2012 YTD 2012 Net Income 63 89 152 Separation costs, net of tax 4 4 8 Adjusted Net Income before Special Tax Items 67 93 160 Special Tax Items - (1) (1) Adjusted Net Income 67 92 159 Diluted Earnings per Share $0.34 $0.48 $0.82 Separation costs per Share $0.02 $0.02 $0.04 Adjusted diluted EPS before Special Tax Items $0.36 $0.50 $0.86 Special Tax Items per Share $0.00 ($0.01) ($0.01) Adjusted diluted EPS $0.36 $0.49 $0.85 Q1 2011 Q2 2011 YTD 2011 Net Income 78 72 150 Separation costs, net of tax 2 27 29 Adjusted Net Income before Special Tax Items 80 99 179 Special Tax Items - 4 4 Adjusted Net Income 80 103 183 Diluted Earnings per Share $0.42 $0.39 $0.82 Separation costs per Share $0.01 $0.15 $0.16 Adjusted diluted EPS before Special Tax Items $0.43 $0.54 $0.97 Special Tax Items per Share $0.00 $0.02 $0.02 Adjusted diluted EPS $0.43 $0.56 $0.99 Adjusted Diluted EPS For The Three and Six Months Ended June 30, 2012 & 2011 ($ Millions, except per share amounts) Xylem Inc. Non-GAAP Reconciliation |
Non-GAAP Reconciliation: Normalized and Adjusted EPS 25 Q2 2011 Q2 2012 As Reported Adjustments Adjusted Adjustments Normalized As Reported Adjustments Adjusted Total Revenue 971 971 971 966 966 Operating Income 116 18 a 134 (8) c 126 129 6 a 135 Operating Margin 11.9% 13.8% 13.0% 13.4% 14.0% Interest Expense (1) (1) (13) d (14) (13) (13) Other Non-Operating Income (Expense) - - - (1) (1) Income before Taxes 115 18 133 (21) 112 115 6 121 Provision for Income Taxes (43) 13 b (30) 5 e (25) (26) (3) b (29) Net Income 72 31 103 (16) 87 89 3 92 Diluted Shares 184.6 184.6 186.2 186.2 Diluted EPS 0.39 $ 0.17 $ 0.56 $ (0.09) $ 0.47 $ 0.48 $ 0.01 $ 0.49 $ a One time separation costs b Tax impact of one time separation costs and special tax items c Incremental stand alone costs incurred in 2012 d Incremental interest expense on long-term debt entered into in conjunction with the spin. e Tax impact of incremental interest expense and stand alone costs incurred in 2012 Xylem Inc. Non-GAAP Reconciliation Normalized and Adjusted Diluted EPS ($ Millions, except per share amounts) |
26 Non-GAAP Reconciliation: Segment Operating Income Adjusted Segment Operating Income Q1 Q2 YTD '12 '11 '12 '11 '12 '11 Total Revenue • Water Infrastructue 584 551 609 602 1,193 1,153 • Applied Water 355 355 373 385 728 740 Operating Income • Water Infrastructue 75 64 93 94 167 158 • Applied Water 40 46 52 50 92 96 Separation Costs • Water Infrastructue 2 - 1 2 3 2 • Applied Water 1 - - - 1 - Adjusted Operating Income* • Water Infrastructue 77 64 94 96 170 160 • Applied Water 41 46 52 50 93 96 Operating Margin • Water Infrastructue 12.8% 11.6% 15.2% 15.6% 14.0% 13.7% • Applied Water 11.3% 13.0% 13.9% 13.0% 12.6% 13.0% Adjusted Operating Margin* • Water Infrastructue 13.2% 11.6% 15.4% 15.9% 14.2% 13.9% • Applied Water 11.5% 13.0% 13.9% 13.0% 12.8% 13.0% *Adjusted Operating Income excludes non-recurring separation costs Xylem Inc. Non-GAAP Reconciliation Segment Operating Income ($ Millions) |
Non-GAAP Reconciliation: Free Cash Flow 27 2012 2011 Net Cash - Operating Activities 125 161 Capital Expenditures (57) (53) Free Cash Flow, including separation costs 68 108 Separation Costs (Cash Paid incl. Capex) 18 26 Free Cash Flow, excluding separation costs 86 134 Net Income 152 150 Separation Costs, net of tax (incl. tax friction) 8 29 Adjusted Net Income 160 179 Free Cash Flow Conversion 54% 75% Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow For The Six Months Ended June 30, 2012 & 2011 ($ Millions) Six Months Ended |
28 Non-GAAP Reconciliation: 2012 Xylem EBITDA & Adj. EBITDA Q1 Q2 YTD Income Before Taxes 84 115 199 Interest, net 13 13 26 Depreciation 23 21 44 Amortization 11 12 23 Stock Compensation 5 5 10 EBITDA 136 166 302 Separation Costs 5 6 11 Adjusted EBITDA 141 172 313 Revenue 925 966 1,891 Adjusted EBITDA Margin 15.2% 17.8% 16.6% Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Total Xylem ($ Millions) 2012 |
29 Non-GAAP Reconciliation: 2011 Xylem EBITDA & Adj. EBITDA Q1 Q2 YTD Income Before Taxes 101 115 216 Interest, net - - - Depreciation 22 25 47 Amortization 11 10 21 Stock Compensation 3 2 5 EBITDA 137 152 289 Separation Costs 3 18 21 Adjusted EBITDA 140 170 310 Revenue 890 971 1,861 Adjusted EBITDA Margin 15.7% 17.5% 16.7% 2011 Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Total Xylem ($ Millions) |
30 Non-GAAP Reconciliation: 2012 Water Infrastructure EBITDA & Adj. EBITDA Q1 Q2 YTD Income Before Taxes 75 93 168 Interest, net - - - Depreciation 16 15 31 Amortization 10 9 19 Stock Compensation 1 1 2 EBITDA 102 118 220 Separation Costs 2 1 3 Adjusted EBITDA 104 119 223 Revenue 584 609 1,193 Adjusted EBITDA Margin 17.8% 19.5% 18.7% Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Water Infrastructure ($ Millions) 2012 |
31 Non-GAAP Reconciliation: 2011 Water Infrastructure EBITDA & Adj. EBITDA Q1 Q2 YTD Income Before Taxes 65 93 158 Interest, net - - - Depreciation 16 19 35 Amortization 9 9 18 Stock Compensation - - - EBITDA 90 121 211 Separation Costs - 2 2 Adjusted EBITDA 90 123 213 Revenue 551 602 1,153 Adjusted EBITDA Margin 16.3% 20.4% 18.5% 2011 Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Water Infrastructure ($ Millions) |
32 Non-GAAP Reconciliation: 2012 Applied Water EBITDA & Adj. EBITDA Q1 Q2 YTD Income Before Taxes 40 52 92 Interest, net - - - Depreciation 6 6 12 Amortization 1 1 2 Stock Compensation 1 - 1 EBITDA 48 59 107 Separation Costs 1 - 1 Adjusted EBITDA 49 59 108 Revenue 355 373 728 Adjusted EBITDA Margin 13.8% 15.8% 14.8% Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Applied Water ($ Millions) 2012 |
33 Non-GAAP Reconciliation: 2011 Applied Water EBITDA & Adj. EBITDA Q1 Q2 YTD Income Before Taxes 46 51 97 Interest, net - - - Depreciation 6 6 12 Amortization 2 1 3 Stock Compensation - - - EBITDA 54 58 112 Separation Costs - - - Adjusted EBITDA 54 58 112 Revenue 355 385 740 Adjusted EBITDA Margin 15.2% 15.1% 15.1% 2011 Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Applied Water ($ Millions) |
Non-GAAP Reconciliation: Guidance 34 Illustration of Mid Point Guidance 2012 Guidance FY '11 FY '12 As Reported Adjustments Adjusted Adjustments Normalized As Projected Adjustments Adjusted Total Revenue 3,803 3,803 3,803 3,800 3,800 Segment Operating Income 503 29 a 532 (10) d 522 524 25 h,i 549 Segment Operating Margin 13.2% 14.0% 13.7% 13.8% 14.4% Corporate Expense 108 (58) b 50 18 e 68 66 (11) h 55 Operating Income 395 87 482 (28) 454 458 36 494 Operating Margin 10.4% 12.7% 11.9% 12.1% 13.0% Interest Expense (17) (17) (39) f (56) (54) (54) Other Non-Operating Income (Expense) 5 5 5 (2) (2) Income before Taxes 383 87 470 (67) 403 402 36 438 Provision for Income Taxes (104) (8) c (112) 16 g (96) (99) (10) j (109) Net Income 279 79 358 (51) 307 303 26 329 Diluted Shares 185.3 185.3 186.3 186.3 Diluted EPS 1.50 $ 0.43 $ 1.93 $ (0.27) $ 1.66 1.63 0.14 1.77 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 ($10M) e Incremental stand alone costs to be incurred in 2012 at the corporate level ($18M) 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 $7M and $11M to be incurred at the segments and headquarters, respectively. i Restructuring & realignment costs of $18M to be incurred at the segments. j Tax impact of one time separation, restructuring & realignment costs expected to be incurred in 2012 and tax special items realized through Q2 2012. Xylem Inc. Non-GAAP Reconciliation Guidance ($ Millions, except per share amounts) |
Non-GAAP Reconciliation: Adj. Operating Income & Margin 35 Mid Point Guidance 2008 2009 2010 2011 2012E Revenue 3,291 2,849 3,202 3,803 3,800 Operating Income 315 276 388 395 458 Operating Margin 9.6% 9.7% 12.1% 10.4% 12.1% Restructuring & Realignment 41 31 15 - 18 Separation Costs - - - 87 18 Adjusted Operating Income 356 307 403 482 494 Adjusted Operating Margin 10.8% 10.8% 12.6% 12.7% 13.0% Standalone Costs - - - 5 28 Adj. Operating Income, excl. Standalone Costs 356 307 403 487 522 Adjusted Operating Margin, excl. Standalone Costs 10.8% 10.8% 12.6% 12.8% 13.7% Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) |
36 Phil De Sousa, Investor Relations Officer (914) 323-5930 Janice Tedesco, Investor Relations Coordinator (914) 323-5931 http://investors.xyleminc.com NYSE: XYL |