 Q3 2012 Earnings Release November 1, 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 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. |
 Q3’12 Xylem Results 3 Solid Operating Performance, Despite Continued Market Challenges Solid Operating Performance, Despite Continued Market Challenges * See Appendix for Non-GAAP Reconciliations Financial Financial Performance Summary Performance Summary Orders Revenue Gross Margin Operating Margin * EPS * $882M $931M 40.2% 12.9% $0.44 Book to Bill 0.95 +3% (Constant Currency Basis)* +130 bps +50 bps Adjusted for Stand-Alone Costs Solid Performance from Core Operations & YSI |
 Business Update 4 Advancing Our Strategic Position • Executing Acquisition Strategy MJK Integration into Analytics Platform Well Underway Heartland Pump Acquisition … Increases Geographic Reach of Dewatering Platform • Selected to Dow Jones Sustainability Global and North America Indices Deploying Innovative New Product Applications and Services • U.S. Launch of the Sanitaire Bioloop Oxidation Ditch • Launched Energy Efficient Lowara Ecocirc – Meeting New European Regulations • Recognized by The Coca-Cola Company as Supplier of the Year Continued Strong Execution • Q3’12 Emerging Market Growth up 9% (Constant Currency Basis) • Gross Margin >40% … Record Performance • Executing on Restructuring & Realignment Actions Advancing Advancing Strategic Strategic Position Position & & Increasing Increasing Profitability Profitability |
 Acquisition Overview 5 Overview - Purchase Price $29M - ‘11 Rev $33M - 100 Employees - 4 locations - Industrial & Muni; • Mining • Energy • Disaster Recovery - Expands Geographic Reach - Increases Rental Opportunities - Leverage Xylem Portfolio - Cost Synergies - Capex Synergies Sales ~60% Rental ~40% Revenue Mix Strategic Rationale Heartland Pump Rental & Sales, Inc. Expands Xylem’s Dewatering Platform in Attractive U.S. Rental Markets Expands Xylem’s Dewatering Platform in Attractive U.S. Rental Markets |
 YTD Xylem Results 6 On Track to Deliver in 2012 … On Track to Deliver in 2012 … Positioned for Long-Term Growth Positioned for Long-Term Growth * See Appendix for Non-GAAP Reconciliations Orders Revenue Gross Margin Operating Margin * EPS * Free Cash Flow * $2.9B $2.8B 39.7% 12.7% $1.29 $171M Book to Bill 1.01 +4% (Constant Currency Basis)* +110 bps Includes Impact from Stand-Alone Costs -90bps Solid Performance from Core Operations & YSI 73% Conversion ... Typical Seasonality Financial Performance Summary Financial Performance Summary |
 Full Year Outlook 7 *See appendix for non-GAAP reconciliations 4th Quarter Execution Sets up 2013 • Executing on Restructuring & Realignment Actions • Accelerating Additional Actions in 2012 • Continued Disciplined Capital Deployment • Successful Integration of MJK & Heartland Acquisitions 2012 Guidance • Full Year Revenue ~$3.8B; Organic Growth ~1% • Delivering Solid Operating Margin Expansion • EPS Mid Point of $1.76* … Includes Heartland Pump Acquisition Impact ($0.01) • Solid Free Cash Flow Conversion* • Executing ~$20M Total Restructuring & Realignment Actions Solid Execution in 2012 … Solid Execution in 2012 … Positioning for Long-Term Growth Positioning for Long-Term Growth |
 Q3’12 Xylem Performance 8 Op Margins +50 bps … Op Margins +50 bps … Cost Actions/Price Enable Investments for Growth Cost Actions/Price Enable Investments for Growth *See appendix for non-GAAP reconciliations (Dollars, In Millions) (Dollars, In Millions) Revenue Revenue Operating Income * Operating Income * Organic Acquisition Constant Currency FX Total +1% +2% +3% - 4% - 1% By End Market By Geography Industrial + Public Utility Commercial Residential + Agriculture + Europe U.S. + Emerging Markets Cost Reductions +3.2% Price +1.3% Vol/Mix/Invest - 0.5% 120 125 - 4% Q3’11 Q3’12 Q3’11 Q3’12 13.3% 4.0% 0.6% 2.9% 13.8% 0.9% 12.9% Q3’11 Op Margin* Operations FX Material, Labor, & OH Inflation Q3’12 Op Margin Before Stand- Alone Costs* Stand- Alone Costs Q3’12 Op Margin* Q3 Growth Q3 Growth Organic Performance Organic Performance 931 939 - 1% |
 Q3’12 Xylem Performance 9 EPS Growth Negatively Impacted by FX and Taxes EPS Growth Negatively Impacted by FX and Taxes Interest ($0.06) Stand-Alone ($0.03) Separation Costs $0.13 Special Tax ($0.01) * See Appendix for Non-GAAP Reconciliations Separation Costs ($0.02) Restruct. & Realign. Costs ($0.02) Special Tax ($0.02) -2% Normalized -2% Normalized 2% Normalized EPS Performance EPS Performance Operational Performance: Core Operations Acquisitions Operating Tax Rate FX Translation $0.01 $0.01 ($0.01) ($0.02) $0.42 $0.03 $0.45 $0.01 $0.44 $0.06 $0.38 Q3’11 GAAP EPS Adjustments Normalized Q3’11 EPS Operational Performance Adjusted Q3’12 EPS Q3’12 GAAP EPS Adjustments Q3’12 EPS * |
 Q3’12 Water Infrastructure Performance 10 Revenue Up 7%* … Revenue Up 7%* … Operating Margin Impacted by Unfavorable Mix & FX Operating Margin Impacted by Unfavorable Mix & FX * See appendix for non-GAAP reconciliations (Constant Currency) • + Public Utility … US & Europe Up, EM Strong Industrial … US Drought Impact on Dewatering • + Global Public Utility Strength Project Orders Continue to Delay • + Strength in US & AP … Europe Flat +2% -6% Organic Acquisition Constant Currency +3% +4% Operating Income * Operating Income * Cost Reductions +2.9% Price +0.7% Vol/Mix/Invest - 0.4% Incremental Margin ~23% Incremental Margin ~23% (Ex. FX & Stand Alone Costs) (Ex. FX & Stand Alone Costs) Q3 Growth Q3 Growth +2% Revenue Revenue +7% -5% FX Total Transport +1% Treatment +11% Test +44% Q3'11 Op Margin* Operations FX Material, Labor, & OH Inflation Q3'12 Op Margin Before Stand-Alone Stand- Alone Q3'12 Op Margin* |
 Q3’12 Applied Water Performance 11 Price & Cost Reduction Initiatives Offset Challenging Market Conditions * See appendix for non-GAAP reconciliations Revenue Operating Income * (Dollars, In Millions) (Dollars, In Millions) -4% (Constant Currency) • Building Services -6% – Commercial … Lag in Major Projects, Tough PY Comp – Residential … Tough PY Comp (U.S. Up Double Digit) • Industrial Water +1% + Favorable Across Most Regions – U.S. & Europe showing signs of weakness • Irrigation +9% + Double Digit U.S. Growth, Europe Improving Preserving Profitability While Investing for Growth Organic -2% Acquisition -% Constant Currency 2% FX -3% Total -5% Q3'11 Op Margin Operations FX Material, Labor, & OH Inflation Q3'12 Op Margin Before Stand-Alone Stand- Alone Q3'12 Op Margin * 12.5% 13.2% 12.6% 3.1% 0.6% 3.4% 0.4% Q3'11 Q3'12 368 350 Q3'11 Q3'12 46 44 Cost Reductions +3.7% Price +2.3% Vol/Mix/Invest - 2.6% -5% Q3 Growth |
 Xylem Financial Position 12 FY Cash Flow On Track … FY Cash Flow On Track … Strong Balance Sheet Provides Flexibility Strong Balance Sheet Provides Flexibility • Free Cash Flow $171M • Higher Cash Taxes • Full Year of Interest • Stand Alone Costs • Capex > 1 Reinvestment Ratio • Strong Cash Position • No Significant Debt Maturities Until 2016 • 28% Net Debt to Net Capital • 1.2x Net Debt/Adj. TTM EBITDA • $600M Revolving Credit Facility - Unutilized • Access to Commercial Paper - Unutilized FCF% 84% 73% W/C%** 23.7% 24.8% (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 September 30, 2012 Cash Debt Net Debt Stockholders’ Equity Net Capital Net Debt to Net Capital 424 1,212 788 2,054 2,842 28% 907 952 171 235 Q3’11 YTD Q3’12 YTD Q3’11 Q3’12 - |
 2012 Guidance |
 2012 EPS Guidance Walk 14 Mid Point 6% Earnings Growth Versus Prior Year On Normalized Basis Illustration of Mid Point Guidance * See Appendix for Non-GAAP Reconciliations Offsetting Volume Reduction Operational Performance: FX Translation Vol. Net of Cost Initiatives $0.02 ($0.02) Heartland Pump Heartland Pump Acquisition Acquisition $(0.01) in 4Q $(0.01) in 4Q $1.77 $1.77 $0.01 $1.76 Previous Guidance Guidance Before Heartlnd Acquisition Heartland Acquisition FY 2012 Guidance |
 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 Constant Currency Organic Acquisition ~$3.8B ~$2.4B ~$1.4B 14.1% - 14.3% 12.7% - 12.9% $1.72 - $1.79 95% ~186.2M ~$28M ~$25% ~$20M ~$20M +10 to +30 bps +0 to +20 bps $1.76 Mid Point incl. Heartland Pump Acq. impact - $0.01 Excluding one-time separation costs Included in EPS Guidance; In Line with Expectations Excludes Special Tax Items In Line with Expectations Additional Actions Identified in 3Q’12 ~$11MTotal Run Rate Savings Beginning 2013 ~3% ~1% 2% ~5% ~1% 4% ~1% ~1% 0% 2012 Full Year 2012 Full Year Financial Outlook Financial Outlook Growth Growth 2012E vs. 2011 2012E vs. 2011 |
 Key Takeaways 16 Positioning for Long-Term Growth • Investing in Strategic Growth Platforms • Executing M&A Strategy • Advancing Our Geographic Position • Launching New Products & Investing in Future Growth • Customer Excellence & Operational Discipline Restructuring & Realignment Actions Underway • Executing Actions to Preserve Investments • Defending and Improving Our Competitive Advantage • Providing for Stronger Operating Leverage Strong Financial Position • Flexibility to Execute Long-Term Strategy |
 Appendix |
 Quarterly Financial Performance 18 ($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 Q3’12 Revenue 686 775 806 935 3,202 890 971 939 1,003 3,803 925 966 931 COGS 431 484 497 576 1,988 553 592 574 623 2,342 562 583 557 Gross Profit 255 291 309 359 1,214 337 379 365 380 1,461 363 383 374 SG&A 164 170 183 220 737 210 219 215 233 877 231 220 231 R&D 18 17 18 21 74 24 26 23 27 100 28 28 24 Separation Costs - - - - - 3 18 46 20 87 5 6 4 Restructuring & Asset Impairment Charges, net 4 3 1 7 15 - - 2 - 2 - - 4 Op Income 69 101 107 111 388 100 116 79 100 395 99 129 111 Interest Expense - - - - - - 1 1 15 17 14 13 14 Other Non-Op -2 -1 3 - - 1 - 4 - 5 (1) (1) 3 Income before Tax 67 100 110 111 388 101 115 82 85 383 84 115 100 Tax 11 15 19 14 59 23 43 5 33 104 21 26 28 Net Income 56 85 91 97 329 78 72 77 52 279 63 89 72 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 $0.38 * 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 19 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 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: “Organic revenue" and "Organic orders” 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. “Constant currency” defined as financial results adjusted for currency translation impacts 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” EBITDA to exclude for non-recurring separation costs associated with the Xylem spin-off from ITT Corporation as well as non-recurring restructuring and realignment costs. "Adjusted Operating Income", "Adjusted Segment Operating Income", and “Adjusted EPS” defined as operating income and earnings per share, adjusted to exclude non-recurring separation costs associated with the Xylem spin-off from ITT Corporation, non-recurring restructuring and realignment costs and tax-related special items. “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 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. performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. These metrics, however, are not defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA” reflects the adjustment to |
 Non-GAAP Reconciliation: Organic & Constant Currency Revenue Growth 20 |
 Non-GAAP Reconciliation: Organic & Constant Currency Order Growth 21 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 Nine Months Ended September 30 Xylem Inc. 2,856 2,942 (86) -2.9% (88) 108 - (66) -2.2% 0.7% Water infrastructure 1,819 1,865 (46) -2.5% (88) 82 - (52) -2.8% 1.9% Applied Water 1,086 1,122 (36) -3.2% - 30 (8) (14) -1.2% -0.5% Quarter Ended September 30, 2012 Xylem Inc. 882 966 (84) -8.7% (21) 39 - (66) -6.8% -4.7% Water infrastructure 564 621 (57) -9.2% (21) 29 - (49) -7.9% -4.5% Applied Water 334 358 (24) -6.7% - 12 (5) (17) -4.7% -3.4% 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 22 Q1 2012 Q2 2012 Q3 2012 YTD 2012 Net Income 63 89 72 224 Separation Costs, Net of Tax 4 4 3 11 Restructuring & Realignment, Net of Tax - - 4 4 Adjusted Net Income before Special Tax Items 67 93 79 239 Special Tax Items - (1) 4 3 Adjusted Net Income 67 92 83 242 Diluted Earnings per Share $0.34 $0.48 $0.38 $1.20 Separation Costs per Share $0.02 $0.02 $0.02 $0.06 Restructuring & Realignment Costs per Share $0.00 $0.00 $0.02 $0.02 Adjusted Diluted EPS before Special Tax Items $0.36 $0.50 $0.42 $1.28 Special Tax Items per Share $0.00 ($0.01) $0.02 $0.01 Adjusted Diluted EPS $0.36 $0.49 $0.44 $1.29 Q1 2011 Q2 2011 Q3 2011 YTD 2011 Net Income 78 72 77 227 Separation Costs, Net of Tax 2 27 25 54 Adjusted Net Income before Special Tax Items 80 99 102 281 Special Tax Items - 4 (1) 3 Adjusted Net Income 80 103 101 284 Diluted Earnings per Share $0.42 $0.39 $0.42 $1.23 Separation Costs per Share $0.01 $0.15 $0.13 $0.29 Adjusted Diluted EPS before Special Tax Items $0.43 $0.54 $0.55 $1.52 Special Tax Items per Share $0.00 $0.02 ($0.01) $0.01 Adjusted Diluted EPS $0.43 $0.56 $0.54 $1.53 Adjusted Diluted EPS For The Three and Nine Months Ended September 30, 2012 & 2011 ($ Millions, except per share amounts) Xylem Inc. Non-GAAP Reconciliation |
 Non-GAAP Reconciliation: Normalized and Adjusted EPS 23 Q3 2011 Q3 2012 As Reported Adjustments Adjusted Adjustments Normalized As Reported Adjustments Adjusted Total Revenue 939 939 939 931 931 Operating Income 79 46 a 125 (8) c 117 111 9 a 120 Operating Margin 8.4% 13.3% 12.5% 11.9% 12.9% Interest Expense (1) (1) (13) d (14) (14) (14) Other Non-Operating Income (Expense) 4 4 4 3 3 Income before Taxes 82 46 128 (21) 107 100 9 109 Provision for Income Taxes (5) (22) b (27) 4 e (23) (28) 2 b (26) Net Income 77 24 101 (17) 84 72 11 83 Diluted Shares 184.6 184.6 186.3 186.3 Diluted EPS 0.42 $ 0.12 $ 0.54 $ (0.09) $ 0.45 $ 0.38 $ 0.06 $ 0.44 $ a One time separation, restructuring & realignment 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) |
 24 Non-GAAP Reconciliation: Operating Income Q3 YTD '12 '11 '12 '11 Total Revenue • Total Xylem 931 939 2,822 2,800 • Water Infrastructure 595 584 1,788 1,737 • Applied Water 350 368 1,078 1,108 Operating Income • Total Xylem 111 79 339 296 • Water Infrastructure 85 87 253 245 • Applied Water 43 37 135 133 Operating Margin • Total Xylem 11.9% 8.4% 12.0% 10.6% • Water Infrastructure 14.3% 14.9% 14.1% 14.1% • Applied Water 12.3% 10.0% 12.5% 12.0% Separation Costs • Total Xylem 4 46 15 67 • Water Infrastructure - 8 3 10 • Applied Water 1 9 2 9 Restructuring & Realignment Costs • Total Xylem 5 - 5 - • Water Infrastructure 4 - 4 - • Applied Water - - - - Adjusted Operating Income* • Total Xylem 120 125 359 363 • Water Infrastructure 89 95 260 255 • Applied Water 44 46 137 142 Adjusted Operating Margin* • Total Xylem 12.9% 13.3% 12.7% 13.0% • Water Infrastructure 15.0% 16.3% 14.5% 14.7% • Applied Water 12.6% 12.5% 12.7% 12.8% *Adjusted Operating Income excludes non-recurring separation, restructuring & realignment costs Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) |
  Non-GAAP Reconciliation: Free Cash Flow 25 2012 2011 Net Cash - Operating Activities 230 252 Capital Expenditures (81) (79) Free Cash Flow, including separation costs 149 173 Cash Paid for Separation Costs (incl. Capex) 22 62 Free Cash Flow, excluding separation costs 171 235 Net Income 224 227 Separation Costs, net of tax (incl. tax friction) 11 54 Adjusted Net Income 235 281 Free Cash Flow Conversion 73% 84% Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow For The Nine Months Ended September 30, 2012 & 2011 ($ Millions) Nine Months Ended |
  26 Non-GAAP Reconciliation: 2012 Xylem EBITDA & Adj. EBITDA Q1 Q2 Q3 YTD Income Before Taxes 84 115 100 299 Interest, net 13 13 12 38 Depreciation 23 21 24 68 Amortization 11 12 12 35 Stock Compensation 5 5 6 16 EBITDA 136 166 154 456 Separation Costs 5 6 4 15 Restructuring & Realignment Costs - - 5 5 Adjusted EBITDA 141 172 163 476 Revenue 925 966 931 2,822 Adjusted EBITDA Margin 15.2% 17.8% 17.5% 16.9% Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Total Xylem ($ Millions) 2012 |
  27 Non-GAAP Reconciliation: 2011 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 EBITDA and Adjusted EBITDA by Quarter ($ Millions) 2011 Total Xylem |
  28 Non-GAAP Reconciliation: 2012 Water Infrastructure EBITDA & Adj. EBITDA Q1 Q2 Q3 YTD Income Before Taxes 75 93 86 254 Interest, net - - (1) (1) Depreciation 16 15 17 48 Amortization 10 9 10 29 Stock Compensation 1 1 3 5 EBITDA 102 118 115 335 Separation Costs 2 1 - 3 Restructuring & Realignment Costs - - 4 4 Adjusted EBITDA 104 119 119 342 Revenue 584 609 595 1,788 Adjusted EBITDA Margin 17.8% 19.5% 20.0% 19.1% Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Water Infrastructure ($ Millions) 2012 |
 29 Non-GAAP Reconciliation: 2011 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 EBITDA and Adjusted EBITDA by Quarter Water Infrastructure ($ Millions) 2011 |
 30 Non-GAAP Reconciliation: 2012 Applied Water EBITDA & Adj. EBITDA Q1 Q2 Q3 YTD Income Before Taxes 40 52 43 135 Interest, net - - - - Depreciation 6 6 6 18 Amortization 1 1 1 3 Stock Compensation 1 - 2 3 EBITDA 48 59 52 159 Separation Costs 1 - 1 2 Restructuring & Realignment Costs - - - - Adjusted EBITDA 49 59 53 161 Revenue 355 373 350 1,078 Adjusted EBITDA Margin 13.8% 15.8% 15.1% 14.9% Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Applied Water ($ Millions) 2012 |
  31 Non-GAAP Reconciliation: 2011 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 EBITDA and Adjusted EBITDA by Quarter Applied Water ($ Millions) 2011 |
 Non-GAAP Reconciliation: Guidance 32 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 522 516 25 h,i 541 Segment Operating Margin 13.2% 14.0% 13.7% 13.6% 14.2% Corporate Expense 108 (58) b 50 18 e 68 68 (15) h 53 Operating Income 395 87 482 (28) 454 448 40 488 Operating Margin 10.4% 12.7% 11.9% 11.8% 12.8% Interest Expense (17) (17) (39) f (56) (54) (54) Other Non-Operating Income (Expense) 5 5 5 (1) (1) Income before Taxes 383 87 470 (67) 403 393 40 433 Provision for Income Taxes (104) (8) c (112) 16 g (96) (99) (7) j (106) Net Income 279 79 358 (51) 307 294 33 327 Diluted Shares 185.3 185.3 186.2 186.2 Diluted EPS 1.50 $ 0.43 $ 1.93 $ (0.27) $ 1.66 1.58 0.18 1.76 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 $5M and $15M to be incurred at the segments and headquarters, respectively. i Restructuring & realignment costs of $20M to be incurred at the segments. j Tax impact of one time separation, restructuring & realignment costs expected to be incurred in 2012 and tax special items realized through Q3 2012. |
 Non-GAAP Reconciliation: Adj. Operating Income & Margin 33 Mid Point Guidance 2008 2009 2010 2011 2012E Revenue 3,291 2,849 3,202 3,803 3,800 Operating Income 315 276 388 395 448 Operating Margin 9.6% 9.7% 12.1% 10.4% 11.8% Restructuring & Realignment 41 31 15 - 20 Separation Costs - - - 87 20 Adjusted Operating Income 356 307 403 482 488 Adjusted Operating Margin 10.8% 10.8% 12.6% 12.7% 12.8% Standalone Costs - - - 5 28 Adj. Operating Income, excl. Standalone Costs 356 307 403 487 516 Adjusted Operating Margin, excl. Standalone Costs 10.8% 10.8% 12.6% 12.8% 13.6% Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) |
 34 Phil De Sousa, Investor Relations Officer (914) 323-5930 Janice Tedesco, Investor Relations Coordinator (914) 323-5931 NYSE: XYL http://investors.xyleminc.com |