![]() XYLEM INC. INVESTOR & ANALYST DAY MARCH 7, 2013 Exhibit 99.2 |
![]() AGENDA 2 * For attendees at NYSE 2013 INVESTOR & ANALYST DAY 9:00 – 9:05 Welcome & Agenda P. De Sousa 9:05 – 9:45 Xylem Current Update & Overview G. McClain 9:45 – 10:05 Market Update & Driving Growth C. Sabol 10:05 – 10:20 Break 10:20 – 10:40 Water Infrastructure: Transport & Treatment M. Kuchenbrod 10:40 – 10:55 Water Infrastructure: Test C. McIntire 10:55 – 11:10 Applied Water Systems K. Napolitano 11:10 – 11:30 Financial Overview M. Speetzen 11:30 – 12:00 Q&A & Closing Remarks G. McClain 12:00 – 1:30 Lunch with Management* |
![]() FORWARD-LOOKING STATEMENTS 3 2013 INVESTOR & ANALYST DAY |
![]() XYLEM CURRENT UPDATE & OVERVIEW |
![]() ![]() ![]() 5 ACQUISITION OVERVIEW MULTITRODE MULTITRODE Overview Strategic Rationale Strategic Rationale 2013 INVESTOR & ANALYST DAY • Purchase Price $26M • ‘12 Revenue $13M • 60 Employees • Serving Municipal & Private Water & Waste Water Authorities • Pump Station Controllers, Web-Based Monitoring Services, SCADA Software, Engineering & Integration Services - Advanced Monitoring & Control Technologies - Scalable Platform - Enables Smart Products & Cloud–Based Service |
![]() 2013 INVESTOR & ANALYST DAY 6 CURRENT UPDATE • Guidance Updated Solely to Reflect the Acquisition of MultiTrode – Purchase Price Accounting & Transaction Costs Drive Margin Dilution of 10 Bps – EPS Dilutive by $0.01 • Actions Underway to Realign European Operations GUIDANCE GUIDANCE UPDATED UPDATED TO TO REFLECT REFLECT MULTITRODE MULTITRODE ACQUISITION ACQUISITION * See Appendix for Non-GAAP Reconciliations 2012 $3.8 B 39.6% 14.3% 12.9% $1.77 Total Revenue: Gross Margin: Segment Margin*: Operating Margin*: Adjusted EPS* 2013E ~$3.9 B ~40% 13.7% - 14.2% 12.2% - 12.7% $1.79 - $1.89 |
![]() 7 WATER IS ONE OF THE MOST COMPLEX, CHALLENGING AND INCREASINGLY VISIBLE ISSUES FACING SOCIETY UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES 2013 INVESTOR & ANALYST DAY |
![]() 8 2013 INVESTOR & ANALYST DAY THIS CHALLENGING CONTEXT SHAPES OUR VISION, INFORMS OUR GOALS AND UNDERPINS OUR STRATEGIES * * * * * * * * |
![]() WE WILL BECOME THE WORLD’S WE WILL BECOME THE WORLD’S TRUSTED LEADER IN SOLVING TRUSTED LEADER IN SOLVING WATER ISSUES WATER ISSUES 9 OUR GOAL 2013 INVESTOR & ANALYST DAY |
![]() OUR STRATEGIC FRAMEWORK 10 2013 INVESTOR & ANALYST DAY |
![]() 11 • Leading Market Positions • Fortress Brands • Diverse Geographic & End Market Exposure • Large Installed Base • Recurring Revenue ~37% • World-Class Distribution $3.8B GLOBAL LEADER IN WATER APPLICATION SOLUTIONS ABILITY TO DELIVER CONSISTENT FINANCIAL PERFORMANCE ABILITY TO DELIVER CONSISTENT FINANCIAL PERFORMANCE 2013 INVESTOR & ANALYST DAY WHAT MAKES XYLEM UNIQUE ? |
![]() EVOLUTION TO A LEADING GLOBAL WATER TECHNOLOGY PROVIDER 12 2013 INVESTOR & ANALYST DAY * * Zenon is a registered trademark of GE |
![]() SPECIALIZED BREADTH IN THE WATER CYCLE 13 13 2013 INVESTOR & ANALYST DAY |
![]() Market Size: $20B 2012 Revenues: $2.4B 2012 Op Margin*: 15.1% • World’s Largest Waste Water Pump & Dewatering Services Provider • Broad Portfolio of Filtration, Biological and Disinfection Technologies • Industry-Leading Water & Environment Analytics Platform APPLIED WATER Market Size: $15B 2012 Revenues: $1.4B 2011 Op Margin*: 12.4% • Leading Global Provider of a Broad Range of Energy-Efficient Solutions with a Large & Diverse Customer Base • U.S. Leader in Building Services Equipment & Solutions • U.S. Leader in Industrial Water Technologies 14 SEGMENT OVERVIEW 64% 64% 36% Segment Split UNIQUE PORTFOLIO PROVIDES FOR UNIQUE PORTFOLIO PROVIDES FOR INNOVATIVE SOLUTIONS INNOVATIVE SOLUTIONS BROAD PRODUCT PORTFOLIO BACKED BROAD PRODUCT PORTFOLIO BACKED BY APPLICATION EXPERTISE BY APPLICATION EXPERTISE 2013 INVESTOR & ANALYST DAY * See Appendix for Non-GAAP Reconciliations WATER INFRASTRUCTURE |
![]() BALANCED PORTFOLIO 15 DIVERSE CUSTOMER BASE SERVING CRITICAL NEEDS GLOBAL MARKET BALANCE BY END MARKET Industrial 43% Public Utility 35% Commercial 11% Residential 8% Agriculture 3% BY APPLICATION Transport 46% Treatment 10% Test 8% Building Svcs 19% Industrial Water 14% Irrigation 3% BY GEOGRAPHY United States 37% Europe 35% Asia Pac 12% Rest of World 16% A Growing Emerging Market Presence … Today ~20% 2013 INVESTOR & ANALYST DAY |
![]() GLOBAL PORTFOLIO 16 GLOBAL SCALE & LOCAL PRESENCE PROVIDE A COMPETITIVE GLOBAL SCALE & LOCAL PRESENCE PROVIDE A COMPETITIVE ADVANTAGE ADVANTAGE 360+ Global Locations More Than 4,500 Sales Representatives Reaching Customers in More Than 150 Countries 2013 INVESTOR & ANALYST DAY |
![]() * See Appendix for Non-GAAP Reconciliations 17 PROVEN TRACK RECORD BALANCED STRATEGY & FOCUSED EXECUTION BALANCED STRATEGY & FOCUSED EXECUTION REVENUE REVENUE OPERATING MARGIN* OPERATING MARGIN* • Revenue Up $500M, +15% • Established Global Platforms in Dewatering & Analytics • Significant Op Margin Improvement; +210 bps • Absorbing Public Company Stand-Alone Costs 2013 INVESTOR & ANALYST DAY |
![]() OUR KEY OBJECTIVES 18 2013 INVESTOR & ANALYST DAY |
![]() DELIVER CUSTOMER VALUE 19 LEVERAGING OUR LARGE INSTALLED BASE LEVERAGING OUR LARGE INSTALLED BASE 2013 INVESTOR & ANALYST DAY |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 20 GROWING AFTERMARKET PARTS & SERVICES INSTALLED BASE DRIVES REPLACEMENT SALES INCREASING PROFITABLE INCREASING PROFITABLE AFTERMARKET OPPORTUNITIES AFTERMARKET OPPORTUNITIES ENHANCE AFTERMARKET CAPABILITIES INTRODUCING XYLEM TOTALCARE ACCELERATING OPPORTUNITIES THROUGH ACQUISITIONS ~37% RECURRING REVENUE BASE ~37% RECURRING REVENUE BASE 2013 INVESTOR & ANALYST DAY $M • Comprehensive Integrated Services Portfolio • Systems Knowledge & Application Expertise • Leverages World’s Largest Installed Base • Provides Customers with Operational Security, Cost Savings Opportunities, and Improved Operating Efficiencies • Brand Loyalty Driven • Like-for-Like Replacement • Opportunity for Upgrades • Next-Generation Installations 2008 2012 $396 $581 |
![]() DRIVE PROFITABLE GROWTH 21 LEVERAGING OUR APPLICATION EXPERTISE LEVERAGING OUR APPLICATION EXPERTISE 2013 INVESTOR & ANALYST DAY |
![]() INNOVATION DRIVES VITALITY INDEX > 25% BY 2017 INNOVATION DRIVES VITALITY INDEX > 25% BY 2017 INCREASE INNOVATIVE OFFERINGS FOCUS AREAS VITALITY INDEX VITALITY INDEX 2013 INVESTOR & ANALYST DAY Vitality Index is defined as the % of revenue from new products launched over the past five years 22 • Smart Products • Energy Reduction Initiatives • Localized Products • Product Range Revitalization • Reuse • Sustainable Water Infrastructure Solutions |
![]() ACCELERATE GEOGRAPHIC GROWTH FOCUSED DEVELOPED & EMERGING MARKETS STRATEGIES 23 EMERGING MARKETS INCREASE TO 25% OF TOTAL REVENUE BY 2017 EMERGING MARKETS INCREASE TO 25% OF TOTAL REVENUE BY 2017 GEOGRAPHIC STRATEGY • Premium in Mega Cities �� Selectively Enter Value Segment • Key Account Focus XYLEM PRESENCE IN EMERGING MARKETS Emerging Asia 35% Latin America 27% Middle East/Africa 24% Eastern Europe 14% EMERGING MARKETS REVENUE EMERGING MARKETS REVENUE 2013 INVESTOR & ANALYST DAY • Replicate Success in Developed Markets • Disciplined Emerging Markets Approach • 53 Sales & Service Units • Localized R&D Centers in China & India • 11 Production Facilities • 2,500 Employees |
![]() ACCELERATE GEOGRAPHIC GROWTH EXAMPLE: CHINA STRATEGY 24 POSITIONED TO BENEFIT FROM CHINA’S CONTINUED DEVELOPMENT POSITIONED TO BENEFIT FROM CHINA’S CONTINUED DEVELOPMENT KEY INVESTMENT AREAS CHINA’S 12 th 5 YEAR PLAN OTHER GROWTH DRIVERS Taiyuan Hefei Changsha Zhengzhou Urumchi Baotou Jinan Tangshan Shijiazhuang Shenyang Beijing Xi’an Chengdu Guangzhou Shanghai Wuhan Nanjing Wuxi 2013 INVESTOR & ANALYST DAY • Infrastructure • Real Estate • Industry • Water & Waste Water Networks • Municipal Treatment Plants • Urbanization • Industrialization • Population Growth |
![]() IMPROVE BUSINESS SUSTAINABILITY 25 FUELING GROWTH WITH A COMPETITIVE EDGE FUELING GROWTH WITH A COMPETITIVE EDGE 2013 INVESTOR & ANALYST DAY |
![]() DRIVE OPERATIONAL EXCELLENCE 26 DRIVING A LEANER, MORE EFFICIENT & COMPETITIVE XYLEM DRIVING A LEANER, MORE EFFICIENT & COMPETITIVE XYLEM 2013 INVESTOR & ANALYST DAY GROSS MARGIN GROSS MARGIN LEAN SIX SIGMA LEAN SIX SIGMA GLOBAL SOURCING GLOBAL SOURCING • Implemented Across the Organization • Hundreds of Projects Completed Annually • Incremental ‘12 Savings of $68M • Components, Motors, & Raw Materials • Driving Incremental $51M Savings in ‘12 • Low-Cost Region Approaching 25% |
![]() FOCUS ON BUSINESS SIMPLIFICATION 27 IT SYSTEM CONSOLIDATIONS IT SYSTEM CONSOLIDATIONS • Global Inventory/Supply Chain Management • Web-Based Ordering/Tracking • Global Data Warehousing • Automated Product Configurations • Integrated CRM System • Eliminates Redundancy STREAMLINED SYSTEMS TO DRIVE PRODUCTIVITY STREAMLINED SYSTEMS TO DRIVE PRODUCTIVITY 2013 INVESTOR & ANALYST DAY - |
![]() OPTIMIZE OUR COST STRUCTURE 28 SUMMARY 2013 FINANCIAL IMPACTS EUROPEAN REALIGNMENT EUROPEAN REALIGNMENT ENABLING – Sales Synergies & Future Growth Opportunities 2013 INVESTOR & ANALYST DAY – HQ: Schaffhausen, Switzerland – Restructuring Savings of $13M to $15M – Additional Net EPS Impact of $0.03 from Realignment • Sales Office Consolidations • Sales Administrative and Functional Back-Office Standardization & Synergies • Factory Realignments • Shared Services & Centers of Excellence • Vertical Market Alignment • Unified Xylem in Europe – Growth & Cost Synergies • Efficient Tax Structure • Restructuring & Realignment Costs of $60M to $70M – Primarily Focused on Europe |
![]() HIGH-PERFORMANCE CULTURE 29 EXPERIENCE, KNOWLEDGE & RELENTLESS DRIVE TO IMPROVE EXPERIENCE, KNOWLEDGE & RELENTLESS DRIVE TO IMPROVE 2013 INVESTOR & ANALYST DAY |
![]() POWERFUL COMBINATION OF CUSTOMER & INDUSTRY EXPERIENCE POWERFUL COMBINATION OF CUSTOMER & INDUSTRY EXPERIENCE HIGH-PERFORMANCE CULTURE 30 Gretchen Gretchen McClain McClain President President & CEO & CEO Operational Leaders Operational Leaders Mike Kuchenbrod President Water Solutions Chris McIntire President Analytics Ken Napolitano President Applied Water Systems Functional Leaders Functional Leaders Angela Buonocore Chief Communications Officer Robyn Mingle Chief Human Resources Officer Board of Directors Board of Directors • Steven R. Loranger, Chairman Emeritus • Curtis J. Crawford, Ph.D. • Victoria D. Harker • Robert F. Friel • John J. Hamre, Ph.D. • Sten E. Jakobsson • Edward J. Ludwig • Surya N. Mohapatra, Ph.D. • Markos I. Tambakeras, Chairman • Gretchen W. McClain Colin Sabol Chief Strategy & Growth Officer Christian Na General Counsel & Corporate Secretary Mike Speetzen Chief Financial Officer Nicholas Colisto Chief Information Officer 2013 INVESTOR & ANALYST DAY |
![]() LINKED TOGETHER AROUND “LET’S SOLVE WATER” LINKED TOGETHER AROUND “LET’S SOLVE WATER” HIGH-PERFORMANCE CULTURE 31 HIGH-PERFORMANCE CULTURE HIGH-PERFORMANCE CULTURE 2013 INVESTOR & ANALYST DAY |
![]() ![]() ![]() ![]() ![]() ![]() FUND GROWTH & RETURNS TO SHAREOWNERS FUND GROWTH & RETURNS TO SHAREOWNERS DISCIPLINED CAPITAL DEPLOYMENT 32 • Balance of Organic & Inorganic Investment • Return Value to Shareowners • Maintain Solid Investment Grade Metrics • Evaluation Processes to Ensure Targeted Returns Achieved 2013 INVESTOR & ANALYST DAY Organic Investment Organic Organic Investment Investment Acquisitions Acquisitions Acquisitions Return of Capital Return of Return of Capital Capital |
![]() 33 LOOKING AHEAD TO 2017 INCREASING PROFITABILITY AND RETURNS INCREASING PROFITABILITY AND RETURNS 2013 INVESTOR & ANALYST DAY XYLEM IN 2017 • Global Leader in the Attractive Water Industry • Leading Positions in All Served Markets • Simplified Business Structure & Improved Cost Base • Trusted Leader & the Applications Expert • Stronger Financial Position LONG-TERM PERFORMANCE TARGETS • • Operating Margin • Earnings Per Share • Return on Invested Capital • Free Cash Flow $5.5B 15% 10% CAGR 14% 100% of Net Income Total Revenue |
![]() MARKET UPDATE & DRIVING GROWTH COLIN SABOL CHIEF STRATEGY & GROWTH OFFICER |
![]() ![]() 35 2013 INVESTOR & ANALYST DAY MARKET UPDATE & DRIVING GROWTH AGENDA • Served Market Update - Geographic Profile - End Market Profile - Industrial Market Dynamics - Public Utility Dynamics - Market Positions • Driving Growth - Sustainable Water Infrastructure (SWI) Solutions - Customer Journey WHAT YOU WILL HEAR ABOUT TODAY WHAT YOU WILL HEAR ABOUT TODAY |
![]() 36 SERVED MARKET UPDATE GEOGRAPHIC PROFILE 2013 INVESTOR & ANALYST DAY 2012 XYLEM REVENUE MIX 2012 XYLEM REVENUE MIX U.S. • Slow Recovery • Commercial Building Construction Strengthening EUROPE • Weak Economic Environment • EU Political Uncertainty Continues EMERGING MARKETS • Infrastructure Investment and Increasing Regulation ’13-’17 SERVED MARKET GROWTH ’13-’17 SERVED MARKET GROWTH DEVELOPED 1-3% • U.S. 1-3% • Europe 0-2% EMERGING 6-8% GLOBAL 2-4% MARKET COMMENTARY MARKET COMMENTARY |
![]() 37 SERVED MARKET UPDATE END MARKET PROFILE 2013 INVESTOR & ANALYST DAY 2012 XYLEM REVENUE MIX 2012 XYLEM REVENUE MIX INDUSTRIAL • Global Industrial Production to Strengthen Modestly PUBLIC UTILITY • Break and Fix Demand to Rise Steadily • CAPEX Spending Delays to Continue COMMERCIAL / RESIDENTIAL • Early Signs of U.S. Recovery • Europe Remains Soft AGRICULTURE • Global Population Growth and Changing Dietary Preferences ’13 - ’13 - ’17 SERVED MARKET GROWTH ’17 SERVED MARKET GROWTH INDUSTRIAL 3-4% PUBLIC UTILITY 2-3% COMMERCIAL 3-4% RESIDENTIAL 3-4% AGRICULTURE 2-3% TOTAL 2-4% MARKET COMMENTARY MARKET COMMENTARY |
![]() 38 SERVED MARKET UPDATE INDUSTRIAL MARKET EXPOSURE 2013 INVESTOR & ANALYST DAY • Strong Brands • Deep Application Knowledge • Broad Product Portfolio • Improving Vitality Index XYLEM ADVANTAGES XYLEM ADVANTAGES MINING • EM Commodity Demand OIL & GAS • Stabilization of Gas Fracking CONSTRUCTION • Global Construction Recovery & Return of Normal Weather FOOD & BEVERAGE • Changing Dietary Habits & Emergence of Middle Class in EM GENERAL INDUSTRY • Paper • Power • Manufacturing Xylem 2012 Revenue: $1.6B • Chemicals • Pharma SUB-SEGMENT COMMENTARY SUB-SEGMENT COMMENTARY |
![]() 39 SERVED MARKET UPDATE PUBLIC UTILITY 2013 INVESTOR & ANALYST DAY • Consistent Tariff Increases • Bid Activity Remains Strong • Focused on Opex Savings (Energy, Services) • Large Installed Base With Loyal Customers • 70-80% of Revenue from Opex • Refreshed Product Portfolio Centered on Energy Efficiency • Deep Application Expertise Fills Void Left by Demographic Shift • Local, Direct Presence Enables Services (TotalCare) Opex Capex Connection Fees Tariffs Bonds Gov’t Financing Private Funding • Stable • Health & Economic Necessity • Cyclical • Capacity & Regulation Driven Source: Strategic Analytics Inc. PUBLIC UTILITY DYNAMICS PUBLIC UTILITY DYNAMICS XYLEM ADVANTAGES XYLEM ADVANTAGES |
![]() 40 SERVED MARKET UPDATE LEADING POSITIONS IN KEY APPLICATIONS 2013 INVESTOR & ANALYST DAY TRANSPORT TREATMENT TEST BUILDING SERVICES INDUSTRIAL WATER IRRIGATION Xylem KSB Sulzer (ABS) Pentair Tsurumi Others Others Grundfos Xylem Danaher (Hach) Grundfos Xylem Siemens Danaher (Trojan) Sulzer (ABS) Ozonia Others Xylem Thermo E+H Mettler Others Xylem Wilo Pentair Franklin Grundfos Wilo KSB Pentair Others Others Pentair Xylem KSB Market: $11B Position: 1st Market: $5B Position: 1st Market: $4B Position: 2nd Market: $9B Position: 2nd Market: $4B Position: 2nd Market: $2B Position: 3rd |
![]() 41 DRIVING GROWTH SUSTAINABLE WATER INFRASTRUCTURE (SWI) SOLUTIONS 2013 INVESTOR & ANALYST DAY Industry 1 Industry 2 Industry 3 Industry 4 Treatment Transport Test Services M&C Non-Xylem WATER LABOR CAPITAL FOOD ENERGY LEVERAGING BROAD PORTFOLIO & APPLICATIONS EXPERTISE LEVERAGING BROAD PORTFOLIO & APPLICATIONS EXPERTISE SOLVING WATER CHALLENGES WITH VERTICAL INDUSTRY TEAMS SOLVING WATER CHALLENGES WITH VERTICAL INDUSTRY TEAMS |
![]() 42 DRIVING GROWTH SUSTAINABLE WATER INFRASTRUCTURE (SWI) SOLUTIONS 2013 INVESTOR & ANALYST DAY • $1B Equipment Market; $400M Served • Marine-Tested Disinfection Technologies with Efficacy Assurance Ballast Water Treatment Aquaculture Systems Efficient Secondary Treatment • $4B Equipment Market; $160M Served • Increasingly Complex Water Management Technologies Required • $3B Equipment Market; $500M Served • Core Public Utilities Expertise Required to Capture Energy Efficiency Opportunity VERTICAL END-MARKET SOLUTIONS REPRESENT VERTICAL END-MARKET SOLUTIONS REPRESENT THE LEADING EDGE OF OUR GROWTH STRATEGY THE LEADING EDGE OF OUR GROWTH STRATEGY THE POWER OF XYLEM’S CAPABILITIES... THE POWER OF XYLEM’S CAPABILITIES... |
![]() 43 2013 INVESTOR & ANALYST DAY |
![]() 44 CUSTOMER JOURNEY LEARNING – DIGITAL WATER SHOW 2013 INVESTOR & ANALYST DAY • 4,000+ Participants • 1,500+ Leads • 90% Lower Cost Per Lead vs. Traditional • Next Steps – More Targeted Events with Channel Partners 2012 WINNER: Best International Event Virtual Communication Excellence Award KEY STATS KEY STATS |
![]() 45 CUSTOMER JOURNEY ENGAGEMENT – CUSTOMER EXCELLENCE 2013 INVESTOR & ANALYST DAY • 80% Coverage … Opportunities To Go Deeper • ~20 Dedicated Resources ... Next Commercial Leaders • Focuses Our Commercial Technology Investments • Enables One Xylem Commercial Team |
![]() 46 CUSTOMER JOURNEY ENGAGEMENT – CUSTOMER EXCELLENCE 2013 INVESTOR & ANALYST DAY Price Last 2 Years $110M+ Strong Pilot Results … 2013 Roll-out Value Proposition |
![]() 47 SUMMARY 2013 INVESTOR & ANALYST DAY SOURCES OF REVENUE GROWTH SOURCES OF REVENUE GROWTH SERVED MARKET 2-4% XYLEM OUT-PERFORMANCE 1% ORGANIC GROWTH 3-5% ACQUISITIONS 2-4% TOTAL 5-9% • More Robust Global Economic Recovery • Tighter Regulatory Policy and Enforcement… Driving Capex • Accelerated Demographic Shift… Enabling Services • Increased Capital Flow Into Global Public Utilities: – Gov’t Funding – Public/Private Partnerships – Privatization INCREMENTAL GROWTH CATALYSTS INCREMENTAL GROWTH CATALYSTS |
![]() WATER INFRASTRUCTURE TRANSPORT & TREATMENT MICHAEL KUCHENBROD PRESIDENT, WATER SOLUTIONS |
![]() WATER INFRASTRUCTURE AGENDA 49 • Business Overview - Transport & Treatment Capabilities • Select Strategic Initiatives - Industrial Market Adjacencies - Xylem TotalCare - Localized Products • Dewatering Overview - Dewatering History - Dewatering Capabilities - Accelerate Geographic Expansion - Operational Excellence 2013 INVESTOR & ANALYST DAY WHAT YOU WILL HEAR ABOUT TODAY WHAT YOU WILL HEAR ABOUT TODAY |
![]() 50 WATER INFRASTRUCTURE BUSINESS OVERVIEW TRANSPORT TRANSPORT 2013 INVESTOR & ANALYST DAY TREATMENT TREATMENT Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography: Key Facilities: Key Brands: $11B $1,745M $5B $366M Waste Water Pumps Dewatering (Sales & Rentals) Aftermarket Parts & Services Emmaboda, Sweden; Baroda, India; Shenyang, China; Bridgeport, NJ Herford, Germany; Brown Deer, WI; Zelienople, PA Biological U.V. and Ozone Disinfection Filtration |
![]() 51 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE TRANSPORT & TREATMENT CAPABILITIES |
![]() 52 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE TRANSPORT & TREATMENT CAPABILITIES |
![]() 53 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE |
![]() ![]() ![]() ![]() ![]() ![]() ![]() 54 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE TRANSPORT & TREATMENT CAPABILITIES |
![]() 55 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE |
![]() INDUSTRIAL MARKETS OFFER NEW GROWTH OPPORTUNITIES INDUSTRIAL MARKETS OFFER NEW GROWTH OPPORTUNITIES 56 INCREASE INNOVATIVE OFFERINGS INDUSTRIAL MARKET ADJACENCIES Strategy: Current Product New Market WHY WHY WHERE WHERE HOW HOW • Adds $1B To Served Market • Stringent Discharge Regulations • Value Versus Price • Little Xylem Investment Required • Pulp & Paper • Ballast Water (SWI) • Bio Gas • Mining • Focused “Capture Teams” • Customized Value Proposition • Rapid Response Capability • Build Applications Expertise 2013 INVESTOR & ANALYST DAY |
![]() ![]() ![]() ![]() ![]() ![]() ![]() 57 ENHANCE AFTERMARKET CAPABILITIES XYLEM TOTALCARE PROCESS PROCESS Audit Retrofit Maintenance Contract 2013 INVESTOR & ANALYST DAY |
![]() 58 • Condition Audit • 5 year $4M Contract • 500 Pump Station Audits • 65 Follow-up Refurbishments • Potential Total Revenue of $4M TOTALCARE WEDECO IN NEW ZEALAND TOTALCARE WEDECO IN NEW ZEALAND TOTALCARE FLYGT IN UK TOTALCARE FLYGT IN UK 2013 INVESTOR & ANALYST DAY ENHANCE AFTERMARKET CAPABILITIES XYLEM TOTALCARE |
![]() 59 ACCELERATE GEOGRAPHIC EXPANSION LOCALIZED PRODUCTS Price Value $1.4B market $0.9B market • Value For Money • Limited and Standardized Product Range • High Availability • Highest Quality and Performance • Wide Range of Sizes and Materials • System Engineering Support 2013 INVESTOR & ANALYST DAY |
![]() XYLEM PROPRIETARY / CONFIDENTIAL Bridgeport, NJ; Emmaboda, Sweden; Quenington, UK Sales & Rentals Dry Prime, Submersible & Slurry Pumps Aftermarket Parts & Services 60 INVEST IN GROWTH PLATFORMS DEWATERING OVERVIEW DEWATERING DEWATERING 2013 INVESTOR & ANALYST DAY Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography & End Market: Key Facilities: Key Brands: $3B $659M • 24/7 Service Capabilities • Leverages Xylem’s Footprint • High ROIC Business When Operating with Scale Advantage • Diverse End Markets • ~ 40% Rental Revenue |
![]() 61 INVEST IN GROWTH PLATFORMS DEWATERING HISTORY 2013 INVESTOR & ANALYST DAY Pre-2010 Flygt Electric Submersible U.S. & International 2010 Acquired Godwin Added Dri-Prime Diesel Technology Expanded U.S. Footprint/Distribution 24/7 Service Model 2011 Organic Expansion in Australia 2012 Acquired Heartland Pump Expanded U.S. Footprint/Distribution 2013 Organic Expansion in Latin America $0 $100 $200 $300 $400 $500 $600 $700 2009 2012 Sales Rental Aftermarket |
![]() 62 DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: INDUSTRIAL 2013 INVESTOR & ANALYST DAY |
![]() 63 2013 INVESTOR & ANALYST DAY DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: MUNICIPAL BYPASS |
![]() 64 2013 INVESTOR & ANALYST DAY DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: OIL & GAS |
![]() 65 2013 INVESTOR & ANALYST DAY DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: MINING |
![]() 66 2013 INVESTOR & ANALYST DAY DELIVER CUSTOMER VALUE DEWATERING CAPABILITIES: DISASTER RELIEF |
![]() 67 ACCELERATE GEOGRAPHIC EXPANSION DEWATERING DEWATERING GROWTH LED BY RENTAL AND SERVICES DEWATERING GROWTH LED BY RENTAL AND SERVICES 2013 INVESTOR & ANALYST DAY • Leverage Existing Footprint • Follow Strong Water Solutions Channels • Target Growing Industries (Mining) |
![]() CREATING A MORE EFFICIENT AND RESPONSIVE ENTERPRISE CREATING A MORE EFFICIENT AND RESPONSIVE ENTERPRISE 68 2013 INVESTOR & ANALYST DAY IMPROVE BUSINESS SUSTAINABILITY OPERATIONAL EXCELLENCE: “A WAY OF LIFE” LEAN SIX SIGMA LEAN SIX SIGMA GLOBAL SOURCING STRATEGIES GLOBAL SOURCING STRATEGIES • More Than 400 Projects and Kaizen Events Annually • Leverage Global Volumes to Achieve 5% Material Cost Savings FOOTPRINT RATIONALIZATION FOOTPRINT RATIONALIZATION • Localize Pump Assembly / Conversion and Testing Closer to the Market • Upgrading Capabilities in China, India and Latin America BUSINESS INTEGRATION BUSINESS INTEGRATION • European Alignment, Unified Front- End Sales Tools and Global Inventory Management PRODUCT SIMPLIFICATION PRODUCT SIMPLIFICATION • Leverage Modular Designs to Reduce Production Costs and Phase Out Old Products |
![]() 69 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE TRANSPORT & TREATMENT |
![]() WATER INFRASTRUCTURE TEST CHRIS MCINTIRE PRESIDENT, ANALYTICS |
![]() WATER INFRASTRUCTURE AGENDA 71 • Business Overview - Analytics Capabilities - Analytics Segments & Vertical Markets • Select Strategic Initiatives - Deliver Customer Value - Accelerate Geographic Expansion - Increase Innovative Offerings - Invest in Growth Platforms - Improve Business Sustainability 2013 INVESTOR & ANALYST DAY WHAT YOU WILL HEAR ABOUT TODAY WHAT YOU WILL HEAR ABOUT TODAY |
![]() Yellow Springs, OH; Weilheim, Germany; Bergen, Norway Field, Online, and Laboratory Analytical Instrumentation Meters, Sensors, Spectrophotometers, and Refractometers Temperature, Data Loggers, Doppler and Level Measurement Water Quality and Environmental Monitoring Systems 72 WATER INFRASTRUCTURE BUSINESS OVERVIEW TEST TEST 2013 INVESTOR & ANALYST DAY Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography & Segment: Key Facilities: Key Brands: $4B $298M |
![]() 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE TEST: ANALYTICS CAPABILITIES |
![]() 74 BUILDING A WORLD-CLASS ANALYTICS PLATFORM BUILDING A WORLD-CLASS ANALYTICS PLATFORM Total Served Market - $4B WATER INFRASTRUCTURE TEST: ANALYTICS SEGMENTS AND VERTICAL MARKETS 2013 INVESTOR & ANALYST DAY APPLIED MEASUREMENT TECHNOLOGIES WATER Note: Other Revenue ~$60M |
![]() 75 DELIVER CUSTOMER VALUE ANALYTICS WASTE WATER CAPABILITIES 2013 INVESTOR & ANALYST DAY |
![]() 76 2013 INVESTOR & ANALYST DAY DELIVER CUSTOMER VALUE ANALYTICS OCEAN / COASTAL CAPABILITIES |
![]() 77 ACCELERATE GEOGRAPHIC EXPANSION DEVELOPED MARKETS STRATEGY DEVELOPED MARKETS STRATEGY Leverage Regional Brands Expand Service and Integration Capabilities EMERGING MARKETS STRATEGY EMERGING MARKETS STRATEGY Stage 1 Distribution Management Stage 2 After Sales Services Stage 3 Channel Optimization Stage 4 Systems Integration ASIA 21% EMEA 43% AMERICAS 36% EMERGING MARKETS REVENUE GROWS FROM 25% TO >30% BY 2017 EMERGING MARKETS REVENUE GROWS FROM 25% TO >30% BY 2017 % of Total Revenues 2012 2013 INVESTOR & ANALYST DAY |
![]() NEW TECHNOLOGY DRIVES MARKET SHARE GROWTH NEW TECHNOLOGY DRIVES MARKET SHARE GROWTH 78 INCREASE INNOVATIVE OFFERINGS CROSS BRANDING CROSS BRANDING NEW PRODUCTS NEW PRODUCTS • Invest in New Products and Advanced Sensor Technology • Leverage Existing Technology Across Operating Companies • Adapt for Local Market Requirements WTW IQ SensorNet North America YSI Branded YSI Supported ~40% Growth in 2012 YSI Field Products - Germany WTW Branded WTW Supported ~25% Growth in 2012 2013 INVESTOR & ANALYST DAY |
![]() 79 INVEST IN GROWTH PLATFORMS ANALYTICS ACQUISITION STRATEGY Targets Aligned with Market Focus and Growth Initiatives • Fill Product or Technology Gaps • Strengthen Geographic Capabilities • Drive Sustainable Water Infrastructure Projects FOCUSED AND DELIBERATE PROCESS WITH STRONG PIPELINE FOCUSED AND DELIBERATE PROCESS WITH STRONG PIPELINE Ideal Target Profile “Thousands Protecting Millions” Premium Offering Compelling Application Knowledge Continued Acquisition Focus • Build on Strong Base • Support Additional Growth • Robust Pipeline 2013 INVESTOR & ANALYST DAY |
![]() Pre Acquisition EBITDA GM OpEx OpEx Post Integration • Continued Topline Growth • >10% in 2012 • Lean Initiatives and Global Sourcing Already Delivering • Lean Six Sigma Deployed • Buying Leverage • GM Up More Than 300 bps • Operating Expense Focus • 23% Reduction • Minimal Impact to Sales Spend • EBITDA Margin Expansion • More Than 168% Increase EBITDA GM OpEx OpEx 2013 INVESTOR & ANALYST DAY IMPROVE BUSINESS SUSTAINABILITY YSI IMPROVEMENT POST-INTEGRATION VALUE CREATION – VALUE CREATION – OPERATIONAL EXCELLENCE DRIVING MARGIN EXPANSION OPERATIONAL EXCELLENCE DRIVING MARGIN EXPANSION 80 |
![]() 81 2013 INVESTOR & ANALYST DAY INVEST IN GROWTH PLATFORMS BUILDING A WORLD-CLASS ANALYTICS PLATFORM |
![]() 82 2013 INVESTOR & ANALYST DAY WATER INFRASTRUCTURE TEST |
![]() APPLIED WATER SYSTEMS KEN NAPOLITANO PRESIDENT |
![]() • Business Overview - Market Drivers - Aftermarket and Installed Base - Commercial Building Capabilities - Industrial Market Capabilities • Select Strategic Initiatives - High-Efficiency Solutions - Emerging Markets Penetration - Improve Business Sustainability APPLIED WATER SYSTEMS AGENDA 84 WHAT YOU WILL HEAR ABOUT TODAY WHAT YOU WILL HEAR ABOUT TODAY 2013 INVESTOR & ANALYST DAY |
![]() 85 APPLIED WATER SYSTEMS BUSINESS OVERVIEW BUILDING SERVICES BUILDING SERVICES 2013 INVESTOR & ANALYST DAY INDUSTRIAL WATER INDUSTRIAL WATER Market Size: 2012 Revenues: Key Products & Services: Key Facilities: Key Brands: $9B $736M $4B $550M HVAC Pumps, Valves & Heat Exchangers, Drives & Controls, Waste Water Pumps, Pressure Boosters, Fire Protection Auburn, NY; Buffalo, NY; Cegled, Hungary; Chihuahua, Mexico; Dallas, TX; Hoddesdon, UK; Montecchio, Italy; Morton Grove, IL; Nanjing, China; Stockerau, Austria; Strzelin, Poland; Wolverhampton, UK Pumps & Pumping Systems Heat Exchangers, Drives & Controls Membrane Filtration Fire Protection IRRIGATION IRRIGATION $2B $96M Groundwater & Surface Pumps Packaged Systems, Drives & Controls |
![]() APPLIED WATER SYSTEMS MARKET DRIVERS • Population Growth • Urbanization • Increasing Middle Class In Emerging Markets • Water Scarcity • High-Efficiency Legislation • Higher Performance Standards • Consumers’ Interest In Life Cycle Cost • Energy Price Escalations REGULATORY ENVIRONMENT FOCUSED ON WATER & ENERGY REGULATORY ENVIRONMENT FOCUSED ON WATER & ENERGY MACRO DRIVERS MACRO DRIVERS 2013 INVESTOR & ANALYST DAY 86 • EU High-Efficiency Circulators & Water Pumps (2013) • EU High-Efficiency Integrated Circulators & Premium Efficiency Motors (2015) • U.S. Dept. of Energy Pump Efficiencies (Pending) |
![]() APPLIED WATER SYSTEMS AFTERMARKET AND INSTALLED BASE • More Than 25 Million Products Installed Worldwide • 30% to 40% Average Replacement Sales • Attractive Aftermarket Margins • Strong Brand Loyalty • Broad Leading Channels • Exceptional Customer Support • OEM Platforms DRIVES OPPORTUNITIES FOR RETROFIT & AFTERMARKET DRIVES OPPORTUNITIES FOR RETROFIT & AFTERMARKET 2013 INVESTOR & ANALYST DAY 87 DIFFERENTIATORS DIFFERENTIATORS |
![]() XYLEM PROPRIETARY / CONFIDENTIAL • Products for the Heating, Cooling and Protection of Commercial Buildings • Broadest Offering Allows for Optimizing Interaction of Key Building Components • Application Expertise Makes Xylem a Strong Partner for Specifying Engineers 88 APPLIED WATER SYSTEMS COMMERCIAL BUILDING CAPABILITIES 2013 INVESTOR & ANALYST DAY INTEGRATED SOLUTIONS INTEGRATED SOLUTIONS |
![]() 89 • Customer - Monarch Plaza, Atlanta, GA - Building Constructed in 1983 - Lack of Sufficient Cooling - Low Pressure on Upper Floors - High Energy Costs - Integrated, Variable Speed System Retrofit - Ability to Accommodate Highly Variable Heating and Cooling Needs - Substantial Energy Savings - Energy Star & LEED Silver Certification BEFORE AFTER 2013 INVESTOR & ANALYST DAY DELIVER CUSTOMER VALUE COMMERCIAL BUILDING • Problem • Xylem Solution |
![]() ![]() ![]() ![]() ![]() ![]() ![]() TREATMENT SOLUTIONS TREATMENT SOLUTIONS SYSTEM SOLUTIONS SYSTEM SOLUTIONS • Energy-Efficient Solutions • Global Supply Chains • Bundling Capabilities • Blue Chip Global Customers VALUE DRIVERS VALUE DRIVERS ATTRACTIVE END MARKETS ATTRACTIVE END MARKETS Food & Beverage Power Generation Oil & Gas Mining Mfg. Industries APPLIED WATER SYSTEMS INDUSTRIAL MARKET CAPABILITIES 2013 INVESTOR & ANALYST DAY PUMPING SOLUTIONS PUMPING SOLUTIONS 90 |
![]() DELIVER CUSTOMER VALUE INDUSTRIAL MARKET 2013 INVESTOR & ANALYST DAY • Customer - Major South American Coal Mine • Problem - Remoteness of Mine and Legislation on Groundwater Withdrawal Required Alternative Sources for Process and Potable Water • Xylem Solution - Designed Efficient RO Treatment System to Desalinate Available Seawater and Generate Process and Potable Water for Facility 91 |
![]() ![]() ![]() ![]() ![]() 92 • Advanced Computational Hydraulic Design • High-Efficiency, Next-Generation Motor Technology • Integration of Variable Speed Drive Technology, Electronics and Motors • Energy-Saving Flow Control • Advanced Systems & Solutions Training 2013 INVESTOR & ANALYST DAY INCREASE INNOVATIVE OFFERINGS HIGH-EFFICIENCY SOLUTIONS |
![]() 93 ACCELERATE GEOGRAPHIC EXPANSION EMERGING MARKETS PENETRATION EMERGING MARKETS FORMULA EMERGING MARKETS FORMULA Stage 1 Focused Investments in Front End Stage 2 Establish Inventory & Assembly Capability Stage 3 Localize Key Products & Packages Stage 4 Develop Fit for Use Products EMERGING ASIA +110% EMERGING EMEA +95% EMERGING AMERICAS +90% EMERGING MARKETS REVENUE GROWS FROM 17% TO 25% BY 2017 EMERGING MARKETS REVENUE GROWS FROM 17% TO 25% BY 2017 Revenue Growth 2012 to 2017 2013 INVESTOR & ANALYST DAY |
![]() Drive Operational Drive Operational Excellence Excellence Optimize Our Optimize Our Cost Structure Cost Structure Focus on Business Focus on Business Simplification Simplification • Lean Six Sigma • Global Sourcing • Complex Footprint • Underutilized Assets • Overweighted in Developed Markets • Multiple ERP Systems • Multiple Customer Tools • Complex Supply Chain • Multiple Regional Products IMPROVE BUSINESS SUSTAINABILITY • Lean & Six Sigma • Global Sourcing • Localized Manufacturing & Supply Chain • Optimized Asset Utilization • Aligned to High-Growth Regions • ERP from 7 to 1 • Customer Tools from 50 to 1 • Simplified Supply Chain • Modular Global Product Platforms 2013 INVESTOR & ANALYST DAY IMPROVE CUSTOMER SATISFACTION, WORKING CAPITAL & COST STRUCTURE IMPROVE CUSTOMER SATISFACTION, WORKING CAPITAL & COST STRUCTURE CURRENT CURRENT FUTURE FUTURE 94 |
![]() 95 • Multiple Regional Product Offerings • Complex Supply Chain • Low Economies of Scale • High Inventory Requirement • Single Modular Global Product Lines • Over 30% Reduction in SKUs • Supply Chain & Manufacturing Leverage • Market-Leading Efficiencies BUSINESS SIMPLIFICATION GLOBAL WATER PLATFORM 2013 INVESTOR & ANALYST DAY CURRENT CURRENT FUTURE FUTURE |
![]() APPLIED WATER SYSTEMS 96 2013 INVESTOR & ANALYST DAY |
![]() FINANCIAL OVERVIEW MICHAEL SPEETZEN CHIEF FINANCIAL OFFICER |
![]() 2013 INVESTOR & ANALYST DAY 98 CURRENT UPDATE • Guidance Updated to Reflect the Acquisition of MultiTrode • Actions Underway to Realign European Operations • 2013 Mid-Point Guidance: – Organic Revenue +0.5% – Op Margin -40 Bps – FX/Acquisitions -50 Bps – European Structure Costs -30 Bps – Required HQ /IT/Pension Costs -20 Bps – EPS Growth +4% – Restructuring Savings +$0.10 – European Structure Benefit +$0.03 – MultiTrode Acquisition -$0.01 – 95% Free Cash Flow Conversion GUIDANCE UPDATED TO REFLECT MULTITRODE ACQUISITION GUIDANCE UPDATED TO REFLECT MULTITRODE ACQUISITION * See Appendix for Non-GAAP Reconciliations 1Q: Revenue Down MSD; Segment Margin Negatively Impacted by Acquisitions & Mix 2012 $3.8 B 39.6% 14.3% 12.9% $1.77 Total Revenue: Gross Margin: Segment Margin*: Operating Margin*: Adjusted EPS* 2013E ~$3.9 B ~40% 13.7% - 14.2% 12.2% - 12.7% $1.79 - $1.89 |
![]() 99 FINANCIAL OVERVIEW 2008-2012 Revenue CAGR of 4% • Driven by Analytics & Dewatering Growth Platforms • Base Recovering to Pre-Crisis Levels Operating Margin* Expansion +210 Bps • Gross Margin +490 Bps • Investment into Key Strategic Areas Strong Free Cash Flow Deployed $1.4B Into Acquisitions ’08-’12 • $670M of Revenue • Contributed ~200 Bps and 130 Bps to Gross & Operating Margin Improvement 2013 INVESTOR & ANALYST DAY LOOKING BACK LOOKING BACK * See Appendix for Non-GAAP Reconciliations |
![]() 100 FINANCIAL OVERVIEW 2008-2012 Revenue CAGR of 4% • Driven by Analytics & Dewatering Growth Platforms • Base Recovering to Pre-Crisis Levels Operating Margin* Expansion +210 Bps • Gross Margin +490 Bps • Investment into Key Strategic Areas Strong Free Cash Flow Deployed $1.4B Into Acquisitions ’08-’12 • $670M of Revenue • Contributed ~200 Bps and 130 Bps to Gross & Operating Margin Improvement 2013-2017 Revenue CAGR of 5-9% • 3-5% Organic; Acquisitions Add 2-4% Core Op. Margin Expands 50-75 Bps/Yr • Gross Margin Continues to Increase • Operating Leverage 2013-2017 EPS CAGR of 7-14% Continued Strong Free Cash Generation Disciplined Capital Deployment 2013 INVESTOR & ANALYST DAY LOOKING BACK LOOKING BACK LOOKING FORWARD LOOKING FORWARD * See Appendix for Non-GAAP Reconciliations • Organic Investments • Acquisitions in the Range of $150M - $350M in 2013 • Return of Capital |
![]() ‘08-’12 Revenue up 15%; 4% CAGR Strong Operating Margin Expansion XYLEM FINANCIAL SUMMARY REVENUE REVENUE OP INCOME & MARGIN* OP INCOME & MARGIN* HIGHLIGHTS HIGHLIGHTS Growth: -13% 12% 19% 0% 3.5% OM%: 10.8% 10.8% 12.6% 12.7% 12.9% 12.5% STRONG TRACK RECORD OF FINANCIAL PERFORMANCE STRONG TRACK RECORD OF FINANCIAL PERFORMANCE Organic*: -9% 3% 7% 0% 0.5% * See Appendix for Non-GAAP Reconciliations 2013 INVESTOR & ANALYST DAY $M $M 101 • New Products • Emerging Market Growth • Analytics and Dewatering Platforms • +210 Bps Through ’12 • Pricing Improvements • Lean & Global Sourcing • Deployed ~$100M in Restructuring • Strong Margin Performance During the Downturn • Includes $33M Stand-Alone Costs |
![]() ![]() ![]() DRIVING GROSS MARGIN EXPANSION GROSS MARGIN EXPANSION ~120 BPS PER YEAR GROSS MARGIN EXPANSION ~120 BPS PER YEAR • Price - 1-2% Price Realization • Portfolio - Continued Organic Investment - Acquisitions • Productivity - Lean/Global Sourcing - Restructuring Savings % of Revenue 2013 INVESTOR & ANALYST DAY +490 +490 Bps Bps KEY PERFORMANCE DRIVERS KEY PERFORMANCE DRIVERS 102 |
![]() ![]() ![]() • Strong Gross Margin Performance • Continued Investment – R&D 2.8%, Up 1% … Driving Innovation – Selling 14.1%, Up 1% – Extending Emerging Market Presence • G&A 9.8%, Up 1% – Stand-Alone Cost Structure – Intangible Amortization – Partially Offset by Cost Savings LEVERAGING COST STRUCTURE FOR OPERATING MARGIN EXPANSION STRONG OPERATING PERFORMANCE STRONG OPERATING PERFORMANCE 2013 INVESTOR & ANALYST DAY % of Revenue +210 +210 Bps Bps KEY PERFORMANCE DRIVERS KEY PERFORMANCE DRIVERS * See Appendix for Non-GAAP Reconciliations 103 |
![]() GENERATING STRONG FREE CASH FLOW STRONG FREE CASH FLOW GENERATION STRONG FREE CASH FLOW GENERATION Conversion: 100% 95% FREE CASH FLOW* FREE CASH FLOW* WORKING CAPITAL WORKING CAPITAL 2013 FCF Conversion Impacts Working Capital Improvement Accounts Receivable Accounts Payable Inventory 2013 INVESTOR & ANALYST DAY % of Revenue * See Appendix for Non-GAAP Reconciliations HIGHLIGHTS HIGHLIGHTS $M 104 • Restructuring & Realignment • TSA Exit & Corp HQ Relocation • Supplier Term Management • Supplier Finance Program • SKU Reduction • Global Sourcing • Further Shared Services • Sales Force Engagement |
![]() WATER INFRASTRUCTURE REVENUE REVENUE Growth: -10% 17% 25% 0% 4.7% Organic*: -4% 2% 7% 0% 0.5% OP INCOME & MARGIN* OP INCOME & MARGIN* OM%: 13.0% 14.7% 14.9% 14.9% 15.1% 14.5% STRONG TOP LINE GROWTH, OP MARGIN +210 BPS STRONG TOP LINE GROWTH, OP MARGIN +210 BPS ‘08-’12 Revenue up 33%; 7% CAGR • Resilient Through the Downturn • Growth Driven by Acquisitions, Emerging Markets & Product Launches • Public Utility CAPEX Slowdown • European Crisis Strong Operating Margin Expansion • Operating Productivity Funds Incremental Strategic Investments • ’13 Margin Impacts - European Realignment - FX/Acquisition Impact HIGHLIGHTS HIGHLIGHTS * See Appendix for Non-GAAP Reconciliations 2013 INVESTOR & ANALYST DAY $M $M 105 |
![]() APPLIED WATER REVENUE REVENUE Growth: -18% 6% 9% -1% 1.8% Organic*: -15% 6% 7% 1% 0.5% OP INCOME & MARGIN* OP INCOME & MARGIN* OM%: 11.8% 9.9% 12.1% 12.0% 12.4% 12.5% HIGHLIGHTS HIGHLIGHTS STRONG OPERATING PERFORMANCE STRONG OPERATING PERFORMANCE ‘08-’12 Revenue Down 7% • Residential & Commercial Building Decline • Growth Driven By New Product Launches – Energy-Efficient Solutions – Emerging Markets Penetration Strong Operating Performance • Margin Expansion Driven by Customer & Operational Excellence Initiatives • Continued to Fund Future Growth Investments * See Appendix for Non-GAAP Reconciliations 2013 INVESTOR & ANALYST DAY $M $M 106 |
![]() LOOKING AHEAD TO 2017 REVENUE • Market Growth 2% to 4% - Developed Market Growth of 1% to 3% - Emerging Market Growth of 6% to 8% • Xylem Organic Growth 3-5%; Acquisitions add 2-4% OPERATING MARGIN • Lean & Global Sourcing More Than Offset Inflation • Investment in R&D of ~3% of Revenue OTHER KEY ASSUMPTIONS • Share Count Remains Flat at 186.4M • Annual Interest Expense ~$55M - No Prepayment; Assumes 1st Tranche Refinanced by 2016 • Tax Rate of 21% 2013 INVESTOR & ANALYST DAY 107 |
![]() DISCIPLINED CAPITAL DEPLOYMENT • New Product Development • Product Range Revitalization • Faster-Growing Markets • Developing Geographies • Cost Optimization • Stringent Financial Metrics • Core Bolt-Ons & Close Adjacencies • ~$1.4B Spent Over the Last 4 Years • Anticipated Deployment of $150M - $350M in 2013 • Estimate Based Upon Expected Dilution From Option Exercises • Program In Place With Identified Triggers • Expected ‘13 Dividend Increase of 15% • 2013 Payout 30% of Free Cash Flow • Expect to Grow Future Dividends in Line with Expected Earnings Growth CORE GROWTH THROUGH CORE GROWTH THROUGH INNOVATION & EXPANSION INNOVATION & EXPANSION ACQUISITION GROWTH FROM A ACQUISITION GROWTH FROM A DISCIPLINED STRATEGY DISCIPLINED STRATEGY INCREASING RETURN OF INCREASING RETURN OF CAPITAL THROUGH DIVIDENDS CAPITAL THROUGH DIVIDENDS SHARE REPURCHASES TO SHARE REPURCHASES TO MAINTAIN SHARE COUNT MAINTAIN SHARE COUNT 2013 INVESTOR & ANALYST DAY 108 |
![]() ![]() ![]() ACQUISITION SCORECARD 2013 INVESTOR & ANALYST DAY Completed On Track Not Achieved 109 2010 |
![]() 2017: WHAT COULD IT LOOK LIKE? CONTINUED GROWTH, MARGIN EXPANSION & INCREASING RETURNS CONTINUED GROWTH, MARGIN EXPANSION & INCREASING RETURNS EARNINGS PER SHARE* EARNINGS PER SHARE* REVENUE REVENUE 4.7B - 5.5B $2.50 - $3.40 OP MARGIN* OP MARGIN* 14% - 15% KEY DRIVERS • Revenue Growth 5-9% - Organic Growth 3-5% - Acquisitions add 2-4% • Core Margins Expand 50- 75 Bps/ Avg. Yrly • Acquisitions Margin Dilutive 20-40 Bps • Tax Rate 21% • Share Count Flat ROIC ROIC 13% - 14% 2013 INVESTOR & ANALYST DAY * See Appendix for Non-GAAP Reconciliations $M 110 |
![]() Q&A 2013 INVESTOR & ANALYST DAY 111 * * * * * * * * * |
![]() 2013 INVESTOR & ANALYST DAY THANK YOU FOR YOUR INTEREST THANK YOU FOR YOUR INTEREST 112 CLOSING REMARKS |
![]() APPENDIX |
![]() 2013 INVESTOR & ANALYST DAY 114 XYLEM MANAGEMENT TEAM MICHAEL T. SPEETZEN CHIEF FINANCIAL OFFICER Michael T. Speetzen serves as our Senior Vice President and Chief Financial Officer. Mr. Speetzen served as Vice President of Finance for the Fluid and Motion Control business of ITT until October 2011. He joined ITT in 2009 as Vice President of Finance for Fluid Technology, and his role was expanded to his Vice President of Finance for the Fluid and Motion Control business later that year. Before joining ITT, Mr. Speetzen served as Executive Vice President and Chief Financial Officer for the StandardAero division of private equity firm Dubai Aerospace Enterprise from 2007 to 2009. Previously, he held positions with Honeywell from 1995 to 2007 and General Electric from 1993 to 1995. Mr. Speetzen currently serves on the board of Faradyne, an Xylem joint venture with Pentair, Inc. Mr. Speetzen holds a bachelor’s degree in management with an emphasis in finance from Purdue University, and a Master of Business Administration from Thunderbird’s School of Global Management. GRETCHEN W. MCCLAIN PRESIDENT & CHIEF EXECUTIVE OFFICER Gretchen W. McClain was named Chief Executive Officer of Xylem Inc., when the company was formed from the spinoff of the water businesses of ITT Corporation in 2011. She joined ITT in September 2005 as the President of the company’s Residential & Commercial Water business. She was named President of ITT Fluid Technology in March 2007 and promoted to Senior Vice President and President of ITT Fluid and Motion Control in December 2008. Prior to joining ITT, McClain served in a number of senior executive positions at Honeywell Aerospace, including Vice President and General Manager of the Business, General Aviation & Helicopters (BGH) Electronics division, and Vice President for Engineering and Technology as well as for Program Management in Honeywell Aerospace’s Engines, Systems & Services division. She joined AlliedSignal in 1999, which later merged with Honeywell. Earlier, McClain spent nine years with NASA and served as Deputy Associate Administrator for Space Development--where she played a pivotal role in the successful development and launch of the International Space Station Program as Chief Director of the Space Station, and Deputy Director for Space Flight. McClain graduated from the University of Utah with a B.S. in Mechanical Engineering. |
![]() 2013 INVESTOR & ANALYST DAY 115 XYLEM MANAGEMENT TEAM ROBYN MINGLE CHIEF HUMAN RESOURCES OFFICER Robyn T. Mingle serves as our Senior Vice President and Chief Human Resources Officer. Ms. Mingle joined ITT in July 2011 and served as Vice President of Human Resources of the ITT Fluid and Motion Control business until October 2011. Ms. Mingle brings more than 20 years of domestic and international human resources experience across multiple industries. Most recently, she spent 8 years as Senior Vice President of Human Resources at Hovnanian Enterprises, Inc. during a period of significant growth and transformation. Ms. Mingle also spent 14 years with The Black & Decker Corporation, where she held numerous HR leadership roles. During this time, she served as Vice President of Human Resources for DeWalt and Black & Decker Power Tools, and held an expatriate assignment in Singapore where she led HR efforts in Asia/Pacific, the Middle East, Africa, and Australia/New Zealand. She holds a master’s degree in industrial psychology from the University of Baltimore and a bachelor’s degree in psychology/industrial relations from Bloomsburg University. COLIN SABOL CHIEF STRATEGY & GROWTH OFFICER Colin R. Sabol serves as our Senior Vice President and Chief Strategy and Growth Officer. Mr. Sabol previously served as Vice President of Marketing and Business Development for the ITT Fluid and Motion Control business. He joined ITT in 2006 as Vice President of Marketing and Business Development, a position he held until March 2009, when his role was expanded to include responsibility for the Motion Control businesses. Prior to joining ITT, Mr. Sabol was with General Electric Corporation (GE). During his 17 years with GE, he held a number of professional and managerial positions of increasing responsibility, including Chief Financial Officer for GE Energy Services and Vice President of Mergers and Acquisitions for GE Corporate. Mr. Sabol holds a bachelor’s degree in materials engineering from Alfred University. |
![]() 2013 INVESTOR & ANALYST DAY 116 XYLEM MANAGEMENT TEAM ANGELA BUONOCORE CHIEF COMMUNICATIONS OFFICER Angela A. Buonocore serves as Xylem’s Senior Vice President and Chief Communications Officer, a role she assumed when the company was spun off from ITT Corporation in October 2011. In this role, she is responsible for global brand and reputation management, public relations, employee communications, corporate advertising and corporate philanthropy. She joined ITT Corporation in 2007 as Vice President and Director of Corporate Relations, and was promoted to Senior Vice President and Chief Communications Officer in May 2008. Previously she was Vice President, Corporate Communications for The Pepsi Bottling Group from 2001 to 2007. Prior to her 12-year career in the PepsiCo system, Ms. Buonocore spent 11 years with IBM and five years at General Electric Company in a series of increasingly responsible internal and external communications roles. Ms. Buonocore is a trustee of the Arthur W. Page Society and the Institute for Public Relations, and a member of the Wisemen and the Seminar, all organizations of senior corporate communications executives. Ms. Buonocore holds a bachelor’s degree in advertising with high honors from the University of Florida and was honored as a Distinguished Alumna of the College of Journalism and Communications in May 2007. CHRISTIAN NA GENERAL COUNSEL & CORPORATE SECRETARY Christian S. Na is Senior Vice President, General Counsel and Corporate Secretary at Xylem Inc., where he is responsible for leading the Legal function for the entire corporation. Prior to joining Xylem, Christian was Deputy General Counsel of CIRCOR International, Inc. in Burlington, Massachusetts. CIRCOR is a publicly traded global company that provides flow control solutions and electro-mechanical systems through 28 different brands with manufacturing operations in 10 countries. Christian was also Group Vice President and General Counsel at Danaher’s Product Identification Division in Wood Dale, Illinois. Earlier in his career, he was General Counsel & Corporate Secretary for U.S., Asia-Pacific and Latin America for Mitel Networks in Herndon, Virginia, during which time he also taught at the George Washington University in Washington, D.C. as an Adjunct Professor. Christian received his Bachelor of Arts and his Juris Doctor degrees from Boston University. |
![]() 2013 INVESTOR & ANALYST DAY 117 XYLEM MANAGEMENT TEAM NICHOLAS R. COLISTO CHIEF INFORMATION OFFICER Nicholas R. Colisto is Senior Vice President and Chief Information Officer of Xylem Inc., where he is responsible for all information technology strategy and staffing to support the global business. Prior to joining Xylem, Mr. Colisto served in executive IT positions at Hovnanian Enterprises, Inc. in Red Bank, N.J., and was subsequently appointed Vice President and CIO. Mr. Colisto was also an Executive Director in IT at Boehringer-Ingelheim Pharmaceuticals, Inc. in Ridgefield, Conn. Prior to that, he served in a number of positions of increasing responsibility at Priceline.com, Hyperion Solutions, Inc., Pepsi- Cola and the Bayer Corporation. Mr. Colisto serves on the academic advisory board at Rutgers University and on the foundation board of trustees for Bayshore Community Hospital, part of the Meridian Health Network. He received both a Bachelor of Business Administration degree in Management Information Systems, and a Master of Science degree in Information Systems from Pace University. MICHAEL L. KUCHENBROD PRESIDENT, WATER SOLUTIONS Michael L. Kuchenbrod serves as our Senior Vice President and President of Water Solutions. He previously served as President of ITT Water and Wastewater, a role to which he was appointed in May 2011. Prior to that, Mr. Kuchenbrod served as President of ITT’s China Operations, a regional value center focused on delivering the ITT commercial portfolio within these critical markets. Prior to his post in China and India, Mr. Kuchenbrod spent most of his 23-year career with ITT in the Interconnect Solutions business with operations throughout the Americas, Europe and Asia, ultimately becoming President of that value center. He was also head of the ITT KONI shock absorber business in the Netherlands. Mr. Kuchenbrod holds a bachelor’s degree in chemical engineering from Montana State University. |
![]() 2013 INVESTOR & ANALYST DAY 118 XYLEM MANAGEMENT TEAM CHRISTOPHER R. MCINTIRE PRESIDENT, ANALYTICS Christopher R. McIntire serves as our Senior Vice President and President of Analytics. Mr. McIntire served as President of Analytics of the ITT Fluid and Motion Control business until October 2011. He joined ITT in March 2009 when ITT acquired Nova Analytics. During his time with Nova Analytics, he served as President and Chief Operating Officer. Prior to joining Nova Analytics, Mr. McIntire held various leadership positions including Chief Executive Officer of WTW, a Munich based company in the Nova portfolio. Earlier, he spent 14 years with Thermo Fisher Scientific in various engineering and operational roles, including several in the Water and Environmental division. He also served as General Manager for both Thermo Affinity Sensors in the United Kingdom and Thermo Detection in the United States. Mr. McIntire holds a Master of Business Administration from Northeastern University. KENNETH NAPOLITANO PRESIDENT, APPLIED WATER SYSTEMS Kenneth Napolitano serves as our Senior Vice President and President of Applied Water Systems. Mr. Napolitano previously served as President of the ITT Residential and Commercial Water business. He began his career with ITT Goulds Pumps as an intern in 1980. Subsequently, Mr. Napolitano served as President of the ITT Industrial Process business, and held a number of other leadership assignments within ITT, including Vice President of the Americas Sales and Service organization and General Manager of ITT Monitoring and Controls, where he focused on the development of advanced technologies. In March 2011, he was elected Chairman of the Board of the Hydraulic Institute. In 2010, Mr. Napolitano also served as the President of the Hydraulic Institute and received the prestigious “President’s Award” in recognition of his efforts and leadership. Mr. Napolitano holds a Bachelor’s Degree in Interdisciplinary Engineering and Management from Clarkson University. |
![]() ![]() ![]() 2013 INVESTOR & ANALYST DAY 119 2013 FINANCIAL GUIDANCE SUMMARY * See Appendix for Non-GAAP Reconciliations |
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![]() 2013 INVESTOR & ANALYST DAY 121 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 CY v. PY CY v. PY FX Contribution Eliminations Adj. CY v. PY Adj. CY v. PY Current Year Prior Year Year Ended December 31, 2012 Xylem Inc. 3,791 3,803 (12) -0.3% (94) 108 - 2 0.1% 2.5% Water infrastructure 2,425 2,416 9 0.4% (94) 80 (1) (6) -0.2% 3.7% Applied Water 1,424 1,444 (20) -1.4% - 32 (3) 9 0.6% 0.8% Year Ended December 31, 2011 Xylem Inc. 3,803 3,202 601 18.8% (264) (111) - 226 7.1% 15.3% Water Infrastructure 2,416 1,930 486 25.2% (264) (87) 2 137 7.1% 20.7% Applied Water 1,444 1,327 117 8.8% - (28) (1) 88 6.6% 6.7% Year Ended December 31, 2010 Xylem Inc. 3,202 2,849 353 12.4% (263) 6 - 96 3.4% 12.6% Water infrastructure 1,930 1,651 279 16.9% (247) (8) - 24 1.5% 16.4% Applied Water 1,327 1,254 73 5.8% (16) 15 - 72 5.7% 7.0% Year Ended December 31, 2009 Xylem Inc. 2,849 3,291 (442) -13.4% (7) 158 - (291) -8.8% -8.6% Water infrastructure 1,651 1,824 (173) -9.5% - 109 (1) (65) -3.6% -3.5% Applied Water 1,254 1,527 (273) -17.9% (7) 53 - (227) -14.9% -14.4% 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) |
![]() 2013 INVESTOR & ANALYST DAY 122 Mid Point Guidance 2008 2009 2010 2011 2012 2013E Revenue 3,291 2,849 3,202 3,803 3,791 3,925 Operating Income 315 276 388 395 443 425 Operating Margin 9.6% 9.7% 12.1% 10.4% 11.7% 10.8% Restructuring & Realignment 41 31 15 - 24 65 Separation Costs - - - 87 22 - Adjusted Operating Income 356 307 403 482 489 490 Adjusted Operating Margin 10.8% 10.8% 12.6% 12.7% 12.9% 12.5% Standalone Costs - - - 5 28 - Adj. Operating Income, excl. Standalone Costs 356 307 403 487 517 490 Adjusted Operating Margin, excl. Standalone Costs 10.8% 10.8% 12.6% 12.8% 13.6% 12.5% Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) |
![]() 2013 INVESTOR & ANALYST DAY 123 2013 2012 2011 2010 2009 2008 Total Revenue • Total Xylem 3,925 3,791 3,803 3,202 2,849 3,291 • Water Infrastructure 2,540 2,425 2,416 1,930 1,651 1,824 • Applied Water 1,450 1,424 1,444 1,327 1,254 1,527 Operating Income • Total Xylem 425 443 395 388 276 315 • Water Infrastructure 318 342 343 276 227 220 • Applied Water 166 170 160 158 109 162 Operating Margin • Total Xylem 10.8% 11.7% 10.4% 12.1% 9.7% 9.6% • Water Infrastructure 12.5% 14.1% 14.2% 14.3% 13.7% 12.1% • Applied Water 11.4% 11.9% 11.1% 11.9% 8.7% 10.6% Separation Costs • Total Xylem - 22 87 - - - • Water Infrastructure - 4 16 - - - • Applied Water - 2 13 - - - Restructuring & Realignment Costs • Total Xylem 65 24 - 15 31 41 • Water Infrastructure 50 19 - 12 15 17 • Applied Water 15 5 - 3 15 18 Adjusted Operating Income* • Total Xylem 490 489 482 403 307 356 • Water Infrastructure 368 365 359 288 242 237 • Applied Water 181 177 173 161 124 180 Adjusted Operating Margin* • Total Xylem 12.5% 12.9% 12.7% 12.6% 10.8% 10.8% • Water Infrastructure 14.5% 15.1% 14.9% 14.9% 14.7% 13.0% • Applied Water 12.5% 12.4% 12.0% 12.1% 9.9% 11.8% *Adjusted Operating Income excludes non-recurring separation, restructuring & realignment costs Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) |
![]() 2013 INVESTOR & ANALYST DAY 124 Illustration of Mid Point Guidance 2013 Guidance FY '12 FY '13 As Reported Adjustments Adjusted As Projected Adjustments Adjusted Total Revenue 3,791 3,791 3,925 3,925 Segment Operating Income 512 30 a 542 484 65 d 549 Segment Operating Margin 13.5% 14.3% 12.3% 14.0% Corporate Expense 69 (16) b 53 59 - 59 Operating Income 443 46 489 425 65 490 Operating Margin 11.7% 12.9% 10.8% 12.5% Interest Expense (55) (55) (55) (55) Other Non-Operating Income (Expense) - - (2) (2) Income before Taxes 388 46 434 368 65 433 Provision for Income Taxes (91) (13) c (104) (72) (19) c (91) Net Income 297 33 330 296 46 342 Diluted Shares 186.2 186.2 186.4 186.4 Diluted EPS 1.59 $ 0.18 $ 1.77 $ 1.59 $ 0.25 $ 1.84 $ a One time separation, restructuring and realignment costs incurred at the segment level b One time separation, restructuring and realignment costs incurred at the corporate level c Net tax impact of above items, plus the addition of special tax items d Restructuring and realignment costs incurred at the segment level Xylem Inc. Non-GAAP Reconciliation Guidance ($ Millions, except per share amounts) |
![]() 2013 INVESTOR & ANALYST DAY 125 2013E 2012 Net Cash - Operating Activities 410 396 Capital Expenditures (130) (112) Free Cash Flow, including separation costs 280 284 Cash Paid for Separation Costs (incl. Capex) - 28 Free Cash Flow, excluding separation costs 280 312 Net Income 296 297 Separation Costs, net of tax (incl. tax friction) - 16 Net Income, excluding separation costs 296 313 Free Cash Flow Conversion 95% 100% Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow ($ Millions) Year Ended |
![]() 2013 INVESTOR & ANALYST DAY 126 |