Xylem (XYL) 8-K Xylem hosts investor and analyst day, updates 2013 guidance

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

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