![]() XYLEM INC. Q1 2013 EARNINGS RELEASE APRIL 30, 2013 Exhibit 99.2 |
![]() FORWARD-LOOKING STATEMENTS This document contains information that may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements about the separation of Xylem Inc. (the “Company”) from ITT Corporation in 2011, capitalization of the Company, future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to orders, revenues, operating margins and earnings per share growth, and statements expressing general views about future operating results — are forward-looking statements. Caution should be taken not to place undue reliance on any such forward-looking statements because they involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those set forth in Item 1A of our Annual Report on Form 10-K, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission. 2013 INVESTOR & ANALYST DAY 2 |
![]() 3 Q1’13 XYLEM RESULTS * See appendix for non-GAAP reconciliations European Market Weakness, Project Timing Volume Decline & Continued Investment Partially Offset by Cost Reductions Restructuring & Realignment Actions Underway Constant Currency Basis * Q1 2013 EARNINGS RELEASE FINANCIAL PERFORMANCE SUMMARY PERFORMANCE SUMMARY Orders $962M Book to Bill 1.09 Revenue $879M -5% Gross Margin 38.0% -120 bps Operating Margin* 8.9% -230 bps EPS * $0.27 In Line with Expectations Free Cash Flow * - $10M Normal Seasonality, Lower Income, Timing of Tax Payments |
![]() 4 BUSINESS UPDATE Q1 2013 EARNINGS RELEASE SIGNIFICANT PROGRESS MADE ON CRITICAL 2013 ACTIVITIES SIGNIFICANT PROGRESS MADE ON CRITICAL 2013 ACTIVITIES • Enhancing Aftermarket Capabilities (PIMS Acquisition/TotalCare) • Focused on Ensuring Robust Delivery and Responsiveness • Advancing Acquisition Strategy • New Product Launches Gaining Traction • Accelerating Geographic Expansion • Executing Restructuring & Realignment Plans • Continuing to Drive Cost Savings Through Lean Six Sigma and Global Sourcing Initiatives • Focused on Business Simplification Initiatives DELIVER CUSTOMER VALUE DRIVE PROFITABLE GROWTH IMPROVE BUSINESS SUSTAINABILITY |
![]() 5 Q1’13 XYLEM PERFORMANCE Q1 2013 EARNINGS RELEASE * See appendix for non-GAAP reconciliations MANAGING THROUGH MARKET CONDITIONS & TOUGH PRIOR YEAR COMPS MANAGING THROUGH MARKET CONDITIONS & TOUGH PRIOR YEAR COMPS |
![]() 6 Q1’13 XYLEM PERFORMANCE Q1 2013 EARNINGS RELEASE * See appendix for non-GAAP reconciliations Q1 EPS PERFORMANCE IN LINE WITH EXPECTATIONS Q1 EPS PERFORMANCE IN LINE WITH EXPECTATIONS |
![]() 7 Q1’13 WATER INFRASTRUCTURE PERFORMANCE Q1 2013 EARNINGS RELEASE * See appendix for non-GAAP reconciliations MAINTAINING INVESTMENT DESPITE LOWER VOLUME MAINTAINING INVESTMENT DESPITE LOWER VOLUME |
![]() 8 Q1’13 APPLIED WATER PERFORMANCE Q1 2013 EARNINGS RELEASE * See appendix for non-GAAP reconciliations CUSTOMER EXCELLENCE & PRODUCTIVITY DRIVE MARGIN PERFORMANCE CUSTOMER EXCELLENCE & PRODUCTIVITY DRIVE MARGIN PERFORMANCE |
![]() 9 Q1 2013 EARNINGS RELEASE XYLEM FINANCIAL POSITION • Free Cash Flow Decline • Lower Income • Timing of Tax Payments • Capex > 1 reinvestment ratio Capital Summary/Liquidity • Strong cash position • No Significant Debt Maturities Until 2016 • 1.3x Net Debt/Adj. TTM EBITDA • $600M Revolving Credit Facility - Unutilized • Access to Commercial Paper - Unutilized FCF% 61% -24% March 31, 2013 Cash 375 Debt 1,205 Net Debt 830 Shareholders’ Equity 2,040 Net Capital 2,870 Net Debt to Net Capital 29% (Dollars, In Millions) (Dollars, In Millions) * See Appendix for Non-GAAP Reconciliations ** (AR+INV-AP-Customer Advances) / Revenue (Adjusted for Acquisitions) |
![]() 10 Q1 2013 EARNINGS RELEASE 2013 FINANCIAL GUIDANCE SUMMARY * See appendix for non-GAAP reconciliations 2013 Full Year 2013 Full Year Financial Outlook Financial Outlook Growth Growth 2013E vs. 2012 2013E vs. 2012 Revenue (Mid-Point) Total Growth Organic Acquisition FX Xylem Consolidated ~$3,925M ~3 to 4% 0 to 1% 2% 1% Water Infrastructure ~$2,540M ~4 to 5% 0 to 1% 3% 1% Applied Water ~$1,450M ~1 to 2% 0 to 1% 0% 1% Segment Margin * 13.7% to 14.2% -60 bps to -10 bps Operating Margin * 12.2% to 12.7% -70 bps to -20 bps EPS * $1.79 to $1.89 $1.84 Mid Point Free Cash Flow Conversion ~95% Restructuring Pmts, Realignment Capex, & CHQ Relocation Guidance Assumptions: Operating Tax Rate ~21% 1H’13 Rate: ~22%; 2H’13 Rate: ~20% Share Count ~186.4M Share Repurchase Program Maintains Current Share Count Items Excluded from EPS: Restructuring & Realignment Costs ~$60M to $70M Restructuring Costs: ~$40M to $50M |
![]() 11 REVENUE OUTLOOK BY END MARKET PLANNING ASSUMPTIONS SUPPORT MODEST SECOND HALF RECOVERY PLANNING ASSUMPTIONS SUPPORT MODEST SECOND HALF RECOVERY FY’13 vs. PY vs. Previous Outlook Planning Assumptions Industrial Flat to Up Low Single Digit • 2H U.S. Improvement/Easier Comps • Europe Challenged Public Utility Flat • Stable OPEX Market • Modest Improvement in U.S. Capital Projects Commercial Flat to Up Low Single Digit • Modest 2H U.S. Improvement • Successful Launch of New Products Residential Flat to Up Low Single Digit • U.S. Markets Continue to Improve • Europe Stabilizes Agriculture Flat • Good Q1 Start /Tough FY Comparison Q1 2013 EARNINGS RELEASE |
![]() 12 Q1 2013 EARNINGS RELEASE 2013 EPS GUIDANCE * See appendix for non-GAAP reconciliations |
![]() 13 Q1 2013 EARNINGS RELEASE SUMMARY • Completed PIMS and MultiTrode Acquisitions … Integration Underway • Orders/Revenue Slightly Weaker Than Expected • Operations & Cost Reduction Activities Deliver EPS In Line with Expectations • Successful Product Launches • Continuing to Invest for Growth … Expect Additional Product Launches in 2013 • Focused on Driving Cost Savings Through Lean Six Sigma and Global Sourcing Initiatives • Executing 2013 Restructuring & Realignment Actions • Acquisition Pipeline Robust Q1 PERFORMANCE 2013 OUTLOOK |
![]() 14 Q1 2013 EARNINGS RELEASE APPENDIX |
![]() 15 Q1 2013 EARNINGS RELEASE NON-GAAP MEASURES Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operations as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators: “Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of foreign currency fluctuations, intercompany transactions, and contributions from acquisitions and divestitures. Divestitures include sales of portions of our business that did not meet the criteria for classification as a discontinued operation or insignificant portions of our business that we did not classify as a discontinued operation. The period-over- period change resulting from foreign currency fluctuations assumes no change in exchange rates from the prior period. “Constant currency” defined as financial results adjusted for currency translation impacts by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the U.S. dollar. “EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA”reflects the adjustment to EBITDA to exclude for non-recurring separation costs associated with the Xylem spin-off from ITT Corporation (not excluded for 2013) as well as non-recurring restructuring and realignment costs. "Adjusted Operating Income", "Adjusted Segment Operating Income", and “Adjusted EPS” defined as operating income and earnings per share, adjusted to exclude non-recurring separation costs associated with the Xylem spin-off from ITT Corporation (not excluded for 2013), non-recurring restructuring and realignment costs and tax-related special items. “Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as adjustments for other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of free cash flows does not consider non-discretionary cash payments, such as debt. |
![]() 16 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: ORGANIC & CONSTANT CURRENCY REVENUE GROWTH 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 2013 v. 2012 2013 v. 2012 FX Contribution Eliminations Adj. 2013 v. 2012 Adj. 2013 v. 2012 2013 2012 Quarter Ended March 31, 2013 Xylem Inc. 879 925 (46) -5.0% (23) 2 - (67) -7.2% -4.8% Water infrastructure 551 584 (33) -5.7% (23) 1 - (55) -9.4% -5.5% Applied Water 345 355 (10) -2.8% - - (2) (12) -3.4% -2.8% 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) |
![]() 17 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: ORGANIC & CONSTANT CURRENCY ORDER GROWTH Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (B + D) / A Change % Change Change % Change Orders Orders 2013 v. 2012 2013 v. 2012 FX Contribution Eliminations Adj. 2013 v. 2012 Adj. 2013 v. 2012 2013 2012 Quarter Ended March 31, 2013 Xylem Inc. 962 1,004 (42) -4.2% (26) 2 - (66) -6.6% -4.0% Water infrastructure 601 638 (37) -5.8% (26) 2 - (61) -9.6% -5.5% Applied Water 378 382 (4) -1.0% - - (1) (5) -1.3% -1.0% Note: Due to rounding the sum of segment amounts may not agree to Xylem totals. Acquisitions / Divestitures Xylem Inc. Non-GAAP Reconciliation Reported vs. Organic & Constant Currency Order Growth ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) |
![]() 18 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: ADJUSTED DILUTED EPS Q1 2012 Q1 2013 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 925 925 879 879 Operating Income 99 5 a 104 66 12 c 78 Operating Margin 10.7% 11.2% 7.5% 8.9% Interest Expense (14) (14) (13) (13) Other Non-Operating Income (Expense) (1) (1) (2) (2) Income before Taxes 84 5 89 51 12 63 Provision for Income Taxes (21) (1) b (22) (10) (3) d (13) Net Income 63 4 67 41 9 50 Diluted Shares 185.9 185.9 186.4 186.4 Diluted EPS 0.34 $ 0.02 $ 0.36 $ 0.22 $ 0.05 $ 0.27 $ a One time separation costs b Net tax impact of separation costs c Restructuring & realignment costs d Tax impact of restructuring & realignment costs Xylem Inc. Non-GAAP Reconciliation Adjusted Diluted EPS ($ Millions, except per share amounts) |
![]() 19 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: ADJUSTED OPERATING INCOME Q1 '13 '12 Total Revenue • Total Xylem 879 925 • Water Infrastructure 551 584 • Applied Water 345 355 Operating Income • Total Xylem 66 99 • Water Infrastructure 42 75 • Applied Water 40 40 Operating Margin • Total Xylem 7.5% 10.7% • Water Infrastructure 7.6% 12.8% • Applied Water 11.6% 11.3% Separation Costs • Total Xylem - 5 • Water Infrastructure - 2 • Applied Water - 1 Restructuring & Realignment Costs • Total Xylem 12 - • Water Infrastructure 10 - • Applied Water 2 - Adjusted Operating Income* • Total Xylem 78 104 • Water Infrastructure 52 77 • Applied Water 42 41 Adjusted Operating Margin* • Total Xylem 8.9% 11.2% • Water Infrastructure 9.4% 13.2% • Applied Water 12.2% 11.5% Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) *Adjusted Operating Income excludes restructuring & realignment costs in 2013 and excludes non-recurring separation costs in 2012. |
![]() ![]() 20 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: FREE CASH FLOW 2013 2012 Net Cash - Operating Activities 20 61 Capital Expenditures (30) (31) Free Cash Flow, including separation costs (10) 30 Cash Paid for Separation Costs (incl. Capex) - 11 Free Cash Flow, excluding separation costs* (10) 41 Net Income 41 63 Separation Costs, net of tax (incl. tax friction) - 4 Net Income, excluding separation costs* 41 67 Free Cash Flow Conversion -24% 61% * Separation costs are not excluded in 2013 Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow Three Months Ended March 31, 2013 and 2012 ($ Millions) Three Months Ended |
![]() ![]() 21 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: XYLEM EBITDA & ADJ. EBITDA Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 51 Interest Expense (Income), net 12 Depreciation 25 Amortization 12 Stock Compensation 6 EBITDA 106 Restructuring & Realignment 12 Adjusted EBITDA 118 Revenues 879 Adjusted EBITDA Margin 13.4% Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 84 115 100 89 388 Interest Expense (Income), net 13 13 12 13 51 Depreciation 23 21 24 26 94 Amortization 11 12 12 13 48 Stock Compensation 5 5 6 6 22 EBITDA 136 166 154 147 603 Separation Costs 5 6 4 7 22 Restructuring & Realignment - - 5 19 24 Adjusted EBITDA 141 172 163 173 649 Revenues 925 966 931 969 3,791 Adjusted EBITDA Margin 15.2% 17.8% 17.5% 17.9% 17.1% 2013 2012 Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter ($ Millions) |
![]() ![]() 22 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: WATER INFRASTRUCTURE EBITDA & ADJ. EBITDA Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 42 Interest Expense (Income), net - Depreciation 19 Amortization 9 Stock Compensation 1 EBITDA 71 Restructuring & Realignment 10 Adjusted EBITDA 81 Revenues 551 Adjusted EBITDA Margin 14.7% Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 75 93 86 88 342 Interest Expense (Income), net - - (1) - (1) Depreciation 16 15 17 20 68 Amortization 10 9 10 10 39 Stock Compensation 1 1 3 - 5 EBITDA 102 118 115 118 453 Separation Costs 2 1 - 1 4 Restructuring & Realignment - - 4 15 19 Adjusted EBITDA 104 119 119 134 476 Revenues 584 609 595 637 2,425 Adjusted EBITDA Margin 17.8% 19.5% 20.0% 21.0% 19.6% 2013 2012 Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Water Infrastructure ($ Millions) |
![]() ![]() 23 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: APPLIED WATER EBITDA & ADJ. EBITDA Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 40 Interest, net - Depreciation 6 Amortization 2 Stock Compensation 1 EBITDA 49 Restructuring & Realignment 2 Adjusted EBITDA 51 Revenues 345 Adjusted EBITDA Margin 14.8% Q1 Q2 Q3 Q4 Total Pre-Tax Net Income 40 52 43 35 170 Interest, net - - - - - Depreciation 6 6 6 5 23 Amortization 1 1 1 2 5 Stock Compensation 1 - 2 (1) 2 EBITDA 48 59 52 41 200 Separation Costs 1 - 1 - 2 Restructuring & Realignment - - - 5 5 Adjusted EBITDA 49 59 53 46 207 Revenues 355 373 350 346 1,424 Adjusted EBITDA Margin 13.8% 15.8% 15.1% 13.3% 14.5% 2013 2012 Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA by Quarter Applied Water ($ Millions) |
![]() 24 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: GUIDANCE 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) |
![]() 25 Q1 2013 EARNINGS RELEASE NON-GAAP RECONCILIATION: ADJ. OPERATING INCOME AND MARGIN 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) |
![]() 26 Q1 2013 EARNINGS RELEASE |