![]() XYLEM INC. ELECTRICAL PRODUCTS GROUP CONFERENCE MAY 21, 2013 Exhibit 99.1 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL FORWARD-LOOKING STATEMENTS 2 This document contains information that may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements about the separation of Xylem Inc. (the “Company”) from ITT Corporation 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. |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 3 • Pure Water Play • Leading Market Positions • Fortress Brands & World Class Distribution • Diverse Geographic & End Market Exposure • Large Installed Base - Recurring Revenue ~37% • Strong Cash Flow Generation $3.8B WHAT MAKES XYLEM UNIQUE? GLOBAL LEADER IN WATER APPLICATION SOLUTIONS ABILITY TO DELIVER CONSISTENT FINANCIAL PERFORMANCE |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 4 WATER IS ONE OF THE MOST COMPLEX, CHALLENGING AND INCREASINGLY VISIBLE ISSUES FACING SOCIETY UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES |
![]() XYLEM PROPRIETARY / CONFIDENTIAL EVOLUTION TO A LEADING GLOBAL WATER TECHNOLOGY PROVIDER 5 MULTITRODE * Zenon is a registered trademark of GE |
![]() XYLEM PROPRIETARY / CONFIDENTIAL SPECIALIZED BREADTH IN THE WATER CYCLE 6 WE WORK TO ANTICIPATE OUR CUSTOMERS’ NEEDS WITH OUR BROAD PRODUCT OFFERING & OUR APPLICATIONS EXPERTISE TEST TEST |
![]() XYLEM PROPRIETARY / CONFIDENTIAL WATER INFRASTRUCTURE Market Size: $20B 2012 Revenues: $2.4B 2012 Op Margin*: 15.1% APPLIED WATER Market Size: $15B 2012 Revenues: $1.4B 2011 Op Margin*: 12.4% 7 SEGMENT OVERVIEW 64% 64% 36% Segment Split UNIQUE PORTFOLIO PROVIDES FOR UNIQUE PORTFOLIO PROVIDES FOR INNOVATIVE SOLUTIONS INNOVATIVE SOLUTIONS BROAD PRODUCT PORTFOLIO BACKED BY BROAD PRODUCT PORTFOLIO BACKED BY APPLICATION EXPERTISE APPLICATION EXPERTISE * See Appendix for Non-GAAP Reconciliations Industry-Leading Water & Environment Analytics Platform Broad Portfolio of Filtration, Biological and Disinfection Technologies World’s Largest Waste Water Pump & Dewatering Services Provider U.S. Leader in Industrial Water Technologies U.S. Leader in Building Services Equipment & Solutions Leading Global Provider of a Broad Range of Energy-Efficient Solutions with a Large & Diverse Customer Base |
![]() XYLEM PROPRIETARY / CONFIDENTIAL BALANCED PORTFOLIO 8 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% (2012 Revenue) |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 9 KEY END MARKETS INDUSTRIAL • Strong Brands • Deep Application Knowledge • Broad Product Portfolio • Improving Vitality Index • Expansion of Existing Products in Adjacent Markets MINING • Commodity Demand OIL & GAS • Natural Gas Fracking Activity CONSTRUCTION • Commercial & Residential Construction • Weather FOOD & BEVERAGE • Changing Dietary Habits • Emergence of Middle Class in EM GENERAL INDUSTRY • Paper • Power • Manufacturing Xylem 2012 Revenue: $1.6B • Chemicals • Pharma DIVERSE MARKET DRIVERS DIVERSE MARKET DRIVERS 13% 10% 9% 9% 6% 53% Mining Oil & Gas Construction Food & Beverage |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 10 KEY END MARKETS PUBLIC UTILITY • Large Installed Base with Loyal Customers • Consistent Tariff Increases • 70-80% of Revenues from Opex • Capex Spending Below Historical Levels but Bid Activity Remains Strong ~70% ~70% ~30% ~30% Opex Capex Connection Fees Tariffs Bonds Gov’t Financing Private Funding • Stable • Health & Economic Necessity • Cyclical • Capacity & Regulation Driven Source: Strategic Analytics Inc. U.S. Water and Sewer Construction Spending - $B Source: U.S. Census Bureau (April 2013) PUBLIC UTILITY DYNAMICS PUBLIC UTILITY DYNAMICS U.S. CAPEX SPENDING U.S. CAPEX SPENDING • Residential & Commercial Real Estate Development • Industrial Expansion • Increasing Regulation General Growth Drivers: |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 11 KEY END MARKETS COMMERCIAL BUILDINGS • Products for the Heating, Cooling and Protection of Commercial Buildings • Broadest Offering Allows for Optimizing Interaction of Key Building Components • Demand for Energy Efficient Solutions has Driven Retrofit Activity During the Recent Multi-Year New Building Construction Slowdown • Application Expertise Makes Xylem a Strong Partner for Specifying Engineers INTEGRATED SOLUTIONS ARCHITECTURE BILLING INDEX Source: AIA. Index Value of 50=No change from previous period. 45 46 47 48 49 50 51 52 Mar '12 Jun '12 Sept '12 Dec '12 Mar '13 49.9 47.3 51.5 51.2 51.9 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL OUR STRATEGIC FRAMEWORK 12 DISCIPLINE TO ACHIEVE KEY OBJECTIVES AND INCREASE SHAREHOLDER VALUE |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 13 GROWING AFTERMARKET PARTS & SERVICES INSTALLED BASE DRIVES REPLACEMENT SALES • Brand Loyalty Driven • Like-for-Like Replacement • Opportunity for Upgrades • Next-Generation Installations INCREASING PROFITABLE AFTERMARKET OPPORTUNITIES DELIVER CUSTOMER VALUE ENHANCING AFTERMARKET CAPABILITIES INTRODUCING XYLEM TOTALCARE • 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 ACCELERATING OPPORTUNITIES THROUGH ACQUISITIONS ~37% RECURRING REVENUE BASE $M 2008 2012 $396 $581 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL DRIVE PROFITABLE GROWTH EXECUTING ACQUISITION STRATEGY 14 ANALYTICS DEWATERING Opportunity Recent Transactions • Heartland Pump • High ROIC Business When Operating With Scale Advantage • Leverage Xylem’s Footprint and Replicate 24/7 Service Expertise • International Expansion • Products have Higher Market Growth Rates and Margins • Fill Product or Technology Gaps and Sell Through Existing Channels • Drive Sustainable Water Projects • International Expansion Revenue (2012) $298M $659M Capital Deployed* $732M $614M *Cumulative capital deployed through M&A from 2010 to Q1’13. Excludes CAPEX expenditures. Key Brands |
![]() XYLEM PROPRIETARY / CONFIDENTIAL IMPROVE BUSINESS SUSTAINABILITY OPTIMIZING OUR COST STRUCTURE 15 Complex Structure ONE Organization SUMMARY • Unified Xylem in Europe – Growth & Cost Synergies – HQ: Schaffhausen, Switzerland • Efficient Tax Structure 2013 FINANCIAL IMPACTS* • Restructuring & Realignment Costs of $60M to $70M Primarily Focused on Europe – Restructuring Savings of $13M to $15M – Additional Net EPS Impact of $0.03 From Realignment EUROPEAN REALIGNMENT ENABLING • Vertical Market Alignment – Sales Synergies & Future Growth Opportunities • Sales Office Consolidations • Sales Administrative and Functional Back-Office Standardization & Synergies • Factory Realignments • Shared Services & Centers of Excellence * 2013 ESTIMATE BASED ON GUIDANCE AS OF APRIL 30, 2013 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL XYLEM FINANCIAL SUMMARY STRONG TRACK RECORD OF FINANCIAL PERFORMANCE * See Appendix for Non-GAAP Reconciliations. ** Margin expansion includes $33M of additional Stand-Alone costs. 16 • Resilient Portfolio … Despite Challenging End Market Conditions • Continued Investment Driving Growth in Core Business • Key Acquisitions … Transitioning Portfolio to Higher Profitability Levels • Management Discipline … Proactive Actions • Operational Excellence … Driving Productivity Initiatives +210 Bps with Stand-Alone Costs** Revenue Up $500M … +15% $M Growth: -13% 12% 19% 0% Organic*: -9% 3% 0% REVENUE OPERATING MARGIN * 2008 2009 2010 2011 2012 10.8% 10.8% 10.8% 10.8% 12.6% 12.6% 12.7% 12.7% 12.9% 12.9% 2008 2009 2010 2011 2012 3,291 3,291 2,849 2,849 3,202 3,202 3,803 3,803 3,791 3,791 7% |
![]() XYLEM PROPRIETARY / CONFIDENTIAL FINANCIAL POSITION 17 • 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 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) * See Appendix for Non-GAAP Reconciliations ** (AR+INV-AP-Customer Advances) / Revenue (Adjusted for Acquisitions) *** See Xylem March 7, 2013 Investor & Analyst Day Presentation for further details. Conversion: 100% 95% $M FREE CASH FLOW * WORKING CAPITAL AS % REVENUE ** CAPITAL SUMMARY/LIQUIDITY 2012 2013E*** 312 280 2012 2013E*** 22.5% 22.0% |
![]() XYLEM PROPRIETARY / CONFIDENTIAL DISCIPLINED CAPITAL DEPLOYMENT 18 • 2.5% to 3.5% of Revenue • $0.1164/share In-line with Peers • Stock Buybacks to Offset Dilution • $150M - 350M in 2013 • Contributes 2% to 4% to Revenue/Yr. on Average Capital Deployment Strategy • Balanced Organic & Inorganic Investment • Return Value to Shareholders • Maintain Solid Investment Grade Metrics • Debt & Pension Organic Growth World Class Facilities Cash Return to Shareholders Cash to Meet Key Obligations Inorganic Investment to Fuel Growth Capital Deployment Evaluation • Fold Targeted Performance into Operating Plans • Quarterly / Annual Investment Review • Ensure Targeted Returns Achieved FOCUSED ON LONG TERM SHAREHOLDER RETURN FOCUSED ON LONG TERM SHAREHOLDER RETURN Cash from Operations Capex Return to Shareholders Financial Obligations Acquisition Strategy |
![]() XYLEM PROPRIETARY / CONFIDENTIAL KEY FINANCIAL PROJECTIONS 19 LONG-TERM PERFORMANCE TARGETS** • 2013-2017 Revenue CAGR of 5-9% • Core Operating Margin Expands 50-75 Bps/Yr Partially Offset by 1x Acquisition Impacts • 2013-2017 EPS CAGR of 7-14% • Strong Free Cash Flow (100% Conversion) • Disciplined Capital Deployment • ROIC Accelerates from 10.8% in 2012 to 13% - 14% by 2017 2013 FY Guidance As of April 30, 2013 * 2017 Long-Term Targets ** Revenues ~$3.925B (mid-point) $4.7B to $5.5B Op. Margin* 12.2% to 12.7% 14% to 15% EPS* $1.79 to $1.89 $2.50 to $3.40 * See Appendix for 2013 Financial Guidance Summary and non-GAAP reconciliations. ** See Xylem March 7, 2013 Investor & Analyst Day Presentation for further details. 2013 KEY OBJECTIVES • Strong Free Cash Flow (95% Conversion) • European Realignment Actions to Best Position for Recovery … $0.03 Net EPS Benefit in ’13 … Tax Rate Reduction to 21% • Restructuring Actions Drive $26M to $30M in Annual Cost Savings ($13M to $15M in 2013) • Continuing to Invest in New Product Launches • Execution of Acquisition Strategy Targeting Deployment of $150M to $350M |
![]() XYLEM PROPRIETARY / CONFIDENTIAL THANK YOU FOR YOUR INTEREST THANK YOU FOR YOUR INTEREST 20 CLOSING REMARKS |
![]() APPENDIX |
![]() XYLEM PROPRIETARY / CONFIDENTIAL * See Appendix for Non-GAAP Reconciliations 22 2013 FINANCIAL GUIDANCE SUMMARY 2013 FY Guidance 2013 FY Guidance As of April 30, 2013 As of April 30, 2013 Growth Growth 2013E vs. 2012 2013E vs. 2012 Revenue Xylem Consolidated Water Infrastructure Applied Water Segment Margin * Operating Margin * EPS * Free Cash Flow Conversion Guidance Assumptions: Operating Tax Rate Share Count Items Excluded from EPS: Restructuring & Realignment Costs (Mid-Point) ~$3,925M ~$2,540M ~$1,450M 13.7% - 14.2% 12.2% - 12.7% $1.79 - $1.89 ~95% ~21% ~186.4M ~$60M - $70M Restructuring Costs: ~$40M to $50M Share Repurchase Program to Maintain Current Share Count 1H’13 Rate: ~22%; 2H’13 Rate: ~20% Restructuring Payments, Realignment Capex, & CHQ Relocation $1.84 Mid Point -70 bps to -20 bps -60 bps to -10 bps Total Growth Organic Acquisition FX ~3 to 4% 0 to 1% 2% 1% ~4 to 5% 0 to 1% 3% 1% ~1 to 2% 0 to 1% 0% 1% |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 23 WATER INFRASTRUCTURE BUSINESS OVERVIEW TRANSPORT TRANSPORT 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 29% 39% 14% 18% U.S. Europe Asia Pacific 26% 46% 14% 14% U.S. Europe Asia Pacific Other Other |
![]() XYLEM PROPRIETARY / CONFIDENTIAL Bridgeport, NJ; Emmaboda, Sweden; Quenington, UK Sales & Rentals Dry Prime, Submersible & Slurry Pumps Aftermarket Parts & Services 24 WATER INFRASTRUCTURE BUSINESS OVERVIEW DEWATERING DEWATERING 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 45% 19% 11% 25% U.S. Europe Asia Pacific Other 21% 15% 28% 21% 15% Public Utilities Oil & Gas Mining Construction Oth. Industrial |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 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 25 WATER INFRASTRUCTURE BUSINESS OVERVIEW TEST TEST Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography & Segment: Key Facilities: Key Brands: $4B $298M 28% 41% 21% 10% U.S. Europe Asia Pacific Other 25% 32% 33% Field Sampling Field Monitoring Online Lab 10% |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 26 APPLIED WATER SYSTEMS BUSINESS OVERVIEW Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography: 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 $2B $96M Groundwater & Surface Pumps Packaged Systems, Drives & Controls BUILDING SERVICES BUILDING SERVICES INDUSTRIAL WATER INDUSTRIAL WATER IRRIGATION IRRIGATION |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 27 COMPETITIVE LANDSCAPE LEADING POSITIONS IN KEY APPLICATIONS 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 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL WATER INFRASTRUCTURE Growth: -10% 17% 25% 0% 4.7% Organic*: -4% 2% 7% 0% 0.5% 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 * See Appendix for Non-GAAP Reconciliations $M $M 28 REVENUE REVENUE HIGHLIGHTS HIGHLIGHTS OP INCOME & MARGIN* OP INCOME & MARGIN* ** 2013 ESTIMATE BASED ON GUIDANCE AS OF MARCH 7, 2013 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL APPLIED WATER Growth: -18% 6% 9% -1% 1.8% Organic*: -15% 6% 7% 1% 0.5% OM%: 11.8% 9.9% 12.1% 12.0% 12.4% 12.5% 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 $M $M 29 * See Appendix for Non-GAAP Reconciliations ** 2013 ESTIMATE BASED ON GUIDANCE AS OF MARCH 7, 2013 OP INCOME & MARGIN* OP INCOME & MARGIN* REVENUE REVENUE HIGHLIGHTS HIGHLIGHTS |
![]() XYLEM PROPRIETARY / CONFIDENTIAL ACQUISITION SCORECARD Acquisition Invested $M Year Completed Strategic Fit Gross Margin Accretive IRR > Risk Adj. Cost of Capital Mid- Teens ROIC Cash Return 7-9 Years EPS Accretive After Yr 1 Laing $30 2009 Nova $384 2010 Godwin $585 2010 OI $25 2010 YSI $310 2011 Through 2012 Added ~200 Bps Added ~$0.45 MJK $13 2012 Heartland $29 2012 PIMS $57 2013 RECENTLY ACQUIRED MultiTrode $26 2013 Completed On Track Not Achieved 30 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 31 NON-GAAP MEASURES Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operations as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators: defined as revenue and orders, respectively, excluding the impact of foreign currency fluctuations, intercompany transactions, and contributions from acquisitions and divestitures. Divestitures include sales of portions of our business that did not meet the criteria for classification as a discontinued operation or insignificant portions of our business that we did not classify as a discontinued operation. The period-over-period change resulting from foreign currency fluctuations assumes no change in exchange rates from the prior period. 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. 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. 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. “Organic revenue" and "Organic orders” “Constant currency” "Adjusted Operating Income", "Adjusted Segment Operating Income", and “Adjusted EPS” “Free Cash Flow” |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 32 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) |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 33 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) |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 34 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) |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 35 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) |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 36 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) |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 37 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 |
![]() XYLEM PROPRIETARY / CONFIDENTIAL 38 |