XYLEM INC. INVESTOR PRESENTATION OPPENHEIMER 9 TH ANNUAL INDUSTRIAL GROWTH CONFERENCE 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. |
INVESTMENT HIGHLIGHTS |
XYLEM PROPRIETARY / CONFIDENTIAL 4 • Focused Pure Water Play • Leading Market Positions • Fortress Brands & World Class Distribution • Diverse Geographic & End Market Exposure • Large Installed Base Drives Recurring Revenue • Strong Financial Position & Cash Flow Generation $3.8B WHY SHOULD YOU INVEST IN XYLEM? STRONG FOUNDATION & FUNDAMENTALS WITH OPPORTUNITY TO OUTPERFORM |
XYLEM PROPRIETARY / CONFIDENTIAL SPECIALIZED BREADTH IN THE WATER CYCLE 5 • Global Water Industry: $500B • Public Utilities • Design & Build Firms • Equipment & Service Providers • Industry Consists of Two Sectors • Water & Waste Water Infrastructure • To Serve End Users • Xylem’s SAM: $35B • Technology Intensive & High Value Equipment • Critical Applications • Knowledge-Based Services • Long-Term Growth Driven by Macro Trends & Growing Water Challenges UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES |
XYLEM PROPRIETARY / CONFIDENTIAL JOURNEY FROM A PORTFOLIO OF BUSINESSES TO A SOLUTION PORTFOLIO 6 MULTITRODE * * Zenon is a registered trademark of GE EVOLUTION TO A LEADING GLOBAL WATER TECHNOLGY PROVIDER |
GLOBAL BUSINESS OVERVIEW |
XYLEM PROPRIETARY / CONFIDENTIAL GLOBAL MARKET PRESENCE 8 REVENUE BY GEOGRAPHY (2013 Revenue) GLOBAL SCALE & LOCAL PRESENCE PROVIDE A COMPETITIVE ADVANTAGE • 360+ Global Locations • 50 Emerging Market Sales & Service Centers • 11 Emerging Market Production Facilities • Reaching Customers in More Than 150 Countries A Growing Emerging Market Presence … Today ~20% United States Europe Asia Pac Rest of World 38% 36% 12% 14% |
XYLEM PROPRIETARY / CONFIDENTIAL DIVERSE CUSTOMER BASE 9 REVENUE BY END MARKET (2013 Revenue) UNDERSTANDING & ANTICIPATING OUR CUSTOMERS NEEDS Industrial 45% Public Utility 34% Commercial 11% Residential 7% Agriculture 3% |
XYLEM PROPRIETARY / CONFIDENTIAL FOCUSED ON KEY GROWTH END MARKETS 10 LEADING POSITIONS & ATTRACTIVE LONG-TERM GROWTH OPPORTUNITIES • Strong Brands • Diverse Market Applications INDUSTRIAL ($1.7B) PUBLIC UTILITY ($1.3B) COMMERCIAL ($400M) (2013 Revenue) • Market Leading Positions • Large Installed Base • LT Growth Opportunities • Market Leading Positions • Large Installed Base • LT Growth Opportunities • US & Europe Pent-Up Demand • Emerging Market Infrastructure Development • Steady Growth from Maintenance & Repair Business • New Product Launches • Demand for Energy Efficient Solutions • Regulatory Standards • Emerging Market Key Account Strategy • Light Industrial • Energy • Mining • Construction • Food & Beverage • Marine • Underserved Markets • Adjacent Mkt Expansion • LT Growth Opportunities |
XYLEM PROPRIETARY / CONFIDENTIAL SERVING CRITICAL NEEDS 11 GLOBAL LEADER IN WATER APPLICATION SOLUTIONS REVENUE BY APPLICATION (2013 Revenue) Water Infrastructure Includes Transport, Treatment and Test Applications … Which Are Integrated into the Most Critical Water Infrastructure Systems for Both Public Utility and Large Industrial Customers Applied Water Includes Building Services, Industrial Water and Irrigation Applications … Which Are Key Elements Systems for Commercial, Residential, Industrial and Ag Customers Transport 47% Treatment 8% Test 8% Building Svcs 18% Industrial Water 16% Irrigation 3% |
XYLEM PROPRIETARY / CONFIDENTIAL HISTORICAL XYLEM PERFORMANCE OM%: 10.8% 10.8% 12.6% 12.7% 12.9% 11.8% OPPORTUNITY TO ACCELERATE GROWTH AND IMPROVE OPERATING PERFORMANCE $M $M 12 REVENUE OPERATING INCOME & MARGIN* * See appendix for non-GAAP reconciliations GM%: 34.7% 36.4% 37.9% 38.4% 39.6% 39.1% $M GROSS PROFIT & MARGIN 2008 2009 2010 2011 2012 2013 3,291 2,849 3,202 3,803 3,791 3,837 2008 2009 2010 2011 2012 2013 1,141 1,037 1,214 1,461 1,502 1,499 2008 2009 2010 2011 2012 2013 356 307 403 482 489 451 ‘08-’13 Revenue up 17%; 3% CAGR • New Product Development • Emerging Market Growth • Analytics and Dewatering Platforms 100 Bps Operating Margin Expansion • Pricing Improvements; Lean & Global Sourcing • Deployed ~$100M in Restructuring • Includes $33M Stand-Alone Costs • 2013 impacted by lower Public Utility CAPEX spending and weak European market conditions -13% 12% 19% 1% Organic*: -9% 3% 7% -1% Growth: 0% 0% |
XYLEM PROPRIETARY / CONFIDENTIAL HISTORICAL XYLEM PERFORMANCE * See appendix for non-GAAP reconciliations Margin %: 12.9% 13.6% 15.7% 16.7% 17.1% 16.2% $M EBITDA* Reinvest %: 1.2x 1.2x 1.5x 1.4x 1.2x 1.3% Ratio $M CAPEX $M R&D % of : 1.9% 2.2% 2.3% 2.6% 2.8% 2.7% Revenue STRONG CASH GENERATION FUNDS CONTINUED GROWTH INVESTMENT 2008 2009 2010 2011 2012 2013 425 387 504 637 649 622 2008 2009 2010 2011 2012 2013 64 63 74 100 106 104 2008 2009 2010 2011 2012 2013 67 62 94 126 112 126 Strong Operating Cash Flow Generation Generate, Reinvest, Grow • EBITDA Up 47% Since 2008; 8% CAGR • Better Price Execution • Increase in Portfolio Profitability • Improved Productivity • Increasing R&D Investment • Capex Reinvestment Ratio >1 13 |
XYLEM PROPRIETARY / CONFIDENTIAL STRONG FINANCIAL POSITION BALANCED CAPITAL DEPLOYMENT TO ENHANCE SHAREHOLDER RETURNS 14 * See appendix for non-GAAP reconciliations CAPITAL SUMMARY March 31, 2014 Cash 466 Debt 1,243 Net Debt 777 Shareholders’ Equity 2,229 Net Capital 3,006 Net Debt to Net Capital 26% Liquidity and Cash Management • Access to Revolver and Commercial Paper for Short-Term Liquidity Requirements • No Debt Maturities Until 2016 & 2021 Pension & OPEB • Status: 103% (Funded Plans); 67% (Overall) CAPITAL DEPLOYMENT STRATEGY Return Capital to Shareholders Invest in Organic Growth Initiatives Inorganic Growth Investments • Differentiated Product Development • Maintenance & Investment Capex • Dividends • Share Repurchase Programs • Acquire Bolt-on and Close-to-Core Companies • Strategic & Financial Filters Drive Disciplined Approach • Proven Track Record |
REVIEW OF 1Q EARNINGS PERFORMANCE & 2014 OUTLOOK Note: Forward Looking information presented on slides 17 & 18 were as of April 29, 2014. Please review the Forward Looking Statements on slide 2, and note that 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. |
XYLEM PROPRIETARY / CONFIDENTIAL 16 BUSINESS UPDATE SOLID 1ST QUARTER PERFORMANCE ... ON TRACK TO DELIVER 2014 * See appendix for non-GAAP reconciliations Highlights 1st Quarter Financial Summary Strong finish to the 1 Quarter … March performance offset slow start Emerging Markets off to fast start, Europe slowly recovering Volume & cost actions drive significant Op Margin expansion & Earnings growth Operating improvements on track to deliver full year savings Orders of $993M up 3% … Ending Backlog $793M, 2014 Shippable Backlog up 6% Revenue of $906M up 3%, with growth in both segments Operating Margin* of 10.4%, up 150 bps; strong incremental margin performance Earnings Per Share* $0.34 up 26% Free Cash Flow* usage $3M … Seasonality and Working Capital investment st |
XYLEM PROPRIETARY / CONFIDENTIAL 17 2014 GROWTH PROFILE (As of April 29, 2014) Industrial Public Utility • Emerging Market infrastructure investment; Slow Capex recovery in U.S./Europe • Opex stable in US & Europe (34% of ’13 Revenue) Commercial • Emerging Market growth & new product launches • Weak U.S. institutional bldg mkt; Europe slow to recover (11% of ’13 Revenue) Agriculture • Tough year-over-year comparison following strong 2012 & 2013 performance (3% of ’13 Revenue) Residential • Cold winter subsides in U.S.; U.S. housing recovery moderates; Europe stabilizes • Tough 2Q comp (2Q’13 U.S. +18% vs. PY) (7% of ’13 Revenue) Up Low Single Digit Up Low Single Digit Up Low Single Digit Up Low Single Digit Flat to Up Low Single Digit Xylem 2014 Organic Growth • Improving global Capex environment • Driving market share gains • Mining headwinds continue (45% of ’13 Revenue) STABLE MARKET CONDITIONS … EXPECTATIONS REMAIN UNCHANGED |
XYLEM PROPRIETARY / CONFIDENTIAL 18 (Dollars, In Millions, except EPS) REVENUE * See appendix for non-GAAP reconciliations OPERATING INCOME* EPS* 2014 XYLEM OUTLOOK (As of April 29, 2014) $3,900 to $3,980 $490 to $525 $1.85 to $2.00 Op Margin FREE CASH FLOW* Higher Income, Working Cap Improvement, and Lower Capex Spend ROIC ~11% DIVIDENDS/SHARE REPURCHASES ~225 Targeting 100 Bps Improvement Expected 10% Annual Dividend Increase, ~$130M for Share Repurchases 3,837 451 1.67 198 154 10.0% 2013 2014 2013 2014 2013 2014 2013 2014E 2013 2014 2013 2014 11.8% 12.6% to 13.2% ~310-345 COST FOCUS EXPECTED TO DRIVE SOLID EARNINGS GROWTH … MARKET RECOVERY FUELS UPSIDE |
CLOSING SUMMARY |
XYLEM PROPRIETARY / CONFIDENTIAL 20 HOW WILL XYLEM IMPROVE PERFORMANCE? The Xylem Management System (“XMS”) defines how we create value. It integrates our key strategic operating processes to drive superior growth and operational excellence, efficient capital deployment, and strong, consistent leadership TOP PRIORITIES FOCUSED ON EXECUTION & DRIVING ACCOUNTABILITY Accelerate Revenue Growth Improve Operating Cost Position Embed Continuous Improvement Tools Optimize Integrated Front End • Invest & Implement Global CRM Tool • Differentiated Product Innovation Emerging Market Expansion • • Expand Global Sourcing Capabilities Manage General & Administrative Costs Drive Lean Six Sigma More Consistently, Deeper and Across the Entire Organization • • • Rebalance Portfolio & Product Investments • REIGNITE “XMS” |
XYLEM PROPRIETARY / CONFIDENTIAL 21 |
APPENDIX |
XYLEM PROPRIETARY / CONFIDENTIAL WATER INFRASTRUCTURE Market Size: $20B 2013 Revenues: $2.5B 2013 Op Margin*: 13.1% APPLIED WATER Market Size: $15B 2013 Revenues: $1.4B 2013 Op Margin*: 12.7% 23 SEGMENT OVERVIEW 64% 36% Segment Split (3 rd Party Revenue) UNIQUE PORTFOLIO PROVIDES FOR INNOVATIVE SOLUTIONS BROAD PRODUCT PORTFOLIO BACKED BY APPLICATION EXPERTISE * See appendix for non-GAAP reconciliations • World’s Largest Waste Water Pump & Dewatering Services Provider • Broad Portfolio of Filtration, Biological and Disinfection Technologies • Industry-Leading Water & Environment Analytics Platform • 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 |
XYLEM PROPRIETARY / CONFIDENTIAL Herford, Germany; Brown Deer, WI; Zelienople, PA 24 WATER INFRASTRUCTURE SEGMENT OVERVIEW Market Size: 2013 Revenues: Key Products & Services: 2013 Revenues by Geography: Key Facilities: Key Brands: $11B $1,812M $5B $329M $4B $298M Water & Waste Water Pumps Dewatering (Sales & Rentals) Aftermarket Parts & Services Biological U.V. and Ozone Disinfection Filtration Analytical Instrumentation, Doppler and Level Measurement, Water Quality and Environmental Monitoring Systems Emmaboda, Sweden; Baroda, India; Shenyang, China; Bridgeport, NJ Yellow Springs, OH; Weilheim, Germany; Bergen, Norway U.S. Europe Asia Pacific Other 26% U.S. Europe Asia Pacific Other U.S. Europe Asia Pacific Other 10% 17% 47% 30% 41% 13% 16% 27% 43% 21% 9% TRANSPORT TREATMENT TEST |
XYLEM PROPRIETARY / CONFIDENTIAL WATER INFRASTRUCTURE Growth: -10% 17% 25% 0% 1% Organic*: -4% 2% 7% 0% -2% OM%: 13.0% 14.7% 14.9% 14.9% 15.1% 13.1% ‘08-’13 Revenue up 35%; 6% CAGR • Resilient Through the Downturn • Growth Driven by Acquisitions, Emerging Markets & Product Launches • Public Utility CAPEX Slowdown • European Crisis Recent Market Conditions Negatively Impacted Operating Margins • Operating Productivity Funds Incremental Strategic Investments • Decline in Dewatering related to Fracking along with weak Public Utility CAPEX and European market conditions impacted 2013 $M $M 25 REVENUE OPERATING INCOME & MARGIN* HIGHLIGHTS * See appendix for non-GAAP reconciliations 2008 2009 2010 2011 2012 2013 1,824 1,651 1,930 2,416 2,425 2,457 2008 2009 2010 2011 2012 2013 237 242 288 359 365 323 LEVERAGE & RECENT COST REDUCTION ACTIONS ACCELRATE LONG-TERM GROWTH |
XYLEM PROPRIETARY / CONFIDENTIAL 26 APPLIED WATER SYSTEMS SEGMENT OVERVIEW Market Size: 2013 Revenues: Key Products & Services: 2013 Revenues by Geography: Key Facilities: Key Brands: $9B $696M $4B $600M 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 $102M Groundwater & Surface Pumps Packaged Systems, Drives & Controls BUILDING SERVICES INDUSTRIAL WATER IRRIGATION 58% 16% 10% 16% U.S. Europe Asia Pacific Other 45% 37% 9% 9% U.S. Europe Asia Pacific Other 52% 33% 1% 14% U.S. Europe Asia Pacific Other |
APPLIED WATER Growth: -18% 6% 9% -1% 1% Organic*: OM%: 11.8% 9.9% 12.1% 12.0% 12.4% 12.7% STRONG OPERATING PERFORMANCE DESPITE CHALLENGED MARKETS ‘08-’13 Revenue Down 5% • 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 27 REVENUE OPERATING INCOME & MARGIN* * See appendix for non-GAAP reconciliations HIGHLIGHTS 2008 2009 2010 2011 2012 2013 180 124 161 173 177 183 2008 2009 2010 2011 2012 2013 1,527 1,254 1,327 1,444 1,424 1,444 -15% 6% 7% 1% 0% |
XYLEM PROPRIETARY / CONFIDENTIAL ACQUISITION SCORECARD Completed On Track Not Achieved 28 Laing $30 2009 Nova $384 2010 Godwin $585 2010 OI $25 2010 YSI $310 2011 Through 2012 MJK $13 2012 $29 2012 PIMS $57 2013 MultiTrode $26 2013 Acquisition Invested $M Year Completed Strategic Fit Gross Margin Accretive Risk Adj. Cost of Capital Mid- Teens ROIC Cash Return 7-9 Years EPS Accretive After Yr 1 Added ~200 Bps Added ~$0.45 IRR > Heartland |
29 2014 FINANCIAL GUIDANCE SUMMARY Q1 2014 EARNINGS RELEASE * Excluding Restructuring & Realignment costs, and special tax items 2014 Full Year Growth Revenue Total Growth Organic FX/Acquisition Xylem Consolidated $3,900 to $3,980 2% to 4% 1% to 3% 1% Water Infrastructure $2,500 to $2,540 2% to 4% 2% to 3% 1% Applied Water $1,470 to $1,490 2% to 3% 1% to 2% 1% Segment Margin * 14.1% to 14.6% +90 bps to +140 bps Operating Margin * 12.6% to 13.2% +80 bps to +140 bps EPS * $1.85 to $2.00 Up 11% to 20% Free Cash Flow Conversion ~100% Guidance Assumptions: Operating Tax Rate * ~21% Unchanged from 2013 Share Count ~185M Q2: 185.5; ~$130M for Share Repurchases in 2014 Restructuring & Realignment Costs ~$40 to $50 ‘14 Rest. Savings ~$15M; Realignment Cost $10-$15 Financial Outlook 2014E vs. 2013 SOLID START TO 2014 … AFFIRMING FULL YEAR GUIDANCE (Dollars In Millions, Except per Share Data) |
XYLEM PROPRIETARY / CONFIDENTIAL 30 NON-GAAP MEASURES “Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of foreign currency fluctuations, “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 non-recurring restructuring and realignment costs. “Adjusted Operating Income", "Adjusted Segment Operating Income", and “Adjusted EPS” defined as operating income and earnings per share, “Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as 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: “Realignment costs” defined as non-recurring costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, relocation, travel and other costs. adjusted to exclude non-recurring restructuring and realignment costs and tax-related special items. 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. 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. |
XYLEM PROPRIETARY / CONFIDENTIAL 31 Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (F - C) / 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, 2013 Xylem Inc. 3,837 3,791 46 1% (82) (3) - (39) -1% 1% Water infrastructure 2,457 2,425 32 1% (82) 4 - (46) -2% 1% Applied Water 1,444 1,424 20 1% - (9) (6) 5 0% 0% Year Ended December 31, 2012 Xylem Inc. 3,791 3,803 (12) 0% (94) 108 - 2 0% 3% Water infrastructure 2,425 2,416 9 0% (94) 80 (1) (6) 0% 4% Applied Water 1,424 1,444 (20) -1% - 32 (3) 9 1% 1% Year Ended December 31, 2011 Xylem Inc. 3,803 3,202 601 19% (264) (111) - 226 7% 15% Water Infrastructure 2,416 1,930 486 25% (264) (87) 2 137 7% 21% Applied Water 1,444 1,327 117 9% - (28) (1) 88 7% 7% Year Ended December 31, 2010 Xylem Inc. 3,202 2,849 353 12% (263) 6 - 96 3% 13% Water infrastructure 1,930 1,651 279 17% (247) (8) - 24 1% 16% Applied Water 1,327 1,254 73 6% (16) 15 - 72 6% 7% Year Ended December 31, 2009 Xylem Inc. 2,849 3,291 (442) -13% (7) 158 - (291) -9% -9% Water infrastructure 1,651 1,824 (173) -9% - 109 (1) (65) -4% -4% Applied Water 1,254 1,527 (273) -18% (7) 53 - (227) -15% -14% 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 32 2008 2009 2010 2011 2012 2013 Revenue 3,291 2,849 3,202 3,803 3,791 3,837 Operating Income 315 276 388 395 443 363 Operating Margin 9.6% 9.7% 12.1% 10.4% 11.7% 9.5% Restructuring & Realignment 41 31 15 - 24 64 Separation Costs* - - - 87 22 - Special Charges - - - - - 24 Adjusted Operating Income 356 307 403 482 489 451 Adjusted Operating Margin 10.8% 10.8% 12.6% 12.7% 12.9% 11.8% Standalone Costs - - - 5 28 - Adj. Operating Income, excl. Standalone Costs 356 307 403 487 517 451 Adjusted Operating Margin, excl. Standalone Costs 10.8% 10.8% 12.6% 12.8% 13.6% 11.8% Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) * 2013 separation costs are not excluded from adjusted operating income. |
XYLEM PROPRIETARY / CONFIDENTIAL 33 2013 2012 2011 2010 2009 2008 Total Revenue • Total Xylem 3,837 3,791 3,803 3,202 2,849 3,291 • Water Infrastructure 2,457 2,425 2,416 1,930 1,651 1,824 • Applied Water 1,444 1,424 1,444 1,327 1,254 1,527 Operating Income • Total Xylem 363 443 395 388 276 315 • Water Infrastructure 271 342 343 276 227 220 • Applied Water 167 170 160 158 109 162 Operating Margin • Total Xylem 9.5% 11.7% 10.4% 12.1% 9.7% 9.6% • Water Infrastructure 11.0% 14.1% 14.2% 14.3% 13.7% 12.1% • Applied Water 11.6% 11.9% 11.1% 11.9% 8.7% 10.6% Separation Costs • Total Xylem - 22 87 - - - • Water Infrastructure - 4 16 - - - • Applied Water - 2 13 - - - Special Charges • Total Xylem 24 - - - - • Water Infrastructure 4 - - - - • Applied Water - - - - - Restructuring & Realignment Costs • Total Xylem 64 24 - 15 31 41 • Water Infrastructure 48 19 - 12 15 17 • Applied Water 16 5 - 3 15 18 Adjusted Operating Income* • Total Xylem 451 489 482 403 307 356 • Water Infrastructure 323 365 359 288 242 237 • Applied Water 183 177 173 161 124 180 Adjusted Operating Margin* • Total Xylem 11.8% 12.9% 12.7% 12.6% 10.8% 10.8% • Water Infrastructure 13.1% 15.1% 14.9% 14.9% 14.7% 13.0% • Applied Water 12.7% 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 34 2013 2012 2011 2010 2009 2008 Net Cash - Operating Activities 324 396 449 395 370 408 Capital Expenditures (126) (112) (126) (94) (62) (67) Free Cash Flow, including separation costs 198 284 323 301 308 341 Cash Paid for Separation Costs (incl. Capex) - 28 65 - - - Free Cash Flow, excluding separation costs* 198 312 388 301 308 341 Net Income 228 297 279 329 263 224 Separation Costs, net of tax (incl. tax friction) - 16 72 0 0 0 Net Income, excluding separation costs* 228 313 351 329 263 224 Free Cash Flow Conversion 87% 100% 111% 91% 117% 152% * Separation costs are not excluded in 2013 Year Ended Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow ($ Millions) |
XYLEM PROPRIETARY / CONFIDENTIAL 35 2008 2009 2010 2011 2012 2013 Net Income 224 263 329 279 297 228 Separation Costs, Net of Tax* - - - 72 16 - Restructuring & Realignment, Net of Tax 28 22 11 - 17 46 Special Charges, Net of Tax - - - - - 23 Adjusted Net Income before Special Tax Items 252 285 340 351 330 297 Special Tax Items - (61) (43) 7 - 14 Adjusted Net Income 252 224 297 358 330 311 Diluted Earnings per Share $1.22 $1.42 $1.78 $1.50 $1.59 $1.22 Separation Costs per Share* $0.00 $0.00 $0.00 $0.39 $0.09 $0.00 Restructuring & Realignment Costs per Share $0.14 $0.11 $0.06 $0.00 $0.09 $0.25 Special Charges per Share - - - - - $0.13 Adjusted Diluted EPS before Special Tax Items $1.36 $1.53 $1.84 $1.89 $1.77 $1.60 Special Tax Items per Share $0.00 ($0.32) ($0.23) $0.04 $0.00 $0.07 Adjusted Diluted EPS $1.36 $1.21 $1.61 $1.93 $1.77 $1.67 * Separation costs are not excluded in 2013 Xylem Inc. Non-GAAP Reconciliation Adjusted Diluted EPS ($ Millions, except per share amounts) |
XYLEM PROPRIETARY / CONFIDENTIAL 36 2008 2009 2010 2011 2012 2013 Pre-Tax Income 312 277 388 383 388 298 Interest Expense (Income), net - - - 17 51 52 Depreciation and Amortization 72 79 101 137 142 149 Stock Compensation - - - 13 22 27 EBITDA 384 356 489 550 603 526 Separation Costs* - - - 87 22 64 Restructuring & Realignment 41 31 15 - 24 32 Adjusted EBITDA 425 387 504 637 649 622 Revenue 3,291 2,849 3,202 3,803 3,791 3,837 Adjusted EBITDA Margin 12.9% 13.6% 15.7% 16.7% 17.1% 16.2% * Separation costs are not excluded in 2013 Xylem Inc. Non-GAAP Reconciliation EBITDA and Adjusted EBITDA ($ Millions) |
XYLEM PROPRIETARY / CONFIDENTIAL 37 Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (F - C) / A Change % Change Change % Change Revenue Revenue 2014 v. 2013 2014 v. 2013 FX Contribution Eliminations Adj. 2014 v. 2013 Adj. 2014 v. 2013 2014 2013 Quarter Ended March 31 Xylem Inc. 906 879 27 3% (5) 4 - 26 3% 4% Water infrastructure 568 551 17 3% (5) 7 1 20 4% 5% Applied Water 355 345 10 3% - (3) (1) 6 2% 2% 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) Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (F - C) / A Change % Change Change % Change Orders Orders 2014 v. 2013 2014 v. 2013 FX Contribution Eliminations Adj. 2014 v. 2013 Adj. 2014 v. 2013 2014 2013 Quarter Ended March 31 Xylem Inc. 993 962 31 3% (7) 3 - 27 3% 4% Water infrastructure 619 601 18 3% (7) 6 2 19 3% 4% Applied Water 394 378 16 4% - (4) (3) 9 2% 2% 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) |
XYLEM PROPRIETARY / CONFIDENTIAL 38 Q1 2014 2013 Total Revenue • Total Xylem 906 879 • Water Infrastructure 568 551 • Applied Water 355 345 Operating Income • Total Xylem 76 66 • Water Infrastructure 46 42 • Applied Water 41 40 Operating Margin • Total Xylem 8.4% 7.5% • Water Infrastructure 8.1% 7.6% • Applied Water 11.5% 11.6% Restructuring & Realignment Costs • Total Xylem 18 12 • Water Infrastructure 12 10 • Applied Water 6 2 Adjusted Operating Income* • Total Xylem 94 78 • Water Infrastructure 58 52 • Applied Water 47 42 Adjusted Operating Margin* • Total Xylem 10.4% 8.9% • Water Infrastructure 10.2% 9.4% • Applied Water 13.2% 12.2% Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) *Adjusted Operating Income excludes restructuring & realignment costs. |
XYLEM PROPRIETARY / CONFIDENTIAL 39 Q1 2013 Q1 2014 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 879 879 906 906 Operating Income 66 12 a 78 76 18 a 94 Operating Margin 7.5% 8.9% 8.4% 10.4% Interest Expense (13) (13) (14) (14) Other Non-Operating Income (Expense) (2) (2) (1) (1) Income before Taxes 51 12 63 61 18 79 Provision for Income Taxes (10) (3) b (13) (12) (4) b (16) Net Income 41 9 50 49 14 63 Diluted Shares 186.4 186.4 185.8 185.8 Diluted EPS 0.22 $ 0.05 $ 0.27 $ 0.27 $ 0.07 $ 0.34 $ a Restructuring & realignment costs b Net tax impact of restructuring & realignment costs and special tax items Xylem Inc. Non-GAAP Reconciliation Adjusted Diluted EPS ($ Millions, except per share amounts) ******* ******* ******* ******* |
XYLEM PROPRIETARY / CONFIDENTIAL 40 2014 2013 Net Cash - Operating Activities 22 $ 20 $ Capital Expenditures (25) (30) Free Cash Flow (3) $ (10) $ Net Income 49 $ 41 $ Free Cash Flow Conversion -6% -24% Xylem Inc. Non-GAAP Reconciliation Net Cash - Operating Activities vs. Free Cash Flow ($ Millions) Three Months Ended ** ** ** ** ** ***************** ***************** ***************** ***************** ***************** ***************** ***************** ***************** ***************** ***************** ***************** ********* |
XYLEM PROPRIETARY / CONFIDENTIAL 41 NYSE: XYL Phil De Sousa, Investor Relations Officer (914) 323-5930 Dawn Powell, Investor Relations Coordinator (914) 323-5931 http://investors.xyleminc.com ***************************** ***************************** ***************************** ***************************** |