UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 7, 2013

 

 

XYLEM INC.

(Exact name of registrant as specified in its charter)

 

 

 

Indiana		001-35229		45-2080495
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)
1133 Westchester Avenue, Suite N200 White Plains, New York				10604
(Address of principal executive offices)				(Zip Code)

(914) 323-5700

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition

Attached hereto as Exhibit 99.1 and incorporated herein by reference is the news release issued by Xylem Inc. on February 7, 2013, announcing the financial results for the quarter and fiscal year ended December 31, 2012. This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

 

Item 7.01

Regulation FD Disclosure

Attached hereto as Exhibit 99.2 and incorporated herein by reference is an earnings presentation posted on Xylem Inc.’s website on February 7, 2013, summarizing Xylem Inc.’s financial results for the quarter and fiscal year ended December 31, 2012. This information is furnished pursuant to Item 7.01 Regulation FD Disclosure. This information shall not be deemed filed for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 8.01

Other Events

The Company’s Board of Directors declared a dividend in the amount of $0.1164 per share for the first quarter of 2013, an increase of 15 percent from the dividend paid in the fourth quarter in 2012. The declared dividend is payable on March 20, 2013 to shareholders of record on February 20, 2013.

 

Item 9.01

Financial Statements and Exhibits

(d) Exhibits.

 

Exhibit No.		Description
99.1		News Release issued by Xylem Inc. on February 7, 2013.
99.2		Presentation summarizing fourth quarter and full year 2012 financial results posted by Xylem Inc. on February 7, 2013.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		XYLEM INC.
Date: February 7, 2013		By:		/s/ Michael T. Speetzen
				Michael T. Speetzen
				Senior Vice President and Chief Financial Officer (Authorized Officer of Registrant)

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		News Release issued by Xylem Inc. on February 7, 2013.
99.2		Presentation summarizing fourth quarter and full year 2012 financial results posted by Xylem Inc. on February 7, 2013.

Exhibit 99.1

 

Xylem

1133 Westchester Ave., White Plains, NY 10604

Tel +1.914.323.5700 Fax +1.914.696.2960

NEWS RELEASE

 

Contacts:		Media		Investors
		Tom Glover +1-914-323-5891		Phil DeSousa - +1-914-323-5930
		tom.glover@xyleminc.com		phil.desousa@xyleminc.com

Xylem Inc. reports fourth quarter and full year 2012 results,

announces 15 percent dividend increase

 

•

Fourth quarter 2012 adjusted net income was $88 million or $0.47 per share, up 21 percent on a normalized1 basis over fourth quarter 2011; GAAP EPS were $0.39 per share, up 39 percent; FY 2012 adjusted earnings were $1.77 per share, up 7 percent on a normalized basis; GAAP EPS were $1.59, up 6 percent

 

•

Fourth quarter 2012 revenue was $969 million, down 3 percent; FY 2012 revenue was $3.8 billion, up 3 percent in constant currencies, flat as reported

 

•

Fourth quarter 2012 adjusted operating margins up 140 basis points, up 70 points as reported

 

•

Full year free cash flow was $312 million, 100 percent of adjusted net earnings

 

•

Company issues full-year 2013 financial guidance, sees FY 2013 adjusted earnings of $1.80-$1.90 per share, earnings growth of 2 to 7 percent on revenue growth of 3 to 4 percent

 

•

Xylem Board of Directors approves a 15 percent increase in the dividend for first quarter 2013

WHITE PLAINS, N.Y., February 7, 2013 – Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world’s most challenging water issues, today reported fourth quarter 2012 net income of $73 million, or $0.39 per share, up 39 percent from the fourth quarter 2011. Excluding the impact of one-time separation costs and other adjustments associated with Xylem’s 2011 spinoff from ITT Corporation as well as restructuring and realignment costs, adjusted net income was $88 million or $0.47 per share, up 8 cents or 21 percent on a normalized basis from 2011. Fourth quarter revenue was $969 million, down 3 percent, reflective of weakness in industrial and public utility markets. Fourth quarter adjusted operating margins improved 140 basis points driven by efficiency and cost control measures.

 

 

1

The 2011 normalized earnings per share reflect adjustments (including one-time separation costs, interest expense, stand-alone costs, and special tax items) to our GAAP results to better illustrate year-over-year performance. The normalized earnings are intended to give a representation of our performance had Xylem been a stand-alone company in 2011.

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“Our fourth quarter results show the impact of strategic steps we’ve taken to improve our financial performance, streamlining operations and taking aggressive cost control measures in the face of challenging market conditions,” said Gretchen McClain, president and chief executive officer of Xylem Inc. “While recognizing and addressing uncertainties in the market, we stayed focused on the needs of our customers, as illustrated during our response to the flooding following Hurricane Sandy. We have continued to invest for future growth, deploying assets to accelerate new product technology and expanding our growth in emerging markets. We also continue to acquire attractive businesses to supplement our growth platforms of analytics, dewatering and services. Our most recent acquisition, PIMS Group of the U.K., is our third since becoming an independent company, and will strengthen our aftermarket and service offering.”

For the full year 2012, Xylem revenues were $3.8 billion, up 3 percent in constant currencies over 2011, flat as reported. Full year reported net income was $297 million, or $1.59 per share. Adjusted net income, excluding the impact of the spinoff and other one-time items, was $330 million or $1.77 per share. Full year 2012 adjusted operating margins were 12.9 percent, up 100 basis points on a normalized basis. Free cash flow was $312 million, 100 percent of adjusted net earnings.

Xylem forecasts full year 2013 revenue growth of 3 to 4 percent to approximately $3.9 billion. Full year 2013 adjusted net income is forecast to grow 2 to 7 percent to $335 to $354 million, for adjusted earnings per share of $1.80 to $1.90 per share. The company anticipates that restructuring and realignment costs will range from $60 to $70 million for the year.

“As a global company, we continually evaluate our actions based on end markets and regional economic conditions,” McClain said. “That’s why we’re taking action in Europe and elsewhere to best position our people and our facilities to meet the needs of our customers and provide economic benefit. Through these steps and with our applications expertise, market-leading brands, a large installed base and unmatched distribution in more than 150 countries around the world, our Xylem portfolio is well-positioned to deliver differentiated growth over the long term.”

Xylem today also announced that its Board of Directors declared a dividend in the amount of $0.1164 per share for the first quarter of 2013, an increase of 15 percent, payable on March 20, 2013 to shareholders of record on February 20, 2013.

“The increased cash dividend returns value to our shareholders, and is made possible through everything we’ve done to maintain a strong balance sheet, improve operating performance significantly and grow cash flow,” McClain said.

Fourth Quarter Segment Results

Water Infrastructure

Xylem’s Water Infrastructure segment consists of its businesses serving clean water delivery, wastewater transport and treatment, dewatering and analytical instrumentation.

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•

Fourth quarter 2012 revenue was $637 million, down 6 percent compared with the fourth quarter 2011, reflecting weakness in the public utility and industrial dewatering markets.

 

•

Fourth quarter adjusted segment operating income, which excludes $1 million of one-time separation-related costs and $15 million of restructuring and realignment costs, was $105 million, up 1 percent over the same period in 2011. Adjusted operating margin for the quarter grew 120 basis points, though after factoring in separation, restructuring and realignment costs, posted a decline of 40 basis points.

Applied Water

Xylem’s Applied Water segment consists of its portfolio of businesses in residential and commercial building services, industrial and agricultural applications.

 

•

Fourth quarter 2012 revenue was $346 million, up 3 percent compared with the fourth quarter 2011, with growth coming in residential and commercial building services and irrigation.

 

•

Fourth quarter adjusted segment operating income, which excludes $5 million of restructuring and realignment costs, was $40 million, 29 percent higher than the comparable period last year. Adjusted operating margin grew 240 basis points; including separation costs, as well as restructuring and realignment costs, operating margin grew 210 basis points.

Supplemental information on Xylem’s fourth quarter and full year 2012 earnings and reconciliations for certain non-GAAP items is posted at investors.xyleminc.com.

About Xylem

Xylem (NYSE: XYL) is a leading global water technology provider, enabling customers to transport, treat, test and efficiently use water in public utility, residential and commercial building services, industrial and agricultural settings. The company does business in more than 150 countries through a number of market-leading product brands, and its people bring broad applications expertise with a strong focus on finding local solutions to the world’s most challenging water and wastewater problems. Xylem is headquartered in White Plains, N.Y., with 2012 annual revenues of $3.8 billion and 12,500 employees worldwide. In 2012, Xylem was named to the Dow Jones Sustainability World Index for advancing sustainable business practices and solutions worldwide.

The name Xylem is derived from classical Greek and is the tissue that transports water in plants, highlighting the engineering efficiency of our water-centric business by linking it with the best water transportation of all — that which occurs in nature. For more information, please visit us at www.xyleminc.com.

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.

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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, sales, 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 in our Annual Report on Form 10-K, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission.

###

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XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Millions, except per share amounts)

 

December 31,		2012				2011
ASSETS
Current assets:
Cash and cash equivalents		$	504			$	318
Receivables, less allowances for discounts and doubtful accounts of $34 and $37 in 2012 and 2011, respectively			776				756
Inventories, net			443				433
Prepaid and other current assets			110				97
Deferred income tax assets			41				45
Total current assets			1,874				1,649
Property, plant and equipment, net			487				463
Goodwill			1,647				1,610
Other intangible assets, net			484				505
Other non-current assets			187				170
Total assets		$	4,679			$	4,397
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	332			$	322
Accrued and other current liabilities			443				490
Short-term borrowings and current maturities of long-term debt			6				5
Total current liabilities			781				817
Long-term debt			1,199				1,201
Accrued postretirement benefits			400				316
Deferred income tax liabilities			173				165
Other non-current accrued liabilities			52				67
Total liabilities			2,605				2,566
Stockholders’ equity:
Common Stock — par value $0.01 per share:
Authorized 750.0 shares, issued 184.6 shares			2				2
Capital in excess of par value			1,706				1,663
Retained earnings			264				44
Treasury stock – at cost 0.5 shares and 0 shares in 2012 and 2011, respectively			(13	)			—
Accumulated other comprehensive income			115				122
Total stockholders’ equity			2,074				1,831
Total liabilities and stockholders’ equity		$	4,679			$	4,397

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XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED INCOME STATEMENTS

(In Millions, except per share data)

 

Year Ended December 31,		2012				2011				2010
Revenue		$	3,791			$	3,803			$	3,202
Cost of revenue			2,289				2,342				1,988
Gross profit			1,502				1,461				1,214
Selling, general and administrative expenses			914				877				737
Research and development expenses			106				100				74
Separation costs			22				87				—
Restructuring and asset impairments charges, net			17				2				15
Operating income			443				395				388
Interest expense			55				17				—
Other non-operating income, net			—				5				—
Income before taxes			388				383				388
Income tax expense			91				104				59
Net income		$	297			$	279			$	329
Earnings per share:
Basic		$	1.60			$	1.51			$	1.78
Diluted		$	1.59			$	1.50			$	1.78
Weighted average number of shares – Basic			185.8				185.1				184.6
Weighted average number of shares – Diluted			186.2				185.3				184.6

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XYLEM INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(In Millions)

 

Year Ended December 31,		2012				2011				2010
Operating Activities
Net income		$	297			$	279			$	329
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			142				137				92
Deferred income taxes			1				8				(31	)
Share-based compensation			22				13				9
Non-cash separation costs			—				10				—
Restructuring and asset impairment charges, net			17				2				15
Payments of restructuring			(9	)			(7	)			(22	)
Contributions to postretirement benefit plans			(46	)			(16	)			(3	)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables			2				(61	)			(45	)
Changes in inventories			5				(18	)			7
Changes in accounts payable			(4	)			(9	)			41
Changes in accrued liabilities			(28	)			53				12
Changes in accrued taxes			(17	)			56				(17	)
Net changes in other assets and liabilities			14				2				8
Net Cash — Operating activities			396				449				395
Investing Activities
Capital expenditures			(112	)			(126	)			(94	)
Proceeds from the sale of property, plant and equipment			5				11				4
Acquisitions of businesses and assets, net of cash acquired			(41	)			(309	)			(1,004	)
Other, net			1				1				1
Net Cash — Investing activities			(147	)			(423	)			(1,093	)
Financing Activities
Net transfer to former parent			(9	)			(995	)			745
Issuance of short-term debt			13				5				—
Issuance of senior notes, net of discount			—				1,198				—
Principal payments of debt and capital lease obligations			(14	)			(8	)			—
Purchase of Xylem common stock			(13	)			—				—
Proceeds from exercise of employee stock options			24				1				—
Payments of debt issuance costs			—				(10	)			—
Dividends paid			(75	)			(19	)			—
Net Cash — Financing activities			(74	)			172				745
Effect of exchange rate changes on cash			11				(11	)			3
Net change in cash and cash equivalents			186				187				50
Cash and cash equivalents at beginning of year			318				131				81
Cash and cash equivalents at end of year		$	504			$	318			$	131
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest		$	53			$	—			$	—
Income taxes (net of refunds received)		$	104			$	64			$	110

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Xylem Inc. 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 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, non-recurring restructuring and realignment costs and tax-related special items.

“Normalized EPS” defined as adjusted earnings per share, as well as adjustments to reflect the incremental current period amount of interest expense and stand alone costs in the prior comparable period.

“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.

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Xylem Inc. Non-GAAP Reconciliation

Reported vs. Organic & Constant Currency Order Growth

($ Millions)

 

		(As Reported - GAAP)																(As Adjusted - Organic)																				Constant Currency
						(A)				(B)								(C)				(D)				(E)				(F) = B+C+D+E				(G) = F/A				(H) = (B + D) / A
		Orders				Orders				Change 2012 v. 2011				% Change 2012 v. 2011				Acquisitions / Divestitures				FX Contribution				Eliminations				Change Adj. 2012 v.  2011				% Change Adj. 2012 v. 2011
		2012				2011
Year Ended December 31, 2012
Xylem Inc.			3,782				3,847				(65	)			-1.7	%			(95	)			114				—				(46	)			-1.2	%			1.3	%
Water infrastructure			2,421				2,454				(33	)			-1.3	%			(95	)			87				1				(40	)			-1.6	%			2.2	%
Applied Water			1,423				1,452				(29	)			-2.0	%			—				31				(8	)			(6	)			-0.4	%			0.1	%
Quarter Ended December 31, 2012
Xylem Inc.			926				905				21				2.3	%			(7	)			6				—				20				2.2	%			3.0	%
Water infrastructure			602				589				13				2.2	%			(7	)			5				1				12				2.0	%			3.1	%
Applied Water			337				330				7				2.1	%			—				1				—				8				2.4	%			2.4	%
Quarter Ended September 30, 2012
Xylem Inc.			882				966				(84	)			-8.7	%			(21	)			39				—				(66	)			-6.8	%			-4.7	%
Water infrastructure			564				621				(57	)			-9.2	%			(21	)			29				—				(49	)			-7.9	%			-4.5	%
Applied Water			334				358				(24	)			-6.7	%			—				12				(5	)			(17	)			-4.7	%			-3.4	%
Quarter Ended June 30, 2012
Xylem Inc.			970				998				(28	)			-2.8	%			(30	)			51				—				(7	)			-0.7	%			2.3	%
Water infrastructure			617				632				(15	)			-2.4	%			(30	)			40				—				(5	)			-0.8	%			4.0	%
Applied Water			370				383				(13	)			-3.4	%			—				13				(2	)			(2	)			-0.5	%			0.0	%
Quarter Ended March 31, 2012
Xylem Inc.			1,004				978				26				2.7	%			(37	)			18				—				7				0.7	%			4.5	%
Water infrastructure			638				612				26				4.2	%			(37	)			13				—				2				0.3	%			6.4	%
Applied Water			382				381				1				0.3	%			—				5				(1	)			5				1.3	%			1.6	%

Note: Due to rounding the sum of segment amounts may not agree to Xylem totals.

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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) = (B + D) / A
										Change				% Change				Acquisitions  / Divestitures												Change				% Change
		Revenue				Revenue				2012 v. 2011				2012 v. 2011								FX Contribution				Eliminations				Adj. 2012 v. 2011				Adj. 2012 v. 2011
		2012				2011
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	%
Quarter Ended December 31, 2012
Xylem Inc.			969				1,003				(34	)			-3.4	%			(7	)			7				—				(34	)			-3.4	%			-2.7	%
Water Infrastructure			637				679				(42	)			-6.2	%			(7	)			5				(1	)			(45	)			-6.6	%			-5.4	%
Applied Water			346				336				10				3.0	%			—				2				—				12				3.6	%			3.6	%
Quarter Ended September 30, 2012
Xylem Inc.			931				939				(8	)			-0.9	%			(21	)			38				—				9				1.0	%			3.2	%
Water infrastructure			595				584				11				1.9	%			(21	)			28				—				18				3.1	%			6.7	%
Applied Water			350				368				(18	)			-4.9	%			—				12				(2	)			(8	)			-2.2	%			-1.6	%
Quarter Ended June 30, 2012
Xylem Inc.			966				971				(5	)			-0.5	%			(32	)			49				—				12				1.2	%			4.5	%
Water infrastructure			609				602				7				1.2	%			(32	)			37				(1	)			11				1.8	%			7.3	%
Applied Water			373				385				(12	)			-3.1	%			—				13				(1	)			—				0.0	%			0.3	%
Quarter Ended March 31, 2012
Xylem Inc.			925				890				35				3.9	%			(34	)			14				—				15				1.7	%			5.5	%
Water infrastructure			584				551				33				6.0	%			(34	)			10				1				10				1.8	%			7.8	%
Applied Water			355				355				—				0.0	%			—				5				—				5				1.4	%			1.4	%

Note: Due to rounding the sum of segment amounts may not agree to Xylem totals.

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Xylem Inc. Non-GAAP Reconciliation

Adjusted Diluted EPS

2012 and 2011

($ Millions, except per share amounts)

 

		Q1 2012				Q2 2012				Q3 2012				Q4 2012				YTD 2012
Net Income			63				89				72				73				297
Separation Costs, Net of Tax			4				4				3				5				16
Restructuring & Realignment, Net of Tax			—				—				4				13				17
Adjusted Net Income before Special Tax Items			67				93				79				91				330
Special Tax Items			—				(1	)			4				(3	)			—
Adjusted Net Income			67				92				83				88				330
Diluted Earnings per Share		$	0.34			$	0.48			$	0.38			$	0.39			$	1.59
Separation Costs per Share		$	0.02			$	0.02			$	0.02			$	0.03			$	0.09
Restructuring & Realignment Costs per Share		$	0.00			$	0.00			$	0.02			$	0.07			$	0.09
Adjusted Diluted EPS before Special Tax Items		$	0.36			$	0.50			$	0.42			$	0.49			$	1.77
Special Tax Items per Share		$	0.00			($	0.01	)		$	0.02			($	0.02	)		$	0.00
Adjusted Diluted EPS		$	0.36			$	0.49			$	0.44			$	0.47			$	1.77
		Q1 2011				Q2 2011				Q3 2011				Q4 2011				YTD 2011
Net Income			78				72				77				52				279
Separation Costs, Net of Tax			2				27				25				18				72
Adjusted Net Income before Special Tax Items			80				99				102				70				351
Special Tax Items			—				4				(1	)			4				7
Adjusted Net Income			80				103				101				74				358
Diluted Earnings per Share		$	0.42			$	0.39			$	0.42			$	0.28			$	1.50
Separation Costs per Share		$	0.01			$	0.15			$	0.13			$	0.10			$	0.39
Adjusted Diluted EPS before Special Tax Items		$	0.43			$	0.54			$	0.55			$	0.38			$	1.89
Special Tax Items per Share		$	0.00			$	0.02			($	0.01	)		$	0.02			$	0.04
Adjusted Diluted EPS		$	0.43			$	0.56			$	0.54			$	0.40			$	1.93

Note: YTD EPS amounts may not equal the sum of the quarterly EPS amounts due to rounding.

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Xylem Inc. Non-GAAP Reconciliation

Adjusted Operating Income

($ Millions)

 

		Q4								YTD
		‘12				‘11				‘12				‘11
Total Revenue
• Total Xylem			969				1,003				3,791				3,803
• Water Infrastructure			637				679				2,425				2,416
• Applied Water			346				336				1,424				1,444
Operating Income
• Total Xylem			104				100				443				395
• Water Infrastructure			89				98				342				343
• Applied Water			35				27				170				160
Operating Margin
• Total Xylem			10.7	%			10.0	%			11.7	%			10.4	%
• Water Infrastructure			14.0	%			14.4	%			14.1	%			14.2	%
• Applied Water			10.1	%			8.0	%			11.9	%			11.1	%
Separation Costs
• Total Xylem			7				20				22				87
• Water Infrastructure			1				6				4				16
• Applied Water			—				4				2				13
Restructuring & Realignment Costs
• Total Xylem			19				—				24				—
• Water Infrastructure			15				—				19				—
• Applied Water			5				—				5				—
Adjusted Operating Income*
• Total Xylem			130				120				489				482
• Water Infrastructure			105				104				365				359
• Applied Water			40				31				177				173
Adjusted Operating Margin*
• Total Xylem			13.4	%			12.0	%			12.9	%			12.7	%
• Water Infrastructure			16.5	%			15.3	%			15.1	%			14.9	%
• Applied Water			11.6	%			9.2	%			12.4	%			12.0	%

 

*	Adjusted Operating Income excludes non-recurring separation, restructuring & realignment costs

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Xylem Inc. Non-GAAP Reconciliation

Normalized and Adjusted Diluted EPS

($ Millions, except per share amounts)

 

		Q4 2011																				Q4 2012
		As Reported				Adjustments				Adjusted				Adjustments				Normalized				As Reported				Adjustments				Adjusted
Total Revenue			1,003								1,003								1,003				969								969
Operating Income			100				20	a			120				(2	)c			118				104				26	f			130
Operating Margin			10.0	%							12.0	%							11.8	%			10.7	%							13.4	%
Interest Expense			(15	)							(15	)							(15	)			(14	)							(14	)
Other Non-Operating Income (Expense)			—								—								—				(1	)							(1	)
Income before Taxes			85				20				105				(2	)			103				89				26				115
Provision for Income Taxes			(33	)			2	b			(31	)			0	e			(31	)			(16	)			(11	)g			(27	)
Net Income			52				22				74				(2	)			72				73				15				88
Diluted Shares			185.3								185.3								185.3				186.5								186.5
Diluted EPS		$	0.28			$	0.12			$	0.40			$	(0.01	)		$	0.39			$	0.39			$	0.08			$	0.47
		YTD 2011																				YTD 2012
		As Reported				Adjustments				Adjusted				Adjustments				Normalized				As Reported				Adjustments				Adjusted
Total Revenue			3,803								3,803								3,803				3,791								3,791
Operating Income			395				87	a			482				(28	)c			454				443				46	f			489
Operating Margin			10.4	%							12.7	%							11.9	%			11.7	%							12.9	%
Interest Expense			(17	)							(17	)			(39	)d			(56	)			(55	)							(55	)
Other Non-Operating Income (Expense)			5								5								5				—								—
Income before Taxes			383				87				470				(67	)			403				388				46				434
Provision for Income Taxes			(104	)			(8	)b			(112	)			16	e			(96	)			(91	)			(13	)g			(104	)
Net Income			279				79				358				(51	)			307				297				33				330
Diluted Shares			185.3								185.3								185.3				186.2								186.2
Diluted EPS		$	1.50			$	0.43			$	1.93			$	(0.27	)		$	1.66			$	1.59			$	0.18			$	1.77

 

a	One time separation costs

b	Net tax impact of above items, plus the addition of 2011 special tax items

c	Incremental stand alone costs incurred in 2012

d	Incremental interest expense on long-term debt incurred in 2012

e	Incremental interest expense and stand alone costs incurred in 2012 tax affected using the 2011 effective tax rate, as adjusted

f	One time separation, restructuring & realignment costs

g	Tax impact of one time separation, restructuring & realignment costs and special tax items

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Xylem Inc. Non-GAAP Reconciliation

Net Cash - Operating Activities vs. Free Cash Flow

Years Ended December 31, 2012 and 2011

($ Millions)

 

		Year Ended
		2012				2011
Net Cash - Operating Activities			396				449
Capital Expenditures			(112	)			(126	)
Free Cash Flow, including separation costs			284				323
Cash Paid for Separation Costs (incl. Capex)			28				65
Free Cash Flow, excluding separation costs			312				388
Net Income			297				279
Separation Costs, net of tax (incl. tax friction)			16				72
Net Income, excluding separation costs			313				351
Free Cash Flow Conversion			100	%			111	%

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Xylem Inc. Non-GAAP Reconciliation

Guidance

($ Millions, except per share amounts)

 

2013 Guidance														Illustration of Mid Point Guidance
		FY ‘12												FY ‘13
		As Reported				Adjustments				Adjusted				As Projected				Adjustments				Adjusted
Total Revenue			3,791								3,791				3,915								3,915
Segment Operating Income			512				30	a			542				487				65	d			552
Segment Operating Margin			13.5	%							14.3	%			12.4	%							14.1	%
Corporate Expense			69				(16	)b			53				59				—				59
Operating Income			443				46				489				428				65				493
Operating Margin			11.7	%							12.9	%			10.9	%							12.6	%
Interest Expense			(55	)							(55	)			(55	)							(55	)
Other Non-Operating Income (Expense)			—								—				(2	)							(2	)
Income before Taxes			388				46				434				371				65				436
Provision for Income Taxes			(91	)			(13	)c			(104	)			(73	)			(19	)c			(92	)
Net Income			297				33				330				298				46				344
Diluted Shares			186.2								186.2				186.4								186.4
Diluted EPS		$	1.59			$	0.18			$	1.77			$	1.60			$	0.25			$	1.85

 

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

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Xylem Inc. Non-GAAP Reconciliation

Adjusted Operating Income

($ Millions)

 

																						Mid Point Guidance
		2008				2009				2010				2011				2012				2013E
Revenue			3,291				2,849				3,202				3,803				3,791				3,915
Operating Income			315				276				388				395				443				428
Operating Margin			9.6	%			9.7	%			12.1	%			10.4	%			11.7	%			10.9	%
Restructuring & Realignment			41				31				15				—				24				65
Separation Costs			—				—				—				87				22				—
Adjusted Operating Income			356				307				403				482				489				493
Adjusted Operating Margin			10.8	%			10.8	%			12.6	%			12.7	%			12.9	%			12.6	%
Standalone Costs			—				—				—				5				28				—
Adj. Operating Income, excl. Standalone Costs			356				307				403				487				517				493
Adjusted Operating Margin, excl. Standalone Costs			10.8	%			10.8	%			12.6	%			12.8	%			13.6	%			12.6	%

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