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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): November 5, 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)) |
| Item 7.01 | Regulation FD Disclosure |
Executives of Xylem Inc. (the “Company”) will present an overview of the Company at the 2013 Robert W. Baird Industrial Conference on November 5, 2013. The presentation slides will be posted on the Company’s website and are attached hereto as Exhibit 99.1.
The information furnished pursuant to this Item 7.01 and Exhibit 99.1 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, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Caution Concerning Forward Looking Statements
This document contains information that may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking.
These forward-looking statements include, but are not limited to, statements about the separation of Xylem Inc. (the “Company”) from ITT Corporation in 2011, capitalization of the Company, future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to orders, 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 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.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit No. |
Description | |
| 99.1 | Presentation posted by Xylem Inc. on November 5, 2013 (furnished pursuant to Item 7.01). | |
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: November 5, 2013 | By: | /s/ Christian S. Na | ||
| Christian S. Na | ||||
| Senior Vice President, General Counsel and Corporate Secretary (Authorized Officer of Registrant) | ||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Presentation posted by Xylem Inc. on November 5, 2013 (furnished pursuant to Item 7.01). | |
 XYLEM
INC. 2013
ROBERT
W.
BAIRD
INDUSTRIAL
CONFERENCE
NOVEMBER 5, 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
UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES
|
 XYLEM PROPRIETARY / CONFIDENTIAL
SPECIALIZED BREADTH IN THE WATER CYCLE
4
WE
WORK
TO
ANTICIPATE
OUR
CUSTOMERS’
NEEDS
WITH
OUR
BROAD PRODUCT OFFERING & OUR APPLICATIONS EXPERTISE
TEST
TEST |
 XYLEM PROPRIETARY / CONFIDENTIAL
BALANCED PORTFOLIO
5
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%
(2012 Revenue)
A Growing Emerging Market
Presence …
Today ~20% |
 XYLEM PROPRIETARY / CONFIDENTIAL
EVOLUTION TO A LEADING
GLOBAL WATER TECHNOLOGY PROVIDER
6
*
* Zenon is a registered trademark of GE |
 XYLEM PROPRIETARY / CONFIDENTIAL
XYLEM OPERATING MODEL
7
XYLEM
XYLEM
INTEGRATED
INTEGRATED
FRONT END
FRONT END
FROM CUSTOMER NEEDS TO PROFITABLE GROWTH
“One”
Integrated Front End
•
Sales
•
Applications Engineering
•
Customer Service
Product Focused Growth Centers
•
Transport
•
Dewatering
•
Treatment
•
Analytics
•
Applied Water Solutions
GROWTH
GROWTH
CENTERS
CENTERS
SIMPLIFIED, DELAYERED & SCALABLE
WATER
WATER
SOLUTIONS
SOLUTIONS
INDIVIDUAL SALES
“Before”
“After” |
 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
2012 Op Margin*: 12.4%
•
•
•
8
SEGMENT OVERVIEW
Segment Split
UNIQUE PORTFOLIO PROVIDES FOR
UNIQUE PORTFOLIO PROVIDES FOR
INNOVATIVE SOLUTIONS
INNOVATIVE SOLUTIONS
BROAD PRODUCT PORTFOLIO BACKED
BROAD PRODUCT PORTFOLIO BACKED
BY APPLICATION EXPERTISE
BY APPLICATION EXPERTISE
* See Appendix for Non-GAAP Reconciliations
64%
36%
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
9
CAPITAL DEPLOYMENT
$
Millions
Dollars
Invested
Analytics
$0.7
Dewatering
$0.6
Advanced Services
$0.1
Total
$1.4
•
Acquisitions Performing to Plan
•
Key Criteria:
•
Strategic Fit
•
Gross Margin Accretive
•
IRR > Risk Adj. Cost of Capital
•
Mid-teens ROIC
•
Cash Returns 7-9 Years
•
EPS Accretive After Yr. 1
CAPITAL DEPLOYMENT ACCELERATED IN 2013 WITH A BALANCED APPROACH
ACQUISITIONS SINCE 2010
ACQUISITIONS SINCE 2010
(Dollars, In Billions)
$107M
$58M
M&A
Dividends
Repurchases
$0
$50
$100
$150
Q3'12 YTD
Q3'13 YTD
81
65
42
12
56
2
2013
Highlights
•
Enhancing Shareholder Returns
•
Completed 3 Acquisitions to Date
•
Announced a 15% Dividend Increase
•
Announced $250 million Share
Repurchase Program |
 XYLEM PROPRIETARY / CONFIDENTIAL
September 30, 2013
Cash
394
Debt
1,202
Net Debt
808
Shareholders’
Equity
2,158
Net Capital
2,966
Net Debt to Net Capital
27%
10
XYLEM FINANCIAL POSITION
* See Appendix for Non-GAAP Reconciliations
CASH DRIVERS
FREE CASH FLOW *
FCF%
73%
45%
CAPITAL SUMMARY
(Dollars, In Millions)
(Dollars, In Millions)
504
169
107
172
394
171
72
Q3'12 YTD
Q3'13 YTD
•
Strong Cash Position
•
No Significant Debt Maturities Until 2016
•
•
Access to Commercial Paper -
Un-utilized
$600M Revolving Credit Facility –
Un-utilized
Cash
Dec. 2012
Operating
Activities
& Other
Dividends
& Share
Repurchases
Acquisitions
& Capex
Cash
Sept. 2013 |
 XYLEM PROPRIETARY / CONFIDENTIAL
11
XYLEM FINANCIAL PERFORMANCE
* See Appendix for Non-GAAP Reconciliations
1H’12 vs. 1H’13
Q3’12 vs. Q3’13
(Dollars, In Millions except EPS)
Revenue
Adj. EPS*
Revenue
Adj. EPS*
+4%
+11%
-3%
-27%
(Dollars, In Millions except EPS)
•
Weak Industrial & Public Utility Markets
•
Challenging European Market Conditions
•
Emerging Markets Revenue Declined
•
Unfavorable Foreign Exchange
•
Early Traction with Cost Reductions
•
Executing on Restructuring and Realignment
•
Industrial & Public Utility Markets Showing
Slight Improvements Vs. 1H
•
Stabilizing European Conditions
•
Emerging Markets Revenue Growth With
Particularly Strong Growth in China
•
Internal Sales Organization Initiatives
•
Strong Incremental Margins and Benefits of
Previous Restructuring and Realignment
1,891
1,839
$0.85
$0.62
931
965
$0.44
$0.49
1H'12
1H'13
1H'12
1H'13
Q3'12
Q3'13
Q3'12
Q3'13 |
 XYLEM PROPRIETARY / CONFIDENTIAL
KEY FINANCIAL PROJECTIONS
12
LONG-TERM
PERFORMANCE
TARGETS**
•
•
•
•
•
•
2013 FY Guidance
As of Oct. 29
th
, 2013 *
2017
Long-Term Targets **
Revenues
~$3.8B (mid-point)
$4.7B to $5.5B
Op. Margin*
11.5% to 11.8%
14% to 15%
EPS*
$1.60 to $1.65
$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
GUIDANCE
HIGHLIGHTS*
•
•
•
•
•
Revenue Down Slightly Year-Over-Year
Europe Stabilizing, U.S. Stable & Emerging
Markets Continue to Grow
’13 Restructuring & Realignment Actions
Generate Annual Cost Savings of ~$35M
European Realignment Drives Decline in
Operating Tax Rate from ~24% to 21%
90% Free Cash Flow Conversion
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 |
 XYLEM PROPRIETARY / CONFIDENTIAL
QUESTIONS & ANSWERS
13
CLOSING REMARKS |
 APPENDIX |
 XYLEM PROPRIETARY / CONFIDENTIAL
15
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
16
WATER INFRASTRUCTURE
BUSINESS OVERVIEW
TRANSPORT
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%
U.S.
Europe
Asia Pacific
Other
39%
14%
18%
U.S.
Europe
Asia Pacific
Other
46%
14%
26%
14% |
 XYLEM PROPRIETARY / CONFIDENTIAL
Bridgeport, NJ; Emmaboda, Sweden;
Quenington, UK
Sales & Rentals
Dry Prime, Submersible & Slurry Pumps
Aftermarket Parts & Services
17
WATER INFRASTRUCTURE
BUSINESS OVERVIEW
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
U.S.
Europe
Asia Pacific
Other
19%
11%
25%
45%
Public Utilities
Oil & Gas
Mining
Construction
Oth. Industrial
15%
21%
28%
15%
21% |
 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
18
WATER INFRASTRUCTURE
BUSINESS OVERVIEW
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
Field Sampling
Field Monitoring
Online
Lab
25%
32%
10%
33% |
 19
GROWING AFTERMARKET PARTS & SERVICES
INSTALLED BASE DRIVES REPLACEMENT SALES
•
•
•
•
INCREASING PROFITABLE
INCREASING PROFITABLE
AFTERMARKET OPPORTUNITIES
AFTERMARKET OPPORTUNITIES
DELIVER CUSTOMER VALUE
ENHANCING AFTERMARKET CAPABILITIES
INTRODUCING XYLEM TOTALCARE
•
•
•
•
ACCELERATING OPPORTUNITIES THROUGH
ACQUISITIONS
~37% RECURRING REVENUE BASE
~37% RECURRING REVENUE BASE
$M
$396
$581
2008
2012
Brand Loyalty Driven
Like-for-Like Replacement
Opportunity for Upgrades
Next-Generation Installations
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 |
 XYLEM PROPRIETARY / CONFIDENTIAL
20
APPLIED WATER SYSTEMS
BUSINESS OVERVIEW
BUILDING SERVICES
INDUSTRIAL WATER
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
IRRIGATION
$2B
$96M
Groundwater & Surface Pumps
Packaged Systems, Drives &
Controls
16%
10%
19%
55%
9%
6%
35%
50%
U.S.
Europe
Asia Pacific
Other
16%
2%
35%
47%
U.S.
Europe
Asia Pacific
Other
U.S.
Europe
Asia Pacific
Other |
 XYLEM PROPRIETARY / CONFIDENTIAL
21
KEY END MARKETS
INDUSTRIAL
•
Strong Brands
•
Deep Application Knowledge
•
Broad Product Portfolio
•
Improving Vitality Index
•
Expansion of Existing Products in
Adjacent Markets
Xylem 2012 Revenue: $1.6B
•
Chemicals
•
Pharma
DIVERSE MARKET DRIVERS
13%
10%
9%
9%
6%
53%
Mining
Oil & Gas
Construction
Food &
Beverage
•
Commodity Demand
•
Natural Gas Fracking Activity
•
Commercial & Residential Construction
•
Weather
•
Changing Dietary Habits
•
Emergence of Middle Class in EM
•
Paper
•
Power
•
Manufacturing
MINING
OIL & GAS
CONSTRUCTION
FOOD & BEVERAGE
GENERAL INDUSTRY |
 XYLEM PROPRIETARY / CONFIDENTIAL
22
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.
PUBLIC UTILITY DYNAMICS
U.S. CAPEX SPENDING
U.S. Water and Sewer Construction
Spending
-
$B
Source: U.S. Census Bureau (April 2013)
General
Growth
Drivers:
•
Residential & Commercial
Real Estate Development
•
Industrial Expansion
•
Increasing Regulation
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45 |
 23
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.
56
54
52
50
48
46
44
42
Mar
'12
Jun
'12
Sept
'12
Dec
'12
Mar
'13
Jun
'13
Sept
'13
49.9
47.3
51.5
51.2
51.9
51.6
54.3 |
 XYLEM PROPRIETARY / CONFIDENTIAL
WATER INFRASTRUCTURE
REVENUE
Growth:
OP INCOME & MARGIN*
OM%: 13.0%
14.7%
14.9% 14.9%
15.1%
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
HIGHLIGHTS
* See Appendix for Non-GAAP Reconciliations
$M
$M
24
2008
2009
2010
2011
2012
1,824
1,651
1,930
2,416
2,425
2008
2009
2010
2011
2012
237
242
288
359
365
25%
17%
-10%
0%
Organic*:
-4%
2%
7%
0% |
 APPLIED WATER
REVENUE
Growth:
Organic*:
OP INCOME & MARGIN*
OM%:
HIGHLIGHTS
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
25
* See Appendix for Non-GAAP Reconciliations
1,527
1,254
1,327
1,444
1,424
180
124
161
173
177
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
-18%
6%
9%
-1%
-15%
6%
7%
1%
11.8%
9.9%
12.1%
12.0%
12.4% |
 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.
26
•
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
REVENUE
OPERATING MARGIN *
2008
2009
2010
2011
2012
3,291
2,849
3,202
3,803
3,791
10.8%
10.8%
12.6%
12.7%
12.9%
2008
2009
2010
2011
2012
Growth:
Organic*:
-9%
-13%
3%
12%
7%
19%
0%
0% |
 XYLEM PROPRIETARY / CONFIDENTIAL
* See Appendix for Non-GAAP Reconciliations
27
2013 FINANCIAL GUIDANCE SUMMARY
(As
of
Oct.
29
2013)
th |
 XYLEM PROPRIETARY / CONFIDENTIAL
DRIVE PROFITABLE GROWTH
EXECUTING ACQUISITION STRATEGY
28
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
ACQUISITION SCORECARD
Completed
On Track
Not Achieved
29
Acquisition
Invested
$M
Year
Completed
Strategic
Fit
Gross
Margin
Accretive
IRR >Risk
Adj.
Cost
of Cap.
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
Pollmann-
Pumpen
$3
2013 |
 XYLEM PROPRIETARY / CONFIDENTIAL
30
NON-GAAP MEASURES
Management views key performance indicators including revenue, gross margins, segment operating
income and margins, orders growth, free cash flow, working capital, and backlog, among
others. In addition, we consider certain measures to be useful to management and investors evaluating our operating
performance for the periods presented, and provide a tool for evaluating our ongoing
operations, liquidity and management of assets. This information can assist
investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives
and initiatives. These metrics, however, are not measures of financial performance under
GAAP and should not be considered a substitute for revenue, operating income, net
income, earnings per share (basic and diluted) or net cash from operations as determined in accordance with GAAP. We consider the
following non-GAAP measures, which may not be comparable to similarly titled measures
reported by other companies, to be key performance indicators: “Organic
revenue"
and
"Organic
orders”
defined
as
revenue
and
orders,
respectively,
excluding
the
impact
of
foreign
currency
fluctuations,
intercompany
transactions,
and
contributions
from
acquisitions
and
divestitures.
Divestitures
include
sales
of
portions
of
our
business
that
did
not
meet
the
criteria
for
classification as a discontinued operation or insignificant portions of our business that we
did not classify as a discontinued operation. The period-over- period
change resulting
from
foreign
currency
fluctuations
assumes
no
change
in
exchange
rates
from
the
prior
period.
“Constant
currency”
defined
as
financial
results
adjusted
for
currency
translation
impacts
by
translating
current
period
and
prior
period
activity
using
the
same currency conversion rate. This approach is used for countries whose functional
currency is not the U.S. dollar. “EBITDA”
defined
as
earnings
before
interest,
taxes,
depreciation,
amortization
expense,
and
share-based
compensation.
“Adjusted
EBITDA”
reflects
the
adjustment to EBITDA to exclude for non-recurring separation costs associated with the
Xylem spin-off from ITT Corporation (not excluded for 2013) as well as
non-recurring restructuring and realignment costs. defined as operating income and
earnings per share, adjusted to exclude non-recurring separation costs associated
with the Xylem spin-off from ITT Corporation (not excluded for 2013), non-recurring restructuring and
realignment costs and tax-related special items.
“Free
Cash
Flow”
defined
as
net
cash
from
operating
activities,
as
reported
in
the
Statement
of
Cash
Flow,
less
capital
expenditures
as
well
as
adjustments
for other significant items that impact current results which management believes are not
related to our ongoing operations and performance. Our definition of free cash
flows does not consider non-discretionary cash payments, such as debt.
"Adjusted Operating Income", "Adjusted Segment Operating Income", and
“Adjusted EPS” |
 XYLEM PROPRIETARY / CONFIDENTIAL
31
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
($ Millions)
(As Reported - GAAP)
(As Adjusted - Organic)
NON-GAAP RECONCILIATION:
ORGANIC & CONSTANT CURRENCY REVENUE GROWTH |
 XYLEM PROPRIETARY / CONFIDENTIAL
32
Mid Point Guidance
2008
2009
2010
2011
2012
2013E
Revenue
3,291
2,849
3,202
3,803
3,791
3,770
Operating Income
315
276
388
395
443
347
Operating Margin
9.6%
9.7%
12.1%
10.4%
11.7%
9.2%
Restructuring, Realignment & Special Charges
41
31
15
-
24
93
Separation Costs*
-
-
-
87
22
-
Adjusted Operating Income
356
307
403
482
489
440
Adjusted Operating Margin
10.8%
10.8%
12.6%
12.7%
12.9%
11.7%
Standalone Costs
-
-
-
5
28
-
Adj. Operating Income, excl. Standalone
Costs 356
307
403
487
517
440
Adjusted Operating Margin, excl.
Standalone Costs 10.8%
10.8%
12.6%
12.8%
13.6%
11.7%
* 2013 separation costs are not excluded from adjusted operating income.
($ Millions)
NON-GAAP RECONCILIATION:
ADJUSTED OPERATING INCOME |
 XYLEM PROPRIETARY / CONFIDENTIAL
2012
2011
2010
2009
2008
Total Revenue
• Total Xylem
3,791
3,803
3,202
2,849
3,291
• Water Infrastructure
2,425
2,416
1,930
1,651
1,824
• Applied Water
1,424
1,444
1,327
1,254
1,527
Operating Income
• Total Xylem
443
395
388
276
315
• Water Infrastructure
342
343
276
227
220
• Applied Water
170
160
158
109
162
Operating Margin
• Total Xylem
11.7%
10.4%
12.1%
9.7%
9.6%
• Water Infrastructure
14.1%
14.2%
14.3%
13.7%
12.1%
• Applied Water
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
24
-
15
31
41
• Water Infrastructure
19
-
12
15
17
• Applied Water
5
-
3
15
18
Adjusted Operating Income*
• Total Xylem
489
482
403
307
356
• Water Infrastructure
365
359
288
242
237
• Applied Water
177
173
161
124
180
Adjusted Operating Margin*
• Total Xylem
12.9%
12.7%
12.6%
10.8%
10.8%
• Water Infrastructure
15.1%
14.9%
14.9%
14.7%
13.0%
• Applied Water
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)
33 |
 XYLEM PROPRIETARY / CONFIDENTIAL
34
NON-GAAP RECONCILIATION:
XYLEM EBITDA & ADJ. EBITDA
Q1
Q2
Q3
Q4
Total
Pre-Tax Income
51
57
83
191
Interest Expense (Income), net
12
13
14
39
Depreciation
25
24
23
72
Amortization
12
13
13
38
Stock Compensation
6
6
9
21
EBITDA
106
113
142
361
Restructuring & Realignment
12
28
12
52
Special Charges
-
-
20
20
Adjusted EBITDA
118
141
174
433
Revenue
879
960
965
2,804
Adjusted EBITDA Margin
13.4%
14.7%
18.0%
15.4%
Q1
Q2
Q3
Q4
Total
Pre-Tax 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
Revenue
925
966
931
969
3,791
Adjusted EBITDA Margin
15.2%
17.8%
17.5%
17.9%
17.1%
2012
EBITDA and Adjusted EBITDA by Quarter
($ Millions)
2013 |
 XYLEM PROPRIETARY / CONFIDENTIAL
35
NON-GAAP RECONCILIATION:
ADJUSTED DILUTED EPS
Q2 2012
Q2 2013
As Reported
Adjustments
Adjusted
As Reported
Adjustments
Adjusted
Total Revenue
966
966
960
960
Operating Income
129
6
a
135
70
28
c
98
Operating Margin
13.4%
14.0%
7.3%
10.2%
Interest Expense
(13)
(13)
(14)
(14)
Other Non-Operating Income (Expense)
(1)
(1)
1
1
Income before Taxes
115
6
121
57
28
85
Provision for Income Taxes
(26)
(3)
b
(29)
(11)
(8)
d
(19)
Net Income
89
3
92
46
20
66
Diluted Shares
186.2
186.2
186.1
186.1
Diluted EPS
0.48
$
0.01
$
0.49
$
0.25
$
0.11
$
0.36
$
Q2 YTD 2012
Q2 YTD 2013
As Reported
Adjustments
Adjusted
As Reported
Adjustments
Adjusted
Total Revenue
1,891
1,891
1,839
1,839
Operating Income
228
11
a
239
136
40
c
176
Operating Margin
12.1%
12.6%
7.4%
9.6%
Interest Expense
(27)
(27)
(27)
(27)
Other Non-Operating Income (Expense)
(2)
(2)
(1)
(1)
Income before Taxes
199
11
210
108
40
148
Provision for Income Taxes
(47)
(4)
b
(51)
(21)
(11)
d
(32)
Net Income
152
7
159
87
29
116
Diluted Shares
186.1
186.1
186.3
186.3
Diluted EPS
0.82
$
0.03
$
0.85
$
0.47
$
0.15
$
0.62
$
a
One time separation costs
b
Net tax impact of separation costs and special tax items
c
Restructuring & realignment costs
d
Net tax impact of restructuring & realignment costs and special tax items
($ Millions, except per share amounts) |
 XYLEM PROPRIETARY / CONFIDENTIAL
36
NON-GAAP RECONCILIATION:
ADJUSTED DILUTED EPS
Q3 2012
Q3 2013
As Reported
Adjustments
Adjusted
As Reported
Adjustments
Adjusted
Total Revenue
931
931
965
965
Operating Income
111
9
a
120
98
32
c
130
Operating Margin
11.9%
12.9%
10.2%
13.5%
Interest Expense
(14)
(14)
(14)
(14)
Other Non-Operating Income (Expense)
3
3
(1)
(1)
Income before Taxes
100
9
109
83
32
115
Provision for Income Taxes
(28)
2
b
(26)
(10)
(13)
d
(23)
Net Income
72
11
83
73
19
92
Diluted Shares
186.3
186.3
186.0
186.0
Diluted EPS
0.38
$
0.06
$
0.44
$
0.39
$
0.10
$
0.49
$
Q3 YTD 2012
Q3 YTD 2013
As Reported
Adjustments
Adjusted
As Reported
Adjustments
Adjusted
Total Revenue
2,822
2,822
2,804
2,804
Operating Income
339
20
a
359
234
72
c
306
Operating Margin
12.0%
12.7%
8.3%
10.9%
Interest Expense
(41)
(41)
(41)
(41)
Other Non-Operating Income (Expense)
1
1
(2)
(2)
Income before Taxes
299
20
319
191
72
263
Provision for Income Taxes
(75)
(2)
b
(77)
(31)
(24)
d
(55)
Net Income
224
18
242
160
48
208
Diluted Shares
186.2
186.2
186.2
186.2
Diluted EPS
1.20
$
0.09
$
1.29
$
0.86
$
0.26
$
1.12
$
a
One time separation costs and restructuring & realignment costs
b
Net tax impact of separation costs, restructuring & realignment costs and special tax
items c
Restructuring & realignment costs and special charges
d
Net tax impact of restructuring & realignment costs, special charges and special tax
items ($ Millions, except per share amounts) |
 XYLEM PROPRIETARY / CONFIDENTIAL
37
NON-GAAP RECONCILIATION:
GUIDANCE
Illustration of Mid Point Guidance
2013 Guidance
FY '12
FY '13
As
Reported
Adjustments
Adjusted
As
Projected
Adjustments
Adjusted
Total Revenue
3,791
3,791
3,770
3,770
Segment Operating Income
512
30
a
542
425
73
c
498
Segment Operating Margin
13.5%
14.3%
11.3%
13.2%
Corporate Expense
69
(16)
b
53
78
(20)
d
58
Operating Income
443
46
489
347
93
440
Operating Margin
11.7%
12.9%
9.2%
11.7%
Interest Expense
(55)
(55)
(55)
(55)
Other Non-Operating Income (Expense)
-
-
(3)
(3)
Income before Taxes
388
46
434
289
93
382
Provision for Income Taxes
(91)
(13)
e
(104)
(48)
(32)
e
(80)
Net Income
297
33
330
241
61
302
Diluted Shares
186.2
186.2
186.0
186.0
Diluted EPS
1.59
$
0.18
$
1.77
$
1.30
$
0.33
$
1.63
$
Guidance
($ Millions, except per share amounts)
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
Restructuring and realignment costs incurred at the segment level
d
Special charges incurred at the corporate level
e
Net tax impact of above items, plus the addition of special tax items
|
 XYLEM PROPRIETARY / CONFIDENTIAL
38
NON-GAAP RECONCILIATION:
FREE CASH FLOW
2013
2012
Net Cash - Operating Activities
163
$
230
$
Capital Expenditures
(91)
(81)
Free Cash Flow, including separation costs
72
149
Cash Paid for Separation Costs (incl. Capex)
-
22
Free Cash Flow, excluding separation costs*
72
$
171
$
Net Income
160
224
Separation Costs, net of tax (incl. tax friction)
-
11
Net Income, excluding separation costs*
160
$
235
$
Free Cash Flow Conversion
45%
73%
* Separation costs are not excluded in 2013
Net Cash - Operating Activities vs. Free Cash Flow
($ Millions)
Nine Months Ended |
 XYLEM PROPRIETARY / CONFIDENTIAL
39 |