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): September 6, 2012

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	
The following 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 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. Company executives will present an overview of the Company at the Vertical Research Partners Industrial Conference on September 6, 2012. The presentation slides will be posted on the Company’s website and are attached and incorporated herein by reference as Exhibit 99.1.
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, the terms and the effect of the separation, the nature and impact of the separation, 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 slides posted by Xylem Inc. on September 6, 2012.	

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: September 6, 2012	 	 	 	By:	 	/s/ Michael T. Speetzen	
 	 	 	 	 	 	Michael T. Speetzen	
 	 	 	 	 	 	Senior Vice President & Chief Financial Officer
(Authorized Officer of Registrant)	

EXHIBIT INDEX

Exhibit
No.	  	Description	
 	 	
99.1	  	Presentation slides posted by Xylem Inc. on September 6, 2012.	

Vertical Research ConferenceSeptember 6, 2012Exhibit 99.1

Forward Looking Statements2Thisdocumentcontainsinformationthatmayconstitute“forward-lookingstatements.”Forward-lookingstatementsbytheirnatureaddressmattersthatare,todifferentdegrees,uncertain.Generally,thewords“anticipate,”“estimate,”“expect,”“project,”“intend,”“plan,”“believe,”“target”and similar expressions identify forward-looking statements, whichgenerally are not historical in nature. However, the absence of these words or similar expressions does not mean that astatement 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, the terms and the effect of the separation, the nature and impact of the separation,capitalization of the Company, future strategic plans and other statements that describe the Company’s businessstrategy, 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 inthefuture—includingstatementsrelatingtoorders,revenues,operatingmarginsandearningspersharegrowth,andstatementsexpressinggeneralviewsaboutfutureoperatingresults—areforward-lookingstatements.Caution should be taken not to place undue reliance on any such forward-looking statements because they involverisks, uncertainties and other factors that could cause actual results to differ materially from those expressed or impliedin,orreasonablyinferredfrom,suchstatements.TheCompanyundertakesnoobligationtopubliclyupdateorreviseany forward-looking statements, whether as a result of new information, future events or otherwise, except as requiredby law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actualresults to differ materially from the Company’s historical experience and our present expectations or projections. Theserisks and uncertainties include, but are not limited to, those set forth in Item 1A of our Annual Report on Form 10-K, andthose described from time to time in subsequent reports filed with the Securities and Exchange Commission.

•Design, Manufacture, & Service Highly Engineered Technologies•A True Water Pure Play•Diverse End Market & Geographic Mix•Leading Brands & Application Expertise•Resilient Portfolio & Large Installed Base•Unrivaled Global Reach …Serving 150+ CountriesGlobal Leader in WaterApplication Solutions3$3.8B Company Uniquely Positioned in the Attractive Water Industry$3.8B Company Uniquely Positioned in the Attractive Water Industry

WaterInfrastructureEquipment& ServicesEndUsersUniquely Positioned …4……Global Leader in Attractive Water IndustryGlobal Leader in Attractive Water Industry$500BGlobal WaterIndustryGrowth Drivers•Depleting Water Supply•Tightening Regulation•Aging Infrastructure•Population Growth•Urbanization•Sustainability•Energy EfficiencyTechnology Intensive $30B•Highly Engineered•Premium Value•High Performance•Knowledge-Based Services•Differentiated Solutions•Higher Profitability

Segment OverviewMarket Size: $16B2011 Revenues:  $2.4B2011 Op Margin*: 14.9%WaterInfrastructure63%Unique Position -Only Provider of All Three “T’s”Water Infrastructure OverviewWater Infrastructure OverviewApplied Water37%Market Size: $14B2011 Revenues:  $1.4B 2011 Op Margin*: 12.0%CustomersResidential & Commercial,Industrial Facilities, AgricultureLarge Installed BaseGrowth Despite Slow New ConstructionApplied Water OverviewApplied Water OverviewCustomersPublic UtilitiesIndustrial FacilitiesDistributionWorld-Class Global Direct(~70%) & Indirect ChannelsNote: (1) Global market share based on company estimates.DistributionPrimarily through World-ClassIndirect (+70%) Channels5*Excluding separation costs of $16M*Excluding separation costs of $13MRevenue by ApplicationMarketShare(1)Transport73%#1Treatment18%#1Test9%#2Revenue by ApplicationMarketShare(1)Bldg. Services53%#2Industrial Water18%#2Irrigation9%#3

Diversified Geographic Market Mix6Europe37%U.S.36%Asia Pac11%Other16%Geographical Mix*Geographical Mix**2011 Revenues……With Large Installed Base & Growing Emerging Market ExposureWith Large Installed Base & Growing Emerging Market ExposureRegionHighlightsEurope•Large Installed Base•2011 Flat Organically•1H’12 Down 1%•So. Europe ~8% Tot RevenueU.S.•Large Installed Base•2011 Up Low Single Digits•1H’12 Up Low Single DigitsEmergingMarkets•Evenly Spread Across LatinAmerica, Middle East & Africa,Eastern Europe, Asia PacEmerging MarketsEmerging Markets•BRIC & ROW Focused Growth Strategy•40+ Sales Units Spread Globally•2 Localized R&D Centers•14 Production Facilities•’09 -’11 Revenue CAGR +20%•Proj.Long-Term Revenue Growth 8-10+%XylemXylemEmergingEmergingMarket RevenueMarket Revenue~19% in 2011~19% in 2011

AgricultureAgricultureResidentialResidentialCommercialCommercialPublic UtilityPublic UtilityDiversified End Market Mix7……With Strong Long Term Fundamentals & Growth DriversWith Strong Long Term Fundamentals & Growth DriversIndustrialIndustrial% of XYL Revenue40%36%13%9%3%Cycle•Late/LessCyclical•Non-Cyclical•Late Cycle•Early Cycle•Mid CycleFundamentals•Operation Critical•Growing Tariffs•Green Regulation•Energy Efficiency•Growing Demand•Aftermarket &Replacement•Aftermarket &Replacement•StrongReplacement•StrongReplacementXYL ‘12Organic Growth•Up Low to MidSingle Digit•Flat to Up LowSingle Digit•Up Low SingleDigit•Up Low SingleDigit•Down Low SingleDigit to FlatDepleting WaterSupplyTighteningRegulationAgingInfrastructurePopulationGrowthUrbanizationSustainabilityEnergyEfficiencyLT Growth Drivers

Public Utility & IndustrialTransport & Treatment8ApplicationTechnologies•Waste Water Transport•Filtration•Biological Treatment•UV & Ozone DisinfectionApplicationApplicationTechnologiesTechnologies••Waste Water TransportWaste Water Transport••FiltrationFiltration••Biological TreatmentBiological Treatment••UV & Ozone DisinfectionUV & Ozone Disinfection

9•36% of Xylem Revenues relatedtoPublicUtilityspending–in2011:•~$1B for Maintenance Activities•Public Utility spending growslong term•U.S.:  ~6% CAGR 1965 –2011•Europe similar to U.S.•Asia Pacific growing faster•Funding of expenditures secure•~80% funded by tariffs•Tariffs growing 8%/yr in U.S.•European Tariffs typically higherthan U.S.•Funds typically can not be used forother purposesStrong Long-term Fundamentals…Xylem Provides Mission Critical SolutionsSource: U.S. Census BureauThe Public Utility End Market•~6% CAGR 1965 –2011•Only 3 years (‘69, ’83 and ‘11) saw >10% drop•10% drop reduces Total XYL Revs. by ~(1-2) pptsU.S. Water and Sewer Construction Spending - $M

Test Applications10Analytical InstrumentationAnalytical InstrumentationDiverse ApplicationsDiverse ApplicationsEnvironmentalEnvironmentalWater & Waste WaterWater & Waste WaterFood & BeverageFood & BeverageChemicalChemicalPharmaceuticalPharmaceuticalOcean/CoastalOcean/Coastal

Dewatering ApplicationsDewatering ApplicationsIndustrial Water ApplicationsIndustrial Water ApplicationsDewatering and IndustrialWater Applications•Mining•Oil, Gas & Chemical•Water & Waste Water•Marine•Mining•Oil, Gas & Chemical•Water & Waste Water•MarineDiverse Applications•Construction•Disaster Recovery•Environmental•Heavy Industry

Commercial & Residential12Customers•Developers•Building Operators•Building Designers•HVAC Specialists•Contractors•PlumbersHVAC  -HeatingPressure boostersFire protectionHVAC  -CoolingWastewaterZone Control

Resilient Portfolio & Increasing Profitability……Proven Track Record, Continued FocusProven Track Record, Continued Focus13•Resilient Portfolio …Despite Challenging End Market Conditions•Management Discipline …Proactive Actions (~$100M of Restructuring & Realignment ‘08-’12)•Operational Excellence …Driving Productivity Initiatives•Continued Investment Driving Growth in Core Business•Key Acquisitions …Transitioning Portfolio to Higher Profitability LevelsRevenue Up ~$510M …+15%Op Income Up ~$165M …~46%Incremental Margin ~32%(2012E At Mid-Point Guidance)Incl. Stand-Alone Costs12.7%     13.0%$M, unless otherwise indicatedExpansion +290 Bps On Comp BasisRevenueOperating Margin *20082009201020112012E10.8%10.8%12.6%12.8%13.7%20082009201020112012E3,2912,8493,2023,803~3.8B* Excludes the impact of restructuring and stand alone costs for all periods. See Appendix for Non-GAAP Reconciliations

Gross Margin Improvement Funds Future GrowthXylem Continues to Invest While Increasing ProfitabilityXylem Continues to Invest While Increasing Profitability14•Operational and Commercial Excellence•Growth in Higher Margin Analytics and Dewatering applications•Xylem’s Water Infrastructure Direct Sales Force a Key Competitive Advantage200820092010201134.7%36.4%37.9%38.4%Gross Margin20082009201020111.9%2.2%2.3%2.6%R&D200820092010201121.9%23.4%23.0%23.1%SG&A

15Highly Attractive Recurring Revenue Profile•15%of Xylem revenue•Strong global presence•120+ owned service centers•600+ service employees•Extensive channel partner network•9% Revenue CAGR ‘06-’11 despiteeconomicdownturn•Approximately 22% of Xylem revenue•Installed base drives replacement sales•Brand loyalty drives like-for-likereplacement•Installed base provides opportunity forupgrades, next generation and services$MAftermarket Parts & Services RevenuesNote:(1) Based on company estimates.AftermarketProvidesStabilityandDrivesStrongProfitableGrowthReplacement Equipment (1)200620072008200920102011$370$382$396$433$512$570•~11% revenue growth 2010-2011

Focused on Free Cash Flow161FreeCashFlow=Netcashfromoperatingactivities-CapitalexpendituresStrongStrongFreeFreeCashCashFlowFlow&&SolidSolidBalanceBalanceSheetSheettotoFundFundGrowthGrowthInitiativesInitiativesCapital Structure & Liquidity PositionCapital Structure & Liquidity PositionJune 30, 2012Cash358Debt1,206Net Debt848Shareholders’Equity1,948Net Capital2,796Net Debt to Net Capital30%•Strong Cash Flow Conversion•Balance Sheet Flexibility•No Significant Debt Maturities Until 2016•30% Net Debt to Net Capital•1.3x Net Debt/Adj. TTM EBITDA•$600MRevolvingCreditFacility-Unutilized•AccesstoCommercialPaper-Unutilized* See non-GAAP reconciliations.$341$308$301$388152%117%91%111%2008200920102011Free Cash FlowFree Cash Flow1*1*and Conversion ($M)and Conversion ($M)

Disciplined Capital Deployment17•2.5% –3.5% of sales•~$0.10/share•In-line with peers•Up to $300M / yearCapital Deployment Strategy•Balance of organic & inorganic investment•Return value to shareholders•Maintain solid investment grade metrics•Debt & pensionOrganic GrowthWorld Class FacilitiesCash Return toShareholdersCash to Meet KeyObligationsInorganic Investmentto Fuel GrowthCapital Deployment Evaluation•Fold targeted performance into Operating plans•Quarterly / Annual investment review•Ensure targeted returns achievedFocused on Long Term Shareholder ReturnFocused on Long Term Shareholder ReturnCapexReturn toShareholdersFinancialObligationsAcquisitionStrategyCash fromOperations

Xylem Has a Focused Growth Strategy•Replicate leadership positions•Strong aftermarket opportunities•Innovative application solutionsOrganic & Inorganic Growth ExpertiseOrganic & Inorganic Growth Expertise•Established footprint•Localized innovation centers•Focused BRIC & ROW Strategy•Disciplined approach•History of successful integration•Bolt-on, niche go-forward strategy18$4.5B -$5.0B(1)Revenue growth rates based on 2011revenue of $3,803$M, unless otherwise indicatedOrganic GrowthEmerging MarketsAcquisition Strategy~8% CAGR201020112012E2015E3,2023,803~3.8BLong Term Growth Rates(1)•Organic4 -6%•M&A1 -2%Market Growth Rates•Developed1 -3%•Emerging8 -10+%•Global3 -5%

Financial Projections19•Market growth of 3-5%...4-6% Xylem targeted growth•Acquisition strategy adds 1-2 % points of growth•Emerging markets > 20% of revenuesXylem is Poised to Achieve its Long-Term Financial ObjectivesXylem is Poised to Achieve its Long-Term Financial Objectives•Operational & Commercial excellence expand segment margins 50-75 bps per year–Gross margin > 40%•Continued cash management discipline to achieve cash conversion of ~100%•Capital deployment strategy to drive ROIC2012 Guidance2015 TargetRevenues~$3.8B$4.5B to $5.0BOperating Margin*12.7% to 13.3%14.5% to 15.5%Free Cash Flow Conversion95%100%Normalized EPS Growth*+4% to +10%* See non-GAAP reconciliations.Long-Term Targets

InvestmentHighlights20•$3.8B Company Uniquely Positioned in the Attractive Water Industry•Resilient Portfolio & Proven Track Record of Increasing Profitability•Leading Brands &World-Class Distribution Channels•Diversified End & Geographic Markets Mix•Attractive Growth Opportunities & Large Installed Base•Solid Cash Flow Generation & Disciplined Capital Deployment StrategyAbility to Deliver Strong & Consistent Financial PerformanceAbility to Deliver Strong & Consistent Financial Performance

21NYSE: XYLPhil De Sousa, Investor Relations Officer(914) 323-5930Janice Tedesco, Investor Relations Coordinator(914) 323-5931http://investors.xyleminc.comThank you for your interest !Thank you for your interest !

Appendix

Non-GAAP Measures23Xylem Inc. Non-GAAP MeasuresManagement views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, workingcapital, 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”  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”  rate.  This approach is used for countries whose functional currency is not the U.S. dollar.“EBITDA”  adjustment to EBITDA to exclude for one-time separation costs associated with the Xylem spin-off from ITT Corporation. “Operating Income * ”, "Adjusted Operating Income" and “Adjusted EPS”  restructuring and realignment and one-time separation costs associated with the Xylem spin-off from ITT Corporation and tax-related special items.“Normalized EPS”   stand alone costs in the prior comparable period.  “Free Cash Flow”  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. definedasrevenueandorders,respectively,excludingtheimpactofforeigncurrencyfluctuations,intercompanydefinedasfinancialresultsadjustedforcurrencybytranslatingcurrentperiodandpriorperiodactivityusingthesamecurrencyconversiondefinedasearningsbeforeinterest,taxes,depreciation,amortizationexpense,andshare-basedcompensation.“AdjustedEBITDA”reflectsthedefinedasoperatingincomeandearningspershare,adjustedtoexcludedefinedasadjustedearningspershare,aswellasadjustmentstoreflecttheincrementalcurrentperiodamountofinterestexpenseanddefinedasnetcashfromoperatingactivities,asreportedintheStatementofCashFlow,lesscapitalexpendituresaswellasadjustmentsfor

Non-GAAP Reconciliation: Organic Revenue24(A)(B)(C)(D)(E)(F) = B+C+D+E(G) = F/AChange% ChangeChange% ChangeRevenueRevenue2011 v. 20102011 v. 2010FX ContributionEliminationsAdj. 2011 v. 2010Adj. 2011 v. 201020112010Year Ended December 31, 2011Xylem Inc.3,8033,20260118.8%(264)(111)-2267.1%Water infrastructure2,4161,93048625.2%(264)(87)21377.1%Applied Water1,4441,3271178.8%-(28)(1)886.6%Change% ChangeChange% ChangeRevenueRevenue2010 v. 20092010 v. 2009FX ContributionEliminationsAdj. 2010 v. 2009Adj. 2010 v. 200920102009Year Ended December 31, 2010Xylem Inc.3,2022,84935312.4%(263)6-963.4%Water Infrastructure1,9301,65127916.9%(247)(8)-241.5%Applied Water1,3271,254735.8%(16)16-735.8%Change% ChangeChange% ChangeRevenueRevenue2009 v. 20082009 v. 2008FX ContributionEliminationsAdj. 2009 v. 2008Adj. 2009 v. 200820092008Year Ended December 31, 2009Xylem Inc.2,8493,291(442)-13.4%(7)158-(291)-8.8%Water infrastructure1,6511,824(173)-9.5%-108-(65)-3.6%Applied Water1,2541,527(273)-17.9%(7)53-(227)-14.9%Acquisitions /DivestituresAcquisitions /DivestituresXylem Inc. Non-GAAP ReconciliationReported vs. Organic Revenue($ Millions)(As Reported -GAAP)(As Adjusted -Organic)Acquisitions /Divestitures

Non-GAAP Reconciliation: EBITDA252011201020092008Pre-Tax Net Income383                    388                    277                         312                         Interest, net17                      -                    -                          -                          Depreciation and Amortization(1)150                    101                    79                            72                            EBITDA550                    489                    356                         384                         Separation Costs87                      -                    -                          -                          Adjusted EBITDA637                    489                    356                         384                         Revenues3,803               3,202               2,849                      3,291                      Adjusted EBITDA Margin16.7%15.3%12.5%11.7%Note: (1) Includes share-based compensation.Xylem Inc. Non-GAAP ReconciliationEBITDA and Adjusted EBITDAYears ended 2011, 2010, 2009, & 2008($ Millions)

Non-GAAP Reconciliation: Earnings Per Share26FY 2009FY 2010FY 2011Net Income263                329                279                Separation costs, net of tax--72                  Adjusted Net Income before Special Tax Items263                329                351                Special Tax Items(61)                 (43)                 7                    Adjusted Net Income202                286                358                Diluted Earnings per Share$1.42$1.78$1.50Separation costs per Share--$0.39Adjusted diluted EPS before Special Tax Items$1.42$1.78$1.89Special Tax Items per Share($0.32)($0.23)$0.04Adjusted diluted EPS$1.10$1.55$1.93Xylem Inc. Non-GAAP ReconciliationAdjusted Diluted EPS2009, 2010, & 2011($ Millions, except per share amounts)

Non-GAAP Reconciliation: Guidance27Illustration of Mid Point Guidance2012 GuidanceFY '11FY '12As ReportedAdjustmentsAdjustedAdjustmentsNormalizedAs ProjectedAdjustmentsAdjustedTotal Revenue3,8033,8033,8033,8003,800Segment Operating Income50329a532(10)d52252425h,i549Segment Operating Margin13.2%14.0%13.7%13.8%14.4%Corporate Expense108(58)b5018e6866(11)h55Operating Income39587482(28)45445836494Operating Margin10.4%12.7%11.9%12.1%13.0%Interest Expense(17)(17)(39)f(56)(54)(54)Other Non-Operating Income (Expense)555(2)(2)Income before Taxes38387470(67)40340236438Provision for Income Taxes(104)(8)c(112)16g(96)(99)(10)j(109)Net Income27979358(51)30730326329Diluted Shares185.3185.3186.3186.3Diluted EPS1.50$             0.43$              1.93$              (0.27)$             1.661.630.141.77aOne time separation costs incurred at the segment levelbOne time separation costs incurred at the corporate levelcNettaximpactofaboveitems,plustheadditionof2011specialtaxitemsdIncremental stand alone costs to be incurred in 2012 at the segment level ($10M)eIncremental stand alone costs to be incurred in 2012 at the corporate level ($18M)fIncremental interest expense on long-term debt to be incurred in 2012gTaximpactofincrementalinterestexpenseandstandalonecoststobeincurredin2012hExpected one time separation costs of $7M and $11M to be incurred at the segments and headquarters, respectively.iRestructuring & realignment costs of $18M to be incurred at the segments.jTax impact of one time separation, restructuring & realignment costs expected to be incurred in 2012 and tax special items realized through Q2 2012.Xylem Inc. Non-GAAP ReconciliationGuidance($ Millions, except per share amounts)

Non-GAAP Reconciliation: Free Cash Flow28Xylem Inc. Non-GAAP ReconciliationNet Cash -Operating Activities vs. Free Cash FlowYears ended 2011, 2010, 2009, & 2008($ Millions)Year Ended2011201020092008Net Cash -Operating Activities449395370408Capital Expenditures(126)(94)(62)(67)Free Cash Flow, including separation costs323301308341Separation Costs (Cash Paid incl. Capex)65---Free Cash Flow, excluding separation costs388301308341Net Income279329263224Separation Costs, net of tax72---Adjusted Net Income351329263224Free Cash Flow Conversion111%91%117%152%

Non-GAAP Reconciliation: Adj. Operating Income & Margin29Mid Point Guidance20082009201020112012ERevenue3,291               2,849               3,202                      3,803                      3,800                    Operating Income315                    276                    388                         395                         458                        Operating Margin9.6%9.7%12.1%10.4%12.1%Restructuring & Realignment41                      31                      15                            -                          18                          Separation Costs-                    -                    -                          87                            18                          Adjusted Operating Income356                    307                    403                         482                         494                        Adjusted Operating Margin10.8%10.8%12.6%12.7%13.0%Standalone Costs-                    -                    -                          5                              28                          Adj. Operating Income, excl. Standalone Costs356                    307                    403                         487                         522                        Adjusted Operating Margin, excl. Standalone Costs10.8%10.8%12.6%12.8%13.7%Xylem Inc. Non-GAAP ReconciliationAdjusted Operating Income($ Millions)