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): May 3, 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 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 May 3, 2012, announcing the financial results for the first quarter ended March 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 are earnings slides posted on Xylem Inc.’s website on May 3, 2012, summarizing Xylem Inc.’s financial results for the quarter ended March 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 9.01	Financial Statements and Exhibits.	
(d) Exhibits.

Exhibit
No.	  	Description	
 	 	
99.1	  	News Release issued by Xylem Inc. on May 3, 2012.	
 	 	
99.2	  	Slides summarizing first quarter financial results posted by Xylem Inc. on May 3, 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: May 3, 2012	 	By:	 	/s/ Frank R. Jimenez	
 	 	 	 	Frank R. Jimenez	
 	 	 	 	Senior Vice President, General Counsel and
Corporate Secretary
(Authorized Officer of Registrant)	

EXHIBIT INDEX

Exhibit
No.	  	Description	
 	 	
99.1	  	News Release issued by Xylem Inc. on May 3, 2012.	
 	 	
99.2	  	Slides summarizing first quarter financial results posted by Xylem Inc. on May 3, 2012.	

Exhibit 99.1

Xylem
1133 Westchester Ave., White Plains, NY 10604
Tel +1.914.323.5700 Fax +1.914.696.2960
FOR IMMEDIATE RELEASE

Contacts:	  	 	
Media	  	Investors	
Tom Glover	  	Phil De Sousa	
+1-914-323-5891	  	+1-914-323-5930	
Tom.Glover@xyleminc.com	  	Phil.DeSousa@xyleminc.com	
Xylem Inc. reports solid first quarter 2012 results; affirms previous full-year guidance
 
 	•	 	First quarter 2012 revenue up 6 percent in constant currencies to $925 million; up 4 percent as reported	
 
 	•	 	First quarter 2012 adjusted net income of $67 million or $0.36 per share, up 9 percent on a normalized basis; $63 million or $0.34 per share as reported	
 
 	•	 	Orders for the quarter exceed $1 billion for the first time; up 3 percent over Q1 2011	
 
 	•	 	YSI acquisition integration ahead of plan; accretive to earnings per share	
WHITE PLAINS, N.Y., May 3, 2012 – Xylem Inc. (NYSE: XYL), a leading global water technology company focused on solving the world’s most challenging water issues, today reported first quarter revenue of $925 million, up 6 percent from the first quarter 2011 on a constant currency basis and up 4 percent on a reported basis. First quarter net income was $63 million or $0.34 per share. Adjusting for one-time separation costs resulting from the Xylem spinoff from ITT Corporation on October 31, 2011, net income was $67 million or $0.36 per share, up 9 percent or 3 cents per share over the first quarter 2011 on a normalized basis.*
“Our growth in revenue and operating earnings in the first quarter is a testament to the strength of our comprehensive water portfolio, particularly the investments we’ve made in expanding our analytics and dewatering platforms,” said Gretchen McClain, president and chief executive officer of Xylem. “We believe we are particularly well-positioned to capture growth opportunities from the diverse end markets we serve.”
“We continue to see strong growth in our businesses serving the industrial markets, our largest end market,” McClain continued. “We are gaining market share in commercial building services, bolstered by some of our new products including the energy-saving eSV multistage booster pump. Total orders for the quarter exceeded $1 billion for the first time. And our latest acquisition, YSI, is already contributing to earnings and its integration into the rest of the business is ahead of plan. Solid free cash flow performance allows us to continue to make strategic investments and drive future growth.”
Xylem achieved free cash flow of $41 million and an adjusted operating margin of 11.2 percent, excluding non-recurring separation costs. Operating margin was also impacted by incremental stand-alone costs of $10 million, which reduced margin by 110 basis points.
 
*	The 2011 normalized earnings per share reflect adjustments (including 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.	

First Quarter Segment Results
Water Infrastructure
Xylem’s Water Infrastructure businesses provide equipment and services focused on the transport, treatment and testing of water and wastewater in the public utility and industrial markets.
 
 	•	 	First quarter 2012 segment revenue was $584 million, up 8 percent from the first quarter of 2011 on a constant currency basis, and up 6 percent on a reported basis. This reflects the YSI acquisition, growth in industrial applications and growth in emerging markets.	
 
 	•	 	Segment orders were $638 million for the quarter, up 4 percent over last year, reflecting the YSI acquisition.	
 
 	•	 	First quarter adjusted segment operating margin, excluding non-recurring separation costs but including the impact of stand-alone costs, expanded by 160 basis points from the first quarter 2011 to 13.2 percent, driven by price and productivity gains. Stand-alone costs impacted operating margin by 20 basis points for the first quarter 2012.	
Applied Water
Xylem’s Applied Water businesses provide equipment and services in the residential and commercial building services, general industrial and agricultural markets.
 
 	•	 	First quarter 2012 segment revenue and orders were $355 million and $382 million, respectively, both up 1 percent over the first quarter of 2011 on an organic basis. Solid growth in general industry, commercial building services, and food and beverage was mostly offset by residential market weakness in Europe and the Middle East.	
 
 	•	 	First quarter adjusted segment operating margin, excluding non-recurring separation costs but including stand-alone costs, was 11.5 percent, down 150 basis points from the first quarter 2011, driven by lower volume in highly profitable HVAC products due to a warm winter in the U.S., lower marine volume and continued investment in the segment. Stand-alone costs impacted operating margin 60 basis points for the first quarter of 2012.	
Affirming previous full-year 2012 guidance
Xylem is affirming previous guidance for full-year 2012 revenue in the range of $3.9 billion – $4.0 billion, representing year-over-year organic growth of 4 to 6 percent. Operating margins are anticipated to be in the range of 12.7 to 13.3 percent, excluding spinoff-related costs, but including incremental stand-alone costs of $25 to $30 million as Xylem completes its first full year as an independent company. These stand-alone costs will offset operating margin by 60 to 80 basis points. Full-year 2012 adjusted net income is forecast to be $334 million to $362 million, for adjusted earnings per share of $1.80 to $1.95 for the full year 2012, which reflects expected growth of 8 to 17 percent over normalized 2011. Reported net income, which includes one-time separation costs, is anticipated to range from $319 million to $350 million, or $1.72 to $1.89 per share.
 
2

More detail available
Supplemental information on Xylem’s first quarter earnings, including reconciliations for certain non-GAAP items, is posted at investors.xyleminc.com.
About Xylem
Xylem (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. Launched in 2011 from the spinoff of the water-related businesses of ITT Corporation, Xylem is headquartered in White Plains, N.Y., with 2011 annual revenues of $3.8 billion and 12,500 employees 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.
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 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.
###
 
3

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED INCOME STATEMENTS (Unaudited)
(in millions, except per share data)

For the three months ended March 31,	  	2012	 	 	2011	 	
Revenue	  	$	925	  	 	$	890	  	
Cost of revenue	  	 	562	  	 	 	553	  	
 	  	 	 	 	 	 	 	 	
Gross profit	  	 	363	  	 	 	337	  	
Selling, general and administrative expenses	  	 	231	  	 	 	210	  	
Research and development expenses	  	 	28	  	 	 	24	  	
Separation costs	  	 	5	  	 	 	3	  	
 	  	 	 	 	 	 	 	 	
Operating income	  	 	99	  	 	 	100	  	
Interest expense	  	 	14	  	 	 	—  	  	
Other non-operating (expense) income, net	  	 	(1	) 	 	 	1	  	
 	  	 	 	 	 	 	 	 	
Income before taxes	  	 	84	  	 	 	101	  	
Income tax expense	  	 	21	  	 	 	23	  	
 	  	 	 	 	 	 	 	 	
Net income	  	$	63	  	 	$	78	  	
 	  	 	 	 	 	 	 	 	
Earnings per share:	  	 	 	 	 	 	 	 	
Basic	  	$	0.34	  	 	$	0.42	  	
Diluted	  	$	0.34	  	 	$	0.42	  	
Weighted average number of shares – Basic	  	 	185.4	  	 	 	184.6	  	
Weighted average number of shares – Diluted	  	 	185.9	  	 	 	184.6	  	
 	 	 	
Dividends declared per share	  	$	0.1012	  	 	$	—  	  	
 
4

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in millions)

For the three months ended March 31,	  	2012	 	  	2011	 	
Net income	  	$	63	  	  	$	78	  	
Other comprehensive income, before tax:	  	 	 	 	  	 	 	 	
Foreign currency translation adjustment	  	 	49	  	  	 	86	  	
Net change in cash flow hedges:	  	 	 	 	  	 	 	 	
Unrealized gains (losses)	  	 	4	  	  	 	—  	  	
Net change in postretirement benefit plans:	  	 	 	 	  	 	 	 	
Amortization of net actuarial loss	  	 	2	  	  	 	—  	  	
Settlement	  	 	2	  	  	 	—  	  	
 	  	 	 	 	  	 	 	 	
Other comprehensive income, before tax	  	 	57	  	  	 	86	  	
Income tax expense related to items of other comprehensive income	  	 	2	  	  	 	—  	  	
 	  	 	 	 	  	 	 	 	
Other comprehensive income, net of tax	  	 	55	  	  	 	86	  	
 	  	 	 	 	  	 	 	 	
Comprehensive income	  	$	118	  	  	$	164	  	

5

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)

 	  	March 31,
2012	 	 	December 31,
2011	 	
 	  	(Unaudited)	 	 	 	 	
ASSETS	  	 	 	 	 	 	 	 	
Current assets:	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	347	  	 	$	318	  	
Receivables, less allowances for discounts and doubtful accounts of $32 and $37 in 2012 and 2011, respectively	  	 	761	  	 	 	756	  	
Inventories, net	  	 	465	  	 	 	426	  	
Prepaid and other current assets	  	 	117	  	 	 	97	  	
Deferred income tax assets	  	 	45	  	 	 	45	  	
 	  	 	 	 	 	 	 	 	
Total current assets	  	 	1,735	  	 	 	1,642	  	
 	 	 	
Property, plant and equipment, net	  	 	468	  	 	 	463	  	
Goodwill	  	 	1,631	  	 	 	1,610	  	
Other intangible assets, net	  	 	502	  	 	 	505	  	
Other non-current assets	  	 	177	  	 	 	173	  	
 	  	 	 	 	 	 	 	 	
Total assets	  	$	4,513	  	 	$	4,393	  	
 	  	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	  	 	 	 	 	 	 	 	
Current liabilities:	  	 	 	 	 	 	 	 	
Accounts payable	  	$	329	  	 	$	322	  	
Accrued and other current liabilities	  	 	486	  	 	 	490	  	
Short-term borrowings and current maturities of long-term debt	  	 	4	  	 	 	5	  	
 	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	819	  	 	 	817	  	
 	 	 	
Long-term debt	  	 	1,202	  	 	 	1,201	  	
Accrued postretirement benefits	  	 	320	  	 	 	316	  	
Deferred income tax liability	  	 	155	  	 	 	165	  	
Other non-current accrued liabilities	  	 	68	  	 	 	67	  	
 	  	 	 	 	 	 	 	 	
Total liabilities	  	 	2,564	  	 	 	2,566	  	
 	  	 	 	 	 	 	 	 	
Commitments and contingencies (Note 14)	  	 	 	 	 	 	 	 	
Stockholders’ equity:	  	 	 	 	 	 	 	 	
Common Stock – authorized 750.0 shares, par value $0.01 per share:	  	 	 	 	 	 	 	 	
Issued 185.4 shares and 184.6 shares in 2012 and 2011, respectively	  	 	2	  	 	 	2	  	
Capital in excess of par value	  	 	1,687	  	 	 	1,663	  	
Retained earnings	  	 	84	  	 	 	40	  	
Treasury stock – at cost 0.1 shares and 0 shares in 2012 and 2011, respectively	  	 	(1	) 	 	 	—  	  	
Accumulated other comprehensive income	  	 	177	  	 	 	122	  	
 	  	 	 	 	 	 	 	 	
Total stockholders’ equity	  	 	1,949	  	 	 	1,827	  	
 	  	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	  	$	4,513	  	 	$	4,393	  	

6

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)

For the three months ended March 31,	  	2012	 	 	2011	 	
Operating Activities	  	 	 	 	 	 	 	 	
Net income	  	$	63	  	 	$	78	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	34	  	 	 	33	  	
Share-based compensation	  	 	5	  	 	 	3	  	
Payments of restructuring	  	 	—  	  	 	 	(5	) 	
Changes in assets and liabilities (net of acquisitions):	  	 	 	 	 	 	 	 	
Changes in receivables	  	 	7	  	 	 	(3	) 	
Changes in inventories	  	 	(31	) 	 	 	(16	) 	
Changes in accounts payable	  	 	14	  	 	 	(31	) 	
Changes in accrued liabilities	  	 	(25	) 	 	 	(5	) 	
Changes in accrued taxes	  	 	3	  	 	 	11	  	
Net changes in other assets and liabilities	  	 	(9	) 	 	 	6	  	
 	  	 	 	 	 	 	 	 	
Net Cash - Operating activities	  	 	61	  	 	 	71	  	
 	  	 	 	 	 	 	 	 	
Investing Activities	  	 	 	 	 	 	 	 	
Capital expenditures	  	 	(31	) 	 	 	(19	) 	
Proceeds from the sale of property, plant and equipment	  	 	2	  	 	 	2	  	
Other, net	  	 	—  	  	 	 	(1	) 	
 	  	 	 	 	 	 	 	 	
Net Cash - Investing activities	  	 	(29	) 	 	 	(18	) 	
 	  	 	 	 	 	 	 	 	
Financing Activities	  	 	 	 	 	 	 	 	
Net transfer (to)/from former parent	  	 	(6	) 	 	 	(33	) 	
Issuance of short-term debt	  	 	3	  	 	 	—  	  	
Principal payments of debt and capital lease obligations	  	 	(3	) 	 	 	—  	  	
Purchase of common stock	  	 	(1	) 	 	 	—  	  	
Proceeds from exercise of employee stock options	  	 	16	  	 	 	—  	  	
Tax impact from equity compensation activity	  	 	(1	) 	 	 	—  	  	
Dividends paid	  	 	(19	) 	 	 	—  	  	
Other, net	  	 	1	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Net Cash - Financing activities	  	 	(10	) 	 	 	(33	) 	
 	  	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash	  	 	7	  	 	 	3	  	
 	  	 	 	 	 	 	 	 	
Net change in cash and cash equivalents	  	 	29	  	 	 	23	  	
Cash and cash equivalents at beginning of year	  	 	318	  	 	 	131	  	
 	  	 	 	 	 	 	 	 	
Cash and cash equivalents at end of year	  	$	347	  	 	$	154	  	
 	  	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	
Cash paid during the period for:	  	 	 	 	 	 	 	 	
Interest	  	$	11	  	 	$	—  	  	
Income taxes (net of refunds received)	  	$	18	  	 	$	9	  	
 
7

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 revenues, 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 by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries where the functional currency is the local currency.
“EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA”  reflects the adjustment to EBITDA to exclude for one-time separation costs associated with the Xylem spin-off from ITT Corporation.
“Operating Income *” and “Adjusted EPS” defined as operating income and earnings per share, adjusted to exclude one-time separation costs associated with the Xylem spin-off from ITT Corporation and tax-related special items.
“Normalized EPS” defined as earnings per share, adjusted to exclude one-time separation costs associated with the Xylem spin-off from ITT Corporation and tax-related special items, as well as an adjustment 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.
 
8

Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic & Constant Currency Revenue / 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	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Orders	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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	% 	

 	 	Revenue	 	 	Revenue	 	 	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	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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 and intersegment eliminations the sum of segment amounts may not agree to Xylem totals.
 
9

Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
For The Three Months Ended 2012 & 2011
($ Millions, except per share amounts)

 	  	Q1 2012	 	  	Q1 2011	 	
Net Income	  	 	63	  	  	 	78	  	
Separation costs, net of tax	  	 	4	  	  	 	2	  	
 	  	 	 	 	  	 	 	 	
Adjusted Net Income before Special Tax Items	  	 	67	  	  	 	80	  	
 	  	 	 	 	  	 	 	 	
Special Tax Items	  	 	—  	  	  	 	—  	  	
 	  	 	 	 	  	 	 	 	
Adjusted Net Income	  	 	67	  	  	 	80	  	
 	  	 	 	 	  	 	 	 	
Diluted Earnings per Share	  	$	0.34	  	  	$	0.42	  	
Separation costs per Share	  	$	0.02	  	  	$	0.01	  	
 	  	 	 	 	  	 	 	 	
Adjusted diluted EPS before Special Tax Items	  	$	0.36	  	  	$	0.43	  	
Special Tax Items per Share	  	$	0.00	  	  	$	0.00	  	
 	  	 	 	 	  	 	 	 	
Adjusted diluted EPS	  	$	0.36	  	  	$	0.43	  	

10

Xylem Inc. Non-GAAP Reconciliation
Normalized and Adjusted Diluted EPS
($ Millions, except per share amounts)

 	  	Q1 2011	 	 	Q1 2012	 	
 	  	As Reported	 	 	Adjustments	 	 	Adjusted	 	 	Adjustments	 	 	Normalized	 	 	As Reported	 	 	Adjustments	 	 	Adjusted	 	
Total Revenue	  	 	890	  	 	 	 	 	 	 	890	  	 	 	 	 	 	 	890	  	 	 	925	  	 	 	 	 	 	 	925	  	
Operating Income	  	 	100	  	 	 	3a	  	 	 	103	  	 	 	(10	)c 	 	 	93	  	 	 	99	  	 	 	5a	  	 	 	104	  	
Operating Margin	  	 	11.2	% 	 	 	 	 	 	 	11.6	% 	 	 	 	 	 	 	10.4	% 	 	 	10.7	% 	 	 	 	 	 	 	11.2	% 	
Interest Expense	  	 	—  	  	 	 	 	 	 	 	—  	  	 	 	(13	)d 	 	 	(13	) 	 	 	(14	) 	 	 	 	 	 	 	(14	) 	
Other Non-Operating Income (Expense)	  	 	1	  	 	 	 	 	 	 	1	  	 	 	 	 	 	 	1	  	 	 	(1	) 	 	 	 	 	 	 	(1	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before Taxes	  	 	101	  	 	 	3	  	 	 	104	  	 	 	(23	) 	 	 	81	  	 	 	84	  	 	 	5	  	 	 	89	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Provision for Income Taxes	  	 	(23	) 	 	 	(1	)b 	 	 	(24	) 	 	 	5e	  	 	 	(19	) 	 	 	(21	) 	 	 	(1	)b 	 	 	(22	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	  	 	78	  	 	 	2	  	 	 	80	  	 	 	(18	) 	 	 	62	  	 	 	63	  	 	 	4	  	 	 	67	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted Shares	  	 	184.6	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	184.6	  	 	 	185.9	  	 	 	 	 	 	 	185.9	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted EPS	  	$	0.42	  	 	$	0.01	  	 	$	0.43	  	 	$	(0.10	) 	 	$	0.33	  	 	$	0.34	  	 	$	0.02	  	 	$	0.36	  	

a	One time separation costs	
b	Tax impact of one time separation costs	
c	Incremental stand alone costs incurred in 2012	
d	Incremental interest expense on long-term debt incurred in 2012	
e	Tax impact of incremental interest expense and stand alone costs incurred in 2012	
 
11

Xylem Inc. Non-GAAP Reconciliation
Segment Operating Income
($ Millions)
Adjusted Segment Operating Income

 	  	Q1	 	 	Q2	 	 	Q3	 	 	Q4	 	
 	  	’12	 	 	’11	 	 	’12	 	  	’11	 	 	’12	 	  	’11	 	 	’12	 	  	’11	 	
Total Revenue	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
• Water Infrastructue	  	 	584	  	 	 	551	  	 	 	—  	  	  	 	602	  	 	 	—  	  	  	 	584	  	 	 	—  	  	  	 	679	  	
• Applied Water	  	 	355	  	 	 	355	  	 	 	—  	  	  	 	385	  	 	 	—  	  	  	 	368	  	 	 	—  	  	  	 	336	  	
 	 	 	 	 	 	 	 	 	
Operating Income	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
• Water Infrastructue	  	 	75	  	 	 	64	  	 	 	—  	  	  	 	94	  	 	 	—  	  	  	 	87	  	 	 	—  	  	  	 	98	  	
• Applied Water	  	 	40	  	 	 	46	  	 	 	—  	  	  	 	50	  	 	 	—  	  	  	 	37	  	 	 	—  	  	  	 	27	  	
 	 	 	 	 	 	 	 	 	
Separation Costs	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
• Water Infrastructue	  	 	2	  	 	 	—  	  	 	 	—  	  	  	 	2	  	 	 	—  	  	  	 	8	  	 	 	—  	  	  	 	6	  	
• Applied Water	  	 	1	  	 	 	—  	  	 	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	9	  	 	 	—  	  	  	 	4	  	
 	 	 	 	 	 	 	 	 	
Adjusted Operating Income*	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
• Water Infrastructue	  	 	77	  	 	 	64	  	 	 	—  	  	  	 	96	  	 	 	—  	  	  	 	95	  	 	 	—  	  	  	 	104	  	
• Applied Water	  	 	41	  	 	 	46	  	 	 	—  	  	  	 	50	  	 	 	—  	  	  	 	46	  	 	 	—  	  	  	 	31	  	
 	 	 	 	 	 	 	 	 	
Operating Margin	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
• Water Infrastructue	  	 	12.8	% 	 	 	11.6	% 	 	 	 	 	  	 	15.6	% 	 	 	 	 	  	 	14.9	% 	 	 	 	 	  	 	14.4	% 	
• Applied Water	  	 	11.3	% 	 	 	13.0	% 	 	 	 	 	  	 	13.0	% 	 	 	 	 	  	 	10.0	% 	 	 	 	 	  	 	8.0	% 	
 	 	 	 	 	 	 	 	 	
Adjusted Operating Margin*	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
• Water Infrastructue	  	 	13.2	% 	 	 	11.6	% 	 	 	 	 	  	 	15.9	% 	 	 	 	 	  	 	16.3	% 	 	 	 	 	  	 	15.3	% 	
• Applied Water	  	 	11.5	% 	 	 	13.0	% 	 	 	 	 	  	 	13.0	% 	 	 	 	 	  	 	12.5	% 	 	 	 	 	  	 	9.2	% 	
 
*	Adjusted Operating Income excludes non-recurring separation costs	
 
12

Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
For The Three Months Ended 2012 & 2011
($ Millions)

 	  	Three Months Ended	 	
 	  	2012	 	 	2011	 	
Net Cash - Operating Activities	  	 	61	  	 	 	71	  	
Capital Expenditures	  	 	(31	) 	 	 	(19	) 	
 	  	 	 	 	 	 	 	 	
Free Cash Flow, including separation costs	  	 	30	  	 	 	52	  	
Separation Costs (Cash Paid incl. Capex)	  	 	11	  	 	 	2	  	
 	  	 	 	 	 	 	 	 	
Free Cash Flow, excluding separation costs	  	 	41	  	 	 	54	  	
 	  	 	 	 	 	 	 	 	
Net Income	  	 	63	  	 	 	78	  	
Separation Costs, net of tax	  	 	4	  	 	 	2	  	
 	  	 	 	 	 	 	 	 	
Adjusted Net Income	  	 	67	  	 	 	80	  	
 	  	 	 	 	 	 	 	 	
Free Cash Flow Conversion	  	 	61	% 	 	 	68	% 	

13

Q1 2012 Earnings ReleaseMay 3, 2012Exhibit 99.2

Forward Looking Statements2This document contains information that may constitute “forward-looking statements.” Forward-looking statements by theirnature 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 historicalin 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 theCompany, future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plansintentions or goals, and any discussion of future operating or financial performance. All statements that address operatingperformance, events or developments that we expect or anticipate will occur in the future — including statements relating toorders, revenues, operating margins and earnings per share growth, and statements expressing general views about futureoperating 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, orreasonably 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 fromthe Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but arenot limited to, those set forth in Item 1A of our Annual Report on Form 10-K, and those described from time to time insubsequent reports filed with the Securities and Exchange Commission. 

Q1’12 Financial Performance Summary3* See Appendix for Non-GAAP ReconciliationsOrders> $1BRecord Milestone; Book to Bill 1.09Revenue$925M+6%  (Constant Currency Basis)*Gross Margin39.2%+130 bpsOperating Margin *11.2%12.3% ex. Stand-Alone Costs; +70 bpsEPS *$0.36+9% Normalized GrowthFree Cash Flow *$41M61% Conversion …Typical SeasonalitySolid Q1 Performance … Confident in Ability to Deliver a Strong 2012

Q1’12 Performance Summary4Making Significant Progress on Key Focus PrioritiesAdvancing Our Strategic Position•YSI Acquisition …EPS Accretive …Integration Ahead of Plan, Launched Cross Branded Products•Recognizing Revenue Synergies Across Analytics•Opened New Distribution and Customer Service Center in RussiaDeploying Innovation & New Product Applications and Services•Bell & Gossett Awarded the PM Engineer Magazine Product of the Year Award•Bell & Gossett Little Red School House®Recognized as a Certified LEED (Leading Energy and EngineeringDesign) Education Provider•Flygt Experior -2012 Ringier Technology Innovation AwardContinued Strong Execution•Deployment of Commercial Excellence ... Continued Strong Price Realization•Operational Initiatives Underway To Drive a More Competitive Cost Structure

Geographic and End Market Q1’12 Performance5Performance In-Line With ExpectationsGeographic RegionEnd Market(% of 2011 Revenue)+Emerging Markets+Lat. Am., Asia Pac., E. Europe-Middle East+U.S.=Europe+Industrial(~40%)=PublicUtility(~36%)+Commercial(~12%)-Residential(~9%)-Agriculture(~3%)

6See appendix for non-GAAP reconciliations* Excludes non-recurring separation costs of $5M and $3M in Q1 2012 and Q1 2011, respectivelyQ1 Performance Drivers+Industrial & Commercial Strength+YSI Acquisition Adds 4%=Public Utility Stable–Residential Market Headwind+Building Backlog …Record Orders $1B(Dollars, In Millions)(Dollars, In Millions)Q1 GrowthQ1 GrowthOrganic+2%FX-2%Acquisition+4%TotalTotal+4%+4%Cost Reductions+2.7%Price+1.5%Acquisitions +0.5%Vol/Mix/Invest-1.8%DeliveredMid-SingleDigitTopLineGrowth…SolidOperatingPerformance890925+4%103104+1%Incremental Margin ~18%Incremental Margin ~18%(Ex. FX & Stand Alone Costs)(Ex. FX & Stand Alone Costs)Operating Income *Operating Income *RevenueRevenue

Q1’12 EPS *Q1’12 Xylem Performance79% Normalized EPS GrowthInterest($0.06)Stand-Alone($0.04)Separation Costs  $0.01* See Appendix for Non-GAAP ReconciliationsOperational Performance:+Base Business / –Investments+YSI Acquisition …EPS Accretive–Operating Tax RateSpin Related:–Interest Expense–Stand-Alone Costs–Separation Costs9%9%NormalizedNormalizedEPS GrowthEPS GrowthQ1'11GAAP EPSAdjustmentsNormalizedQ1'11 EPSOperationalPerformanceAdjustedQ1'12 EPSSeparationCostsQ1'12GAAP EPS$0.42$0.33$0.36$0.34$0.03$0.09$0.02 

Q1’12 Water Infrastructure Performance8Significant Margin Expansion Driven by Strategic Acquisitions & InitiativesSee appendix for non-GAAP reconciliations* Excludes Q1 2012 non-recurring separation costs of $2M+6%(Dollars, In Millions)(Dollars, In Millions)+20%Incremental Margin ~26%(Ex. FX & Stand Alone Costs)Q1 Organic Growth Drivers•Transport +3%+Global Industrial …Dewatering Strong=Public Utility Flat•Treatment -3%–Developed Markets Soft …Project Timing+Double-Digit Emerging Markets Growth•Test -2% (Excludes YSI, Double-Digit Growth)–Exceptionally Strong Q1’11Cost Reductions+2.7%Price+0.9%Acquisitions +0.6%Vol/Mix/Invest-0.7%Operating Income *RevenueQ1 GrowthQ1 GrowthOrganic+2%FX-2%Acquisition+6%Q1'11Q1'12551Q1'11Q1'1264Q1'11Op MarginOperationsFXInflationQ1'12Op MarginBeforeStand-Alone*Stand-AloneQ1'12Op Margin*11.6%13.4%13.2%2.4%0.2%3.5%0.7%77584TotalTotal+6%+6%

Q1’12 Applied Water Performance9Results As Expected …Confident in Delivering Operational ImprovementFlatSee appendix for non-GAAP reconciliations* Excludes Q1 2012 non-recurring separation costs of $1M(Dollars, In Millions)(Dollars, In Millions)-11%•Building Services +2%+Commercial Market Share Gains–Residential Weakness …Europe & Warm US Winter–Emerging Markets Down …Middle East Instability•Industrial Water +2%+General Industrial and Food & Beverage Strength–Leisure Marine•Irrigation -4%=Continued Strength in US …Strong Q1’11Cost Reductions+2.5%Price+2.6%Vol/Mix/Invest-3.1%Unfavorable Mix•Marine Down …Q2’12 Improvement Opportunity•Warm US Winter Drove Lower High Margin BusinessRevenueOperating Income *Q1 GrowthQ1 GrowthOrganic+1%FX-1%Acquisition-TotalTotalFlatFlatQ1'11Q1'12355Q1'11Q1'1246Q1'11Op MarginOperationsFXInflationQ1'12Op MarginBeforeStand-Alone*Stand-AloneQ1'12Op Margin*13.0%12.1%11.5%0.1%2.8%0.6%2.0%41355

Xylem Financial Position10•Free Cash Flow $41M•Typical Seasonality•Impact of Stand-Alone Costs & Interest•Working Capital Investment•Increased Capex for Growth Initiatives•Capex > 1 Reinvestment Ratio•Strong Cash Position•No Significant Debt Maturities Until 2016•31% Net Debt to Net Capital•1.3x Net Debt/Adj. TTM EBITDA•$600M Revolving Credit Facility Undrawn•Access to Commercial PaperFCF%68%61%W/C%**24.1%23.1%March 31, 2012Cash347Debt1,206Net Debt859Shareholders’Equity1,949Net Capital2,808Net Debt to Net Capital31%(Dollars, In Millions)(Dollars, In Millions)(Dollars, In Millions)* See Appendix for Non-GAAP Reconciliations** (AR+INV-AP)/ TTM Revenue (Adjusted for Acquisitions)Free Cash Flow *Free Cash Flow *Working CapitalWorking CapitalCapital Summary/LiquidityCapital Summary/LiquidityStrongCashFlow…HealthyBalanceSheet...ProvidingFlexibility5441843897

2012 Guidance

2012 Financial Guidance Summary122012 Full YearFinancial OutlookGrowth2012E vs. 2011Total Revenue$3.9B -$4.0B4% -6% (Organic)Water Infrastructure$2.5B -$2.6B5% -7% (Organic)Applied Water$1.4B -$1.5B2% -6% (Organic)Segment Margin*14.5% -15.0%+50 to +100 bpsOperating Margin*12.7% -13.3%Flat to +60 bps (incl. incrementalstand-alone costs $25M-$30M)EPS * $1.80 -$1.95-7% to +1% on Adjusted Basis+8% to +17% on Normalized BasisFree Cash Flow Conversion95%Excluding one-time separation costs* See Appendix for Non-GAAP ReconciliationsSolidQ1’12Performance…AffirmingFullYearGuidance

2012 Xylem Performance13Affirming 2012 EPS OutlookIllustration of Mid Point Guidance•Operational performance $0.21, includes YSI contribution, FX andtax headwind•Projected structural tax rate ~25%•Nine months incremental interest expense normalization•Full year impact of stand alone costs …in line with expectations* See Appendix for Non-GAAP ReconciliationsIncludesunfavorable taxrate change of 1%13%13%NormalizedNormalizedEPS GrowthEPS Growth2012 EPS * OutlookAdjustedFY'11 EPSIncrementalInterestExpenseIncrementalStand-Alone CostsNormalizedFY'11 EPSOperationalPerformanceAdjustedFY'12 EPS$1.93$1.66$1.87$0.16$0.11$0.21

Key Takeaways14•SolidQ1Performance…AsExpected•End Market Conditions Consistent with 2012 GuidanceAssumptions•YSI …Further Demonstrates Inorganic Growth Capabilities, andOur Ability to Acquire & Effectively Integrate•Strong Financial Position & Strong Cash Flow Generation•Confident in Ability to Deliver a Strong 2012

Appendix

2012 Revenue Outlook16StrongUnderlyingGrowth…FXShiftfromTailwindtoHeadwindXylemXylemXylem3.9 -4.0(Dollars, In Billions)20112012CommentsOrganicGrowth7%4-6%-1H’12 tough compare vs. strong 1H’11-2H’12 stronger than 1HFX(Translation)4%(3)%~65% international revenuesTop foreign currencies:Euro, CAD, AUD, GBP, SEKAcquisition8%2%2012 represents YSI2011 represents incremental Godwin,Nova, OI Analytics and YSITotal Growth19%3-5%QuarterlyRevenue Profile(% of FY Revenue)Q1Q2Q3Q42009-2011Composite22%25%25%28%3.820112012 Outlook

2012 Margin Outlook17Solid Margin Performance …On Track to Meet Long Term ObjectiveIncludes Stand-AloneCosts of ~70 bpsIncludes Stand-AloneCosts  of ~10 bpsOp Margin Expansion (Ex. Stand Alone Costs) **Op Margin Expansion (Ex. Stand Alone Costs) **•Segment Op Margin 14.5% -15.0%•Comm’l & Oper’l Excellence Initiatives•Acquisition margin accretive•Organic growth investments•Inflation ~3%•Operating Margin 12.7% -13.3%•Includes stand-alone costs ~$25M-$30MSegment Margin *Segment Margin *Operating Margin *Operating Margin *12.7% -13.3%See appendix for non-GAAP reconciliations*Excludes non-recurring separation costs of $87M and $15M-$20M for 2011 and 2012, respectively** Adjusted for non recurring separation costs and stand alone costs9.6%14.5% -15.0%14.0%2012Outlook20112012Outlook201112.7%9.7%12.1%12.8%13.7%20112010200920082012MidpointDriving ConsistentImprovements…OnTrack to Meet LongTerm Objective

Quarterly Financial Performance18($M, ExceptEPS)Q1’10Q2’10Q3’10Q4’10FY’10Q1’11Q2’11Q3’11Q4’11FY’11Q1’12Revenue6867758069353,2028909719391,0033,803925COGS4314844975761,9885535925746232,342562Gross Profit2552913093591,2143373793653801,461363SG&A164170183220737210219215233877231R&D18171821742426232710028Separation Costs-----3184620875Restructuring &Asset ImpairmentCharges, net431715--2-2-Op Income691011071113881001167910039599Interest Expense------11151714Other Non-Op-2-13--1-4-5(1)Income before Tax67100110111388101115828538384Tax1115191459234353310421Net Income568591973297872775227963EPS –Diluted *$0.30$0.46$0.49$0.53$1.78$0.42$0.39$0.42$0.28$1.50$0.34* On October 31, 2011, Xylem Inc. completed the spin-off through a tax-free stock dividend to ITT Corporation’s shareholders.  ITTCorporation shareholders received one share of our common stock for each share of ITT common stock.  As a result on October 31, 2011,wehad184.6millionsharesofcommonstockoutstandingandthisshareamountisbeingutilizedtocalculateearningspershareforallperiods presented prior to the spin-off.

Non-GAAP Measures19Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, freecash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investorsevaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity andmanagement of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capitalfor deployment among competing strategic alternatives and initiatives. These metrics, however, are not measures of financial performance underGAAP and should not be considered a substitute for revenues, operating income, net income, earnings per share (basic and diluted) or net cashfrom operations as determined in accordance with GAAP. We consider the following non- GAAP measures, which may not be comparable tosimilarly 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 thecriteria 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” conversion rate. This approach is used for countries where the functional currency is the local currency.“EBITDA”  definedadjustment to EBITDA to exclude for one-time separation costs associated with the Xylem spin-off from ITT Corporation. “Operating Income *” and “Adjusted EPS”with the Xylem spin-off from ITT Corporation and tax- related special items.“Normalized EPS” tax- related special items, as well as an adjustment to reflect the incremental current period amount of interest expense and stand alone costs inthe 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. Ourdefinition of free cash flows does not consider non-discretionary cash payments, such as debt.  asrevenueandorders,respectively,excludingtheimpactofforeigncurrencyfluctuations,intercompanydefinedasfinancialresultsadjustedforcurrencybytranslatingcurrentperiodandpriorperiodactivityusingthesamecurrencyasearningsbeforeinterest,taxes,depreciation,amortizationexpense,andshare-basedcompensation.“AdjustedEBITDA”reflectsthedefined as operating income and earnings per share, adjusted to exclude one-time separation costs associatedasearningspershare,adjustedtoexcludeone-timeseparationcostsassociatedwiththeXylemspin-offfromITTCorporationanddefined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as adjustments fordefineddefined

Non-GAAP Reconciliation:Organic & Constant Currency Revenue / Order Growth20Constant Currency(A)(B)(C)(D)(E)(F) = B+C+D+E(G) = F/A(H) = (B + D) / AOrdersChange% ChangeChange% ChangeOrdersOrders2012 v. 20112012 v. 2011FX ContributionEliminationsAdj. 2012 v. 2011Adj. 2012 v. 201120122011Quarter Ended March 31, 2012Xylem Inc.1,004978262.7%(37)18-70.7%4.5%Water infrastructure638612264.2%(37)13-20.3%6.4%Applied Water38238110.3%-5(1)51.3%1.6%RevenueChange% ChangeChange% ChangeRevenueRevenue2012 v. 20112012 v. 2011FX ContributionEliminationsAdj. 2012 v. 2011Adj. 2012 v. 201120122011Quarter Ended March 31, 2012Xylem Inc.925890353.9%(34)14-151.7%5.5%Water infrastructure584551336.0%(34)101101.8%7.8%Applied Water355355-0.0%-5-51.4%1.4%Note: Due to rounding and intersegment eliminations the sum of segment amounts may not agree to Xylem totals.Acquisitions /DivestituresAcquisitions /DivestituresXylem Inc. Non-GAAP ReconciliationReported vs. Organic & Constant Currency Revenue / Order Growth($ Millions)(As reported -GAAP)(As Adjusted -Organic)

Non-GAAP Reconciliation: Adjusted Diluted EPS21Q1 2012Q1 2011Net Income63                  78                 Separation costs, net of tax4                    2                   Adjusted Net Income before Special Tax Items67                  80                 Special Tax Items-                 -               Adjusted Net Income67                  80                 Diluted Earnings per Share$0.34$0.42Separation costs per Share$0.02$0.01Adjusted diluted EPS before Special Tax Items$0.36$0.43Special Tax Items per Share$0.00$0.00Adjusted diluted EPS$0.36$0.43Adjusted Diluted EPSFor The Three Months Ended 2012 & 2011($ Millions, except per share amounts)Xylem Inc. Non-GAAP Reconciliation

Non-GAAP Reconciliation: Normalized EPS22Q1 2011Q1 2012As ReportedAdjustmentsAdjustedAdjustmentsNormalizedAs ReportedAdjustmentsAdjustedTotal Revenue890                   890                    890                  925                   925                  Operating Income100                   3                         a103                    (10)                     c93                    99                     5                         a104                  Operating Margin11.2%11.6%10.4%10.7%11.2%Interest Expense-                    -                     (13)                     d(13)                  (14)                    (14)                  Other Non-Operating Income (Expense)1                        1                         1                      (1)                      (1)                     Income before Taxes101                   3                         104                    (23)                     81                    84                     5                         89                    Provision for Income Taxes(23)                    (1)                       b(24)                     5                         e(19)                  (21)                    (1)                       b(22)                  Net Income78                     2                         80                      (18)                     62                    63                     4                         67                    Diluted Shares184.6              184.6             185.9              185.9             Diluted EPS0.42$              0.01$               0.43$               (0.10)$              0.33$             0.34$              0.02$               0.36$             aOne time separation costsbTax impact of one time separation costscIncremental stand alone costs incurred in 2012dIncremental interest expense on long-term debt  incurred in 2012eTax impact of incremental interest expense and stand alone costs incurred in 2012Xylem Inc. Non-GAAP ReconciliationNormalized and Adjusted Diluted EPS($ Millions, except per share amounts)

23Non-GAAP Reconciliation: Segment Operating IncomeAdjusted Segment Operating IncomeQ1'12'11Total Revenue• Water Infrastructue584     551        • Applied Water355     355        Operating Income• Water Infrastructue75       64          • Applied Water40       46          Separation Costs• Water Infrastructue2         -        • Applied Water1         -        Adjusted Operating Income*• Water Infrastructue77       64          • Applied Water41       46          Operating Margin• Water Infrastructue12.8%11.6%• Applied Water11.3%13.0%Adjusted Operating Margin*• Water Infrastructue13.2%11.6%• Applied Water11.5%13.0%*Adjusted Operating Income excludes non-recurring separation costsXylem Inc. Non-GAAP ReconciliationSegment Operating Income($ Millions)

Non-GAAP Reconciliation: Free Cash Flow2420122011Net Cash - Operating Activities61                        71                    Capital Expenditures(31)                      (19)                  Free Cash Flow, including separation costs30                        52                    Separation Costs (Cash Paid incl. Capex)11                        2                      Free Cash Flow, excluding separation costs41                        54                    Net Income6378Separation Costs, net of tax42                      Adjusted Net Income6780Free Cash Flow Conversion61%68%Xylem Inc. Non-GAAP ReconciliationNet Cash - Operating Activities vs. Free Cash FlowFor The Three Months Ended 2012 & 2011($ Millions)Three Months Ended

25Non-GAAP Reconciliation: Xylem EBITDA & Adj. EBITDA2012Q1Q1Q2Q3Q4TotalPre-Tax Net Income84                      101                    115                    82                            85                            383                         Interest, net13                      -                    -                    1                              16                            17                            Depreciation23                      22                      25                      25                            21                            93                            Amortization11                      11                      10                      11                            12                            44                            Stock Compensation5                        3                        2                        2                              6                              13                            EBITDA136                    137                    152                    121                         140                         550                         Separation Costs5                        3                        18                      46                            20                            87                            Adjusted EBITDA141                    140                    170                    167                         160                         637                         Revenues925                    890                    971                    939                         1,003                      3,803                      Adjusted EBITDA Margin15.2%15.7%17.5%17.8%16.0%16.7%2011Xylem Inc. Non-GAAP ReconciliationEBITDA and Adjusted EBITDA by QuarterTotal Xylem($ Millions)

26Non-GAAP Reconciliation: Water Infrastructure EBITDA & Adj. EBITDA2012Q1Q1Q2Q3Q4TotalPre-Tax Net Income75                      65                      93                      88                            99                            345                         Interest, net-                    -                    -                    (1)                            -                          (1)                            Depreciation16                      16                      19                      19                            14                            68                            Amortization10                      9                        9                        9                              9                              36                            Stock Compensation1                        -                    -                    1                              1                              2                              EBITDA102                    90                      121                    116                         123                         450                         Separation Costs2                        -                    2                        8                              6                              16                            Adjusted EBITDA104                    90                      123                    124                         129                         466                         Revenues584                    551                    602                    584                         679                         2,416                      Adjusted EBITDA Margin17.8%16.3%20.4%21.2%19.0%19.3%2011Xylem Inc. Non-GAAP ReconciliationEBITDA and Adjusted EBITDA by QuarterWater Infrastructure($ Millions)

27Non-GAAP Reconciliation: Applied Water EBITDA & Adj. EBITDA2012Q1Q1Q2Q3Q4TotalPre-Tax Net Income40                      46                      51                      37                            25                            159                         Interest, net-                    -                    -                    -                          -                          -                          Depreciation6                        6                        6                        6                              7                              25                            Amortization1                        2                        1                        2                              1                              6                              Stock Compensation1                        -                    -                    1                              1                              2                              EBITDA48                      54                      58                      46                            34                            192                         Separation Costs1                        -                    -                    9                              4                              13                            Adjusted EBITDA49                      54                      58                      55                            38                            205                         Revenues355                    355                    385                    368                         336                         1,444                      Adjusted EBITDA Margin13.8%15.2%15.1%14.9%11.3%14.2%2011Xylem Inc. Non-GAAP ReconciliationEBITDA and Adjusted EBITDA by QuarterApplied Water($ Millions)

Non-GAAP Reconciliation: Guidance28Illustration of Mid Point Guidance2012 GuidanceFY '11FY '12As ReportedAdjustmentsAdjustedAdjustmentsNormalizedAs ReportedAdjustmentsAdjustedTotal Revenue3,803              3,803               3,803             3,950              3,950             Segment Operating Income503                   29                      a532                    (8)                       d524                  577                   8                         h585                  Segment Operating Margin13.2%14.0%13.8%14.6%14.8%Corporate Expense108                   (58)                     b50                      20                      e70                    81                     (10)                     h71                    Operating Income395                   87                      482                    (28)                     454                  496                   18                      514                  Operating Margin10.4%12.7%11.9%12.6%13.0%Interest Expense(17)                    (17)                     (39)                     f(56)                  (51)                    (51)                  Other Non-Operating Income (Expense)5                        5                         5                      -                    -                  Income before Taxes383                   87                      470                    (67)                     403                  445                   18                      463                  Provision for Income Taxes(104)                 (7)                       c(111)                  16                      g(95)                  (111)                 (5)                       i(116)               Net Income279                   80                      359                    (51)                     308                  334                   13                      347                  Diluted Shares (j)185.3              185.3             185.9              185.9             Diluted EPS1.50$              0.43$               1.93$               (0.27)$              1.66               1.80                  0.07                   1.87               aOne time separation costs incurred at the segment levelbOne time separation costs incurred at the corporate levelcNet tax impact of above items, plus the addition of 2011 special tax itemsdIncremental stand alone costs to be incurred in 2012 at the segment level ($8M)eIncremental stand alone costs to be incurred in 2012 at the corporate level ($20M)fIncremental interest expense on long-term debt to be incurred in 2012gTax impact of incremental interest expense and stand alone costs to be incurred in 2012hExpected one time separation costs of $8M and $10M to be incurred at the segments and headquarters, respectively.iTax impact of one time separation costs expected to be incurred in 2012.jFull year 2012 diluted shares outstanding are based on diluted shares outstanding for quarter ended March 31, 2012($ Millions, except per share amounts)GuidanceXylem Inc. Non-GAAP Reconciliation

29NYSE: XYLhttp://investors.xyleminc.comPhil De Sousa, Investor Relations Officer(914) 323-5930Janice Tedesco, Investor Relations Coordinator(914) 323-5931