UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 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 February 28, 2012, announcing the financial results for its fiscal quarter and fiscal year ended December 31, 2011. 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 February 28, 2012, summarizing Xylem Inc.’s financial results for the quarter and fiscal year ended December 31, 2011. 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 February 28, 2012.	
 	 	
99.2	  	Slides summarizing 2011 financial results posted by Xylem Inc. on February 28, 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: February 28, 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 February 28, 2012.	
 	 	
99.2	  	Slides summarizing 2011 financial results posted by Xylem Inc. on February 28, 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 fourth quarter and full-year 2011 results
 
 	•	 	Fourth quarter 2011 revenue of $1.0 billion, up 7 percent from fourth quarter 2010; full-year 2011 revenue of $3.8 billion, up 19 percent over prior year	
 
 	•	 	Fourth quarter 2011 earnings per share of $0.28; adjusted earnings of $0.40 per share, up 5 percent over fourth quarter 2010 normalized earnings per share	
 
 	•	 	Full-year 2011 earnings per share of $1.50; adjusted earnings of $1.93 per share, up 30 percent from 2010 normalized earnings per share *	
 
 	•	 	Strong full-year cash generation of $388 million, 111 percent conversion of adjusted net income	
WHITE PLAINS, N.Y., February 28, 2012 – Xylem Inc. (NYSE: XYL) today reported fourth quarter revenue of $1.0 billion, up 7 percent from the fourth quarter 2010, and net income of $52 million or $0.28 per share. Xylem, a leading global water technology company focused on solving the world’s most challenging water issues, was spun off from ITT Corporation on October 31, 2011. Excluding the impact of one-time separation costs and other special items, adjusted net income was $74 million or $0.40 per share, up 2 cents or 5 percent from the normalized earnings in the fourth quarter 2010.
“We drove solid business performance in 2011. We delivered revenue and earnings growth that reflected the strength of our core water and wastewater portfolio, as well as increased activity in the emerging markets, and solid returns from investments in our analytical instrumentation and dewatering businesses,” said Gretchen McClain, president and chief executive officer of Xylem. “All of this was accomplished as we worked through the successful launch of our new company. It is a testament to the dedication of our 12,500 employees who focus on solving our customers’ water challenges.”
For the fourth quarter, Xylem achieved adjusted operating margin of 12.0 percent, including incremental stand-alone costs of $5 million, which reduced margin by 50 basis points. Operating margin in the fourth quarter of 2010 was 11.9 percent.
For the full year 2011, Xylem revenue was $3.8 billion, up 19 percent over 2010. Excluding the impact of acquisitions and positive foreign currency translation, full-year organic revenue growth was 7 percent. Adjusted operating margin was 12.7 percent, up 60 basis points compared to 2010. The $5 million of incremental stand-alone cost incurred in the fourth quarter reduced full-year operating margin by 10 basis points. Full-year reported net income was $279 million, or
 
*	The 2010 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 2010.	

$1.50 per share. Adjusted net income, excluding the impact of the spinoff and other special items, was $358 million or $1.93 per share, up 45 cents or 30 percent from the normalized earnings in 2010. Strong performance from acquired businesses and working capital improvements helped generate $388 million of free cash flow during the year, which excludes $65 million of cash paid for spinoff-related costs. This represents a 111 percent conversion of adjusted net income.
Fourth Quarter and Full-Year 2011 Segment Results
Water Infrastructure
Xylem’s Water Infrastructure businesses provide equipment and services to water and wastewater transport and treatment, dewatering and analytical instrumentation markets.
 
 	•	 	Fourth-quarter 2011 revenue was $679 million, an increase of 9 percent compared with the fourth quarter 2010, up 6 percent organically. This reflects solid growth in dewatering and the emerging markets, particularly in treatment and analytical instrumentation.	
 
 	•	 	Orders for the quarter increased 15 percent, 10 percent organically, to $589 million from the comparable period in 2010.	
 
 	•	 	Fourth-quarter segment operating income, which included $6 million of spinoff-related costs, was $98 million. Adjusted operating income for the period, excluding the impact of the spinoff costs, was $104 million, up $3 million relative to the same period in 2010.	
 
 	•	 	Full-year segment revenue was $2.42 billion, up 25 percent over the prior year. Full-year reported segment operating income was $343 million. Full-year adjusted operating income for the Water Infrastructure segment was $359 million, an increase of 30 percent or $83 million over the full year 2010.	
Applied Water
Xylem’s Applied Water businesses provide equipment and services in the residential and commercial building services, industrial and agricultural markets.
 
 	•	 	Fourth quarter 2011 Applied Water segment revenue was $336 million, up 3 percent compared with the fourth quarter 2010, with growth in sales of energy-efficient solutions like the e-SV pump used in a wide range of applications, more than offsetting relative weakness in building services in the developed markets.	
 
 	•	 	Orders of $330 million were essentially flat vs. the comparable period in 2010.	
 
 	•	 	Fourth quarter segment operating income, which included $4 million of spinoff-related expenses, was $27 million. Excluding the impact of these special items, segment operating income was $31 million, up 15 percent or $4 million relative to the same period in 2010.	
 
 	•	 	Full-year segment revenue was $1.44 billion, up 9 percent over the prior year. Full-year reported segment operating income was $160 million, including $13 million of spinoff- related expenses. Full-year adjusted segment operating income was $173 million, an increase of 9 percent or $15 million over 2010.	
Full-year 2012 Outlook
Xylem forecasts full-year 2012 revenue in the range of $3.9 billion – $4.0 billion, representing year over year organic growth of 4 percent 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
 
2

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.
“We’ve begun 2012 in a strong competitive and financial position,” McClain said. “We remain mindful of the pockets of weak economic activity in Europe, and less rapid growth in some of the emerging markets. With our applications expertise, customer focus, market-leading brands, large installed base and superior distribution in more than 150 countries, our portfolio is fundamentally well-positioned to continue growing at a rate faster than the global market. Further, we will continue investing in attractive opportunities, deploying resources to continue growing our core businesses through new product development and innovative applications, while maintaining our ability to make attractive acquisitions.”
More detail available
Supplemental information on Xylem’s fourth quarter and full-year 2011 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.
 
3

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 our Registration Statement on Form 10, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission.
###
 
4

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED INCOME STATEMENTS
(In Millions, except per share data)

Year Ended December 31,	  	2011	 	  	2010	 	  	2009	 	
Revenue	  	$	3,803	  	  	$	3,202	  	  	$	2,849	  	
Cost of revenue	  	 	2,342	  	  	 	1,988	  	  	 	1,812	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Gross profit	  	 	1,461	  	  	 	1,214	  	  	 	1,037	  	
Selling, general and administrative expenses	  	 	877	  	  	 	737	  	  	 	667	  	
Research and development expenses	  	 	100	  	  	 	74	  	  	 	63	  	
Separation costs	  	 	87	  	  	 	—  	  	  	 	—  	  	
Restructuring and asset impairments charges, net	  	 	2	  	  	 	15	  	  	 	31	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Operating income	  	 	395	  	  	 	388	  	  	 	276	  	
Interest expense	  	 	17	  	  	 	—  	  	  	 	—  	  	
Other non-operating income, net	  	 	5	  	  	 	—  	  	  	 	1	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Income before taxes	  	 	383	  	  	 	388	  	  	 	277	  	
Income tax expense	  	 	104	  	  	 	59	  	  	 	14	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Net income	  	$	279	  	  	$	329	  	  	$	263	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Earnings per share:	  	 	 	 	  	 	 	 	  	 	 	 	
Basic	  	$	1.51	  	  	$	1.78	  	  	$	1.42	  	
Diluted	  	$	1.50	  	  	$	1.78	  	  	$	1.42	  	
Weighted average number of shares – Basic	  	 	185.1	  	  	 	184.6	  	  	 	184.6	  	
Weighted average number of shares – Diluted	  	 	185.3	  	  	 	184.6	  	  	 	184.6	  	

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In Millions, except per share amounts)

December 31,	  	2011	 	  	2010	 	
ASSETS	  	 	 	 	  	 	 	 	
Current assets:	  	 	 	 	  	 	 	 	
Cash and cash equivalents	  	$	318	  	  	$	131	  	
Receivable, less allowances for discounts and doubtful accounts of $37 and $32 in 2011 and 2010, respectively	  	 	756	  	  	 	690	  	
Inventories, net	  	 	426	  	  	 	389	  	
Prepaid assets	  	 	97	  	  	 	79	  	
Deferred income tax assets	  	 	45	  	  	 	47	  	
 	  	 	 	 	  	 	 	 	
Total current assets	  	 	1,642	  	  	 	1,336	  	
 	 	 	
Property, plant and equipment, net	  	 	463	  	  	 	454	  	
Goodwill	  	 	1,610	  	  	 	1,437	  	
Other intangible assets, net	  	 	505	  	  	 	416	  	
Other non-current assets	  	 	173	  	  	 	92	  	
 	  	 	 	 	  	 	 	 	
Total assets	  	$	4,393	  	  	$	3,735	  	
 	  	 	 	 	  	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	  	 	 	 	  	 	 	 	
Current liabilities:	  	 	 	 	  	 	 	 	
Accounts payable	  	$	322	  	  	$	309	  	
Accrued and other current liabilities	  	 	490	  	  	 	340	  	
Short-term borrowings and current maturities of long-term debt	  	 	5	  	  	 	—  	  	
 	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	817	  	  	 	649	  	
 	 	 	
Long-term debt	  	 	1,201	  	  	 	4	  	
Accrued postretirement benefits	  	 	316	  	  	 	163	  	
Deferred income tax liabilities	  	 	165	  	  	 	99	  	
Other non-current accrued liabilities	  	 	67	  	  	 	101	  	
 	  	 	 	 	  	 	 	 	
Total liabilities	  	 	2,566	  	  	 	1,016	  	
 	  	 	 	 	  	 	 	 	
Commitments and contingencies
Stockholders’ equity:	  	 	 	 	  	 	 	 	
Common Stock - par value $0.01 per share:	  	 	 	 	  	 	 	 	
Authorized 750.0 shares, issued 184.6 shares	  	 	2	  	  	 	—  	  	
Capital in excess of par value	  	 	1,663	  	  	 	—  	  	
Retained earnings	  	 	40	  	  	 	—  	  	
Parent company investment	  	 	—  	  	  	 	2,682	  	
Accumulated other comprehensive income	  	 	122	  	  	 	37	  	
 	  	 	 	 	  	 	 	 	
Total stockholders’ equity	  	 	1,827	  	  	 	2,719	  	
 	  	 	 	 	  	 	 	 	
Total liabilities and stockholders’ equity	  	$	4,393	  	  	$	3,735	  	

XYLEM INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED CASH FLOWS
(In Millions)

Year Ended December 31,	  	2011	 	 	2010	 	 	2009	 	
Operating Activities	  	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	$	279	  	 	$	329	  	 	$	263	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	137	  	 	 	92	  	 	 	70	  	
Deferred income taxes	  	 	8	  	 	 	(31	) 	 	 	(36	) 	
Share-based compensation	  	 	13	  	 	 	9	  	 	 	9	  	
Non-cash separation costs	  	 	10	  	 	 	—  	  	 	 	—  	  	
Restructuring charges, net	  	 	2	  	 	 	15	  	 	 	31	  	
Payments of restructuring	  	 	(7	) 	 	 	(22	) 	 	 	(40	) 	
Changes in assets and liabilities (net of acquisitions):	  	 	 	 	 	 	 	 	 	 	 	 	
Changes in receivables	  	 	(61	) 	 	 	(45	) 	 	 	45	  	
Changes in inventories	  	 	(18	) 	 	 	7	  	 	 	62	  	
Changes in accounts payable	  	 	(9	) 	 	 	41	  	 	 	(38	) 	
Changes in accrued liabilities	  	 	53	  	 	 	12	  	 	 	(11	) 	
Changes in accrued taxes	  	 	56	  	 	 	(17	) 	 	 	(1	) 	
Net changes in other assets and liabilities	  	 	(14	) 	 	 	5	  	 	 	16	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net Cash - Operating activities	  	 	449	  	 	 	395	  	 	 	370	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Investing Activities	  	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	  	 	(126	) 	 	 	(94	) 	 	 	(62	) 	
Proceeds from the sale of property, plant and equipment	  	 	11	  	 	 	4	  	 	 	11	  	
Acquisitions of businesses and assets, net of cash acquired	  	 	(309	) 	 	 	(1,004	) 	 	 	(33	) 	
Other, net	  	 	1	  	 	 	1	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net Cash - Investing activities	  	 	(423	) 	 	 	(1,093	) 	 	 	(84	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Financing Activities	  	 	 	 	 	 	 	 	 	 	 	 	
Net transfer (to)/from parent	  	 	(995	) 	 	 	745	  	 	 	(292	) 	
Issuance of short-term debt	  	 	5	  	 	 	—  	  	 	 	—  	  	
Issuance of senior notes, net of discount	  	 	1,198	  	 	 	—  	  	 	 	—  	  	
Principal payments of debt and capital lease obligations	  	 	(8	) 	 	 	—  	  	 	 	—  	  	
Proceeds from exercise of employee stock options	  	 	1	  	 	 	—  	  	 	 	—  	  	
Payments of debt issuance costs	  	 	(10	) 	 	 	—  	  	 	 	—  	  	
Dividends paid	  	 	(19	) 	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net Cash - Financing activities	  	 	172	  	 	 	745	  	 	 	(292	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash	  	 	(11	) 	 	 	3	  	 	 	6	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in cash and cash equivalents	  	 	187	  	 	 	50	  	 	 	—  	  	
Cash and cash equivalents at beginning of year	  	 	131	  	 	 	81	  	 	 	81	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of year	  	$	318	  	 	$	131	  	 	$	81	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	 	 	 	 	
Cash paid during the year for:	  	 	 	 	 	 	 	 	 	 	 	 	
Income taxes (net of refunds received)	  	$	64	  	 	$	110	  	 	$	52	  	

 

Xylem Inc. Non-GAAP Measures
Management views key performance indicators including revenue, segment operating income and margins, orders growth, 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 or net cash from continuing 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.
“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 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 and 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.

Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic Order Growth
($ Millions)

 	  	(As Reported - GAAP)	 	 	(As Adjusted - Organic)	 	
 	  	 	 	  	(A)	 	  	(B)	 	 	 	 	 	(C)	 	 	(D)	 	 	(E)	 	 	(F) = B+C+D+E	 	 	(G) = F/A	 	
 	  	Orders	 	  	Orders	 	  	Change
2011 v. 2010	 	 	% Change
2011 v. 2010	 	 	Acquisitions /
Divestitures	 	 	FX Contribution	 	 	Eliminations	 	 	Change
Adj. 2011 v.  2010	 	 	% Change
Adj. 2011 v. 2010	 	
 	  	2011	 	  	2010	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2011	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	3,847	  	  	 	3,237	  	  	 	610	  	 	 	18.8	% 	 	 	(272	) 	 	 	(120	) 	 	 	—  	  	 	 	218	  	 	 	6.7	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	2,454	  	  	 	1,941	  	  	 	513	  	 	 	26.4	% 	 	 	(272	) 	 	 	(96	) 	 	 	1	  	 	 	146	  	 	 	7.5	% 	
Applied Water	  	 	1,452	  	  	 	1,352	  	  	 	100	  	 	 	7.4	% 	 	 	—  	  	 	 	(27	) 	 	 	(1	) 	 	 	72	  	 	 	5.3	% 	
 	 	 	 	 	 	 	 	 	 	
Quarter Ended December 31, 2011	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	905	  	  	 	836	  	  	 	69	  	 	 	8.3	% 	 	 	(24	) 	 	 	5	  	 	 	—  	  	 	 	50	  	 	 	6.0	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	589	  	  	 	514	  	  	 	75	  	 	 	14.6	% 	 	 	(24	) 	 	 	4	  	 	 	(5	) 	 	 	50	  	 	 	9.7	% 	
Applied Water	  	 	330	  	  	 	331	  	  	 	(1	) 	 	 	-0.3	% 	 	 	—  	  	 	 	1	  	 	 	(1	) 	 	 	(1	) 	 	 	-0.3	% 	
 	 	 	 	 	 	 	 	 	 	
Quarter Ended September 30, 2011	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	966	  	  	 	810	  	  	 	156	  	 	 	19.3	% 	 	 	(41	) 	 	 	(42	) 	 	 	—  	  	 	 	73	  	 	 	9.0	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	621	  	  	 	504	  	  	 	117	  	 	 	23.2	% 	 	 	(41	) 	 	 	(33	) 	 	 	5	  	 	 	48	  	 	 	9.5	% 	
Applied Water	  	 	358	  	  	 	322	  	  	 	36	  	 	 	11.2	% 	 	 	—  	  	 	 	(10	) 	 	 	—  	  	 	 	26	  	 	 	8.1	% 	
 	 	 	 	 	 	 	 	 	 	
Quarter Ended June 30, 2011	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	998	  	  	 	822	  	  	 	176	  	 	 	21.4	% 	 	 	(91	) 	 	 	(70	) 	 	 	—  	  	 	 	15	  	 	 	1.8	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	632	  	  	 	498	  	  	 	134	  	 	 	26.9	% 	 	 	(91	) 	 	 	(55	) 	 	 	2	  	 	 	(10	) 	 	 	-2.0	% 	
Applied Water	  	 	383	  	  	 	341	  	  	 	42	  	 	 	12.3	% 	 	 	—  	  	 	 	(17	) 	 	 	1	  	 	 	26	  	 	 	7.6	% 	
 	 	 	 	 	 	 	 	 	 	
Quarter Ended March 31, 2011	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	978	  	  	 	769	  	  	 	209	  	 	 	27.2	% 	 	 	(116	) 	 	 	(13	) 	 	 	—  	  	 	 	80	  	 	 	10.4	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	612	  	  	 	425	  	  	 	187	  	 	 	44.0	% 	 	 	(116	) 	 	 	(12	) 	 	 	(1	) 	 	 	58	  	 	 	13.6	% 	
Applied Water	  	 	381	  	  	 	358	  	  	 	23	  	 	 	6.4	% 	 	 	—  	  	 	 	(1	) 	 	 	(1	) 	 	 	21	  	 	 	5.9	% 	

Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic Revenue
($ Millions)

 	  	(As Reported - GAAP)	 	 	(As Adjusted - Organic)	 	
 	  	 	 	  	(A)	 	  	(B)	 	  	 	 	 	(C)	 	 	(D)	 	 	(E)	 	 	(F) = B+C+D+E	 	  	(G) = F/A	 	
 	  	Revenue	 	  	Revenue	 	  	Change
2011 v. 2010	 	  	% Change
2011 v. 2010	 	 	Acquisitions /
Divestitures	 	 	FX Contribution	 	 	Eliminations	 	 	Change
Adj. 2011 v.  2010	 	  	% Change
Adj. 2011 v. 2010	 	
 	  	2011	 	  	2010	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	
Year Ended December 31, 2011	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	3,803	  	  	 	3,202	  	  	 	601	  	  	 	18.8	% 	 	 	(264	) 	 	 	(111	) 	 	 	—  	  	 	 	226	  	  	 	7.1	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	2,416	  	  	 	1,930	  	  	 	486	  	  	 	25.2	% 	 	 	(264	) 	 	 	(87	) 	 	 	2	  	 	 	137	  	  	 	7.1	% 	
Applied Water	  	 	1,444	  	  	 	1,327	  	  	 	117	  	  	 	8.8	% 	 	 	—  	  	 	 	(28	) 	 	 	(1	) 	 	 	88	  	  	 	6.6	% 	
 	 	 	 	 	 	 	 	 	 	
Quarter Ended December 31, 2011	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	1,003	  	  	 	935	  	  	 	68	  	  	 	7.3	% 	 	 	(27	) 	 	 	6	  	 	 	—  	  	 	 	47	  	  	 	5.0	% 	
 	 	 	 	 	 	 	 	 	 	
Water Infrastructure	  	 	679	  	  	 	622	  	  	 	57	  	  	 	9.2	% 	 	 	(27	) 	 	 	5	  	 	 	1	  	 	 	36	  	  	 	5.8	% 	
Applied Water	  	 	336	  	  	 	327	  	  	 	9	  	  	 	2.8	% 	 	 	—  	  	 	 	1	  	 	 	(1	) 	 	 	9	  	  	 	2.8	% 	
Quarter Ended September 30, 2011	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	939	  	  	 	806	  	  	 	133	  	  	 	16.5	% 	 	 	(42	) 	 	 	(39	) 	 	 	—  	  	 	 	52	  	  	 	6.5	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	584	  	  	 	488	  	  	 	96	  	  	 	19.7	% 	 	 	(42	) 	 	 	(30	) 	 	 	1	  	 	 	25	  	  	 	5.1	% 	
Applied Water	  	 	368	  	  	 	331	  	  	 	37	  	  	 	11.2	% 	 	 	—  	  	 	 	(10	) 	 	 	1	  	 	 	28	  	  	 	8.5	% 	
 	 	 	 	 	 	 	 	 	 	
Quarter Ended June 30, 2011	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	971	  	  	 	775	  	  	 	196	  	  	 	25.3	% 	 	 	(85	) 	 	 	(65	) 	 	 	—  	  	 	 	46	  	  	 	5.9	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	602	  	  	 	443	  	  	 	159	  	  	 	35.9	% 	 	 	(85	) 	 	 	(50	) 	 	 	1	  	 	 	25	  	  	 	5.6	% 	
Applied Water	  	 	385	  	  	 	346	  	  	 	39	  	  	 	11.3	% 	 	 	—  	  	 	 	(18	) 	 	 	—  	  	 	 	21	  	  	 	6.1	% 	
 	 	 	 	 	 	 	 	 	 	
Quarter Ended March 31, 2011	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Xylem Inc.	  	 	890	  	  	 	686	  	  	 	204	  	  	 	29.7	% 	 	 	(110	) 	 	 	(13	) 	 	 	—  	  	 	 	81	  	  	 	11.8	% 	
 	 	 	 	 	 	 	 	 	 	
Water infrastructure	  	 	551	  	  	 	377	  	  	 	174	  	  	 	46.2	% 	 	 	(110	) 	 	 	(12	) 	 	 	(1	) 	 	 	51	  	  	 	13.5	% 	
Applied Water	  	 	355	  	  	 	323	  	  	 	32	  	  	 	9.9	% 	 	 	—  	  	 	 	(1	) 	 	 	(1	) 	 	 	30	  	  	 	9.3	% 	

 

Xylem Inc. Non-GAAP Reconciliation
Normalized and Adjusted Operating Income and Earnings Per Share (EPS)
($ Millions, except per share amounts)

 	  	Q4 ’10	 	 	Q4 ’11	 	
 	  	As Reported	 	 	Adjustments	 	 	Normalized	 	 	As Reported	 	 	Adjustments	 	 	Adjusted	 	
Total Revenue	  	 	935	  	 	 	 	 	 	 	935	  	 	 	1,003	  	 	 	 	 	 	 	1,003	  	
Operating Income	  	 	111	  	 	 	(5	)a 	 	 	106	  	 	 	100	  	 	 	20	g 	 	 	120	  	
Operating Margin	  	 	11.9	% 	 	 	 	 b 	 	 	11.4	% 	 	 	9.9	% 	 	 	 	 	 	 	11.9	% 	
Interest Income (Expense)	  	 	—  	  	 	 	(14	) 	 	 	(14	) 	 	 	(13	) 	 	 	 	 	 	 	(13	) 	
Other Income (Expense)	  	 	—  	  	 	 	 	 	 	 	—  	  	 	 	(1	) 	 	 	 	 	 	 	(1	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before Taxes	  	 	111	  	 	 	(19	) 	 	 	92	  	 	 	85	  	 	 	20	  	 	 	105	  	
Provision for Income Taxes	  	 	(14	) 	 	 	(9	)f 	 	 	(23	) 	 	 	(33	) 	 	 	2	h 	 	 	(31	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	  	 	97	  	 	 	(28	) 	 	 	69	  	 	 	52	  	 	 	22	  	 	 	74	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted Shares	  	 	184.6	  	 	 	 	 	 	 	184.6	  	 	 	185.3	  	 	 	 	 	 	 	185.3	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted EPS	  	$	0.53	  	 	$	(0.15	) 	 	$	0.38	  	 	$	0.28	  	 	$	0.12	  	 	$	0.40	  	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	FY ’10	 	 	FY ’11	 	
 	  	As Reported	 	 	Adjustments	 	 	Normalized	 	 	As Reported	 	 	Adjustments	 	 	Adjusted	 	
 	  	 	3,202	  	 	 	 	 	 	 	3,202	  	 	 	3,803	  	 	 	 	 	 	 	3,803	  	
Operating Income	  	 	388	  	 	 	(5	)a 	 	 	383	  	 	 	395	  	 	 	87	d 	 	 	482	  	
 	  	 	12.1	% 	 	 	 	 b 	 	 	11.9	% 	 	 	10.4	% 	 	 	 	 	 	 	12.7	% 	
Interest Income (Expense)	  	 	—  	  	 	 	(14	) 	 	 	(14	) 	 	 	(17	) 	 	 	 	 	 	 	(17	) 	
Other Income (Expense)	  	 	—  	  	 	 	 	 	 	 	—  	  	 	 	5	  	 	 	 	 	 	 	5	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before Taxes	  	 	388	  	 	 	(19	) 	 	 	369	  	 	 	383	  	 	 	87	  	 	 	470	  	
Provision for Income Taxes	  	 	(59	) 	 	 	(37	)c 	 	 	(96	) 	 	 	(104	) 	 	 	(7	)e 	 	 	(111	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	  	 	329	  	 	 	(56	) 	 	 	273	  	 	 	279	  	 	 	80	  	 	 	359	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted Shares	  	 	184.6	  	 	 	 	 	 	 	184.6	  	 	 	185.3	  	 	 	 	 	 	 	185.3	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted EPS	  	$	1.78	  	 	$	(0.30	) 	 	$	1.48	  	 	$	1.50	  	 	$	0.43	  	 	$	1.93	  	

a	Equals incremental stand alone costs incurred in 2011 of $5M	
b	Represents incremental interest expense on long-term debt that was incurred in 2011	
c	Represents net tax impact of above items, less 2010 special tax items of $43M	
d	Represents one-time separation costs incurred in 2011	
e	Represents the tax benefit on one time separation costs of $15M, less special tax items of $7M	
f	Represents net tax impact on stand alone and interest expenses, less Q4 2010 special tax items of $15M	
g	One time separation costs incurred in Q4 2010	
h	Represents net tax impact of one time separation costs	

Xylem Inc. Non-GAAP Reconciliation
Adjusted Diluted EPS
2011 and 2010
($ Millions, except per share amounts)

 	  	Q1 2011	 	  	Q2 2011	 	  	Q3 2011	 	 	Q4 2011	 	  	FY 2011	 	
Net Income	  	 	78	  	  	 	72	  	  	 	77	  	 	 	52	  	  	 	279	  	
Separation costs, net of tax	  	 	2	  	  	 	27	  	  	 	25	  	 	 	18	  	  	 	72	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Adjusted Net Income before Special Tax Items	  	 	80	  	  	 	99	  	  	 	102	  	 	 	70	  	  	 	351	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Special Tax Items	  	 	 	 	  	 	4	  	  	 	(1	) 	 	 	4	  	  	 	7	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Adjusted Net Income	  	 	80	  	  	 	103	  	  	 	101	  	 	 	74	  	  	 	358	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Diluted Earnings per Share	  	$	0.42	  	  	$	0.39	  	  	$	0.42	  	 	$	0.28	  	  	$	1.50	  	
Separation costs per Share	  	$	0.01	  	  	$	0.15	  	  	$	0.13	  	 	$	0.10	  	  	$	0.39	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Adjusted diluted EPS before Special Tax Items	  	$	0.43	  	  	$	0.54	  	  	$	0.55	  	 	$	0.38	  	  	$	1.89	  	
Special Tax Items per Share	  	$	0.00	  	  	$	0.02	  	  	($	0.01	) 	 	$	0.02	  	  	$	0.04	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Adjusted diluted EPS	  	$	0.43	  	  	$	0.56	  	  	$	0.54	  	 	$	0.40	  	  	$	1.93	  	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	Q1 2010	 	 	Q2 2010	 	 	Q3 2010	 	 	Q4 2010	 	 	FY 2010	 	
Net Income	  	 	56	  	 	 	85	  	 	 	91	  	 	 	97	  	 	 	329	  	
Separation costs, net of tax	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Net Income before Special Tax Items	  	 	56	  	 	 	85	  	 	 	91	  	 	 	97	  	 	 	329	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Special Tax Items	  	 	(6	) 	 	 	(11	) 	 	 	(11	) 	 	 	(15	) 	 	 	(43	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Net Income	  	 	50	  	 	 	74	  	 	 	80	  	 	 	82	  	 	 	286	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted Earnings per Share	  	$	0.30	  	 	$	0.46	  	 	$	0.49	  	 	$	0.53	  	 	$	1.78	  	
Adjusted diluted EPS before Special Tax Items	  	$	0.30	  	 	$	0.46	  	 	$	0.49	  	 	$	0.53	  	 	$	1.78	  	
Special Tax Items per Share	  	($	0.03	) 	 	($	0.06	) 	 	($	0.05	) 	 	($	0.09	) 	 	($	0.23	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted diluted EPS	  	$	0.27	  	 	$	0.40	  	 	$	0.44	  	 	$	0.44	  	 	$	1.55	  	

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

 	  	Q1	 	 	Q2	 	 	Q3	 	 	Q4	 	 	FY	 	
 	  	’11	 	 	’10	 	 	’11	 	 	’10	 	 	’11	 	 	’10	 	 	’11	 	 	’10	 	 	’11	 	 	’10	 	
Total Revenue	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
• Water Infrastructue	  	 	551	  	 	 	377	  	 	 	602	  	 	 	443	  	 	 	584	  	 	 	488	  	 	 	679	  	 	 	622	  	 	 	2,416	  	 	 	1,930	  	
• Applied Water	  	 	355	  	 	 	323	  	 	 	385	  	 	 	346	  	 	 	368	  	 	 	331	  	 	 	336	  	 	 	327	  	 	 	1,444	  	 	 	1,327	  	
 	 	 	 	 	 	 	 	 	 	 	
Operating Income	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
• Water Infrastructue	  	 	64	  	 	 	45	  	 	 	94	  	 	 	57	  	 	 	87	  	 	 	73	  	 	 	98	  	 	 	101	  	 	 	343	  	 	 	276	  	
• Applied Water	  	 	46	  	 	 	40	  	 	 	50	  	 	 	51	  	 	 	37	  	 	 	40	  	 	 	27	  	 	 	27	  	 	 	160	  	 	 	158	  	
 	 	 	 	 	 	 	 	 	 	 	
Separation Costs	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
• Water Infrastructue	  	 	—  	  	 	 	—  	  	 	 	2	  	 	 	—  	  	 	 	8	  	 	 	—  	  	 	 	6	  	 	 	—  	  	 	 	16	  	 	 	—  	  	
• Applied Water	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	9	  	 	 	—  	  	 	 	4	  	 	 	—  	  	 	 	13	  	 	 	—  	  	
 	 	 	 	 	 	 	 	 	 	 	
Adjusted Operating Income*	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
• Water Infrastructue	  	 	64	  	 	 	45	  	 	 	96	  	 	 	57	  	 	 	95	  	 	 	73	  	 	 	104	  	 	 	101	  	 	 	359	  	 	 	276	  	
• Applied Water	  	 	46	  	 	 	40	  	 	 	50	  	 	 	51	  	 	 	46	  	 	 	40	  	 	 	31	  	 	 	27	  	 	 	173	  	 	 	158	  	
 	 	 	 	 	 	 	 	 	 	 	
Operating Margin	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
• Water Infrastructue	  	 	11.6	% 	 	 	11.9	% 	 	 	15.6	% 	 	 	12.9	% 	 	 	14.9	% 	 	 	14.9	% 	 	 	14.4	% 	 	 	16.2	% 	 	 	14.2	% 	 	 	14.3	% 	
• Applied Water	  	 	13.0	% 	 	 	12.4	% 	 	 	13.0	% 	 	 	14.7	% 	 	 	10.0	% 	 	 	12.0	% 	 	 	8.0	% 	 	 	8.3	% 	 	 	11.1	% 	 	 	11.9	% 	
 	 	 	 	 	 	 	 	 	 	 	
Adjusted Operating Margin*	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
• Water Infrastructue	  	 	11.6	% 	 	 	11.9	% 	 	 	15.9	% 	 	 	12.9	% 	 	 	16.3	% 	 	 	14.9	% 	 	 	15.3	% 	 	 	16.2	% 	 	 	14.9	% 	 	 	14.3	% 	
• Applied Water	  	 	13.0	% 	 	 	12.4	% 	 	 	13.0	% 	 	 	14.7	% 	 	 	12.5	% 	 	 	12.0	% 	 	 	9.2	% 	 	 	8.3	% 	 	 	12.0	% 	 	 	11.9	% 	
 
*	Adjusted Operating Income excludes non-recurring separation costs	

Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
Years ended 2011 & 2010
($ Millions)

 	  	Year Ended	 	
 	  	2011	 	 	2010	 	
Net Cash - Operating Activities	  	 	449	  	 	 	395	  	
Capital Expenditures	  	 	(126	) 	 	 	(94	) 	
 	  	 	 	 	 	 	 	 	
Free Cash Flow, including separation costs	  	 	323	  	 	 	301	  	
Separation Costs (Cash Paid incl. Capex)	  	 	65	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Free Cash Flow, excluding separation costs	  	 	388	  	 	 	301	  	
 	  	 	 	 	 	 	 	 	
Net Income	  	 	279	  	 	 	329	  	
Separation Costs, net of tax	  	 	72	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	
Adjusted Net Income	  	 	351	  	 	 	329	  	
 	  	 	 	 	 	 	 	 	
Free Cash Flow Conversion	  	 	111	% 	 	 	91	% 	

Xylem Inc. Non- GAAP Reconciliation
Guidance
($ Millions, except per share amounts)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Illustration of Mid Point Guidance	 	
2012 Guidance	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	FY ’11	 	 	FY ’12	 	
 	 	As Reported	 	 	Adjustments	 	 	Adjusted	 	 	Adjustments	 	 	Normalized	 	 	As Reported	 	 	Adjustments	 	 	Adjusted	 	
Total Revenue	 	 	3,803	  	 	 	 	 	 	 	3,803	  	 	 	 	 	 	 	3,803	  	 	 	3,950	  	 	 	 	 	 	 	3,950	  	
Segment Operating Income	 	 	503	  	 	 	29	a 	 	 	532	  	 	 	(8	)d 	 	 	524	  	 	 	577	  	 	 	8	h 	 	 	585	  	
Segment Operating Margin	 	 	13.2	% 	 	 	 	 	 	 	14.0	% 	 	 	 	 	 	 	13.8	% 	 	 	14.6	% 	 	 	 	 	 	 	14.8	% 	
Corporate Expense	 	 	108	  	 	 	(58	)b 	 	 	50	  	 	 	20	e 	 	 	70	  	 	 	81	  	 	 	(10	)h 	 	 	71	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Income	 	 	395	  	 	 	87	  	 	 	482	  	 	 	(28	) 	 	 	454	  	 	 	496	  	 	 	18	  	 	 	514	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Margin	 	 	10.4	% 	 	 	 	 	 	 	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 Taxes	 	 	383	  	 	 	87	  	 	 	470	  	 	 	(67	) 	 	 	403	  	 	 	445	  	 	 	18	  	 	 	463	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Provision for Income Taxes	 	 	(104	) 	 	 	(7	)c 	 	 	(111	) 	 	 	16	g 	 	 	(95	) 	 	 	(111	) 	 	 	(5	)i 	 	 	(116	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	 	 	279	  	 	 	80	  	 	 	359	  	 	 	(51	) 	 	 	308	  	 	 	334	  	 	 	13	  	 	 	347	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted Shares	 	 	185.3	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	185.3	  	 	 	185.8	  	 	 	 	 	 	 	185.8	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted EPS	 	$	1.50	  	 	$	0.43	  	 	$	1.93	  	 	$	(0.27	) 	 	 	1.66	  	 	 	1.80	  	 	 	0.07	  	 	 	1.87	  	

a	One time separation costs incurred at the segment level	
b	One time separation costs incurred at the corporate level	
c	Net tax impact of above items, plus the addition of 2011 special tax items	
d	Incremental stand alone costs to be incurred in 2012 at the segment level ($8M)	
e	Incremental stand alone costs to be incurred in 2012 at the corporate level ($20M)	
f	Incremental interest expense on long-term debt to be incurred in 2012	
g	Tax impact of incremental interest expense and stand alone costs to be incurred in 2012	
h	Expected one time separation costs of $8M and $10M to be incurred at the segments and headquarters, respectively.	
i	Tax impact of one time separation costs expected to be incurred in 2012.	

Q4 2011 Earnings ReleaseFebruary 28, 2012Exhibit 99.2

Forward Looking Statements2This document contains information that may constitute “forward-looking statements.” Forward-looking statements bytheir 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, 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 inthe future — including statements relating to orders, revenues, operating margins and earnings per share growth, andstatements 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 involverisks, uncertainties and other factors that could cause actual results to differ materially from those expressed or impliedin, or reasonably inferred from, such statements.  The Company undertakes no obligation to publicly update or reviseany 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 our Registration Statement on Form 10, andthose described from time to time in subsequent reports filed with the Securities and Exchange Commission.

2011 Performance Summary3StrongStrategicExecution…PositionedWellfor2012Advanced our Strategic Position•Solidified Leading Position in Analytical Instrumentation with YSI Acquisition•Built Out High Growth Dewatering Platform•Introduced New Product and Strategic Partnerships•Double-Digit Growth in Emerging MarketsStrong 2011 Financial Performance•SolidRevenueGrowth+19%…Organic+7%*•Expanded Operating Margin +60 bps to 12.7%*•Double-Digit“Normalized”EPSGrowth+30%*•Strong Free Cash Flow ConversionSolid Fundamentals …Positioned Well for 2012•Large Installed Base, Diversified Portfolio, and Stable End Markets•Focused Strategic InitiativesSeparation Complete …Selected to the S&P 500* See Appendix for Non-GAAP Reconciliations

2011 Xylem Performance4Broad Based Growth and Margin Expansion+19%+7%+24%OM%11.9%12.0%12.1%12.7%See appendix for non-GAAP reconciliations* Excludes Q4 & FY 2011 non-recurring separation costs of $20M and $87M, respectivelyQ4 Performance•Total growth +7%: US/Europe ea. up ~3%, EM up 20+%•Organic revenue growth +5%•Total orders $905M +8%; organic order growth +6%FY Performance•Total growth +19%: US/EM ea. up 20+%; Europe up ~13%•Organic revenue growth +7%•Total orders $3,847 +19%; organic order growth +7%•Q4 Op Margin +10 bps; FY Op Margin +60 bps•Commercial & Operational Excellence drive priceand cost savings•Acquisitions accretive; Purchase accountingheadwind (Q4)•Significant inflation•Impact of stand alone costs ~$5M, -50 bps (Q4)and -10 bps (FY), included in Op Margin•Increased organic investments(Dollars, In Millions)(Dollars, In Millions)+8%RevenueOperating Income *

2011 Xylem Performance5Delivered Double-Digit Normalized EPS Growth•Q4’11 EPS $0.28; $0.40 Adj.•1x separation costs•Special tax items•5% Normalized EPS Growth•Strong operational performance•Purchase accounting dilution•FY’11 EPS $1.50; $1.93 Adj.•1x separation costs•Special tax items•30% Normalized EPS Growth•Strong operational performance•Organic investments & acquisitionsdriving significant growth* See Appendix for Non-GAAP Reconciliations5% Normalized5% NormalizedEPS GrowthEPS Growth30%30%NormalizedNormalizedEPS GrowthEPS GrowthQ4’11 EPS*2011 EPS*

6Strategic Acquisitions Bolstered Strong Application PortfolioOM%16.2%15.3%14.3%14.9%* Excludes Q4 and FY Non-Recurring Separation Costs of $6M and $16M, respectively2011 Water Infrastructure Performance•Transport +3% (Q4); +6% (FY)•Global dewatering strength•Stability from large installed base•Treatment +21% (Q4); +13% (FY)•Emerging market strength•Project timing•Test +1% (Q4); +6% (FY)•Europe flat; US & emerging market strength•Q4 Op Margin 15.3%•Price & cost savings exceed inflation•Purchase accounting headwind•Stand alone costs•Unfavorable mix/lower restructuring offset•FY Op Margin 14.9%•Price & cost savings exceed inflation•Unfavorable FX•Unfavorable mix/lower restructuring offset(Organic Revenue Growth by Application)See Appendix for Non-GAAP Reconciliations(Dollars, In Millions)(Dollars, In Millions)RevenueOperating Income *Organic GrowthOrganic GrowthQ4 +6% /Q4 +6% /FY+7%FY+7%+30%+3%+9%+25%

7Energy Efficient Solutions Fueled GrowthOM%8.3%9.2%11.9%12.0%* Excludes Q4 and FY Non-Recurring Separation Costs of $4M and $13M, respectively2011 Applied Water Performance(Organic Revenue Growth by Application)•Building Services +2% (Q4); +6% (FY)•New energy efficient solutions•Q4: Destocking•Industrial Water +5% (Q4); +7% (FY)•Improved market conditions•Favorable across all regions•Irrigation +9% (Q4); +12% (FY)•Favorable weather conditions in US•Q4 Op Margin 9.2%•Price & cost savings exceeded inflation•Continued organic investments•Stand alone costs•Non-restructuring severance costs•FY Op Margin 12.0%•Price & cost savings exceeded inflation•Continued organic investmentsSee Appendix for Non-GAAP Reconciliations(Dollars, In Millions)(Dollars, In Millions)Organic GrowthOrganic GrowthQ4 +3% /Q4 +3% /FY+7%FY+7%+9%+3%+15%+9%Operating Income *Operating Income *RevenueRevenue

2011 Xylem Financial Position8Strong Cash Flow …Healthy Balance Sheet ... Providing Flexibility•Free Cash Flow Growth•Favorable  acquisition performance•Working Capital improvement of 20 bps asa % Sales•Continued investment $126MCapex > 1 reinvestment ratio•Strong cash position•Debt/Adj EBITDA ratio of 1.9x•33% Net Debt to Net Capital•$600M Revolving Credit Facility Available•Access to Commercial PaperFCF%91%111%W/C%**22.3%22.1%December 31, 2011Cash318Debt1,206Net Debt888Shareholders’Equity1,827Net Capital2,715Net Debt to Net Capital33%* See Appendix for Non-GAAP Reconciliations(Dollars, In Millions)(Dollars, In Millions)(Dollars, In Millions)* See Appendix for Non-GAAP Reconciliations** (AR+INV-AP / Revenue (Adjusted for Acquisitions)Free Cash Flow *Free Cash Flow *Working Capital **Working Capital **Capital Summary/LiquidityCapital Summary/Liquidity2010201177085620102011301388

2012 Guidance

Key Macro Economic Indicators10Navigating Through Tougher Macro Economic ConditionsEmerging GDPEmerging GDPEurope GDPEurope GDPUS GDPUS GDPSource: MAPI, U.S. Census Bureau , ITR, Company EstimatesPublic Water & Sewer: Billions of dollarsUS Private Residential Construction Spending: Seasonally Adjusted Annual Rate in Billions of DollarsIndustrial Production Index: 2007 = 100. S.A.JP Morgan Developing Country Composite IndexUS Public Water & Sewer Facility ConstructionUS Public Water & Sewer Facility ConstructionUS Private Residential Construction SpendingUS Private Residential Construction SpendingArchitectural Billing Index (ABI)Architectural Billing Index (ABI)US Total Industrial ProductionUS Total Industrial ProductionEurope Union Industrial Production IndexEurope Union Industrial Production Index12 Month Moving AverageDeveloping Country Composite IndexDeveloping Country Composite IndexStableImprovingFlatSofteningImprovingModerating

•Global dewatering applications•Emerging market strength•2H OEM activity Down LowSingle Digitto FlatEnd Markets11Xylem Well PositionedUp Low toMid SingleDigitUp Low toMid SingleDigitUp LowSingleDigitProjected ‘12XYL Growth•Increasing operation & maintenance spend•Rising global tariffs•Weakness in developed market Capex•Emerging market strength•Green building legislation 2H benefits•New products drive share gains•Installed base provides stability•US Construction slightly improving•European new construction weakness•Tough compare vs. strong 2011•Favorable long-term marketexpectation(~ 40% of ’11 Revenue)(~ 36% of ’11 Revenue)(~ 12% of ’11 Revenue)(~ 9% of ’11 Revenue)(~ 3% of ’11 Revenue)IndustrialPublic UtilityCommercialResidentialAgricultureUp MidSingleDigit

2012 Key Focus Areas12Creating Customer Value and Building CredibilityAdvancing our Strategic PositionDeploying Innovation and New Product Applications & ServicesContinued Strong Execution•Build out of high growth dewatering platform globally•Leverage leading position in analytical instrumentation•Build upon our presence in fast-growing emerging markets•Continue to advance our disciplined acquisition pipeline•Energy efficient technology and new product launches•Leverage our applications expertise to solve high-order water infrastructure challenges•Focus on Commercial Excellence: price realization through differentiated customer value•Strong productivity (Lean, LCR sourcing) while enabling reinvestment for long-term growth•Disciplined execution through proven management operating system

Capital Deployment Strategy Update13Clear Strategy …Strong Balance SheetOrganic InvestmentsRobust Acquisition PipelineDividend Policy•Funding through strong cash performance•Strong balance sheet provides flexibility•Target within peer range•Confidence in cash flow generation•Capex of ~$130M, >1 reinvestment ratio•R&D, ~3% of revenue•Core product development•Global dewatering and analytical instrumentation expansion•Emerging market expansion

2012 Financial Guidance Summary142012Financial 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%Excludingone-timeseparationcosts* See Appendix for Non-GAAP Reconciliations

2012 Revenue Outlook15Strong Underlying Growth …FX Shift from Tailwind to Headwind(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%XylemXylem

2012 Revenue Outlook16Revenue Growth Driven by End Market Conditions & Xylem Initiatives(Dollars, In Billions)20112012CommentsOrganicGrowth7%5-7%Public Utility up low to mid single digitIndustrial up mid single digitFX(Translation)4%(3)%Top foreign currencies:Euro, CAD, AUD, GBP, SEKAcquisition14%3%2012 represents YSI2011 represents incremental Godwin,Nova, OI Analytics and YSITotal Growth25%5-7%20112012CommentsOrganicGrowth7%2-6%Commercial up low to mid single digitResidential up low single digitIndustrial up mid single digitFX(Translation)2%(2)%Top foreign currencies:Euro, CAD, AUD, GBPTotal Growth9%0-4%Water InfrastructureWater InfrastructureApplied WaterApplied Water

2012 Margin Outlook17Solid Margin Performance …On Track to Meet Long Term ObjectiveIncludes Stand AloneCosts of ~70 bpsIncludes Stand AloneCosts  of ~10 bps•SegmentOpMargin14.5%-15.0%•Comm’l & Oper’l Excellence Initiatives•Acquisition margin accretive•Organic growth investments•Inflation ~3%•OperatingMargin12.7%-13.3%•Includes stand alone costs ~$25M-$30MSee 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 costsDriving ConsistentImprovements  …OnTrack to Meet LongTerm ObjectiveOp Margin Expansion (Ex. Stand Alone Costs) **Op Margin Expansion (Ex. Stand Alone Costs) **Segment Margin *Segment Margin *Operating Margin *Operating Margin *

2012 Xylem Performance18Delivering Double-Digit EPS GrowthIllustration 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 * Outlook2012 EPS * Outlook

Summary192011 …A Year in the Making•A Leader in the Global Water Industry•Executed Significant Strategic Advancement•Delivered Strong Financial Performance•Xylem, new independent companyPositioned to Deliver in 2012•Solid Foundation and Fundamentals•Strong Financial Position•Strong Growth Opportunities

Appendix

Separation Costs21($M)Q1’11Q2’11Q3’11Q4’11FY’11IT Costs$              -$             7$              10$              2$                  19Advisory fees269118Employee retention & hiring costs144514Rebranding & marketing costs--31013Lease termination & other real estatecosts--10-10Non-cash asset impairments--8-8Other-1225Total separation costs in Op Income318462087Tax-related separation (benefit) costs-14(9)16Income tax benefit(1)(5)(12)(3)(21)Total separation costs, net of tax$           2$           27$           25$           18$              72

Quarterly Financial Performance22($M, ExceptEPS)Q1’10Q2’10Q3’10Q4’10FY’10Q1’11Q2’11Q3’11Q4’11FY’11Revenue6867758069353,2028909719391,0033,803COGS4314844975761,9885535925746232,342Gross Profit2552913093591,2143373793653801,461SG&A164170183220737210219215233877R&D181718217424262327100Separation Costs-----318462087Restructuring &Asset ImpairmentCharges, net431715--2-2Op Income6910110711138810011679100395Interest Expense------111517Other Non-Op-2-13--1-4-5Income before Tax671001101113881011158285383Tax11151914592343533104Net Income5685919732978727752279EPS –Diluted *$0.30$0.46$0.49$0.53$1.78$0.42$0.39$0.42$0.28$1.50* 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 Measures23Management views key performance indicators including revenue, segment operating income and margins, orders growth, andbacklog, among others.  In addition, we consider certain measures to be useful to management and investors evaluating  ouroperating 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 togenerate capital for deployment among competing strategic alternatives and initiatives.  These metrics, however, are notmeasures of financial performance under GAAP and should not be considered a substitute for revenues, operating income, netincome or net cash from continuing operations as determined in accordance with GAAP. We consider the following non-GAAPmeasures, which may not be comparable to similarly titled measures reported by other companies, to be key performanceindicators:“Organic revenue”and “Organic Orders”defined as revenue or orders, as applicable, excluding the impact of foreigncurrency fluctuations, intercompany transactions, and contributions from acquisitions and divestitures.  Divestitures include salesof portions of our business that did not meet the criteria for classification as a discontinued operation or insignificant portions of ourbusiness that we did not classify as a discontinued operation.  The period-over-period change resulting from foreign currencyfluctuations assumes no change in exchange rates from the prior period.“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-timeseparation 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 to reflect the incremental current period amount of interest expenseand 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 capitalexpenditures and other significant items that impact current results which management believes are not related to our ongoingoperations and performance.  Our definition of free cash flows does not consider non-discretionary cash payments, such as debt. 

Non-GAAP Reconciliation: Organic Orders24(A)(B)(C)(D)(E)(F) = B+C+D+E(G) = F/AChange% ChangeChange% ChangeOrdersOrders2011 v. 20102011 v. 2010FX ContributionEliminationsAdj. 2011 v. 2010Adj. 2011 v. 201020112010Year Ended December 31, 2011Xylem Inc.3,847               3,237               610                    18.8%(272)                  (120)                  -                          218                         6.7%Water infrastructure2,454               1,941               513                    26.4%(272)                  (96)                    1                              146                         7.5%Applied Water1,452               1,352               100                    7.4%-                    (27)                    (1)                            72                           5.3%Quarter Ended December 31, 2011Xylem Inc.905                    836                    69                      8.3%(24)                    5                        -                          50                           6.0%Water infrastructure589                    514                    75                      14.6%(24)                    4                        (5)                            50                           9.7%Applied Water330                    331                    (1)                       -0.3%-                    1                        (1)                            (1)                            -0.3%Quarter Ended September 30, 2011Xylem Inc.966                    810                    156                    19.3%(41)                    (42)                    -                          73                           9.0%Water infrastructure621                    504                    117                    23.2%(41)                    (33)                    5                              48                           9.5%Applied Water358                    322                    36                      11.2%-                    (10)                    -                          26                           8.1%Quarter Ended June 30, 2011Xylem Inc.998                    822                    176                    21.4%(91)                    (70)                    -                          15                           1.8%Water infrastructure632                    498                    134                    26.9%(91)                    (55)                    2                              (10)                          -2.0%Applied Water383                    341                    42                      12.3%-                    (17)                    1                              26                           7.6%Quarter Ended March 31, 2011Xylem Inc.978                    769                    209                    27.2%(116)                  (13)                    -                          80                           10.4%Water infrastructure612                    425                    187                    44.0%(116)                  (12)                    (1)                            58                           13.6%Applied Water381                    358                    23                      6.4%-                    (1)                       (1)                            21                           5.9%Acquisitions /DivestituresXylem Inc. Non-GAAP ReconciliationReported vs. Organic Order Growth($ Millions)(As Reported - GAAP)(As Adjusted - Organic)

Non-GAAP Reconciliation: Organic Revenue25(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.3,803               3,202               601                    18.8%(264)                  (111)                  -                          226                         7.1%Water infrastructure2,416               1,930               486                    25.2%(264)                  (87)                    2                              137                         7.1%Applied Water1,444               1,327               117                    8.8%-                    (28)                    (1)                            88                           6.6%Quarter Ended December 31, 2011Xylem Inc.1,003               935                    68                      7.3%(27)                    6                        -                          47                           5.0%Water Infrastructure679                    622                    57                      9.2%(27)                    5                        1                              36                           5.8%Applied Water336                    327                    9                        2.8%-                    1                        (1)                            9                              2.8%Quarter Ended September 30, 2011Xylem Inc.939                    806                    133                    16.5%(42)                    (39)                    -                          52                           6.5%Water infrastructure584                    488                    96                      19.7%(42)                    (30)                    1                              25                           5.1%Applied Water368                    331                    37                      11.2%-                    (10)                    1                              28                           8.5%Quarter Ended June 30, 2011Xylem Inc.971                    775                    196                    25.3%(85)                    (65)                    -                          46                           5.9%Water infrastructure602                    443                    159                    35.9%(85)                    (50)                    1                              25                           5.6%Applied Water385                    346                    39                      11.3%-                    (18)                    -                          21                           6.1%Quarter Ended March 31, 2011Xylem Inc.890                    686                    204                    29.7%(110)                  (13)                    -                          81                           11.8%Water infrastructure551                    377                    174                    46.2%(110)                  (12)                    (1)                            51                           13.5%Applied Water355                    323                    32                      9.9%-                    (1)                       (1)                            30                           9.3%Acquisitions /DivestituresXylem Inc. Non-GAAP ReconciliationReported vs. Organic Revenue($ Millions)(As Reported - GAAP)(As Adjusted - Organic)

Q4 '10Q4 '11As ReportedAdjustmentsNormalizedAs ReportedAdjustmentsAdjustedTotal Revenue935                   935                  1,003            1,003           Operating Income111                   (5)                          a106                  100                 20                       g120              Operating Margin11.9%b11.4%9.9%11.9%Interest Income (Expense)-                    (14)                        (14)                  (13)                 (13)               Other Income (Expense)-                    -                  (1)                    (1)                  Income before Taxes111                   (19)                        92                    85                   20                       105              Provision for Income Taxes(14)                    (9)                          f(23)                  (33)                 2                         h(31)               Net Income97                     (28)                        69                    52                   22                       74                  Diluted Shares184.6              184.6             185.3            185.3           Diluted EPS0.53$              (0.15)$                  0.38$             0.28$            0.12$                0.40$           FY '10FY '11As ReportedAdjustmentsNormalizedAs ReportedAdjustmentsAdjusted3,202              3,202             3,803            3,803           Operating Income388                   (5)                          a383                  395                 87                       d482              12.1%b11.9%10.4%12.7%Interest Income (Expense)-                    (14)                        (14)                  (17)                 (17)               Other Income (Expense)-                    -                  5                     5                    Income before Taxes388                   (19)                        369                  383                 87                       470              Provision for Income Taxes(59)                    (37)                        c(96)                  (104)              (7)                       e(111)             Net Income329                   (56)                        273                  279                 80                       359              Diluted Shares184.6              184.6             185.3            185.3           Diluted EPS1.78$              (0.30)$                  1.48$             1.50$            0.43$                1.93$           aEquals incremental stand alone costs incurred in 2011 of $5MbRepresents incremental interest expense on long-term debt that was incurred in 2011cRepresents net tax impact of above items, less 2010 special tax items of $43MdRepresents one-time separation costs incurred in 2011eRepresents the tax benefit on one time separation costs of $15M, less special tax items of $7MfRepresents net tax impact on stand alone and interest expenses, less Q4 2010 special tax items of $15MgOne time separation costs incurred in Q4 2010hRepresents net tax impact of one time separation costs($ Millions, except per share amounts)Xylem Inc. Non-GAAP ReconciliationNormalized and Adjusted Operating Income and Earnings Per Share (EPS)Non-GAAP Reconciliation: EPS26

Non-GAAP Reconciliation: EPS27Q1 2011Q2 2011Q3 2011Q4 2011FY 2011Net Income78                72                77                52                279              Separation costs, net of tax2                   27                25                18                72                Adjusted Net Income before Special Tax Items80                99                102              70                351              Special Tax Items4                   (1)                 4                   7                   Adjusted Net Income80                103              101              74                358              Diluted Earnings per Share$0.42$0.39$0.42$0.28$1.50Separation costs per Share$0.01$0.15$0.13$0.10$0.39Adjusted diluted EPS before Special Tax Items$0.43$0.54$0.55$0.38$1.89Special Tax Items per Share$0.00$0.02($0.01)$0.02$0.04Adjusted diluted EPS$0.43$0.56$0.54$0.40$1.93Q1 2010Q2 2010Q3 2010Q4 2010FY 2010Net Income56                85                91                97                329              Separation costs, net of tax-               -               -               -               -               Adjusted Net Income before Special Tax Items56                85                91                97                329              Special Tax Items(6)                 (11)               (11)               (15)               (43)               Adjusted Net Income50                74                80                82                286              Diluted Earnings per Share$0.30$0.46$0.49$0.53$1.78Adjusted diluted EPS before Special Tax Items$0.30$0.46$0.49$0.53$1.78Special Tax Items per Share($0.03)($0.06)($0.05)($0.09)($0.23)Adjusted diluted EPS$0.27$0.40$0.44$0.44$1.55Xylem Inc. Non-GAAP ReconciliationAdjusted Diluted EPS2011 and 2010($ Millions, except per share amounts)

28Non-GAAP Reconciliation: Segment Operating IncomeAdjusted Segment Operating IncomeQ1Q2Q3Q4FY'11'10'11'10'11'10'11'10'11'10Total Revenue• Water Infrastructure551     377        602         443         584         488         679         622         2,416        1,930        • Applied Water355     323        385         346         368         331         336         327         1,444        1,327        Operating Income• Water Infrastructure64       45          94            57            87            73            98            101         343           276           • Applied Water46       40          50            51            37            40            27            27            160           158           Separation Costs• Water Infrastructue-     -        2              -          8              -          6              -          16              -            • Applied Water-     -        -          -          9              -          4              -          13              -            Adjusted Operating Income• Water Infrastructue64       45          96            57            95            73            104         101         359           276           • Applied Water46       40          50            51            46            40            31            27            173           158           Operating Margin• Water Infrastructure11.6%11.9%15.6%12.9%14.9%14.9%14.4%16.2%14.2%14.3%• Applied Water13.0%12.4%13.0%14.7%10.0%12.0%8.0%8.3%11.1%11.9%Adjusted Operating Margin*• Water Infrastructure11.6%11.9%15.9%12.9%16.3%14.9%15.3%16.2%14.9%14.3%• Applied Water13.0%12.4%13.0%14.7%12.5%12.0%9.2%8.3%12.0%11.9%*Adjusted Operating Income excludes non-recurring separation costs(Dollars, In Millions)

29Non-GAAP Reconciliation: Adj. Operating Margin RollforwardXylemWater InfrastructureApplied WaterQ4'10 Margin11.9%16.2%8.3%   Price1.6%0.5%3.7%   Vol/Mix/Other-0.9%-1.2%-1.6%   Stand Alone Costs-0.5%-0.3%0.0%   Cost Improvements3.5%3.1%3.6%   Acquisitions-0.5%-0.9%0.0%   Inflation-2.8%-1.9%-4.5%   FX-0.3%-0.2%-0.3%Q4'11 Margin12.0%15.3%9.2%XylemWater InfrastructureApplied WaterFY'10 Margin12.1%14.3%11.9%   Price1.3%0.4%2.7%   Vol/Mix/Other-0.1%0.3%-1.0%   Stand Alone Costs-0.1%-0.1%0.0%   Cost Improvements3.1%3.1%3.1%   Acquisitions0.2%0.0%0.0%   Inflation-3.3%-2.3%-4.6%   FX-0.5%-0.8%-0.1%FY'11 Margin12.7%14.9%12.0%Adjusted Operating Margin RollforwardXylem Inc. Non-GAAP ReconciliationOperating Margin Rollforward

Non-GAAP Reconciliation: Free Cash Flow3020112010Net Cash - Operating Activities449                     395                 Capital Expenditures(126)                    (94)                  Free Cash Flow, including separation costs323                     301                 Separation Costs (Cash Paid incl. Capex)65                        -                  Free Cash Flow, excluding separation costs388                     301                 Net Income279329Separation Costs720Adjusted Net Income351329Free Cash Flow Conversion111%91%Xylem Inc. Non-GAAP ReconciliationNet Cash - Operating Activities vs. Free Cash FlowYears ended 2011 & 2010($ Millions)Year Ended

31Non-GAAP Reconciliation: Xylem EBITDA & Adj. EBITDAQ1Q2Q3Q4TotalPre-Tax Net Income101                    115                    82                            85                            383                         Interest, net-                    -                    1                              16                            17                            Depreciation22                      25                      25                            21                            93                            Amortization11                      10                      11                            12                            44                            Stock Compensation3                        2                        2                              6                              13                            EBITDA137                    152                    121                         140                         550                         Separation Costs3                        18                      46                            20                            87                            Adjusted EBITDA140                    170                    167                         160                         637                         Revenues890                    971                    939                         1,003                      3,803                      Adjusted EBITDA Margin15.7%17.5%17.8%16.0%16.7%Xylem Inc. Non-GAAP ReconciliationAdjusted EBITDA by Quarter($ Millions)2011

32Non-GAAP Reconciliation: Water Infrastructure EBITDA & Adj. EBITDAQ1Q2Q3Q4TotalPre-Tax Net Income65938899345Interest, net(1)-(1)Depreciation1619191468Amortization999936Stock Compensation--112EBITDA90121116123450Separation Costs-28616Adjusted EBITDA90123124129466Revenues5516025846792,416Adjusted EBITDA Margin16.3%20.4%21.2%19.0%19.3%Xylem Inc. Non-GAAP ReconciliationAdjusted EBITDA by Quarter($ Millions)2011Water Infrastructure

33Non-GAAP Reconciliation: Applied Water EBITDA & Adj. EBITDAQ1Q2Q3Q4TotalPre-Tax Net Income46513725159Interest, net-----Depreciation666725Amortization21216Stock Compensation--112EBITDA54584634192Separation Costs--9413Adjusted EBITDA54585538205Revenues3553853683361,444Adjusted EBITDA Margin15.2%15.1%14.9%11.3%14.2%Xylem Inc. Non-GAAP ReconciliationAdjusted EBITDA by Quarter($ Millions)2011Applied Water

Illustration 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 Shares185.3              185.3             185.8              185.8             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 $10M to be incurred at the segments and headquarters, respectively.iTax impact of one time separation costs expected to be incurred in 2012.($ Millions, except per share amounts)GuidanceXylem Inc. Non-GAAP ReconciliationNon-GAAP Reconciliation: Guidance34

35NYSE: XYLhttp://investors.xyleminc.comPhil De Sousa, Investor Relations Officer(914) 323-5930Janice Tedesco, Investor Relations Coordinator(914) 323-5931