EX-99.1 2 d622143dex991.htm EX-99.1

XYLEM INC. 2013 ROBERT W. BAIRD INDUSTRIAL CONFERENCE NOVEMBER 5, 2013 Exhibit 99.1

XYLEM PROPRIETARY / CONFIDENTIAL FORWARD-LOOKING STATEMENTS 2 This document contains information that may constitute “forward-looking statements.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements about the separation of Xylem Inc. (the “Company”) from ITT Corporation in 2011, capitalization of the Company, future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to orders, revenues, operating margins and earnings per share growth, and statements expressing general views about future operating results — are forward-looking statements. Caution should be taken not to place undue reliance on any such forward-looking statements because they involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those set forth in Item 1A of our Annual Report on Form 10-K, and those described from time to time in subsequent reports filed with the Securities and Exchange Commission.

XYLEM PROPRIETARY / CONFIDENTIAL 3 • Pure Water Play • Leading Market Positions • Fortress Brands & World Class Distribution • Diverse Geographic & End Market Exposure • Large Installed Base - Recurring Revenue ~37% • Strong Cash Flow Generation $3.8B WHAT MAKES XYLEM UNIQUE? GLOBAL LEADER IN WATER APPLICATION SOLUTIONS UNIQUELY POSITIONED TO SOLVE THE WORLD’S GROWING WATER CHALLENGES

XYLEM PROPRIETARY / CONFIDENTIAL SPECIALIZED BREADTH IN THE WATER CYCLE 4 WE WORK TO ANTICIPATE OUR CUSTOMERS’ NEEDS WITH OUR BROAD PRODUCT OFFERING & OUR APPLICATIONS EXPERTISE TEST TEST

XYLEM PROPRIETARY / CONFIDENTIAL BALANCED PORTFOLIO 5 DIVERSE CUSTOMER BASE SERVING CRITICAL NEEDS GLOBAL MARKET BALANCE BY END MARKET Industrial 43% Public Utility 35% Commercial 11% Residential 8% Agriculture 3% BY APPLICATION Transport 46% Treatment 10% Test 8% Building Svcs 19% Industrial Water 14% Irrigation 3% BY GEOGRAPHY United States 37% Europe 35% Asia Pac 12% Rest of World 16% (2012 Revenue) A Growing Emerging Market Presence … Today ~20%

XYLEM PROPRIETARY / CONFIDENTIAL EVOLUTION TO A LEADING GLOBAL WATER TECHNOLOGY PROVIDER 6 * * Zenon is a registered trademark of GE

XYLEM PROPRIETARY / CONFIDENTIAL XYLEM OPERATING MODEL 7 XYLEM XYLEM INTEGRATED INTEGRATED FRONT END FRONT END FROM CUSTOMER NEEDS TO PROFITABLE GROWTH “One” Integrated Front End • Sales • Applications Engineering • Customer Service Product Focused Growth Centers • Transport • Dewatering • Treatment • Analytics • Applied Water Solutions GROWTH GROWTH CENTERS CENTERS SIMPLIFIED, DELAYERED & SCALABLE WATER WATER SOLUTIONS SOLUTIONS INDIVIDUAL SALES “Before” “After”

XYLEM PROPRIETARY / CONFIDENTIAL WATER INFRASTRUCTURE Market Size: $20B 2012 Revenues: $2.4B 2012 Op Margin*: 15.1% • • • APPLIED WATER Market Size: $15B 2012 Revenues: $1.4B 2012 Op Margin*: 12.4% • • • 8 SEGMENT OVERVIEW Segment Split UNIQUE PORTFOLIO PROVIDES FOR UNIQUE PORTFOLIO PROVIDES FOR INNOVATIVE SOLUTIONS INNOVATIVE SOLUTIONS BROAD PRODUCT PORTFOLIO BACKED BROAD PRODUCT PORTFOLIO BACKED BY APPLICATION EXPERTISE BY APPLICATION EXPERTISE * See Appendix for Non-GAAP Reconciliations 64% 36% World’s Largest Waste Water Pump & Dewatering Services Provider Broad Portfolio of Filtration, Biological and Disinfection Technologies Industry-Leading Water & Environment Analytics Platform Leading Global Provider of a Broad Range of Energy-Efficient Solutions with a Large & Diverse Customer Base U.S. Leader in Building Services Equipment & Solutions U.S. Leader in Industrial Water Technologies

XYLEM PROPRIETARY / CONFIDENTIAL 9 CAPITAL DEPLOYMENT $ Millions Dollars Invested Analytics $0.7 Dewatering $0.6 Advanced Services $0.1 Total $1.4 • Acquisitions Performing to Plan • Key Criteria: • Strategic Fit • Gross Margin Accretive • IRR > Risk Adj. Cost of Capital • Mid-teens ROIC • Cash Returns 7-9 Years • EPS Accretive After Yr. 1 CAPITAL DEPLOYMENT ACCELERATED IN 2013 WITH A BALANCED APPROACH ACQUISITIONS SINCE 2010 ACQUISITIONS SINCE 2010 (Dollars, In Billions) $107M $58M M&A Dividends Repurchases $0 $50 $100 $150 Q3'12 YTD Q3'13 YTD 81 65 42 12 56 2 2013 Highlights • Enhancing Shareholder Returns • Completed 3 Acquisitions to Date • Announced a 15% Dividend Increase • Announced $250 million Share Repurchase Program

XYLEM PROPRIETARY / CONFIDENTIAL September 30, 2013 Cash 394 Debt 1,202 Net Debt 808 Shareholders’ Equity 2,158 Net Capital 2,966 Net Debt to Net Capital 27% 10 XYLEM FINANCIAL POSITION * See Appendix for Non-GAAP Reconciliations CASH DRIVERS FREE CASH FLOW * FCF% 73% 45% CAPITAL SUMMARY (Dollars, In Millions) (Dollars, In Millions) 504 169 107 172 394 171 72 Q3'12 YTD Q3'13 YTD • Strong Cash Position • No Significant Debt Maturities Until 2016 • • Access to Commercial Paper - Un-utilized $600M Revolving Credit Facility – Un-utilized Cash Dec. 2012 Operating Activities & Other Dividends & Share Repurchases Acquisitions & Capex Cash Sept. 2013

XYLEM PROPRIETARY / CONFIDENTIAL 11 XYLEM FINANCIAL PERFORMANCE * See Appendix for Non-GAAP Reconciliations 1H’12 vs. 1H’13 Q3’12 vs. Q3’13 (Dollars, In Millions except EPS) Revenue Adj. EPS* Revenue Adj. EPS* +4% +11% -3% -27% (Dollars, In Millions except EPS) • Weak Industrial & Public Utility Markets • Challenging European Market Conditions • Emerging Markets Revenue Declined • Unfavorable Foreign Exchange • Early Traction with Cost Reductions • Executing on Restructuring and Realignment • Industrial & Public Utility Markets Showing Slight Improvements Vs. 1H • Stabilizing European Conditions • Emerging Markets Revenue Growth With Particularly Strong Growth in China • Internal Sales Organization Initiatives • Strong Incremental Margins and Benefits of Previous Restructuring and Realignment 1,891 1,839 $0.85 $0.62 931 965 $0.44 $0.49 1H'12 1H'13 1H'12 1H'13 Q3'12 Q3'13 Q3'12 Q3'13

XYLEM PROPRIETARY / CONFIDENTIAL KEY FINANCIAL PROJECTIONS 12 LONG-TERM PERFORMANCE TARGETS** • • • • • • 2013 FY Guidance As of Oct. 29 th , 2013 * 2017 Long-Term Targets ** Revenues ~$3.8B (mid-point) $4.7B to $5.5B Op. Margin* 11.5% to 11.8% 14% to 15% EPS* $1.60 to $1.65 $2.50 to $3.40 * See Appendix for 2013 Financial Guidance Summary and non-GAAP reconciliations. ** See Xylem March 7, 2013 Investor & Analyst Day Presentation for further details. 2013 GUIDANCE HIGHLIGHTS* • • • • • Revenue Down Slightly Year-Over-Year Europe Stabilizing, U.S. Stable & Emerging Markets Continue to Grow ’13 Restructuring & Realignment Actions Generate Annual Cost Savings of ~$35M European Realignment Drives Decline in Operating Tax Rate from ~24% to 21% 90% Free Cash Flow Conversion 2013-2017 Revenue CAGR of 5-9% Core Operating Margin Expands 50-75 Bps/Yr Partially Offset by 1x Acquisition Impacts 2013-2017 EPS CAGR of 7-14% Strong Free Cash Flow (100% Conversion) Disciplined Capital Deployment ROIC Accelerates from 10.8% in 2012 to 13% - 14% by 2017

XYLEM PROPRIETARY / CONFIDENTIAL QUESTIONS & ANSWERS 13 CLOSING REMARKS

APPENDIX

XYLEM PROPRIETARY / CONFIDENTIAL 15 COMPETITIVE LANDSCAPE LEADING POSITIONS IN KEY APPLICATIONS TRANSPORT TREATMENT TEST BUILDING SERVICES INDUSTRIAL WATER IRRIGATION Xylem KSB Sulzer (ABS) Pentair Tsurumi Others Others Grundfos Xylem Danaher (Hach) Grundfos Xylem Siemens Danaher (Trojan) Sulzer (ABS) Ozonia Others Xylem Thermo E+H Mettler Others Xylem Wilo Pentair Franklin Grundfos Wilo KSB Pentair Others Others Pentair Xylem KSB Market: $11B Position: 1st Market: $5B Position: 1st Market: $4B Position: 2nd Market: $9B Position: 2nd Market: $4B Position: 2nd Market: $2B Position: 3rd

XYLEM PROPRIETARY / CONFIDENTIAL 16 WATER INFRASTRUCTURE BUSINESS OVERVIEW TRANSPORT TREATMENT Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography: Key Facilities: Key Brands: $11B $1,745M $5B $366M Waste Water Pumps Dewatering (Sales & Rentals) Aftermarket Parts & Services Emmaboda, Sweden; Baroda, India; Shenyang, China; Bridgeport, NJ Herford, Germany; Brown Deer, WI; Zelienople, PA Biological U.V. and Ozone Disinfection Filtration 29% U.S. Europe Asia Pacific Other 39% 14% 18% U.S. Europe Asia Pacific Other 46% 14% 26% 14%

XYLEM PROPRIETARY / CONFIDENTIAL Bridgeport, NJ; Emmaboda, Sweden; Quenington, UK Sales & Rentals Dry Prime, Submersible & Slurry Pumps Aftermarket Parts & Services 17 WATER INFRASTRUCTURE BUSINESS OVERVIEW DEWATERING Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography & End Market: Key Facilities: Key Brands: $3B $659M • 24/7 Service Capabilities • Leverages Xylem’s Footprint • High ROIC Business When Operating with Scale Advantage • Diverse End Markets • ~40% Rental Revenue U.S. Europe Asia Pacific Other 19% 11% 25% 45% Public Utilities Oil & Gas Mining Construction Oth. Industrial 15% 21% 28% 15% 21%

XYLEM PROPRIETARY / CONFIDENTIAL Yellow Springs, OH; Weilheim, Germany; Bergen, Norway Field, Online, and Laboratory Analytical Instrumentation Meters, Sensors, Spectrophotometers, and Refractometers Temperature, Data Loggers, Doppler and Level Measurement Water Quality and Environmental Monitoring Systems 18 WATER INFRASTRUCTURE BUSINESS OVERVIEW TEST Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography & Segment: Key Facilities: Key Brands: $4B $298M 28% 41% 21% 10% U.S. Europe Asia Pacific Other Field Sampling Field Monitoring Online Lab 25% 32% 10% 33%

19 GROWING AFTERMARKET PARTS & SERVICES INSTALLED BASE DRIVES REPLACEMENT SALES • • • • INCREASING PROFITABLE INCREASING PROFITABLE AFTERMARKET OPPORTUNITIES AFTERMARKET OPPORTUNITIES DELIVER CUSTOMER VALUE ENHANCING AFTERMARKET CAPABILITIES INTRODUCING XYLEM TOTALCARE • • • • ACCELERATING OPPORTUNITIES THROUGH ACQUISITIONS ~37% RECURRING REVENUE BASE ~37% RECURRING REVENUE BASE $M $396 $581 2008 2012 Brand Loyalty Driven Like-for-Like Replacement Opportunity for Upgrades Next-Generation Installations Comprehensive Integrated Services Portfolio Systems Knowledge & Application Expertise Leverages World’s Largest Installed Base Provides Customers with Operational Security, Cost Savings Opportunities, and Improved Operating Efficiencies

XYLEM PROPRIETARY / CONFIDENTIAL 20 APPLIED WATER SYSTEMS BUSINESS OVERVIEW BUILDING SERVICES INDUSTRIAL WATER Market Size: 2012 Revenues: Key Products & Services: 2012 Revenues by Geography: Key Facilities: Key Brands: $9B $736M $4B $550M HVAC Pumps, Valves & Heat Exchangers, Drives & Controls, Waste Water Pumps, Pressure Boosters, Fire Protection Auburn, NY; Buffalo, NY; Cegled, Hungary; Chihuahua, Mexico; Dallas, TX; Hoddesdon, UK; Montecchio, Italy; Morton Grove, IL; Nanjing, China; Stockerau, Austria; Strzelin, Poland; Wolverhampton, UK Pumps & Pumping Systems Heat Exchangers, Drives & Controls Membrane Filtration Fire Protection IRRIGATION $2B $96M Groundwater & Surface Pumps Packaged Systems, Drives & Controls 16% 10% 19% 55% 9% 6% 35% 50% U.S. Europe Asia Pacific Other 16% 2% 35% 47% U.S. Europe Asia Pacific Other U.S. Europe Asia Pacific Other

XYLEM PROPRIETARY / CONFIDENTIAL 21 KEY END MARKETS INDUSTRIAL • Strong Brands • Deep Application Knowledge • Broad Product Portfolio • Improving Vitality Index • Expansion of Existing Products in Adjacent Markets Xylem 2012 Revenue: $1.6B • Chemicals • Pharma DIVERSE MARKET DRIVERS 13% 10% 9% 9% 6% 53% Mining Oil & Gas Construction Food & Beverage • Commodity Demand • Natural Gas Fracking Activity • Commercial & Residential Construction • Weather • Changing Dietary Habits • Emergence of Middle Class in EM • Paper • Power • Manufacturing MINING OIL & GAS CONSTRUCTION FOOD & BEVERAGE GENERAL INDUSTRY

XYLEM PROPRIETARY / CONFIDENTIAL 22 KEY END MARKETS PUBLIC UTILITY • Large Installed Base with Loyal Customers • Consistent Tariff Increases • 70-80% of Revenues from Opex • Capex Spending Below Historical Levels but Bid Activity Remains Strong ~70% ~70% ~30% ~30% Opex Capex Connection Fees Tariffs Bonds Gov’t Financing Private Funding • Stable • Health & Economic Necessity • Cyclical • Capacity & Regulation Driven Source: Strategic Analytics Inc. PUBLIC UTILITY DYNAMICS U.S. CAPEX SPENDING U.S. Water and Sewer Construction Spending - $B Source: U.S. Census Bureau (April 2013) General Growth Drivers: • Residential & Commercial Real Estate Development • Industrial Expansion • Increasing Regulation $0 $5 $10 $15 $20 $25 $30 $35 $40 $45

23 KEY END MARKETS COMMERCIAL BUILDINGS • Products for the Heating, Cooling and Protection of Commercial Buildings • Broadest Offering Allows for Optimizing Interaction of Key Building Components • Demand for Energy Efficient Solutions has Driven Retrofit Activity During the Recent Multi-Year New Building Construction Slowdown • Application Expertise Makes Xylem a Strong Partner for Specifying Engineers INTEGRATED SOLUTIONS ARCHITECTURE BILLING INDEX Source: AIA. Index Value of 50=No change from previous period. 56 54 52 50 48 46 44 42 Mar '12 Jun '12 Sept '12 Dec '12 Mar '13 Jun '13 Sept '13 49.9 47.3 51.5 51.2 51.9 51.6 54.3

XYLEM PROPRIETARY / CONFIDENTIAL WATER INFRASTRUCTURE REVENUE Growth: OP INCOME & MARGIN* OM%: 13.0% 14.7% 14.9% 14.9% 15.1% STRONG TOP LINE GROWTH, OP MARGIN +210 BPS ‘08-’12 Revenue up 33%; 7% CAGR • Resilient Through the Downturn • Growth Driven by Acquisitions, Emerging Markets & Product Launches • Public Utility CAPEX Slowdown • European Crisis Strong Operating Margin Expansion • Operating Productivity Funds Incremental Strategic Investments HIGHLIGHTS * See Appendix for Non-GAAP Reconciliations $M $M 24 2008 2009 2010 2011 2012 1,824 1,651 1,930 2,416 2,425 2008 2009 2010 2011 2012 237 242 288 359 365 25% 17% -10% 0% Organic*: -4% 2% 7% 0%

APPLIED WATER REVENUE Growth: Organic*: OP INCOME & MARGIN* OM%: HIGHLIGHTS STRONG OPERATING PERFORMANCE ‘08-’12 Revenue Down 7% • Residential & Commercial Building Decline • Growth Driven By New Product Launches – Energy-Efficient Solutions – Emerging Markets Penetration Strong Operating Performance • Margin Expansion Driven by Customer & Operational Excellence Initiatives • Continued to Fund Future Growth Investments $M $M 25 * See Appendix for Non-GAAP Reconciliations 1,527 1,254 1,327 1,444 1,424 180 124 161 173 177 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 -18% 6% 9% -1% -15% 6% 7% 1% 11.8% 9.9% 12.1% 12.0% 12.4%

XYLEM PROPRIETARY / CONFIDENTIAL XYLEM FINANCIAL SUMMARY STRONG TRACK RECORD OF FINANCIAL PERFORMANCE * See Appendix for Non-GAAP Reconciliations. ** Margin expansion includes $33M of additional Stand-Alone costs. 26 • Resilient Portfolio … Despite Challenging End Market Conditions • Continued Investment Driving Growth in Core Business • Key Acquisitions … Transitioning Portfolio to Higher Profitability Levels • Management Discipline … Proactive Actions • Operational Excellence … Driving Productivity Initiatives +210 Bps with Stand-Alone Costs** Revenue Up $500M … +15% $M REVENUE OPERATING MARGIN * 2008 2009 2010 2011 2012 3,291 2,849 3,202 3,803 3,791 10.8% 10.8% 12.6% 12.7% 12.9% 2008 2009 2010 2011 2012 Growth: Organic*: -9% -13% 3% 12% 7% 19% 0% 0%

XYLEM PROPRIETARY / CONFIDENTIAL * See Appendix for Non-GAAP Reconciliations 27 2013 FINANCIAL GUIDANCE SUMMARY (As of Oct. 29 2013) th

XYLEM PROPRIETARY / CONFIDENTIAL DRIVE PROFITABLE GROWTH EXECUTING ACQUISITION STRATEGY 28 ANALYTICS DEWATERING Opportunity Recent Transactions • Heartland Pump • High ROIC Business When Operating With Scale Advantage • Leverage Xylem’s Footprint and Replicate 24/7 Service Expertise • International Expansion • Products have Higher Market Growth Rates and Margins • Fill Product or Technology Gaps and Sell Through Existing Channels • Drive Sustainable Water Projects • International Expansion Revenue (2012) $298M $659M Capital Deployed* $732M $614M *Cumulative capital deployed through M&A from 2010 to Q1’13. Excludes CAPEX expenditures. Key Brands

XYLEM PROPRIETARY / CONFIDENTIAL ACQUISITION SCORECARD Completed On Track Not Achieved 29 Acquisition Invested $M Year Completed Strategic Fit Gross Margin Accretive IRR >Risk Adj. Cost of Cap. Mid-Teens ROIC Cash Return 7-9 Years EPS Accretive After Yr 1 Laing $30 2009 Nova $384 2010 Godwin $585 2010 OI $25 2010 YSI $310 2011 Through 2012 Added ~200 Bps Added ~$0.45 MJK $13 2012 Heartland $29 2012 PIMS $57 2013 RECENTLY ACQUIRED MultiTrode $26 2013 Pollmann- Pumpen $3 2013

XYLEM PROPRIETARY / CONFIDENTIAL 30 NON-GAAP MEASURES Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operations as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators: “Organic revenue" and "Organic orders” defined as revenue and orders, respectively, excluding the impact of foreign currency fluctuations, intercompany transactions, and contributions from acquisitions and divestitures. Divestitures include sales of portions of our business that did not meet the criteria for classification as a discontinued operation or insignificant portions of our business that we did not classify as a discontinued operation. The period-over- period change resulting from foreign currency fluctuations assumes no change in exchange rates from the prior period. “Constant currency” defined as financial results adjusted for currency translation impacts by translating current period and prior period activity using the same currency conversion rate. This approach is used for countries whose functional currency is not the U.S. dollar. “EBITDA” defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude for non-recurring separation costs associated with the Xylem spin-off from ITT Corporation (not excluded for 2013) as well as non-recurring restructuring and realignment costs. defined as operating income and earnings per share, adjusted to exclude non-recurring separation costs associated with the Xylem spin-off from ITT Corporation (not excluded for 2013), non-recurring restructuring and realignment costs and tax-related special items. “Free Cash Flow” defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as adjustments for other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of free cash flows does not consider non-discretionary cash payments, such as debt. "Adjusted Operating Income", "Adjusted Segment Operating Income", and “Adjusted EPS”

XYLEM PROPRIETARY / CONFIDENTIAL 31 Constant Currency (A) (B) (C) (D) (E) (F) = B+C+D+E (G) = F/A (H) = (B + D) / A Change % Change Change % Change Revenue Revenue CY v. PY CY v. PY FX Contribution Eliminations Adj. CY v. PY Adj. CY v. PY Current Year Prior Year Year Ended December 31, 2012 Xylem Inc. 3,791 3,803 (12) -0.3% (94) 108 - 2 0.1% 2.5% Water infrastructure 2,425 2,416 9 0.4% (94) 80 (1) (6) -0.2% 3.7% Applied Water 1,424 1,444 (20) -1.4% - 32 (3) 9 0.6% 0.8% Year Ended December 31, 2011 Xylem Inc. 3,803 3,202 601 18.8% (264) (111) - 226 7.1% 15.3% Water Infrastructure 2,416 1,930 486 25.2% (264) (87) 2 137 7.1% 20.7% Applied Water 1,444 1,327 117 8.8% - (28) (1) 88 6.6% 6.7% Year Ended December 31, 2010 Xylem Inc. 3,202 2,849 353 12.4% (263) 6 - 96 3.4% 12.6% Water infrastructure 1,930 1,651 279 16.9% (247) (8) - 24 1.5% 16.4% Applied Water 1,327 1,254 73 5.8% (16) 15 - 72 5.7% 7.0% Year Ended December 31, 2009 Xylem Inc. 2,849 3,291 (442) -13.4% (7) 158 - (291) -8.8% -8.6% Water infrastructure 1,651 1,824 (173) -9.5% - 109 (1) (65) -3.6% -3.5% Applied Water 1,254 1,527 (273) -17.9% (7) 53 - (227) -14.9% -14.4% Note: Due to rounding the sum of segment amounts may not agree to Xylem totals. Acquisitions / Divestitures ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) NON-GAAP RECONCILIATION: ORGANIC & CONSTANT CURRENCY REVENUE GROWTH

XYLEM PROPRIETARY / CONFIDENTIAL 32 Mid Point Guidance 2008 2009 2010 2011 2012 2013E Revenue 3,291 2,849 3,202 3,803 3,791 3,770 Operating Income 315 276 388 395 443 347 Operating Margin 9.6% 9.7% 12.1% 10.4% 11.7% 9.2% Restructuring, Realignment & Special Charges 41 31 15 - 24 93 Separation Costs* - - - 87 22 - Adjusted Operating Income 356 307 403 482 489 440 Adjusted Operating Margin 10.8% 10.8% 12.6% 12.7% 12.9% 11.7% Standalone Costs - - - 5 28 - Adj. Operating Income, excl. Standalone Costs 356 307 403 487 517 440 Adjusted Operating Margin, excl. Standalone Costs 10.8% 10.8% 12.6% 12.8% 13.6% 11.7% * 2013 separation costs are not excluded from adjusted operating income. ($ Millions) NON-GAAP RECONCILIATION: ADJUSTED OPERATING INCOME

XYLEM PROPRIETARY / CONFIDENTIAL 2012 2011 2010 2009 2008 Total Revenue • Total Xylem 3,791 3,803 3,202 2,849 3,291 • Water Infrastructure 2,425 2,416 1,930 1,651 1,824 • Applied Water 1,424 1,444 1,327 1,254 1,527 Operating Income • Total Xylem 443 395 388 276 315 • Water Infrastructure 342 343 276 227 220 • Applied Water 170 160 158 109 162 Operating Margin • Total Xylem 11.7% 10.4% 12.1% 9.7% 9.6% • Water Infrastructure 14.1% 14.2% 14.3% 13.7% 12.1% • Applied Water 11.9% 11.1% 11.9% 8.7% 10.6% Separation Costs • Total Xylem 22 87 - - - • Water Infrastructure 4 16 - - - • Applied Water 2 13 - - - Restructuring & Realignment Costs • Total Xylem 24 - 15 31 41 • Water Infrastructure 19 - 12 15 17 • Applied Water 5 - 3 15 18 Adjusted Operating Income* • Total Xylem 489 482 403 307 356 • Water Infrastructure 365 359 288 242 237 • Applied Water 177 173 161 124 180 Adjusted Operating Margin* • Total Xylem 12.9% 12.7% 12.6% 10.8% 10.8% • Water Infrastructure 15.1% 14.9% 14.9% 14.7% 13.0% • Applied Water 12.4% 12.0% 12.1% 9.9% 11.8% *Adjusted Operating Income excludes non-recurring separation, restructuring & realignment costs Xylem Inc. Non-GAAP Reconciliation Adjusted Operating Income ($ Millions) 33

XYLEM PROPRIETARY / CONFIDENTIAL 34 NON-GAAP RECONCILIATION: XYLEM EBITDA & ADJ. EBITDA Q1 Q2 Q3 Q4 Total Pre-Tax Income 51 57 83 191 Interest Expense (Income), net 12 13 14 39 Depreciation 25 24 23 72 Amortization 12 13 13 38 Stock Compensation 6 6 9 21 EBITDA 106 113 142 361 Restructuring & Realignment 12 28 12 52 Special Charges - - 20 20 Adjusted EBITDA 118 141 174 433 Revenue 879 960 965 2,804 Adjusted EBITDA Margin 13.4% 14.7% 18.0% 15.4% Q1 Q2 Q3 Q4 Total Pre-Tax Income 84 115 100 89 388 Interest Expense (Income), net 13 13 12 13 51 Depreciation 23 21 24 26 94 Amortization 11 12 12 13 48 Stock Compensation 5 5 6 6 22 EBITDA 136 166 154 147 603 Separation Costs 5 6 4 7 22 Restructuring & Realignment - - 5 19 24 Adjusted EBITDA 141 172 163 173 649 Revenue 925 966 931 969 3,791 Adjusted EBITDA Margin 15.2% 17.8% 17.5% 17.9% 17.1% 2012 EBITDA and Adjusted EBITDA by Quarter ($ Millions) 2013

XYLEM PROPRIETARY / CONFIDENTIAL 35 NON-GAAP RECONCILIATION: ADJUSTED DILUTED EPS Q2 2012 Q2 2013 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 966 966 960 960 Operating Income 129 6 a 135 70 28 c 98 Operating Margin 13.4% 14.0% 7.3% 10.2% Interest Expense (13) (13) (14) (14) Other Non-Operating Income (Expense) (1) (1) 1 1 Income before Taxes 115 6 121 57 28 85 Provision for Income Taxes (26) (3) b (29) (11) (8) d (19) Net Income 89 3 92 46 20 66 Diluted Shares 186.2 186.2 186.1 186.1 Diluted EPS 0.48 $ 0.01 $ 0.49 $ 0.25 $ 0.11 $ 0.36 $ Q2 YTD 2012 Q2 YTD 2013 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 1,891 1,891 1,839 1,839 Operating Income 228 11 a 239 136 40 c 176 Operating Margin 12.1% 12.6% 7.4% 9.6% Interest Expense (27) (27) (27) (27) Other Non-Operating Income (Expense) (2) (2) (1) (1) Income before Taxes 199 11 210 108 40 148 Provision for Income Taxes (47) (4) b (51) (21) (11) d (32) Net Income 152 7 159 87 29 116 Diluted Shares 186.1 186.1 186.3 186.3 Diluted EPS 0.82 $ 0.03 $ 0.85 $ 0.47 $ 0.15 $ 0.62 $ a One time separation costs b Net tax impact of separation costs and special tax items c Restructuring & realignment costs d Net tax impact of restructuring & realignment costs and special tax items ($ Millions, except per share amounts)

XYLEM PROPRIETARY / CONFIDENTIAL 36 NON-GAAP RECONCILIATION: ADJUSTED DILUTED EPS Q3 2012 Q3 2013 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 931 931 965 965 Operating Income 111 9 a 120 98 32 c 130 Operating Margin 11.9% 12.9% 10.2% 13.5% Interest Expense (14) (14) (14) (14) Other Non-Operating Income (Expense) 3 3 (1) (1) Income before Taxes 100 9 109 83 32 115 Provision for Income Taxes (28) 2 b (26) (10) (13) d (23) Net Income 72 11 83 73 19 92 Diluted Shares 186.3 186.3 186.0 186.0 Diluted EPS 0.38 $ 0.06 $ 0.44 $ 0.39 $ 0.10 $ 0.49 $ Q3 YTD 2012 Q3 YTD 2013 As Reported Adjustments Adjusted As Reported Adjustments Adjusted Total Revenue 2,822 2,822 2,804 2,804 Operating Income 339 20 a 359 234 72 c 306 Operating Margin 12.0% 12.7% 8.3% 10.9% Interest Expense (41) (41) (41) (41) Other Non-Operating Income (Expense) 1 1 (2) (2) Income before Taxes 299 20 319 191 72 263 Provision for Income Taxes (75) (2) b (77) (31) (24) d (55) Net Income 224 18 242 160 48 208 Diluted Shares 186.2 186.2 186.2 186.2 Diluted EPS 1.20 $ 0.09 $ 1.29 $ 0.86 $ 0.26 $ 1.12 $ a One time separation costs and restructuring & realignment costs b Net tax impact of separation costs, restructuring & realignment costs and special tax items c Restructuring & realignment costs and special charges d Net tax impact of restructuring & realignment costs, special charges and special tax items ($ Millions, except per share amounts)

XYLEM PROPRIETARY / CONFIDENTIAL 37 NON-GAAP RECONCILIATION: GUIDANCE Illustration of Mid Point Guidance 2013 Guidance FY '12 FY '13 As Reported Adjustments Adjusted As Projected Adjustments Adjusted Total Revenue 3,791 3,791 3,770 3,770 Segment Operating Income 512 30 a 542 425 73 c 498 Segment Operating Margin 13.5% 14.3% 11.3% 13.2% Corporate Expense 69 (16) b 53 78 (20) d 58 Operating Income 443 46 489 347 93 440 Operating Margin 11.7% 12.9% 9.2% 11.7% Interest Expense (55) (55) (55) (55) Other Non-Operating Income (Expense) - - (3) (3) Income before Taxes 388 46 434 289 93 382 Provision for Income Taxes (91) (13) e (104) (48) (32) e (80) Net Income 297 33 330 241 61 302 Diluted Shares 186.2 186.2 186.0 186.0 Diluted EPS 1.59 $ 0.18 $ 1.77 $ 1.30 $ 0.33 $ 1.63 $ Guidance ($ Millions, except per share amounts) a One time separation, restructuring and realignment costs incurred at the segment level b One time separation, restructuring and realignment costs incurred at the corporate level c Restructuring and realignment costs incurred at the segment level d Special charges incurred at the corporate level e Net tax impact of above items, plus the addition of special tax items

XYLEM PROPRIETARY / CONFIDENTIAL 38 NON-GAAP RECONCILIATION: FREE CASH FLOW 2013 2012 Net Cash - Operating Activities 163 $ 230 $ Capital Expenditures (91) (81) Free Cash Flow, including separation costs 72 149 Cash Paid for Separation Costs (incl. Capex) - 22 Free Cash Flow, excluding separation costs* 72 $ 171 $ Net Income 160 224 Separation Costs, net of tax (incl. tax friction) - 11 Net Income, excluding separation costs* 160 $ 235 $ Free Cash Flow Conversion 45% 73% * Separation costs are not excluded in 2013 Net Cash - Operating Activities vs. Free Cash Flow ($ Millions) Nine Months Ended

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