SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(State or other jurisdiction of incorporation or

~~1 International Drive, Rye Brook, NY 10573~~301 Water Street SE, Washington, DC 20003

(Address of principal executive offices) (Zip code)

~~(914) 323-5700~~(202) 869-9150

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange of which registered

Common Stock, par value $0.01 per share

XYL

New York Stock Exchange

2.250% Senior Notes due 2023

XYL23

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Three Months Six Months
For the period ended June 30, 2021 2020 2021 2020
Revenue $ 1,351 $ 1,160 $ 2,607 $ 2,283
Cost of revenue 831 726 1,597 1,440
Gross profit 520 434 1,010 843
Selling, general and administrative expenses 304 288 605 585
Research and development expenses 53 44 103 93
Restructuring and asset impairment charges 3 48 9 50
Operating income 160 54 293 115
Interest expense 21 18 42 34
Other non-operating expense, net (3) (1) (1) (4)
Gain from sale of business 2 0 2 0
Income before taxes 138 35 252 77
Income tax expense 25 4 52 8
Net income $ 113 $ 31 $ 200 $ 69
Earnings per share:
Basic $ 0.63 $ 0.17 $ 1.11 $ 0.38
Diluted $ 0.62 $ 0.17 $ 1.10 $ 0.38
Weighted average number of shares:
Basic 180.1 180.0 180.2 180.1
Diluted 181.3 180.6 181.4 181.0


	Three Months				Six Months

For the period ended June 30,	2022		2021		2022		2021
Revenue	$	1,364	$	1,351	$	2,636	$	2,607
Cost of revenue	844		831		1,649		1,597
Gross profit	520		520		987		1,010
Selling, general and administrative expenses	314		304		618		605
Research and development expenses	53		53		105		103
Restructuring and asset impairment charges	7		3		7		9

Operating income	146		160		257		293
Interest expense	12		21		25		42
Other non-operating income (expense), net	2		(3)		1		(1)
Gain from sale of business	—		2		1		2
Income before taxes	136		138		234		252
Income tax expense	24		25		40		52
Net income	$	112	$	113	$	194	$	200


Earnings per share:
Basic	$	0.62	$	0.63	$	1.07	$	1.11
Diluted	$	0.62	$	0.62	$	1.07	$	1.10
Weighted average number of shares:
Basic	180.2		180.1		180.2		180.2
Diluted	180.6		181.3		180.8		181.4

See accompanying notes to condensed consolidated financial statements.


		Three Months				Six Months					Three Months				Six Months
For the period ended June 30,	For the period ended June 30,	2021		2020		2021		2020		For the period ended June 30,	2022		2021		2022		2021
Net income	Net income	$	113	$	31	$	200	$	69	Net income	$	112	$	113	$	194	$	200
Other comprehensive income (loss), before tax:	Other comprehensive income (loss), before tax:									Other comprehensive income (loss), before tax:
Foreign currency translation adjustment	Foreign currency translation adjustment	19		35		29		(43)		Foreign currency translation adjustment	(41)		19		(44)		29

Net change in derivative hedge agreements:	Net change in derivative hedge agreements:									Net change in derivative hedge agreements:
Unrealized gain (loss)	Unrealized gain (loss)	4		6		(7)		4		Unrealized gain (loss)	(9)		4		(15)		(7)
Amount of loss (gain) reclassified into net income	Amount of loss (gain) reclassified into net income	1		0		(2)		3		Amount of loss (gain) reclassified into net income	3		1		5		(2)
Net change in post-retirement benefit plans:	Net change in post-retirement benefit plans:									Net change in post-retirement benefit plans:

Amortization of prior service credit	Amortization of prior service credit	0		(1)		(1)		(2)		Amortization of prior service credit	(1)		—		(1)		(1)
Amortization of net actuarial loss into net income	Amortization of net actuarial loss into net income	5		5		11		10		Amortization of net actuarial loss into net income	4		5		8		11

Other comprehensive income (loss), before tax	Other comprehensive income (loss), before tax	29		45		30		(28)		Other comprehensive income (loss), before tax	(44)		29		(47)		30
Income tax expense (benefit) related to items of other comprehensive income (loss)	Income tax expense (benefit) related to items of other comprehensive income (loss)	1		(7)		15		7		Income tax expense (benefit) related to items of other comprehensive income (loss)	27		1		30		15
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	28		52		15		(35)		Other comprehensive income (loss), net of tax	(71)		28		(77)		15
Comprehensive income	Comprehensive income	$	141	$	83	$	215	$	34	Comprehensive income	$	41	$	141	$	117	$	215
Less: comprehensive loss attributable to noncontrolling interests		0		0		0		(1)
Comprehensive income attributable to Xylem		$	141	$	83	$	215	$	35

See accompanying notes to condensed consolidated financial statements.


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021

ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,840	$	1,875	Cash and cash equivalents	$	1,113	$	1,349

Receivables, less allowances for discounts, returns and credit losses of $41 and $46 in 2021 and 2020, respectively		975		923
Receivables, less allowances for discounts, returns and credit losses of $41 and $44 in 2022 and 2021, respectively						Receivables, less allowances for discounts, returns and credit losses of $41 and $44 in 2022 and 2021, respectively	1,024		953
Inventories	Inventories	642		558		Inventories	852		700
Prepaid and other current assets	Prepaid and other current assets	166		167		Prepaid and other current assets	185		158

Total current assets	Total current assets	3,623		3,523		Total current assets	3,174		3,160
Property, plant and equipment, net	Property, plant and equipment, net	626		657		Property, plant and equipment, net	608		644
Goodwill	Goodwill	2,841		2,854		Goodwill	2,714		2,792
Other intangible assets, net	Other intangible assets, net	1,058		1,093		Other intangible assets, net	975		1,016
Other non-current assets	Other non-current assets	637		623		Other non-current assets	718		664
Total assets	Total assets	$	8,785	$	8,750	Total assets	$	8,189	$	8,276
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	599	$	569	Accounts payable	$	648	$	639
Accrued and other current liabilities	Accrued and other current liabilities	760		787		Accrued and other current liabilities	782		752
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	600		600		Short-term borrowings and current maturities of long-term debt	521		—
Total current liabilities	Total current liabilities	1,959		1,956		Total current liabilities	1,951		1,391
Long-term debt	Long-term debt	2,466		2,484		Long-term debt	1,879		2,440
Accrued post-retirement benefits	Accrued post-retirement benefits	501		519		Accrued post-retirement benefits	408		438
Deferred income tax liabilities	Deferred income tax liabilities	264		242		Deferred income tax liabilities	292		287
Other non-current accrued liabilities	Other non-current accrued liabilities	546		573		Other non-current accrued liabilities	456		494
Total liabilities	Total liabilities	5,736		5,774		Total liabilities	4,986		5,050
Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)	0		0		Commitments and contingencies (Note 16)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common Stock – par value $0.01 per share:	Common Stock – par value $0.01 per share:					Common Stock – par value $0.01 per share:
Authorized 750.0 shares, issued 195.3 shares and 194.9 shares in 2021 and 2020, respectively		2		2
Authorized 750.0 shares, issued 195.9 shares and 195.6 shares in 2022 and 2021, respectively						Authorized 750.0 shares, issued 195.9 shares and 195.6 shares in 2022 and 2021, respectively	2		2
Capital in excess of par value	Capital in excess of par value	2,063		2,037		Capital in excess of par value	2,111		2,089
Retained earnings	Retained earnings	2,029		1,930		Retained earnings	2,238		2,154
Treasury stock – at cost 15.2 shares and 14.5 shares in 2021 and 2020, respectively		(656)		(588)
Treasury stock – at cost 15.8 shares and 15.2 shares in 2022 and 2021, respectively						Treasury stock – at cost 15.8 shares and 15.2 shares in 2022 and 2021, respectively	(708)		(656)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(398)		(413)		Accumulated other comprehensive loss	(448)		(371)
Total stockholders’ equity	Total stockholders’ equity	3,040		2,968		Total stockholders’ equity	3,195		3,218
Non-controlling interests	Non-controlling interests	9		8		Non-controlling interests	8		8
Total equity	Total equity	3,049		2,976		Total equity	3,203		3,226
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	8,785	$	8,750	Total liabilities and stockholders’ equity	$	8,189	$	8,276

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions)


For the six months ended June 30,	2022		2021
Operating Activities
Net income	$	194	$	200
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	56		59
Amortization	62		65
Share-based compensation	18		17
Restructuring and asset impairment charges	7		9

Gain from sale of business	(1)		(2)
Other, net	6		6
Payments for restructuring	(5)		(18)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables	(119)		(66)
Changes in inventories	(189)		(89)
Changes in accounts payable	40		36



Other, net	(37)		(11)
Net Cash – Operating activities	32		206
Investing Activities
Capital expenditures	(95)		(80)

Proceeds from sale of business	1		2
Proceeds from the sale of property, plant and equipment	3		—
Cash received from investments	4		—
Cash paid for investments	(7)		—
Other, net	10		9
Net Cash – Investing activities	(84)		(69)
Financing Activities




Repurchase of common stock	(52)		(68)
Proceeds from exercise of employee stock options	3		9
Dividends paid	(110)		(102)

Other, net	1		(1)
Net Cash – Financing activities	(158)		(162)
Effect of exchange rate changes on cash	(26)		(10)
Net change in cash and cash equivalents	(236)		(35)
Cash and cash equivalents at beginning of year	1,349		1,875
Cash and cash equivalents at end of period	$	1,113	$	1,840
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	40	$	58
Income taxes (net of refunds received)	$	42	$	60

~~(in millions)~~

For the six months ended June 30, 2021 2020
Operating Activities
Net income $ 200 $ 69
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 59 58
Amortization 65 68
Share-based compensation 17 16
Restructuring and asset impairment charges 9 50
Gain from sale of business (2) 0
Other, net 6 18
Payments for restructuring (18) (12)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables (66) 48
Changes in inventories (89) (63)
Changes in accounts payable 36 (86)
Other, net (11) 13
Net Cash – Operating activities 206 179
Investing Activities
Capital expenditures (80) (95)
Proceeds from sale of business 2 0
Other, net 9 7
Net Cash – Investing activities (69) (88)
Financing Activities
Short-term debt issued, net 0 359
Short-term debt repaid 0 (422)
Long-term debt issued, net 0 987
Repurchase of common stock (68) (60)
Proceeds from exercise of employee stock options 9 5
Dividends paid (102) (95)
Other, net (1) 0
Net Cash – Financing activities (162) 774
Effect of exchange rate changes on cash (10) (12)
Net change in cash and cash equivalents (35) 853
Cash and cash equivalents at beginning of year 1,875 724
Cash and cash equivalents at end of period $ 1,840 $ 1,577
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 58 $ 45
Income taxes (net of refunds received) $ 60 $ 11

See accompanying notes to condensed consolidated financial statements.

XYLEM INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Xylem Inc. (“Xylem” or the “Company”) is a leading equipment and service provider for water and wastewater applications with a broad portfolio of products and services addressing the full cycle of water, from collection, distribution and use to the return of water to the environment.

Xylem operates in 3 segments, Water Infrastructure, Applied Water and Measurement & Control Solutions. See Note 17, "Segment Information", to the condensed consolidated financial statements for further segment background information.

Except as otherwise indicated or unless the context otherwise requires, "Xylem," "we," "us," "our" and the "Company" refer to Xylem Inc. and its subsidiaries.

Basis of Presentation

The interim condensed consolidated financial statements reflect our financial position and results of operations in conformity with accounting principles generally accepted in the United States of America ("GAAP"). All intercompany transactions between our businesses have been eliminated.

The unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) considered necessary for a fair statement of the financial position and results of operations for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such SEC rules. We believe that the disclosures made are adequate to make the information presented not misleading. We consistently applied the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 ("~~2020~~2021 Annual Report") in preparing these unaudited condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes included in our ~~2020~~2021 Annual Report.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Estimates are revised as additional information becomes available. Estimates and assumptions are used for, but not limited to, post-retirement obligations and assets, revenue recognition, income taxes, valuation of intangible assets, goodwill and indefinite-lived intangible impairment testing and contingent liabilities. Actual results could differ from these estimates. The global outbreak of the novel coronavirus ("COVID-19") disease in March 2020, declared a pandemic by the World Health Organization, has created significant global volatility, uncertainty and ~~economic~~related macroeconomic disruption. The COVID-19 pandemic and related macroeconomic impacts have also ~~has~~ caused increased uncertainty in estimates and assumptions affecting the condensed consolidated financial statements. Actual results could differ from these ~~estimates.~~estimates.

Our quarterly financial periods end on the Saturday closest to the last day of the calendar quarter, except for the fourth quarter which ends on December 31. For ease of presentation, the condensed consolidated financial statements included herein are described as ending on the last day of the calendar quarter.

Disaggregation of Revenue

The following table illustrates the sources of revenue:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Revenue from contracts with customers	Revenue from contracts with customers	$	1,302	$	1,114	$	2,513	$	2,188	Revenue from contracts with customers	$	1,312	$	1,302	$	2,534	$	2,513
Lease Revenue	Lease Revenue	49		46		94		95		Lease Revenue	52		49		102		94
Total	Total	$	1,351	$	1,160	$	2,607	$	2,283	Total	$	1,364	$	1,351	$	2,636	$	2,607

The following table reflects revenue from contracts with customers by application. ~~The table below also reflects updates~~


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)	2022		2021		2022		2021
Water Infrastructure
Transport	$	432	$	414	$	825	$	784
Treatment	104		106		194		200

Applied Water*
Commercial Building Services	147		155		308		303
Residential Building Services	79		71		153		135
Industrial Water	204		188		394		369

Measurement & Control Solutions
Water	279		288		544		571
Energy	67		80		116		151



Total	$	1,312	$	1,302	$	2,534	$	2,513

*Items in the prior year footnote disclosures for Applied Water were reclassified to conform to the ~~aggregation of applications to simplify and focus presentation.~~
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2021 2020 2021 2020
Water Infrastructure
     Transport $ 414 $ 350 $ 784 $ 668
     Treatment 106 105 200 176
Applied Water
     Commercial Building Services 155 133 302 270
Residential Building Services 73 54 140 104
     Industrial Water 186 150 365 301
Measurement & Control Solutions
     Water 288 240 571 505
     Energy 80 82 151 164
Total $ 1,302 $ 1,114 $ 2,513 $ 2,188
current classification.

The following table reflects revenue from contracts with customers by geographical region. The presentation of geographic regions below has been updated to better align to how management currently focuses on revenue and growth platforms by geographic region. There has been no change to the Company's reportable segments.


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Water Infrastructure	Water Infrastructure									Water Infrastructure
United States	United States	$	142	$	144	$	265	$	265	United States	$	165	$	142	$	312	$	265
Western Europe	Western Europe	190		157		363		299		Western Europe	190		190		376		363
Emerging Markets (a)	Emerging Markets (a)	133		109		255		195		Emerging Markets (a)	120		133		221		255
Other	Other	55		45		101		85		Other	61		55		110		101

Applied Water	Applied Water									Applied Water
United States	United States	202		183		396		374		United States	219		202		440		396
Western Europe	Western Europe	99		70		191		144		Western Europe	101		99		195		191
Emerging Markets (a)	Emerging Markets (a)	81		61		159		111		Emerging Markets (a)	79		81		159		159
Other	Other	32		23		61		46		Other	31		32		61		61

Measurement & Control Solutions	Measurement & Control Solutions									Measurement & Control Solutions
United States	United States	224		212		437		433		United States	212		224		393		437
Western Europe	Western Europe	69		51		143		114		Western Europe	59		69		128		143
Emerging Markets (a)	Emerging Markets (a)	49		39		95		80		Emerging Markets (a)	50		49		94		95
Other	Other	26		20		47		42		Other	25		26		45		47

Total	Total	$	1,302	$	1,114	$	2,513	$	2,188	Total	$	1,312	$	1,302	$	2,534	$	2,513

(a)Emerging Markets ~~revenue~~ includes results from the following regions: Eastern Europe, the Middle East and Africa, Latin America and Asia Pacific (excluding Japan, Australia and New Zealand, which are presented in "Other")

We receive payments from customers based on a billing schedule as established in our contracts. Contract assets relate to costs incurred to perform in advance of scheduled billings. Contract liabilities relate to payments received in advance of performance under the contracts. Changes in contract assets and liabilities are due to our performance under the contract.

The table below provides contract assets, contract liabilities, and significant changes in contract assets and liabilities:


(in millions)	(in millions)	Contract Assets (a)		Contract Liabilities		(in millions)	Contract Assets (a)		Contract Liabilities
Balance at January 1, 2020		$	106	$	135
Additions, net		63		85
Revenue recognized from opening balance		—		(70)
Billings transferred to accounts receivable		(60)		—

Other		(2)		(4)
Balance at June 30, 2020		$	107	$	146

Balance at January 1, 2021	Balance at January 1, 2021	$	117	$	166	Balance at January 1, 2021	$	117	$	166
Additions, net	Additions, net	78		99		Additions, net	78		99
Revenue recognized from opening balance	Revenue recognized from opening balance	—		(93)		Revenue recognized from opening balance	—		(93)
Billings transferred to accounts receivable	Billings transferred to accounts receivable	(74)		—		Billings transferred to accounts receivable	(74)		—

Other	Other	0		(1)		Other	—		(1)
Balance at June 30, 2021	Balance at June 30, 2021	$	121	$	171	Balance at June 30, 2021	$	121	$	171

Balance at January 1, 2022						Balance at January 1, 2022	$	125	$	164
Additions, net						Additions, net	63		97
Revenue recognized from opening balance						Revenue recognized from opening balance	—		(75)
Billings transferred to accounts receivable						Billings transferred to accounts receivable	(61)		—
Other						Other	(4)		(3)
Balance at June 30, 2022						Balance at June 30, 2022	$	123	$	183

(a)Excludes receivable balances, which are disclosed on the ~~balance sheet~~Condensed Consolidated Balance Sheets

Performance obligations

Delivery schedules vary from customer to customer based upon their requirements. Typically, large projects require longer lead production cycles and delays can occur from time to time. As of June 30, ~~2021,~~2022, the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied for contracts with performance obligations, amount to ~~$438~~$498 million. We expect to recognize the majority of revenue upon the completion of satisfying these performance obligations in the following ~~60 months.~~three years. The Company elects to apply the practical expedient to exclude from this disclosure revenue related to performance obligations that are part of a contract whose original expected duration is less than one year.

Note 3. Restructuring and Asset Impairment Charges

From time to time, the Company will incur costs related to restructuring actions in order to optimize our cost base and more strategically position ~~ourselves.~~ itself. During the three and six months ended June 30, 2022, we incurred restructuring charges of $6 million. We incurred these charges primarily as a continuation of our efforts to reposition our European and North American businesses to optimize our cost structure and improve our operational efficiency and effectiveness.The charges included the reduction of headcount across all segments.

During the three and six months ended June 30, 2021, we recognized restructuring charges of $3 million and $8 million, respectively, of which $2 million and $6 million relate to actions previously announced in 2020. These charges included reduction of headcount across all segments and asset impairments within our Measurement & Control Solutions segment.

In response to the changes in business and economic conditions arising as a result of the COVID-19 pandemic, in June 2020 management committed to a restructuring plan that includes actions across our businesses and functions globally. The plan is designed to support our long-term financial resilience, simplify our operations, strengthen our competitive positioning and better serve our customers. During the three and six months ended June 30, 2020, we recognized restructuring charges of $38 million and $40 million, respectively. These charges included reduction of headcount across all segments and asset impairments within our Measurement & Control Solutions segment.

The following table presents the components of restructuring expense and asset impairment charges:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
By component:	By component:									By component:
Severance and other charges	Severance and other charges	$	4	$	21	$	8	$	23	Severance and other charges	$	6	$	4	$	6	$	8

Asset impairment	Asset impairment	0		17		1		17		Asset impairment	—		—		—		1

Reversal of restructuring accruals	Reversal of restructuring accruals	(1)		0		(1)		0		Reversal of restructuring accruals	—		(1)		—		(1)
Total restructuring charges	Total restructuring charges	$	3	$	38	$	8	$	40	Total restructuring charges	$	6	$	3	$	6	$	8
Asset impairment charges	Asset impairment charges	0		10		1		10		Asset impairment charges	1		—		1		1
Total restructuring and asset impairment charges	Total restructuring and asset impairment charges	$	3	$	48	$	9	$	50	Total restructuring and asset impairment charges	$	7	$	3	$	7	$	9

By segment:	By segment:									By segment:
Water Infrastructure	Water Infrastructure	$	3	$	6	$	7	$	8	Water Infrastructure	$	2	$	3	$	2	$	7
Applied Water	Applied Water	0		2		1		2		Applied Water	1		—		1		1
Measurement & Control Solutions	Measurement & Control Solutions	0		40		1		40		Measurement & Control Solutions	4		—		4		1

The following table displays a roll-forward of the restructuring accruals, presented on our Condensed Consolidated Balance Sheets within "Accrued and other current liabilities" and "Other non-current accrued liabilities", for the six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


(in millions)	(in millions)	2021		2020		(in millions)	2022		2021
Restructuring accruals - January 1	Restructuring accruals - January 1	$	29	$	27	Restructuring accruals - January 1	$	7	$	29
Restructuring charges		8		40
Restructuring charges, net						Restructuring charges, net	6		8
Cash payments	Cash payments	(18)		(12)		Cash payments	(5)		(18)
Asset impairment	Asset impairment	(1)		(17)		Asset impairment	—		(1)
Foreign currency and other		0		(1)

Restructuring accruals - June 30	Restructuring accruals - June 30	$	18	$	37	Restructuring accruals - June 30	$	8	$	18

By segment:	By segment:					By segment:
Water Infrastructure	Water Infrastructure	$	3	$	4	Water Infrastructure	$	1	$	3
Applied Water	Applied Water	1		1		Applied Water	—		1
Measurement & Control Solutions	Measurement & Control Solutions	11		27		Measurement & Control Solutions	4		11
Regional selling locations (a)	Regional selling locations (a)	3		4		Regional selling locations (a)	1		3
Corporate and other	Corporate and other	0		1		Corporate and other	2		—

(a)Regional selling locations consist primarily of selling and marketing organizations and related support services that incurred restructuring expense ~~which~~that was allocated to the segments. The liabilities associated with restructuring expense were not allocated to the segments.

The following table presents expected restructuring spend in ~~2021~~2022 and thereafter:
(in millions) Water Infrastructure Applied Water Measurement & Control Solutions Corporate Total
Actions Commenced in 2021:
Total expected costs $ 5 $ 0 $ 0 $ 0 $ 5
Costs incurred during Q1 2021 1 0 0 0 1
Costs incurred during Q2 2021 1 0 0 0 1
Total expected costs remaining $ 3 $ 0 $ 0 $ 0 $ 3
Actions Commenced in 2020:
Total expected costs $ 25 $ 8 $ 33 $ 2 $ 68
Costs incurred during 2020 19 4 30 0 53
Costs incurred during Q1 2021 2 1 1 0 4
Costs incurred during Q2 2021 2 0 0 0 2
Total expected costs remaining $ 2 $ 3 $ 2 $ 2 $ 9

~~The Water Infrastructure actions commenced in 2021 consist primarily of severance charges. These actions are expected to continue through the second quarter of 2022.~~


(in millions)	Water Infrastructure		Applied Water		Measurement & Control Solutions		Corporate		Total







Actions Commenced in 2022:
Total expected costs	$	2	$	1	$	3	$	—	$	6

Costs incurred during Q1 2022	—		—		—		—		—
Costs incurred during Q2 2022	2		1		2		—		5

Total expected costs remaining	$	—	$	—	$	1	$	—	$	1

Actions Commenced in 2021:
Total expected costs	$	3	$	—	$	1	$	—	$	4
Costs incurred during 2021	3		—		—		—		3
Costs incurred during Q1 2022	—		—		—		—		—
Costs incurred during Q2 2022	—		—		—		—		—

Total expected costs remaining	$	—	$	—	$	1	$	—	$	1

The Water Infrastructure, Applied Water and Measurement & Control Solutions actions commenced in ~~2020~~2022 consist primarily of severance ~~charges across segments~~charges. The Water Infrastructure and ~~asset impairment charges in our~~Applied Water actions are complete and the Measurement & Control Solutions ~~segment. These~~ actions are expected to continue through the ~~second quarter~~end of 2022.

The Water Infrastructure and Measurement & Control Solutions actions commenced in 2021 consist primarily of severance charges. The Water Infrastructure actions are complete and the Measurement & Control Solutions actions are expected to continue through the end of 2022.

During the second quarter of ~~2020~~2022, we also incurred charges of $1 million within the discontinuance of a product line resulted in $17 million of asset impairments, primarily related to customer relationships, trademarks and fixed assets within our Measurement & Control Solutions segment.

~~Asset Impairment~~

~~During the second quarter of 2020 we determined that internally developed in-process software within our~~ Measurement & Control Solutions segment, ~~was impaired as a result of~~related to actions ~~taken~~commenced prior to ~~prioritize strategic investments. Accordingly, we recognized an impairment charge of $10 million. Refer to Note 7, "Goodwill and Other Intangible Assets," for additional information.~~2021.

Note 4. Income Taxes

Our quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items within periods presented. The comparison of our effective tax rate between periods is significantly impacted by the level and mix of earnings and losses by tax jurisdiction and discrete items.

The income tax provision for the three months ended June 30, ~~2021~~2022 was ~~$25~~$24 million resulting in an effective tax rate of ~~18.5%~~17.5%, compared to a $4$25 million expense resulting in an effective tax rate of ~~10.9%~~18.5% for the same period in ~~2020.~~2021. The income tax provision for the six months ended June 30, ~~2021~~2022 was ~~$52~~$40 million resulting in an effective tax rate of ~~20.7%~~17.0%, compared to ~~an $8~~a $52 million expense resulting in an effective tax rate of ~~10.4%~~20.7% for the same period in ~~2020.~~2021. The effective tax rate for the three and six month periods ended June 30, ~~2021~~2022 was lower than the U.S. federal statutory rate primarily due to favorable earnings mix and tax settlement benefits, partially offset by the Global Intangible Low Taxed Income ("GILTI") inclusion. Additionally, the effective tax rate for the three and six month periods ended June 30, 2021 differ from the same periods in 2020 due to unfavorable earnings mix as compared to the prior year and favorable equity compensation deductions in the prior year. The effective tax rate for the six month period ended June 30, 2021 differs from the same period in 2020 due to the impact of tax settlements in the current period.

Unrecognized Tax Benefits

During 2019, Xylem’s Swedish subsidiary received a tax assessment for the 2013 tax year related to the tax treatment of an intercompany transfer of certain intellectual property that was made in connection with a reorganization of our European businesses. ~~The assessment asserts an aggregate amount of approximately $80 million for tax, penalties and interest.~~ Xylem filed an appeal with the Administrative Court of ~~Stockholm. Management,~~Vaxjo, which rendered a decision adverse to Xylem in June 2022 for $80 million, consisting of the full tax assessment amount plus penalties and interest. Xylem intends to appeal this decision with the intermediate appellate court, the Administrative Court of Appeal (the “Court”). At this time, management, in consultation with external legal advisors, ~~believes~~continues to believe it is more likely than not that Xylem will prevail on the proposed assessment and iswill continue to vigorously ~~defending~~defend our position through ~~litigation.~~the appellate process. The appeal to the Court is expected to take approximately one year; however, there can be no assurance as to the timing of the Court’s decision. Both parties will have the ability to seek appeal of the Court’s decision to the Supreme Administrative Court of Sweden. There can be no assurance that the final determination by the authorities will not be materially different than our position. As of June 30, ~~2021,~~2022, we have not recorded any unrecognized tax benefits related to this uncertain tax position.

Note 5. Earnings Per Share

The following is a reconciliation of the shares used in calculating basic and diluted net earnings per share:
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Net income (in millions) $ 113 $ 31 $ 200 $ 69
Shares (in thousands):
Weighted average common shares outstanding 180,072 179,933 180,162 180,043
Add: Participating securities (a) 34 32 24 29
Weighted average common shares outstanding — Basic 180,106 179,965 180,186 180,072
Plus incremental shares from assumed conversions: (b)
Dilutive effect of stock options 897 563 845 644
Dilutive effect of restricted stock units and performance share units 346 79 380 234
Weighted average common shares outstanding — Diluted 181,349 180,607 181,411 180,950
Basic earnings per share $ 0.63 $ 0.17 $ 1.11 $ 0.38
Diluted earnings per share $ 0.62 $ 0.17 $ 1.10 $ 0.38


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net income (in millions)	$	112	$	113	$	194	$	200
Shares (in thousands):
Weighted average common shares outstanding	180,123		180,072		180,164		180,162
Add: Participating securities (a)	33		34		29		24
Weighted average common shares outstanding — Basic	180,156		180,106		180,193		180,186
Plus incremental shares from assumed conversions: (b)
Dilutive effect of stock options	438		897		513		845
Dilutive effect of restricted stock units and performance share units	56		346		129		380

Weighted average common shares outstanding — Diluted	180,650		181,349		180,835		181,411
Basic earnings per share	$	0.62	$	0.63	$	1.07	$	1.11
Diluted earnings per share	$	0.62	$	0.62	$	1.07	$	1.10

(a)Restricted stock unit awards containing rights to non-forfeitable dividends that participate in undistributed earnings with common ~~shareholders~~stockholders are considered participating securities for purposes of computing earnings per share.

(b)Incremental shares from stock options, restricted stock units and performance share units are computed by the treasury stock method. The weighted average shares listed below were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented or were otherwise excluded under the treasury stock method. The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of restricted stock units and performance share units, reduced by the repurchase of shares with the proceeds from the assumed exercises and unrecognized compensation expense for outstanding awards. Performance share units will be included in the treasury stock calculation of diluted earnings per share upon achievement of underlying performance or market conditions at the end of the reporting period. See Note 13, "Share-Based Compensation Plans", to the condensed consolidated financial statements for further detail on the performance share units.
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) 2021 2020 2021 2020
Stock options 1,227 1,766 1,238 1,567
Restricted stock units 318 441 302 377
Performance share units 345 313 349 299


	Three Months Ended		Six Months Ended
	June 30,		June 30,
(in thousands)	2022	2021	2022	2021
Stock options	1,647	1,227	1,491	1,238
Restricted stock units	362	318	346	302
Performance share units	270	345	252	349

The components of total inventories are summarized as follows:


(in millions)	(in millions)	June 30, 2021		December 31, 2020		(in millions)	June 30, 2022		December 31, 2021
Finished goods	Finished goods	$	244	$	221	Finished goods	$	318	$	236
Work in process	Work in process	62		49		Work in process	71		58
Raw materials	Raw materials	336		288		Raw materials	463		406
Total inventories	Total inventories	$	642	$	558	Total inventories	$	852	$	700

Note 7. Goodwill and Other Intangible Assets

Changes in the carrying value of goodwill by reportable segment for the six months ended June 30, ~~2021~~2022 are as follows:
(in millions)
Water
Infrastructure
Applied Water Measurement & Control Solutions Total
Balance as of January 1, 2021 $ 668 $ 529 $ 1,657 $ 2,854
Activity in 2021
Foreign currency and other 0 (5) (8) (13)
Balance as of June 30, 2021 $ 668 $ 524 $ 1,649 $ 2,841


(in millions)	Water Infrastructure		Applied Water		Measurement & Control Solutions		Total
Balance as of January 1, 2022	$	656	$	515	$	1,621	$	2,792
Activity in 2022


Foreign currency and other	(19)		(15)		(44)		(78)
Balance as of June 30, 2022	$	637	$	500	$	1,577	$	2,714

~~As of June 30, 2021, goodwill included an accumulated impairment loss of $206 million within the Measurement & Control Solutions segment.~~

Other Intangible Assets

Information regarding our other intangible assets is as follows:


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
(in millions)	(in millions)	Carrying Amount		Accumulated Amortization		Net Intangibles		Carrying Amount		Accumulated Amortization		Net Intangibles		(in millions)	Carrying Amount		Accumulated Amortization		Net Intangibles		Carrying Amount		Accumulated Amortization		Net Intangibles
Customer and distributor relationships	Customer and distributor relationships	$	941	$	(436)	$	505	$	941	$	(410)	$	531	Customer and distributor relationships	$	914	$	(473)	$	441	$	929	$	(456)	$	473
Proprietary technology and patents	Proprietary technology and patents	206		(138)		68		206		(131)		75		Proprietary technology and patents	198		(144)		54		201		(142)		59
Trademarks	Trademarks	143		(68)		75		143		(63)		80		Trademarks	138		(76)		62		141		(72)		69
Software	Software	523		(284)		239		500		(265)		235		Software	525		(274)		251		548		(303)		245
Other	Other	21		(19)		2		21		(18)		3		Other	20		(18)		2		21		(18)		3
Indefinite-lived intangibles	Indefinite-lived intangibles	169		0		169		169		0		169		Indefinite-lived intangibles	165		—		165		167		—		167
Other Intangibles	Other Intangibles	$	2,003	$	(945)	$	1,058	$	1,980	$	(887)	$	1,093	Other Intangibles	$	1,960	$	(985)	$	975	$	2,007	$	(991)	$	1,016

Amortization expense related to finite-lived intangible assets was $32 million and $62 million for the three and six-month periods ended June 30, 2022, respectively, and $33 million and $65 million for the three and six month periods ended June 30, 2021, ~~respectively, and $33 million and $68 million for the three and six month periods ended June 30, 2020,~~ respectively.

During the second quarter of 2020, we recognized impairment charges of $16 million primarily related to customer relationships and trademarks due to discontinuance of a product line within our Measurement & Control Solutions segment. We also determined that internally developed in-process software within our Measurement & Control Solutions segment was impaired as a result of actions taken to prioritize strategic investments and recognized an impairment charge of $10 million.

Note 8. Derivative Financial Instruments

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions, and we principally manage our exposures to these risks through management of our core business activities. Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates that may impact revenue, expenses, cash receipts, cash payments, and the value of our stockholders' equity. We enter into derivative financial instruments to protect the value or fix the amount of certain cash flows in terms of the functional currency of the business unit with that exposure and also reduce the volatility in stockholders' equity.

Cash Flow Hedges of Foreign Exchange Risk

We are exposed to fluctuations in various foreign currencies against our functional currencies. We use foreign currency derivatives, including currency forward agreements, to manage our exposure to fluctuations in the various exchange rates. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date.

Certain business units with exposure to foreign currency exchange risks have designated certain currency forward agreements as cash flow hedges of forecasted intercompany inventory purchases and sales. Our principal currency exposures relate to the Euro, Swedish Krona, British Pound, Canadian Dollar, Polish Zloty and Australian Dollar. We had foreign exchange contracts with purchased notional amounts totaling ~~$270~~$278 million and $0$301 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. As of June 30, ~~2021,~~2022, our most significant foreign currency derivatives included contracts to sell U.S. Dollar and purchase Euro, purchase Swedish Krona and sell Euro, sell British Pound and purchase Euro, purchase ~~Polish Zloty and sell Euro, purchase~~ U.S. Dollar and sell Canadian Dollar, ~~and to~~ sell Canadian Dollar and purchase Euro, sell Australian Dollar and purchase Euro, and to purchase Polish Zloty and sell Euro. The purchased notional amounts associated with these currency derivatives are ~~$97~~$112 million, ~~$88~~$83 million, ~~$36~~$30 million, $15 million, $14 million, $13 million and ~~$12~~$11 million, respectively. As of December 31, 2021 the purchased notional amounts associated with these currency derivatives are $130 million, $88 million, $31 million, $14 million, $14 million, $13 million and $11 million, respectively.

Hedges of Net Investments in Foreign Operations

We are exposed to changes in foreign currencies impacting our net investments held in foreign subsidiaries.

Cross-Currency Swaps

Beginning in 2015, we entered into cross-currency swaps to manage our exposure to fluctuations in the Euro-U.S. Dollar exchange rate. During the second quarter of 2019, ~~and~~ third quarter of 2020, and second quarter of 2022 we entered into additional cross-currency swaps. The total notional amount of derivative instruments designated as net investment hedges was ~~$1,208~~$1,587 million and ~~$1,249~~$1,151 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Foreign Currency Denominated Debt

On March 11, 2016, we issued 2.250% Senior Notes of €500 million aggregate principal amount due March 2023. ~~We designated~~

On June 2, 2022, we de-designated the entirety of the outstanding balance of the €500 million 2.250% Senior Notes, or $533 million from the net investment hedge relationship. Previously, the entirety of the outstanding balance, or ~~$591 million and $610~~$563 million as of ~~June 30, 2021 and~~ December 31, ~~2020, respectively,~~2021, net of unamortized discount, was designated as a hedge of a net investment in certain foreign subsidiaries.

Fair Value Hedges of Foreign Exchange Risk

The de-designation of our 2.250% Senior Notes of €500 million resulted in exposure to fluctuations in the Euro-U.S. Dollar exchange rate. We use currency forward agreements to manage our exposure to fluctuations in the Euro-U.S. Dollar exchange rate. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date.

On June 2, 2022, we entered into a currency forward agreement with a total notional amount of €500 million, designating the agreement as a fair value hedge of our Euro denominated notes. As of June 30, 2022, the total notional amount of the fair value hedge was $522 million.

Effectiveness of derivatives designated as fair value hedges is assessed using the spot method. The changes in the fair value of these derivatives due to movements in spot exchange rates are recorded in Selling, general and administrative Expenses. Changes in the fair value of the 2.250% Senior Notes of €500 million related to spot exchange rates are also recorded in Selling, general and administrative expenses. Changes in the spot-forward differential and counterparty non-performance risk of the derivatives are excluded from the assessment of hedge effectiveness and will be recognized in Accumulated other comprehensive loss (AOCL). Amounts in AOCL are recognized in earnings, specifically Interest expense, using a systematic and rational method over the life of the hedging instrument.

The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Income Statements and Statements of Comprehensive Income:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Cash Flow Hedges	Cash Flow Hedges									Cash Flow Hedges
Foreign Exchange Contracts	Foreign Exchange Contracts									Foreign Exchange Contracts
Amount of (loss) gain recognized in OCI		$	4	$	6	$	(7)	$	4
Amount of (gain) loss reclassified from OCI into revenue		1		(1)		(1)		1
Amount of (gain) loss reclassified from OCI into cost of revenue		0		1		(1)		2
Amount of gain (loss) recognized in OCI										Amount of gain (loss) recognized in OCI	$	(13)	$	4	$	(19)	$	(7)
Amount of (gain) loss reclassified from OCI into Revenue										Amount of (gain) loss reclassified from OCI into Revenue	2		1		4		(1)
Amount of (gain) loss reclassified from OCI into Cost of revenue										Amount of (gain) loss reclassified from OCI into Cost of revenue	1		—		1		(1)

Net Investment Hedges	Net Investment Hedges									Net Investment Hedges
Cross-Currency Swaps	Cross-Currency Swaps									Cross-Currency Swaps
Amount of gain (loss) recognized in OCI		$	2	$	(22)	$	32	$	23
Amount of income recognized in Interest Expense		5		5		$	10	$	9
Amount of gain recognized in OCI										Amount of gain recognized in OCI	$	93	$	2	$	94	$	32
Amount of income recognized in Interest expense										Amount of income recognized in Interest expense	7		5		13		10
Foreign Currency Denominated Debt	Foreign Currency Denominated Debt									Foreign Currency Denominated Debt
Amount of gain (loss) recognized in OCI	Amount of gain (loss) recognized in OCI	$	(6)	$	(15)	$	20	$	(5)	Amount of gain (loss) recognized in OCI	$	23	$	(6)	$	31	$	20

Fair Value Hedges										Fair Value Hedges
Foreign Exchange Contracts										Foreign Exchange Contracts
Amount of gain recognized in OCI										Amount of gain recognized in OCI	$	4	$	—	$	4	$	—
Amount of (loss) recognized in Selling, general and administrative expenses										Amount of (loss) recognized in Selling, general and administrative expenses	$	(11)	$	—	$	(11)	$	—
Amount recognized in Interest expense										Amount recognized in Interest expense	$	(1)	$	—	$	(1)	$	—

As of June 30, ~~2021, $6~~2022, $17 million of net losses on cash flow hedges are expected to be reclassified into earnings in the next 12 months.

As of June 30, ~~2021,~~2022, no gains or losses on the net investment hedges are expected to be reclassified into earnings over their duration.

As of June 30, 2022, $4 million of net losses on the fair value hedges are expected to be reclassified into earnings in the next 12 months.

The fair values of our derivative assets and liabilities are measured on a recurring basis using Level 2 inputs and are determined through the use of models that consider various assumptions including yield curves, time value and other measurements.

The fair values of our derivative contracts currently included in our hedging program were as follows:


(in millions)	(in millions)	June 30, 2021		December 31, 2020		(in millions)	June 30, 2022		December 31, 2021
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments					Derivatives designated as hedging instruments

Assets						Assets
Cash Flow Hedges						Cash Flow Hedges
Prepaid and other current assets						Prepaid and other current assets	$	1	$	—
Net Investment Hedges						Net Investment Hedges
Other non-current assets						Other non-current assets	$	77	$	8
Liabilities	Liabilities					Liabilities
Cash Flow Hedges	Cash Flow Hedges					Cash Flow Hedges
Other current liabilities		$	(5)	$	0
Accrued and other current liabilities						Accrued and other current liabilities	$	(14)	$	(1)
Net Investment Hedges	Net Investment Hedges					Net Investment Hedges
Other non-current accrued liabilities	Other non-current accrued liabilities	$	(82)	$	(117)	Other non-current accrued liabilities	$	(1)	$	(26)
Fair Value Hedges						Fair Value Hedges
Accrued and other current liabilities						Accrued and other current liabilities	$	(8)	$	—

~~The fair value of our~~Our long-term debt, due in 2023, was de-designated from the hedging relationship in June 2022. The fair value of the long-term debt designated as a net investment hedge was ~~$614 million and $640~~$577 million as of ~~June 30, 2021 and~~ December 31, ~~2020, respectively.~~2021.

Note 9. Accrued and Other Current Liabilities

The components of total ~~accrued~~Accrued and other current liabilities are as follows:


(in millions)	(in millions)	June 30, 2021		December 31, 2020		(in millions)	June 30, 2022		December 31, 2021
Compensation and other employee-benefits	Compensation and other employee-benefits	$	253	$	258	Compensation and other employee-benefits	$	248	$	273
Customer-related liabilities	Customer-related liabilities	196		186		Customer-related liabilities	208		186
Accrued taxes	Accrued taxes	78		103		Accrued taxes	115		86
Lease liabilities	Lease liabilities	70		63		Lease liabilities	71		69
Accrued warranty costs	Accrued warranty costs	52		54		Accrued warranty costs	37		40
Other accrued liabilities	Other accrued liabilities	111		123		Other accrued liabilities	103		98
Total accrued and other current liabilities	Total accrued and other current liabilities	$	760	$	787	Total accrued and other current liabilities	$	782	$	752

Note 10. Credit Facilities and Debt

Total debt outstanding is summarized as follows:


(in millions)	(in millions)	June 30, 2021		December 31, 2020		(in millions)	June 30, 2022		December 31, 2021

4.875% Senior Notes due 2021 (a)		$	600	$	600

2.250% Senior Notes due 2023 (a)	2.250% Senior Notes due 2023 (a)	592		612		2.250% Senior Notes due 2023 (a)	522		564
3.250% Senior Notes due 2026 (a)	3.250% Senior Notes due 2026 (a)	500		500		3.250% Senior Notes due 2026 (a)	500		500
1.950% Senior Notes due 2028 ~~(b)~~(a)	1.950% Senior Notes due 2028 ~~(b)~~(a)	500		500		1.950% Senior Notes due 2028 ~~(b)~~(a)	500		500
2.250% Senior Notes due 2031 ~~(b)~~(a)	2.250% Senior Notes due 2031 ~~(b)~~(a)	500		500		2.250% Senior Notes due 2031 ~~(b)~~(a)	500		500
4.375% Senior Notes due 2046 (a)	4.375% Senior Notes due 2046 (a)	400		400		4.375% Senior Notes due 2046 (a)	400		400

Debt issuance costs and unamortized discount ~~(c)~~(b)	Debt issuance costs and unamortized discount ~~(c)~~(b)	(26)		(28)		Debt issuance costs and unamortized discount ~~(c)~~(b)	(22)		(24)

Total debt	Total debt	3,066		3,084		Total debt	2,400		2,440
Less: short-term borrowings and current maturities of long-term debt	Less: short-term borrowings and current maturities of long-term debt	600		600		Less: short-term borrowings and current maturities of long-term debt	521		—
Total long-term debt	Total long-term debt	$	2,466	$	2,484	Total long-term debt	$	1,879	$	2,440

(a)The fair value of our Senior Notes was determined using quoted prices in active markets for identical securities, which are considered Level 1 inputs. The fair value of our Senior Notes due ~~2021~~2023 was ~~$606~~$525 million and ~~$620~~$577 million as of June 30, ~~2021~~2022 and December 31, ~~2020, respectively. The fair value of our Senior Notes due 2023 was $614 million and $640 million as of June 30,~~ 2021, ~~and December 31, 2020,~~ respectively. The fair value of our Senior Notes due 2026 was ~~$548~~$487 million and ~~$563~~$537 million as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 respectively. The fair value of our Senior Notes due 2028 was $446 million and $497 million as of June 30, 2022 and December 31, 2021, respectively. The fair value of our Senior Notes due 2031 was $419 million and $496 million as of June 30, 2022 and December 31, 2021, respectively. The fair value of our Senior Notes due 2046 was ~~$483~~$367 million and ~~$496~~$481 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(b)The fair value of our Senior Notes was determined using quoted prices in active markets for identical securities, which are considered Level 1 inputs. The fair value of our Senior Notes due 2028 was $508 million and $529 million as of June 30, 2021 and December 31, 2020, respectively. The fair value of our Senior Notes due 2031 was $507 million and $527 million as of June 30, 2021 and December 31, 2020, respectively.

~~(c)~~The debt issuance costs and unamortized discount are recognized as a reduction in the carrying value of the Senior Notes in the Condensed Consolidated Balance Sheets and are being amortized to interest expense in our Condensed Consolidated Income Statements over the expected remaining terms of the Senior Notes.

On June 26, 2020, we issued 1.950% Senior Notes of $500 million aggregate principal amount due January 2028 (the “Senior Notes due 2028”) and 2.250% Senior Notes of $500 million aggregate principal amount due January 2031 (the “Senior Notes due 2031" and, together with the Senior Notes due 2028, the “Green Bond”).

The Green Bond includes covenants that restrict our ability, and the ability of our restricted subsidiaries, to incur debt secured by liens on certain property above a threshold, to engage in certain sale and leaseback transactions involving certain property above a threshold, and to consolidate or merge, or convey or transfer all or substantially all of our assets. We may redeem the Green Bond at any time, at our option, subject to certain conditions, at specified redemption prices, plus accrued and unpaid interest to the redemption date.

If a change of control triggering event (as defined in the applicable Green Bond indenture) occurs, we will be required to make an offer to purchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest to the date of repurchase.

Interest on the Green Bond is payable on January 30 and July 30 of each year. As of June 30, ~~2021,~~2022, we are in compliance with all covenants for the Green Bond.

~~On September 20, 2011, we issued 4.875% Senior Notes of $600 million aggregate principal amount due October 2021 (the "Senior Notes due 2021").~~ On March 11, 2016, we issued 2.250% Senior Notes of €500 million aggregate principal amount due March 2023 (the "Senior Notes due 2023"). On October 11, 2016, we issued 3.250% Senior Notes of $500 million aggregate principal amount due October 2026 (the “Senior Notes due 2026”) and 4.375% Senior Notes of $400 million aggregate principal amount due October 2046 (the “Senior Notes due 2046” and, together with the Senior Notes due 2021, the Senior Notes due 2023 and the Senior Notes due 2026, the “Senior Notes”).

The Senior Notes include covenants that restrict our ability, and the ability of our restricted subsidiaries, to incur debt secured by liens on certain property above a threshold, to engage in certain sale and leaseback transactions involving certain property above a threshold, and to consolidate or merge, or convey or transfer all or substantially all of our assets. We may redeem the Senior Notes, as applicable, in whole or in part, at any time at a redemption price equal to the principal amount of the Senior Notes to be redeemed, plus a make-whole premium. We may also redeem the Senior Notes in certain other circumstances, as set forth in the applicable Senior Notes indenture.

If a change of control triggering event (as defined in the applicable Senior Notes indenture) occurs, we will be required to make an offer to purchase the Senior Notes at a price equal to 101% of their principal amount plus accrued and unpaid interest to the date of repurchase.

Interest on the Senior Notes due 2021 iswas payable on April 1 and October 1 of each year. Interest on the Senior Notes due 2023 is payable on March 11 of each year. Interest on the Senior Notes due 2026 and the Senior Notes due 2046 is payable on May 1 and November 1 of each year. As of June 30, ~~2021,~~2022, we are in compliance with all covenants for the Senior Notes.

2019 Five-Year Revolving Credit Facility

On March 5, 2019, Xylem entered into a Five-Year Revolving Credit Facility (the “2019 Credit Facility”) with Citibank, N.A., as Administrative Agent, and a syndicate of lenders. The 2019 Credit Facility provides for an aggregate principal amount of up to $800 million (available in U.S. Dollars and in Euros), with increases of up to $200 million for a maximum aggregate principal amount of $1 billion at the request of Xylem and with the consent of the institutions providing such increased commitments.

Interest on all loans under the 2019 Credit Facility is payable either quarterly or at the expiration of any LIBOR or EURIBOR interest period applicable thereto. Borrowings accrue interest at a rate equal to, at Xylem's election, a base rate or an adjusted LIBOR or EURIBOR rate plus an applicable margin. The 2019 Credit Facility includes customary provisions for implementation of replacement rates for LIBOR-based and EURIBOR-based loans. The 2019 Credit Facility also includes a pricing grid that determines the applicable margin based on Xylem's credit rating, with a further adjustment depending on Xylem's annual Sustainalytics Environmental, Social and Governance ("ESG") score, determined based on the methodology in effect as of March 5, 2019. Xylem will also pay quarterly fees to each lender for such lender’s commitment to lend accruing on such commitment at a rate based on our credit rating, whether such commitment is used or unused, as well as a quarterly letter of credit fee accruing on the letter of credit exposure of such lender during the preceding quarter at a rate based on the credit rating of Xylem (as adjusted for the ESG score).

The 2019 Credit Facility requires that Xylem maintain a consolidated total debt to consolidated EBITDA ratio (or maximum leverage ratio), which will be based on the last four fiscal quarters; and in addition contains a number of customary covenants, including limitations on the incurrence of secured debt and debt of subsidiaries, liens, sale and lease-back transactions, mergers, consolidations, liquidations, dissolutions and sales of assets. The 2019 Credit Facility also contains customary events of default. Finally, Xylem has the ability to designate subsidiaries that can borrow under the 2019 Credit Facility, subject to certain requirements and conditions set forth in the 2019 Credit Facility.

On June 22, 2020, Xylem entered into Amendment No. 1 to the 2019 Credit Facility (the "Amendment") which modified the financial covenant from a test based on the maximum leverage ratio (defined as consolidated total debt to consolidated EBITDA) to a test based on the net leverage ratio (defined as consolidated total debt less unrestricted cash and cash equivalents to consolidated EBITDA). This modification is effective through the quarter ending September 30, 2021, after which the covenant will revert back to the prior maximum leverage ratio test. The Amendment also restricted stock repurchases until March 31, 2021, except for shares of common stock in an amount not to exceed the number of shares issued after the date of the Amendment, subject to customary exceptions. As of June 30, ~~2021,~~2022, the 2019 Credit Facility was undrawn and we are in compliance with all revolver covenants.

U.S. Dollar Commercial Paper Program

Our U.S. Dollar commercial paper program generally serves as a means of short-term funding with a $600 million maximum issuing balance and a combined limit of $800 million inclusive of the 2019 Credit Facility. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, none of the Company's $600 million U.S. Dollar commercial paper program was outstanding. We have the ability to continue borrowing under this program going forward in future periods.

Euro Commercial Paper Program

On June 3, 2019, Xylem entered into a Euro commercial paper program with ING Bank N.V., as administrative agent, and a syndicate of dealers. The Euro commercial paper program provides for a maximum issuing balance of up to €500 million (approximately ~~$592~~$522 million) which may be denominated in a variety of currencies. The maximum issuing balance may be increased in accordance with the Dealer Agreement. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, none of the Company's Euro commercial paper program was outstanding. We have the ability to continue borrowing under this program going forward in future periods.

Note 11. Post-retirement Benefit Plans

The components of net periodic benefit cost for our defined benefit pension plans are as follows:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Domestic defined benefit pension plans:	Domestic defined benefit pension plans:									Domestic defined benefit pension plans:
Service cost	Service cost	$	0	$	1	$	1	$	2	Service cost	$	—	$	—	$	1	$	1
Interest cost	Interest cost	1		1		2		2		Interest cost	1		1		2		2
Expected return on plan assets	Expected return on plan assets	(1)		(2)		(3)		(4)		Expected return on plan assets	(1)		(1)		(3)		(3)

Amortization of net actuarial loss	Amortization of net actuarial loss	1		1		2		2		Amortization of net actuarial loss	—		1		1		2
Net periodic benefit cost	Net periodic benefit cost	$	1	$	1	$	2	$	2	Net periodic benefit cost	$	—	$	1	$	1	$	2
International defined benefit pension plans:	International defined benefit pension plans:									International defined benefit pension plans:
Service cost	Service cost	$	3	$	3	$	7	$	6	Service cost	$	4	$	3	$	7	$	7
Interest cost	Interest cost	3		3		6		6		Interest cost	3		3		7		6
Expected return on plan assets	Expected return on plan assets	(3)		(3)		(7)		(6)		Expected return on plan assets	(3)		(3)		(7)		(7)

Amortization of net actuarial loss	Amortization of net actuarial loss	4		3		8		6		Amortization of net actuarial loss	3		4		6		8

Net periodic benefit cost	Net periodic benefit cost	$	7	$	6	$	14	$	12	Net periodic benefit cost	$	7	$	7	$	13	$	14
Total net periodic benefit cost	Total net periodic benefit cost	$	8	$	7	$	16	$	14	Total net periodic benefit cost	$	7	$	8	$	14	$	16

The components of net periodic benefit cost, other than the service cost component, are included in the line item "Other non-operating expense, net" in the Condensed Consolidated Income Statements.

The total net periodic benefit cost for other post-retirement employee benefit plans was less than $1 million, including net credits recognized into other comprehensive income of less than $1 million, for both the three and six months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

We contributed ~~$12~~$10 million and ~~$16~~$12 million to our defined benefit plans during the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Additional contributions ranging between approximately $7 million and ~~$15~~$13 million are expected to be made during the remainder of ~~2021.~~2022.

During the first quarter of 2020, the Company purchased a bulk annuity policy with an insurance company for its largest defined benefit plan in the U.K., as a plan asset, to facilitate the termination and buy-out of the plan. The bulk annuity fully insures the benefits payable to the participants of the plan until a full buy-out of the plan can be executed, which is expected to occur in2022. ~~Included in the Company's six months ended June 30, 2020 contributions is $5 million paid to meet the shortfall between the cost of the bulk annuity policy and the plan assets.~~

The following table shows the changes in stockholders' equity for the six months ended June 30, ~~2021:~~2022:


		Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non-Controlling Interest		Total			Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non-Controlling Interest		Total
Balance at January 1, 2021		$	2	$	2,037	$	1,930	$	(413)	$	(588)	$	8	$	2,976
Other		—		—		—		—		—		1		1
Balance at January 1, 2022																Balance at January 1, 2022	$	2	$	2,089	$	2,154	$	(371)	$	(656)	$	8	$	3,226

Net income	Net income	—		—		87		—		—		—		87		Net income	—		—		82		—		—		—		82
Other comprehensive loss, net	Other comprehensive loss, net	—		—		—		(13)		—		0		(13)		Other comprehensive loss, net	—		—		—		(6)		—		—		(6)
Dividends declared ($0.28 per share)		—		—		(50)		—		—		—		(50)
Dividends declared ($0.30 per share)																Dividends declared ($0.30 per share)	—		—		(55)		—		—		—		(55)
Stock incentive plan activity	Stock incentive plan activity	—		12		—		—		(7)		—		5		Stock incentive plan activity	—		10		—		—		(6)		—		4
Repurchase of common stock	Repurchase of common stock	—		—		—		—		(60)		—		(60)		Repurchase of common stock	—		—		—		—		(45)		—		(45)
Balance at March 31, 2021		$	2	$	2,049	$	1,967	$	(426)	$	(655)	$	9	$	2,946
Balance at March 31, 2022																Balance at March 31, 2022	$	2	$	2,099	$	2,181	$	(377)	$	(707)	$	8	$	3,206

Net income	Net income	—		—		113		—		—		—		113		Net income	—		—		112		—		—		—		112
Other comprehensive income, net	Other comprehensive income, net	—		—		—		28		—		—		28		Other comprehensive income, net	—		—		—		(71)		—		—		(71)
Dividends declared ($0.28 per share)		—		—		(51)		—		—		—		(51)
Dividends declared ($0.30 per share)																Dividends declared ($0.30 per share)	—		—		(55)		—		—		—		(55)
Stock incentive plan activity	Stock incentive plan activity	—		14		—		—		(1)		—		13		Stock incentive plan activity	—		12		—		—		(1)		—		11

Balance at June 30, 2021		$	2	$	2,063	$	2,029	$	(398)	$	(656)	$	9	$	3,049
Balance at June 30, 2022																Balance at June 30, 2022	$	2	$	2,111	$	2,238	$	(448)	$	(708)	$	8	$	3,203

The following table shows the changes in stockholders' equity for the six months ended June 30, ~~2020:~~2021:


		Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non-Controlling Interest		Total			Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Non-Controlling Interest		Total
Balance at January 1, 2020		$	2	$	1,991	$	1,866	$	(375)	$	(527)	$	10	$	2,967
Cumulative effect of change in accounting principle		—		—		(2)		—		—		—		(2)
Balance at January 1, 2021																Balance at January 1, 2021	$	2	$	2,037	$	1,930	$	(413)	$	(588)	$	8	$	2,976
Other																Other	—		—		—		—		—		1		1
Net income	Net income	—		—		38		—		—		—		38		Net income	—		—		87		—		—		—		87
Other comprehensive loss, net	Other comprehensive loss, net	—		—		—		(86)		—		(1)		(87)		Other comprehensive loss, net	—		—		—		(13)		—		—		(13)
Dividends declared ($0.26 per share)		—		—		(48)		—		—		—		(48)
Dividends declared ($0.28 per share)																Dividends declared ($0.28 per share)	—		—		(50)		—		—		—		(50)
Stock incentive plan activity	Stock incentive plan activity	—		13		—		—		(10)		—		3		Stock incentive plan activity	—		12		—		—		(7)		—		5
Repurchase of common stock	Repurchase of common stock	—		—		—		—		(50)		—		(50)		Repurchase of common stock	—		—		—		—		(60)		—		(60)
Balance at March 31, 2020		$	2	$	2,004	$	1,854	$	(461)	$	(587)	$	9	$	2,821
Balance at March 31, 2021																Balance at March 31, 2021	$	2	$	2,049	$	1,967	$	(426)	$	(655)	$	9	$	2,946
Net income	Net income	—		—		31		—		—		—		31		Net income	—		—		113		—		—		—		113
Other comprehensive income, net	Other comprehensive income, net	—		—		—		52		—		—		52		Other comprehensive income, net	—		—		—		28		—		—		28
Dividends declared ($0.26 per share)		—		—		(47)		—		—		—		(47)
Dividends declared ($0.28 per share)																Dividends declared ($0.28 per share)	—		—		(51)		—		—		—		(51)
Stock incentive plan activity	Stock incentive plan activity	—		8		—		—		—		—		8		Stock incentive plan activity	—		14		—		—		(1)		—		13
Balance at June 30, 2020		$	2	$	2,012	$	1,838	$	(409)	$	(587)	$	9	$	2,865
Balance at June 30, 2021																Balance at June 30, 2021	$	2	$	2,063	$	2,029	$	(398)	$	(656)	$	9	$	3,049

Note 13. Share-Based Compensation Plans

Share-based compensation expense was $9 million and $18 million during the three and six months ended June 30, 2022, respectively, and $8 million and $17 million during the three and six months ended June 30, 2021, ~~respectively, and $8 million and $16 million during the three and six months ended June 30, 2020,~~ respectively. The unrecognized compensation expense related to our stock options, restricted stock units and performance share units was $9 million, ~~$30~~$35 million and ~~$16~~$17 million, respectively, at June 30, ~~2021~~2022 and is expected to be recognized over a weighted average period of 2.0, 2.1 ~~2.0~~ and ~~2.8~~2.4 years, respectively. The amount of cash received from the exercise of stock options was $9$3 million and $5$9 million for the six months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

The following is a summary of the changes in outstanding stock options for the six months ended June 30, ~~2021~~2022:
Share units
(in thousands)
Weighted
Average
Exercise
Price / Share
Weighted Average
Remaining
Contractual
Term (Years)
Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2021 1,961 $ 56.66 6.4
Granted 259 102.31
Exercised (135) 58.39
Forfeited and expired (22) 83.88
Outstanding at June 30, 2021 2,063 $ 61.93 6.3 $ 122
Options exercisable at June 30, 2021 1,409 $ 51.45 5.0 $ 98
Vested and expected to vest as of June 30, 2021 1,987 $ 60.98 6.2 $ 119


	Share units (in thousands)	Weighted Average Exercise Price / Share		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2022	1,827	$	64.12	6.1	102
Granted	306	86.76
Exercised	(58)	48.07
Forfeited and expired	(20)	90.49
Outstanding at June 30, 2022	2,055	$	67.69	6.2	$	32
Options exercisable at June 30, 2022	1,432	$	59.14	5.1	$	30
Vested and expected to vest as of June 30, 2022	1,980	$	66.91	6.1	$	31

The total intrinsic value of options exercised (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) during the six months ended June 30, ~~2021~~2022 was ~~$7.1~~$2.1 million.

Stock Option Fair Value

The fair value of each option grant was estimated on the date of grant using the binomial lattice pricing model which incorporates multiple and variable assumptions over time, including assumptions such as employee exercise patterns, stock price volatility and changes in dividends. The following are weighted-average assumptions for ~~2021~~2022 grants:


Volatility	~~26.30~~26.20		%
Risk-free interest rate	~~0.86~~1.59		%
Dividend yield	~~1.10~~1.38		%
Expected term (in years)	~~5.7~~5.6
Weighted-average fair value / share	$	~~23.20~~19.86

Expected volatility is calculated based on an analysis of historic volatility measures for Xylem. We use historical data to estimate option exercise and employee termination behavior within the valuation model. Employee groups and option characteristics are considered separately for valuation purposes. The expected term represents an estimate of the period of time options are expected to remain outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of option grant.

Restricted Stock Unit Grants

The following is a summary of restricted stock unit activity for the six months ended June 30, ~~2021~~2022. The fair value of the restricted share unit awards is determined using the closing price of our common stock on date of grant:


		Share units (in thousands)	Weighted Average Grant Date Fair Value /Share			Share units (in thousands)	Weighted Average Grant Date Fair Value / Share
Outstanding at January 1, 2021		537	$	74.62
Outstanding at January 1, 2022					Outstanding at January 1, 2022	484	$	88.47
Granted	Granted	213	103.36		Granted	323	86.42
Vested	Vested	(233)	74.47		Vested	(215)	84.40
Forfeited	Forfeited	(15)	85.91		Forfeited	(26)	91.34
Outstanding at June 30, 2021		502	$	86.47
Outstanding at June 30, 2022					Outstanding at June 30, 2022	566	$	88.72

ROIC Performance Share Unit Grants

The following is a summary of Return on Invested Capital ("ROIC") performance share unit grants for the six months ended June 30, ~~2021.~~2022. The fair value of the ROIC performance share units is equal to the closing share price on the date of the grant:


		Share units (in thousands)	Weighted Average Grant Date Fair Value /Share			Share units (in thousands)	Weighted Average Grant Date Fair Value / Share
Outstanding at January 1, 2021		182	$	76.12
Outstanding at January 1, 2022					Outstanding at January 1, 2022	177	$	84.84
Granted	Granted	60	102.30		Granted	35	86.76

Forfeited (a)	Forfeited (a)	(65)	76.04		Forfeited (a)	(59)	75.49
Outstanding at June 30, 2021		177	$	84.66
Outstanding at June 30, 2022					Outstanding at June 30, 2022	153	$	88.89

(a) Includes ROIC performance share unit awards forfeited during the period as a result of the final performance condition not being achieved on vest date.

TSR Performance Share Unit Grants

The following is a summary of our Total Shareholder Return ("TSR") performance share unit grants for the six months ended June 30, ~~2021:~~2022:


		Share units (in thousands)	Weighted Average Grant Date Fair Value /Share			Share units (in thousands)	Weighted Average Grant Date Fair Value / Share
Outstanding at January 1, 2021		182	$	96.98
Outstanding at January 1, 2022					Outstanding at January 1, 2022	177	$	102.96
Granted	Granted	60	117.56		Granted	70	71.14
Adjustment for Market Condition Achieved (a)	Adjustment for Market Condition Achieved (a)	35	98.79		Adjustment for Market Condition Achieved (a)	22	89.62
Vested	Vested	(93)	98.79		Vested	(75)	89.62
Forfeited	Forfeited	(7)	102.66		Forfeited	(7)	87.54
Outstanding at June 30, 2021		177	$	102.86
Outstanding at June 30, 2022					Outstanding at June 30, 2022	187	$	100.64

(a) Represents an increase in the number of original TSR performance share units awarded based on the final market condition achievement at the end of the performance period of such awards.

The fair value of TSR performance share units was calculated on the date of grant using a Monte Carlo simulation model utilizing several key assumptions, including expected Company and peer company share price volatility, correlation coefficients between peers, the risk-free rate of return, the expected dividend yield and other award design features. The following are weighted-average assumptions for ~~2021~~2022 grants:




Volatility	~~33.5~~33.3	%
Risk-free interest rate	~~0.24~~1.44	%

~~ESG~~Revenue Performance Share Unit Grants

~~During the first quarter~~The following is a summary of ~~2021, we issued a special grant of less than 0.1 million ESG~~our Revenue performance share ~~units.~~unit grants for the six months ended June 30, 2022:


	Share units (in thousands)	Weighted Average Grant Date Fair Value / Share
Outstanding at January 1, 2022	—	$	—
Granted	35	86.76


Forfeited	(1)	86.76
Outstanding at June 30, 2022	34	$	86.76

The fair value of the Revenue performance share unit awards is determined using the closing price of our common stock on date of grant. The shares will vest ~~after five years based on our performance against certain~~contingent upon the achievement of ~~the Company's 2025 sustainability goals.~~a pre-set, three-year Revenue target.

Note 14. Capital Stock

For the three and six months ended June 30, 2022, the Company repurchased less than 0.1 million shares of common stock for $0.5 million and approximately 0.6 million shares of common stock for $52 million, respectively. For the three and six months ended June 30, 2021, the Company repurchased less than 0.1 million shares of common stock for $1 million and approximately 0.7 million shares of common stock for $68 million, respectively. For the three and six months ended June 30, 2020, the Company repurchased less than 0.1 million shares of common stock for less than $1 million and approximately 0.8 million shares of common stock for $60 million, respectively.respectively Repurchases include both share repurchase programs approved by the Board of Directors and

repurchases in relation to settlement of employee tax withholding obligations due as a result of the vesting of restricted stock units. The details of repurchases by each program are as follows:

On August 24, 2015, our Board of Directors authorized the repurchase of up to $500 million in shares with no expiration date. The program's objective is to deploy our capital in a manner that benefits our ~~shareholders~~stockholders and maintains our focus on growth. There were 0no shares repurchased under the program for the three months ended June 30, 2022. For the six months ended June 30, 2022, we repurchased 0.5 million shares for approximately $46 million. There were no shares repurchased under the program for the three months ended June 30, 2021. For the six months ended June 30, 2021, we repurchased ~~approximately~~ 0.6 million shares for ~~$60 million. There were no shares repurchased under the program for the three months ended June 30, 2020. For the six months ended June 30, 2020, we repurchased~~ approximately ~~0.7 million shares for $50~~$60 million. There are up to ~~$228~~$182 million in shares that may still be purchased under this plan as of June 30, ~~2021.~~2022.

Aside from the aforementioned repurchase program, we repurchased less than 0.1 million shares and approximately 0.1 million shares for less than $1 million and $8approximately $6 million for the three and six months ended June 30, ~~2021,~~2022, respectively, in relation to settlement of employee tax withholding obligations due as a result of the vesting of restricted stock units. Likewise, we repurchased less than 0.1 million shares and approximately 0.1 million shares for ~~less than~~ $1 million and ~~$10~~$8 million for the three and six months ended June 30, ~~2020,~~2021, respectively.

Note 15. Accumulated Other Comprehensive Loss

The following table provides the components of Accumulated other comprehensive loss for the six months ended June 30, 2022:


(in millions)	Foreign Currency Translation		Post-retirement Benefit Plans		Derivative Instruments		Total
Balance at January 1, 2022	$	(101)	$	(268)	$	(2)	$	(371)
Foreign currency translation adjustment	(3)		—		—		(3)
Tax on foreign currency translation adjustment	(2)		—		—		(2)


Amortization of prior service cost and net actuarial loss on post-retirement benefit plans into other non-operating income (expense), net	—		4		—		4





Income tax impact on amortization of post-retirement benefit plan items	—		(1)		—		(1)
Unrealized loss on derivative hedge agreements	—		—		(6)		(6)



Reclassification of unrealized gain on foreign exchange agreements into revenue	—		—		2		2



Balance at March 31, 2022	$	(106)	$	(265)	$	(6)	$	(377)
Foreign currency translation adjustment	(41)		—		—		(41)
Tax on foreign currency translation adjustment	(28)		—		—		(28)


Amortization of prior service cost and net actuarial loss on post-retirement benefit plans into other non-operating income (expense), net	—		4		—		4
Income tax impact on amortization of post-retirement benefit plan items	—		(1)		—		(1)





Unrealized gain on derivative hedge agreements	—		—		(9)		(9)
Income tax benefit on unrealized gain on derivative hedge agreements	—		—		1		1
Reclassification of unrealized loss on foreign exchange agreements into revenue	—		—		2		2
Reclassification of unrealized loss on foreign exchange agreements into cost of revenue	—		—		1		1

Balance at June 30, 2022	$	(175)	$	(262)	$	(11)	$	(448)

The following table provides the components of accumulated other comprehensive loss for the six months ended June 30, 2021:


(in millions)	Foreign Currency Translation		Post-retirement Benefit Plans		Derivative Instruments		Total
Balance at January 1, 2021	$	(86)	$	(330)	$	3	$	(413)

Foreign currency translation adjustment	10		—		—		10
Tax on foreign currency translation adjustment	(14)		—		—		(14)


Amortization of prior service cost and net actuarial loss on post-retirement benefit plans into other non-operating income (expense), net	—		5		—		5


Income tax impact on amortization of post-retirement benefit plan items	—		(1)		—		(1)
Unrealized loss on derivative hedge agreements	—		—		(11)		(11)
Income tax benefit on unrealized loss on derivative hedge agreements	—		—		1		1

Reclassification of unrealized gain on foreign exchange agreements into revenue	—		—		(2)		(2)
Reclassification of unrealized gain on foreign exchange agreements into cost of revenue	—		—		(1)		(1)


Balance at March 31, 2021	$	(90)	$	(326)	$	(10)	$	(426)

Foreign currency translation adjustment	19		—		—		19
Tax on foreign currency translation adjustment	1		—		—		1

Amortization of prior service cost and net actuarial loss on post-retirement benefit plans into other non-operating income (expense), net	—		5		—		5

Income tax impact on amortization of post-retirement benefit plan items	—		(2)		—		(2)
Unrealized gain on derivative hedge agreements	—		—		4		4

Reclassification of unrealized loss on foreign exchange agreements into revenue	—		—		1		1

Balance at June 30, 2021	$	(70)	$	(323)	$	(5)	$	(398)

~~The following table provides the components of accumulated other comprehensive loss for the six months ended June 30, 2020:~~
(in millions) Foreign Currency Translation Post-retirement Benefit Plans Derivative Instruments Total
Balance at January 1, 2020 $ (103) $ (269) $ (3) $ (375)
Foreign currency translation adjustment (77) — — (77)
Tax on foreign currency translation adjustment (13) — — (13)
Amortization of prior service cost and net actuarial loss on post-retirement benefit plans into other non-operating income (expense), net — 4 — 4
Income tax impact on amortization of post-retirement benefit plan items — (1) — (1)
Unrealized loss on derivative hedge agreements — — (2) (2)
Reclassification of unrealized loss on foreign exchange agreements into revenue — — 2 2
Reclassification of unrealized loss on foreign exchange agreements into cost of revenue — — 1 1
Balance at March 31, 2020 $ (193) $ (266) $ (2) $ (461)
Foreign currency translation adjustment 35 — — 35
Tax on foreign currency translation adjustment 9 — — 9
Amortization of prior service cost and net actuarial loss on post-retirement benefit plans into other non-operating income (expense), net — 4 — 4
Income tax impact on amortization of post-retirement benefit plan items — (1) — (1)
Unrealized gain on derivative hedge agreements — — 6 6
Income tax benefit on unrealized gain on derivative hedge agreements — — (1) (1)
Reclassification of unrealized gain on foreign exchange agreements into revenue — — (1) (1)
Reclassification of unrealized loss on foreign exchange agreements into cost of revenue — — 1 1
Balance at June 30, 2020 $ (149) $ (263) $ 3 $ (409)

Note 16. Commitments and Contingencies

From time to time, we are involved in legal and regulatory proceedings that are incidental to the operation of our businesses (or the business operations of previously-owned entities). These proceedings may seek remedies relating to matters including environmental, tax, intellectual property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pension, government contract issues and commercial or contractual disputes.

From time to time, claims may be asserted against Xylem alleging injury caused by any of our products resulting from asbestos exposure. We believe there are numerous legal defenses available for such claims and would defend ourselves vigorously. Pursuant to the Distribution Agreement among ITT Corporation (now ITT LLC; acquired by Delticus HoldCo, L.P., a portfolio company of Warburg Pincus LLC, on July 1, 2021), Exelis (acquired by Harris Corporation, now L3Harris Technologies, Inc.) and Xylem, ITT LLC has an obligation to indemnify, defend and hold Xylem harmless for asbestos product liability matters, including settlements, judgments, and legal defense costs associated with all pending and future claims that may arise from past sales of ITT’s legacy products. We believe ITT LLC remains a substantial entity with sufficient financial resources to honor its obligations to us.

See Note 4, "Income Taxes", of our condensed consolidated financial statements for a description of a pending tax litigation matter.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claims, we do not believe it is reasonably possible that any asserted or unasserted legal claims or proceedings, individually or in aggregate, will have a material adverse effect on our results of operations, or financial condition. We have estimated and accrued ~~$5 million~~ ~~and $6~~$4 million as of June 30, ~~2021~~2022 and December 31, ~~2020, respectively,~~2021 for these general legal matters.

~~Indemnifications~~

As part of our 2011 spin-off from our former parent, ITT Corporation (now ITT LLC; acquired by Delticus HoldCo, L.P., a portfolio company of Warburg Pincus LLC, on July 1, 2021), Exelis Inc. (acquired by Harris Corporation, now L3Harris Technologies, Inc.) and Xylem will indemnify, defend and hold harmless each of the other parties with respect to such parties’ assumed or retained liabilities under the Distribution Agreement and breaches of the Distribution Agreement or related spin agreements. ITT LLC's indemnification obligations include asserted and unasserted asbestos and silica liability claims that relate to the presence or alleged presence of asbestos or silica in products manufactured, repaired or sold prior to October 31, 2011, the Distribution Date, subject to limited exceptions with respect to certain employee claims, or in the structure or material of any building or facility, subject to exceptions with respect to employee claims relating to Xylem buildings or facilities. The indemnification associated with pending and future asbestos claims does not expire. Xylem has not recorded a liability for material matters for which we expect to be indemnified by the former parent or Exelis Inc. through the Distribution Agreement and we are not aware of any claims or other circumstances that would give rise to material payments from us under such indemnifications.

Guarantees

We obtain certain stand-by letters of credit, bank guarantees, surety bonds and insurance letters of credit from third-party financial institutions in the ordinary course of business when required under contracts or to satisfy insurance-related requirements. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the amount of surety bonds, bank guarantees, insurance letters of credit, ~~and~~ stand-by letters of credit as well as revenue and customs guarantees was ~~$410~~$447 million and ~~$378~~$415 million, respectively.

Environmental

In the ordinary course of business, we are subject to federal, state, local, and foreign environmental laws and regulations. We are responsible, or are alleged to be responsible, for ongoing environmental investigation and remediation of sites in various countries. These sites are in various stages of investigation and/or remediation and in many of these proceedings our liability is considered de minimis. We have received notification from the U.S. Environmental Protection Agency, and from similar state and foreign environmental agencies, that a number of sites formerly or currently owned and/or operated by Xylem or for which we are responsible, ~~under the Distribution Agreement,~~ and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites include instances where we have been identified as a potentially responsible party under federal and state environmental laws and regulations.

Accruals for environmental matters are recorded on a site-by-site basis when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. Our accrued liabilities for these environmental matters represent our best estimates related to the investigation and remediation of environmental media such as water, soil, soil vapor, air and structures, as well as related legal fees. These estimates, and related accruals, are reviewed quarterly and updated for progress of investigation and remediation efforts and changes in facts and legal circumstances. Liabilities for these environmental expenditures are recorded on an undiscounted basis. We have estimated and accrued $4 millionand$3 million as of ~~both~~ June 30, ~~2021~~2022 and December 31, ~~2020~~2021 for environmental matters.

It is difficult to estimate the final costs of investigation and remediation due to various factors, including incomplete information regarding particular sites and other potentially responsible parties, uncertainty regarding the extent of investigation or remediation and our share, if any, of liability for such conditions, the selection of alternative remedial approaches, and changes in environmental standards and regulatory requirements. We believe the total amount accrued is reasonable based on existing facts and circumstances.

Warranties

We warrant numerous products, the terms of which vary widely. In general, we warrant products against defect and specific non-performance. The table below provides changes in the combined current and non-current product warranty accruals over each period:


(in millions)	(in millions)	2021		2020		(in millions)	2022		2021
Warranty accrual – January 1	Warranty accrual – January 1	$	65	$	41	Warranty accrual – January 1	$	57	$	65
Net charges for product warranties in the period	Net charges for product warranties in the period	17		34		Net charges for product warranties in the period	11		17
Settlement of warranty claims	Settlement of warranty claims	(18)		(15)		Settlement of warranty claims	(12)		(18)
Foreign currency and other	Foreign currency and other	(1)		0		Foreign currency and other	(2)		(1)
Warranty accrual - June 30	Warranty accrual - June 30	$	63	$	60	Warranty accrual - June 30	$	54	$	63

Note 17. Segment Information

Our business has 3 reportable segments: Water Infrastructure, Applied Water and Measurement & Control Solutions. The Water Infrastructure segment focuses on the transportation and treatment of water, offering a range of products including water, wastewater and storm water pumps, treatment equipment, and controls and systems. The Applied Water segment serves many of the primary uses of water and focuses on the residential, commercial and industrial markets. The Applied Water segment's major products include pumps, valves, heat exchangers, controls and dispensing equipment. The Measurement & Control Solutions segment focuses on developing advanced technology solutions that enable intelligent use and conservation of critical water and energy resources as well as analytical instrumentation used in the testing of water. The Measurement & Control Solutions segment's major products include smart metering, networked communications, measurement and control technologies, critical infrastructure technologies, software and services including cloud-based analytics, remote monitoring and data management, leak detection and pressure monitoring solutions and testing equipment.

Additionally, we have Regional selling locations, which consist primarily of selling and marketing organizations and related support services, that offer products and services across our reportable segments. Corporate and other consists of corporate office expenses including compensation, benefits, occupancy, depreciation, and other administrative costs, as well as charges related to certain matters, such as environmental matters, that are managed at a corporate level and are not included in the business segments in evaluating performance or allocating resources.

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The accounting policies of each segment are the same as those described in the ~~summary~~Summary of ~~significant accounting policies (see~~Significant Accounting Policies section of Note 1 in the ~~2020~~2021 Annual ~~Report).~~Report. The following table contains financial information for each reportable segment:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Water Infrastructure	Water Infrastructure	$	569	$	501	$	1,078	$	939	Water Infrastructure	$	589	$	569	$	1,122	$	1,078
Applied Water	Applied Water	414		337		807		675		Applied Water	429		414		854		807
Measurement & Control Solutions	Measurement & Control Solutions	368		322		722		669		Measurement & Control Solutions	346		368		660		722
Total	Total	$	1,351	$	1,160	$	2,607	$	2,283	Total	$	1,364	$	1,351	$	2,636	$	2,607
Operating Income (Loss):	Operating Income (Loss):									Operating Income (Loss):
Water Infrastructure	Water Infrastructure	$	93	$	73	$	164	$	112	Water Infrastructure	$	108	$	93	$	182	$	164
Applied Water	Applied Water	64		41		130		88		Applied Water	61		64		120		130
Measurement & Control Solutions	Measurement & Control Solutions	13		(46)		22		(58)		Measurement & Control Solutions	(5)		13		(15)		22
Corporate and other	Corporate and other	(10)		(14)		(23)		(27)		Corporate and other	(18)		(10)		(30)		(23)
Total operating income	Total operating income	$	160	$	54	$	293	$	115	Total operating income	$	146	$	160	$	257	$	293
Interest expense	Interest expense	$	21	$	18	$	42	$	34	Interest expense	$	12	$	21	$	25	$	42
Other non-operating income (expense), net		(3)		(1)		(1)		(4)
Other non-operating income, net										Other non-operating income, net	2		(3)		1		(1)
Gain from sale of business	Gain from sale of business	2		0		2		0		Gain from sale of business	—		2		1		2
Income before taxes	Income before taxes	$	138	$	35	$	252	$	77	Income before taxes	$	136	$	138	$	234	$	252
Depreciation and Amortization:	Depreciation and Amortization:									Depreciation and Amortization:
Water Infrastructure	Water Infrastructure	$	13	$	16	$	26	$	31	Water Infrastructure	$	14	$	13	$	27	$	26
Applied Water	Applied Water	6		5		12		11		Applied Water	5		6		10		12
Measurement & Control Solutions	Measurement & Control Solutions	37		34		73		70		Measurement & Control Solutions	34		37		68		73
Regional selling locations (a)	Regional selling locations (a)	4		7		9		11		Regional selling locations (a)	4		4		9		9
Corporate and other	Corporate and other	2		0		4		3		Corporate and other	2		2		4		4
Total	Total	$	62	$	62	$	124	$	126	Total	$	59	$	62	$	118	$	124
Capital Expenditures:	Capital Expenditures:									Capital Expenditures:
Water Infrastructure	Water Infrastructure	$	13	$	8	$	24	$	18	Water Infrastructure	$	13	$	13	$	30	$	24
Applied Water	Applied Water	3		3		7		12		Applied Water	5		3		8		7
Measurement & Control Solutions	Measurement & Control Solutions	20		24		41		51		Measurement & Control Solutions	21		20		43		41
Regional selling locations (b)	Regional selling locations (b)	5		8		8		12		Regional selling locations (b)	5		5		10		8
Corporate and other	Corporate and other	0		1		0		2		Corporate and other	2		—		4		—
Total	Total	$	41	$	44	$	80	$	95	Total	$	46	$	41	$	95	$	80

(a)Depreciation and amortization expense incurred by the Regional selling locations was included in an overall allocation of Regional selling location costs to the segments; however, a certain portion of that expense was not specifically identified to a segment. That expense is captured in this Regional selling location line.

(b)Represents capital expenditures incurred by the Regional selling locations not allocated to the segments.

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ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements, including the notes, included elsewhere in this report on Form 10-Q (this "Report").

This Report contains “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” "contemplate," "predict," ~~“project,”~~ “forecast,” “likely,” “believe,” “target,” “will,” “could,” “would,” “should,” "potential," "may" and similar expressions or their negative, may, but are not necessary to, identify forward-looking statements. By their nature, forward-looking statements address uncertain matters and include any statements that are not historical, such as statements about our strategy, financial plans, outlook, objectives, plans, intentions or ~~goals;~~goals (including those related to our social, environmental and other sustainability goals); or address possible or future results of operations or financial performance, including statements relating to orders, revenues, operating margins and earnings per share growth.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by impacts from the war between Russia and Ukraine, as well as the ongoing coronavirus (“COVID-19”) ~~pandemic.~~pandemic and related macroeconomic conditions (including inflation). Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include, among others, the following: the impact of overall industry and general economic conditions, including industrial, governmental, and public and private sector spending and the strength of the residential and commercial real estate ~~markets;~~markets, on economic activity and our operations; geopolitical events, including the war between Russia and Ukraine, and regulatory, economic and other risks associated with ~~international operations;~~our global sales and operations, including with respect to domestic content requirements applicable to projects with governmental funding; continued uncertainty around the ongoing COVID-19 pandemic’s magnitude, duration and impacts on our business, operations, growth, and financial ~~condition, as well as uncertainty around approved vaccines and the pace of recovery when the pandemic subsides;~~condition; actual or potential other epidemics, pandemics or global health crises; availability, shortage or delays in receiving electronic components (in particular, semiconductors), parts, and raw materials from our supply chain; manufacturing and operating cost increases due to macroeconomic conditions, including inflation, supply chain shortages, logistics challenges, tight labor markets, prevailing price changes, tariffs and other factors; ~~fluctuations in foreign currency exchange rates;~~demand for our products; disruption, competition ~~and~~or pricing pressures in the markets we serve; cybersecurity incidents or other disruptions of information technology systems on which we rely, or involving our products; disruptions in operations at our facilities or that of third parties upon which we rely; ~~availability of products, parts, electronic components and raw materials from our supply chain; availability, regulation and interference with radio spectrum used by some of our products; our~~ ability to retain and attract senior management and other diverse and key ~~talent;~~talent, as well as competition for overall talent and labor; difficulty predicting our financial results; defects, security, warranty and liability claims, and recalls with respect to products; availability, regulation or interference with radio spectrum used by certain of our products; uncertainty related to restructuring and realignment actions and related charges and savings; our ability to continue strategic investments for growth; our ability to successfully identify, execute and integrate acquisitions; risks relating to products, including defects, security, warranty and liability claims, and recalls; difficulty predicting our financial results, including uncertainties due to the nature of our short- and long-cycle businesses; volatility in ~~our results~~served markets or impacts on business and operations due to weather ~~conditions;~~conditions, including the effects of climate change; fluctuations in foreign currency exchange rates; our ability to borrow or refinance our existing indebtedness and uncertainty around the availability of liquidity sufficient to meet our needs; risk of future impairments to goodwill and other intangible assets; failure to comply with, or changes in, laws or regulations, including those pertaining to anti-corruption, data privacy and security, export and import, competition, and the environment and climate change; changes in our effective tax rates or tax expenses; legal, governmental or regulatory claims, investigations or proceedings and associated contingent liabilities; and other factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 ("~~2020~~2021 Annual Report") and in subsequent filings we make with the Securities and Exchange Commission (“SEC”).

Forward-looking and other statements in this Report regarding our environmental and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or are required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking social, environmental and sustainability related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. All forward-looking statements made herein are based on information currently available to us as of the date of this Report. We undertake 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.

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Overview

Xylem is a leading global water technology company. We design, manufacture and service highly engineered products and solutions ranging across a wide variety of critical applications in utility, industrial, residential and commercial building services settings. Our broad portfolio of solutions addresses customer needs across the water cycle, from the delivery, measurement and use of drinking water to the collection, test, treatment and analysis of wastewater to the return of water to the environment. Our product and service offerings are organized into three reportable segments that are aligned around the critical market applications they provide: Water Infrastructure, Applied Water and Measurement & Control Solutions.

•Water Infrastructure serves the water infrastructure sector with pump systems that transport water from aquifers, lakes, rivers and seas; with filtration, ultraviolet and ozone systems that provide treatment, making the water fit to use; and pumping solutions that move the wastewater and storm water to treatment facilities where our mixers, biological treatment, monitoring and control systems provide the primary functions in the treatment process. We also provide sales and rental of specialty dewatering pumps and related equipment and services. Additionally, our offerings use monitoring and control, smart and connected technologies to allow for remote monitoring of performance and enable products to self-optimize pump operations maximizing energy efficiency and minimizing unplanned downtime and maintenance for our customers. In the Water Infrastructure segment, we provide the majority of our sales directly to customers along with strong applications expertise, while the remaining amount is through distribution partners.

•Applied Water serves the water usage applications sector with water pressure boosting systems for heating, ventilation and air conditioning, and for fire protection systems to the residential and commercial building services markets. In addition, our pumps, heat exchangers and controls provide cooling to power plants and manufacturing facilities, circulation for food and beverage processing, as well as boosting systems for agricultural irrigation. In the Applied Water segment, we provide the majority of our sales through long-standing relationships with many of the leading independent distributors in the markets we serve, with the remainder going directly to customers.

•Measurement & Control Solutions primarily serves the utility infrastructure solutions and services sector by delivering communications, smart metering, measurement and control technologies and critical infrastructure technologies that allow customers to more effectively use their distribution networks for the delivery, monitoring and control of critical resources such as water, electricity and natural gas. We also provide analytical instrumentation used to measure and analyze water quality, flow and level in clean water, wastewater, surface water and coastal environments. Additionally, we offer software and services including cloud-based analytics, remote monitoring and data management, leak detection, condition assessment, asset management and pressure monitoring solutions. In the Measurement & Control Solutions segment, we generate our sales through a combination of long-standing relationships with leading distributors and dedicated channel partners, as well as direct sales depending on the regional availability of distribution channels and the type of product.

COVID-19 Pandemic Update and Related Macroeconomic Impacts

~~Depending on~~Given the ~~severity,~~ magnitude and duration of the COVID-19 pandemic and its prolonged economic consequences, ~~we anticipate that~~ it ~~will~~has become more difficult to distinguish specific aspects of our operational and financial performance that are most directly related to the pandemic from those more broadly influenced by ongoing macroeconomic, market and industry dynamics that may be, to varying degrees, related to the pandemic and its consequences.

~~The COVID-19 pandemic as well as broader market dynamics~~

Our markets and operations have ~~adversely affected, and are expected to continue to adversely affect, our supply chains. We~~largely demonstrated resilience against the effects of the pandemic. However, we have experienced, and ~~expect~~may continue to ~~continue experiencing,~~experience, shortages in the supply of components, including electronics, particularly semiconductors ("chips"), parts and raw ~~materials,~~materials. For example, China has adopted and continues to rely upon a “zero-COVID” policy pursuant to which it has declared a number of total and partial lockdowns in some cases, unpredictable interruptions with our external suppliers in 2021. We have also experienced increased logistics costs related to the current global capacity shortages. We continue to enhance our supplier pulsing and redundancy to help mitigate these challenges. Additionally, we have in the pastcities throughout China that has, and may continue to ~~take~~adversely affect the global supply chain. As a result of these measures, ~~with respect~~our production facilities located in China have experienced, and may continue to ~~buffer stock or use of alternative suppliers to mitigate~~experience in the impacts of freight and logistics delays and bolster our access to raw materials and components. If these shortages and interruptions are sustained, or if additional interruptions occur, they could have a negative impact on our results of operations. Our current overall operating capacity approximates normal levels globally.future, reduced production levels.

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~~Xylem Watermark,~~To counteract the ongoing impacts on our ~~corporate social responsibility program, continues~~supply chain, we are taking various actions, including building inventory to support backlog execution, qualifying alternative supply chains and redesigning our ~~communities~~products. We expect chip supply to modestly improve in ~~addressing the challenges posed by this global pandemic through its partnership with Americares~~each successive quarter in 2022.

We have also experienced, and ~~UNICEF, as well as the Partner Community Grants program~~continue to experience, increased inflation, freight and ~~matching donations program for employees~~logistics costs, and ~~partners, and other philanthropic commitments.~~are engaging in various mitigation strategies, including enhanced price realization efforts.

Xylem continues to focus on the health and safety of our employees, working with our customers to help them minimize potential disruptions and positively impact our communities. Our support pay program for employees impacted by COVID-19 will remain in place into the fourth quarter of 2021 and is evaluated for continuation, as necessary.

Many of our offices globally remain in a substantially remote work from home status and our COVID-19 Response Team applies a set of Xylem "Return to Workplace" health and safety guidelines for remote workers to return to our facilities.

We continue to assess the evolving nature of the pandemic and ~~its possible implications to~~related macroeconomic impacts on our business, employees, supply chain, customers and communities, and to take appropriate actions in an effort to mitigate adverse consequences.

Risk related to the ~~impact of COVID-19 as well as our~~pandemic, supply chain and macroeconomic issues, including inflation, are described in further detail under "Item 1A. Risk Factors" in the Company's ~~2020~~2021 Annual Report.

Executive Summary

Xylem reported revenue for the second quarter of ~~2021~~2022 of ~~$1,351~~$1,364 million, an increase of ~~16.5%~~1.0% compared to ~~$1,160~~$1,351 million reported in the second quarter of ~~2020.~~2021. On a constant currency basis, revenue increased by ~~$125~~$73 million, or ~~10.8%~~5.4%, driven by organic revenue growth ~~across all~~in the Applied Water and Water Infrastructure segments, partially offset by organic declines in Measurement & Control Solutions. These results were driven by organic growth in the industrial, residential and utilities end markets, partially offset by organic declines in ~~all end markets.~~commercial.

We generated operating income of ~~$160~~$146 million (margin of ~~11.8%~~10.7%) during the second quarter of ~~2021,~~2022, as compared to ~~$54~~$160 million (margin of ~~4.7%~~11.8%) in ~~2020.~~2021. Operating income in the second quarter of ~~2021 benefited~~2022 included an unfavorable impact from ~~a decrease in~~increased restructuring and realignment costs of ~~$37~~$2 million as compared to the second quarter of ~~2020 and~~2021, as well as an increase in special charges of ~~$11 million incurred during 2020 that did not recur.~~$1 million. Excluding the impact of these items, adjusted operating income was $155 million (adjusted margin of 11.4%) during the second quarter of 2022 as compared to $166 million (adjusted margin of 12.3%) ~~during the second quarter of 2021 as compared to $108 million (adjusted margin of 9.3%)~~ in ~~2020.~~2021. The ~~increase~~decrease in adjusted operating margin was primarily due to cost ~~reductions from our productivity, restructuring~~inflation, increased spending on strategic investments and ~~other cost saving initiatives and favorable volume, impacted by COVID-19 recovery.~~some unfavorable mix. These impacts were partially offset by ~~cost inflation~~strong price realization and ~~increased spending on strategic investments.~~productivity savings.

Additional financial highlights for the quarter ended June 30, ~~2021~~2022 include the following:

•Orders of ~~$1,660~~$1,684 million, up ~~34.7%~~1.4% from ~~$1,232~~$1,660 million in the prior year, and up ~~28.8%~~5.8% on an organic basis.

•Earnings per share of $0.62, ~~up 264.7% when~~flat compared to ~~the~~ prior year ($0.66, ~~up 65.0%~~flat versus prior year, on an adjusted basis).

•Net income as a percent of revenue of ~~8.4%~~8.2%, ~~up 570~~down 20 basis points compared to ~~2.7%~~8.4% in the prior year. EBITDA margin of ~~16.2%~~15.1%, ~~up 650~~down 110 basis points when compared to ~~9.7%~~16.2% in the prior year ~~(17.3%, up 200 basis points~~(16.6% on an adjusted ~~basis)~~basis, down 70 basis points)

•Net cash flow ~~provided by~~used in operating activities of ~~$206~~$32 million for the six months ended June 30, ~~2021, an increase~~2022, a decrease of ~~$27~~$174 million ~~from cash provided in~~during the same period of the prior year. ~~Free~~Negative free cash flow ~~was $126~~of $63 million, ~~up $42~~down $189 million from the prior year.

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Key Performance Indicators and Non-GAAP Measures

Management reviews key performance indicators including revenue, gross margins, segment operating income and operating income margins, free cash flow, orders growth, working capital and backlog, among others. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and to 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, including, but not limited to, dividends, acquisitions, share repurchases and debt repayment. Excluding revenue, Xylem provides guidance only on a non-GAAP basis due to the inherent difficulty in forecasting certain amounts that would be included in GAAP earnings, such as discrete tax items, without unreasonable effort. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. 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 operating activities as determined in accordance with GAAP. We consider the following ~~items to represent the~~ non-GAAP measures ~~we consider~~ to be key performance indicators, as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures may not be comparable to similarly-titled measures reported by other companies.

•"organic revenue" and "organic orders" defined as revenue and orders, respectively, excluding the impact of fluctuations in foreign currency translation and contributions from acquisitions and divestitures. Divestitures include sales or discontinuance of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. The period-over-period change resulting from foreign currency translation impacts is determined by translating current period and prior period activity using the same currency conversion rate.

•"constant currency" defined as financial results adjusted for foreign 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.

•"adjusted net income" and "adjusted earnings per share" defined as net income and earnings per share, respectively, adjusted to exclude restructuring and realignment costs, special charges, gain or loss from sale of businesses and tax-related special items, as applicable. A reconciliation of adjusted net income and adjusted earnings per share is provided below.


		Three Months Ended								Six Months Ended									Three Months Ended								Six Months Ended
		June 30,								June 30,									June 30,								June 30,
(In millions, except for per share data)	(In millions, except for per share data)	2021				2020				2021				2020				(In millions, except for per share data)	2022				2021				2022				2021
Net income & Earnings per share	Net income & Earnings per share	$	113	$	0.62	$	31	$	0.17	$	200	$	1.10	$	69	$	0.38	Net income & Earnings per share	$	112	$	0.62	$	113	$	0.62	$	194	$	1.07	$	200	$	1.10
Restructuring and realignment, net of tax of $1 and $3 for 2021 and $10 and $12 for 2020		5		0.03		33		0.18		11		0.06		40		0.22

Special charges, net of tax of $1 and $1 for 2021 and $3 and $3 for 2020		2		0.01		10		0.06		5		0.03		11		0.06
Restructuring and realignment, net of tax of $2 and $3 for 2022 and $1 and $3 for 2021																		Restructuring and realignment, net of tax of $2 and $3 for 2022 and $1 and $3 for 2021	6		0.03		5		0.03		9		0.06		11		0.06
Special charges, net of tax of $0 and $1 for 2022 and $1 and $1 for 2021																		Special charges, net of tax of $0 and $1 for 2022 and $1 and $1 for 2021	3		0.02		2		0.01		4		0.02		5		0.03
Tax-related special items	Tax-related special items	1		0.01		(1)		(0.01)		7		0.04		(5)		(0.03)		Tax-related special items	(1)		(0.01)		1		0.01		(2)		(0.01)		7		0.04
Gain from sale of business, net of tax of $0 for 2021		(2)		(0.01)		—		—		(2)		—		—		—
Gain from sale of business, net of tax of $0 for 2022																		Gain from sale of business, net of tax of $0 for 2022	—		—		(2)		(0.01)		(1)		(0.01)		(2)		—
Adjusted net income & Adjusted earnings per share	Adjusted net income & Adjusted earnings per share	$	119	$	0.66	$	73	$	0.40	$	221	$	1.23	$	115	$	0.63	Adjusted net income & Adjusted earnings per share	$	120	$	0.66	$	119	$	0.66	$	204	$	1.13	$	221	$	1.23

•"adjusted operating expenses" and "adjusted gross profit" defined as operating expenses and gross profit, respectively, adjusted to exclude restructuring and realignment costs and special charges.

•"adjusted operating income" defined as operating income, adjusted to exclude restructuring and realignment costs and special charges, and "adjusted operating margin" defined as adjusted operating income divided by total revenue.

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•“EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense "EBITDA margin" defined as EBITDA divided by total revenue, "adjusted EBITDA" reflects the adjustment to EBITDA to exclude share-based compensation charges, restructuring and realignment costs, special charges and gain or loss from sale of businesses, and "adjusted EBITDA margin" defined as adjusted EBITDA divided by total revenue.
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2021 2020 2021 2020
Net Income $ 113 $ 31 $ 200 $ 69
Income tax expense 25 4 52 8
Interest expense, net 19 16 38 30
Depreciation 29 29 59 58
Amortization 33 33 65 68
EBITDA $ 219 $ 113 $ 414 $ 233
EBITDA Margin 16.2 % 9.7 % 15.9 % 10.2 %
Share-based compensation $ 8 $ 8 $ 17 $ 16
Restructuring and realignment 6 43 14 52
Special charges 3 13 6 14
Gain from sale of business (2) — (2) —
Adjusted EBITDA $ 234 $ 177 $ 449 $ 315
Adjusted EBITDA Margin 17.3 % 15.3 % 17.2 % 13.8 %

•“realignment costs” defined as costs not included in restructuring costs that are incurred as part of actions taken to reposition our business, including items such as professional fees, severance, relocation, travel, facility set-up and other costs.

•“special charges" defined as costs incurred by the Company, such as acquisition and integration related costs, non-cash impairment charges and both operating and non-operating adjustments for costs related to the UK pension ~~costs.~~plan buy-out.

•"tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, excess tax benefits/losses and other discrete tax adjustments.

•"free cash flow" defined as net cash from operating activities, as reported in the Condensed Consolidated Statement of Cash Flows, less capital expenditures. Our definition of "free cash flow" does not consider certain non-discretionary cash payments, such as debt. The following table provides a reconciliation of free cash flow.
Six Months Ended
June 30,
(In millions) 2021 2020
Net cash provided by operating activities $ 206 $ 179
Capital expenditures (80) (95)
Free cash flow $ 126 $ 84
Net cash used by investing activities $ (69) $ (88)
Net cash (used) provided by financing activities $ (162) $ 774


	Six Months Ended
	June 30,
(In millions)	2022		2021
Net cash provided by operating activities	$	32	$	206
Capital expenditures	(95)		(80)
Free cash flow	$	(63)	$	126
Net cash used in investing activities	$	(84)	$	(69)
Net cash used in financing activities	$	(158)	$	(162)

3335

~~2021~~2022 Outlook

We ~~anticipate~~are updating our total revenue growth to be in the range of 8%3% to ~~10%~~5% in ~~2021,~~2022, with organic revenue growth anticipated to be in the range of 6%8% to 8%10%. The following is a summary of our organic revenue outlook by end markets:

•Utilities revenue ~~increased by approximately 5% organically~~was flat through the first half of the year on an organic basis driven by strength in western Europe and ~~the emerging markets, partially~~tempered growth in North America offset by weakness in ~~North America.~~the emerging markets. For ~~2021,~~2022, we expect organic revenue growth in the ~~mid to high-single-digit~~mid-single-digit range, ~~with continued resilience on the wastewater side,~~ as utilities remain focused on mission-critical applications in wastewater and ~~anticipate modest~~operational activity and demand continues to be healthy and resilient. We expect uneven growth ~~on a global basis through~~from China and India as multi-year government funding programs are deployed. On the ~~year. The~~clean water side, the timing of large ~~clean water utility~~ project deployments has been impacted by the global shortage of electronic ~~components, which we expect to continue throughout the remainder of 2021.~~components. We anticipate that with modest easing of chip shortages, these deployments will ramp up ~~when supply constraints ease~~ based on our strong backlog position and orders momentum. Additionally, we can expect ~~healthy~~continued momentum in the global test and treatment markets ~~globally~~ and ~~increased~~rising demand, ~~for our smart water solution~~ and ~~digital offerings.~~focus on pipeline assessment services.

•Industrial revenue increased by approximately ~~15% organically~~11% through the first half of the year on an organic basis driven by strength across all major geographic regions. For ~~2021,~~2022, we expect organic revenue growth in the high-single-digit to low-double-digit range ~~as activity across all segments rebounds globally and~~based on steady global demand. We continue to see robust growth in our dewatering business, ~~continues to recover,~~ especially in the emerging ~~markets, as demand increases and site access restrictions continue to ease. We anticipate growth in during~~markets. In the ~~second half of the year led by North America, with growth in emerging markets~~U.S. and western Europe, ~~as well.~~we expect sustained demand in light industrial activity reflecting our strong orders and backlog, and considerable traction from new product introductions and large account activity in western Europe.

•In the commercial markets, organic revenue ~~growth was approximately 8% through~~for the first half of the year increased by approximately 4% driven by ~~strength in~~ western Europe ~~North America~~ and the ~~emerging markets.~~U.S. For ~~2021,~~2022, we expect organic revenue growth in the ~~mid~~mid-single to ~~high-single-digit~~high-single digit range. We expect solid replacement business and new product introductions in the U.S. ~~to be stable during the year~~ and ~~anticipate continued healthy activity~~Europe. We also expect modest share gains, with demand for eco-friendly products supported by increase in funding for green buildings in Europe. ~~We expect new construction activity in North America to be soft, however we are optimistic that conditions will begin to recover late in the year.~~

•In the residential markets, organic revenue ~~growth was~~increased by approximately ~~30%~~14% through the first half of the year driven by strength in the ~~emerging markets, North America~~U.S. growth and western ~~Europe.~~Europe, marginally offset by weakness in the emerging markets. This market is primarily driven by solid replacement revenue serviced through our distribution network. For ~~2021,~~2022, we expect double-digit organic revenue ~~growth in the low-teens, driven by~~growth. We anticipate activity to remain healthy ~~demand activity~~ from increased residential users in the U.S. and western Europe. ~~Additionally, we anticipate strong demand in China for secondary water supply product applications.~~

We will continue to strategically execute restructuring and realignment actions in an effort to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers. During ~~2021,~~2022, we expect to incur ~~between $30~~approximately $20 million and ~~$40~~$25 million in restructuring and realignment costs. We expect to realize between $35 million and $40 million of net savings in 2021, consisting of between $33 million and $35 million of incremental net savings from restructuring and realignment actions initiated in 2020, and between $2 million and $5 million of net savings from the restructuring, realignment and other structural cost actions initiated during this year.

3436

Results of Operations


		Three Months Ended								Six Months Ended									Three Months Ended								Six Months Ended
		June 30,								June 30,									June 30,								June 30,
(In millions)	(In millions)	2021			2020			Change		2021			2020			Change		(In millions)	2022			2021			Change		2022			2021			Change
Revenue	Revenue	$	1,351		$	1,160		16.5	%	$	2,607		$	2,283		14.2	%	Revenue	$	1,364		$	1,351		1.0	%	$	2,636		$	2,607		1.1	%
Gross profit	Gross profit	520			434			19.8	%	1,010			843			19.8	%	Gross profit	520			520			—	%	987			1,010			(2.3)	%
Gross margin	Gross margin	38.5		%	37.4		%	110	bp	38.7		%	36.9		%	180	bp	Gross margin	38.1		%	38.5		%	(40)	bp	37.4		%	38.7		%	(130)	bp

Total operating expenses	Total operating expenses	360			380			(5.3)	%	717			728			(1.5)	%	Total operating expenses	374			360			3.9	%	730			717			1.8	%
Expense to revenue ratio	Expense to revenue ratio	26.6		%	32.8		%	(620)	bp	27.5		%	31.9		%	(440)	bp	Expense to revenue ratio	27.4		%	26.6		%	80	bp	27.7		%	27.5		%	20	bp
Restructuring and realignment costs	Restructuring and realignment costs	6			43			(86.0)	%	14			52			(73.1)	%	Restructuring and realignment costs	8			6			33.3	%	12			14			(14.3)	%

Special charges	Special charges	—			11			—	%	2			11			(81.8)	%	Special charges	1			—			NM	%	2			2			—	%
Adjusted operating expenses	Adjusted operating expenses	354			326			8.6	%	701			665			5.4	%	Adjusted operating expenses	365			354			3.1	%	716			701			2.1	%
Adjusted operating expenses to revenue ratio	Adjusted operating expenses to revenue ratio	26.2		%	28.1		%	(190)	bp	26.9		%	29.1		%	(220)	bp	Adjusted operating expenses to revenue ratio	26.8		%	26.2		%	60	bp	27.2		%	26.9		%	30	bp
Operating income	Operating income	160			54			196.3	%	293			115			154.8	%	Operating income	146			160			(8.8)	%	257			293			(12.3)	%
Operating margin	Operating margin	11.8		%	4.7		%	710	bp	11.2		%	5.0		%	620	bp	Operating margin	10.7		%	11.8		%	(110)	bp	9.7		%	11.2		%	(150)	bp
Interest and other non-operating expense, net	Interest and other non-operating expense, net	24			19			26.3	%	43			38			13.2	%	Interest and other non-operating expense, net	10			24			(58.3)	%	24			43			(44.2)	%
Gain from sale of business	Gain from sale of business	2			—			NM		2			—			NM		Gain from sale of business	—			2			—		1			2			(50.0)
Income tax expense	Income tax expense	25			4			525.0	%	52			8			550.0	%	Income tax expense	24			25			(4.0)	%	40			52			(23.1)	%
Tax rate	Tax rate	18.5		%	10.9		%	760	bp	20.7		%	10.4		%	1,030	bp	Tax rate	17.5		%	18.5		%	(100)	bp	17.0		%	20.7		%	(370)	bp
Net income	Net income	$	113		$	31		264.5	%	$	200		$	69		189.9	%	Net income	$	112		$	113		(0.9)	%	$	194		$	200		(3.0)	%

NM - Not meaningful change

Revenue

Revenue generated during the three and six months ended June 30, ~~2021~~2022 was ~~$1,351~~$1,364 million and ~~$2,607~~$2,636 million, reflecting increases of ~~$191~~$13 million, or ~~16.5%~~1.0%, and ~~$324~~$29 million, or ~~14.2%~~1.1%, respectively, compared to the same prior year periods. On a constant currency basis, revenue grew ~~10.8%~~5.4% and ~~9.4%~~4.7% for the three and six months ended June 30, ~~2021.~~2022. The increases on a constant currency basis were driven by organic revenue growth of ~~$128~~$76 million and ~~$219~~$127 million respectively, reflecting strong organic growth ~~across all major geographic regions~~in western Europe and ~~segments.~~the U.S. for both periods, as the emerging markets were flat for the quarter and a decline for the year-to-date, with the COVID lockdowns mandated by the government in China offsetting organic growth in other parts of the region.

The following table illustrates the impact from organic growth, recent divestitures, and foreign currency translation in relation to revenue during the three and six months ended June 30, ~~2021:~~2022:


		Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem				Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem
(In millions)	(In millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change			(In millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
2020 Revenue		$	501			$	337			$	322			$	1,160
2021 Revenue																			2021 Revenue	$	569			$	414			$	368			$	1,351
Organic Growth	Organic Growth	32		6.4	%	59		17.5	%	37		11.5	%	128		11.0	%		Organic Growth	54		9.5	%	30		7.2	%	(8)		(2.2)	%	76		5.6	%
Divestitures	Divestitures	—		—	%	—		—	%	(3)		(0.9)	%	(3)		(0.2)	%		Divestitures	—		—	%	—		—	%	(3)		(0.8)	%	(3)		(0.2)	%
Constant Currency	Constant Currency	32		6.4	%	59		17.5	%	34		10.6	%	125		10.8	%		Constant Currency	54		9.5	%	30		7.2	%	(11)		(3.0)	%	73		5.4	%
Foreign currency translation (a)	Foreign currency translation (a)	36		7.2	%	18		5.3	%	12		3.7	%	66		5.7	%		Foreign currency translation (a)	(34)		(6.0)	%	(15)		(3.6)	%	(11)		(3.0)	%	(60)		(4.4)	%
Total change in revenue	Total change in revenue	68		13.6	%	77		22.8	%	46		14.3	%	191		16.5	%		Total change in revenue	20		3.5	%	15		3.6	%	(22)		(6.0)	%	13		1.0	%
2021 Revenue		$	569			$	414			$	368			$	1,351
2022 Revenue																			2022 Revenue	$	589			$	429			$	346			$	1,364

(a)Foreign currency translation impact for the quarter due to the ~~strengthening~~weakening in value of various currencies against the U.S. Dollar, the largest being the Euro, the ~~Chinese Yuan,~~British Pound, the ~~British Pound~~Swedish Krona and the Australian Dollar.

3537


		Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem					Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem
(In millions)	(In millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change		(In millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
2020 Revenue		$	939			$	675			$	669			$	2,283
2021 Revenue																		2021 Revenue	$	1,078			$	807			$	722			$	2,607
Organic Growth	Organic Growth	79		8.4	%	103		15.3	%	37		5.5	%	219		9.6	%	Organic Growth	97		9.0	%	70		8.7	%	(40)		(5.5)	%	127		4.9	%
Divestitures	Divestitures	—		—	%	—		—	%	(5)		(0.7)	%	(5)		(0.2)	%	Divestitures	—		—	%	—		—	%	(5)		(0.7)	%	(5)		(0.2)	%
Constant Currency	Constant Currency	79		8.4	%	103		15.3	%	32		4.8	%	214		9.4	%	Constant Currency	97		9.0	%	70		8.7	%	(45)		(6.2)	%	122		4.7	%
Foreign currency translation (a)	Foreign currency translation (a)	60		6.4	%	29		4.3	%	21		3.1	%	110		4.8	%	Foreign currency translation (a)	(53)		(4.9)	%	(23)		(2.9)	%	(17)		(2.4)	%	(93)		(3.6)	%
Total change in revenue	Total change in revenue	139		14.8	%	132		19.6	%	53		7.9	%	324		14.2	%	Total change in revenue	44		4.1	%	47		5.8	%	(62)		(8.6)	%	29		1.1	%
2021 Revenue		$	1,078			$	807			$	722			$	2,607
2022 Revenue																		2022 Revenue	$	1,122			$	854			$	660			$	2,636

(a)Foreign currency translation impact for the quarter due to the ~~strengthening~~weakening in value of various currencies against the U.S. Dollar, the largest being the Euro, the ~~Chinese Yuan,~~British Pound, the Swedish Krona and the Australian ~~Dollar and the British Pound.~~Dollar.

Water Infrastructure

Water Infrastructure revenue increased ~~$68~~$20 million, or ~~13.6%~~3.5%, for the second quarter of ~~2021 (6.4%~~2022 (9.5% increase on a constant currency basis) as compared to the prior year. Revenue ~~benefited from $36~~was negatively impacted by $34 million of foreign currency translation, with the change at constant currency coming entirely from organic growth of ~~$32~~$54 million. Organic growth for the quarter was driven by strength in both the industrial and utility end markets. The industrial end market ~~particularly~~had organic growth across all major geographic regions, with particular strength in western Europe where we benefited from price realization and strong backlog execution, as well as strong dewatering demand in the emerging ~~markets and, to a lesser extent, in western Europe. Organic~~markets. The utilities end market also experienced organic growth ~~for the quarter was also driven~~led by strength in the ~~utility end market, primarily~~U.S. driven by strong backlog and order intake execution, as well as good price realization, and in western Europe where we saw strong demand in utilities' ~~operational spending coupled with recovery from prior year COVID-19 impacts. Organic growth~~capital spending. Strength in the ~~utility~~utilities end market was ~~marginally~~partially offset by ~~declines~~weakness in ~~North America during~~the emerging markets, mostly due to the negative impact of continued COVID lockdowns in China early on in the quarter.

From an application perspective, organic revenue growth for the second quarter was primarily driven by our transport ~~application. The transport application had~~applications reflecting strong revenue growth across all major geographies, with particular strength in the ~~emerging markets,~~U.S., where ~~the dewatering business in Latin America~~we executed on a strong backlog, experienced solid price realization and ~~Africa benefited from strong market conditions in mining during the quarter and Asia Pacific had strong revenue growth during the quarter,~~healthy order intake, and in western Europe from solid price realization and increased demand in utility capital projects. We also experienced solid growth in emerging markets where ~~we had strong industrial~~Africa and ~~utility~~Latin America benefited from robust mining and rental demand ~~positively impacted by COVID-19 recovery.~~in our dewatering business. Organic revenue ~~growth from our transport~~for the treatment application was also up modestly for the quarter, driven by healthy market conditions and solid backlog execution in western Europe and the U.S., partially offset by the negative impact in China as a ~~modest decline~~result of the COVID lockdowns early in the ~~treatment application, driven by the timing of project deliveries in the U.S. as compared to the prior year.~~quarter.

For the six months ended June 30, ~~2021,~~2022, revenue increased ~~$139~~$44 million, or ~~14.8% (8.4%~~4.1% (9.0% increase on a constant currency basis) as compared to the prior year. Revenue was negatively impacted by $53 million of foreign currency translation, with the change at constant currency coming entirely from organic growth of $97 million. Organic growth for the period was driven by strength in both the industrial and utility end markets. The industrial end market had organic growth across all major geographies, with particular strength in western Europe, Latin America and the U.S. The utilities end market also experienced organic growth led by strength in the U.S. and western Europe, bolstered by strong price realization, solid backlog execution and timing of projects as compared to prior year; which was partially offset by weakness in the emerging markets, primarily due to the negative impact of continued COVID lockdowns in China.

From an application perspective, organic revenue growth during the six-month period was driven almost entirely by our transport applications. Transport experienced strong revenue growth the U.S., where we executed on a strong backlog and experienced solid price realization, and in western Europe from solid price realization and strong utility project backlog execution. The emerging markets had strong growth in dewatering from mining demand in Latin America and Africa, which was partially offset by declines in China due to COVID lockdowns. Organic revenue for the treatment application was also up modestly for the period, as revenue growth from project deliveries and strong backlog execution in western Europe and the U.S. more than offset the negative impact in China as a result of the continued COVID lockdowns.

Applied Water revenue increased $15 million, or 3.6%, for the second quarter of 2022 (7.2% increase on a constant currency basis) as compared to the prior year. Revenue was negatively impacted by $15 million of foreign currency translation, with the change at constant currency coming entirely from organic growth of $30 million, driven by strength in the industrial and residential end markets, partially offset by modest declines in the commercial end market. Organic revenue growth in the second quarter was led by strength in the industrial water application in the U.S. where we benefited from ~~$60~~price realization and strong backlog execution, and in western Europe where we benefited from investments that drove strong growth in manufacturing output. Residential building services also grew organically during the quarter, primarily from price realization and strong backlog execution in the U.S., partially offset by declines in China impacted by COVID related project delays. Organic growth for the quarter was partially offset by the declines in the commercial building services application in the U.S., impacted by supply constraints more than offsetting the growth in western Europe due to healthy order intake and stocking by distributors.

For the six months ended June 30, 2022, revenue increased $47 million, or 5.8% (8.7% increase on a constant currency basis) as compared to the prior year. Revenue was negatively impacted by $23 million of foreign currency translation during the six month period, with the change at constant currency coming entirely from organic growth of $79 million. Organic growth during the year was driven by strength in the both the utility and industrial end markets. Strength in the utility end market was led by western Europe, where utilities' operational spending continues to be strong, and in the emerging markets, where China benefited from healthy order intake coming into the year. Organic growth in the industrial end market was particularly strong across the emerging markets, which included growth from the COVID-19 recovery in Latin America and healthy order intake in China and Africa, and in western Europe.

From an application perspective, organic revenue growth during the six month period was primarily driven by our transport application. The transport application was driven by strong revenue growth across the emerging markets, where we benefited from healthy order intake in Asia Pacific and Africa and a favorable prior year comparison in Latin America, as well as growth from the COVID-19 recovery in western Europe. Organic revenue from our treatment application also contributed to the segment's growth during the period, driven by strength in the emerging markets, particularly in China, which was partially offset by the timing of project deliveries in the U.S. during the year.

Applied Water revenue increased $77 million, or 22.8%, for the second quarter of 2021 (17.5% increase on a constant currency basis) as compared to the prior year. Revenue benefited from $18 million of foreign currency translation, with the change at constant currency coming entirely from organic growth of $59 million. Organic growth for the quarter was driven by strength in every end market and across all major geographic regions, with particular strength in North America and western Europe.

From an application perspective, organic revenue growth in the second quarter was led by strength in the industrial water application which was primarily driven by market growth across the emerging markets, strong order intake in North America, with particular strength in specialty flow control applications (marine and food & beverage), and market recovery in western Europe, where the industry was more significantly impacted by the COVID-19 pandemic in the prior year. The residential building services application also had strong organic growth, primarily driven by western Europe, as market conditions recover from the COVID-19 pandemic, strength in North America, where we benefited from healthy backlog execution, and the emerging markets, specifically driven by strong second water supply business in China. The commercial building services application also contributed organic growth during the quarter, primarily driven by strength in the U.S. and western Europe, where the industry was more significantly impacted by the COVID-19 pandemic in the prior year.

For the six months ended June 30, 2021, revenue increased $132 million, or 19.6% (15.3% increase on a constant currency basis) as compared to the prior year. Revenue benefited from $29 million of foreign currency translation during the six month period, with the change at constant currency coming entirely from organic growth of $103$70 million. Organic growth during the period was driven by strength in every end market and across all major geographic ~~regions.~~

~~From an application perspective, organic~~regions, with particular strength in the U.S. and western Europe. Organic revenue growth during the six month period was led by strength in the industrial water application ~~which was primarily~~in the U.S. where we benefited from price realization and strong backlog execution, and in western Europe, driven by ~~market growth in the emerging markets, particularly in Asia Pacific where the industry was more significantly impacted by the COVID-19 pandemic in the first half of the prior year, strong~~healthy order ~~intake in North America and western Europe, reflecting recovery from the COVID-19 pandemic during the second quarter of the year.~~intake. The residential building services application ~~revenue~~ also ~~had strong organic growth~~grew organically during the ~~first half of~~period, primarily in the ~~year, primarily~~U.S. driven by price realization and strong backlog execution. Commercial building services also grew organically during the ~~emerging markets where we experienced strong second water supply business~~period, particularly in western Europe due to distributors maintaining higher stock levels, and ~~a favorable prior year comparison in China, as markets conditions recover from the COVID-19 pandemic. Strength in North America also contributed to the growth~~ in the ~~residential building services application, as~~U.S. where we benefited from ~~healthy~~price realization and strong backlog execution coming into the year, and market growth in western Europe during the period. The commercial building services application contributed organic growth during the first half of the year, primarily driven by strength in western Europe, North America and the emerging markets, particularly Asia Pacific.execution.

Measurement & Control Solutions

Measurement & Control Solutions revenue ~~increased $46~~decreased $22 million, or ~~14.3%~~6.0%, for the second quarter of ~~2021 (10.6% increase~~2022 (3.0% decrease on a constant currency basis) as compared to the prior year. Revenue ~~benefited from $12~~was negatively impacted by $11 million of foreign currency translation, with the change at constant currency ~~driven by~~coming from an organic ~~growth~~decline of ~~$37~~$8 million ~~which was partially offset by~~and reduced revenue related to divestiture impacts of $3 million. Organic weakness in the quarter was driven by declines in the utility end markets in the U.S. and western Europe while the emerging markets remained relatively flat as compared to the prior year. The industrial end market experienced modest growth.

From an application perspective, organic revenue ~~growth~~decline during the quarter was driven by ~~strength in both the utility and industrial end markets and across all major geographic regions.~~

In order to simplify and focus the application discussion, beginning with the first quarter of 2021, we are aggregating the test application into the water application and the software as a service and other application into the water and energy applications, as applicable, as both of these sub-applications provide products and services to the broader, ultimate applications of water and energy. From an application perspective, organic revenue growth was driven by the timing of project deploymentsdeclines in the ~~water application, coupled with COVID-19 recovery~~energy applications, in the U.S. ~~and western Europe during the quarter.~~as a result of continued electronic component shortages affecting our smart metering business. The ~~energy application experienced a~~water applications had modest ~~decrease during the quarter, primarily driven project timing and supply chain constraints~~growth in the ~~U.S.~~emerging markets where we executed on strong backlog.

For the six months ended June 30, ~~2021,~~2022, revenue ~~increased $53~~decreased $62 million, or ~~7.9% (4.8% increase~~8.6% (6.2% decrease on a constant currency basis) as compared to the prior year. Revenue ~~benefited from $21~~was negatively impacted by $17 million of foreign currency translation, ~~during the six month period,~~ with the change at constant currency ~~driven by~~coming from an organic ~~growth~~decline of ~~$37~~$40 million ~~which was partially offset by~~and reduced revenue related to divestiture impacts of $5 million. Organic ~~revenue growth during~~weakness in the period was driven by ~~strength~~declines in ~~both~~the utility end ~~markets and~~market across all major geographic regions, ~~particularly~~primarily driven by electronic component shortages which more than offset modest growth in ~~western Europe.~~the industrial end market.

From an application perspective, organic revenue ~~growth~~declined during the six-month period ~~was~~ driven by weakness in both the energy and water ~~application, particularly~~applications, primarily in the U.S. ~~and western Europe, where regions benefited~~as a result of continued electronic component shortages affecting our smart metering business. Declines in the water applications were slightly offset by modest growth in the emerging markets from ~~a favorable prior year comparison during the period coupled with~~ strong backlog ~~execution. This organic revenue growth was partially offset by a decline~~execution in the energy application during the period driven by the gas business, where large project deployments in the U.S. during the prior year did not repeat and we experienced project delays driven by the COVID-19 pandemic during the year.our test business.

An order represents a legally enforceable, written document that includes the scope of work or services to be performed or equipment to be supplied to a customer, the corresponding price and the expected delivery date for the applicable products or services to be provided. An order often takes the form of a customer purchase order or a signed quote from a Xylem business. Orders received during the second quarter of ~~2021~~2022 were ~~$1,660~~$1,684 million, an increase of ~~$428~~$24 million, or ~~34.7%~~1.4%, over the prior year ~~(28.7%~~(5.5% increase on a constant currency basis). Orders received during the six months ended June 30, ~~2021~~2022 were ~~$3,198~~$3,399 million, an increase of ~~$705~~$201 million, or ~~28.3%~~6.3%, over the prior year ~~(23.3%~~(9.6% increase on a constant currency basis). Order intake ~~benefited from $74~~was negatively impacted by $67 million and ~~$123~~$107 million of foreign currency translation for the three and six months ended June 30, ~~2021, respectively. The increase on a constant currency basis was primarily driven by organic order growth of $355 million and $590 million for the three and six months ended June 30, 2021,~~2022, respectively.

The following table illustrates the impact from organic growth, recent divestitures, and foreign currency translation in relation to orders during the three and six months ended June 30, ~~2021:~~2022:


		Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem					Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem
(in millions)	(in millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change		(in millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
2020 Orders		$	598			$	326			$	308			$	1,232
2021 Orders																		2021 Orders	$	639			$	486			$	535			$	1,660
Organic Growth	Organic Growth	—		—	%	140		42.9	%	215		69.8	%	355		28.8	%	Organic Growth	134		21.0	%	9		1.9	%	(47)		(8.8)	%	96		5.8	%
Divestitures	Divestitures	—		—	%	—		—	%	(1)		(0.3)	%	(1)		(0.1)	%	Divestitures	—		—	%	—		—	%	(5)		(0.9)	%	(5)		(0.3)	%
Constant Currency	Constant Currency	—		—	%	140		42.9	%	214		69.5	%	354		28.7	%	Constant Currency	134		21.0	%	9		1.9	%	(52)		(9.7)	%	91		5.5	%
Foreign currency translation (a)	Foreign currency translation (a)	41		6.9	%	20		6.1	%	13		4.2	%	74		6.0	%	Foreign currency translation (a)	(42)		(6.6)	%	(15)		(3.1)	%	(10)		(1.9)	%	(67)		(4.0)	%
Total change in orders	Total change in orders	41		6.9	%	160		49.1	%	227		73.7	%	428		34.7	%	Total change in orders	92		14.4	%	(6)		(1.2)	%	(62)		(11.6)	%	24		1.4	%
2021 Orders		$	639			$	486			$	535			$	1,660
2022 Orders																		2022 Orders	$	731			$	480			$	473			$	1,684

Water Infrastructure Applied Water Measurement & Control Solutions Total Xylem
(in millions) $ Change % Change $ Change % Change $ Change % Change $ Change % Change
2020 Orders $ 1,112 $ 698 $ 683 $ 2,493
Organic Growth 70 6.3 % 232 33.2 % 288 42.2 % 590 23.7 %
Divestitures — — % — — % (8) (1.2) % (8) (0.4) %
Constant Currency 70 6.3 % 232 33.2 % 280 41.0 % 582 23.3 %
Foreign currency translation (a) 68 6.1 % 33 4.7 % 22 3.2 % 123 4.9 %
Total change in orders 138 12.4 % 265 38.0 % 302 44.2 % 705 28.3 %
2021 Orders $ 1,250 $ 963 $ 985 $ 3,198


	Water Infrastructure				Applied Water				Measurement & Control Solutions				Total Xylem
(in millions)	$ Change		% Change		$ Change		% Change		$ Change		% Change		$ Change		% Change
2021 Orders	$	1,250			$	963			$	985			$	3,198
Organic Growth	207		16.6	%	47		4.9	%	65		6.6	%	319		10.0	%
Divestitures	—		—	%	—		—	%	(11)		(1.1)	%	(11)		(0.4)	%
Constant Currency	207		16.6	%	47		4.9	%	54		5.5	%	308		9.6	%
Foreign currency translation (a)	(66)		(5.3)	%	(25)		(2.6)	%	(16)		(1.6)	%	(107)		(3.3)	%
Total change in orders	141		11.3	%	22		2.3	%	38		3.9	%	201		6.3	%
2022 Orders	$	1,391			$	985			$	1,023			$	3,399

(a)Foreign currency translation impact for the quarter due to the ~~strengthening~~weakening in value of various currencies against the U.S. Dollar, the largest being the Euro, the ~~Chinese Yuan,~~British Pound, the Swedish Krona and the Australian ~~Dollar and the British Pound.~~Dollar.

Water Infrastructure

Water Infrastructure segment orders increased ~~$41~~$92 million, or ~~6.9%~~14.4%, to ~~$639~~$731 million ~~(flat~~(21.0% on a constant currency basis) for the second quarter of ~~2021~~2022 as compared to the prior year. Order growth for the quarter ~~benefited from $41~~was negatively impacted by $42 million of foreign currency translation. ~~Organic orders remained essentially flat during~~The order increase on a constant currency basis in the quarter ~~as strength in the treatment application, which~~ was driven by ~~strong~~organic order ~~intake~~growth in our transport applications across all major ~~geographies, was offset by decline~~geographic regions, primarily in the transport application, which included a significant project order of greater than $100 million in India during the second quarter of 2020 that did not recur. Excluding the impact of the significant India order in 2020, the transport applicationU.S., where we benefited from strong market demand and large infrastructure projects. Transport also had organic order growth ~~driven by healthy market conditions~~ in western Europe, where we saw healthy demand and ~~North America during~~capital spending from utility customers and in emerging markets, primarily from continued mining demand in Africa. For the treatment application, organic orders declined in the quarter, ~~including order growth~~primarily due to in weakness in the ~~dewatering business.~~emerging markets from the impact of COVID lockdowns in China.

For the six months ended June 30, ~~2021,~~2022, orders increased ~~$138~~$141 million, or ~~12.4%~~11.3%, to ~~$1,250~~$1,391 million ~~(6.3% increase~~(16.6% on a constant currency basis) as compared to the ~~same~~ prior ~~year period.~~year. Order growth ~~during~~for the period ~~benefited from $68~~was negatively impacted by $66 million of foreign currency translation. The order increase on a constant currency basis consisted primarily of organic order growth in the treatment application. Organic growth in the treatment application was driven by strength in North America, the emerging markets, particularly in China, and western Europe. Organic orders ~~for the transport application also~~ increased during the period as strength in the transport applications came primarily ~~driven by healthy~~from the U.S. where we benefited from strong market ~~conditions~~demand, large infrastructure projects and mining demand for the dewatering business. There was also order growth from water utility customers in western Europe and ~~North America which were partially offset by weakness~~dewatering demand in the emerging markets coming from Africa and Latin America, partially offset by order declines in India where ~~we had~~there was a ~~significant~~large project order ~~of greater than $100 million~~ in ~~India during~~ the ~~second quarter of 2020~~prior year, and China impacted by the COVID lockdowns. The treatment application saw a decrease in orders due to the prolonged COVID lockdowns in China, which more than offset ~~strength~~project order wins in ~~Latin America and Africa during~~western Europe in the period.

Applied Water segment orders ~~increased $160~~decreased $6 million, or ~~49.1%~~1.2%, to ~~$486~~$480 million ~~(42.9%~~(1.9% increase on a constant currency basis) for the second quarter of ~~2021~~2022 as compared to the prior year. Order growth for the quarter ~~benefited from $20~~was negatively impacted by $15 million of foreign currency translation. The order increase on a constant currency basis was driven by ~~organic order growth~~strength across all ~~end~~major geographic regions, primarily the emerging markets ~~primarily in the U.S.,~~ where we ~~benefited from~~saw strong ~~demand recovery, amplified by longer lead times for delivering product,~~project orders in Africa and ~~to a lesser extent,~~distributor order strength in ~~western Europe and the emerging markets.~~India.

For the six months ended June 30, ~~2021,~~2022, orders increased ~~$265~~$22 million, or ~~38.0%~~2.3%, to ~~$963~~$985 million ~~(33.2%~~(4.9% increase on a constant currency basis) as compared to the ~~same~~ prior ~~year period.~~year. Order growth ~~during~~for the period ~~benefited from $33~~was negatively impacted by $25 million of foreign currency translation. The order increase on a constant currency basis was driven by ~~organic order growth~~strength across all ~~end markets during the first half~~major geographic regions. This reflects demand and timing of ~~the year, primarily in the U.S., where we benefited from strong demand, amplified by early ordering~~orders to ~~mitigate~~address longer lead times in the U.S and ~~to a lesser extent, in~~ western Europe, and strong project orders in the emerging ~~markets, particularly in China where order intake was weakened by COVID-19 impacts in the prior year.~~markets.

Measurement & Control Solutions

Measurement & Control Solutions segment orders ~~increased $227~~decreased $62 million, or ~~73.7%~~11.6%, to ~~$535~~$473 million ~~(69.5% increase~~(9.7% decrease on a constant currency basis) for the second quarter of ~~2021~~2022 as compared to the prior year. Order weakness for the quarter was negatively impacted by $10 million of foreign currency translation and reduced orders related to divestiture impacts of $5 million. The order decrease on a constant currency basis consisted primarily of organic order declines of $47 million, or (8.8)%. Organic orders for the quarter decreased in water applications, primarily driven by moderation of the early increased demand and advanced ordering to address electronic component shortages that we benefited from in the prior year and lapping of large prior year orders for metrology projects in the U.S. and western Europe. This decline was partially offset by strength in the energy applications driven by continued orders to mitigate electronic component shortages and longer lead times.


Indiana						45-2080495
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


ITEM			PAGE
PART I – Financial Information
Item 1	-	Financial Statements:
		Condensed Consolidated Income Statements for the Three and Six Months Ended June 3 0 ~~, 2021~~ 30, 2022 and ~~2020~~2021 (Unaudited)	3
		Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 3 0 ~~, 2021~~ 30, 2022 and ~~2020~~2021 (Unaudited)	4
		Condensed Consolidated Balance Sheets as of June 3 0 ~~, 2021~~ 30, 2022 and December 31, ~~2020~~2021 (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 ~~, 2021~~ 30, 2022 and ~~2020~~2021 (Unaudited)	6
		Notes to the Condensed Consolidated Financial Statements (Unaudited)	7
Item 2	-	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2931
Item 3	-	Quantitative and Qualitative Disclosures About Market Risk	4753
Item 4	-	Controls and Procedures	4753
PART II – Other Information
Item 1	-	Legal Proceedings	4854
Item 1A	-	Risk Factors	4854
Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	4854
Item 3	-	Defaults Upon Senior Securities	4854
Item 4	-	Mine Safety Disclosures	4854
Item 5	-	Other Information	4854
Item 6	-	Exhibits	4854
		Signatures	5056


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


2022 versus 2021
	Water Infrastructure		Applied Water		Measurement & Control Solutions		Other*	Total
EBITDA	$19		$(5)		$(21)		$(6)	$(13)
Restructuring and realignment	(1)		0		3		0	2
Share-based compensation	0		0		0		1	1
Special charges	0		0		1		(1)	0
(Gain) loss from sale of business	0		2		0		0	2
Adjusted EBITDA	$18		$(3)		$(17)		$(6)	$(8)
Adjusted EBITDA margin	2.4	%	(1.3)	%	(4.1)	%	NM	(0.7)	%

* Other includes Regional selling locations, corporate and other items.


Exhibit Number		Description	Location

3.1		Fourth Amended and Restated Articles of Incorporation of Xylem Inc.	Incorporated by reference to Exhibit 3.1 of Xylem Inc.’s Form 8-K filed on May 15, 2017 (CIK No. 1524472, File No. 1-35229).

3.2		Fourth Amended and Restated By-laws of Xylem Inc.	Incorporated by reference to Exhibit 3.2 of Xylem Inc.’s Form 8-K filed on May 15, 2017 (CIK No. 1524472, File No. 1-35229).



10.1	#	~~Form of Xylem 2011 Omnibus~~Annual Incentive Plan ~~Non-Qualified Stock Option Award Agreement~~ for ~~Certain Executives and~~Senior Leadership Team (Formerly "Annual Incentive Plan for Executive ~~Officers as Approved by the Leadership Development & Compensation Committee~~Officers") restated with administrative changes only, on July 11, 2022	Filed herewith.

10.2		Xylem Special Senior Executive Severance Pay Plan restated with administrative changes only, on July 11, 2022	Filed herewith.

10.3		Separation Agreement between Xylem Inc. and Colin R. Sabol	Filed herewith.
31.1		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

31.2		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.

101.0		The following materials from Xylem Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, ~~2021,~~2022, formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) Condensed Consolidated Income Statements, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements	The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

104.0		The cover page from Xylem Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, ~~2021~~2022 formatted in Inline XBRL and contained in Exhibit 101.0.


						XYLEM INC.
						(Registrant)

						/s/ Geri McShane
						Geri McShane
						Vice President, Controller and Chief Accounting Officer