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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number: 1-35229
Xylem Inc.
(Exact name of registrant as specified in its charter)
 
Indiana  45-2080495
(State or other jurisdiction of incorporation or
organization)
  (I.R.S. Employer Identification No.)
301 Water Street SE, Washington, DC 20003
(Address of principal executive offices) (Zip code)
(202) 869-9150
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange of which registered
Common Stock, par value $0.01 per shareXYLNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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  
As of April 26, 2024, there were 242,447,263 outstanding shares of the registrant’s common stock, par value $0.01 per share.



Xylem Inc.
Table of Contents
ITEM
  
  
PAGE
PART I – Financial Information
Item 1-
Item 2-
Item 3-
Item 4-
PART II – Other Information
Item 1-
Item 1A-
Item 2-
Item 3-
Item 4-
Item 5-
Item 6-
2

PART I

ITEM 1.             CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

For the three months ended March 31,20242023
Revenue from products$1,690 $1,308 
Revenue from services343 140 
Revenue2,033 1,448 
Cost of revenue from products1,021 791 
Cost of revenue from services260 111 
Cost of revenue1,281 902 
Gross profit752 546 
Selling, general and administrative expenses474 354 
Research and development expenses59 53 
Restructuring and asset impairment charges10 8 
Operating income209 131 
Interest expense14 9 
Other non-operating income, net6 4 
(Loss) on sale of businesses(5) 
Income before taxes196 126 
Income tax expense43 27 
Net income$153 $99 
Earnings per share:
Basic$0.63 $0.55 
Diluted$0.63 $0.54 
Weighted average number of shares:
Basic241.9 180.4 
Diluted243.0 181.3 
See accompanying notes to condensed consolidated financial statements.

3

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in millions)
 
For the three months ended March 31,20242023
Net income$153 $99 
Other comprehensive income (loss), before tax:
Foreign currency translation adjustment(65)22 
Net change in derivative hedge agreements:
Unrealized gain (loss)(3)4 
Amount of loss reclassified into net income1 5 
Net change in post-retirement benefit plans:
Amortization of actuarial (gain) loss into net income (1)
Foreign currency translation adjustment2  
Other comprehensive income (loss), before tax(65)30 
Income tax (benefit) expense related to items of other comprehensive income (loss)11 (5)
Other comprehensive income (loss), net of tax(76)35 
Comprehensive income$77 $134 


See accompanying notes to condensed consolidated financial statements.
4

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except per share amounts)
 
March 31,
2024
December 31,
2023
  
ASSETS
Current assets:
Cash and cash equivalents$947 $1,019 
Receivables, less allowances for discounts, returns and credit losses of $46 and $56 in 2024 and 2023, respectively
1,641 1,617 
Inventories1,039 1,018 
Prepaid and other current assets266 230 
Total current assets3,893 3,884 
Property, plant and equipment, net1,141 1,169 
Goodwill7,509 7,587 
Other intangible assets, net2,454 2,529 
Other non-current assets927 943 
Total assets$15,924 $16,112 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$948 $968 
Accrued and other current liabilities1,098 1,221 
Short-term borrowings and current maturities of long-term debt285 16 
Total current liabilities2,331 2,205 
Long-term debt1,985 2,268 
Accrued post-retirement benefits323 344 
Deferred income tax liabilities558 557 
Other non-current accrued liabilities524 562 
Total liabilities5,721 5,936 
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock – par value $0.01 per share:
Authorized 750.0 shares, issued 258.6 shares and 257.6 shares in 2024 and 2023, respectively
3 3 
Capital in excess of par value8,618 8,564 
Retained earnings2,667 2,601 
Treasury stock – at cost 16.1 shares and 16.0 shares in 2024 and 2023, respectively
(748)(733)
Accumulated other comprehensive loss(345)(269)
Total stockholders’ equity10,195 10,166 
Non-controlling interests8 10 
Total equity10,203 10,176 
Total liabilities and stockholders’ equity$15,924 $16,112 

See accompanying notes to condensed consolidated financial statements.
5

XYLEM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions)
For the three months ended March 31,20242023
Operating Activities
Net income$153 $99 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation61 28 
Amortization73 32 
Share-based compensation18 12 
Restructuring and asset impairment charges10 8 
Loss from sale of business5  
Other, net(2)3 
Payments for restructuring(11)(6)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables(47)(28)
Changes in inventories(52)(55)
Changes in accounts payable6 (14)
Other, net(125)(98)
Net Cash – Operating activities89 (19)
Investing Activities
Capital expenditures(74)(49)
Proceeds from sale of business11  
Proceeds from the sale of property, plant and equipment1  
Cash received from investments2 2 
Cash paid for investments(2) 
Cash received from cross-currency swaps11 11 
Other, net (1)
Net Cash – Investing activities(51)(37)
Financing Activities
   Long-term debt repaid(5) 
Repurchase of common stock(15)(8)
Proceeds from exercise of employee stock options33 7 
Dividends paid(88)(60)
Other, net(7)(2)
Net Cash – Financing activities(82)(63)
Effect of exchange rate changes on cash(28)12 
Net change in cash and cash equivalents(72)(107)
Cash and cash equivalents at beginning of year1,019 944 
Cash and cash equivalents at end of period$947 $837 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest$13 $11 
Income taxes (net of refunds received)$39 $49 

See accompanying notes to condensed consolidated financial statements.
6

XYLEM INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Background and Basis of Presentation
Background
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 four segments, Water Infrastructure, Applied Water, Measurement and Control Solutions and Water Solutions and Services. See Note 19, "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.
Acquisition of Evoqua
On May 24, 2023, Xylem completed the acquisition of Evoqua Water Technologies Corp. (“Evoqua”). Refer to Note 3, "Acquisitions and Divestitures," for additional information.
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, 2023 ("2023 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 2023 Annual Report. Certain prior year amounts have been reclassified to conform to the current year presentation.
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, valuation results associated with purchase accounting, 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 Company announced a change to its reportable segments effective January 1, 2024, and as a result, is now reporting the financial position and results of operations of its former Integrated Solutions and Services segment together with the dewatering business, previously within our Water Infrastructure segment, and the assessment services business, previously within our Measurement and Control Solutions segment, in a new segment that is referred to as Water Solutions and Services. The Company’s Water Infrastructure reportable segment no longer includes the results of the dewatering business, and the Company’s Measurement and Control Solutions reportable segment no longer includes the results of the assessment services business. The Company's Applied Water reportable segment remains unchanged. As a result of the change, the Company has recast prior period segment amounts to align with the new segment reporting. The recast financial information reflects depreciation, amortization and share-based compensation specifically identified to the segments that were previously reported
7

within Corporate and other and Regional selling locations as part of an overall allocation. These changes have no impact on the Company’s historical consolidated financial position or results of operations.
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.
Note 2. Recently Issued Accounting Pronouncements
Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures." This guidance requires disclosure information about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is required to be applied on a retrospective basis to all periods presented in the consolidated financial statements. The Company is currently evaluating the impacts of the guidance on our disclosures in future periods.
In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures." The ASU is intended to improve income tax disclosure requirements, primarily through additional disclosures about a reporting entity’s effective tax rate reconciliations as well as information on income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. The amendments are required to be applied on a prospective basis, with the option to apply retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently evaluating the method of adoption and the impacts of the guidance on our disclosures in future periods.
Recently Adopted Pronouncements
In September 2022, the FASB issued ASU 2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations." This guidance requires disclosure of the key terms of outstanding supplier finance programs and a rollforward of the related obligations. The standard does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations. The ASU became effective January 1, 2023, and the rollforward requirement became effective January 1, 2024. Refer to Note 11, "Current Liabilities" for the disclosures related to our adoption of the standard.

Note 3. Acquisitions and Divestitures
Evoqua Water Technologies Corp.
On May 24, 2023, the Company completed the acquisition of 100% of the issued and outstanding shares of Evoqua, a leader in providing water and wastewater treatment solutions, offering a broad portfolio of products and services to support industrial, municipal, and recreational customers, pursuant to the Agreement and Plan of Merger dated January 22, 2023 (the “Merger Agreement”). The Merger Agreement provided that Fore Merger Sub, Inc., a wholly owned subsidiary of the Company, merge with and into Evoqua, with Evoqua surviving as a wholly owned subsidiary of Xylem (the “Merger”). Under the terms and conditions of the Merger Agreement, each share of Evoqua common stock issued and outstanding immediately prior to the effective time of the Merger (other than certain excluded shares as described in the Merger Agreement) was converted into the right to receive 0.48 (the “Exchange Ratio”) of a share of the common stock of Xylem. Upon the effectiveness of the Merger on May 24, 2023, legacy Evoqua stockholders owned approximately 25% and legacy Xylem shareholders owned approximately 75% of the combined company. The purchase price for purposes of the Merger consisted of an aggregate of $6,121 million of the Company’s common stock, $160 million in replacement equity awards, and $619 million to repay certain indebtedness of Evoqua (refer to Note 12, "Credit Facilities and Debt").
The acquisition-date fair value of the consideration totaled $6,900 million, which consisted of the following:
8

(in millions)Fair Value of Purchase Consideration
Xylem Common Stock issued to Evoqua stockholders (58,779,096 shares)
$6,121 
Estimated replacement equity awards 160 
Payment of certain Evoqua indebtedness 619 
Total $6,900 
The Company has applied the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”) and recognized assets acquired and liabilities assumed at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months from the acquisition date). The following table summarizes the preliminary acquisition date fair value of net tangible and intangible assets acquired, net of liabilities assumed from Evoqua:
(in millions)Fair Value
  Cash and cash equivalents$143 
  Receivables(a)432 
  Inventories263 
  Prepaid and other current assets78 
  Assets held for sale8 
  Property, plant and equipment, net508 
  Goodwill4,798 
  Other intangible assets, net1,769 
  Other non-current assets178 
  Non-current assets held for sale85 
  Accounts payable(210)
  Accrued and other current liabilities(350)
 Short-term borrowings and current maturities of long-term debt(166)
  Liabilities held for sale(1)
  Long-term debt(111)
  Other non-current accrued liabilities(120)
  Deferred income tax liabilities(401)
  Non-current liabilities held for sale(3)
Total$6,900 
(a) Including $322 million of receivables and $110 million of contract assets.
The preliminary purchase price allocation is subject to further refinement and may require adjustments to arrive at the final purchase price allocation. The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The fair values of the assets acquired and liabilities assumed were preliminarily determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, future expected cash flows and other future events that are judgmental and subject to change. The final determination of the fair value of certain assets and liabilities will be completed as soon as the necessary information becomes available but no later than one year from the acquisition date.
The fair value of receivables acquired is $322 million, with the gross contractual amount being $329 million. The Company expects $7 million to be uncollectible.


9

The amounts of revenue and income before taxes of Evoqua since the acquisition date included in the Consolidated Income Statement for the three months ended March 31, 2024 are $480 million and $6 million, respectively.The $4,798 million of goodwill recognized, which is not deductible for U.S. income tax purposes, is primarily attributable to synergies and economies of scale expected from combining the operations of Evoqua and Xylem as well as the assembled workforce of Evoqua.

Identifiable Intangible Assets Acquired

The following table summarizes key information underlying identifiable intangible assets related to the Evoqua acquisition:

(in millions)Useful Life (in years)Useful Life Weighted Average (in years)
Fair Value
(in millions)
Trademarks66.0$50 
Proprietary technology and patents
4 - 9
7.1120 
Customer and distributor relationships
6 - 20
17.91,395 
Backlog
1 - 10
5.4120 
Permits88.070 
Software
1 - 13
2.314 
Total15.4$1,769 

The preliminary estimate of the fair value of Evoqua’s identifiable intangible assets was determined primarily using the “income approach,” which requires a forecast of all of the expected future cash flows either through the use of the multi-period excess earnings method or the relief-from-royalty method. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements (“ASC 820”). Intangible assets consisting of the Evoqua tradename, technology, customer relationships, backlog, and permits were valued using the multi-period excess earnings method (“MEEM”), the relief from royalty (“RFR”) method, or the with and without method, which are all forms of the income approach. Intangible assets related to Evoqua software were valued using the cost approach.
Trademarks and proprietary technology intangible assets were valued using the RFR method. The RFR method of valuation suggests that in lieu of ownership, the acquirer can obtain comparable rights to use the subject asset via a license from a hypothetical third-party owner. The asset’s Fair Value is the present value of license fees avoided by owning it (i.e., the royalty savings).
Customer and distributor relationships and backlog intangible assets were valued using the MEEM method. The MEEM method of valuation is an approach where the net earnings attributable to the asset being measured are isolated from other “contributory assets” over the intangible asset’s remaining economic life.
The Permits intangible asset was valued using the with and without method. The with and without method of valuation is an approach that considers the hypothetical impact to the projected cash flows of the business if the intangible asset was not put in place.
The Software intangible asset was valued using the cost approach. The cost approach method of valuation is an approach that relies on estimating the replacement or reproduction costs new of assets, along with factors of physical deterioration, based on the principle that an asset would not be purchased for a price higher than the cost to replace it with an asset of comparable utility.
Inventory was estimated using the comparative sales method, which quantifies the fair value of inventory based on the expected sales price of the subject inventory (when complete), reduced for: (i) all costs expected to be incurred in its completion and disposition efforts and (ii) a profit on those value-added completion and disposition costs.
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Stock-Based Compensation
In connection with the Merger, each outstanding and issued option, restricted stock unit (“RSU”), performance stock unit (“PSU”) and cash-settled stock appreciation right (“SAR”) was converted into the Xylem equivalent, with outstanding PSUs being converted into Xylem RSUs. As a result, Xylem issued 2 million replacement equity options and 707 thousand RSU awards (of which 330 thousand were converted PSUs.) The portion of the fair value related to pre-combination services of $160 million was included in the purchase price, and $56 million will be recognized over the remaining service periods. As of March 31, 2024, the future unrecognized expense related to the outstanding options and RSUs was approximately $1 million and $7 million, respectively. The future unrecognized expense related to options and RSUs will be recognized over a weighted-average service period of 1 year. SARs are immaterial.
Note 4. Revenue
Disaggregation of Revenue
The following table illustrates the sources of revenue:
Three Months Ended
March 31,
(in millions)20242023
Revenue from contracts with customers$1,910 $1,383 
Lease Revenue123 65 
Total$2,033 $1,448 

The following table reflects revenue from contracts with customers by application.
Three Months Ended
March 31,
(in millions)20242023
Water Infrastructure
     Transport$337 $322 
     Treatment237 88 
Applied Water
Building Solutions240 253 
     Industrial Water196 200 
Measurement and Control Solutions
     Smart Metering and Other377 291 
     Analytics85 87 
Water Solutions and Services438 142 
Total$1,910 $1,383 
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The following table reflects revenue from contracts with customers by geographical region.
Three Months Ended
March 31,
(in millions)20242023
Water Infrastructure
     United States$204 $132 
Western Europe211 168 
Emerging Markets (a)114 73 
Other45 37 
Applied Water
     United States232 244 
Western Europe99 104 
Emerging Markets (a)73 73 
Other32 32 
Measurement and Control Solutions
     United States305 237 
Western Europe82 75 
Emerging Markets (a)44 46 
Other31 20 
Water Solutions and Services
United States335 64 
Western Europe23 24 
Emerging Markets (a)42 34 
Other38 20 
Total$1,910 $1,383 
(a)Emerging Markets 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")
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Contract Balances
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)Contract Assets (a)Contract Liabilities
Balance at January 1, 2023$151 $183 
  Additions, net48 58 
  Revenue recognized from opening balance— (50)
  Billings transferred to accounts receivable (48)— 
  Foreign currency and other  
Balance at March 31, 2023$151 $191 
Balance at January 1, 2024$263 $315 
  Additions, net99 178 
  Revenue recognized from opening balance (161)
  Billings transferred to accounts receivable(100) 
  Foreign currency and other(2)(10)
Balance at March 31, 2024$260 $322 
(a)Excludes receivable balances, which are disclosed on the 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 March 31, 2024, the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied for contracts with performance obligations, amount to $978 million, of which $463 million was contributed by the Evoqua acquisition. We expect to recognize the majority of revenue upon the completion of satisfying these performance obligations in the following 60 months. 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 5. Restructuring and Asset Impairment Charges
Restructuring
During the three months ended March 31, 2024, we incurred restructuring costs of $9 million. We incurred these charges primarily as a result of our acquisition of Evoqua. Approximately $5 million of the charges represented the reduction of headcount related to the integration of Evoqua for the three months ended March 31, 2024. Additionally, during the three months ended March 31, 2024, we incurred $4 million of charges related to our efforts to reposition our businesses to optimize our cost structure, improve our operational efficiency and effectiveness, strengthen our competitive positioning and better serve our customers.
During the three months ended March 31, 2023, 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.
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The following table presents the components of restructuring expense and asset impairment charges:
Three Months Ended
March 31,
(in millions)20242023
By component:
Severance and other charges$9 $6 
Asset impairment1  
Reversal of restructuring accruals(1) 
Total restructuring costs$9 $6 
Asset impairment charges1 2 
Total restructuring and asset impairment charges$10 $8 
By segment:
Water Infrastructure$5 $1 
Applied Water1 1 
Measurement and Control Solutions 6 
Water Solutions and Services2  
Corporate and other2  
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 three months ended March 31, 2024 and 2023:
(in millions)20242023
Restructuring accruals - January 1$24 $10 
Restructuring costs, net9 6 
Cash payments(11)(6)
Asset impairment(1) 
Foreign currency and other(1) 
Restructuring accruals - March 31$20 $10 
By segment:
Water Infrastructure$4 $1 
Applied Water1  
Measurement and Control Solutions7 4 
Water Solutions and Services2  
Regional selling locations (a)5 3 
Corporate and other1 2 
(a)Regional selling locations consist primarily of selling and marketing organizations and related support services that incurred restructuring expense that was allocated to the segments. The liabilities associated with restructuring expense were not allocated to the segments.
14

The following table presents expected restructuring spend in 2024 and thereafter:
(in millions)Water InfrastructureApplied WaterMeasurement and Control SolutionsWater Solutions and ServicesCorporateTotal
Actions Commenced in 2024:
Total expected costs$ $1 $ $4 $ $5 
Costs incurred during Q1 2024 1  2  3 
Total expected costs remaining$ $ $ $2 $ $2 
Actions Commenced in 2023:
Total expected costs$19 $10 $11 $7 $36 $83 
Costs incurred in 202313 6 10 7 35 71 
Costs incurred during Q1 20245    1 6 
Total expected costs remaining$1 $4 $1 $ $ $6 
The actions commenced in 2024 consist primarily of severance charges. The actions are expected to continue through the end of 2024.
Asset Impairment
During the first quarter of 2024, we recognized a $1 million impairment charge for internally developed software within Corporate. Refer to Note 9, "Goodwill and Other Intangible Assets," for additional information.
During the first quarter of 2023, we determined that internally developed in-process software within our Measurement and Control Solutions segment was impaired as a result of actions taken to prioritize strategic investments and we therefore recognized an impairment charge of $2 million. Refer to Note 9, "Goodwill and Other Intangible Assets," for additional information.
Note 6. Income Taxes
Our quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items within the 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 March 31, 2024 was $43 million resulting in an effective tax rate of 21.8%, compared to a $27 million expense resulting in an effective tax rate of 21.7% for the same period in 2023. The effective tax rate for the three month period ended March 31, 2024 was higher than the U.S. federal statutory rate primarily due to earnings mix.
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. Xylem filed an appeal with the Administrative Court of Växjö, which rendered a decision adverse to Xylem in June 2022 for SEK833 million (approximately $78 million), consisting of the full tax assessment amount plus penalties and interest. Xylem has appealed this decision with the intermediate appellate court, the Administrative Court of Appeal (the “Court”). At this time, management, in consultation with external legal advisors, continues to believe it is more likely than not that Xylem will prevail on the proposed assessment and will continue to vigorously defend our position through the appellate process. 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 March 31, 2024, we do not have any unrecognized tax benefits related to this uncertain tax position.
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Note 7. Earnings Per Share
The following is a reconciliation of the shares used in calculating basic and diluted net earnings per share:
Three Months Ended
 March 31,
20242023
Net income (in millions)$153 $99 
Shares (in thousands):
Weighted average common shares outstanding241,826 180,371 
Add: Participating securities (a)28 25 
Weighted average common shares outstanding — Basic241,854 180,396 
Plus incremental shares from assumed conversions: (b)
Dilutive effect of stock options727 622 
Dilutive effect of restricted stock units and performance share units440 301 
Weighted average common shares outstanding — Diluted243,021 181,319 
Basic earnings per share$0.63 $0.55 
Diluted earnings per share$0.63 $0.54 
(a)Restricted stock units containing rights to non-forfeitable dividends that participate in undistributed earnings with common 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 15, "Share-Based Compensation Plans," to the condensed consolidated financial statements for further detail on the performance share units.
Three Months Ended
 March 31,
(in thousands)20242023
Stock options1,254 1,357 
Restricted stock units428 332 
Performance share units342 241 

Note 8. Inventories
The components of total inventories are summarized as follows:
(in millions)March 31,
2024
December 31,
2023
Finished goods$367 $355 
Work in process112 102 
Raw materials560 561 
Total inventories$1,039 $1,018 

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Note 9. Goodwill and Other Intangible Assets
Goodwill    
As a result of the change in reportable segments disclosed in Note 1, "Background and Basis of Presentation," goodwill was reallocated amongst segments. This reallocation and changes in the carrying value of goodwill by reportable segment for the three months ended March 31, 2024 are as follows:
(in millions)Water
Infrastructure
Applied WaterMeasurement and Control SolutionsWater Solutions and ServicesTotal
Balance as of December 31, 2023$2,434 $895 $1,739 $2,519 $7,587 
Reallocation(287)(64)351  
Balance as of January 1, 20242,147 895 1,675 2,870 7,587 
Activity in 2024
Foreign currency and other(64)(5)(15)6 (78)
Balance as of March 31, 2024$2,083 $890 $1,660 $2,876 $7,509 
The Company has applied the acquisition method of accounting in accordance with ASC 805 and recognized assets acquired and liabilities assumed of Evoqua at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. We have preliminarily allocated goodwill to segments of the Company that are expected to benefit from the synergies of the acquisition. As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments to the amount of goodwill allocated to each segment may be necessary.
Other Intangible Assets
Information regarding our other intangible assets is as follows:
March 31, 2024December 31, 2023
(in millions)Carrying
Amount
Accumulated
Amortization
Net
Intangibles
Carrying
Amount
Accumulated
Amortization
Net
Intangibles
Customer and distributor relationships$2,161 $(498)$1,663 $2,172 $(475)$1,697 
Proprietary technology and patents291 (147)144 292 (141)151 
Trademarks187 (100)87 188 (96)92 
Software601 (347)254 598 (335)263 
Other196 (55)141 201 (41)160 
Indefinite-lived intangibles165  165 166  166 
Other Intangibles$3,601 $(1,147)$2,454 $3,617 $(1,088)$2,529 
Amortization expense related to finite-lived intangible assets was $73 million and $32 million for the three-month periods ended March 31, 2024 and 2023, respectively.
During the first quarter of 2024, we recognized a $1 million impairment charge for internally developed software within Corporate.
During the first quarter of 2023, we determined that internally developed in-process software within our Measurement and Control Solutions segment was impaired as a result of actions taken to prioritize strategic investments and we therefore recognized an impairment charge of $2 million.
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Note 10. 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 for which we enter into cash flow hedges relate to the Euro, Swedish Krona, British Pound, Canadian Dollar, Polish Zloty, Australian Dollar, and Chinese Yuan. We had foreign exchange contracts with purchased notional amounts totaling $488 million and $29 million as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, 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, sell Canadian Dollar and purchase Euro, purchase Polish Zloty and sell Euro, sell Australian Dollar and purchase Euro, purchase U.S. Dollar and sell Canadian Dollar, purchase Canadian Dollar and sell U.S. Dollar, and purchase U.S. Dollar and sell Chinese Yuan. The purchased notional amounts associated with these currency derivatives are $178 million, $141 million, $61 million, $32 million, $28 million, $19 million, $18 million, $7 million, and $4 million, respectively. As of December 31, 2023, our most significant foreign currency derivatives included contracts to purchase U.S. Dollar and sell Chinese Yuan and to purchase U.S. Dollar and sell Canadian Dollar. The purchased notional amounts associated with these currency derivatives were $19 million and $10 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, 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 $1,641 million and $1,691 million as of March 31, 2024 and December 31, 2023, respectively.
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The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Income Statements and Statements of Comprehensive Income. Items in the table below reflect changes in "Other comprehensive loss" ("OCL") within the Statements of Comprehensive Income:
Three Months Ended
March 31,
(in millions)20242023
Cash Flow Hedges
Foreign Exchange Contracts
Amount of (loss) recognized in OCL$(3)$4 
Amount of loss reclassified from OCL into Revenue 3 
Amount of loss reclassified from OCL into Cost of revenue1 2 
Net Investment Hedges
Cross-Currency Swaps
Amount of gain (loss) recognized in OCL$40 $(22)
Amount of income recognized in Interest expense8 7 
As of March 31, 2024, $3 million of net losses on cash flow hedges are expected to be reclassified into earnings in the next 12 months.
As of March 31, 2024, no gains or losses on the net investment hedges are expected to be reclassified into earnings over their duration.
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)March 31,
2024
December 31,
2023
Derivatives designated as hedging instruments
Assets
Cash Flow Hedges
  Prepaid and other current assets$1 $ 
Net Investment Hedges
Other non-current assets$25 $9 
Liabilities
Cash Flow Hedges
  Accrued and other current liabilities$(4)$ 
Net Investment Hedges
Other non-current accrued liabilities$(29)$(54)

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Note 11. Current Liabilities
The components of total Accrued and other current liabilities are as follows:
(in millions)March 31,
2024
December 31,
2023
Compensation and other employee-benefits$293 $403 
Customer-related liabilities379 370 
Accrued taxes144 170 
Lease liabilities 104 106 
Accrued warranty costs43 45 
Other accrued liabilities135 127 
Total accrued and other current liabilities$1,098 $1,221 
The Company facilitates the opportunity for suppliers to participate in voluntary supply chain financing programs with third-party financial institutions. Xylem agrees on commercial terms, including payment terms, with suppliers regardless of program participation. The Company does not determine the terms or conditions of the arrangement between suppliers and the third-party financial institutions. Participating suppliers are paid directly by the third-party financial institution. Xylem pays the third-party financial institution the stated amount of confirmed invoices from its designated suppliers at the original invoice amount on the original maturity dates of the invoices, ranging from 45-180 days. Xylem does not pay fees related to these programs. Xylem or the third-party financial institutions may terminate the agreements upon at least 30 days’ notice. The total outstanding balance presented within "Accounts payable" on our Condensed Consolidated Balance Sheets under these programs is $262 million and $176 million as of March 31, 2024, and December 31, 2023, respectively.
The table below provides changes in the confirmed obligations outstanding related to our supplier financing programs over each period:
(in millions)2024
Confirmed obligations outstanding – January 1$176 
Invoices confirmed$281 
Confirmed invoices paid$(193)
Foreign currency and other$(2)
Confirmed obligations outstanding – March 31$262 

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Note 12. Credit Facilities and Debt
Total debt outstanding is summarized as follows:
(in millions)March 31,
2024
December 31,
2023
3.250% Senior Notes due 2026 (a)
$500 $500 
1.950% Senior Notes due 2028 (a)
500 500 
2.250% Senior Notes due 2031 (a)
500 500 
4.375% Senior Notes due 2046 (a)
400 400 
Equipment Financing due 2024 to 2032117 123 
Term loan270 278 
Debt issuance costs and unamortized discount (b)(17)(17)
Total debt2,270 2,284 
Less: short-term borrowings and current maturities of long-term debt285 16 
Total long-term debt$1,985 $2,268 
(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 2026 was $478 million and $482 million as of March 31, 2024 and December 31, 2023, respectively. The fair value of our Senior Notes due 2028 was $449 million and $453 million as of March 31, 2024 and December 31, 2023, respectively. The fair value of our Senior Notes due 2031 was $422 million and $429 million as of March 31, 2024 and December 31, 2023, respectively. The fair value of our Senior Notes due 2046 was $344 million and $349 million as of March 31, 2024 and December 31, 2023, respectively.
(b)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.
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 March 31, 2024, we are in compliance with all covenants for the Green Bond.
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 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.
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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 2026 and the Senior Notes due 2046 is payable on May 1 and November 1 of each year. As of March 31, 2024, we are in compliance with all covenants for the Senior Notes.
Credit Facilities
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 provided 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. On March 1, 2023, Xylem terminated the 2019 Credit Facility among the Company, certain lenders and Citibank, N.A. as Administrative Agent as a result of signing the 2023 Five-Year Revolving Credit Facility.
2023 Five-Year Revolving Credit Facility
On March 1, 2023, Xylem entered into a five-year revolving credit facility (the "2023 Credit Facility") with Citibank, N.A., as Administrative Agent, and a syndicate of lenders. The 2023 Credit Facility provides for an aggregate principal amount of up to $1 billion (available in U.S. Dollars and in Euros), with increases of up to $300 million for a maximum aggregate principal amount of $1.3 billion at the request of Xylem and with the consent of the institutions providing such increased commitments.
Interest on all loans under the 2023 Credit Facility is payable either quarterly or at the expiration of any Term SOFR or EURIBOR interest period applicable thereto. Borrowings accrue interest at a rate equal to, at Xylem's election, a base rate or an adjusted Term SOFR or EURIBOR rate plus an applicable margin. The 2023 Credit Facility includes customary provisions for implementation of replacement rates for Term SOFR-based and EURIBOR-based loans. The 2023 Credit Facility also includes a pricing grid that determines the applicable margin based on Xylem's credit rating, with a further adjustment based on Xylem's achievement of certain Environmental, Social and Governance ("ESG") key performance indicators. 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 Xylem's 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 with a further adjustment based on Xylem's achievement of certain ESG key performance indicators.
The 2023 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. In accordance with the terms of the agreement to the 2023 Credit Facility, Xylem may not exceed a maximum leverage ratio of 4.00 to 1.00 for a period of four consecutive fiscal quarters beginning with the fiscal quarter during which a material acquisition is consummated and a maximum leverage ratio of 3.50 to 1.00 thereafter for a minimum of four fiscal quarters before another material acquisition is consummated. In addition, the 2023 Credit Facility 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 2023 Credit Facility also contains customary events of default. Finally, Xylem has the ability to designate subsidiaries that can borrow under the 2023 Credit Facility, subject to certain requirements and conditions set forth in the 2023 Credit Facility. As of March 31, 2024, the 2023 Credit Facility was undrawn, and we are in compliance with all revolver covenants. The 2023 Credit Facility has availability of $1 billion, comprised of the $1 billion aggregate principal as of March 31, 2024.
Term Loan Facility
On May 9, 2023, the Company’s subsidiary, Xylem Europe GmbH (the “borrower”) entered into a twenty four-month €250 million (approximately $270 million) term loan facility (the “Term Facility”) the terms of which are set forth in a term loan agreement, among the borrower, the Company, as parent guarantor and ING Bank. The Company has entered into a parent guarantee in favor of ING Bank also dated May 9, 2023 to secure all present and future obligations of the borrower under the Term Loan Agreement. The net cash proceeds were used to repay a portion of Evoqua’s indebtedness pursuant to the Merger Agreement.
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On April 19, 2024 our Term Loan Facility was settled with cash on hand for a total of €250 million (approximately $270 million). As of March 31, 2024, the Term Loan Facility is reported within current maturities of long term debt on the Consolidated Balance Sheet.
Equipment Financing
As a result of the Evoqua acquisition, the Company has secured financing agreements that require providing a security interest in specified equipment and, in some cases, the underlying contract and related receivables. As of March 31, 2024, the gross and net amounts of those assets are included on the Consolidated Balance Sheets as follows:
March 31, 2024
(in millions)GrossNet
Property, plant, and equipment, net $75 $69 
Receivables, net 3 3 
Prepaid and other current assets 5 5 
Other non-current assets 58 58 
$141 $135 
Commercial Paper
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 $1 billion inclusive of the 2023 Credit Facility. As of March 31, 2024 and December 31, 2023, none of the Company's $600 million U.S. Dollar commercial paper program was outstanding, respectively. The net cash proceeds from issuance of commercial paper were used to repay a portion of Evoqua’s indebtedness pursuant to the Merger Agreement. 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 $540 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 March 31, 2024 and December 31, 2023, 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.
Receivables Securitization Program
On April 1, 2021, Evoqua Finance LLC (“Evoqua Finance”), now an indirect wholly-owned subsidiary of the Company, entered into an accounts receivable securitization program (the “Receivables Securitization Program”) consisting of, among other agreements, (i) a Receivables Financing Agreement (as amended, the “Receivables Financing Agreement”) among Evoqua Finance, as the borrower, the lenders from time to time party thereto (the “Receivables Financing Lenders”), PNC Bank, National Association ("PNC"), as administrative agent, EWT LLC, as initial servicer, and PNC Capital Markets LLC, as structuring agent, pursuant to which the lenders have made available to Evoqua Finance a receivables finance facility in an amount up to $150 million, (ii) a Sale and Contribution Agreement (as amended, the “Sale and Contribution Agreement”) among Evoqua Finance, as purchaser, EWT LLC, as initial servicer and as an originator, and Neptune Benson, Inc., an indirectly wholly-owned subsidiary of the Company, as an originator (together with EWT LLC, the “Originators”), and (iii) a Performance Guaranty of Xylem Inc. dated as of May 24, 2023 (the “Performance Guaranty”) in favor of PNC and for the benefit of PNC and the other secured parties under the Receivables Financing Agreement that replaced the performance guaranty of EWT Holdings II Corp. and EWT Holdings III Corp dated as of April 1, 2021.
The Receivables Securitization Program contains certain customary representations, warranties, affirmative covenants, and negative covenants, subject to certain cure periods in some cases, including the eligibility of the receivables being sold by the Originators and securing the loans made by the Receivables Financing Lenders, as well as customary reserve requirements, events of default, termination events, and servicer defaults.
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On July 20, 2023, the Receivables Financing Agreement, the Sale and Contribution Agreement and the Performance Guaranty and the other transaction documents under the Receivables Financing Program were terminated and all outstanding obligations for principal, interest, and fees under the agreement were paid in full.
Note 13. Post-retirement Benefit Plans
The components of net periodic benefit cost for our defined benefit pension plans are as follows:
Three Months Ended
 March 31,
(in millions)20242023
Domestic defined benefit pension plans:
Service cost$1 $1 
Interest cost1 1 
Expected return on plan assets(1)(1)
Net periodic benefit cost$1 $1 
International defined benefit pension plans:
Service cost$2 $2 
Interest cost4 4 
Expected return on plan assets(3)(3)
Amortization of actuarial (gain) loss (1)
Net periodic benefit cost$3 $2 
Total net periodic benefit cost$4 $3 
The components of net periodic benefit cost, other than the service cost component are included in the line item "Other non-operating income, 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 (loss)" of less than $1 million, for both the three months ended March 31, 2024 and 2023, respectively.
We contributed $4 million and $5 million to our defined benefit plans for the three months ended March 31, 2024 and 2023, respectively. Additional contributions ranging between approximately $28 million and $32 million are expected to be made during the remainder of 2024.
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Note 14. Equity
The following table shows the changes in stockholders' equity for the three months ended March 31, 2024:
(in millions)Common
Stock
Capital in Excess of Par ValueRetained
Earnings
Accumulated Other
Comprehensive
Income (Loss)
Treasury StockNon-Controlling InterestTotal
Balance at January 1, 2024$3 $8,564 $2,601 $(269)$(733)$10 $10,176 
Net income   153    153 
Other comprehensive income, net   (76)  (76)
Other activity     (2)(2)
Dividends declared ($0.36 per share)
  (87)   (87)
Stock incentive plan activity 54   (15) 39 
Balance at March 31, 2024$3 $8,618 $2,667 $(345)$(748)$8 $10,203 
The following table shows the changes in stockholders' equity for the three months ended March 31, 2023:
Common
Stock

Capital in Excess of Par Value
Retained
Earnings
Accumulated Other
Comprehensive
Income (Loss)
Treasury StockNon-Controlling InterestTotal
Balance at January 1, 2023$2 $2,134 $2,292 $(226)$(708)$9 $3,503 
Net income — — 99 — — — 99 
Other comprehensive loss, net— — — 35 — — 35 
Other activity— —  — — 2 2 
Dividends declared ($0.33 per share)
— — (60)— — — (60)
Stock incentive plan activity— 18 — — (8)— 10 
Balance at March 31, 2023$2 $2,152 $2,331 $(191)$(716)$11 $3,589 
Note 15. Share-Based Compensation Plans
Share-based compensation expense was $18 million and $12 million during the three months ended March 31, 2024 and 2023, respectively. The unrecognized compensation expense related to our stock options, restricted stock units and performance share units was $11 million, $59 million and $25 million, respectively, at March 31, 2024 and is expected to be recognized over a weighted average period of 2.2, 2.1 and 2.2 years, respectively. The amount of cash received from the exercise of stock options was $33 million and $7 million for the three months ended March 31, 2024 and 2023, respectively.
On May 24, 2023, there were an additional 2.7 million shares registered for issuance. As of March 31, 2024, there were approximately 5.5 million shares of common stock available for future awards.
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Stock Option Grants
The following is a summary of the changes in outstanding stock options for the three months ended March 31, 2024:
Share units
(in thousands)
Weighted
Average
Exercise
Price / Share
Weighted Average
Remaining
Contractual
Term (Years)
Aggregate Intrinsic Value
(in millions)
Outstanding at January 1, 20242,150 $69.34 5.9$97 
Granted177 127.94 
Exercised(636)51.72 
Outstanding at March 31, 20241,691 $