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021-01-012021-03-31

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, 2022
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.)
1 International Drive, Rye Brook, NY 10573
(Address of principal executive offices) (Zip code)
(914) 323-5700
(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
2.250% Senior Notes due 2023XYL23New 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 29, 2022, there were 180,092,712 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-
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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 31,20222021
Revenue$1,272 $1,256 
Cost of revenue805 766 
Gross profit467 490 
Selling, general and administrative expenses304 301 
Research and development expenses52 50 
Restructuring and asset impairment charges  6 
Operating income111 133 
Interest expense13 21 
Other non-operating (expense) income, net(1)2 
Gain from sale of business1  
Income before taxes98 114 
Income tax expense16 27 
Net income$82 $87 
Earnings per share:
Basic$0.45 $0.49 
Diluted$0.45 $0.48 
Weighted average number of shares:
Basic180.2 180.3 
Diluted181.0 181.5 
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 31,20222021
Net income$82 $87 
Other comprehensive income (loss), before tax:
Foreign currency translation adjustment(3)10 
Net change in derivative hedge agreements:
Unrealized gain (loss)(6)(11)
Amount of loss (gain) reclassified into net income2 (3)
Net change in post-retirement benefit plans:
Amortization of prior service credit (1)
Amortization of net actuarial loss into net income4 6 
Other comprehensive income (loss), before tax(3)1 
Income tax expense (benefit) related to items of other comprehensive income (loss)3 14 
Other comprehensive income (loss), net of tax(6)(13)
Comprehensive income$76 $74 


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,
2022
December 31,
2021
  
ASSETS
Current assets:
Cash and cash equivalents$1,117 $1,349 
Receivables, less allowances for discounts, returns and credit losses of $37 and $44 in 2022 and 2021, respectively
1,011 953 
Inventories804 700 
Prepaid and other current assets186 158 
Total current assets3,118 3,160 
Property, plant and equipment, net636 644 
Goodwill2,782 2,792 
Other intangible assets, net1,002 1,016 
Other non-current assets681 664 
Total assets$8,219 $8,276 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$652 $639 
Accrued and other current liabilities713 752 
Short-term borrowings and current maturities of long-term debt555  
Total current liabilities1,920 1,391 
Long-term debt1,878 2,440 
Accrued post-retirement benefits432 438 
Deferred income tax liabilities283 287 
Other non-current accrued liabilities500 494 
Total liabilities5,013 5,050 
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common Stock – par value $0.01 per share:
Authorized 750.0 shares, issued 195.9 shares and 195.6 shares in 2022 and 2021, respectively
2 2 
Capital in excess of par value2,099 2,089 
Retained earnings2,181 2,154 
Treasury stock – at cost 15.8 shares and 15.2 shares in 2022 and 2021, respectively
(707)(656)
Accumulated other comprehensive loss(377)(371)
Total stockholders’ equity3,198 3,218 
Non-controlling interests8 8 
Total equity3,206 3,226 
Total liabilities and stockholders’ equity$8,219 $8,276 


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 31,20222021
Operating Activities
Net income$82 $87 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation28 30 
Amortization30 32 
Share-based compensation9 9 
Restructuring and asset impairment charges 6 
Gain from sale of business(1) 
Other, net3 2 
Payments for restructuring(3)(12)
Changes in assets and liabilities (net of acquisitions):
Changes in receivables(64)(42)
Changes in inventories(106)(46)
Changes in accounts payable20 (29)
Other, net(79)(63)
Net Cash – Operating activities(81)(26)
Investing Activities
Capital expenditures(49)(39)
Proceeds from sale of business1  
Proceeds from the sale of property, plant and equipment1 1 
Cash received from investments4  
Cash paid for investments(6) 
Other, net6 7 
Net Cash – Investing activities(43)(31)
Financing Activities
Repurchase of common stock(51)(67)
Proceeds from exercise of employee stock options1 3 
Dividends paid(55)(51)
Other, net(1) 
Net Cash – Financing activities(106)(115)
Effect of exchange rate changes on cash(2)(15)
Net change in cash and cash equivalents(232)(187)
Cash and cash equivalents at beginning of year1,349 1,875 
Cash and cash equivalents at end of period$1,117 $1,688 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest$23 $41 
Income taxes (net of refunds received)$15 $28 


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 three 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, 2021 ("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 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 macroeconomic disruption. The COVID-19 pandemic also has caused increased uncertainty in estimates and assumptions affecting the condensed consolidated financial statements. Actual results could differ from these 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.


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Note 2. Revenue
Disaggregation of Revenue
The following table illustrates the sources of revenue:
Three Months Ended
March 31,
(in millions)20222021
Revenue from contracts with customers$1,222 $1,211 
Lease Revenue50 45 
Total$1,272 $1,256 

The following table reflects revenue from contracts with customers by application.
Three Months Ended
March 31,
(in millions)20222021
Water Infrastructure
     Transport$393 $370 
     Treatment90 94 
Applied Water*
     Commercial Building Services161 148 
Residential Building Services73 64 
     Industrial Water191 181 
Measurement & Control Solutions
     Water265 283 
     Energy49 71 
Total$1,222 $1,211 
*Items in the prior year footnote disclosures for Applied Water were reclassified to conform to the current classification.
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The following table reflects revenue from contracts with customers by geographical region.
Three Months Ended
March 31,
(in millions)20222021
Water Infrastructure
     United States$147 $123 
Western Europe186 173 
Emerging Markets (a)101 122 
Other49 46 
Applied Water
     United States221 194 
Western Europe94 92 
Emerging Markets (a)80 78 
Other30 29 
Measurement & Control Solutions
     United States181 213 
Western Europe69 74 
Emerging Markets (a)44 46 
Other20 21 
Total$1,222 $1,211 

(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")

9


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, 2022$125 $164 
  Additions, net34 62 
  Revenue recognized from opening balance (50)
  Billings transferred to accounts receivable (39)
  Other(2)(1)
Balance at March 31, 2022$118 $175 
Balance at January 1, 2021$117 $166 
  Additions, net43 67 
  Revenue recognized from opening balance— (71)
  Billings transferred to accounts receivable(50)— 
  Other(1) 
Balance at March 31, 2021$109 $162 
(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, 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 $379 million. 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 3. Restructuring and Asset Impairment Charges
Restructuring
From time to time, the Company will incur costs related to restructuring actions in order to optimize our cost base and more strategically position itself. During the three months ended March 31, 2022, we incurred restructuring charges that were less than $1 million.
During the three months ended March 31, 2021, we recognized restructuring charges of $5 million of which $4 million relates to actions previously announced in 2020 arising as a result of the COVID-19 pandemic. These charges included reduction of headcount across all segments and asset impairments within our Measurement & Control Solutions segment.
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The following table presents the components of restructuring expense and asset impairment charges:
Three Months Ended
March 31,
(in millions)20222021
By component:
Severance and other charges$ $4 
Asset impairment 1 
Total restructuring charges$ $5 
Asset impairment charges 1 
Total restructuring and asset impairment charges$ $6 
By segment:
Water Infrastructure$ $4 
Applied Water 1 
Measurement & Control Solutions 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 three months ended March 31, 2022 and 2021:
(in millions)20222021
Restructuring accruals - January 1$7 $29 
Restructuring charges, net 5 
Cash payments(3)(12)
Asset impairment (1)
Restructuring accruals - March 31$4 $21 
By segment:
Water Infrastructure$ $2 
Applied Water 1 
Measurement & Control Solutions3 14 
Regional selling locations (a)1 4 
Corporate and other  
(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.
The following table presents expected restructuring spend in 2022 and thereafter:
(in millions)Water InfrastructureApplied WaterMeasurement & Control SolutionsCorporateTotal
Actions Commenced in 2021:
Total expected costs$4 $ $1 $ $5 
Costs incurred during 20213    3 
Costs incurred during Q1 2022     
Total expected costs remaining$1 $ $1 $ $2 

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

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 March 31, 2022 was $16 million resulting in an effective tax rate of 16.4%, compared to a $27 million expense resulting in an effective tax rate of 23.3% for the same period in 2021. The effective tax rate for the three-month period ended March 31, 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.
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, in consultation with external legal advisors, believes it is more likely than not that Xylem will prevail on the proposed assessment and is vigorously defending our position through litigation; however, there can be no assurance that any final determination by the authorities will not be materially different than our position. As of March 31, 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
 March 31,
20222021
Net income (in millions)$82 $87 
Shares (in thousands):
Weighted average common shares outstanding180,205 180,252 
Add: Participating securities (a)26 15 
Weighted average common shares outstanding — Basic180,231 180,267 
Plus incremental shares from assumed conversions: (b)
Dilutive effect of stock options587 794 
Dilutive effect of restricted stock units and performance share units203 413 
Weighted average common shares outstanding — Diluted181,021 181,474 
Basic earnings per share$0.45 $0.49 
Diluted earnings per share$0.45 $0.48 
(a)Restricted stock unit awards 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.
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(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
 March 31,
(in thousands)20222021
Stock options1,335 1,249 
Restricted stock units330 285 
Performance share units233 352 

Note 6. Inventories
The components of total inventories are summarized as follows:
(in millions)March 31,
2022
December 31,
2021
Finished goods$282 $236 
Work in process71 58 
Raw materials451 406 
Total inventories$804 $700 

Note 7. Goodwill and Other Intangible Assets
Goodwill    
Changes in the carrying value of goodwill by reportable segment for the three months ended March 31, 2022 are as follows:
(in millions)
Water
Infrastructure
Applied WaterMeasurement & Control SolutionsTotal
Balance as of January 1, 2022$656 $515 $1,621 $2,792 
Activity in 2022
Foreign currency and other(3)(2)(5)(10)
Balance as of March 31, 2022$653 $513 $1,616 $2,782 

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Other Intangible Assets
Information regarding our other intangible assets is as follows:
March 31, 2022December 31, 2021
(in millions)
Carrying
Amount
Accumulated
Amortization
Net
Intangibles
Carrying
Amount
Accumulated
Amortization
Net
Intangibles
Customer and distributor relationships$927 $(468)$459 $929 $(456)$473 
Proprietary technology and patents201 (144)57 201 (142)59 
Trademarks141 (75)66 141 (72)69 
Software564 (314)250 548 (303)245 
Other21 (18)3 21 (18)3 
Indefinite-lived intangibles167  167 167  167 
Other Intangibles$2,021 $(1,019)$1,002 $2,007 $(991)$1,016 
Amortization expense related to finite-lived intangible assets was $30 million and $32 million for the three-month periods ended March 31, 2022 and 2021, respectively.

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 $457 million and $301 million as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 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, sell Canadian Dollar and purchase Euro, purchase U.S. Dollar and sell Canadian Dollar, sell Australian Dollar and purchase Euro, and to purchase Polish Zloty and sell Euro. The purchased notional amounts associated with these currency derivatives are $186 million, $140 million, $49 million, $23 million, $22 million, $20 million and $17 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 we entered into additional cross-currency swaps. The total notional amount of derivative instruments designated as net investment hedges was $1,135 million and $1,151 million as of March 31, 2022 and December 31, 2021, respectively.
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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 the entirety of the outstanding balance, or $556 million and $563 million as of March 31, 2022 and December 31, 2021, respectively, net of unamortized discount, as a hedge of a net investment in certain foreign subsidiaries.
The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Income Statements and Statements of Comprehensive Income:
Three Months Ended
 March 31,
(in millions)20222021
Cash Flow Hedges
Foreign Exchange Contracts
Amount of (loss) recognized in OCI$(6)$(11)
Amount of loss (gain) reclassified from OCI into revenue2 (2)
Amount of (gain) reclassified from OCI into cost of revenue (1)
Net Investment Hedges
Cross-Currency Swaps
Amount of gain recognized in OCI$1 $30 
Amount of income recognized in Interest Expense6 5 
Foreign Currency Denominated Debt
Amount of gain recognized in OCI$8 $26 
As of March 31, 2022, $7 million of net losses on cash flow hedges are expected to be reclassified into earnings in the next 12 months.
As of March 31, 2022, 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,
2022
December 31,
2021
Derivatives designated as hedging instruments
Assets
Cash Flow Hedges
  Other current assets$1 $ 
Net Investment Hedges
Other non-current assets$5 $8 
Liabilities
Cash Flow Hedges
  Other current liabilities$(6)$(1)
Net Investment Hedges
Other non-current accrued liabilities$(22)$(26)
The fair value of our long-term debt, due in 2023, designated as a net investment hedge was $564 million and $577 million as of March 31, 2022 and December 31, 2021, respectively.

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Note 9. Accrued and Other Current Liabilities
The components of total accrued and other current liabilities are as follows:
(in millions)March 31,
2022
December 31,
2021
Compensation and other employee-benefits$216 $273 
Customer-related liabilities197 186 
Accrued taxes89 86 
Lease liabilities 73 69 
Accrued warranty costs38 40 
Other accrued liabilities100 98 
Total accrued and other current liabilities$713 $752 

Note 10. Credit Facilities and Debt
Total debt outstanding is summarized as follows:
(in millions)March 31,
2022
December 31,
2021
2.250% Senior Notes due 2023 (a)557 564 
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 
Debt issuance costs and unamortized discount (b)(24)(24)
Total debt2,433 2,440 
Less: short-term borrowings and current maturities of long-term debt555  
Total long-term debt$1,878 $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 2023 was $564 million and $577 million as of March 31, 2022 and December 31, 2021, respectively. The fair value of our Senior Notes due 2026 was $499 million and $537 million as of March 31, 2022 and December 31, 2021 respectively. The fair value of our Senior Notes due 2028 was $463 million and $497 million as of March 31, 2022 and December 31, 2021, respectively. The fair value of our Senior Notes due 2031 was $454 million and $496 million as of March 31, 2022 and December 31, 2021, respectively. The fair value of our Senior Notes due 2046 was $413 million and $481 million as of March 31, 2022 and December 31, 2021, 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.
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Interest on the Green Bond is payable on January 30 and July 30 of each year. As of March 31, 2022, we are in compliance with all covenants for the Green Bond.
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 is 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 March 31, 2022, 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 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. As of March 31, 2022, the 2019 Credit Facility was undrawn and we are in compliance with all revolver covenants.
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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 $800 million inclusive of the 2019 Credit Facility. As of March 31, 2022 and December 31, 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 $557 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, 2022 and December 31, 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
 March 31,
(in millions)20222021
Domestic defined benefit pension plans:
Service cost$1 $1 
Interest cost1 1 
Expected return on plan assets(2)(2)
Amortization of net actuarial loss1 1 
Net periodic benefit cost$1 $1 
International defined benefit pension plans:
Service cost$3 $4 
Interest cost4 3 
Expected return on plan assets(4)(4)
Amortization of net actuarial loss3 4 
Net periodic benefit cost$6 $7 
Total net periodic benefit cost$7 $8 
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 months ended March 31, 2022 and 2021, respectively.
We contributed $5 million and $6 million to our defined benefit plans during the three months ended March 31, 2022 and 2021, respectively. Additional contributions ranging between approximately $11 million and $19 million are expected to be made during the remainder of 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 in mid-2022.

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Note 12. Equity
The following table shows the changes in stockholders' equity for the three months ended March 31, 2022:
Common
Stock
Capital in Excess of Par ValueRetained
Earnings
Accumulated Other
Comprehensive Loss
Treasury StockNon-Controlling InterestTotal
Balance at January 1, 2022$2 $2,089 $2,154 $(371)$(656)$8 $3,226 
Net income   82    82 
Other comprehensive loss, net   (6)  (6)
Dividends declared ($0.30 per share)
  (55)   (55)
Stock incentive plan activity 10   (6) 4 
Repurchase of common stock    (45) (45)
Balance at March 31, 2022$2 $2,099 $2,181