Xylem (XYL) 10-K risk factor changes: FY2019 vs FY2018

*In evaluating our business, [removed: each of] the following [removed: risks] [added: discussion of significant factors, events, and uncertainties that make an investment in our securities risky] should be carefully considered, along with all of the other information in this Report and in our other filings with the SEC.

We offer our [added: technologies,] products and services in competitive markets.

We believe the principal points of competition in our markets are product and service performance, quality and reliability, innovation, speed to market with new or disruptive [removed: technologies,] [added: technologies and business models,] application expertise, brand reputation, energy efficiency, product [added: security, product] life cycle cost, timeliness of delivery, proximity of service centers, effectiveness of our distribution [removed: channels] [added: channels, price] and [removed: price.][added: customers’ experience in conducting business with us.]

Maintaining and improving our competitive position will require successful management of these [removed: factors,] [added: factors in a business environment with increasingly rapid rates of change and disruption,] including [added: our] continued investment [removed: by us] in [added: talent,] manufacturing, technology and innovation, research and development, engineering, [added: sales and] marketing, customer service and support, and our distribution networks.

Our future growth rate depends upon a number of factors, including our ability [removed: to] [added: to:] (i) [removed: identify emerging technological trends in our target end-markets, (ii)] develop and maintain competitive products, [removed: services and] [added: services,] business models and [added: customer experience to address emerging trends and customer needs in our target markets, (ii)] defend our market share against an ever-expanding number of [removed: competitors including] [added: competitors,] many [added: of which are] new and non-traditional [removed: competitors,] [added: competitors from outside our industry such as major technology firms, or those out of emerging markets,] (iii) enhance our [removed: products] [added: product] and [removed: services] [added: service] offerings by adding innovative features or disruptive technologies that differentiate them from those of our competitors and prevent commoditization, (iv) develop, manufacture and bring compelling new products and services to market quickly and cost-effectively, and (v) attract, develop and retain individuals with the requisite [added: innovation and] technical expertise and understanding of customers’ needs to develop new technologies and introduce new products and services.

Our competitors or third parties from outside [removed: of] our industry may develop disruptive [removed: technologies or] [added: technologies,] products and services [added: more quickly than us or] that are superior to ours, may develop [added: new or] more efficient or effective methods [removed: of providing] [added: or business models to provide technologies,] products and [removed: services] [added: services,] or may adapt more quickly than we do to new [removed: or] [added: trends,] disruptive technologies or evolving customer requirements.

The failure of our technologies, products or services to maintain and gain market acceptance due to more attractive [removed: offerings] [added: offerings, as well as customers’ slower-than-expected adoption of and investment in our new and innovative technologies] could significantly reduce our revenues or market share and adversely affect our competitive standing and prospects.

Failure to continue competing successfully or to win large contracts could adversely affect our business, financial [removed: condition] [added: condition, cash flow] or results of operations.

Our results of operations and financial condition [removed: may be adversely affected by] [added: are subject to] global [removed: economic] [added: economic, geopolitical] and financial market conditions.

In [removed: 2018, 47%, 25%] [added: 2019, 49%, 24%] and 20% of our total revenue was from customers located in the United States, western Europe and emerging markets, respectively.

Important factors impacting our businesses include the overall strength of these economies and our customers’ confidence in both local and global macro-economic conditions; [added: instability and uncertainties from the global geopolitical environment;] industrial and private sector spending, federal, state, local and municipal governmental fiscal and trade policies; the strength of the residential and commercial real estate markets; interest rates; availability of commercial financing for our customers and end-users; the availability of funding for our public sector customers; and unemployment rates.

A slowdown or prolonged downturn in [added: the global economy or] our markets [added: has in the past, and] could have [added: in the future] a material adverse effect on our business, financial [removed: condition] [added: condition, cash flow] and results of operations.

[removed: Economic] [added: We are exposed to economic, geopolitical] and other risks associated with [added: our] international sales and [removed: operations could adversely affect our business.][added: operations.]

In [removed: 2018, 53%] [added: 2019, 51%] of our total revenue was from customers outside the United States, with 20% of total revenue generated in emerging markets.

Many of our manufacturing operations, employees and suppliers are located [added: outside of the United States.]

| • | instability and uncertainties arising from the global geopolitical environment, [removed: such as] [added: including] economic nationalism, populism, [added: and increasing] protectionism and anti-global sentiment; |

| • | [removed: outbreak] [added: threat, outbreak, uncertainty] or escalation of insurrection, armed conflict, [removed: terrorism] [added: terrorism, pandemics] or war. |

Changes in the geopolitical or economic environments in the countries [added: and regions] in which we operate could have a material adverse effect on our financial condition, results of operations or cash flows.

For example, changes in [removed: U.S.] [added: United States] policy regarding international trade, including import and export regulation and international trade agreements, could [removed: also] negatively impact our business.

[removed: In 2018, the U.S. imposed] [added: The United States] tariffs [added: imposed] on certain goods imported from China and certain other [removed: countries, which] [added: countries] has resulted in retaliatory tariffs by China and other countries.

Additional tariffs imposed by the [removed: U.S.] [added: United States] on a broader range of [removed: imports,] [added: imports from China] or [added: other countries' goods, or] further retaliatory trade measures taken by China or other countries in response, could result in [removed: an] [added: a continued] increase in supply chain costs that we may not be able to offset or may otherwise adversely impact our financial condition and results of operations.

Additionally, we continue to monitor [removed: Brexit and its] [added: the] potential impacts [added: Brexit] on our results of operations and financial condition.

If the United [removed: Kingdom's membership in] [added: Kingdom and] the European Union [removed: terminates without] [added: cannot conclude] an agreement [added: on their future relationship before the end of the transition period] (referred to as a “hard Brexit”), [removed: there could] [added: trade would] be [added: based on World Trade Organization rules which would likely lead to] increased costs from re-imposition of tariffs on trade between the United Kingdom and European Union, increased transportation costs, shipping delays because of the need for customs inspections and procedures and shortages of certain goods.

The United Kingdom will also need to negotiate its own [removed: tax and] trade treaties with countries all over the world, which could take years to complete.

Further, any payment of distributions, loans or advances to us by our foreign subsidiaries could be subject to restrictions on, or taxation of, dividends [removed: on] [added: or] repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate.

In addition, emerging markets pose other uncertainties, including the difficulty of enforcing agreements, challenges collecting receivables, [removed: protection of] [added: protecting] our intellectual property and other assets, pressure on the pricing of our products and services, higher business conduct risks, ability to hire and retain qualified talent and risks of political instability.

We cannot predict the impact such events might have on our business, financial [removed: condition] [added: condition, cash flow] and results of operations.

Our [removed: business] [added: business, products and services] could be adversely affected by cyber threats or other interruptions in information technology, communications networks and operations.

[removed: Our business operations] [added: We also] rely on [added: third parties’] information technology [removed: and communications networks, including those operated by third parties,] [added: systems] to [removed: process, transmit and store our electronic information or our customers’ electronic information, and] manage or support a variety of [added: critical] business processes [removed: or] [added: and] activities.

Regardless of protection measures, essentially all systems are susceptible to [added: damage,] disruption [added: or shut-down] due to cybersecurity [removed: attacks] [added: attacks,] including [added: ransomware,] denial-of-service, computer viruses and security breaches, [removed: insider risk,] [added: as well as human error or malfeasance,] equipment or system failure, [added: including due to maintenance, obsolescence or age,] vandalism, natural disasters, [added: fire,] power [added: or communication] outages, shutdown, telecommunication or utility failure and other events.

[removed: In addition, we have designed products and services that connect to and are part of the “Internet of Things.”] While we attempt to provide [removed: adequate] security measures to safeguard our products [added: and services] from cyber threats, the potential for an attack remains.

[removed: We,] [added: Like many multinational corporations, we,] and some [removed: of our] third [removed: party vendors,] [added: parties upon which we rely,] have experienced cybersecurity attacks [added: on information technology networks and systems, products and services] in the past and may experience them in the future, likely with more frequency and involving a broader range of [removed: devices.][added: devices and modes of attack.]

To date, none have resulted in any material adverse impact to our [removed: business] [added: business, operations, products, services] or [removed: operations.][added: customers.]

We have adopted measures designed to mitigate potential risks associated with [added: cybersecurity threats, breaches or other disruptions or damage to our] information technology [removed: disruptions] [added: networks] and [removed: cybersecurity threats, however, given] [added: systems, products and services but] the unpredictability of the timing, nature and scope of such [removed: disruptions, we] [added: disruptions and threats] could [removed: potentially be subject to production downtimes, operational delays, other detrimental impacts on] [added: impact] our [removed: operations or ability to provide] [added: business, operations,] products and [removed: services to our customers, the compromise of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business, liability to others, regulatory enforcement actions, and/or damage to our reputation.][added: services.]

We [removed: also have] [added: have,] or operate [removed: through] [added: through,] a concentration of operations on certain sites, such as production and shared [removed: services centers, where business interruptions could cause material damage and costs.][added: service centers.]

Disruption to any of the information technology and communications networks on which we rely, or an attack on our [removed: IoT] products and services, could interfere with our operations, disrupt [added: our supply chain and] service to our customers, interrupt production and shipments, [added: result in theft or compromise of our and our customers’ intellectual property and trade secrets,] damage [added: employee,] customer [removed: relationships] and [added: business partner relationships,] negatively impact our reputation, [added: result in legal claims and proceedings or regulatory enforcement actions, and increase our costs for security and remediation,] any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

Although we continue to assess these risks, implement controls and perform business continuity and disaster recovery planning, we cannot be sure that [added: cybersecurity attacks or other] interruptions with material adverse effects will not occur.

If our facilities or [removed: operations, or that] [added: operations] of third parties upon which we rely in our supply chain and critical business [removed: operations,] [added: operations] were to be disrupted as a result of a significant equipment or system failure, natural disaster, power, water or communications outage, fire, explosion, critical supply failure, terrorism, [removed: cyber-based] [added: cybersecurity] attack, political disruption, [added: outbreak of pandemics, insurrection, armed conflict or war,] labor dispute, work stoppage or slowdown, [added: technology failure,] adverse weather conditions or other reason, our financial [removed: performance] [added: performance, operations and business] could be adversely affected.

Interruptions could cause an inability to meet customer [removed: demand,] [added: demand or contractual commitments,] increase our costs, reduce our sales, and impact our business processes and [removed: activities.][added: activities, including our ability to timely report financial results.]

Any interruption in capability may be lengthy and have lasting effects, require a significant amount of management and other employees' time and focus, and require us to make substantial expenditures to remedy the situation, which could negatively affect our [added: operations, business processes and activities,] profitability and financial condition.

The events and consequences discussed in these risk factors could, in circumstances that we may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, financial condition, cash flow, results of operations or market price of our common stock.*

*These risk factors do not identify all the risks we face.

We could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks.

In addition, the global economic and geopolitical climate amplifies many of these risks.*

Risks Related to our Business

Our business operations rely on information technology and communications networks, some of which are operated by third parties including, increasingly, cloud-based service providers, to process, transmit and store our electronic information, including sensitive data such as confidential business information and personal data relating to employees, customers or other business partners.

In

any such circumstances, our system redundancy and other business continuity and disaster recovery planning and response may be ineffective or inadequate.

In addition, we offer certain services and products, including pumps, controllers and meters, used by third parties for operational purposes or to collect data, which are digitally-enabled or connect to and are part of the “Internet of Things” (IoT).

Cybersecurity attacks may target hardware, software and information installed, stored or transmitted by our products after they have been purchased and incorporated into third-parties’ products, facilities or infrastructure.

A successful attack may result in the misappropriation, destruction, unauthorized access to or disclosure of third parties' confidential information, damage, disruption or shut-down of third parties’ operations, recall of our products or increased costs for security and remediation, as well as possible damage to our brand reputation.

| • | theft, compromise or misappropriation of technology or intellectual property; |

product price increases.

Our facilities and operations rely on a complex global supply chain consisting of suppliers, contract manufacturers and logistics providers.

In addition, our business relies on certain third parties to supply critical business processes and activities, including in the areas of Finance, Human Resources, Procurement and Information Technology.

Factors that may impede a successful implementation include the retention of key employees, the impact of

Our business is subject to foreign currency exchange rates fluctuations.

Refer to Item 7A.

Additionally, we may be required to change or cease operations at one or more

For example, heavy rain events due to climate change may increase demand for some of our XylemVue solutions that may help customers minimize water and storm water overflows.

Our intellectual property rights may provide us with competitive advantage because they may help us differentiate our technologies, products and services, including our growing portfolio of data analytics and digitally-enabled offerings.

The

In addition, we could be affected by future environmental laws or regulations.

Risks Related to Ownership of our Common Stock

| • | uncertainty or instability arising from the global geopolitical environment or events or actual or potential global pandemics; |

| | |

| --- | --- |

Risks Related to our 2011 Spin-Off from ITT Corporation (now ITT LLC)

Our Spin-off from ITT may expose us to potential liabilities.

Should any of these risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially and adversely affected.

The risks and uncertainties described below are those that we have identified as material but are not the only risks and uncertainties we face and therefore may not be exhaustive.

We can neither predict with certainty these new risk factors nor assess the extent to which any new factor, or combination of factors, may adversely impact our business or results of operations.*

Risks Related to Operational and External Factors

outside of the United States.

A successful attack may result in inappropriate access to our or our customers' information or an inability for our products and services to function properly.

Transport of goods from suppliers and to customers could also be hampered for the reasons stated above.

Implementing planned restructuring

Other countries, such as China, have enacted or are

Our business could be adversely affected by significant movements in foreign currency exchange rates.

Effective succession planning is also important to our long-term success.

indebtedness instead of funding working capital, capital expenditures, acquisitions or other general corporate purposes; and

The unpredictable nature of weather conditions and climate change may result in volatility for certain portions of our business, as well as the operations of certain of our customers and suppliers.

The carrying value of goodwill represents the fair

value of an acquired business in excess of identifiable assets and liabilities as of the acquisition date.

The carrying value of indefinite-lived intangible assets represents the fair value of trademarks, trade names and FCC licenses as of the acquisition date.

A goodwill impairment charge will be recognized if the fair value of a reporting unit is less than its carrying amount.

In addition, we could be affected by future environmental laws or regulations, including, for example, those imposed in response to climate change concerns.

Our liquidity, financial position (including shareholders’

| • | acquisitions and divestitures; |

Anti-takeover provisions in our organizational documents and Indiana law could delay or prevent a change in control.

Certain provisions of our fourth amended and restated articles of incorporation and our amended and restated by-laws may delay or prevent a merger or acquisition of part or all of our business operations.

For example, our articles of incorporation and our by-laws, among other things, require advance notice for shareholder proposals and nominations.

In addition, our articles of incorporation authorize our Board of Directors to issue one or more series of preferred stock.

These provisions may also discourage acquisition proposals of our business operations or delay or prevent a change in control, which could harm our stock price.

Indiana law also imposes some restrictions on mergers and other business combinations between any holder of 10% or more of our outstanding common stock and us.

If we are required to indemnify ITT (now ITT LLC) or Exelis, we may need to divert cash to meet those obligations and our financial results could be negatively impacted.

Pursuant to the Distribution Agreement and certain other agreements with ITT (now ITT LLC) and Exelis, ITT (now ITT LLC) and Exelis agreed to indemnify us from certain liabilities, and we agreed to indemnify ITT (now ITT LLC) and Exelis for certain liabilities.

Further, there can be no assurance that the indemnities from ITT (now ITT LLC) and Exelis will be sufficient to protect us against the full amount of such liabilities, or that ITT (now ITT LLC) and Exelis will be able to fully satisfy their indemnification obligations.

This discussion summarizes the significant factors affecting our results of operations and the financial condition of our [removed: business during each of the fiscal years in the three-year period ended* *December 31, 2018.][added: business.]

Our broad portfolio of solutions addresses customer needs across the water cycle, from the delivery, measurement and use of drinking water to the collection, [removed: test and] [added: test,] treatment [added: and analysis] of wastewater to the return of water to the environment.

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

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

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

In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and [added: to] provide a tool for evaluating our ongoing operations, liquidity and management of assets.

[removed: We consider the following] [added: The] non-GAAP [removed: measures, which] [added: measures] may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:

| • | "adjusted net income" and "adjusted earnings per share" defined as net income and earnings per share, respectively, adjusted to [removed: exclude] [added: exclude, as applicable,] restructuring and realignment costs, [removed: Sensus acquisition related costs,] special charges, tax-related special items and gains and losses from the sale of [removed: businesses, as applicable.] [added: a business.] A reconciliation of adjusted net income is provided below. |

| (in millions, except per share data) | | [removed: 2018] [added: 2019] | | | | [removed: 2017] | | | [added: 2018] | [removed: 2016] | | | [added: | |]

| Restructuring and realignment, net of tax of [removed: $12, $13] [added: $19] and [removed: $13, respectively] [added: $12] | | [removed: 36] [added: 63] | | | [added: 0.35] | [removed: 28] | | | [added: 36] | [removed: 34] | | [added: 0.20] | [added: | |]

| Special charges, net of tax of [removed: $1, $4] [added: $6] and [removed: $7, respectively] [added: $1] | | [removed: 12] [added: 172] | | | [added: 0.95] | [removed: 8] | | | [added: 12] | [removed: 11] | | [added: 0.07] | [added: | |]

| Tax-related special items | | [removed: (75] [added: (88] | | ) | [added: (0.48] | [removed: 40] | [added: )] | | [added: (75] | [removed: 21] | [added: )] | [added: (0.42] | [added: | ) |]

| [removed: Loss (gain)] [added: (Gain) loss] from sale of [removed: businesses,] [added: business,] net of tax benefit of [removed: $2] [added: $0] | | [removed: —] [added: (1] | | [added: )] | [added: (0.01] | [removed: 12] | [added: )] | | [added: —] | [added: | |] — | | |

| Adjusted [added: net income & Adjusted] earnings per share | | $ | [removed: 2.88] [added: 547] | | [added: $] | [removed: $] [added: 3.02] | [removed: 2.40] | | [added: $] | [added: 522 | |] $ | [removed: 2.03] [added: 2.88] | |

| ▪ | "adjusted operating expenses" and "adjusted gross profit" defined as operating expenses and gross profit, respectively, adjusted to exclude restructuring and realignment [removed: costs, Sensus acquisition related] costs and special charges. |

| ▪ | "adjusted operating income" defined as operating income, adjusted to exclude [removed: "adjusted operating expenses",] [added: restructuring] and [added: realignment costs and special charges, and] "adjusted operating margin" defined as adjusted operating income divided by total revenue. |

| ▪ | "Sensus acquisition related costs" defined as costs incurred by the Company associated with the acquisition of Sensus that are being reported within operating income. These costs include integration costs, acquisition [added: costs, costs related to the recognition of the backlog intangible asset amortization recorded in purchase accounting.] |

| ▪ | “special charges" defined as costs incurred by the Company, such as acquisition and integration related costs not included in "Sensus acquisition related costs", non-cash impairment [removed: charges, due diligence costs] [added: charges] and other special non-operating [removed: items.] [added: items, such as pension adjustments.] |

| ▪ | "tax-related special items" defined as tax items, such as tax return versus tax provision adjustments, tax exam impacts, tax law change impacts, [removed: significant reserves for cash repatriation,] excess tax benefits/losses and other discrete tax adjustments. |

| ▪ | "free cash flow" defined as net cash from operating [removed: activities] [added: activities, as reported in the Statement of Cash Flows,] less capital [removed: expenditures. Free cash flow is further adjusted] [added: expenditures as well as adjustments] for other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of [removed: free] [added: "free] cash [removed: flow] [added: flow"] does not consider certain non-discretionary cash payments, such as debt. The following table provides a reconciliation of free cash flow. |

| (in millions) | | [removed: 2018 | | | | 2017] [added: 2019] | | | | [removed: 2016] [added: 2018] | | |

| Net cash provided by operating activities | | $ | [removed: 586 | | | $ | 686] [added: 839] | | | $ | [removed: 497] [added: 586] | |

| Capital expenditures | | [removed: (237] [added: (226] | | ) | | [removed: (170 | | ) | | (124] [added: (237] | | ) |

| Free cash flow | | $ | [removed: 349 | | | $ | 516] [added: 613] | | | $ | [removed: 373] [added: 349] | |

| Cash paid for Sensus acquisition related costs | | [removed: 1 | | | | 28] [added: —] | | | | [removed: 13] [added: 1] | | |

| Free cash flow, excluding Sensus acquisition related costs | | $ | [removed: 350 | | | $ | 544] [added: 613] | | | $ | [removed: 386] [added: 350] | |

| ▪ | “EBITDA” defined as earnings before interest, taxes, depreciation and amortization expense and "Adjusted EBITDA" reflects the adjustment to EBITDA to exclude share-based [removed: compensation,] [added: compensation charges,] restructuring and realignment costs, [removed: Sensus acquisition related costs, special charges and] gain or loss from sale of [removed: businesses.] [added: businesses and special charges.] |

| Net Income | | $ | [removed: 549 | | | $ | 330] [added: 401] | | | $ | [removed: 260] [added: 549] | |

| Income tax expense | | [removed: 36 | | | | 136] [added: 15] | | | | [removed: 80] [added: 36] | | |

| Interest expense (Income), net | | [removed: 78 | | | | 79] [added: 62] | | | | [removed: 68] [added: 78] | | |

| Depreciation | | 117 | | | | [removed: 109 | | | | 87] [added: 117] | | |

| Amortization | | [removed: 144 | | | | 125] [added: 140] | | | | [removed: 64] [added: 144] | | |

| EBITDA | | $ | [removed: 924 | | | $ | 779] [added: 735] | | | $ | [removed: 559] [added: 924] | |

| Share-based compensation | | [removed: 30 | | | | 21] [added: 29] | | | | [removed: 18] [added: 30] | | |

| Restructuring and realignment | | [removed: 47 | | | | 41] [added: 82] | | | | 47 | | |

| Special charges | [removed: | 12] [added: —] | | | | [removed: 13] [added: 2] | | | | [removed: 5] [added: NM] | | |

| [removed: Loss (gain)] [added: (Gain) loss] from sale of business | | [removed: — | | | | 10] [added: (1] | | [added: )] | | — | | |

| Adjusted EBITDA | | $ | [removed: 1,013 | | | $ | 878] [added: 1,023] | | | $ | [removed: 675] [added: 1,013] | |

Xylem reported revenue of [removed: $5,207] [added: $5,249] million for [removed: 2018,] [added: 2019,] an increase of [removed: $500] [added: $42] million, or [removed: 10.6%,] [added: 0.8%,] from [removed: $4,707] [added: $5,207] million reported in [removed: 2017.][added: 2018.]

On a constant currency basis, revenue increased by [removed: $477] [added: $166] million, or [removed: 10.1%,] [added: 3.2%,] primarily consisting of organic revenue growth of [removed: $390] [added: $188] million, or [removed: 8.3%,] [added: 3.6%,] driven by growth in all end [removed: markets, as well as] [added: markets and] across all [removed: major geographic regions.][added: segments.]

*This section of this Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018.

Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.*

We consider the following items to represent non-GAAP measures as well as the related reconciling items to the most directly comparable measure calculated and presented in accordance with GAAP.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | |

| Net income & Earnings per share | | $ | 401 | | $ | 2.21 | | | $ | 549 | | $ | 3.03 | |

| Net cash used in investing activities | | $ | (231 | ) | | $ | (643 | ) |

| Net cash used by financing activities | | $ | (177 | ) | | $ | (40 | ) |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

A net decrease in revenue related to acquisition and divestiture impacts of $22 million partially offset the organic revenue growth during the year.

| • | Industrial increased by approximately 1% for 2019 on an organic basis driven by strength in the United States, Europe and the Middle East and Africa, partially offset by weakness in Latin America and Canada. For 2020, we expect organic revenue to remain relatively flat driven by soft growth within the North America Dewatering business during the first half of the year, as oil and gas markets continue to be soft. We anticipate mixed market conditions outside of the United States with modest strength in Asia Pacific offset by softness in the Middle East due to geopolitical and economic uncertainty. We anticipate that Europe will remain relatively flat during the year. |

| Revenue | | $ | 5,249 | | | $ | 5,207 | | | 0.8 | % |

| Gross profit | | 2,046 | | | | 2,026 | | | | 1.0 | % |

| *Tax rate* | | 3.7 | | % | | 6.1 | | % | | (240 | )bp |

| Net income | | $ | 401 | | | $ | 549 | | | (27.0 | )% |

A net decrease in revenue related to acquisition and divestiture impacts of $22 million partially offset organic growth during the year.

| Organic Growth | 71 | | | 3.3 | % | | 36 | | | 2.3 | % | | 81 | | | 5.4 | % | | 188 | | | 3.6 | % |

| Acquisitions/(Divestitures) | — | | | — | % | | — | | | — | % | | (22 | | ) | (1.5 | )% | | (22 | | ) | (0.4 | )% |

| Constant Currency | 71 | | | 3.3 | % | | 36 | | | 2.3 | % | | 59 | | | 3.9 | % | | 166 | | | 3.2 | % |

| Foreign currency translation (a) | (70 | | ) | (3.2 | )% | | (29 | | ) | (1.9 | )% | | (25 | | ) | (1.7 | )% | | (124 | | ) | (2.4 | )% |

| Total change in revenue | 1 | | | — | % | | 7 | | | 0.5 | % | | 34 | | | 2.3 | % | | 42 | | | 0.8 | % |

| 2019 Revenue | $ | 2,177 | | | | | $ | 1,541 | | | | | $ | 1,531 | | | | | $ | 5,249 | | | |

The utility end market also saw growth in Asia Pacific and western Europe driven by strong project deployments during the year.

The industrial end market has remained relatively flat during the year with organic growth in the emerging markets and the United States, where we benefited from solid order intake and a strong mining market over the first half of the year, which was partially offset by declines in western Europe due to the timing of project deployments in the prior year.

Organic growth in both end markets also benefited from price realization during the year.

The transport application had strong organic revenue growth driven by project deliveries and price realization in the United States and the emerging markets.

Organic growth from the global dewatering application was also up modestly for the year, with strong growth in first half of the year, coming from strength in construction and mining in the United States and Australia, being offset by rental revenue declines in North America in the second half of the year driven by a sharp drop off in oil and gas.

This organic growth was partially offset by declines in the Middle East and Latin America, primarily due to the lapping of large treatment project deliveries in these regions in the prior year.

Revenue was negatively impacted by $29 million of foreign currency translation, with the change at constant currency coming entirely from organic growth during the year of $36 million.

From an application perspective, organic revenue growth during the year was led by strength in the building services application in the commercial market which was driven by market expansion in the emerging markets, primarily in the Middle East & Africa, and product localization in China, partially offset by softness in western Europe.

The industrial water application had modest organic growth during the year, primarily driven by market growth in western Europe, coupled with customers stocking orders due to geopolitical concerns, and strength in the United States, partially offset by some declines in the emerging market regions.

Organic growth in building services application in the residential market came primarily from healthy market growth in the United States and strong second water supply business in China, which was partially offset by declines in western Europe and the Middle East.

Organic growth within the segment also benefited from price realization during the year.

The energy application also contributed to the organic growth during the year as gas project deployments more than offset the timing of a large electric project deployment in the prior year in the United States .

This organic growth was partially offset by a decline in the software as a service ("SaaS") and other application primarily due to the timing of a large software sale in the prior year in the United Kingdom.

The test application remained relatively flat as compared to the prior year.

An order represents a legally enforceable, written document that includes the scope of work or services to be performed or equipment to be supplied to a customer, the corresponding price and the expected delivery date for the applicable products or services to be provided.

| | |

| --- | --- |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Net income attributable to Xylem | | $ | 549 | | | $ | 331 | | | $ | 260 | |

| Earnings per share - diluted | | $ | 3.03 | | | $ | 1.83 | | | $ | 1.45 | |

| Sensus acquisition related costs, net of tax of $8 and $15, respectively | | — | | | | 14 | | | | 38 | | |

| Adjusted net income | | $ | 522 | | | $ | 433 | | | $ | 364 | |

costs, costs related to the recognition of the backlog intangible asset amortization recorded in purchase accounting.

| Sensus acquisition related costs | | — | | | | 14 | | | | 46 | | |

Acquisition revenue of $111 million also contributed to the increase, partially offset by revenue related to divestitures of $24 million.

The increase in operating income and margin included favorable impacts from decreased Sensus acquisition related costs of $22 million, partially offset by an increase in restructuring and realignment costs of $7 million and increased special charges of $1 million.

| • | Industrial increased by roughly 6% for 2018 on an organic basis driven by strength in North America, western Europe and Latin America, partially offset by weakness in Asia Pacific. For 2019, we expect organic growth in the low to mid-single-digits driven by continued solid industrial conditions in the U.S. as the oil and gas markets begin to stabilize after a strong 2018. We also anticipate mixed emerging market conditions with strength in India and Latin America, offset by softness in the Middle East and slowing growth in China. |

respectively.

| | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Revenue | | $ | 5,207 | | | $ | 4,707 | | | $ | 3,771 | | | 10.6 | % | | 24.8 | % |

| Gross profit | | 2,026 | | | | 1,847 | | | | 1,462 | | | | 9.7 | % | | 26.3 | % |

| Sensus acquisition related charges | | — | | | | 8 | | | | 26 | | | | NM | | | (69.2 | )% |

| Sensus acquisition related charges | | — | | | | (14 | | ) | | (27 | | ) | | NM | | | (48.1 | )% |

| Operating income | | 654 | | | | 552 | | | | 408 | | | | 18.5 | % | | 35.3 | % |

| *Tax rate* | | 6.1 | | % | | 29.2 | | % | | 23.5 | | % | | (2,310 | )bp | | 570 | bp |

| Net income | | $ | 549 | | | $ | 330 | | | $ | 260 | | | 66.4 | % | | 26.9 | % |

NM Not Meaningful

Acquisition revenue of $111 million also contributed to the increase, partially offset by a reduction in revenue related to divestitures of $24 million during the period.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Water Infrastructure | | | | | | Applied Water | | | | | | Measurement & Control Solutions | | | | | | Total Xylem | | | | |

| 2017 Revenue | $ | 2,004 | | | | | $ | 1,421 | | | | | $ | 1,282 | | | | | $ | 4,707 | | | |

| Organic Growth | 176 | | | 8.8 | % | | 113 | | | 8.0 | % | | 101 | | | 7.9 | % | | 390 | | | 8.3 | % |

| Acquisitions/(Divestitures) | — | | | — | % | | (10 | | ) | (0.7 | )% | | 97 | | | 7.6 | % | | 87 | | | 1.8 | % |

| Constant Currency | 176 | | | 8.8 | % | | 103 | | | 7.2 | % | | 198 | | | 15.4 | % | | 477 | | | 10.1 | % |

| Foreign currency translation (a) | (4 | | ) | (0.2 | )% | | 10 | | | 0.7 | % | | 17 | | | 1.3 | % | | 23 | | | 0.5 | % |

| Total change in revenue | 172 | | | 8.6 | % | | 113 | | | 8.0 | % | | 215 | | | 16.8 | % | | 500 | | | 10.6 | % |

*Water Infrastructure*

Organic growth during the year was also driven by strength in the industrial end market, primarily in North America and Europe, while emerging market industrial strength in Latin America was partially offset by declines in Asia Pacific due to the lapping of a large ozone project delivery in China last year.

The transport application grew due to strength across all geographic regions.

Growth in North America was driven by modest share gains and continued focus by utility customers on improving infrastructure, as well as strong dewatering rental sales and oil and gas growth.

Project deliveries in western Europe and product localization in China also contributed to the transport application growth during the period with China having 35.6% organic growth for the year.

*Applied Water*

Our exposure to foreign exchange rate risk is due to certain costs, revenue and borrowings being denominated in currencies other than one of our [removed: subsidiaries] [added: subsidiaries'] functional currency.

We conduct approximately [removed: 53%] [added: 51%] of our business in various locations outside the United States.

We enter into currency forward contracts periodically in order to manage the exchange rate fluctuation risk on certain intercompany transactions associated with [removed: third party] [added: third-party] sales and purchases.

As of December 31, [removed: 2018,] [added: 2019,] our long-term debt portfolio is primarily comprised of four series of fixed-rate senior notes that total $2.1 billion.

Based on [added: the] current interest rate market we do not anticipate material risk associated with our debt refinancing within the target time frame of [removed: completion.][added: maturity.]

Xylem, with [removed: 2018 revenue] [added: 2019 revenues] of $5.2 billion and approximately [removed: 17,000] [added: 16,300] employees, is a leading global water technology company.

Our broad portfolio of products, services and solutions addresses customer needs across the water cycle, from the delivery, measurement and use of drinking water to the collection, [removed: test] [added: testing, analysis] and treatment of wastewater to the return of water to the environment.

We have differentiated market positions in core application areas including transport, treatment, test, smart metering, [removed: smart] infrastructure [removed: analytics,] [added: assessment services,] digital solutions, condition assessment and leak detection, [added: commercial and residential] building services and industrial processing.

| • | [removed: Fortress brands with] [added: Market] leading [removed: positions,] [added: brands,] some of which have been in use for more than 100 years |

| • | Far-reaching global distribution networks consisting of direct sales forces and independent channel partners [removed: that collectively serve] [added: serving] a diverse customer base in approximately 150 countries |

| • | A substantial [added: global] installed base that provides for steady recurring revenue |

Key pillars of our long-term strategy include: (1) accelerate profitable growth; (2) increase profitability by driving continuous improvement initiatives; (3) [added: develop] leadership and [removed: talent development;] [added: talent;] (4) focus on execution and accountability; and (5) create social value in everything we do.

On October 31, [removed: 2011 (the "Distribution Date"),] [added: 2011,] ITT Corporation ("ITT") completed the Spin-off (the “Spin-off”) of Xylem, formerly ITT’s water equipment and services businesses.

Even in developed countries with sufficient clean water supply, existing water supply infrastructure is aging and [removed: inadequately funded.][added: often inefficient.]

In the United States, deteriorating pipe systems, theft or inaccurate meters result in approximately one out of every six gallons of [added: treated] water being lost [removed: between the treatment plant and] [added: prior to reaching] the end customer.

This problem of "non-revenue" water is a major financial challenge of many utilities globally, especially in developing markets where non-revenue water can represent [removed: 15%] [added: 10%] to 60% or more of net water produced.

We estimate the total addressable market size to be approximately [removed: $550] [added: $560] billion.

We compete in areas that are pivotal to improving water [removed: productivity, water quality] [added: affordability] and [removed: resilience.][added: resilience while reducing the impact of water scarcity.]

Water [removed: productivity] [added: affordability] refers to the more efficient [removed: delivery and] [added: delivery,] use [added: and treatment] of clean [removed: water.][added: water and wastewater.]

Our customers often face all three of these challenges, ranging from inefficient and aging water distribution networks [removed: (which require improvements in “water productivity”);] [added: and] energy-intensive or unreliable wastewater management systems (which require improvements in “water [removed: quality”);] [added: affordability”); droughts and pollution which limit the amount of water readily available (causing "water scarcity”);] or exposure to natural disasters such as floods or droughts (which require improvements in “resilience”).

Additionally, [removed: through the acquisition of Sensus,] we also provide solutions to enhance communications and efficiency, improve safety and conserve resources to customers in the water, electric, gas, and lighting sectors.

We estimate our total served market size to be approximately [removed: $57] [added: $61] billion.

The water industry value chain includes [removed: Equipment] [added: Equipment, Technology] and Services companies, like Xylem, which address the unique challenges and demands of a diverse customer base.

This customer base includes water and wastewater utilities that [removed: supply and] [added: supply,] treat [added: and monitor] clean water or [removed: transport and] [added: transport,] treat [added: and analyze] wastewater or storm water through an infrastructure network, and engineering, procurement and construction or (EPC) [removed: firms,] [added: firms and third party contractors,] which work with utilities to design and build water and wastewater infrastructure networks, as depicted below.

Utilities and [removed: EPC] [added: other] customers require products, solutions, services, technology and application expertise from their [removed: Equipment] [added: Equipment, Technology] and Services providers to address trends such as rising pollution, stricter regulations, increasing operational costs and the increased outsourcing of process knowledge.

In addition to [removed: utilities and EPC customers, Equipment] [added: utilities, Equipment, Technology] and Service [removed: providers] [added: companies] also provide distinct technologies [added: and application expertise] to a wide array of entities, including farms, mines, power plants, industrial facilities [added: (such as food] and [added: beverage and pharmaceutical manufacturers) and] residential and commercial customers seeking to address similar trends.

[removed: ][added: ]

Our strategy is to enhance shareholder value by providing distinctive solutions for our customers' most important water [removed: productivity, quality] [added: scarcity, affordability] and resilience challenges, enabling us to grow revenue, organically and through strategic acquisitions, as we streamline our cost structure.

| [removed: •] [added: •] | Accelerate Profitable Growth. To accelerate growth, we continue to focus on several priorities: |

| • | Emerging Markets *\-* We seek to accelerate our [removed: growth] [added: growth, particularly] in priority emerging markets through increased focus on product localization and channel development. |

| [removed: ▪] [added: •] | Innovation & Technology \- We seek to enhance our innovation efforts with increased focus on smart, digitally enabled technologies and innovation that can significantly improve customers’ productivity, quality and resilience. |

| • | Commercial Leadership \- We are strengthening our capabilities by simplifying [added: and modernizing] our commercial processes and supporting information technology systems. |

| • | Mergers and Acquisitions - We continue to evaluate and, where appropriate, [removed: will] act upon attractive acquisition candidates to accelerate our growth, including into adjacent markets. |

| • | Drive Continuous Improvement. We seek to embed continuous improvement into our culture and simplify our organization to make the Company more agile, more profitable and create room to reinvest in growth. To accomplish this, we will continue to strengthen our lean six sigma and global procurement capabilities, [removed: while also continuing to optimize our cost structure through business simplification, which aims to eliminate structural, process and product complexity.] |

| • | [removed: Leadership] [added: Develop Leadership] and [removed: Talent Development.] [added: Talent.] We [removed: seek to] continue to invest in attracting, developing and retaining world-class talent with [removed: an increased] [added: a] focus on leadership and talent development programs. We will continue to align individual performance with the objectives of the [removed: Company] [added: Company, its shareholders] and its [removed: shareholders.] [added: stakeholders.] |

| • | Create social value in everything we do. We seek to have a positive impact on communities through the combination of [added: sustainable practices,] corporate social responsibility and employee, customer, and stakeholder engagement. |

See Note [removed: 21,] [added: 22,] “Segment and Geographic Data,” in our consolidated financial statements for financial information about segments and geographic areas.

| | | Market Applications | | [removed: 2018] [added: 2019] Revenue (in millions) | | | | % Revenue | | | Major Products | | Primary Brands |

| Water Infrastructure | | Transport | | $ | [removed: 1,779] [added: 1,780] | | | 82 | % | | • Water and wastewater pumps • Filtration, disinfection and biological treatment equipment • Mobile dewatering equipment | | • Flygt • Godwin • Leopold • Sanitaire • Wedeco |

| Applied Water | | [removed: Industrial Water] [added: Building Services] | | $ | [removed: 706] [added: 848] | | | [removed: 46] [added: 55] | % | | • Pumps • Valves • Heat exchangers • Controls • Dispensing equipment systems | | • A-C Fire Pump • Bell & Gossett • Flojet • Goulds Water Technology • Jabsco • Lowara • Standard Xchange |

| Measurement & Control Solutions | | Water | | $ | [removed: 692] [added: 768] | | | [removed: 46] [added: 50] | % | | • Smart meters • Networked communication devices • Data analytics • Test equipment • Controls • Sensor devices • Software & managed services • Critical infrastructure services | | • EmNet • Pure • Sensus • Smith Blair • [removed: Valor Water •] Visenti • WTW • YSI |

| | | Software as a Service/Other | | [removed: 123] [added: 99] | | | | [removed: 8] [added: 7] | % | | | | |

Our Water Infrastructure segment [added: primarily] supports the process that collects water from a source, treats it and distributes it to users, and then treats and returns the wastewater responsibly to the environment through two closely linked applications: [removed: *Transport and* *Treatment*.][added: Transport and Treatment.]

[removed: The *Transport* application also includes sales and rental of] specialty dewatering pumps and related equipment and services, which provide the safe removal or draining of groundwater and surface water from [removed: riverbeds and] construction sites or other industrial sites and bypass pumping for the repair of aging utility infrastructure, as well as emergency water transport and removal during severe weather events.

Water Infrastructure [removed: provides the majority of its sales] [added: sells primarily] through direct channels with remaining sales through indirect channels and service capabilities.

Global water needs cannot be met without streamlining the water industry’s cost structure with technologies that fundamentally change the provision and management of water.

Water scarcity refers to the management of limited supplies of water due to climate change, overpopulation and pollution.

while also continuing to optimize our cost structure through business simplification, which aims to eliminate structural, process and product complexity.

| | | | | $ | 2,177 | | | 100 | % | | | | |

| | Industrial Water | | 693 | | | | 45 | % | | | | | |

| | | | | $ | 1,541 | | | 100 | % | | | | |

| | Energy | | 337 | | | | 22 | % | | | | | |

| | Test | | 327 | | | | 21 | % | | | | | |

| | | | | $ | 1,531 | | | 100 | % | | | | |

The Transport application also includes sales and rental of

Applied Water encompasses the uses of water in two primarily applications: Building Services and Industrial Water.

As

We believe our financial performance and commitment to sustainability go hand in hand.

Xylem approaches business sustainability as a way to generate economic value while also creating value for society, thus meeting the needs of both.

Accordingly, in 2019, we evolved our approach to leverage sustainability in our decision-making toward long-term value for our shareholders, customers, employees and communities in which we operate and announced an ambitious new slate of 2025 sustainability goals.

These new goals can be found in our 2018 Sustainability Report, which is published using the Global Reporting Initiative (GRI) framework.

In setting our 2025 Sustainability goals, we also aligned them with the United Nations Sustainable Development Goals (UNSDGs), not only to substantiate our contribution to achieving global objectives, but also to be transparent in our communication to stakeholders by providing details on our responsibility to build a sustainable future.

While Xylem embraces all 17 of the UNSDGs, we have a special focus on SDG6: Clean Water and Sanitation.

Water quality refers to the efficient and effective management of wastewater.

| | | | | $ | 2,176 | | | 100 | % | | | | |

| | Commercial Building Services | | 596 | | | | 39 | % | | | | | |

| | Residential Building Services | | 232 | | | | 15 | % | | | | | |

| | | | | $ | 1,534 | | | 100 | % | | | | |

| | Test | | 344 | | | | 23 | % | | | | | |

| | Gas | | 195 | | | | 13 | % | | | | | |

| | | Electric | | 143 | | | | 10 | % | | | | |

| | | | | $ | 1,497 | | | 100 | % | | | | |

Several trends are increasing demand for this application expertise: (i) the increase in both the type and amount of contaminants

changing and unsafe conditions.

While we own, control or license a significant number of patents, trade secrets, proprietary information, trademarks, trade names,

These solutions will allow us to transport, treat, test and use water smarter and more sustainably than in the past, and enable our customers to realize greater water and energy efficiencies.

Our link to global water and environmental challenges informs how we think about sustainability and drives us to become a more sustainable company.

Our approach to climate-related issues is informed by Xylem’s Climate Change Policy, which defines our climate change approach across product development, operations, employees and external engagement.

For example, in the past two years, we have completed several acquisitions to build out our Measurement & Control Solutions portfolio around systems intelligence, bringing best-in-class advanced metering infrastructure, advanced data analytics and software development capabilities to our portfolio.

These technologies have enhanced our ability to help customers facing water scarcity, storm water overflows and other climate-related issues.

We are also focused on increasing our capabilities in the areas of advanced industrial water treatment and industrial water services.

We are committed to sustainability through our own operations as well, as we are reducing our environmental footprint by decreasing our water intensity, greenhouse gas emissions and waste sent to landfills.

From time to time we are involved in legal and regulatory proceedings that are incidental to the operation of our businesses (or the business operations of [removed: previously owned] [added: previously-owned] entities).

See Note [removed: 19,] [added: 20,] "Commitments and Contingencies", of the consolidated financial statements included in Item 8 of Part II of this 10-K for information regarding certain legal and regulatory proceedings we are involved in.

| [removed: þ] [added: ☑] | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | [added: |]

[removed: | | |] For the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018 | | |][added: 2019]

| [removed: ¨] [added: ☐] | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | [added: |]

Commission file [removed: number: 1-35229][added: number: 1-35229]

[removed: |] 1 International [removed: Drive, Rye Brook, NY 10573 | | |][added: Drive, Rye Brook, NY 10573]

[removed: | *(address] [added: *(Address] of principal executive offices and zip code)* [removed: | | |]

[removed: | (914) 323-5700 | | |][added: (914) 323-5700]

[removed: |] *(Registrant's telephone number, including area code)* [removed: | | |]

| Title of each class | [added: Trading Symbol(s)] | Name of each exchange on which registered |

| Common Stock, par value $0.01 per share | [added: XYL] | New York Stock Exchange |

| 2.250% Senior Notes due 2023 | [added: XYL23] | New York Stock Exchange |

Yes [removed: ¨] [added: ☐] No [removed: þ][added: ☑]

Large Accelerated Filer [removed: þ] [added: ☑] Accelerated Filer [removed: ¨] [added: ☐] Non-Accelerated Filer [removed: ¨] [added: ☐] Smaller reporting company [removed: ¨] [added: ☐] Emerging growth company [removed: ¨][added: ☐]

The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant as of June 30, [removed: 2018] [added: 2019] was approximately [removed: $12.0] [added: $14.0] billion.

As of February [removed: 15, 2019,] [added: 21, 2020,] there were [removed: 179,552,698] [added: 180,222,582] outstanding shares of the registrant’s common stock, par value $0.01 per share.

Portions of the registrant’s definitive proxy statement for its [removed: 2019] [added: 2020] Annual Meeting of Shareowners, to be held in May [removed: 2019,] [added: 2020,] are incorporated by reference into Part II and Part III of this Report.

[added: | | |] For the fiscal year ended [removed: December 31, 2018][added: | 12/31/2019 | | |]

| 1A. | [Risk [removed: Factors](#sC41415D3FF455F4DAB27509B6528A886)] [added: Factors](#sCA153EAA26FC545EAB8D824B0F363F19)] | [removed: [11](#sC41415D3FF455F4DAB27509B6528A886)] [added: [12](#sCA153EAA26FC545EAB8D824B0F363F19)] |

| 1B. | [Unresolved Staff [removed: Comments](#s754049474C855B34ABFB7B4B1EC0AEF6)] [added: Comments](#s63158A2DBB3E5E29A53AC693BD16623B)] | [removed: [21](#s754049474C855B34ABFB7B4B1EC0AEF6)] [added: [22](#s63158A2DBB3E5E29A53AC693BD16623B)] |

| 3 | [Legal [removed: Proceedings](#sE0A46A0C3AEA531EB39B2658378E98F2)] [added: Proceedings](#s01D79B5A126B56D39EDCF2A8323FE00B)] | [removed: [22](#sE0A46A0C3AEA531EB39B2658378E98F2)] [added: [23](#s01D79B5A126B56D39EDCF2A8323FE00B)] |

| 4 | [Mine Safety [removed: Disclosures](#s6B4B3B2F3CD7552689B4DE1FCB40BA8D)] [added: Disclosures](#s79F52A0C576B5D3D8B9194C482CEF191)] | [removed: [23](#s6B4B3B2F3CD7552689B4DE1FCB40BA8D)] [added: [24](#s79F52A0C576B5D3D8B9194C482CEF191)] |

| | [Board of [removed: Directors](#s35A458C957095A059AB128C2BFC6DB8B)] [added: Directors](#sA1EF338F501D5A7E84E30A8334198A0A)] | [removed: [24](#s35A458C957095A059AB128C2BFC6DB8B)] [added: [25](#sA1EF338F501D5A7E84E30A8334198A0A)] |

| 5 | [Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s352A9E1926855588B9DB78590233B4BD)] [added: Securities](#s2E767856979B55179D9091DAE9FCC516)] | [removed: [25](#s352A9E1926855588B9DB78590233B4BD)] [added: [26](#s2E767856979B55179D9091DAE9FCC516)] |

| 6 | [Selected Financial [removed: Data](#s16CA40CCCDDD5B2185E950C218AF3477)] [added: Data](#s577C3D706D0A5E93BB59F449B44FB391)] | [removed: [27](#s16CA40CCCDDD5B2185E950C218AF3477)] [added: [28](#s577C3D706D0A5E93BB59F449B44FB391)] |

| 7 | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sD35F8CF82ADC596D91480A402EB85DA9)] [added: Operations](#s024EC71BE09A53EABC67DD971477F7FC)] | [removed: [28](#sD35F8CF82ADC596D91480A402EB85DA9)] [added: [29](#s024EC71BE09A53EABC67DD971477F7FC)] |

| 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s9F41B5998B79563AA185C2AF7ED981C6)] [added: Risk](#sA5C3C875342959E3B710A84949789FE0)] | [removed: [55](#s9F41B5998B79563AA185C2AF7ED981C6)] [added: [48](#sA5C3C875342959E3B710A84949789FE0)] |

| 8 | [Financial Statements and Supplementary [removed: Data](#s915E1C0E08BE5A07ABBB7F40BECB5050)] [added: Data](#s274A1FB783535CD6ACD7D8CA7828283C)] | [removed: [56](#s915E1C0E08BE5A07ABBB7F40BECB5050)] [added: [49](#s274A1FB783535CD6ACD7D8CA7828283C)] |

| 9 | [Changes In and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#s0026F8397EFC51E2947B1D0A195F9C70)] [added: Disclosure](#s6D3EAC3658415BD28F74DA5DB9E3CC87)] | [removed: [110](#s0026F8397EFC51E2947B1D0A195F9C70)] [added: [104](#s6D3EAC3658415BD28F74DA5DB9E3CC87)] |

| 9A. | [Controls and [removed: Procedures](#sA672435FBAF253DBA16D4E50945B7AA5)] [added: Procedures](#sC77430D646B55A62B9A5BF9F20DC5347)] | [removed: [110](#sA672435FBAF253DBA16D4E50945B7AA5)] [added: [104](#sC77430D646B55A62B9A5BF9F20DC5347)] |

| 9B. | [Other [removed: Information](#s6EC9F8FBE2C558C6894F9A17034CFC37)] [added: Information](#s78CA9D3FF7FA5434A25BC326FDC459BB)] | [removed: [111](#s6EC9F8FBE2C558C6894F9A17034CFC37)] [added: [105](#s78CA9D3FF7FA5434A25BC326FDC459BB)] |

| 10 | [Directors, Executive Officers and Corporate [removed: Governance](#s36B873CEEE3E5573BE43004F95D705D4)] [added: Governance](#s9DD6DD79752954CC8C1F41BFD6057751)] | [removed: [114](#s36B873CEEE3E5573BE43004F95D705D4)] [added: [107](#s9DD6DD79752954CC8C1F41BFD6057751)] |

| 12 | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#sE552EAD23FE75E379DAC3909B5020F1E)] [added: Matters](#sE653017883BD52BB88B2743ED57C7655)] | [removed: [114](#sE552EAD23FE75E379DAC3909B5020F1E)] [added: [107](#sE653017883BD52BB88B2743ED57C7655)] |

| 13 | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sA4441FA7158A54C3814061B25394D7C3)] [added: Independence](#s82595CCEB4CA563D9ACDF80EDAE8544F)] | [removed: [114](#sA4441FA7158A54C3814061B25394D7C3)] [added: [107](#s82595CCEB4CA563D9ACDF80EDAE8544F)] |

| 14 | [Principal Accounting Fees and [removed: Services](#s72DC3340DE4D548FA01630378306212F)] [added: Services](#s7D2ADE85544950CE9A8A7F3DB5A4A3A9)] | [removed: [114](#s72DC3340DE4D548FA01630378306212F)] [added: [107](#s7D2ADE85544950CE9A8A7F3DB5A4A3A9)] |

| 15 | [Exhibits, Financial Statement [removed: Schedules](#sAFA65ABB26DD533BBA1E132826FB02A1)] [added: Schedules](#s8C5A9FF700F95F8A944037110A6EE35A)] | [removed: [115](#sAFA65ABB26DD533BBA1E132826FB02A1)] [added: [108](#s8C5A9FF700F95F8A944037110A6EE35A)] |

These forward-looking statements include any statements that are not historical in nature, including any statements about the capitalization of the Company, the Company’s restructuring and [removed: realignment,] [added: realignment plans,] future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals.

Factors that could cause results to differ materially from those anticipated include: overall economic and business [removed: conditions, political] [added: conditions; geopolitical] and other risks associated with our international operations, including military actions, [added: protectionism,] economic sanctions or trade barriers including tariffs and embargoes that could affect customer [removed: markets,] [added: markets] and [added: our business, and] non-compliance with laws, including foreign corrupt practice laws, [added: data privacy,] export and import laws and competition laws; [added: actual or] potential [added: pandemics; potential] for unexpected cancellations or delays of customer orders in our reported backlog; our exposure to fluctuations in foreign currency exchange rates; [added: disruption,] competition and pricing pressures in the markets we serve; [added: industrial, governmental and private sector spending;] the strength of housing and related markets; weather conditions; ability to retain and attract talent and key members of management; our relationship with and the performance of our [added: supply chain including] channel partners; our ability to successfully identify, complete and integrate acquisitions; our ability to borrow or to refinance our existing indebtedness and availability of liquidity sufficient to meet our needs; [added: uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark;] changes in the value of goodwill or intangible assets; risks relating to product defects, product [added: security, product] liability and recalls; claims or investigations by governmental or regulatory bodies; [removed: security] [added: cybersecurity attacks,] breaches or other disruptions of [removed: our] information technology [removed: systems;] [added: systems on which we rely; our sustainability initiatives;] litigation and contingent liabilities; and other factors set forth under “Item 1A.

Risk Factors” and [removed: in] [added: with] subsequent filings we make with the Securities and Exchange Commission (“SEC”).

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| | | or | | | |

| --- | --- | --- |

| 1 | [Business](#s9F2DFF7A97EF5F93A808EF82433A9E71) | [3](#s9F2DFF7A97EF5F93A808EF82433A9E71) |

| 2 | [Properties](#sE04A908F11365A7BBF4C3F2D1AB194A5) | [23](#sE04A908F11365A7BBF4C3F2D1AB194A5) |

| * | [Information about our Executive Officers](#s6311EA77171A5BC1BCFAC7956A557948) | [24](#s6311EA77171A5BC1BCFAC7956A557948) |

| 11 | [Executive Compensation](#s94345A6B79095944ACD388192BA45258) | [107](#s94345A6B79095944ACD388192BA45258) |

| 16 | [Form 10-K Summary](#s384BAA0BEFA55E2A83D6D46DE9A3BADD) | [112](#s8D198DE0E609518B9A1B2841913D97A8) |

| | [Signatures](#s8D198DE0E609518B9A1B2841913D97A8) | [112](#s8D198DE0E609518B9A1B2841913D97A8) |

| | | | | |

| --- | --- | --- | --- | --- |

| | | or | | |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| 1 | [Business](#sBE4FD9A51E5F57F2BDF131AE162A2C2B) | [3](#sBE4FD9A51E5F57F2BDF131AE162A2C2B) |

| 2 | [Properties](#s26CBB48B5D02525EA30D4DF8E4050D69) | [22](#s26CBB48B5D02525EA30D4DF8E4050D69) |

| * | [Executive Officers of the Registrant](#sD50F845A576153D5AC409AFFA08E36BD) | [23](#sD50F845A576153D5AC409AFFA08E36BD) |

| 11 | [Executive Compensation](#s3364FA3D996B5B8C8198441E034E1297) | [114](#s3364FA3D996B5B8C8198441E034E1297) |

| 16 | [Form 10-K Summary](#sF8C6DF4564FD5B7296C0FA75DC1EEF86) | [119](#s66C1F5AAD44A51009D8C2CDC5E0060FB) |

| | [Signatures](#s66C1F5AAD44A51009D8C2CDC5E0060FB) | [119](#s66C1F5AAD44A51009D8C2CDC5E0060FB) |

We have approximately [removed: 385] [added: 380] locations in more than [removed: 52] [added: 55] countries.

These properties total approximately [removed: 12.3] [added: 12] million square feet, of which more than [removed: 345] [added: 340] locations, or approximately [removed: 6.6] [added: 6.4] million square feet, are leased.

| Stockerau | | Austria | | Administration | | [removed: 233,000] [added: 234,000] | | | Owned |

| Vadodara | | India | | Manufacturing and Research & Development | | 133,000 | | | Leased |

| Lubbock | | TX | | Manufacturing | | 229,000 | | | Owned |

The following information is provided regarding the executive officers of Xylem as of [removed: January 31, 2019:][added: February 6, 2020:]

| Patrick K. Decker | | [removed: 54] [added: 55] | | President and Chief Executive Officer (2014) | | • President and Chief Executive Officer, Harsco Corp. (diversified, worldwide industrial company) (2012) |

| E. Mark Rajkowski | | [removed: 60] [added: 61] | | Senior VP and Chief Financial Officer (2016) | | • Senior VP and Chief Financial Officer, MeadWestvaco Corp. (worldwide packaging company) (2004) |

| Pak Steven Leung | | [removed: 62] [added: 63] | | Senior VP and President, Emerging Markets (2015) | | • VP, Global Sales, Valves and Controls, Pentair Plc (diversified, worldwide industrial manufacturing company) (2013) |

| Kenneth Napolitano | | [removed: 56] [added: 57] | | Senior VP and President, Applied Water Systems and Americas Commercial Team (2017) | | • Senior VP and President, Applied Water Systems (2012) |

| Colin R. Sabol | | [removed: 51] [added: 52] | | Senior VP and President, Measurement & Control Solutions (2017) | | • Senior VP and President, Analytics and Treatment (2015) • Senior VP and President, Dewatering (2013) |

| Kairus Tarapore | | [removed: 57] [added: 58] | | Senior VP and Chief Human Resources Officer (2015) | | • Senior VP and Chief Administrative Officer, Babcock & Wilcox Company (energy and environmental technologies and services) (2013) |

| Claudia S. Toussaint | | [removed: 55] [added: 56] | | Senior VP, General [removed: Counsel] [added: Counsel, Chief Sustainability Officer] and Corporate Secretary (2014) | | • Senior VP, General Counsel and Secretary, Barnes Group Inc. (international industrial and aerospace manufacturing) (2012) |

The following information is provided regarding the Board of Directors of Xylem as of [removed: January 31, 2019:][added: February 6, 2020:]

| Robert F. Friel | | [added: Former] Chairman, President and Chief Executive Officer, PerkinElmer, Inc. |

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

| David Flinton | | 49 | | Senior VP and Chief Innovation, Technology & Products Officer (2019), Acting President, Water Infrastructure and Europe Commercial Team (2019) | | • Senior VP and President, Dewatering (2015) |

| Geri McShane | | 46 | | VP, Controller and Chief Accounting Officer (2019) | | • Controller, Accounting and Reporting (2016) |

| Jorge M. Gomez | | Executive Vice President, Chief Financial Officer, Dentsply Sirona, Inc. |

| | | |

EXECUTIVE OFFICERS OF THE REGISTRANT

| | | | | | | |

| Tomas Brannemo | | 47 | | Senior VP and President, Transport and Treatment (2017) | | • Senior VP and President, Transport (2014) • VP, Transport (2013) |

| David Flinton | | 48 | | Senior VP and President, Dewatering (2015) | | • VP, Engineering and Marketing, Applied Water Systems (2013) |

| Paul A. Stellato | | 44 | | VP, Controller and Chief Accounting Officer (2017) | | • VP, Financial Planning and Analysis (2014) • Director, Financial Planning and Analysis (2011) |

As of January 31, [removed: 2019,] [added: 2020,] there were [removed: 10,898] [added: 10,046] holders of record of our common stock.

In the first quarter of [removed: 2019,] [added: 2020,] we declared a dividend of [removed: $0.24] [added: $0.26] per share to be paid on March [removed: 14, 2019] [added: 26, 2020] for shareholders of record on February [removed: 14, 2019.][added: 27, 2020.]

There were no unregistered offerings of our common stock during [removed: 2018.][added: 2019.]

*Fourth Quarter* [removed: *2018*] [added: *2019*] *Share Repurchase Activity*

The following table summarizes our purchases of our common stock for the quarter ended December 31, [removed: 2018:][added: 2019:]

| (b) | On August 24, 2015, our Board of Directors authorized the repurchase of up to $500 million in shares with no expiration date. The program's objective is to deploy our capital in a manner that benefits our shareholders and maintains our focus on growth. There were no shares repurchased under this program during the three months ended December 31, [removed: 2018.] [added: 2019.] There are up to [removed: $363] [added: $338] million in shares that may still be purchased under this plan as of December 31, [removed: 2018.] [added: 2019.] |

This graph covers the period from December 31, [removed: 2013] [added: 2014] through December 31, [removed: 2018] [added: 2019] and assumes that $100 was invested on December 31, [removed: 2013] [added: 2014] in our common stock, the S&P 500 and the S&P 500 Industrials with the reinvestment of any dividends.

[removed: ][added: ]

| December 31, [removed: 2013] [added: 2014] | 100 | | | 100 | | | 100 | |

| December 31, 2018 | [removed: 206] [added: 185] | | | [removed: 150] [added: 132] | | | [removed: 132] [added: 120] | |

| 10/1/19 - 10/31/19 | | — | | — | | — | | $338 |

| 11/1/19 - 11/30/19 | | — | | — | | — | | $338 |

| 12/1/19 - 12/31/19 | | — | | — | | — | | $338 |

| December 31, 2015 | 97 | | | 101 | | | 97 | |

| December 31, 2016 | 134 | | | 113 | | | 116 | |

| December 31, 2017 | 187 | | | 138 | | | 139 | |

| December 31, 2019 | 221 | | | 174 | | | 156 | |

| 10/1/18 - 10/31/18 | | — | | — | | — | | $363 |

| 11/1/18 - 11/30/18 | | — | | — | | — | | $363 |

| 12/1/18 - 12/31/18 | | — | | — | | — | | $363 |

| December 31, 2014 | 112 | | | 114 | | | 110 | |

| December 31, 2015 | 109 | | | 115 | | | 107 | |

| December 31, 2016 | 150 | | | 129 | | | 127 | |

| December 31, 2017 | 209 | | | 157 | | | 153 | |

The following table sets forth selected consolidated financial data for the five years ended December 31, [removed: 2018.][added: 2019.]

| (in millions, except per share data) | [removed: 2018 (a)] [added: 2019 (a) (b)] | | | | [removed: 2017] [added: 2018] (b) [removed: (c)] | | | | [removed: 2016 (b)] [added: 2017] (c) | | | | [removed: 2015] [added: 2016] (c) | | | | [removed: 2014 (c)] [added: 2015] | | |

| Revenue | $ | [removed: 5,207] [added: 5,249] | | | $ | [removed: 4,707] [added: 5,207] | | | $ | [removed: 3,771] [added: 4,707] | | | $ | [removed: 3,653] [added: 3,771] | | | $ | [removed: 3,916] [added: 3,653] | |

| Gross profit | [removed: 2,026] [added: 2,046] | | | | [removed: 1,847] [added: 2,026] | | | | [removed: 1,462] [added: 1,847] | | | | [removed: 1,407] [added: 1,462] | | | | [removed: 1,517] [added: 1,407] | | |

| *Gross margin* | [removed: 38.9] [added: 39.0] | | % | | [removed: *39.2*] [added: *38.9*] | | *%* | | [removed: *38.8*] [added: *39.2*] | | *%* | | [removed: *38.5*] [added: *38.8*] | | *%* | | [removed: *38.7*] [added: *38.5*] | | *%* |

| Operating income | [removed: 654] [added: 486] | | | | [removed: 552] [added: 654] | | | | [removed: 408] [added: 552] | | | | [removed: 454] [added: 408] | | | | [removed: 469] [added: 454] | | |

| *Operating margin* | [removed: 12.6] [added: 9.3] | | % | | [removed: *11.7*] [added: *12.6*] | | *%* | | [removed: *10.8*] [added: *11.7*] | | *%* | | [removed: *12.4*] [added: *10.8*] | | *%* | | [removed: *12.0*] [added: *12.4*] | | *%* |

| Net income attributable to Xylem | [removed: 549] [added: 401] | | | | [removed: 331] [added: 549] | | | | [removed: 260] [added: 331] | | | | [removed: 340] [added: 260] | | | | [removed: 337] [added: 340] | | |

| Basic | $ | [removed: 3.05] [added: 2.23] | | | $ | [removed: 1.84] [added: 3.05] | | | $ | [removed: 1.45] [added: 1.84] | | | $ | [removed: 1.88] [added: 1.45] | | | $ | [removed: 1.84] [added: 1.88] | |

| Diluted | [removed: 3.03] [added: 2.21] | | | | [removed: 1.83] [added: 3.03] | | | | [removed: 1.45] [added: 1.83] | | | | [removed: 1.87] [added: 1.45] | | | | [removed: 1.83] [added: 1.87] | | |

| Basic shares outstanding | [removed: 179.8] [added: 180.0] | | | | [removed: 179.6] [added: 179.8] | | | | [removed: 179.1] [added: 179.6] | | | | [removed: 180.9] [added: 179.1] | | | | [removed: 183.1] [added: 180.9] | | |

| Diluted shares outstanding | [removed: 181.1] [added: 181.2] | | | | [removed: 180.9] [added: 181.1] | | | | [removed: 180.0] [added: 180.9] | | | | [removed: 181.7] [added: 180.0] | | | | [removed: 184.2] [added: 181.7] | | |

| Cash and cash equivalents | $ | [removed: 296] [added: 724] | | | $ | [removed: 414] [added: 296] | | | $ | [removed: 308] [added: 414] | | | $ | [removed: 680] [added: 308] | | | $ | [removed: 663] [added: 680] | |

| Working capital* | [removed: 988] [added: 919] | | | | [removed: 873] [added: 988] | | | | [removed: 878] [added: 873] | | | | [removed: 810] [added: 878] | | | | [removed: 882] [added: 810] | | |

| Total assets | [removed: 7,222] [added: 7,710] | | | | [removed: 6,860] [added: 7,222] | | | | [removed: 6,474] [added: 6,860] | | | | [removed: 4,657] [added: 6,474] | | | | [removed: 4,833] [added: 4,657] | | |

| Total debt | [removed: 2,308] [added: 2,316] | | | | [removed: 2,200] [added: 2,308] | | | | [removed: 2,368] [added: 2,200] | | | | [removed: 1,274] [added: 2,368] | | | | [removed: 1,284] [added: 1,274] | | |

| [removed: (a)] [added: (b)] | The amounts [added: shown] for the [removed: year] [added: years] ended December 31, [added: 2019 and December 31,] 2018 [removed: reflects] [added: reflect] the acquisitions of both Pure [added: Technologies Ltd.] and Sensus. Refer to Note 3 to the Consolidated Financial Statements for further information regarding acquisitions. |

| [removed: (b)] [added: (c)] | The amounts [added: shown] for the years ended December 31, 2017 and December 31, 2016 reflect the [added: the] acquisition of Sensus. [removed: Refer to Note 3 to the Consolidated Financial Statements for further information regarding acquisitions.] |

| Cash dividends per share | $ | 0.96 | | | $ | 0.84 | | | $ | 0.72 | | | $ | 0.62 | | | $ | 0.56 | |

| (a) | The amounts shown for the year ended December 31, 2019 include a goodwill impairment charge of $148 million related to the AIA goodwill reporting unit. Refer to Note 12 to the Consolidated Financial Statements for further information regarding goodwill. |

| Cash dividends per share | $ | 0.8400 | | | $ | 0.7200 | | | $ | 0.6196 | | | $ | 0.5632 | | | $ | 0.5120 | |

| (c) | The amounts for the years ended December 31, 2017, December 31, 2016, December 31, 2015 and December 31, 2014 reflect a re-classification related to prior year pension and post retirement accounting. Refer to Note 2 to the Consolidated Financial Statements for further information regarding this prior year re-classification. |

| [Report of Independent Registered Public Accounting [removed: Firm](#s9E0A288F8F6852D7B4B655C548E0AC28)] [added: Firm](#s064358E6A0A8502CBB24F96CDD95AE70)] | [removed: [57](#s9E0A288F8F6852D7B4B655C548E0AC28)] [added: [50](#s064358E6A0A8502CBB24F96CDD95AE70)] |

| [Consolidated Income Statements for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s87CC51822A415B08A7880E082B4EE3BF)] [added: 2017](#sDF0F0C5FFAC451619DF6EFCBD5B7CEBA)] | [removed: [58](#s87CC51822A415B08A7880E082B4EE3BF)] [added: [52](#sDF0F0C5FFAC451619DF6EFCBD5B7CEBA)] |

| [Consolidated Statements of Comprehensive Income for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#s71093898B8A25F41BC0C45360DBD311A)] [added: 2017](#s994AA6B0548D59DF8D4C435FC58234A3)] | [removed: [59](#s71093898B8A25F41BC0C45360DBD311A)] [added: [53](#s994AA6B0548D59DF8D4C435FC58234A3)] |

| [Consolidated Balance Sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017](#sA7FE6D37CA1E588D825AD0F57E968BD6)] [added: 2018](#sB37140C94D5153CF97C7FAC794BEECEC)] | [removed: [60](#sA7FE6D37CA1E588D825AD0F57E968BD6)] [added: [54](#sB37140C94D5153CF97C7FAC794BEECEC)] |

| [Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#sE027447FC158563B9B4405C378CE8E3F)] [added: 2017](#s0F55A2D08F1E5B6FAF031F4A9ED7E99D)] | [removed: [61](#sE027447FC158563B9B4405C378CE8E3F)] [added: [55](#s0F55A2D08F1E5B6FAF031F4A9ED7E99D)] |

| [Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#sB21983A617FE5906AAE5F5194D49B92C)] [added: 2017](#sA319F4D811B45B3D9CE953D2E93F43C3)] | [removed: [62](#sB21983A617FE5906AAE5F5194D49B92C)] [added: [56](#sA319F4D811B45B3D9CE953D2E93F43C3)] |

| [Note 1 Summary of Significant Accounting [removed: Policies](#s42D6099DC5D75CB79564DAFAECBBB633)] [added: Policies](#s86F3CF438ED45BF8B631E439BC929449)] | [removed: [63](#s42D6099DC5D75CB79564DAFAECBBB633)] [added: [57](#s86F3CF438ED45BF8B631E439BC929449)] |

| [Note 2 Recently Issued Accounting [removed: Pronouncements](#s83CD9A19C3C15D158B5331B027014742)] [added: Pronouncements](#s67614D8A3CC45A2BB19E95262EE2DAAF)] | [removed: [71](#s83CD9A19C3C15D158B5331B027014742)] [added: [65](#s67614D8A3CC45A2BB19E95262EE2DAAF)] |

| [Note 3 Acquisitions and [removed: Divestitures](#s83896C5196F758658DB32102679142E3)] [added: Divestitures](#s7D31CFD661565A87BE18D405AB27A8EC)] | [removed: [73](#s83896C5196F758658DB32102679142E3)] [added: [67](#s7D31CFD661565A87BE18D405AB27A8EC)] |

| [Note 4 [removed: Revenue](#s83896C5196F758658DB32102679142E3)] [added: Revenue](#s40D7291BD9F85E9195ACD847EC5B7761)] | [removed: [78](#s4f7cd850810f46739f95475c54fdc044)] [added: [69](#s40D7291BD9F85E9195ACD847EC5B7761)] |

| [Note 5 Restructuring and Asset Impairment [removed: Charges](#sBAA50FD81FFC551A907C450E6AB1EF89)] [added: Charges](#sB29CC8AC472356B4A089FD36090054D5)] | [removed: [80](#sBAA50FD81FFC551A907C450E6AB1EF89)] [added: [71](#sB29CC8AC472356B4A089FD36090054D5)] |

| [Note 6 Other Non-Operating Income, [removed: Net](#sAD16B04300F950B7BC61F8BD2170B491)] [added: Net](#s153B465590AC5A8B81154FCEDB8EEDCA)] | [removed: [82](#sAD16B04300F950B7BC61F8BD2170B491)] [added: [73](#s153B465590AC5A8B81154FCEDB8EEDCA)] |

| [Note 7 Income [removed: Taxes](#s40B51794BB84540686D85E6B003C430C)] [added: Taxes](#sA398E3A504375B3194A944BA498C4D5B)] | [removed: [82](#s40B51794BB84540686D85E6B003C430C)] [added: [73](#sA398E3A504375B3194A944BA498C4D5B)] |

| [Note 8 Earnings Per [removed: Share](#sF9FEC1ADC0FA551BBEB32173CE491C1C)] [added: Share](#s26D27BFE75C3554B9A91CFDA74F3B939)] | [removed: [85](#sF9FEC1ADC0FA551BBEB32173CE491C1C)] [added: [77](#s26D27BFE75C3554B9A91CFDA74F3B939)] |

| [Note 9 [removed: Inventories](#sA960C4F5E41A5A21AE6865B7E6AFD292)] [added: Inventories](#s0D46DE9191675F94A2810D9FC1749FAE)] | [removed: [86](#sA960C4F5E41A5A21AE6865B7E6AFD292)] [added: [77](#s0D46DE9191675F94A2810D9FC1749FAE)] |

| [Note 10 Property, Plant and [removed: Equipment](#sE6D80498DDBA5548815AA98E126F3CE0)] [added: Equipment](#s294DF3A621655595BB6598ED0D8E188B)] | [removed: [86](#sE6D80498DDBA5548815AA98E126F3CE0)] [added: [78](#s294DF3A621655595BB6598ED0D8E188B)] |

| [Note [removed: 11] [added: 12] Goodwill and Other Intangible [removed: Assets](#s6D3C4CDA06BF5C799B0110AB29CC08CB)] [added: Assets](#s802361F3F11C50E39E4C29BCF67CBCC5)] | [removed: [86](#s6D3C4CDA06BF5C799B0110AB29CC08CB)] [added: [80](#s802361F3F11C50E39E4C29BCF67CBCC5)] |

| [Note [removed: 12] [added: 13] Derivative Financial [removed: Instruments](#s8DC6318C9CC85A64B47C342A017EC8F8)] [added: Instruments](#s3A97AB2BDFC459618ABEE842817B3119)] | [removed: [87](#s8DC6318C9CC85A64B47C342A017EC8F8)] [added: [82](#s3A97AB2BDFC459618ABEE842817B3119)] |

| [Note [removed: 13] [added: 14] Accrued and Other Current [removed: Liabilities](#s0A2CDB17B8B65C34B313A69120277D9F)] [added: Liabilities](#sD7F77715CEEC5AA5866B667A960D0F27)] | [removed: [90](#s0A2CDB17B8B65C34B313A69120277D9F)] [added: [84](#sD7F77715CEEC5AA5866B667A960D0F27)] |

| [Note [removed: 14] [added: 15] Credit Facilities and [removed: Long-Term Debt](#s8B10F92D6E32576B9F97E647A138AFF1)] [added: Debt](#s33BE9351C052525DA0CF2F115757CA7B)] | [removed: [90](#s8B10F92D6E32576B9F97E647A138AFF1)] [added: [84](#s33BE9351C052525DA0CF2F115757CA7B)] |

| [Note [removed: 15] [added: 16] Postretirement Benefit [removed: Plans](#s6E627C8F2C4853478F18EDECA2BF8236)] [added: Plans](#sCB263E6067ED50A89A977DC988EF682D)] | [removed: [92](#s6E627C8F2C4853478F18EDECA2BF8236)] [added: [86](#sCB263E6067ED50A89A977DC988EF682D)] |

| [Note [removed: 16] [added: 17] Stock-Based Compensation [removed: Plans](#s1C5F1FC729D25633B4FFF077ED4856C3)] [added: Plans](#sA426B3CE662F5441BFCE09E68A201103)] | [removed: [100](#s1C5F1FC729D25633B4FFF077ED4856C3)] [added: [94](#sA426B3CE662F5441BFCE09E68A201103)] |

| [Note [removed: 17] [added: 18] Capital [removed: Stock](#sFA22C096DBE053CC897B7D78B423A4A3)] [added: Stock](#sC84F1BCBE00A5855BF8CA494CB387F51)] | [removed: [102](#sFA22C096DBE053CC897B7D78B423A4A3)] [added: [96](#sC84F1BCBE00A5855BF8CA494CB387F51)] |

| [Note [removed: 18] [added: 19] Accumulated Other Comprehensive Income [removed: (Loss)](#s71C2F4BB7EA75D9C945B266BA9682331)] [added: (Loss)](#s0360C1265F5E54D882569CBAF22B9B35)] | [removed: [104](#s71C2F4BB7EA75D9C945B266BA9682331)] [added: [97](#s0360C1265F5E54D882569CBAF22B9B35)] |

| [removed: [Note 19] Commitment and [removed: Contingencies](#sFFEDA6F3BE7B5B74A475370F738712B8)] [added: Contingencies (Note 20)] | [removed: [105](#sFFEDA6F3BE7B5B74A475370F738712B8)] | [added: | | | | | |]

| [Note [removed: 20] [added: 21] Related Party [removed: Transactions](#s5CB5463694D15A999443F0579B261BD0)] [added: Transactions](#s02A408A03E63543995B7F7E7B9619EB6)] | [removed: [107](#s5CB5463694D15A999443F0579B261BD0)] [added: [100](#s02A408A03E63543995B7F7E7B9619EB6)] |

| [Note [removed: 21] [added: 22] Segment and Geographic [removed: Data](#sEF355A765AAC5CD898C851BBC49DFECF)] [added: Data](#s09475156C01953178483E58A73372404)] | [removed: [108](#sEF355A765AAC5CD898C851BBC49DFECF)] [added: [101](#s09475156C01953178483E58A73372404)] |

| [Note [removed: 22] [added: 23] Valuation and Qualifying [removed: Accounts](#s14D08982C004501888C16A51F999CF39)] [added: Accounts](#sE751EE97E18853B39E73E50BF30D1D1E)] | [removed: [110](#s14D08982C004501888C16A51F999CF39)] [added: [103](#sE751EE97E18853B39E73E50BF30D1D1E)] |

| [Note [removed: 23] [added: 24] Quarterly Financial [removed: Data](#s2956F43632AC523693BA1EF92302B2FF)] [added: Data](#s1C2C09737CDF5B5AB3D997705E3564A6)] | [removed: [110](#s2956F43632AC523693BA1EF92302B2FF)] [added: [104](#s1C2C09737CDF5B5AB3D997705E3564A6)] |

To the Stockholders and [added: the] Board of Directors of

We have audited the accompanying consolidated balance sheets of Xylem Inc. and subsidiaries (the "Company") as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February [removed: 22, 2019,] [added: 28, 2020,] expressed an unqualified opinion on the Company's internal control over financial reporting.

| Year Ended December 31, | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Revenue | $ | [removed: 5,207] [added: 5,249] | | | $ | [removed: 4,707] [added: 5,207] | | | $ | [removed: 3,771] [added: 4,707] | |

| Cost of revenue | [removed: 3,181] [added: 3,203] | | | | [removed: 2,860] [added: 3,181] | | | | [removed: 2,309] [added: 2,860] | | |

| Gross profit | [removed: 2,026] [added: 2,046] | | | | [removed: 1,847] [added: 2,026] | | | | [removed: 1,462] [added: 1,847] | | |

| Selling, general and administrative expenses | [removed: 1,161] [added: 1,158] | | | | [removed: 1,089] [added: 1,161] | | | | [removed: 914] [added: 1,089] | | |

| Research and development expenses | [removed: 189] [added: 191] | | | | [removed: 181] [added: 189] | | | | [removed: 110] [added: 181] | | |

| Restructuring and asset impairment charges | [removed: 22] [added: 63] | | | | [removed: 25] [added: 22] | | | | [removed: 30] [added: 25] | | |

| [Note 11 Leases](#s61af021627ca43e883a502dd179e639e) | [78](#s61af021627ca43e883a502dd179e639e) |

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill - Advanced Infrastructure Analytics Reporting Unit - Refer to Note 12 to the financial statements

*Critical Audit Matter Description*

During the third quarter of 2019, the Company recorded a goodwill impairment charge of $148 million related to the Advanced Infrastructure Analytics (“AIA”) reporting unit.

The impairment resulted from a downward revision of forecasted future cash flows.

The Company’s measurement of the goodwill impairment resulted from the comparison of the fair value of the AIA reporting unit to its carrying value.

To determine the fair value of the AIA reporting unit, the Company used the income approach.

Under the income approach, the fair value of the AIA reporting unit was based on the discounted value of the estimated cash flows that the reporting unit is expected to generate.

Cash flow projections were based on management’s estimates of

revenue growth rates and operating margins, taking into consideration industry and market conditions.

The discount rate was based on the weighted average cost of capital for the AIA reporting unit.

Given the significant judgments made by management to estimate the fair value of AIA, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate, and forecasts of future revenue required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists

*How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to forecasts of future revenue and operating margin and selection of the discount rate for AIA included the following, among others:

| • | We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the AIA reporting unit and the measurement of the goodwill impairment, such as controls related to management’s forecasts of future revenue, and the selection of the discount rate. |

| • | We evaluated the reasonableness of management’s revenue forecasts by comparing the forecasts to: |

| – | Historical revenues. |

| – | Internal communications to management and the Board of Directors. |

| – | Information included in industry reports and certain peer company data. |

| • | We also evaluated the reasonableness of management’s revenue forecasts by comparing the actual growth in sales orders received to management’s forecasted growth in sales and we tested the existence, accuracy and completeness of the underlying sales orders. |

| • | With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) discount rate, and (3) long-term revenue growth rate, including testing the source information underlying the determination of the discount rate and long-term revenue growth rate, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rate and long-term revenue growth rate selected by management. |

| • | Our fair value specialists also assisted in evaluating the reasonableness of the AIA fair value by considering comparable revenue valuation multiples of peer companies. |

| • | We evaluated developments in AIA’s business from the third quarter of 2019, the period in which the impairment charge was recorded, through December 31, 2019 to determine if events or circumstances have occurred that would more likely than not further reduce the fair value of the business. |

February 28, 2020

| Goodwill impairment charge | 148 | | | | — | | | | — | | |

| December 31, | 2019 | | | | 2018 | | |

| Year Ended December 31, | 2019 | | | | 2018 | | | | 2017 | | |

| Restructuring and asset impairment charges | 63 | | | | 22 | | | | 25 | | |

| Goodwill impairment charge | 148 | | | | — | | | | — | | |

| Cash received from cross currency swaps | 9 | | | | — | | | | — | | |

| Sale of business | | | | | | | | | | | | | | | | | | | | | (2 | | ) | | (2 | | ) |

| Distribution to minority shareholders | | | | | | | | | | | | | | | | | | | | | (3 | | ) | | (3 | | ) |

| Balance at December 31, 2019 | $ | 2 | | | $ | 1,991 | | | $ | 1,866 | | | $ | (375 | ) | | $ | (527 | ) | | $ | 10 | | | $ | 2,967 | |

providing those goods and services.

In addition, we apply a practical

assessment of the probable outcome of the performance condition.

greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.

February 22, 2019

| Balance at December 31, 2015 | $ | 2 | | | $ | 1,834 | | | $ | 885 | | | $ | (238 | ) | | $ | (399 | ) | | $ | — | | | $ | 2,084 | |

| Acquisition activity | | | | | | | | | | | | | | | | | | | | | $ | 17 | | | $ | 17 | |

| Dividends declared ($.84 per share) | | | | | | | | | (151 | | ) | | | | | | | | | | | | | | (151 | | ) |

The Applied Water segment serves many of the primary uses of water and focuses on the residential, commercial and industrial markets.

The Applied Water segment’s major products include pumps, valves, heat exchangers, controls and dispensing equipment.

The Measurement & Control Solutions segment focuses on developing advanced technology solutions that enable intelligent use and conservation of critical water and energy resources as well as analytical instrumentation used in the testing of water.

The Measurement & Control Solutions segment's major products include smart metering, networked communications, measurement and control technologies, critical infrastructure technologies, software and services including cloud-based analytics, remote monitoring and data management, leak detection and pressure monitoring solutions and testing equipment.

deferred tax asset.

l be entitled.

of purchases classified into cost of revenue) in the period that the hedged forecasted transaction affects earnings.

adjustment related to eliminating the separate measurement of ineffectiveness is required.

In May 2017, the FASB issued guidance, which amends the scope of modification accounting guidance for share-based payment arrangements.

The guidance outlines the types of changes to the terms or conditions of share-based payment arrangements that would require the use of modification accounting.

Specifically, modification accounting would not apply if the fair value, vesting conditions, and classification of the award as equity or liability are the same immediately before and after the modification.

This guidance is effective prospectively for interim and annual reporting periods beginning December 15, 2017 and early adoption is permitted.

We elected to early adopt this guidance effective the second quarter of 2017.

In January 2017, the FASB issued guidance amending the impairment testing of goodwill.

Under current guidance, the testing of goodwill for impairment is performed at least annually using a two-step test.

Step one involves comparing the fair value of a “reporting unit” to its carrying amount.

If the applicable book value exceeds the reporting unit’s fair value then step two must be performed.

Step two involves comparing the fair value of the reporting unit’s goodwill to the applicable carrying amount of the asset and recognizing an impairment charge equal to the amount by which the carrying amount of the goodwill exceeds its implied fair value.

The amended guidance eliminates step two of the impairment test and allows an entity to record an impairment charge equal to the amount that the carrying amount of the applicable reporting unit exceeds its fair value, up to the value of the recorded goodwill.

This guidance is effective prospectively for interim and annual goodwill impairment tests beginning after December 15, 2019 with early adoption permitted for interim or annual tests after January 1, 2017.

We elected to

early adopt this guidance effective the first quarter of 2017.

The adoption of this guidance did not impact our financial condition or results of operations.

In October 2016, the FASB issued guidance amending the accounting for income taxes.

Under current guidance the recognition of current and deferred income taxes for an intra-entity asset transfer is prohibited until the asset has been sold to an outside party.

The amended guidance eliminates the prohibition against immediate recognition of current and deferred income tax amounts associated with intra-entity transfers of assets other than inventory.

This guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance.

The requirements of the amended guidance should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

We elected to early adopt this guidance effective the first quarter of 2017.

As a result of adopting the amended guidance, prepaid tax assets were reduced by $14 million, long-term deferred tax assets increased $3 million, and accrued taxes were reduced by $4 million.

The net impact of these adjustments on retained earnings was a decrease of $7 million.

In July 2015, the FASB issued guidance regarding simplifying the measurement of inventory.

Under prior guidance, inventory is measured at the lower of cost or market, where market is defined as replacement cost, with a ceiling of net realizable value and a floor of net realizable value less a normal profit margin.

The amended guidance requires the measurement of inventory at the lower of cost and net realizable value.

Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

This guidance is effective prospectively for interim and annual periods beginning after December 15, 2016 and early application is permitted.

Our management, with the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of the Company, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the year ended December 31, [removed: 2018] [added: 2019] pursuant to Rule 13a-15(b) and 15d-15(e) of the Securities Exchange Act of 1934 (“the Exchange Act”).

Based upon that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures as of the year ended December 31, [removed: 2018] [added: 2019] were effective, in all material respects, and designed to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

The Company's management, including the CEO and CFO, conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (2013).

This assessment included an evaluation of the design of our internal control over financial reporting and [removed: testing of the operational effectiveness of those controls.]

Based on our assessment, the Company's management has concluded that our internal control over financial reporting was effective as of December 31, [removed: 2018.][added: 2019.]

The effectiveness of the Company's internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears following Item 9B of this Annual Report on Form 10-K.

[removed: There were] [added: Other than as described in the preceding paragraph, there have been] no changes in [removed: the Company's] [added: our] internal control over financial reporting [removed: that occurred] [added: (as defined in Rule 13a-15(f) under the 1934 Act)] during the [added: fiscal] quarter ended December 31, [removed: 2018] [added: 2019] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

testing of the operational effectiveness of those controls.

In the ordinary course of business, the Company reviews its internal control over financial reporting and makes changes to systems and processes to improve such controls and increase efficiency, while ensuring that an effective internal control environment is maintained.

Starting in 2017, the Company undertook steps to advance a multi-year effort to transform many of our support functions and related technologies, including Finance, Human Resources and Procurement.

In connection with these restructuring and transformation plans, we continue to centralize certain accounting functions within shared service centers operated by an outsourced provider.

This initiative is not in response to any identified deficiency or weakness in the Company’s internal control over financial reporting.

In response to this process, the Company has and will continue to align and streamline the design and operation of its financial control environment.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2018 excluded Pure Technologies Ltd. ("Pure"), which was acquired by the Company on January 31, 2018.

Pure is a wholly-owned subsidiary of the Company whose total assets and total net sales represented less than 6% of consolidated total assets and less than 2% of consolidated net sales, respectively, of the Company as of and for the year ended December 31, 2018.

As permitted by guidelines established by the Securities and Exchange Commission, companies are allowed to exclude certain acquisitions from their assessments of internal control over financial reporting during the first year of an acquisition while integrating the acquired companies.

December 31, [removed: 2018,] [added: 2019,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, [removed: 2018, and the related notes (collectively referred to as the “financial statements”),] [added: 2019,] of the Company and our report dated February [removed: 22, 2019,] [added: 28, 2020,] expressed an unqualified opinion on those financial statements.

Basis [removed: of] [added: for] Opinion

February 28, 2020

As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Pure Technologies (“Pure”), which was acquired on January 31, 2018 and whose financial statements constitute less than 6% and 2% of total assets and total revenue, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 2018.

Accordingly, our audit did not include the internal control over financial reporting at Pure.

February 22, 2019

The information required by this Item is incorporated herein by reference to the information in our Definitive Proxy Statement to be filed with the SEC in connection with our [removed: 2019] [added: 2020] Annual Meeting of Shareholders (the [removed: “2019] [added: “2020] Proxy Statement”) under the captions “Proposal 1 - Election of Directors,” [removed: "Identifying] [added: "Board Composition] and [removed: Evaluating Director Nominees,"] [added: Refreshment,"] "Board Committees - Audit [removed: Committee"] [added: Committee," "Audit Committee Report"] and [removed: “Section] [added: “Delinquent Section] 16(a) [removed: Beneficial Ownership Reporting Compliance.”][added: Reports.”]

The information called for by Item 10 with respect to executive officers is set forth in Part I of this Report under the caption [removed: “Executive Officers of the Registrant”] [added: “Information about our Executive Officers”] and is incorporated by reference in this section.

The corporate governance principles and board committee charters are available on the Company’s website at [removed: *www.investors.xyleminc.com*.][added: *www.xylem.com/en-us/investors/*.]

The information required by this Item is incorporated herein by reference to the information in our [removed: 2019] [added: 2020] Proxy Statement set forth under captions [removed: “Executive Compensation,"] [added: “Compensation Discussion and Analysis,"] "Director [removed: Compensation",] [added: Compensation,"] "Board Committees - Leadership Development and Compensation Committee" and “Leadership Development and Compensation Committee Report.”

The information required by this Item is incorporated herein by reference to the information in our [removed: 2019] [added: 2020] Proxy Statement set forth under the captions “Stock Ownership [removed: of Directors, Executive Officers and] [added: -] Certain Beneficial [removed: Owners”] [added: Owners," "Stock Ownership - Directors] and [added: Executive Officers" and] "Equity Compensation Plan Information."

The information required by this Item is incorporated herein by reference to the information in our [removed: 2019] [added: 2020] Proxy Statement set forth under the captions [removed: "Governance] [added: "Corporate Governance] - Director Independence" and [removed: “Governance] [added: “Corporate Governance Policies and Practices] - Related Party Transactions.”

The information required by this Item is incorporated herein by reference to the information in our [removed: 2019] [added: 2020] Proxy Statement set forth under the captions [removed: “Fees] [added: “Proposal 2 - Fees] of Audit and Other Services Fees” and [removed: "Pre-Approval] [added: "Proposal 2 - Pre-Approval] of Audit and Non-Audit Services."

| [removed: [2.2](http://www.sec.gov/Archives/edgar/data/1524472/000119312516681898/d242351dex21.htm)] [added: [10.34](http://www.sec.gov/Archives/edgar/data/1524472/000152447219000015/xyl03052019exhibit1034.htm)] | | [removed: Share Purchase] [added: Five-Year Revolving Credit Facility] Agreement, dated as of [removed: August 15, 2016, by and] [added: March 5, 2019] among Xylem [removed: Inc., Xylem Luxembourg S.à r.l., Sensus Worldwide Limited, Sensus Industries Limited, and Sensus USA] Inc. [added: and the Lenders party thereto.] | Incorporated by reference to Exhibit [removed: 2.1 to] [added: 10.34 of] Xylem Inc.’s [removed: Current Report on] Form 8-K filed on [removed: August 15, 2016] [added: March 5, 2019] (CIK No. 1524472, File No. 1-35229). |

| [removed: [4.3](http://www.sec.gov/Archives/edgar/data/1524472/000119312516501188/d161514dex41.htm)] [added: [4.3](http://www.sec.gov/Archives/edgar/data/1524472/000119312516501188/d161514dex42.htm)] | | First Supplemental Indenture, dated March 11, 2016, by and between the Company and Deutsche Bank Trust Company Americas, as trustee. | Incorporated by reference to Exhibit 4.2 of Xylem Inc.’s Form 8-K filed on March 11, 2016 (CIK No. 1524472, File No. 1-35229) |

| [removed: [4.4](http://www.sec.gov/Archives/edgar/data/1524472/000119312516501188/d161514dex41.htm)] [added: [4.4](http://www.sec.gov/Archives/edgar/data/1524472/000119312516501188/d161514dex43.htm)] | | Second Supplemental Indenture, dated March 11, 2016, by and between the Company and Deutsche Bank Trust Company Americas, as trustee. | Incorporated by reference to Exhibit 4.3 of Xylem Inc.’s Form 8-K filed on March 11, 2016 (CIK No. 1524472, File No. 1-35229). |

| [removed: [21.0](https://www.sec.gov/Archives/edgar/data/1524472/000152447219000009/xyl12312018ex21.htm)] [added: [21.0](https://www.sec.gov/Archives/edgar/data/1524472/000152447220000006/xyl12312019ex21v1.htm)] | | Subsidiaries of the Registrant. | Filed herewith. |

| [removed: [23.1](https://www.sec.gov/Archives/edgar/data/1524472/000152447219000009/xyl12312018ex231.htm)] [added: [23.1](https://www.sec.gov/Archives/edgar/data/1524472/000152447220000006/xyl12312019ex231v1.htm)] | | Consent of Independent Registered Public Accounting Firm. | Filed herewith. |

| [removed: [31.1](https://www.sec.gov/Archives/edgar/data/1524472/000152447219000009/xyl12312018ex311.htm)] [added: [31.1](https://www.sec.gov/Archives/edgar/data/1524472/000152447220000006/xyl12312019ex311v1.htm)] | | Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. |

| [removed: [31.2](https://www.sec.gov/Archives/edgar/data/1524472/000152447219000009/xyl12312018ex312.htm)] [added: [31.2](https://www.sec.gov/Archives/edgar/data/1524472/000152447220000006/xyl12312019ex312v1.htm)] | | Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith. |

| [removed: [32.1](https://www.sec.gov/Archives/edgar/data/1524472/000152447219000009/xyl12312018ex321.htm)] [added: [32.1](https://www.sec.gov/Archives/edgar/data/1524472/000152447220000006/xyl12312019ex321v1.htm)] | | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference. |