Xylem Inc.XYL

Xylem Inc. Commitments Disclosure

10-KFiled Feb 25, 20263 min read
Commitments and Contingencies
Legal Proceedings
From time to time, we are involved in legal and regulatory proceedings that are incidental to the operation of our businesses (or the business operations of previously owned entities). These proceedings may seek remedies relating to matters including environmental, tax, intellectual property, acquisitions or divestitures, product liability, property damage, personal injury, privacy, employment, labor and pension, government investigations or contract issues and commercial or contractual disputes.
See Note 7, "Income Taxes," for a description of a pending tax litigation matter.
Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claims, we do not believe it is reasonably possible that any asserted or unasserted legal claims or proceedings, individually or in aggregate, will have a material adverse effect on our results of operations, or financial condition.
We have estimated and accrued $4 million as of both December 31, 2025 and 2024 for these general legal matters.
Unconditional Purchase Obligations
We have future unconditional purchase commitments which are legally binding and that specify all significant terms including price and/or quantity. Total future commitments for these obligations is $802 million, of which $775 million is committed within the next twelve months, excluding contracts that can be canceled without penalty.
Guarantees
We obtain certain stand-by letters of credit, bank guarantees, surety bonds and insurance letters of credit from third-party financial institutions in the ordinary course of business when required under contracts or to satisfy insurance related requirements. As of December 31, 2025 and 2024, the amount of surety bonds, bank guarantees, insurance letters of credit and stand-by letters of credit was $822 million and $758 million, respectively.
Environmental
In the ordinary course of business, we are subject to federal, state, local, and foreign environmental laws and regulations. We are responsible, or are alleged to be responsible, for ongoing environmental investigation and remediation of sites in various countries. Our accrued liabilities represent our best estimates related to the investigation and remediation of environmental media such as water, soil, soil vapor, air and structures, as well as related legal fees. Liabilities for these environmental expenditures are recorded on an undiscounted basis. We have estimated and accrued $4 million as of both December 31, 2025 and 2024, respectively, for environmental matters.
Given the complexities and uncertainties involved in on-going and future investigation and remediation projects, the process to estimate environmental remediation liabilities requires judgment. We believe the total amount accrued is reasonable based on existing facts and circumstances.
Warranties
We warrant numerous products, the terms of which vary widely. In general, we warrant products against defects and specific non-performance. Warranty expense was $39 million, $36 million, and $29 million for 2025, 2024 and 2023, respectively. The table below provides changes in the combined current and non-current product warranty accruals over each period.
(in millions)202520242023
Warranty accrual – January 1$57 $63 $54 
Net charges for product warranties in the period39 36 29 
Net Evoqua additions from acquisition— — 10 
Settlement of warranty claims(34)(37)(32)
Transfers related to assets held for sale(8)(2)— 
Foreign currency and other(1)(3)2 
Warranty accrual – December 31$53 $57 $63 
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Historical Timeline

Fiscal YearFiled
2025Feb 25, 2026Showing above
2024Mar 3, 2025
2023Feb 28, 2024
2022Feb 24, 2023
2021Feb 25, 2022
2020Feb 26, 2021
2019Feb 28, 2020
2018Feb 22, 2019
2017Feb 23, 2018
2016Feb 23, 2017
2015Feb 26, 2016

About Commitments Disclosures

Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.

Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.

Other Available Disclosures

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