Fourth-quarter reported operating margin was 13%, and adjusted operating margin was 13.8% each declining 120 basis points year-over-year. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin declined 170 basis points to 18.8%. COVID-related impacts and inflation drove the margin decline, exceeding productivity improvements and cost savings. Xylem generated net income of $148 million, or $0.82 per share, and adjusted net income of $145 million, or $0.81 per share, which excludes the impact of restructuring, realignment and special charges.
For the full year, Xylem delivered reported operating margin of 7.5%, down 180 basis points versus the prior year, and adjusted operating margin of 10.8%, down 310 basis points for the same period. Adjusted EBITDA margin was 16.3%, down 320 basis points year-over-year. The same factors drove the margin declines for the full year in the fourth quarter. Full-year reported net income was $254 million, or $1.40 per share, with a reported operating margin of 7.5%. Adjusted net income, which excludes the impact of restructuring, realignment and special charges, was $374 million, or $2.06 per share. The company generated $824 million of operating cash flow, representing a 324% conversion, and $641 million of free cash flow, representing a 181% conversion.
"Our team again delivered solid operational performance, exceeding expectations across all major indicators, including revenue, margin, and EPS," said Patrick Decker, president and CEO of Xylem. "We drove better-than-anticipated top-line improvements in all segments, taking full advantage of stabilising demand, demonstrated by sequential gains globally, with a particularly strong performance in Europe and China. Our improved bottom-line performance reflects effective cost containment and supply chain execution through the pandemic and over-delivery on our free cash flow conversion commitments on the back of disciplined working capital management."
Decker said Xylem's full-year and Q4 2020 performance gives the company positive momentum entering 2021.
He added: "As our end markets showed encouraging signs of recovery in the fourth quarter, with healthy orders trends and significant backlog growth. We also delivered strong performance with our industry-leading digital portfolio, as the pandemic continues to accelerate customer adoption of digital technologies across the water sector. This clearly positions Xylem well in both the near and long term."
