Non-GAAP Measures 23 Xylem Inc. Non-GAAP Measures Management views key performance indicators including revenue, gross margins, segment operating income and margins, orders growth, free cash flow, working capital, and backlog, among others. In addition, we consider certain measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operations as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators: “Organic revenue" and "Organic orders” transactions, and contributions from acquisitions and divestitures. Divestitures include sales of portions of our business that did not meet the criteria for classification as a discontinued operation or insignificant portions of our business that we did not classify as a discontinued operation. The period-over-period change resulting from foreign currency fluctuations assumes no change in exchange rates from the prior period. “Constant currency” rate. This approach is used for countries whose functional currency is not the U.S. dollar. “EBITDA” adjustment to EBITDA to exclude for one-time separation costs associated with the Xylem spin-off from ITT Corporation. “Operating Income * ”, "Adjusted Operating Income" and “Adjusted EPS” restructuring and realignment and one-time separation costs associated with the Xylem spin-off from ITT Corporation and tax-related special items. “Normalized EPS” stand alone costs in the prior comparable period. “Free Cash Flow” other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of free cash flows does not consider non-discretionary cash payments, such as debt. defined as revenue and orders, respectively, excluding the impact of foreign currency fluctuations, intercompany defined as financial results adjusted for currency by translating current period and prior period activity using the same currency conversion defined as earnings before interest, taxes, depreciation, amortization expense, and share-based compensation. “Adjusted EBITDA” reflects the defined as operating income and earnings per share, adjusted to exclude defined as adjusted earnings per share, as well as adjustments to reflect the incremental current period amount of interest expense and defined as net cash from operating activities, as reported in the Statement of Cash Flow, less capital expenditures as well as adjustments for | 
