Earthlink 2014 Annual Report Download - page 51

Table of Contents
Board of Directors at any time. In addition, the agreements governing our Senior Secured Notes, Senior Notes and senior secured revolving
credit facility contain restrictions on our ability to repurchase common stock.
Non-GAAP Financial Measures
In addition to our financial information presented in accordance with U.S. generally accepted accounting principles (“GAAP”),
management
uses certain “non-GAAP financial measures”
within the meaning of the SEC Regulation G, to clarify and enhance understanding of past
performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’
s operating
performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly
comparable measure calculated and presented in accordance with GAAP. Set forth below is a discussion of the presentation and use of Adjusted
EBITDA and Unlevered Free Cash Flow, the non-GAAP financial measures used by management.
Adjusted EBITDA is defined as net income (loss) before interest expense and other, net, income tax provision (benefit), depreciation and
amortization, stock-based compensation expense, impairment of goodwill and long-lived assets, restructuring, acquisition and integration-
related
costs, and loss from discontinued operations, net of tax. Unlevered Free Cash Flow is defined as net income (loss) before interest expense and
other, net, income tax provision (benefit), depreciation and amortization, stock-based compensation expense, impairment of goodwill and long-
lived assets, restructuring, acquisition and integration-
related costs, and loss from discontinued operations, net of tax, less cash used for
purchases of property and equipment.
These non-
GAAP financial measures are commonly used in the industry and are presented because management believes they provide relevant
and useful information to investors. Management uses these non-
GAAP financial measures to evaluate the performance of its business.
Management also uses Unlevered Free Cash Flow to assess its ability to fund capital expenditures, fund growth and service debt. Management
believes that excluding the effects of certain non-cash and non-
operating items enables investors to better understand and analyze the current
period’s results and provides a better measure of comparability.
There are limitations to using these non-
GAAP financial measures. Adjusted EBITDA and Unlevered Free Cash Flow are not indicative of cash
provided or used by operating activities and may differ from comparable information provided by other companies. Adjusted EBITDA and
Unlevered Free Cash Flow should not be considered in isolation, as an alternative to, or more meaningful than measures of financial
performance determined in accordance with U.S. GAAP.
The following table presents a reconciliation of Adjusted EBITDA to the most closely related financial measure reported under GAAP for the
years ended
December 31, 2012, 2013 and 2014 :
46
Year Ended December 31,
2012 2013 2014
(in thousands)
Net income (loss)
$
7,520
$
(538,827
)
$
(72,752
)
Interest expense and other, net
63,416
60,686
56,261
Income tax provision (benefit)
(1,331
)
211,231
(4,744
)
Depreciation and amortization
183,165
183,114
186,872
Stock-based compensation expense
10,462
13,275
12,600
Impairment of goodwill and long-lived assets —
255,599
14,334
Restructuring, acquisition and integration-related costs
18,244
40,030
20,088
Loss from discontinued operations, net of tax
2,418
1,961
381
Adjusted EBITDA
$
283,894
$
227,069
$
213,040