Earthlink 2015 Annual Report Download - page 52

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, loss on extinguishment of debt, 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, loss on extinguishment of debt, 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 our 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, 2013, 2014 and 2015 :
Year Ended December 31,
2013
2014
2015
(in thousands)
Net loss $ (538,827)
$ (72,752)
$ (43,210)
Interest expense and other, net 58,606
56,261
50,972
Income tax provision (benefit) 211,231
(4,744)
2,730
Depreciation and amortization 183,114
186,872
188,315
Stock-based compensation expense 13,275
12,600
14,594
Impairment of goodwill and long-lived assets 255,599
14,334
—
Restructuring, acquisition and integration-related costs 40,030
20,088
19,320
Loss on extinguishment of debt 2,080
—
9,734
Loss from discontinued operations, net of tax 1,961
381
—
Adjusted EBITDA $ 227,069
$ 213,040
$ 242,455
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