XM Radio 2008 Annual Report Download - page 31

GAAP. We believe adjusted income (loss) from operations is a useful measure of our operating performance.
We use adjusted income (loss) from operations for budgetary and planning purposes; to assess the relative
profitability and on-going performance of our consolidated operations; to compare our performance from
period — to-period; and to compare our performance to that of our competitors. We also believe adjusted
income (loss) from operations is useful to investors to compare our operating performance to the performance
of other communications, entertainment and media companies. We believe that investors use current and
projected adjusted income (loss) from operations to estimate our current or prospective enterprise value and to
make investment decisions.
Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large
amounts of capital, our results of operations reflect significant charges for interest and depreciation expense.
We believe adjusted income (loss) from operations provides useful information about the operating perfor-
mance of our business apart from the costs associated with our capital structure and physical plant. The
exclusion of interest and depreciation and amortization expense is useful given fluctuations in interest rates and
significant variation in depreciation and amortization expense that can result from the amount and timing of
capital expenditures and potential variations in estimated useful lives, all of which can vary widely across
different industries or among companies within the same industry. We believe the exclusion of taxes is
appropriate for comparability purposes as the tax positions of companies can vary because of their differing
abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which
they operate. We believe the exclusion of restructuring and related costs and impairment of goodwill is useful
given the non-recurring nature of these transactions. We also believe the exclusion of share-based payment
expense is useful given the significant variation in expense that can result from changes in the fair market value
of our common stock. To compensate for the exclusion of taxes, other income (expense), depreciation and
amortization and share-based payment expense, we separately measure and budget for these items.
There are material limitations associated with the use of adjusted income (loss) from operations in evaluating
our company compared with net loss, which reflects overall financial performance, including the effects of
taxes, other income (expense), depreciation and amortization, restructuring and related costs, impairment of
goodwill and share-based payment expense. We use adjusted income (loss) from operations to supplement
GAAP results to provide a more complete understanding of the factors and trends affecting the business than
GAAP results alone. Investors that wish to compare and evaluate our operating results after giving effect for
these costs, should refer to net loss as disclosed in our audited consolidated statements of operations. Since
adjusted income (loss) from operations is a non-GAAP financial measure, our calculation of adjusted income
(loss) from operations may be susceptible to varying calculations; may not be comparable to other similarly
titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to
measures of financial performance prepared in accordance with GAAP.
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