EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and may not be defined similarly by other companies. EBITDA and Adjusted EBITDA should not be considered alternatives to net income as indications of financial performance or as alternatives to cash flow from operations as measures of liquidity. There are limitations to using non-U.S. GAAP financial measures, including the difficulty associated with comparing companies in different industries that use similar performance measures whose calculations may differ from ours.
EBITDA and Adjusted EBITDA are key measures used in our internal operating reports by management and our Board of Directors to evaluate the performance of our operations and are also used by analysts, investment banks and lenders for the same purpose. EBITDA, excluding certain acquisition costs, is a measure being used as a key element of the company-wide bonus incentive plan.
We believe that the presentation of EBITDA and Adjusted EBITDA enables a more consistent measurement of period to period performance of our operations and facilitates comparison of our operating performance to companies in our industry. We believe that EBITDA and Adjusted EBITDA measures are particularly important in a capital intensive industry such as ours, in which our current period depreciation is not a good indication of our current or future period capital expenditures. The cost to construct and launch a satellite and to build the related ground infrastructure may vary greatly from one satellite to another, depending on the satellite's size, type and capabilities. For example, our QuickBird satellite, which we are currently depreciating, cost significantly less than our WorldView-1 and WorldView-2 satellites. Current depreciation expense is not indicative of the revenue generating potential of the satellites.
EBITDA excludes interest income, interest expense and income taxes because these items are associated with our capitalization and tax structures. EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the impact of prior capital expenditure decisions which are not indicative of future capital expenditure requirements.
Adjusted EBITDA further adjusts EBITDA to exclude the loss on the early extinguishment of debt and the loss on abandonment of asset because these are not related to our primary operations. Additionally, it excludes restructuring costs, acquisition costs and integration costs as these are non-core items. Restructuring costs are costs incurred to realize efficiencies from the acquisition with GeoEye, such as reducing excess workforce, consolidating facilities and systems, and relocating ground terminals. Acquisition costs are costs incurred to effect the acquisition, such as advisory, legal, accounting, consulting and other professional fees. Integration costs consist primarily of professional fees incurred to assist us with system and process improvements associated with integrating operations. Loss on early extinguishment of debt is related to entering into the 2013 Credit Facility and Senior Notes, the proceeds of which were used to refinance our $500.0 million senior secured term loan and $100.0 million senior secured revolving credit facility, and to fund the discharge and redemption of GeoEye's $525.0 million senior secured notes that we assumed in the acquisition.
We use EBITDA and Adjusted EBITDA in conjunction with traditional U.S. GAAP operating performance measures as part of our overall assessment of our performance and we do not place undue reliance on these non-U.S. GAAP measures as our only measures of operating performance. EBITDA and Adjusted EBITDA should not be considered as substitutes for other measures of financial performance reported in accordance with U.S. GAAP.
FINANCIAL TABLES TO FOLLOW
DigitalGlobe, Inc.
Unaudited Condensed Consolidated Statements of Operations
For the three months ended
March 31,
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(in millions, except per share) 2014 2013
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Revenue $ 156.5 $ 127.6
Costs and expenses:
Cost of revenue, excluding depreciation and
amortization 39.5 40.9
Selling, general and administrative 53.0 79.8
Depreciation and amortization 57.6 47.3
Restructuring charges 1.1 20.3
Loss on abandonment of asset 1.2 -
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Income (loss) from operations 4.1 (60.7)
Loss from early extinguishment of debt - (17.8)
Other income, net 0.1 0.3
Interest expense, net - (1.4)
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Income (loss) before income taxes 4.2 (79.6)
Income tax (expense) benefit (3.8) 19.0
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Net income (loss) 0.4 (60.6)
Preferred stock dividends (1.0) (0.6)
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Net loss less preferred stock dividends (0.6) (61.2)
Income allocated to participating securities - -
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Net loss available to common stockholders $ (0.6) $ (61.2)
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Net loss per share:
Basic and diluted loss per share $ (0.01) $ (0.96)
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Weighted average common shares outstanding:
Basic and diluted 75.0 64.0
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DigitalGlobe, Inc.
Reconciliation Net Income (Loss) to EBITDA and Adjusted EBITDA
For the three months ended
March 31,
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(in millions) 2014 2013
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Net income (loss) $ 0.4 $ (60.6)
Depreciation and amortization 57.6 47.3
Interest expense, net - 1.4
Income tax expense (benefit) 3.8 (19.0)
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EBITDA 61.8 (30.9)
Loss from early extinguishment of debt - 17.8
Loss on abandonment of asset 1.2
Restructuring charges (1) 1.1 20.3
Acquisition costs (1) - 20.8
Integration costs (1) 3.8 7.9
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Adjusted EBITDA $ 67.9 $ 35.9
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(1) Restructuring, acquisition and integration costs consist of charges
related to the acquisition of GeoEye.
