|SUNEDISON SEMICONDUCTOR LIMITED AND SUBSIDIARIES|
|UNAUDITED SUPPLEMENTAL INFORMATION|
|RECONCILIATION OF NON-GAAP FINANCIAL MEASURE|
|ADJUSTED EBITDA CALCULATION [*]|
|Three Months Ended|
|Income tax expense||7.4||9.9||3.3|
|Depreciation and amortization||25.9||27.3||29.0|
|Restructuring charges and other non-recurring items (1) (2)||3.8||3.5||1.2|
|Loss on partial sale of SMP investment||6.1||—||—|
|Long-lived asset impairment charges||—||2.7||0.1|
|Pension settlement charge (3)||—||0.6||—|
|Stock compensation expense||3.9||4.1||3.6|
|Equity in loss (income) of equity method investments (4)||86.2||(0.7||)||0.3|
|Adjusted EBITDA [*]||$||20.1||$||23.7||$||31.6|
(1) For the three months ended March 31, 2016 and December 31, 2015, we recognized approximately $0.2 million and $0.4 million, respectively, of securities transaction tax related to the dispositions of approximately 30% and 21%, respectively, investment interest in SMP, Ltd. ("SMP") to our subsidiary. This is a non-recurring expense that is excluded from Adjusted EBITDA as we do not consider this to be useful in assessing our on-going operating performance.
(2) For the three months ended March 31, 2016, we reserved approximately $2.1 million in net receivables from SunEdison, Inc., our former parent, due to their filing for Chapter 11 bankruptcy protection on April 21, 2016. This is excluded from Adjusted EBITDA as we do not consider this to be useful in assessing our on-going operating performance.
(3) For the three months ended December 31, 2015, we recognized approximately $0.6 million in interim lump-sum pension settlement charges related to our U.S. pension plan. Pension lump-sum settlement charges is a non-cash expense that is excluded from Adjusted EBITDA as we do not consider this to be useful in assessing our on-going operating performance.
(4) For the three months ended March 31, 2016, we recognized $86.2 million equity in loss of equity method investments, net of tax, primarily due to an $86.9 million other-than-temporary impairment charge related to SMP. These charges are non-cash expenses that are excluded from Adjusted EBITDA as we do not consider this to be useful in assessing our on-going operating performance.
[*] Adjusted EBITDA is a non-GAAP financial measure. This measurement should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
We define Adjusted EBITDA as earnings before net interest expense; income tax expense (benefit); depreciation and amortization; restructuring charges (reversals); non-recurring items; loss on sale of property, plant, and equipment; long-lived asset impairment charges; pension settlement charges; stock compensation expense; and equity in loss of equity method investments. All of the omitted items are either (i) non-cash items or (ii) items that we do not consider in assessing our on-going operating performance. Because it omits non-cash items, we feel that Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect our operating performance. Because it omits the other items, we believe Adjusted EBITDA is also more reflective of our on-going operating performance. We believe Adjusted EBITDA is useful to investors in evaluating our operating performance because:
- securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities, and
- it is used by our management for internal planning purposes, including aspects of our operating budget and capital expenditures.
Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
- it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments,
- it does not reflect changes in, or cash requirements for, working capital,
- it does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our outstanding debt,
- it does not reflect payments made or future requirements for income taxes,
- it adjusts for restructuring charges (reversals), non-recurring items, loss on sale of property, plant, and equipment, long-lived asset impairments, and pension settlement charges which are factors that we do not consider indicative of future performance,
- it adjusts for non-cash stock compensation expense and equity in loss of equity method investments to more clearly reflect comparable period-over-period cash operating performance,
- although it reflects adjustments for factors that we do not consider indicative of future performance, we may, in the future, incur expenses similar to the adjustments reflected in our calculation of Adjusted EBITDA, and
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect cash requirements for such replacements.