UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 21, 2019
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
(Address of principal executive offices) | (Zip Code) | |||
Registrant's telephone number, including area code 281 -618-0400
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On October 21, 2019, Helix Energy Solutions Group, Inc. (“Helix”) issued a press release announcing its third quarter results of operations for the period ended September 30, 2019. Attached hereto as Exhibit 99.1, and incorporated herein by reference, is the press release.
Item 7.01 Regulation FD Disclosure.
On October 21, 2019, Helix issued a press release announcing its third quarter results of operations for the period ended September 30, 2019. In addition, on October 22, 2019, Helix is making a presentation (with slides) to analysts and investors regarding its financial and operating results. Attached hereto as Exhibits 99.1 and 99.2, respectively, and incorporated herein by reference, are the press release and the slides for the Third Quarter 2019 Conference Call Presentation issued by Helix. The presentation materials are also available beginning on October 21, 2019 under For the Investor - Presentations in the Investors section of Helix’s website, www.HelixESG.com.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number | Description | |
99.1 |
99.2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October 21, 2019
HELIX ENERGY SOLUTIONS GROUP, INC. | ||||
By: | /s/ Erik Staffeldt | |||
Erik Staffeldt | ||||
Executive Vice President and Chief Financial Officer | ||||
EXHIBIT 99.1
| PRESSRELEASE www.HelixESG.com | |
Helix Energy Solutions Group, Inc. · 3505 W. Sam Houston Parkway N., Suite 400 · Houston, TX 77043 · 281-618-0400 · fax: 281-618-0505
For Immediate Release | 19-014 | ||
Date: October 21, 2019 | Contact: | Erik Staffeldt | |
Executive Vice President & CFO | |||
Helix Reports Third Quarter 2019 Results
HOUSTON, TX – Helix Energy Solutions Group, Inc. (“Helix”) (NYSE: HLX) reported net income of $31.6 million, or $0.21 per diluted share, for the third quarter of 2019 compared to $27.1 million, or $0.18 per diluted share, for the same period in 2018 and $16.8 million, or $0.11 per diluted share, for the second quarter of 2019. Net income for the nine months ended September 30, 2019 was $49.8 million, or $0.33 per diluted share, compared to $42.3 million, or $0.29 per diluted share, for the nine months ended September 30, 2018.
Helix reported Adjusted EBITDA1 of $66.3 million for the third quarter of 2019 compared to $58.6 million for the third quarter of 2018 and $50.3 million for the second quarter of 2019. Adjusted EBITDA for the nine months ended September 30, 2019 was $146.8 million compared to $138.5 million for the nine months ended September 30, 2018. The table below summarizes our results of operations:
Summary of Results
($ in thousands, except per share amounts, unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||||||
9/30/2019 | 9/30/2018 | 6/30/2019 | 9/30/2019 | 9/30/2018 | |||||||||||||||
Revenues | $ | 212,609 | $ | 212,575 | $ | 201,728 | $ | 581,160 | $ | 581,462 | |||||||||
Gross Profit | $ | 55,074 | $ | 51,993 | $ | 39,934 | $ | 111,262 | $ | 107,873 | |||||||||
26 | % | 24 | % | 20 | % | 19 | % | 19 | % | ||||||||||
Net Income | $ | 31,622 | $ | 27,121 | $ | 16,823 | $ | 49,763 | $ | 42,345 | |||||||||
Diluted Earnings Per Share | $ | 0.21 | $ | 0.18 | $ | 0.11 | $ | 0.33 | $ | 0.29 | |||||||||
Adjusted EBITDA 1 | $ | 66,273 | $ | 58,636 | $ | 50,324 | $ | 146,811 | $ | 138,471 | |||||||||
Cash and cash equivalents | $ | 286,340 | $ | 325,092 | $ | 261,142 | $ | 286,340 | $ | 325,092 | |||||||||
Cash flows from operating activities | $ | 57,316 | $ | 63,161 | $ | 66,807 | $ | 89,877 | $ | 150,827 | |||||||||
Owen Kratz, President and Chief Executive Officer of Helix, stated, “In this challenging market we had a strong third quarter, marked by the disciplined execution of our strategy, resulting in our highest quarterly revenue and EBITDA levels since 2014. We are pleased with the continued improvement in our results, and although our fourth quarter operations will be impacted by the normal winter slowdown in the North Sea and lower rates in the Gulf of Mexico, we will maintain our focus on project execution and cost controls to carry that momentum into 2020 with the launch of the Q7000.”
1 Adjusted EBITDA is a non-GAAP measure. See reconciliation below.
Segment Information, Operational and Financial Highlights
($ in thousands, unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||||||
9/30/2019 | 9/30/2018 | 6/30/2019 | 9/30/2019 | 9/30/2018 | |||||||||||||||
Revenues: | |||||||||||||||||||
Well Intervention | $ | 170,206 | $ | 154,441 | $ | 159,074 | $ | 451,511 | $ | 445,769 | |||||||||
Robotics | 51,909 | 54,340 | 45,446 | 136,396 | 120,569 | ||||||||||||||
Production Facilities | 13,777 | 15,877 | 15,621 | 44,651 | 48,541 | ||||||||||||||
Intercompany Eliminations | (23,283 | ) | (12,083 | ) | (18,413 | ) | (51,398 | ) | (33,417 | ) | |||||||||
Total | $ | 212,609 | $ | 212,575 | $ | 201,728 | $ | 581,160 | $ | 581,462 | |||||||||
Income (Loss) from Operations: | |||||||||||||||||||
Well Intervention | $ | 37,689 | $ | 34,427 | $ | 26,672 | $ | 74,002 | $ | 82,774 | |||||||||
Robotics | 8,876 | 5,601 | 2,949 | 7,921 | (12,818 | ) | |||||||||||||
Production Facilities | 3,050 | 6,694 | 4,452 | 11,907 | 20,919 | ||||||||||||||
Corporate / Other / Eliminations | (10,617 | ) | (15,345 | ) | (11,001 | ) | (31,491 | ) | (35,842 | ) | |||||||||
Total | $ | 38,998 | $ | 31,377 | $ | 23,072 | $ | 62,339 | $ | 55,033 | |||||||||
Segment Results
Well Intervention Well Intervention revenues in the third quarter of 2019 increased $11.1 million, or 7%, from the previous quarter. The increase in revenue was primarily due to higher utilization and integrated services in the Gulf of Mexico. Overall, Well Intervention vessel utilization increased to 97% in the third quarter from 94% in the second quarter. Income from operations increased $11.0 million, or 41%, in the third quarter of 2019 from the previous quarter primarily due to higher segment revenues. Well Intervention revenues increased $15.8 million, or 10%, in the third quarter of 2019 compared to the third quarter of 2018. The increase was due to higher utilization and integrated services in the Gulf of Mexico and higher utilization in Brazil, offset in part by lower rates in the North Sea and a weaker British pound in the third quarter of 2019 compared to the same period in the prior year. Overall, Well Intervention vessel utilization increased from 91% in the third quarter of 2018 to 97% in the third quarter of 2019. Income from operations increased $3.3 million, or 9%, in the third quarter of 2019 compared to the third quarter of 2018. The increase was primarily related to overall higher revenues during the third quarter of 2019 compared to the third quarter of 2018. |
Robotics Robotics revenues in the third quarter of 2019 increased by $6.5 million, or 14%, from the previous quarter. The increase was driven by higher long-term chartered vessel and ROV, trencher and ROVDrill utilization. Chartered vessel utilization increased to 96% in the third quarter of 2019, which included 28 spot vessel days, from 92% in the second quarter of 2019, which included 24 spot vessel days. ROV, trencher and ROVDrill utilization improved to 44% in the third quarter of 2019 from 41% in the previous quarter, and vessel trenching days in the third quarter of 2019 totaled 149 days compared to 138 days in the previous quarter. Income from operations improved $5.9 million over the second quarter due to higher revenues and lower costs related to the expiration of the hedge of the Grand Canyon II charter payments. Robotics revenues decreased $2.4 million, or 4%, in the third quarter of 2019 compared to the third quarter of 2018. The decrease in revenues year over year was due primarily to a decrease in trenching activity and spot vessel days, offset in part by higher rates on the Grand Canyon II and increased ROV, trencher and ROVDrill utilization. Robotics had 149 trenching days and 28 spot vessel days in the third quarter of 2019, down from 219 trenching days and 113 spot vessel days in the third quarter of 2018. Overall ROV, trencher and ROVDrill utilization increased to 44% in the third quarter of 2019 from 42% in 2018. Income from operations in the third quarter of 2019 improved $3.3 million compared to the third quarter of 2018 due to higher rates on the Grand Canyon II and lower costs on the Grand Canyon II related to the expiration of the hedge of its charter payments, offset in part by lower spot vessel activity year over year. |
Production Facilities Production Facilities revenues decreased quarter over quarter due to reduced production income. Revenues decreased year over year due to reduced revenue related to the Helix Fast Response System offset in part by production revenues. |
Selling, General and Administrative and Other
Selling, General and Administrative Selling, general and administrative expenses were $16.1 million, or 7.6% of revenue, in the third quarter of 2019 compared to $16.9 million, or 8.4% of revenue, in the second quarter of 2019. The decrease in expenses was primarily related to a reduction in employee compensation costs from the second quarter, which had included an acceleration of $1.1 million of non-cash share-based awards. |
Other Income and Expenses Other expense, net was $2.3 million in the third quarter of 2019 compared to $1.3 million in the second quarter of 2019. The increase was primarily due to increases in net foreign currency losses quarter over quarter. |
Cash Flows Operating cash flow was $57.3 million in the third quarter of 2019 compared to $66.8 million in the second quarter of 2019 and $63.2 million in the third quarter of 2018. Operating cash flow for the nine months ended September 30, 2019 was $89.9 million compared to $150.8 million for the same period in the prior year. The decrease in operating cash flow for the nine months ended September 30, 2019 compared to the prior year was primarily due to higher regulatory certification costs, which are included in operating cash flows, for our vessels and systems and a net increase in working capital in 2019 compared to 2018. Regulatory certification costs for the nine months ended September 30, 2019 were $17.8 million, which included planned dry dock costs for three of our vessels in the first quarter of 2019, compared to $2.5 million in the same period in 2018. Capital expenditures totaled $18.2 million in the third quarter of 2019 compared to $15.8 million in the second quarter of 2019 and $13.5 million in the third quarter of 2018. The increases in capital expenditures quarter over quarter and year over year were due to completion costs related to the Q7000. Free cash flow was $39.2 million in the third quarter of 2019 compared to $53.5 million in the second quarter of 2019 and $49.7 million in the third quarter of 2018. The decrease quarter over quarter was due to higher capital expenditures and lower operating cash flow quarter over quarter. The decrease in free cash flow year over year was primarily due to higher capital expenditures compared to the third quarter of 2018. (Free cash flow is a non-GAAP measure. See reconciliation below.) |
Financial Condition and Liquidity Cash and cash equivalents at September 30, 2019 were $286.3 million. Available capacity under our revolving credit facility was $172.6 million at September 30, 2019. Consolidated long-term debt decreased to $413.4 million at September 30, 2019 from $424.5 million at June 30, 2019. Consolidated net debt at September 30, 2019 was $127.1 million. Net debt to book capitalization at September 30, 2019 was 7%. (Net debt and net debt to book capitalization are non-GAAP measures. See reconciliations below.) |
* * * * *
Conference Call Information
Further details are provided in the presentation for Helix’s quarterly teleconference to review its third quarter 2019 results (see the “For the Investor” page of Helix’s website, www.HelixESG.com). The teleconference, scheduled for Tuesday, October 22, 2019 at 9:00 a.m. Central Time, will be audio webcast live from the “For the Investor” page of Helix’s website. Investors and other interested parties wishing to participate in the teleconference may join by dialing 1-800-732-5617 for participants in the United States and 1-303-223-0120 for international participants. The passcode is “Staffeldt.” A replay of the webcast will be available at “For the Investor” by selecting the “Audio Archives” link beginning approximately two hours after the completion of the event.
About Helix
Helix Energy Solutions Group, Inc., headquartered in Houston, Texas, is an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations. For more information about Helix, please visit our website at www.HelixESG.com.
Reconciliation of Non-GAAP Financial Measures
Management evaluates performance and financial condition using certain non-GAAP measures, primarily EBITDA, Adjusted EBITDA, net debt, net debt to book capitalization and free cash flow. We define EBITDA as earnings before income taxes, net interest expense, gain or loss on extinguishment of long-term debt, net other income or expense, and depreciation and amortization expense. Non-cash losses on equity investments are also added back if applicable. To arrive at our measure of Adjusted EBITDA, we exclude the gain or loss on disposition of assets, if any. In addition, we include realized losses from foreign currency exchange contracts not designated as hedging instruments and other than temporary loss on note receivable, which are excluded from EBITDA as a component of net other income or expense. Net debt is calculated as total long-term debt less cash and cash equivalents. Net debt to book capitalization is calculated by dividing net debt by the sum of net debt and shareholders’ equity. We define free cash flow as cash flows from operating activities less capital expenditures, net of proceeds from sale of assets.
We use EBITDA and free cash flow to monitor and facilitate internal evaluation of the performance of our business operations, to facilitate external comparison of our business results to those of others in our industry, to analyze and evaluate financial and strategic planning decisions regarding future investments and acquisitions, to plan and evaluate operating budgets, and in certain cases, to report our results to the holders of our debt as required by our debt covenants. We believe that our measures of EBITDA and free cash flow provide useful information to the public regarding our operating performance and ability to service debt and fund capital expenditures and may help our investors understand and compare our results to other companies that have different financing, capital and tax structures. Other companies may calculate their measures of EBITDA, Adjusted EBITDA and free cash flow differently from the way we do, which may limit their usefulness as comparative measures. EBITDA, Adjusted EBITDA and free cash flow should not be considered in isolation or as a substitute for, but instead are supplemental to, income from operations, net income, cash flows from operating activities, or other income or cash flow data prepared in accordance with GAAP. Users of this financial information should consider the types of events and transactions that are excluded from these measures.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks, uncertainties and assumptions that could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, any statements regarding our strategy; any statements regarding visibility and future utilization; any projections of financial items; any statements regarding future operations expenditures; any statements regarding the plans, strategies and objectives of management for future operations; any statements regarding our ability to enter into and/or perform commercial contracts; any statements concerning developments; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors that could cause results to differ materially from those in the forward-looking statements, including but not limited to market conditions; results from acquired properties; demand for our services; the performance of contracts by suppliers, customers and partners; actions by governmental and regulatory authorities; operating hazards and delays, which include delays in delivery, chartering or customer acceptance of assets or terms of their acceptance; our ultimate ability to realize current backlog; employee management issues; complexities of global political and economic developments; geologic risks; volatility of oil and gas prices and other risks described from time to time in our reports filed with the Securities and Exchange Commission (“SEC”), including our most recently filed Annual Report on Form 10-K and in our other filings with the SEC, which are available free of charge on the SEC’s website at www.sec.gov. We assume no obligation and do not intend to update these forward-looking statements except as required by the securities laws.
Social Media
From time to time we provide information about Helix on Twitter (@Helix_ESG), LinkedIn (www.linkedin.com/company/helix-energy-solutions-group) and Facebook (www.facebook.com/HelixEnergySolutionsGroup).
HELIX ENERGY SOLUTIONS GROUP, INC.
Comparative Condensed Consolidated Statements of Operations |
Three Months Ended Sep. 30, | Nine Months Ended Sep. 30, | |||||||||||||||
(in thousands, except per share data) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net revenues | $ | 212,609 | $ | 212,575 | $ | 581,160 | $ | 581,462 | ||||||||
Cost of sales | 157,535 | 160,582 | 469,898 | 473,589 | ||||||||||||
Gross profit | 55,074 | 51,993 | 111,262 | 107,873 | ||||||||||||
Gain on disposition of assets, net | — | 146 | — | 146 | ||||||||||||
Selling, general and administrative expenses | (16,076 | ) | (20,762 | ) | (48,923 | ) | (52,986 | ) | ||||||||
Income from operations | 38,998 | 31,377 | 62,339 | 55,033 | ||||||||||||
Equity in losses of investment | (13 | ) | (107 | ) | (82 | ) | (378 | ) | ||||||||
Net interest expense | (1,901 | ) | (3,249 | ) | (6,204 | ) | (10,744 | ) | ||||||||
Loss on extinguishment of long-term debt | — | (2 | ) | (18 | ) | (1,183 | ) | |||||||||
Other expense, net | (2,285 | ) | (709 | ) | (2,430 | ) | (3,225 | ) | ||||||||
Royalty income and other | 362 | 652 | 2,897 | 4,068 | ||||||||||||
Income before income taxes | 35,161 | 27,962 | 56,502 | 43,571 | ||||||||||||
Income tax provision | 3,539 | 841 | 6,739 | 1,226 | ||||||||||||
Net income | 31,622 | 27,121 | 49,763 | 42,345 | ||||||||||||
Net loss attributable to redeemable noncontrolling interests | (73 | ) | — | (104 | ) | — | ||||||||||
Net income attributable to common shareholders | $ | 31,695 | $ | 27,121 | $ | 49,867 | $ | 42,345 | ||||||||
Earnings per share of common stock: | ||||||||||||||||
Basic | $ | 0.21 | $ | 0.18 | $ | 0.33 | $ | 0.29 | ||||||||
Diluted | $ | 0.21 | $ | 0.18 | $ | 0.33 | $ | 0.29 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 147,575 | 146,700 | 147,506 | 146,679 | ||||||||||||
Diluted | 148,354 | 146,964 | 148,086 | 146,761 | ||||||||||||
Comparative Condensed Consolidated Balance Sheets |
ASSETS | LIABILITIES & SHAREHOLDERS' EQUITY | |||||||||||||||||
(in thousands) | Sep. 30, 2019 | Dec. 31, 2018 | (in thousands) | Sep. 30, 2019 | Dec. 31, 2018 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||
Current Assets: | Current Liabilities: | |||||||||||||||||
Cash and cash equivalents (1) | $ | 286,340 | $ | 279,459 | Accounts payable | $ | 79,122 | $ | 54,813 | |||||||||
Accounts receivable, net | 164,255 | 119,875 | Accrued liabilities | 71,982 | 85,594 | |||||||||||||
Other current assets | 61,751 | 51,594 | Income tax payable | — | 3,829 | |||||||||||||
Total Current Assets | 512,346 | 450,928 | Current maturities of long-term debt (1) | 108,468 | 47,252 | |||||||||||||
Current operating lease liabilities (2) | 52,840 | — | ||||||||||||||||
Total Current Liabilities | 312,412 | 191,488 | ||||||||||||||||
Long-term debt (1) | 304,932 | 393,063 | ||||||||||||||||
Operating lease liabilities (2) | 164,761 | — | ||||||||||||||||
Deferred tax liabilities | 110,118 | 105,862 | ||||||||||||||||
Property & equipment, net | 1,797,794 | 1,826,745 | Other non-current liabilities | 39,008 | 39,538 | |||||||||||||
Operating lease right-of use assets (2) | 213,048 | — | Redeemable noncontrolling interests | 3,257 | — | |||||||||||||
Other assets, net | 90,323 | 70,057 | Shareholders' equity (1) | 1,679,023 | 1,617,779 | |||||||||||||
Total Assets | $ | 2,613,511 | $ | 2,347,730 | Total Liabilities & Equity | $ | 2,613,511 | $ | 2,347,730 | |||||||||
(1) | Net debt to book capitalization - 7% at September 30, 2019. Calculated as net debt (total long-term debt less cash and cash equivalents - $127,060) divided by the sum of net debt and shareholders' equity ($1,806,083). |
(2) | Reflects adoption of Accounting Standards Update No. 2016-02, "Leases (Topic 842)." |
Helix Energy Solutions Group, Inc.
Reconciliation of Non-GAAP Measures
Earnings Release: | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
9/30/2019 | 9/30/2018 | 6/30/2019 | 9/30/2019 | 9/30/2018 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Reconciliation from Net Income to Adjusted EBITDA: | |||||||||||||||||||||||
Net income | $ | 31,622 | $ | 27,121 | $ | 16,823 | $ | 49,763 | $ | 42,345 | |||||||||||||
Adjustments: | |||||||||||||||||||||||
Income tax provision | 3,539 | 841 | 2,876 | 6,739 | 1,226 | ||||||||||||||||||
Net interest expense | 1,901 | 3,249 | 2,205 | 6,204 | 10,744 | ||||||||||||||||||
Loss on extinguishment of long-term debt | — | 2 | 18 | 18 | 1,183 | ||||||||||||||||||
Other expense, net | 2,285 | 709 | 1,311 | 2,430 | 3,225 | ||||||||||||||||||
Depreciation and amortization | 27,908 | 27,680 | 28,003 | 84,420 | 83,339 | ||||||||||||||||||
EBITDA | 67,255 | 59,602 | 51,236 | 149,574 | 142,062 | ||||||||||||||||||
Adjustments: | |||||||||||||||||||||||
Gain on disposition of assets, net | — | (146 | ) | — | — | (146 | ) | ||||||||||||||||
Realized losses from foreign exchange contracts not designated as hedging instruments | (982 | ) | (820 | ) | (912 | ) | (2,763 | ) | (2,316 | ) | |||||||||||||
Other than temporary loss on note receivable | — | — | — | — | (1,129 | ) | |||||||||||||||||
Adjusted EBITDA | $ | 66,273 | $ | 58,636 | $ | 50,324 | $ | 146,811 | $ | 138,471 | |||||||||||||
Free Cash Flow: | |||||||||||||||||||||||
Cash flows from operating activities | $ | 57,316 | $ | 63,161 | $ | 66,807 | $ | 89,877 | $ | 150,827 | |||||||||||||
Less: Capital expenditures, net of proceeds from sale of assets | (18,153 | ) | (13,437 | ) | (13,303 | ) | (43,086 | ) | (55,406 | ) | |||||||||||||
Free cash flow | $ | 39,163 | $ | 49,724 | $ | 53,504 | $ | 46,791 | $ | 95,421 | |||||||||||||
We define EBITDA as earnings before income taxes, net interest expense, gain or loss on extinguishment of long-term debt, net other income or expense, and depreciation and amortization expense. Non-cash losses on equity investments are also added back if applicable. To arrive at our measure of Adjusted EBITDA, we exclude the gain or loss on disposition of assets. In addition, we include realized losses from foreign currency exchange contracts not designated as hedging instruments and other than temporary loss on note receivable, if any, which are excluded from EBITDA as a component of net other income or expense. We define free cash flow as cash flows from operating activities less capital expenditures, net of proceeds from sale of assets. We use EBITDA and free cash flow to monitor and facilitate internal evaluation of the performance of our business operations, to facilitate external comparison of our business results to those of others in our industry, to analyze and evaluate financial and strategic planning decisions regarding future investments and acquisitions, to plan and evaluate operating budgets, and in certain cases, to report our results to the holders of our debt as required by our debt covenants. We believe that our measures of EBITDA and free cash flow provide useful information to the public regarding our operating performance and ability to service debt and fund capital expenditures and may help our investors understand and compare our results to other companies that have different financing, capital and tax structures. Other companies may calculate their measures of EBITDA, Adjusted EBITDA and free cash flow differently from the way we do, which may limit their usefulness as comparative measures. EBITDA, Adjusted EBITDA and free cash flow should not be considered in isolation or as a substitute for, but instead are supplemental to, income from operations, net income, cash flows from operating activities, or other income or cash flow data prepared in accordance with GAAP. Users of this financial information should consider the types of events and transactions that are excluded from these measures.
EXHIBIT 99.2
