DigitalGlobe Reports Fourth Quarter and Full Year 2014 Results

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 became fully depreciated during 2014, cost significantly less than our WorldView-1, WorldView-2, and WorldView-3 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 seven-year $550.0 million Senior Secured Term Loan Facility and a five-year $150.0 million Senior Secured Revolving Credit Facility and issuing the $600.0 million of 5.25% Senior Notes due 2021, 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.

Free Cash Flow. Free cash flow is defined as net cash provided by operating activities ($76.3 million in the fourth quarter of 2014) less net cash flows used in investing activities ($26.8 million in the fourth quarter of 2014) (excluding acquisition of businesses, net of cash acquired, which were $0.0 in the fourth quarter of 2014). Free cash flow is not a recognized term under U.S. GAAP and may not be defined similarly by other companies. Free cash flow should not be considered an alternative to “operating income (loss),” “net income (loss),” “net cash flows provided by (used in) operating activities” or any other measure determined in accordance with U.S. GAAP. Since free cash flow includes investments in operating assets, we believe this non-GAAP liquidity measure is useful in addition to the most comparable U.S. GAAP measure — “net cash flows provided by (used in) operating activities” because it provides information about the amount of cash generated after acquisitions of businesses that is then available to repay debt obligations, make investments, fund acquisitions, and for certain other activities. 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.

FINANCIAL TABLES TO FOLLOW

                   

DigitalGlobe, Inc.
Consolidated Statements of Operations

 
For the three months ended For the twelve months ended
December 31, December 31,
(in millions, except per share data) 2014 2013 2014 2013
Revenue $ 185.7 $ 169.7 $ 654.6 $ 612.7
Costs and expenses:
Cost of revenue, excluding depreciation and amortization 38.9 40.4 160.4 175.3
Selling, general and administrative 54.3 52.4 221.5 257.3
Depreciation and amortization 65.6 59.1 238.5 224.8
Restructuring charges 3.1 1.1 40.1
Loss on abandonment of asset     1.2    
Income (loss) from operations 26.9 14.7 31.9 (84.8 )
Loss from early extinguishment of debt (17.8 )
Other income (expense), net 0.4 (0.3 ) 0.6 0.2
Interest (expense) income, net (7.1 ) 0.1   (7.1 ) (3.4 )
Income (loss) before income taxes 20.2 14.5 25.4 (105.8 )
Income tax (expense) benefit (8.0 ) 0.6   (6.9 ) 37.5  
Net income (loss) 12.2 15.1 18.5 (68.3 )
Preferred stock dividends (1.0 ) (1.0 ) (4.0 ) (3.6 )
Net income (loss) less preferred stock dividends 11.2 14.1 14.5 (71.9 )
Income allocated to participating securities (0.5 ) (0.5 ) (0.6 )  
Net income (loss) available to common stockholders $ 10.7   $ 13.6   $ 13.9   $ (71.9 )
 
Earnings (loss) per share:
Basic earnings (loss) per share $ 0.14   $ 0.18   $ 0.19   $ (1.00 )
Diluted earnings (loss) per share $ 0.14   $ 0.18   $ 0.18   $ (1.00 )
Weighted average common shares outstanding:
Basic   74.4     74.7     74.9     71.8  
Diluted   75.1     76.0     75.9     71.8  
 
         

DigitalGlobe, Inc.
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

 
For the three months ended For the twelve months ended
December 31, December 31,
(in millions) 2014     2013 2014     2013
Net income (loss) $ 12.2 $ 15.1 $ 18.5 $ (68.3 )
Depreciation and amortization 65.6 59.1 238.5 224.8
Interest expense, net 7.1 (0.1 ) 7.1 3.4
Income tax expense (benefit)   8.0   (0.6 ) 6.9 (37.5 )
EBITDA 92.9 73.5 271.0 122.4
Loss on abandonment of asset 1.2
Loss from early extinguishment of debt 17.8
Restructuring charges (1) 3.1 1.1 40.1
Integration costs (1) 6.1 12.9 29.2
Acquisition costs (1)       20.6  
Adjusted EBITDA $ 92.9 $ 82.7 $ 286.2 $ 230.1
 

(1) Restructuring, acquisition and integration costs consist of non-recurring charges related to the combination with GeoEye.

 

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