We define EBITDA as net income (loss) plus interest expense, net, income tax expense and depreciation and amortization expense. We define adjusted EBITDA as EBITDA plus or minus the following:
- non-cash loss (gain) from commodity and embedded derivatives;
- non-cash unit-based compensation expenses;
- loss (gain) on asset sales, net;
- loss on debt refinancing, net;
- other non-cash (income) expense, net;
- net income attributable to noncontrolling interest; and
- our interest in adjusted EBITDA from unconsolidated affiliates less income from unconsolidated affiliates.
These measures are used as supplemental measures by our management and by external users of our financial statements such as investors, banks, research analysts and others, to assess:
- financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
- the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and make cash distributions to our unitholders and General Partner;
- our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or capital structure; and
- the viability of acquisitions and capital expenditure projects.
EBITDA is the starting point in determining cash available for distribution, which is an important non-GAAP financial measure for a publicly traded partnership.
We define cash available for distribution as adjusted EBITDA:
- minus interest expense, excluding capitalized interest;
- minus maintenance capital expenditures;
- minus distributions to Series A Preferred Units,
- plus cash proceeds from asset sales, if any; and
- other adjustments.