EBITDA consists of earnings before interest, taxes, depreciation, and amortization. EBITDA is a measure commonly used in our industry, and we present EBITDA to enhance your understanding of our operating performance. We use EBITDA as a way of evaluating our performance relative to that of our peers. We believe that EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Adjusted EBITDA is EBITDA further adjusted to exclude unusual items and other pro forma adjustments permitted in calculating covenant compliance in the indentures governing our debt securities to test the permissibility of certain types of transactions. Adjusted EBITDA is modified to align the mark-to-market impact of derivative contracts used to economically hedge a portion of future natural gas purchases with the period in which the contracts settle and is modified to reflect the amount of net cost savings projected to be realized as a result of specified activities taken during the preceding 12-month period. We believe that the supplemental adjustments applied in calculating Adjusted EBITDA are reasonable and appropriate to provide additional information to investors. We also believe that Adjusted EBITDA is a useful liquidity measurement tool for assessing our ability to meet our future debt service, capital expenditures, and working capital requirements.

However, EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP, and our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA or Adjusted EBITDA as an alternative to operating or net income, determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of our cash flows or as a measure of liquidity. The following table reconciles net loss to EBITDA and Adjusted EBITDA for the periods presented.
                 
Six Three Six Twelve
Months Year Months Months Months
Ended Ended Ended Ended Ended
June 30, December 31, June 30, June 30, June 30,
(Dollars in millions)   2011   2011     2012     2012     2012
Net loss $ (68.9 ) $ (137.1 ) $ (20.7 ) $ (94.6 ) $ (162.8 )
Income tax expense - 0.2 - (0.1 ) 0.1
Interest expense, net 63.9 126.5 33.3 65.4 128.0

Depreciation, amortization, and depletion
    63.0       125.3         31.8         63.2         125.5  
EBITDA 58.0 114.9 44.4 33.9 90.8
Adjustments to EBITDA:

Loss (gain) on early extinguishment of debt, net (1)
26.1 26.1 (21.8 ) 8.2 8.2
Goodwill impairment (2) - 18.7 - - 18.7
Restructuring and other charges (3) - 24.5 (0.1 ) - 24.5
Hedge losses (4) - 7.5 (4.6 ) 0.1 7.6
Equity award expense (5) 1.3 2.4 1.0 1.6 2.7
Other items, net (6)     5.2       8.4         4.6         5.0         8.2  

Adjusted EBITDA before pro forma effects of profitability program
90.6 202.5 23.5 48.8 160.7

Pro forma effects of profitability program (7)
                          46.8  
Adjusted EBITDA                         $ 207.5  
(1)Represents net loss related to debt refinancing.
(2)Represents impairment of goodwill allocated to the coated paper segment.
(3)Represents costs associated with the shutdown of three paper machines.
(4)Represents unrealized losses on energy-related derivative contracts.
(5)Represents amortization of non-cash incentive compensation.
(6)Represents miscellaneous non-cash and other non-recurring earnings adjustments.
(7)Represents cost savings expected to be realized as part of our cost savings program.
 

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