Adjusted Net income and Adjusted Earnings per Share represent net income before gain/(loss) on sale of vessels, non-cash changes in fair value of derivatives, non-cash "Accrued charter revenue" recorded under charters with escalating charter rates, realized (gain)/loss on Euro/USD forward contracts and the cash of partial purchases of consumable stores for newly acquired vessels. "Accrued charter revenue" is attributed to the timing difference between the revenue recognition and the cash collection. However, Adjusted Net income and Adjusted Earnings per Share are not recognized measurements under U.S. generally accepted accounting principles, or "GAAP." We believe that the presentation of Adjusted Net income and Adjusted Earnings per Share are useful to investors because they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that Adjusted Net income and Adjusted Earnings per Share are useful in evaluating our ability to service additional debt and make capital expenditures. In addition, we believe that Adjusted Net income and Adjusted Earnings per Share are useful in evaluating our operating performance and liquidity position compared to that of other companies in our industry because the calculation of Adjusted Net income and Adjusted Earnings per Share generally eliminates the effects of the accounting effects of capital expenditures and acquisitions, certain hedging instruments and other accounting treatments, items which may vary for different companies for reasons unrelated to overall operating performance and liquidity. In evaluating Adjusted Net income and Adjusted Earnings per Share, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted Net income and Adjusted Earnings per Share should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Reconciliation of Net Income to Adjusted EBITDA Nine-month period Three-month period ended September 30, ended September 30, -------------------- --------------------(Expressed in thousands of U.S. dollars) 2011 2012 2011 2012 --------- --------- --------- --------- (Unaudited) ------------------------------------------Net Income $ 61,510 $ 58,198 $ 17,391 $ 12,517Interest and finance costs 55,953 57,840 19,847 19,603Interest income (354) (1,173) (45) (457)Depreciation 58,092 60,182 20,079 20,301Amortization of dry-docking and special survey costs 6,139 6,017 2,096 2,081 --------- --------- --------- ---------EBITDA 181,340 181,064 59,368 54,045Accrued charter revenue 23,218 3,909 7,776 2,924(Gain)/ Loss on sale/disposal of vessels (10,771) 4,296 - 5,599Realized (Gain) Loss on Euro/USD forward contracts (1,566) 997 (764) 265Loss on derivative instruments 6,580 321 6,511 (358)Initial purchases of consumable stores for newly acquired vessels 1,197 - - - --------- --------- --------- ---------Adjusted EBITDA $ 199,998 $ 190,587 $ 72,891 $ 62,475 ========= ========= ========= =========
