Reconciliation of Net Income to Adjusted EBITDA Three-month period ended March 31, ------------------------(Expressed in thousands of U.S. dollars) 2012 2013 ----------- -----------Net Income $ 24,534 $ 24,735Interest and finance costs 20,240 17,564Interest income (284) (209)Depreciation 20,013 19,882Amortization of dry-docking and special survey costs 1,948 2,050 ----------- -----------EBITDA 66,451 64,022 ----------- -----------Accrued charter revenue 505 3,292(Gain) Loss on sale/disposal of vessels 2,801 (2,909)Realized (Gain) Loss on Euro/USD forward contracts 368 (190)Gain on derivative instruments (3,030) (2,989) ----------- -----------Adjusted EBITDA $ 67,095 $ 61,226 =========== ===========
EBITDA represents net income before interest and finance costs, interest income, depreciation and amortization of deferred dry-docking & special survey costs. Adjusted EBITDA represents net income before interest and finance costs, interest income, depreciation, amortization of deferred dry-docking & special survey costs, non-cash "Accrued charter revenue" recorded under charters with escalating charter rates, gain/(loss) on sale of vessels, realized (gain)/loss on Euro/USD forward contracts and non-cash changes in fair value of derivatives. "Accrued charter revenue" is attributed to the time difference between the revenue recognition and the cash collection. However, EBITDA and Adjusted EBITDA are not recognized measurements under U.S. generally accepted accounting principles, or "GAAP." We believe that the presentation of EBITDA and Adjusted EBITDA 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 EBITDA and Adjusted EBITDA are useful in evaluating our ability to service additional debt and make capital expenditures. In addition, we believe that EBITDA and Adjusted EBITDA are useful in evaluating our operating performance and liquidity position compared to that of other companies in our industry because the calculation of EBITDA and Adjusted EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance and liquidity. In evaluating EBITDA and Adjusted EBITDA, 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 EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.