EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain items that are required in calculating covenant compliance under our senior secured credit facility entered into May 2004. Adjusted EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense as described below. EBITDA and Adjusted EBITDA are not recognized terms under generally accepted accounting principles, or GAAP. EBITDA and Adjusted EBITDA do not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow available for management or discretionary use as such measures do not consider certain cash requirements such as capital expenditures (including capitalized software expense), tax payments and debt service requirements. UGS Corp. considers EBITDA and Adjusted EBITDA to be key indicators of our ability to pay our debt. We have included information concerning EBITDA and Adjusted EBITDA because we use such information in determining compensation of our management and in our review of the performance of our business. EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures. The following is a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the GAAP measure we believe to be most directly comparable to EBITDA and Adjusted EBITDA (in thousands).
Three months Three months ended ended March 31, March 31, 2006 2005 Reconciliation of net loss to EBITDA: Net loss $(19,154) $(8,169) Interest expense 26,447 21,163 Benefit for income taxes (10,508) (3,974) Depreciation and amortization 51,285 37,534 EBITDA $48,070 $46,554 Reconciliation of EBITDA to Adjusted EBITDA: EBITDA $48,070 $46,554 Impact of revenue reduction resulting from purchase accounting (A) 189 4,638 Restructuring (B) (535) --- Other items (C) 3,970 2,037 Currency translation impact (D) (3,467) 3,082 Adjusted EBITDA $48,227 $56,311 (A) Removes the purchase accounting impact for the adjustment to deferred revenue. (B) Removes the impact of the restructuring. (C) Represents the impact of management, consulting and advisory fees and related expenses paid to our parent companies and affiliates of each of our sponsors, severance related expenses, and expenses associated with our retention incentive plan for certain members of management. (D) Represents the net effect of unrealized gains and losses from revaluing the intercompany debt that resulted from the acquisition of UGS PLM Solutions Inc. and from hedging obligations used to offset foreign exchange currency balance sheet exposures
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