Asset and Organic Growth Investments
Non-GAAP Measures
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As used in this presentation, and except as referenced in connection with the discussion of incremental adjusted EBITDA from the MVP project, Hammerhead pipeline and Equitrans Expansion project, adjusted EBITDA means, as applicable, net income, plus income tax
expense, net interest expense, loss on extinguishment of debt, depreciation, amortization of intangible assets, impairments of long-lived assets, payments on the preferred interest in EQT Energy Supply, LLC (Preferred Interest), non-cash long-term compensation
expense (income), and transaction costs, less equity income, AFUDC -equity, unrealized gain (loss) on derivative instruments and adjusted EBITDA attributable to noncontrolling interest.
When used in reference to ETRN's expected incremental adjusted EBITDA from the MVP project, as well as the Hammerhead pipeline and the Equitrans Expansion project, adjusted EBITDA means, as applicable, ETRN's net income plus income tax expense, net interest
expense, loss on extinguishment of debt, depreciation, amortization of intangible assets, impairments of long-lived assets, payments on the Preferred Interest, non-cash long-term compensation expense (income) and transaction costs, less equity income, AFUDC-
equity, unrealized gain (loss) on derivative instruments and adjusted EBITDA attributable to noncontrolling interest, and also includes, as applicable, ETRN's proportional ownership interest in the projected earnings before interest, taxes, depreciation and amortization
of the MVP project, as well as its ownership of the projected earnings before interest, taxes, depreciation and amortization of the Hammerhead pipeline and Equitrans Expansion project.
As used in this presentation, free cash flow means net cash provided by operating activities plus principal payments received on the Preferred Interest, and less net cash provided by operating activities attributable to noncontrolling interest, premiums paid on debt
extinguishment, capital expenditures (excluding the noncontrolling interest share (40%) of Eureka capital expenditures), capital contributions to MVP JV, and dividends paid to Series A Preferred shareholders.
As used in this presentation, retained free cash flow means free cash flow less dividends paid to common shareholders.
assess:
Adjusted EBITDA, free cash flow and retained free cash flow are non-GAAP supplemental financial measures that management and external users of ETRN's consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies, may use to
ETRN's operating performance as compared to other publicly traded companies in the midstream energy industry without regard to historical cost basis or, in the case of adjusted EBITDA, financing methods
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The ability of ETRN's assets to generate sufficient cash flow to pay dividends to ETRN's shareholders
ETRN's ability to incur and service debt and fund capital expenditures and capital contributions
The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities
ETRN believes that adjusted EBITDA, free cash flow, and retained free cash flow provide useful information to investors in assessing ETRN's financial condition and results of operations. Adjusted EBITDA, free cash flow, and retained free cash flow should not be
considered as alternatives to net income, operating income, net cash provided by operating activities, as applicable, or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA, free cash flow, and retained free cash
flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income, operating income and net cash provided by operating activities. Additionally, because these non-GAAP metrics may be defined differently by other
companies in ETRN's industry, ETRN's definitions of adjusted EBITDA, free cash flow, and retained free cashflow may not be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measures. Free cash flow and retained free
cash flow should not be viewed as indicative of the actual amount of cash that ETRN has available for dividends or that ETRN plans to distribute and are not intended to be liquidity measures.
ETRN is unable to provide a reconciliation of projected adjusted EBITDA from projected net income, the most comparable financial measure calculated in accordance with GAAP, or a reconciliation of projected free cash flow or retained free cash flow to net cash
provided by operating activities, the most comparable financial measure calculated in accordance with GAAP. ETRN has not provided a reconciliation of projected adjusted EBITDA to projected net income, the most comparable financial measure calculated in
accordance with GAAP, due to the inherent difficulty and impracticability of predicting certain amounts required by GAAP with a reasonable degree of accuracy. Net income includes the impact of depreciation expense, income tax expense, the revenue impact of
changes in the projected fair value of derivative instruments prior to settlement, potential changes in estimates for certain contract liabilities and unbilled revenues and certain other items that impact comparability between periods and the tax effect of such items,
which may be significant and difficult to project with a reasonable degree of accuracy. Therefore, a reconciliation of projected adjusted EBITDA to projected net income is not available without unreasonable effort.
ETRN has not provided the projected net income of the MVP project and/or related assets and projects, including the Hammerhead pipeline and Equitrans Expansion project, the most comparable financial measure calculated in accordance with GAAP, or a
reconciliation of such measure to incremental adjusted EBITDA. Projected net income from such projects and assets, and the related reconciliation, is not available without unreasonable effort because ETRN does not provide guidance with respect to the intra-year
timing of its or the MVP JV's capital spending, which impact AFUDC-debt and equity and equity earnings, among other items, that are reconciling items. In addition, the MVP project remains under construction. As a result, the timing of capital expenditures associated
with the MVP project is uncertain and subject to elements outside of ETRN's control. Further, these assets and projects are or will upon completion be reported in ETRN's Gathering and Transmission business segments, and ETRN does not allocate certain costs, such as
interest expenses, to individual assets within business segments.
ETRN is unable to project net cash provided by operating activities because this metric includes the impact of changes in operating assets and liabilities related to the timing of cash receipts and disbursements that may not relate to the period in which the operating
activities occurred. ETRN is unable to project these timing differences with any reasonable degree of accuracy to a specific day, three or more months in advance. Therefore, ETRN is unable to provide projected net cash provided by operating activities, or the related
reconciliation of each of projected free cash flow and projected retained free cash flow to projected net cash provided by operating activities without unreasonable effort. ETRN provides a range for the forecasts of net income, adjusted EBITDA, free cash flow and
retained free cash flow to allow for the inherent difficulty of predicting certain amounts and the variability in the timing of cash spending and receipts and the impact on the related reconciling items, many of which interplay with each other.
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