Non-GAAP Financial Measures

Compressco occasionally uses numerical measures in press releases, earnings conference calls and other forums which are or may be considered Non-GAAP Financial Measures. We have provided below for your reference supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation. This supplemental financial disclosure should be considered within the context of our complete audited financial results for the given period, which are available on the SEC Filings page of our website.

EBITDA
Distributable Cash Flow
Unusual Items
Enterprise Value
Capitalization

EBITDA

EBITDA is defined as net income (loss) plus net interest expense, plus income tax provision, plus depreciation, amortization, and impairments. Management views  EBITDA, a non-GAAP measure, as a measure of the Partnership operating performance without regard to items such as interest expense, taxes, depreciation, and amortization, which can vary substantially from company to company. A reconciliation of EBITDA to Net Income as of March, 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012 is shown below:

EBITDA Quarter Ended   Year Ended    
  March 31, 2015   Dec. 31, 2014   Dec. 31, 2013   Dec. 31, 2012    
Net income $1,808   $11,258   $17,567   $16,331    
Interest Expense, Net                        7,906                       12,964                            469                              25    
Income tax provision (benefit)                           592                        (1,172)                         2,258                         3,353    
Depreciation and amortization                      19,988                       41,158                       14,642                       13,227    
EBITDA $30,294   $64,208   $34,936   $32,936    
                   
TTM EBITDA / Three Months Ended     EBITDA for the three months ended
  March 31, 2015   December 31, 2014   September 30, 2014   June 30, 2014   March 31, 2014
Net Income $1,808   $4,361   -$2,601   $4,879   $4,619
Interest Expense, Net                        7,906                         7,662                         4,998                            145                            159
Income tax provision (benefit)                           592                           (989)                        (1,351)                            534                            634
Depreciation and amortization                      19,988                       20,249                       13,476                         3,751                         3,682
EBITDA $30,294   $31,283   $14,522   $9,309   $9,094
                   

Adjusted EBITDA is defined as EBITDA, Stock Compensation Expense, Amortization of finance costs, and Unusual Items (see definition). Management views Adjusted EBITDA, a non-GAAP measure, as a measure of operating performance without regard to items such as interest expense, taxes, depreciation, depletion amortization, and impairments, stock comp expense, and unusual items,  which can vary substantially from company to company. A reconciliation of Adjusted EBITDA to Net Income as of March, 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012 is shown below:

Adjusted EBITDA Quarter Ended   Year Ended
  March 31, 2015   Dec. 31, 2014   Dec. 31, 2013   Dec. 31, 2012
EBITDA $30,294   $64,208   $34,936   $32,936
Stock Compensation Expense                           477 *                       1,544                         1,459                         1,905
Unusual Items                           407                       14,158                                -                                -
Adjusted EBITDA $31,178   $79,910   $36,395   $34,841

*Beginning with the quarter ended March 31, 2015, the Partnership included Stock Compensation Expense in the determination of Adjusted EBITDA.  Prior periods have been retroactively adjusted to conform to the current period presentation.

Adjusted TTM EBITDA / Three Months Ended     EBITDA for the Three Months Ended
  March 31, 2015   December 31, 2014   September 30, 2014   June 30, 2014   March 31, 2014
EBITDA $30,294   $31,283   $14,522   $9,309   $9,094
Stock Compensation Expense                           477                            625                            482                            235                            202
Unusual Items                           407                         2,634                       10,669                            855                                -
Adjusted EBITDA $31,178   $34,542   $25,673   $10,399   $9,296


Distributable Cash Flow

Distributable cash flow is used as a supplemental financial measure by the Partnership’s management as  it provides important information relating to the relationship between our financial operating performance and our cash distribution capability. Additionally, the Partnership uses distributable cash flow in setting forward expectations and in communications with the board of directors of our general partner. The Partnership defines distributable cash flow as EBITDA less current income tax expense, maintenance capital expenditures, and interest expense, plus the non-cash cost of compressors sold, non-cash charges and losses that are unusual or non-recurring, and equity compensation expense. The Partnership also calculates the ratio of distributable cash flow to the total cash distributed (the distribution coverage ratio) as it provides important information relating to the relationship between the Partnership’s financial operating performance and its cash distribution capability. The Partnership defines the distribution coverage ratio as the ratio of distributable cash flow to the quarterly distribution payable on all outstanding common units and the general partner interest.  A reconciliation of net income to distributable cash flow and distribution coverage ratio for the three month periods ended March 31, 2015 and year end 2014 is shown below:

Distributable cash flow and Distribution Coverage Ratio Three months ended   Three months ended   Year Ended
  Mar. 31, 2015   Dec. 31, 2014   Dec. 31, 2014
EBITDA $30,294   $31,283   $64,208
Less: Current income tax expense                          (412)                        (1,318)                        (2,342)
Less: Maintenance capital expenditures                       (2,171)                        (2,888)                        (4,974)
Less: Interest expense, net                       (7,906)                        (7,662)                      (12,964)
Add:  Non-cash cost of compressors sold                           206                         6,158                         6,529
Add: Stock Compensation Expense                           477                            625                         1,544
Add: Amortization of finance costs                           696                            728                         1,163
Add: Transaction Related Costs                           208                         2,634                       13,258
Distributable cash flow $21,392   $29,560   $66,422

Distributions attributable to period is defined as Distributions paid per CSI Compressco LP Consolidated Statement of Cash Flows as reported in CSI Compressco LP most recently filed respective Form 10-K and 10-Q, plus the cash distribution declared for the current quarter minus the last TTM quarter.  for the three month periods ended March 31, 2015 and year end 2014 is shown below:

Distributions attributable to period Three months ended   Three months ended   Year Ended
  Mar. 31, 2015   Dec. 31, 2014   Dec. 31, 2014
Distributions paid $16,615   $0   $36,687
Add: Distribution announced for current quarter                      17,051                       16,609                       16,609
Less: Distribution received in last TTM quarter                     (16,615)                                -                        (6,964)
Distributions attributable to period $17,051   $16,609   $46,332
           
Distribution Coverage Ratio 1.25   1.78   1.43


Unusual Items

Unusual Items are defined as transaction costs, write offs and other one time, non-recurring expenses for the period.  A reconciliation of Unusual Items  as of March 31, 2015, December 31, 2014, December 31, 2013, and December 31, 2012  is shown below:

Unusual Items – Year Ended Quarter Ended   Year Ended    
  March 31, 2015   Dec. 31, 2014   Dec. 31, 2013   Dec. 31, 2012    
Transaction Related Costs $208   $13,258   $-   $-    
ERP Implementation Costs                               -                            900                                -                                -    
Other Nonrecurring Costs                           199                                -                                -        
  $407   $14,158   $-   $-    
                   
      Three months ended
Unusual Items – Three Months Ended March 31, 2015   December 31, 2014   September 30, 2014   June 30, 2014   March 31, 2014
Transaction Related Costs $208   $2,634   $9,769   $855   $-
ERP Implementation Costs                               -                                -                            900                                -                                -
Severance                           199                                -                                -                                -                                -
  $407   $2,634   $10,669   $855   $-


Enterprise Value

Enterprise value is defined as market capitalization plus the sum of long-term and short-term debt on the consolidated balance sheet, less cash,  on the consolidated balance sheet. Conceptually, enterprise value is a measure of the market value of a company if it were free of debt. A reconciliation as of December 31, 2015, December 31, 2014 and December 31, 2013 is shown below:

Enterprise Value          
  Mar. 31, 2015   Dec. 31, 2014   Dec. 31, 2013
Market Capitalization $622,795   $235,098   $163,666
Total debt                    553,085                      539,961                       29,959
Less: cash                     (25,471)                      (34,066)                        (9,477)
Enterprise value $1,150,409   $740,993   $184,148


Capitalization

Capitalization is defined as total CSI Compressco partners’ capital plus the sum of long-term debt and the current portion of long-term debt.   A reconciliation as of March 31, 2015, December 31, 2014 and December 31, 2013 is shown below:

Capitalization          
  Mar. 31, 2015   Dec. 31, 2014   Dec. 31, 2013
Total partner’s capital $536,127   $550,281   $173,716
Total debt                    553,085                      539,961                       29,959
Capitalization $1,089,212   $1,090,242   $203,675