Annex A: Non-GAAP Financial Information Non-GAAP Combined Financial Information Because GTT was a company with no material business or operations prior to the completion of the Acquisitions on October 15, 2006, GTT is presenting its results of operations, combined on an arithmetic basis, with those of GII and ETT for the relevant periods of each company during the quarter ended March 31, 2006. We refer to such combined financial information as being presented on a "non-GAAP combined" basis. Such non-GAAP combined financial information only constitutes the arithmetic sums described above with respect to the three months ended March 31, 2006 and does not give effect to purchase accounting, cost savings, interest expense or other pro forma adjustments resulting from the Acquisitions of GII and ETT for that period. GTT is presenting and analyzing non-GAAP combined financial information because management believes that presenting such non-GAAP financial information will be useful to investors for comparative purposes. Because of the method by which the non-GAAP combined financial information was compiled, GTT's analysis compares results of different companies over different periods using different bases of accounting, and the non-GAAP combined financial information may not be indicative of GTT's future results or of what GTT's results would have been had the Acquisitions of GII and ETT occurred as of the first day of the periods presented. Therefore, you should not consider the non-GAAP combined financial information in isolation or view it as a substitute for any financial information of GTT, GII or ETT that is prepared in accordance with GAAP. You should read the non-GAAP combined financial information and this analysis in conjunction with the separate financial statements of the companies included in this press release, along with the financial statements and discussion of those financial statements that will be included in GTT's quarterly report on Form 10-Q for the three months ended March 31, 2007. Non-GAAP Revenue Non-GAAP revenue for the three months ended March 31, 2007 is the arithmetic combination of the revenue of GTT, GII and ETT for such period, as described above under "-Non-GAAP Combined Financial Information." Under SFAS No. 141, $0.2 million of deferred revenue that existed as of October 15, 2006 and was received by GTT during the three month period ended March 31, 2007 was not included in GTT's reported revenues for that period and was instead recorded as a part of goodwill, net of cost, as a result of the Acquisitions. Non-GAAP revenue for the quarter ended March 31, 2007 includes such deferred revenues. Non-GAAP Gross Margin Non-GAAP gross margin for the three months ended March 31, 2007 includes the effect of $0.2 million of cost of revenues associated with the $0.2 million of deferred revenues that are included in non-GAAP combined revenues. Adjusted EBITDA Adjusted EBITDA represents operating income before depreciation and amortization on a non-GAAP combined basis for the quarter ended March 31, 2007 and adjusted to take account of deferred revenues (and associated expenses) that were eliminated as a result of purchase accounting adjustments in connection with the Acquisitions for the three months ended March 31, 2007; in each case further adjusted to exclude certain one-time expenses including costs associated with the completion of the Acquisitions, employee terminations and other non- recurring items. GTT presents Adjusted EBITDA as a supplemental measure of GTT's performance. GTT also presents Adjusted EBITDA because GTT believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry and in measuring the ability of issuers to meet debt service obligations. In evaluating Adjusted EBITDA, you should be aware that in the future GTT may incur expenses similar to the adjustments in this presentation. GTT's presentation of Adjusted EBITDA should not be construed as an inference that GTT's future results will be unaffected by unusual or non- recurring items. Adjusted EBITDA is not a measurement of GTT's financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP. |