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SEC Filings

10-Q
EQUINIX INC filed this Form 10-Q on 11/02/2018
Entire Document
 

income generated by the operations of our REIT and QRSs for the tax years ended December 31, 2018 and 2017, respectively. As such, other than built-in-gains recognized and withholding taxes, no provision for U.S. income taxes for the REIT and QRSs has been included in the accompanying condensed consolidated financial statements for the three months ended September 30, 2018 and 2017.
We have made TRS elections for some of our subsidiaries in and outside the U.S. In general, a TRS may provide services that may otherwise be considered impermissible for REITs to provide and may hold assets that may not be REIT compliant. U.S. income taxes for the TRS entities located in the U.S. and foreign income taxes for our foreign operations regardless of whether the foreign operations are operated as QRSs or TRSs have been accrued, as necessary, for the three months ended September 30, 2018 and 2017.
For the three months ended September 30, 2018 and 2017, we recorded $18.5 million and $2.2 million of income tax expense, respectively. Our effective tax rates were 12.9% and 2.7%, respectively, for the three months ended September 30, 2018 and 2017. The increase in the effective tax rate for the three months ended September 30, 2018 as compared to the same period in 2017 is primarily due to increased profits in higher tax rate jurisdictions, which is partially offset by a release of valuation allowance during the three months ended September 30, 2018.
Our accounting for deferred taxes involves weighing positive and negative evidence relating to the realizability of deferred tax assets in each tax jurisdiction. A release of valuation allowance results in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the event occurs. We recognized a tax benefit of approximately $33.0 million in the three months ended September 30, 2018 as a result of concluding that the valuation allowances were no longer required in certain foreign jurisdictions after considering such evidence as the nature, frequency, severity of current and cumulative financial reporting losses, and sources of future taxable incomes and tax planning strategies.
Adjusted EBITDA. Adjusted EBITDA is a key factor in how we assess the operating performance of our segments and develop regional growth strategies such as IBX data center expansion decisions. We define adjusted EBITDA as income or loss from operations excluding depreciation, amortization, accretion, stock-based compensation expense, restructuring charges, impairment charges, acquisition costs and gain on asset sales. See "Non-GAAP Financial Measures" below for more information about adjusted EBITDA and a reconciliation of adjusted EBITDA to income or loss from operations. Our adjusted EBITDA for the three months ended September 30, 2018 and 2017 was split among the following geographic regions (dollars in thousands):
 
Three Months Ended September 30,
 
% Change
 
2018
 
%
 
2017
 
%
 
Actual
 
Constant
Currency
Americas
$
296,003

 
48
%
 
$
292,101

 
53
%
 
1
%
 
3
%
EMEA
179,797

 
30
%
 
146,464

 
27
%
 
23
%
 
24
%
Asia-Pacific
136,726

 
22
%
 
111,754

 
20
%
 
22
%
 
24
%
Total
$
612,526

 
100
%
 
$
550,319

 
100
%
 
11
%
 
13
%
Americas Adjusted EBITDA. The increase in our Americas adjusted EBITDA was primarily due to the Infomart Dallas Acquisition, higher revenues as a result of our IBX data center expansion activity and organic growth as described above. During the three months ended September 30, 2018, foreign currency fluctuations resulted in approximately $3.9 million of net unfavorable foreign currency impact to our Americas adjusted EBITDA primarily due to a generally stronger U.S. dollar relative to the Brazilian Real during the three months ended September 30, 2018 compared to the three months ended September 30, 2017.
EMEA Adjusted EBITDA. The increase in our EMEA adjusted EBITDA was primarily due to higher revenues as a result of our IBX data center expansion activity and acquisitions, as described above, as well as lower sales and marketing and general and administrative expenses as a percentage of revenues. During the three months ended September 30, 2018, foreign currency fluctuations resulted in approximately $2.5 million of net unfavorable foreign currency impact to our EMEA adjusted EBITDA primarily due to a generally stronger U.S. dollar relative to the Euro, Turkish Lira and Swedish Krona during the three months ended September 30, 2018 compared to the three months ended September 30, 2017.
Asia-Pacific Adjusted EBITDA. The increase in our Asia-Pacific adjusted EBITDA was primarily due to the Metronode Acquisition, higher revenues as a result of our IBX data center expansion activity and organic growth as described above. The impact of foreign currency fluctuations on our Asia-Pacific adjusted EBITDA for the three months ended September 30, 2018 was not significant when compared to average exchange rates of the three months ended September 30, 2017.

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