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SEC Filings

10-Q
EQUINIX INC filed this Form 10-Q on 11/02/2018
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offset by lower weighted average interest rates during the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. We capitalized $13.0 million and $20.6 million of interest expense to construction in progress for the nine months ended September 30, 2018 and 2017, respectively. We expect to incur higher interest expense in future periods in connection with additional indebtedness that we incurred during 2018 and as a result of the increasing interest rates.
Other Income (Expense). We recorded net other income of $9.5 million and $0.5 million, respectively, for the nine months ended September 30, 2018 and September 30, 2017, which was primarily due to foreign currency exchange gains and losses during those periods.
Loss on debt extinguishment. We recorded a $39.2 million net loss on debt extinguishment during the nine months ended September 30, 2018, primarily due to the extinguishment of financing obligations as a result of the Infomart Dallas Acquisition and the SK2 land and building purchase. During the nine months ended September 30, 2017, we recorded a $42.1 million loss on debt extinguishment as a result of amendments of capital lease and other financing obligations and lease terminations in connection with real estate property purchases. In addition, we recorded $14.6 million loss on debt extinguishment in connection with the repayment of all of our 4.875% senior notes.
Income Taxes. We operate as a REIT for federal income tax purposes. As a REIT, we are generally not subject to federal income taxes on our taxable income distributed to stockholders. We intend to distribute or have distributed the entire taxable 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 nine 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 nine months ended September 30, 2018 and 2017.
For the nine months ended September 30, 2018 and 2017, we recorded $41.6 million and $24.9 million of income tax expense, respectively. Our effective tax rates were 14.0% and 12.9%, respectively, for the nine months ended September 30, 2018 and 2017. The increase in the effective tax rate for the nine 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 as a result of a legal entity reorganization in our Americas region during the nine 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 nine 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 nine months ended September 30, 2018 and 2017 was split among the following geographic regions (dollars in thousands):
 
Nine Months Ended September 30,
 
% Change
 
2018
 
%
 
2017
 
%
 
Actual
 
Constant
Currency
Americas
$
881,507

 
49
%
 
$
748,871

 
50
%
 
18
%
 
19
%
EMEA
516,790

 
29
%
 
417,640

 
28
%
 
24
%
 
16
%
Asia-Pacific
397,748

 
22
%
 
320,690

 
22
%
 
24
%
 
22
%
Total
$
1,796,045

 
100
%
 
$
1,487,201

 
100
%
 
21
%
 
19
%
Americas Adjusted EBITDA. The increase in our Americas adjusted EBITDA was primarily due to the Verizon Data Center Acquisition and the Infomart Dallas Acquisition, higher revenues as a result of our IBX data center expansion activity and organic growth as described above. During the nine months ended September 30, 2018, foreign currency fluctuations resulted in

50