LensCrafters 2010 Annual Report Download - page 70

ANNUAL REPORT 2010> 68 |
net cash from operations, which is used for mandatory debt service requirements, to fund discretionary investments, pay
dividends or pursue other strategic opportunities.
Free cash flow is not a measure of performance under IAS/IFRS. We include it in this Management Report in order to:
improve transparency for investors;•
assist investors in their assessment of our operating performance and our ability to generate cash from operations in •
excess of our cash expenses;
ensure that this measure is fully understood in light of how we evaluate our operating results;•
properly define the metrics used and confirm their calculation; and•
share this measure with all investors at the same time.•
Free cash flow is not meant to be considered in isolation or as a substitute for items appearing on our financial statements
prepared in accordance with IAS/IFRS. Rather, this non–IAS/IFRS measure should be used as a supplement to IAS/IFRS
results to assist the reader in better understanding the operational performance of the Company.
The Company cautions that this measure is not a defined term under IAS/IFRS and its definition should be carefully
reviewed and understood by investors.
Investors should be aware that our method of calculation of free cash flow may differ from methods used by other companies.
We recognize that the usefulness of free cash flow as an evaluative tool may have certain limitations, including:
the manner in which we calculate free cash flow may differ from that of other companies, which limits its usefulness as •
a comparative measure;
free cash flow does not represent the total increase or decrease in the net debt balance for the period since it •
excludes, among other things, cash used for funding discretionary investments and to pursue strategic opportunities
during the period and any impact of the exchange rate changes; and
free cash flow can be subject to adjustment at our discretion if we take steps or adopt policies that increase or •
diminish our current liabilities and/or changes to working capital.
We compensate for the foregoing limitations by using free cash flow as one of several comparative tools, together with
IAS/IFRS measurements, to assist in the evaluation of our operating performance.
The following table provides a reconciliation of free cash flow to EBITDA and the table above provides a reconciliation of
EBITDA to net income, which is the most directly comparable IAS/IFRS financial measure:
NON–IAS/IFRS MEASURE: FREE CASH FLOW
(millions of Euro) FY10
Adjusted EBITDA (1) 1,034.2
Working capital 103.6
Capex (230.4)
Operating cash flow 907.5
Financial charges (2) (98.5)
Taxes (186.0)
Extraordinary charges (3) (6.5)
Free cash flow 616.5
(1) Adjusted EBITDA is not an IAS/IFRS measure; please see tables on the earlier pages for a reconciliation of adjusted EBITDA to net income and adjusted net income to net income.
(2) Equals interest income minus interest expense.
(3) Equals extraordinary income minus extraordinary expense.