LensCrafters 2011 Annual Report Download - page 125

| 49 >APPENDIXMANAGEMENT REPORT - APPENDIX
FREE CASH FLOW
Free cash flow represents net income before non-controlling interests, taxes, other income/
expense, depreciation and amortization (i.e. EBITDA) plus or minus the decrease/(increase)
in working capital over the prior period, less capital expenditures, plus or minus interest
income/(expense) and extraordinary items, minus taxes paid. We believe that free cash
flow is useful to both management and investors in evaluating our operating performance
compared with other companies in our industry. In particular, our calculation of free cash
flow provides a clearer picture of our ability to generate 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
for distributing dividends to stockholders; 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.