LensCrafters 2012 Annual Report Download - page 132

ANNUAL REPORT 2012> 46 |
EBITDA and EBITDA margin are not measures of performance under IFRS. We include
them in this Management Report in order to:
• improve transparency for investors;
• assist investors in their assessment of the Group’s operating performance and its
ability to refinance its debt as it matures and incur additional indebtedness to invest in
new business opportunities;
• assist investors in their assessment of the Group’s cost of debt;
• ensure that these measures are fully understood in light of how the Group evaluates its
operating results and leverage;
• properly define the metrics used and confirm their calculation; and
• share these measures with all investors at the same time.
Investors should be aware that our method of calculating EBITDA may differ from methods
used by other companies. We recognize that the usefulness of EBITDA has certain
limitations, including:
• EBITDA does not include interest expense. Because we have borrowed money in
order to finance our operations, interest expense is a necessary element of our costs
and ability to generate profits and cash flows. Therefore, any measure that excludes
interest expense may have material limitations;
• EBITDA does not include depreciation and amortization expense. Because we use
capital assets, depreciation and amortization expense is a necessary element of our
costs and ability to generate profits. Therefore, any measure that excludes depreciation
and expense may have material limitations;
• EBITDA does not include provision for income taxes. Because the payment of income
taxes is a necessary element of our costs, any measure that excludes tax expense may
have material limitations;
• EBITDA does not reflect cash expenditures or future requirements for capital
expenditures or contractual commitments;
• EBITDA does not reflect changes in, or cash requirements for, working capital needs;
• EBITDA does not allow us to analyze the effect of certain recurring and non-recurring
items that materially affect our net income or loss.
We compensate for the foregoing limitations by using EBITDA as a comparative tool,
together with IFRS measurements, to assist in the evaluation of our operating performance
and leverage.
The following table provides a reconciliation of EBITDA to net income, which is the most
directly comparable IFRS financial measure, as well as the calculation of EBITDA margin
on net sales: