LensCrafters 2012 Annual Report Download - page 136

ANNUAL REPORT 2012> 50 |
The Group recognizes that the usefulness of EBITDA and the ratio of net debt to EBITDA
as evaluative tools may have 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; and
• the ratio of net debt to EBITDA is net of cash and cash equivalents, restricted cash and
short-term investments, thereby reducing our debt position.
Because we may not be able to use our cash to reduce our debt on a dollar-for-dollar
basis, this measure may have material limitations.
We compensate for the foregoing limitations by using EBITDA and the ratio of net debt to
EBITDA as two of several comparative tools, together with IFRS measurements, to assist in
the evaluation of our operating performance and leverage.
See the table below for a reconciliation of net debt to long-term debt, which is the most
directly comparable IFRS financial measure, as well as the calculation of the ratio of net
debt to EBITDA. For a reconciliation of EBITDA to its most directly comparable IFRS
measure, see the table on the earlier page.