After Tax Cash Flow: HealthTronics has presented After Tax Cash Flow, a non-GAAP financial measure. HealthTronics believes its presentation of After Tax Cash Flow is an important supplemental measure of its operating performance to its investors.
After Tax Cash Flow is intended to give investors a clear picture of the cash being generated by HealthTronics at the corporate level. After Tax Cash Flow is calculated using Net Cash Provided by Operating Activities and subtracting Distributions to Non-controlling Interests. HealthTronics believes that After Tax Cash Flow highlights the value of the Company’s tax assets as well as other benefits beyond those reflected in the Company’s GAAP Net Income. For example, After Tax Cash Flow includes the impact of changes in working capital and thereby provides better insight into the Company’s ability to manage payables, receivables and inventory.
To convert from After Tax Cash Flow to what is typically referred to as Free Cash Flow, one would subtract capital expenditures made at the corporate level. It is important to note that the “Purchases of equipment and leasehold improvements” reflected on the Company’s cash flow statements includes capital expenditures at both the corporate and partnership level and a significant portion of expenditures are made in equipment at the partnerships. Thus, a break out of capital expenditures at the corporate and physician partnership level is included herein.
Prior to 2009, distributions to our partners were made on an irregular quarterly basis that was based on the tax calendar. We now make distributions on a monthly basis. At the time we made the switch, we anticipated the investor community would benefit from the increased transparency into operating cash flows. Thus, by highlighting After Tax Cash Flow in our quarterly releases, HealthTronics will be leveraging this increased transparency. However, it is important to note that given the irregular distribution schedule in prior years, HealthTronics will not be able to make year-over-year comparisons until the second quarter of 2010.
EBITDA and Adjusted EBITDA: HealthTronics has presented EBITDA and Adjusted EBITDA amounts, which are non-GAAP financial measures. In the financial statements attached to this press release, HealthTronics has reconciled such amounts to their most directly comparable financial measure calculated in accordance with GAAP, which is HealthTronics’ net income. HealthTronics believes that its presentations of EBITDA and Adjusted EBITDA are useful supplemental measures of operating performance to its investors.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a commonly used measure of performance which HealthTronics believes, when considered with measures calculated in accordance with GAAP, gives investors a more complete understanding of HealthTronics’ operating results before the impact of investing and financing transactions and income taxes. HealthTronics does not subtract minority interest expense when calculating EBITDA; however, HealthTronics does adjust for minority interest expense and refers to this measure as “Adjusted EBITDA.” “Adjusted EBITDA” also excludes stock-based compensation expense. Minority interest is a GAAP measure intended to reflect our partner’s share of our consolidated net income and not our partner’s share of our consolidated EBITDA. For example, calculation of minority interest expense does not include adjustments for depreciation, amortization, taxes or interest. As a result, our partners’ share of consolidated EBITDA may not, in a given reporting period, equal the deduction for minority interest expense used in arriving at Adjusted EBITDA. HealthTronics has historically reported Adjusted EBITDA to its investors and believes that the continued inclusion of Adjusted EBITDA provides consistency in its financial reporting. Adjusted EBITDA is used in management’s internal evaluation of total company performance. Adjusted EBITDA is also used by HealthTronics management in the annual budgeting process. HealthTronics believes these measures continue to be used by investors and creditors in their assessment of HealthTronics’ operational performance and the valuation of the company. |
