Adjusted Discretionary Cash Flow
In addition to reporting net cash provided by operating activities as defined under GAAP, Forest also presents adjusted discretionary cash flow, which is a non-GAAP liquidity measure. Adjusted discretionary cash flow consists of net cash provided by operating activities after adjustment for those items shown in the table below. This measure does not represent, and should not be considered an alternative to GAAP measurements, such as net cash provided by operating activities (its most comparable GAAP financial measure), and Forest’s calculations thereof may not be comparable to similarly titled measures reported by other companies. Forest’s management uses adjusted discretionary cash flow as a measure of liquidity and believes it provides useful information to investors because it assesses cash flow from operations before changes in working capital, which fluctuates due to the timing of collections of receivables and the settlements of liabilities, and other items. Forest’s management uses adjusted discretionary cash flow to manage its business, including in preparing its annual operating budget and financial projections. This measure does not represent the residual cash flow available for discretionary expenditures. The following table provides a reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to adjusted discretionary cash flow for the periods presented (in thousands):
|Forest Remainco||Total Company|
|Three Months Ended June 30,|
|Net cash provided by operating activities||$||75,461||$||149,326||$||104,932||$||180,281|
|Changes in working capital:|
|Other current assets||(10,607||)||(9,132||)||(12,008||)||(17,231||)|
|Accounts payable and accrued liabilities||5,478||(25,980||)||8,789||(19,916||)|
|Accrued interest and other current liabilities||14,128||10,813||13,843||10,429|
|Canadian dividend tax (1)||28,921||-||28,921||-|
|Legal proceeding settlement (1)||6,500||-||6,500||-|
|Adjusted discretionary cash flow||$||107,248||$||117,407||$||139,571||$||142,608|
The Canadian dividend tax and legal proceeding settlement are non-recurring cash-settled items. Including the effect of these items, adjusted discretionary cash flow for the three months ended June 30, 2011, for Forest Remainco and Total Company, would have been $72 million and $104 million, respectively.
In addition to reporting total debt as defined under GAAP, Forest also presents net debt, which is a non-GAAP debt measure. Net debt consists of the principal amount of debt adjusted for cash and cash equivalents at the end of the period. Forest’s management uses net debt to assess Forest’s indebtedness. The following table sets forth the components of net debt as of the dates presented (in thousands):
|Forest Remainco||Total Company|
|June 30, 2011|
|8% Senior notes due 2011||285,000||286,031||285,000||286,031|
|7% Senior subordinated notes due 2013||12||12||12||12|
|8 1/2% Senior notes due 2014||600,000||584,677||600,000||584,677|
|7 1/4% Senior notes due 2019||1,000,000||1,000,449||1,000,000||1,000,449|
|Less: cash and cash equivalents||474,139||474,139||479,149||479,149|
Book amounts include the principal amount of debt adjusted for unamortized gains on interest rate swap terminations of $0.4 million and unamortized net discounts on the issuance of certain senior notes of $(14.2) million each as of June 30, 2011.
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