Non-GAAP Financial Measures
The Company computes and discloses free cash flow and free cash flow as a percentage of revenues. Free cash flow is a non-GAAP financial measure. Free cash flow is defined by the Company as operating income plus depreciation, depletion and amortization, non-cash charges, and any impairment of mining assets, less non-controlling interests in operating income of consolidated subsidiaries. Management believes that free cash flow and free cash flow as a percentage of revenues are useful measures of performance of our royalty portfolio. Free cash flow identifies the cash generated in a given period that will be available to fund the Company’s future operations, growth opportunities, shareholder dividends, and to service the Company’s debt obligations. Free cash flow, as defined, is most directly comparable to operating income in the Statements of Operations. Below is the reconciliation to operating income:
| Free Cash Flow Reconciliation | For the Fiscal Years Ended June 30, | |||||||||
| (Unaudited, in thousands) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||
| Operating income | $ | 41,035 | $ | 27,292 | $ | 32,982 | $ | 28,506 | $ | 13,412 |
| Depreciation, depletion and amortization | $ | 53,793 | $ | 32,578 | $ | 18,364 | $ | 8,269 | $ | 4,261 |
| Non-cash employee stock compensation | $ | 7,279 | $ | 2,921 | $ | 2,869 | $ | 2,663 | $ | 2,778 |
| Non-controlling interests in operating income of consolidated subsidiaries | $ | (2,039) | $ | (1,085) | $ | (1,352) | $ | (1,522) | $ | - |
| Free cash flow | $ | 100,068 | $ | 61,706 | $ | 52,863 | $ | 37,916 | $ | 20,451 |