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Management monitors the capital structure based on covenants required pursuant to the Credit Facility.
Covenants under our Credit Facility(1) include:
----------------------------------------------------------------------------Ratio December 31, 2012 December 31, 2011 Threshold----------------------------------------------------------------------------Senior secured debt(2) to EBITDA(3) 0.66:1 0.65:1 2.75:1 maximumTotal debt(4) to EBITDA(3) 2.46:1 2.38:1 4.00:1 maximumInterest Coverage 5.09:1 5.86:1 2.25:1 minimum----------------------------------------------------------------------------(1) We are restricted from declaring dividends if we are in breach of any covenants under our credit facility.(2) Senior secured debt means the total debt less the senior unsecured debentures.(3) EBITDA is a non-IFRS measure, the closest measure of which is net earnings.For the purpose of calculating the covenant, EBITDA is defined as the trailing twelve months consolidated net income for Newalta before the deduction of interest, taxes, depreciation and amortization, and non-cash items (such as non-cash stock-based compensation and gains or losses on asset dispositions). Additionally, EBITDA is normalized for any acquisitions or dispositions as if they had occurred at the beginning of the period.(4) Total debt comprises outstanding indebtedness under the credit facility, including our bank surplus or overdraft balance and the senior unsecured debentures.
The trust indenture under which the senior unsecured debentures have been issued also contains certain annual restrictions and covenants that, subject to certain exceptions, limit our ability to incur additional indebtedness, pay dividends, make certain loans or investments and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations.
Covenants under the trust indenture include:
----------------------------------------------------------------------------Ratio December 31, 2012 December 31, 2011 Threshold----------------------------------------------------------------------------Senior Secured Debt $25,000 + the including Letters of greater of Credit $220,000 and 92,546 94,510 1.75x EBITDACumulative finance lease obligations nil nil $25,000 maximumConsolidated Fixed Charge Coverage 5.09:1 5.86:1 2.00:1 minimumPeriod end surplus for Restricted restricted payments(1) payments cannot 110,739 27,001 exceed surplus----------------------------------------------------------------------------(1) We are restricted from declaring dividends, purchasing and redeeming shares or making certain investments if the total of such amounts exceeds the period end surplus for such restricted payments.
NOTE 14. EARNINGS PER SHARE
Basic earnings per share calculations for the year ended December 31, 2012 and 2011 were based on the weighted average number of shares outstanding for the respective years. Diluted earnings per share include the potential dilution of outstanding options under incentive plans to acquire shares.
