Burger King 2006 Annual Report Download - page 68

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prepayments, our next scheduled principal payment on the senior secured credit facility is December 31, 2008.
The level of required principal repayments increases over time thereafter. The maturity dates of term loan A,
term loan B-1, and amounts drawn under the revolving credit facility are June 2011, June 2012, and June
2011, respectively.
The interest rate under the senior secured credit facility for term loan A and the revolving credit facility is
at our option either (a) the greater of the federal funds effective rate plus 0.50% and the prime rate, which we
refer to as ABR, plus a rate not to exceed 0.75%, which varies according to our leverage ratio or (b) LIBOR
plus a rate not to exceed 1.75%, which varies according to our leverage ratio. The interest rate for term
loan B-1 is at our option either (a) ABR, plus a rate of 0.50% or (b) LIBOR plus 1.50%, in each case so long
as our leverage ratio remains at or below certain levels (but in any event not to exceed 0.75%, in the case of
ABR loans, and 1.75% in the case of LIBOR loans).
Our senior secured credit facility contains certain customary financial and other covenants. These
covenants impose restrictions on additional indebtedness, liens, investments, advances, guarantees, mergers
and acquisitions. These covenants also place restrictions on asset sales, sale and leaseback transactions,
dividends, payments between us and our subsidiaries and certain transactions with affiliates.
The financial covenants limit the maximum amount of capital expenditures to an amount ranging from
$180 million to $250 million per fiscal year over the term of our senior secured credit facility. Following the
end of each fiscal year, we are required to prepay the term debt in an amount equal to 50% of excess cash flow
(as defined in our senior secured credit facility) for such fiscal year. This prepayment requirement is not
applicable if our leverage ratio is less than a predetermined amount. There are other events and transactions,
such as certain asset sales, sale and leaseback transactions resulting in aggregate net proceeds over $2.5 million
in any fiscal year, proceeds from casualty events and incurrence of debt that will trigger additional mandatory
prepayment.
While BKC is the only borrower under our senior secured credit facility, we and certain of our
subsidiaries have jointly and severally unconditionally guaranteed the payment of the amounts due under our
senior secured credit facility. We and certain of our subsidiaries, including BKC, have pledged as collateral a
100% equity interest in our and BKC's domestic subsidiaries with some exceptions. Furthermore, BKC has
pledged as collateral a 65% equity interest in certain of its foreign subsidiaries.
See Part II, Item 8 Term Debt in Note 10 of this Form 10-K for further information about our senior
secured credit facility.
Comparative Cash Flows
Operating Activities. Cash flows from operating activities were $74 million in fiscal 2006 compared to
$218 million in fiscal 2005 and $199 million in fiscal 2004. The $144 million decrease in fiscal 2006 was due
primarily to the payment of $103 million of interest on the PIK notes in connection with our July 2005
refinancing, the payment of the $34 million compensatory make-whole payment and related taxes and the
payment of the management agreement termination fee of $30 million.
Investing Activities. Cash used in investing activities was $74 million in fiscal 2006 compared to
$5 million in fiscal 2005 and $184 million in fiscal 2004. The $69 million increase in fiscal 2006 and
$179 million decrease in fiscal 2005 were due primarily to $122 million of securities purchased as short-term
investments in fiscal 2004, which were sold for $122 million in fiscal 2005. In fiscal 2006, our cash used to
acquire franchise restaurants and franchisee debt decreased by $43 million, partially offsetting the comparative
cash flow effect of the $122 million in proceeds for the investment sale in fiscal 2005.
In fiscal 2005, our cash used to acquire franchise restaurants and franchisee debt increased by
$27 million, partially offsetting the comparative cash flow effect of the $122 million for the investment sale in
fiscal 2005 and purchase in fiscal 2004.
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