Dunkin' Donuts 2015 Annual Report Download - page 56

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-46-
included herein). In addition, as of December 26, 2015, we had a borrowing capacity of $73.7 million under our $100.0 million
Variable Funding Notes (as defined below).
Free cash flow
During fiscal year 2015, net cash provided by operating activities was $185.6 million, as compared to net cash provided by
operating activities of $199.3 million for fiscal year 2014. Net cash provided by operating activities for fiscal years 2015 and
2014 includes net cash inflows of $12.3 million and $8.8 million, respectively, related to advertising funds and gift card/
certificate programs. Net cash provided by operating activities for fiscal year 2015 includes the net funding of restricted cash
accounts of $65.7 million, which represents cash restricted in accordance with our securitized financing facility and will be
used for operating activities such as to pay interest and real estate obligations. Excluding cash held for advertising funds and
reserved for gift card/certificate programs and excluding the fluctuation in restricted cash, we generated $203.4 million and
$176.4 million of free cash flow during fiscal years 2015 and 2014, respectively.
The increase in free cash flow from fiscal year 2014 to 2015 was due primarily to the increase in pre-tax income, excluding
non-cash items, a reduction in incentive compensation payments, and the payment of a third-party product volume guarantee in
the prior fiscal year. Offsetting these increases in free cash flow were reduced proceeds from the sale of real estate and
company-operated restaurants as compared to the prior fiscal year, the timing of receipts and payments related to the sale of
Dunkin’ K-Cup® pods and the related franchisee profit-sharing program, and increases in cash paid for income taxes and
capital expenditures.
Free cash flow is a non-GAAP measure reflecting net cash provided by operating and investing activities, excluding the cash
flows related to advertising funds, gift card/certificate programs, and restricted cash. The Company uses free cash flow as a key
performance measure for the purpose of evaluating performance internally and our ability to generate cash. We also believe free
cash flow provides our investors with useful information regarding our historical cash flow results. This non-GAAP
measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Use of the term free
cash flow may differ from similar measures reported by other companies.
Free cash flow is reconciled from net cash provided by operating activities determined under GAAP as follows (in thousands):
Fiscal year
2015 2014
Net cash provided by operating activities $ 185,566 199,323
Less: Increase in cash held for advertising funds and gift card/certificate programs (12,335)(8,781)
Plus: Increase in restricted cash 65,673 —
Less: Net cash used in investing activities (35,467)(14,104)
Free cash flow, excluding cash held for advertising funds and gift card/certificate programs $ 203,437 176,438
Operating, investing, and financing cash flows
Net cash provided by operating activities was $185.6 million during fiscal year 2015, as compared to $199.3 million in fiscal
year 2014. The $13.8 million decline in operating cash flows was driven primarily by the funding of restricted cash accounts of
$65.7 million in accordance with the requirements of our new securitized debt structure, as well as the timing of receipts and
payments related to the sale of Dunkin’ K-Cup® pods and the related franchisee profit-sharing program, and an increase in cash
paid for income taxes. Offsetting these declines was an increase in pre-tax income, excluding non-cash items, a reduction in
incentive compensation payments, the payment of a third-party product volume guarantee in the prior fiscal year, and favorable
cash flows related to our gift card program due primarily to the timing of holidays and our fiscal year end.
Net cash used in investing activities was $35.5 million during fiscal year 2015, as compared to $14.1 million in fiscal year
2014. The $21.4 million increase in net cash used in investing activities was driven primarily by reduced proceeds received
from the sale of real estate and company-operated restaurants of $11.7 million, as well as incremental additions to property and
equipment of $6.6 million.
Net cash used in financing activities was $96.9 million during fiscal year 2015, as compared to $233.4 million in fiscal year
2014. The $136.5 million decrease in net cash used in financing activities was driven primarily by the favorable impact of debt-
related activities of $638.3 million, resulting from proceeds from the issuance of long-term debt, net of debt repayment,
payment of debt issuance and other debt-related costs, and funding of restricted cash accounts. Offsetting the favorable impact
of debt-related activities was incremental cash used for repurchases of common stock of $494.9 million.
Borrowing capacity
Our securitized financing facility included original aggregate borrowings of approximately $2.60 billion, consisting of $2.50
billion Class A-2 Notes (as defined below) and $100.0 million of Variable Funding Notes (as defined below) which were