Dunkin' Donuts 2015 Annual Report Download - page 58

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-48-
required to deliver shares of its common stock or may elect to make a cash payment to the financial institution. Final settlement
of the February 2016 ASR Agreement is expected to be completed in the first quarter of fiscal year 2016.
In order to assess our current debt levels, including servicing our long-term debt, and our ability to take on additional
borrowings, we monitor a leverage ratio of our long-term debt, net of cash (“Net Debt”), to adjusted earnings before interest,
taxes, depreciation, and amortization (“Adjusted EBITDA”). This leverage ratio, and the related Net Debt and Adjusted
EBITDA measures used to compute it are non-GAAP measures, and our use of the terms Net Debt and Adjusted EBITDA may
vary from other companies, including those in our industry, due to the potential inconsistencies in the method of calculation and
differences due to items subject to interpretation. Net Debt reflects the gross principal amount outstanding under our securitized
financing facility and capital lease obligations, less short-term cash, cash equivalents, and restricted cash, excluding cash
reserved for gift card/certificate programs. Adjusted EBITDA is defined in our securitized financing facility as net income
before interest, taxes, depreciation and amortization, and impairment charges, as adjusted for certain items that are summarized
in the table below. Net Debt should not be considered as an alternative to debt, total liabilities, or any other obligations derived
in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net income, operating income, or
any other performance measures derived in accordance with GAAP, as a measure of operating performance, or as an alternative
to cash flows as a measure of liquidity. Net Debt, Adjusted EBITDA, and the related leverage ratio have important limitations
as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under
GAAP. However, we believe that presenting Net Debt, Adjusted EBITDA and the related leverage ratio are appropriate to
provide additional information to investors to demonstrate our current debt levels and ability to take on additional borrowings.
As of December 26, 2015, we had a Net Debt to Adjusted EBITDA ratio of 5.2 to 1.0. The following is a reconciliation of our
Net Debt and Adjusted EBITDA to the corresponding GAAP measures as of and for the fiscal year ending December 26, 2015,
respectively (in thousands):
December 26,
2015
Principal outstanding under Class A-2 Notes $ 2,481,250
Total capital lease obligations 8,043
Less: cash and cash equivalents (260,430)
Less: restricted cash, current (71,917)
Plus: cash held for gift card/certificate programs 142,548
Net Debt $ 2,299,494
Fiscal year
2015
Net income including noncontrolling interests $ 105,229
Interest expense 96,765
Income tax expense 96,359
Depreciation and amortization 45,244
Impairment charges 623
Japan joint venture impairment, net(a) 54,300
EBITDA 398,520
Adjustments:
Non-cash adjustments(b) 12,402
Loss on debt extinguishment and refinancing transactions(c) 20,554
Other(d) 8,525
Total adjustments 41,481
Adjusted EBITDA $ 440,001
(a) Represents an impairment of our investment in the Japan JV. See note 6 to the consolidated financial statements
included herein.
(b) Represents non-cash adjustments, including stock compensation expense, legal reserves, and other non-cash gains and
losses.
(c) Represents transaction costs associated with the refinancing and repayment of long-term debt, including fees paid to
third parties and the write-off of debt issuance costs and original issue discount.
(d) Represents loss on settlement of our Canadian pension plan in June 2015 as a result of the closure of our Canadian ice
cream manufacturing plant in fiscal year 2012, as well as costs and fees associated with various franchisee-related
investments, bank fees, and the net impact of other insignificant adjustments.