Papa Johns 2014 Annual Report Download - page 60

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47
Our credit facility contains affirmative and negative covenants, including the following financial
covenants, as defined by the credit facility:
Permitted Ratio
Actual Ratio for the
Year Ended
December 28, 2014
Leverage Ratio Not to exceed 3.0 to 1.0 1.5 to 1.0
Interest Coverage Ratio Not less than 3.5 to 1.0 5.0 to 1.0
Our leverage ratio is defined as outstanding debt divided by consolidated EBITDA for the most recent
four fiscal quarters. Our interest coverage ratio is defined as the sum of consolidated EBITDA and
consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated
interest expense and consolidated rental expense for the most recent four fiscal quarters. We were in
compliance with all covenants as of December 28, 2014.
Cash flow provided by operating activities was $122.6 million for 2014 as compared to $101.4 million in
2013. The increase of approximately $21.3 million was primarily due to higher net income and favorable
changes in working capital and other operating activities including higher depreciation and amortization
expense. Cash flow provided by operating activities decreased to $101.4 million in 2013 from $104.4
million in 2012, primarily due to working capital needs offset somewhat by higher net income.
The Company’s free cash flow for the last three years was as follows (in thousands):
Dec. 28, Dec. 29, Dec. 30,
2014 2013 2012
Net cash provided by operating activities 122,632$ 101,360$ 104,379$
Purchase of property and equipment (a) (48,655) (50,750) (42,628)
Free cash flow (b) 73,977$ 50,610$ 61,751$
Year Ended
(a) We require capital primarily for the development, acquisition, renovation and maintenance of
restaurants, the development, renovation and maintenance of commissary facilities and
equipment and the enhancement of corporate systems and facilities, including technological
enhancements. The purchases for 2014 include FOCUS equipment costs for domestic Company-
owned restaurants and technology investments, including FOCUS software development costs.
The purchases for 2013 include expenditures on equipment for New Jersey commissary dough
production, technology investments, including FOCUS software development costs, and China
new restaurant builds. Purchases of property and equipment are summarized by operating
segment in “Note 20” of “Notes to Consolidated Financial Statements.”
(b) We define free cash flow as net cash provided by operating activities (from the consolidated
statements of cash flows) less the purchases of property and equipment. See “Items Impacting
Comparability; Non-GAAP Measures” for more information about this non-GAAP measure, its
limitations and why we present free cash flow alongside the most directly comparable GAAP
measure.