Papa Johns 2015 Annual Report Download - page 59

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46
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 27, 2015
Leverage Ratio Not to exceed 3.0 to 1.0 1.6 to 1.0
Interest Coverage Ratio Not less than 3.5 to 1.0 4.8 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 27, 2015.
Cash Flows
Cash flow provided by operating activities was $160.3 million for 2015 as compared to $122.6 million in
2014. The increase of approximately $37.7 million was primarily due to higher operating income and
favorable changes in inventory and other working capital items. The prior year included higher inventory
levels of equipment to support the rollout of FOCUS to our domestic franchised restaurants. The Perrin
legal settlement does not impact 2015 cash provided by operating activities as it was not paid until
January 2016. Cash flow provided by operating activities increased to $122.6 million in 2014 from
$101.4 million in 2013, primarily due to higher operating income and favorable changes in working
capital.
The Company’s free cash flow for the last three years was as follows (in thousands):
Dec. 27, Dec. 28, Dec. 29,
2015 2014 2013
Net cash provided by operating activities 160,312$ 122,632$ 101,360$
Purchase of property and equipment (a) (38,972) (48,655) (50,750)
Free cash flow (b) 121,340$ 73,977$ 50,610$
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 such as our FOCUS system.
(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.