Jack In The Box 2005 Annual Report Download - page 36

Interest Rate Swaps. To reduce the Company’ s exposure to rising interest rates, in March 2005, the Company entered
into two interest rate swap agreements that effectively converted $130 million of its variable rate term loan borrowings to a fixed
rate basis through March 2008. The agreements have been designated as cash flow hedges under the terms of SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. Accordingly, changes in the fair value of the interest rate swap
contracts are recorded, net of taxes, as a component of accumulated other comprehensive income in the accompanying condensed
consolidated balance sheet as of October 2, 2005. These agreements effectively convert a portion of the Company’ s variable rate
bank debt to fixed rate bank debt and have an average pay rate of 4.28%, yielding a fixed rate of 6.03% including the term loan’ s
1.75% applicable margin.
Covenants. We are subject to a number of customary covenants under our various credit agreements, including
limitations on additional borrowings, acquisitions, loans to franchisees, capital expenditures, lease commitments and dividend
payments, and requirements to maintain certain financial ratios, cash flows and net worth. As of October 2, 2005, we were in
compliance with all debt covenants.
Total debt outstanding decreased to $298.0 million at October 2, 2005 from $305.3 million at October 3, 2004, due to
scheduled repayments made during the year, including payments made on capital lease obligations.
Other Transactions. During fiscal year 2005, we exercised our purchase option under certain lease arrangements and
purchased approximately 31 JACK IN THE BOX restaurant properties. By year-end, we had subsequently sold and leased back 7 of
these properties at more favorable rental rates. We anticipate selling and leasing back the remaining sites during fiscal 2006
which are included in assets held for sale and leaseback at October 2, 2005.
Sale of Company-Operated Restaurants. During the last three years we have continued our strategy of selectively
selling JACK IN THE BOX company-operated restaurants to franchisees, selling 58, 49 and 36 restaurants in 2005, 2004 and 2003,
respectively. Proceeds from the sale of company-operated restaurants and collections on notes receivable, primarily related to
such sales, were $34.1 million, $43.4 million and $23.8 million, respectively.
Common Stock Repurchase Programs. In fiscal years 2002, 2004 and 2005 our Board of Directors authorized the
repurchase of our outstanding common stock in the open market. Under these authorizations, the Company repurchased
2,578,801, 228,400 and 2,566,053 shares of Jack in the Box common stock at a cost of $92.9 million, $7.1 million and $50.2
million during fiscal years 2005, 2004 and 2003, respectively. On September 15, 2005, the Board of Directors approved an
additional $150 million share repurchase program which was not utilized as of October 2, 2005. These stock repurchase
programs are intended to increase shareholder value and offset the dilutive effect of stock option exercises.
Acquisition. On January 21, 2003, we acquired Qdoba, operator and franchisor of Qdoba Mexican Grill, for
approximately $45 million in cash. The primary assets acquired include $8.2 million in net property and equipment and other
long-term assets, $18.0 million in intangible assets and $23.6 million in goodwill. Qdoba operates in the fast-casual segment of
the restaurant industry and, as of October 2, 2005, operated or franchised 250 restaurants in 37 states.
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