Jack In The Box 2005 Annual Report Download - page 37

Contractual Obligations and Commitments. The following is a summary of the Company’ s contractual obligations and
commercial commitments as of October 2, 2005:
Payments Due by Period (in thousands)
Total
Less than
1 year 1-3 years 3-5 years
After
5 years
Contractual Obligations:
Credit facility term loan (1)......................... $ 342,106 $ 16,944 $ 33,454 $ 159,909 $ 131,799
Revolving credit facility............................. − − − − −
Capital lease obligations (1) ........................ 37,097 6,685 12,942 5,215 12,255
Other long-term debt obligations (1) ........... 847 367 398 82 −
Operating lease obligations ........................ 1,706,014 178,829 325,382 270,267 931,536
Guarantee (2)............................................... 982 464 276 242 _−
Total contractual obligations .................... $ 2,087,046 $ 203,289 $ 372,452 $ 435,715 $ 1,075,590
Other Commercial Commitments:
Stand-by letters of credit (3)........................ $ 40,960 $ 40,960 $ − $ − $ −
(1) Obligations related to the Company’ s credit facility term loan, capital lease obligations, and other long-term debt obligations include interest
expense estimated at interest rates in effect on October 2, 2005.
(2) Consists of a guarantee associated with one Chi-Chi’ s property. Due to the bankruptcy of the Chi-Chi’ s restaurant chain, previously owned by
the Company, we are obligated to perform in accordance with the terms of the guarantee agreement.
(3) Consists primarily of letters of credit for workers’ compensation and general liability insurance. Letters of credit outstanding against our credit
facility totaled $.3 million. Letters of credit outstanding under our cash-collateralized letters of credit agreement totaled $40.6 million and do not
impact the borrowing capacity under our credit facility.
Capital Expenditures. Capital expenditures, including capital lease obligations, were $124.0 million, $130.0 million,
and $121.1 million in 2005, 2004 and 2003, respectively. Cash flows used for additions to property and equipment were $123.1
million, $120.1 million, and $111.9 million in 2005, 2004 and 2003, respectively. Fiscal 2005, compared with fiscal 2004,
includes higher expenditures for new restaurants and QUICK STUFF locations, as well as increases in facility improvements
primarily related to Brand Reinvention. The increase in cash flows utilized in 2004 compared with 2003 is primarily due to
expenditures related to the Company’ s Innovation Center which opened in March 2004, JACK IN THE BOX restaurant
improvements and Qdoba capital expenditures, primarily related to new company-operated restaurants.
In fiscal year 2006, capital expenditures are expected to be $140 million to $150 million. We plan to open a moderate
number of new JACK IN THE BOX restaurants, and under our brand reinvention strategy, plan to upgrade approximately 100 to 150
of our restaurant facilities to create a unique new look for JACK IN THE BOX restaurants at an average cost per restaurant of
approximately $100,000.
Pension Funding. During 2005, we elected to contribute $22.2 million to our qualified defined benefit pension plans
from available cash on hand, compared with $30.0 million in 2004 and $4.4 million in 2003. The additional funding
contributions in each year were determined based on an annual actuarial review of the plans.
Future Liquidity. We require capital principally to grow the business through new restaurant construction, as well as to
maintain, improve and refurbish existing restaurants, and for general operating purposes. Our primary short-term and long-term
sources of liquidity are expected to be cash flows from operations, the revolving bank credit facility, and the sale and leaseback
of certain restaurant properties. Additional potential sources of liquidity include the sale of company-operated restaurants to
franchisees. Based upon current levels of operations and anticipated growth, we expect that cash flows from operations,
combined with other financing alternatives in place or available, will be sufficient to meet debt service, capital expenditure and
working capital requirements.
Discussion of Critical Accounting Policies
We have identified the following as the Company’ s most critical accounting policies, which are those that are most
important to the portrayal of the Company's financial condition and results and require management's most subjective and
complex judgments. Information regarding the Company’ s other significant accounting policies are disclosed in Note 1 of our
consolidated financial statements.
Retirement Benefits – The Company sponsors pension and other retirement plans in various forms covering those
employees who meet certain eligibility requirements. Several statistical and other factors which attempt to anticipate future
events are used in calculating the expense and liability related to the plans, including assumptions about the discount rate,
expected return on plan assets and the rate of increase in compensation levels, as determined by the Company using specified
guidelines. In addition, our outside actuarial consultants also use certain statistical factors such as turnover, retirement and
mortality rates to estimate the Company’ s future benefit obligations. The actuarial assumptions used may differ materially from
actual results due to changing market and economic conditions, higher or lower turnover and retirement rates or longer or shorter
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