Jack In The Box 2005 Annual Report Download - page 56

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
4. LONG-TERM DEBT
2005 2004
The detail of long-term debt at each year-end follows:
Term loan, replaced during fiscal year 2004, variable interest rate based on an
applicable margin plus LIBOR, 5.26% at October 2, 2005, quarterly payments
of $688 through January 29, 2010 and subsequent quarterly payments of
$64,625 through January 8, 2011 ........................................................................... $ 270,875 $ 273,625
Secured notes, 11.5% interest, repaid during fiscal year 2005 ..................................... – 713
Capitalized lease obligations, 7.97% average interest rate ........................................... 26,315 29,815
Other notes, principally unsecured, 10% average interest rate .................................... 811 1,142
298,001 305,295
Less current portion...................................................................................................... 7,788 8,203
$ 290,213 $ 297,092
Credit facility - Our credit facility is comprised of: (i) a $200,000 revolving credit facility maturing on January 8, 2008
with a rate of London Interbank Offered Rate (“LIBOR”) plus 2.25% and (ii) a $270,875 term loan maturing on January 8,
2011 with a rate of LIBOR plus 1.75%. The credit facility requires the payment of an annual commitment fee based on the
unused portion of the credit facility. The annual commitment rate and the credit facility’ s interest rates are based on a
financial leverage ratio, as defined in the credit agreement. The credit facility may also require prepayments of the term
loan based on an excess cash flow calculation as defined in the credit agreement. The Company and certain of its
subsidiaries granted liens in substantially all personal property assets and certain real property assets to secure our
respective obligations under the credit facility. Additionally, certain of our real and personal property secure other
indebtedness of the Company. At October 2, 2005, we had no borrowings under our revolving credit facility and had
letters of credit outstanding against our credit facility of $313.
Effective October 6, 2005, we amended our credit agreement to achieve a 25 basis point reduction in the term loan’ s
applicable margin, to expand the categories of investments allowable under the credit agreement, and to provide for an
aggregate amount of $200,000 for the acquisition of our common stock or the potential payment of cash dividends.
Letter of credit agreement - To reduce our letter of credit fees incurred under the credit facility, we entered into a separate
cash-collateralized letter of credit agreement. At October 2, 2005, we had letters of credit outstanding under this
agreement of $40,647, which were collateralized by approximately $45,580 of cash and cash equivalents. Although we
intend to continue this agreement, we have the ability to terminate the cash-collateralized letter of credit agreement thereby
eliminating restrictions on the $45,580 restricted cash and cash equivalent balance.
Interest rate swaps – We are exposed to interest rate volatility with regard to existing variable rate debt. To reduce our
exposure to rising interest rates, in March 2005, we entered into two interest rate swap agreements that effectively
converted $130,000 of our 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, with effectiveness assessed based on changes in the present value of interest payments on the term loan.
There was no hedge ineffectiveness in 2005. Accordingly, changes in the fair value of the interest rate swap contracts were
recorded, net of taxes, as a component of accumulated other comprehensive income in the accompanying consolidated
balance sheet as of October 2, 2005.
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.
Aggregate maturities on all long-term debt are $7,788, $7,939, $7,880, $4,726 and $4,046 for the years 2006 through 2010,
respectively.
We capitalize interest in connection with the construction of our restaurants and other facilities. Interest capitalized in
2005, 2004 and 2003 was $1,052, $1,997 and $1,130, respectively. Capitalized interest in 2004 and 2003 includes dollars
associated with the construction of our Innovation Center.
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