Jack In The Box 2009 Annual Report Download - page 28

Table of Contents
began in 2006, is an important part of the chain’s holistic brand-reinvention initiative and is intended to create a warm and inviting
dining experience for Jack in the box guests. In 2009, we focused our reimage efforts on completing the restaurant exteriors as the majority
of the Company’s business is conducted through the drive-thru. With the exteriors substantially completed, we will focus on reimaging
restaurant interiors. As of September 27, 2009, approximately 53% of all company-operated restaurants feature all interior and exterior
elements of the reimage program and we now expect system-wide completion by the end of fiscal year 2012.
In fiscal 2010, capital expenditures are expected to be approximately $125-$135 million, including investment costs related to the
Jack in the Box restaurant re-image program. We plan to open approximately 30 new Jack in the Box and 15 new Qdoba company-
operated restaurants in 2010.
Sale of Company-Operated Restaurants. We have continued our strategy of selectively selling Jack in the Box company-operated
restaurants to franchisees. In 2009, we generated cash proceeds and notes receivable of $116.5 million from the sale of 194 restaurants
compared with $85.0 million in 2008 from the sale of 109 restaurants and $51.3 million in 2007 from the sale of 76 restaurants. Fiscal
years 2009 and 2008 include $21.6 million and $27.9 million, respectively, of financing provided to facilitate the closing of certain
transactions. The $20 million in notes receivable at September 28, 2008 related to franchising transactions was repaid in 2009. As of
September 27, 2009, notes receivable related to refranchisings were $12.2 million, of which we anticipate approximately $4.5 million
will be repaid in fiscal 2010. We expect total proceeds of $85-$95 million from the sale of 150-170 Jack in the Box restaurants in 2010.
Acquisition of Franchise-Operated Restaurants. In the first quarter of 2009, Qdoba acquired 22 franchise-operated restaurants
for approximately $6.8 million, net of cash received. The total purchase price was allocated to property and equipment, goodwill and
other income. The restaurants acquired are located in Michigan and Los Angeles, which we believe provide good long-term growth
potential consistent with our strategic goals. In the third quarter of 2007, Qdoba acquired nine franchise-operated restaurants for
approximately $7.0 million in cash. The primary assets acquired include $2.5 million in net property and equipment and $4.5 million in
goodwill.
Financing Activities. Cash used in financing activities increased $96.8 million primarily attributable to cash used in 2009 for the
repayment of borrowings under our revolving credit facility. In 2008, cash used in financing activities decreased due to a decrease in share
repurchases and proceeds from the issuance of common stock, offset in part by a decrease in credit facility borrowings.
Financing. Our credit facility is comprised of (i) a $150.0 million revolving credit facility maturing on December 15, 2011 and
(ii) a term loan maturing on December 15, 2012, both bearing interest at London Interbank Offered Rate (“LIBOR”) plus 1.125%. As
part of the credit agreement, we may request the issuance of up to $75.0 million in letters of credit, the outstanding amount of which
reduces the net borrowing capacity under the agreement. The credit facility requires the payment of an annual commitment fee based on
the unused portion of the credit facility. The credit facility’s interest rates and the annual commitment rate are based on a financial
leverage ratio, as defined in the credit agreement. Our obligations under the credit facility are secured by first priority liens and security
interests in the capital stock, partnership and membership interests owned by us and (or) our subsidiaries, and any proceeds thereof,
subject to certain restrictions set forth in the credit agreement. Additionally, the credit agreement includes a negative pledge on all tangible
and intangible assets (including all real and personal property) with customary exceptions. At September 27, 2009, we had no borrowings
under the revolving credit facility, $415.0 million outstanding under the term loan and letters of credit outstanding of $35.5 million.
Loan origination costs associated with the credit facility were $7.4 million and are included as deferred costs in other assets, net in
the consolidated balance sheet. Deferred financing fees of $1.9 million related to the prior credit facility were written-off in fiscal 2007 and
are included in interest expense, net in the consolidated statement of earnings for the year ended September 30, 2007.
Covenants. We are subject to a number of customary covenants under our credit facility, including limitations on additional
borrowings, acquisitions, loans to franchisees, capital expenditures, lease commitments, stock repurchases and dividend payments, and
requirements to maintain certain financial ratios. Following the end of each fiscal year, we may be required to prepay the term debt with a
portion of our excess cash flows for such fiscal year, as defined in the credit agreement. Other events and transactions, such as certain
asset sales, may also trigger
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