Jack In The Box 2006 Annual Report Download - page 62

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
F-12
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Had compensation expense been recognized for our stock-based compensation plans by applying the fair value
recognition provisions of SFAS 123,we would have recorded net earnings and earnings per share amounts as
follows:
2005 2004
Net earnings, as reported .............................................................................................................
.
$ 91,537 $ 74,684
Add: Stock-based employee compensation included in reported net income, net of taxes..........
.
1,056 1,356
Deduct: Total stock-based employee compensation expense determined under fair-value-
based method for all awards, net of taxes ..................................................................................
.
(7,869) (7,156)
Pro forma net earnings.................................................................................................................
.
$ 84,724 $ 68,884
Net earnings per share:
Basic — as reported.................................................................................................................
.
$ 2.57 $ 2.06
Basic — pro forma ..................................................................................................................
.
$ 2.38 $ 1.90
Diluted — as reported..............................................................................................................
.
$ 2.48 $ 2.02
Diluted — pro forma ...............................................................................................................
.
$ 2.29 $ 1.86
For the pro forma disclosures, the estimated fair values of the options were amortized on a straight-line basis
over their vesting periods of up to five years. Refer to Note 10, Share-Based Employee Compensation, for
information regarding the assumptions used by the Company in valuing its stock options.
Estimations — In preparing the consolidated financial statements in conformity with U.S. generally accepted
accounting principles, management is required to make certain assumptions and estimates that affect reported
amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies. In making these assumptions
and estimates, management may from time-to-time seek advice from, and consider information provided by,
actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates.
2. ASSET RETIREMENT OBLIGATIONS
Effective October 1, 2006, we adopted the provisions of FIN 47, which clarifies the term conditional asset retirement
obligation and requires a liability to be recorded if the fair value of the obligation can be reasonably estimated. The
types of asset retirement obligations that are covered by FIN 47 are those for which an entity has a legal obligation to
perform an asset retirement activity; however, the timing and/or method of settling the obligation are contingent on a
future event that may or may not be within the control of the entity. FIN 47 also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of an asset retirement obligation.
This interpretation only applied to legal obligations associated with the removal of improvements in surrendering
our leased properties. The impact of adopting FIN 47 was the recognition of an additional asset of $460 (net of
accumulated amortization of $353); an asset retirement obligation of $2,150; and a charge of $1,690 ($1,044, net
of tax), which was recorded as a cumulative effect of change in accounting principle in the consolidated
statement of earnings.
Had depreciation and interest expense been recognized for asset retirement obligations by applying the
recognition provisions of FIN 47 as of the beginning of each fiscal year, we would have recognized an asset
retirement liability as of October 2, 2005 and October 3, 2004 of $2,075 and $1,923, respectively, and the impact
to net earnings and earnings per share in all fiscal years presented would have been immaterial.
In addition to the asset retirement obligations recorded by the Company upon the adoption of FIN 47, the
Company has recorded asset retirement obligations associated with the removal of fuel tanks, in connection with
the adoption of SFAS 143, Accounting for Asset Retirement Obligations in fiscal year 2003.The following table
is a reconciliation of the asset retirement obligation activity for fiscal years 2006 and 2005:
2006 2005
Asset retirement obligation at beginning of the year........................................................ $ 163 $ 149
Adoption of FIN 47 ...................................................................................................... 2,150 —
New obligations incurred ............................................................................................. 68 —
Accretion ...................................................................................................................... 18 14
Asset retirement obligation at end of the year.................................................................. $ 2,399 $ 163