Jack In The Box 2006 Annual Report Download - page 64

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
F-14
4. LONG-TERM DEBT (continued)
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.
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, we have entered into three interest-rate swap agreements. In March
2005, under two agreements the Company effectively converted $130,000 of our variable rate term loan
borrowings to a fixed-rate basis through March 2008. In April 2006, we entered into an interest rate swap
agreement that will effectively convert $60,000 of our variable rate term loan borrowings to a fixed-rate basis
beginning March 2008, concurrent with the end of our existing $60,000 interest rate swap, through April 2010.
These 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 the term loan interest payments. There was no hedge ineffectiveness in 2006 or 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 sheets.
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,
stock repurchases and dividend payments, and requirements to maintain certain financial ratios, cash flows and
net worth. As of October 1, 2006, we complied with all debt covenants.
Future cash payments — Aggregate maturities on all long-term debt are $37,539, $8,387, $4,952, $4,039 and
$229,311 for the years 2007 through 2011, respectively.
Capitalized interest — We capitalize interest in connection with the construction of our restaurants and other
facilities. Interest capitalized in 2006, 2005 and 2004 was $1,403, $1,052 and $1,997, respectively. Capitalized
interest in 2004 includes dollars associated with the construction of our Innovation Center.
5. LEASES
As lessee — We lease restaurants and other facilities, which generally have renewal clauses of 5 to 20 years
exercisable at our option. In some instances, our leases have provisions for contingent rentals based upon a
percentage of defined revenues. Many of our leases also have rent escalation clauses and require the payment of
property taxes, insurance and maintenance costs. We also lease certain restaurant, office and warehouse
equipment, as well as various transportation equipment. Minimum rental obligations are accounted for on a
straight-line basis over the term of the initial lease. Total rent expense was as follows:
2006 2005 2004
Minimum rentals .......................................................................................... $ 191,772 $ 184,277 $ 179,041
Contingent rentals ........................................................................................ 3,765 3,157 5,250
195,537 187,434 184,291
Less sublease rentals .................................................................................... (33,202) (26,087) (22,087)
$ 162,335 $ 161,347 $ 162,204