Jack In The Box 2007 Annual Report Download - page 27

several parcels of real estate on which our restaurants are located. We are unaware of any significant hazards on
properties we own or have owned, or operate or have operated, the remediation of which would result in material
liability for the Company. In the event of the determination of contamination on such properties, the Company, as
owner or operator, could be held liable for severe penalties and costs of remediation. We also operate motor vehicles
and warehouses and handle various petroleum substances and hazardous substances, and are not aware of any
current material liability related thereto.
Risks Related to Leverage. The Company has a $565.0 million credit facility, which is comprised of a
$150.0 million revolving credit facility and a $415.0 million term loan. Increased leverage resulting from
borrowings under the credit facility could have certain material adverse effects on the Company, including, but
not limited to the following: (i) our credit rating may be reduced; (ii) our ability to obtain additional financing in the
future for acquisitions, working capital, capital expenditures, and general corporate or other purposes could be
impaired, or any such financing may not be available on terms favorable to us; (iii) a substantial portion of our cash
flows could be required for debt service and, as a result, might not be available for our operations or other purposes;
(iv) any substantial decrease in net operating cash flows or any substantial increase in expenses could make it
difficult for us to meet our debt service requirements or force us to modify our operations or sell assets; (v) our
ability to withstand competitive pressures may be decreased; and (vi) our level of indebtedness may make us more
vulnerable to economic downturns, and reduce our flexibility in responding to changing business, regulatory and
economic conditions. Our ability to repay expected borrowings under our credit facility, and to meet our other debt
or contractual obligations (including compliance with applicable financial covenants) will depend upon our future
performance and our cash flows from operations, both of which are subject to prevailing economic conditions and
financial, business and other known and unknown risks and uncertainties, certain of which are beyond our control.
Risks of Changes in Accounting Policies and Assumptions. Changes in accounting standards, policies or
related interpretations by auditors or regulatory entities may negatively impact our results. Many accounting
standards require management to make subjective assumptions and estimates, such as those required for stock
compensation, tax matters, pension costs, litigation, insurance accruals and asset impairment calculations. Changes
in those underlying assumptions and estimates could significantly change our results.
Litigation. Litigation trends and potential class actions by consumers and shareholders, and the costs and
other effects of legal claims by employees, franchisees, customers, vendors, stockholders and others, including
settlement of those claims may negatively impact our results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of September 30, 2007, of our 2,132 JACK IN THE BOX and 395 Qdoba restaurants, we owned 817 restaurant
buildings, including 606 located on leased land. In addition, we leased both the land and building for 1,291
restaurants, including 358 restaurants operated by franchisees. Also at that date, franchisees directly owned or
leased 419 restaurants.
Company-
Operated Franchised Total
Number of Restaurants at
September 30, 2007
Company-owned restaurant buildings:
On Company-owned land .............................. 140 71 211
On leased land ...................................... 453 153 606
Subtotal ........................................... 593 224 817
Company-leased restaurant buildings on leased land ............ 933 358 1,291
Franchise directly-owned or directly-leased restaurant buildings.... — 419 419
Total restaurant buildings .............................. 1,526 1,001 2,527
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