Jack In The Box 2007 Annual Report Download - page 38

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credit facility. In 2006, interest expense increased compared with 2005 due to the impact of higher average interest
rates incurred on our credit facility.
Income Taxes
The income tax provisions reflect effective tax rates of 35.7%, 35.7%, and 33.8% of earnings before income
taxes and cumulative effect of an accounting change in 2007, 2006 and 2005, respectively. The lower tax rate in
2005 relates primarily to the resolution of a prior year’s tax position.
Cumulative Effect of Accounting Change
In fiscal 2006, we adopted Financial Accounting Standards Board Interpretation (“FIN”) 47 which requires
that we record a liability for an asset retirement obligation at the end of a lease if the amount can be reasonably
estimated. As a result of adopting FIN 47, we recorded an after-tax cumulative effect from this accounting change of
$1.0 million related to the depreciation and interest expense that would have been charged prior to the adoption.
Net Earnings
Net earnings were $126.3 million or $1.88 per diluted share, in 2007; $108.0 million or $1.50 per diluted share,
in 2006; and $91.5 million, or $1.24 per diluted share, in 2005.
LIQUIDITY AND CAPITAL RESOURCES
General. Our primary sources of short-term and long-term liquidity are expected to be cash flows from
operations, the revolving bank credit facility, the sale of company-operated restaurants to franchisees and the sale
and leaseback of certain restaurant properties.
Our cash requirements consist principally of:
• capital expenditures for new restaurant construction, restaurant renovations and upgrades of our manage-
ment information systems;
• debt service requirements;
• working capital;
• income tax payments; and
• obligations related to our benefit plans.
Based upon current levels of operations and anticipated growth, we expect that cash flows from operations,
combined with other financing alternatives in place or available, will be sufficient to meet our capital expenditure,
working capital and debt service requirements.
As is common in the restaurant industry, we maintain relatively low levels of accounts receivable and
inventories, and our vendors grant trade credit for purchases such as food and supplies. We also continually invest in
our business through the addition of new units and refurbishment of existing units, which are reflected as long-term
assets.
Cash and cash equivalents decreased $218.2 million to $15.7 million at September 30, 2007 from $233.9 mil-
lion at the beginning of the fiscal year. This decrease is primarily due to the use of cash to repurchase our common
stock, and property and equipment expenditures, which were offset in part by borrowings under our new credit
facility, cash flows provided by operating activities and proceeds from the issuance of common stock and from the
sale of restaurants to franchisees. We generally reinvest available cash flows from operations to develop new
restaurants or enhance existing restaurants, to repurchase shares of our common stock and to reduce debt.
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