Jack In The Box 2007 Annual Report Download - page 40

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 new 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.
Loan origination costs associated with the new credit facility were $7.4 million and are included as deferred
costs in other assets, net in the consolidated balance sheet as of September 30, 2007. Deferred financing fees of
$1.9 million related to the prior credit facility were written-off in the first quarter and are included in interest
expense, net in the consolidated statement of earnings for the year ended September 30, 2007.
Interest Rate Swaps. Concurrent with the termination of our prior credit facility, we liquidated three swap
agreements and reversed the fair value of the swaps recorded as a component of accumulated other comprehensive
loss, net. We realized a net gain of $0.4 million, included in interest expense, net in the accompanying consolidated
statement of earnings for the year ended September 30, 2007. To reduce our exposure to rising interest rates under
our new credit facility, in March 2007, we entered into two interest rate swap agreements that will effectively
convert $200.0 million of our variable rate term loan borrowings to a fixed rate basis for three years.
Debt Covenants. We are subject to a number of covenants under our various debt instruments, including
limitations on additional borrowings, acquisitions, loans to franchisees, capital expenditures, lease commitments,
stock repurchases and dividend payments, as well as requirements to maintain certain financial ratios, cash flows
and net worth. As of September 30, 2007, we complied with all debt covenants.
Debt Outstanding. Total debt outstanding increased to $433.3 million at September 30, 2007 from
$291.8 million at the beginning of the fiscal year. Current maturities of long-term debt decreased $31.8 million
and long-term debt, net of current maturities increased $173.3 million due to borrowings under the new credit
facility. At October 1, 2006, $29.1 million was classified as current under the prior credit facility related to a clause
in the agreement requiring prepayments based on an excess cash flow calculation.
Repurchases of Common Stock. On November 21, 2006, we announced the commencement of a Tender
Offer for up to 5.5 million shares of our common stock at a price per share not less than $55.00 and not greater than
$61.00, for a maximum aggregate purchase price of $335.5 million. On December 19, 2006, we accepted for
purchase approximately 2.3 million shares of common stock at a purchase price of $61.00 per share, for a total cost
of $143.3 million.
On December 20, 2006, the Board of Directors authorized a program to repurchase up to 3.3 million shares in
calendar year 2007 to complete the repurchase of the total shares authorized in the Tender Offer. In the second
quarter of 2007, under a 10b5-1 plan, we repurchased 3.2 million shares for $220.1 million.
The Tender Offer and the additional repurchase program were funded through the new credit facility and
available cash, and all shares repurchased were subsequently retired.
In September 2005, the Board of Directors authorized the repurchase of $150.0 million of our outstanding
common stock in the open market. Pursuant to this authorization, we repurchased 1,582,881 shares of our common
stock in 2007 at a cost of $100.0 million and 1,444,700 shares of common stock in 2006 at a cost of $50.0 million.
The Board of Directors also approved a share repurchase program in fiscal year 2004. Under this authorization, we
repurchased 2,578,801 shares of our common stock in 2005 at a cost of $92.9 million.
Off-balance sheet arrangements. Other than operating leases, we are not a party to any off-balance sheet
arrangements that have, or are reasonably likely to have, a current or future material effect on our financial
condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
We finance a portion of our new restaurant development through sale-leaseback transactions. These
transactions involve selling restaurants to unrelated parties and leasing the restaurants back. Additional information
regarding our operating leases is available in Item 2. Properties, and Note 4, Leases of the notes to the consolidated
financial statements.
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