Jack In The Box 2007 Annual Report Download - page 57

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) owns, operates, and franchises
JACK IN THE BOX»quick-service restaurants and Qdoba Mexican Grill»(“Qdoba”) fast-casual restaurants in 42 states.
The Company also operates 60 proprietary convenience stores called Quick Stuff», which include a major-branded
fuel station developed adjacent to a full-size JACK IN THE BOX restaurant.
References to the Company throughout these notes to the consolidated financial statements are made using the
first person notations of “we,” “us” and “our.”
Basis of presentation — The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries and the accounts of any variable interest entities where we are deemed the primary
beneficiary. All significant intercompany transactions are eliminated.
Reclassifications and adjustments — Certain prior year amounts in the consolidated financial statements have
been reclassified to conform to the fiscal 2007 presentation, including the reclassification of gains on the sale of
company-operated restaurants as a reduction of operating costs and expenses from revenues. Additionally, all
historical share and per share data, except for treasury stock, in our consolidated financial statements and notes
thereto have been restated to give retroactive recognition of our two-for-one stock split. In the consolidated
statements of stockholders’ equity, for all periods presented, the par value of the additional shares was reclassified
from capital in excess of par value to common stock. Refer to Note 9, Stockholders’ Equity, for additional
information regarding the stock split.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2007,
2006 and 2005 include 52 weeks.
Use of estimates — 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 and consider information provided by,
actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates.
Cash and cash equivalents — We invest cash in excess of operating requirements in short-term, highly liquid
investments with original maturities of three months or less, which are considered cash equivalents.
Restricted cash — To reduce our letter of credit fees incurred under our credit facility, we entered into a cash-
collateralized letter of credit agreement in October 2004. At October 1, 2006, we had letters of credit outstanding
under this agreement of $40.2 million, which were collateralized by approximately $47.7 million of cash and cash
equivalents. Effective July 2007, we elected to terminate this arrangement. Thus, there are no restrictions on our
cash and cash equivalents at September 30, 2007.
Accounts and other receivables, net is primarily comprised of receivables from franchisees and tenants.
Franchisee receivables primarily include rents, royalties, and marketing fees associated with the franchise
agreements and receivables arising from distribution services provided to most franchisees. Tenant receivables
relate to subleased properties where we are on the master lease agreement. The allowance for doubtful accounts is
based on historical experience and a review of existing receivables. Changes in accounts and other receivables are
classified as operating activity in the consolidated statements of cash flows.
Inventories are valued at the lower of cost on a first-in, first-out basis, or market. Changes in inventories are
classified as operating activity in the consolidated statements of cash flows.
Assets held for sale and leaseback typically represent the costs for new sites that we plan to sell and lease back
when construction is completed. Gains or losses realized on sale-leaseback transactions are deferred and amortized
to income over the lease terms.
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