Jack In The Box 2010 Annual Report Download - page 32

Table of Contents
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In June 2009, the FASB issued authoritative guidance for consolidation, which changes the approach for determining which enterprise
has a controlling financial interest in a variable interest entity and requires more frequent reassessments of whether an enterprise is a
primary beneficiary. This guidance is effective for annual periods beginning after November 15, 2009. We are currently in the process of
assessing the impact this guidance may have on our consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require
adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to risks relating to financial instruments is changes in interest rates. Our credit facility, which is comprised of a
revolving credit facility and a term loan, bears interest at an annual rate equal to the prime rate or LIBOR plus an applicable margin based
on a financial leverage ratio. As of October 3, 2010, the applicable margin for the LIBOR-based revolving loans and term loan was set at
2.50%.
We use interest rate swap agreements to reduce exposure to interest rate fluctuations. In August 2010, we entered into two interest rate
swap agreements that will effectively convert $100.0 million of our variable rate term loan borrowings to a fixed-rate basis beginning
September 2011 through September 2014. Based on the term loan’s applicable margin of 2.50% as of October 3, 2010, these agreements
would have an average pay rate of 1.54%, yielding a fixed rate of 4.04%.
A hypothetical 100 basis point increase in short-term interest rates, based on the outstanding balance of our revolving credit facility and
term loan at October 3, 2010, would result in an estimated increase of $3.6 million in annual interest expense.
We are also exposed to the impact of commodity and utility price fluctuations related to unpredictable factors such as weather and
various other market conditions outside our control. Our ability to recover increased costs through higher prices is limited by the
competitive environment in which we operate. From time to time, we enter into futures and option contracts to manage these fluctuations.
At October 3, 2010, we had no such contracts in place.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related financial information required to be filed are indexed on page F-1 and are incorporated
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
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Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13(a) – 15(e) and 15(d) – 15(e) of
the Securities Exchange Act of 1934, as amended), as of the end of the Company’s fiscal year ended October 3, 2010, the Company’s
Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) have
concluded that the Company’s disclosure controls and procedures were effective.
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There have been no significant changes in the Company’s internal control over financial reporting that occurred
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