Jack In The Box 2014 Annual Report Download - page 33

Assets Held for Sale and Leaseback — We use sale and leaseback financing to lower the initial cash investment in our Jack in the Box restaurants to the
cost of the equipment, whenever possible. The following table summarizes the cash flow activity related to sale and leaseback transactions in each year
(dollars in thousands):



Number of restaurants sold and leased back
3
24
15
Proceeds from sale and leaseback transactions
$ 5,698
$ 47,431
$ 27,844
Purchases of assets intended for sale and leaseback
$ (2,801)
$ (26,058)
$ (35,927)
As of September 28, 2014, we had investments of approximately $3.5 million relating to two restaurant properties that we expect to sell and lease back
during fiscal 2015.
Acquisition of Franchise-Operated Restaurants — In 2014, we acquired four Jack in the Box franchise restaurants. In 2013, we acquired 13 Qdoba
franchise restaurants in select markets where we believe there is continued opportunity for restaurant development. Additionally, in 2013 we exercised our
right of first refusal and acquired one Jack in the Box restaurant. The following table details franchise-operated restaurant acquisition activity (dollars in
thousands):



Number of restaurants acquired from franchisees
4
14
46
Cash used to acquire franchise-operated restaurants
$ 1,750
$ 12,064
$ 48,945
The purchase prices were primarily allocated to property and equipment, goodwill and reacquired franchise rights. For additional information, refer to
Note 3, Summary of Refranchisings, Franchisee Development and Acquisitions, of the notes to the consolidated financial statements.
Franchise Finance, LLC(“FFE” Loans to Franchisees — During fiscal 2012, FFE processed loans to qualifying franchisees of $4.0 million for use in
re-imaging their restaurants. These loans have terms ranging from five to seven years and bear a fixed or variable rate of interest. For additional information
related to FFE, refer to Note 15, Variable Interest Entities, of the notes to the consolidated financial statements.
. Cash used in financing activities decreased $6.6 million in 2014 and increased $105.6 million in 2013 as compared with the
previous year. The decrease in 2014 is primarily attributable to an increase in borrowings under our credit facility and the change in our book overdraft
related to the timing of working capital receipts and disbursements, partially offset by an increase in cash used to repurchase shares of our common stock and
to pay dividends, and a decrease in proceeds from the issuance of common stock. The increase in 2013 is primarily attributable to an increase in cash used to
repurchase shares of our common stock and the change in our book overdraft related to the timing of working capital receipts and disbursements.
Credit Facility — In March 2014, we refinanced our former credit facility with a new five-year $800.0 million senior credit facility. As of September 28,
2014, our credit facility was comprised of (i) a $600.0 million revolving credit facility and (ii) a term loan maturing on March 19, 2019, bearing interest at
London Interbank Offered Rate (“LIBOR”) plus 1.75%. As part of the credit agreement, we may request the issuance of up to $75.0 million in letters of credit,
the outstanding amount of which reduces the net borrowing capacity under the agreement. The credit facility 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. We can make voluntary prepayments of the loans under the revolving credit facility and term loan at any time
without premium or penalty. Specific events, such as asset sales, certain issuances of debt and insurance and condemnation recoveries, could trigger a
mandatory prepayment.
We are subject to a number of customary covenants under our credit facility, including limitations on additional borrowings, acquisitions, loans to
franchisees, capital expenditures, lease commitments, stock repurchases, dividend payments and requirements to maintain certain financial ratios. We were in
compliance with all covenants as of September 28, 2014.
At September 28, 2014, we had $197.5 million outstanding under the term loan, borrowings under the revolving credit facility of $306.0 million and
letters of credit outstanding of $22.2 million. For additional information related to our credit facility, refer to Note 7, Indebtedness, of the notes to the
consolidated financial statements.
Interest Rate Swaps — To reduce our exposure to rising interest rates under our credit facility, we consider interest rate swaps. In August 2010, we entered
into two forward-looking swaps that effectively converted $100.0 million of our variable rate term loan to a fixed-rate basis beginning September 2011
through September 2014. Additionally, in April 2014, we entered into nine forward-starting interest rate swap agreements that effectively convert $300.0
million of our variable rate borrowings to a fixed rate basis from October 2014 through October 2018. Based on the applicable margin in effect as of
September 28, 2014, these
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