1 unchanged sentence
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
−Removed: Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s fiscal year ended September 29, 2019, 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 not effective due to a material weakness in internal control over financial reporting, identified during the fourth quarter of 2019, described below.
−Removed: Notwithstanding the material weakness in internal control over financial reporting, management, including the Company’s Chief Executive Officer and Chief Financial Officer, concluded that our consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 29, 2019 and September 30, 2018, and the results of its operations and its cash flows for the fifty-two weeks ended September 29, 2019, September 30, 2018, and October 1, 2017, in conformity with U.S.
−Removed: generally accepted accounting principles.
+Added: Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s fiscal year ended September 27, 2020, the Company’s Chief Executive Officer and Controller (its principal executive officer and principal financial officer, respectively) have concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
−Removed: Except for the material weakness described below, there have been no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 29, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
+Added: Except for the changes in connection with our implementation of the remediation plan described below, there have been no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 27, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
2 unchanged sentences
GAAP and includes those policies and procedures that:
−Removed: Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and the dispositions of our assets;
+Added: • Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions;
• Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with appropriate authorizations;
4 unchanged sentences
In making this assessment, management used the criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.
−Removed: Based on this assessment, management has concluded that, as of September 29, 2019, the Company’s internal control over financial reporting was not effective because of the effect of the material weakness described below.
+Added: As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended September 29, 2019, during the fourth quarter of 2019, management concluded that the Company’s internal control over financial reporting was not effective because of the effect of the material weakness described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis.
4 unchanged sentences
Automated process-level controls and manual controls dependent upon the accuracy and completeness of information derived from IT systems were also rendered ineffective.
−Removed: These control deficiencies did not result in any misstatements to our annual consolidated financial statements as of and for the year ended September 29, 2019.
−Removed: However, because they created a reasonable possibility that material misstatements to the consolidated financial statements would not be prevented or detected on a timely basis, we concluded they represented a material weakness and our internal control over financial reporting was not effective as of September 29, 2019.
−Removed: The Company’s independent registered public accounting firm, KPMG LLP, has issued an adverse opinion on the effectiveness of our internal control over financial reporting, which follows.
−Removed: Remediation Plan
−Removed: We have initiated a remediation plan to address the control deficiencies that led to the material weaknesses.
−Removed: The remediation plan includes:
−Removed: developing enhanced risk assessment procedures and controls related to changes in IT systems;
−Removed: enhancing governance by management of significant and/or unusual changes to the IT environment;
−Removed: developing and conducting a mandatory annual program addressing IT general controls and policies, including educating control owners concerning the principles and requirements of each control, with a focus on those related to change-management over IT systems;
−Removed: implementing an annual requirement for IT personnel to review and acknowledge their understanding of change control policies and procedures.
+Added: During 2020, we implemented our previously disclosed remediation plan that included:
+Added: (i) developing enhanced risk assessment procedures and controls related to changes in IT systems;
+Added: (ii) enhancing governance by management of significant and/or unusual changes to the IT environment;
+Added: (iii) developing and conducting a mandatory annual program addressing IT general controls and policies, including educating control owners concerning the principles and requirements of each control, with a focus on those related to change-management over IT systems;
+Added: (iv) implementing an annual requirement for IT personnel to review and acknowledge their understanding of change control policies and procedures.
+Added: During the fourth quarter of 2020, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective.
+Added: As a result, we have concluded that the material weakness has been remediated as of September 27, 2020.
Report of Independent Registered Public Accounting Firm
4 unchanged sentences
and subsidiaries’ (the Company) internal control over financial reporting as of September 27, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of September 29, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 29, 2019 and September 30, 2018, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for each of the fifty-two weeks ended September 29, 2019, September 30, 2018, and October 1, 2017, and the related notes (collectively, the consolidated financial statements), and our report dated November 21, 2019 expressed an unqualified opinion on those consolidated financial statements.
−Removed: A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
−Removed: The following material weakness has been identified and included in management’s assessment:
−Removed: The Company did not maintain effective controls over information technology (IT) change management for systems that support the Company’s financial reporting process to ensure that program and data changes were tested, approved and implemented appropriately.
−Removed: Automated process-level controls and manual controls dependent upon the accuracy and completeness of information derived from IT systems were also rendered ineffective.
−Removed: These control deficiencies were a result of ineffective risk assessment, oversight and monitoring controls over changes in the Company’s IT environment in connection with the restructuring and outsourcing of certain IT support functions to third party contractors, and over dependence on the knowledge and actions of certain individuals with IT expertise without providing sufficient training and documentation to support other personnel with control responsibilities.
−Removed: The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the fiscal year 2019 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
+Added: In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 27, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 27, 2020 and September 29, 2019, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for each of the fifty-two week periods ended September 27, 2020, September 29, 2019, and September 30, 2018, and the related notes (collectively, the consolidated financial statements), and our report dated November 18, 2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
−Removed: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (Item 9A(b)).
+Added: The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting .
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
18 unchanged sentences
That portion of our definitive Proxy Statement appearing under the captions “Election of Directors,” “Director Qualifications and Biographical Information,” “Committees of the Board,” and “Section 16(a) Beneficial Ownership Reporting Compliance” to be filed with the Commission pursuant to Regulation 14A within 120 days after September 27, 2020 and to be used in connection with our 2021 Annual Meeting of Stockholders is hereby incorporated by reference.
−Removed: Information regarding our executive officers is set forth in Item 1 of Part I of this Report under the caption “Executive Officers.”
+Added: Information regarding our executive officers is set forth in Part I of this Report under the caption “Information about our Executive Officers.”
That portion of our definitive Proxy Statement appearing under the caption “Committees of the Board - Audit Committee,” relating to the members of the Company’s Audit Committee and the members of the Audit Committee who qualify as financial experts, is also incorporated herein by reference.
2 unchanged sentences
directors, officers, and employees, including the Chief Executive Officer, Chief Financial Officer, Controller, and all of the financial team.
−Removed: The Code of Ethics is posted on the Company’s website, www.jackinthebox.com (under the “Investors — Corporate Governance — Code of Conduct” caption) and is available in print free of charge to any stockholder upon request.
−Removed: We intend to satisfy the disclosure requirement regarding any amendment to, or waiver of, a provision of the Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and Controller or persons performing similar functions, by posting such information on our website.
+Added: The Code of Ethics is posted on the Company’s corporate website, www.jackintheboxinc.com (under the “Investors — Corporate Governance — Code of Conduct” caption) and is available in print free of charge to any stockholder upon request.
+Added: We intend to satisfy the disclosure requirement regarding any amendment to, or waiver of, a provision of the Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and Controller or persons performing similar functions, by posting such information on our corporate website.
No such waivers have been issued during fiscal 2020.
We have also adopted a set of Corporate Governance Principles and Practices for our Board of Directors and charters for all of our Board Committees, including the Audit, Compensation, and Nominating and Governance Committees.
−Removed: The Corporate Governance Principles and Practices and committee charters are available on our website at www.jackinthebox.com and in print free of charge to any shareholder who requests them.
−Removed: Written requests for our Code of Business Conduct and Ethics, Corporate Governance Principles and Practices and committee charters should be addressed to Jack in the Box Inc., 9330 Balboa Avenue, San Diego, California 92123, Attention:
+Added: The Corporate Governance Principles and Practices and committee charters are available on our corporate website at www.jackintheboxinc.com and in print free of charge to any shareholder who requests them.
+Added: Written requests for our Code of Business Conduct and Ethics, Corporate Governance Principles and Practices and committee charters should be addressed to Jack in the Box Inc., 9357 Spectrum Center Blvd., San Diego, California 92123, Attention:
Corporate Secretary.
9 unchanged sentences
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
−Removed: ITEM 15(a) (1)
−Removed: Financial Statements.
+Added: ITEM 15(a) (1) Financial Statements.
See Index to Consolidated Financial Statements on page F-1 of this Report.
−Removed: ITEM 15(a) (2)
−Removed: Financial Statement Schedules.
+Added: ITEM 15(a) (2) Financial Statement Schedules.
ITEM 15(a) (3) Exhibits .
−Removed: Filed with SEC
+Added: Number Description Form Filed with SEC
3.1 Certificate of Amendment of Restated Certificate of Incorporation dated September 21, 2007
+Added: 8-K 9/24/2007
+Added: 3.1.1 Restated Certificate of Incorporation, dated March 6, 1992
+Added: 10-Q 5/14/2020
3.2 Amended and Restated Bylaws dated August 2, 2019
−Removed: Stock Purchase Agreement by and among Jack in the Box Inc., as the Seller, Qdoba Restaurant Corporation, as the Company, and Quidditch Acquisition, Inc., as the Buyer, dated as of December 19, 2017
+Added: 10-Q 8/8/2019
+Added: 3.3 Amended and Restated Bylaws, dated May 8, 2020
+Added: 10-Q 5/14/2020
4.1 Base Indenture, dated as of July 8, 2019, by and between Jack in the Box Funding, LLC, as Master Issuer, and Citibank, N.A., as Trustee and Securities Intermediary.
4.2 Series 2019-1 Supplement to Base Indenture, dated as of July 8, 2019, by and between Jack in the Box Funding, LLC, as Master Issuer of the Series 2019-1 fixed rate senior secured notes, Class A-2, and Series 2019-1 variable funding senior notes, Class A-1, and Citibank, N.A., as Trustee and Series 2019-1 Securities Intermediary.
−Removed: Credit Agreement dated as of June 29, 2010 by and among Jack in the Box Inc.
−Removed: and the lenders named therein
−Removed: Collateral Agreement dated as of June 29, 2010 by and among Jack in the Box Inc.
−Removed: and the lenders named therein
−Removed: Guaranty Agreement dated as of June 29, 2010 by and among Jack in the Box Inc.
−Removed: and the lenders named therein
−Removed: First Amendment to the Credit Agreement dated as of February 16, 2012 by and among Jack in the Box Inc.
−Removed: and the lenders named therein
−Removed: Second Amended and Restated Credit Agreement dated as of March 19, 2014, among Jack in the Box Inc., Wells Fargo Bank, National Association, as administrative agent, and the other lender and agent parties thereto
−Removed: Amended and Restated Guaranty Agreement dated as of March 19, 2014, among Jack in the Box Inc., Wells Fargo Bank, National Association, as administrative agent, and the subsidiaries of Jack in the Box Inc.
−Removed: party thereto
−Removed: Filed with SEC
−Removed: Amended and Restated Collateral Agreement dated as of March 19, 2014, among Jack in the Box Inc., Wells Fargo Bank, National Association, as administrative agent, and the subsidiaries of Jack in the Box Inc.
−Removed: party thereto
−Removed: Waiver, Joinder and Second Amendment, dated as of July 1, 2015, among Jack in the Box Inc., the Guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto.
−Removed: Third Amendment, dated as of September 16, 2016, by and among Jack in the Box Inc., the Guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto
−Removed: Second Amended and Restated Collateral Agreement dated as of September 16, 2016, by and among Jack in the Box Inc., the Grantors party thereto and Wells Fargo Bank, National Association, as administrative agent
−Removed: Fourth Amendment to the Credit Agreement dated March 21, 2018 by and among Jack in the Box, Wells Fargo Bank, National Association, the subsidiaries of Jack in the Box Inc.
−Removed: party thereto, and other lender parties thereto
−Removed: Agreement, dated as of October 25, 2018, between Jack in the Box Inc.
−Removed: and JANA Partners LLC
−Removed: Cooperation Agreement, dated as of October 29, 2018, between Jack in the Box Inc.
−Removed: and JANA Partners LLC
−Removed: Amendment No.1 to Cooperation Agreement, dated as of January 4, 2019, between Jack in the Box Inc.
−Removed: and JANA Partners LLC
−Removed: Amendment No.
−Removed: 2 to Cooperation Agreement, dated as of March 6, 2019, between Jack in the Box Inc.
−Removed: and JANA Partners LLC
−Removed: Amendment No.
−Removed: 3 to Cooperation Agreement, dated as of April 25, 2019, between Jack in the Box Inc.
−Removed: and JANA Partners LLC
−Removed: Fifth Amendment, dated as of May 1, 2019, by and among Jack in the Box Inc., the Guarantors party thereto, Wells Fargo Bank, national Association, as administrative agent, and the lenders party thereto
10.1.20 Class A-1 Note Purchase Agreement, dated as of July 8, 2019, by and among Jack in the Box Funding, LLC, as Master Issuer, each of Different Rules, LLC, Jack in the Box Properties, LLC and Jack in the Box SPV Guarantor, LLC, as Guarantors, Jack in the Box Inc.
3 unchanged sentences
10.2* Form of Compensation and Benefits Assurance Agreement for Executives
+Added: 10-Q 2/20/2008
10.2.1* Form of Revised Compensation and Benefits Assurance Agreement for certain officers
+Added: 10-Q 5/17/2012
10.2.2* Form of Revised Compensation and Benefits Assurance Agreement for certain officers, dated May 8, 2014
−Removed: Agreement to Provide Conditional Bonus Payment to Qdoba Brand President, dated August 3, 2017
−Removed: Filed with SEC
−Removed: Compensation and Benefits Assurance Agreement for Qdoba Brand President, dated October 10, 2017
−Removed: Jack in the Box Inc.
−Removed: Chief Financial Officer Offer Letter, dated January 11, 2018
+Added: 10-K 11/21/2014
+Added: 10.2.3* Form of Revised Compensation and Benefits Assurance Agreement for certain officers, dated June 15, 2020
+Added: 10-K Filed herewith
+Added: 10.2.11* Mark Blankenship Separation and Release Agreement, dated January 3, 2020
+Added: 10-Q 2/20/2020
+Added: 10.2.12* Paul Melancon Separation and Release Agreement, dated January 3, 2020
+Added: 10-Q 2/20/2020
+Added: 10.2.13* Vanessa Fox Separation and Release Agreement, dated January 17, 2020
+Added: 10-Q 2/20/2020
+Added: Number Description Form Filed with SEC
+Added: 10.2.14* Phillip Rudolph Separation and Release Agreement, dated March 2, 2020
+Added: 10-Q 5/14/2020
10.2.15* Jack in the Box Inc.
−Removed: Vice President, Chief Operating Officer Offer Letter, dated January 22, 2018
−Removed: Retention Agreement with Iwona Alter, dated March 29, 2018
−Removed: Summary of Severance Benefits for Ray Pepper, General Counsel, dated August 8, 2018
−Removed: Carol Diraimo Separation and Release Agreement, dated August 16, 2019
−Removed: Filed herewith
+Added: Severance Plan for Executive Officers, dated March 9, 2020 (as amended)
+Added: 10-K Filed herewith
+Added: 10.2.16* Offer Letter by and between Darin Harris and Jack in the Box Inc., dated April 2, 2020
+Added: 8-K 4/16/2020
+Added: 10.2.17* Retention, Transition and Separation Agreement, by and between Leonard A.
+Added: Comma and Jack in the Box Inc., dated April 16, 2020
+Added: 8-K 4/16/2020
+Added: 10.2.18* Lance Tucker Retention Agreement, dated May 5, 2020
+Added: 10-Q 8/5/2020
+Added: 10.2.19* Jennifer Kennedy Separation and Release Agreement, dated November 13, 2020
+Added: 10-K Filed herewith
10.3* Amended and Restated Supplemental Executive Retirement Plan
+Added: 10-Q 2/18/2009
10.3.1 * First Amendment to Jack in the Box Inc.
Supplemental Executive Retirement Plan, As Amended and Restated Effective January 1, 2009
+Added: 8-K 9/22/2015
10.4* Amended and Restated Executive Deferred Compensation Plan
+Added: 10-Q 2/18/2009
10.4.1 * Jack in the Box Inc.
Executive Deferred Compensation Plan, As Amended and Restated Effective January 1, 2016
+Added: 8-K 9/22/2015
10.5* Amended and Restated Deferred Compensation Plan for Non-Management Directors
+Added: 10-K 11/22/2006
10.8* Jack in the Box Inc.
2004 Stock Incentive Plan, Amended and Restated Effective February 17, 2012
+Added: DEF 14A 1/25/2017
10.8.1* Form of Restricted Stock Award for officers and certain members of management under the 2004 Stock Incentive Plan
+Added: 10-Q 8/5/2009
10.8.3* Jack in the Box Inc.
Non-Employee Director Stock Option Award Agreement under the 2004 Stock Incentive Plan
+Added: 8-K 11/15/2005
10.8.4* Form of Restricted Stock Unit Award Agreement for Non-Employee Director under the 2004 Stock Incentive Plan
+Added: 10-K 11/20/2009
10.8.6* Form of Restricted Stock Unit Grant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan
+Added: 10-Q 5/14/2015
10.8.9* Form of Stock Option and Performance Share Awards Agreement under the 2004 Stock Incentive Plan
+Added: 10-K 11/22/2013
10.8.10* Form of Time-Vested Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan
+Added: 10-K 11/22/2013
10.8.11* Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan
+Added: 10-Q 2/19/2015
10.8.12* Form of Stock Option and Performance Share Award Agreement under the 2004 Stock Incentive Plan
+Added: 10-Q 2/19/2015
10.8.13* Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan
+Added: 10-Q 2/18/2016
10.8.14* Form of Stock Option and Performance Share Award Agreement under the 2004 Stock Incentive Plan
+Added: 10-Q 2/18/2016
10.8.15* Form of Restricted Stock Unit Grant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan
+Added: 10-Q 5/12/2016
10.8.16* Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan
+Added: 10-Q 2/21/2019
10.8.17* Jack in the Box Inc.
+Added: Special Time-Vesting Restricted Stock Unit Award Agreement Under the 2004 Stock Incentive Plan
+Added: 10-Q 2/20/2020
+Added: 10.10.2* Jack in the Box Inc.
Performance Incentive Plan, Effective February 13, 2016
−Removed: Filed with SEC
+Added: DEF 14A 1/11/2016
10.11* Form of Amended and Restated Indemnification Agreement between the registrant and individual directors, officers and key employees
+Added: 10-Q 8/10/2012
21.1 Subsidiaries of the Registrant
4 unchanged sentences
_____ Filed herewith
−Removed: Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
+Added: 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
_____ Filed herewith
2 unchanged sentences
_____ Filed herewith
−Removed: Certification of Chief Financial Officer pursuant to 18 U.S.C.
+Added: Number Description Form Filed with SEC
+Added: 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
_____ Filed herewith
−Removed: XBRL Instance Document
−Removed: XBRL Taxonomy Extension Schema Document
−Removed: XBRL Taxonomy Extension Calculation Linkbase Document
−Removed: XBRL Taxonomy Extension Definition Linkbase Document
−Removed: XBRL Taxonomy Extension Label Linkbase Document
−Removed: XBRL Taxonomy Extension Presentation Linkbase Document
+Added: 101.INS iXBRL Instance Document
+Added: 101.SCH iXBRL Taxonomy Extension Schema Document
+Added: 101.CAL iXBRL Taxonomy Extension Calculation Linkbase Document
+Added: 101.DEF iXBRL Taxonomy Extension Definition Linkbase Document
+Added: 101.LAB iXBRL Taxonomy Extension Label Linkbase Document
+Added: 101.PRE iXBRL Taxonomy Extension Presentation Linkbase Document
+Added: 104 Cover Page Interactive Data File formatted in iXBRL
* Management contract or compensatory plan.
5 unchanged sentences
JACK IN THE BOX INC.
−Removed: /s/ LANCE TUCKER
−Removed: Executive Vice President and Chief Financial Officer (principal financial officer)
+Added: /s/ DAWN HOOPER
+Added: Vice President, Controller (principal financial officer)
November 18, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
−Removed: Each person whose signature appears below constitutes and appoints Leonard A.
−Removed: Comma and Lance Tucker, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
−Removed: /s/ LEONARD A.
−Removed: Chairman of the Board and Chief Executive Officer (principal executive officer)
−Removed: November 21, 2019
−Removed: /s/ LANCE TUCKER
−Removed: Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer)
−Removed: November 21, 2019
−Removed: November 21, 2019
−Removed: November 21, 2019
−Removed: November 21, 2019
+Added: Each person whose signature appears below constitutes and appoints Darin Harris and Dawn Hooper, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
+Added: Signature Title Date
+Added: /s/ DARIN HARRIS Chief Executive Officer and Director (principal executive officer) November 18, 2020
+Added: /s/ DAWN HOOPER Vice President, Controller (principal financial officer) November 18, 2020
+Added: GOEBEL Director and Chairman of the Board November 18, 2020
+Added: BIRCH Director November 18, 2020
+Added: GAINOR Director November 18, 2020
/s/ SHARON P.
−Removed: November 21, 2019
+Added: JOHN Director November 18, 2020
/s/ MADELEINE A.
−Removed: November 21, 2019
+Added: KLEINER Director November 18, 2020
/s/ MICHAEL W.
−Removed: November 21, 2019
−Removed: November 21, 2019
−Removed: November 21, 2019
−Removed: November 21, 2019
+Added: MURPHY Director November 18, 2020
+Added: MYERS Director November 18, 2020
+Added: TEHLE Director November 18, 2020
/s/ VIVIEN M.
−Removed: November 21, 2019
+Added: YEUNG Director November 18, 2020
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
13 unchanged sentences
We have audited the accompanying consolidated balance sheets of Jack in the Box Inc.
−Removed: and subsidiaries (the Company) as of September 29, 2019 and September 30, 2018, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for each of the fifty-two weeks ended September 29, 2019, September 30, 2018, and October 1, 2017 and the related notes (collectively, the consolidated financial statements).
−Removed: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 29, 2019 and September 30, 2018, and the results of its operations and its cash flows for the fifty-two weeks ended September 29, 2019, September 30, 2018, and October 1, 2017, in conformity with U.S.
+Added: and subsidiaries (the Company) as of September 27, 2020 and September 29, 2019, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for each of the fifty-two week periods ended September 27, 2020, September 29, 2019, and September 30, 2018, and the related notes (collectively, the consolidated financial statements).
+Added: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 27, 2020 and September 29, 2019, and the results of its operations and its cash flows for each of the fifty-two week periods ended September 27, 2020, September 29, 2019, and September 30, 2018, in conformity with U.S.
generally accepted accounting principles.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 29, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 21, 2019, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.
−Removed: Change in Accounting Principle
−Removed: As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue from contracts with customers in 2019 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers .
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 27, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 18, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
+Added: Change in Accounting Principles
+Added: As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as of September 30, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases, and changed its method of accounting for revenue as of October 1, 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers .
Basis for Opinion
11 unchanged sentences
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:
−Removed: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.
+Added: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of self-insurance liabilities related to workers’ compensation and general liability
−Removed: As discussed in Note 1 to the consolidated financial statements, the Company establishes its undiscounted insurance liability and reserves using assistance from independent actuaries to estimate expected losses based on a statistical analysis of historical claims data.
+Added: As discussed in Note 1 to the consolidated financial statements, the Company establishes its undiscounted insurance liability and reserves using independent actuarial estimates of expected losses based on a statistical analysis of historical claims data.
As of September 27, 2020, the Company has recorded an estimated self-insurance liability of $25.0 million.
We identified the assessment of self-insurance liabilities related to workers’ compensation and general liability as a critical audit matter.
−Removed: Evaluating the Company’s judgments regarding the use of actuarial estimates and assumptions related to the loss development factors and expected loss rates involved a high degree of complex and subjective auditor judgment.
+Added: Evaluating the Company’s judgments regarding the use of actuarial estimates and assumptions related to the loss development factors and the expected loss rates involved a high degree of complex and subjective auditor judgment.
Changes in the loss development factors and expected loss rates could have a significant impact on the liability recognized.
−Removed: The primary procedures we performed to address this critical audit matter included the following.
−Removed: We tested, with the involvement of actuarial professionals when appropriate, certain internal controls over the Company’s process to develop the estimate of self-insurance liabilities, including controls related to the review of the loss development factors and expected loss rates applied in the actuarial report.
−Removed: We tested the claims paid and claims reported (not paid) data used in the actuarial models for consistency with the actual claims paid and claims reported (not paid) records of the Company.
−Removed: We involved actuarial professionals with specialized skills and knowledge, who assisted in evaluating the Company’s actuarial estimates and assumptions related to the loss development factors and expected loss rates, by comparing them to generally accepted actuarial methodologies, the Company’s historical data, and industry and regulatory trends.
+Added: The following are the primary procedures we performed to address this critical audit matter.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to develop the estimate of self-insurance liabilities, with the involvement of actuarial professionals when appropriate.
+Added: This included a control related to the review of the loss development factors and expected loss rates applied in the actuarial report and controls related to the completeness and accuracy of claims data.
+Added: We tested the claims paid and claims reported (not paid) data used in the actuarial models for consistency with the actual claims paid and claims reported (not paid) records of the Company, which is used in the development of the loss development factors and expected loss rates.
+Added: We involved actuarial professionals with specialized skills and knowledge, who assisted in evaluating the Company’s actuarial estimates and assumptions related to the loss development factors and expected loss rates, by comparing them to generally accepted actuarial methodologies and the Company’s historical data.
We have served as the Company’s auditor since 1986.
8 unchanged sentences
Current assets:
+Added: Cash $ 199,662 $ 125,536
Restricted cash 37,258 26,025
Accounts and other receivables, net 78,417 45,235
+Added: Inventories 1,808 1,776
Prepaid expenses 10,114 9,015
3 unchanged sentences
Property and equipment, at cost:
+Added: Land 100,460 116,070
+Added: Buildings 914,311 927,337
Restaurant and other equipment 112,675 125,176
Construction in progress 4,984 7,658
+Added: 1,132,430 1,176,241
Less accumulated depreciation and amortization ( 796,448 ) ( 784,307 )
1 unchanged sentence
Other assets:
+Added: Operating lease right-of-use assets 904,548 —
Intangible assets, net 277 425
+Added: Goodwill 47,161 46,747
Deferred tax assets 72,322 85,564
1 unchanged sentence
Total other assets 1,234,931 339,421
+Added: $ 1,906,494 $ 958,483
LIABILITIES AND STOCKHOLDERS’ DEFICIT
1 unchanged sentence
Current maturities of long-term debt $ 818 $ 774
+Added: Current operating lease liabilities 179,000 —
Accounts payable 31,105 37,066
3 unchanged sentences
Long-term debt, net of current maturities 1,376,913 1,274,374
+Added: Long-term operating lease liabilities, net of current portion 776,094 —
Other long-term liabilities 206,494 263,770
7 unchanged sentences
Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively
+Added: ( 2,809,306 ) ( 2,655,756 )
Total stockholders’ deficit ( 793,361 ) ( 737,584 )
+Added: $ 1,906,494 $ 958,483
See accompanying notes to consolidated financial statements.
3 unchanged sentences
(In thousands, except per share data)
+Added: 2020 2019 2018
Company restaurant sales $ 348,987 $ 336,807 $ 448,058
2 unchanged sentences
Franchise contributions for advertising and other services 173,553 170,674 —
+Added: 1,021,506 950,107 869,690
Operating costs and expenses, net:
−Removed: Company restaurant costs (excluding depreciation and amortization):
Food and packaging 102,449 97,699 128,947
1 unchanged sentence
Occupancy and other 54,157 50,613 71,803
−Removed: Total company restaurant costs
−Removed: Franchise occupancy expenses (excluding depreciation and amortization)
+Added: Franchise occupancy expenses 210,038 166,584 158,319
Franchise support and other costs 13,059 12,110 11,593
4 unchanged sentences
Gains on the sale of company-operated restaurants ( 3,261 ) ( 1,366 ) ( 46,164 )
+Added: 790,922 747,884 636,243
Earnings from operations 230,584 202,223 233,447
2 unchanged sentences
Earnings from continuing operations and before income taxes 122,121 115,772 186,067
+Added: Income taxes 32,727 24,025 81,728
Earnings from continuing operations 89,394 91,747 104,339
Earnings from discontinued operations, net of income taxes 370 2,690 17,032
+Added: Net earnings $ 89,764 $ 94,437 $ 121,371
Net earnings per share — basic:
14 unchanged sentences
(In thousands)
+Added: 2020 2019 2018
+Added: Net earnings $ 89,764 $ 94,437 $ 121,371
Cash flow hedges:
1 unchanged sentence
Net loss reclassified to earnings — 24,328 3,455
+Added: Tax effect — ( 3,165 ) ( 5,725 )
+Added: — ( 2,462 ) 16,499
Unrecognized periodic benefit costs:
−Removed: Actuarial (losses) gains arising during the period
+Added: Actuarial gains (losses) arising during the period ( 4,875 ) ( 62,377 ) 31,478
Actuarial losses and prior service cost reclassified to earnings 44,616 3,917 4,988
+Added: 39,741 ( 58,460 ) 36,466
+Added: Tax effect ( 10,340 ) 15,176 ( 9,544 )
+Added: 29,401 ( 43,284 ) 26,922
Foreign currency translation adjustments — — 6
+Added: Tax effect — — ( 2 )
Derecognition of foreign currency translation adjustments due to sale — — 76
−Removed: Other comprehensive (loss) income, net of taxes
+Added: Other comprehensive income (loss), net of taxes 29,401 ( 45,746 ) 43,501
Comprehensive income $ 119,165 $ 48,691 $ 164,872
4 unchanged sentences
(In thousands)
+Added: 2020 2019 2018
Cash flows from operating activities:
+Added: Net earnings $ 89,764 $ 94,437 $ 121,371
Earnings from discontinued operations 370 2,690 17,032
4 unchanged sentences
Amortization of debt issuance costs 5,628 3,121 2,803
−Removed: Loss on debt extinguishment
+Added: Loss on extinguishment of debt — 2,757 —
Loss on interest rate swap termination — 23,551 —
4 unchanged sentences
Gains on cash surrender value of company-owned life insurance
+Added: ( 4,262 ) ( 4,475 ) ( 2,280 )
Gains on the sale of company-operated restaurants
+Added: ( 3,261 ) ( 1,366 ) ( 46,164 )
(Gains) losses on the disposition of property and equipment ( 9,768 ) ( 6,244 ) 1,627
+Added: Non-cash operating lease costs 490 — —
Impairment charges and other 322 5,414 2,505
1 unchanged sentence
Accounts and other receivables ( 28,724 ) 3,504 24,220
+Added: Inventories 41 82 1,587
Prepaid expenses and other current assets ( 2,780 ) 8,728 ( 9,432 )
3 unchanged sentences
Franchise tenant improvement allowance disbursements ( 7,516 ) ( 10,593 ) ( 14,893 )
+Added: Other ( 825 ) ( 9,355 ) ( 16,426 )
Cash flows provided by operating activities 143,525 168,405 104,055
5 unchanged sentences
Proceeds from the sale of property and equipment 22,774 9,714 10,259
−Removed: Cash flows (used in) provided by investing activities
+Added: Other 2,654 1,630 2,969
+Added: Cash flows provided by (used in) investing activities 29,123 ( 13,819 ) 65,661
Cash flows from financing activities:
8 unchanged sentences
Repurchases of common stock ( 155,576 ) ( 137,654 ) ( 325,634 )
−Removed: Excess tax benefits from share-based compensation arrangements
Payroll tax payments for equity award issuances ( 5,946 ) ( 2,883 ) ( 7,719 )
3 unchanged sentences
Net cash provided by operating activities of discontinued operations — — 4,823
−Removed: Net cash provided by (used in) investing activities of discontinued operations
+Added: Net cash provided by investing activities of discontinued operations — — 266,125
Net cash used in financing activities of discontinued operations — — ( 78 )
8 unchanged sentences
(Dollars in thousands)
+Added: of Shares Amount Capital in
+Added: Par Value Retained
+Added: Earnings Accumulated
Comprehensive
+Added: Loss Treasury
Balance at October 1, 2017 81,843,483 $ 818 $ 453,432 $ 1,485,820 $ ( 137,761 ) $ ( 2,190,439 ) $ ( 388,130 )
3 unchanged sentences
Purchases of treasury stock — — — — — ( 340,000 ) ( 340,000 )
+Added: Net earnings — — — 121,371 — — 121,371
Foreign currency translation adjustment — — — — 80 — 80
1 unchanged sentence
Effect of actuarial gains and prior service cost, net — — — — 26,922 — 26,922
−Removed: Balance at October 1, 2017
+Added: Other — — — ( 151 ) — — ( 151 )
+Added: Balance at September 30, 2018 82,061,661 821 470,826 1,561,353 ( 94,260 ) ( 2,530,439 ) ( 591,699 )
Shares issued under stock plans, including tax benefit 97,341 1 1,231 — — — 1,232
2 unchanged sentences
Purchases of treasury stock — — — — — ( 125,317 ) ( 125,317 )
−Removed: Foreign currency translation adjustment
+Added: Net earnings — — — 94,437 — — 94,437
Effect of interest rate swaps, net — — — — ( 2,462 ) — ( 2,462 )
−Removed: Effect of actuarial gains and prior service cost, net
+Added: Effect of actuarial losses and prior service cost, net — — — — ( 43,284 ) — ( 43,284 )
+Added: Cumulative-effect from a change in accounting principle — — — ( 37,330 ) — — ( 37,330 )
Balance at September 29, 2019 82,159,002 822 480,322 1,577,034 ( 140,006 ) ( 2,655,756 ) ( 737,584 )
3 unchanged sentences
Purchases of treasury stock — — — — — ( 153,550 ) ( 153,550 )
−Removed: Effect of interest rate swaps, net
−Removed: Effect of actuarial losses and prior service cost, net
+Added: Net earnings — — — 89,764 — — 89,764
+Added: Effect of actuarial gains and prior service cost, net — — — — 29,401 — 29,401
Cumulative-effect from a change in accounting principle — — — ( 2,870 ) — — ( 2,870 )
9 unchanged sentences
The following table summarizes the number of restaurants as of the end of each fiscal year:
+Added: 2020 2019 2018
Company-operated 144 137 137
+Added: Franchise 2,097 2,106 2,100
+Added: Total system 2,241 2,243 2,237
References to the Company throughout these notes to the consolidated financial statements are made using the first-person notations of “we,” “us,” and “our.”
2 unchanged sentences
GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
−Removed: On December 19, 2017, we entered into a definitive agreement to sell Qdoba Restaurant Corporation (“Qdoba”), a wholly owned subsidiary of the Company that operates and franchises more than 700 Qdoba Mexican Eats ® fast-casual restaurants, to certain funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, the “Buyer”).
−Removed: The sale was completed on March 21, 2018.
−Removed: For all periods presented in our consolidated statements of earnings, all sales, costs, expenses and income taxes attributable to Qdoba, except as related to the impact of the decrease in the federal statutory tax rate (see Note 11, Income Taxes) , have been aggregated under the caption “Earnings from discontinued operations, net of income taxes.” Refer to Note 10, Discontinued Operations , for additional information.
−Removed: Unless otherwise noted, amounts and disclosures throughout these notes to consolidated financial statements relate to our continuing operations.
−Removed: Reclassifications — We have reclassified certain items in the consolidated financial statements for prior periods to be comparable to the current year presentation.
−Removed: These reclassifications had no effect on previously reported net earnings.
+Added: On December 19, 2017, we entered into a definitive agreement to sell Qdoba Restaurant Corporation (“Qdoba”), a wholly owned subsidiary of the Company, to certain funds managed by affiliates of Apollo Global Management, LLC (the “Buyer”).
+Added: The sale was completed on March 21, 2018, and operating results for Qdoba are included under the caption “Earnings from discontinued operations, net of income taxes” for all periods presented.
+Added: Refer to Note 10, Discontinued Operations , for additional information.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30.
−Removed: Comparisons throughout these notes to the consolidated financial statements refer to the 52 -week periods ended September 29, 2019 , September 30, 2018 and October 1, 2017 for fiscal years 2019 , 2018 , and 2017 , respectively .
−Removed: Principles of consolidation — The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and the accounts of any variable interest entities (“VIEs”) where we are deemed the primary beneficiary.
−Removed: All significant intercompany accounts and transactions are eliminated.
−Removed: The Financial Accounting Standards Board (“FASB”) authoritative guidance on consolidation requires the primary beneficiary of a VIE to consolidate that entity.
−Removed: The primary beneficiary of a VIE is an enterprise that has a controlling financial interest in the VIE.
−Removed: Controlling financial interest exists when an enterprise has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
−Removed: The primary entities in which we possess a variable interest are franchise entities, which operate our franchise restaurants.
−Removed: We do not possess any ownership interests in franchise entities.
−Removed: We have reviewed these franchise entities and determined that we are not the primary beneficiary of the entities and therefore, these entities have not been consolidated.
+Added: Comparisons throughout these notes to the consolidated financial statements refer to the 52 -week periods ended September 27, 2020, September 29, 2019 and September 30, 2018 for fiscal years 2020, 2019, and 2018, respectively .
+Added: Principles of consolidation — The accompanying consolidated financial statements include the accounts of Jack in the Box Inc.
+Added: and its wholly-owned subsidiaries.
+Added: All intercompany accounts and transactions have been eliminated upon consolidation.
Use of estimates — In preparing the consolidated financial statements in conformity with U.S.
2 unchanged sentences
Actual amounts could differ materially from these estimates.
−Removed: Restricted cash is comprised of certain cash balances required to be held in trust in connection with the Company’s securitized financing facility.
−Removed: Such restricted cash primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitments fees required for the Class A-2 Notes.
−Removed: Refer to Note 7, Indebtedness , for additional information.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Accounts and other receivables, net, is primarily comprised of receivables from franchisees, tenants, and credit card processors.
−Removed: Franchisee receivables primarily include rents, royalties, and marketing, sourcing and technology support fees associated with lease and franchise agreements, and notes issued in connection with refranchising transactions.
+Added: Risks and uncertaintie s — In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) outbreak to be a global pandemic, which continues to spread throughout the United States.
+Added: The COVID-19 pandemic has disrupted and is expected to continue to disrupt our business.
+Added: While sales have accelerated in the second half of fiscal 2020, we continue to see a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as social distancing practices, dining room closures, and other restrictions have been mandated or encouraged by federal, state, and local governments.
+Added: Substantially all of our restaurants have remained open, with dining rooms closed and locations operating in an off-premise capacity, which has historically represented close to 90 % of the Company’s business, including drive-thru, third-party delivery, and carry-out.
+Added: The Company is closely monitoring the impact of the pandemic on all aspects of its business and is unable to predict the continued financial impact of the COVID-19 pandemic on our business due to numerous uncertainties.
+Added: We cannot predict how or when the social impacts resulting from the pandemic may change, or how any such change will impact our business.
+Added: Ongoing material adverse effects on our company-owned restaurants or the financial health of our franchisees could negatively affect our operating results, including reductions in revenue and cash flow and could impact the recoverability of our accounts receivable, long-lived assets, and/or goodwill.
+Added: Restricted cash — In accordance with the terms of our securitized financing facility, certain cash balances are required to be held in trust and are restricted in their use.
+Added: Such restricted cash primarily represents cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees for the Class A-1 and Class A-2 Notes due on a quarterly basis.
+Added: With uncertainty surrounding COVID-19 events and as a cautionary measure, we have voluntarily elected to fund cash held in trust for quarterly interest and commitment fees due in February 2021.
+Added: Accounts and other receivables, net, — Our accounts and other receivable, net is primarily comprised of receivables from franchisees, tenants, insurance receivables and credit card processors.
+Added: Franchisee receivables primarily include rents, property taxes, royalties, marketing, sourcing and technology support fees associated with lease and franchise agreements, and notes from certain of our franchisees.
Tenant receivables relate to subleased properties where we are on the master lease agreement.
1 unchanged sentence
The allowance for doubtful accounts is based on historical experience and a review of existing receivables.
−Removed: Changes in accounts and other receivables are classified as an operating activity in the consolidated statements of cash flows, except for changes in notes related to refranchising transactions, which are classified as an investing activity.
−Removed: Inventories consist principally of food, packaging, and supplies, and are valued at the lower of cost or market on a first-in, first-out basis.
−Removed: Assets held for sale typically includes the net book value of property and equipment we plan to sell within the next year.
+Added: Inventories — Our inventories consist principally of food, packaging, and supplies, and are valued at the lower of cost or market on a first-in, first-out basis.
+Added: Assets held for sale — Our assets held for sale typically includes property we plan to sell within the next year.
If the determination is made that we no longer expect to sell an asset within the next year, the asset is reclassified out of assets held for sale.
Long-lived assets that meet the held for sale criteria are reported at the lower of their carrying value or fair value, less estimated costs to sell.
−Removed: At September 29, 2019 and September 30, 2018 , assets held for sale are primarily comprised of various excess properties that we do not intend to use for restaurant operations in the future, as well as one of our corporate headquarter buildings which we currently expect to sell by the first half of fiscal 2020.
Property and equipment, net — Expenditures for new facilities and equipment, and those that substantially increase the useful lives of the property, are capitalized.
−Removed: Facilities leased under capital leases are stated at the present value of minimum lease payments at the beginning of the lease term, not to exceed fair value.
+Added: Facilities leased under finance leases are stated at the present value of minimum lease payments at the beginning of the lease term, not to exceed fair value.
Maintenance and repairs are expensed as incurred.
−Removed: When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the dispositions are reflected in results of operations.
+Added: When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the dispositions are included in “Impairment and other charges, net” in the accompanying consolidated statements of earnings.
Buildings, equipment and leasehold improvements are generally depreciated using the straight-line method based on the estimated useful lives of the assets, over the initial lease term for certain assets acquired in conjunction with the lease commencement for leased properties, or the remaining lease term for certain assets acquired after the commencement of the lease for leased properties.
3 unchanged sentences
Depreciation expense related to property and equipment was $ 52.8 million, $ 55.2 million, and $ 59.4 million in fiscal year 2020, 2019, and 2018, respectively.
−Removed: Impairment of long-lived assets — We evaluate our long-lived assets, such as property and equipment, for impairment on an annual basis or whenever events or changes in circumstances indicate that their carrying value may not be recoverable.
−Removed: This review generally includes a restaurant-level analysis, except when we are actively selling a group of restaurants, in which case we perform our impairment evaluations at the group level.
−Removed: Impairment evaluations for individual restaurants may take into consideration a restaurant’s operating cash flows, the period of time since a restaurant has been opened or remodeled, refranchising expectations, if any, and the maturity of the related market, which are all significant unobservable inputs (“Level 3 Inputs”).
−Removed: Impairment evaluations for a group of restaurants take into consideration the group’s expected future cash flows and sales proceeds from bids received, if any, or fair market value based on, among other considerations, the specific sales and cash flows of those restaurants.
−Removed: If the assets of a restaurant or group of restaurants subject to our impairment evaluation are not recoverable based upon the forecasted, undiscounted cash flows, we recognize an impairment loss by the amount that the carrying value of the assets exceeds fair value.
+Added: Impairment of long-lived assets — We evaluate long-lived assets, such as property and equipment and operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.
+Added: Factors that we consider important individually or in combination trigger an impairment review include, but are not limited to, bankruptcy proceedings or other significant financial distress of a lessee, significant underperformance relative to historical or projected operating results, significant changes in our business and/or negative industry or economic trends, or our expectation to dispose of long-lived assets before the end of their estimated useful lives.
+Added: Long-lived assets are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets.
+Added: The impairment test for long-lived assets requires us to assess the recoverability of long-lived assets by comparing their net carrying value to the sum of undiscounted estimated future cash flows directly associated with and arising from our use and eventual disposition of the assets.
+Added: If the carrying amount of a long-lived asset group exceeds the sum of related undiscounted future cash flows, we recognize an impairment loss by the amount that the carrying value of the assets exceeds fair value.
Refer to Note 9, Impairment and Other Charges, Net , for additional information.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Goodwill and intangible assets — Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired, if any.
3 unchanged sentences
If the business disposed of was never fully integrated into the reporting unit after its acquisition, and thus the benefits of the acquired goodwill were never realized, the current carrying amount of the acquired goodwill is written off.
−Removed: Goodwill and our other indefinite-lived intangible assets are evaluated for impairment annually during the fourth quarter, or more frequently if indicators of impairment are present.
+Added: Goodwill is evaluated for impairment annually during the fourth quarter, or more frequently if indicators of impairment are present.
We first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit or indefinite-lived asset is less than its carrying amount.
If the qualitative factors indicate that it is more likely than not that the fair value is less than the carrying amount, we perform a single-step impairment test.
−Removed: To perform our impairment analysis, we estimate the fair value of the reporting unit or indefinite-lived asset using Level 3 Inputs and compare it to the carrying value.
+Added: To perform our impairment analysis, we estimate the fair value of the reporting unit and compare it to the carrying value.
If the carrying value exceeds the fair value, an impairment loss is recognized equal to the excess.
−Removed: Lease acquisition costs primarily represent the fair values of acquired lease contracts having contractual rents lower than fair market rents and are amortized on a straight-line basis over the remaining initial lease term.
+Added: Refer to Note 4, Goodwill , for additional information.
Reacquired franchise rights are recorded in connection with our acquisition of franchised restaurants and are amortized over the remaining contractual period of the franchise contract in which the right was granted.
−Removed: Refer to Note 4, Goodwill and Intangible Assets, Net , for additional information.
+Added: As of September 27, 2020 and September 29, 2019, the carrying value of our intangible assets was $ 0.3 million and $ 0.4 million, respectively, and are included in “Intangible assets, net” in the accompanying consolidated balance sheets.
Company-owned life insurance — We have purchased company-owned life insurance (“COLI”) policies to support our non-qualified benefit plans.
2 unchanged sentences
These policies reside in an umbrella trust for use only to pay plan benefits to participants or to pay creditors if the Company becomes insolvent.
−Removed: Leases — We review all leases for capital or operating classification at their inception under the FASB authoritative guidance for leases.
−Removed: Our operations are primarily conducted under operating leases.
−Removed: Within the provisions of certain leases, there are rent holidays and escalations in payments over the base lease term, as well as renewal periods.
−Removed: The effects of the holidays and escalations have been reflected in rent expense on a straight-line basis over the expected lease term.
−Removed: Differences between amounts paid and amounts expensed are recorded as deferred rent.
−Removed: The lease term commences on the date when we have the right to control the use of the leased property.
−Removed: Certain leases also include contingent rent provisions based on sales levels, which are accrued at the point in time we determine that it is probable such sales levels will be achieved.
−Removed: Refer to Note 8, Leases , for additional information.
+Added: Leases — We evaluate the contracts entered into by the Company to determine whether such contracts contain leases.
+Added: A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration.
+Added: At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee, or as an operating, sales-type or direct financing lease where the Company is a lessor, based on their terms.
+Added: The lease term and incremental borrowing rate for each lease requires judgement by management and can impact the classification of our leases as well as the value of our lease assets and liabilities.
+Added: When determining the lease term, we consider option periods available, and include option periods in the measurement of the lease right-of-use (“ROU”) asset and lease liability where the exercise is reasonably certain to occur.
+Added: As our leases do not provide an implicit discount rate, we have determined it is appropriate to use our estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, in calculating our lease liabilities.
Revenue recognition — “Company restaurant sales” include revenue recognized upon delivery of food and beverages to the customer at company-operated restaurants, which is when our obligation to perform is satisfied.
Company restaurant sales exclude taxes collected from the Company’s customers.
−Removed: Company restaurant sales also include income for gift cards.
Gift cards, upon customer purchase, are recorded as deferred income and are recognized in revenue as they are redeemed.
2 unchanged sentences
Certain franchise rents, which are contingent upon sales levels, are recognized in the period in which the contingency is met.
−Removed: “Franchise royalties and other” includes royalties and franchise and other fees received from franchisees.
+Added: “Franchise royalties and other” primarily includes royalties and franchise fees received from our franchisees.
Royalties are based upon a percentage of sales of the franchised restaurant and are recognized as earned.
7 unchanged sentences
We recognize income from gift cards when redeemed by the customer.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
While we will continue to honor all gift cards presented for payment, we may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity.
−Removed: In these circumstances, to the extent we determine there is no requirement for remitting balances to government agencies under unclaimed property laws, card balances may be recognized as a reduction to “Selling, general and administrative expenses” in the accompanying consolidated statements of earnings.
−Removed: Amounts recognized on unredeemed gift card balances was $ 0.5 million , $ 0.6 million , and $ 0.5 million in fiscal 2019 , 2018 , and 2017 , respectively.
−Removed: Pre-opening costs associated with the opening of a new restaurant consist primarily of property rent and employee training costs.
−Removed: Pre-opening costs associated with the opening of a restaurant that was closed upon acquisition consist primarily of labor costs, maintenance and repair costs, and property rent.
−Removed: Pre-opening costs are expensed as incurred in “Selling, general and administrative expenses” in the accompanying consolidated statements of earnings.
−Removed: Restaurant closure costs — All costs associated with exit or disposal activities are recognized when they are incurred.
−Removed: Restaurant closure costs, which are included in “Impairment and other charges, net”, and “Gains on the sale of company-operated restaurants” in the accompanying consolidated statements of earnings, primarily consist of future lease commitments, net, of anticipated sublease rentals, and expected ancillary costs.
+Added: In these circumstances, to the extent we determine there is no requirement for remitting balances to government agencies under unclaimed property laws, card balances may be recognized as income in our statement of earnings.
+Added: Amounts recognized on unredeemed gift card balances were $ 0.5 million, $ 0.5 million, and $ 0.6 million in fiscal 2020, 2019, and 2018, respectively.
Self-insurance — We are self-insured for a portion of our workers’ compensation, general liability, employee medical and dental, and automotive claims.
3 unchanged sentences
Advertising costs — We administer a marketing fund that includes contractual contributions.
−Removed: In fiscal 2019 , 2018 , and 2017 the marketing fund contributions from franchise and company-operated restaurants were approximately 5.0 % of gross revenues, and the Company made incremental contributions to the marketing fund of $ 2.0 million , $ 6.2 million , and $ 0.5 million , respectively.
+Added: In fiscal 2020, 2019 and 2018, the marketing fund contributions from franchise and company-operated restaurants were approximately 5.0 % of gross revenues with the exception of our March and April 2020 marketing fees.
+Added: In response to the economic burden associated with the COVID-19 pandemic, the Company reduced March marketing fees to 4.0 % and postponed the collection of these fees over the course of 24 months starting in October 2020.
+Added: April marketing fees ranged from 2 % to 4 % based on annualized sales volumes, and these fees will be collected over three months beginning October 2020.
+Added: As of September 27, 2020, postponed marketing fees which remain uncollected were $ 16.1 million, of which $ 12.6 million is included within “Accounts and other receivable, net” and $ 3.5 million is included within “Other assets, net” in our consolidated balance sheet.
Production costs of commercials, programming, and other marketing activities are charged to the marketing funds when the advertising is first used for its intended purpose, and the costs of advertising are charged to operations as incurred.
−Removed: When contributions of the marketing fund exceed the related advertising expenses, advertising costs are accrued up to the amount of revenues on an annual basis.
+Added: When contributions to the marketing fund exceed the related advertising expenses, advertising costs are accrued up to the amount of revenues on an annual basis since we are contractually obligated to spend these funds.
+Added: As of September 27, 2020 and September 29, 2019, additional amounts accrued were $ 8.3 million and $ 0.3 million, respectively, for this requirement.
+Added: There have been no incremental contributions to the marketing fund made in 2020.
+Added: In fiscal 2019 and 2018, incremental contributions to the marketing fund were $ 2.0 million and $ 6.2 million, respectively.
Total contributions made by the Company, including incremental contributions, are included in “Selling, general, and administrative expenses” in the accompanying consolidated statements of earnings.
9 unchanged sentences
Refer to Note 11, Income Taxes , for additional information.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative instruments — We have historically used interest rate swaps to hedge interest rate volatility under our senior credit facility.
9 unchanged sentences
We record legal settlement costs when those costs are probable and reasonably estimable.
−Removed: Refer to Note 16, Commitments, Contingencies and Legal Matters , for additional information.
−Removed: Effect of new accounting pronouncements adopted in fiscal 2019 — In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue Recognition - Revenue from Contracts with Customers (Topic 606) , which provides a comprehensive new revenue recognition model that requires an entity to recognize revenue in an amount that reflects the consideration the entity expects to receive for the transfer of promised goods or services to its customers.
−Removed: The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
−Removed: We adopted the new standard on October 1, 2018 using the modified retrospective method, whereby the cumulative effect of this transition to applicable contracts with customers that were not completed as of October 1, 2018 was recorded as an adjustment to beginning retained earnings as of this date.
−Removed: The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
−Removed: The new revenue recognition standard did not impact our recognition of restaurant sales, rental revenues, or royalties from franchisees.
−Removed: The new pronouncement changed the way initial fees from franchisees for new restaurant openings or new franchise terms are recognized.
−Removed: Under the previous revenue recognition guidance, initial franchise fees were recognized as revenue at the time when a new restaurant opened or at the start of a new franchise term.
−Removed: In accordance with the new guidance, the initial franchise services are not distinct from the continuing rights and services offered during the term of the franchise agreement and will therefore be treated as a single performance obligation together with the continuing rights and services.
−Removed: As such, initial fees received will be recognized over the franchise term and any unamortized portion will be recorded as deferred revenue in our consolidated balance sheet.
−Removed: An adjustment to opening retained earnings and a corresponding contract liability of approximately $ 50.3 million (of which $ 5.0 million was current and $ 45.3 million was long-term) was established on the date of adoption.
−Removed: A deferred tax asset of approximately $ 13.0 million related to this contract liability was also established on the date of adoption.
−Removed: The new standard also had an impact on transactions presented net and not included in our revenues and expenses such as franchisee contributions to and expenditures from our advertising fund, and sourcing and technology fee contributions from franchisees and the related expenses.
−Removed: We determined that we are the principal in these arrangements, and as such, contributions to and expenditures from the advertising fund, and sourcing and technology fees and expenditures are now reported on a gross basis within our consolidated statements of earnings.
−Removed: While this change materially impacted our gross amount of reported revenues and expenses, the impact was largely offsetting with no material impact to our reported net earnings.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The following table summarizes the impacts of adopting ASC 606 on our consolidated financial statements as of and for the period ended September 29, 2019 (in thousands) :
−Removed: Franchise Fees
−Removed: Marketing and Sourcing Fees
−Removed: Technology Support Fees
−Removed: Balances without Adoption
−Removed: Consolidated Statement of Earnings
−Removed: Fiscal Year Ended September 29, 2019
−Removed: Franchise royalties and other
−Removed: Franchise contributions for advertising and other services
−Removed: Total revenues
−Removed: Franchise advertising and other services expenses
−Removed: Selling, general and administrative expenses
−Removed: Total operating costs and expenses, net
−Removed: Earnings from operations
−Removed: Earnings from continuing operations and before income taxes
−Removed: Income tax expense
−Removed: Earnings from continuing operations
−Removed: Consolidated Balance Sheet
−Removed: September 29, 2019
−Removed: Prepaid expenses
−Removed: Total current assets
+Added: Refer to Note 16, Commitments and Contingencies , for additional information.
+Added: Effect of new accounting pronouncements adopted in fiscal 2020 — We adopted ASU 2016-02, Leases (Topic 842) (“ASC 842”) in the first quarter of 2020.
+Added: The new guidance requires the recognition of lease liabilities, representing future minimum lease payments on a discounted basis, and corresponding right-of-use (“ROU”) assets on the balance sheet for most leases.
+Added: The Company adopted the new guidance in the first quarter of 2020 using the alternative transition method;
+Added: therefore, the comparative period has not been restated and continues to be reported under the previous lease guidance.
+Added: We elected the transition package of three practical expedients, which, among other items, permitted us not to reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs.
+Added: We also elected the short-term lease recognition exemption for all leases that qualify, permitting us to not apply the recognition requirements of this standard to leases with a term of 12 months or less, and an accounting policy to not separate lease and non-lease components for underlying assets subject to real estate leases.
+Added: As lessor, we elected for all classes of underlying leased assets to account for lease and non-lease components, primarily property taxes and maintenance, as a single lease component.
+Added: We did not elect the use-of-hindsight practical expedient, and therefore continued to utilize lease terms determined under the existing lease guidance.
+Added: The adoption had a material impact on our consolidated balance sheet.
+Added: As a result of the adoption, we recognized operating lease assets and liabilities of $ 880.6 million and $ 931.0 million, respectively, at the date of adoption.
+Added: The ROU assets were adjusted for certain lease-related assets and liabilities at adoption, primarily comprised of straight-line rent accruals of $ 29.0 million, incentives and unfavorable lease liabilities of $ 2.1 million, sublease loss and exit-related lease liabilities of $ 19.4 million, which were previously reported in “Accrued liabilities” and “Other long-term liabilities”, as well as favorable lease assets of $ 0.4 million, which were previously reported in “Intangible assets, net” in our consolidated balance sheet.
+Added: We also recorded a cumulative adjustment to opening retained earnings of $ 2.9 million, net of tax, as a result of the impairment of certain newly recognized ROU assets and derecognition of deferred gains and losses on sale-leaseback transactions upon transition to the new guidance.
+Added: The effects of the changes made to the Company's consolidated balance sheet as of September 29, 2019 for the adoption of the new lease guidance were as follows (in thousands) :
+Added: Balance at September 29, 2019 Adjustments due to ASC 842 adoption Balance at September 30, 2019
+Added: Other assets:
+Added: Operating lease ROU assets $ — $ 880,564 $ 880,564
+Added: Intangible assets, net $ 425 $ ( 386 ) $ 39
Deferred tax assets $ 85,564 $ 1,006 $ 86,570
−Removed: Other assets, net
−Removed: Total other assets
+Added: Liabilities and Stockholders’ Deficit
+Added: Current liabilities:
+Added: Current operating lease liabilities $ — $ 159,821 $ 159,821
Accrued liabilities $ 120,083 $ ( 4,702 ) $ 115,381
−Removed: Total current liabilities
+Added: Long-term liabilities:
+Added: Long-term operating lease liabilities, net of current portion $ — $ 770,818 $ 770,818
Other long-term liabilities $ 263,770 $ ( 41,883 ) $ 221,887
−Removed: Total long-term liabilities
+Added: Stockholders’ deficit:
Retained earnings $ 1,577,034 $ ( 2,870 ) $ 1,574,164
−Removed: Total stockholders’ deficit
−Removed: Total liabilities and stockholders’ deficit
−Removed: The adoption of ASC 606 had no impact on our cash provided by or used in operating, investing or financing activities as previously reported in the accompanying consolidated statement of cash flows.
−Removed: In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715):
−Removed: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost .
−Removed: This standard requires the presentation of the service cost component of net benefit cost to be in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period.
−Removed: All other components of net benefit cost should be presented separately from the service cost component and outside of a subtotal of earnings from operations, or separately disclosed.
−Removed: We adopted this standard in the first quarter of fiscal 2019 applying the retrospective method.
−Removed: As a result of the adoption, 2018 and 2017 amounts of $ 1.8 million and $ 3.4 million , respectively, previously reported within “Selling, general, and administrative expenses” have been reclassified to a separate line under earnings from operations to conform to current year presentation.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Effect of new accounting pronouncements to be adopted in future periods — In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (as subsequently amended by ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01) which requires a lessee to recognize assets and liabilities on the balance sheet for those leases classified as operating leases under previous guidance.
−Removed: Substantially all the Company’s operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right of use assets upon adoption, resulting in a significant increase in the assets and liabilities on our consolidated balance sheets.
−Removed: We do not expect the adoption of this guidance to have a material impact on our consolidated statements of earnings and statements of cash flows.
−Removed: We are required to adopt this standard in the first quarter of fiscal 2020 and have elected to utilize the alternative transition method, whereby an entity records a cumulative adjustment to opening retained earnings in the year of adoption without restating prior periods.
−Removed: We will elect the transition package of three practical expedients, which, among other items, permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.
−Removed: We will also elect the short-term lease recognition exemption for all leases that qualify, permitting us to not apply the recognition requirements of this standard to leases with a term of 12 months or less and an accounting policy to not separate lease and non-lease components for certain classes of assets.
−Removed: We will not elect the use-of-hindsight practical expedient, and therefore will continue to utilize lease terms determined under the existing lease guidance.
−Removed: We are in the final phase of our adoption plan.
−Removed: We are substantially complete with our scoping analysis, data gathering process to ensure the completeness and accuracy of our current leasing portfolio, and testing of our existing leasing system for compliance with Topic 842, and are in the process of finalizing our accounting policies, processes, disclosures and internal controls over financial reporting.
−Removed: For our real estate operating leases, we expect the adoption of the new guidance will result in the recognition of approximately $ 950 million of operating lease liabilities based on the present value of the remaining minimum rental payments using discount rates as of the effective date.
−Removed: We expect to record corresponding right of use assets of approximately $ 900 million , based on the operating lease liabilities adjusted for certain lease related assets and liabilities and the impairment of certain right of use assets recognized as a cumulative effect adjustment in retained earnings as of the adoption date.
−Removed: We do not expect operating lease liabilities and right of use assets related to our other contracts to be material.
The accounting guidance for lessors remains largely unchanged from previous guidance, except for the presentation of certain lease costs that the Company passes through to lessees, including but not limited to, property taxes and maintenance.
These costs are generally paid by the Company and reimbursed by the lessee.
−Removed: Historically, these costs have been recorded on a net basis in the consolidated statements of operations but will be presented gross upon adoption of the new guidance.
−Removed: As a result, we expect an increase in our annual revenues and expenses of approximately $ 5.0 million after adoption.
+Added: Historically, these costs have been recorded on a net basis in our consolidated statements of earnings but are now presented gross upon adoption of the new guidance.
+Added: As a result, annual revenues and expenses reported in “Franchise rental revenues” and “Franchise occupancy expenses” increased by approximately $ 37.4 million in fiscal 2020.
+Added: Refer to Note 8, Leases , for further information on our leases and the impact on the Company’s accounting policies.
+Added: Effect of new accounting pronouncements to be adopted in future periods — In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):
+Added: Measurement of Credit Losses on Financial Instruments , that requires measurement and recognition of expected versus incurred credit losses for financial assets held, including trade receivables.
+Added: This standard is effective for the Company in our first quarter of fiscal 2021 and we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
+Added: In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):
+Added: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which aligns the requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
+Added: This standard is effective for the Company in our first quarter of fiscal 2021 and we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements.
2 unchanged sentences
The agreement also requires franchisees to pay sourcing, technology support and other miscellaneous fees.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Disaggregation of revenue — The following table disaggregates revenue by primary source for the fiscal year ended September 29, 2019 (in thousands) :
+Added: Disaggregation of revenue — The following table disaggregates revenue by primary source for the fiscal years ended September 27, 2020 and September 29, 2019 (in thousands) :
Sources of revenue:
7 unchanged sentences
Contract liabilities — Our contract liabilities consist of deferred revenue resulting from initial fees received from franchisees for new restaurant openings or new franchise terms, which are generally recognized over the franchise term.
−Removed: We classify these contract liabilities as “Accrued liabilities” and “Other long-term liabilities” in our consolidated balance sheets.
−Removed: A summary of significant changes in our contract liabilities between the date of adoption (October 1, 2018) and September 29, 2019 is presented below (in thousands) :
−Removed: Deferred Franchise Fees
−Removed: Deferred franchise fees at October 1, 2018
+Added: We classify these contract liabilities within “Accrued liabilities” and “Other long-term liabilities” in our consolidated balance sheets.
+Added: A summary of significant changes in our contract liabilities is presented below (in thousands) :
+Added: Deferred franchise fees at beginning of period $ 46,273 $ 50,018
Revenue recognized during the period ( 5,440 ) ( 5,173 )
Additions during the period 2,708 1,428
−Removed: Deferred franchise fees at September 29, 2019
+Added: Deferred franchise fees at end of period $ 43,541 $ 46,273
The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period (in thousands) :
−Removed: We have applied the optional exemption, as provided for under ASC 606, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: SUMMARY OF REFRANCHISINGS, FRANCHISEE DEVELOPMENT AND ACQUISITIONS
−Removed: Refranchisings and franchisee development — The following table summarizes the number of restaurants sold to franchisees, the number of restaurants developed by franchisees, and gains recognized in each fiscal year ( dollars in thousands ):
+Added: Thereafter 20,507
+Added: We have applied the optional exemption, as provided for under ASC Topic 606, Revenue from Contracts with Customers , which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.
+Added: SUMMARY OF REFRANCHISINGS AND FRANCHISE ACQUISITIONS
+Added: Refranchisings — The following table summarizes the number of restaurants sold to franchisees and gains recognized in each fiscal year ( dollars in thousands ):
+Added: 2020 2019 2018
Restaurants sold to franchisees — — 135
−Removed: New restaurants opened by franchisees
Proceeds from the sale of company-operated restaurants:
+Added: Cash (1) $ 3,395 $ 1,280 $ 26,486
Notes receivable — — 70,461
+Added: $ 3,395 $ 1,280 $ 96,947
Net assets sold (primarily property and equipment) $ — $ — $ ( 21,329 )
−Removed: Lease commitment charges (2)
Goodwill related to the sale of company-operated restaurants — ( 2 ) ( 4,663 )
+Added: Other (2) ( 134 ) 88 ( 24,791 )
Gains on the sale of company-operated restaurants $ 3,261 $ 1,366 $ 46,164
________________________
−Removed: Amounts in 2019 , 2018 , and 2017 include additional proceeds of $ 1.3 million , $ 1.4 million , and $ 0.2 million related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years.
−Removed: Charges are for operating restaurant leases with lease commitments in excess of our sublease rental income.
+Added: (1) Amounts in 2020, 2019, and 2018 include additional proceeds of $ 3.4 million, $ 1.3 million, and $ 1.4 million, respectively, related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years.
(2) Amounts in 2018 primarily represent $ 9.2 million of costs related to franchise remodel incentives, $ 8.7 million reduction of gains related to the modification of certain 2017 refranchising transactions, $ 2.3 million of maintenance and repair expenses and $ 3.7 million of other miscellaneous non-capital charges.
−Removed: Amounts in 2017 represent impairment of $ 4.6 million and equipment write-offs of $ 1.4 million related to restaurants closed in connection with the sale of the related markets, maintenance and repair charges, and other miscellaneous non-capital charges.
−Removed: Franchise acquisitions — In 2019 and 2018 we did not acquire any franchise restaurants.
−Removed: In 2017 we acquired 50 franchise restaurants.
−Removed: Of the 50 restaurants acquired, we took over 31 restaurants as a result of an agreement with an underperforming franchisee who was in violation of franchise and lease agreements with the Company.
−Removed: Under this agreement, the franchisee voluntarily agreed to turn over the restaurants.
−Removed: The acquisition of the additional 19 restaurants in 2017 was the result of a legal action filed in September 2013 against a franchisee, from which legal action we obtained a judgment in January 2017 granting us possession of the restaurants.
−Removed: Of the 50 restaurants acquired in 2017, we closed eight and sold 42 to franchisees.
−Removed: GOODWILL AND INTANGIBLE ASSETS, NET
+Added: Franchise acquisitions — During the second quarter of 2020, we acquired eight franchise restaurants as a result of a legal action filed in October 2019 against a franchisee in which we obtained a judgment in January 2020 granting us the possession of the restaurants.
+Added: In 2019 and 2018 we did no t acquire any franchise restaurants.
+Added: We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations.
+Added: The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3).
+Added: The goodwill recorded primarily relates to the sales growth potential of the market acquired and is expected to be deductible for income tax purposes.
+Added: Total consideration on the fiscal 2020 acquisition was $ 0.9 million, comprised of receivables that were eliminated in acquisition accounting.
+Added: The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for the restaurants acquired ( in thousand s):
+Added: Inventory $ 73
+Added: Property and equipment 903
+Added: Intangible assets 263
+Added: Other assets 6
+Added: Liabilities assumed ( 800 )
+Added: Total consideration $ 859
The changes in the carrying amount of goodwill during fiscal 2020 and 2019 were as follows ( in thousands ):
−Removed: Balance at October 1, 2017
−Removed: Sale of company-operated restaurants to franchisees
Balance at September 30, 2018 $ 46,749
1 unchanged sentence
Balance at September 29, 2019 46,747
−Removed: Intangible assets, net, consist of the following as of the end of each fiscal year ( in thousands ):
−Removed: Gross carrying amount
−Removed: Less accumulated amortization
−Removed: Net carrying amount
−Removed: Amortized intangible assets include lease acquisition costs and reacquired franchise rights.
−Removed: Total amortization expense related to intangible assets was $ 0.1 million in fiscal 2019 , and $ 0.2 million in fiscal 2018 and 2017 .
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The following table summarizes, as of September 29, 2019 , the estimated amortization expense for each of the next five fiscal years ( in thousands ):
+Added: Acquisition of franchise-operated restaurants 414
+Added: Balance at September 27, 2020 $ 47,161
FAIR VALUE MEASUREMENTS
Financial assets and liabilities — The following table presents the financial assets and liabilities measured at fair value on a recurring basis ( in thousands ):
+Added: (Level 1) Significant
+Added: (Level 2) Significant
Fair value measurements as of September 27, 2020:
3 unchanged sentences
Non-qualified deferred compensation plan (1) $ 30,104 $ 30,104 $ — $ —
−Removed: Interest rate swaps (Note 6) (2)
Total liabilities at fair value $ 30,104 $ 30,104 $ — $ —
3 unchanged sentences
The obligation is included in “Accrued liabilities” and “Other long-term liabilities” on our consolidated balance sheets.
−Removed: We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable rate debt.
−Removed: The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties.
−Removed: These valuation models use a discounted cash flow analysis on the cash flows of each derivative.
−Removed: The key inputs for the valuation models are quoted market prices, discount rates, and forward yield curves.
−Removed: The Company also considered its own nonperformance risk and the respective counter-party’s nonperformance risk in the fair value measurements.
−Removed: As further described in Note 6, Derivatives , the Company’s interest rate swaps were terminated on July 2, 2019 and settled in connection with our securitization transaction on July 8, 2019.
(2) We did not have any transfers in or out of Level 1, 2, or 3 .
−Removed: At September 29, 2019 , the fair value of our Class A-2 Notes was $ 1,344.3 million .
+Added: The following table presents the carrying value and estimated fair value of our Class A-2 Notes as of September 27, 2020 and September 29, 2019 ( in thousands ):
+Added: September 27,
+Added: 2020 September 29,
+Added: Carrying Amount Fair Value Carrying Amount Fair Value
+Added: Class A-2 Notes $ 1,290,251 $ 1,354,241 $ 1,300,000 $ 1,344,300
The fair value of the Class A-2 Notes was estimated using Level 2 inputs based on quoted market prices in markets that are not considered active markets.
−Removed: The estimated fair values of our capital lease obligations approximated their carrying values as of September 29, 2019 .
−Removed: Non-financial assets and liabilities — Our non-financial instruments, which primarily consist of property and equipment, goodwill, and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis.
−Removed: However, whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment.
−Removed: If the carrying values are not fully recoverable, they are written down to fair value.
−Removed: In connection with management’s decision to discontinue a long-term technology project, an impairment charge of $ 3.5 million was recorded in the fourth quarter of 2019.
−Removed: Refer to Note 9, Impairment and Other Charges, Net, for additional information regarding impairment charges.
+Added: The Company had $ 107.9 million of outstanding borrowings under its Variable Funding Notes as of September 27, 2020.
+Added: The fair value of this loan approximates carrying value due to the variable rate nature of these borrowings.
+Added: Non-financial assets and liabilities — Our non-financial instruments, which primarily consist of property and equipment, operating lease right-of-use assets, goodwill and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis.
+Added: However, on an annual basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment.
+Added: If applicable, the carrying values are written down to fair value.
+Added: In connection with our impairment reviews performed during 2020, no material fair value adjustments were required.
DERIVATIVE INSTRUMENTS
2 unchanged sentences
These agreements were designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging.
−Removed: To the extent that they are effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives are not
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: included in earnings, but are included in OCI.
+Added: Since they were effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives are not included in earnings but were included in OCI.
These changes in fair value were subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments were made on our variable rate debt.
−Removed: Effective July 2, 2019 , the Company terminated all interest rate swap agreements in anticipation of the securitization transaction and related retirement of our senior credit facility (see Note 7, Indebtedness ).
+Added: Effective July 2, 2019, the Company terminated all interest rate swap agreements in anticipation of the securitization transaction and related retirement of our senior credit facility.
The fair value of the interest rate swaps at the termination date was $ 23.6 million, which was required to be paid in full on July 8, 2019.
1 unchanged sentence
Consequently, unrealized losses in other comprehensive income at the termination date were immediately reclassified to “Interest expense, net” in the accompanying consolidated statement of earnings.
−Removed: Financial position — The following derivative instruments were outstanding as of the end of each fiscal year ( in thousands ):
−Removed: Derivatives designated as hedging instruments:
−Removed: Interest rate swaps
−Removed: Accrued liabilities
−Removed: Interest rate swaps
−Removed: Other long-term liabilities
−Removed: Interest rate swaps
−Removed: Other assets, net
−Removed: Total derivatives (Note 5)
−Removed: Financial performance — The following table summarizes the accumulated OCI activity related to our interest rate swap derivative instruments in each fiscal year ( in thousands ):
+Added: Financial performance — The following table summarizes the OCI activity related to our interest rate swap derivative instruments and the amounts reclassified from accumulated OCI ( in thousands ):
Location in Income 2019 2018
−Removed: (Loss) gain recognized in OCI
−Removed: Loss reclassified from accumulated OCI into net earnings
−Removed: Interest expense, net
+Added: (Loss) gain recognized in OCI N/A $ ( 23,625 ) $ 18,769
+Added: Loss reclassified from accumulated OCI into net earnings Interest expense, net $ 24,328 $ 3,455
Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparty for the effective portions of the interest rate swaps.
4 unchanged sentences
Class A-2-III Notes 446,625 450,000
−Removed: Revolving credit facility
−Removed: Capital lease obligations
−Removed: Less current maturities of long-term debt, net of $0 and $1,008 of debt issuance costs, respectively
+Added: Class A-1 Variable Funding Notes 107,876 —
+Added: Finance lease obligations 2,934 3,594
+Added: Total debt 1,401,061 1,303,594
+Added: Less current maturities of long-term debt ( 818 ) ( 774 )
Less unamortized debt issuance costs ( 23,330 ) ( 28,446 )
3 unchanged sentences
The Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “Notes.”
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Notes were issued in a privately placed securitization transaction pursuant to which certain of the Company’s revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly owned indirect subsidiaries of the Company that act as Guarantors (as defined below) of the Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Notes.
+Added: The proceeds from the issuance of the Class A-2 Notes, were used to repay the remaining principal outstanding on the term loans and revolving credit facility.
+Added: As a result, a loss on early extinguishment of debt of $ 2.8 million was recorded in fiscal 2019, primarily consisting of the write-off of unamortized deferred financing costs related to the Credit Agreement, and is reflected in “Interest expense, net” in the consolidated statement of earnings.
Class A-2 Notes — Interest and principal payments on the Class A-2 Notes are payable on a quarterly basis.
−Removed: In general, no principal payments will be required if a specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in the Indenture), is less than or equal to 5.0 x.
−Removed: As of September 29, 2019, the Company’s actual leverage ratio was under 5.0 x;
−Removed: accordingly, no principal payment on the Class A-2 Notes was required.
+Added: The quarterly principal payment of $ 3.25 million on the Class A-2 Notes may be suspended when the specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in the Indenture), is less than or equal to 5.0 x.
+Added: Exceeding the leverage ratio of 5.0 x does not violate any covenant related to the Class A-2 Notes.
+Added: As of September 27, 2020, the Company’s actual leverage ratio was under 5.0 x, and as a result, quarterly principal payments are not required.
+Added: Accordingly, the entire outstanding balance of the Class A-2 Notes has been classified as long-term debt.
The legal final maturity date of the Class A-2 Notes is in August 2049, but it is expected that, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment dates of the Class A-2-I Notes, the Class A-2-II Notes and the Class A-2-III Notes will be August 2023, August 2026 and August 2029, respectively (the “Anticipated Repayment Dates”).
7 unchanged sentences
Following the anticipated repayment date (and any extensions thereof), additional interest will accrue equal to 5.00 % per annum.
−Removed: As of September 29, 2019, $ 45.6 million of letters of credit were outstanding against the Variable Funding Notes, which relate primarily to interest reserves required under the Indenture.
−Removed: The Variable Funding Notes were undrawn at September 29, 2019.
+Added: As of September 27, 2020 and September 29, 2019, $ 39.5 million and $ 45.6 million of letters of credit, respectively, were outstanding against the Variable Funding Notes, which relate primarily to interest reserves required under the Indenture.
+Added: During the second quarter of 2020, to secure our liquidity position and provide financial flexibility given the uncertain market conditions, we borrowed $ 107.9 million under the Variable Funding Notes.
+Added: As of September 27, 2020, unused borrowing capacity under our Variable Funding Notes was $ 2.7 million.
Guarantees and collateral — Pursuant to the Guarantee and Collateral Agreement, dated July 8, 2019 (the “Guarantee and Collateral Agreement”), among the Guarantors, in favor of the trustee, the Guarantors guarantee the obligations of the Master Issuer under the Indenture and related documents and secure the guarantee by granting a security interest in substantially all of their assets.
3 unchanged sentences
Covenants and restrictions — The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters.
−Removed: The Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date.
+Added: The Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes in full by the applicable anticipated repayment date.
The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.
−Removed: In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the note holders, and are restricted in their use.
−Removed: As of September 29, 2019, the Master Issuer had restricted cash of $ 26.0 million , which primarily represented cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Notes.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Deferred financing costs — The Company incurred costs of approximately $ 33.0 million in connection with the securitization transaction.
+Added: Deferred financing costs — In 2019, the Company incurred costs of approximately $ 33.0 million in connection with the securitization transaction.
The costs related to our Class A-2 Notes are presented as a reduction in “Long-term debt, net of current maturities” and are being amortized over the Anticipated Repayment Dates, utilizing the effective interest rate method.
1 unchanged sentence
As of September 27, 2020, the effective interest rates, including the amortization of debt issuance costs, were 4.544 %, 4.800 %, and 5.197 % for the Class A-2-I Notes, Class A-2-II, Notes and Class A-2-III Notes, respectively.
−Removed: Amended credit facility — On May 1, 2019, we entered into the Fifth Amendment to the Credit Agreement (the “Fifth Amendment”).
−Removed: The Fifth Amendment extended the maturity date of both our term loan and revolving credit facility from March 19, 2020 to March 19, 2021.
−Removed: Fees of $ 1.3 million paid to third parties in connection with the Fifth Amendment were capitalized as deferred loan costs during the third quarter.
−Removed: The proceeds from the issuance of the Class A-2 Notes, were used to repay the remaining principal outstanding on the term loans and revolving credit facility.
−Removed: As a result, a loss on early extinguishment of debt of $ 2.8 million was recorded in fiscal 2019 , primarily consisting of the write-off of unamortized deferred financing costs related to the Credit Agreement, and is reflected in “Interest expense, net” in the consolidated statement of earnings.
Maturities of long-term debt — Assuming repayment by the Anticipated Repayment Dates and based on the leverage ratio as of September 27, 2020, principal payments on our long-term debt outstanding at September 27, 2020 for each of the next five fiscal years and thereafter are as follows ( in thousands ):
−Removed: As lessee — We lease restaurants and other facilities, which generally have renewal clauses of 1 to 20 years exercisable at our option.
−Removed: In some instances, these leases have provisions for contingent rentals based upon a percentage of defined revenues.
−Removed: Many of our restaurant and other facility leases also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs.
−Removed: We also lease certain restaurant and office equipment.
−Removed: Minimum rental obligations are accounted for on a straight-line basis over the term of the initial lease, plus lease option terms for certain locations.
−Removed: The components of rent expense were as follows in each fiscal year ( in thousands ):
+Added: Thereafter 827,462
+Added: Nature of leases — We own restaurant sites and we also lease restaurant sites from third parties.
+Added: Some of these owned or leased sites are leased and/or subleased to franchisees.
+Added: Initial terms of our real estate leases are generally 20 years, exclusive of options to renew, which are generally exercisable at our sole discretion for 1 to 20 years.
+Added: In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues.
+Added: Many of our restaurants also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs.
+Added: Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance and common area maintenance, which are excluded from the measurement of the lease liability.
+Added: We also lease certain restaurant and office equipment with initial terms generally ranging from 3 to 8 years.
+Added: Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
+Added: As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees subsequent to refranchising transactions.
+Added: The lease descriptions, terms, variable lease payments and renewal options are generally the same as the lessee leases described above.
+Added: Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the accompanying consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”
+Added: Rent concessions as lessee — In response to the pandemic, certain landlords have agreed to temporary rent concessions.
+Added: These concessions generally relate to the deferral of certain rent payments for April, May, June, and July 2020 until future periods and total approximately $ 15.5 million.
+Added: We considered the FASB’s recent guidance regarding rent concessions related to the effects of the COVID-19 pandemic and have elected to apply the temporary practical expedient to account for rent concessions as though enforceable rights and obligations for those concessions existed in the lease agreements.
+Added: Therefore, we did not remeasure our lease ROU assets and liabilities, and we have not bifurcated our operating lease liabilities into the portion that remains subject to accretion of $ 947.8 million, and the portion that is related to the rent deferrals of $ 7.2 million as of September 27, 2020.
+Added: Rent concessions as lessor — We postponed collection of approximately 40 % of April 2020 rents due from our franchisees totaling approximately $ 9.1 million, to be collected over three months beginning July 2020.
+Added: Furthermore, we passed on to our franchisees approximately $ 5.6 million of the rent concessions secured from our landlords for April, May, June, and July 2020.
+Added: As of September 27, 2020, all of the postponed April rent has been repaid and the franchisees have chosen to pay according to the original lease terms on approximately half of the rent concessions that we offered.
+Added: As of September 27, 2020, rent concessions which remain uncollected were $ 2.6 million and are included within “Accounts and other receivable, net” in our consolidated balance sheets.
+Added: Company as lessee — Leased assets and liabilities consisted of the following as of September 27, 2020 (in thousands) :
+Added: September 27,
+Added: Operating lease ROU assets $ 904,548
+Added: Finance lease ROU assets (1) 2,333
+Added: Total ROU assets $ 906,881
+Added: Current operating lease liabilities $ 179,000
+Added: Current finance lease liabilities (2) 818
+Added: Long term operating lease liabilities 776,094
+Added: Long-term finance lease liabilities (2) 2,116
+Added: Total lease liabilities $ 958,028
+Added: ________________________
+Added: (1) Included in “Property and equipment, net” on our consolidated balance sheet.
+Added: (2) Included in “Current maturities of long-term debt” and “Long-term debt, net of current maturities” on our consolidated balance sheet.
+Added: The following table presents the components of our lease costs in fiscal 2020 ( in thousands ):
+Added: Finance lease cost:
+Added: Amortization of ROU assets (1) $ 767
+Added: Interest on lease liabilities (2) 110
+Added: Operating lease cost (3) 190,461
+Added: Short-term lease cost (3) 175
+Added: Variable lease cost (3)(4) 40,798
+Added: ________________________
+Added: (1) Included in “Depreciation and amortization” in our consolidated statement of earnings.
+Added: (2) Included in “Interest expense, net” in our consolidated statement of earnings.
+Added: (3) Operating lease, short-term and variable lease costs associated with franchisees and company-operated restaurants are included in “Franchise occupancy expenses” and “Occupancy and other,” respectively, in our consolidated statement of earnings.
+Added: For our closed restaurants, these costs are included in “Impairment and other, net” and all other costs are included in “Selling, general and administrative expenses.”
+Added: (4) Includes $ 37.4 million of property taxes and common area maintenance costs which are reimbursed by sub-lessees.
+Added: The following table summarizes the components of rent expense in fiscal 2019 and 2018, as accounted for under previous guidance ( in thousands ):
Minimum rentals 184,587 184,106
1 unchanged sentence
Total rent expense 186,842 186,327
−Removed: Less rental expense on subleased properties
−Removed: Net rent expense
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The following table presents as of September 29, 2019 , future minimum lease payments under capital and operating leases, including leases recorded as lease obligations ( in thousands ):
+Added: The following table presents supplemental information related to leases:
+Added: September 27,
+Added: Weighted-average remaining lease term (in years):
+Added: Finance leases 3.3
+Added: Operating leases 8.3
+Added: Weighted-average discount rate:
+Added: Finance leases 3.5 %
+Added: Operating leases 4.2 %
+Added: The following table presents as of September 27, 2020, the annual maturities of our lease liabilities ( in thousands ):
+Added: Finance Leases Operating Leases
+Added: 2021 (1) $ 917 $ 215,039
+Added: 2022 906 167,926
+Added: 2023 904 140,576
+Added: 2024 400 108,576
+Added: 2025 24 99,334
+Added: Thereafter 20 417,850
+Added: Total future lease payments (2) $ 3,171 $ 1,149,301
+Added: imputed interest ( 237 ) ( 194,207 )
+Added: Present value of lease liabilities $ 2,934 $ 955,094
+Added: Less current portion ( 818 ) ( 179,000 )
+Added: Long-term lease obligations $ 2,116 $ 776,094
+Added: ________________________
+Added: (1) The impact of rent concessions increased 2021 operating leases maturities by $ 7.2 million.
+Added: (2) Total future lease payments include non-cancellable commitments of $ 3.2 million for finance leases and $ 1,076.9 million for operating leases.
+Added: The following table presents as of September 29, 2019, future minimum lease payments for non-cancellable leases ( in thousands ):
+Added: Capital Leases Operating Leases
+Added: 2020 $ 879 $ 193,313
+Added: 2021 879 186,226
+Added: 2022 879 145,794
+Added: 2023 864 117,753
+Added: 2024 396 87,420
+Added: Thereafter 40 363,505
Total minimum lease payments $ 3,937 $ 1,094,011
−Removed: Less amount representing interest, 3.40% weighted-average interest rate
−Removed: Present value of obligations under capital leases
+Added: imputed interest ( 343 )
+Added: Present value of lease liability $ 3,594
Less current portion ( 774 )
−Removed: Long-term capital lease obligations
−Removed: Assets recorded under capital leases are included in property and equipment, and consisted of the following at each fiscal year-end ( in thousands ):
+Added: Long-term lease obligations $ 2,820
+Added: Assets recorded under finance leases are included in property and equipment, and consisted of the following at each fiscal year-end ( in thousands ):
+Added: Buildings 1,342 1,342
+Added: Equipment 5,631 5,538
Less accumulated amortization ( 4,640 ) ( 3,904 )
−Removed: Amortization of assets under capital leases is included in depreciation and amortization expense in the consolidated statements of earnings.
−Removed: As lessor — We lease or sublease restaurants to certain franchisees and others under agreements that generally provide for the payment of percentage rentals in excess of stipulated minimum rentals, usually for a period up to 20 years.
−Removed: Most of our leases have rent escalation clauses and renewal clauses of 5 to 20 years.
−Removed: The following table summarizes rents received under these agreements in each fiscal year ( in thousands ):
+Added: The following table includes supplemental cash flow and non-cash information related to our lessee leases ( in thousands ):
+Added: Cash paid for amounts included in the measurement of lease liabilities:
+Added: Operating cash flows from operating leases $ 190,303
+Added: Operating cash flows from financing leases $ 110
+Added: Financing cash flows from financing leases $ 785
+Added: Right-of-use assets obtained in exchange for lease obligations:
+Added: Operating leases $ 181,532
+Added: Financing leases $ 132
+Added: Sale leaseback transactions — In fiscal 2020, we completed two sale-leaseback transactions of our restaurant properties with one occurring during the first quarter of 2020 and the other occurring during the third quarter of 2020.
+Added: In the first quarter of 2020, we completed a sale leaseback transaction of a multi-tenant commercial property in Los Angeles, California and leased back the parcel on which a company-operated restaurant is located.
+Added: The Company received net proceeds of $ 17.4 million and recognized a $ 0.2 million loss on the sale.
+Added: The initial term on the lease is 20 years and the lease has been accounted for as an operating lease.
+Added: Under the other arrangement, we received net proceeds of $ 2.4 million on a restaurant property sold and recognized a loss of less than $ 0.1 million on the sale.
+Added: The initial term of the lease is 17 years and the lease has been accounted for as an operating lease.
+Added: In fiscal 2020, we also completed the sale of one of our corporate office buildings as we move forward with our previously announced consolidation of our headquarters.
+Added: We entered into a lease with the buyer to leaseback the property for up to 18 months with an option to terminate earlier without penalty, upon providing a 90 -day notice.
+Added: The net proceeds received on the sale were $ 20.6 million and the lease has been accounted for as an operating lease.
+Added: A gain on the sale of $ 10.8 million was recognized, and is presented within “Impairment and other charges, net” in our consolidated statement of earnings.
+Added: Company as lessor — The following table presents rental income ( in thousands ):
+Added: Owned Properties Leased Properties Total
+Added: Operating lease income - franchise $ 19,785 $ 216,015 $ 235,800
+Added: Variable lease income - franchise 9,960 74,887 84,847
+Added: Franchise rental revenues $ 29,745 $ 290,902 $ 320,647
+Added: Operating lease income - closed restaurants and other (1) $ — $ 6,370 $ 6,370
+Added: ________________________
+Added: (1) Primarily relates to closed restaurant properties included in “Impairment and other, net” in our consolidated statement of earnings.
+Added: The following table summarizes rents received in fiscal 2019 and 2018, as accounted for under previous guidance ( in thousands ):
Total rental income (1) $ 277,623 $ 264,432
2 unchanged sentences
(1) Includes contingent rentals.
−Removed: The minimum rents receivable expected to be received under these non-cancelable operating leases and subleases, including leases recorded as lease obligations relating to continuing and discontinuing operations, and excluding contingent rentals, as of September 29, 2019 are as follows ( in thousands ):
−Removed: Total minimum future rent receivable
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: The following table presents as of September 27, 2020, future minimum rental receipts for non-cancellable leases and subleases ( in thousands ):
+Added: September 27,
+Added: 2021 (1) $ 261,388
+Added: Thereafter 1,067,624
+Added: Total minimum rental receipts $ 2,205,489
+Added: ________________________
+Added: (1) The impact of rent concessions passed on to franchisees increased 2021 by $ 2.6 million.
+Added: The following table presents as of September 29, 2019, future minimum rental receipts for non-cancellable leases and subleases ( in thousands ):
+Added: September 29,
+Added: 2020 $ 239,219
+Added: Thereafter 1,215,811
+Added: Total minimum rental receipts $ 2,365,786
Assets held for lease and included in property and equipment consisted of the following at each fiscal year-end ( in thousands ):
+Added: September 27,
+Added: 2020 September 29,
+Added: Land $ 88,187 $ 91,130
+Added: Buildings 801,730 817,400
+Added: Equipment 589 537
+Added: 890,506 909,067
Less accumulated depreciation ( 650,812 ) ( 632,197 )
+Added: $ 239,694 $ 276,870
IMPAIRMENT AND OTHER CHARGES, NET
Impairment and other charges, net, in the accompanying consolidated statements of earnings is comprised of the following in each fiscal year ( in thousands ):
+Added: 2020 2019 2018
Restructuring costs $ 1,168 $ 8,455 $ 10,647
3 unchanged sentences
Operating restaurant impairment charges — — 211
−Removed: Restructuring costs — Restructuring charges include costs resulting from the exploration of strategic alternatives (the “Strategic Alternatives Evaluation”) in 2019 , and a plan that management initiated to reduce our general and administrative costs.
−Removed: Restructuring charges in 2018 also include costs related to the evaluation of potential alternatives with respect to the Qdoba brand (the “Qdoba Evaluation”), which resulted in the Qdoba Sale.
−Removed: Refer to Note 10, Discontinued Operations, for information regarding the Qdoba Sale.
+Added: $ ( 6,493 ) $ 12,455 $ 18,418
+Added: ________________________
+Added: (1) In 2020, includes a $ 10.8 million gain related to the sale of one of our corporate office buildings.
+Added: In 2019, includes a $ 5.7 million gain related to the sale of property.
+Added: Restructuring costs — Restructuring costs in fiscal 2020, 2019, and 2018 include charges resulting from a plan that management initiated to reduce our general and administrative costs, which was completed in the third quarter of 2020.
+Added: In fiscal 2019, charges also include costs resulting from the exploration of strategic alternatives (the “Strategic Alternatives Evaluation”), which was concluded in the third quarter of 2019.
+Added: In fiscal 2018, charges also include costs related to the evaluation of potential alternatives with respect to the Qdoba brand (the “Qdoba Evaluation”), which resulted in the sale of Qdoba.
The following is a summary of the costs incurred in connection with these activities during each fiscal year ( in thousands ):
+Added: 2020 2019 2018
Employee severance and related costs $ 1,168 $ 7,169 $ 7,845
1 unchanged sentence
Qdoba Evaluation (2) — — 2,211
+Added: Other — — 591
$ 1,168 $ 8,455 $ 10,647
−Removed: Strategic Alternative Evaluation costs are primarily related to third party advisory services.
−Removed: Qdoba Evaluation consulting costs are primarily related to third party advisory services and retention compensation.
−Removed: We currently expect to recognize severance and related costs of approximately $ 1.3 million in fiscal 2020 related to positions that have been identified for elimination.
−Removed: At this time, we do not expect any additional charges to be incurred related to additional positions that may be identified for elimination or our other restructuring activities.
+Added: ________________________
+Added: (1) Strategic Alternatives Evaluation costs are primarily related to third party advisory services.
+Added: (2) Qdoba Evaluation costs are primarily related to third party advisory services and retention compensation.
Total accrued severance costs related to our restructuring activities are included in “Accrued liabilities” and changed as follows during fiscal 2020 (in thousands) :
1 unchanged sentence
Costs incurred 1,168
−Removed: Accruals released
Cash payments ( 3,268 )
Balance as of September 27, 2020 $ —
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Costs of closed restaurants and other — Costs of closed restaurants in all years include future lease commitment charges and expected ancillary costs, net of anticipated sublease rentals, impairment and other costs associated with closed restaurants, and canceled project costs.
−Removed: During the fourth quarter of 2019 , the Company recorded a charge of $ 3.5 million related to the write-off of software development costs as a result of management’s decision to discontinue a long-term technology project.
−Removed: Accrued restaurant closing costs included in “Accrued liabilities” and “Other long-term liabilities” changed as follows during fiscal 2019 ( in thousands ):
−Removed: Balance as of September 30, 2018
−Removed: Adjustments (1)
−Removed: Interest expense
−Removed: Cash payments
−Removed: Balance as of September 29, 2019 (2) (3)
−Removed: ___________________________________________
−Removed: Adjustments relate primarily to revisions of certain sublease and cost assumptions.
−Removed: Our estimates related to our future lease obligations, primarily the sublease income we anticipate, are subject to a high degree of judgment and may differ from actual sublease income due to changes in economic conditions, desirability of the sites, and other factors.
−Removed: The weighted-average remaining lease term related to these commitments is approximately four years .
−Removed: This balance excludes $ 1.5 million of restaurant closing costs that are included in “Accrued liabilities” and “Other long-term liabilities”, which were initially recorded as losses on the sale of company-operated restaurants to franchisees in prior years.
−Removed: Accelerated depreciation — When a long-lived asset will be replaced or otherwise disposed of prior to the end of its estimated useful life, the useful life of the asset is adjusted based on the estimated disposal date and accelerated depreciation is recognized.
−Removed: In fiscal 2019 , accelerated depreciation primarily related to information technology and facility improvements.
−Removed: In fiscal 2018, accelerated depreciation was primarily related to the replacement of computer hardware, restaurant remodels, and exterior enhancements at our company-operated restaurants.
−Removed: In fiscal 2017, accelerated depreciation primarily related to restaurant remodels and the anticipated closure of three company-owned restaurants.
+Added: Costs of closed restaurants and other — Costs of closed restaurants include impairment charges as a result of our decision to close restaurants, ongoing costs associated with closed restaurants, and canceled project costs.
+Added: During 2019, the Company recorded a charge of $ 3.5 million related to the write-off of software development costs as a result of management’s decision to discontinue a technology project.
DISCONTINUED OPERATIONS
−Removed: Qdoba — On December 19, 2017, we entered into a stock purchase agreement (the “Qdoba Purchase Agreement”) with the Buyer to sell all issued and outstanding shares of Qdoba (the “Shares”).
+Added: Qdoba — In December 2017, we entered into a stock purchase agreement (the “Qdoba Purchase Agreement”) with the Buyer to sell all issued and outstanding shares of Qdoba.
The Buyer completed the acquisition of Qdoba on March 21, 2018 (the “Qdoba Sale”) for an aggregate purchase price of approximately $ 298.5 million.
8 unchanged sentences
As the Qdoba Sale represented a strategic shift that had a major effect on our operations and financial results, in accordance with the provisions of FASB authoritative guidance on the presentation of financial statements, Qdoba results are classified as discontinued operations in our consolidated statements of earnings and our consolidated statements of cash flows for all periods presented.
−Removed: Income taxes — In fiscal 2019, the Company entered into a bilateral California election with Quidditch Acquisition, Inc.
−Removed: to retroactively treat the divestment of Qdoba Restaurant Corporation on March 21, 2018 as a sale of assets instead of a stock sale for income tax purposes.
−Removed: This election reduced the Company’s fiscal year 2018 California tax liability on the divestment by $ 2.8 million .
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The following table summarizes the Qdoba results for each period ( in thousands, except per share data ):
+Added: The following table summarizes results of operations in periods that have included discontinued operations ( in thousands, except per share data ):
+Added: 2020 2019 2018
Company restaurant sales $ — $ — $ 192,620
6 unchanged sentences
Interest expense, net (2) — — ( 4,787 )
−Removed: Operating (loss) earnings from discontinued operations before income taxes
+Added: Operating earnings (loss) from discontinued operations before income taxes 514 ( 88 ) 2,107
(Loss) gain on Qdoba Sale — ( 85 ) 30,717
−Removed: (Loss) earnings from discontinued operations before income taxes
−Removed: Income tax benefit (expense)
+Added: Earnings (loss) from discontinued operations before income taxes 514 ( 173 ) 32,824
+Added: Income tax (expense) benefit (3) ( 144 ) 2,863 ( 15,726 )
Earnings from discontinued operations, net of income taxes $ 370 $ 2,690 $ 17,098
Net earnings per share from discontinued operations:
−Removed: Selling, general and administrative expenses presented in the table above include corporate costs directly in support of Qdoba operations.
−Removed: All other corporate costs were classified in results of continuing operations.
+Added: Basic $ 0.02 $ 0.10 $ 0.60
+Added: Diluted $ 0.02 $ 0.10 $ 0.59
+Added: ________________________
+Added: (1) In fiscal 2018, selling, general and administrative expenses include corporate costs directly in support of Qdoba operations.
+Added: All other corporate costs were classified in continuing operations.
+Added: Amounts in 2020 and 2019 include resolutions of certain contingencies that existed at the date of sale which were insignificant in nature.
(2) Our credit facility required us to make a mandatory prepayment (“Qdoba Prepayment”) on our term loan upon the closing of the Qdoba Sale, which was $ 260.0 million.
Interest expense associated with our credit facility was allocated to discontinued operations based on our estimate of the mandatory prepayment that was made upon closing of the Qdoba Sale.
+Added: (3) In fiscal 2019, the Company entered into a bilateral California election with Quidditch Acquisition, Inc.
+Added: to retroactively treat the divestment of Qdoba Restaurant Corporation on March 21, 2018 as a sale of assets instead of a stock sale for income tax purposes.
+Added: This election reduced the Company’s fiscal year 2018 California tax liability on the divestment by $ 2.8 million.
Lease guarantees — While all operating leases held in the name of Qdoba were part of the Qdoba Sale, some of the leases remain guaranteed by the Company pursuant to one or more written guarantees (the “Guarantees”).
In the event Qdoba fails to meet its payment and performance obligations under such guaranteed leases, we may be required to make rent and other payments to the landlord under the requirements of the Guarantees.
−Removed: Should we, as guarantor of the lease obligations, be required to make any lease payments due for the remaining term of the subject lease(s) subsequent to March 21, 2018, the maximum amount we may be required to pay is approximately $ 32.1 million as of September 29, 2019 .
+Added: Should we, as guarantor of the lease obligations, be required to make any lease payments due for the remaining term of the subject leases, the maximum amount we may be required to pay is approximately $ 29.8 million as of September 27, 2020.
The lease terms extend for a maximum of approximately 15 more years as of September 27, 2020, and we would remain a guarantor of the leases in the event the leases are extended for any established renewal periods.
In the event that we are obligated to make payments under the Guarantees, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer.
−Removed: Qdoba continues to meet its obligations under these leases and there have not been any events that would indicate that Qdoba will not continue to meet the obligations of the leases.
−Removed: As such, we have not recorded a liability for the Guarantees as of September 29, 2019 as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: As of September 27, 2020, no amounts have been accrued relating to these guarantees as we do not believe any losses are probable.
Income taxes consist of the following in each fiscal year ( in thousands ):
+Added: 2020 2019 2018
+Added: Federal $ 19,721 $ 14,683 $ 51,454
+Added: State 7,844 5,242 4,922
+Added: 27,565 19,925 56,376
+Added: Federal 4,625 3,750 23,462
+Added: State 537 350 1,890
+Added: 5,162 4,100 25,352
Income tax expense from continuing operations $ 32,727 $ 24,025 $ 81,728
1 unchanged sentence
A reconciliation of the federal statutory income tax rate to our effective tax rate for continuing operations is as follows:
+Added: 2020 2019 2018
Income tax expense at federal statutory rate 21.0 % 21.0 % 24.5 %
State income taxes, net of federal tax benefit 5.3 % 5.3 % 4.7 %
−Removed: One-time, non-cash impact of the Tax Act
+Added: One-time, non-cash impact of the Tax Cuts and Jobs Act — % — % 17.5 %
Stock compensation excess tax benefit ( 0.4 ) % ( 0.1 ) % ( 1.1 ) %
4 unchanged sentences
Termination of interest rate swaps — % ( 2.6 ) % — %
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Officers’ compensation limitation 2.2 % 1.1 % 0.4 %
+Added: Other, net 0.1 % ( 1.1 ) % ( 1.3 ) %
+Added: 26.8 % 20.8 % 43.9 %
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at each fiscal year-end are presented below ( in thousands ):
Deferred tax assets:
+Added: Operating and finance lease liabilities $ 234,926 $ —
Accrued defined benefit pension and postretirement benefits 44,436 46,918
Deferred income 12,921 13,803
+Added: Impairment 8,895 9,981
Accrued insurance 6,500 7,133
−Removed: Share-based compensation
Tax loss and tax credit carryforwards 4,273 5,327
−Removed: Lease commitments related to closed or refranchised locations
−Removed: Deferred interest deduction
−Removed: Other reserves and allowances
+Added: Share-based compensation 4,143 5,415
Accrued incentive compensation 2,585 2,617
+Added: Other reserves and allowances 2,440 2,965
Accrued compensation expense 672 1,092
−Removed: Interest rate swaps
+Added: Lease commitments related to closed or refranchised locations — 3,786
+Added: Deferred interest deduction — 3,188
+Added: Other, net 2,364 868
Total gross deferred tax assets 324,155 103,093
2 unchanged sentences
Deferred tax liabilities:
+Added: Operating and finance lease ROU assets ( 235,373 ) ( 3,822 )
Intangible assets ( 11,437 ) ( 10,520 )
−Removed: Leasing transactions
Property and equipment, principally due to differences in depreciation ( 1,781 ) ( 128 )
+Added: Other ( 1,138 ) ( 574 )
Total gross deferred tax liabilities ( 249,729 ) ( 15,044 )
Net deferred tax assets $ 72,322 $ 85,564
−Removed: The Tax Act was enacted into law on December 22, 2017.
−Removed: The Tax Act included a reduction in the U.S.
−Removed: federal statutory corporate income tax rate (the “Tax Rate”) from 35% to 21% and introduced new limitations on certain business deductions.
−Removed: As a result, for the fiscal year ended September 30, 2018, we recognized a year-to-date, non-cash $ 32.5 million tax provision expense impact primarily related to the re-measurement of our deferred tax assets and liabilities due to the reduced Tax Rate.
Deferred tax assets as of September 27, 2020 include state net operating loss carry-forwards of approximately $ 20.1 million expiring at various times between 2021 and 2038.
−Removed: At September 29, 2019 , we recorded a valuation allowance of $ 2.5 million related to losses and state tax credits, which decreased from the $ 3.6 million at September 30, 2018 primarily due to the release of the valuation allowance on prior year net operating losses.
−Removed: We believe that it is more likely than not that these net operating loss and credit carry-forwards will not be realized and that all other deferred tax assets will be realized through future taxable income or alternative tax strategies.
+Added: At September 27, 2020, we recorded a valuation allowance of $ 2.1 million related to losses and state tax credits, which decreased from the $ 2.5 million at September 29, 2019 primarily due to the release of the valuation allowance on California Enterprise Zone Credits.
+Added: We believe it is more likely than not that these net operating loss and credit carry-forwards will not be realized and that all other deferred tax assets will be realized through future taxable income or alternative tax strategies.
The major jurisdictions in which the Company files income tax returns include the United States and states in which we operate that impose an income tax.
1 unchanged sentence
The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for fiscal years 2016 and forward.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RETIREMENT PLANS
11 unchanged sentences
In addition, to compensate executives who were hired or promoted into an eligible position prior to May 7, 2015 and who may no longer participate in our supplemental defined benefit pension plan, we also contribute a supplemental amount equal to 4 % of an eligible employee’s salary and bonus for a period of 10 years in such eligible position.
−Removed: Our contributions under the non-qualified deferred compensation plan were $ 0.2 million in fiscal 2019 , and $ 0.2 million , and $ 0.5 million in fiscal 2018 and 2017 , respectively.
−Removed: Defined benefit pension plans — We sponsor two defined benefit pension plans, a “Qualified Plan” covering substantially all full-time employees hired prior to January 1, 2011, and an unfunded supplemental executive retirement plan (“SERP”) that provides certain employees additional pension benefits and was closed to new participants effective January 1, 2007 .
+Added: Our contributions under the non-qualified deferred compensation plan were $ 0.3 million in fiscal 2020, $ 0.2 million and $ 0.2 million in fiscal 2019 and 2018, respectively.
+Added: Defined benefit pension plans — We sponsor two defined benefit pension plans, a “Qualified Plan” covering substantially all full-time employees hired prior to January 1, 2011, and an unfunded supplemental executive retirement plan (“SERP”) which provides certain employees additional pension benefits and was closed to new participants effective January 1, 2007.
In fiscal 2011, the Board of Directors approved changes to our Qualified Plan whereby participants will no longer accrue benefits effective December 31, 2015.
Benefits under both plans are based on the employees’ years of service and compensation over defined periods of employment.
−Removed: In the fourth quarter of 2019, the Company amended its Qualified Plan to add a limited lump sum payment window whereby certain terminated participants with a vested pension benefit could elect to receive an immediate lump sum or monthly annuity payment of their accrued benefit.
−Removed: The offering period began September 16, 2019 and ended on or around October 31, 2019.
−Removed: The participants that elect a lump sum benefit under the program will be paid in December 2019.
−Removed: The estimated impact of the bulk lump sum offering was taken into consideration in connection with the Qualified Plan’s fiscal year-end pension benefit obligation (“PBO”) measurement.
−Removed: The Company assumed a 40 % participant acceptance rate which resulted in a $ 25.6 million reduction in the Company’s PBO as of September 29, 2019.
−Removed: In accordance with the FASB authoritative guidance for pension plans, the expected settlement loss related to the offering will be recorded in the period the lump sum payments are made (the first quarter of fiscal 2020).
+Added: In the fiscal fourth quarter of 2019, the Company amended its Qualified Plan to add a limited lump sum payment window whereby certain terminated participants with a vested pension benefit could elect to receive either an immediate lump sum or a monthly annuity payment of their accrued benefit.
+Added: The offering period began September 16, 2019 and ended October 31, 2019.
+Added: The participants that elected a lump sum benefit under the program were paid in December 2019, which triggered settlement accounting.
+Added: As a result of the offering, the Company’s Qualified Plan paid $ 122.3 million from its plan assets to those who accepted the offer, thereby reducing the plan’s pension benefit obligation (“PBO”).
+Added: The transaction had no cash impact to the Company but did result in a non-cash settlement charge of $ 38.6 million in the first quarter of fiscal 2020.
+Added: Routine lump sum payments made in the second, third and fourth quarters of fiscal 2020 resulted in additional non-cash settlement charges totaling $ 0.6 million.
Postretirement healthcare plans — We also sponsor two healthcare plans, closed to new participants, that provide postretirement medical benefits to certain employees who have met minimum age and service requirements.
The plans are contributory, with retiree contributions adjusted annually, and contain other cost-sharing features such as deductibles and coinsurance.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Obligations and funded status — The following table provides a reconciliation of the changes in benefit obligations, plan assets, and funded status of our retirement plans for each fiscal year ( in thousands ):
−Removed: Qualified Plan
−Removed: Postretirement Health Plans
+Added: Qualified Plan SERP Postretirement Health Plans
+Added: 2020 2019 2020 2019 2020 2019
Change in benefit obligation:
Obligation at beginning of year $ 521,931 $ 457,109 $ 79,893 $ 73,067 $ 25,632 $ 23,461
+Added: Service cost — — — — — —
Interest cost 13,377 19,825 2,499 3,080 807 997
2 unchanged sentences
Benefits paid ( 12,980 ) ( 12,224 ) ( 5,160 ) ( 5,025 ) ( 1,246 ) ( 1,354 )
+Added: Settlements ( 124,253 ) ( 3,808 ) — — — —
+Added: Other — — — — 57 73
Obligation at end of year $ 412,573 $ 521,931 $ 78,971 $ 79,893 $ 20,965 $ 25,632
5 unchanged sentences
Benefits paid ( 12,980 ) ( 12,224 ) ( 5,160 ) ( 5,025 ) ( 1,246 ) ( 1,354 )
+Added: Settlements ( 124,253 ) ( 3,808 ) — — — —
+Added: Other — — — — 57 73
Fair value at end of year $ 365,510 $ 476,194 $ — $ — $ — $ —
−Removed: Funded status at end of year
+Added: Unfunded status at end of year $ ( 47,063 ) $ ( 45,737 ) $ ( 78,971 ) $ ( 79,893 ) $ ( 20,965 ) $ ( 25,632 )
Amounts recognized on the balance sheet:
5 unchanged sentences
Unamortized prior service cost — — 72 157 — —
+Added: Total $ 152,370 $ 187,705 $ 34,962 $ 34,960 $ ( 4,174 ) $ 235
Other changes in plan assets and benefit obligations recognized in OCI:
Net actuarial loss (gain) $ 7,527 $ 51,263 $ 1,739 $ 8,771 $ ( 4,391 ) $ 2,343
+Added: Pension settlement costs ( 39,218 ) — — — — —
Amortization of actuarial (loss) gain ( 3,644 ) ( 2,754 ) ( 1,652 ) ( 1,207 ) ( 18 ) 159
1 unchanged sentence
Total recognized in OCI ( 35,335 ) 48,509 2 7,449 ( 4,409 ) 2,502
−Removed: Net periodic benefit (credit) cost and other losses
+Added: Net periodic benefit cost (credit) and other losses 36,661 ( 3,755 ) 4,236 4,402 825 838
Total recognized in comprehensive income $ 1,326 $ 44,754 $ 4,238 $ 11,851 $ ( 3,584 ) $ 3,340
Amounts in AOCI expected to be amortized in fiscal 2021 net periodic benefit cost:
−Removed: Net actuarial loss
+Added: Net actuarial loss (gain) $ 3,511 $ 1,743 $ ( 341 )
Prior service cost — 19 —
+Added: Total $ 3,511 $ 1,762 $ ( 341 )
Additional year-end pension plan information — The PBO is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases.
2 unchanged sentences
The funded status is measured as the difference between the fair value of a plan’s assets and its PBO.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 27, 2020 and September 29, 2019, the Qualified Plan’s ABO exceeded the fair value of its plan assets.
9 unchanged sentences
Net periodic benefit cost — The components of the fiscal year net periodic benefit cost were as follows ( in thousands ):
+Added: 2020 2019 2018
Qualified Plan:
1 unchanged sentence
Expected return on plan assets ( 19,578 ) ( 26,334 ) ( 26,467 )
+Added: Pension settlements 39,218 — —
Actuarial loss 3,644 2,754 3,331
−Removed: Net periodic benefit credit
+Added: Net periodic benefit cost (credit) $ 36,661 $ ( 3,755 ) $ ( 3,673 )
+Added: Service cost $ — $ — $ 490
Interest cost 2,499 3,080 2,894
4 unchanged sentences
Interest cost $ 807 $ 997 $ 955
−Removed: Actuarial (gain) loss
+Added: Actuarial loss (gain) 18 ( 159 ) ( 27 )
Net periodic benefit cost $ 825 $ 838 $ 928
−Removed: Changes in presentation —As discussed in Note 1, Nature of Operations and Summary of Significant Accounting Policies , we adopted ASU 2017-07 during the first quarter of 2019 using the retrospective method, which changed the financial statement presentation of service costs and the other components of net periodic benefit cost.
−Removed: The service cost component continues to be included in operating income;
−Removed: however, the other components are now presented in a separate line below earnings from operations captioned “Other pension and post-retirement expenses, net” in our consolidated statements of earnings.
−Removed: Further, in connection with the adoption, plan administrative expenses historically presented as a component of service cost are now presented as a component of expected return on plan assets.
−Removed: The prior year components of net periodic benefit costs and assumptions on the long-term rate of return on assets have been recast to conform to current year presentation.
Prior service costs are amortized on a straight-line basis from date of participation to full eligibility.
2 unchanged sentences
For our SERP, actuarial losses are amortized over the expected remaining future lifetime for inactive participants, and for our postretirement health plans, actuarial losses are amortized over the expected remaining future lifetime of inactive participants expected to receive benefits.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assumptions — We determine our actuarial assumptions on an annual basis.
−Removed: In determining the present values of our benefit obligations and net periodic benefit costs as of and for the fiscal years ended September 29, 2019 , September 30, 2018 , and October 1, 2017 , we used the following weighted-average assumptions:
+Added: In determining the present values of our benefit obligations and net periodic benefit costs as of and for the fiscal years ended September 27, 2020, September 29, 2019, and September 30, 2018, we used the following weighted-average assumptions:
+Added: 2020 2019 2018
Assumptions used to determine benefit obligations (1):
2 unchanged sentences
Discount rate 2.84 % 3.24 % 4.37 %
−Removed: Rate of future pay increases
+Added: Rate of future pay increases (2) N/A 3.50 % 3.50 %
Postretirement health plans:
10 unchanged sentences
(1) Determined as of end of year.
+Added: (2) Rate is not applicable as there are no active employees as of fiscal year end 2020.
(3) Determined as of beginning of year.
+Added: (4) Remeasurements were performed in the first, second, and third quarters of fiscal 2020 using 3.61 %, 3.38 %, and 3.13 % respectively.
+Added: (5) Remeasurements were performed in the first, second, and third quarters of fiscal 2020 using 5.9 %, 5.2 %, and 5.4 % respectively.
The assumed discount rates were determined by considering the average of pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better whose cash flow from coupons and maturities match the year-by-year projected benefit payments from the plans.
3 unchanged sentences
The assumed discount rate and expected long-term rate of return on assets have a significant effect on amounts reported for our pension and postretirement plans.
−Removed: A quarter percentage point decrease in the discount rate and long-term rate of return used would have decreased fiscal 2019 earnings before income taxes by $ 0.5 million and $ 1.1 million , respectively.
+Added: If the discount rate and long-term rate of return used were decreased by a quarter percentage point, fiscal 2020 earnings before income taxes would have increased by less than $ 0.1 million and decreased by $ 1.0 million, respectively.
The assumed average rate of compensation increase is the average annual compensation increase expected over the remaining employment periods for the participating employees.
1 unchanged sentence
For measurement purposes, the weighted-average assumed health care cost trend rates for our postretirement health plans were as follows for each fiscal year:
+Added: 2020 2019 2018
Healthcare cost trend rate for next year:
7 unchanged sentences
Participants age 65 or older 2028 2028 2028
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The assumed healthcare cost trend rate represents our estimate of the annual rates of change in the costs of the healthcare benefits currently provided by our postretirement plans.
2 unchanged sentences
For example, a 1.0% change in the assumed healthcare cost trend rate would have the following effect on the fiscal 2020 net periodic benefit cost and end of year PBO ( in thousands ):
+Added: Increase 1% Point
Total interest and service cost $ 89 $ ( 76 )
7 unchanged sentences
Our plan asset allocation at the end of fiscal 2020 and target allocations were as follows:
+Added: 2020 Target Minimum Maximum
Cash & cash equivalents 1 % — % — % — %
Domestic equities 23 % 23 % 12 % 32 %
−Removed: International equity
+Added: International equities 22 % 23 % 12 % 32 %
Core fixed funds 33 % 32 % 27 % 37 %
+Added: High yield 3 % 4 % — % 8 %
Alternative investments 8 % 8 % — % 16 %
+Added: Real estate 9 % 7 % 2 % 12 %
Real return bonds 1 % 3 % — % 8 %
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company measures its defined benefit plan assets and obligations as of the month-end date closest to its fiscal year end, which is a practical expedient under FASB authoritative guidance.
The fair values of the Qualified Plan’s assets by asset category are as follows ( in thousands ):
−Removed: Quoted Prices
+Added: Total Quoted Prices
+Added: (Level 1) Significant
+Added: (Level 2) Significant
Items Measured at Fair Value at September 30, 2020:
1 unchanged sentence
Cash and cash equivalents (1) $ 3,665 $ — $ 3,665 $ —
+Added: U.S (2) 83,676 83,676 — —
International (3),(4) 81,228 40,319 — —
1 unchanged sentence
Investment grade (5) 126,630 3,006 123,624 —
+Added: High yield (6) 9,270 9,270 — —
+Added: Alternatives (4),(7) 29,375 — — —
+Added: Real estate (4),(8) 31,666 — — —
+Added: $ 365,510 $ 136,271 $ 127,289 $ —
Items Measured at Fair Value at September 30, 2019:
1 unchanged sentence
Cash and cash equivalents (1) $ 10,110 $ — $ 10,110 $ —
+Added: U.S (2) 99,124 99,124 — —
International (3),(4) 94,953 47,262 — —
1 unchanged sentence
Investment grade (5) 177,500 — 177,500 —
+Added: High yield (6) 9,256 9,256 — —
+Added: Alternatives (4),(7) 42,052 — — —
+Added: Real estate (4),(8) 43,199 — — —
$ 476,194 $ 155,642 $ 187,610 $ —
+Added: ________________________
(1) Cash and cash equivalents are comprised of commercial paper, short-term bills and notes, and short-term investment funds, which are valued at quoted prices in active markets for similar securities.
17 unchanged sentences
These investments can be redeemed on a quarterly basis.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future cash flows — Our policy is to fund our plans at or above the minimum required by law.
2 unchanged sentences
Contributions expected to be paid in the next fiscal year, the projected benefit payments for each of the next five fiscal years, and the total aggregate amount for the subsequent five fiscal years are as follows ( in thousands ):
−Removed: Defined Benefit Pension Plans
−Removed: Postretirement
+Added: Defined Benefit Plans Postretirement
Estimated net contributions during fiscal 2021 $ 5,223 $ 1,260
Estimated future year benefit payments during fiscal years:
+Added: 2021 $ 19,948 $ 1,260
+Added: 2022 $ 19,883 $ 1,276
+Added: 2023 $ 19,947 $ 1,296
+Added: 2024 $ 20,205 $ 1,319
+Added: 2025 $ 20,678 $ 1,336
+Added: 2026-2030 $ 111,465 $ 6,634
We will continue to evaluate contributions to our Qualified Plan based on changes in pension assets as a result of asset performance in the current market and economic environment.
5 unchanged sentences
We issue new shares to satisfy stock issuances under our stock incentive plans.
−Removed: Our Amended and Restated 2004 Stock Incentive Plan authorizes the issuance of up to 11,600,000 common shares in connection with the granting of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, or performance units to key employees, directors, and other designated employees.
+Added: Our Amended and Restated 2004 Stock Incentive Plan authorizes the issuance of up to 11,600,000 common shares in connection with the granting of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, or performance units to our employees and directors.
There were 1,764,132 shares of common stock available for future issuance under this plan as of September 27, 2020.
5 unchanged sentences
Compensation expense — The components of share-based compensation expense, included within “Selling, general, and administrative expenses” in our consolidated statement of earnings, in each fiscal year are as follows ( in thousands ):
+Added: 2020 2019 2018
Nonvested stock units $ 3,526 $ 5,458 $ 5,737
8 unchanged sentences
There were 34,700 of such RSUs outstanding as of September 27, 2020.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Beginning fiscal 2011 , we replaced the ownership share grants with time-vested RSUs for certain Vice Presidents and Officers that vest ratably over four to five years and have a 50 % or 100 % holding requirement on settled shares, which must be held until termination.
+Added: Beginning fiscal 2011, we eliminated ownership share grants to executive officers and implemented a stock holding requirement on grants of time-vesting RSUs that vest ratably over four years, and require executives to hold until termination of service 50 % of after-tax net shares resulting from the vesting of RSUs.
There were 46,351 of such RSUs outstanding as of September 27, 2020.
−Removed: RSUs issued to non-management directors and certain other employees vest 12 months from the date of grant, or upon termination of board service if the director or employee elects to defer receipt, and totaled 69,411 units outstanding as of September 29, 2019 .
+Added: RSUs issued to non-management directors vest 12 months from the date of grant, or upon termination of board service if the director elects to defer receipt and totaled 64,836 units outstanding as of September 27, 2020.
RSUs issued to certain other employees either cliff vest or vest ratably over three years and totaled 29,254 units outstanding as of September 27, 2020.
1 unchanged sentence
The following is a summary of RSU activity for fiscal 2020:
+Added: Shares Weighted-
Average Grant
RSUs outstanding at September 29, 2019 311,845 $ 66.18
+Added: Granted 76,429 $ 73.94
+Added: Released ( 126,694 ) $ 68.39
+Added: Forfeited ( 86,439 ) $ 83.05
RSUs outstanding at September 27, 2020 175,141 $ 59.65
2 unchanged sentences
In fiscal years 2020, 2019, and 2018, the total fair value of RSUs that vested and were released was $ 8.7 million, $ 4.7 million, and $ 4.4 million, respectively.
+Added: Modification of RSU awards — On April 16, 2020, we entered into a Retention, Transition and Separation Agreement with our former Chairman and Chief Executive Officer, which sets forth the terms of his transition and certain benefits he is eligible to receive, pro-rated through the duration of the transition period, which included vesting of his final tranche of unvested restricted stock units remaining under his November 2015 restricted stock unit award scheduled to vest in November 2020.
+Added: Consequently, 23,128 shares vested on his last day of employment on July 31, 2020.
+Added: This was accounted for as an equity award modification under ASC Topic 718, and as the fair value of the modified award was less than previously recognized compensation, no incremental compensation costs were recorded by the Company.
Stock options — Option grants have contractual terms of seven years and employee options vest over a three-year period.
2 unchanged sentences
The following is a summary of stock option activity for fiscal 2020:
+Added: Shares Weighted-
+Added: Price Weighted-
+Added: Term (Years) Aggregate
(in thousands)
Options outstanding at September 29, 2019 266,558 $ 89.54
+Added: Granted 129,173 $ 75.23
+Added: Exercised ( 62,305 ) $ 74.57
+Added: Forfeited ( 122,594 ) $ 77.95
+Added: Expired ( 3,369 ) $ 97.31
Options outstanding at September 27, 2020 207,463 $ 91.85 2.48 $ 252
Options exercisable at September 27, 2020 174,104 $ 94.67 1.81 $ 107
−Removed: Options exercisable and expected to vest at September 29, 2019
The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on September 27, 2020 exceeds the weighted-average exercise price.
1 unchanged sentence
The following table presents the weighted-average assumptions used for stock option grants in each fiscal year, along with the related weighted-average grant date fair value:
−Removed: Risk-free interest rate
−Removed: Expected dividends yield
−Removed: Expected stock price volatility
−Removed: Expected life of options (in years)
−Removed: Weighted-average grant date fair value
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: 2020 2019 2018
+Added: Risk-free interest rate 1.7 % N/A 2.4 %
+Added: Expected dividends yield 2.1 % N/A 1.8 %
+Added: Expected stock price volatility 28.1 % N/A 28.8 %
+Added: Expected life of options (in years) 3.47 N/A 3.40
+Added: Weighted-average grant date fair value $ 13.97 N/A $ 18.49
The risk-free interest rate was determined by a yield curve of risk-free rates based on published U.S.
3 unchanged sentences
The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends.
−Removed: As of September 29, 2019 , there was approximately $ 0.6 million of total unrecognized compensation cost related to stock options grants that is expected to be recognized over a weighted-average period of 1 year .
+Added: As of September 27, 2020, there was approximately $ 0.3 million of total unrecognized compensation cost related to stock options grants that is expected to be recognized over a weighted-average period of 2 years.
The total intrinsic value of stock options exercised was $ 0.7 million, $ 0.5 million, and $ 2.3 million in fiscal years 2020, 2019, and 2018, respectively.
6 unchanged sentences
The following is a summary of performance share award activity for fiscal 2020:
+Added: Shares Weighted-
Average Grant
Performance share awards outstanding at September 29, 2019 75,490 $ 83.40
+Added: Granted 23,600 $ 81.02
+Added: Issued ( 21,509 ) $ 97.51
+Added: Forfeited ( 50,336 ) $ 83.31
Performance adjustments ( 2,203 ) $ 86.84
7 unchanged sentences
These awards are amortized to compensation expense over the estimated vesting period based upon the fair value of our common stock on the award date.
−Removed: As of September 29, 2019 , RSAs outstanding totaled 33,243 shares with a weighted-average grant date fair value of $ 26.47 per share.
−Removed: In fiscal 2019 , there were no releases of RSAs.
−Removed: Compensation cost related to RSAs was fully recognized during the prior year.
+Added: During fiscal 2020, 33,243 RSAs were released with a weighted-average grant date fair value of $ 26.47 per share.
+Added: Compensation cost related to RSAs was fully recognized by the end of 2018.
+Added: As of September 27, 2020, there were no RSAs outstanding.
Non-management directors’ deferred compensation — All awards outstanding under our directors’ deferred compensation plan are accounted for as equity-based awards and deferred amounts are converted into stock equivalents based on a per share price equal to the average of the closing price of our common stock for the 10 trading days immediately preceding the date the deferred compensation is credited to the director’s account.
+Added: During fiscal 2020, 204 shares of common stock were issued in connection with director retirements with a fair value of less than $ 0.1 million.
During fiscal years 2019 and 2018 no common stock was issued in connection with director retirements.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the stock equivalent activity for fiscal 2020:
+Added: Equivalents Weighted-
Average Grant
2 unchanged sentences
Dividend equivalents 2,224 $ 68.80
+Added: Stock distribution ( 204 ) $ 86.74
Stock equivalents outstanding at September 27, 2020 105,876 $ 40.96
STOCKHOLDERS’ DEFICIT
−Removed: Repurchases of common stock — As of September 29, 2019 , there was approximately $ 175.7 million remaining under a Board-authorized stock buyback program, which expires in November 2020 .
−Removed: During fiscal 2019 , we repurchased 1.4 million shares at an aggregate cost of $ 125.3 million .
−Removed: Repurchases of common stock included in our consolidated statements of cash flows for fiscal 2019 and 2018 exclude $ 2.0 million and $ 14.4 million , respectively, related to repurchase transactions traded in the respective fiscal year that settled in the next applicable fiscal year.
−Removed: Repurchases of common stock for fiscal 2017 includes $ 7.2 million related to repurchase transactions traded in the prior fiscal year that settled in fiscal year 2017.
−Removed: Dividends — In fiscal 2019 , the Board of Directors declared four cash dividends of $ 0.40 per share totaling $ 41.4 million .
+Added: Repurchases of common stock — The Company purchased 1.9 million shares of its common stock in the first quarter of fiscal 2020 at an average price of $ 81.41 per shares for an aggregate cost of $ 153.5 million.
+Added: There were no other repurchases of common stock in fiscal 2020.
+Added: As of September 27, 2020, there was approximately $ 122.2 million remaining under share repurchase programs authorized by the Board of Directors, consisting of $ 22.2 million that expires in November 2020 and $ 100.0 million that expires in November 2021.
+Added: Repurchases of common stock included in our consolidated statement of cash flows for fiscal 2020 include $ 2.0 million related to repurchase transactions traded in fiscal 2019 but settled in fiscal 2020.
+Added: Dividends — In fiscal 2020, the Board of Directors declared three cash dividends of $ 0.40 per share totaling $ 27.7 million.
Future dividends are subject to approval by our Board of Directors.
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The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding in each fiscal year ( in thousands ):
+Added: 2020 2019 2018
Weighted-average shares outstanding — basic 23,125 25,823 28,499
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Excluded from diluted weighted-average shares outstanding:
+Added: Antidilutive 318 186 150
Performance conditions not satisfied at the end of the period 14 65 44
−Removed: COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS
−Removed: Commitments — As of September 29, 2019 , we had unconditional purchase obligations during the next five fiscal years as follows ( in thousands ):
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: These obligations primarily represent amounts payable under purchase contracts for goods related to system-wide restaurant operations.
+Added: COMMITMENTS AND CONTINGENCIES
+Added: Purchase commitments — We have entered into long-term beverage agreements with The Coca-Cola Company and Dr.
+Added: Pepper / Seven Up, Inc., which provide fountain products and certain marketing support funding to the Company and its franchisees.
+Added: These agreements require minimum purchases of fountain beverage syrup, by the Company and its franchisees at agreed upon prices until the total volume commitments have been reached.
+Added: The volume commitments are not subject to any time limit and as of September 27, 2020, we estimate that it will take approximately 5 years for both of these commitments to be completed.
+Added: The Company estimates future annual purchases under these agreements to be approximately $ 62.1 million as of September 27, 2020 based on the expected ratio of usage at company-operated to franchise restaurants.
+Added: We also have entered into various arrangements with vendors providing information technology services with no early termination fees.
+Added: The Company’s unconditional purchase obligations on these contracts total approximately $ 11.3 million over the next three years .
Legal matters — We assess contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in our financial statements.
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The ultimate amount of loss may differ from these estimates.
+Added: As of September 27, 2020 and September 29, 2019, the Company had recorded aggregate liabilities of $ 3.8 million and $ 10.0 million, respectively, within “Accrued liabilities” on our consolidated balance sheets for all matters including those described below, that were probable and reasonably estimable.
+Added: While we believe that additional losses beyond these accruals are reasonably possible, we cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond these accruals.
Jack in the Box Inc.
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In June 2017, the court granted class certification with respect to state law claims of improper deductions and late payment of final wages.
−Removed: In February 2019, plaintiff’s counsel reduced their earlier demand from $ 62.0 million to $ 42.0 million .
−Removed: We have accrued an amount that is not material to our consolidated financial statements relating to claims for which we believe a loss is both probable and estimable.
−Removed: We continue to believe that no additional losses are probable beyond this accrual and we cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond this accrual.
−Removed: We plan to vigorously defend against this lawsuit.
−Removed: Nonetheless, an unfavorable resolution of this matter in excess of our current accrued loss contingencies could have a material adverse effect on our business, results of operations, liquidity, or financial condition.
−Removed: Jack in the Box Inc.
−Removed: — On June 11, 2019, an unfavorable jury verdict was delivered in a wrongful termination lawsuit against the Company in Los Angeles Superior Court.
−Removed: The plaintiff in the case was a restaurant employee who was terminated in 2013.
−Removed: The jury’s verdict included $ 5.4 million in compensatory damages and $ 10.0 million in punitive damages.
−Removed: The Company filed post-trial motions with the trial judge for the purpose of setting aside or significantly reducing damages.
−Removed: These motions were granted, resulting in a reduction of damages from $ 15.4 million to $ 3.2 million .
−Removed: The plaintiff accepted the reduction.
−Removed: In October 2019, the plaintiff’s counsel filed a motion for attorney’s fees in the amount of $ 5.1 million .
−Removed: We intend to file an opposition to the motion in December 2019, and the hearing on the motions is scheduled for January 2020.
−Removed: As of September 29, 2019, we have recorded an accrual for legal settlement of $ 8.3 million within “Accrued liabilities” and a litigation insurance recovery receivable of $ 8.3 million , which represents the expected payment of the settlement by the Company’s insurance carriers, within “Accounts and other receivable, net” in our consolidated balance sheet.
+Added: In November 2019, the court issued a ruling on various dispositive motions, disallowing a portion of plaintiffs’ claimed damages.
+Added: The parties participated in a voluntary mediation on March 16, 2020, but the matter did not settle.
+Added: The plaintiffs recently filed a motion for reconsideration of the court’s prior denial of class certification regarding meal and rest break claims which was denied by the court.
+Added: The plaintiffs have now filed a motion requesting permission to appeal this ruling.
+Added: The Company has opposed the motion and the parties are currently awaiting a decision from the 9th Circuit as to whether or not it will allow the appeal.
+Added: The Company continues to dispute liability and the plaintiffs’ damage calculations and will continue to vigorously defend against the lawsuit.
Other legal matters — In addition to the matter described above, we are subject to normal and routine litigation brought by former or current employees, customers, franchisees, vendors, landlords, shareholders or others.
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however, it is possible that our business, results of operations, liquidity, or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period.
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION ( in thousands )
+Added: 2020 2019 2018
Cash paid during the year for:
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Decrease in equipment capital lease obligations from the sale of company-operated restaurants, closure of stores, and termination of equipment leases $ — $ — $ 3,617
−Removed: Decrease in capital lease obligations from the termination of building leases
−Removed: Equipment capital lease obligations incurred
+Added: Decrease in finance lease obligations from the termination of building leases $ 24 $ 41 $ 271
+Added: Equipment finance lease obligations incurred $ 132 $ 20 $ 98
Consideration for franchise acquisitions $ 859 $ — $ —
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(Decrease) increase in obligations for treasury stock repurchases $ ( 2,025 ) $ ( 12,337 ) $ 14,362
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION ( in thousands )
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Accounts and other receivables, net:
+Added: Trade $ 77,082 $ 36,907
Notes receivable 1,193 278
Income tax receivable 1,591 160
+Added: Other 4,092 10,855
Allowance for doubtful accounts ( 5,541 ) ( 2,965 )
−Removed: Prepaid expenses:
−Removed: Prepaid income taxes
−Removed: Prepaid advertising
+Added: $ 78,417 $ 45,235
Other assets, net:
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Deferred rent receivable 48,604 49,333
−Removed: Franchise tenant improvement allowance
+Added: Franchise tenant improvement allowances 29,437 26,925
+Added: Other 18,815 17,674
+Added: $ 210,623 $ 206,685
Accrued liabilities:
+Added: Insurance $ 25,310 $ 27,888
Payroll and related taxes 34,475 31,095
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Gift card liability 2,195 2,036
−Removed: Percentage rent accrual
Deferred franchise fees 4,934 4,978
+Added: Other 40,479 49,818
+Added: $ 129,431 $ 120,083
Other long-term liabilities:
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Straight-line rent accrual — 29,537
−Removed: JACK IN THE BOX INC.
−Removed: AND SUBSIDIARIES
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Other 47,076 72,678
+Added: $ 206,494 $ 263,770
UNAUDITED QUARTERLY RESULTS OF OPERATIONS ( in thousands, except per share data )
−Removed: 12 Weeks Ended
−Removed: Fiscal Year 2019
+Added: Ended 12 Weeks Ended
+Added: Fiscal Year 2020 January 19,
+Added: 2020 April 12,
2020 September 27,
+Added: Revenues $ 307,673 $ 216,157 $ 242,275 $ 255,401
Earnings from operations $ 69,950 $ 32,842 $ 61,790 $ 66,002
+Added: Net earnings $ 7,897 $ 11,463 $ 32,555 $ 37,849
Net earnings per share:
−Removed: 12 Weeks Ended
−Removed: Fiscal Year 2018
+Added: Basic $ 0.33 $ 0.50 $ 1.42 $ 1.65
+Added: Diluted $ 0.33 $ 0.50 $ 1.42 $ 1.64
+Added: Ended 12 Weeks Ended
+Added: Fiscal Year 2019 January 20,
+Added: 2019 April 14,
2019 September 29,
+Added: Revenues $ 290,786 $ 215,727 $ 222,359 $ 221,235
Earnings from operations $ 58,324 $ 47,123 $ 48,261 $ 48,515
+Added: Net earnings $ 34,098 $ 25,089 $ 13,189 $ 22,061
Net earnings per share:
+Added: Basic $ 1.32 $ 0.97 $ 0.51 $ 0.86
+Added: Diluted $ 1.31 $ 0.96 $ 0.50 $ 0.85
SUBSEQUENT EVENTS
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.