Company Quick10K Filing
Quick10K
Jack In The Box
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$77.11 26 $1,990
10-Q 2019-04-14 Quarter: 2019-04-14
10-Q 2019-01-20 Quarter: 2019-01-20
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-07-08 Quarter: 2018-07-08
10-Q 2018-04-15 Quarter: 2018-04-15
10-Q 2018-01-21 Quarter: 2018-01-21
10-K 2017-10-01 Annual: 2017-10-01
10-Q 2017-07-09 Quarter: 2017-07-09
10-Q 2017-04-16 Quarter: 2017-04-16
10-Q 2017-01-22 Quarter: 2017-01-22
10-K 2016-10-02 Annual: 2016-10-02
10-Q 2016-07-03 Quarter: 2016-07-03
10-Q 2016-04-10 Quarter: 2016-04-10
10-Q 2016-01-17 Quarter: 2016-01-17
10-K 2015-09-27 Annual: 2015-09-27
10-Q 2015-07-05 Quarter: 2015-07-05
10-Q 2015-04-12 Quarter: 2015-04-12
10-Q 2015-01-18 Quarter: 2015-01-18
10-K 2014-09-28 Annual: 2014-09-28
10-Q 2014-07-06 Quarter: 2014-07-06
10-Q 2014-04-13 Quarter: 2014-04-13
10-Q 2014-01-19 Quarter: 2014-01-19
8-K 2019-07-08 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-06-28 Enter Agreement, Other Events, Exhibits
8-K 2019-06-17 Other Events, Exhibits
8-K 2019-06-11 Other Events
8-K 2019-05-27 Officers, Exhibits
8-K 2019-05-15 Earnings, Exhibits
8-K 2019-05-15 Earnings, Other Events, Exhibits
8-K 2019-05-08 Regulation FD
8-K 2019-05-01 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-04-25 Enter Agreement, Exhibits
8-K 2019-02-20 Earnings, Exhibits
8-K 2019-02-13 Regulation FD, Exhibits
8-K 2019-01-04 Enter Agreement, Exhibits
8-K 2018-12-17 Other Events, Exhibits
8-K 2018-11-19 Earnings
8-K 2018-11-08 Regulation FD, Exhibits
8-K 2018-10-29 Enter Agreement, Exhibits
8-K 2018-10-25 Enter Agreement, Exhibits
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-08-01 Regulation FD, Exhibits
8-K 2018-05-30 Regulation FD, Exhibits
8-K 2018-05-16 Earnings
8-K 2018-05-09 Regulation FD, Exhibits
8-K 2018-03-21 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-03-01 Regulation FD, Exhibits
8-K 2018-02-27 Shareholder Vote
8-K 2018-02-21 Earnings, Exhibits
8-K 2018-02-14 Regulation FD, Exhibits
8-K 2018-01-23 Officers, Exhibits
8-K 2018-01-16 Officers, Exhibits
8-K 2018-01-02 Regulation FD, Exhibits
WPP WPP 15,850
JLL Jones Lang Lasalle 6,240
MEDP Medpace Holdings 2,020
PRGS Progress Software 1,960
NG Novagold Resources 1,250
ISRL Isramco 313
RREIO Resource Apartment REIT III 0
HAWK Blackhawk Network 0
TCPP Trinity Capital 0
NAP Navios Maritime Midstream Partners 0
JACK 2019-04-14
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 5.03. None.
Item 6. Exhibits
EX-31.1 ex311.htm
EX-31.2 ex312.htm
EX-32.1 ex321.htm
EX-32.2 ex322.htm

Jack In The Box Earnings 2019-04-14

JACK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 fy201910-qq2.htm 10-Q2 FY19 Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ____________________________________________________
FORM 10-Q
 _______________________________________________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 14, 2019
Commission File Number: 1-9390
jiblogo3cfinalcirclera03a02.jpg
 ____________________________________________________ 
JACK IN THE BOX INC.
(Exact name of registrant as specified in its charter)
 _______________________________________________________________________________________
DELAWARE
 
95-2698708
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
9330 BALBOA AVENUE, SAN DIEGO, CA
 
92123
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (858) 571-2121
   _______________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
JACK
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes  þ    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
¨
Non-accelerated filer
¨  
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨    No  þ
As of the close of business May 10, 2019, 25,813,361 shares of the registrant’s common stock were outstanding.



JACK IN THE BOX INC. AND SUBSIDIARIES
INDEX
 
 
 
Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
 
 
 
Condensed Consolidated Statements of Earnings
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Item 4.
 
PART II – OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Defaults of Senior Securities
Item 4.
Item 5.
Item 6.
 

1


PART I. FINANCIAL INFORMATION
 
ITEM 1.        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 
April 14,
2019
 
September 30,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
1,590

 
$
2,705

Accounts and other receivables, net
70,174

 
57,422

Inventories
1,949

 
1,858

Prepaid expenses
13,464

 
14,443

Current assets held for sale
12,915

 
13,947

Other current assets
5,244

 
4,598

Total current assets
105,336

 
94,973

Property and equipment:
 
 
 
Property and equipment, at cost
1,188,081

 
1,190,031

Less accumulated depreciation and amortization
(789,478
)
 
(770,362
)
Property and equipment, net
398,603

 
419,669

Other assets:
 
 
 
Intangible assets, net
486

 
600

Goodwill
46,747

 
46,749

Deferred tax assets
73,567

 
62,140

Other assets, net
207,388

 
199,266

Total other assets
328,188

 
308,755

 
$
832,127

 
$
823,397

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
42,591

 
$
31,828

Accounts payable
25,144

 
44,970

Accrued liabilities
114,393

 
106,922

Total current liabilities
182,128

 
183,720

Long-term liabilities:
 
 
 
Long-term debt, net of current maturities
1,014,864

 
1,037,927

Other long-term liabilities
227,649

 
193,449

Total long-term liabilities
1,242,513

 
1,231,376

Stockholders’ deficit:
 
 
 
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued

 

Common stock $0.01 par value, 175,000,000 shares authorized, 82,138,993 and 82,061,661 issued, respectively
821

 
821

Capital in excess of par value
475,871

 
470,826

Retained earnings
1,562,475

 
1,561,353

Accumulated other comprehensive loss
(101,242
)
 
(94,260
)
Treasury stock, at cost, 56,325,632 shares
(2,530,439
)
 
(2,530,439
)
Total stockholders’ deficit
(592,514
)
 
(591,699
)
 
$
832,127

 
$
823,397

See accompanying notes to condensed consolidated financial statements.

2


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Revenues:
 
 
 
 
 
 
 
Company restaurant sales
$
76,682

 
$
113,938

 
$
179,514

 
$
283,575

Franchise rental revenues
61,646

 
57,843

 
145,536

 
135,060

Franchise royalties and other
38,410

 
37,991

 
90,660

 
85,600

Franchise contributions for advertising and other services
38,989




90,803



 
215,727

 
209,772

 
506,513

 
504,235

Operating costs and expenses, net:
 
 
 
 
 
 
 
Company restaurant costs (excluding depreciation and amortization):
 
 
 
 
 
 
 
Food and packaging
21,676

 
32,638

 
51,292

 
81,502

Payroll and employee benefits
22,768

 
33,096

 
53,042

 
82,036

Occupancy and other
11,100

 
18,143

 
27,113

 
45,893

Total company restaurant costs
55,544

 
83,877

 
131,447

 
209,431

Franchise occupancy expenses (excluding depreciation and amortization)
38,618

 
36,065

 
89,331

 
82,586

Franchise support and other costs
2,797

 
2,583

 
5,642

 
5,065

Franchise advertising and other services expenses
40,245




94,515



Selling, general and administrative expenses
17,585

 
26,594

 
41,668

 
60,655

Depreciation and amortization
12,690

 
13,955

 
29,859

 
33,112

Impairment and other charges, net
1,125

 
4,927

 
8,823

 
7,184

Gains on the sale of company-operated restaurants

 
(5,472
)
 
(219
)
 
(14,412
)
 
168,604

 
162,529

 
401,066

 
383,621

Earnings from operations
47,123

 
47,243

 
105,447

 
120,614

Other pension and post-retirement expenses, net
343


423


799


987

Interest expense, net
13,276

 
10,413

 
30,650

 
23,193

Earnings from continuing operations and before income taxes
33,504

 
36,407

 
73,998

 
96,434

Income taxes
8,374

 
11,426

 
17,747

 
58,564

Earnings from continuing operations
25,130

 
24,981

 
56,251

 
37,870

(Losses) earnings from discontinued operations, net of income taxes
(41
)
 
22,624

 
2,936

 
21,925

Net earnings
$
25,089

 
$
47,605

 
$
59,187

 
$
59,795

 
 
 
 
 
 
 
 
Net earnings per share - basic:
 
 
 
 
 
 
 
Earnings from continuing operations
$
0.97

 
$
0.86

 
$
2.17

 
$
1.29

Earnings (losses) from discontinued operations

 
0.78

 
0.11

 
0.75

Net earnings per share (1)
$
0.97

 
$
1.64

 
$
2.28

 
$
2.04

Net earnings per share - diluted:
 
 
 
 
 
 
 
Earnings from continuing operations
$
0.96

 
$
0.85

 
$
2.15

 
$
1.27

Earnings (losses) from discontinued operations

 
0.77

 
0.11

 
0.74

Net earnings per share (1)
$
0.96

 
$
1.62

 
$
2.26

 
$
2.01

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.40

 
$
0.40

 
$
0.80

 
$
0.80

____________________________
(1)
Earnings per share may not add due to rounding.
See accompanying notes to condensed consolidated financial statements.

3


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Net earnings
$
25,089

 
$
47,605

 
$
59,187

 
$
59,795

Cash flow hedges:
 
 
 
 
 
 
 
Net change in fair value of derivatives
(4,959
)
 
4,295

 
(12,126
)
 
14,586

Net loss reclassified to earnings
134

 
876

 
613

 
2,550

 
(4,825
)
 
5,171

 
(11,513
)
 
17,136

Tax effect
1,244

 
(1,313
)
 
2,967

 
(4,352
)
 
(3,581
)
 
3,858

 
(8,546
)
 
12,784

Unrecognized periodic benefit costs:
 
 
 
 
 
 
 
Actuarial losses and prior service costs reclassified to earnings
904

 
1,151

 
2,109

 
2,686

Tax effect
(234
)
 
(292
)
 
(545
)
 
(834
)
 
670

 
859

 
1,564

 
1,852

Other:
 
 
 
 
 
 
 
Foreign currency translation adjustments

 
6

 

 
6

Tax effect

 
(2
)
 

 
(2
)
 

 
4

 

 
4

Derecognition of foreign currency translation adjustments due to sale

 
76

 

 
76

 

 
80

 

 
80

 
 
 
 
 
 
 
 
Other comprehensive (loss) income, net of taxes
(2,911
)
 
4,797

 
(6,982
)
 
14,716

 
 
 
 
 
 
 
 
Comprehensive income
$
22,178

 
$
52,402

 
$
52,205

 
$
74,511

See accompanying notes to condensed consolidated financial statements.


4


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
Cash flows from operating activities:
 
 
 
Net earnings
$
59,187

 
$
59,795

Earnings from discontinued operations
2,936

 
21,925

Earnings from continuing operations
56,251

 
37,870

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
29,859

 
33,112

Amortization of franchise tenant improvement allowances and other
1,137

 
265

Deferred finance cost amortization
1,224

 
1,725

Excess tax benefits from share-based compensation arrangements
(47
)
 
(816
)
Deferred income taxes
3,955

 
34,726

Share-based compensation expense
4,708

 
6,148

Pension and postretirement expense
799

 
1,252

Gains on cash surrender value of company-owned life insurance
(1,336
)
 
(312
)
Gains on the sale of company-operated restaurants
(219
)
 
(14,412
)
(Gains) losses on the disposition of property and equipment, net
(138
)
 
481

Impairment charges and other
896

 
1,502

Changes in assets and liabilities, excluding dispositions:
 
 
 
Accounts and other receivables
(11,658
)
 
(13,876
)
Inventories
(91
)
 
886

Prepaid expenses and other current assets
3,701

 
(5,458
)
Accounts payable
(3,904
)
 
(3,742
)
Accrued liabilities
(6,532
)
 
(35,959
)
Pension and postretirement contributions
(3,671
)
 
(3,077
)
Franchise tenant improvement allowance distributions
(6,697
)
 
(3,487
)
Other
(7,421
)
 
(7,551
)
Cash flows provided by operating activities
60,816

 
29,277

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(18,191
)
 
(18,347
)
Purchases of assets intended for sale and leaseback

 
(5,491
)
Proceeds from the sale and leaseback of assets
1,944

 
4,949

Proceeds from the sale of company-operated restaurants
133

 
16,844

Collections on notes receivable
6,491

 
9,722

Proceeds from the sale of property and equipment
1,479

 
600

Other

 
2,969

Cash flows (used in) provided by investing activities
(8,144
)
 
11,246

Cash flows from financing activities:
 
 
 
Borrowings on revolving credit facilities
189,736

 
283,200

Repayments of borrowings on revolving credit facilities
(180,800
)
 
(199,100
)
Principal repayments on debt
(21,757
)
 
(282,626
)
Debt issuance costs
(3,615
)
 
(1,367
)
Dividends paid on common stock
(20,615
)
 
(23,370
)
Proceeds from issuance of common stock
243

 
39

Repurchases of common stock
(14,362
)
 
(100,000
)
Change in book overdraft

 
1,397

Payroll tax payments for equity award issuances
(2,617
)
 
(4,268
)
Cash flows used in financing activities
(53,787
)
 
(326,095
)
Cash flows used in continuing operations
(1,115
)
 
(285,572
)
Net cash provided by operating activities of discontinued operations

 
5,503

Net cash provided by investing activities of discontinued operations

 
273,653

Net cash used in financing activities of discontinued operations

 
(78
)
Net cash provided by discontinued operations

 
279,078

Effect of exchange rate changes on cash

 
6

Cash at beginning of period
2,705

 
7,642

Cash at end of period
$
1,590

 
$
1,154

See accompanying notes to condensed consolidated financial statements.

5

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)









1.
BASIS OF PRESENTATION
Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® quick-service restaurants. The following table summarizes the number of restaurants as of the end of each period:
 
April 14,
2019
 
April 15,
2018
Company-operated
137

 
188

Franchise
2,103

 
2,057

Total system
2,240

 
2,245

References to the Company throughout these notes to condensed consolidated financial statements are made using the first person notations of “we,” “us” and “our.”
Basis of presentation — The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018 (“2018 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our 2018 Form 10-K with the exception of two new accounting pronouncements adopted in fiscal 2019, which are described below.
On December 19, 2017, we entered into a definitive agreement to sell Qdoba Restaurant Corporation (“Qdoba”), a wholly owned subsidiary of the Company which 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”). The sale was completed on March 21, 2018. For all periods presented in our condensed 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 8, Income Taxes), have been aggregated under the caption “(Losses) earnings from discontinued operations, net of income taxes.” Refer to Note 3, Discontinued Operations, for additional information.
Unless otherwise noted, amounts and disclosures throughout these notes to condensed consolidated financial statements relate to our continuing operations. In our opinion, all adjustments considered necessary for a fair presentation of financial condition and results of operations for these interim periods have been included. Operating results for one interim period are not necessarily indicative of the results for any other interim period or for the full year.
Segment reporting — As a result of our sale of Qdoba, which has been classified as discontinued operations, we now have one reporting segment.
Reclassifications and adjustments — We recorded certain adjustments in fiscal 2019 upon the adoption of a new accounting pronouncement; see details regarding the effects of the adoption on our condensed consolidated financial statements below.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2019 and 2018 include 52 weeks. Our first quarter includes 16-weeks and all other quarters include 12-weeks. All comparisons between 2019 and 2018 refer to the 12-weeks (“quarter”) and 28-weeks (“year-to-date”) ended April 14, 2019 and April 15, 2018, respectively, unless otherwise indicated.
Principles of consolidation — The condensed 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. All significant intercompany accounts and transactions are eliminated. The financial results and position of our VIE are immaterial to our condensed consolidated financial statements.
Use of estimates — In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make certain assumptions and estimates that affect reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies. In making these assumptions and estimates, management may from time to time seek advice and consider information provided by actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates.

6

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








Advertising costs — We administer a marketing fund which includes contractual contributions. In 2019 and 2018, marketing fund contributions from franchise and company-operated restaurants were approximately 5.0% of gross revenues, and year-to-date incremental contributions made by the Company were $2.0 million and $1.8 million, respectively.
Production costs of commercials, programming and other marketing activities are charged to the marketing fund when the advertising is first used for its intended purpose, and the costs of advertising are charged to operations as incurred. Total contributions made by the Company, including incremental contributions, are included in “Selling, general, and administrative expenses” in the accompanying condensed consolidated statements of earnings. Advertising costs for the quarter and year-to-date in 2019 were $3.9 million and $11.1 million, respectively, and in 2018, were $7.3 million and $16.1 million, respectively.
Effect of new accounting pronouncements adopted in fiscal 2019 — In May 2014, the FASB issued ASU 2014-09, Revenue Recognition - Revenue from Contracts with Customers (Topic 606) (“ASC 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. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. 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. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
The new revenue recognition standard did not impact our recognition of restaurant sales, rental revenues, or royalty fees from franchisees. The new pronouncement changed the way initial fees from franchisees for new restaurant openings or new franchise terms are recognized. 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. 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. As such, initial fees received will be recognized over the franchise term and any unamortized portion will be recorded as deferred revenue in our condensed consolidated balance sheet. 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. A deferred tax asset of approximately $13.0 million related to this contract liability was also established on the date of adoption.
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. 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. While this change materially impacted our gross amount of reported revenues and expenses, the impact will be largely offsetting with no material impact to our reported net earnings. However, any annual surplus or deficit in the marketing fund will impact income from operations and net income.

7

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)









The following table summarizes the impacts of adopting ASC 606 on the Company’s condensed consolidated financial statements as of and for the 12-weeks and 28-weeks ended April 14, 2019 (in thousands):
 
 
 
Adjustments
 
 
 
As Reported
 
Franchise Fees
 
Marketing and Sourcing Fees
 
Technology Support Fees
 
Balances without Adoption
Condensed Consolidated Statements of Earnings
 
 
 
 
 
 
 
 
 
12-Weeks Ended April 14, 2019
 
 
 
 
 
 
 
 
 
Franchise royalties and other
$
38,410

 
$
(972
)
 
$

 
$

 
$
37,438

Franchise contributions for advertising and other services
$
38,989

 
$

 
$
(36,956
)
 
$
(2,033
)
 
$

Total revenues
$
215,727

 
$
(972
)
 
$
(36,956
)
 
$
(2,033
)
 
$
175,766

Franchise advertising and other services expenses
$
40,245

 
$

 
$
(36,956
)
 
$
(3,289
)
 
$

Selling, general and administrative expenses
$
17,585

 
$

 
$

 
$
1,256

 
$
18,841

Total operating costs and expenses, net
$
168,604

 
$

 
$
(36,956
)
 
$
(2,033
)
 
$
129,615

Earnings from operations
$
47,123

 
$
(972
)
 
$

 
$

 
$
46,151

Earnings from continuing operations and before income taxes
$
33,504

 
$
(972
)
 
$

 
$

 
$
32,532

Income taxes
$
8,374

 
$
(250
)
 
$

 
$

 
$
8,124

Earnings from continuing operations
$
25,130

 
$
(722
)
 
$

 
$

 
$
24,408

Net earnings
$
25,089

 
$
(722
)
 
$

 
$

 
$
24,367

 
 
 
 
 
 
 
 
 
 
28-Weeks Ended April 14, 2019
 
 
 
 
 
 
 
 
 
Franchise royalties and other
$
90,660

 
$
(2,065
)
 
$

 
$

 
$
88,595

Franchise contributions for advertising and other services
$
90,803

 
$

 
$
(86,053
)
 
$
(4,750
)
 
$

Total revenues
$
506,513

 
$
(2,065
)
 
$
(86,053
)
 
$
(4,750
)
 
$
413,645

Franchise advertising and other services expenses
$
94,515

 
$

 
$
(86,053
)
 
$
(8,462
)
 
$

Selling, general and administrative expenses
$
41,668

 
$

 
$

 
$
3,712

 
$
45,380

Total operating costs and expenses, net
$
401,066

 
$

 
$
(86,053
)
 
$
(4,750
)
 
$
310,263

Earnings from operations
$
105,447

 
$
(2,065
)
 
$

 
$

 
$
103,382

Earnings from continuing operations and before income taxes
$
73,998

 
$
(2,065
)
 
$

 
$

 
$
71,933

Income taxes
$
17,747

 
$
(532
)
 
$

 
$

 
$
17,215

Earnings from continuing operations
$
56,251

 
$
(1,533
)
 
$

 
$

 
$
54,718

Net earnings
$
59,187

 
$
(1,533
)
 
$

 
$

 
$
57,654

 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheet
 
 
 
 
 
 
 
 
 
April 14, 2019
 
 
 
 
 
 
 
 
 
Prepaid expenses
$
13,464

 
$
532

 
$

 
$

 
$
13,996

Total current assets
$
105,336

 
$
532

 
$

 
$

 
$
105,868

Deferred tax assets
$
73,567

 
$
(12,958
)
 
$

 
$

 
$
60,609

Other assets, net
$
207,388

 
$
269

 
$

 
$

 
$
207,657

Total other assets
$
328,188

 
$
(12,689
)
 
$

 
$

 
$
315,499

Total assets
$
832,127

 
$
(12,157
)
 
$

 
$

 
$
819,970

Accrued liabilities
$
114,393

 
$
(4,964
)
 
$

 
$

 
$
109,429

Total current liabilities
$
182,128

 
$
(4,964
)
 
$

 
$

 
$
177,164

Other long-term liabilities
$
227,649

 
$
(42,989
)
 
$

 
$

 
$
184,660

Total long-term liabilities
$
1,242,513

 
$
(42,989
)
 
$

 
$

 
$
1,199,524

Retained earnings
$
1,562,475

 
$
35,796

 
$

 
$

 
$
1,598,271

Total stockholders’ deficit
$
(592,514
)
 
$
35,796

 
$

 
$

 
$
(556,718
)
Total liabilities and stockholders’ deficit
$
832,127

 
$
(12,157
)
 
$

 
$

 
$
819,970

The adoption of ASC 606 had no impact on the Company’s cash provided by or used in operating, investing or financing activities as previously reported in its condensed consolidated statement of cash flows.

8

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This standard requires the presentation of the service cost component of net benefit costs to be in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. All other components of net benefit costs should be presented separately from the service cost component and outside of a subtotal of earnings from operations, or separately disclosed. We adopted this standard in the first quarter of fiscal 2019 applying the retrospective method. As a result of the adoption, 2018 quarter and year-to-date amounts of $0.4 million and $1.0 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.
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. Based on a preliminary assessment, we expect that most of our 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. We do not expect the adoption of this guidance to have a material impact on our consolidated statement of earnings and statement of cash flows. We will be required to adopt these standards in the first quarter of fiscal 2020 and plan 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. We are continuing our evaluation, which may identify additional impacts this standard and its amendments will have on our consolidated financial statements and related disclosures.

2.
REVENUE
Nature of products and services — We derive revenue from retail sales at Jack in the Box company-operated restaurants and rental revenue, royalties, advertising, and franchise and other fees from franchise-operated restaurants.
Our franchise arrangements generally provide for an initial franchise fee of $50,000 per restaurant and generally require that franchisees pay royalty and marketing fees at 5% of gross sales. The agreement also requires franchisees to pay sourcing, technology and other miscellaneous fees.
Significant accounting policy — “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. 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. The timing and amount of revenue recognized related to company restaurant sales was not impacted by the adoption of ASC 606.
“Franchise royalties and other” includes royalties fees and franchise and other fees received from franchisees. Royalties are based upon a percentage of sales of the franchised restaurant and are recognized as earned. Franchise royalties are billed on a monthly basis. Franchise fees when a new restaurant opens or at the start of a new franchise term are recorded as deferred revenue when received and recognized as revenue over the term of the franchise agreement.
“Franchise contributions for advertising and other services” includes franchisee contributions to our marketing fund billed on a monthly basis and sourcing and technology fees, as required under the franchise agreements. Contributions to our marketing fund are based on a percentage of sales and recognized as earned. Sourcing and technology services are recognized when the goods or services are transferred to the franchisee. The adoption of the new revenue standard did not impact the timing of revenue recognition for these fees received; however, these arrangements are now presented on a gross basis because we believe we are the principal in the arrangement.
“Franchise rental revenues” received from franchised restaurants based on fixed rental payments are recognized as revenue over the term of the lease. Certain franchise rents, which are contingent upon sales levels, are recognized in the period in which the contingency is met. Rental revenues are accounted for in accordance with applicable guidance for leases and are excluded from the scope of the new revenue standard.

9

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








Disaggregation of revenue — The following table disaggregates revenue by primary source for the 12-weeks and 28-weeks ended April 14, 2019 (in thousands):
 
Quarter
 
Year-to-date
Sources of revenue:
 
 
 
Company restaurant sales
$
76,682

 
$
179,514

Franchise rental revenues
61,646

 
145,536

Franchise royalties
37,148

 
86,655

Marketing fees
35,947

 
83,810

Technology and sourcing fees
3,042

 
6,993

Franchise fees and other services
1,262

 
4,005

Total revenue
$
215,727

 
$
506,513

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. We classify these contract liabilities as “Other long-term liabilities” and “Accrued liabilities” in our condensed consolidated balance sheets.
A summary of significant changes in our contract liabilities between the date of adoption (October 1, 2018) and April 14, 2019 is presented below (in thousands):
 
 
Deferred Franchise Fees
Deferred franchise fees at October 1, 2018
 
$
50,018

Revenue recognized during the period
 
(2,745
)
Additions during the period
 
680

Deferred franchise fees at April 14, 2019
 
$
47,953

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):
2019 (1)
 
$
2,290

2020
 
4,870

2021
 
4,848

2022
 
4,649

2023
 
4,494

Thereafter
 
26,802

 
 
$
47,953

____________________________
(1)     Represents the estimate for remainder of fiscal year 2019.

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.

3.
DISCONTINUED OPERATIONS
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”).

10

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








We also entered into a Transition Services Agreement with the Buyer pursuant to which the Buyer is receiving certain services (the “Services”) to enable it to operate the Qdoba business after the closing of the Qdoba Sale. The Services include information technology, finance and accounting, human resources, supply chain and other corporate support services. Under the Agreement, the Services are being provided at cost for a period of up to 12 months, with two 3-month extensions available for certain services. We are still providing accounting and information technology services under the Agreement and currently estimate these services will be performed up to, but no later than, the end of the fourth quarter of fiscal 2019. In 2019 and 2018, we recorded $1.9 million and $1.1 million in the quarter, respectively, and $5.6 million and $1.1 million year-to-date, respectively, in income related to the Services as a reduction of selling, general and administrative expenses in the condensed consolidated statements of earnings.
Further, in 2018, we entered into an Employee Agreement with the Buyer pursuant to which we continued to employ all Qdoba employees who work for the Buyer (the “Qdoba Employees”) from the date of closing of the Qdoba Sale through December 31, 2018. During the term of the Employee Agreement, we paid all wages and benefits of the Qdoba Employees and received reimbursement of these costs from the Buyer. From October 1, 2018 to December 31, 2018, we paid $35.4 million of Qdoba wages and benefits pursuant to the Employee Agreement.
As the Qdoba Sale represents 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 condensed consolidated statements of earnings and our condensed consolidated statements of cash flows for all periods presented.
Income taxes — In fiscal 2019, the Company entered into a bilateral California election with Quidditch Acquisition, Inc. 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. This election reduced the Company’s fiscal year 2018 California tax liability on the divestment by $2.8 million.
The following table summarizes the Qdoba-related activity for each period in discontinued operations (in thousands, except per share data):
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Company restaurant sales
$

 
$
66,850

 
$

 
$
192,620

Franchise revenues

 
3,351

 

 
9,337

Company restaurant costs (excluding depreciation and amortization)

 
(57,504
)
 

 
(166,122
)
Franchise costs (excluding depreciation and amortization)

 
(930
)
 

 
(2,338
)
Selling, general and administrative expenses
(59
)
 
(5,848
)
 
243

 
(18,112
)
Depreciation and amortization

 

 

 
(5,012
)
Impairment and other charges, net

 
(594
)
 

 
(2,263
)
Interest expense, net

 
(1,575
)
 

 
(4,787
)
Operating (losses) earnings from discontinued operations before income taxes
(59
)
 
3,750

 
243

 
3,323

Gain (loss) on Qdoba Sale

 
35,729

 
(85
)
 
35,729

(Losses) earnings from discontinued operations before income taxes
(59
)
 
39,479

 
158

 
39,052

Income tax benefit (expense)
18

 
(16,819
)
 
2,778

 
(17,024
)
(Losses) earnings from discontinued operations, net of income taxes
$
(41
)
 
$
22,660

 
$
2,936

 
$
22,028

 
 
 
 
 
 
 
 
Net earnings per share from discontinued operations:
 
 
 
 
 
 
 
Basic
$

 
$
0.78

 
$
0.11

 
$
0.75

Diluted
$

 
$
0.77

 
$
0.11

 
$
0.74

Selling, general and administrative expenses presented in the table above include corporate costs directly in support of Qdoba operations. All other corporate costs were classified in results of continuing operations. 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. In accordance with authoritative guidance on financial statement presentation, interest expense associated with our credit facility was allocated to discontinued operations in the prior year based on our estimate of the mandatory prepayment that was made upon closing of the Qdoba Sale.

11

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








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. 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 $35.3 million as of April 14, 2019. The lease terms extend for a maximum of approximately 17 more years as of April 14, 2019, 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. 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. As such, we have not recorded a liability for the Guarantees as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable.

4.
SUMMARY OF REFRANCHISINGS AND FRANCHISEE DEVELOPMENT
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 period (dollars in thousands):
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Restaurants sold to franchisees

 
63

 

 
85

New restaurants opened by franchisees
2

 
3

 
11

 
8

 
 
 
 
 
 
 
 
Proceeds from the sale of company-operated restaurants:
 
 
 
 
 
 
 
       Cash (1)
$

 
$
11,253

 
$
133

 
$
16,844

       Notes receivable

 
22,422

 

 
31,506

 

 
33,675

 
133

 
48,350

 
 
 
 
 
 
 
 
Net assets sold (primarily property and equipment)

 
(9,509
)
 

 
(13,146
)
Goodwill related to the sale of company-operated restaurants

 
(3,807
)
 
(2
)
 
(3,960
)
Other (2)

 
(14,887
)
 
88

 
(16,832
)
Gains on the sale of company-operated restaurants
$

 
$
5,472

 
$
219

 
$
14,412

____________________________
(1)
The year-to-date amounts in 2019 and 2018 include additional proceeds of $0.1 million and $1.2 million, respectively, related to restaurants sold in prior years.
(2)
Amounts in 2018 are primarily related to an $8.8 million reduction of gains related to the modification of certain 2017 refranchising transactions. The quarter and year-to-date amounts in 2018 also include $3.7 million and $5.2 million, respectively, of costs related to franchise remodel incentives.


12

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








5.
FAIR VALUE MEASUREMENTS
Financial assets and liabilities — The following table presents our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 
Total      
 
Quoted Prices
in Active
Markets for
Identical
Assets (3)
(Level 1)
 
Significant
Other
Observable
Inputs (3)
(Level 2)
 
Significant
Unobservable
Inputs (3)
(Level 3)
Fair value measurements as of April 14, 2019:
 
 
 
 
 
 
 
Non-qualified deferred compensation plan (1)
$
31,801

 
$
31,801

 
$

 
$

Interest rate swaps (Note 6) (2) 
12,216

 

 
12,216

 

Total liabilities at fair value
$
44,017

 
$
31,801

 
$
12,216

 
$

Fair value measurements as of September 30, 2018:
 
 
 
 
 
 
 
Non-qualified deferred compensation plan (1)
$
37,447

 
$
37,447

 
$

 
$

Interest rate swaps (Note 6) (2) 
703

 

 
703

 

Total liabilities at fair value
$
38,150

 
$
37,447

 
$
703

 
$

 
____________________________
(1)
We maintain an unfunded defined contribution plan for key executives and other members of management. The fair value of this obligation is based on the closing market prices of the participants’ elected investments. The obligation is included in “Accrued liabilities” and “Other long-term liabilities” on our condensed consolidated balance sheets.
(2)
We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable rate debt. The fair values of our interest rate swaps are based upon Level 2 inputs which include valuation models as reported by our counterparties. These valuation models use a discounted cash flow analysis on the cash flows of each derivative. The key inputs for the valuation models are quoted market prices, discount rates and forward yield curves. The Company also considers its own nonperformance risk and the respective counter-party’s nonperformance risk in the fair value measurements.
(3)
We did not have any transfers in or out of Level 1, 2 or 3.

The fair values of our debt instruments are based on the amount of future cash flows associated with each instrument discounted using our borrowing rate. At April 14, 2019, the carrying value of all financial instruments was not materially different from fair value, as the borrowings are prepayable without penalty. The estimated fair values of our capital lease obligations approximated their carrying values as of April 14, 2019.
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. 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. If applicable, the carrying values are written down to fair value.
In connection with our impairment reviews performed during 2019, no material fair value adjustments were required. Refer to Note 7, Impairment and Other Charges, Net, for additional information regarding impairment charges.


13

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








6.
DERIVATIVE INSTRUMENTS
Objectives and strategies — We are exposed to interest rate volatility with regard to our variable rate debt. In June 2015, we entered into forward-starting interest rate swap agreements that effectively converted $500.0 million of our variable rate borrowings to a fixed rate from October 2018 through October 2022.
These agreements have been designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. 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 included in earnings but are included in other comprehensive income (“OCI”). These changes in fair value are subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments are made on our variable rate debt.
Financial position — The following derivative instruments were outstanding as of the end of each period (in thousands):
 
Balance
Sheet
Location
 
Fair Value
 
 
April 14,
2019
 
September 30, 2018
Derivatives designated as hedging instruments:
 
 
 
 
 
Interest rate swaps
Accrued liabilities
 
$
(1,308
)
 
$
(26
)
Interest rate swaps
Other long-term liabilities
 
(10,908
)
 
(1,266
)
Interest rate swaps
Other assets, net
 

 
589

Total derivatives
 
 
$
(12,216
)
 
$
(703
)
Financial performance — The following table summarizes the OCI activity related to our interest rate swap derivative instruments (in thousands):
 
Location in Income
 
Quarter
 
Year-to-date
 
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
(Loss) gain recognized in OCI
N/A
 
$
(4,959
)
 
$
4,295

 
$
(12,126
)
 
$
14,586

Loss reclassified from accumulated OCI into net earnings
Interest expense, net
 
$
134

 
$
876

 
$
613

 
$
2,550

Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparties for the effective portions of the interest rate swaps. During the periods presented, our interest rate swaps had no hedge ineffectiveness.

7.
IMPAIRMENT AND OTHER CHARGES, NET
Impairment and other charges, net in the accompanying condensed consolidated statements of earnings is comprised of the following (in thousands):
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Restructuring costs
$
946


$
2,575


$
6,786


$
2,933

Costs of closed restaurants and other
383


1,730


1,249


3,177

Accelerated depreciation
510


324


926


382

(Gains) losses on disposition of property and equipment, net (1)
(714
)

298


(138
)

481

Operating restaurant impairment charges (2)






211

 
$
1,125

 
$
4,927

 
$
8,823

 
$
7,184

____________________________
(1)
In 2019, includes an $0.8 million gain related to an eminent domain transaction.
(2)
In 2018, impairment charges relate to our landlord’s sale of a restaurant property to a franchisee.

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. 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. Refer to Note 3, Discontinued Operations, for information regarding the Qdoba Sale.

14

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)









The following is a summary of our restructuring costs (in thousands):
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Employee severance and related costs
$
642

 
$
1,808

 
$
5,148

 
$
1,352

Strategic Alternatives Evaluation (1)
304

 

 
1,638

 

Qdoba Evaluation (2)

 
767

 

 
1,580

Other

 

 

 
1

 
$
946

 
$
2,575

 
$
6,786

 
$
2,933

____________________________
(1)
Strategic Alternative Evaluation costs are primarily related to third party advisory services.
(2)
Qdoba Evaluation costs are primarily related to retention compensation and third party advisory services.
We currently expect to recognize severance and related costs of approximately $0.6 million for the remainder of fiscal 2019 related to positions that have been identified for elimination. At this time, we are unable to estimate any additional charges to be incurred related to additional positions that may be identified for elimination or our other restructuring activities.
Total accrued severance costs related to our restructuring activities are included in “Accrued liabilities” on our condensed consolidated balance sheets, and changed as follows during 2019 (in thousands):
Balance as of September 30, 2018
 
$
5,309

Costs incurred
 
5,665

Accruals released
 
(586
)
Cash payments
 
(6,378
)
Balance as of April 14, 2019
 
$
4,010

Costs of closed restaurants and other — Costs of closed restaurants and other is generally comprised of 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.
The liability for lease termination costs related to closed restaurants, included in “Accrued liabilities” and “Other long-term liabilities” on our condensed consolidated balance sheets, changed as follows during 2019 (in thousands):
Balance as of September 30, 2018
 
$
3,534

Additions
 

Adjustments (1)
 
203

Interest expense
 
794

Cash payments
 
(1,994
)
Balance as of April 14, 2019 (2) (3)
 
$
2,537

___________________________
(1)
Adjustments relate primarily to revisions of certain sublease and cost assumptions. 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.
(2)
The weighted average remaining lease term related to these commitments is approximately 4 years.
(3)
This balance excludes $1.9 million of restaurant closing costs that are included in “Accrued liabilities” and “Other long-term liabilities” on our condensed consolidated balance sheets, which were initially recorded as losses on the sale of company-operated restaurants to franchisees.
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.

15

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)









8.
INCOME TAXES
Our tax rates for the quarter and year-to-date ended April 14, 2019 were impacted by the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted into law on December 22, 2017. As a fiscal year taxpayer, the corporate federal tax rate reduction from 35% to 21% was phased in, resulting in a statutory federal tax rate of 24.5% for our fiscal year ending September 30, 2018, and 21.0% for our fiscal year ending September 29, 2019 and subsequent fiscal years.
In 2019 and 2018, income tax provisions reflect quarter tax rates of 25.0% and 31.4%, respectively, and year-to-date tax rates of 24.0% and 60.7%, respectively. The major components of the year-over-year change in tax rates were a non-cash impact of the enactment of the Tax Act in fiscal year 2018, a decrease in the statutory tax rate, and an adjustment related to state taxes recorded in the first quarter of fiscal year 2019, partially offset by a decrease in the excess tax benefit on stock compensation. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 2019 rate could differ from our current estimates.
The following is a summary of the components of each tax rate (dollars in thousands):
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Income tax expense at statutory rate
$
8,633

 
25.8
 %
 
$
10,717

 
29.4
%
 
$
19,068

 
25.8
 %
 
$
28,037

 
29.1
 %
Stock compensation excess tax expense (benefit)
3

 
 %
 
(14
)
 
%
 
(47
)
 
(0.1
)%
 
(816
)
 
(0.9
)%
Non-cash impact of the Tax Act

 
 %
 
577

 
1.6
%
 

 
 %
 
31,204

 
32.4
 %
Adjustment to state tax provision

 
 %
 

 
%
 
(1,027
)
 
(1.4
)%
 

 
 %
Other
(262
)
 
(0.8
)%
 
146

 
0.4
%
 
(247
)
 
(0.3
)%
 
139

 
0.1
 %
(1)
$
8,374

 
25.0
 %
 
$
11,426

 
31.4
%
 
$
17,747

 
24.0
 %
 
$
58,564

 
60.7
 %
____________________________
(1)
Percentages may not add due to rounding.


16

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








9.
RETIREMENT PLANS
Defined benefit pension plans — We sponsor two defined benefit pension plans, a frozen “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. Benefits under both plans are based on the employee’s years of service and compensation over defined periods of employment.
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.
Net periodic benefit cost — The components of net periodic benefit cost in each period were as follows (in thousands): 
  
Quarter
 
Year-to-date
  
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Defined benefit pension plans:
 
 
 
 
 
 
 
Interest cost
$
5,286

 
$
5,160

 
$
12,334

 
$
12,039

Service cost

 
114

 

 
265

Expected return on plan assets (1)
(6,077
)
 
(6,108
)
 
(14,181
)
 
(14,252
)
Actuarial loss (2)
913

 
1,123

 
2,132

 
2,621

Amortization of unrecognized prior service costs (2)
27

 
34

 
62

 
79

Net periodic benefit cost
$
149

 
$
323

 
$
347

 
$
752

Postretirement healthcare plans:
 
 
 
 
 
 
 
Interest cost
$
230

 
$
220

 
$
537

 
$
514

Actuarial gain (2)
(36
)
 
(6
)
 
(85
)
 
(14
)
Net periodic benefit cost
$
194

 
$
214

 
$
452

 
$
500

___________________________
(1)
Determined as of the beginning of the year based on a return on asset assumption of 6.2%.
(2)
Amounts were reclassified from accumulated OCI into net earnings as a component of “Other pension and post-retirement expenses, net.”
Changes in presentation —As discussed in Note 1, Basis in Presentation, 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. The service cost component continues to be included in operating income; 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 condensed consolidated statements of earnings. 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. The prior year components of net periodic benefit costs have been recast to conform to current year presentation.
Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of January 1, 2018, the date of our last actuarial funding valuation, there was no minimum contribution funding requirement. Details regarding 2019 contributions are as follows (in thousands):
 
SERP
 
Postretirement
Healthcare Plans
Net year-to-date contributions
$
2,989

 
$
682

Remaining estimated net contributions during fiscal 2019
$
2,100

 
$
700

We 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 the economic environment. We do not anticipate making any contributions to our Qualified Plan in fiscal 2019.


17

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








10.
STOCKHOLDERS’ DEFICIT
Summary of changes in stockholders’ deficit A reconciliation of the beginning and ending amounts of deficit is presented below (in thousands):
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Balance at beginning of period
$
(607,296
)
 
$
(374,560
)
 
$
(591,699
)
 
$
(388,130
)
Shares issued under stock plans, including tax benefit
128

 
39

 
243

 
39

Share-based compensation
2,799

 
2,882

 
4,708

 
6,267

Dividends declared
(10,323
)
 
(11,673
)
 
(20,641
)
 
(23,446
)
Purchases of treasury stock

 
(100,000
)
 

 
(100,000
)
Net earnings
25,089

 
47,605

 
59,187

 
59,795

Other comprehensive (loss) income, net of taxes
(2,911
)
 
4,797

 
(6,982
)
 
14,716

Cumulative-effect from a change in accounting principle

 

 
(37,330
)
 
(151
)
Balance at end of period
$
(592,514
)
 
$
(430,910
)
 
$
(592,514
)
 
$
(430,910
)
Repurchases of common stock In 2019, we have not repurchased any common shares. In November 2018, the Board of Directors approved an additional $60.0 million stock-buyback program that expires in November 2019. As of April 14, 2019, there was approximately $101.0 million remaining under the Board-authorized stock buyback program which expire November 2019.
Repurchases of common stock included in our condensed consolidated statement of cash flows for fiscal 2019 includes $14.4 million related to repurchase transactions traded in the prior fiscal year that settled in 2019.
Dividends — During year-to-date 2019, the Board of Directors declared two cash dividends of $0.40 per common share which were paid on March 19, 2019 and December 18, 2018 to shareholders of record as of the close of business on March 4, 2019 and December 5, 2018, respectively, and totaled $20.7 million. Future dividends are subject to approval by our Board of Directors.

11.
AVERAGE SHARES OUTSTANDING
Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive common shares include stock options, nonvested stock awards and units, and non-management director stock equivalents. Performance share awards are included in the average diluted shares outstanding each period if the performance criteria have been met at the end of the respective periods.

The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):
 
Quarter
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
 
April 14,
2019
 
April 15,
2018
Weighted-average shares outstanding – basic
25,943

 
29,040

 
25,922

 
29,332

Effect of potentially dilutive securities:
 
 
 
 
 
 
 
Nonvested stock awards and units
190

 
268

 
203

 
311

Stock options
10

 
41

 
10

 
55

Performance share awards
2

 
7

 
2

 
7

Weighted-average shares outstanding – diluted
26,145

 
29,356

 
26,137

 
29,705

Excluded from diluted weighted-average shares outstanding:
 
 
 
 
 
 
 
Antidilutive
186

 
150

 
186

 
116

Performance conditions not satisfied at the end of the period
89

 
67

 
89

 
67



18

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)









12.
CONTINGENCIES AND LEGAL MATTERS 
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. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. We regularly review contingencies to determine the adequacy of the accruals and related disclosures. The ultimate amount of loss may differ from these estimates.  
Gessele v. Jack in the Box Inc. — In August 2010, five former employees instituted litigation in federal court in Oregon alleging claims under the federal Fair Labor Standards Act and Oregon wage and hour laws. The plaintiffs alleged that the Company failed to pay non-exempt employees for certain meal breaks and improperly made payroll deductions for shoe purchases and for workers’ compensation expenses, and later added additional claims relating to timing of final pay and related wage and hour claims involving employees of a franchisee. In 2016, the court dismissed the federal claims and those relating to franchise employees. In June 2017, the court granted class certification with respect to state law claims of improper deductions and late payment of final wages. In February 2019, plaintiff’s counsel reduced their earlier demand from $62 million to $42 million. We have accrued an amount that is not material to our financial statements for claims which we believe a loss is both probable and estimable. 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. We plan to vigorously defend against this lawsuit. 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.
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. We intend to defend ourselves in any such matters. Some of these matters may be covered, at least in part, by insurance or other third party indemnity obligation. Our insurance liability (undiscounted) and reserves are established in part by using independent actuarial estimates of expected losses for reported claims and for estimating claims incurred but not reported. We believe that the ultimate determination of liability in connection with legal claims pending against us, if any, in excess of amounts already provided for such matters in the consolidated financial statements, will not have a material adverse effect on our business, our annual results of operations, liquidity or financial position; 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.
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. 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. 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. As such, we have not recorded a liability for the Guarantees as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable. Refer to Note 3, Discontinued Operations, for additional information regarding the Guarantees.


19

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)








13.
SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)
 
Year-to-date
 
April 14,
2019
 
April 15,
2018
Non-cash investing and financing transactions:
 
 
 
Decrease in obligations for treasury stock repurchases
$
14,362

 
$

Decrease in obligations for purchases of property and equipment
$
5,368

 
$
3,465

Increase in dividends accrued or converted to common stock equivalents
$
121

 
$
160

Decrease in capital lease obligations from the termination of equipment and building leases
$
41

 
$
2,563

Increase in notes receivable from the sale of company-operated restaurants
$

 
$
31,506

Equipment capital lease obligations incurred
$