SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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~~_______________________________________________________________________________________~~

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 19, 2020

~~For~~for the ~~quarterly~~transition period ~~ended January 21, 2018~~from ________to________.

Commission File Number: 1-9390

JACK IN THE BOX INC.

Registrant’s telephone number, including area code (858) 571-2121

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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.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

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).

As of the close of business February ~~16, 2018, 29,532,155~~14, 2020, 22,630,771 shares of the registrant’s common stock were outstanding.

Condensed Consolidated Statements of Earnings

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

See accompanying notes to condensed consolidated financial statements.

____________________________

(1)Earnings per share may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

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:

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 ~~October 1, 2017~~September 29, 2019 (“~~2017~~2019 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our ~~2017~~2019 Form 10-K with the exception of ~~two~~the new lease accounting ~~pronouncements~~standard adopted in fiscal ~~2018,~~2020, which ~~are~~is 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”). All assets being sold and liabilities being conveyed to the Buyer are presented as “held for sale” on the condensed consolidated balance sheets. Additionally, 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 7, ~~Income Taxes)~~, have been aggregated under the caption “(losses) earnings from discontinued operations, net of income taxes.” Cash flows used in or provided by Qdoba operations have been aggregated in the condensed consolidated statement of cash flows as part of discontinued operations. Prior year results have been recast to conform with the current presentation. Refer to Note 2, ~~Discontinued Operations, for additional information.~~

During fiscal 2012, we entered into an agreement to outsource our Jack in the Box distribution business and the related results of operations for this business are also reported as discontinued operations for all periods presented. Refer to Note 2, ~~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 — ~~Prior to the decision to sell Qdoba, we had two reporting segments, Jack in the Box restaurant operations and Qdoba restaurant operations.~~ The ~~reportable segments did not include an allocation~~Company is comprised of the costs related to shared corporate service functions; nor did they include unallocated costs such as pension expense, share-based compensation and restructuring expense. As a result of the decision to sell Qdoba, which has been classified as discontinued operations, we now have one reporting1 operating segment. ~~Revenues and costs related to our Jack in the Box restaurant operations, including indirect corporate overhead costs, are reported within results from continuing operations. See Note 2,~~ ~~Discontinued Operations, for additional information regarding the planned sale of Qdoba.~~

~~Reclassifications and adjustments~~ ~~— Certain prior year amounts in the condensed consolidated financial statements have been reclassified due to our Board of Director’s approval to sell Qdoba. See Note 2,~~ ~~Discontinued Operations~~, for further information regarding this planned sale and the resulting prior year reclassifications. We recorded certain adjustments in 2018 upon the adoption of a new accounting pronouncement; see details regarding the effects of the adoption on our condensed consolidated financial statements below. Further, in 2018, we began presenting depreciation and amortization as a separate line item on our condensed consolidated statements of earnings to better align with similar presentation made by many of our peers and to provide additional disclosure that is meaningful for our investors. The prior year condensed consolidated statement of earnings was adjusted to conform with this new presentation. Depreciation and amortization were previously presented within company restaurant costs, franchise occupancy expenses, selling,

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~general and administrative expenses, and impairment and other charges, net on our condensed consolidated statement of earnings.~~

Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years ~~2018~~2020 and ~~2017~~2019 include 52 weeks. Our first quarter includes 16-weeks and all other quarters include 12-weeks. All comparisons between ~~2018~~2020 and ~~2017~~2019 refer to the 16-weeks (“quarter”) ended January ~~21, 2018~~19, 2020 and January ~~22, 2017,~~20, 2019, 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.

On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law, or if in certain cases, the U.S. Treasury is expected to issue further guidance on the application of certain provisions of the U.S. legislation. See Note 7, ~~Income Taxes, for additional details on the provisional tax expense recognized in accordance with SAB 118.~~

Advertising costs — We administer a marketing fund which includes contractual contributions. In ~~2018, the~~2020 and 2019, marketing fund contributions from franchise and company-operated restaurants were approximately 5.0% of gross revenues. ~~We record~~In 2019, incremental contributions ~~from franchisees as a liability included~~made by the Company were $2.0 million. There have been no incremental contributions made in accrued liabilities in the accompanying condensed consolidated balance sheets until such funds are expended. The contributions to the marketing fund are designated for sales driving and marketing-related initiatives and advertising, and we act as an agent for the franchisees with regard to these contributions. Therefore, we do not reflect franchisee contributions to the funds in our condensed consolidated statements of earnings.2020.

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 ~~and other marketing expenses~~made by the Company, including incremental contributions, are included in ~~selling,~~“Selling, general, and administrative ~~expenses~~expenses” in the accompanying condensed consolidated statements of ~~earnings. In 2018~~earnings and ~~2017, advertising and promotions were $8.9~~totaled $5.3 million and ~~$12.0~~$7.2 million in 2020 and 2019, respectively.

Effect of new accounting pronouncements adopted in fiscal ~~2018~~2020 — ~~In March 2016, the FASB issued~~We adopted ASU ~~No. 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting.~~ This standard is intended to simplify various aspects of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. This standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. As such, we adopted this standard2016-02, Leases (Topic 842) (“ASC 842”) in the first quarter of ~~fiscal 2018. Upon~~2020. The new guidance requires the ~~adoption~~recognition of ~~the standard we prospectively reclassified excess tax benefits from share-based compensation arrangements of $0.8 million as~~lease liabilities, representing future minimum lease payments on a ~~discrete item within income tax expense~~discounted basis, and corresponding right-of-use (“ROU”) assets on the ~~condensed consolidated statements~~balance sheet for most leases. The Company adopted the new guidance in the first quarter of ~~earnings, rather than recognizing such excess income tax benefits in capital in excess of par value on~~2020 using the ~~condensed consolidated balance sheet. This also impacted~~alternative transition method; therefore, the ~~related classification on our condensed consolidated statements of cash flows as excess tax benefits from share-based compensation arrangements is only~~comparative period has not been restated and continues to reported in cash flows from operating activities on a prospective basis, rather than as previously reported in cash flows from operating activities and cash flows used in financing activities. Upon adoption of the standard we also began reporting cash paid to a taxing authority on an employee’s behalf when we directly withhold equivalent shares for taxes as cash flows used in financing activities with the related tax withholding classified as a change in accounts and other receivables in cash flows from operating activities on our condensed consolidated statements of cash flows. We retrospectively applied this new reporting of tax payments for equity award issuances on our condensed consolidated statements of cash flows. The standard also impacted our earnings per share calculation on a prospective basis as the estimate of dilutive common share equivalents under the ~~treasury stock method no longer assumes~~previous lease guidance.

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. We also elected the short-term lease recognition exemption for all leases that qualify, permitting us to not apply the ~~estimated tax benefits realized when~~recognition requirements of this standard to leases with a term of 12 months or less, and an ~~award is settled are used~~accounting policy to ~~repurchase shares. Lastly, the Company~~not separate lease and non-lease components for underlying assets subject to real estate leases. As lessor, we elected for all classes of underlying leased assets to account for ~~forfeitures~~lease and non-lease components, primarily property taxes and maintenance, as ~~they occur,~~a single lease component. We did not elect the use-of-hindsight practical expedient, and ~~a cumulative-effect adjustment was made in~~therefore continued to utilize lease terms determined under the ~~amount of $0.2 million and recorded in retained earnings as of October 2, 2017 on the condensed consolidated balance sheet.~~existing lease guidance.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~In December 2016, the FASB issued ASU 2016-19,~~ ~~Technical Corrections and Improvements. This standard contains amendments that affect~~The adoption had a wide variety of topics in the Accounting Standards Codification (“ASC”). The amendments include differences between original FASB guidance and the ASC, guidance clarification and reference corrections, simplifications and minor improvements. This standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. As such, we adopted this standard in the first quarter of fiscal 2018. This standard did not have a significant effectmaterial impact on our ~~accounting policies or on~~consolidated balance sheet. As a result of the adoption, we recognized operating lease assets and liabilities of $881 million and $931 million, respectively, at the date of adoption. 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 condensed consolidated ~~financial~~balance sheet. 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.

The effects of the changes made to the Company's condensed consolidated balance sheet as of September 29, 2019 for the adoption of the new lease guidance were as follows (in thousands):


	Balance at September 29, 2019		Adjustments due to ASC 842 adoption		Balance at September 30, 2019
Assets
Other assets:
Operating lease ROU assets	$	—	$	880,564	$	880,564
Intangible assets, net	$	425	$	(386)	$	39
Deferred income taxes	$	85,564	$	1,006	$	86,570
Liabilities and Stockholders’ Deficit
Current liabilities:
Current operating lease liabilities	$	—	$	159,821	$	159,821
Accrued liabilities	$	120,083	$	(4,702)	$	115,381
Long-term liabilities:
Long-term operating lease liabilities, net of current portion	$	—	$	770,818	$	770,818
Other long-term liabilities	$	263,770	$	(41,883)	$	221,887
Stockholders’ deficit:
Retained earnings	$	1,577,034	$	(2,870)	$	1,574,164

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. Historically, these costs have been recorded on a net basis in our condensed consolidated statements of earnings but are now presented gross upon adoption of the new guidance. As a result, we expect annual revenues and ~~related disclosures.~~expenses reported in “Franchise rental revenues” and “Franchise occupancy expenses” to increase by approximately $37 million in fiscal 2020. Refer to Note 4, Leases, for further information on our leases and the impact on the Company’s accounting policies.

Effect of new accounting pronouncements to be adopted in future periods — In ~~May 2014,~~August 2018, the FASB issued ASU ~~No. 2014-09,~~ ~~Revenue Recognition - Revenue from Contracts with Customers (Topic 606)~~2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which ~~provides a comprehensive new revenue recognition model that requires an entity to recognize revenue~~aligns the requirements for capitalizing implementation costs 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. Further, in March 2016, the FASB issued ASU No. 2016-08, ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),~~ ~~which clarifies the guidance in ASU No. 2014-09 when evaluating when another party, along~~cloud computing arrangements with the ~~entity,~~requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is ~~involved in providing a good or service to a customer.In April 2016, the FASB issued ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing~~, which clarifies the guidance in ASU No. 2014-09 regarding assessing whether promises to transfer goods or services are distinct, and whether an entity's promise to grant a license provides a customer with a right to use, or right to access the entity's intellectual property. ~~In December 2016, the FASB issued ASU No. 2016-20,Technical Corrections and Improvements to Revenue from Contracts with Customers (Topic 606). This ASU clarifies the guidance in ASU 2014-09, providing technical corrections and improvements to clarify guidance and correct unintended applications of the guidance.~~ ~~All standards are~~ effective for interim and annual periods beginning after December 15, 2017, and interim periods within that reporting period. As such, we will be required to adopt these standards in the first quarter of fiscal 2019. These standards are to be applied retrospectively or using a cumulative effect transition method, and early adoption is not permitted. We do not believe the new revenue recognition standard will impact our recognition of restaurant sales, rental revenues or royalty fees from franchisees. However, we are still evaluating the impact that this pronouncement will have on the recognition of certain transactions in our consolidated financial statements, including the initial franchise fees currently recognized upon the opening of a franchise restaurant and our advertising arrangements with franchisees currently reported on a net versus gross basis in our consolidated statements of earnings, and the effect it will have on our disclosures. We have not yet selected a transition method.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~, which requires a lessee to recognize assets and liabilities on the balance sheet for those leases classified as operating leases under previous guidance. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As such, we will be required to adopt this standard in the first quarter of fiscal 2020. This standard requires adoption based upon a modified retrospective transition approach,2019, with early adoption permitted. ~~Based on a preliminary assessment, we expect that most of our operating lease commitments will be subject~~Companies can choose to adopt the new guidance ~~and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a significant increase~~prospectively or retrospectively. We are currently in the ~~assets and liabilities on our consolidated balance sheets. In January 2018,~~process of evaluating the ~~FASB issued ASU No.2018-01,~~ ~~Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,~~ ~~which affects the guidance in ASU 2016-02. The standard permits the election~~effects of an optional transition practical expedient to not evaluate land easements that exist or expired before the adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. The effective date and transition requirements are the same as ASU 2016-02. We are continuing our evaluation, which may identify additional impacts this ~~standard will have~~pronouncement on our consolidated financial statements and ~~related disclosures.~~do not expect there to be a material impact upon adoption.

~~In March 2016, the FASB issued ASU No. 2016-04,~~ ~~Liabilities-Extinguishment~~

Nature of ~~Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products, which is designed to provide guidance~~products and ~~eliminate diversity~~services — We derive revenue from retail sales at Jack in the ~~accounting~~Box company-operated restaurants and rental revenue, royalties, advertising, and franchise and other fees from franchise-operated restaurants.

Our franchise arrangements generally provide for ~~the derecognition~~an initial franchise fee of ~~financial liabilities related~~$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 ~~certain prepaid stored-value products using a revenue-like breakage model. This standard is effective for fiscal years beginning after December 15, 2017,~~pay sourcing, technology and interim periods within those fiscal years, with early adoption permitted. As such, we will be required to adopt this standard in the first quarter of fiscal 2019. This standard is to be applied retrospectively or using a cumulative effect transition method as of the date of adoption. We are currently evaluating which transition method to use, but believe the impact this standard will have on our consolidated financial statements and related disclosures will be immaterial upon adoption.other miscellaneous fees.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. This standard is intended to address eight classification issues related to the statement of cash flows to reduce diversity in practice in how certain transactions are classified. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. As such, we will be required to adopt this standard in the first quarter of fiscal 2019. This standard requires adoption

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 (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Sources of revenue:
Company restaurant sales	$	105,364	$	102,832
Franchise rental revenues	96,084		83,890
Franchise royalties	50,243		49,507
Marketing fees	48,835		47,863
Technology and sourcing fees	4,924		3,951
Franchise fees and other services	2,223		2,743
Total revenue	$	307,673	$	290,786

~~based upon a retrospective transition method.~~

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 ~~are currently evaluating this standard, but do not believe it will have a material impact on the classification of cash flows within our statement of cash flows.~~

~~In October 2016, the FASB issued ASU No. 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.~~ This standard requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than deferring the recognition until the asset has been sold to an outside party. This standard is effective for fiscal years beginning after December 15, 2017,classify these contract liabilities as “Accrued liabilities” and ~~interim periods within those fiscal years, with early adoption permitted. As such, we will be required to adopt this standard~~“Other long-term liabilities” in the first quarter of fiscal 2019. The standard requires adoption on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. We are currently evaluating this standard, but do not believe it will have a material impact on our consolidated financial statements.

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)~~: ~~Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets~~. The standard provides clarification about the term “in substance nonfinancial asset” and guidance for recognizing gains and losses from the transfer of nonfinancial assets and for partial sales of nonfinancial assets. The standard is required to be adopted retrospectively, in conjunction with ASU 2014-09. As such, we will be required to adopt this standard in the first quarter of fiscal 2019. This standard is not expected to have a material impact on our consolidated financial statements.

~~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 cost 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 cost should be presented separately from the service cost component and outside of a subtotal of earnings from operations, or separately disclosed. The standard is effective for annual and interim periods beginning after December 15, 2017 and must be adopted retrospectively. Early adoption is permitted as of the beginning of an annual period, but we plan to adopt this standard in the first quarter of fiscal 2019. Upon adoption of this standard, we will separately present the components of net periodic benefit cost, excluding the service cost component, outside of earnings from operations. Net periodic benefit cost, excluding the service cost component, was $0.1 million and $0.6 million in 2018 and 2017, respectively.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting~~. This standard provides guidance that clarifies when changes to the terms or conditions of a share-based payment award require the application of modification accounting under ASC 718. This new guidance will allow for certain changes to be made to awards without accounting for them as modifications. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The standard is required to be applied prospectively to awards modified on or after the adoption date. We will be required to adopt this standard in the first quarter of fiscal 2019. This standard is not expected to have a significant effect on our accounting policies or on our consolidated financial statements and related disclosures.

~~Distribution business~~ — During fiscal 2012, we entered into an agreement with a third party distribution service provider pursuant to a plan approved by our Board of Directors to sell our Jack in the Box distribution business. During fiscal 2013, we completed the transition of our distribution centers. The operations and cash flows of the business have been eliminated, and in accordance with the provisions of the FASB authoritative guidance on the presentation of financial statements, the results are reported as discontinued operations for all periods presented.

In 2018 and 2017, the results of discontinued operations related to our distribution business were immaterial to our condensed consolidated results of operations. Our liability for lease commitments related to our distribution centers is immaterial to our condensed consolidated balance ~~sheet~~sheets.

A summary of significant changes in our contract liabilities is presented below (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Deferred franchise fees at beginning of period	$	46,273	$	50,018
Revenue recognized during the period	(1,632)		(1,592)
Additions during the period	895		500
Deferred franchise fees at end of period	$	45,536	$	48,926

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied as of ~~October 1, 2017,~~January 19, 2020 (in thousands):


Remainder of 2020	$	3,411
2021	4,926
2022	4,726
2023	4,572
2024	4,379
Thereafter	23,522
	$	45,536

We have applied the optional exemption, as provided for under Accounting Standards Codification 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.

3.SUMMARY OF REFRANCHISINGS AND FRANCHISEE DEVELOPMENT

Refranchisings and ~~relates~~franchisee development — Franchisees opened 11 new restaurants in 2020, compared to ~~one distribution center lease that expired in July 2017.~~

~~Qdoba~~ — On December 19, 2017, we entered into a stock purchase agreement (the “Qdoba Purchase Agreement”) with Quidditch Acquisition, Inc., a Delaware corporation and affiliate of certain funds managed by affiliates of Apollo Global Management, LLC (the “Buyer”). Pursuant to the Qdoba Purchase Agreement, the Buyer has agreed to purchase from the Company all issued and outstanding shares of Qdoba (the “Shares”) for an aggregate purchase price of approximately $305.0 million in cash, subject to customary closing conditions and adjustments set forth9 in the ~~Qdoba Purchase Agreement (the “Qdoba Sale”). Our Board~~prior year, and closed 10 restaurants in fiscal 2020, compared to 5 in 2019. In both comparative periods 0 company-operated restaurants were sold to franchisees. In 2020 and 2019, amounts presented in “Gains on the sale of ~~Directors unanimously approved~~company-operated restaurants” of $1.6 million and $0.2 million, respectively, pertain to meeting certain contingent consideration provisions included in the ~~Qdoba Purchase Agreement after its comprehensive evaluation~~sale of ~~potential alternatives with respect to Qdoba, which began~~restaurants in ~~2017.~~previous years.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.LEASES

~~The Buyer has obtained guarantees with respect~~Nature of leases — We own restaurant sites and we also lease restaurant sites from third parties. Some of these owned or leased sites are leased and/or subleased to ~~its obligations under~~franchisees. 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. In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurants also have rent escalation clauses and require the ~~Qdoba Purchase Agreement. The closing~~payment of property taxes, insurance, and maintenance costs. 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 ~~Qdoba Sale is anticipated~~lease liability. We also lease certain restaurant and office equipment with initial terms generally ranging from 3 to ~~occur by April 2018, subject~~8 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As lessor, our leases and subleases primarily consist of restaurants that have been leased to ~~customary closing conditions set forth~~franchisees subsequent to refranchising transactions. The lease descriptions, terms, variable lease payments and renewal options are generally the same as the lessee leases described above. Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the ~~Qdoba Purchase Agreement.~~

In addition to the purchase of the Shares, the Company and the Buyer will enter into a Transition Services Agreement pursuant to which the Buyer will receive certain services (the “Services”) to enable it to operate the Qdoba business from and after the closing of the Qdoba Sale. The Services will include information technology, finance and accounting, human resources, supply chain and other corporate support services. The Services will be provided at a cost for a period of up to 12 months, with two 3 month extensions available for certain services.

The Company and the Buyer will also enter into an Employee Agreement pursuant to which the Company will continue to employ all Qdoba employees who will transfer employment to the Buyer (the “Qdoba Employees”) from the closing of the Qdoba Sale through the earlier of: (a) following 30 days written notice from the Buyer of termination of the Employee Agreement, or (b) nine months following the closing of the Qdoba Sale. Upon termination of the Employee Agreement, the Qdoba employees will effectively become employees of the Buyer. During the term of the Employee Agreement, the Company will pay all wages and benefits of the Qdoba Employees and will receive reimbursement of these costs from the Buyer.

As the Qdoba Sale represents a strategic shift that will have 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 ouraccompanying condensed consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”

Significant assumptions and judgements — We evaluate the contracts entered into by the Company to determine whether such contracts contain leases. 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. 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.

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. When determining the lease term, we consider option periods available, and include option periods in the measurement of the lease ROU asset and lease liability where the exercise is reasonably certain to occur. 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.

Leased assets and liabilities consisted of the following as of January 19, 2020 (in thousands):


	January 19, 2020
Assets:
Operating lease ROU assets	$	884,213
Finance lease ROU assets (1)	2,742
Total ROU assets	$	886,955
Liabilities:
Current operating lease liabilities	$	158,779
Current finance lease liabilities (2)	786
Long term operating lease liabilities	767,819
Long-term finance lease liabilities (2)	2,609
Total lease liabilities	$	929,993

____________________________

(1)Included in “Property and equipment, net” on our condensed consolidated ~~statements~~balance sheet.

(2)Included in “Current maturities of ~~cash flows for all periods presented. Prior year results have been recast to conform with the~~long-term debt” and “Long-term debt, net of current ~~presentation.~~

In 2018, we recognized deferred tax benefits of $0.5 million on the excess of the tax basis over the book basis in our investment in Qdoba as a result of its pending disposition as it is probable that the temporary difference will reverse in the foreseeable future.

~~The following table summarizes the Qdoba results for each period (in thousands, except per share data~~):

Selling, general and administrative expenses include corporate costs directly in support of Qdoba operations. All other corporate costs are classified in results of continuing operations. Our credit facility requires us to make a mandatory prepaymentmaturities” on our borrowings upon closing of the Qdoba Sale. In accordance with FASB authoritative guidance on financial statement presentation, interest expense associated with our credit facility has been allocated to discontinued operations based on our estimate of the mandatory prepayment that will be made upon closing of the Qdoba Sale.condensed consolidated balance sheet.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following ~~is a summary~~table presents our lease cost components and other supplemental information related to our leases (dollars in thousands):


	Sixteen Weeks Ended
	January 19, 2020
Lease costs:
Finance lease cost:
Amortization of ROU assets (1)	$	234
Interest on lease liabilities (2)	33
Operating lease cost (3)	58,512
Short-term lease cost (3)	1
Variable lease cost (3)(4)	12,507
	$	71,287
Weighted-average remaining lease term (in years):
Finance leases	3.9
Operating leases	8.0
Weighted-average discount rate:
Finance leases	3.4		%
Operating leases	3.9		%

____________________________

(1)Included in “Depreciation and amortization” in our condensed consolidated statement of ~~the unaudited quarterly results~~earnings.

(2)Included in “Interest expense, net” in our condensed consolidated statement of ~~Qdoba operations~~earnings.

(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 condensed consolidated statement of earnings. 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”.

(4)Includes $11.6 million of property taxes and common area maintenance costs which are reimbursed by sub-lessees.

The following table presents as of January 19, 2020, future minimum lease payments for ~~fiscal 2017~~non-cancellable leases (in thousands ~~except per share data~~):


	Finance Leases		Operating Leases
Fiscal year:
Remainder of 2020	$	647	$	130,553
2021	879		193,874
2022	879		153,011
2023	866		124,843
2024	390		94,034
Thereafter	40		386,822
Total minimum lease payments	$	3,701	$	1,083,137
Less: imputed interest	(306)		(156,539)
Present value of lease liability	$	3,395	$	926,598

Sixteen Weeks Ended Twelve Weeks Ended
January 22,
2017 April 16,
2017 July 9,
2017 October 1,
2017
Company restaurant sales $ 128,699
$ 98,793
$ 107,067
$ 102,000
Franchise revenues 6,053
4,711
4,678
4,622
Company restaurant costs (excluding depreciation and amortization) (105,716 ) (80,713 ) (84,747 ) (86,194 )
Franchise costs (excluding depreciation and amortization) (1,173 ) (910 ) (879 ) (2,031 )
Selling, general and administrative expenses (12,429 ) (7,956 ) (8,232 ) (8,089 )
Depreciation and amortization (6,695 ) (5,057 ) (5,023 ) (4,725 )
Impairment and other charges, net (3,904 ) (3,811 ) (1,815 ) (5,531 )
Interest expense, net (2,515 ) (2,044 ) (2,229 ) (2,237 )
(Losses) earnings from discontinued operations before income taxes 2,320
3,013
8,820
(2,185 )
Income taxes (876 ) (1,181 ) (3,398 ) 937
(Losses) earnings from discontinued operations, net of income taxes $ 1,444
$ 1,832
$ 5,422
$ (1,248 )

Net (losses) earnings per share from discontinued operations:
Basic $ 0.05
$ 0.06
$ 0.18
$ (0.04 )
Diluted $ 0.05
$ 0.06
$ 0.18
$ (0.04 )

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Assets being sold and liabilities being assumed by the Buyer in the Qdoba Sale include substantially all assets and liabilities associated with Qdoba, and are classified as held for sale on our condensed consolidated balance sheets. Prior year balances have been recast to conform with the current presentation. Upon classification of the Qdoba assets as held for sale, in accordance with the FASB authoritative guidance on financial statement presentation, the assets are no longer depreciated. The following table ~~summarizes~~presents as of September 29, 2019, future minimum lease payments for non-cancellable leases (in thousands):


	Capital Leases		Operating Leases
Fiscal year:
2020	$	879	$	193,313
2021	879		186,226
2022	879		145,794
2023	864		117,753
2024	396		87,420
Thereafter	40		363,505
Total minimum lease payments	$	3,937	$	1,094,011
Less: imputed interest	(343)
Present value of lease liability	$	3,594

The following table includes supplemental cash flow and non-cash information related to our lessee leases (in thousands):


	Sixteen Weeks Ended
	January 19, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	65,996
Operating cash flows from financing leases	$	33
Financing cash flows from financing leases	$	198
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	51,311
Financing leases	$	—

Sale leaseback transactions — In 2020, we completed a sale leaseback transaction of a multi-tenant commercial property in Los Angeles, California and leased back the ~~major categories~~parcel on which a company-operated restaurant is located. The Company received net proceeds of ~~assets~~$17.4 million and ~~liabilities classified~~recognized a $0.2 million loss on the sale. The initial term on the lease is 20 years and has been accounted for as ~~held~~an operating lease.

In 2020, we completed the sale of one of our corporate office buildings as we move forward with our previously announced consolidation of our headquarters. 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. The net proceeds received on the sale was $20.6 million and the lease has been accounted for as an operating lease. A gain on the sale of $10.8 million was recognized during the quarter, and is presented within “Impairment and other charges, net” in our condensed consolidated ~~balance sheets as~~statement of ~~the end of each period (in thousands~~):earnings.

January 21,
2018 October 1,
2017
Cash $ 3,942
$ 3,175
Accounts receivable, net 8,529
9,086
Inventories 3,168
3,202
Prepaid expenses and other current assets 5,144
8,802
Property and equipment, net 161,643
148,715
Intangible assets, net 12,517
12,660
Goodwill 117,636
117,636
Other assets, net 1,735
1,785
Total assets classified as held for sale (1) $ 314,314
$ 305,061

Accounts payable $ 5,903
$ 8,936
Accrued liabilities 24,472
25,251
Current maturities of long-term debt 175
158
Straight-line rent accrual 14,319
13,347
Deferred income tax liability (2) 5,444
6,421
Other long-term liabilities 11,208
12,310
Total liabilities classified as held for sale $ 61,521
$ 66,423

~~____________________________~~


~~(1)~~	Current assets held for sale on our condensed consolidated balance sheets include Jack in the Box assets held for sale of $18.0 million and $18.5 million as of January 21, 2018 and October 1, 2017, respectively.


~~(2)~~	Prior to held for sale presentation, Qdoba’s deferred income tax liability as of January 22, 2017 was netted against the Jack in the Box deferred income tax assets in other assets, net on our condensed consolidated balance sheet.

Our liability for Qdoba lease commitments is included in current liabilities held for sale as of January 21, 2018 and is included in current and non-current liabilities held for sale as of October 1, 2017 in the accompanying condensed consolidated balance sheets and has changed as follows in 2018 (~~in thousands~~):

Balance as of October 1, 2017 $ 2,473
Adjustments (1) 193
Cash payments (800 )
Balance as of January 21, 2018 (2) $ 1,866

~~____________________________~~


~~(1)~~	~~Adjustments relate to revisions to certain sublease assumptions due to changes in market conditions and includes interest expense.~~


~~(2)~~	~~The weighted average remaining lease term related to these commitments is approximately 2 years.~~

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Company as Lessor

~~3. 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 the related fees and gains recognized in each period~~presents rental income (~~dollars~~ in thousands):

Sixteen Weeks Ended
January 21,
2018 January 22,
2017
Restaurants sold to franchisees 22
—
New restaurants opened by franchisees 5
7

Initial franchise fees $ 995
$ 290

Proceeds from the sale of company-operated restaurants:
Cash (1) $ 5,591
$ 138
Short-term notes receivable (2) 9,084
—
14,675
138

Net assets sold (primarily property and equipment) (3,637 ) —
Goodwill related to the sale of company-operated restaurants (153 ) (1 )
Other (3) (1,945 ) —
Gains on the sale of company-operated restaurants $ 8,940
$ 137


	Sixteen Weeks Ended
	January 19, 2020
	Owned Properties		Leased Properties		Total
Operating lease income - franchise	$	6,095	$	66,568	$	72,663
Variable lease income - franchise	2,716		20,704		23,420
Franchise rental revenues	$	8,811	$	87,272	$	96,083
Operating lease income - closed restaurants and other (1)	$	—	$	2,057	$	2,057

____________________________


~~(1)~~	~~Amounts in 2018 and 2017 include additional proceeds of $1.2 million and $0.1 million, respectively, related to restaurants sold in prior years.~~


~~(2)~~	~~These notes were collected during 2018.~~


~~(3)~~	~~Amount primarily~~ (1)Primarily relates ~~to $1.5 million of remodel credits.~~

~~As of the end of the first 2018 quarter, we had signed non-binding letters of intent with franchisees~~ to sell an additional 10 company-operated restaurants. Pre-tax gross proceeds related to these sales are estimated at $2.0 million to $3.0 million. Equipment of $0.8 million related to these sales has been classified as assets held for sale onclosed restaurant properties included in “Impairment and other, net” in our ~~January 21, 2018 and October 1, 2017~~ condensed consolidated ~~balance sheets.~~statement of earnings.

The following table presents as of January 19, 2020, future minimum rental receipts for non-cancellable leases and subleases (in thousands):


	January 19, 2020
Fiscal year:
Remainder of 2020	$	159,654
2021	256,052
2022	232,129
2023	225,488
2024	200,425
Thereafter	1,237,167
Total minimum rental receipts	$	2,310,915

The following table presents as of September 29, 2019, future minimum rental receipts for non-cancellable leases and subleases (in thousands):


	September 29, 2019
Fiscal year:
2020	$	239,219
2021	255,315
2022	231,394
2023	224,605
2024	199,442
Thereafter	1,215,811
Total minimum rental receipts	$	2,365,786

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.FAIR VALUE MEASUREMENTS


4.	~~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 (2) (Level 1)		Significant Other Observable Inputs (2) (Level 2)		Significant Unobservable Inputs (2) (Level 3)
	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 January 21, 2018:
Fair value measurements as of January 19, 2020:												Fair value measurements as of January 19, 2020:
Non-qualified deferred compensation plan (1)	$	(38,007	)	$	(38,007	)	$	—		$	—	Non-qualified deferred compensation plan (1)	$	29,857	$	29,857	$	—	$	—
Interest rate swaps (Note 5) (2)	(10,962		)	—			(10,962		)	—
Total liabilities at fair value	$	(48,969	)	$	(38,007	)	$	(10,962	)	$	—	Total liabilities at fair value	$	29,857	$	29,857	$	—	$	—
Fair value measurements as of October 1, 2017:
Fair value measurements as of September 29, 2019:												Fair value measurements as of September 29, 2019:
Non-qualified deferred compensation plan (1)	$	(37,575	)	$	(37,575	)	$	—		$	—	Non-qualified deferred compensation plan (1)	$	30,104	$	30,104	$	—	$	—
Interest rate swaps (Note 5) (2)	(22,927		)	—			(22,927		)	—
Total liabilities at fair value	$	(60,502	)	$	(37,575	)	$	(22,927	)	$	—	Total liabilities at fair value	$	30,104	$	30,104	$	—	$	—

____________________________


~~(1)~~	(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. The key inputs for the valuation models are quoted market prices, discount rates and forward yield curves.


~~(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~~closing market prices of ~~future cash flows associated with each instrument discounted using~~the participants’ elected investments. The obligation is included in “Accrued liabilities” and “Other long-term liabilities” on our ~~borrowing rate.~~ condensed consolidated balance sheets.

(2)We did not have any transfers in or out of Level 1, 2 or 3.

At January ~~21, 2018,~~19, 2020, the carrying value of ~~all financial instruments~~our Class A-2 Notes was ~~not materially different from~~$1,300.0 million and fair value aswas $1,332.0 million. The fair value of the ~~borrowings~~Class A-2 Notes was estimated using Level 2 inputs based on quoted market prices in markets that are ~~prepayable without penalty.~~not considered active markets. The estimated fair values of our ~~capital~~finance lease obligations approximated their carrying values as of January ~~21, 2018.~~19, 2020.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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. 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 ~~2018, we recorded $0.5 million of additional impairment charges resulting from changes in market~~2020, no material fair value ~~from three previously closed restaurants, and $0.2 million in charges related to our landlord’s sale of a restaurant property to a franchisee.~~adjustments were required. Refer to Note 6, 7, Impairment and Other Charges, Net, for additional information regarding impairment charges.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

6.DERIVATIVE INSTRUMENTS


5.	~~DERIVATIVE INSTRUMENTS~~

~~Objectives and strategies~~Interest rate swaps — We ~~are exposed~~have used interest rate swaps to mitigate interest rate volatility with regard to ~~our~~ variable rate ~~debt.~~borrowings under our senior credit facility. In ~~April 2014, to reduce our exposure to rising interest rates,~~June 2015, we entered into ~~nine~~ forward-starting interest rate swap agreements that effectively converted $300.0 million of our variable rate borrowings to a fixed-rate basis from October 2014 through October 2018. Additionally, in June 2015, we entered into eleven forward-starting interest rate swap agreements that effectively converted an additional $200.0$500.0 million of our variable rate borrowings to a fixed rate from October ~~2015 through October 2018, and $500.0 million from October~~ 2018 through October 2022.

These agreements ~~have been~~were designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. ~~To the extent that~~Since they ~~are~~were effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives ~~are~~were not included in earnings, but ~~are~~were included in other comprehensive income (“OCI”). These changes in fair value ~~are~~were subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments ~~are~~were made on our variable rate debt.

~~Financial position~~ ~~— The following derivative instruments were outstanding as~~Effective July 2, 2019, the Company terminated all interest rate swap agreements in anticipation of the ~~end~~securitization transaction and related retirement of ~~each period (~~our senior credit facility in ~~thousands~~):the fourth quarter of 2019. During fiscal 2019, our interest rate swaps had no hedge ineffectiveness.

Balance
Sheet
Location
Fair Value
January 21,
2018 October 1, 2017
Derivatives designated as cash flow hedging instruments:
Interest rate swaps Accrued liabilities $ (2,422 ) $ (4,777 )
Interest rate swaps Other long-term liabilities (8,540 ) (18,150 )
Total derivatives (Note 4) $ (10,962 ) $ (22,927 )

Financial performance — The following table summarizes the OCI activity related to our interest rate swap derivative instruments (~~in thousands~~):

Location in Income Sixteen Weeks Ended
January 21,
2018 January 22,
2017
Gain recognized in OCI N/A $ 10,291
$ 23,086
Loss reclassified from accumulated OCI into net earnings Interest expense, net $ 1,674
$ 2,066

~~Amounts~~and the 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.(in thousands):


6.	~~IMPAIRMENT AND OTHER CHARGES, NET~~Location in Income	Sixteen Weeks Ended
					January 20, 2019
Loss recognized in OCI	N/A		$	(7,167)
Loss reclassified from accumulated OCI into net earnings	Interest expense, net		$	479

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):


						Sixteen Weeks Ended
	Sixteen Weeks Ended					January 19, 2020		January 20, 2019
Restructuring costs					Restructuring costs	$	1,045	$	5,840
Costs of closed restaurants and other					Costs of closed restaurants and other	101		866
Accelerated depreciation					Accelerated depreciation	—		416
(Gains) losses on disposition of property and equipment, net (1)					(Gains) losses on disposition of property and equipment, net (1)	(10,437)		576
	January 21, 2018		January 22, 2017			$	(9,291)	$	7,698
Costs of closed restaurants and other	$	1,375	$	1,839
Restructuring costs	358		183
Operating restaurant impairment charges (1)	291		—
Losses on disposition of property and equipment, net	183		530
Accelerated depreciation	50		102
	$	2,257	$	2,654

____________________________

(1)In 2020, includes a $10.8 million gain related to the sale of one of our corporate office buildings. Refer to Note 4, Leases, for further information.

Restructuring costs — Restructuring charges include costs resulting from the exploration of strategic alternatives (the “Strategic Alternatives Evaluation”) in 2019, which was concluded in the third quarter of 2019, and a plan that management initiated to reduce our general and administrative costs.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Costs of closed restaurants and other~~ — Costs of closed restaurants in 2018 and 2017 include future lease commitment charges and expected ancillary cost, net of anticipated sublease rentals. Costs in 2018 also include $0.5 million of additional impairment charges resulting from changes in market value from three previously closed restaurants.

~~Accrued restaurant closing costs, included in accrued liabilities and other long-term liabilities on our condensed consolidated balance sheets, changed as follows during 2018 (in thousands~~):

Balance as of October 1, 2017 $ 6,175
Additions 135
Adjustments (1) 347
Interest expense 545
Cash payments (1,592 )
Balance as of January 21, 2018 (2) (3) $ 5,610

~~___________________________~~

~~This balance excludes $2.8 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 upon sale to Jack in the Box franchisees in prior years.~~

~~Restructuring costs~~ — Restructuring charges in 2018 and 2017 include costs resulting from a plan that management initiated in fiscal 2016 to reduce our general and administrative costs. This plan includes cost saving initiatives from workforce reductions and refranchising initiatives. 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 Board of Director’s approval to sell Qdoba. Refer to Note 2, ~~Discounted Operations,~~ ~~for additional information regarding the Qdoba Sale.~~

The following is a summary of our restructuring costs (in thousands):

____________________________

~~At this time, we are unable~~(1) Strategic Alternative Evaluation costs primarily relate to ~~estimate additional charges~~third party advisory services.

We do not expect any significant severance and related costs for the remainder of fiscal 2020 related to ~~be incurred.~~these initiatives.

Total accrued severance costs related to our restructuring activities are included in ~~accrued liabilities~~“Accrued liabilities” on our condensed consolidated balance sheets, and changed as follows during ~~2018~~ 2020 (in thousands):

Balance as of October 1, 2017 $ 648
Adjustments (1) (456 )
Cash payments (150 )
Balance as of January 21, 2018 $ 42

~~____________________________~~

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~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. In 2018, accelerated depreciation was primarily related to exterior enhancements at our company-operated restaurants. In 2017, accelerated depreciation primarily related to the anticipated closure of two restaurants.

Our tax rates for the quarter ended January 21, 2018 was 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, certain provisions of the Tax Act impacted us in fiscal year 2018, including a reduction in the U.S. federal statutory corporate income tax rate (the “Tax Rate”), while other provisions will be effective starting at the beginning of fiscal year 2019. The Tax Rate reduction was effective as of January 1, 2018, and will be phased in, resulting in a statutory federal tax rate of 24.5% for our fiscal year ending September 30, 2018, and 21.0% for subsequent fiscal years.

As of January 21, 2018, we provisionally accounted for the results of the Tax Act. The provision for income taxes is based on a reasonable estimate of the effects on our existing deferred tax balances. A tax expense of $30.6 million, including a $2.3 million benefit related to Qdoba, was recognized and is included as a component of income taxes from continuing operations. This tax expense consists primarily of a $30.7 million re-measurement of our deferred tax assets and liabilities due to the enactment of the Tax Act. The impact of the Tax Act is based upon estimates and interpretations which may be refined as further authoritative guidance is issued and is expected to be completed by the first quarter of fiscal year 2019.

The income tax provisions reflect tax rates of ~~78.5%~~28.4% in ~~2018~~2020 and ~~38.7%~~23.1% in ~~2017.~~2019. The major components of the year- over-year change in ~~these~~ tax rates were a decrease in operating earnings before income tax, an adjustment related to state taxes recorded in the ~~one-time, non-cash impact~~first quarter of 2019, an increase in the ~~enactment of the Tax Act, including the revaluation of all deferred~~ tax ~~assets and liabilities at the reduced federal statutory tax rate,~~deficiency on stock compensation, partially offset by an increase in gains from the ~~decrease in the federal statutory tax rate and the excess tax benefit on 2018 stock compensation.~~market performance of insurance products used to fund certain non-qualified retirement plans which are excluded from taxable income. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual ~~annual 2018~~2020 rate could differ from our current estimates.

The following is a summary of the components of each tax rate (dollars in thousands):

____________________________

(1)Percentages may not add due to rounding.

Defined benefit pension plans — We sponsor ~~two~~2 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. ~~In fiscal 2011, the Board of Directors approved the sunset of our Qualified Plan whereby participants no longer accrue benefits effective December 31, 2015.~~ Benefits under both plans are based on the employee’s years of service and compensation over defined periods of employment.

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 either an immediate lump sum or a monthly annuity payment of their accrued benefit. The offering period began September 16, 2019 and ended October 31, 2019. The participants that elected a lump sum benefit under the program were paid in December 2019, which triggered settlement accounting. 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”). 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.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Postretirement healthcare plans — We also sponsor ~~two~~2 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;~~contributory, with retiree contributions adjusted annually, and they contain other cost-sharing features such as deductibles and coinsurance.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Net periodic benefit cost — The components of net periodic benefit cost in each period were as follows (in thousands):

___________________________

(1)Based on a return on asset, net of administrative expenses, assumption of 5.8% determined at the end of fiscal 2019, subsequently updated to 5.9% as of December 31, 2019 upon remeasurement of the Qualified Plan’s assets and PBO as required by settlement accounting.

(2)Amounts were reclassified from accumulated OCI into net earnings as a component of “Other pension and post-retirement expenses, net.”

Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of January 1, ~~2017,~~2019, the date of our last actuarial funding valuation, there was no0 minimum contribution funding requirement. Details regarding ~~2018~~2020 contributions are as follows (in thousands):


	SERP		Postretirement Healthcare Plans
Net year-to-date contributions	$	1,639	$	386
Remaining estimated net contributions during fiscal 2020	$	3,732	$	1,011

SERP
Postretirement
Healthcare Plans
Net year-to-date contributions $ 1,100
$ 610
Remaining estimated net contributions during fiscal 2018 $ 3,300
$ 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 ~~2018.~~2020.

We offer share-based compensation plans to attract, retain and motivate key officers, employees and non-employee directors to work towards the financial success of the Company. During 2018, we granted the following shares related to our share-based compensation awards:



~~Nonvested stock units~~	~~43,459~~
~~Performance share awards~~	~~22,040~~

~~The components of share-based compensation expense recognized in each period are as follows (in thousands~~):

Sixteen Weeks Ended
January 21,
2018 January 22,
2017
Nonvested stock units $ 1,778
$ 2,069
Performance share awards 663
790
Stock options 482
801
Nonvested stock awards 14
27
Total share-based compensation expense $ 2,937
$ 3,687

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 stockholders’ deficit is presented below (in thousands):


~~10.~~	~~STOCKHOLDERS’ EQUITY~~


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Balance at beginning of period	$	(737,584)	$	(591,699)
Shares issued under stock plans, including tax benefit	184		115
Share-based compensation	3,184		1,909
Dividends declared	(9,425)		(10,318)
Purchases of treasury stock	(153,550)		—
Net earnings	7,897		34,098
Other comprehensive income (loss), net of taxes	51,011		(4,071)
Cumulative-effect from a change in accounting principle	(2,870)		(37,330)
Balance at end of period	$	(841,153)	$	(607,296)

Repurchases of common stock— ~~In 2018, we have not~~ The Company repurchased ~~any~~1.9 million shares of its common ~~shares.~~stock in the first quarter of fiscal 2020 at an average price of $81.41 per share for an aggregate cost of $153.5 million. As of January ~~21, 2018, there was~~19, 2020, this leaves approximately ~~$181.0~~$122.2 million remaining under ~~Board-authorized stock buyback~~share repurchase programs ~~which expire~~authorized by the Board of Directors, consisting of $22.2 million that expires in November ~~2018.~~2020 and $100.0 million that expires in November 2021.

Repurchases of common stock included in our condensed consolidated statement of cash flows for fiscal 2020 include $2.0 million related to repurchase transactions traded in the prior year but settled in 2020.

Dividends— ~~In 2018,~~During 2020, the Board of Directors declared ~~one~~a cash dividend of $0.40 per common share ~~which was paid on December 15, 2017 to shareholders of record as of the close of business on December 4, 2017 and totaled $11.8~~totaling $9.4 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.

11.AVERAGE SHARES OUTSTANDING

The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):


	Sixteen Weeks Ended
	January 19, 2020	January 20, 2019
Weighted-average shares outstanding – basic	23,741	25,907
Effect of potentially dilutive securities:
Nonvested stock awards and units	181	208
Stock options	7	11
Performance share awards	7	2
Weighted-average shares outstanding – diluted	23,936	26,128
Excluded from diluted weighted-average shares outstanding:
Antidilutive	224	186
Performance conditions not satisfied at the end of the period	80	89

Sixteen Weeks Ended
January 21,
2018 January 22,
2017
Weighted-average shares outstanding – basic 29,551
32,168
Effect of potentially dilutive securities:
Nonvested stock awards and units 229
181
Stock options 64
76
Performance share awards 9
17
Weighted-average shares outstanding – diluted 29,853
32,442
Excluded from diluted weighted-average shares outstanding:
Antidilutive 90
44
Performance conditions not satisfied at the end of the period 74
79

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~~is adverse to the Company 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/or~~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 ~~fiscal 2012, we~~February 2019, plaintiff’s counsel reduced their earlier demand from $62.0 million to $42.0 million. In November 2019, the court issued a ruling on various dispositive motions, disallowing approximately $25.0 million in claimed damages. We have accrued ~~for a single claim~~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; this accrued loss contingency did not have a material effect on our results of operations. We continue to~~estimable. While we believe that no additional losses ~~are probable~~ beyond this accrual ~~and~~are reasonably possible, we cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond this accrual. The parties are participating in a voluntary mediation on March 16, 2020. If the ~~accrual. We plan~~case does not resolve at mediation, we will continue to vigorously defend against this lawsuit. ~~Nonetheless,~~

Marquez v. Jack in the Box Inc. — In August 2017, a former employee filed a class action lawsuit in California state court and as a Private Attorney General Act (“PAGA”) representative suit alleging that the Company failed to provide all non-exempt California employees with compliant rest and meal breaks, overtime pay, accurate wage statements, and final pay upon termination of employment. On January 29, 2020, the parties participated in voluntary mediation and reached a tentative agreement to settle the case. The settlement agreement is subject to documentation and court approval. During the first quarter of 2020, commensurate with the anticipated settlement, we recorded an accrual for legal settlement of $3.8 million.

Ramirez v. Jack in the Box Inc. — On June 11, 2019, an unfavorable ~~resolution~~jury verdict was delivered in a wrongful termination lawsuit against the Company in Los Angeles Superior Court. Plaintiff in the case was a restaurant employee who was terminated in 2013. The jury’s verdict included $5.4 million in compensatory damages and $10.0 million in punitive damages. The Company filed post-trial motions with the trial judge for the purpose of ~~this matter~~setting aside or significantly reducing damages. These motions were granted, resulting in ~~excess~~a reduction of damages from $15.4 million to $3.2 million. The plaintiff accepted the reduction. In October 2019, the plaintiff’s counsel filed a motion for attorney’s fees in the amount of $5.1 million. On January 9, 2020, the court issued its ruling awarding $3.9 million in attorney fees. As of January 19, 2020, we have recorded an accrual for legal settlement of $7.3 million within “Accrued liabilities” and a litigation insurance recovery receivable of $7.3 million, which represents the expected payment of the settlement by the Company’s insurance carriers, within “Accounts and other receivable, net” in our ~~current accrued loss contingencies could have a material adverse effect on our business, results of operations, liquidity or financial condition.~~condensed consolidated balance sheet.

Other legal matters— In addition to the matter described above, we are subject to normal and routine litigation brought by former ~~current~~ or ~~prospective~~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. 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.~~or other third party indemnity obligation. We record receivables from third party insurers when recovery has been determined to be probable. 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 ~~condensed~~ 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.


~~13.~~	~~SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands~~)

Sixteen Weeks Ended
January 21,
2018 January 22,
2017
Cash paid during the year for:
Interest, net of amounts capitalized $ 12,632
$ 9,691
Income tax payments $ 1,344
$ 47
Decrease in obligations for purchases of property and equipment $ 4,201
$ 2,841
Decrease in obligations for treasury stock repurchases $ —
$ 7,208
Non-cash transactions:
Increase in notes receivable from the sale of company-operated restaurants $ 9,084
$ —
Increase in franchise tenant improvement allowances $ 5,325
$ —
Increase in dividends accrued or converted to common stock equivalents $ 78
$ 74
Decrease in capital lease obligations from the termination of equipment and building leases $ 685
$ 87
Equipment capital lease obligations incurred $ 39
$ 59

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

13.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”).

We also entered into a Transition Services Agreement with the Buyer pursuant to which the Buyer received certain services (the “Services”) to enable it to operate the Qdoba business after the closing of the Qdoba Sale. The Services included information technology, finance and accounting, human resources, supply chain and other corporate support services. Under the Agreement, the Services were provided at cost for a period of up to 12 months, with 2 3-month extensions available for certain services. As of September 21, 2019, we are no longer providing transition services to Qdoba. In 2019, we recorded $3.7 million in the quarter in income related to the Services as a reduction of “Selling, general and administrative expenses” in the condensed consolidated statements of earnings.

The following table presents Qdoba’s results of operations in periods which have been included in discontinued operations (in thousands, except per share data):


~~14.~~			~~SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION~~ ~~(in thousands)~~			Sixteen Weeks Ended

January 21,
2018 October 1,
2017
Accounts and other receivables, net:
Trade $ 31,688
$ 55,108
Notes receivable 766
988
Other 5,020
5,672
Allowance for doubtful accounts (1,171 ) (2,159 )
$ 36,303
$ 59,609
Prepaid expenses:
Prepaid rent $ 4,761
$ —
Prepaid income taxes 4,190
16,928
Other 7,472
10,604
$ 16,423
$ 27,532
Other assets, net:
Company-owned life insurance policies $ 109,791
$ 110,057
Deferred tax assets 67,033
105,117
Deferred rent receivable 47,345
46,962
Other 19,725
15,434
$ 243,894
$ 277,570
Accrued liabilities:
Insurance $ 37,095
$ 39,011
Payroll and related taxes 24,390
23,361
Advertising 11,047
18,493
Deferred rent income 5,681

18,961
Sales and property taxes 3,242
7,275
Gift card liability 2,516
2,237
Deferred franchise fees 425
450
Other 18,470
25,266
$ 102,866
$ 135,054
Other long-term liabilities:
Defined benefit pension plans $ 104,798
$ 107,011
Straight-line rent accrual 33,047
33,749
Other 97,549
108,065
$ 235,394
$ 248,825

		January 20, 2019
Selling, general and administrative expenses		$	(302)
Loss on Qdoba Sale		85
Earnings from discontinued operations before income taxes		217
Income tax benefit (1)		2,760
Earnings from discontinued operations, net of income taxes		$	2,977

~~15.~~Basic and diluted earnings per share from discontinued operations:	~~SUBSEQUENT EVENTS~~	$	0.11

____________________________

(1)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.

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 leases, the maximum amount we may be required to pay is approximately $31.2 million as of January 19, 2020. The lease terms extend for a maximum of approximately 16 more years as of January 19, 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. 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.

14.SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Non-cash investing and financing transactions:
Decrease in obligations for treasury stock repurchases	$	2,025	$	14,362
Decrease in obligations for purchases of property and equipment	$	2,377	$	4,927
Increase in dividends accrued or converted to common stock equivalents	$	63	$	58
Decrease in finance lease obligations from the termination of equipment and building leases	$	—	$	7

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

15.SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)


	January 19, 2020		September 29, 2019
Accounts and other receivables, net:
Trade	$	29,361	$	36,907
Notes receivable	375		278
Income tax receivable	1,279		160
Property taxes receivable	17,713		32
Other	9,970		10,823
Allowance for doubtful accounts	(5,122)		(2,965)
	$	53,576	$	45,235
Prepaid expenses:
Prepaid income taxes	$	7,470	$	579
Prepaid advertising	32		1,838
Other	6,163		6,598
	$	13,665	$	9,015
Other assets, net:
Company-owned life insurance policies	$	116,127	$	112,753
Deferred rent receivable	49,419		49,333
Franchise tenant improvement allowance	28,702		26,925
Other	18,535		17,674
	$	212,783	$	206,685
Accrued liabilities:
Insurance	$	27,852	$	27,888
Payroll and related taxes	24,375		31,095
Deferred franchise fees	4,970		4,978
Sales and property taxes	8,731		4,268
Gift card liability	2,443		2,036
Other	49,918		49,818
	$	118,289	$	120,083
Other long-term liabilities:
Defined benefit pension plans	$	88,455	$	120,260
Deferred franchise fees	40,566		41,295
Straight-line rent accrual	—		29,537
Other	57,568		72,678
	$	186,589	$	263,770

16.SUBSEQUENT EVENTS

Dividends—On February ~~19, 2018,~~18, 2020, the Board of Directors declared a cash dividend of $0.40 per common share, to be paid on March ~~16, 2018~~17, 2020 to shareholders of record as of the close of business on March ~~5, 2018.~~3, 2020.

Subsequent to the end of the first quarter of 2018, we signed non-binding letters of intent with franchisees to sell approximately 50 company-operated restaurants in several markets. Pre-tax gross proceeds related to these sales are estimated at $25.0 million to $27.0 million.


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

All comparisons between ~~2018~~2020 and ~~2017~~2019 refer to the 16-weeks (“quarter”) ended January ~~21, 2018~~19, 2020 and January ~~22, 2017,~~20, 2019, respectively, unless otherwise indicated.

For an understanding of the significant factors that influenced our performance during ~~2018~~2020 and ~~2017,~~2019, our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and related notes included in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended ~~October 1, 2017.~~September 29, 2019.

Our MD&A consists of the following sections:

•Overview — a general description of our business and ~~2018~~2020 highlights.

•Financial reporting — a discussion of changes in presentation, if any.

•Results of operations — an analysis of our condensed consolidated statements of earnings for the periods presented in our condensed consolidated financial statements.

•Liquidity and capital resources — an analysis of our cash flows including pension and postretirement health contributions, capital expenditures, sale of company-operated restaurants, ~~our credit facility,~~franchise tenant improvement allowance distributions, share repurchase activity, dividends, known trends that may impact liquidity and the impact of inflation, if applicable.

•Discussion of critical accounting estimates — a discussion of accounting policies that require critical judgments and estimates.

•New accounting pronouncements — a discussion of new accounting pronouncements, dates of implementation and the impact on our consolidated financial position or results of operations, if any.

•Cautionary statements regarding forward-looking statements — a discussion of the risks and uncertainties that may cause our actual results to differ materially from any forward-looking statements made by management.

We have included in our MD&A certain performance metrics that management uses to assess company performance and which we believe will be useful in analyzing and understanding our results of operations. These metrics include:

•Changes in sales at restaurants open more than one year (“same-store sales”), system restaurant sales, franchised restaurant sales, and average unit volumes (“AUVs”). Same-store sales, restaurant sales, and AUVs are presented for franchised restaurants and on a system-wide basis, which includes company and franchise restaurants. Franchise sales represent sales at franchise restaurants and are revenues of our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and percentage rent revenues are calculated based on a percentage of franchise sales. We believe franchise and system same-store sales, franchised and system restaurant sales,and AUV information isare useful to investors as they have a ~~significant indicator of~~direct effect on the ~~overall strength of our business.~~Company’s profitability.

•Adjusted EBITDA, which represents net earnings on a generally accepted accounting principles (“GAAP”) basis excluding ~~gains~~earnings or losses from discontinued operations, income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, impairment and other charges, net, depreciation and amortization, ~~and the~~ amortization of tenant improvement ~~allowances.~~allowances and other, and pension settlement charges.We are presenting Adjusted EBITDA because we believe that it provides a meaningful supplement to net earnings of the Company's core business operating results, as well as a comparison to those of other similar companies. Management believes that Adjusted EBITDA, when viewed with the Company's results of operations in accordance with GAAP and the accompanying reconciliations within MD&A, provides useful information about operating performance and period-over-period change, and provides additional information that is useful for evaluating the operating performance of the Company's core business without regard to potential distortions. Additionally, management believes that Adjusted EBITDA permits investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.

Same-store sales, system restaurant sales, franchised restaurant sales, AUVs, and Adjusted EBITDA are not measurements determined in accordance with GAAP and should not be considered in isolation, or as an alternative to earnings from operations, or other similarly titled measures of other companies.

OVERVIEW

As of January ~~21, 2018,~~19, 2020, we operated and franchised ~~2,250~~2,244 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including one in ~~Guam, and 738 Qdoba fast-casual restaurants operating primarily throughout the United States and Canada, which are currently held for sale.~~

Our primary source of revenue is from retail sales at Jack in the Box company-operated restaurants. We also derive revenue from Jack in the Box franchise restaurants, including rental revenue, royalties (based upon a percent of sales) and franchise fees. In addition, we recognize gains or losses from the sale of company-operated restaurants to franchisees, which are included as a line item within operating costs and expenses, net in the accompanying condensed consolidated statements of earnings.Guam.

The following summarizes the most significant events occurring year-to-date in fiscal ~~2018,~~2020, and certain trends compared to a year ago:

~~Same-Store Sales~~ — ~~Same-store~~•System same-store sales ~~decreased 0.2% at Jack in the Box system restaurants~~— System same-store sales are up 1.7% year-to-date as compared with athe prior year ~~ago~~ primarily ~~driven by a decrease in traffic at both company-operated and franchise-operated restaurants,~~due to menu price increases, partially offset by ~~increases~~changes in ~~menu price~~product mix and ~~favorable mix.~~

a decline in transactions.

•Company ~~Restaurant Operations~~ restaurant operations — ~~Jack in the Box company~~ Company restaurant costs as a percentage of company restaurant sales ~~decreased~~increased in ~~2018~~2020 to ~~74.0%~~75.2% from ~~74.2%~~73.8% a year ago primarily due to higher costs for labor and commodities.

•Pension settlement — As previously announced, in connection with the ~~benefit of refranchising, partially offset by an increase in food and packaging costs as a percentage of sales resulting from commodity inflation.~~

~~Franchise Operations~~ — ~~Jack in~~Company’s pension plan de-risking strategy, the Box franchise costs as a percentage of franchise revenues increased in 2018 to 39.3%, from 39.0% in the prior year, primarily due to reduced royalties for certain restaurants sold to franchisees in 2017, and a 0.3% decrease in same-store sales at franchised restaurants, which were partially offset by additional franchise fees resulting from our refranchising strategy.

~~Jack in the Box Franchising Program~~— Franchisees opened a total of 5 restaurants. As part of our refranchising strategy, we sold 22 company-operated restaurants to franchisees in several different markets during 2018 resulting in proceeds of approximately $14.7 million. In fiscal year 2018, we expect approximately 25 Jack in the Box restaurants to open system-wide, the majority of which will be franchise locations. Our Jack in the Box system was 89% franchised as of January 21, 2018. WeCompany amended its pension plan to ~~increase franchise ownership~~offer a limited time lump sum payment option to certain eligible participants. The transaction resulted in a non-cash settlement charge of ~~the Jack in the Box system to over 90%. Prior~~$38.6 million presented within “Other Pension and subsequent to the end of the first quarter of 2018, we signed non-binding letters of intent with franchisees to sell approximately 60 company-operated restaurants in several markets. Pre-tax gross proceeds related to these sales are estimated at $27.0 million to $30.0 million, and we have classified $0.8 million of equipment, related to sales under letters executed prior to quarter-end, as assets held for salePost-Retirement Expenses” in our ~~January 21, 2018~~ condensed consolidated ~~balance sheet.~~

statement of earnings.

~~Restructuring Costs (including costs related to~~•Sale of corporate office building —During the ~~Qdoba Evaluation)~~ — ~~In 2016,~~quarter, we executed on our previously announced planned sale of one our corporate office buildings as we move forward with consolidating our corporate facilities. We recognized a ~~plan to reduce~~$10.8 million gain on the sale which is presented in “Impairment and Other Costs” in our general and administrative costs, and in the third quarter of 2017, we began an evaluation of potential alternatives with respect to the Qdoba brand (the “Qdoba Evaluation”), which ultimately resulted in the Board’s approval to sell Qdoba. In connection with these activities, we have recorded $0.4 million of restructuring charges in 2018, which includes $0.8 million related to the Qdoba Evaluation, offset by a $0.4 million adjustment to severance costs. These costs are included in impairment and other costs, net in the accompanying condensed consolidated ~~statements~~statement of earnings.

•Return of ~~Cash~~cash to ~~Shareholders~~shareholders— We returned cash to shareholders in the form of share repurchases and cash dividends. We repurchased 1.9 million shares of our common stock at an average price of $81.41, totaling $153.5 million. We also declared ~~one~~a quarterly cash dividend of $0.40 per common share totaling ~~$11.8~~$9.4 million. ~~We have not repurchased any shares of our common stock in 2018.~~

•Adjusted EBITDA — Adjusted EBITDA decreased in ~~2018~~2020 to ~~$85.4~~$76.6 million from ~~$90.6~~$83.0 million in ~~2017 due to the previously mentioned changes in company restaurant operations and franchise operations.~~

~~Tax Reform~~ — ~~The~~Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law on December 22, 2017, resulting in an estimated annual statutory federal tax rate of 24.5% for fiscal 2018, and 21% for subsequent fiscal years. Due to the Tax Act, a tax expense of $30.6 million was recognized and is included as a component of income taxes from continuing operations in 2018.

2019.

FINANCIAL REPORTING

~~During fiscal 2012, we entered into an agreement to outsource our Jack in the Box distribution business.~~ In fiscal ~~2018,~~2020, we adopted Accounting Standards Codification Topic 842, Leases (“ASC 842”), effective at the ~~Board~~beginning of ~~Directors approved, and we entered into,~~our fiscal year on a ~~Stock Purchase Agreement to sell all issued and outstanding shares~~modified retrospective basis using the effective date transition method. Our consolidated financial statements reflect the application of ~~the Qdoba Restaurant Corporation (“Qdoba”) as the result of the Qdoba Evaluation. All results related to~~ASC 842 guidance beginning in 2020, while our ~~distribution business and Qdoba operations are reported as discontinued operations for all periods presented. Refer to Note 2,~~ ~~Discontinued Operations, in the notes to condensed~~ consolidated financial statements for ~~additional information. Unless otherwise noted, amounts~~prior periods were prepared under the guidance of a previously applicable accounting standard.

The most significant effects of this transition that affect comparability of our results of operations between 2020 and ~~disclosures throughout our MD&A relate~~2019 include the following:

•Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as “Franchise occupancy expenses” and “Franchise rental revenues”, respectively. These expenses and reimbursements were presented on a net basis under the previous accounting standard. Although there was no net impact to our ~~continuing operations.~~

In the first quarter of fiscal 2018, we prospectively adopted an Accounting Standards Update (“ASU”) which is intended to simplify various aspects of accounting for share-based compensation arrangements, including the income tax impact, classification on theconsolidated statement of ~~cash flows~~earnings from this change, the presentation resulted in total increases in “Franchise rental revenues” and ~~forfeitures. Upon adoption, we reclassified the excess tax benefits from share-based compensation arrangements~~“Franchise occupancy expenses” of $0.8 million as a discrete item within income tax expense on the condensed consolidated statements of earnings, rather than recognizing such excess income tax benefits in capital in excess of par value on the condensed consolidated balance sheet. This reclassification$11.6 million.

•ASC 842 also impacted the related classification on our condensed consolidated statements of cash flows as excess tax benefits from share-based compensation arrangements is only reported in cash flows from operating activities rather than as previously reported in cash flows from operating activities and cash flows used in investing activities. Upon adoption of the standard, we also began reporting cash paid to a taxing authority on an employee’s behalf when we directly withhold equivalent shares for taxes as cash flows used in financing activities. The standard also impacts the Company’s earnings per share calculation as the estimate of dilutive common share equivalents under the treasury stock method no longer assumes that the estimated tax benefits realized when an award is settled are used to repurchase shares. Lastly, the Company elected tochanged how lessees account for ~~forfeitures~~leases subleased at a loss. Under ASC 842, sublease income and lessee rent expense are recorded as ~~they occur. A cumulative-effect adjustment was made in the amount~~franchise rent revenue and franchise occupancy costs as earned or incurred. As a result of ~~$0.2~~this change, franchise revenues and franchise occupancy expenses increased $1.2 million and ~~recorded~~$1.7 million, respectively in ~~2018 retained earnings on the condensed consolidated balance sheet. Refer to Note 1,~~ ~~Basis of Presentation, in the notes to condensed consolidated financial statements for more information.~~2020.

RESULTS OF OPERATIONS

Thefollowing table presents certain income and expense items included in our condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA


	Sixteen Weeks Ended					Sixteen Weeks Ended
	January 21, 2018		January 22, 2017			January 19, 2020		January 20, 2019
Revenues:					Revenues:
Company restaurant sales	57.6	%	67.5	%	Company restaurant sales	34.2	%	35.4	%
Franchise rental revenues	26.2	%	20.2	%	Franchise rental revenues	31.2	%	28.8	%
Franchise royalties and other	16.2	%	12.2	%	Franchise royalties and other	17.1	%	18.0	%
Franchise contributions for advertising and other services					Franchise contributions for advertising and other services	17.5	%	17.8	%
Total revenues	100.0	%	100.0	%	Total revenues	100.0	%	100.0	%
Operating costs and expenses, net:					Operating costs and expenses, net:
Company restaurant costs (excluding depreciation and amortization):					Company restaurant costs (excluding depreciation and amortization):
Food and packaging (1)	28.8	%	28.5	%	Food and packaging (1)	29.8	%	28.8	%
Payroll and employee benefits (1)	28.8	%	29.4	%	Payroll and employee benefits (1)	30.3	%	29.4	%
Occupancy and other (1)	16.4	%	16.3	%	Occupancy and other (1)	15.1	%	15.6	%
Total company restaurant costs (excluding depreciation and amortization) (1)	74.0	%	74.2	%
Total company restaurant costs (1)					Total company restaurant costs (1)	75.2	%	73.8	%
Franchise occupancy expenses (excluding depreciation and amortization) (2)	60.2	%	59.1	%	Franchise occupancy expenses (excluding depreciation and amortization) (2)	67.1	%	60.5	%
Franchise support and other costs (3)	5.2	%	5.9	%	Franchise support and other costs (3)	8.9	%	5.4	%
Franchise advertising and other services expenses (4)					Franchise advertising and other services expenses (4)	102.7	%	104.7	%
Selling, general and administrative expenses	11.8	%	11.5	%	Selling, general and administrative expenses	9.2	%	8.3	%
Depreciation and amortization	6.5	%	6.0	%	Depreciation and amortization	5.4	%	5.9	%
Impairment and other charges, net	0.8	%	0.8	%	Impairment and other charges, net	(3.0)	%	2.6	%
Gains on the sale of company-operated restaurants	(3.0	)%	—	%	Gains on the sale of company-operated restaurants	(0.5)	%	(0.1)	%

Earnings from operations	24.7	%	18.9	%	Earnings from operations	22.7	%	20.1	%
Income tax rate (4)	78.5	%	38.7	%
Income tax rate (5)					Income tax rate (5)	28.4	%	23.1	%

____________________________


~~(1)~~	~~As a percentage of company restaurant sales.~~


~~(2)~~	~~As a percentage of franchise rental revenues.~~


~~(3)~~	~~As a percentage of franchise royalties and other.~~


~~(4)~~	~~As a percentage of earnings from continuing operations and before income taxes.~~

(1)As a percentage of company restaurant sales.

(2)As a percentage of franchise rental revenues.

~~CHANGES IN SAME-STORE SALES~~(3)As a percentage of franchise royalties and other.

(4)As a percentage of franchise contributions for advertising and other services.

(5)As a percentage of earnings from continuing operations and before income taxes.

Sixteen Weeks Ended
Fiscal Basis Calendar Basis (1)
January 21, 2018 January 22, 2017 January 22, 2017
Company 0.2 % — % 0.6 %
Franchise (0.3 )% 3.3 % 3.9 %
System (0.2 )% 2.5 % 3.1 %

~~____________________________~~


~~(1)~~	Due to the transition from a 53-week year in fiscal 2016 to a 52-week year in fiscal 2017, year-over-year fiscal period comparisons are off by one week. The change in same-store sales presented in the Calendar Basis column uses comparable calendar periods to balance the one-week shift from fiscal 2016 and to provide a clearer year-over-year comparison.

The following table summarizes ~~the~~ changes in ~~Jack in the Box company-operated~~ same-store ~~sales:~~sales for company-owned, franchised, and system-wide restaurants:


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Company	2.9	%	0.5	%
Franchise	1.6	%	(0.1)	%
System	1.7	%	(0.1)	%

Sixteen Weeks Ended
Fiscal Basis Calendar Basis
January 21, 2018 January 22, 2017 January 22, 2017
Average check (1) 2.6 % 4.7 % 4.9 %
Transactions (2.4 )% (4.7 )% (4.3 )%
Change in same-store sales 0.2 % — % 0.6 %

~~____________________________~~


~~(1)~~	~~Amounts on a fiscal basis in 2018 and 2017 include price increases of approximately 1.6% and 2.9%, respectively. Amount in 2017 on a calendar basis includes a price increase of approximately 2.9%.~~

The following table summarizes ~~the~~ changes in the number and mix of ~~Jack in the Box~~ company and franchise restaurants:


	2020										2019
	Company		Franchise		Total		Company		Franchise		Total
Beginning of year	137		2,106		2,243		137		2,100		2,237
New	—		11		11		—		9		9


Closed	—		(10)		(10)		—		(5)		(5)
End of period	137		2,107		2,244		137		2,104		2,241
% of system	6	%	94	%	100	%	6	%	94	%	100	%

2018 2017
Company Franchise Total Company Franchise Total
Beginning of year 276

1,975

2,251

417

1,838

2,255
New 1

5

6

2

7

9
Refranchised (22 )
22

—

—

—

—
Closed —

(7 )
(7 )
—

(3 )
(3 )
End of period 255

1,995

2,250

419

1,842

2,261
% of system 11 % 89 % 100 % 19 % 81 % 100 %

The following table summarizes restaurant sales for company-owned, franchised, and total system sales (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Company-owned restaurant sales	$	105,364	$	102,832
Franchised restaurant sales (1)	979,345		959,960
System sales (1)	$	1,084,709	$	1,062,792

____________________________

(1)Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. System sales include company and franchised restaurant sales. We do not record franchised sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchised sales. We believe franchised and system restaurant sales information is useful to investors as they have a direct effect on the Company's profitability.

Below is a reconciliation of Non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net ~~earnings:~~earnings (in thousands):

~~ADJUSTED EBITDA~~


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Net earnings - GAAP	$	7,897	$	34,098
Earnings from discontinued operations, net of taxes	—		(2,977)
Income tax expense	3,133		9,373
Interest expense, net	19,942		17,374
Pension settlement charge	38,606		—
Gains on the sale of company-operated restaurants	(1,575)		(219)
Impairment and other charges, net	(9,291)		7,698
Depreciation and amortization	16,728		17,169
Amortization of franchise tenant improvement allowances and other	1,151		530
Adjusted EBITDA - Non-GAAP	$	76,591	$	83,046

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Net earnings - GAAP $ 12,190
$ 35,930
Losses (earnings) from discontinued operations, net of taxes 699
(1,381 )
Income taxes 47,138
21,831
Interest expense, net 12,780
10,409
Earnings from operations $ 72,807
$ 66,789
Gains on the sale of company-operated restaurants (8,940 ) (137 )
Impairment and other charges, net 2,257
2,654
Depreciation and amortization 19,157
21,263
Amortization of franchise tenant improvement allowances 147
25
Adjusted EBITDA - Non-GAAP $ 85,428
$ 90,594

Company Restaurant Operations

The following table presents ~~Jack in the Box~~ company restaurant sales and costs, and restaurant costs as a percentage of the related sales. Percentages may not add due to rounding (dollars in thousands):


	Sixteen Weeks Ended
	January 19, 2020						January 20, 2019
Company restaurant sales	$	105,364			$	102,832
Company restaurant costs:
Food and packaging	31,348		29.8	%	29,616		28.8	%
Payroll and employee benefits	31,890		30.3	%	30,274		29.4	%
Occupancy and other	15,958		15.1	%	16,013		15.6	%
Total company restaurant costs	$	79,196	75.2	%	$	75,903	73.8	%

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Company restaurant sales $ 169,637
$ 238,571

Company restaurant costs (excluding depreciation and amortization):
Food and packaging 48,864
28.8 % 67,989
28.5 %
Payroll and employee benefits 48,940
28.8 % 70,183
29.4 %
Occupancy and other 27,750
16.4 % 38,941
16.3 %
Total company restaurant costs (excluding depreciation and amortization) $ 125,554
74.0 % $ 177,113
74.2 %

Company restaurant sales ~~decreased $68.9~~increased $2.5 million in ~~2018 as compared with~~2020 versus the prior year primarily driven by a decrease in the average number of restaurants resulting from the execution of our refranchising strategy and, to a lesser extent, by a decrease in traffic, which was more than offset by menu price increases and favorable product mix. The following table presents the approximate impact of these (decreases) increases on company restaurant sales in 2018 (~~in thousands~~):

Decrease in the average number of restaurants $ (96.1 )
AUV increase 27.2
Total change in company restaurant sales $ (68.9 )

~~Fiscal basis same-store sales at company-operated restaurants increased 0.2% as compared with~~ prior year primarily due to menu price increases and ~~favorable mix, partially offset by~~an increase in traffic.

Same-store sales at company-operated restaurants increased 2.9% compared to a ~~decline in transactions.~~year ago. The following table summarizes the change in company-operated ~~same-store sales:~~same store-sales versus a year ago:

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Average check (1) 2.6 % 4.7 %
Transactions (2.4 )% (4.7 )%
Change in same-store sales 0.2 % — %

~~____________________________~~


~~(1)~~	~~Amounts on a fiscal basis~~Sixteen Weeks Ended
	January 19, 2020
Average check (1)	2.6	%
Transactions	0.3	%
Change in ~~2018 and 2017 include price increases of approximately 1.6% and 2.9%, respectively.~~same-store sales	2.9	%

____________________________

(1)Includes price increases of approximately 2.6%.

Food and packaging costs as a percentage of company restaurant sales increased to 29.8% in 2020 from 28.8% a year ago due primarily to higher costs for ingredients and changes in ~~2018, compared with 28.5% in 2017. The increase was driven by higher commodity costs,~~product mix, partially offset by ~~favorable product mix and~~ menu price increases. Commodity costs were up approximately 4.9% due primarily to increases in beef and cheese. Cheese increased ~~5.2% compared to a year ago. The increase was driven~~most significantly by ~~higher costs for~~approximately 33% and beef, ~~pork, produce and beverages. Beef,~~ our most significant commodity, increased approximately ~~approximately 11% compared with the prior year. For fiscal 2018, we currently expect commodity costs to be up approximately 3% compared with fiscal 2017.~~15% versus a year ago.

Payroll and employee benefit costs as a percentage of company restaurant sales ~~decreased~~increased to ~~28.8%~~30.3% in ~~2018~~2020 compared with 29.4% ~~in 2017~~a year ago due primarily to ~~the benefits of refranchising, partially offset by~~higher average wages resulting from wage inflation ~~resulting from an increase in the minimum wage in certain markets~~ and a highly competitive labor market.

Occupancy and other costs as a percentage of company restaurant sales, decreased ~~$11.2 million in 2018 compared~~ to ~~the prior~~15.1% from 15.6% a year ago due primarily ~~due~~ to ~~a decrease in the average number of restaurants, impacting occupancy~~lower costs for maintenance and ~~other costs by approximately $15.7 million,~~repair expenses, partially offset by higher ~~maintenance~~costs for delivery fees and ~~repair expenses.~~utilities.

Franchise Operations

The following table presents ~~Jack in the Box~~ franchise revenues and costs in each period and other information we believe is useful in analyzing the change in franchise operating results (dollars in thousands):


	Sixteen Weeks Ended
	January 19, 2020			January 20, 2019
Franchise rental revenues	$	96,084		$	83,890

Royalties	50,243			49,507
Franchise fees and other	2,223			2,743
Franchise royalties and other	52,466			52,250
Franchise contributions for advertising and other services	53,759			51,814
Total franchise revenues	$	202,309		$	187,954

Franchise occupancy expenses (excluding depreciation and amortization)	$	64,517		$	50,713
Franchise support and other costs	4,676			2,845
Franchise advertising and other services expenses	55,224			54,270
Total franchise costs	$	124,416		$	107,828
Franchise costs as a percentage of total franchise revenues	61.5		%	57.4		%

Average number of franchise restaurants	2,087			2,084
Increase (decrease) in franchise-operated same-store sales	1.6		%	(0.1)		%
Franchised restaurant sales	$	979,345		$	959,960
Franchised restaurant AUVs	$	469		$	461
Royalties as a percentage of total franchised restaurant sales	5.1		%	5.2		%

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Franchise rental revenues $ 77,217
$ 71,436

Royalties 46,293
42,588
Franchise fees and other 1,316
586
Franchise royalties and other 47,609
43,174
Total franchise revenues $ 124,826
$ 114,610

Franchise occupancy expenses (excluding depreciation and amortization) $ 46,521
$ 42,190
Franchise support and other costs 2,482
2,537
Total franchise costs $ 49,003
$ 44,727
Franchise costs as a % of total franchise revenues 39.3 % 39.0 %

Average number of franchise restaurants 1,975
1,839
% increase 7.4 %
(Decrease) increase in franchise-operated same-store sales (0.3 )% 3.3 %
Franchise restaurant AUVs $ 455
$ 453
Royalties as a percentage of total franchise restaurant sales 5.1 % 5.1 %

Franchise rental revenues increased ~~$5.8~~$12.2 million, or ~~8.1%~~14.5%, asin 2020 compared ~~with a~~to the prior year, ~~ago. This increase is~~ primarily ~~due to $6.3 million~~from our adoption of ~~additional~~ASC 842, which increased rental revenues in 2018 resulting from the net increase in the average number of restaurants leased or subleased from the Company due to our refranchising strategy, partially offset by a decline in franchise restaurant same-store sales resulting in a decrease in revenues from percentage rent.$12.8 million.

Franchise royalties and other increased ~~$4.4~~$0.2 million ~~or 10.3%~~ in ~~2018 versus a~~2020 compared to the prior year, ~~ago primarily reflecting a $4.1 million~~due to an increase in franchise same-store sales driving royalties ~~driven~~higher by ~~a net increase in the average number of franchise restaurants primarily resulting from our refranchising strategy, and additional franchise fees of $0.8~~approximately $1.7 million, ~~related to the sale of 22 company-operated restaurants to franchisees during 2018. These increases were~~ partially offset by a $0.8 million increase in franchise incentives recorded as a reduction of franchise royalties and a $0.5 million decrease in ~~royalties related~~franchise fees and other.

Franchise contributions for advertising and other services increased $1.9 million compared to the ~~decline~~prior year, due to an increase in ~~same-store~~technology fees charged to our franchisees and an increase in franchisee contributions to our marketing fund which are based on a percentage of their restaurant sales.

Franchise occupancy expenses, principally rents, increased ~~$4.3~~$13.8 million in ~~2018 versus a~~2020 compared to the prior year, ~~ago~~due primarily to the adoption of ASC 842 which increased franchise occupancy expenses by $13.3 million.

Franchise support and other costs increased $1.8 million in 2020 compared to the prior year, due primarily to a ~~net~~$1.9 million increase in franchisee bad debt expense.

Franchise advertising and other service expenses increased $1.0 million compared to the ~~average number of franchise-operated restaurants resulting~~prior year, due to a $0.9 million increase in marketing fund contributions from our ~~refranchising strategy, contributing additional costs of approximately $3.7 million, and to a lesser extent, routine rent increases.~~franchisees.

Depreciation and Amortization

Depreciation and amortization decreased by ~~$2.1~~$0.4 million in ~~2018~~2020 as compared with the prior year, primarily due to a decrease in equipment depreciation driven by a decrease in the average number of company-operated restaurants resulting from our refranchising activities in 2017 and 2018. To a lesser extent, a decline in depreciation resulting from our franchise building assets becoming fully depreciated ~~also contributed to~~in the ~~decrease.~~current fiscal year.

Selling, General and Administrative (“SG&A”) Expenses

The following table presents the change in ~~2018~~2020 SG&A expenses compared with the prior year (in thousands):


	Sixteen Weeks Ended
	January 19, 2020
Advertising	$	(1,873)
Incentive compensation (including share-based compensation and related payroll taxes)	3,014
Cash surrender value of COLI policies, net	(3,506)
Litigation matters	3,756
Other (includes transition services income and savings related to our restructuring plan)	2,774
	$	4,165

(Decrease) / Increase
Advertising $ (3,109 )
Cash surrender value of COLI policies, net (1,248 )
Region administration (892 )
Pension and postretirement benefits (582 )
Incentive compensation (including share-based compensation and related payroll taxes) (203 )
Other (including savings related to our restructuring plan) (113 )
$ (6,147 )

Advertising costs ~~at our Jack in the Box brand are primarily~~represent company contributions to our marketing fund and are generally determined as a percentage of ~~gross~~company-operated restaurant sales. Advertising costs decreased ~~$3.1~~$1.9 million in ~~2018~~2020 compared ~~with a~~to the prior year, ~~ago~~primarily due to a ~~decrease~~$2.0 million discretionary marketing fund contribution made by the Company in ~~the number~~2019.

Incentive compensation increased by $3.0 million in 2020 primarily due to an increase in performance-based stock compensation and annual incentives, mainly as a result of ~~company-operated restaurants resulting from our refranchising efforts.~~higher achievement levels compared to prior year.

The cash surrender value of our ~~Company-owned~~company-owned life insurance (“COLI”) policies, net of changes in our non-qualified deferred compensation obligation supported by these policies, are subject to market fluctuations. The changes in market values had a positive impact of ~~$0.3~~$2.1 million in ~~2018 and~~2020, compared to a negative impact of ~~$0.9~~$1.4 million in ~~2017.~~the prior year.

~~Region administration costs decreased in 2018 as compared to 2017 due primarily to workforce reductions related to our refranchising efforts.~~

~~Pension and postretirement benefit costs decreased~~Litigation matters increased by $3.8 million, primarily due to costs accrued in 2020 on the expected settlement of an ~~increase in the discount rates and higher than expected return on assets (“ROA”) in the prior year, partially offset by a decrease in the ROA assumption from 6.5% to 6.2% in 2018.~~

Incentive compensation decreased primarily due to a decrease in share-based compensation related to the timing of award grants and a decrease in payroll taxes, partially offset by higher levels of performance in the current year versus the prior year as compared to target bonus levels.

~~Impairment and Other Charges, Net~~

~~Impairment and other charges, net is comprised of the following (in thousands~~):

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Costs of closed restaurants and other $ 1,375
$ 1,839
Restructuring costs 358
183
Restaurant impairment charges 291
—
Losses on disposition of property and equipment, net 183
530
Accelerated depreciation 50
102
$ 2,257
$ 2,654

Impairment and other charges, net decreased $0.4 million in 2018 compared with a year ago. The decrease was primarily driven by a $0.9 million reduction in costs associated with closed restaurant properties related to revisions of certain sublease assumptions for our lease obligations and a $0.4 million gain on sale of a closed restaurant property in 2018. These decreases were partially offset by $0.5 million of impairment charges in 2018 related to a reduction in the value of three previously closed properties.employee litigation matter. Refer to Note 6, ~~Impairment~~12, Contingencies and ~~Other Charges, Net~~Legal Matters, of the notes to the condensed consolidated financial statements for additional information regarding these ~~costs.~~charges.

Impairment and Other Charges, Net

Impairment and other charges, net is comprised of the following (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Restructuring costs	$	1,045	$	5,840
Costs of closed restaurants and other	101		866
Accelerated depreciation	—		416
(Gains) losses on disposition of property and equipment, net	(10,437)		576
	$	(9,291)	$	7,698

Restructuring costs decreased by $4.8 million in 2020 compared to the prior year, primarily as a result of lower severance expenses of $3.5 million, as well as $1.3 million lower costs related to the strategic alternative evaluation that was concluded on in the third quarter of 2019.

Gains on disposition of property and equipment, net, increased by $11.0 million, primarily due to a $10.8 million gain related to the sale of one of our corporate office buildings in 2020.

Gains on the Sale of Company-Operated Restaurants (~~dollars in thousands~~)

Gains on the sale of company-operated restaurants ~~net are detailed~~were $1.6 million in 2020 versus $0.2 million in the ~~following table (dollars~~prior year. In both comparative periods, the gains recognized pertain to meeting certain contingent consideration provisions included in ~~thousands~~):

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Number of restaurants sold to Jack in the Box franchisees 22
—

Gains on the sale of company-operated restaurants $ 8,940
$ 137

Gains are impacted by the number of restaurants sold and changes in average gains or losses recognized, which primarily relate to the specific sales and cash flows of those restaurants. Gains in 2018 and 2017 include additional proceeds of $1.2 million and $0.1 million, respectively, related to restaurants sold in previous years.

Other Pension and Post-Retirement Expenses, Net

Other pension and post-retirement expenses, net increased by $38.5 million in 2020 versus a ~~prior year.~~year ago, primarily due to a non-cash pension settlement charge of $38.6 million in 2020. Refer to Note 3, ~~Summary of Refranchisings and Franchisee Development~~9, Retirement Plans, of the notes to the condensed consolidated financial statements for additional information regarding ~~these gains.~~

this charge.

Interest Expense, Net

Interest expense, net is comprised of the following (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Interest expense	$	20,419	$	17,612
Interest income	(477)		(238)
Interest expense, net	$	19,942	$	17,374

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Interest expense $ 12,811
$ 10,436
Interest income (31 ) (27 )
Interest expense, net $ 12,780
$ 10,409

Interest expense, net increased ~~$2.4~~$2.6 million in ~~2018 compared with~~2020 versus a year ago, primarily due to a higher average ~~interest rates and average~~ borrowings ~~which contributed additional interest expense~~compared to prior year, as well an increase in loan fee amortization of ~~approximately $1.6 million and $1.3 million, respectively.~~$1.1 million.

Income Taxes

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law on December 22, 2017. The Tax Act included a reduction in the U.S. federal statutory corporate income tax rate (the “Tax Rate”) from 35% to 21% and introduced new limitations on certain business deductions. As a result, we recognized a one-time, non-cash $30.6 million tax provision expense impact primarily related to the re-measurement of our deferred tax assets and liabilities due to the reduced Tax Rate.

The tax rate in ~~2018 is 78.5%,~~2020 was 28.4% compared with ~~38.7% in 2017.~~23.1% a year ago. The major components of the change in tax rates were a decrease in operating earnings before income tax, an adjustment related to state taxes recorded in the ~~one-time, non-cash impact~~first quarter of fiscal year 2019, an increase in the ~~enactment of the Tax Cuts and Jobs Act, including the revaluation of all deferred~~ tax ~~assets and liabilities at the reduced federal statutory rate,~~deficiency on 2020 stock compensation, partially offset by an increase in gains from the ~~decrease in the federal statutory tax rate and the excess tax benefit on year-to-date stock compensation expense. We expect the fiscal year tax rate~~market performance of insurance products used to ~~be approximately 41.0%. As discussed in Note 1,~~ ~~Basis of Presentation,~~ ~~upon the adoption of ASU 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, we~~fund certain non-qualified retirement plans which are including the excess tax benefit of our stock based compensation as a discrete item within income tax expense on the condensed consolidated statements of earnings, which may cause volatility in our quarterly tax rate.excluded from taxable income. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual ~~2018~~2020 rate could differ from our current estimates. Refer to Note 7, 8,Income Taxes, of the notes to the condensed consolidated financial statements for additional information regarding income taxes.

~~(Losses) Earnings from Discontinued Operations, Net~~

~~As described in Note 2,~~ ~~Discontinued Operations~~, in the notes to condensed consolidated financial statements, the results of operations from our distribution business and Qdoba have been reported as discontinued operations for all periods presented. Refer to Note 2 for additional information regarding discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available financing in place. On July 8, 2019, we completed a refinancing of our ~~revolving bank~~existing senior credit ~~facility.~~facility with a new securitized financing facility, comprised of $1.3 billion of senior fixed-rate term notes and $150.0 million of variable funding notes as further described below.

We generally reinvest available cash flows from operations to ~~develop new restaurants or~~ enhance existing restaurants, to reduce debt, to repurchase shares of our common stock, and to pay cash dividends. Our cash requirements consist principally of:

•working capital;

•capital ~~expenditures for new restaurant construction and restaurant renovations;~~expenditures;

•income tax payments;

•debt service requirements;

•franchise tenant improvement allowance distributions; and

•obligations related to our benefit plans.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with ~~other~~our securitized financing ~~alternatives in place or available,~~facility including our variable funding notes, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

As is common in the restaurant industry, we maintain relatively low levels of accounts receivable and inventories, and our vendors grant trade credit for purchases such as food and supplies. We also continually invest in our business through the addition of new units and refurbishment of existing units, which are reflected as long-term assets and not as part of working capital. As a result, we may at times maintain current liabilities in excess of current assets, which results in a working capital deficit.

Cash Flows

The table below summarizes our cash flows from continuing operations (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Total cash provided by (used in):
Operating activities	$	22,687	$	37,601
Investing activities	32,364		(4,263)
Financing activities	(168,326)		(31,743)
Net cash flows	$	(113,275)	$	1,595

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Total cash provided by (used in):
Operating activities $ 53,730
$ 69,798
Investing activities (1,818 ) (13,183 )
Financing activities (54,917 ) (67,880 )
Net cash flows $ (3,005 ) $ (11,265 )

Operating Activities. Operating cash flows in ~~2018~~the quarter decreased ~~$16.1~~$14.9 million compared with a year ago, primarily due to ~~the timing~~unfavorable changes in working capital of ~~October rent payments of $15.4~~$9.0 million and ~~a decrease in earnings from continuing operations in 2018.~~lower net income adjusted for non-cash items of $5.9 million.

Pension and Postretirement Contributions — Our policy is to fund our pension plans at or above the minimum required by law. As of January 1, ~~2017,~~2019, the date of our last actuarial funding valuation, there was no minimum contribution funding requirement for our qualified pension plan. 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 ~~2018. Year-to-date 2018,~~2020. In 2020, we contributed ~~$1.7~~$2.0 million to our non-qualified pension plan and postretirement plans.

Investing Activities. Cash ~~used in~~provided by investing activities ~~decreased $11.4~~increased by $36.6 million compared with a year ago, primarily due to $14.7 million in proceeds from the sale of 22 company-operated Jack in the Box restaurants in 2018, which includes $9.1 million in collections of notes receivable issued in connection with the 2018 sales, and an additional $2.5 million inhigher proceeds from the sale and leaseback of assets ~~in 2018. These increases in cash were~~of $17.4 million, higher proceeds from the sale of property and equipment of $20.3 million, and $4.0 million lower capital expenditure spending, partially offset by ~~a $7.3~~$6.5 million ~~increase~~of lower repayments received on notes issued in ~~Qdoba inter-company transfers in 2018.~~connection with 2018 refranchising transactions.

Capital Expenditures— The composition of capital expenditures in each period follows (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Jack in the Box:
Restaurant facility expenditures	$	3,500	$	7,346
New restaurants	—		1,301
Other, including information technology	1,552		2,525
	5,052		11,172
Corporate Services:
Information technology	1,760		11
Other, including facility improvements	390		—
	2,150		11

Total capital expenditures	$	7,202	$	11,183

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Jack in the Box:
Restaurant facility expenditures $ 8,554
$ 5,128
New restaurants 555
2,000
Other, including information technology 657
410
9,766
7,538
Corporate Services:
Information technology 1,017
1,037
Other, including facility improvements 10
6
1,027
1,043

Total capital expenditures $ 10,793
$ 8,581

Our capital expenditure program includes, among other things, restaurant remodeling, information technology enhancements, and investments in new locations and ~~equipment, restaurant remodeling, and information technology enhancements.~~equipment. Capital expenditures ~~increased $2.2~~decreased by $4.0 million compared to a year ago primarily ~~resulting from a $3.4 million increase in spending related~~due to ~~Jack in the Box~~lower facility expenditures ~~primarily capital maintenance~~from restaurant remodels and ~~restaurant innovation,~~technology initiatives; partially offset by ~~a $1.4 million decrease~~higher spending on certain corporate technology initiatives in spending related to building new Jack in the Box restaurants primarily resulting from our refranchising initiative. We expect fiscal 2018 capital expenditures to be approximately $30.0 million to $35.0 million.2020.

~~Assets Held for~~ Sale ~~and Leaseback~~leaseback transactions — We use sale and leaseback financing to ~~limit~~lower the initial cash investment in our restaurants to the cost of the equipment, whenever possible. In ~~2018,~~2020, we ~~did not exercise our right~~completed a sale leaseback transaction of ~~first refusal for any~~a multi-tenant commercial property in Los Angeles, California and leased ~~properties. During 2017, we exercised our right~~back the parcel on which a company-operated restaurant is located. We received net proceeds on the transaction of first refusal related to one leased property, which we intend to sell and leaseback within 12 months of the balance sheet date. The following table summarizes the cash flow activity related to sale and leaseback transactions in each period (~~dollars in thousands~~):

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Number of restaurants sold and leased back 2
1

Purchases of assets intended for sale and leaseback $ (1,411 ) $ (1,717 )
Proceeds from the sale and leaseback of assets $ 4,949
$ 2,466

~~As of January 21, 2018, we had investments of $10.1~~$17.4 million ~~relating to four restaurant properties that we expect to sell and leaseback~~ during the ~~next 12 months.~~quarter.

~~Sale of Company-Operated Restaurants~~— ~~We continue to expand franchise ownership in the Jack in the Box system primarily through~~In 2020, we also completed the sale of ~~company-operated restaurants to franchisees. The following table details proceeds received in connection~~one of our corporate office buildings as we move forward with our ~~refranchising activities in each~~previously announced consolidation of our corporate facilities We entered into a lease with the buyer to leaseback the property up to a period (~~dollars in thousands~~):

Sixteen Weeks Ended
January 21, 2018 January 22, 2017
Number of restaurants sold to franchisees 22
—

Proceeds from the sale of company-operated restaurants $ 14,675
$ 138

~~Proceeds in 2018 and 2017 include additional gains~~ of ~~$1.2 million and $0.1 million, respectively, related to restaurants sold in previous years. For additional information, refer to Note 3,~~ ~~Summary of Refranchisings, Franchisee Development and Acquisitions~~,18 months with an option of the ~~notes~~Company to ~~condensed consolidated financial statements~~.terminate the lease, without penalty, upon providing a 90-day notice. We received net proceeds on the sale of $20.6 million during the quarter.

Financing Activities. Cash flows used in financing activities ~~decreased $13.0~~increased by $136.6 million ~~in 2018~~ compared with a year ago, primarily due to an increase in stock repurchases of $141.2 million and lower cash book overdrafts of $9.2 million, partially offset lower debt repayments of $13.7 million.

Class A-2 Notes — Interest and principal payments on the Class A-2 Notes are payable on a ~~decrease~~quarterly basis. 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 ~~cash used~~the Indenture), is less than or equal to ~~repurchase common stock~~5.0x. At January 19, 2020, the Company’s actual leverage ratio exceeded 5.0x, and ~~proceeds from~~as a result, we will be required to make quarterly principal payments of $3.25 million. The Company anticipates that we will be required to make quarterly principal payments on the Class A-2 Notes for the foreseeable future.

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”). If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to the respective anticipated repayment date, additional interest will accrue pursuant to the Indenture. As of January 19, 2020, $1,300.0 million of borrowings were outstanding on the Class A-2 Notes.

Variable Funding Notes — The Variable Funding Notes were issued under the Indenture and allow for drawings of up to $150.0 million on a revolving basis and the issuance of ~~our common stock, partially offset by~~letters of credit. Depending on the type of borrowing under the Variable Funding Notes, interest on the Variable Funding Notes will be based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars or (iv) the lenders’ commercial paper funding rate plus any applicable margin, as set forth in the Variable Funding Note Purchase Agreement. There is a ~~net increase in payments under our credit facility.~~

~~Credit Facility~~ ~~— Our credit facility consists of (i) a $900.0 million revolving credit agreement and (ii) a $700.0 million term loan. Both~~scaled commitment fee on the ~~revolving credit agreement and the term loan have maturity dates of March 19, 2019. As part~~unused portion of the ~~credit agreement, we may also request~~Variable Funding Notes facility of between 50 and 100 basis points. It is anticipated that the ~~issuance~~principal and interest on the Variable Funding Notes will be repaid in full on or prior to August 2024, subject to two one-year extensions at the option of upthe Company. Following the anticipated repayment date (and any extensions thereof), additional interest will accrue equal to ~~$75.0~~5.00% per annum. As of January 19, 2020, $42.1 million inof letters of credit ~~the~~were outstanding ~~amount of~~against the

Variable Funding Notes, which ~~reduces our net borrowing capacity~~relate primarily to interest reserves required under the ~~agreement. As of~~Indenture. The Variable Funding Notes were undrawn at January ~~21, 2018, we had $625.7 million outstanding under the term loan, borrowings under the revolving credit agreement of $472.4 million,~~19, 2020.

Covenants and ~~letters of credit outstanding of $31.4 million.~~

restrictions —The interest rate on our credit facility is based on our leverage ratio and can range from the London Interbank Offered Rate (“LIBOR”) plus 1.25% to 2.25% with a 0% floor on LIBOR. The current interest rate is LIBOR plus 2.00%.

WeNotes are subject to a ~~number~~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 ~~under our credit facility,~~relating to recordkeeping, access to information and similar matters. The Notes are also subject to customary rapid amortization events provided for in the Indenture, including ~~limitations on additional borrowings, acquisitions, loans~~events tied to ~~franchisees, lease commitments, stock repurchases and dividend payments, and requirements~~failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain ~~financial ratios as defined in~~levels on certain measurement dates, certain manager termination events, an event of default, and the ~~credit agreement. We~~failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity 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. As of January 19, 2020, we were in compliance with all ~~covenants as~~of our debt covenant requirements and were not subject to any rapid amortization events.

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. As of January ~~21, 2018.~~19, 2020, the Master Issuer had restricted cash of $18.4 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.

~~Interest Rate Swaps~~— To reduce our exposure to fluctuating interest rates under our credit facility, we consider interest rate swaps. In April 2014, we entered into nine forward-starting interest rate swap agreements that effectively converted $300.0 million of our variable rate borrowings to a fixed-rate basis from October 2014 through October 2018. In June 2015, we entered into eleven forward-starting interest rate swap agreements that effectively converted an additional $200.0 million of our variable rate borrowings to a fixed-rate from October 2015 through October 2018, and $500.0 million from October 2018 through October 2022. For additional information, refer to Note 5, ~~Derivative Instruments, of the notes to our condensed consolidated financial statements and Item 3,~~ ~~Quantitative and Qualitative Disclosures About Market Risk, of this report.~~

Repurchases of Common Stock— ~~We have not~~ The Company repurchased ~~any~~approximately 1.9 million shares of its common ~~shares during 2018. In 2017 we repurchased 1.0 million common shares~~stock in the first quarter of fiscal 2020 at an average price of $81.41 per share for an aggregate cost of ~~$108.1~~$153.5 million. ~~As of January 21, 2018, there was~~This leaves approximately ~~$181.0~~$122.2 million remaining under ~~Board-authorized stock-buyback~~share repurchase programs ~~which~~authorized by its Board of Directors, consisting of $22.2 million remaining that expire in November ~~2018. In~~2020 and approximately $100.0 million remaining that expire in November 2021.

Repurchases of common stock included in our condensed consolidated statement of cash flows for ~~2017, repurchases of common stock~~fiscal 2020 includes ~~$7.2~~$2.0 million related to repurchase transactions traded in the prior ~~fiscal~~ year that settled in ~~2017.~~2020.

Dividends — During ~~2018,~~2020, the Board of Directors declared a quarterly cash ~~dividend~~dividends of $0.40 per common share totaling ~~$11.8~~$9.4 million. Future dividends are subject to approval by our Board of Directors.

Off-Balance Sheet Arrangements

We have entered into certain off-balance sheet contractual obligations and commitments in the ordinary course of business, which are recognized in our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles. There has been no material change in these arrangements as disclosed in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended ~~October 1, 2017.~~September 29, 2019. We are not a party to any other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates are those that we believe are most important for the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~October 1, 2017.~~September 29, 2019.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1, Basis of Presentation, of the notes to condensed consolidated financial statements.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the federal securities laws. Any statements contained herein that are not historical facts may be deemed to be forward-looking statements. Forward-looking statements may be identified by words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would”, “should” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to:

~~Changes in consumer confidence and declines in general economic conditions could negatively impact our financial results.~~

•We face significant competition in the food service industry and our inability to compete may adversely affect our business.

•Changes in demographic trends and in customer tastes and preferences could cause sales and the royalties we receive from franchisees to decline.

•Changes in consumer confidence and declines in general economic conditions could negatively impact our financial results.

•Increases in food and commodity costs could decrease our profit margins or result in a modified menu, which could adversely affect our financial results.

•Failure to receive scheduled deliveries of high quality food ingredients and other supplies could harm our ~~operations.~~operations and reputation.

•We have a limited number of suppliers for our major products and rely on a distribution network with a limited number of distribution partners for the majority of our national distribution program in the United States. If our suppliers or distributors are unable to fulfill their obligations under their contracts, it could harm our operations.

•Food safety and food-borne illness concerns may have an adverse effect on our business by reducing demand and increasing costs.

•Negative publicity relating to our business or industry could adversely impact our reputation.

•Our business could be adversely affected by increased labor ~~costs~~costs.

•Inability to attract, train and retain top-performing personnel could adversely impact our financial results or ~~difficulties in finding and retaining top-performing personnel.~~business.

•We may not have the same resources as our competitors for marketing, advertising and promotion.

•We may be adversely impacted by severe weather conditions, natural disasters, terrorist acts or civil unrest that could result in property damage, injury to employees and staff, and lost restaurant sales.

~~Our business is subject to seasonal fluctuations.~~

•We may not achieve our development goals.

~~The~~•Our highly franchised business model presents a number of risks, and the failure of our franchisees to operate successful and profitable restaurants could negatively impact our business.

•We are subject to ~~land~~financial and regulatory risks ~~and regulations~~associated with ~~respect to~~ our owned and leased properties and real estate development projects.

~~Estimated values of~~•Changes to estimates related to our property, fixtures, and equipment or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges on certain long-lived ~~assets; such charges~~assets, which may adversely affect our results of operations.

•Our tax provision may fluctuate due to changes in expected earnings.

~~We may incur costs as a result~~•Activities related to our sale of ~~certain~~Qdoba, and our refranchising, restructuring, ~~activities which~~and cost savings initiatives entail various risks and may negatively impact our financial results.

•We ~~may experience cyber security~~are subject to the risk of cybersecurity breaches, intrusions, data loss, or other ~~similar~~data security incidents.

•If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, the Company’s stockholders could lose confidence in our financial results, which would harm our business and the value of the Company’s common shares.

•We may not be able to adequately protect our intellectual property, which could harm the value of our brands and adversely affect our business.

~~We adjust our capital structure from time~~•Jack in the Box may be subject to ~~time and we may increase our~~risk associated with disagreements with key stakeholders, such as franchisees.

•The securitized debt ~~leverage which would make us more sensitive to the effects of economic downturns.~~

~~The trading volatility and price~~instruments issued by certain of our ~~common stock may be affected by many factors.~~wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, which could harm the value of our brand and adversely affect our business.

•We have a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of our Company or its subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations.

•The securitization transaction documents impose certain restrictions on our activities or the activities of our subsidiaries, and the failure to comply with such restrictions could adversely affect our business.

•Changes in accounting standards may negatively impact our results of operations.

•We are subject to increasing legal complexity and may be subject to claims or ~~litigation~~lawsuits that are costly to defend and could result in our payment of substantial damages or settlement costs.

•Unionization activities or labor disputes may disrupt our operations and affect our profitability.

•Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results.

•Our insurance may not provide adequate levels of coverage against claims.

•Our quarterly results and, as a result, the price of our common stock, may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors.

~~Our bylaws contain~~•Activities of activist stockholders could cause us to incur substantial costs, divert management’s attention and resources, and have an ~~exclusive forum provision that may discourage lawsuits against us and~~adverse effect on our ~~directors and officers.~~business.

•Governmental regulation may adversely affect our existing and future operations and results, including by harming our ability to profitably operate our restaurants.

•The proliferation of federal, state, and local regulations increases our compliance risks, which in turn could adversely affect our business.

~~Changes to healthcare laws in the United States or the repeal of existing healthcare laws may negatively impact our financial results in future periods.~~

•Legislation and regulations regarding our products and ingredients, including the nutritional content of our products, could impact customer preferences and negatively impact our financial results.

•Failure to obtain and maintain required licenses and permits or to comply with food control regulations could lead to the loss of our food service licenses and, thereby, harm our business.

~~Delay or failure in closing the pending sale of Qdoba.~~

These and other factors are identified and described in more detail in our filings with the Securities and Exchange Commission, including, but not limited to: the “Discussion of Critical Accounting Estimates,” and other sections in this Form 10-Q and the “Risk Factors” section of our most recent Annual Report on Form 10-K for the fiscal year ended ~~October 1, 2017~~September 29, 2019 (“Form 10-K”). These documents may be read free of charge on the SEC’s website at www.sec.gov. Potential investors are urged to consider these factors, more fully described in our Form 10-K, carefully in evaluating any forward-looking statements, and are cautioned not to place undue reliance on the forward-looking statements. All forward-looking statements are made only as of the date issued, and we do not undertake any obligation to update any forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Our primary exposure to risks relating to our financial instruments is~~There have been no material changes in ~~interest rates. Our credit facility is comprised of a revolving credit facility~~our quantitative and ~~a term loan, bearing interest at a rate equal to the prime rate or LIBOR plus an applicable margin based~~qualitative market risks set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on ~~a financial leverage ratio. As of January 21, 2018, the applicable margin~~Form 10-K for the ~~LIBOR-based revolving loans and term loan was set at 2.00%.~~fiscal year ended September 29, 2019.

We use interest rate swap agreements to reduce exposure to interest rate fluctuations. In April 2014, we entered into nine forward-starting interest rate swap agreements that effectively converted $300.0 million of our variable rate borrowings to a fixed-rate basis from October 2014 through October 2018. Additionally, in June 2015, we entered into eleven forward-starting interest rate swap agreements that effectively converted an additional $200.0 million of our variable rate borrowings to a fixed-rate from October 2015 through October 2018, and $500.0 million from October 2018 through October 2022. Based on the applicable margin in effect as of January 21, 2018, these twenty interest rate swaps would yield average fixed rates of 4.41%, 4.62%, 4.89%, 5.07%, 5.17% in years 2018 through 2022, respectively. For additional information related to our interest rate swaps, refer to Note 5, ~~Derivative Instruments, of the notes to condensed consolidated financial statements.~~

We are also exposed to the impact of commodity and utility price fluctuations. Many of the ingredients we use are commodities or ingredients that are affected by the price of other commodities, weather, seasonality, production, availability and various other factors outside our control. In order to minimize the impact of fluctuations in price and availability, we monitor the primary commodities we purchase and may enter into purchasing contracts and pricing arrangements when considered to be advantageous. However, certain commodities remain subject to price fluctuations. We are exposed to the impact of utility price fluctuations related to unpredictable factors such as weather and various other market conditions outside our control. Our ability to recover increased costs for commodities and utilities through higher prices is limited by the competitive environment in which we operate.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

~~Based on an evaluation~~Management, under the oversight of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s quarter ended January 21, 2018, the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive ~~officer~~ and principal financial officer, respectively) ~~have concluded that~~, evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13-1-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by the Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were ~~effective.~~

not effective due to a material weakness in internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the fiscal year ended September 29, 2019.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended January 19, 2020, we adopted new guidance for lease accounting. We implemented internal controls to ensure we adequately evaluated leasing arrangements and properly assessed the impact of the new guidance to facilitate the adoption. Additionally, we implemented new business processes, internal controls, and modified information technology systems to assist in the ongoing application of the new guidance. There have been no other changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended January ~~21, 2018~~19, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Remediation of Material Weakness

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended September 29, 2019, we began implementing a remediation plan to address the material weakness mentioned above. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

PART II. OTHER INFORMATION

There is no information required to be reported for any items under Part II, except as follows:

ITEM 1. LEGAL PROCEEDINGS

See Note 12, Contingencies and Legal Matters, of the notes to the condensed consolidated financial statements for a discussion of our contingencies and legal matters.

ITEM 1A. RISK FACTORS

The risk factors set forth below contain material changes to the risk factors previously disclosed and included in our Annual Report on Form 10-K for the fiscal year ended September 29, 2019. When evaluating our business and our prospects, you should consider the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended ~~October 1, 2017,~~September 29, 2019, which we filed with the SEC on November ~~29, 2017.~~21, 2019, as updated in this Item 1A. You should also consider the risks and uncertainties discussed under the heading “Cautionary Statements Regarding Forward-Looking Statements” in Item 2 of this Quarterly Report on Form 10-Q. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended ~~October 1, 2017,~~September 29, 2019, including our financial statements and the related notes. ~~There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended October 1, 2017.~~ These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the risks or uncertainties actually occurs, our business and financial results could be harmed. In that case, the market price of our common stock could decline.

Inability to attract, train and retain top-performing personnel could adversely impact our financial results or business.

We believe that our continued success will depend, in part, on our ability to attract and retain the services of skilled personnel, from our senior management to our restaurant employees. The loss of the services of, or our inability to attract and retain, such personnel could have a material adverse effect on our business. We believe good managers and crew are a key part of our success, and we devote significant resources to recruiting and training our restaurant managers and crew. We aim to reduce turnover among our restaurant crews and managers in an effort to retain top performing employees and better realize our investment in training new employees. Any failure to do so may adversely impact our operating results by increasing training costs and making it more difficult to deliver outstanding customer service, which could have a material adverse effect on our financial results.

On December 11, 2019, we announced that Lenny Comma, our Chief Executive Officer, intends to leave the Company and our Board has retained Spencer Stuart to assist us in identifying an individual to succeed Mr. Comma as Chairman and Chief Executive Officer. While our Board is confident in its ability to identify and attract a successor, there can be no assurances of when we will be able to successfully attract and retain a qualified candidate to serve as Chief Executive Officer. Our inability to identify, attract and retain such a qualified candidate could impede the further implementation of our business strategy, which could have a material adverse effect on our business. In addition, we previously announced that other key members of executive management have left and will be leaving the Company in early 2020. The loss of these key executives or any additional members of our executive management team or an inability to effectively plan for and implement a succession plan for key management could negatively impact our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Our credit agreement provides for the potential payment of cash dividends and stock repurchases, subject to certain limitations based on our leverage ratio as defined in our credit agreement.~~

Stock Repurchases— ~~We have not~~In the first quarter of 2020 we repurchased ~~any~~1.9 million shares at an aggregate cost of ~~our common stock in 2018.~~$153.5 million. As of January ~~21, 2018,~~19, 2020, there was approximately ~~$181.0~~$22.2 million remaining under ~~stock-buyback programs~~the Board-authorized stock buyback program which ~~expire~~expires in November ~~2018.~~2020 and approximately $100.0 million which expires in November 2021.


	(a) Total number of shares purchased	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced programs	(d) Maximum dollar value that may yet be purchased under these programs
					$	275,702,860
September 30, 2019 - October 27, 2019	338,792	$	88.47	338,792	$	246,164,247
October 28, 2019 - November 24, 2019	978,035	$	82.97	978,035	$	166,866,944
November 25, 2019 - December 22, 2019	569,373	$	78.45	569,373	$	122,153,031
December 23, 2019 - January 19, 2020	—	$	—	—	$	122,153,031
Total	1,886,200			1,886,200

ITEM 3. DEFAULTS ~~UPON~~OF SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Item 5.03. None.

ITEM 6. EXHIBITS

Number

Description

Form

Filed with SEC

~~3.1~~10.2.11*

~~Certificate of Amendment of Restated Certificate of Incorporation,~~Mark Blankenship Separation and Release A greement, dated ~~September 21, 2007~~January 3, 2020

~~8-K~~10-Q

~~9/24/2007~~Filed herewith

~~3.2~~10.2.12*

~~Amended~~Paul Melancon Separation and ~~Restated Bylaws,~~Release Agreement, dated ~~August 4, 2017~~January 3, 2020

10-Q

Filed herewith

~~3.3~~10.2.13*

~~Stock Purchase~~Vanessa Fox Separation and Release 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~~January 17, 2020

~~8-K~~10-Q

~~12/20/2017~~Filed herewith

~~10.2.6~~10.8.17*

Jack in the Box Inc. ~~Chief Financial Officer Offer Letter, dated January 11, 2018~~Special Time-Vesting Restricted Stock Unit Award Agreement Under the 2004 Stock Incentive Plan

~~8-K~~10-Q

~~1/16/2018~~Filed herewith

~~10.2.7~~31.1

~~Jack in the Box Inc. Vice President, Chief Operating Officer Offer Letter, dated January 22, 2018~~

~~8-K~~

~~1/26/2018~~

~~31.1~~

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

—

Filed herewith

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

—

Filed herewith

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

—

Filed herewith

32.2

Certification of Chief 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

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

*Management contract or compensatory plan

* Management contract or compensatory plan.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		JACK IN THE BOX INC.

		~~JACK IN THE BOX INC.~~

By:	/S/ J~~ERRY~~ ~~P. REBEL~~ LANCE TUCKER
			~~Jerry P. Rebel~~Lance Tucker
			Executive Vice President and Chief Financial Officer (principal financial officer) (Duly Authorized Signatory)

Date: February ~~22, 2018~~

20, 2020



Large accelerated filer			þ	~~Accelerated filer~~	¨
~~Non-accelerated filer~~	¨ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	¨☐
Accelerated filer			☐	Emerging growth company	¨☐
Non-accelerated filer			☐



		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Earnings	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2221
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3634
Item 4.	Controls and Procedures	3734
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3735
Item 1A.	Risk Factors	3735
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3735
Item 3.	Defaults of Senior Securities	3736
Item 4.	Mine Safety Disclosures	3736
Item 5.	Other Information	3736
Item 6.	Exhibits	3837
	Signature	3938


	January 21, 2018			October 1, 2017				January 19, 2020		September 29, 2019
ASSETS							ASSETS
Current assets:							Current assets:
Cash	$	3,789		$	4,467		Cash	$	19,914	$	125,536
Restricted cash							Restricted cash	18,372		26,025
Accounts and other receivables, net	36,303			59,609			Accounts and other receivables, net	53,576		45,235
Inventories	3,335			3,445			Inventories	2,029		1,776
Prepaid expenses	16,423			27,532			Prepaid expenses	13,665		9,015
Current assets held for sale	332,308			42,732			Current assets held for sale	7,760		16,823
Other current assets	5,950			1,493			Other current assets	3,037		2,718
Total current assets	398,108			139,278			Total current assets	118,353		227,128
Property and equipment:							Property and equipment:
Property and equipment, at cost	1,250,596			1,262,117			Property and equipment, at cost	1,155,356		1,176,241
Less accumulated depreciation and amortization	(787,427		)	(777,841		)	Less accumulated depreciation and amortization	(793,851)		(784,307)
Property and equipment, net	463,169			484,276			Property and equipment, net	361,505		391,934
Other Assets:
Other assets:							Other assets:
Operating lease right-of-use assets							Operating lease right-of-use assets	884,213		—
Intangible assets, net	1,348			1,413			Intangible assets, net	37		425
Goodwill	51,050			51,412			Goodwill	46,747		46,747
Non-current assets held for sale	—			280,796
Deferred tax assets							Deferred tax assets	66,675		85,564
Other assets, net	243,894			277,570			Other assets, net	212,783		206,685
Total other assets	296,292			611,191			Total other assets	1,210,455		339,421
	$	1,157,569		$	1,234,745			$	1,690,313	$	958,483
LIABILITIES AND STOCKHOLDERS’ DEFICIT							LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:							Current liabilities:
Current maturities of long-term debt	$	68,564		$	64,225		Current maturities of long-term debt	$	13,786	$	774
Current operating lease liabilities							Current operating lease liabilities	158,779		—
Accounts payable	27,142			28,366			Accounts payable	23,467		37,066
Accrued liabilities	102,866			135,054			Accrued liabilities	118,289		120,083
Current liabilities held for sale	61,521			34,345
Total current liabilities	260,093			261,990			Total current liabilities	314,321		157,923
Long-term liabilities:							Long-term liabilities:
Long-term debt, net of current maturities	1,036,642			1,079,982			Long-term debt, net of current maturities	1,262,737		1,274,374
Non-current liabilities held for sale	—			32,078
Long-term operating lease liabilities, net of current portion							Long-term operating lease liabilities, net of current portion	767,819		—
Other long-term liabilities	235,394			248,825			Other long-term liabilities	186,589		263,770
Total long-term liabilities	1,272,036			1,360,885			Total long-term liabilities	2,217,145		1,538,144
Stockholders’ deficit:							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, 81,943,562 and 81,843,483 issued, respectively	819			818
Preferred stock $0.01 par value, 15,000,000 shares authorized, NaN issued							Preferred stock $0.01 par value, 15,000,000 shares authorized, NaN issued	—		—
Common stock $0.01 par value, 175,000,000 shares authorized, 82,255,912 and 82,159,002 issued, respectively							Common stock $0.01 par value, 175,000,000 shares authorized, 82,255,912 and 82,159,002 issued, respectively	823		822
Capital in excess of par value	457,772			453,432			Capital in excess of par value	483,739		480,322
Retained earnings	1,485,130			1,485,820			Retained earnings	1,572,586		1,577,034
Accumulated other comprehensive loss	(127,842		)	(137,761		)	Accumulated other comprehensive loss	(88,995)		(140,006)
Treasury stock, at cost, 52,411,407 shares	(2,190,439		)	(2,190,439		)
Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively							Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively	(2,809,306)		(2,655,756)
Total stockholders’ deficit	(374,560		)	(388,130		)	Total stockholders’ deficit	(841,153)		(737,584)
	$	1,157,569		$	1,234,745			$	1,690,313	$	958,483


	Sixteen Weeks Ended							Sixteen Weeks Ended
	January 21, 2018			January 22, 2017				January 19, 2020		January 20, 2019
Net earnings	$	12,190		$	35,930		Net earnings	$	7,897	$	34,098
Cash flow hedges:							Cash flow hedges:
Net change in fair value of derivatives	10,291			23,086			Net change in fair value of derivatives	—		(7,167)
Net loss reclassified to earnings	1,674			2,066			Net loss reclassified to earnings	—		479
	11,965			25,152				—		(6,688)
Tax effect	(3,039		)	(9,731		)	Tax effect	—		1,723
	8,926			15,421				—		(4,965)
Unrecognized periodic benefit costs:							Unrecognized periodic benefit costs:
Actuarial gains arising during the period							Actuarial gains arising during the period	28,583		—
Actuarial losses and prior service costs reclassified to earnings	1,535			1,978			Actuarial losses and prior service costs reclassified to earnings	40,310		1,205
								68,893		1,205
Tax effect	(542		)	(766		)	Tax effect	(17,882)		(311)
	993			1,212				51,011		894

Other comprehensive income, net of tax	9,919			16,633
Other comprehensive income (loss), net of taxes							Other comprehensive income (loss), net of taxes	51,011		(4,071)

Comprehensive income	$	22,109		$	52,563		Comprehensive income	$	58,908	$	30,027


	Sixteen Weeks Ended							Sixteen Weeks Ended
	January 21, 2018			January 22, 2017				January 19, 2020		January 20, 2019
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings	$	12,190		$	35,930		Net earnings	$	7,897	$	34,098
(Losses) earnings from discontinued operations	(699		)	1,381
Income from continuing operations	12,889			34,549
Earnings from discontinued operations							Earnings from discontinued operations	—		2,977
Earnings from continuing operations							Earnings from continuing operations	7,897		31,121
Adjustments to reconcile net earnings to net cash provided by operating activities:							Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	19,157			21,263			Depreciation and amortization	16,728		17,169
Amortization of franchise tenant improvement allowances	147			25
Amortization of franchise tenant improvement allowances and other							Amortization of franchise tenant improvement allowances and other	1,151		530
Deferred finance cost amortization	1,031			1,123			Deferred finance cost amortization	1,755		704
Excess tax benefits from share-based compensation arrangements	(802		)	(3,981		)
Tax deficiency (excess tax benefit) from share-based compensation arrangements							Tax deficiency (excess tax benefit) from share-based compensation arrangements	196		(50)
Deferred income taxes	33,542			2,285			Deferred income taxes	2,010		(783)
Share-based compensation expense	2,937			3,687			Share-based compensation expense	3,184		1,909
Pension and postretirement expense	715			1,297			Pension and postretirement expense	38,978		456
(Gains) losses on cash surrender value of company-owned life insurance	(2,163		)	326			(Gains) losses on cash surrender value of company-owned life insurance	(3,374)		2,863
Gains on the sale of company-operated restaurants	(8,940		)	(137		)	Gains on the sale of company-operated restaurants	(1,575)		(219)
Losses on the disposition of property and equipment, net	183			530
(Gains) losses on the disposition of property and equipment, net							(Gains) losses on the disposition of property and equipment, net	(10,437)		635
Non-cash operating lease costs							Non-cash operating lease costs	(7,668)		—
Impairment charges and other	805			467			Impairment charges and other	—		387
Changes in assets and liabilities, excluding dispositions:							Changes in assets and liabilities, excluding dispositions:
Accounts and other receivables	26,539			25,208			Accounts and other receivables	(5,619)		(3,154)
Inventories	110			(111		)	Inventories	(253)		(232)
Prepaid expenses and other current assets	7,419			27,481			Prepaid expenses and other current assets	(4,957)		6,224
Accounts payable	(371		)	(3,458		)	Accounts payable	(7,984)		6,365
Accrued liabilities	(32,667		)	(37,940		)	Accrued liabilities	(1,558)		(16,298)
Pension and postretirement contributions	(1,710		)	(1,440		)	Pension and postretirement contributions	(2,025)		(2,111)
Franchise tenant improvement allowance disbursements	(1,761		)	—
Franchise tenant improvement allowance distributions							Franchise tenant improvement allowance distributions	(3,682)		(3,247)
Other	(3,330		)	(1,376		)	Other	(80)		(4,668)
Cash flows provided by operating activities	53,730			69,798			Cash flows provided by operating activities	22,687		37,601
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property and equipment	(10,793		)	(8,581		)	Purchases of property and equipment	(7,202)		(11,183)
Purchases of assets intended for sale and leaseback	(1,411		)	(1,717		)
Proceeds from the sale of property and equipment							Proceeds from the sale of property and equipment	20,618		270
Proceeds from the sale and leaseback of assets	4,949			2,466			Proceeds from the sale and leaseback of assets	17,373		—
Proceeds from the sale of company-operated restaurants	5,591			138			Proceeds from the sale of company-operated restaurants	1,575		133
Collections on notes receivable	9,410			264			Collections on notes receivable	—		6,517
Proceeds from the sale of property and equipment	589			87
Funding of intercompany operations	(13,122		)	(5,805		)
Other	2,969			(35		)
Cash flows used in investing activities	(1,818		)	(13,183		)

Cash flows provided by (used in) investing activities							Cash flows provided by (used in) investing activities	32,364		(4,263)
Cash flows from financing activities:							Cash flows from financing activities:
Borrowings on revolving credit facilities	106,200			231,000			Borrowings on revolving credit facilities	—		114,298
Repayments of borrowings on revolving credit facilities	(130,800		)	(167,000		)	Repayments of borrowings on revolving credit facilities	—		(117,300)
Principal repayments on debt	(14,208		)	(14,398		)	Principal repayments on debt	(198)		(10,907)
Debt issuance costs							Debt issuance costs	(216)		(17)
Dividends paid on common stock	(11,736		)	(12,963		)	Dividends paid on common stock	(9,412)		(10,305)
Proceeds from issuance of common stock	—			4,756			Proceeds from issuance of common stock	184		114
Repurchases of common stock	—			(115,354		)	Repurchases of common stock	(155,576)		(14,362)
Excess tax benefits from share-based compensation arrangements	—			3,981
Change in book overdraft	(129		)	7,804			Change in book overdraft	—		9,234
Tax payments for equity award issuances	(4,244		)	(5,706		)
Payroll tax payments for equity award issuances							Payroll tax payments for equity award issuances	(3,108)		(2,498)
Cash flows used in financing activities	(54,917		)	(67,880		)	Cash flows used in financing activities	(168,326)		(31,743)
Cash flows used in continuing operations	(3,005		)	(11,265		)
Net cash provided by operating activities of discontinued operations	16,785			12,668
Net cash used in investing activities of discontinued operations	(13,648		)	(12,304		)
Net cash used in financing activities of discontinued operations	(43		)	(40		)
Net cash provided by discontinued operations	3,094			324
Cash at beginning of period	4,467			13,906
Cash at end of period	$	3,789		$	2,641
Net (decrease) increase in cash and restricted cash							Net (decrease) increase in cash and restricted cash	(113,275)		1,595
Cash and restricted cash at beginning of period							Cash and restricted cash at beginning of period	151,561		2,705
Cash and restricted cash at end of period							Cash and restricted cash at end of period	$	38,286	$	4,300



	Sixteen Weeks Ended			Twelve Weeks Ended
	January 22, 2017			April 16, 2017			July 9, 2017			October 1, 2017
Company restaurant sales	$	128,699		$	98,793		$	107,067		$	102,000
Franchise revenues	6,053			4,711			4,678			4,622
Company restaurant costs (excluding depreciation and amortization)	(105,716		)	(80,713		)	(84,747		)	(86,194		)
Franchise costs (excluding depreciation and amortization)	(1,173		)	(910		)	(879		)	(2,031		)
Selling, general and administrative expenses	(12,429		)	(7,956		)	(8,232		)	(8,089		)
Depreciation and amortization	(6,695		)	(5,057		)	(5,023		)	(4,725		)
Impairment and other charges, net	(3,904		)	(3,811		)	(1,815		)	(5,531		)
Interest expense, net	(2,515		)	(2,044		)	(2,229		)	(2,237		)
(Losses) earnings from discontinued operations before income taxes	2,320			3,013			8,820			(2,185		)
Income taxes	(876		)	(1,181		)	(3,398		)	937
(Losses) earnings from discontinued operations, net of income taxes	$	1,444		$	1,832		$	5,422		$	(1,248	)

Net (losses) earnings per share from discontinued operations:
Basic	$	0.05		$	0.06		$	0.18		$	(0.04	)
Diluted	$	0.05		$	0.06		$	0.18		$	(0.04	)



Balance as of October 1, 2017	$	2,473
Adjustments (1)	193
Cash payments	(800		)
Balance as of January 21, 2018 (2)	$	1,866



	Balance Sheet Location	Fair Value
	Balance Sheet Location	January 21, 2018			October 1, 2017
Derivatives designated as cash flow hedging instruments:
Interest rate swaps	Accrued liabilities	$	(2,422	)	$	(4,777	)
Interest rate swaps	Other long-term liabilities	(8,540		)	(18,150		)
Total derivatives (Note 4)		$	(10,962	)	$	(22,927	)



	Location in Income	Sixteen Weeks Ended
	Location in Income	January 21, 2018		January 22, 2017
Gain recognized in OCI	N/A	$	10,291	$	23,086
Loss reclassified from accumulated OCI into net earnings	Interest expense, net	$	1,674	$	2,066


~~(1)~~	~~Impairment charges are due primarily to our landlord’s sale of a restaurant property to a franchisee.~~



Balance as of October 1, 2017	$	6,175
Additions	135
Adjustments (1)	347
Interest expense	545
Cash payments	(1,592		)
Balance as of January 21, 2018 (2) (3)	$	5,610


~~(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.


~~(1)~~	~~Qdoba Evaluation consulting costs are primarily related to third party advisory services.~~


~~(2)~~	~~2018 reflects a reduction in severance and related costs due to a change in the number of employees to be terminated in connection with our restructuring activities.~~



Balance as of October 1, 2017	$	648
Adjustments (1)	(456		)
Cash payments	(150		)
Balance as of January 21, 2018	$	42


2.	~~DISCONTINUED OPERATIONS~~


~~(1)~~Balance as of September 29, 2019			~~Adjustments in accrued severance costs are the result of the change in number of employees to be terminated in connection with our restructuring activities.~~			$	2,100

Costs incurred		1,019

7.Cash payments	~~INCOME TAXES~~	(2,134)
Balance as of January 19, 2020		$	985


~~(1)~~	~~Amounts were reclassified from accumulated OCI into net earnings as a component of selling, general and administrative expenses.~~



	Sixteen Weeks Ended
	Fiscal Basis				Calendar Basis (1)
	January 21, 2018		January 22, 2017		January 22, 2017
Company	0.2	%	—	%	0.6	%
Franchise	(0.3	)%	3.3	%	3.9	%
System	(0.2	)%	2.5	%	3.1	%



	Sixteen Weeks Ended
	Fiscal Basis				Calendar Basis
	January 21, 2018		January 22, 2017		January 22, 2017
Average check (1)	2.6	%	4.7	%	4.9	%
Transactions	(2.4	)%	(4.7	)%	(4.3	)%
Change in same-store sales	0.2	%	—	%	0.6	%



	2018						2017
	Company		Franchise		Total		Company		Franchise		Total
Beginning of year	276		1,975		2,251		417		1,838		2,255
New	1		5		6		2		7		9
Refranchised	(22	)	22		—		—		—		—
Closed	—		(7	)	(7	)	—		(3	)	(3	)
End of period	255		1,995		2,250		419		1,842		2,261
% of system	11	%	89	%	100	%	19	%	81	%	100	%



Decrease in the average number of restaurants	$	(96.1	)
AUV increase	27.2
Total change in company restaurant sales	$	(68.9	)



	(Decrease) / Increase
Advertising	$	(3,109	)
Cash surrender value of COLI policies, net	(1,248		)
Region administration	(892		)
Pension and postretirement benefits	(582		)
Incentive compensation (including share-based compensation and related payroll taxes)	(203		)
Other (including savings related to our restructuring plan)	(113		)
	$	(6,147	)