Jack In The Box 2012 Annual Report Download - page 70

the primary beneficiary of FFE including, but not limited to, who holds the power to direct matters that most significantly impact FFE’s economic
performance (such as determining the underwriting standards and credit management policies), as well as what party has the obligation to absorb the losses of
FFE. Based on these considerations, we determined that the Company is the primary beneficiary and the entity is reflected in the accompanying consolidated
financial statements.
FFE’s assets consolidated by the Company represent assets that can be used only to settle obligations of the consolidated VIE. Likewise, FFE’s liabilities
consolidated by the Company do not represent additional claims on the Company’s general assets; rather they represent claims against the specific assets of
FFE. The impact of FFE’s results were not material to the Company’s consolidated statement of earnings or cash flows. The FFE’s balance sheet consisted of
the following at September 30, 2012 and October 2, 2011 (in thousands):


Cash $ 444
$531
Other current assets (1) 2,536
2,086
Other assets, net (1) 11,051
12,292
Total assets $14,031
$14,909
Current liabilities $14
$140
Revolving credit facility —
1,160
Other long-term liabilities (2) 14,428
14,046
Retained earnings (411)
(437)
Total liabilities and stockholders’ equity $14,031
$14,909
____________________________
(1) Consists primarily of amounts due from franchisees.
(2) Consists primarily of the capital note contribution from Jack in the Box which is eliminated in consolidation.
The Company’s maximum exposure to loss is equal to its outstanding contributions as of September 30, 2012. This amount represents estimated losses that
would be incurred should all franchisees default on their loans without any consideration of recovery. To offset the credit risk associated with the Company’s
variable interest in FFE, the Company holds a security interest in the assets of FFE subordinate and junior to all other obligations of FFE.

Commitments — As of September 30, 2012, we had unconditional purchase obligations during the next five fiscal years as follows ( in thousands):



2013
$404,100
2014
84,800
2015
72,400
2016
69,110
2017
51,400
Total
$681,810
These obligations primarily represent amounts payable under purchase contracts for goods related to restaurant operations.
Legal matters — The Company is subject to normal and routine litigation brought by former, current or prospective employees, customers, franchisees,
vendors, landlords, shareholders or others. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential
accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and
the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires
judgments about future events. When evaluating 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 presence of complex or novel legal theories, and/or the ongoing discovery and development of information
important to the matters. 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. The Company regularly reviews contingencies to determine the adequacy of the accruals and
related disclosures. The ultimate amount of loss may differ from these estimates. Although the Company currently believes that the ultimate outcome of these
matters will not have a material adverse effect on the results of operations, liquidity or financial position of the Company, it is
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