Jack In The Box 2013 Annual Report Download - page 74

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equivalents and shares issuable under our ESPP. Performance-vested stock awards are included in the average diluted shares outstanding each period if the
performance criteria have been met at the end of the respective periods.
The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding ( in thousands):
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Weighted-average shares outstanding — basic
43,351
43,999
49,302
Effect of potentially dilutive securities:
Stock options
957
462
422
Nonvested stock awards and units
371
270
225
Performance-vested stock awards
220
217
136
Weighted-average shares outstanding — diluted
44,899
44,948
50,085
Excluded from diluted weighted-average shares outstanding:
Antidilutive
145
2,753
3,157
Performance conditions not satisfied at the end of the period
209
358
328
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In January 2012, we formed Jack in the Box Franchise Finance, LLC (“FFE”) for the purpose of operating a franchisee lending program to assist Jack in the
Box franchisees in re-imaging their restaurants. We are the sole equity investor in FFE. The lending program was comprised of a $20.0 million commitment
from the Company in the form of a capital note and an $80.0 million Senior Secured Revolving Securitization Facility (“FFE Facility”) entered into with a
third party. The lending period and the revolving period expired in June 2012. At September 29, 2013 and September 30, 2012, we had no borrowings under
the FFE Facility and do not plan to make any further contributions.
We determined that FFE is a VIE and that the Company is its primary beneficiary. We considered a variety of factors in identifying 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 29, 2013 and September 30, 2012 (in thousands):
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Cash $250
$ 444
Other current assets (1) 2,368
2,536
Other assets, net (1) 8,367
11,051
Total assets $10,985
$14,031
Current liabilities (2) $3,010
$14
Other long-term liabilities (2) 8,076
14,428
Retained earnings (101)
(411)
Total liabilities and stockholders’ equity $10,985
$14,031
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(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 29, 2013. 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.
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