Jack In The Box 2013 Annual Report Download - page 75

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
Commitments — As of September 29, 2013, we had unconditional purchase obligations during the next five fiscal years as follows ( in thousands):
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

2014
$662,729
2015
298,207
2016
171,871
2017
142,830
2018
79,507
Total
$1,355,144
These obligations primarily represent amounts payable under purchase contracts for goods related to restaurant operations.
Legal matters — The Company assesses contingencies, including litigation 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 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 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. 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.
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 (“FLSA”) and Oregon wage and hour laws. The plaintiffs allege that the Company failed to pay non-exempt employees for certain
meal breaks and improperly recorded payroll deductions for shoe purchases and for workers’ compensation expenses. In April 2013, the district court: (i)
granted certification of the Oregon state law claims with respect to payroll deductions for shoe purchases and workers’ compensation expenses, (ii) granted
conditional certification for these same claims under the FLSA, and (iii) denied certification for meal break claims under both federal and Oregon law. We
intend to vigorously defend against this lawsuit. We have made an accrual for a single claim 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. Due to the procedural status of the other claims in this case, we have not
established a loss contingency accrual for these claims as the liability with respect to these claims is not probable and we are currently unable to estimate a
range of loss. Nonetheless, an unfavorable resolution of this matter could have a material adverse effect on our business, results of operations, liquidity or
financial condition.
Lease guarantees — In connection with the sale of the distribution business, we have assigned the leases at two of our distribution centers to third parties.
Under these agreements, which expire in 2015 and 2017, the Company remains secondarily liable for the lease payments for which we were responsible under
the original lease. As of September 29, 2013, the amount remaining under these lease guarantees totaled $2.9 million. We have not recorded a liability for the
guarantees as the likelihood of the third party defaulting on the assignment agreements was deemed to be less than probable.
Other legal matters — In addition to the matter described above, the Company is subject to normal and routine litigation brought by former, current or
prospective 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 partly, by insurance. Although the Company currently believes that the ultimate determination of liability in connection with
legal claims pending against it, if any, in excess of amounts already provided for these matters in the consolidated financial statements will not have a material
adverse effect on our business, the Company’s annual results of operations, liquidity or financial position, it is possible that our results of operations,
liquidity, or financial position could be materially affected in an particular future reporting period by the unfavorable resolution of one or more of these matters
or contingencies during such period.
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Reflecting the information currently being used in managing the Company as a two-branded restaurant operations business, our segments comprise results
related to system restaurant operations for our Jack in the Box and Qdoba brands. This segment reporting
F-33