Jack In The Box 2014 Annual Report Download - page 78
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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 28, 2014 and September 29, 2013 (in thousands):
Cash $ —
$ 250
Other current assets (1) 2,494
2,368
Other assets, net (1) 5,776
8,367
Total assets $ 8,270
$ 10,985
Current liabilities (2) $ 2,833
$ 3,010
Other long-term liabilities (2) 5,367
8,076
Retained earnings 70
(101)
Total liabilities and stockholders’ equity $ 8,270
$ 10,985
____________________________
(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 28, 2014. 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 28, 2014, we had unconditional purchase obligations during the next five fiscal years as follows (in thousands):
2015
$ 733,000
2016
491,700
2017
430,500
2018
214,000
2019
190,400
Total
$ 2,059,600
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 or financial exposure. 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.
F-34