Jack In The Box 2015 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2015 Jack In The Box annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 89

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89




Financial assets and liabilities — The following table presents the financial assets and liabilities measured at fair value on a recurring basis (in thousands):


















Non-qualified deferred compensation plan (1)
$ (35,003)
$ (35,003)
$ —
$ —
Interest rate swaps (Note 6) (2)
(26,374)
—
(26,374)
—
Total liabilities at fair value
$ (61,377)
$ (35,003)
$ (26,374)
$ —

Non-qualified deferred compensation plan (1)
$ (35,602)
$ (35,602)
$ —
$ —
Interest rate swaps (Note 6) (2)
(1,789)
—
(1,789)
—
Total liabilities at fair value
$ (37,391)
$ (35,602)
$ (1,789)
$ —
____________________________
(1) We maintain an unfunded defined contribution plan for key executives and other members of management excluded from participation in our qualified savings plan. The
fair value of this obligation is based on the closing market prices of the participants’ elected investments.
(2) We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable 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, interest 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 the Company’s debt instruments are based on the amount of future cash flows associated with each instrument discounted using the
Company’s borrowing rate. A t September 27, 2015, the carrying value of all financial instruments was not materially different from fair value, as the
borrowings are prepayable without penalty. The estimated fair values of our capital lease obligations approximated their carrying values as of September 27,
2015.
Non-financial assets and liabilities — Our non-financial instruments, which primarily consist of property and equipment, 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 the carrying values are
not fully recoverable, they are written down to fair value.
In connection with our impairment reviews performed during fiscal 2015, we recorded an impairment charge of $0.4 million related to one under performing
Jack in the Box restaurant which is currently held for use. No other material fair value adjustments were required. Refer to Note 9, Impairment and Other
Charges, Net, for additional information regarding impairment charges.

Objectives and strategies — We are exposed to interest rate volatility with regard to our variable rate debt. To reduce our exposure to rising interest rates, in
August 2010, we entered into two interest rate swap agreements that effectively converted $100.0 million of our variable rate term loan borrowings to a fixed-
rate basis from September 2011 through September 2014. In April 2014, we entered into nine forward-starting interest rate swap agreements that effectively
convert $300.0 million of our variable rate borrowings, and future expected 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 convert 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.
These agreements have been designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. To the extent
that they are effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives are not included in earnings but are
included in OCI. These changes in fair value are subsequently reclassified into net earnings as a component of interest expense as the hedged interest
payments are made on our term debt.
F-16