Jack In The Box 2015 Annual Report Download - page 79

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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. FFE’s balance sheet consisted of the
following at September 27, 2015 and September 28, 2014 (in thousands):


Cash $ 100
$ —
Other current assets (1) 1,037
2,494
Other assets, net (1) 1,928
5,776
Total assets $ 3,065
$ 8,270
Current liabilities (2) $ 1,134
$ 2,833
Other long-term liabilities (2) 1,793
5,367
Retained earnings 138
70
Total liabilities and stockholders’ equity $ 3,065
$ 8,270
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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.
In 2015, we received $3.9 million of early prepayments on notes receivable due from franchisees, which increased our cash flows from investing activities in
the year-to-date period.
The Company’s maximum exposure to loss is equal to its outstanding contributions as of September 27, 2015. 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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Commitments — As of September 27, 2015, we had unconditional purchase obligations during the next five fiscal years as follows (in thousands):
2016
$ 802,700
2017
567,500
2018
247,600
2019
206,400
2020
200,100
Total
$ 2,024,300
These obligations primarily represent amounts payable under purchase contracts for goods related to system-wide 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.
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