SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~____________________________________________________~~

~~_______________________________________________________________________________________~~

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 19, 2020

~~For~~for the ~~quarterly~~transition period ~~ended January 20, 2019~~from ________to________.

Commission File Number: 1-9390

JACK IN THE BOX INC.

Registrant’s telephone number, including area code (858) 571-2121

_______________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	JACK	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of the close of business February ~~15, 2019, 25,806,804~~14, 2020, 22,630,771 shares of the registrant’s common stock were outstanding.

Condensed Consolidated Statements of Earnings

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

See accompanying notes to condensed consolidated financial statements.

____________________________

(1)Earnings per share may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.BASIS OF PRESENTATION

Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box^® quick-service restaurants. The following table summarizes the number of restaurants as of the end of each period:

References to the Company throughout these notes to condensed consolidated financial statements are made using the first person notations of “we,” “us” and “our.”

Basis of presentation — The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended September ~~30, 2018~~29, 2019 (“~~2018~~2019 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our ~~2018~~2019 Form 10-K with the exception of ~~two~~the new lease accounting ~~pronouncements~~standard adopted in fiscal ~~2019,~~2020, which ~~are~~is described below.

On December 19, 2017, we entered into a definitive agreement to sell Qdoba Restaurant Corporation (“Qdoba”), a wholly owned subsidiary of the Company which operates and franchises more than 700 Qdoba Mexican Eats^® fast-casual restaurants, to certain funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, the “Buyer”). The sale was completed on March 21, 2018. For all periods presented in our condensed consolidated statements of earnings, all sales, costs, expenses and income taxes attributable to Qdoba, except as related to the impact of the decrease in the federal statutory tax rate (see Note 8, ~~Income Taxes), have been aggregated under the caption “Earnings (losses) from discontinued operations, net of income taxes.” Refer to Note 3,~~ ~~Discontinued Operations, for additional information.~~

~~Unless otherwise noted, amounts and disclosures throughout these notes to condensed consolidated financial statements relate to our continuing operations.~~ In our opinion, all adjustments considered necessary for a fair presentation of financial condition and results of operations for these interim periods have been included. Operating results for one interim period are not necessarily indicative of the results for any other interim period or for the full year.

Segment reporting — ~~As a result~~The Company is comprised of ~~our sale of Qdoba, which has been classified as discontinued operations, we now have one reporting~~1 operating segment.

~~Reclassifications and adjustments~~ — We recorded certain adjustments in 2019 upon the adoption of a new accounting pronouncement; see details regarding the effects of the adoption on our condensed consolidated financial statements below.

Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years ~~2019~~2020 and ~~2018~~2019 include 52 weeks. Our first quarter includes 16-weeks and all other quarters include 12-weeks. All comparisons between ~~2019~~2020 and ~~2018~~2019 refer to the 16-weeks (“quarter”) ended January ~~20, 2019~~19, 2020 and January ~~21, 2018,~~20, 2019, respectively, unless otherwise indicated.

~~Principles of consolidation~~ — The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the accounts of any variable interest entities (“VIEs”) where we are deemed the primary beneficiary. All significant intercompany accounts and transactions are eliminated. The financial results and position of our VIE are immaterial to our condensed consolidated financial statements.

Use of estimates — In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make certain assumptions and estimates that affect reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies. In making these assumptions and estimates, management may from time to time seek advice and consider information provided by actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Advertising costs — We administer a marketing fund which includes contractual contributions. In 2020 and 2019, marketing fund contributions from franchise and company-operated restaurants were approximately 5.0% of gross ~~revenues, and~~revenues. In 2019, incremental contributions made by the Company ~~made~~were $2.0 million. There have been no incremental contributions ~~to the marketing fund of $2.0 million.~~made in 2020.

Production costs of commercials, programming and other marketing activities are charged to the marketing fund when the advertising is first used for its intended purpose, and the costs of advertising are charged to operations as incurred. Total contributions made by the Company, including incremental contributions, are included in “Selling, general, and administrative expenses” in the accompanying condensed consolidated statements of earnings and totaled $5.3 million and $7.2 million in 2020 and ~~$8.9 million in~~ 2019, ~~and 2018,~~ respectively.

Effect of new accounting pronouncements adopted in fiscal ~~2019~~2020 — ~~In May 2014,~~We adopted ASU 2016-02, Leases (Topic 842) (“ASC 842”) in the ~~FASB issued ASU 2014-09,~~ ~~Revenue Recognition - Revenue from Contracts with Customers (Topic 606)~~ ~~(“ASC 606”), which provides~~first quarter of 2020. The new guidance requires the recognition of lease liabilities, representing future minimum lease payments on a ~~comprehensive new revenue recognition model that requires an entity to recognize revenue in an amount that reflects~~discounted basis, and corresponding right-of-use (“ROU”) assets on the ~~consideration the entity expects to receive~~balance sheet for ~~the transfer of promised goods or services to its customers.~~most leases. The ~~standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We~~Company adopted the new ~~standard on October 1, 2018~~guidance in the first quarter of 2020 using the ~~modified retrospective method, whereby~~alternative transition method; therefore, the cumulative effect of this transition to applicable contracts with customers that were not completed as of October 1, 2018 was recorded as an adjustment to beginning retained earnings as of this date. The comparative ~~information~~period has not been restated and continues to be reported under the ~~accounting standards in effect for those periods.~~previous lease guidance.

~~The new revenue recognition standard did~~We elected the transition package of three practical expedients, which, among other items, permitted us not impact our recognition of restaurant sales, rental revenues, or royalty fees from franchisees. The new pronouncement changed the way initial fees from franchisees for new restaurant openings or new franchise terms are recognized. Under the previous revenue recognition guidance, initial franchise fees were recognized as revenue at the time when a new restaurant opened or at the start of a new franchise term. In accordance withto reassess under the new ~~guidance,~~standard our prior conclusions about lease identification, lease classification and initial direct costs. We also elected the ~~initial franchise services are~~short-term lease recognition exemption for all leases that qualify, permitting us to not ~~distinct from~~apply the ~~continuing rights and services offered during the~~recognition requirements of this standard to leases with a term of ~~the franchise agreement~~12 months or less, and ~~will therefore be treated~~an accounting policy to not separate lease and non-lease components for underlying assets subject to real estate leases. As lessor, we elected for all classes of underlying leased assets to account for lease and non-lease components, primarily property taxes and maintenance, as a single ~~performance obligation together with~~lease component. We did not elect the ~~continuing rights~~use-of-hindsight practical expedient, and ~~services. As such, initial fees received will be recognized over~~therefore continued to utilize lease terms determined under the franchise term and any unamortized portion will be recorded as deferred revenue in our condensed consolidated balance sheet. An adjustment to opening retained earnings and a corresponding contract liability of approximately $50.3 million (of which $5.0 million was current and $45.3 million was long-term) was established on the date of adoption. A deferred tax asset of approximately $13.0 million related to this contract liability was also established on the date of adoption.existing lease guidance.

The new standard also had an impact on transactions presented net and not included in our revenues and expenses such as franchisee contributions to and expenditures from our advertising fund, and sourcing and technology fee contributions from franchisees and the related expenses. We determined that we are the principal in these arrangements, and as such, contributions to and expenditures from the advertising fund, and sourcing and technology fees and expenditures are now reported on a gross basis within our consolidated statements of earnings. While this change materially impacted our gross amount of reported revenues and expenses, the impact will be largely offsetting with no material impact to our reported net earnings. However, any annual surplus or deficit in the marketing fund will impact income from operations and net income.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~The following table summarizes the impacts of adopting ASC 606 on the Company’s condensed consolidated financial statement as of and for the 16-weeks ended January 20, 2019~~ ~~(in thousands)~~:

The adoption ~~of ASC 606~~ had noa material impact on ~~the Company’s cash provided by or used in operating, investing or financing activities as previously reported in its condensed~~our consolidated ~~statement of cash flows.~~

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ This standard requires the presentation of the service cost component of net benefit cost to be in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. All other components of net benefit cost should be presented separately from the service cost component and outside of a subtotal of earnings from operations, or separately disclosed. We adopted this standard in the first quarter of fiscal 2019 applying the retrospective method.balance sheet. As a result of the adoption, ~~$0.6~~we recognized operating lease assets and liabilities of $881 million and $931 million, respectively, at the date of ~~pension costs~~adoption. The ROU assets were adjusted for certain lease-related assets and liabilities at adoption, primarily comprised of straight-line rent accruals of $29.0 million, incentives and unfavorable lease liabilities of $2.1 million, sublease loss and exit-related lease liabilities of $19.4 million, which were previously reported ~~within “Selling, general,~~in “Accrued liabilities” and ~~administrative~~“Other long-term liabilities”, as well as favorable lease assets of $0.4 million, which were previously reported in “Intangible assets, net” in our condensed consolidated balance sheet. We also recorded a cumulative adjustment to opening retained earnings of $2.9 million, net of tax, as a result of the impairment of certain newly recognized ROU assets and derecognition of deferred gains and losses on sale-leaseback transactions upon transition to the new guidance.

The effects of the changes made to the Company's condensed consolidated balance sheet as of September 29, 2019 for the adoption of the new lease guidance were as follows (in thousands):


	Balance at September 29, 2019		Adjustments due to ASC 842 adoption		Balance at September 30, 2019
Assets
Other assets:
Operating lease ROU assets	$	—	$	880,564	$	880,564
Intangible assets, net	$	425	$	(386)	$	39
Deferred income taxes	$	85,564	$	1,006	$	86,570
Liabilities and Stockholders’ Deficit
Current liabilities:
Current operating lease liabilities	$	—	$	159,821	$	159,821
Accrued liabilities	$	120,083	$	(4,702)	$	115,381
Long-term liabilities:
Long-term operating lease liabilities, net of current portion	$	—	$	770,818	$	770,818
Other long-term liabilities	$	263,770	$	(41,883)	$	221,887
Stockholders’ deficit:
Retained earnings	$	1,577,034	$	(2,870)	$	1,574,164

The accounting guidance for lessors remains largely unchanged from previous guidance, except for the presentation of certain lease costs that the Company passes through to lessees, including but not limited to, property taxes and maintenance. These costs are generally paid by the Company and reimbursed by the lessee. Historically, these costs have been recorded on a net basis in our condensed consolidated statements of earnings but are now presented gross upon adoption of the new guidance. As a result, we expect annual revenues and expenses reported in “Franchise rental revenues” and “Franchise occupancy expenses” ~~has been reclassified~~ to ~~a separate line under earnings from operations~~increase by approximately $37 million in fiscal 2020. Refer to ~~conform to current year presentation.~~Note 4, Leases, for further information on our leases and the impact on the Company’s accounting policies.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Effect of new accounting pronouncements to be adopted in future periods — In ~~February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842), which requires a lessee to recognize assets and liabilities on the balance sheet for those leases classified as operating leases under previous guidance. In January~~August 2018, the FASB issued ASU ~~2018-01,~~ ~~Leases (Topic 842)~~2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): ~~Land Easement Practical Expedient~~Customer’s Accounting for ~~Transition to Topic 842~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which ~~affects~~aligns the ~~guidance~~requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU ~~2016-02. The standard permits the election of an optional transition practical expedient to not evaluate land easements that exist or expired before the~~2018-15 is effective for interim and annual periods beginning after December 15, 2019, with early adoption ~~of Topic 842 and that were not previously accounted for as leases under Topic 840. In July 2018, the FASB issued ASU 2018-10,~~ ~~Codification Improvements to Topic 842 (Leases), and ASU 2018-11,~~ ~~Leases (Topic 842), Targeted Improvements, which provide (i) narrow amendments to clarify how to apply certain aspects of the new lease standard, (ii) entities with an additional transition method~~permitted. Companies can choose to adopt the new standard, and (iii) lessors with a practical expedient for separating components of a contract. Based on a preliminary assessment, we expect that most of our operating lease commitments will be subject to the new guidance ~~and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a significant increase~~prospectively or retrospectively. We are currently in the ~~assets and liabilities on our consolidated balance sheets. We do not expect~~process of evaluating the ~~adoption~~effects of this guidance to have a material impact on our consolidated statement of earnings and statement of cash flows. We will be required to adopt these standards in the first quarter of fiscal 2020 and are required to adopt using a modified retrospective transition approach. We are continuing our evaluation, which may identify additional impacts this standard and its amendments will havepronouncement on our consolidated financial statements and ~~related disclosures.~~do not expect there to be a material impact upon adoption.

Nature of products and services — We derive revenue from retail sales at Jack in the Box company-operated restaurants and rental revenue, royalties, advertising, and franchise and other fees from franchise-operated restaurants.

Our franchise arrangements generally provide for an initial franchise fee of $50,000 per restaurant and generally require that franchisees pay royalty and marketing fees at 5% of gross sales. The agreement also requires franchisees to pay sourcing, technology and other miscellaneous fees.

~~Significant accounting policy~~ — “Company restaurant sales” include revenue recognized upon delivery of food and beverages to the customer at company-operated restaurants, which is when our obligation to perform is satisfied. Company restaurant sales exclude taxes collected from the Company’s customers. Company restaurant sales also include income for gift cards. Gift cards, upon customer purchase, are recorded as deferred income and are recognized in revenue as they are redeemed. The timing and amount of revenue recognized related to company restaurant sales was not impacted by the adoption of ASC 606.

“Franchise royalties and other” includes royalties fees and initial franchise fees received from franchisees. Royalties are based upon a percentage of sales of the franchised restaurant and are recognized as earned. Franchise royalties are billed on a monthly basis. Initial franchise fees when a new restaurant opens or at the start of a new franchise term are recorded as deferred revenue when received and recognized as revenue over the term of the franchise agreement.

“Franchise contributions for advertising and other services” includes franchisee contributions billed on a monthly basis to our marketing fund, and sourcing and technology fees, as required under the franchise agreements. Contributions to our marketing fund are based on a percentage of sales and recognized as earned. Sourcing and technology services are recognized when the goods or services are transferred to the franchisee. The adoption of the new revenue standard did not impact the timing of revenue recognition for these fees received; however, these arrangements are now presented on a gross basis because we believe we are the principal in the arrangement.

“Franchise rental revenues” received from franchised restaurants based on fixed rental payments are recognized as revenue over the term of the lease. Certain franchise rents, which are contingent upon sales levels, are recognized in the period in which the contingency is met. Rental revenues are accounted for in accordance with applicable guidance for leases and are excluded from the scope of the new revenue standard.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Disaggregation of revenue — The following table disaggregates revenue by primary source ~~for the 16-weeks ended January 20, 2019~~ (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Sources of revenue:
Company restaurant sales	$	105,364	$	102,832
Franchise rental revenues	96,084		83,890
Franchise royalties	50,243		49,507
Marketing fees	48,835		47,863
Technology and sourcing fees	4,924		3,951
Franchise fees and other services	2,223		2,743
Total revenue	$	307,673	$	290,786

Sources of revenue:
Company restaurant sales $ 102,832
Franchise rental income 83,890
Franchise royalties 49,507
Marketing fees 47,863
Technology and sourcing fees 3,951
Franchise fees and other services 2,743
Total revenue $ 290,786

Contract liabilities — Our contract liabilities consist of deferred revenue resulting from initial fees received from franchisees for new restaurant openings or new franchise terms, which are generally recognized over the franchise term. We classify these contract liabilities as ~~“Other long-term~~“Accrued liabilities” and ~~“Accrued~~“Other long-term liabilities” in our condensed consolidated balance sheets.

A summary of significant changes in our contract liabilities ~~between the date of adoption (October 1, 2018) and January 20, 2019~~ is presented below (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Deferred franchise fees at beginning of period	$	46,273	$	50,018
Revenue recognized during the period	(1,632)		(1,592)
Additions during the period	895		500
Deferred franchise fees at end of period	$	45,536	$	48,926

Deferred Franchise Fees
Deferred franchise fees at October 1, 2018 $ 50,018
Revenue recognized during the period (1,592 )
Additions during the period 500
Deferred franchise fees at January 20, 2019 $ 48,926

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied ~~at the end~~as of ~~the period~~ January 19, 2020 (in thousands):


Remainder of 2020	$	3,411
2021	4,926
2022	4,726
2023	4,572
2024	4,379
Thereafter	23,522
	$	45,536

2019 (1) $ 3,434
2020 4,860
2021 4,838
2022 4,639
2023 4,484
Thereafter 26,671
$ 48,926

~~____________________________~~

~~(1) Represents the estimate for remainder of fiscal year 2019.~~

We have applied the optional exemption, as provided for under ~~ASC~~Accounting Standards Codification Topic 606,Revenue from Contracts with Customers, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.


3.	~~DISCONTINUED OPERATIONS~~

~~Qdoba~~ 3.SUMMARY OF REFRANCHISINGS AND FRANCHISEE DEVELOPMENT

Refranchisings and franchisee development— ~~In December 2017, we entered into a stock purchase agreement (the “Qdoba Purchase Agreement”) with the Buyer~~Franchisees opened 11 new restaurants in 2020, compared to ~~sell all issued and outstanding shares of Qdoba. The Buyer completed the acquisition of Qdoba on March 21, 2018 (the “Qdoba Sale”).~~

We also entered into a Transition Services Agreement with the Buyer pursuant to which the Buyer is receiving certain services (the “Services”) to enable it to operate the Qdoba business after the closing of the Qdoba Sale. The Services include information technology, finance and accounting, human resources, supply chain and other corporate support services. Under the Agreement, the Services are being provided at cost for a period of up to 12 months, with two 3-month extensions available for certain services. Based on current discussions with the Buyer, we expect certain services will be extended past the original date as allowed for under the Agreement. In 2019, we recorded $3.7 million in income related to the Services in 2019 as a reduction of selling, general and administrative expenses9 in the ~~condensed consolidated statements~~prior year, and closed 10 restaurants in fiscal 2020, compared to 5 in 2019. In both comparative periods 0 company-operated restaurants were sold to franchisees. In 2020 and 2019, amounts presented in “Gains on the sale of ~~earnings.~~company-operated restaurants” of $1.6 million and $0.2 million, respectively, pertain to meeting certain contingent consideration provisions included in the sale of restaurants in previous years.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.LEASES

~~Further, in 2018,~~Nature of leases — We own restaurant sites and we ~~entered into an Employee Agreement with~~also lease restaurant sites from third parties. Some of these owned or leased sites are leased and/or subleased to franchisees. Initial terms of our real estate leases are generally 20 years, exclusive of options to renew, which are generally exercisable at our sole discretion for 1 to 20 years. In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurants also have rent escalation clauses and require the ~~Buyer pursuant to~~payment of property taxes, insurance, and maintenance costs. Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance and common area maintenance, which ~~we continued to employ all Qdoba employees who work for the Buyer (the “Qdoba Employees”)~~are excluded from the ~~date of closing~~measurement of the ~~Qdoba Sale through December 31, 2018. During the term of the Employee Agreement, we paid all wages~~lease liability. We also lease certain restaurant and ~~benefits of the Qdoba Employees and received reimbursement of these costs~~office equipment with initial terms generally ranging from ~~the Buyer. From October 1, 2018~~3 to ~~December 31, 2018, we paid $35.4 million of Qdoba wages and benefits pursuant to the Employee Agreement.~~8 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees subsequent to refranchising transactions. The lease descriptions, terms, variable lease payments and renewal options are generally the ~~Qdoba Sale represents a strategic shift that had a major effect on~~same as the lessee leases described above. Revenues from leasing arrangements with our ~~operations and financial results,~~franchisees are presented in ~~accordance with~~“Franchise rental revenues” in the ~~provisions of FASB authoritative guidance on the presentation of financial statements, Qdoba results are classified as discontinued operations in our~~accompanying condensed consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”

Significant assumptions and judgements — We evaluate the contracts entered into by the Company to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee, or as an operating, sales-type or direct financing lease where the Company is a lessor, based on their terms.

The lease term and incremental borrowing rate for each lease requires judgement by management and can impact the classification of our leases as well as the value of our lease assets and liabilities. When determining the lease term, we consider option periods available, and include option periods in the measurement of the lease ROU asset and lease liability where the exercise is reasonably certain to occur. As our leases do not provide an implicit discount rate, we have determined it is appropriate to use our estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, in calculating our lease liabilities.

Company as Lessee

Leased assets and liabilities consisted of the following as of January 19, 2020 (in thousands):


	January 19, 2020
Assets:
Operating lease ROU assets	$	884,213
Finance lease ROU assets (1)	2,742
Total ROU assets	$	886,955
Liabilities:
Current operating lease liabilities	$	158,779
Current finance lease liabilities (2)	786
Long term operating lease liabilities	767,819
Long-term finance lease liabilities (2)	2,609
Total lease liabilities	$	929,993

____________________________

(1)Included in “Property and equipment, net” on our condensed consolidated ~~statements~~balance sheet.

(2)Included in “Current maturities of ~~cash flows for all periods presented.~~

~~Income taxes~~ ~~— In fiscal 2019, the Company entered into a bilateral California election with Quidditch Acquisition, Inc. to retroactively treat the divestment~~long-term debt” and “Long-term debt, net of Qdoba Restaurant Corporation on March 21, 2018 as a sale of assets instead of a stock sale for income tax purposes. This election reduced the Company’s fiscal year 2018 California tax liability on the divestment by $2.8 million.

~~The following table summarizes the Qdoba related activity for each period in discontinued operations (in thousands, except per share data~~):

Sixteen Weeks Ended
January 20,
2019 January 21,
2018
Company restaurant sales $ —
$ 125,770
Franchise revenues —
5,986
Company restaurant costs (excluding depreciation and amortization) —
(108,618 )
Franchise costs (excluding depreciation and amortization) —
(1,408 )
Selling, general and administrative expenses 302
(12,264 )
Depreciation and amortization —
(5,012 )
Impairment and other charges, net —
(1,669 )
Interest expense, net —
(3,212 )
Operating earnings from discontinued operations before income taxes 302
(427 )
Gain (loss) on Qdoba Sale (85 ) —
Earnings (losses) from discontinued operations before income taxes 217
(427 )
Income tax benefit (expense) 2,760
(205 )
Earnings (losses) from discontinued operations, net of income taxes $ 2,977
$ (632 )

Net earnings (losses) per share from discontinued operations:
Basic $ 0.11
$ (0.02 )
Diluted $ 0.11
$ (0.02 )

Selling, general and administrative expenses presented in the table above include corporate costs directly in support of Qdoba operations. All other corporate costs were classified in results of continuing operations. Our credit facility required us to make a mandatory prepayment (“Qdoba Prepayment”)current maturities” on our term loan upon the closing of the Qdoba Sale, which was $260.0 million. In accordance with authoritative guidance on financial statement presentation, interest expense associated with our credit facility was allocated to discontinued operations in the prior year based on our estimate of the mandatory prepayment that was made upon closing of the Qdoba Sale.condensed consolidated balance sheet.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Lease guarantees~~ — While all operating leases held in the name of Qdoba were part of the Qdoba Sale, some of the leases remain guaranteed by the Company pursuant to one or more written guarantees (the “Guarantees”). In the event Qdoba fails to meet its payment and performance obligations under such guaranteed leases, we may be required to make rentThe following table presents our lease cost components and other ~~payments~~supplemental information related to ~~the landlord under the requirements~~our leases (dollars in thousands):


	Sixteen Weeks Ended
	January 19, 2020
Lease costs:
Finance lease cost:
Amortization of ROU assets (1)	$	234
Interest on lease liabilities (2)	33
Operating lease cost (3)	58,512
Short-term lease cost (3)	1
Variable lease cost (3)(4)	12,507
	$	71,287
Weighted-average remaining lease term (in years):
Finance leases	3.9
Operating leases	8.0
Weighted-average discount rate:
Finance leases	3.4		%
Operating leases	3.9		%

____________________________

(1)Included in “Depreciation and amortization” in our condensed consolidated statement of ~~the Guarantees. Should we, as guarantor~~earnings.

(2)Included in “Interest expense, net” in our condensed consolidated statement of ~~the~~earnings.

(3)Operating lease, ~~obligations, be required to make any~~short-term and variable lease ~~payments due for the remaining term~~costs associated with franchisees and company-operated restaurants are included in “Franchise occupancy expenses” and “Occupancy and other”, respectively in our condensed consolidated statement of ~~the subject lease(s) subsequent to March 21, 2018, the maximum amount we may be required to pay is approximately $35.9~~earnings. For our closed restaurants, these costs are included in “Impairment and other, net” and all other costs are included in “Selling, general and administrative expenses”.

(4)Includes $11.6 million of property taxes and common area maintenance costs which are reimbursed by sub-lessees.

The following table presents as of January ~~20, 2019. The~~19, 2020, future minimum lease ~~terms extend~~payments for ~~a maximum of approximately 17 more years as of January 20, 2019, and we would remain a guarantor of the~~non-cancellable leases in the event the leases are extended for any established renewal periods. In the event that we are obligated to make payments under the Guarantees, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer. Qdoba continues to meet its obligations under these leases and there have not been any events that would indicate that Qdoba will not continue to meet the obligations of the leases. As such, we have not recorded a liability for the Guarantees as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable.

~~4. SUMMARY OF REFRANCHISINGS AND FRANCHISEE DEVELOPMENT~~

~~Refranchisings and franchisee development~~ ~~— The following table summarizes the number of restaurants sold to franchisees, the number of restaurants developed by franchisees, and gains recognized in each period~~ (~~dollars~~ in thousands):


	Finance Leases		Operating Leases
Fiscal year:
Remainder of 2020	$	647	$	130,553
2021	879		193,874
2022	879		153,011
2023	866		124,843
2024	390		94,034
Thereafter	40		386,822
Total minimum lease payments	$	3,701	$	1,083,137
Less: imputed interest	(306)		(156,539)
Present value of lease liability	$	3,395	$	926,598

Sixteen Weeks Ended
January 20,
2019 January 21,
2018
Restaurants sold to franchisees —
22
New restaurants opened by franchisees 9
5

Proceeds from the sale of company-operated restaurants:
Cash (1) $ 133
$ 5,591
Notes receivable —
9,084
133
14,675

Net assets sold (primarily property and equipment) —
(3,637 )
Goodwill related to the sale of company-operated restaurants (2 ) (153 )
Other (2) 88
(1,945 )
Gains on the sale of company-operated restaurants $ 219
$ 8,940

~~____________________________~~


~~(1)~~	~~Amounts in 2019 and 2018 include additional proceeds of $0.1 million and $1.2 million, respectively, related to restaurants sold in prior years.~~


~~(2)~~	~~Amounts in 2018 primarily relate to $1.5 million of remodel credits.~~

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents as of September 29, 2019, future minimum lease payments for non-cancellable leases (in thousands):


	Capital Leases		Operating Leases
Fiscal year:
2020	$	879	$	193,313
2021	879		186,226
2022	879		145,794
2023	864		117,753
2024	396		87,420
Thereafter	40		363,505
Total minimum lease payments	$	3,937	$	1,094,011
Less: imputed interest	(343)
Present value of lease liability	$	3,594

The following table includes supplemental cash flow and non-cash information related to our lessee leases (in thousands):


5.	~~FAIR VALUE MEASUREMENTS~~Sixteen Weeks Ended
	January 19, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	65,996
Operating cash flows from financing leases	$	33
Financing cash flows from financing leases	$	198
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	51,311
Financing leases	$	—

Sale leaseback transactions — In 2020, we completed a sale leaseback transaction of a multi-tenant commercial property in Los Angeles, California and leased back the parcel on which a company-operated restaurant is located. The Company received net proceeds of $17.4 million and recognized a $0.2 million loss on the sale. The initial term on the lease is 20 years and has been accounted for as an operating lease.

In 2020, we completed the sale of one of our corporate office buildings as we move forward with our previously announced consolidation of our headquarters. We entered into a lease with the buyer to leaseback the property for up to 18 months with an option to terminate earlier without penalty, upon providing a 90-day notice. The net proceeds received on the sale was $20.6 million and the lease has been accounted for as an operating lease. A gain on the sale of $10.8 million was recognized during the quarter, and is presented within “Impairment and other charges, net” in our condensed consolidated statement of earnings.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Company as Lessor

The following table presents rental income (in thousands):


	Sixteen Weeks Ended
	January 19, 2020
	Owned Properties		Leased Properties		Total
Operating lease income - franchise	$	6,095	$	66,568	$	72,663
Variable lease income - franchise	2,716		20,704		23,420
Franchise rental revenues	$	8,811	$	87,272	$	96,083
Operating lease income - closed restaurants and other (1)	$	—	$	2,057	$	2,057

____________________________

(1)Primarily relates to closed restaurant properties included in “Impairment and other, net” in our condensed consolidated statement of earnings.

The following table presents as of January 19, 2020, future minimum rental receipts for non-cancellable leases and subleases (in thousands):


	January 19, 2020
Fiscal year:
Remainder of 2020	$	159,654
2021	256,052
2022	232,129
2023	225,488
2024	200,425
Thereafter	1,237,167
Total minimum rental receipts	$	2,310,915

The following table presents as of September 29, 2019, future minimum rental receipts for non-cancellable leases and subleases (in thousands):


	September 29, 2019
Fiscal year:
2020	$	239,219
2021	255,315
2022	231,394
2023	224,605
2024	199,442
Thereafter	1,215,811
Total minimum rental receipts	$	2,365,786

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.FAIR VALUE MEASUREMENTS

Financial assets and liabilities — The following table presents our financial assets and liabilities measured at fair value on a recurring basis (in thousands):


										Total		Quoted Prices in Active Markets for Identical Assets (2) (Level 1)		Significant Other Observable Inputs (2) (Level 2)		Significant Unobservable Inputs (2) (Level 3)
	Total		Quoted Prices in Active Markets for Identical Assets (3) (Level 1)		Significant Other Observable Inputs (3) (Level 2)		Significant Unobservable Inputs (3) (Level 3)
Fair value measurements as of January 20, 2019:
Fair value measurements as of January 19, 2020:									Fair value measurements as of January 19, 2020:
Non-qualified deferred compensation plan (1)	$	31,053	$	31,053	$	—	$	—	Non-qualified deferred compensation plan (1)	$	29,857	$	29,857	$	—	$	—
Interest rate swaps (Note 6) (2)	7,391		—		7,391		—
Total liabilities at fair value	$	38,444	$	31,053	$	7,391	$	—	Total liabilities at fair value	$	29,857	$	29,857	$	—	$	—
Fair value measurements as of September 30, 2018:
Fair value measurements as of September 29, 2019:									Fair value measurements as of September 29, 2019:
Non-qualified deferred compensation plan (1)	$	37,447	$	37,447	$	—	$	—	Non-qualified deferred compensation plan (1)	$	30,104	$	30,104	$	—	$	—
Interest rate swaps (Note 6) (2)	703		—		703		—
Total liabilities at fair value	$	38,150	$	37,447	$	703	$	—	Total liabilities at fair value	$	30,104	$	30,104	$	—	$	—

____________________________


~~(1)~~	(1)We maintain an unfunded defined contribution plan for key executives and other members of management. The fair value of this obligation is based on the closing market prices of the participants’ elected investments. The obligation is included in “Accrued liabilities” and “Other long-term liabilities” on our condensed consolidated balance sheets.

~~(2)~~

We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable rate debt. The fair values of our interest rate swaps are based upon Level 2 inputs which include valuation models as reported by our counterparties. These valuation models use a discounted cash flow analysis on the cash flows of each derivative. The key inputs for the valuation models are quoted market prices, discount rates and forward yield curves. The Company also considers its own nonperformance risk and the respective counter-party’s nonperformance risk in the fair value measurements.


~~(3)~~	~~We did not have any transfers in or out of Level 1, 2 or 3.~~

~~The fair values of our debt instruments are~~ based on the ~~amount~~closing market prices of ~~future cash flows associated with each instrument discounted using~~the participants’ elected investments. The obligation is included in “Accrued liabilities” and “Other long-term liabilities” on our ~~borrowing rate.~~ condensed consolidated balance sheets.

(2)We did not have any transfers in or out of Level 1, 2 or 3.

At January ~~20, 2019,~~19, 2020, the carrying value of ~~all financial instruments~~our Class A-2 Notes was ~~not materially different from~~$1,300.0 million and fair value aswas $1,332.0 million. The fair value of the ~~borrowings~~Class A-2 Notes was estimated using Level 2 inputs based on quoted market prices in markets that are ~~prepayable without penalty.~~not considered active markets. The estimated fair values of our ~~capital~~finance lease obligations approximated their carrying values as of January ~~20, 2019.~~19, 2020.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Non-financial assets and liabilities — Our non-financial instruments, which primarily consist of property and equipment, operating lease right-of-use assets, 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 applicable, the carrying values are written down to fair value.

In connection with our impairment reviews performed during ~~2019,~~2020, no material fair value adjustments were required. Refer to Note 7, Impairment and Other Charges, Net, for additional information regarding impairment charges.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

6.DERIVATIVE INSTRUMENTS


6.	~~DERIVATIVE INSTRUMENTS~~

~~Objectives and strategies~~Interest rate swaps — We ~~are exposed~~have used interest rate swaps to mitigate interest rate volatility with regard to ~~our~~ variable rate ~~debt.~~borrowings under our senior credit facility. In June 2015, we entered into forward-starting interest rate swap agreements that effectively converted $500.0 million of our variable rate borrowings to a fixed rate from October 2018 through October 2022.

These agreements ~~have been~~were designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. ~~To the extent that~~Since they ~~are~~were effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives ~~are~~were not included in earnings, but ~~are~~were included in other comprehensive income (“OCI”). These changes in fair value ~~are~~were subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments ~~are~~were made on our variable rate debt.

~~Financial position~~ ~~— The following derivative instruments were outstanding as~~Effective July 2, 2019, the Company terminated all interest rate swap agreements in anticipation of the ~~end~~securitization transaction and related retirement of ~~each period (~~our senior credit facility in ~~thousands~~):the fourth quarter of 2019. During fiscal 2019, our interest rate swaps had no hedge ineffectiveness.

Balance
Sheet
Location
Fair Value
January 20,
2019 September 30, 2018
Derivatives designated as hedging instruments:
Interest rate swaps Accrued liabilities $ (402 ) $ (26 )
Interest rate swaps Other long-term liabilities (6,989 ) (1,266 )
Interest rate swaps Other assets, net —
589
Total derivatives (Note 5) $ (7,391 ) $ (703 )

Financial performance — The following table summarizes the OCI activity related to our interest rate swap derivative instruments (~~in thousands~~):

Location in Income Sixteen Weeks Ended
January 20,
2019 January 21,
2018
(Loss) gain recognized in OCI N/A $ (7,167 ) $ 10,291
Loss reclassified from accumulated OCI into net earnings Interest expense, net $ 479
$ 1,674

~~Amounts~~and the amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparties for the effective portions of the interest rate swaps. During the periods presented, our interest rate swaps had no hedge ineffectiveness.(in thousands):


7.	~~IMPAIRMENT AND OTHER CHARGES, NET~~Location in Income	Sixteen Weeks Ended
					January 20, 2019
Loss recognized in OCI	N/A		$	(7,167)
Loss reclassified from accumulated OCI into net earnings	Interest expense, net		$	479

7.IMPAIRMENT AND OTHER CHARGES, NET

Impairment and other charges, net in the accompanying condensed consolidated statements of earnings is comprised of the following (in thousands):


	Sixteen Weeks Ended					Sixteen Weeks Ended
	January 20, 2019		January 21, 2018			January 19, 2020		January 20, 2019
Restructuring costs	$	5,840	$	358	Restructuring costs	$	1,045	$	5,840
Costs of closed restaurants and other	866		1,447		Costs of closed restaurants and other	101		866
Losses on disposition of property and equipment, net	576		184
Accelerated depreciation	416		57		Accelerated depreciation	—		416
Operating restaurant impairment charges (1)	—		211
(Gains) losses on disposition of property and equipment, net (1)					(Gains) losses on disposition of property and equipment, net (1)	(10,437)		576
	$	7,698	$	2,257		$	(9,291)	$	7,698

____________________________


~~(1)~~	~~In 2018, impairment charges relate to our landlord’s sale of a restaurant property to a franchisee.~~

(1)In 2020, includes a $10.8 million gain related to the sale of one of our corporate office buildings. Refer to Note 4, Leases, for further information.

Restructuring costs — Restructuring charges include costs resulting from the exploration of strategic alternatives (the “Strategic Alternatives Evaluation”) in 2019, which was concluded in the third quarter of 2019, and a plan that management initiated to reduce our general and administrative costs. Restructuring charges in 2018 also include costs related to the evaluation of potential alternatives with respect to the Qdoba brand (the “Qdoba Evaluation”), which resulted in the Qdoba Sale. Refer to Note 3, ~~Discontinued Operations,~~ ~~for information regarding the Qdoba Sale.~~

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following is a summary of our restructuring costs (in thousands):

Sixteen Weeks Ended
January 20,
2019 January 21,
2018
Employee severance and related costs (1) $ 4,506
$ (456 )
Strategic Alternatives Evaluation (2) 1,334
—
Qdoba Evaluation (3) —
813
Other —
1
$ 5,840
$ 358


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Employee severance and related costs	$	1,045	$	4,506
Strategic Alternatives Evaluation (1)	—		1,334
	$	1,045	$	5,840

____________________________


~~(1)~~	~~2018 reflects a reduction in severance and related costs due to a change in the number of employees to be terminated in connection with our restructuring activities.~~


~~(2)~~	~~Strategic Alternative Evaluation costs are primarily related to third party advisory services.~~


~~(3)~~	~~Qdoba Evaluation costs are primarily related to retention compensation and third party advisory services.~~

(1) Strategic Alternative Evaluation costs primarily relate to third party advisory services.

We ~~currently~~do not expect ~~to recognize~~any significant severance and related costs ~~of approximately $1.6 million~~ for the remainder of fiscal ~~2019~~2020 related to positions that have been identified for elimination. At this time, we are unable to estimate any additional charges to be incurred related to additional positions that may be identified for elimination or our other restructuring activities.these initiatives.

Total accrued severance costs related to our restructuring activities are included in “Accrued liabilities” on our condensed consolidated balance sheets, and changed as follows during ~~2019~~ 2020 (in thousands):

Balance as of September 30, 2018 $ 5,309
Costs incurred 4,474
Cash payments (4,200 )
Balance as of January 20, 2019 $ 5,583

~~Costs of closed restaurants and other~~ — Costs of closed restaurants in 2019 and 2018 include future lease commitment charges and expected ancillary costs, net of anticipated sublease rentals. Costs in 2018 also include also include $0.5 million of additional impairment charges resulting from changes in the market value of three closed restaurant properties held for sale.

~~Accrued restaurant closing costs, included in “Accrued liabilities” and “Other long-term liabilities” on our condensed consolidated balance sheets, changed as follows during 2019 (in thousands~~):

Balance as of September 30, 2018 $ 3,534
Additions —
Adjustments (1) 146
Interest expense 460
Cash payments (1,179 )
Balance as of January 20, 2019 (2) (3) $ 2,961

~~___________________________~~


~~(1)~~Balance as of September 29, 2019			Adjustments relate primarily to revisions of certain sublease and cost assumptions. Our estimates related to our future lease obligations, primarily the sublease income we anticipate, are subject to a high degree of judgment and may differ from actual sublease income due to changes in economic conditions, desirability of the sites and other factors.			$	2,100

Costs incurred		1,019

~~(2)~~Cash payments	~~The weighted average remaining lease term related to these commitments is approximately 4 years.~~

			(2,134)
~~(3)~~Balance as of January 19, 2020			This balance excludes $2.1 million of restaurant closing costs that are included in “Accrued liabilities” and “Other long-term liabilities” on our condensed consolidated balance sheets, which were initially recorded as losses on the sale of company-operated restaurants to franchisees.			$	985

~~Accelerated depreciation~~ — When a long-lived asset will be replaced or otherwise disposed of prior to the end of its estimated useful life, the useful life of the asset is adjusted based on the estimated disposal date and accelerated depreciation is recognized.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

8.INCOME TAXES


8.	~~INCOME TAXES~~

Our tax rate for the quarter ended January 20, 2019 was impacted by the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted into law on December 22, 2017. As a fiscal year taxpayer, the corporate federal tax rate reduction from 35% to 21% was phased in, resulting in a statutory federal tax rate of 24.5% for our fiscal year ending September 30, 2018, and 21.0% for our fiscal year ending September 29, 2019 and subsequent fiscal years.

~~In 2019 and 2018~~The income tax provisions reflect tax rates of 28.4% in 2020 and 23.1% ~~and 78.5%, respectively.~~in 2019. The major components of the ~~year over year~~year- over-year change in tax rates were ~~the one-time, non-cash impact of the enactment of the Tax Act in fiscal year 2018,~~ a decrease in ~~the statutory~~operating earnings before income tax, ~~rate, and~~ an adjustment related to state taxes recorded in the first quarter of ~~fiscal year~~ 2019, an increase in the tax deficiency on stock compensation, partially offset by ~~a decrease~~an increase in gains from the ~~excess tax benefit on stock compensation.~~market performance of insurance products used to fund certain non-qualified retirement plans which are excluded from taxable income. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual ~~annual 2019~~2020 rate could differ from our current estimates.

The following is a summary of the components of each tax rate (dollars in thousands):


	Sixteen Weeks Ended											Sixteen Weeks Ended
	January 20, 2019					January 21, 2018						January 19, 2020						January 20, 2019
Income tax expense at statutory rate	$	10,434		25.8	%	$	17,192		28.6	%	Income tax expense at statutory rate	$	2,868	26.0	%	$	10,434	25.8	%
One-time, non-cash impact of the Tax Act	—			—	%	30,627			51.0	%
Stock compensation excess tax benefit	(50		)	(0.1	)%	(802		)	(1.3	)%
Stock compensation tax deficiency (excess tax benefit)											Stock compensation tax deficiency (excess tax benefit)	196		1.8	%	(50)		(0.1)	%
Company-owned life insurance policies											Company-owned life insurance policies	(99)		(0.9)	%	231		0.6	%
Adjustment to state tax provision	(1,027		)	(2.6	)%	—			—	%	Adjustment to state tax provision	—		—	%	(1,027)		(2.6)	%
Other	16			—	%	121			0.2	%	Other	168		1.5	%	(215)		(0.5)	%
(1)	$	9,373		23.1	%	$	47,138		78.5	%	(1)	$	3,133	28.4	%	$	9,373	23.1	%

____________________________


~~(1)~~	~~Percentages may not add due to rounding.~~

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~(1)Percentages may not add due to rounding.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

9.RETIREMENT PLANS

Defined benefit pension plans — We sponsor ~~two~~2 defined benefit pension plans, a frozen “Qualified Plan” covering substantially all full-time employees hired prior to January 1, 2011, and an unfunded supplemental executive retirement plan (“SERP”) which provides certain employees additional pension benefits and was closed to new participants effective January 1, 2007. Benefits under both plans are based on the employee’s years of service and compensation over defined periods of employment.

In the fourth quarter of 2019, the Company amended its Qualified Plan to add a limited lump sum payment window whereby certain terminated participants with a vested pension benefit could elect to receive either an immediate lump sum or a monthly annuity payment of their accrued benefit. The offering period began September 16, 2019 and ended October 31, 2019. The participants that elected a lump sum benefit under the program were paid in December 2019, which triggered settlement accounting. As a result of the offering, the Company’s Qualified Plan paid $122.3 million from its plan assets to those who accepted the offer, thereby reducing the plan’s pension benefit obligation (“PBO”). The transaction had no cash impact to the Company but did result in a non-cash settlement charge of $38.6 million in the first quarter of fiscal 2020.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Postretirement healthcare plans — We also sponsor ~~two~~2 healthcare plans, closed to new participants, that provide postretirement medical benefits to certain employees who have met minimum age and service requirements. The plans are ~~contributory;~~contributory, with retiree contributions adjusted annually, and they contain other cost-sharing features such as deductibles and coinsurance.

Net periodic benefit cost — The components of net periodic benefit cost in each period were as follows (in thousands):


	Sixteen Weeks Ended							Sixteen Weeks Ended
	January 20, 2019			January 21, 2018				January 19, 2020		January 20, 2019
Defined benefit pension plans:							Defined benefit pension plans:
Interest cost	$	7,048		$	6,879		Interest cost	$	5,076	$	7,048
Service cost	—			151
Expected return on plan assets (1)	(8,104		)	(8,144		)	Expected return on plan assets (1)	(6,656)		(8,104)
Pension settlement (2)							Pension settlement (2)	38,606		—
Actuarial loss (2)	1,219			1,498			Actuarial loss (2)	1,672		1,219
Amortization of unrecognized prior service costs (2)	35			45			Amortization of unrecognized prior service costs (2)	26		35
Net periodic benefit cost	$	198		$	429		Net periodic benefit cost	$	38,724	$	198
Postretirement healthcare plans:							Postretirement healthcare plans:
Interest cost	$	307		$	294		Interest cost	$	248	$	307
Actuarial gain (2)	(49		)	(8		)
Actuarial loss (gain) (2)							Actuarial loss (gain) (2)	6		(49)
Net periodic benefit cost	$	258		$	286		Net periodic benefit cost	$	254	$	258

___________________________

(1)Based on a return on asset, net of administrative expenses, assumption of 5.8% determined at the end of fiscal 2019, subsequently updated to 5.9% as of December 31, 2019 upon remeasurement of the Qualified Plan’s assets and PBO as required by settlement accounting.

(2)Amounts were reclassified from accumulated OCI into net earnings as a component of ~~“Other pension and post-retirement expenses, net.”~~

~~Changes in presentation—As discussed in Note 1,~~ ~~Basis in Presentation~~, we adopted ASU 2017-07 during the first quarter of 2019 using the retrospective method, which changed the financial statement presentation of service costs and the other components of net periodic benefit cost. The service cost component continues to be included in operating income; however, the other components are now presented in a separate line below earnings from operations captioned “Other pension and post-retirement expenses, net” in our condensed consolidated statement of earnings. Further, in connection with the adoption, plan administrative expenses historically presented as a component of service cost are now presented as a component of expected return on assets. The prior year components of net periodic benefit costs have been recast to conform to current year presentation.net.”

Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of January 1, ~~2018,~~2019, the date of our last actuarial funding valuation, there was no0 minimum contribution funding requirement. Details regarding ~~2019~~2020 contributions are as follows (in thousands):


	SERP		Postretirement Healthcare Plans
Net year-to-date contributions	$	1,639	$	386
Remaining estimated net contributions during fiscal 2020	$	3,732	$	1,011

SERP
Postretirement
Healthcare Plans
Net year-to-date contributions $ 1,763
$ 348
Remaining estimated net contributions during fiscal 2019 $ 3,300
$ 1,000

We continue to evaluate contributions to our Qualified Plan based on changes in pension assets as a result of asset performance in the current market and the economic environment. We do not anticipate making any contributions to our Qualified Plan in fiscal ~~2019.~~2020.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

10.STOCKHOLDERS’ DEFICIT

Summary of changes in stockholders’ deficit— A reconciliation of the beginning and ending amounts of stockholders’ deficit is presented below (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Balance at beginning of period	$	(737,584)	$	(591,699)
Shares issued under stock plans, including tax benefit	184		115
Share-based compensation	3,184		1,909
Dividends declared	(9,425)		(10,318)
Purchases of treasury stock	(153,550)		—
Net earnings	7,897		34,098
Other comprehensive income (loss), net of taxes	51,011		(4,071)
Cumulative-effect from a change in accounting principle	(2,870)		(37,330)
Balance at end of period	$	(841,153)	$	(607,296)

Sixteen Weeks Ended
January 20,
2019 January 21,
2018
Balance at beginning of period $ (591,699 ) $ (388,130 )
Shares issued under stock plans, including tax benefit 115
—
Share-based compensation 1,909
3,385
Dividends declared

(10,318 ) (11,773 )
Net earnings

34,098
12,190
Other comprehensive (loss) income, net of taxes

(4,071 ) 9,919
Cumulative-effect from a change in accounting principle (37,330 ) (151 )
Balance at end of period $ (607,296 ) $ (374,560 )

Repurchases of common stock— ~~In 2019, we have not~~ The Company repurchased ~~any~~1.9 million shares of its common ~~shares. In November 2018,~~stock in the first quarter of fiscal 2020 at an average price of $81.41 per share for an aggregate cost of $153.5 million. As of January 19, 2020, this leaves approximately $122.2 million remaining under share repurchase programs authorized by the Board of Directors, ~~approved an additional $60.0~~consisting of $22.2 million ~~stock-buyback program~~ that expires in November ~~2019. As of January 20, 2019, there was approximately $101.0~~2020 and $100.0 million ~~remaining under the Board-authorized stock buyback program which expire~~that expires in November ~~2019.~~2021.

Repurchases of common stock included in our condensed consolidated statement of cash flows for fiscal ~~2019 includes $14.4~~2020 include $2.0 million related to repurchase transactions traded in the prior ~~fiscal~~ year ~~that~~but settled in ~~2019.~~2020.

Dividends— ~~In November 2018,~~During 2020, the Board of Directors declared a cash dividend of $0.40 per common share ~~which was paid on December 18, 2018 to shareholders of record as of the close of business on December 5, 2018 and totaled $10.3~~totaling $9.4 million. Future dividends are subject to approval by our Board of Directors.

Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive common shares include stock options, nonvested stock awards and units, and non-management director stock equivalents. Performance share 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.

11.AVERAGE SHARES OUTSTANDING

The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):


	Sixteen Weeks Ended
	January 19, 2020	January 20, 2019
Weighted-average shares outstanding – basic	23,741	25,907
Effect of potentially dilutive securities:
Nonvested stock awards and units	181	208
Stock options	7	11
Performance share awards	7	2
Weighted-average shares outstanding – diluted	23,936	26,128
Excluded from diluted weighted-average shares outstanding:
Antidilutive	224	186
Performance conditions not satisfied at the end of the period	80	89

Sixteen Weeks Ended
January 20,
2019 January 21,
2018
Weighted-average shares outstanding – basic 25,907
29,551
Effect of potentially dilutive securities:
Nonvested stock awards and units 208
229
Stock options 11
64
Performance share awards 2
9
Weighted-average shares outstanding – diluted 26,128
29,853
Excluded from diluted weighted-average shares outstanding:
Antidilutive 186
90
Performance conditions not satisfied at the end of the period 89
74

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

12.CONTINGENCIES AND LEGAL MATTERS

Legal matters— We assess contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability ~~has been incurred~~is adverse to the Company 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 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. We regularly review 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 and Oregon wage and hour laws. The plaintiffs alleged that the Company failed to pay non-exempt employees for certain meal breaks and improperly made payroll deductions for shoe purchases and for workers’ compensation expenses, and later added additional claims relating to timing of final pay and related wage and hour claims involving employees of a franchisee. In 2016, the court dismissed the federal claims and those relating to franchise employees. In June 2017, the court granted class certification with respect to state law claims of improper deductions and late payment of final wages. In ~~fiscal 2012, we~~February 2019, plaintiff’s counsel reduced their earlier demand from $62.0 million to $42.0 million. In November 2019, the court issued a ruling on various dispositive motions, disallowing approximately $25.0 million in claimed damages. We have accrued ~~for a single claim~~an amount that is not material to our consolidated financial statements relating to claims 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. In October 11, 2018, Plaintiff’s counsel alleged that the total potential damages were approximately $62 million, without providing a specific basis for that amount. We continue toestimable. While we believe that no additional losses ~~are probable~~ beyond this accrual ~~and~~are reasonably possible, we cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond this accrual. The parties are participating in a voluntary mediation on March 16, 2020. If the ~~accrual. We plan~~case does not resolve at mediation, we will continue to vigorously defend against this lawsuit. ~~Nonetheless,~~

Marquez v. Jack in the Box Inc. — In August 2017, a former employee filed a class action lawsuit in California state court and as a Private Attorney General Act (“PAGA”) representative suit alleging that the Company failed to provide all non-exempt California employees with compliant rest and meal breaks, overtime pay, accurate wage statements, and final pay upon termination of employment. On January 29, 2020, the parties participated in voluntary mediation and reached a tentative agreement to settle the case. The settlement agreement is subject to documentation and court approval. During the first quarter of 2020, commensurate with the anticipated settlement, we recorded an accrual for legal settlement of $3.8 million.

Ramirez v. Jack in the Box Inc. — On June 11, 2019, an unfavorable ~~resolution~~jury verdict was delivered in a wrongful termination lawsuit against the Company in Los Angeles Superior Court. Plaintiff in the case was a restaurant employee who was terminated in 2013. The jury’s verdict included $5.4 million in compensatory damages and $10.0 million in punitive damages. The Company filed post-trial motions with the trial judge for the purpose of ~~this matter~~setting aside or significantly reducing damages. These motions were granted, resulting in ~~excess~~a reduction of damages from $15.4 million to $3.2 million. The plaintiff accepted the reduction. In October 2019, the plaintiff’s counsel filed a motion for attorney’s fees in the amount of $5.1 million. On January 9, 2020, the court issued its ruling awarding $3.9 million in attorney fees. As of January 19, 2020, we have recorded an accrual for legal settlement of $7.3 million within “Accrued liabilities” and a litigation insurance recovery receivable of $7.3 million, which represents the expected payment of the settlement by the Company’s insurance carriers, within “Accounts and other receivable, net” in our ~~current accrued loss contingencies could have a material adverse effect on our business, results of operations, liquidity, or financial condition.~~condensed consolidated balance sheet.

Other legal matters— In addition to the matter described above, we are subject to normal and routine litigation brought by former or current 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 in part, by insurance or other third party indemnity obligation. Our insurance liability (undiscounted) and reserves are established in part by using independent actuarial estimates of expected losses for reported claims and for estimating claims incurred but not reported.We record receivables from third party insurers when recovery has been determined to be probable. We believe that the ultimate determination of liability in connection with legal claims pending against us, if any, in excess of amounts already provided for such matters in the consolidated financial statements, will not have a material adverse effect on our business, our annual results of operations, liquidity or financial position; however, it is possible that our business, results of operations, liquidity, or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

13.DISCONTINUED OPERATIONS

Qdoba — In December 2017, we entered into a stock purchase agreement (the “Qdoba Purchase Agreement”) with the Buyer to sell all issued and outstanding shares of Qdoba. The Buyer completed the acquisition of Qdoba on March 21, 2018 (the “Qdoba Sale”).

We also entered into a Transition Services Agreement with the Buyer pursuant to which the Buyer received certain services (the “Services”) to enable it to operate the Qdoba business after the closing of the Qdoba Sale. The Services included information technology, finance and accounting, human resources, supply chain and other corporate support services. Under the Agreement, the Services were provided at cost for a period of up to 12 months, with 2 3-month extensions available for certain services. As of September 21, 2019, we are no longer providing transition services to Qdoba. In 2019, we recorded $3.7 million in the quarter in income related to the Services as a reduction of “Selling, general and administrative expenses” in the condensed consolidated statements of earnings.

The following table presents Qdoba’s results of operations in periods which have been included in discontinued operations (in thousands, except per share data):


	Sixteen Weeks Ended
	January 20, 2019
Selling, general and administrative expenses	$	(302)
Loss on Qdoba Sale	85
Earnings from discontinued operations before income taxes	217
Income tax benefit (1)	2,760
Earnings from discontinued operations, net of income taxes	$	2,977

Basic and diluted earnings per share from discontinued operations:	$	0.11

____________________________

(1)In fiscal 2019, the Company entered into a bilateral California election with Quidditch Acquisition, Inc. to retroactively treat the divestment of Qdoba Restaurant Corporation on March 21, 2018 as a sale of assets instead of a stock sale for income tax purposes. This election reduced the Company’s fiscal year 2018 California tax liability on the divestment by $2.8 million.

Lease guarantees— While all operating leases held in the name of Qdoba were part of the Qdoba Sale, some of the leases remain guaranteed by the Company pursuant to one or more written ~~guarantees.~~guarantees (the “Guarantees”). In the event Qdoba fails to meet its payment and performance obligations under such guaranteed leases, we may be required to make rent and other payments to the landlord under the requirements of the Guarantees. Should we, as guarantor of the lease obligations, be required to make any lease payments due for the remaining term of the subject leases, the maximum amount we may be required to pay is approximately $31.2 million as of January 19, 2020. The lease terms extend for a maximum of approximately 16 more years as of January 19, 2020, and we would remain a guarantor of the leases in the event the leases are extended for any established renewal periods. In the event that we are obligated to make payments under the Guarantees, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer. Qdoba continues to meet its obligations under these leases and there have not been any events that would indicate that Qdoba will not continue to meet the obligations of the leases. As such, we have not recorded a liability for the Guarantees as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable. ~~Refer to Note 3,~~ ~~Discontinued Operations, for additional information regarding the Guarantees.~~

14.SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Non-cash investing and financing transactions:
Decrease in obligations for treasury stock repurchases	$	2,025	$	14,362
Decrease in obligations for purchases of property and equipment	$	2,377	$	4,927
Increase in dividends accrued or converted to common stock equivalents	$	63	$	58
Decrease in finance lease obligations from the termination of equipment and building leases	$	—	$	7

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

15.SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)


	January 19, 2020		September 29, 2019
Accounts and other receivables, net:
Trade	$	29,361	$	36,907
Notes receivable	375		278
Income tax receivable	1,279		160
Property taxes receivable	17,713		32
Other	9,970		10,823
Allowance for doubtful accounts	(5,122)		(2,965)
	$	53,576	$	45,235
Prepaid expenses:
Prepaid income taxes	$	7,470	$	579
Prepaid advertising	32		1,838
Other	6,163		6,598
	$	13,665	$	9,015
Other assets, net:
Company-owned life insurance policies	$	116,127	$	112,753
Deferred rent receivable	49,419		49,333
Franchise tenant improvement allowance	28,702		26,925
Other	18,535		17,674
	$	212,783	$	206,685
Accrued liabilities:
Insurance	$	27,852	$	27,888
Payroll and related taxes	24,375		31,095
Deferred franchise fees	4,970		4,978
Sales and property taxes	8,731		4,268
Gift card liability	2,443		2,036
Other	49,918		49,818
	$	118,289	$	120,083
Other long-term liabilities:
Defined benefit pension plans	$	88,455	$	120,260
Deferred franchise fees	40,566		41,295
Straight-line rent accrual	—		29,537
Other	57,568		72,678
	$	186,589	$	263,770

16.SUBSEQUENT EVENTS


~~13.~~	~~SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands~~)

Sixteen Weeks Ended
January 20,
2019 January 21,
2018
Non-cash investing and financing transactions:
Decrease in obligations for treasury stock repurchases $ 14,362
$ —
Decrease in obligations for purchases of property and equipment $ 4,927
$ 4,201
Increase in dividends accrued or converted to common stock equivalents $ 58
$ 78
Decrease in capital lease obligations from the termination of equipment and building leases

$ 7
$ 685
Increase in notes receivable from the sale of company-operated restaurants $ —
$ 9,084
Equipment capital lease obligations incurred $ —
$ 39

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~


~~14.~~	~~SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION~~ ~~(in thousands)~~

January 20,
2019 September 30,
2018
Accounts and other receivables, net:
Trade $ 34,989
$ 35,877
Due from marketing fund 13,774
—
Notes receivable 10,666
11,480
Income tax receivable 1,132
5,637
Other 2,513
6,123
Allowance for doubtful accounts (1,533 ) (1,695 )
$ 61,541
$ 57,422
Prepaid expenses:
Prepaid rent $ 4,763
$ —
Prepaid income taxes 868
4,837
Prepaid advertising —
4,318
Other 4,736
5,288
$ 10,367
$ 14,443
Other assets, net:
Company-owned life insurance policies $ 107,045
$ 109,908
Deferred rent receivable 48,844
48,372
Other 43,573
40,986
$ 199,462
$ 199,266
Accrued liabilities:
Insurance $ 35,829
$ 35,405
Payroll and related taxes 19,161
29,498
Deferred franchise fees 4,963
375
Sales and property taxes 2,830
4,555
Gift card liability 2,467
2,081
Other 35,179
35,008
$ 100,429
$ 106,922
Other long-term liabilities:
Defined benefit pension plans $ 67,214
$ 69,012
Deferred franchise fees 43,963
—
Straight-line rent accrual 30,731
31,762
Other 92,908
92,675
$ 234,816
$ 193,449


~~15.~~	~~SUBSEQUENT EVENTS~~

Dividends—On February 18, ~~2019,~~2020, the Board of Directors declared a cash dividend of $0.40 per common share, to be paid on March ~~19, 2019~~17, 2020 to shareholders of record as of the close of business on March ~~4, 2019.~~3, 2020.


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

All comparisons between ~~2019~~2020 and ~~2018~~2019 refer to the 16-weeks (“quarter”) ended January ~~20, 2019~~19, 2020 and January ~~21, 2018,~~20, 2019, respectively, unless otherwise indicated.

For an understanding of the significant factors that influenced our performance during ~~2019~~2020 and ~~2018,~~2019, our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and related notes included in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended September ~~30, 2018.~~29, 2019.

Our MD&A consists of the following sections:

•Overview — a general description of our business and ~~2019~~2020 highlights.

•Financial reporting — a discussion of changes in presentation, if any.

•Results of operations — an analysis of our condensed consolidated statements of earnings for the periods presented in our condensed consolidated financial statements.

•Liquidity and capital resources — an analysis of our cash flows including pension and postretirement health contributions, capital expenditures, sale of company-operated restaurants, franchise tenant improvement allowance distributions, ~~our credit facility,~~ share repurchase activity, dividends, known trends that may impact liquidity and the impact of inflation, if applicable.

•Discussion of critical accounting estimates — a discussion of accounting policies that require critical judgments and estimates.

•New accounting pronouncements — a discussion of new accounting pronouncements, dates of implementation and the impact on our consolidated financial position or results of operations, if any.

•Cautionary statements regarding forward-looking statements — a discussion of the risks and uncertainties that may cause our actual results to differ materially from any forward-looking statements made by management.

We have included in our MD&A certain performance metrics that management uses to assess company performance and which we believe will be useful in analyzing and understanding our results of operations. These metrics include:

•Changes in sales at restaurants open more than one year (“same-store sales”), system restaurant sales, franchised restaurant sales, and average unit volumes (“AUVs”). Same-store sales, restaurant sales, and AUVs are presented for franchised restaurants and on a system-wide basis, which includes company and franchise restaurants. Franchise sales represent sales at franchise restaurants and are revenues of our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and percentage rent revenues are calculated based on a percentage of franchise sales. We believe franchise and system same-store sales, franchised and system restaurant sales,and AUV information are useful to investors as they have a direct effect on the Company’s profitability.

•Adjusted EBITDA, which represents net earnings on a generally accepted accounting principles (“GAAP”) basis excluding ~~gains~~earnings or losses from discontinued operations, income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, impairment and other charges, net, depreciation and amortization, ~~and the~~ amortization of tenant improvement ~~allowances.~~allowances and other, and pension settlement charges.We are presenting Adjusted EBITDA because we believe that it provides a meaningful supplement to net earnings of the Company's core business operating results, as well as a comparison to those of other similar companies. Management believes that Adjusted EBITDA, when viewed with the Company's results of operations in accordance with GAAP and the accompanying reconciliations within MD&A, provides useful information about operating performance and period-over-period change, and provides additional information that is useful for evaluating the operating performance of the Company's core business without regard to potential distortions. Additionally, management believes that Adjusted EBITDA permits investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.

Same-store sales, system restaurant sales, franchised restaurant sales, AUVs, and Adjusted EBITDA are not measurements determined in accordance with GAAP and should not be considered in isolation, or as an alternative to earnings from operations, or other similarly titled measures of other companies.

OVERVIEW

As of January ~~20, 2019,~~19, 2020, we operated and franchised ~~2,241~~2,244 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including one in Guam.

The following summarizes the most significant events occurring year-to-date in fiscal ~~2019,~~2020, and certain trends compared to a year ago:

~~Same-store and system sales~~ —•System same-store sales ~~decreased 0.1%, and system~~— System same-store sales ~~decreased $5.9 million, or 0.6%,~~are up 1.7% year-to-date as compared with athe prior year ~~ago. Menu~~primarily due to menu price increases, ~~and favorable~~partially offset by changes in product mix ~~were partially offset at company-operated restaurants~~ and ~~more than offset at franchise-operated restaurants by~~ a ~~decrease~~decline in ~~traffic.~~

transactions.

•Company restaurant operations — Company restaurant costs as a percentage of company restaurant sales ~~decreased~~increased in ~~2019~~2020 to ~~73.8%~~75.2% from ~~74.0%~~73.8% a year ago primarily due to ~~the benefit of refranchising units that had lower AUVs than the average for all company restaurants, partially offset by~~ higher costs for labor and ~~other operating expenses.~~

commodities.

~~Franchise operations~~ •Pension settlement — ~~Excluding~~As previously announced, in connection with the ~~impacts of~~Company’s pension plan de-risking strategy, the ~~adoption of ASC 606 further described below, franchise costs as a percentage of franchise revenues were largely flat compared to prior year.~~

~~Restructuring costs~~ — ~~In 2019, we have continued with our~~Company amended its pension plan to ~~reduce~~offer a limited time lump sum payment option to certain eligible participants. The transaction resulted in a non-cash settlement charge of $38.6 million presented within “Other Pension and Post-Retirement Expenses” in our ~~general and administrative costs by revamping~~condensed consolidated statement of earnings.

•Sale of corporate office building —During the quarter, we executed on our ~~organization and cost structures. Additionally, in~~previously announced planned sale of one our corporate office buildings as we move forward with consolidating our corporate facilities. We recognized a $10.8 million gain on the first quarter of fiscal 2019, we began an evaluation of strategic alternatives for the Company (the “Strategic Alternatives Evaluation”). In connection with these activities, we have recorded $5.8 million of restructuring charges in 2019,sale which ~~includes $4.5 million primarily related to severance costs, and $1.3 million related to the Strategic Alternatives Evaluation. These costs are included~~is presented in “Impairment and ~~other costs, net”~~Other Costs” in ~~the accompanying~~our condensed consolidated ~~statements~~statement of earnings.

•Return of cash to shareholders— We returned cash to shareholders in the form of share repurchases and cash dividends. We repurchased 1.9 million shares of our common stock at an average price of $81.41, totaling $153.5 million. We also declared a quarterly cash dividend of $0.40 per common share totaling ~~$10.3~~$9.4 million.

•Adjusted EBITDA — Adjusted EBITDA decreased in ~~2019~~2020 to $76.6 million from $83.0 million ~~from $85.4 million~~ in ~~2018.~~

2019.

FINANCIAL REPORTING

In fiscal ~~2019,~~2020, we adopted ~~ASU 2014-09,~~ ~~Revenue Recognition - Revenue from Contracts with Customers (Topic 606)~~ Accounting Standards Codification Topic 842, Leases (“ASC ~~606”~~842”), effective at the beginning of our fiscal year on a modified retrospective basis using the ~~modified retrospective method, whereby~~effective date transition method. Our consolidated financial statements reflect the ~~cumulative effect~~application of ~~initially adopting~~ASC 842 guidance beginning in 2020, while our consolidated financial statements for prior periods were prepared under the guidance ~~was recognized as an adjustment to beginning retained earnings at October 1, 2018. The comparative information has not been restated and continues to be reported under the~~of a previously applicable accounting ~~standards in effect for those periods.~~ standard.

The most significant effects of this transition that affect comparability of our results of operations between ~~2019~~2020 and ~~2018~~2019 include the following:

~~Franchise fee revenue for initial franchise services will be recognized over~~•Our transition to ASC 842 resulted in the ~~franchise term beginning in 2019 compared to upfront recognition~~gross presentation of property tax and maintenance expenses and related lessee reimbursements as “Franchise occupancy expenses” and “Franchise rental revenues”, respectively. These expenses and reimbursements were presented on a net basis under the previous ~~revenue guidance.~~

~~Franchise contribution for advertising and other services are reflected on a gross basis~~accounting standard. Although there was no net impact to our consolidated statement of earnings from this change, the presentation resulted in ~~2019 compared to a net basis~~total increases in ~~2018. Newly created captions~~ “Franchise ~~contribution for advertising and other services”~~rental revenues” and “Franchise ~~advertising~~occupancy expenses” of $11.6 million.

•ASC 842 also changed how lessees account for leases subleased at a loss. Under ASC 842, sublease income and ~~other services expenses” include the gross-up~~lessee rent expense are recorded as franchise rent revenue and franchise occupancy costs as earned or incurred. As a result of ~~respective~~this change, franchise revenues and ~~expenses; however, the 2018 results have not been restated to conform to current year presentation.~~franchise occupancy expenses increased $1.2 million and $1.7 million, respectively in 2020.

~~In fiscal 2018, we completed the sale of Qdoba on March 21, 2018. Qdoba results are included in discontinued operations for all periods presented.~~

RESULTS OF OPERATIONS

Thefollowing table presents certain income and expense items included in our condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA


	Sixteen Weeks Ended					Sixteen Weeks Ended
	January 20, 2019		January 21, 2018			January 19, 2020		January 20, 2019
Revenues:					Revenues:
Company restaurant sales	35.4	%	57.6	%	Company restaurant sales	34.2	%	35.4	%
Franchise rental revenues	28.8	%	26.2	%	Franchise rental revenues	31.2	%	28.8	%
Franchise royalties and other	18.0	%	16.2	%	Franchise royalties and other	17.1	%	18.0	%
Franchise contributions for advertising and other services	17.8	%	—	%	Franchise contributions for advertising and other services	17.5	%	17.8	%
Total revenues	100.0	%	100.0	%	Total revenues	100.0	%	100.0	%
Operating costs and expenses, net:					Operating costs and expenses, net:
Company restaurant costs (excluding depreciation and amortization):					Company restaurant costs (excluding depreciation and amortization):
Food and packaging (1)	28.8	%	28.8	%	Food and packaging (1)	29.8	%	28.8	%
Payroll and employee benefits (1)	29.4	%	28.8	%	Payroll and employee benefits (1)	30.3	%	29.4	%
Occupancy and other (1)	15.6	%	16.4	%	Occupancy and other (1)	15.1	%	15.6	%
Total company restaurant costs (1)	73.8	%	74.0	%	Total company restaurant costs (1)	75.2	%	73.8	%
Franchise occupancy expenses (excluding depreciation and amortization) (2)	60.5	%	60.2	%	Franchise occupancy expenses (excluding depreciation and amortization) (2)	67.1	%	60.5	%
Franchise support and other costs (3)	5.4	%	5.2	%	Franchise support and other costs (3)	8.9	%	5.4	%
Franchise advertising and other services expenses (4)	104.7	%	—	%	Franchise advertising and other services expenses (4)	102.7	%	104.7	%
Selling, general and administrative expenses	8.3	%	11.6	%	Selling, general and administrative expenses	9.2	%	8.3	%
Depreciation and amortization	5.9	%	6.5	%	Depreciation and amortization	5.4	%	5.9	%
Impairment and other charges, net	2.6	%	0.8	%	Impairment and other charges, net	(3.0)	%	2.6	%
Gains on the sale of company-operated restaurants	(0.1	)%	(3.0	)%	Gains on the sale of company-operated restaurants	(0.5)	%	(0.1)	%

Earnings from operations	20.1	%	24.9	%	Earnings from operations	22.7	%	20.1	%
Income tax rate (5)	23.1	%	78.5	%	Income tax rate (5)	28.4	%	23.1	%

____________________________

(1)As a percentage of company restaurant sales.

(2)As a percentage of franchise rental revenues.

~~CHANGES IN SAME-STORE SALES~~(3)As a percentage of franchise royalties and other.

(4)As a percentage of franchise contributions for advertising and other services.

(5)As a percentage of earnings from continuing operations and before income taxes.

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Company 0.5 % 0.2 %
Franchise (0.1 )% (0.3 )%
System (0.1 )% (0.2 )%

The following table summarizes ~~the~~changes in same-store sales for company-owned, franchised, and system-wide restaurants:


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Company	2.9	%	0.5	%
Franchise	1.6	%	(0.1)	%
System	1.7	%	(0.1)	%

The following table summarizes changes in the number and mix of company and franchise restaurants:


	2020										2019
	Company		Franchise		Total		Company		Franchise		Total
Beginning of year	137		2,106		2,243		137		2,100		2,237
New	—		11		11		—		9		9


Closed	—		(10)		(10)		—		(5)		(5)
End of period	137		2,107		2,244		137		2,104		2,241
% of system	6	%	94	%	100	%	6	%	94	%	100	%

2019 2018
Company Franchise Total Company Franchise Total
Beginning of year 137

2,100

2,237

276

1,975

2,251
New —

9

9

1

5

6
Refranchised —

—

—

(22 )
22

—
Closed —

(5 )
(5 )
—

(7 )
(7 )
End of period 137

2,104

2,241

255

1,995

2,250
% of system 6 % 94 % 100 % 11 % 89 % 100 %

The following table summarizes ~~the~~ restaurant sales for company-owned, franchised, and total system sales (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Company-owned restaurant sales	$	105,364	$	102,832
Franchised restaurant sales (1)	979,345		959,960
System sales (1)	$	1,084,709	$	1,062,792

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Company-owned restaurant sales $ 102,832
$ 169,637
Franchised restaurant sales 959,960
899,062
System sales $ 1,062,792
$ 1,068,699
____________________________

(1)Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. System sales include company and franchised restaurant sales. We do not record franchised sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchised sales. We believe franchised and system restaurant sales information is useful to investors as they have a direct effect on the Company's profitability.

Below is a reconciliation of Non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net earnings (in thousands):

~~ADJUSTED EBITDA~~


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Net earnings - GAAP	$	7,897	$	34,098
Earnings from discontinued operations, net of taxes	—		(2,977)
Income tax expense	3,133		9,373
Interest expense, net	19,942		17,374
Pension settlement charge	38,606		—
Gains on the sale of company-operated restaurants	(1,575)		(219)
Impairment and other charges, net	(9,291)		7,698
Depreciation and amortization	16,728		17,169
Amortization of franchise tenant improvement allowances and other	1,151		530
Adjusted EBITDA - Non-GAAP	$	76,591	$	83,046

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Net earnings - GAAP $ 34,098

$ 12,190
(Earnings) losses from discontinued operations, net of taxes (2,977 )
699
Income taxes 9,373

47,138
Interest expense, net 17,374

12,780
Gains on the sale of company-operated restaurants (219 )
(8,940 )
Impairment and other charges, net 7,698

2,257
Depreciation and amortization 17,169

19,157
Amortization of franchise tenant improvement allowances 530

147
Adjusted EBITDA - Non-GAAP $ 83,046
$ 85,428

Company Restaurant Operations

The following table presents company restaurant sales and costs, and restaurant costs as a percentage of the related sales. Percentages may not add due to rounding (dollars in thousands):


	Sixteen Weeks Ended
	January 19, 2020						January 20, 2019
Company restaurant sales	$	105,364			$	102,832
Company restaurant costs:
Food and packaging	31,348		29.8	%	29,616		28.8	%
Payroll and employee benefits	31,890		30.3	%	30,274		29.4	%
Occupancy and other	15,958		15.1	%	16,013		15.6	%
Total company restaurant costs	$	79,196	75.2	%	$	75,903	73.8	%

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Company restaurant sales $ 102,832
$ 169,637

Company restaurant costs:
Food and packaging 29,616
28.8 % 48,864
28.8 %
Payroll and employee benefits 30,274
29.4 % 48,940
28.8 %
Occupancy and other 16,013
15.6 % 27,750
16.4 %
Total company restaurant costs $ 75,903
73.8 % $ 125,554
74.0 %

Company restaurant sales ~~decreased $66.8~~increased $2.5 million in 2019 as compared with the prior year primarily driven by a decrease in the number of company restaurants resulting from the execution of our refranchising strategy and, to a lesser extent, by a decrease in traffic, which was more than offset by menu price increases and favorable product mix. The following table presents the approximate impact of these (decreases) increases on company restaurant sales in 2019 (~~in millions~~):

Sixteen Weeks Ended
Decrease in the average number of restaurants $ (67.8 )
AUV increase 1.0
Total change in company restaurant sales $ (66.8 )

~~Same-store sales at company-operated restaurants increased 0.5% in 2019 as compared with~~2020 versus the prior year primarily due to menu price increases and ~~favorable product mix, partially offset by~~an increase in traffic.

Same-store sales at company-operated restaurants increased 2.9% compared to a ~~decline in transactions.~~year ago. The following table summarizes the change in company-operated ~~same-store sales~~same store-sales versus a year ago:

Sixteen Weeks Ended
January 20,
2019 January 21,
2018
Average check (1) 3.8 % 2.6 %
Transactions (3.3 )% (2.4 )%
Change in same-store sales 0.5 % 0.2 %

~~____________________________~~


~~(1)~~	~~Amounts~~Sixteen Weeks Ended
	January 19, 2020
Average check (1)	2.6	%
Transactions	0.3	%
Change in ~~2019 and 2018 include price increases of approximately 2.6% and 1.6%, respectively.~~same-store sales	2.9	%

____________________________

(1)Includes price increases of approximately 2.6%.

Food and packaging costs as a percentage of company restaurant sales ~~remained consistent at~~increased to 29.8% in 2020 from 28.8% ~~in 2019 and 2018 primarily due to menu price increases and favorable product mix, partially offset by higher commodity costs. Commodity costs increased 0.8% compared to~~ a year ago due primarily to higher costs for ~~potatoes~~ingredients and ~~beverages,~~changes in product mix, partially offset by ~~lower~~menu price increases. Commodity costs ~~for~~were up approximately 4.9% due primarily to increases in beef and ~~pork. Potatoes~~cheese. Cheese increased most significantly by ~~7% in the quarter while~~approximately 33% and beef, our most significant commodity, ~~decreased~~increased approximately ~~5% in 2019 compared with the prior year. For fiscal 2019, we currently expect commodity costs to increase approximately 2% compared with fiscal 2018.~~15% versus a year ago.

Payroll and employee benefit costs as a percentage of company restaurant sales increased to ~~29.4%~~30.3% in ~~2019~~2020 compared with ~~28.8% in 2018~~29.4% a year ago due primarily to higher average wages resulting from ~~a change in the mix of restaurants due to refranchising,~~ wage inflation and a highly competitive labor market.

Occupancy and other costs decreased $11.7 million in 2019 compared to the prior year, primarily due to a decrease in the average number of restaurants, impacting occupancy and other costs by approximately $13 million, partially offset by higher costs for maintenance and repairs, uniforms, utilities, information technology and property rent. The decrease in occupancy and other costs as a percentage of company restaurant sales, ~~in 2019 compared~~decreased to ~~2018 was~~15.1% from 15.6% a year ago due primarily ~~due~~ to ~~the benefit of refranchising units that had~~ lower ~~AUVs than the average~~costs for ~~all company restaurants.~~maintenance and repair expenses, partially offset by higher costs for delivery fees and utilities.

Franchise Operations

The following table presents franchise revenues and costs in each period and other information we believe is useful in analyzing the change in franchise operating results (dollars in thousands):


	Sixteen Weeks Ended
	January 19, 2020			January 20, 2019
Franchise rental revenues	$	96,084		$	83,890

Royalties	50,243			49,507
Franchise fees and other	2,223			2,743
Franchise royalties and other	52,466			52,250
Franchise contributions for advertising and other services	53,759			51,814
Total franchise revenues	$	202,309		$	187,954

Franchise occupancy expenses (excluding depreciation and amortization)	$	64,517		$	50,713
Franchise support and other costs	4,676			2,845
Franchise advertising and other services expenses	55,224			54,270
Total franchise costs	$	124,416		$	107,828
Franchise costs as a percentage of total franchise revenues	61.5		%	57.4		%

Average number of franchise restaurants	2,087			2,084
Increase (decrease) in franchise-operated same-store sales	1.6		%	(0.1)		%
Franchised restaurant sales	$	979,345		$	959,960
Franchised restaurant AUVs	$	469		$	461
Royalties as a percentage of total franchised restaurant sales	5.1		%	5.2		%

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Franchise rental revenues $ 83,890
$ 77,217

Royalties 49,507
46,293
Franchise fees and other 2,743
1,316
Franchise royalties and other 52,250
47,609
Franchise contributions for advertising and other services 51,814
—
Total franchise revenues $ 187,954
$ 124,826

Franchise occupancy expenses (excluding depreciation and amortization) $ 50,713
$ 46,521
Franchise support and other costs 2,845
2,482
Franchise advertising and other services expenses 54,270
—
Total franchise costs $ 107,828
$ 49,003
Franchise costs as a % of total franchise revenues 57.4 % 39.3 %

Average number of franchise restaurants 2,084
1,975
% increase 5.5 %
Decrease in franchise-operated same-store sales (0.1 )% (0.3 )%
Franchised restaurant sales $ 959,960
$ 899,062
Franchised restaurant AUVs $ 461
$ 455
Royalties as a percentage of total franchised restaurant sales 5.2 % 5.1 %

Franchise rental revenues increased ~~$6.7~~$12.2 million, or ~~8.6%~~14.5%, in ~~2019 as~~2020 compared ~~with~~to the prior ~~year. This increase is~~year, primarily ~~due to additional~~from our adoption of ASC 842, which increased rental revenues ~~in 2019 of $7.0 million resulting from an increase in the number of restaurants leased or subleased from the Company due to our refranchising strategy.~~$12.8 million.

Franchise royalties and other increased ~~$4.6~~$0.2 million ~~or 9.7%,~~ in ~~2019 versus a~~2020 compared to the prior year, ~~ago primarily~~ due to an increase in ~~the number~~franchise same-store sales driving royalties higher by approximately $1.7 million, partially offset by a $0.8 million increase in franchise incentives recorded as a reduction of franchise ~~restaurants.~~royalties and a $0.5 million decrease in franchise fees and other.

~~In years prior to 2019, franchise~~Franchise contributions for advertising and other services were shown net with the related disbursements within “Selling, general, and administrative expenses” in our condensed consolidated statement of earnings. In the first quarter of 2019, we adopted ASC 606, which requires these revenues and expenses to be presented gross on our condensed consolidated statement of earnings. Refer to Note 2, ~~Revenue,~~ ~~for additional information related~~increased $1.9 million compared to the ~~adoption~~prior year, due to an increase in technology fees charged to our franchisees and an increase in franchisee contributions to our marketing fund which are based on a percentage of ~~this new accounting standard.~~their restaurant sales.

Franchise occupancy expenses, principally rents, increased ~~$4.2~~$13.8 million in ~~2019 versus a~~2020 compared to the prior year, ~~ago~~ due primarily to ~~a net increase in~~ the ~~average number~~adoption of ~~franchise-operated restaurants resulting from our refranchising strategy, contributing additional costs of approximately $4.0~~ASC 842 which increased franchise occupancy expenses by $13.3 million.

Franchise support and other costs increased ~~$0.4~~$1.8 million in ~~2019~~2020 compared ~~with a~~to the prior year, ~~ago~~ due primarily to ana $1.9 million increase in ~~costs associated with franchise remodels~~franchisee bad debt expense.

Franchise advertising and other service expenses increased $1.0 million compared to the prior year, due to a $0.9 million increase in ~~2019.~~marketing fund contributions from our franchisees.

Depreciation and Amortization

Depreciation and amortization decreased by ~~$2.0~~$0.4 million in ~~2019~~2020 as compared with the prior year, primarily due to a decrease in equipment depreciation driven by a decrease in the average number of company-operated restaurants resulting from our refranchising activities in 2018. To a lesser extent, a decline in depreciation resulting from our franchise building assets becoming fully depreciated ~~also contributed to~~in the ~~decrease.~~current fiscal year.

Selling, General and Administrative (“SG&A”) Expenses

The following table presents the change in ~~2019~~2020 SG&A expenses compared with the prior year (in thousands):


	Sixteen Weeks Ended
	January 19, 2020
Advertising	$	(1,873)
Incentive compensation (including share-based compensation and related payroll taxes)	3,014
Cash surrender value of COLI policies, net	(3,506)
Litigation matters	3,756
Other (includes transition services income and savings related to our restructuring plan)	2,774
	$	4,165

Increase / (Decrease)
Incentive compensation (including share-based compensation and related payroll taxes) $ (4,526 )
Advertising (1,650 )
Technology fees (1,470 )
Region administration (964 )
Legal fees 857
Cash surrender value of COLI policies, net 1,712
Other (includes transition services income and savings related to our restructuring plan) (3,937 )
$ (9,978 )

Incentive compensation decreased in 2019 primarily due to lower levels of performance in 2019 versus the prior year as compared to target bonus levels and a decrease of $1.0 million in share-based compensation primarily related to the elimination of retiree eligible accelerated vesting provisions in our fiscal 2019 restricted stock unit grants.

Advertising costs ~~are primarily~~represent company contributions to our marketing fund and are generally determined as a percentage of ~~gross~~company-operated restaurant sales. Advertising costs decreased $1.9 million in 2020 compared to the prior year, primarily due to a ~~decrease in the number of company-operated restaurants resulting from our refranchising efforts. These decreases were partially offset by incremental contributions to the~~$2.0 million discretionary marketing fund ~~of $2.0~~contribution made by the Company in 2019.

Incentive compensation increased by $3.0 million in ~~2019 for additional system-wide promotional activity.~~

~~Upon adoption~~2020 primarily due to an increase in performance-based stock compensation and annual incentives, mainly as a result of ASC 606 in 2019, technology fees and costs are recorded on a gross basis within our condensed consolidated statements of earnings within “Franchise contributions from advertising and other services” and “Franchise advertising and other services expenses.”

~~Region administration costs decreased in 2019 as~~higher achievement levels compared to ~~2018 due primarily to workforce reductions related to our refranchising efforts.~~prior year.

The cash surrender value of our ~~Company-owned~~company-owned life insurance (“COLI”) policies, net of changes in our non-qualified deferred compensation obligation supported by these policies, are subject to market fluctuations. The changes in market values had a positive impact of $2.1 million in 2020, compared to a negative impact of $1.4 million in ~~2019, compared with a positive impact of $0.3 million in~~ the prior year.

~~Impairment and Other Charges, Net~~

~~Impairment and other charges, net is comprised~~Litigation matters increased by $3.8 million, primarily due to costs accrued in 2020 on the expected settlement of ~~the following (in thousands~~):

~~____________________________~~

Impairment and other charges, net increased $5.4 million in 2019 compared with a year ago. The increase was primarily driven by a $5.5 million increase in restructuring costs, primarily relating to severance and the Strategic Alternatives Evaluation. This increase was partially offset by a decrease of $0.6 million in costs of closed restaurants primarily related to changes in the market value of three closed restaurant properties held for sale in the first quarter of 2018.an employee litigation matter. Refer to Note 7, ~~Impairment~~12, Contingencies and ~~Other Charges, Net,~~Legal Matters, of the notes to the condensed consolidated financial statements for additional information regarding these charges.

Impairment and Other Charges, Net

Impairment and other charges, net is comprised of the following (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Restructuring costs	$	1,045	$	5,840
Costs of closed restaurants and other	101		866
Accelerated depreciation	—		416
(Gains) losses on disposition of property and equipment, net	(10,437)		576
	$	(9,291)	$	7,698

Restructuring costs decreased by $4.8 million in 2020 compared to the prior year, primarily as a result of lower severance expenses of $3.5 million, as well as $1.3 million lower costs related to the strategic alternative evaluation that was concluded on in the third quarter of 2019.

Gains on disposition of property and equipment, net, increased by $11.0 million, primarily due to a $10.8 million gain related to the sale of one of our corporate office buildings in 2020.

Gains on the Sale of Company-Operated Restaurants

Gains on the sale of company-operated restaurants ~~net are detailed~~were $1.6 million in 2020 versus $0.2 million in the ~~following table (dollars~~prior year. In both comparative periods, the gains recognized pertain to meeting certain contingent consideration provisions included in ~~thousands~~):

Gains are impacted by the number of restaurants sold and changes in average gains or losses recognized, which primarily relate to the specific sales and cash flows of those restaurants. Gains in 2019 primarily relate to escrow funds released on restaurants sold in ~~prior~~previous years.

Other Pension and Post-Retirement Expenses, Net

Other pension and post-retirement expenses, net increased by $38.5 million in 2020 versus a year ago, primarily due to a non-cash pension settlement charge of $38.6 million in 2020. Refer to Note 4, ~~Summary of Refranchisings and Franchisee Development~~9, Retirement Plans, of the notes to the condensed consolidated financial statements for additional information regarding ~~these gains.~~

Interest Expense, Net

Interest expense, net is comprised of the following (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Interest expense	$	20,419	$	17,612
Interest income	(477)		(238)
Interest expense, net	$	19,942	$	17,374

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Interest expense $ 17,612
$ 12,811
Interest income (238 ) (31 )
Interest expense, net $ 17,374
$ 12,780

Interest expense, net increased ~~$4.6~~$2.6 million in ~~2019 compared with~~2020 versus a year ago, primarily due to a higher average ~~interest rates on average borrowings. As described in Note 3,~~ ~~Discontinued Operations, a portion of interest costs was allocated~~borrowings compared to ~~discontinued operations in the~~ prior year, ~~based on our estimate~~as well an increase in loan fee amortization of ~~the mandatory prepayment that was made upon closing of the Qdoba Sale.~~$1.1 million.

The tax rate in ~~2019~~2020 was ~~23.1% in the quarter~~28.4% compared with ~~78.5%~~23.1% a year ago. The major components of the change in tax rates were ~~the non-cash impact of the enactment of the Tax Act in fiscal year 2018,~~ a decrease in ~~the statutory~~operating earnings before income tax, ~~rate, and~~ an adjustment related to state taxes recorded in the first quarter of fiscal year 2019, an increase in the tax deficiency on 2020 stock compensation, partially offset by ~~a decrease~~an increase in gains from the ~~excess tax benefit on stock compensation. We expect the fiscal year tax rate~~market performance of insurance products used to ~~be approximately 26.0% to 27.0%.~~fund certain non-qualified retirement plans which are excluded from taxable income. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual ~~2019~~2020 rate could differ from our current estimates. Refer to Note 8,Income Taxes, of the notes to the condensed consolidated financial statements for additional information regarding income taxes.

~~Earnings (Losses) from Discontinued Operations, Net~~

~~As described in Note 3,~~ ~~Discontinued Operations~~, in the notes to condensed consolidated financial statements, the results of operations from our distribution business and Qdoba have been reported as discontinued operations for all periods presented. Refer to Note 3 for additional information regarding discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available financing in place. On July 8, 2019, we completed a refinancing of our ~~revolving bank~~existing senior credit ~~facility.~~facility with a new securitized financing facility, comprised of $1.3 billion of senior fixed-rate term notes and $150.0 million of variable funding notes as further described below.

We generally reinvest available cash flows from operations to enhance existing restaurants, to reduce debt, to repurchase shares of our common stock, and to pay cash ~~dividends, and to develop new restaurants.~~dividends. Our cash requirements consist principally of:

•capital ~~expenditures for restaurant renovations and new restaurant construction;~~expenditures;

•income tax payments;

•debt service requirements;

•franchise tenant improvement allowance distributions; and

•obligations related to our benefit plans.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with ~~other~~our securitized financing ~~alternatives in place or available,~~facility including our variable funding notes, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

As is common in the restaurant industry, we maintain relatively low levels of accounts receivable and inventories, and our vendors grant trade credit for purchases such as food and supplies. We also continually invest in our business through the addition of new units and refurbishment of existing units, which are reflected as long-term assets and not as part of working capital. As a result, we may at times maintain current liabilities in excess of current assets, which results in a working capital deficit.

The table below summarizes our cash flows from continuing operations (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Total cash provided by (used in):
Operating activities	$	22,687	$	37,601
Investing activities	32,364		(4,263)
Financing activities	(168,326)		(31,743)
Net cash flows	$	(113,275)	$	1,595

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Total cash provided by (used in):
Operating activities $ 37,601
$ 53,730
Investing activities (4,263 ) (1,818 )
Financing activities (31,743 ) (54,917 )
Net cash flows $ 1,595
$ (3,005 )

Operating Activities. Operating cash flows in ~~2019~~the quarter decreased ~~$16.1~~$14.9 million compared with a year ago, primarily due to unfavorable changes in working capital of ~~$11.4~~$9.0 million ~~mainly attributable to higher incentive compensation paid in the current fiscal period~~ and ~~timing of receipts and expenditures, as well as~~ lower net income adjusted for non-cash items of ~~$4.8~~$5.9 million.

Pension and Postretirement Contributions — Our policy is to fund our pension plans at or above the minimum required by law. As of January 1, ~~2018,~~2019, the date of our last actuarial funding valuation, there was no minimum contribution funding requirement for our qualified pension plan. We continue to evaluate contributions to our Qualified Plan based on changes in pension assets as a result of asset performance in the current market and the economic environment. We do not anticipate making any contributions to our Qualified Plan in fiscal ~~2019.~~2020. In ~~2019,~~2020, we contributed ~~$2.1~~$2.0 million to our non-qualified pension plan and postretirement plans.

Investing Activities. Cash ~~used in~~provided by investing activities increased ~~$2.4~~by $36.6 million compared with a year ago, primarily due to $8.4 million lower proceeds received in connection with the sale of company-owned restaurants, including collections on notes issued in connection with the 2018 refranchising, as well as $4.9 million lowerhigher proceeds from the sale and leaseback of assets ~~in 2018. These decreases were~~of $17.4 million, higher proceeds from the sale of property and equipment of $20.3 million, and $4.0 million lower capital expenditure spending, partially offset by ~~a $13.1~~$6.5 million ~~increase~~of lower repayments received on notes issued in ~~Qdoba inter-company transfers in 2018.~~connection with 2018 refranchising transactions.

Capital Expenditures— The composition of capital expenditures in each period follows (in thousands):


	Sixteen Weeks Ended
	January 19, 2020		January 20, 2019
Jack in the Box:
Restaurant facility expenditures	$	3,500	$	7,346
New restaurants	—		1,301
Other, including information technology	1,552		2,525
	5,052		11,172
Corporate Services:
Information technology	1,760		11
Other, including facility improvements	390		—
	2,150		11

Total capital expenditures	$	7,202	$	11,183

Sixteen Weeks Ended
January 20, 2019 January 21, 2018
Jack in the Box:
Restaurant facility expenditures $ 7,346
$ 8,554
New restaurants 1,301
555
Other, including information technology 2,525
657
11,172
9,766
Corporate Services:
Information technology 11
1,017
Other, including facility improvements —
10
11
1,027

Total capital expenditures $ 11,183
$ 10,793

Our capital expenditure program includes, among other things, ~~investments in new equipment,~~ restaurant remodeling, information technology enhancements, and investments in new ~~locations.~~locations and equipment. Capital expenditures ~~increased $0.4~~decreased by $4.0 million compared to a year ago primarily ~~resulting~~due to lower facility expenditures from ~~a $0.9 million increase in spending related to~~ restaurant remodels and ~~corporate services information~~ technology ~~and a $0.7 million increase in spending related to building new Jack in the Box restaurants,~~initiatives; partially offset by higher spending on certain corporate technology initiatives in 2020.

Sale leaseback transactions — We use sale and leaseback financing to lower the initial cash investment in our restaurants to the cost of the equipment, whenever possible. In 2020, we completed a ~~$1.2~~sale leaseback transaction of a multi-tenant commercial property in Los Angeles, California and leased back the parcel on which a company-operated restaurant is located. We received net proceeds on the transaction of $17.4 million ~~decrease in spending related~~during the quarter.

In 2020, we also completed the sale of one of our corporate office buildings as we move forward with our previously announced consolidation of our corporate facilities We entered into a lease with the buyer to ~~restaurant facility expenditures.~~leaseback the property up to a period of 18 months with an option of the Company to terminate the lease, without penalty, upon providing a 90-day notice. We ~~expect fiscal 2019 capital expenditures to be approximately $30.0~~received net proceeds on the sale of $20.6 million ~~to $35.0 million.~~during the quarter.

Financing Activities. Cash flows used in financing activities ~~decreased $23.2~~increased by $136.6 million ~~in 2019~~ compared with a year ago, primarily due to ~~lower net repayments of $24.9 million borrowings under our credit facility and~~ an increase in stock repurchases of ~~$9.4~~$141.2 million inand lower cash book overdrafts ~~resulting from timing differences on checks issued but not yet endorsed,~~of $9.2 million, partially offset ~~by an increase~~lower debt repayments of ~~$14.4 million~~$13.7 million.

Class A-2 Notes — Interest and principal payments on the Class A-2 Notes are payable on a quarterly basis. In general, no principal payments will be required if a specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in ~~cash used~~the Indenture), is less than or equal to ~~repurchase common stock.~~5.0x. At January 19, 2020, the Company’s actual leverage ratio exceeded 5.0x, and as a result, we will be required to make quarterly principal payments of $3.25 million. The Company anticipates that we will be required to make quarterly principal payments on the Class A-2 Notes for the foreseeable future.

~~Credit Facility~~ ~~— Our credit facility was amended on March 21, 2018, which extended~~The legal final maturity date of the ~~revolving credit agreement~~Class A-2 Notes is in August 2049, but it is expected that, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment dates of the Class A-2-I Notes, the Class A-2-II Notes and the ~~term loan maturity dates~~Class A-2-III Notes will be August 2023, August 2026 and August 2029, respectively (the “Anticipated Repayment Dates”). If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to ~~March 19, 2020.~~the respective anticipated repayment date, additional interest will accrue pursuant to the Indenture. As of January ~~20, 2019, we had $325.7~~19, 2020, $1,300.0 million of borrowings were outstanding on the Class A-2 Notes.

Variable Funding Notes — The Variable Funding Notes were issued under the ~~term loan, borrowings~~Indenture and allow for drawings of up to $150.0 million on a revolving basis and the issuance of letters of credit. Depending on the type of borrowing under the ~~revolving credit agreement~~Variable Funding Notes, interest on the Variable Funding Notes will be based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars or (iv) the lenders’ commercial paper funding rate plus any applicable margin, as set forth in the Variable Funding Note Purchase Agreement. There is a scaled commitment fee on the unused portion of ~~$727.4~~the Variable Funding Notes facility of between 50 and 100 basis points. It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to August 2024, subject to two one-year extensions at the option of the Company. Following the anticipated repayment date (and any extensions thereof), additional interest will accrue equal to 5.00% per annum. As of January 19, 2020, $42.1 million ~~and~~of letters of credit were outstanding ~~of $31.4 million. As of~~against the

Variable Funding Notes, which relate primarily to interest reserves required under the Indenture. The Variable Funding Notes were undrawn at January ~~20, 2019, our unused borrowing capacity was $141.2 million.~~19, 2020.

Covenants and restrictions —The interest rate on our credit facility is based on our leverage ratio and can range from the London Interbank Offered Rate (“LIBOR”) plus 1.25% to 2.25% with a 0% floor on LIBOR. The interest rate as of January 20, 2019 was LIBOR plus 2.25%.

WeNotes are subject to a ~~number~~series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants ~~under our credit facility,~~relating to recordkeeping, access to information and similar matters. The Notes are also subject to customary rapid amortization events provided for in the Indenture, including ~~limitations on additional borrowings, acquisitions, loans~~events tied to ~~franchisees, lease commitments, stock repurchases and dividend payments, and requirements~~failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain ~~financial ratios as defined in~~levels on certain measurement dates, certain manager termination events, an event of default, and the ~~credit agreement.~~failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date. The ~~amendment raised our maximum leverage ratio from 4.0 times~~Notes are also subject to ~~4.5 times~~certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and ~~permits unlimited cash dividends~~warranties, failure of security interests to be effective, and ~~share repurchases if pro forma leverage is less than 4.0 times, subject also to pro forma fixed charge covenant compliance.~~

Wecertain judgments. As of January 19, 2020, we were in compliance with all ~~covenants as~~of our debt covenant requirements and were not subject to any rapid amortization events.

In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the note holders, and are restricted in their use. As of January ~~20, 2019.~~19, 2020, the Master Issuer had restricted cash of $18.4 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Notes.

~~Interest Rate Swaps~~— To reduce our exposure to fluctuating interest rates under our credit facility, we consider interest rate swaps. In June 2015, we entered into forward-starting interest rate swap agreements that effectively converted $500.0 million of our variable rate borrowings to a fixed-rate from October 2018 through October 2022. For additional information, refer to Note 6, ~~Derivative Instruments, of the notes to our condensed consolidated financial statements.~~

Repurchases of Common Stock— ~~We did not~~ The Company repurchased approximately 1.9 million shares of its common stock in the first quarter of fiscal 2020 at an average price of $81.41 per share for an aggregate cost of $153.5 million. This leaves approximately $122.2 million remaining under share repurchase ~~any common shares during 2019 or 2018. In November 2018, the~~programs authorized by its Board of Directors, ~~approved a stock buyback program for up to $60.0 million in shares~~consisting of ~~our common stock, expiring in November 2019. As of January 20, 2019, there was approximately $101.0~~$22.2 million remaining ~~under Board-authorized stock-buyback programs which~~that expire in November ~~2019.~~ 2020 and approximately $100.0 million remaining that expire in November 2021.

Repurchases of common stock included in our condensed consolidated statement of cash flows for fiscal ~~2019~~2020 includes ~~$14.4~~$2.0 million related to repurchase transactions traded in the prior ~~fiscal~~ year that settled in ~~2019.~~2020.

Dividends — During ~~2019,~~2020, the Board of Directors declared a quarterly cash ~~dividend~~dividends of $0.40 per common share totaling ~~$10.3~~$9.4 million. Future dividends are subject to approval by our Board of Directors.

Off-Balance Sheet Arrangements

We have entered into certain off-balance sheet contractual obligations and commitments in the ordinary course of business, which are recognized in our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles. There has been no material change in these arrangements as disclosed in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended September ~~30, 2018.~~29, 2019. We are not a party to any other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates are those that we believe are most important for the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September ~~30, 2018.~~29, 2019.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1, Basis of Presentation, of the notes to condensed consolidated financial statements.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the federal securities laws. Any statements contained herein that are not historical facts may be deemed to be forward-looking statements. Forward-looking statements may be identified by words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would”, “should” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to:

•Changes in demographic trends and in customer tastes and preferences could cause sales and the royalties we receive from franchisees to decline.

•Changes in consumer confidence and declines in general economic conditions could negatively impact our financial results.



Large accelerated filer			þ	~~Accelerated filer~~	¨
~~Non-accelerated filer~~	¨	Smaller reporting company	¨☐
Accelerated filer			☐	Emerging growth company	¨☐
Non-accelerated filer			☐



		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Earnings	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2221
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3534
Item 4.	Controls and Procedures	3634
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3635
Item 1A.	Risk Factors	3635
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3635
Item 3.	Defaults of Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
	Signature	38


	January 20, 2019			September 30, 2018				January 19, 2020		September 29, 2019
ASSETS							ASSETS
Current assets:							Current assets:
Cash	$	4,300		$	2,705		Cash	$	19,914	$	125,536
Restricted cash							Restricted cash	18,372		26,025
Accounts and other receivables, net	61,541			57,422			Accounts and other receivables, net	53,576		45,235
Inventories	2,090			1,858			Inventories	2,029		1,776
Prepaid expenses	10,367			14,443			Prepaid expenses	13,665		9,015
Current assets held for sale	12,556			13,947			Current assets held for sale	7,760		16,823
Other current assets	5,692			4,598			Other current assets	3,037		2,718
Total current assets	96,546			94,973			Total current assets	118,353		227,128
Property and equipment:							Property and equipment:
Property and equipment, at cost	1,191,930			1,190,031			Property and equipment, at cost	1,155,356		1,176,241
Less accumulated depreciation and amortization	(783,639		)	(770,362		)	Less accumulated depreciation and amortization	(793,851)		(784,307)
Property and equipment, net	408,291			419,669			Property and equipment, net	361,505		391,934
Other assets:							Other assets:
Operating lease right-of-use assets							Operating lease right-of-use assets	884,213		—
Intangible assets, net	511			600			Intangible assets, net	37		425
Goodwill	46,747			46,749			Goodwill	46,747		46,747
Deferred tax assets	77,295			62,140			Deferred tax assets	66,675		85,564
Other assets, net	199,462			199,266			Other assets, net	212,783		206,685
Total other assets	324,015			308,755			Total other assets	1,210,455		339,421
	$	828,852		$	823,397			$	1,690,313	$	958,483
LIABILITIES AND STOCKHOLDERS’ DEFICIT							LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:							Current liabilities:
Current maturities of long-term debt	$	42,485		$	31,828		Current maturities of long-term debt	$	13,786	$	774
Current operating lease liabilities							Current operating lease liabilities	158,779		—
Accounts payable	44,742			44,970			Accounts payable	23,467		37,066
Accrued liabilities	100,429			106,922			Accrued liabilities	118,289		120,083
Total current liabilities	187,656			183,720			Total current liabilities	314,321		157,923
Long-term liabilities:							Long-term liabilities:
Long-term debt, net of current maturities	1,013,676			1,037,927			Long-term debt, net of current maturities	1,262,737		1,274,374
Long-term operating lease liabilities, net of current portion							Long-term operating lease liabilities, net of current portion	767,819		—
Other long-term liabilities	234,816			193,449			Other long-term liabilities	186,589		263,770
Total long-term liabilities	1,248,492			1,231,376			Total long-term liabilities	2,217,145		1,538,144
Stockholders’ deficit:							Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued	—			—
Common stock $0.01 par value, 175,000,000 shares authorized, 82,132,436 and 82,061,661 issued, respectively	821			821
Preferred stock $0.01 par value, 15,000,000 shares authorized, NaN issued							Preferred stock $0.01 par value, 15,000,000 shares authorized, NaN issued	—		—
Common stock $0.01 par value, 175,000,000 shares authorized, 82,255,912 and 82,159,002 issued, respectively							Common stock $0.01 par value, 175,000,000 shares authorized, 82,255,912 and 82,159,002 issued, respectively	823		822
Capital in excess of par value	472,894			470,826			Capital in excess of par value	483,739		480,322
Retained earnings	1,547,759			1,561,353			Retained earnings	1,572,586		1,577,034
Accumulated other comprehensive loss	(98,331		)	(94,260		)	Accumulated other comprehensive loss	(88,995)		(140,006)
Treasury stock, at cost, 56,325,632 shares	(2,530,439		)	(2,530,439		)
Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively							Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively	(2,809,306)		(2,655,756)
Total stockholders’ deficit	(607,296		)	(591,699		)	Total stockholders’ deficit	(841,153)		(737,584)
	$	828,852		$	823,397			$	1,690,313	$	958,483


	Sixteen Weeks Ended							Sixteen Weeks Ended
	January 20, 2019			January 21, 2018				January 19, 2020		January 20, 2019
Net earnings	$	34,098		$	12,190		Net earnings	$	7,897	$	34,098
Cash flow hedges:							Cash flow hedges:
Net change in fair value of derivatives	(7,167		)	10,291			Net change in fair value of derivatives	—		(7,167)
Net loss reclassified to earnings	479			1,674			Net loss reclassified to earnings	—		479
	(6,688		)	11,965				—		(6,688)
Tax effect	1,723			(3,039		)	Tax effect	—		1,723
	(4,965		)	8,926				—		(4,965)
Unrecognized periodic benefit costs:							Unrecognized periodic benefit costs:
Actuarial gains arising during the period							Actuarial gains arising during the period	28,583		—
Actuarial losses and prior service costs reclassified to earnings	1,205			1,535			Actuarial losses and prior service costs reclassified to earnings	40,310		1,205
								68,893		1,205
Tax effect	(311		)	(542		)	Tax effect	(17,882)		(311)
	894			993				51,011		894

Other comprehensive (loss) income, net of taxes	(4,071		)	9,919
Other comprehensive income (loss), net of taxes							Other comprehensive income (loss), net of taxes	51,011		(4,071)

Comprehensive income	$	30,027		$	22,109		Comprehensive income	$	58,908	$	30,027


	Sixteen Weeks Ended							Sixteen Weeks Ended
	January 20, 2019			January 21, 2018				January 19, 2020		January 20, 2019
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings	$	34,098		$	12,190		Net earnings	$	7,897	$	34,098
Earnings (losses) from discontinued operations	2,977			(699		)
Earnings from discontinued operations							Earnings from discontinued operations	—		2,977
Earnings from continuing operations	31,121			12,889			Earnings from continuing operations	7,897		31,121
Adjustments to reconcile net earnings to net cash provided by operating activities:							Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	17,169			19,157			Depreciation and amortization	16,728		17,169
Amortization of franchise tenant improvement allowances	530			147
Amortization of franchise tenant improvement allowances and other							Amortization of franchise tenant improvement allowances and other	1,151		530
Deferred finance cost amortization	704			1,031			Deferred finance cost amortization	1,755		704
Excess tax benefits from share-based compensation arrangements	(50		)	(802		)
Tax deficiency (excess tax benefit) from share-based compensation arrangements							Tax deficiency (excess tax benefit) from share-based compensation arrangements	196		(50)
Deferred income taxes	(783		)	33,542			Deferred income taxes	2,010		(783)
Share-based compensation expense	1,909			2,937			Share-based compensation expense	3,184		1,909
Pension and postretirement expense	456			715			Pension and postretirement expense	38,978		456
Losses (gains) on cash surrender value of company-owned life insurance	2,863			(2,163		)
(Gains) losses on cash surrender value of company-owned life insurance							(Gains) losses on cash surrender value of company-owned life insurance	(3,374)		2,863
Gains on the sale of company-operated restaurants	(219		)	(8,940		)	Gains on the sale of company-operated restaurants	(1,575)		(219)
Losses on the disposition of property and equipment, net	635			183
(Gains) losses on the disposition of property and equipment, net							(Gains) losses on the disposition of property and equipment, net	(10,437)		635
Non-cash operating lease costs							Non-cash operating lease costs	(7,668)		—
Impairment charges and other	387			805			Impairment charges and other	—		387
Changes in assets and liabilities, excluding dispositions:							Changes in assets and liabilities, excluding dispositions:
Accounts and other receivables	(3,154		)	26,539			Accounts and other receivables	(5,619)		(3,154)
Inventories	(232		)	110			Inventories	(253)		(232)
Prepaid expenses and other current assets	6,224			7,419			Prepaid expenses and other current assets	(4,957)		6,224
Accounts payable	6,365			(371		)	Accounts payable	(7,984)		6,365
Accrued liabilities	(16,298		)	(32,667		)	Accrued liabilities	(1,558)		(16,298)
Pension and postretirement contributions	(2,111		)	(1,710		)	Pension and postretirement contributions	(2,025)		(2,111)
Franchise tenant improvement allowance distributions	(3,247		)	(1,761		)	Franchise tenant improvement allowance distributions	(3,682)		(3,247)
Other	(4,668		)	(3,330		)	Other	(80)		(4,668)
Cash flows provided by operating activities	37,601			53,730			Cash flows provided by operating activities	22,687		37,601
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property and equipment	(11,183		)	(10,793		)	Purchases of property and equipment	(7,202)		(11,183)
Purchases of assets intended for sale and leaseback	—			(1,411		)
Proceeds from the sale of property and equipment							Proceeds from the sale of property and equipment	20,618		270
Proceeds from the sale and leaseback of assets	—			4,949			Proceeds from the sale and leaseback of assets	17,373		—
Proceeds from the sale of company-operated restaurants	133			5,591			Proceeds from the sale of company-operated restaurants	1,575		133
Collections on notes receivable	6,517			9,410			Collections on notes receivable	—		6,517
Proceeds from the sale of property and equipment	270			589
Funding of intercompany operations	—			(13,122		)
Other	—			2,969
Cash flows used in investing activities	(4,263		)	(1,818		)

Cash flows provided by (used in) investing activities							Cash flows provided by (used in) investing activities	32,364		(4,263)
Cash flows from financing activities:							Cash flows from financing activities:
Borrowings on revolving credit facilities	114,298			106,200			Borrowings on revolving credit facilities	—		114,298
Repayments of borrowings on revolving credit facilities	(117,300		)	(130,800		)	Repayments of borrowings on revolving credit facilities	—		(117,300)
Principal repayments on debt	(10,907		)	(14,208		)	Principal repayments on debt	(198)		(10,907)
Debt issuance costs	(17		)	—			Debt issuance costs	(216)		(17)
Dividends paid on common stock	(10,305		)	(11,736		)	Dividends paid on common stock	(9,412)		(10,305)
Proceeds from issuance of common stock	114			—			Proceeds from issuance of common stock	184		114
Repurchases of common stock	(14,362		)	—			Repurchases of common stock	(155,576)		(14,362)
Change in book overdraft	9,234			(129		)	Change in book overdraft	—		9,234
Payroll tax payments for equity award issuances	(2,498		)	(4,244		)	Payroll tax payments for equity award issuances	(3,108)		(2,498)
Cash flows used in financing activities	(31,743		)	(54,917		)	Cash flows used in financing activities	(168,326)		(31,743)
Cash flows provided by (used in) continuing operations	1,595			(3,005		)
Net cash provided by operating activities of discontinued operations	—			16,785
Net cash used in investing activities of discontinued operations	—			(13,648		)
Net cash used in financing activities of discontinued operations	—			(43		)
Net cash provided by discontinued operations	—			3,094
Cash at beginning of period	2,705			4,467
Cash at end of period	$	4,300		$	3,789
Net (decrease) increase in cash and restricted cash							Net (decrease) increase in cash and restricted cash	(113,275)		1,595
Cash and restricted cash at beginning of period							Cash and restricted cash at beginning of period	151,561		2,705
Cash and restricted cash at end of period							Cash and restricted cash at end of period	$	38,286	$	4,300



				Adjustments
	As Reported			Franchise Fees			Marketing and Sourcing Fees			Technology Support Fees			Balances without Adoption
Condensed Consolidated Statement of Earnings
Sixteen Weeks Ended January 20, 2019
Franchise royalties and other	$	52,250		$	(1,092	)	$	—		$	—		$	51,158
Franchise contributions for advertising and other services	$	51,814		$	—		$	(49,097	)	$	(2,717	)	$	—
Total revenues	$	290,786		$	(1,092	)	$	(49,097	)	$	(2,717	)	$	237,880
Franchise advertising and other services expenses	$	54,270		$	—		$	(49,097	)	$	(5,173	)	$	—
Selling, general and administrative expenses	$	24,083		$	—		$	—		$	2,456		$	26,539
Total operating costs and expenses, net	$	232,462		$	—		$	(49,097	)	$	(2,717	)	$	180,648
Earnings from operations	$	58,324		$	(1,092	)	$	—		$	—		$	57,232
Earnings from continuing operations and before income taxes	$	40,494		$	(1,092	)	$	—		$	—		$	39,402
Income taxes	$	9,373		$	(282	)	$	—		$	—		$	9,091
Earnings from continuing operations	$	31,121		$	(810	)	$	—		$	—		$	30,311
Net earnings	$	34,098		$	(810	)	$	—		$	—		$	33,288

Condensed Consolidated Balance Sheet
January 20, 2019
Prepaid expenses	$	10,367		$	282		$	—		$	—		$	10,649
Total current assets	$	96,546		$	282		$	—		$	—		$	96,828
Deferred tax assets	$	77,295		$	(12,958	)	$	—		$	—		$	64,337
Other assets, net	$	199,462		$	269		$	—		$	—		$	199,731
Total other assets	$	324,015		$	(12,689	)	$	—		$	—		$	311,326
Total assets	$	828,852		$	(12,407	)	$	—		$	—		$	816,445
Accrued liabilities	$	100,429		$	(4,963	)	$	—		$	—		$	95,466
Total current liabilities	$	187,656		$	(4,963	)	$	—		$	—		$	182,693
Other long-term liabilities	$	234,816		$	(43,962	)	$	—		$	—		$	190,854
Total long-term liabilities	$	1,248,492		$	(43,962	)	$	—		$	—		$	1,204,530
Retained earnings	$	1,547,759		$	36,518		$	—		$	—		$	1,584,277
Total stockholders’ deficit	$	(607,296	)	$	36,518		$	—		$	—		$	(570,778	)
Total liabilities and stockholders’ deficit	$	828,852		$	(12,407	)	$	—		$	—		$	816,445



	Deferred Franchise Fees
Deferred franchise fees at October 1, 2018	$	50,018
Revenue recognized during the period	(1,592		)
Additions during the period	500
Deferred franchise fees at January 20, 2019	$	48,926



2019 (1)	$	3,434
2020	4,860
2021	4,838
2022	4,639
2023	4,484
Thereafter	26,671
	$	48,926



	Balance Sheet Location	Fair Value
	Balance Sheet Location	January 20, 2019			September 30, 2018
Derivatives designated as hedging instruments:
Interest rate swaps	Accrued liabilities	$	(402	)	$	(26	)
Interest rate swaps	Other long-term liabilities	(6,989		)	(1,266		)
Interest rate swaps	Other assets, net	—			589
Total derivatives (Note 5)		$	(7,391	)	$	(703	)



	Location in Income	Sixteen Weeks Ended
	Location in Income	January 20, 2019			January 21, 2018
(Loss) gain recognized in OCI	N/A	$	(7,167	)	$	10,291
Loss reclassified from accumulated OCI into net earnings	Interest expense, net	$	479		$	1,674



Balance as of September 30, 2018	$	5,309
Costs incurred	4,474
Cash payments	(4,200		)
Balance as of January 20, 2019	$	5,583



Balance as of September 30, 2018	$	3,534
Additions	—
Adjustments (1)	146
Interest expense	460
Cash payments	(1,179		)
Balance as of January 20, 2019 (2) (3)	$	2,961


~~(1)~~	~~Determined as of the beginning of the year based on a return on asset assumption of 6.2%.~~


~~(3)~~	~~As a percentage of franchise royalties and other.~~


~~(4)~~	~~As a percentage of franchise contributions for advertising and other services.~~


~~(5)~~	~~As a percentage of earnings from continuing operations and before income taxes.~~



	2019						2018
	Company		Franchise		Total		Company		Franchise		Total
Beginning of year	137		2,100		2,237		276		1,975		2,251
New	—		9		9		1		5		6
Refranchised	—		—		—		(22	)	22		—
Closed	—		(5	)	(5	)	—		(7	)	(7	)
End of period	137		2,104		2,241		255		1,995		2,250
% of system	6	%	94	%	100	%	11	%	89	%	100	%



	Sixteen Weeks Ended
Decrease in the average number of restaurants	$	(67.8	)
AUV increase	1.0
Total change in company restaurant sales	$	(66.8	)



	Increase / (Decrease)
Incentive compensation (including share-based compensation and related payroll taxes)	$	(4,526	)
Advertising	(1,650		)
Technology fees	(1,470		)
Region administration	(964		)
Legal fees	857
Cash surrender value of COLI policies, net	1,712
Other (includes transition services income and savings related to our restructuring plan)	(3,937		)
	$	(9,978	)


	(a) Total number of shares purchased	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced programs	(d) Maximum dollar value that may yet be purchased under these programs
					$	275,702,860
September 30, 2019 - October 27, 2019	338,792	$	88.47	338,792	$	246,164,247
October 28, 2019 - November 24, 2019	978,035	$	82.97	978,035	$	166,866,944
November 25, 2019 - December 22, 2019	569,373	$	78.45	569,373	$	122,153,031
December 23, 2019 - January 19, 2020	—	$	—	—	$	122,153,031
Total	1,886,200			1,886,200


		JACK IN THE BOX INC.

		~~JACK IN THE BOX INC.~~

By:	/S/ LANCE TUCKER
			Lance Tucker
			Executive Vice President and Chief Financial Officer (principal financial officer) (Duly Authorized Signatory)