UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 12,July 5, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ________to________.
Commission File Number: 1-9390
jack-20200705_g1.jpg

JACK IN THE BOX INC.
(Exact name of registrant as specified in its charter)
 _______________________________________________________________________________________
Delaware95-2698708
(State of Incorporation)(I.R.S. Employer Identification No.)
9330 Balboa Avenue9357 Spectrum Center Blvd.
San Diego, California 92123
(Address of principal executive offices)

9330 Balboa Avenue
San Diego, California 92123
(Former name or former address, if changed since last report)
Registrant’s telephone number, including area code (858) 571-2121

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockJACKNASDAQ 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.
Yes  þ    No  ¨
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).
Yes  þ    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþSmaller reporting company
Accelerated filerEmerging growth company
Non-accelerated filer
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).
Yes      No  þ
As of the close of business May 8,July 30, 2020, 22,671,84922,677,817 shares of the registrant’s common stock were outstanding.



JACK IN THE BOX INC. AND SUBSIDIARIES
INDEX
 
  Page
 PART I – FINANCIAL INFORMATION 
Item 1.
Condensed Consolidated Statements of Earnings
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.Defaults of Senior Securities
Item 4.
Item 5.
Item 6.

1


PART I. FINANCIAL INFORMATION
 
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
April 12,
2020
September 29,
2019
July 5,
2020
September 29,
2019
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
CashCash$132,161  $125,536  Cash$159,540  $125,536  
Restricted cashRestricted cash37,023  26,025  Restricted cash37,373  26,025  
Accounts and other receivables, netAccounts and other receivables, net66,331  45,235  Accounts and other receivables, net88,242  45,235  
InventoriesInventories1,821  1,776  Inventories1,835  1,776  
Prepaid expensesPrepaid expenses18,460  9,015  Prepaid expenses13,447  9,015  
Current assets held for saleCurrent assets held for sale6,186  16,823  Current assets held for sale6,191  16,823  
Other current assetsOther current assets3,970  2,718  Other current assets3,504  2,718  
Total current assetsTotal current assets265,952  227,128  Total current assets310,132  227,128  
Property and equipment:Property and equipment:Property and equipment:
Property and equipment, at costProperty and equipment, at cost1,149,656  1,176,241  Property and equipment, at cost1,140,285  1,176,241  
Less accumulated depreciation and amortizationLess accumulated depreciation and amortization(793,435) (784,307) Less accumulated depreciation and amortization(796,159) (784,307) 
Property and equipment, netProperty and equipment, net356,221  391,934  Property and equipment, net344,126  391,934  
Other assets:Other assets:Other assets:
Operating lease right-of-use assetsOperating lease right-of-use assets903,010  —  Operating lease right-of-use assets902,858  —  
Intangible assets, netIntangible assets, net294  425  Intangible assets, net283  425  
GoodwillGoodwill47,161  46,747  Goodwill47,161  46,747  
Deferred tax assetsDeferred tax assets77,410  85,564  Deferred tax assets66,132  85,564  
Other assets, netOther assets, net211,205  206,685  Other assets, net216,008  206,685  
Total other assetsTotal other assets1,239,080  339,421  Total other assets1,232,442  339,421  
$1,861,253  $958,483  $1,886,700  $958,483  
LIABILITIES AND STOCKHOLDERS’ DEFICITLIABILITIES AND STOCKHOLDERS’ DEFICITLIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:Current liabilities:Current liabilities:
Current maturities of long-term debtCurrent maturities of long-term debt$13,819  $774  Current maturities of long-term debt$13,821  $774  
Current operating lease liabilitiesCurrent operating lease liabilities163,077  —  Current operating lease liabilities169,347  —  
Accounts payableAccounts payable47,867  37,066  Accounts payable26,339  37,066  
Accrued liabilitiesAccrued liabilities120,949  120,083  Accrued liabilities143,344  120,083  
Total current liabilitiesTotal current liabilities345,712  157,923  Total current liabilities352,851  157,923  
Long-term liabilities:Long-term liabilities:Long-term liabilities:
Long-term debt, net of current maturitiesLong-term debt, net of current maturities1,368,446  1,274,374  Long-term debt, net of current maturities1,366,171  1,274,374  
Long-term operating lease liabilities, net of current portionLong-term operating lease liabilities, net of current portion781,653  —  Long-term operating lease liabilities, net of current portion777,883  —  
Other long-term liabilitiesOther long-term liabilities242,368  263,770  Other long-term liabilities216,752  263,770  
Total long-term liabilitiesTotal long-term liabilities2,392,467  1,538,144  Total long-term liabilities2,360,806  1,538,144  
Stockholders’ deficit:Stockholders’ deficit:Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, NaN issuedPreferred 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, 82,318,622 and 82,159,002 issued, respectively823  822  
Common stock $0.01 par value, 175,000,000 shares authorized, 82,320,270 and 82,159,002 issued, respectivelyCommon stock $0.01 par value, 175,000,000 shares authorized, 82,320,270 and 82,159,002 issued, respectively823  822  
Capital in excess of par valueCapital in excess of par value489,847  480,322  Capital in excess of par value491,594  480,322  
Retained earningsRetained earnings1,574,930  1,577,034  Retained earnings1,607,485  1,577,034  
Accumulated other comprehensive lossAccumulated other comprehensive loss(133,220) (140,006) Accumulated other comprehensive loss(117,553) (140,006) 
Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectivelyTreasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively(2,809,306) (2,655,756) Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively(2,809,306) (2,655,756) 
Total stockholders’ deficitTotal stockholders’ deficit(876,926) (737,584) Total stockholders’ deficit(826,957) (737,584) 
$1,861,253  $958,483  $1,886,700  $958,483  
See accompanying notes to condensed consolidated financial statements.
2


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Revenues:Revenues:Revenues:
Company restaurant salesCompany restaurant sales$74,380  $76,682  $179,744  $179,514  Company restaurant sales$82,444  $78,434  $262,188  $257,948  
Franchise rental revenuesFranchise rental revenues69,885  61,646  165,969  145,536  Franchise rental revenues76,021  63,359  241,990  208,895  
Franchise royalties and otherFranchise royalties and other37,764  38,410  90,230  90,660  Franchise royalties and other43,239  40,180  133,469  130,840  
Franchise contributions for advertising and other servicesFranchise contributions for advertising and other services34,128  38,989  87,887  90,803  Franchise contributions for advertising and other services40,571  40,386  128,458  131,189  
216,157  215,727  523,830  506,513  242,275  222,359  766,105  728,872  
Operating costs and expenses, net:Operating costs and expenses, net:Operating costs and expenses, net:
Company restaurant costs (excluding depreciation and amortization):Company restaurant costs (excluding depreciation and amortization):Company restaurant costs (excluding depreciation and amortization):
Food and packagingFood and packaging22,237  21,676  53,585  51,292  Food and packaging24,077  23,058  77,662  74,350  
Payroll and employee benefitsPayroll and employee benefits24,261  22,768  56,151  53,042  Payroll and employee benefits25,085  23,121  81,236  76,163  
Occupancy and otherOccupancy and other12,570  11,100  28,528  27,113  Occupancy and other12,334  11,052  40,862  38,165  
Total company restaurant costsTotal company restaurant costs59,068  55,544  138,264  131,447  Total company restaurant costs61,496  57,231  199,760  188,678  
Franchise occupancy expenses (excluding depreciation and amortization)Franchise occupancy expenses (excluding depreciation and amortization)48,341  38,618  112,858  89,331  Franchise occupancy expenses (excluding depreciation and amortization)48,612  38,371  161,470  127,702  
Franchise support and other costsFranchise support and other costs2,971  2,797  7,647  5,642  Franchise support and other costs2,692  2,695  10,339  8,337  
Franchise advertising and other services expensesFranchise advertising and other services expenses35,734  40,245  90,958  94,515  Franchise advertising and other services expenses42,176  41,882  133,134  136,397  
Selling, general and administrative expensesSelling, general and administrative expenses24,203  17,585  52,451  41,668  Selling, general and administrative expenses13,680  24,389  66,131  66,057  
Depreciation and amortizationDepreciation and amortization12,282  12,690  29,010  29,859  Depreciation and amortization12,141  12,786  41,151  42,645  
Impairment and other charges, netImpairment and other charges, net716  1,125  (8,575) 8,823  Impairment and other charges, net738  (3,256) (7,837) 5,567  
Gains on the sale of company-operated restaurantsGains on the sale of company-operated restaurants—  —  (1,575) (219) Gains on the sale of company-operated restaurants(1,050) —  (2,625) (219) 
183,315  168,604  421,038  401,066  180,485  174,098  601,523  575,164  
Earnings from operationsEarnings from operations32,842  47,123  102,792  105,447  Earnings from operations61,790  48,261  164,582  153,708  
Other pension and post-retirement expenses, netOther pension and post-retirement expenses, net512  343  39,490  799  Other pension and post-retirement expenses, net1,482  342  40,972  1,141  
Interest expense, netInterest expense, net15,409  13,276  35,351  30,650  Interest expense, net15,700  36,494  51,051  67,144  
Earnings from continuing operations and before income taxesEarnings from continuing operations and before income taxes16,921  33,504  27,951  73,998  Earnings from continuing operations and before income taxes44,608  11,425  72,559  85,423  
Income tax expense5,458  8,374  8,591  17,747  
Income tax expense (benefit)Income tax expense (benefit)12,432  (2,048) 21,023  15,699  
Earnings from continuing operationsEarnings from continuing operations11,463  25,130  19,360  56,251  Earnings from continuing operations32,176  13,473  51,536  69,724  
(Losses) earnings from discontinued operations, net of income taxes—  (41) —  2,936  
Earnings (losses) from discontinued operations, net of income taxesEarnings (losses) from discontinued operations, net of income taxes379  (284) 379  2,652  
Net earningsNet earnings$11,463  $25,089  $19,360  $59,187  Net earnings$32,555  $13,189  $51,915  $72,376  
Net earnings per share - basic:Net earnings per share - basic:Net earnings per share - basic:
Earnings from continuing operationsEarnings from continuing operations$0.50  $0.97  $0.83  $2.17  Earnings from continuing operations$1.41  $0.52  $2.22  $2.69  
Earnings from discontinued operations—  —  —  0.11  
Earnings (losses) from discontinued operationsEarnings (losses) from discontinued operations0.02  (0.01) 0.02  0.10  
Net earnings per share (1)Net earnings per share (1)$0.50  $0.97  $0.83  $2.28  Net earnings per share (1)$1.42  $0.51  $2.24  $2.79  
Net earnings per share - diluted:Net earnings per share - diluted:Net earnings per share - diluted:
Earnings from continuing operationsEarnings from continuing operations$0.50  $0.96  $0.82  $2.15  Earnings from continuing operations$1.40  $0.51  $2.21  $2.67  
Earnings from discontinued operations—  —  —  0.11  
Earnings (losses) from discontinued operationsEarnings (losses) from discontinued operations0.02  (0.01) 0.02  0.10  
Net earnings per share (1)Net earnings per share (1)$0.50  $0.96  $0.82  $2.26  Net earnings per share (1)$1.42  $0.50  $2.23  $2.77  
Cash dividends declared per common shareCash dividends declared per common share$0.40  $0.40  $0.80  $0.80  Cash dividends declared per common share$—  $0.40  $0.80  $1.20  
____________________________
(1)Earnings per share may not add due to rounding.
See accompanying notes to condensed consolidated financial statements.
3


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
(Unaudited)
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Net earningsNet earnings$11,463  $25,089  $19,360  $59,187  Net earnings$32,555  $13,189  $51,915  $72,376  
Cash flow hedges:Cash flow hedges:Cash flow hedges:
Net change in fair value of derivativesNet change in fair value of derivatives—  (4,959) —  (12,126) Net change in fair value of derivatives—  (11,499) —  (23,625) 
Net loss reclassified to earningsNet loss reclassified to earnings—  134  —  613  Net loss reclassified to earnings—  23,715  —  24,328  
—  (4,825) —  (11,513) —  12,216  —  703  
Tax effectTax effect—  1,244  —  2,967  Tax effect—  (6,132) —  (3,165) 
—  (3,581) —  (8,546) —  6,084  —  (2,462) 
Unrecognized periodic benefit costs:Unrecognized periodic benefit costs:Unrecognized periodic benefit costs:
Actuarial losses arising during the period(61,090) —  (32,507) —  
Actuarial income (losses) arising during the periodActuarial income (losses) arising during the period19,666  —  (12,841) —  
Actuarial losses and prior service costs reclassified to earningsActuarial losses and prior service costs reclassified to earnings1,362  904  41,672  2,109  Actuarial losses and prior service costs reclassified to earnings1,494  904  43,166  3,013  
(59,728) 904  9,165  2,109  21,160  904  30,325  3,013  
Tax effectTax effect15,503  (234) (2,379) (545) Tax effect(5,493) (232) (7,872) (777) 
(44,225) 670  6,786  1,564  15,667  672  22,453  2,236  
Other comprehensive (loss) income, net of taxes(44,225) (2,911) 6,786  (6,982) 
Other comprehensive income (loss), net of taxesOther comprehensive income (loss), net of taxes15,667  6,756  22,453  (226) 
Comprehensive (loss) income$(32,762) $22,178  $26,146  $52,205  
Comprehensive incomeComprehensive income$48,222  $19,945  $74,368  $72,150  
See accompanying notes to condensed consolidated financial statements.

4


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year-to-date Year-to-date
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net earningsNet earnings$19,360  $59,187  Net earnings$51,915  $72,376  
Earnings from discontinued operationsEarnings from discontinued operations—  2,936  Earnings from discontinued operations379  2,652  
Earnings from continuing operationsEarnings from continuing operations19,360  56,251  Earnings from continuing operations51,536  69,724  
Adjustments to reconcile net earnings to net cash provided by operating activities: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 amortizationDepreciation and amortization29,010  29,859  Depreciation and amortization41,151  42,645  
Amortization of franchise tenant improvement allowances and otherAmortization of franchise tenant improvement allowances and other1,765  1,137  Amortization of franchise tenant improvement allowances and other2,383  1,524  
Deferred finance cost amortizationDeferred finance cost amortization3,046  1,224  Deferred finance cost amortization4,337  1,903  
Excess tax benefits from share-based compensation arrangementsExcess tax benefits from share-based compensation arrangements(77) (47) Excess tax benefits from share-based compensation arrangements(71) (66) 
Deferred income taxesDeferred income taxes6,783  3,955  Deferred income taxes12,567  (1,745) 
Share-based compensation expenseShare-based compensation expense5,865  4,708  Share-based compensation expense7,612  6,589  
Pension and postretirement expensePension and postretirement expense39,490  799  Pension and postretirement expense40,972  1,141  
Losses (gains) on cash surrender value of company-owned life insurance3,150  (1,336) 
Gains on cash surrender value of company-owned life insuranceGains on cash surrender value of company-owned life insurance(1,861) (3,117) 
Gains on the sale of company-operated restaurantsGains on the sale of company-operated restaurants(1,575) (219) Gains on the sale of company-operated restaurants(2,625) (219) 
Gains on the disposition of property and equipment, netGains on the disposition of property and equipment, net(10,170) (138) Gains on the disposition of property and equipment, net(10,386) (5,756) 
Non-cash operating lease costsNon-cash operating lease costs(13,118) —  Non-cash operating lease costs(5,689) —  
Impairment charges and otherImpairment charges and other133  896  Impairment charges and other195  1,624  
Changes in assets and liabilities, excluding acquisitions:Changes in assets and liabilities, excluding acquisitions:Changes in assets and liabilities, excluding acquisitions:
Accounts and other receivablesAccounts and other receivables(22,858) (11,658) Accounts and other receivables(39,198) (3,555) 
InventoriesInventories28  (91) Inventories14  (79) 
Prepaid expenses and other current assetsPrepaid expenses and other current assets(10,350) 3,701  Prepaid expenses and other current assets(5,034) 1,509  
Accounts payableAccounts payable20,660  (3,904) Accounts payable(4,620) 24,321  
Accrued liabilitiesAccrued liabilities1,400  (6,532) Accrued liabilities15,755  9,363  
Pension and postretirement contributionsPension and postretirement contributions(3,582) (3,671) Pension and postretirement contributions(4,921) (5,126) 
Franchise tenant improvement allowance distributionsFranchise tenant improvement allowance distributions(5,811) (6,697) Franchise tenant improvement allowance distributions(7,105) (7,875) 
OtherOther(4,222) (7,421) Other(4,844) (16,012) 
Cash flows provided by operating activitiesCash flows provided by operating activities58,927  60,816  Cash flows provided by operating activities90,168  116,793  
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Purchases of property and equipmentPurchases of property and equipment(12,777) (18,191) Purchases of property and equipment(16,736) (25,041) 
Proceeds from the sale of property and equipmentProceeds from the sale of property and equipment22,394  1,479  Proceeds from the sale of property and equipment22,790  7,563  
Proceeds from the sale and leaseback of assetsProceeds from the sale and leaseback of assets17,373  1,944  Proceeds from the sale and leaseback of assets19,828  3,056  
Proceeds from the sale of company-operated restaurantsProceeds from the sale of company-operated restaurants1,575  133  Proceeds from the sale of company-operated restaurants2,625  133  
Collections on notes receivableCollections on notes receivable—  6,491  Collections on notes receivable—  15,239  
OtherOther1,036  —  Other1,036  —  
Cash flows provided by (used in) investing activities29,601  (8,144) 
Cash flows provided by investing activitiesCash flows provided by investing activities29,543  950  
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Borrowings on revolving credit facilitiesBorrowings on revolving credit facilities111,376  189,736  Borrowings on revolving credit facilities111,376  229,798  
Repayments of borrowings on revolving credit facilitiesRepayments of borrowings on revolving credit facilities(3,500) (180,800) Repayments of borrowings on revolving credit facilities(3,500) (252,800) 
Principal repayments on debtPrincipal repayments on debt(3,640) (21,757) Principal repayments on debt(7,094) (32,611) 
Debt issuance costsDebt issuance costs(216) (3,615) Debt issuance costs(216) (5,088) 
Dividends paid on common stockDividends paid on common stock(18,466) (20,615) Dividends paid on common stock(18,466) (30,929) 
Proceeds from issuance of common stockProceeds from issuance of common stock3,559  243  Proceeds from issuance of common stock3,559  696  
Repurchases of common stockRepurchases of common stock(155,576) (14,362) Repurchases of common stock(155,576) (14,362) 
Payroll tax payments for equity award issuancesPayroll tax payments for equity award issuances(4,442) (2,617) Payroll tax payments for equity award issuances(4,442) (2,705) 
Cash flows used in financing activitiesCash flows used in financing activities(70,905) (53,787) Cash flows used in financing activities(74,359) (108,001) 
Net increase (decrease) in cash and restricted cash17,623  (1,115) 
Net increase in cash and restricted cashNet increase in cash and restricted cash45,352  9,742  
Cash and restricted cash at beginning of periodCash and restricted cash at beginning of period151,561  2,705  Cash and restricted cash at beginning of period151,561  2,705  
Cash and restricted cash at end of periodCash and restricted cash at end of period$169,184  $1,590  Cash and restricted cash at end of period$196,913  $12,447  

See accompanying notes to condensed consolidated financial statements.
5

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:
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
Company-operatedCompany-operated144  137  Company-operated144  137  
FranchiseFranchise2,102  2,103  Franchise2,100  2,105  
Total systemTotal system2,246  2,240  Total system2,244  2,242  
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 29, 2019 (“2019 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our 2019 Form 10-K with the exception of the new lease accounting standard adopted in fiscal 2020, which is described below.
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 — The Company is comprised of 1 operating segment.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2020 and 2019 include 52 weeks. Our first quarter includes 16-weeks and all other quarters include 12-weeks. All comparisons between 2020 and 2019 refer to the 12-weeks (“quarter”) and 28-weeks40-weeks (“year-to-date”) ended April 12,July 5, 2020 and April 14,July 7, 2019, respectively, unless otherwise indicated.
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.
Risks and uncertainties — The Company is subject to risks and uncertainties as a result of the rapidly spreading outbreak of a novel strain of coronavirus (“COVID-19”). The extent has disrupted and is expected to continue to disrupt our business. While sales have accelerated in the third quarter of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult2020, we continue to predict, as the response to the pandemic varies by state and municipalities within states. In the last five weeks of the quarter we experiencedsee a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as social distancing practices, dining room closures, and other restrictions as have been mandated or encouraged by federal, state, and local governments. DuringThroughout the COVID-19 impacted weeks,pandemic, substantially all of our restaurants have remained open, with dining rooms closed and all locations operating in an off-premise capacity, which representshas historically represented close to 90% of the Company’s business, historically, including drive-thru, third-party delivery, and carry-out.
Our operating results substantially depend upon our franchisees’ sales volumes, restaurant profitability, and financial stability. The financialCompany is closely monitoring the impact of COVID-19 has had,the pandemic on all aspects of its business and is expectedunable to continue to have, an adverse effect on our franchisees’ liquidity and we are working closely with our franchisees to monitor and assist them with access to appropriate sources of liquidity in order to sustain their businesses throughout this crisis.
We cannot currently estimatepredict the duration or future negativecontinued financial impact of the COVID-19 pandemic on our business due to numerous uncertainties. We cannot predict how or when the social impacts resulting from the pandemic may change, or how any such change will impact our business. Ongoing material adverse effects on our company-owned restaurants or the financial health of the COVID-19 pandemic on company-owned and franchised restaurants for an extended periodour franchisees could negatively affect our operating results, including reductions in revenue and cash flow and could impact the recoverability of our impairment assessments of accounts receivable, long-lived assets, operating lease assets, and/or goodwill.


6

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 with the exception of our March and April 2020 marketing fees. In response to the economic burden associated with the COVID-19 pandemic, the Company reduced March marketing fees to 4.0% and postponed the collection of these fees over the course of 24 months.months starting in October 2020. April marketing fees will rangeranged from 2% to 4% based on annualized sales volumes, and these fees will be collected over three months beginning October 2020. As of July 5, 2020, postponed marketing fees which remain uncollected were $16.2 million, of which $10.3 million is included within “Accounts and other receivable, net” and $5.9 million is included within “Other assets, net” in our condensed consolidated balance sheet.
In 2019, incremental contributions made by the Company were $2.0 million. There have been 0 incremental contributions made in 2020. 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 for the quarter and year-to-date totaled $3.5$3.9 million and $8.9$12.8 million, respectively, in 2020 and $3.9$4.0 million and $11.1$15.0 million, respectively, in 2019.
Restricted cash In accordance with the terms of our securitized financing facility, certain cash balances are required to be held in trust. Such restricted cash primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitments fees required for the Class A-1 and Class A-2 Notes. As of April 12,July 5, 2020 and September 29, 2019, restricted cash balances were $37.0$37.4 million and $26.0 million, respectively. During the secondthird quarter, with uncertainty surrounding COVID-19 events, and as a cautionary measure, we continued to voluntarily electedelect to reservefund cash held in trust for quarterly interest and principal payments due in AugustNovember 2020.
Effect of new accounting pronouncements adopted in fiscal 2020 — We adopted ASU 2016-02, Leases (Topic 842) (“ASC 842”) in the first quarter of 2020. The new guidance requires the recognition of lease liabilities, representing future minimum lease payments on a discounted basis, and corresponding right-of-use (“ROU”) assets on the balance sheet for most leases. The Company adopted the new guidance in the first quarter of 2020 using the alternative transition method; therefore, the comparative period has not been restated and continues to be reported under the previous lease guidance.
We elected the transition package of three practical expedients, which, among other items, permitted us not to reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs. We also elected the short-term lease recognition exemption for all leases that qualify, permitting us to not apply the recognition requirements of this standard to leases with a term of 12 months or less, and 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 lease component. We did not elect the use-of-hindsight practical expedient, and therefore continued to utilize lease terms determined under the existing lease guidance.
The adoption had a material impact on our consolidated balance sheet. As a result of the adoption, we recognized operating lease assets and liabilities of $880.6 million and $931.0 million, respectively, at the date of 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 in “Accrued liabilities” and “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.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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, 2019Adjustments due to ASC 842 adoptionBalance 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” to increase by approximately $37$37.7 million in fiscal 2020. Refer to Note 4, Leases, for further information on our leases and the impact on the Company’s accounting policies.
Effect of new accounting pronouncements to be adopted in future periods — In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will replace the incurred loss methodology of recognizing credit losses on financial instruments that is currently required with a methodology that estimates theinstead reflects a current estimate of all expected credit losslosses on financial instrumentsassets, including receivables. The guidance requires that an entity measure and reflects the net amountrecognize expected to be collected on the financial instrument. Application of the new guidance may result in the earlier recognition of credit losses asat the new methodology will require entitiestime the asset is recorded, while considering a broader range of information to consider forward-looking information in addition toestimate credit losses, including macroeconomic conditions that correlate with historical loss experience, delinquency trends, and current information used in assessing incurred losses. ASU 2016-13aging behavior of receivables, among others. The standard is effective for annual periodsthe Company beginning after December 15, 2019, with earlyour 2021 fiscal year. We do not anticipate the adoption permitted. The Company will be required to adopt the new guidance on a modified retrospective basis. We are currently in the process of evaluating the effects of this pronouncement onstandard will have a material impact to our consolidated financial statements and do not expect there to be a material impact upon adoption.statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the 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 2018-15The standard is effective for interim and annual periodsthe Company beginning after December 15, 2019, with earlyour 2021 fiscal year. We do not anticipate the adoption permitted. Companies can choose to adopt the new guidance prospectively or retrospectively. We are currently in the process of evaluating the effects of this pronouncement onstandard will have a material impact to our consolidated financial statements and do not expect there to be a material impact upon adoption.statements.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.REVENUE
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.
Disaggregation of revenue — The following table disaggregates revenue by primary source (in thousands):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Sources of revenue:Sources of revenue:Sources of revenue:
Company restaurant salesCompany restaurant sales$74,380  $76,682  $179,744  $179,514  Company restaurant sales$82,444  $78,434  $262,188  $257,948  
Franchise rental revenuesFranchise rental revenues69,885  61,646  165,969  145,536  Franchise rental revenues76,021  63,359  241,990  208,895  
Franchise royaltiesFranchise royalties36,049  37,148  86,292  86,655  Franchise royalties41,537  38,752  127,829  125,407  
Marketing feesMarketing fees30,550  35,947  79,385  83,810  Marketing fees36,757  37,269  116,142  121,078  
Technology and sourcing feesTechnology and sourcing fees3,578  3,042  8,502  6,993  Technology and sourcing fees3,814  3,117  12,316  10,111  
Franchise fees and other servicesFranchise fees and other services1,715  1,262  3,938  4,005  Franchise fees and other services1,702  1,428  5,640  5,433  
Total revenueTotal revenue$216,157  $215,727  $523,830  $506,513  Total revenue$242,275  $222,359  $766,105  $728,872  
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 “Accrued liabilities” and “Other long-term liabilities” in our condensed consolidated balance sheets.
A summary of significant changes in our contract liabilities is presented below (in thousands):
Year-to-dateYear-to-date
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
Deferred franchise fees at beginning of periodDeferred franchise fees at beginning of period$46,272  $50,018  Deferred franchise fees at beginning of period$46,272  $50,018  
Revenue recognizedRevenue recognized(3,061) (2,745) Revenue recognized(4,249) (3,953) 
AdditionsAdditions1,488  680  Additions1,923  970  
Deferred franchise fees at end of periodDeferred franchise fees at end of period$44,699  $47,953  Deferred franchise fees at end of period$43,946  $47,035  
The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied as of April 12,July 5, 2020 (in thousands):
Remainder of 2020Remainder of 2020$2,267  Remainder of 2020$1,136  
202120214,926  20214,947  
202220224,724  20224,742  
202320234,572  20234,590  
202420244,379  20244,398  
ThereafterThereafter23,831  Thereafter24,133  
$44,699  $43,946  
We have applied the optional exemption, as provided for under 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.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3.SUMMARY OF REFRANCHISINGS AND FRANCHISEE DEVELOPMENT
Refranchisings and franchisee developmentdevelopment/closures — Through the secondthird quarter in 2020 and 2019, 0 company-operated restaurants were sold to franchisees. In 2020 and 2019, amounts presented in “Gains on the sale of company-operated restaurants” of $1.6$2.6 million and $0.2 million, respectively, pertain to meeting certain contingent consideration provisions included in the sale of restaurants in previous years. The following table summarizes the number of restaurants developed and closed by franchisees.
QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
QuarterYear-to-date
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
New restaurants opened by franchiseesNew restaurants opened by franchisees  16  11  New restaurants opened by franchisees  20  16  
Franchisee restaurants closedFranchisee restaurants closed(2) (3) (12) (8) Franchisee restaurants closed(6) (3) (18) (11) 
Franchise acquisitions — During the second quarter of 2020, we acquired 8 franchise restaurants as a result of a legal action filed in October 2019 against a franchisee in which we obtained a judgment in January 2020 granting us the possession of the restaurants.
We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3). The goodwill recorded primarily relates to the sales growth potential of the market acquired and is expected to be deductible for income tax purposes.
Total consideration on the acquisition was $0.9 million, comprised of receivables that were eliminated in acquisition accounting.
The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for the restaurants acquired (in thousands):
Inventory$73  
Property and equipment903  
Intangible assets263  
Other assets 
Goodwill414  
Liabilities assumed(800) 
Total consideration$859  

4.LEASES
Nature of leases — We own restaurant sites and we 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 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 are excluded from the measurement of the lease liability. We also lease certain restaurant and office equipment with initial terms generally ranging from 3 to 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 same as the lessee leases described above. Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the 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.
10

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
Rent Concessions as Lessee
In response to the pandemic, certain landlords have agreed to temporary rent concessions. These concessions generally relate to the deferral of certain rent payments for April, May, June, and JuneJuly until future periods and total approximately $13.4$15.5 million. We considered the FASB’s recent guidance regarding rent concessions related to the effects of the COVID-19 pandemic and have elected to apply the temporary practical expedient to account for rent concessions as though enforceable rights and obligations for those concessions existed in the lease agreements. Therefore, we willdid not remeasure our lease ROU assets and liabilities, and as of April 12, 2020we have not bifurcated our operating lease liabilities into the portion that remains subject to accretion of $940.0$934.5 million, and the portion that is related to Aprilthe rent deferrals of $4.8$12.7 million.
Rent Concessions as Lessor
We postponed collection of approximately 40% of April rents due from our franchisees totaling approximately $9.1 million, to be collected over three months beginning July 2020. Furthermore, we passed on to our franchisees approximately $10.4$5.6 million of the rent concessions secured from our landlords for April, May, June, and June.July. As of the end of the third quarter, $6.2 million of the postponed April rent has been repaid and the franchisees have chosen to pay according to the original lease terms on approximately half of the rent concessions that we offered.
Company as Lessee
Leased assets and liabilities consisted of the following as of April 12,July 5, 2020 (in thousands):
April 12,July 5,
2020
Assets:
Operating lease ROU assets$903,010902,858  
Finance lease ROU assets (1)2,6892,511  
Total ROU assets$905,699905,369  
Liabilities:
Current operating lease liabilities$163,077169,347  
Current finance lease liabilities (2)819821  
Long term operating lease liabilities781,653777,883  
Long-term finance lease liabilities (2)2,5112,306  
Total lease liabilities$948,060950,357  
____________________________
(1)Included in “Property and equipment, net” on our condensed consolidated balance sheet.
(2)Included in “Current maturities of long-term debt” and “Long-term debt, net of current maturities” on our condensed consolidated balance sheet.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents the components of our lease costs (in thousands):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 12,
2020
July 5,
2020
July 5,
2020
Lease costs: Lease costs:  Lease costs:
Finance lease cost: Finance lease cost:  Finance lease cost:
Amortization of ROU assets (1)Amortization of ROU assets (1) $179  $413  Amortization of ROU assets (1)$177  $590  
Interest on lease liabilities (2)Interest on lease liabilities (2) 28  61  Interest on lease liabilities (2)27  88  
Operating lease cost (3)Operating lease cost (3) 43,891  102,403  Operating lease cost (3)44,006  146,409  
Short-term lease cost (3)Short-term lease cost (3) 102  103  Short-term lease cost (3)46  149  
Variable lease cost (3)(4)Variable lease cost (3)(4) 9,316  21,823  Variable lease cost (3)(4)9,494  31,317  
$53,516  $124,803  $53,750  $178,553  
____________________________
(1)Included in “Depreciation and amortization” in our condensed consolidated statement of earnings.
(2)Included in “Interest expense, net” in our condensed consolidated statement of earnings.
(3)Operating lease, short-term and variable lease costs associated with franchisees and company-operated restaurants are included in “Franchise occupancy expenses” and “Occupancy and other”,other,” respectively, in our condensed consolidated statement of 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”.expenses.”
(4)Includes $8.6 million in the quarter and $20.2$28.8 million year-to-date of property taxes and common area maintenance costs which are reimbursed by sub-lessees.
The following table presents supplemental information related to leases:
April 12,July 5,
2020
Weighted-average remaining lease term (in years):
Finance leases3.63.5
Operating leases8.28.3
Weighted-average discount rate:
Finance leases3.53.6 %
Operating leases4.04.2 %
The following table presents as of April 12,July 5, 2020, the annual maturities of our lease liabilities (in thousands):
Finance LeasesOperating LeasesFinance LeasesOperating Leases
Fiscal year:Fiscal year:Fiscal year:
Remainder of 2020 (1)Remainder of 2020 (1)$443  $80,592  Remainder of 2020 (1)$405  $38,311  
2021 (1)2021 (1)906  205,534  2021 (1)917  211,404  
20222022906  158,823  2022906  163,586  
20232023901  131,362  2023893  136,250  
20242024408  100,021  2024217  104,566  
ThereafterThereafter54  449,077  Thereafter49  484,203  
Total future lease payments (2)Total future lease payments (2)$3,618  $1,125,409  Total future lease payments (2)$3,387  $1,138,320  
Less: imputed interestLess: imputed interest(288) (180,679) Less: imputed interest(260) (191,090) 
Present value of lease liabilitiesPresent value of lease liabilities$3,330  $944,730  Present value of lease liabilities$3,127  $947,230  
____________________________
(1)The impact of rent concessions reducedincreased 2020 operating leases maturities by $1.3$5.5 million and increased 2021 by $6.0$7.3 million.
(2)Total future lease payments include non-cancellable commitments of $3.6$3.4 million for finance leases and $1,090$1,080 million for operating leases.

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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 LeasesOperating Leases
Fiscal year:
2020$879  $193,313  
2021879  186,226  
2022879  145,794  
2023864  117,753  
2024396  87,420  
Thereafter40  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):
Year-to-date
April 12,July 5,
2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$115,376151,981  
Operating cash flows from financing leases$6188  
Financing cash flows from financing leases$390593  
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$105,748143,604  
Financing leases$132  
Sale leaseback transactions — In the first quarter of 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 the lease has been accounted for as an operating lease.
In the first quarter of 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, and is presented within “Impairment and other charges, net” in our condensed consolidated statement of earnings.
Company as Lessor
The following table presents rental income (in thousands):
QuarterYear-to-dateQuarterYear-to-date
April 12, 2020April 12, 2020July 5, 2020July 5, 2020
Owned PropertiesLeased PropertiesTotalOwned PropertiesLeased PropertiesTotalOwned PropertiesLeased PropertiesTotalOwned PropertiesLeased PropertiesTotal
Operating lease income - franchise Operating lease income - franchise  $4,572  $50,123  $54,695  $10,667  $116,692  $127,359  Operating lease income - franchise$4,562  $49,819  $54,381  $15,229  $166,511  $181,740  
Variable lease income - franchise Variable lease income - franchise  1,810  13,380  15,190  4,526  34,084  38,610  Variable lease income - franchise2,570  19,070  21,640  7,096  53,154  60,250  
Franchise rental revenues Franchise rental revenues  $6,382  $63,503  $69,885  $15,193  $150,776  $165,969  Franchise rental revenues$7,132  $68,889  $76,021  $22,325  $219,665  $241,990  
Operating lease income - closed restaurants and other (1)Operating lease income - closed restaurants and other (1) $—  $1,470  $1,470  $—  $3,527  $3,527  Operating lease income - closed restaurants and other (1)$—  $1,442  $1,442  $—  $4,969  $4,969  
____________________________
(1)Primarily relates to closed restaurant properties included in “Impairment and other, net” in our condensed consolidated statement of earnings.
13

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents as of April 12,July 5, 2020, future minimum rental receipts for non-cancellable leases and subleases (in thousands):
April 12,
2020
July 5,
2020
Fiscal year:Fiscal year:Fiscal year:
Remainder of 2020 (1)(2)Remainder of 2020 (1)(2)$106,892  Remainder of 2020 (1)(2)$44,093  
2021 (2)2021 (2)261,492  2021 (2)262,910  
20222022232,748  2022233,084  
20232023226,178  2023226,507  
20242024201,003  2024201,325  
ThereafterThereafter1,250,834  Thereafter1,259,936  
Total minimum rental receipts Total minimum rental receipts  $2,279,147  Total minimum rental receipts$2,227,855  
____________________________
(1)Includes $9.1$2.9 million of postponed April rents to be repaid over three months beginning July 2020.
(2)The impact of rent concessions passed on to franchisees reducedincreased 2020 by $1.7$1.9 million and increased 2021 by $4.7$2.7 million.
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  
2021255,315  
2022231,394  
2023224,605  
2024199,442  
Thereafter1,215,811  
Total minimum rental receipts$2,365,786  

5.INDEBTEDNESS
Long-term debt as of April 12,July 5, 2020 and September 29, 2019 consisted of the following (in thousands):
April 12,
2020
September 29,
2019
July 5,
2020
September 29,
2019
Class A-2-I NotesClass A-2-I Notes$573,563  $575,000  Class A-2-I Notes$572,125  $575,000  
Class A-2-II NotesClass A-2-II Notes274,313  275,000  Class A-2-II Notes273,625  275,000  
Class A-2-III NotesClass A-2-III Notes448,875  450,000  Class A-2-III Notes447,750  450,000  
Class A-1 Variable Funding NotesClass A-1 Variable Funding Notes107,876  —  Class A-1 Variable Funding Notes107,876  —  
Finance lease obligationsFinance lease obligations3,330  3,594  Finance lease obligations3,127  3,594  
Total debtTotal debt1,407,957  1,303,594  Total debt1,404,503  1,303,594  
Less current maturities of long-term debtLess current maturities of long-term debt(13,819) (774) Less current maturities of long-term debt(13,821) (774) 
Less unamortized debt issuance costsLess unamortized debt issuance costs(25,692) (28,446) Less unamortized debt issuance costs(24,511) (28,446) 
Long-term debtLong-term debt$1,368,446  $1,274,374  Long-term debt$1,366,171  $1,274,374  
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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company’s outstanding debt consists of Series 2019-1 3.982% Fixed Rate Senior Secured Notes (the “Class A-2-I Notes”), Series 2019-1 4.476% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II Notes”), and Series 2019-1 4.970% Fixed Rate Senior Secured Notes, Class A-2-III (the “Class A-2-III Notes”) and together with the Class A-2-I Notes and the Class A-2-II Notes, (the “Class A-2 Notes”), issued by Jack in the Box Funding, LLC (the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly owned indirect subsidiary of the Company. In addition, the Master Issuer entered into a revolving financing facility of Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “Variable Funding Notes”), which allows for the drawing of up to $150.0 million under the Variable Funding Notes and the issuance of letters of credit.
14

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As of April 12,July 5, 2020 and September 29, 2019, $41.1 million and $45.6 million, respectively, of letters of credit were pledged against the Variable Funding Notes. As of September 29, 2019, we had no outstanding borrowings under our Variable Funding Notes.
During the second quarter of 2020, to secure our liquidity position and provide financial flexibility given the uncertain market conditions, we borrowed $107.9 million under the Variable Funding Notes. The Company may use the proceeds from the borrowings for working capital and general corporate purposes. As of April 12,July 5, 2020, remainingunused borrowing availabilitycapacity under our Variable Funding Notes was $1.1 million.

6.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):
TotalQuoted Prices
in Active
Markets for
Identical
Assets (2)
(Level 1)
Significant
Other
Observable
Inputs (2)
(Level 2)
Significant
Unobservable
Inputs (2)
(Level 3)
TotalQuoted Prices
in Active
Markets for
Identical
Assets (2)
(Level 1)
Significant
Other
Observable
Inputs (2)
(Level 2)
Significant
Unobservable
Inputs (2)
(Level 3)
Fair value measurements as of April 12, 2020:
Fair value measurements as of July 5, 2020:Fair value measurements as of July 5, 2020:
Non-qualified deferred compensation plan (1)Non-qualified deferred compensation plan (1)$25,261  $25,261  $—  $—  Non-qualified deferred compensation plan (1)$26,638  $26,638  $—  $—  
Total liabilities at fair valueTotal liabilities at fair value$25,261  $25,261  $—  $—  Total liabilities at fair value$26,638  $26,638  $—  $—  
Fair value measurements as of September 29, 2019:Fair value measurements as of September 29, 2019:Fair value measurements as of September 29, 2019:
Non-qualified deferred compensation plan (1)Non-qualified deferred compensation plan (1)$30,104  $30,104  $—  $—  Non-qualified deferred compensation plan (1)$30,104  $30,104  $—  $—  
Total liabilities at fair valueTotal liabilities at fair value$30,104  $30,104  $—  $—  Total liabilities at fair value$30,104  $30,104  $—  $—  
____________________________
(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 did not have any transfers in or out of Level 1, 2 or 3.
The following table presents the carrying value and estimated fair value of our Class A-2 Notes as of April 12,July 5, 2020 and September 29, 2019 (in thousands):
April 12,
2020
September 29,
2019
Carrying AmountFair ValueCarrying AmountFair Value
Class A-2 Notes$1,296,751  $1,170,896  $1,300,000  $1,344,300  
July 5,
2020
September 29,
2019
Carrying AmountFair ValueCarrying AmountFair Value
Class A-2 Notes$1,293,500  $1,337,755  $1,300,000  $1,344,300  
The fair value of the Class A-2 Notes was estimated using Level 2 inputs based on quoted market prices in markets that are not considered active markets. The Company had $107.9 million of outstanding borrowings under its Variable Funding Notes. The fair value of this loan approximates carrying value due to the variable rate nature of these borrowings.
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 2020, no material fair value adjustments were required. Refer to Note 8, Impairment and Other Charges, Net, for additional information regarding impairment charges.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7.DERIVATIVE INSTRUMENTS
Interest rate swaps — We have used interest rate swaps to mitigate interest rate volatility with regard to variable rate 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 were designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. Since they were effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives were not included in earnings but were included in other comprehensive income (“OCI”). These changes in fair value were subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments were made on our variable rate debt.
15

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Effective July 2, 2019, the Company terminated all interest rate swap agreements in anticipation of the securitization transaction and related retirement of our senior credit facility in the fourth quarter of 2019. The fair value of the interest rate swaps at the termination date was $23.6 million, which was paid on July 8, 2019. As a result of the decision to extinguish the senior credit facility, forecasted cash flows associated with the variable-rate debt interest payments were no longer considered to be probable. Consequently, unrealized losses in other comprehensive income at the termination date were immediately reclassified to “Interest expense, net” in the condensed consolidated statement of earnings.
During fiscal 2019, our interest rate swaps had no hedge ineffectiveness.
Financial performance — The following table summarizes the OCI activity related to our interest rate swap derivative instruments and the amounts reclassified from accumulated OCI (in thousands):
Location in IncomeQuarterYear-to-date Location in IncomeQuarterYear-to-date
April 14,
2019
April 14,
2019
Location in IncomeJuly 7,
2019
July 7,
2019
Loss recognized in OCILoss recognized in OCIN/A$(4,959) $(12,126) Loss recognized in OCIN/A$(11,499) $(23,625) 
Loss reclassified from accumulated OCI into net earningsLoss reclassified from accumulated OCI into net earningsInterest expense, net$134  $613  Loss reclassified from accumulated OCI into net earningsInterest expense, net$23,715  $24,328  

8.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):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Restructuring costsRestructuring costs$118  $946  $1,163  $6,786  Restructuring costs$ $(64) $1,165  $6,722  
Costs of closed restaurants and otherCosts of closed restaurants and other331  383  432  1,249  Costs of closed restaurants and other890  2,010  1,322  3,259  
Losses (gains) on disposition of property and equipment, net (1)267  (714) (10,170) (138) 
Gains on disposition of property and equipment, net (1)Gains on disposition of property and equipment, net (1)(216) (5,618) (10,386) (5,756) 
Accelerated depreciationAccelerated depreciation—  510  —  926  Accelerated depreciation62  416  62  1,342  
$716  $1,125  $(8,575) $8,823  $738  $(3,256) $(7,837) $5,567  
____________________________
(1)In 2020, year-to-date includes a $10.8 million gain related to the sale of one of our corporate office buildings. ReferIn 2019, includes a $5.7 million gain related to Note 4, Leases, for further information.a sale of property recognized in the third quarter.
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.costs, which was completed in the third quarter of 2020. We do not expect any future severance and related costs under these initiatives.
16

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):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Employee severance and related costsEmployee severance and related costs$118  $642  $1,163  $5,148  Employee severance and related costs$ $287  $1,165  $5,436  
Strategic Alternatives Evaluation (1)Strategic Alternatives Evaluation (1)—  304  —  1,638  Strategic Alternatives Evaluation (1)—  (351) —  1,286  
$118  $946  $1,163  $6,786  $ $(64) $1,165  $6,722  
____________________________
(1) Strategic Alternative Evaluation costs primarily relate to third party advisory services.
We do not expect any significant severance and related costs for the remainder of fiscal 2020 related to 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 2020 (in thousands):

Balance as of September 29, 2019$2,100  
Costs incurred1,1631,165  
Cash payments(3,010)(3,265) 
Balance as of April 12,July 5, 2020$253  

16

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9.INCOME TAXES
The income tax provisions reflect tax rates of 32.3%27.9% in the second quarter and 30.7%29.0% year-to-date, compared with 25.0%(17.9%) and 24.0%18.4%, respectively, in fiscal year 2019. The major components of the year-over-year change in tax rates were a decrease in operating earnings before income tax, an increase in the impact of non-deductible compensation for certain officers, an increasenon-recurring activity in fiscal year 2019 including the termination of interest rate swap agreements, the release of valuation reserves on state tax credits and losses, fromand the market performancerelease of insurance products useda federal tax liability due to fund certain non-qualified retirement plans which are excluded from taxable income,expiration of statute of limitations, and an increase in non-deductible legal settlements.nondeductible costs resulting from a California Private Attorney General Act lawsuit settled in the current year. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 2020 rate could differ from our current estimates.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the U.S. on March 27, 2020. The CARES Act includes several U.S. income tax provisions related to, among other things, modifications to the net interest deduction limitations, and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. The CARES Act is not expected to have a material impact on the Company’s financial results.

10.RETIREMENT PLANS
Defined benefit pension plans — We sponsor 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. Routine lump sum payments made in the second quarterand third quarters of fiscal 2020 resulted in a non-cash settlement chargecharges of $0.3 million.million and $0.1 million, respectively.
Postretirement healthcare plans — We also sponsor 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, with retiree contributions adjusted annually, and they contain other cost-sharing features such as deductibles and coinsurance.
17

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Net periodic benefit cost — The components of net periodic benefit cost in each period were as follows (in thousands): 
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Defined benefit pension plans:Defined benefit pension plans:Defined benefit pension plans:
Interest costInterest cost$3,669  $5,286  $8,745  $12,334  Interest cost$3,581  $5,286  $12,326  $17,619  
Expected return on plan assets (1)Expected return on plan assets (1)(4,706) (6,077) (11,362) (14,181) Expected return on plan assets (1)(3,779) (6,077) (15,141) (20,257) 
Pension settlements (2)Pension settlements (2)321  —  38,927  —  Pension settlements (2)103  —  39,030  —  
Actuarial losses (2)Actuarial losses (2)1,019  913  2,691  2,132  Actuarial losses (2)1,367  914  4,058  3,046  
Amortization of unrecognized prior service costs (2)Amortization of unrecognized prior service costs (2)19  27  45  62  Amortization of unrecognized prior service costs (2)20  27  65  89  
Net periodic benefit costNet periodic benefit cost$322  $149  $39,046  $347  Net periodic benefit cost$1,292  $150  $40,338  $497  
Postretirement healthcare plans:Postretirement healthcare plans:Postretirement healthcare plans:
Interest costInterest cost$187  $230  $435  $537  Interest cost$186  $229  $621  $766  
Actuarial losses (gains) (2)Actuarial losses (gains) (2) (36)  (85) Actuarial losses (gains) (2) (37) 13  (122) 
Net periodic benefit costNet periodic benefit cost$190  $194  $444  $452  Net periodic benefit cost$190  $192  $634  $644  
___________________________
(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, and 5.2% as of March 31, 2020, and 5.4% as of June 30, 2020, 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.”
17

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of January 1, 2019, the date of our last actuarial funding valuation, there was 0 minimum contribution funding requirement. Details regarding 2020 contributions are as follows (in thousands):
SERPPostretirement
Healthcare Plans
SERPPostretirement
Healthcare Plans
Net year-to-date contributionsNet year-to-date contributions$2,857  $725  Net year-to-date contributions$4,070  $851  
Remaining estimated net contributions during fiscal 2020Remaining estimated net contributions during fiscal 2020$2,514  $676  Remaining estimated net contributions during fiscal 2020$1,301  $550  
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 2020.

11.STOCKHOLDERS’ DEFICIT
Summary of changes in stockholders’ deficit A reconciliation of the beginning and ending amounts of stockholders’ deficit is presented below (in thousands):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Balance at beginning of periodBalance at beginning of period$(841,153) $(607,296) $(737,584) $(591,699) Balance at beginning of period$(876,926) $(592,514) $(737,584) $(591,699) 
Shares issued under stock plans, including tax benefitShares issued under stock plans, including tax benefit3,375  128  3,559  243  Shares issued under stock plans, including tax benefit—  453  3,559  696  
Share-based compensation expenseShare-based compensation expense2,681  2,799  5,865  4,708  Share-based compensation expense1,747  1,881  7,612  6,589  
Dividends declaredDividends declared(9,067) (10,323) (18,492) (20,641) Dividends declared—  (10,326) (18,492) (30,967) 
Purchases of treasury stockPurchases of treasury stock—  —  (153,550) —  Purchases of treasury stock—  —  (153,550) —  
Net earningsNet earnings11,463  25,089  19,360  59,187  Net earnings32,555  13,189  51,915  72,376  
Other comprehensive income (loss), net of taxesOther comprehensive income (loss), net of taxes(44,225) (2,911) 6,786  (6,982) Other comprehensive income (loss), net of taxes15,667  6,756  22,453  (226) 
Cumulative-effect from a change in accounting principleCumulative-effect from a change in accounting principle—  —  (2,870) (37,330) Cumulative-effect from a change in accounting principle—  —  (2,870) (37,330) 
Balance at end of periodBalance at end of period$(876,926) $(592,514) $(876,926) $(592,514) Balance at end of period$(826,957) $(580,561) $(826,957) $(580,561) 
18

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Repurchases of common stock The Company repurchased 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. There were no0 repurchases of common stock in the second or third quarter of fiscal 2020. As of April 12,July 5, 2020, this leaves approximately $122.2 million remaining under share repurchase programs authorized by the Board of Directors, consisting of $22.2 million that expires in November 2020 and $100.0 million that expires in November 2021.
Repurchases of common stock included in our condensed consolidated statement of cash flows for fiscal 2020 include $2.0 million related to repurchase transactions traded in the prior year but settled in 2020.
Dividends — During 2020, the Board of Directors declared 2 cash dividends of $0.40 per common share which were paid on March 17, 2020 and December 20, 2019 to shareholders of record as of the close of business on March 3, 2020 and December 5, 2019, respectively, and totaled $18.5 million. Future dividends are subject to approval by our Board of Directors.

18

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12.AVERAGE SHARES OUTSTANDING
The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Weighted-average shares outstanding – basicWeighted-average shares outstanding – basic22,803  25,943  23,339  25,922  Weighted-average shares outstanding – basic22,847  25,958  23,192  25,933  
Effect of potentially dilutive securities:Effect of potentially dilutive securities:Effect of potentially dilutive securities:
Nonvested stock awards and unitsNonvested stock awards and units85  190  144  203  Nonvested stock awards and units62  206  123  205  
Stock optionsStock options—  10  —  10  Stock options—  10  —  10  
Performance share awardsPerformance share awards    Performance share awards    
Weighted-average shares outstanding – dilutedWeighted-average shares outstanding – diluted22,895  26,145  23,490  26,137  Weighted-average shares outstanding – diluted22,916  26,176  23,322  26,150  
Excluded from diluted weighted-average shares outstanding:Excluded from diluted weighted-average shares outstanding:Excluded from diluted weighted-average shares outstanding:
AntidilutiveAntidilutive362  186  307  186  Antidilutive344  186  334  186  
Performance conditions not satisfied at the end of the periodPerformance conditions not satisfied at the end of the period77  89  77  89  Performance conditions not satisfied at the end of the period77  89  77  89  

13.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 liability 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. As of April 12,July 5, 2020 and September 29, 2019, the Company had recorded aggregate liabilities of $14.2$14.9 million and $10.0 million, respectively, within “Accrued liabilities” on our condensed consolidated balance sheets, for all matters including those described below, that were probable and reasonably estimable. While we believe that additional losses beyond these accruals are reasonably possible, we cannot estimate a possible loss contingency or range of reasonably possible loss contingencies beyond these accruals.
19

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 February 2019, plaintiff’splaintiffs’ 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. The parties participated in a voluntary mediation on March 16, 2020, but the matter did not settle. The plaintiffplaintiffs recently filed a motion for reconsideration of the court’s prior denial of class certification regarding meal and rest break claims.claims which was denied by the court. The plaintiffs have now filed a motion requesting permission to appeal this ruling. The Company has opposed the motion and will continue to vigorously defend against this lawsuit.
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 parties have executed a settlement agreement and submitted the settlement to the court for final approval. The settlement was approved on July 1, 2020.
19

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Ramirez v. Jack in the Box Inc. — On June 11, 2019, an unfavorable 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 setting aside or significantly reducing damages. These motions were granted, resulting in 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$4.1 million in attorney fees.fees and costs. As of April 12,July 5, 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 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 obligations. 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.

14.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 $1.9$0.9 million in the quarter and $5.6$6.5 million year-to-date, in income related to the Services as a reduction of “Selling, general and administrative expenses” in the condensed consolidated statements of earnings.
20

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents Qdoba’s results of operations in periods which have been included in discontinued operations (in thousands, except per share data)thousands):
QuarterYear-to-date
April 14,
2019
April 14,
2019
Selling, general and administrative expenses$59  $(243) 
Loss on Qdoba Sale—  85  
(Losses) earnings from discontinued operations before income taxes(59) 158  
Income tax benefit (1)18  2,778  
(Losses) earnings from discontinued operations, net of income taxes$(41) $2,936  
Basic and diluted earnings per share from discontinued operations:$—  $0.11  
QuarterYear-to-date
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Total revenues$—  $—  $—  $—  
Total cost and expense (income) (1)(527) 382  (527) 224  
Earnings (losses) before income taxes527  (382) 527  (224) 
Income tax expense (benefit) (2)148  (98) 148  (2,876) 
Earnings (losses) from discontinued operations, net of income taxes$379  $(284) $379  $2,652  
____________________________
(1)Activity primarily consists of resolutions on certain liabilities related to our discontinued operations, including self-insurance reserves and asset retirement obligations.
(2)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.
20

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 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 $29.3 million as of April 12,July 5, 2020. The lease terms extend for a maximum of approximately 1615 more years as of April 12,July 5, 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. As of April 12,July 5, 2020, 0 amounts have been accrued relating to these guarantees as we do not believe any losses are probable.

15.SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)
Year-to-dateYear-to-date
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
Non-cash investing and financing transactions:Non-cash investing and financing transactions:Non-cash investing and financing transactions:
Decrease in obligations for treasury stock repurchasesDecrease in obligations for treasury stock repurchases$2,025  $14,362  Decrease in obligations for treasury stock repurchases$2,025  $14,362  
Decrease in obligations for purchases of property and equipmentDecrease in obligations for purchases of property and equipment$1,247  $5,368  Decrease in obligations for purchases of property and equipment$2,534  $5,421  
Increase in dividends accrued or converted to common stock equivalentsIncrease in dividends accrued or converted to common stock equivalents$65  $121  Increase in dividends accrued or converted to common stock equivalents$65  $184  
Consideration for franchise acquisitionsConsideration for franchise acquisitions$859  $—  Consideration for franchise acquisitions$859  $—  
Decrease in finance lease obligations from the termination of equipment and building leasesDecrease in finance lease obligations from the termination of equipment and building leases$24  $41  Decrease in finance lease obligations from the termination of equipment and building leases$24  $41  

21

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
16.SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)
April 12,
2020
September 29,
2019
July 5,
2020
September 29,
2019
Accounts and other receivables, net:Accounts and other receivables, net:Accounts and other receivables, net:
TradeTrade$46,339  $36,907  Trade$82,132  $36,907  
Notes receivableNotes receivable9,589  278  Notes receivable505  278  
Income tax receivableIncome tax receivable1,279  160  Income tax receivable1,172  160  
OtherOther14,410  10,855  Other10,273  10,855  
Allowance for doubtful accountsAllowance for doubtful accounts(5,286) (2,965) Allowance for doubtful accounts(5,840) (2,965) 
$66,331  $45,235  $88,242  $45,235  
Prepaid expenses:Prepaid expenses:Prepaid expenses:
Prepaid income taxesPrepaid income taxes$12,965  $579  Prepaid income taxes$6,881  $579  
Prepaid advertisingPrepaid advertising32  1,838  Prepaid advertising32  1,838  
OtherOther5,463  6,598  Other6,534  6,598  
$18,460  $9,015  $13,447  $9,015  
Other assets, net:Other assets, net:Other assets, net:
Company-owned life insurance policiesCompany-owned life insurance policies$107,973  $112,753  Company-owned life insurance policies$112,984  $112,753  
Deferred rent receivableDeferred rent receivable49,152  49,333  Deferred rent receivable48,832  49,333  
Franchise tenant improvement allowanceFranchise tenant improvement allowance29,536  26,925  Franchise tenant improvement allowance29,967  26,925  
OtherOther24,544  17,674  Other24,225  17,674  
$211,205  $206,685  $216,008  $206,685  
Accrued liabilities:Accrued liabilities:Accrued liabilities:
InsuranceInsurance$27,972  $27,888  Insurance$25,605  $27,888  
Payroll and related taxesPayroll and related taxes20,808  31,095  Payroll and related taxes30,214  31,095  
Deferred franchise feesDeferred franchise fees4,951  4,978  Deferred franchise fees4,934  4,978  
Sales and property taxesSales and property taxes10,251  4,268  Sales and property taxes15,428  4,268  
Gift card liabilityGift card liability2,196  2,036  Gift card liability2,214  2,036  
Deferred rent incomeDeferred rent income17,347  915  
OtherOther54,771  49,818  Other47,602  48,903  
$120,949  $120,083  $143,344  $120,083  
Other long-term liabilities:Other long-term liabilities:Other long-term liabilities:
Defined benefit pension plansDefined benefit pension plans$147,295  $120,260  Defined benefit pension plans$126,217  $120,260  
Deferred franchise feesDeferred franchise fees39,748  41,295  Deferred franchise fees39,012  41,295  
Straight-line rent accrualStraight-line rent accrual—  29,537  Straight-line rent accrual—  29,537  
OtherOther55,325  72,678  Other51,523  72,678  
$242,368  $263,770  $216,752  $263,770  

17.SUBSEQUENT EVENTS
On July 31, 2020, the Board of Directors declared a cash dividend of $0.40 per common share, to be paid on September 3, 2020 to shareholders of record as of the close of business on August 18, 2020.
22


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
All comparisons between 2020 and 2019 refer to the 12-weeks (“quarter”) and 28-weeks40-weeks (“year-to-date”) ended April 12,July 5, 2020 and April 14,July 7, 2019, respectively, unless otherwise indicated.
For an understanding of the significant factors that influenced our performance during 2020 and 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 29, 2019.
Our MD&A consists of the following sections:
Overview — a general description of our business and 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, franchise tenant improvement allowance distributions, 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, marketing fees 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 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, amortization of tenant improvement 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.
23


IMPACT OF COVID-19
As of May 8, 2020,Throughout the pandemic, substantially all of our restaurants remain open, with dining rooms closed and all locations operating in an off-premise capacity, which representshas historically represented close to 90% of the Company’s business, historically, including drive-thru, third-party delivery, and carry-out. While we navigate through this time of uncertainty, Jack in the Box remains committed to operating our restaurants with integrity, providing great guest service, and most importantly, protecting the health and safety of our employees and guests.
Our system same store sales decreased by 4.2% inIn the quarter; however,last five weeks of the outbreak did not materially impact the business until late in the quarter. Prior tosecond quarter, upon the rise in “shelter-in-place” mandates and “social distancing” requirements across the country, same storesystem same-store sales increased 5.2%decreased by 17.0%; however, during the third quarter our system same-store sales have accelerated, increasing by 6.6%. Given the level of volatility and uncertainty surrounding the future impact of COVID-19 on the broader United States economy and specific impacts to our business, in the seven weeks ended March 8,second quarter we withdrew our previously issued fiscal 2020 compared toand long-term guidance. We will provide an update when we can reasonably estimate the 17.0% decrease in same store sales we experienced in the last five weeksimpacts of the quarter.COVID-19 pandemic on business results.
To mitigate the impact of COVID-19 on the Company, operations, franchisees and our employees, we have undertaken the following actions:
Implemented a short-term cash preservation strategy (refer to the Liquidity and Capital Resources section for further information).
Provided financial support to our franchisees in the form of a reduction and payment deferral of marketing fees, postponement of rent, and delayed remodel requirements and development agreements for at least six months.
Instituted a new emergency paid sick leave program at company-operated restaurants and have providedprocured protective masks, gloves, sneeze guards and thermometers toat all company-owned and franchised locations.
Given the level of volatility and uncertainty surrounding the future impact of COVID-19 on the broader US economy and specific impacts to our business, we have withdrawn our previously issued fiscal 2020 and long-term guidance. The Company will provide an update when it can reasonably estimate the impacts of the COVID-19 pandemic on business results.
OTHER RECENT DEVELOPMENTS
On April 16, 2020, we announced that Darin Harris has been appointed by our Board of Directors as Chief Executive Officer and will join the Board of Directors, both effective on the start of his employment no later than June 15, 2020. Our Board of Directors has also elected David Goebel to serve as non-executive Chairman of the Board, effective when Mr. Harris begins employment with the Company.
Mr. Harris takes over from Lenny Comma, who announced his intent to retire in December 2019 and has served as Chief Executive Officer and Chairman of the Board of Directors since 2014. Mr. Comma’s last day of employment will be effective upon Mr. Harris’ start date, at which time Mr. Comma will also leave the Board of Directors.
OVERVIEW
As of April 12,July 5, 2020, we operated and franchised 2,2462,244 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 in fiscalthe third quarter of 2020, and certain trends compared to a year ago:
System same-store sales System same-store sales decreasedincreased by 4.2%6.6% in the quarter and 0.8%1.5% year-to-date. Company same-store sales decreasedincreased 4.1% in the quarter, driven by a 10.5% decrease20.2% increase in transactions,average check growth, partially offset by average check growth of 6.4%. As previously disclosed, system-same store sales increased 5.2%a 16.1% decrease in the seven weeks ended March 8, 2020, prior to any impacts from the COVID-19 pandemic.transactions.
Company restaurant operations Company restaurant costs as a percentage of company restaurant sales increased in the quarter to 79.4%74.6% from 72.4%73.0% a year ago primarily due to sales deleverage during COVID-19 impacted weekswage inflation and wage and commodity inflation.increases in other operating costs.
Franchise operations Excluding the impacts of ASC 842 described in the Financial Reporting section below, our franchise operating results were impactedFranchise same-store sales increased by a decrease in royalties and rent margins6.9% in the quarter, resulting in higher royalties and year-to-date, primarily due to lower franchise salespercentage rent for the Company during COVID-19 impacted weeks, and a $2.0 million year-to-date increase in franchisee bad debt expense compared to the prior year.quarter.
Selling, general and administrative (“SG&A”) expenses - SG&A increaseddecreased by $6.6$10.7 million forin the quarter, and $10.8 million year-to-date, largelyprimarily due to unfavorablelower litigation-related matters and favorable mark-to-market adjustments on investments supporting the Company’s non-qualified retirement plans and higher costs related to litigation matters compared to the prior year.plans.
Adjusted EBITDA Adjusted EBITDA decreased in 2020increased to $122.9 million from $144.2$72.9 million in 2019.
24



the quarter from $57.8 million in the prior year.
FINANCIAL REPORTING
In fiscal 2020, we adopted Accounting Standards Codification Topic 842, Leases (“ASC 842”), effective at the beginning of our fiscal year on a modified retrospective basis using the effective date transition method. Our consolidated financial statements reflect the application of ASC 842 guidance beginning in 2020, while our consolidated financial statements for prior periods were prepared under the guidance of a previously applicable accounting standard.
24


The most significant effects of this transition that affect comparability of our results of operations between 2020 and 2019 include the following:
Our transition to ASC 842 resulted in the 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 accounting standard. Although there was no net impact to our consolidated statement of earnings from this change, the presentation resulted in total increases in “Franchise rental revenues” and “Franchise occupancy expenses” of $8.6 million in the quarter and $20.2$28.8 million year-to-date.
ASC 842 also changed how lessees account for leases subleased at a loss. Under ASC 842, sublease income and lessee rent expense are recorded as franchise rent revenue and franchise occupancy costs as earned or incurred. As a result of this change, franchise revenues and franchise occupancy expenses increased by $0.9$1.1 million and $1.3 million, respectively, in the quarter and $2.1$3.2 million and $2.6$3.9 million respectively, year-to-date.


25


RESULTS OF OPERATIONS
The following 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
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Revenues:Revenues:Revenues:
Company restaurant salesCompany restaurant sales34.4 %35.5 %34.3 %35.4 %Company restaurant sales34.0 %35.3 %34.2 %35.4 %
Franchise rental revenuesFranchise rental revenues32.3 %28.6 %31.7 %28.7 %Franchise rental revenues31.4 %28.5 %31.6 %28.7 %
Franchise royalties and otherFranchise royalties and other17.5 %17.8 %17.2 %17.9 %Franchise royalties and other17.8 %18.1 %17.4 %18.0 %
Franchise contributions for advertising and other servicesFranchise contributions for advertising and other services15.8 %18.1 %16.8 %17.9 %Franchise contributions for advertising and other services16.7 %18.2 %16.8 %18.0 %
Total revenuesTotal revenues100.0 %100.0 %100.0 %100.0 %Total revenues100.0 %100.0 %100.0 %100.0 %
Operating costs and expenses, net:Operating costs and expenses, net:Operating costs and expenses, net:
Company restaurant costs (excluding depreciation and amortization):Company restaurant costs (excluding depreciation and amortization):Company restaurant costs (excluding depreciation and amortization):
Food and packaging (1)Food and packaging (1)29.9 %28.3 %29.8 %28.6 %Food and packaging (1)29.2 %29.4 %29.6 %28.8 %
Payroll and employee benefits (1)Payroll and employee benefits (1)32.6 %29.7 %31.2 %29.5 %Payroll and employee benefits (1)30.4 %29.5 %31.0 %29.5 %
Occupancy and other (1)Occupancy and other (1)16.9 %14.5 %15.9 %15.1 %Occupancy and other (1)15.0 %14.1 %15.6 %14.8 %
Total company restaurant costs (1)Total company restaurant costs (1)79.4 %72.4 %76.9 %73.2 %Total company restaurant costs (1)74.6 %73.0 %76.2 %73.1 %
Franchise occupancy expenses (2)Franchise occupancy expenses (2)69.2 %62.6 %68.0 %61.4 %Franchise occupancy expenses (2)63.9 %60.6 %66.7 %61.1 %
Franchise support and other costs (3)Franchise support and other costs (3)7.9 %7.3 %8.5 %6.2 %Franchise support and other costs (3)6.2 %6.7 %7.7 %6.4 %
Franchise advertising and other services expenses (4)Franchise advertising and other services expenses (4)104.7 %103.2 %103.5 %104.1 %Franchise advertising and other services expenses (4)104.0 %103.7 %103.6 %104.0 %
Selling, general and administrative expensesSelling, general and administrative expenses11.2 %8.2 %10.0 %8.2 %Selling, general and administrative expenses5.6 %11.0 %8.6 %9.1 %
Depreciation and amortizationDepreciation and amortization5.7 %5.9 %5.5 %5.9 %Depreciation and amortization5.0 %5.8 %5.4 %5.9 %
Impairment and other charges, netImpairment and other charges, net0.3 %0.5 %(1.6)%1.7 %Impairment and other charges, net0.3 %(1.5)%(1.0)%0.8 %
Gains on the sale of company-operated restaurantsGains on the sale of company-operated restaurants— %— %(0.3)%— %Gains on the sale of company-operated restaurants(0.4)%— %(0.3)%— %
Earnings from operationsEarnings from operations15.2 %21.8 %19.6 %20.8 %Earnings from operations25.5 %21.7 %21.5 %21.1 %
Income tax rate (5)Income tax rate (5)32.3 %25.0 %30.7 %24.0 %Income tax rate (5)27.9 %(17.9)%29.0 %18.4 %
____________________________
(1)As a percentage of company restaurant sales.
(2)As a percentage of franchise rental revenues.
(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.

2625


The following table summarizes changes in same-store sales for company-owned, franchised, and system-wide restaurants:
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
CompanyCompany(4.1)%0.6 %(0.1)%0.5 %Company4.1 %2.8 %1.2 %1.2 %
FranchiseFranchise(4.2)%0.1 %(0.9)%— %Franchise6.9 %2.7 %1.5 %0.8 %
SystemSystem(4.2)%0.2 %(0.8)%— %System6.6 %2.7 %1.5 %0.8 %
The following table summarizes changes in the number and mix of company and franchise restaurants:
20202019 20202019
CompanyFranchiseTotalCompanyFranchiseTotal CompanyFranchiseTotalCompanyFranchiseTotal
Beginning of yearBeginning of year137  2,106  2,243  137  2,100  2,237  Beginning of year137  2,106  2,243  137  2,100  2,237  
NewNew—  16  16  —  11  11  New—  20  20  —  16  16  
Acquired from franchiseesAcquired from franchisees (8) —  —  —  —  Acquired from franchisees (8) —  —  —  —  
ClosedClosed(1) (12) (13) —  (8) (8) Closed(1) (18) (19) —  (11) (11) 
End of periodEnd of period144  2,102  2,246  137  2,103  2,240  End of period144  2,100  2,244  137  2,105  2,242  
% of system% of system%94 %100 %%94 %100 %% of system%94 %100 %%94 %100 %
The following table summarizes restaurant sales for company-owned, franchised, and total system sales (in thousands):
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Company-owned restaurant salesCompany-owned restaurant sales$74,380  $76,682  $179,744  $179,514  Company-owned restaurant sales$82,444  $78,434  $262,188  $257,948  
Franchised restaurant sales (1)Franchised restaurant sales (1)695,926  721,350  1,675,271  1,681,310  Franchised restaurant sales (1)804,791  747,398  2,480,062  2,428,708  
System sales (1)System sales (1)$770,306  $798,032  $1,855,015  $1,860,824  System sales (1)$887,235  $825,832  $2,742,250  $2,686,656  
____________________________
(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):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Net earnings - GAAPNet earnings - GAAP$11,463  $25,089  $19,360  $59,187  Net earnings - GAAP$32,555  $13,189  $51,915  $72,376  
Losses (earnings) from discontinued operations, net of taxes—  41  —  (2,936) 
Income tax expense5,458  8,374  8,591  17,747  
(Earnings) losses from discontinued operations, net of taxes(Earnings) losses from discontinued operations, net of taxes(379) 284  (379) (2,652) 
Income tax expense (benefit)Income tax expense (benefit)12,432  (2,048) 21,023  15,699  
Interest expense, netInterest expense, net15,409  13,276  35,351  30,650  Interest expense, net15,700  36,494  51,051  67,144  
Pension settlement chargesPension settlement charges321  —  38,927  —  Pension settlement charges103  —  39,030  —  
Gains on the sale of company-operated restaurantsGains on the sale of company-operated restaurants—  —  (1,575) (219) Gains on the sale of company-operated restaurants(1,050) —  (2,625) (219) 
Impairment and other charges, netImpairment and other charges, net716  1,125  (8,575) 8,823  Impairment and other charges, net738  (3,256) (7,837) 5,567  
Depreciation and amortizationDepreciation and amortization12,282  12,690  29,010  29,859  Depreciation and amortization12,141  12,786  41,151  42,645  
Amortization of franchise tenant improvement allowances and otherAmortization of franchise tenant improvement allowances and other614  607  1,765  1,137  Amortization of franchise tenant improvement allowances and other618  387  2,383  1,524  
Adjusted EBITDA - Non-GAAPAdjusted EBITDA - Non-GAAP$46,263  $61,202  $122,854  $144,248  Adjusted EBITDA - Non-GAAP$72,858  $57,836  $195,712  $202,084  

2726


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):
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Company restaurant salesCompany restaurant sales$74,380  $76,682  $179,744  $179,514  Company restaurant sales$82,444  $78,434  $262,188  $257,948  
Company restaurant costs:Company restaurant costs:Company restaurant costs:
Food and packagingFood and packaging22,237  29.9 %21,676  28.3 %53,585  29.8 %51,292  28.6 %Food and packaging24,077  29.2 %23,058  29.4 %77,662  29.6 %74,350  28.8 %
Payroll and employee benefitsPayroll and employee benefits24,261  32.6 %22,768  29.7 %56,151  31.2 %53,042  29.5 %Payroll and employee benefits25,085  30.4 %23,121  29.5 %81,236  31.0 %76,163  29.5 %
Occupancy and otherOccupancy and other12,570  16.9 %11,100  14.5 %28,528  15.9 %27,113  15.1 %Occupancy and other12,334  15.0 %11,052  14.1 %40,862  15.6 %38,165  14.8 %
Total company restaurant costsTotal company restaurant costs$59,068  79.4 %$55,544  72.4 %$138,264  76.9 %$131,447  73.2 %Total company restaurant costs$61,496  74.6 %$57,231  73.0 %$199,760  76.2 %$188,678  73.1 %
Company restaurant sales decreased $2.3increased $4.0 million, or 3.0%5.1% in the quarter and $4.2 million, or 1.6% versus a year ago due primarily to a decreaseincreases in traffic during COVID-19 impacted weeks, partially offset by changes in product mix, retail price increasesthe average check, menu pricing, and an increase in the number of company-operated restaurants related to the acquisition of eight restaurants from a franchisee during the quarter. Year-to-date, restaurant sales increased $0.2 million, or 0.1% versussecond quarter, and were partially offset by a year ago due to an increase in the number of company-operated restaurants and retail price increases, which more than offset declinesdecline in traffic.
Same-store sales at company-operated restaurants decreasedincreased 4.1% in the quarter and 0.1%1.2% year-to-date compared to a year ago. The following table summarizes the change in company-operated same store-sales versus a year ago:
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Average check (1)Average check (1)6.4 %2.8 %4.2 %3.4 %Average check (1)20.2 %2.8 %9.1 %3.2 %
TransactionsTransactions(10.5)%(2.2)%(4.3)%(2.9)%Transactions(16.1)%— %(7.9)%(2.0)%
Change in same-store salesChange in same-store sales(4.1)%0.6 %(0.1)%0.5 %Change in same-store sales4.1 %2.8 %1.2 %1.2 %
____________________________
(1)Amounts in 2020 include price increases of approximately 2.4%3.0% in the quarter and 2.6%2.7% year-to-date. Amounts in 2019 include price increases of approximately 2.1%2.3% in the quarter and 2.3% year-to-date.
Food and packaging costs as a percentage of company restaurant sales increaseddecreased to 29.9%29.2% in the quarter and 29.8%increased to 29.6% year-to-date in 2020 compared to 28.3%29.4% in the quarter and 28.6%28.8% year-to-date in 2019, due primarily2019. In the quarter, menu price increases and favorable changes in product mix were partially offset by higher costs for ingredients. Year to date, the impact of higher costs for ingredients and changes in product mix were partially offset by menu price increases. Commodity costs increased in the quarter and year-to-date by approximately3.6% and 4.4% and 4.7%, respectively, due primarily to increases in beef in both periods and cheese year-to-date. Beef, our most significant commodity, increased 27% in the quarter and beverages.18% year-to-date.
Payroll and employee benefit costs as a percentage of company restaurant sales increased to 32.6%30.4% in the quarter and 31.2%31.0% year-to-date in 2020 compared with 29.7%29.5% in the quarter and 29.5% year-to-date in 2019, due primarily to higher average wages resulting from wage inflation, and a highly competitive labor market, maintaining pre-COVID-19 staffing levels during the COVID-19 impacted weeks, and sales deleveragehigher incentive compensation in the quarter, and was partially offset by loweras well as higher costs for incentive compensation.related to our new emergency paid sick leave program implemented in response to COVID-19.
Occupancy and other costs as a percentage of company restaurant sales, increased to 16.9%15.0% in the quarter and 15.9%15.6% year-to-date in 2020 compared with 14.5%14.1% in the quarter and 15.1%14.8% year-to-date in 2019. Sales deleverage contributed2019 driven by higher costs for delivery fees, higher costs for supplies related to the increase in the quarter. Furthermore, in the quarterCOVID-19, and year-to-date, the acquisition in 2020 of eight restaurants with lower than average sales volumes, and higher costs for repairs and maintenance, third party delivery fees, and utilities, drove occupancy and other costs higher as a percentage of company restaurant sales.volumes.

2827


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):
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Franchise rental revenuesFranchise rental revenues$69,885  $61,646  $165,969  $145,536  Franchise rental revenues$76,021  $63,359  $241,990  $208,895  
RoyaltiesRoyalties36,049  37,148  86,292  86,655  Royalties41,537  38,752  127,829  125,407  
Franchise fees and otherFranchise fees and other1,715  1,262  3,938  4,005  Franchise fees and other1,702  1,428  5,640  5,433  
Franchise royalties and otherFranchise royalties and other37,764  38,410  90,230  90,660  Franchise royalties and other43,239  40,180  133,469  130,840  
Franchise contributions for advertising and other servicesFranchise contributions for advertising and other services34,128  38,989  87,887  90,803  Franchise contributions for advertising and other services40,571  40,386  128,458  131,189  
Total franchise revenuesTotal franchise revenues$141,777  $139,045  $344,086  $326,999  Total franchise revenues$159,831  $143,925  $503,917  $470,924  
Franchise occupancy expenses (excluding depreciation and amortization)Franchise occupancy expenses (excluding depreciation and amortization)$48,341  $38,618  $112,858  $89,331  Franchise occupancy expenses (excluding depreciation and amortization)$48,612  $38,371  $161,470  $127,702  
Franchise support and other costsFranchise support and other costs2,971  2,797  7,647  5,642  Franchise support and other costs2,692  2,695  10,339  8,337  
Franchise advertising and other services expensesFranchise advertising and other services expenses35,734  40,245  90,958  94,515  Franchise advertising and other services expenses42,176  41,882  133,134  136,397  
Total franchise costsTotal franchise costs$87,046  $81,660  $211,463  $189,488  Total franchise costs$93,480  $82,948  $304,943  $272,436  
Franchise costs as a percentage of total franchise revenuesFranchise costs as a percentage of total franchise revenues61.4 %58.7 %61.5 %57.9 %Franchise costs as a percentage of total franchise revenues58.5 %57.6 %60.5 %57.9 %
Average number of franchise restaurantsAverage number of franchise restaurants2,085  2,085  2,086  2,085  Average number of franchise restaurants2,079  2,081  2,084  2,084  
Decrease in franchise-operated same-store sales(4.2)%(0.9)%
Increase in franchise-operated same-store salesIncrease in franchise-operated same-store sales6.9 %1.5 %
Franchised restaurant salesFranchised restaurant sales$695,926  $721,350  $1,675,271  $1,681,310  Franchised restaurant sales$804,791  $747,398  $2,480,062  $2,428,708  
Franchised restaurant AUVsFranchised restaurant AUVs$334  $345  $803  $806  Franchised restaurant AUVs$387  $359  $1,190  $1,166  
Royalties as a percentage of total franchised restaurant salesRoyalties as a percentage of total franchised restaurant sales5.2 %5.1 %5.2 %5.2 %Royalties as a percentage of total franchised restaurant sales5.2 %5.2 %5.2 %5.2 %
Franchise rental revenues increased $8.2$12.7 million, or 13.4%20.0% in the quarter and $20.4$33.1 million, or 14.0%15.8% year-to-date compared to the prior year, primarily from our adoption of ASC 842, which increased our rental revenues $9.5$9.7 million in the quarter and $22.3$32.0 million year-to-date, partially offset by a decrease inas well as higher percentage rent revenue from lowerrevenues due to an increase in franchise restaurant sales.
Franchise royalties and other decreased $0.6increased $3.1 million, or 1.7%7.6% in the quarter and $0.4$2.6 million, or 0.5%2.0% year-to-date compared to the prior year, due primarily to a decreasean increase in franchise same-store sales driving royalties lower, partially offset year-to-date by an $0.8 million increase in franchise incentives recorded as a reduction of franchise royalties.higher.
Franchise contributions for advertising and other services decreased $4.9revenues increased $0.2 million, or 12.5%0.5% in the quarter as a result of $0.7 million higher technology and $2.9sourcing fees, partially offset by $0.5 million lower marketing contributions. Marketing contributions were lower due to a reduction in April marketing fees and was largely offset by an increase in marketing contributions due to higher franchise restaurant sales compared with a year ago. Year-to-date, franchise contributions for advertising and other services revenues decreased $2.7 million, or 3.2% year-to-date compared to the prior year, primarily due to2.1%, as a result of $4.9 million lower marketing contributions from our franchisees of $5.4 million in the quarter and $4.4 million year-to-date mainly as a result ofdriven by a decrease in the contribution percentage and lower franchise restaurant sales,percentages; partially offset by $2.2 million higher technology and sourcing fees as a result of an increase in technology fees charged to our franchisees.in July 2019.
Franchise occupancy expenses, principally rents, increased $9.7$10.2 million in the quarter and $23.5$33.8 million year-to-date compared to the prior year, due primarily to the adoption of ASC 842, which increased franchise occupancy expenses by $9.5$9.9 million in the quarter and $22.8$32.7 million year-to-date.
Franchise support and other costs increased $0.2 millionremained flat in the quarter and increased $2.0 million year-to-date compared to the prior year, primarily as a result of an increase in franchisee bad debt expense.expense related to specific franchise situations that occurred in the first quarter of 2020.
Franchise advertising and other service expenses decreased $4.5increased $0.3 million, or 11.2%0.7% in the quarter as a result of higher technology and $3.6sourcing costs of $0.8 million; partially offset by lower marketing contributions of $0.5 million. Year-to-date, franchise advertising and other service expenses decreased $3.3 million, or 3.8% year-to-date2.4% compared to the prior year, due toas a decrease inresult of lower marketing contributions from our franchisees of $5.4$4.9 million, in the quarter and $4.4 million year-to-date, partially offset by an increase in information technology costs.and sourcing costs of $1.7 million.
28



Depreciation and Amortization
Depreciation and amortization decreased by $0.4$0.6 million in the quarter and $0.8$1.5 million year-to-date compared with the prior year, primarily due to certain of our franchise building assets becoming fully depreciated in the current fiscal year.
29


Selling, General and Administrative (“SG&A”) Expenses
The following table presents the change in 2020 SG&A expenses compared with the prior year (in thousands):
Increase / (Decrease)Increase / (Decrease)
QuarterYear-to-dateQuarterYear-to-date
AdvertisingAdvertising$(349) $(2,222) Advertising$(68) $(2,290) 
Incentive compensation (including share-based compensation and related payroll taxes)Incentive compensation (including share-based compensation and related payroll taxes)(2,373) 641  Incentive compensation (including share-based compensation and related payroll taxes)(2,489) (2,111) 
Cash surrender value of COLI policies, netCash surrender value of COLI policies, net7,221  3,715  Cash surrender value of COLI policies, net(2,587) 1,128  
Litigation mattersLitigation matters1,917  5,799  Litigation matters(6,982) (1,182) 
InsuranceInsurance2,553  1,781  
Other (includes transition services income and savings related to our restructuring plan)Other (includes transition services income and savings related to our restructuring plan)202  2,850  Other (includes transition services income and savings related to our restructuring plan)(1,136) 2,748  
$6,618  $10,783  $(10,709) $74  
Advertising costs represent company contributions to our marketing fund and are generally determined as a percentage of company-operated restaurant sales. Advertising costs decreased $0.3$0.1 million in the quarter and $2.2$2.3 million year-to-date compared to the prior year. In the quarter, the decrease was driven by a decrease in the contribution percentage, and lowerlargely offset by higher company-operated restaurant sales. Year-to-date, the decrease was primarily due to a $2.0 million discretionary marketing fund contribution made by the Company in 2019 that was non-recurring in 2020.
Incentive compensation decreased by $2.4$2.5 million in the quarter mainlyand $2.1 million year-to-date primarily as a result of lower achievement levels compared to the prior year for performance-stock units and the Company’s annual incentive plan.
The cash surrender value of our 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 negativepositive impact of $7.2$2.6 million in the quarter and $3.7a negative impact of $1.1 million year-to-date, compared to the prior year.
Litigation matters increaseddecreased by $1.9$7.0 million in the quarter and $5.8$1.2 million year-to-date, primarily due to lower costs accrued in 2020 for various employmenton certain employee litigation matters. Refer to Note 13, Contingencies and Legal Matters, of the notes to the condensed consolidated financial statements for additional information regarding these charges.
Insurance costs increased by $2.6 million in the quarter and $1.8 million year-to-date, primarily due to less favorable development factors related to workers’ compensation and general liability claims compared to the prior year.
Impairment and Other Charges, Net
Impairment and other charges, net is comprised of the following (in thousands):
QuarterYear-to-dateQuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Restructuring costsRestructuring costs$118  $946  $1,163  $6,786  Restructuring costs$ $(64) $1,165  $6,722  
Costs of closed restaurants and otherCosts of closed restaurants and other331  383  432  1,249  Costs of closed restaurants and other890  2,010  1,322  3,259  
Losses (gains) on disposition of property and equipment, net267  (714) (10,170) (138) 
Gains on disposition of property and equipment, netGains on disposition of property and equipment, net(216) (5,618) (10,386) (5,756) 
Accelerated depreciationAccelerated depreciation—  510  —  926  Accelerated depreciation62  416  62  1,342  
$716  $1,125  $(8,575) $8,823  $738  $(3,256) $(7,837) $5,567  
Impairment and other charges, net decreasedincreased by $0.4$4.0 million in the quarter compared to a year ago, driven by a $1.0 million increase in lossesgain on the dispositionsale of a restaurant property and equipment due to an eminent domain gain in the prior year, partially offset by a decrease in restructuring costs as we conclude our restructuring initiative. Year-to-date, impairmentyear. Impairment and other charges, net decreased $17.4year-to-date by $13.4 million, due toas a result of a $10.8 million gain related to the sale of one of our corporate office buildings in the first quarter of the 2020 as well asand lower restructuring costs of $5.6 million decrease in restructuring costs.million.

29


Gains on the Sale of Company-Operated Restaurants
In 2020 and 2019, no company-operated restaurants were sold to franchisees. Gains on the sale of company-operated restaurants in both periods pertain to meeting certain contingent consideration provisions included in restaurants sold in previous years.
30


Other Pension and Post-Retirement Expenses, Net
Other pension and post-retirement expenses, net increased by $0.2$1.1 million in the quarter and $39.5$39.8 million year-to-date versus the prior year, primarily due to non-cash pension settlement charges of $0.1 million in 2020.the quarter and $39.0 million year-to-date. Refer to Note 10, Retirement Plans, of the notes to the condensed consolidated financial statements for additional information regarding these charges.
Interest Expense, Net
Interest expense, net is comprised of the following (in thousands):
QuarterYear-to-date QuarterYear-to-date
April 12,
2020
April 14,
2019
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
July 5,
2020
July 7,
2019
Interest expenseInterest expense$15,458  $13,414  $35,877  $31,026  Interest expense$15,703  $36,561  $51,580  $67,587  
Interest incomeInterest income(49) (138) (526) (376) Interest income(3) (67) (529) (443) 
Interest expense, netInterest expense, net$15,409  $13,276  $35,351  $30,650  Interest expense, net$15,700  $36,494  $51,051  $67,144  
Interest expense, net increased $2.1decreased $20.8 million in the quarter and $4.9$16.1 million year-to-date compared with a year ago, primarily due to higher average borrowings which contributed additionala charge of $23.6 million for the early termination of our interest rate swaps in the prior year quarter. Excluding this impact, interest expense of approximatelyincreased by $2.8 million and $6.1 million, respectively; partially offset by lower average interest rates.
Income Taxes
The tax rate in 2020 was 32.3% in the quarter and 30.7%$7.5 million year-to-date, primarily as a result of higher average debt balances.
Income Tax Expense (Benefit)
The income tax provisions reflect tax rates of 27.9% in the quarter and 29.0% year-to-date, compared with 25.0%to (17.9%) and 24.0%18.4%, respectively, in fiscal year 2019. The major components of the year-over-year change in tax rates were a decrease in operating earnings before income tax, an increase in the impact of non-deductible compensation for certain officers, an increasenon-recurring activity in fiscal year 2019 including the termination of interest rate swap agreements, the release of valuation reserves on state tax credits and losses, fromand the market performancerelease of insurance products useda federal tax liability due to fund certain non-qualified retirement plans which are excluded from taxable income,expiration of statute of limitations, and an increase in non-deductible legal settlements.nondeductible costs resulting from a California Private Attorney General Act lawsuit settled in the current year. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 2020 rate could differ from our current estimates.
Earnings (Losses) from Discontinued Operations, Net
As described in Note 14, Discontinued Operations, in the notes to condensed consolidated financial statements, the results of operations from our former Qdoba business has been reported as discontinued operations for all periods presented. Refer to Note 14 for additional information regarding discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES
General
As is common in the restaurant industry, we generally 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. 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. Our cash requirements consist principally of working capital, capital expenditures, income tax payments, debt service requirements, franchise tenant improvement allowance distributions, dividend payments, and obligations related to our benefit plans.
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 existing senior credit 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. During the second quarter of fiscal 2020, to secure our liquidity position and provide financial flexibility given the uncertain market conditions, we drew down on our Variable Funding Notes, which provided us $107.9 million of unrestricted cash. As of the end of our secondthird quarter, the Company had $169.2$196.9 million of cash and restricted cash on its balance sheet.
30


In the context of an unprecedented global pandemic, we believe it is prudent to maintain maximum financial flexibility by preserving our capital and maintaining the Company’s healthy liquidity position. As a result, beginning in the second quarter, we have temporarily suspended our quarterly cash dividend and all share repurchase activity and significantly reduced capital expenditures to essential spend only, and have negotiated rent concessions withonly. We also temporarily suspended our landlords,dividend payments beginning in the last quarter, which were passed on to our franchisees. Additional measures we have taken to ensurewas subsequently reinstated. The reinstatement of the dividend reflects the strong financial health of the Company and our franchise operators include deferring approximately 40% of April rents, reducing and deferring March and April marketing feescontinued commitment to give operators more cash, and delaying remodel requirements and development agreements for at least six months.shareholders.
We believe that our cash on hand, cash flow from operations, and the actions taken to mitigate the effects of the COVID-19 pandemic discussed above will provide us with adequate liquidity for the next twelve months and the foreseeable future.
31


Cash Flows
The table below summarizes our cash flows from continuing operations (in thousands):
Year-to-date Year-to-date
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
Total cash provided by (used in):Total cash provided by (used in):Total cash provided by (used in):
Operating activitiesOperating activities$58,927  $60,816  Operating activities$90,168  $116,793  
Investing activitiesInvesting activities29,601  (8,144) Investing activities29,543  950  
Financing activitiesFinancing activities(70,905) (53,787) Financing activities(74,359) (108,001) 
Net cash flowsNet cash flows$17,623  $(1,115) Net cash flows$45,352  $9,742  
Operating ActivitiesActivities.. Operating cash flows decreased $1.9$26.6 million compared with a year ago, primarily due to lower netcollections of $23.6 million from rent and marketing payment deferrals we provided to our franchisees and higher income adjusted for non-cash itemstax and interest payments of $13.4$6.7 million partially offset by favorable changes in working capital of $11.5and $8.4 million, primarily due to an increase in payables from both timing of payments and extending payment terms during the period;respectively. These decreases were partially offset by lower collections on receivables as a result of postponing collections on marketing and rent payments of $12.7 million from payment deferrals we received from our franchisees.landlords.
Pension and Postretirement Contributions Our policy is to fund our pension plans at or above the minimum required by law. As of January 1, 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 2020. In 2020, we contributed $3.6$4.9 million to our non-qualified pension plan and postretirement plans.
Investing Activities. Cash provided by investing activities increased by $37.7$28.6 million compared with a year ago, primarily due to higher proceeds from the sale and leaseback of assets of $15.4$16.8 million, higher proceeds from the sale of property and equipment of $20.9$15.2 million, and $5.4$8.3 million of lower capital expenditure spending, partially offset by $6.5$15.2 million of lower repayments received on notes issued in connection with 2018 refranchising transactions.
31


Capital Expenditures The composition of capital expenditures in each period follows (in thousands):
Year-to-date Year-to-date
April 12,
2020
April 14,
2019
July 5,
2020
July 7,
2019
Jack in the Box:Jack in the Box:Jack in the Box:
Restaurant facility expendituresRestaurant facility expenditures$6,443  $9,780  Restaurant facility expenditures$8,385  $10,734  
Purchases of assets intended for sale or sale and leasebackPurchases of assets intended for sale or sale and leaseback417  4,236  
New restaurantsNew restaurants—  1,452  New restaurants—  701  
Other, including information technologyOther, including information technology1,967  6,586  Other, including information technology3,775  4,438  
8,410  17,818  12,577  20,109  
Corporate Services:Corporate Services:Corporate Services:
Information technologyInformation technology2,926  373  Information technology3,370  4,247  
Other, including facility improvementsOther, including facility improvements1,441  —  Other, including facility improvements789  685  
4,367  373  4,159  4,932  
Total capital expendituresTotal capital expenditures$12,777  $18,191  Total capital expenditures$16,736  $25,041  
Our capital expenditure program includes, among other things, restaurant remodeling, information technology enhancements, and investments in new locations and equipment. Capital expenditures decreased by $5.4$8.3 million compared to a year ago primarily dueas a result of the Company reducing capital expenditures to lower facility expenditures from restaurant remodelsessential spend only to provide additional liquidity and technology initiatives; partially offset by higher spending on certain corporate technology initiatives in 2020.financial flexibility given the current uncertainty surrounding the pandemic.
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 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 of $17.4 million during the first quarter of 2020 on this transaction.
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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 leaseback the property for up to a period of 18 months with an option to terminate earlier without penalty, upon providing a 90-day notice. We received net proceeds of $20.6 million on the sale.
Financing Activities. Cash flows used in financing activities increaseddecreased by $17.1$33.6 million compared with a year ago, primarily due to a net increase in borrowings under our revolving credit facilities of $98.9$130.9 million, lower principal repayments of $18.1$25.5 million as a result of our debt recapitalization completed in the prior year, lower dividends paid on common stock of$12.5 million, and lower payments for debt issuance costs of $3.4$4.9 million; partially offset by higher stock repurchases of $141.2 million.
Repurchases of Common Stock 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. Repurchases of common stock included in our condensed consolidated statement of cash flows for fiscal 2020 includes $2.0 million related to repurchase transactions traded in the prior year that settled in 2020.
This leaves approximately $122.2 million remaining under share repurchase programs authorized by the Company’s Board of Directors, consisting of $22.2 million that expires in November 2020 and approximately $100.0 million that expires in November 2021. As previously announced, we have temporarily paused our share repurchase program and did not buy back any shares in the second quarter.or third quarter of 2020.
Dividends — During 2020, the Board of Directors declared two quarterly cash dividends of $0.40 per common share totaling $18.5 million.
In addition toFollowing our second quarter, we announced that our dividend would be temporarily suspendingsuspended as a result of uncertainty caused by the pandemic. On July 31, 2020, our share repurchase program, on May 8, 2020, the Board of Directors approved our voluntary electiondeclared a quarterly cash dividend of $0.40 per common share, to temporarily suspend quarterly dividend payments. We will continuebe paid on September 3, 2020 to monitor and revisit our capital allocation policies throughout the third quarter with the goalshareholders of reinstating dividends and share repurchases once we have more clarity around the scope and durationrecord as of the disruption causedclose of business on August 18, 2020. Future dividends are subject to approval by COVID-19.our Board of Directors.
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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 the Indenture), is less than or equal to 5.0x. The Company’s actual leverage ratio exceeded 5.0x, and as a result, we are 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.
The legal final maturity date of the 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 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 the respective anticipated repayment date, additional interest will accrue pursuant to the Indenture. As of April 12,July 5, 2020, $1,296.8$1,293.5 million of borrowings were outstanding on the Class A-2 Notes.
Restricted Cash In accordance with the terms of 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 April 12,July 5, 2020, the Master Issuer had restricted cash of $37.0$37.4 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 Class A-1 and A-2 Notes. During the secondthird quarter, with uncertainty surrounding COVID-19 events, and as a cautionary measure, we continued to voluntarily electedelect to reserve the third quarter’sfund cash held in trust for quarterly interest and principal and interest payments due in AugustNovember 2020.
Variable Funding Notes The Variable Funding Notes were issued under the 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 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 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 April 12,July 5, 2020 and September 29, 2019, $41.1 million and $45.6 million, respectively, of letters of credit were outstanding against the Variable Funding Notes. As of September 29, 2019, we had no outstanding borrowings under our Variable Funding Notes. During the second quarter of 2020, with uncertainty surrounding COVID-19 events, and as a cautionary measure, we borrowed $107.9 million under the Variable Funding Notes. The Company may use the proceeds from the borrowings for working capital and general corporate purposes. As of April 12,July 5, 2020, remaining borrowing availability under our Variable Funding Notes was $1.1 million. As of July 5, 2020, $107.9 million of borrowings were outstanding under our Variable Funding Notes at a weighted average interest rate of 2.3%.
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Covenants and restrictions The Class A-2 Notes and the Variable Funding Notes (collectively referred to as the “Notes”) are subject to a 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 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 events tied to failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date. The Notes are also subject to 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 warranties, failure of security interests to be effective, and certain judgments. As of April 12,July 5, 2020, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.
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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 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 29, 2019. 

NEW ACCOUNTING PRONOUNCEMENTS
Refer to Note 1, Basis of Presentation, of the notes to condensed consolidated financial statements.
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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the federal securities laws, including further impacts that COVID-19 pandemic may have on our future operations. 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:
The potential impacts to our business and operations resulting from the coronavirus COVID-19 pandemic.
We face significant competition in the food service industry and our inability to compete may adversely affect our business.
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.
Increases in food and commodity costs could decrease our profit margins or result in a modified menu, which could adversely affect our financial results.
Failure to receive scheduled deliveries of high quality food ingredients and other supplies could harm our operations and reputation.
We have a limited number of suppliers for our major products and rely on a distribution network with a limited number of distribution partners for the majority of our national distribution program in the United States. If our suppliers or distributors are unable to fulfill their obligations under their contracts, it could harm our operations.
Food safety and food-borne illness concerns may have an adverse effect on our business by reducing demand and increasing costs.
Negative publicity relating to our business or industry could adversely impact our reputation.
Our business could be adversely affected by increased labor costs.
Inability to attract, train and retain top-performing personnel could adversely impact our financial results or business.
We may not have the same resources as our competitors for marketing, advertising and promotion.
We may be adversely impacted by severe weather conditions, natural disasters, terrorist acts or civil unrest that could result in property damage, injury to employees and staff, and lost restaurant sales.
We may not achieve our development goals.
Our highly franchised business model presents a number of risks, and the failure of our franchisees to operate successful and profitable restaurants could negatively impact our business.
We are subject to financial and regulatory risks associated with our owned and leased properties and real estate development projects.
Changes to estimates related to our property, fixtures, and equipment or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges on certain long-lived assets, which may adversely affect our results of operations.
Our tax provision may fluctuate due to changes in expected earnings.
Activities related to our sale of Qdoba, and our refranchising, restructuring, and cost savings initiatives entail various risks and may negatively impact our financial results.
We are subject to the risk of cybersecurity breaches, intrusions, data loss, or other data security incidents.
If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, the Company’s stockholders could lose confidence in our financial results, which would harm our business and the value of the Company’s common shares.
We may not be able to adequately protect our intellectual property, which could harm the value of our brands and adversely affect our business.
Jack in the Box may be subject to risk associated with disagreements with key stakeholders, such as franchisees.
The securitized debt instruments issued by certain of our wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, which could harm the value of our brand and adversely affect our business.
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We have a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of our Company or its subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations.
The securitization transaction documents impose certain restrictions on our activities or the activities of our subsidiaries, and the failure to comply with such restrictions could adversely affect our business.
Changes in accounting standards may negatively impact our results of operations.
We are subject to increasing legal complexity and may be subject to claims or lawsuits that are costly to defend and could result in our payment of substantial damages or settlement costs.
Unionization activities or labor disputes may disrupt our operations and affect our profitability.
Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results; including federal, state, and local policies regarding mitigation strategies for controlling the coronavirus COVID-19 pandemic.
Our insurance may not provide adequate levels of coverage against claims.
Our quarterly results and, as a result, the price of our common stock, may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors.
The price of our common stock may be adversely affected by investor response to our temporary suspension of dividends and our stock repurchase program.
Activities of activist stockholders could cause us to incur substantial costs, divert management’s attention and resources, and have an adverse effect on our business.
Governmental regulation may adversely affect our existing and future operations and results, including by harming our ability to profitably operate our restaurants.
The proliferation of federal, state, and local regulations increases our compliance risks, which in turn could adversely affect our business.
Legislation and regulations regarding our products and ingredients, including the nutritional content of our products, could impact customer preferences and negatively impact our financial results.
Failure to obtain and maintain required licenses and permits or to comply with food control regulations could lead to the loss of our food service licenses and, thereby, harm our business.
These and other factors are identified and described in more detail in our filings with the Securities and Exchange Commission, including, but not limited to: the “Discussion of Critical Accounting Estimates,” and other sections in this Form 10-Q and the “Risk Factors” section of our most recent Annual Report on Form 10-K for the fiscal year ended September 29, 2019 (“Form 10-K”). These documents may be read free of charge on the SEC’s website at www.sec.gov. Potential investors are urged to consider these factors, more fully described in our Form 10-K, carefully in evaluating any forward-looking statements, and are cautioned not to place undue reliance on the forward-looking statements. All forward-looking statements are made only as of the date issued, and we do not undertake any obligation to update any forward-looking statements.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In connection with the securitized refinancing completed on July 8, 2019, weWe are only exposed to interest rate risk on borrowings under our $150.0 millionClass A-1 Variable Funding Notes, a revolving credit facility, borrowings from which are subject to variable funding notes. Duringinterest rates. In the second quarter of 2020, we borrowed $107.9 million under the variable funding notes, which remains outstanding as of April 12,July 5, 2020. Based on outstanding borrowings as of July 5, 2020, and are subject to variablean increase or decrease of 100 basis points in interest rates.rates would impact our interest expense by approximately $1.1 million on an annualized basis.
We are also exposed to the impact of commodity and utility price fluctuations. Many of the ingredients we use are commodities or ingredients that are affected by the price of other commodities, weather, seasonality, production, availability and various other factors outside our control. In order to minimize the impact of fluctuations in price and availability, we monitor the primary commodities we purchase and may enter into purchasing contracts and pricing arrangements when considered to be advantageous. However, certain commodities remain subject to price fluctuations. We are exposed to the impact of utility price fluctuations related to unpredictable factors such as weather and various other market conditions outside our control. Our ability to recover increased costs for commodities and utilities through higher prices is limited by the competitive environment in which we operate. We also could experience shortages of key ingredients if our suppliers need to close or restrict operations due to the impact of the COVID-19 pandemic. We have not experienced any material disruptions in our supply chains as of the date of this report.

ITEM 4.  CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Management, under the oversight of the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive and principal financial officer, respectively), evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13-1-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by the Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the fiscal year ended September 29, 2019.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended April 12,July 5, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Remediation of Material Weakness
As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended September 29, 2019, we began implementing a remediation plan to address the material weakness mentioned above. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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PART II. OTHER INFORMATION
There is no information required to be reported for any items under Part II, except as follows:

ITEM 1.  LEGAL PROCEEDINGS
See Note 13, Contingencies and Legal Matters, of the notes to the condensed consolidated financial statements for a discussion of our contingencies and legal matters.

ITEM 1A. RISK FACTORS
The risk factors set forth below contain material changes to the risk factors previously disclosed and included in our Annual Report on Form 10-K for the fiscal year ended September 29, 2019. When evaluating our business and our prospects, you should consider the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended September 29, 2019, which we filed with the SEC on November 21, 2019, as updated in this Item 1A. You should also consider the risks and uncertainties discussed under the heading “Cautionary Statements Regarding Forward-Looking Statements” in Item 2 of this Quarterly Report on Form 10-Q. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended September 29, 2019, including our financial statements and the related notes. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the risks or uncertainties actually occurs, our business and financial results could be harmed. In that case, the market price of our common stock could decline.
The novel coronavirus (COVID-19) outbreakCOVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which has affected and could continue to materially affect our operations, financial condition and results of operations for an extended period of time.
The COVID-19 pandemic novel coronavirus (COVID-19) outbreak, federal, state and local government responses to COVID-19 and our responses to the outbreak have all disrupted and will continue to disrupt our business. In the United States, individuals are being encouraged to practice social distancing, restricted from gathering in groups, and in some areas, placed on complete restriction from non-essential movements outside of their homes. In response to the COVID-19 outbreak and these changing conditions, we previously announced that all company-owned and franchise-operated restaurants are operating in an off-premise capacity, including drive-thru, third-party delivery and carry-out. We have implemented a number of safety procedures, including implementing heightened sanitation requirements, practicing employee social distancing, and adhering to glove and mask protocol for all patrons and workers.
Our operating results substantially depend upon our franchisees’ sales volumes, restaurant profitability, and financial stability. The financial impact of COVID-19 has had, and is expected to continue to have, an adverse effect on our franchisees’ liquidity. To ensure financial health of our valued franchise operators, we have reduced marketing fees and postponed collection of these marketing fees, postponed the collection of certain franchisee rental payments and delayed all fiscal 2020 franchise development agreements by at least six months and suspended other required capital investments. To the extent our franchisees experience financial distress, our operating results may be adversely impacted, potentially materially affecting our liquidity, financial condition, or results of operations.
As discussed in this report, we have a significant amount of debt outstanding and have recently drawn down on our Variable Funding Notes, which provided us $107.9 million of unrestricted cash, to provide additional security to our liquidity position and provide financial flexibility given uncertain market and economic conditions as a result of the COVID-19 pandemic. A material increase in our level of debt could have certain material adverse effects on us. If the business interruptions caused by COVID-19 last longer than we expect, we may need to seek other sources of liquidity. The COVID-19 outbreak is adversely affecting the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be readily available or available on favorable terms, especially the longer the COVID-19 outbreak lasts.
Our business could be further disrupted if any of our company or franchised restaurant employees are diagnosed with COVID-19 since this could require us or our franchisees to quarantine some or all of a restaurant’s employees and disinfect the restaurants facilities. If a significant percentage of our or our franchisees’ workforce is unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our results may be adversely impacted, potentially materially affecting our liquidity, financial condition, or results of operations.
Our suppliers could be adversely impacted by the COVID-19 outbreak. If our suppliers’ employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, we could face cost increases and/or shortages of food items or other supplies across our restaurants and our results could be adversely impacted by such supply interruptions.
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The equity markets in the United States have been extremely volatile due to the COVID-19 outbreak and our stock price has fluctuated significantly.
Additional government regulations or legislation as a result of COVID-19 in addition to decisions we have made and may make in the future relating to the compensation of and benefit offerings for our company-operated restaurant team members could also have an adverse effect on our business. We cannot predict the types of government regulations or legislation that may be passed relating to employee compensation as a result of the COVID-19 outbreak. We have implemented an emergency paid sick leave program at our company-operated restaurants and taken other compensation and benefit actions to support our restaurant team members during the COVID-19 business interruption, but those actions may not be sufficient to compensate our team members for the entire duration of any business interruption resulting from COVID-19. Those team members might seek and find other employment during that interruption, which could materially adversely affect our ability to properly staff and reopen our restaurants with experienced team members when the business interruptions caused by COVID-19 abate or end.
The COVID-19 outbreak also may have the effect of heightening other risks disclosed in the Risk Factors section including in our Form 10-K filed on November 21, 2019, including, but not limited to, those related to consumer confidence, increase in food and commodity costs, supply chain interruptions, labor availability and cost, cybersecurity incidents, increased indebtedness, regulatory and legal complexity, and governmental regulation.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Stock Repurchases — We did not repurchase any shares of our common stock in the secondthird quarter of 2020. As of April 12,July 5, 2020, there was approximately $22.2 million remaining under the Board-authorized stock buyback program which expires in November 2020 and approximately $100.0 million which expires in November 2021.

ITEM 3.  DEFAULTS OF SENIOR SECURITIES
None.

ITEM 4.  MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5.  OTHER INFORMATION
Effective May 8, 2020, the Board of Directors approved the Amended and Restated Bylaws of the Company, which were updated to establish the roles and duties of the Chairman of the Board and Lead Director, and to provide that the Chairman of the Board, rather than the Chief Executive Officer, can call special meetings. The foregoing summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the complete copy of the Amended and Restated Bylaws, which has been filed as Exhibit 3.2, hereto and is hereby incorporated herein by reference. Interested parties should read the document in its entirety.Item 5.03.  None.
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ITEM 6.  EXHIBITS
NumberDescriptionFormFiled with SEC
3.1† 10.2.18*10-QFiled herewith
3.2 10-QFiled herewith
10.2.14* 10-QFiled herewith
10.2.15* 8-KMarch 4, 2020
10.2.16* 8-KApril 16, 2020
10.2.17* 8-KApril 16, 2020
31.1Filed herewith
31.2Filed herewith
32.1Filed herewith
32.2Filed herewith
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
† Originally filed as Exhibit 3.1 to the registrant’s Annual Report on Form 10-K filed on December 2, 1999
* Management contract or compensatory plan

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
JACK IN THE BOX INC.
By:
/S/    LANCE TUCKER       
 Lance Tucker
 Executive Vice President and Chief Financial Officer (principal financial officer)
(Duly Authorized Signatory)
Date: May 14,August 5, 2020
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