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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 January 19, 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
https://cdn.kscope.io/40556075962c181c55563e4dbe025eec-jack-20200119_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 Avenue
San Diego, California 92123
(Address of principal executive offices)
Registrant’s telephone number, including area code (858571-2121
   _______________________________________________________________________________________
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 February 14, 2020, 22,630,771 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)
January 19,
2020
September 29,
2019
ASSETS
Current assets:
Cash$19,914  $125,536  
Restricted cash18,372  26,025  
Accounts and other receivables, net53,576  45,235  
Inventories2,029  1,776  
Prepaid expenses13,665  9,015  
Current assets held for sale7,760  16,823  
Other current assets3,037  2,718  
Total current assets118,353  227,128  
Property and equipment:
Property and equipment, at cost1,155,356  1,176,241  
Less accumulated depreciation and amortization(793,851) (784,307) 
Property and equipment, net361,505  391,934  
Other assets:
Operating lease right-of-use assets884,213  —  
Intangible assets, net37  425  
Goodwill46,747  46,747  
Deferred tax assets66,675  85,564  
Other assets, net212,783  206,685  
Total other assets1,210,455  339,421  
$1,690,313  $958,483  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt$13,786  $774  
Current operating lease liabilities158,779  —  
Accounts payable23,467  37,066  
Accrued liabilities118,289  120,083  
Total current liabilities314,321  157,923  
Long-term liabilities:
Long-term debt, net of current maturities1,262,737  1,274,374  
Long-term operating lease liabilities, net of current portion767,819  —  
Other long-term liabilities186,589  263,770  
Total long-term liabilities2,217,145  1,538,144  
Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued
    
Common stock $0.01 par value, 175,000,000 shares authorized, 82,255,912 and 82,159,002 issued, respectively
823  822  
Capital in excess of par value483,739  480,322  
Retained earnings1,572,586  1,577,034  
Accumulated other comprehensive loss(88,995) (140,006) 
Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively
(2,809,306) (2,655,756) 
Total stockholders’ deficit(841,153) (737,584) 
$1,690,313  $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)
 Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Revenues:
Company restaurant sales$105,364  $102,832  
Franchise rental revenues96,084  83,890  
Franchise royalties and other52,466  52,250  
Franchise contributions for advertising and other services53,759  51,814  
307,673  290,786  
Operating costs and expenses, net:
Company restaurant costs (excluding depreciation and amortization):
Food and packaging31,348  29,616  
Payroll and employee benefits31,890  30,274  
Occupancy and other15,958  16,013  
Total company restaurant costs79,196  75,903  
Franchise occupancy expenses (excluding depreciation and amortization)64,517  50,713  
Franchise support and other costs4,676  2,845  
Franchise advertising and other services expenses55,224  54,270  
Selling, general and administrative expenses 28,248  24,083  
Depreciation and amortization16,728  17,169  
Impairment and other charges, net (9,291) 7,698  
Gains on the sale of company-operated restaurants(1,575) (219) 
237,723  232,462  
Earnings from operations69,950  58,324  
Other pension and post-retirement expenses, net38,978  456  
Interest expense, net19,942  17,374  
Earnings from continuing operations and before income taxes11,030  40,494  
Income tax expense3,133  9,373  
Earnings from continuing operations7,897  31,121  
Earnings from discontinued operations, net of income taxes  2,977  
Net earnings $7,897  $34,098  
Net earnings per share - basic:
Earnings from continuing operations$0.33  $1.20  
Earnings from discontinued operations  0.11  
Net earnings per share (1)$0.33  $1.32  
Net earnings per share - diluted:
Earnings from continuing operations$0.33  $1.19  
Earnings from discontinued operations  0.11  
Net earnings per share (1)$0.33  $1.31  
Cash dividends declared per common share
$0.40  $0.40  
____________________________
(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 INCOME
(In thousands)
(Unaudited)
 Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Net earnings$7,897  $34,098  
Cash flow hedges:
Net change in fair value of derivatives  (7,167) 
Net loss reclassified to earnings  479  
  (6,688) 
Tax effect  1,723  
  (4,965) 
Unrecognized periodic benefit costs:
Actuarial gains arising during the period28,583    
Actuarial losses and prior service costs reclassified to earnings40,310  1,205  
68,893  1,205  
Tax effect(17,882) (311) 
51,011  894  
Other comprehensive income (loss), net of taxes51,011  (4,071) 
Comprehensive income $58,908  $30,027  
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)
 Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Cash flows from operating activities:
Net earnings$7,897  $34,098  
Earnings from discontinued operations  2,977  
Earnings from continuing operations7,897  31,121  
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization16,728  17,169  
Amortization of franchise tenant improvement allowances and other1,151  530  
Deferred finance cost amortization1,755  704  
Tax deficiency (excess tax benefit) from share-based compensation arrangements196  (50) 
Deferred income taxes2,010  (783) 
Share-based compensation expense3,184  1,909  
Pension and postretirement expense38,978  456  
(Gains) losses on cash surrender value of company-owned life insurance(3,374) 2,863  
Gains on the sale of company-operated restaurants(1,575) (219) 
(Gains) losses on the disposition of property and equipment, net(10,437) 635  
Non-cash operating lease costs(7,668) —  
Impairment charges and other  387  
Changes in assets and liabilities, excluding dispositions:
Accounts and other receivables(5,619) (3,154) 
Inventories(253) (232) 
Prepaid expenses and other current assets(4,957) 6,224  
Accounts payable(7,984) 6,365  
Accrued liabilities(1,558) (16,298) 
Pension and postretirement contributions(2,025) (2,111) 
Franchise tenant improvement allowance distributions(3,682) (3,247) 
Other(80) (4,668) 
Cash flows provided by operating activities22,687  37,601  
Cash flows from investing activities:
Purchases of property and equipment(7,202) (11,183) 
Proceeds from the sale of property and equipment20,618  270  
Proceeds from the sale and leaseback of assets17,373    
Proceeds from the sale of company-operated restaurants1,575  133  
Collections on notes receivable  6,517  
Cash flows provided by (used in) investing activities32,364  (4,263) 
Cash flows from financing activities:
Borrowings on revolving credit facilities  114,298  
Repayments of borrowings on revolving credit facilities  (117,300) 
Principal repayments on debt(198) (10,907) 
Debt issuance costs(216) (17) 
Dividends paid on common stock(9,412) (10,305) 
Proceeds from issuance of common stock184  114  
Repurchases of common stock(155,576) (14,362) 
Change in book overdraft  9,234  
Payroll tax payments for equity award issuances(3,108) (2,498) 
Cash flows used in financing activities(168,326) (31,743) 
Net (decrease) increase in cash and restricted cash (113,275) 1,595  
Cash and restricted cash at beginning of period151,561  2,705  
Cash and restricted cash at end of period$38,286  $4,300  
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:
January 19,
2020
January 20,
2019
Company-operated137  137  
Franchise2,107  2,104  
Total system2,244  2,241  
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 one 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 16-weeks (“quarter”) ended January 19, 2020 and January 20, 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.
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. In 2019, incremental contributions made by the Company were $2.0 million. There have been no 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 totaled $5.3 million and $7.2 million in 2020 and 2019, respectively.
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 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.

6

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 $881 million and $931 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 $2.9 million, net of tax, as a result of the impairment of certain newly recognized ROU assets and derecognition of deferred gains and losses on sale-leaseback transactions upon transition to the new guidance.
The effects of the changes made to the Company's condensed consolidated balance sheet as of September 29, 2019 for the adoption of the new lease guidance were as follows (in thousands):
Balance at September 29, 2019Adjustments due to ASC 842 adoptionBalance at September 30, 2019
Assets
Other assets:
Operating lease ROU assets$—  $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 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 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 2018-15 is effective for interim and annual periods beginning after December 15, 2019, with early 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 on our consolidated financial statements and do not expect there to be a material impact upon adoption.

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.
7

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Disaggregation of revenue — The following table disaggregates revenue by primary source (in thousands):
Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Sources of revenue:
Company restaurant sales$105,364  $102,832  
Franchise rental revenues96,084  83,890  
Franchise royalties50,243  49,507  
Marketing fees48,835  47,863  
Technology and sourcing fees4,924  3,951  
Franchise fees and other services2,223  2,743  
Total revenue
$307,673  $290,786  

Contract liabilities — Our contract liabilities consist of deferred revenue resulting from initial fees received from franchisees for new restaurant openings or new franchise terms, which are generally recognized over the franchise term. We classify these contract liabilities as “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):
Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Deferred franchise fees at beginning of period$46,273  $50,018  
Revenue recognized during the period(1,632) (1,592) 
Additions during the period895  500  
Deferred franchise fees at end of period$45,536  $48,926  

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied as of January 19, 2020 (in thousands):
Remainder of 2020$3,411  
20214,926  
20224,726  
20234,572  
20244,379  
Thereafter23,522  
$45,536  

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.

3.SUMMARY OF REFRANCHISINGS AND FRANCHISEE DEVELOPMENT
Refranchisings and franchisee development — Franchisees opened 11 new restaurants in 2020, compared to 9 in the prior year, and closed 10 restaurants in fiscal 2020, compared to 5 in 2019. In both comparative periods no 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 million and $0.2 million, respectively, pertain to meeting certain contingent consideration provisions included in the sale of restaurants in previous years.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
The lease term and incremental borrowing rate for each lease requires judgement by management and can impact the classification of our leases as well as the value of our lease assets and liabilities. When determining the lease term, we consider option periods available, and include option periods in the measurement of the lease ROU asset and lease liability where the exercise is reasonably certain to occur. As our leases do not provide an implicit discount rate, we have determined it is appropriate to use our estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, in calculating our lease liabilities.
Company as Lessee
Leased assets and liabilities consisted of the following as of January 19, 2020 (in thousands):
January 19,
2020
Assets:  
Operating lease ROU assets  $884,213  
Finance lease ROU assets (1) 2,742  
Total ROU assets  $886,955  
Liabilities:  
Current operating lease liabilities   $158,779  
Current finance lease liabilities (2) 786  
Long term operating lease liabilities  767,819  
Long-term finance lease liabilities (2) 2,609  
Total lease liabilities  $929,993  
____________________________
(1)Included in “Property and equipment, net” on our condensed consolidated 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 our lease cost components and other supplemental information related to our leases (dollars in thousands):
Sixteen Weeks Ended
January 19,
2020
Lease costs:  
Finance lease cost:  
Amortization of ROU assets (1) $234  
Interest on lease liabilities (2) 33  
Operating lease cost (3) 58,512  
Short-term lease cost (3) 1  
Variable lease cost (3)(4) 12,507  
$71,287  
Weighted-average remaining lease term (in years): 
Finance leases  3.9
Operating leases  8.0
Weighted-average discount rate:  
Finance leases  3.4 %
Operating leases  3.9 %
____________________________
(1)Included in “Depreciation and amortization” in our condensed consolidated statement of 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”, 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”.
(4)Includes $11.6 million of property taxes and common area maintenance costs which are reimbursed by sub-lessees.
The following table presents as of January 19, 2020, future minimum lease payments for non-cancellable leases (in thousands):
Finance LeasesOperating Leases
Fiscal year:
Remainder of 2020$647  $130,553  
2021879  193,874  
2022879  153,011  
2023866  124,843  
2024390  94,034  
Thereafter40  386,822  
Total minimum lease payments$3,701  $1,083,137  
Less: imputed interest(306) (156,539) 
Present value of lease liability$3,395  $926,598  

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

Sale leaseback transactions — In 2020, we completed a sale leaseback transaction of a multi-tenant commercial property in Los Angeles, California and leased back the parcel on which a company-operated restaurant is located. The Company received net proceeds of $17.4 million and recognized a $0.2 million loss on the sale. The initial term on the lease is 20 years and has been accounted for as an operating lease.
In 2020, we completed the sale of one of our corporate office buildings as we move forward with our previously announced consolidation of our headquarters. We entered into a lease with the buyer to leaseback the property for up to 18 months with an option to terminate earlier without penalty, upon providing a 90-day notice. The net proceeds received on the sale was $20.6 million and the lease has been accounted for as an operating lease. A gain on the sale of $10.8 million was recognized during the quarter, and is presented within “Impairment and other charges, net” in our condensed consolidated statement of earnings.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Company as Lessor
The following table presents rental income (in thousands):
Sixteen Weeks Ended
January 19, 2020
Owned PropertiesLeased PropertiesTotal
Operating lease income - franchise  $6,095  $66,568  $72,663  
Variable lease income - franchise  2,716  20,704  23,420  
Franchise rental revenues  $8,811  $87,272  $96,083  
Operating lease income - closed restaurants and other (1) $  $2,057  $2,057  
____________________________
(1)Primarily relates to closed restaurant properties included in “Impairment and other, net” in our condensed consolidated statement of earnings.
The following table presents as of January 19, 2020, future minimum rental receipts for non-cancellable leases and subleases (in thousands):
January 19,
2020
Fiscal year:
Remainder of 2020$159,654  
2021256,052  
2022232,129  
2023225,488  
2024200,425  
Thereafter1,237,167  
Total minimum rental receipts  $2,310,915  

The following table presents as of September 29, 2019, future minimum rental receipts for non-cancellable leases and subleases (in thousands):
September 29,
2019
Fiscal year:
2020$239,219  
2021255,315  
2022231,394  
2023224,605  
2024199,442  
Thereafter1,215,811  
Total minimum rental receipts  $2,365,786  

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5.FAIR VALUE MEASUREMENTS
Financial assets and liabilitiesThe following table presents our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
Total      Quoted Prices
in Active
Markets for
Identical
Assets (2)
(Level 1)
Significant
Other
Observable
Inputs (2)
(Level 2)
Significant
Unobservable
Inputs (2)
(Level 3)
Fair value measurements as of January 19, 2020:
Non-qualified deferred compensation plan (1)$29,857  $29,857  $  $  
Total liabilities at fair value$29,857  $29,857  $  $  
Fair value measurements as of September 29, 2019:
Non-qualified deferred compensation plan (1)$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.
At January 19, 2020, the carrying value of our Class A-2 Notes was $1,300.0 million and fair value was $1,332.0 million. 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 estimated fair values of our finance lease obligations approximated their carrying values as of January 19, 2020.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Non-financial assets and liabilities — Our non-financial instruments, which primarily consist of property and equipment, operating lease right-of-use assets, goodwill and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis. However, on an annual basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment. If applicable, the carrying values are written down to fair value.
In connection with our impairment reviews performed during 2020, no material fair value adjustments were required. Refer to Note 7, Impairment and Other Charges, Net, for additional information regarding impairment charges.

6.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 $500.0 million of our variable rate borrowings to a fixed rate from October 2018 through October 2022. These agreements were designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. Since they were effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives were not included in earnings, but were included in other comprehensive income (“OCI”). These changes in fair value were subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments were made on our variable rate debt.
Effective July 2, 2019, the Company terminated all interest rate swap agreements in anticipation of the securitization transaction and related retirement of our senior credit facility in the fourth quarter of 2019. During fiscal 2019, our interest rate swaps had no hedge ineffectiveness.
Financial performanceThe following table summarizes the OCI activity related to our interest rate swap derivative instruments and the amounts reclassified from accumulated OCI (in thousands):
 Location in IncomeSixteen Weeks Ended
January 20,
2019
Loss recognized in OCIN/A$(7,167) 
Loss reclassified from accumulated OCI into net earnings
Interest expense, net$479  

7.IMPAIRMENT AND OTHER CHARGES, NET
Impairment and other charges, net in the accompanying condensed consolidated statements of earnings is comprised of the following (in thousands):
Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Restructuring costs$1,045  $5,840  
Costs of closed restaurants and other101  866  
Accelerated depreciation  416  
(Gains) losses on disposition of property and equipment, net (1)(10,437) 576  
$(9,291) $7,698  
____________________________
(1)In 2020, includes a $10.8 million gain related to the sale of one of our corporate office buildings. Refer to Note 4, Leases, for further information.

Restructuring costs — Restructuring charges include costs resulting from the exploration of strategic alternatives (the “Strategic Alternatives Evaluation”) in 2019, which was concluded in the third quarter of 2019, and a plan that management initiated to reduce our general and administrative costs.
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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following is a summary of our restructuring costs (in thousands):
Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Employee severance and related costs$1,045  $4,506  
Strategic Alternatives Evaluation (1)  1,334  
$1,045  $5,840  
____________________________
(1) 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 incurred1,019  
Cash payments(2,134) 
Balance as of January 19, 2020$985  

8.INCOME TAXES
The income tax provisions reflect tax rates of 28.4% in 2020 and 23.1% in 2019. The major components of the year- over-year change in tax rates were a decrease in operating earnings before income tax, an adjustment related to state taxes recorded in the first quarter of 2019, an increase in the tax deficiency on stock compensation, partially offset by an increase in gains from the market performance of insurance products used to fund certain non-qualified retirement plans which are excluded from taxable income. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 2020 rate could differ from our current estimates.
The following is a summary of the components of each tax rate (dollars in thousands):
Sixteen Weeks Ended
January 19,
2020
January 20,
2019
Income tax expense at statutory rate$2,868  26.0 %$10,434  25.8 %
Stock compensation tax deficiency (excess tax benefit)
196  1.8 %(50) (0.1)%
Company-owned life insurance policies(99) (