Variable Interest Entities

9 Months Ended

Jul. 05, 2015

Variable Interest Entities ("VIEs") [Abstract]

Variable Interest Entity Disclosure [Text Block]


	VARIABLE INTEREST ENTITIES

In January 2011, we formed Jack in the Box Franchise Finance, LLC (“FFE”) for the purpose of operating a franchisee lending program to assist Jack in the Box franchisees in re-imaging their restaurants. We are the sole equity investor in FFE. The lending program was comprised of a $20.0 million commitment from the Company in the form of a capital note and an $80.0 million Senior Secured Revolving Securitization Facility entered into with a third party. The lending period and the revolving period expired in June 2012. At July 5, 2015, we had no borrowings under the FFE Facility and we do not plan to make any further contributions.

We have determined that FFE is a VIE, and that we are the primary beneficiary. We considered a variety of factors in identifying the primary beneficiary of FFE including, but not limited to, who holds the power to direct matters that most significantly impact FFE’s economic performance (such as determining the underwriting standards and credit management policies), as well as what party has the obligation to absorb the losses of FFE. Based on these considerations, we have determined that we are the primary beneficiary and the entity is reflected in the accompanying condensed consolidated financial statements.

FFE’s assets consolidated by us represent assets that can be used only to settle obligations of the consolidated VIE. Likewise, FFE’s liabilities consolidated by us do not represent additional claims on our general assets; rather they represent claims against the specific assets of FFE. The impacts of FFE’s results were not material to our condensed consolidated statements of earnings.

The FFE’s balance sheet consisted of the following at the end of each period (in thousands):



	July 5, 2015		September 28, 2014
Cash	$	159	$	—
Other current assets (1)	1,041		2,494
Other assets, net (1)	2,216		5,776
Total assets	$	3,416	$	8,270

Current liabilities (2)	$	1,153	$	2,833
Other long-term liabilities (2)	2,127		5,367
Retained earnings	136		70
Total liabilities and stockholders’ equity	$	3,416	$	8,270

____________________________


(1)	Consists primarily of amounts due from franchisees.


(2)	Consists primarily of the capital note contribution from Jack in the Box which is eliminated in consolidation.

In 2015, we received $3.9 million of early prepayments on notes receivable due from franchisees, which increased our cash flows from investing activities in the year-to-date period.

Our maximum exposure to loss is equal to its outstanding contributions as of July 5, 2015. This amount represents estimated losses that would be incurred should all franchisees default on their loans without any consideration of recovery. To offset the credit risk associated with our variable interest in FFE, we hold a security interest in the assets of FFE subordinate and junior to all other obligations of FFE.

Variable Interest Entities

The FFE’s balance sheet consisted of the following at the end of each period (in thousands):



	July 5, 2015		September 28, 2014
Cash	$	159	$	—
Other current assets (1)	1,041		2,494
Other assets, net (1)	2,216		5,776
Total assets	$	3,416	$	8,270

Current liabilities (2)	$	1,153	$	2,833
Other long-term liabilities (2)	2,127		5,367
Retained earnings	136		70
Total liabilities and stockholders’ equity	$	3,416	$	8,270

____________________________


(1)	Consists primarily of amounts due from franchisees.


(2)	Consists primarily of the capital note contribution from Jack in the Box which is eliminated in consolidation.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References + Details