UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 2013OCTOBER 2, 2016
COMMISSION FILE NUMBER 1-9390
JACK IN THE BOX INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2698708
(State of Incorporation) (I.R.S. Employer Identification No.)
  
9330 Balboa Avenue, San Diego, CA 92123
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (858) 571-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $0.01 par value The NASDAQ Stock Market LLC (NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ    No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes ¨    No þ
Indicate by check mark if 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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ    No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ        Accelerated filer ¨        Non-accelerated filer ¨        Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨    No þ
The aggregate market value of the common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, computed by reference to the closing price reported on the NASDAQ Global Select Market — Composite Transactions as of April 12, 2013,8, 2016, was approximately $1.5 billion.$2.2 billion.
Number of shares of common stock, $0.01 par value, outstanding as of the close of business on November 14, 201318, 2016 — 42,606,520.32,334,732.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange Commission in connection with the 20142017 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
     

JACK IN THE BOX INC.
TABLE OF CONTENTS
 
  Page
 PART I 
Item 1.Business
2
Item 1A.Risk Factors
910
Item 1B.Unresolved Staff Comments
15
Item 2.Properties
1516
Item 3.Legal Proceedings
1516
Item 4.Mine Safety Disclosures
1516
 PART II 
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
1617
Item 6.Selected Financial Data
1820
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
1921
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
3137
Item 8.Financial Statements and Supplementary Data
3138
Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
3138
Item 9A.Controls and Procedures
3238
Item 9B.Other Information
3440
 PART III 
Item 10.Directors, Executive Officers and Corporate Governance
3440
Item 11.Executive Compensation
3440
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
3440
Item 13.Certain Relationships and Related Transactions, and Director Independence
3541
Item 14.Principal Accounting Fees and Services
3541
 PART IV 
Item 15.Exhibits, Financial Statement Schedules
3541






FORWARD-LOOKING STATEMENTS
From time to time, we make oral and written forward-looking statements that reflect our current expectations regarding future results of operations, economic performance, financial condition and achievements of Jack in the Box Inc. (the “Company”). A forward-looking statement is neither a prediction nor a guarantee of future events or results. In some cases, forward-looking statements can be identified by words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “should,” “will,” “would,” and similar expressions. Certain forward-looking statements are included in this Form 10-K, principally in the sections captioned “Business,” “Legal Proceedings,” “Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including statements regarding our strategic plans and operating strategies. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations and forward-looking statements may prove to be materially incorrect due to known and unknown risks and uncertainties.
In some cases, information regarding certain important factors that could cause our actual results to differ materially from any forward-looking statement appears together with such statement. In addition, the factors described under “Risk Factors” and “Critical“Discussion of Critical Accounting Estimates” in this Form 10-K, as well as other possible factors not listed, could cause our actual results, economic performance, financial condition or achievements to differ materially from those expressed in any forward-looking statements. As a result, investors should not place undue reliance on such forward-looking statements, which speak only as of the date of this report. The Company is under no obligation to update forward-looking statements, whether as a result of new information or otherwise.


1



PART I
ITEM 1.  BUSINESS
The Company
Overview.  Jack in the Box Inc., based in San Diego, California, operates and franchises 2,8662,954 Jack in the Box® quick-service restaurants (“QSR”QSRs”) and Qdoba Mexican GrillEats®("Qdoba") fast-casual restaurants. References to the Company throughout this Annual Report on Form 10-K are made using the first person notations of “we,” “us” and “our.”
Jack in the Box.  The first Jack in the Box opened its first restaurant opened in 1951. Jack in the Box is1951, and has since become one of the nation’s largest hamburger chains and, basedchains. Based on number of restaurants, our top 10 major markets comprise approximately 70% of the total system, and Jack in the Box is the second or third largest QSR hamburger chain in eacheight of our top 10those major markets, which comprise approximately 70% of the total system.markets. As of the end of our fiscal year on September 29, 2013,October 2, 2016, the Jack in the Box system included 2,2512,255 restaurants in 21 states and Guam, of which 465417 were company-operated and 1,7861,838 were franchise-operated.
Qdoba Mexican Grill.Qdoba.  To supplement our core growth and balance the risk associated with growing solely in the highly competitive hamburger segment of the QSR industry, in 2003 we acquired Qdoba Restaurant Corporation, operator and franchisor of Qdoba Mexican Grill.Eats. Qdoba is the second largest fast-casual Mexican food brand in the United States. As of September 29, 2013October 2, 2016, the Qdoba system included 615699 restaurants in 4647 states, as well as the District of Columbia and Canada, of which 296367 were company-operated and 319332 were franchise-operated. Qdoba is the second largest fast-casual Mexican brand in the United States.
Strategic Plan.  Our long-term strategic plan focuses on continued growth, of our two restaurant brands, increasing average unit volumes and(“AUVs”), improving restaurant profitability and returns on invested capital. A key elementcapital, and returning cash to shareholders.
Through the execution of our plan is to continue expanding our Jack inrefranchising strategy over the Box franchising operations to generate higher margins and returns for the Company while creating a business model that is less capital intensive and not as susceptible to cost fluctuations. Through the sale of 78 company-operated Jack in the Box restaurants to franchisees and the development of 11 new franchise restaurants in fiscal 2013,last five years, we have increased franchise ownership of the Jack in the Box system to approximately 79% at fiscal year end from approximately 76%72% at the end of fiscal 2012.2011 to 82% at the end of fiscal 2016. We plan to continue to refranchise our Jack in the Box restaurants and bringincrease franchise ownership inof the Jack in the Box system to between 80-85%over 90%. In fiscal 2016, our Jack in the Box franchisees independently developed 12 new franchise restaurants, and we expect the majority of Jack in the Box new unit growth will be through franchise restaurants.
Through new unit growth, and acquisitions of franchised Qdoba restaurants in select markets, and due to the refranchising of Jack in the Box restaurants, Qdoba has become a more prominent part of our company restaurant operations. As of the end of fiscal 20132016, Qdoba comprised approximately 39%47% of our total company-operated units as compared with approximately 12% five years ago.28% at the end of fiscal 2011. We plan to more aggressivelycontinue to build out the number of Qdoba company locations at an accelerated pace over the next several years primarily through new unit growth.years. Accelerating the growth of our Qdoba brand by increasing market penetration shouldis anticipated to generate heightened brand awareness.
Restaurant Concepts
Jack in the Box.  Jack in the Box restaurants offer a broad selection of distinctive products including classic burgers like our Jumbo Jack® burgers, and innovative products targeted primarily at the adult fast-food consumer. Our menu features a variety of items including hamburgers,new product lines such as Buttery Jack™ burgers and our Brunchfast™ menu. We also offer tacos, regular and curly fries, specialty sandwiches, drinks,salads and real ice cream shakes, salads and sideamong other items. Jack in the Box restaurants also offerWe allow our guests the ability to customize their meals to their tastes and to order any product when they want it, including breakfast items any time of the day.day (or night).
The Jack in the Box restaurant chain was the first major hamburger chain to develop and expand the concept of drive-thru restaurants. In addition to drive-thru windows, most of our restaurants have seating capacities ranging from 20 to 100 personspeople and are open 18-24 hours a day. Drive-thru sales currently account for approximately 70%75% of sales at company-operated restaurants. The average check in fiscal year 20132016 was $6.48$7.38 for company-operated restaurants.
With a presence in only 21 states, we believe Jack in the Box is a brand with significant growth opportunities. In fiscal 2013,2016, we continued to expand in both existing and new markets. We opened 6four company-operated restaurants and franchisees opened 1112 Jack in the Box restaurants during the year. In fiscal 2014,2017, we planexpect to open approximately 1020-25 new company- and franchise-operated restaurants.Jack in the Box restaurants system-wide.

2



The following table summarizes the changes in the number of company-operated and franchise Jack in the Box restaurants over the past five years: 
 Fiscal Year Fiscal Year
 2013 2012 2011 2010 2009 2016 2015 2014 2013 2012
Company-operated restaurants:                    
Beginning of period 547
 629
 956
 1,190
 1,346
 413
 431
 465
 547
 629
New 6
 19
 15
 30
 43
 4
 2
 1
 6
 19
Refranchised (78) (97) (332) (219) (194) (1) (21) (37) (78) (97)
Closed (11) (4) (10) (46) (6) —
 (6) (2) (11) (4)
Acquired from franchisees 1
 —
 —
 1
 1
 1
 7
 4
 1
 —
End of period total 465
 547
 629
 956
 1,190
 417
 413
 431
 465
 547
% of system 21% 24% 28% 43% 54% 18% 18% 19% 21% 24%
Franchise restaurants:                    
Beginning of period 1,703
 1,592
 1,250
 1,022
 812
 1,836
 1,819
 1,786
 1,703
 1,592
New 11
 18
 16
 16
 21
 12
 16
 11
 11
 18
Refranchised 78
 97
 332
 219
 194
 1
 21
 37
 78
 97
Closed (5) (4) (6) (6) (4) (10) (13) (11) (5) (4)
Sold to Company (1) —
 —
 (1) (1)
Sold to company (1) (7) (4) (1) —
End of period total 1,786
 1,703
 1,592
 1,250
 1,022
 1,838
 1,836
 1,819
 1,786
 1,703
% of system 79% 76% 72% 57% 46% 82% 82% 81% 79% 76%
System end of period total 2,251
 2,250
 2,221
 2,206
 2,212
 2,255
 2,249
 2,250
 2,251
 2,250
Qdoba.  Qdoba’s menu features Mexican-themed food items including burritos, tacos, salads, and quesadillas. Guests can customize their meals by adding 3-cheese queso, guacamole, and a variety of sauces and salsas without paying an extra charge. Our new logo that debuted in fiscal 2016 modifies the full name of our brand from Qdoba Mexican Grill.  Our® to Qdoba restaurants feature fresh, high quality ingredients and unique Mexican flavors that combineEats to create a variety of innovativebetter reflect the flavors and products. Throughout each day, guacamole is prepared on site using fresh Hass avocados, black and pinto beans are slow-simmered, shredded beef and pork are slow-roasted and adobo-marinated chicken and steak are flame-grilled. Customer orders are prepared in full view, which givesvariety our guests the ability to build a meal specifically suited to their individual taste preferences and nutritional needs. menu offers.
Our restaurants also offer a variety of catering options that can be tailored to feed groups of fiveten to several hundred. OurWhile some of our restaurants serve breakfast, the majority generally operate from 10:30 a.m. to 10:00 p.m. andQdoba restaurants have a seating capacity that ranges from 60 to 80 persons, includingpeople, and many locations include outdoor patio seating at many locations. Theseating. In fiscal 2016, the average check excluding catering sales, in fiscal year 2013 was $10.43for company-operated restaurants.restaurants was $11.75, which excludes catering sales.
We believe there is significant opportunity for continued growth at Qdoba. Wecurrently estimate the long-term growth potential for Qdoba to be approximately 2,000 units across the United States. Our company-operated restaurants are generally located in larger market service areas, while franchiseareas. Franchise development is more weighted to less densely-populatedtowards traditional sites, but are also developed in non-traditional sites (airports, campuses, etc.) or areas where local franchisees can operate more efficiently. WeDuring fiscal 2016, we opened 3435 company-operated restaurants and franchisees opened 3418 Qdoba restaurants, duringincluding six non-traditional sites. In fiscal 2013, including two in Canada. Additionally, during the third quarter of fiscal 2013,2017, we closed 62expect to open 60-70 new Qdoba restaurants (the “2013 Qdoba Closures”) based on a comprehensive analysis that took into consideration levelssystem-wide, of return on investment and other key operating performance metrics. For additional information relatedwhich we expect approximately 40 to the 2013 Qdoba Closures, refer to Note 2, Discontinued Operations, of the notes to the consolidated financial statements. In fiscal 2014, we plan to open 60-70 new company and franchise restaurants.be company-operated locations.

3



The following table summarizes the changes in the number of company-operated and franchise Qdoba restaurants over the past five years:
 Fiscal Year Fiscal Year
 2013 2012 2011 2010 2009 2016 2015 2014 2013 2012
Company-operated restaurants:                    
Beginning of period 316
 245
 188
 157
 111
 322
 310
 296
 316
 245
New 34
 26
 25
 15
 24
 35
 17
 16
 34
 26
Refranchised (3) —
 —
 —
 —
 —
 —
 —
 (3) —
Closed (4) (5) (2) (64) (1)
Acquired from franchisees 13
 46
 32
 16
 22
 14
 —
 —
 13
 46
Closed (64) (1) —
 —
 —
End of period total 296
 316
 245
 188
 157
 367
 322
 310
 296
 316
% of system 48% 50% 42% 36% 31% 53% 49% 49% 48% 50%
Franchise restaurants:                    
Beginning of period 311
 338
 337
 353
 343
 339
 328
 319
 311
 338
New 34
 32
 42
 21
 38
 18
 22
 22
 34
 32
Refranchised 3
 —
 —
 —
 —
 —
 —
 —
 3
 —
Sold to Company (13) (46) (32) (16) (22)
Closed (16) (13) (9) (21) (6) (11) (11) (13) (16) (13)
Sold to company (14) —
 —
 (13) (46)
End of period total 319
 311
 338
 337
 353
 332
 339
 328
 319
 311
% of system 52% 50% 58% 64% 69% 47% 51% 51% 52% 50%
System end of period total 615
 627
 583
 525
 510
 699
 661
 638
 615
 627

Site Selection and Design
Site selections for all new company-operated Jack in the Box and Qdoba restaurants are made after an economic analysis and a review of demographic data and other information relating to population density, traffic, competition, restaurant visibility and access, available parking, surrounding businesses and opportunities for market penetration. Restaurants developed by franchisees are built to ourbrand specifications on sites we have reviewed.
WeEach of our brands have multiple restaurant models with different seating capacities to help reduce costs and improve our flexibility in selecting locations for our restaurants. Management believes that this flexibility enables the Company to match the restaurant configuration with the specific economic, demographic, geographic or physical characteristics of a particular site.
Typical costs to develop a traditional Jack in the Box restaurant, excluding the land value, range from $1.2 million to $2.0 million. The majority of our Jack in the Box restaurants are constructed on leased land or on land that was purchasedwe purchase and subsequently sold,sell, along with the improvements, in a sale and leaseback transaction. Typical costs to develop a traditional Jack in the Box restaurant, excluding the land value, range from $1.5 million to $1.9 million.transactions. Upon completion of a sale and leaseback transaction, the Company’s initial cash investment is reduced to the cost of equipment, which averagesranges from approximately $0.4$0.3 million. to $0.5 million.
The majority of Qdoba restaurants are located in leased spaces ranging from conventional large-scale retail projects to smaller neighborhood retail strip centers as well as non-traditional locations such as airports, college campuses and food courts. Qdoba restaurant development costs typicallygenerally range from $0.6$0.8 million to $1.0$1.5 million depending on the type, square footage, geographic region.region, and if the location includes an expanded alcohol offering. In fiscal 2015, we began testing new restaurant design elements as part of our brand evolution, and in fiscal 2016, we finalized our new restaurant design and approved remodel designs for existing restaurants.
Franchising Program
Jack in the Box.  The Jack in the Box franchise agreement generally provides for an initial franchise fee of $50,000$50,000 per restaurant for a 20-year term, royalty payments, and marketing fees at 5% of gross sales. Royalty rates, typically 5% of gross sales, generallycan range from 2%1% to as high as 15% of gross sales, and some existing agreements provide for variable rates.rates and/or royalty holidays. We may offer development agreements to franchisees for construction of one or more new restaurants over a defined period of time and in a defined geographic area. Developers aremay be required to pay a fee, which may be credited against a portion of the franchise fee due when restaurants open in the future.fees for certain company-sourced new sites.  Developers may forfeit such fees and lose their rights to future development if they do not maintain the required schedule of openings.opening schedule. To simulatestimulate growth beginning in fiscal 2012, we began offeringhave offered lower royalty rates to franchisees who opened restaurants within a specified time reduced franchise fees and lower royalty rates.frames.


In connection with the sale of a company-operated restaurant to a franchisee, we sell to the franchisee the restaurant equipment and the right to do business at that location are sold to the franchisee.for a specified term. The aggregate price is negotiated based upon the value of the restaurant as a going concern, which depends on various factors, including the sales and cash flows of the restaurant, as well as its location and history. In addition, the land and building are generally leased or subleased to the franchisee at a negotiated rent, typically equal to the greater of a minimum base rent or a percentage of gross sales. The franchisee is usually required to pay property taxes, insurance and ancillary costs, and is responsible for maintaining the restaurant.

4Qdoba. ��


Qdoba Mexican Grill.  The current Qdoba franchise agreementfranchisees are generally provides forcharged an initial franchise fee of $30,000$30,000 per restaurant for a 10-year franchise term with a 10-year option to extend at a fee of $5,000,$5,000, royalty payments, and marketing fees of up to 2%1.25% of gross sales. MostWe also require franchisees are also required to spend a minimum of 2% of gross sales on local marketing for their restaurants. Royalty rates are typically 5% of gross sales with certain agreements at 2.5%, as described below.sales. We offer development agreements to franchisees for the construction of one or more new restaurants over a defined period of time and in a defined geographic area for a development fee, a portion of which may be credited against franchise fees due for restaurants when they are opened. If the developer does not maintain the required schedule of openings, they may forfeit such fees and lose their rights to future development. During fiscal 2010 and 2011, as an incentive to develop target markets, we entered into development agreements with an initial franchise fee of $15,000 and a royalty rate of 2.5% of gross sales for the first two years of operation for each restaurant opened within the first two years of the development agreement, subject to certain limitations. As weWe continue to pursue non-traditional locations both through multi-location commitments and single unit franchise agreements. Currently, the non-traditional franchise agreements we offer provide for a $15,000 initial franchise fee, and a 6% royalty rate. To enhance our multi unit non-traditional growth, we may enter into franchiseoffer agreements that provide for a lower initial fee and lower royalty rates.fees.
Restaurant Management and Operations
OurJack in the Box and Qdoba restaurants are operated by a company manager or franchise operator who is directly responsible for the operations of the restaurant, including product quality, service, food safety, cleanliness, inventory, cash control and the conduct and appearance of employees. We focus on attracting, selecting, engaging and retaining employees and franchisees who share our passion for creating long-lasting, successful restaurants.
At both brands, company-operated restaurant managers are supervised by district managers, who are overseen by directors of operations, who report to vice presidents of operations. Under our performance system, vice presidents and directors are eligible for an annual incentive based on achievement of goals related to region level sales, profit, and company-wide performance. District managers and restaurant managers are eligible for quarterly incentives based on growth in restaurant sales and profit and/or certain other operational performance standards.
Jack in the Box.Company restaurant managers are required to attend extensive management training classes involving a combination of classroom instruction and on-the-job training in specially designated training restaurants. Restaurant managers and supervisory personnel train other restaurant employees in accordance with detailed procedures and guidelines using training aids available at each location. Both company and franchise-operated restaurants also use an interactive system of computer-based training (“CBT”), with a touch-screen computer terminal. The CBT technology incorporates audio, video and text, all of which are updated via satellite. CBT is also designed to reduce the administrative demands on restaurant managers.
For Jack in the Box company operations, division vice presidents supervise directors of operations, who supervise district managers, who in turn supervise restaurant managers. Under our performance system, these management levels are all eligible for periodic bonuses based on achievement of goals related to restaurant sales, profit and/or certain other operational performance standards.
Qdoba. The Qdoba Mexican Grill. At Qdoba company restaurants, we focus on attracting, selecting, engaging and retaining people who share our values to create long-lasting positive impacts on operating results. Our Qdoba Career MapTraining System is the core development tool used to provide employees with detailed educationtraining by position, from entry level to arearestaurant manager. High performing general managers and hourly team membersRestaurant management are certified to train and develop employeesteam members through a series of on-the-jobon the job and classroom trainingsworkshop training that focus on knowledge, skills and behaviors. The Team Member Progression program within the Career Map tool recognizes and rewards three levels ofQdoba Training System certifies  achievement for our cooks and line servers who showcase excellence in their positions. Team members must have, or acquire, specific technical and behavioral skill setsskills to reach an achievement level.
For Qdoba restaurant operations, the division vice presidents supervise regional operations managers, who supervise district managers, whobecome certified in turn supervise restaurant managers. All levels are eligible for periodic performance bonuses based on goals related to restaurant sales, profit optimization and other operations performance standards such as guest satisfaction.all positions.
Customer Satisfaction
Company-operated and franchise-operated restaurants devote significant resources toward ensuring that all of our restaurants offeroffering quality food and excellent service. Toservice at all of our restaurants. One tool we use to help us maintain a high level of customer satisfaction is our Voice of Guest program, which provides restaurant managers, district managers, and franchise operators with ongoing feedback from guests who complete a short guest satisfaction survey via an invitation typically provided on the register receipt. In these surveys, guests rate their satisfaction with key elements of their restaurant experience, including friendliness, food quality, cleanliness, speed of service and order accuracy. In 2013,2016, the Jack in the Box and Qdoba systems received more than 1.6approximately 2.1 million and 0.2 million guest survey responses, respectively. We also have a “mystery guest” program at Jack in the BoxOur Guest Relations Department receives feedback that providesguests provide via our website, and communicates that feedback to restaurant managers, district managers and franchise operatorsoperators. We also collect guest feedback on guest service as evaluated by “secret shoppers” who visit the restaurant.  Finally, our Guest Relations department provides feedback that guests report through our toll-free numbersocial media and via our website.other resources.


Food Safety and Quality Assurance
Our “farm-to-fork” food safety and quality assurance programs are designed to maintain high standards for the food products and food preparation procedures used by theour vendors and in our restaurants. We maintain product specifications for our ingredients and our Food Safety and Regulatory Compliance Department must approve product sources.all suppliers of food products to our restaurants. We have a comprehensive Hazard Analysis & Critical Control Points (“HACCP”) system for managinguse third-party and internal audits to review the food safety management programs of our vendors. We manage food safety in our restaurants. HACCP combinesrestaurants through a comprehensive food safety management program that is based on the Food and Drug Administration (“FDA”) Food Code requirements. The food safety management program includes employee training, ingredient testing, documented restaurant practices and detailed attention to product safety and quality

5


at each stage of the food preparation cycle. The U.S. Department of Agriculture, Food and Drug Administration and the Center for Science in the Public Interest have recognized our HACCP program as a leader in the industry.
In addition, our HACCP systemfood safety management program uses American National Standards Institute certified food safety training programs to train our company and franchise restaurant management employees on food safety practices for our restaurants.
Supply Chain
Historically, we provided purchasing and distribution services for our company-operated restaurants and most of our franchise-operated restaurants. Our remaining franchisees purchased product from approved suppliers and distributors. In fiscal 2012, all of our company-operated Qdoba restaurants and approximately 90% of our Qdoba franchisesfranchisees began utilizing the distribution services of a third-party distributor under a long-term contract, ending February 2017. Since December 2014, the remaining 10% of our Qdoba franchisees have utilized the same third-party distributor under the same long-term contract. We expect to enter into a new long-term agreement with a third-party distributor for all company and franchise Qdoba restaurants in the United States upon expiration of our current contract.
In July 2012, weall of our Jack in the Box company-operated restaurants and approximately 90% of our Jack in the Box franchisees entered into a long-term contract with another third-party distributor to provide distribution services to our Jack in the Box restaurants through August 2022. InBeginning in June 2015, the fourth quarterremaining 10% of fiscal 2012, we had completedour Jack in the transition ofBox franchisees decided to use the services from one distribution center and our remaining centers were transitioned by the end of the first quarter of fiscal 2013.same third-party distributor under the same long-term contract.
The primary commodities purchased by our restaurants are beef, poultry, pork, cheese and produce. We monitor the primary commodities we purchase in order to minimize the impact of fluctuations in price and availability, and we may enter into purchasing contracts and pricing arrangements when considered to bewe consider them advantageous. However, certain commodities remain subject to price fluctuations. We believe all essential food and beverage products are available, or can be made available, upon short notice from alternative qualified suppliers.
Information Systems
At our shared services corporate support center, we have centralized financial accounting systems, human resources and payroll systems, and a communications and network infrastructure that supports both Jack in the Box and Qdoba corporate functions. Our restaurant software allows for daily polling of sales, inventory and laborother data from the restaurants directly. WeOur company restaurants and traditional site franchise restaurants use standardized Windows-based touch screen point-of-sale (“POS”) platforms. These platforms in our company and traditional site franchiseallow the restaurants which allows us to accept cash, credit cards and our re-loadable gift cards. Our Qdoba POS system is also enhanced with an integrated guest loyalty program as well as a takeout and delivery interface. The takeout and delivery interface is used to manage online and catering orders which are distributed to sites via a hosted online ordering website.
We have developed business intelligence systems that provide visibility to the key metrics in the operation of company and franchise restaurants. These systems play an integral role in accumulating and analyzing market information. We haveOur company restaurants use labor scheduling systems to assist managers in managing labor hours based on forecasted sales volumes andvolumes. We also have inventory management systems which enable timely and accurate deliveries of food and packaging to our restaurants. To support order accuracy and speed of service, our drive-thru Jack in the Box restaurants use color order confirmation screens. We also have kiosks in many corporate and franchiseplans to consolidate our restaurant level technologies at Jack in the Box restaurants throughout our major markets that allow customers to place their order themselves using easy-to-follow steps on a touchscreen. Our Jack in the Box company and franchised restaurants utilize an interactive CBT system as the standard training tool for new hire training and periodic workstation re-certifications.Qdoba restaurants.
Advertising and Promotion
Jack in the Box. At Jack in the Box, we build brand awareness through our marketing and advertising programs and activities. These activities are supported primarily by financial contributions to a marketing fund from all company and franchise restaurants based on a percentage of gross sales. Activities to advertise restaurant products, promote brand awareness and attract customers include, but are not limited to, regionalsystem and localregional campaigns on television, national cable television, radio and print media, as well as Internet advertising on specific sitesdigital and broad-reach Web portals. Also, in recent years we began utilizing social media as a channel to better reach our target customers.media. 


Qdoba Mexican Grill.Qdoba. At Qdoba, the goal of our marketing and advertising and marketing isprograms are designed to build brand awareness, and generatelift restaurant traffic, and we seek to buildincrease brand advocates by delivering a great guest experience in the restaurants. While alladvocacy. All company and franchise restaurants financially contribute a small amountpercentage of gross sales to a fund primarily used forthe production and development of brand assets, we do not have a national media fund. Advertising is done at theand regional or local level for both companyradio, print, and franchise owneddigital and operated restaurants, and is determined by the local management.social media. Advertising is created at the brand level and the system operators can utilize these assets, or tap into our in-house graphic design departmentcreative services group to create custom advertising that meets their particular communication objectives while adhering to brand standards. Additionally, the brand is piloting an affinity and mobile platform designed to inspire, motivate and reward increased frequency among Qdoba guests.

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Employees
At September 29, 2013,October 2, 2016, we had approximately 19,15022,200 employees, of whom 18,20021,500 were restaurant employees, 800500 were corporate personnel, and 150200 were field management or administrative personnel. Employees are paid on an hourly basis, except certain restaurant management, operations and corporate management, and administrative personnel. We employ both full- and part-time restaurant employees in order to provide the flexibility necessary during peak periods of restaurant operations.
We have not experienced any significant work stoppages, and believe our labor relations are good. Wewe support our employees, including part-time workers, by offering industry competitive wages and benefits. Furthermore, we offer all hourly employees meeting certain minimum service requirements access to health coverage, including vision and dental benefits. As an additional incentive to our Jack in the Box hourly team members with more than a year of service, we pay a portion of their health insurance premiums.
Executive Officers
The following table sets forth the name, age, position and years with the Company of each person who is an executive officer of Jack in the Box Inc.: as of October 2, 2016:
Name Age Positions 
Years with the
Company
 Age Positions 
Years with the
Company
Linda A. Lang 55 Chairman of the Board and Chief Executive Officer 26
Leonard A. Comma 43 President and Chief Operating Officer 12 47 Chairman of the Board and Chief Executive Officer 15
Mark H. Blankenship, Ph.D. 52 Executive Vice President, Chief People, Culture and Corporate Strategy Officer 16 55 Executive Vice President, Chief People, Culture and Corporate Strategy Officer 19
Jerry P. Rebel 56 Executive Vice President and Chief Financial Officer 10 59 Executive Vice President and Chief Financial Officer 13
Phillip H. Rudolph 55 Executive Vice President, General Counsel and Corporate Secretary 5 58 Executive Vice President, Chief Legal and Risk Officer and Corporate Secretary 9
Elana M. Hobson 53 Senior Vice President of Operations 36
Frances L. Allen 54 President, Jack in the Box Brand 2
Keith M. Guilbault 53 President, Qdoba Brand 12
Paul D. Melancon 57 Senior Vice President of Finance, Controller and Treasurer 8 60 Senior Vice President of Finance, Controller and Treasurer 11
Timothy P. Casey 53 President, Qdoba Restaurant Corporation 1
Vanessa C. Fox 43 Vice President, Chief Development Officer 19
Carol A. DiRaimo 52 Vice President of Investor Relations and Corporate Communications 5 55 Vice President of Investor Relations and Corporate Communications 8
Dean C. Gordon 54 Vice President of Supply Chain 7
Raymond Pepper 55 Vice President and General Counsel 19
The following sets forth the business experience of each executive officer for at least the last five years:
Ms. LangMr. Comma has been Chairman of the Board and Chief Executive Officer since October 2005. She was also President from February 2010 untilJanuary 2014. From May 2012 until October 2014, he served as President, and servedfrom November 2010 through January 2014, as Chief Operating Officer from November 2003 to October 2005. She was Executive Vice President from July 2002 to November 2003, and held various officer-level positions with marketing or operations responsibilities from 1996 through 2002. She has more than 25 years of experience with the Company. Ms. Lang announced her retirement from the Company, effective January 1, 2014.
Officer. Mr. Comma has been President and Chief Operating Officer since May 2012. He was previously Executive Vice President and Chief Operating Officer from November 2010 to May 2012, and served as Senior Vice President and Chief Operating Officer from February 2010 to November 2010. Mr. Comma was2010, Vice President Operations Division II from February 2007 to February 2010, Regional Vice President of the Company’s Southern California region from May 2006 to February 2007 and Director of Convenience-Store & Fuel Operations for the Company’s proprietary chain of Quick Stuff convenience stores from August 2001 to May 2006. Mr. Comma will succeed Ms. Lang as the Company’s Chief Executive Officer, effective January 1, 2014. Mr. Comma will also be appointed to the Boardhas 24 years of retail and serve as Chairman of the Board, effective January 1, 2014, and will retain his title as President of the Company.franchise experience.
Dr. Blankenship has been Executive Vice President, Chief People, Culture and Corporate Strategy Officer since November 2013. He was previously Senior Vice President and Chief Administrative Officer from October 2010 to November 2013, Vice President, Human Resources and Operational Services from October 2005 to October 2010 and Division Vice President, Human Resources from October 2001 to September 2005. Dr. Blankenship has more than 1619 years of experience with the Company in various human resource and training positions.
Mr. Rebel has been Executive Vice President and Chief Financial Officer since October 2005. He was previously Senior Vice President and Chief Financial Officer from January 2005 to October 2005 and Vice President and Controller of the Company from September 2003 to January 2005. Prior to joining the Company in 2003, Mr. Rebel held senior level positions with Fleming Companies and CVS Corporation. He has more than 3135 years of corporate finance experience.
Mr. Rudolph has been Chief Legal and Risk Officer since October 2014, Executive Vice President since February 2010, and Corporate Secretary since November 2007. Before becoming Chief Legal and Risk Officer, he was General Counsel and Corporate Secretary since November 2007. Prior to joining the Company, Mr. Rudolph was Vice President and General Counsel for Ethical Leadership Group. He was previously a partner in the Washington, D.C. office of Foley Hoag, LLP, and a Vice President at McDonald’s

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Corporation where, among other roles, he served as U.S. and International General Counsel. Before joining McDonald’s, Mr. Rudolph spent 15 years with the law firm of Gibson, Dunn & Crutcher, LLP, the last six of which he spent as a litigation partner in the firm’s Washington, D.C. office. Mr. Rudolph has more than 30 years of legal experience.


Ms. HobsonAllen has beenserved as President of the Jack in the Box brand since October 2014. She joined the Company with more than 30 years of branding and marketing experience, including senior leadership roles at such major organizations as Denny’s, Dunkin’ Brands, Sony Ericsson Mobile Communications, PepsiCo and Frito-Lay. From July 2010 to October 2014, Ms. Allen worked for Denny’s Corp., most recently as its Chief Brand Officer and, previously, as its Chief Marketing Officer. From 2007 to 2009, she was Chief Marketing Officer of Dunkin’ Donuts, from 2004 to 2007, she was Vice President of Marketing, North America at Sony Ericsson Mobile Communications, and from 1998 to 2004, she held several positions at PepsiCo, most recently as Vice President of Marketing. Prior to that, Ms. Allen served at Frito-Lay as Director of International Advertising, and worked for several advertising agencies.
Mr. Guilbault has served as President of Qdoba brand since June 2016. From March 2016 to June 2016, he served as Chief Operating Officer of Qdoba. Prior to that, Mr. Guilbault held several positions with the Jack in the Box brand, including: Senior Vice President of Operations since May 2013. She was previouslyand Chief Marketing Officer from November 2013 to March 2016; Vice President of OperationsMenu & Innovation from FebruaryOctober 2012 to November 2013; Vice President of Franchising from October 2010 to May 2013,October 2012; Division Vice President of Operations Initiatives from March 2009February 2010 to February 2010,October 2010; and Division Vice President of Guest Service SystemsBrand Innovation & Regional Marketing from June 2007February 2006 to March 2009. Prior to managing Guest Service Systems, Ms. Hobson held several management-level positionsFebruary 2010. He joined the Company in the field, including2004 as a Regional Vice President from 2003 to 2007; and Area Manager from 1998 to 2003. She joinedin Central California. Including his service with Jack in the Box as a restaurant team memberInc., Mr. Guilbault has more than 16 years of experience in 1977,management positions with several companies, including Mobil Oil Corporation, Priceline WebHouse Club and served in various District Manager and Restaurant Manager positions from 1981 to 1998.Freemarkets, Inc.
Mr. Melancon has been Senior Vice President of Finance, Controller and Treasurer since November 2013. He was previously Vice President of Finance, Controller and Treasurer from September 2008 to November 2013 and Vice President and Controller from July 2005 to September 2008. Before joining the Company, Mr. Melancon held senior financial positions at several major companies, including Guess?, Inc., Hyper Entertainment, Inc. (a subsidiary of Sony Corporation of America) and Sears, Roebuck and Co.Company. Mr. Melancon has more than 3035 years of experience in accounting and finance, including 11 years with Price Waterhouse.
Mr. CaseyMs. Fox has been President of Qdoba since March 2013. From 2010 until March 2013, he served asVice President and Chief ExecutiveDevelopment Officer of MFOC Holdco, Inc. which isoverseeing development for the parent company ofJack in the Mrs. Fields BrandBox and TCBY. From 2007 to 2010, Mr. Casey was an executive with International Coffee & Tea, which operatedQdoba brands since June 2016, and franchised The Coffee Bean & Tea Leaf, most recently serving asthe Jack in the Box brand since March 2014. Previously, she held numerous positions for the Jack in the Box brand, including: Division Vice President of Global Brand Marketing, ProductFranchise Business Development since September 2013 and Division Vice President of Franchise Sales & Development since June 2011. From February 2011 to June 2011, she was Director of Franchise Business Development, and Operations. As Regional Vice President at Starbucks from 1998 to 2004, Mr. Casey managed more than 500 storesshe previously had the same title in a 10-state region. Prior toFranchise Sales since October 2010. Ms. Fox served in other capacities since joining Starbucksthe Company in 1996, Mr. Casey held leadership positions in marketing and operations with Circle K Corporation and Southland Corporation. He has more than 30 years experience1997. Before joining Jack in the restaurantBox Inc., she was a licensed real estate agent and retail industries.worked for several companies in the residential real estate industry. Ms. Fox has 24 years of real estate and development experience.
Ms. DiRaimo has been Vice President of Investor Relations and Corporate Communications since July 2008. She previously spent 14 years at Applebee’s International, Inc. where she held various positions including Vice President of Investor Relations from February 2004 to November 2007. Ms. DiRaimo has more than 30 years of corporate finance and public accounting experience, including positions with Gilbert/Robinson Restaurants, Inc. and Deloitte.
Mr. Gordon has been Vice President of Supply Chain since October 2012. He was previously Division Vice President of Purchasing from February 2009 to October 2012. Prior to joining the Company in February 2009, Mr. Gordon was Vice President of Supply Chain Management for Potbelly Sandwich Works from December 2005 to February 2009, and he held various positions with Applebee’s International from August 2000 to December 2005, most recently as Executive Director of Procurement. Mr. Gordon also held a number of positions at Prandium, Inc., an operator of multiple restaurant concepts, from October 1994 to August 2000. Mr. Gordon has over 20 years of Supply Chain Management experience.
Mr. Pepper has been Vice President and General Counsel since September 2014. He was previously Vice President, Deputy General Counsel since September 2013, and Division Vice President, Deputy General Counsel from July 2009 to September 2013. Prior to that, Mr. Pepper held the positions of Division Vice President, Corporate Counsel from 2003 to 2009 and Director, Corporate Counsel from 1997 to 2003. Before joining the Company, Mr. Pepper spent 11 years with the law firm of Miller, Boyko and Bell, both as an associate and partner. Mr. Pepper has 30 years of legal experience.
Trademarks and Service Marks
The Jack in the Box, andQdoba Mexican Eats, Qdoba Mexican Grill and Qdoba names are of material importance to us, and each is a registered trademark and service mark in the United StateStates and elsewhere. In addition, we have registered or applied to register numerous service marks and trade names for use in our businesses, including the Jack in the Box logo, the Qdoba logologos, Qdoba Mexican Grill mark and various product names and designs.


Seasonality
Restaurant sales and profitability are subject to seasonal fluctuations because of factors such as vacation and holiday travel and events, seasonal weather conditions, and crises, all of which affect the public’s dining habits.
Competition and Markets
The restaurant business is highly competitive and is affected by local and national economic conditions, including unemployment levels, population and socioeconomic trends, traffic patterns, local and national competitive changes, in a geographic area, changes in consumer dining habits and preferences, and new information regarding diet, nutrition and health, thatall of which may affect consumer spending habits. Key elements of competition in the industry are the quality and innovation in the food products offered, price and perceived value, quality of service experience (including technological and other innovations), speed of service, personnel, advertising and other marketing efforts, name identification, restaurant location, and image and attractiveness of the facilities.
Each Jack in the Box and Qdoba restaurant competes directly and indirectly with a large number of national and regional restaurant chains, some of whomwhich have significantly greater financial resources, as well as with locally-owned and/or independent restaurants in the quick-service and the fast-casual segments, and other “food away from home” consumer options.options including grocery and specialty stores, catering and delivery services. In selling franchises, we compete with many other restaurant franchisors, some of whom have substantially greater financial resources.
Available Information
The Company’s primary website can be found at www.jackinthebox.com. We make available free of charge at this website (under the caption “Investors — SEC Filings”) all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K, and amendments to those reports. These reports are made available on the website as soon as reasonably

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practicable after their filing with, or furnishing to, the Securities and Exchange Commission (“SEC”). You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site (www.sec.gov) that contains our reports, proxy and information statements, and other information at www.sec.gov.information.
Regulation
Each restaurant is subject to regulation by federal agencies, as well as licensing and regulation by state and local health, sanitation, safety, fire, zoning, building, taxing and other agencies and departments. Restaurants are also subject to rules and regulations imposed by owners and (or)and/or operators of shopping centers, college campuses, airports, military bases or other non-traditional locations in whichwhere a restaurant is located. Difficulties or failures in obtaining and maintaining any required permits, licensinglicenses or approval,approvals, or difficulties in complying with applicable rules and regulations, could result in restricted operations, closures of existing restaurants, delays or cancellations in the opening of new restaurants, increased cost of operations or the imposition of fines and other penalties.
We are also subject to federal, state and international laws regulating the offer and sale of franchises.franchises, as well as judicial and administrative interpretations of such laws. Such laws impose registration and disclosure requirements on franchisors in the offer and sale of franchises, and may also apply substantive standards to the relationship between franchisor and franchisee, including limitations on the ability of franchisors to terminate franchises and alter franchise arrangements.
We are subject to the federal Fair Labor Standards Act and various state laws governing such matters as minimum wages, exempt status classification, overtime, breaks and other working conditions for company employees. A significant numberOur franchisees are subject to these same laws. Many of our food service personnel are paid at rates based onset in relation to the federal and state minimum wage laws and, accordingly, increaseschanges in the minimum wage requirements may increase labor costs for us and our labor costs.franchisees. Federal and state laws may also require us to provide paid and unpaid leave to our employees, or healthcare or other employee benefits, which could result in significant additional expense to us.us and our franchisees. We are also subject to federal immigration laws requiring compliance with work authorization documentation and verification procedures.
We are subject to certain guidelines under the Americans with Disabilities Act of 1990 and various state codes and regulations, which require restaurants to provide full and equal access to persons with physical disabilities.
We are also subject to various federal, state and local laws regulating the discharge of materials into the environment. The cost of complying with these laws increases the cost of operating existing restaurants and developing new restaurants. Additional costs relate primarily to the necessity of obtaining more land, landscaping, storm drainage control and the cost of more expensive equipment necessary to decrease the amount of effluent emitted into the air, ground and surface waters.
Many

Some of our Qdoba restaurants sell alcoholic beverages, which require licensing. The regulations governing licensing may impose requirements on licensees including minimum age of employees, hours of operation, and advertising and handling of alcoholic beverages. The failure of a Qdoba restaurant to obtain or retain a license could adversely affect the store’s results of operations.
We have processes in place to monitor compliance with applicable laws and regulations governing our company operations.
ITEM 1A.  RISK FACTORS
We caution you that our business and operations are subject to a number of risks and uncertainties. The factors listed below are important factors that could cause our actual results to differ materially from our historical results and from projections in the forward-looking statements contained in this report, in our other filings with the SEC, in our news releases and in oral statements by our representatives. However, other factors that we do not anticipate or that we do not consider significant based on currently available information may also have an adverse effect on our results.
Risks Related to the Food Service Industry.  Food service businesses such as ours may be materially and adversely affected by changes in consumer preferences, national and regional economic, political and socioeconomic conditions, attitudes and changes in consumer dining habits whether(whether or not based on new information regarding diet, nutrition or health, onhealth), as well as by the cost of food at home compared to food away from home, technological and other innovations, health-based regulations or on other factors. Adverse economic conditions, such as higher levels of unemployment, lower levels of consumer confidence and decreased discretionary spending, may reduce restaurant traffic and sales and impose practical limits on pricing. If adverse or uncertain economic conditions persist for an extended period of time, consumers may make long-lasting changes to their spending behavior. The impact of these factors may be exacerbated by the geographic profile of our Jack in the Box segment.brand. Specifically, nearly 70% of the restaurants in our Jack in the Box system are located in the states of California and Texas. Economic conditions, state and local laws, government regulations, weather conditions or natural disasters affecting those states may therefore more greatly impact our results than would similar occurrences in other locations.

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The performance of our business may also be adversely affected by factors such as:
 
seasonal sales fluctuations;
severe weather and other natural disasters;
unfavorable trends or developments concerning operating costs such as inflation, increased costs of food, fuel, utilities, technology, labor (including due to legislated minimum wage increases or employee relations issues)new administrative interpretations of regulations impacting labor costs), insurance, andor employee benefits (including healthcare, workers’ compensation and other insurance costs and premiums);
the impact of initiatives by competitors and increased competition generally;
lack of customer acceptance of new menu items, service initiatives or potential price increases necessary to cover higher input costs;
customers trading down to lower priced items and/or shifting to competitorscompetitive offerings with lower priced products;
labor disruptions, unionization, labor shortages or other labor or employee relations issues, and the availability of qualified, experienced management and hourly employees;employees at company and franchise locations; and
failure to anticipate or respond quickly to relevant market trends or to implement successful advertising and marketing programs, including technology-based programs.
In addition, if economic conditions deteriorate or are uncertain for a prolonged period of time, or if our operating results decline unexpectedly, we may be required to record impairment charges, which will negatively impact our results of operations for the periods in which they are recorded. Due to the foregoing or other factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for a full fiscal year. These fluctuations may cause our operating results to be below the expectations of public market analysts and investors, and may adversely impact our stock price.
Risks Related to Food and Commodity Costs and Availability.  We and our franchisees are subject to volatility in food and commodity costs and availability. Accordingly, our profitability depends in part on our ability to anticipate and react to changes in food costs and availability, including changes in fuel costs and other supply and distribution costs.availability. For example, prices forthe costs of feed ingredients used to produce beef, chickenpork and porkchicken could be adversely affected by changes in worldwide supply andor demand, or by regulatory or societal mandates, leading to higher prices. Further, increases in fuel prices could result in increased distribution costs.for our products. In recentpast years, food and commodity costs increased significantly, out-pacing general inflation and industry expectations. Looking forward, we anticipate volatile or uncertain price conditions to continue.
We seek to manage food and commodity costs, including through extended fixed price contracts, strong category and commodity management, and purchasing fundamentals. However, certain commodities such as beef and pork, which currently represent approximately 20% and 8%7%, respectively, of our overallconsolidated commodity spend, do not lend themselves to fixed price contracts.


We cannot assure you that we will successfully enter into fixed price contracts on a timely basis or on commercially favorable pricing terms. In addition, although we have fixed price contracts for produce, we are subject to force majeure clauses resulting from weather or acts of God that may result in temporary spikes in costs.

Further, we cannot assure you that we or our franchisees will be able to successfully anticipate and react effectively to changing food and commodity costs by adjusting our purchasing practices or menu offerings. We and our franchisees also may not be able to pass along price increases to our customers price increases as a result of adverse economic conditions, competitive pricing or other factors. Therefore, variability of food and other commodity costs could adversely affect our profitability and results of operations.
A significant number of our Jack in the Box and Qdoba restaurants are company-operated, so we continue to have exposure to operating cost issues. Exposure to these fluctuating costs, including increases in commodity costs, could negatively impact our margins as well as franchise margins and franchisee financial health.
Risk Related to Our Brands and Reputation.  Multi-unit food service businesses such as ours can also be materially and adversely affected by widespread negative publicity of any type, particularly regarding food quality, food safety, nutritional content, safety or public health issues (such as epidemics or the prospect of a pandemic), obesity or other health concerns, and employee relations issues, among other things. Adverse publicity in these areas could damage the trust customers place in our brands. The increasingly widespread use of mobile communications and social media applications has amplified the speed and scope of adverse publicity and could hamper our ability to promptly correct misrepresentations or otherwise respond effectively to negative publicity.
To minimize the risk of food-borne illness, we have put in place HACCP systems for managing food safety issues arising in our restaurants and withat our vendors, we have restaurant Food Safety programs that include a daily restaurant Food Safety Checklist, and we use third-party and internal audits to review the Food Safety programs of our vendors. Nevertheless, food safety risks cannot be completely eliminated. Any outbreak of illness attributed to company or franchised restaurants, or within the food service industry, or any widespread negative publicity regarding our brands or the restaurant industry in general could cause a decline in ourcompany and our franchisees’franchise restaurant sales, and could have a material adverse effect on our financial condition and results of operations.
In addition, the success of our business strategy depends on the value and relevance of our brands and reputation.reputation, including implementation and success of brand strategies. If customers perceive that we and our franchisees fail to deliver a consistently positive and relevant experience, our brands could suffer. This could have ana material adverse effect on our business. Additionally,Moreover, while we devote considerable efforts and resources to protecting our

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trademarks and other intellectual property, if these efforts are not successful, the value of our brands may be harmed. This could also have a material adverse effect on our business.
Supply and Distribution Risks.  Dependence on frequent deliveries of fresh produce and other food products subjects food service businesses such as ours to the risk that shortages or interruptions in supply could adversely affect the availability, quality andor cost of ingredients or require us to incur additional costs to obtain adequate supplies. Deliveries of supplies may be affected by adverse weather conditions, natural disasters, distributor or supplier financial or solvency issues, product recalls, or other issues. Further, increases in fuel prices could result in increased distribution costs. In addition, if any of our distributors, suppliers, vendors or other contractors fail to meet our quality standards or otherwise do not perform adequately, or if any one or more of such entities seeks to terminate its agreement or fails to perform as anticipated, or if there is any disruption in any of our distribution or supply relationships or operations for any reason, our business, financial condition and results of operations may be materially affected.
Risks Associated with Severe Weather, and Natural Disasters or Civil Unrest.  Food service businesses such as ours can be materially and adversely affected by severe weather conditions, such as severe storms, hurricanes, flooding, prolonged drought or protracted heat or cold waves, and by natural disasters, such as earthquakes and wild fires, and their aftermath. Any of these, canor civil disturbances or unrest, could result in:
 
lost restaurant sales when consumers stay home or are physically prevented from reaching the restaurants;
property damage, loss of product, and resulting lost sales when locations are forced to close for extended periods of time;
interruptions in supply when distributors or vendors suffer damages or transportation is negatively affected; and
increased costs if agricultural capacity is diminished or if insurance recoveries do not cover all of our losses.
If systemic or widespread adverse changes in climate or weather patterns occur, we could experience more of these losses, and such losses could have a material adverse effect on our results of operations and financial condition.
Growth and Development Risks.  We intend to grow both Qdoba and Jack in the Box by developing additional company-owned restaurants and through new restaurant development by franchisees, both in existing markets and in new markets. Development involves substantial risks, including the risk of:
 
the inability to identify suitable franchisees;
limited availability of financing for the Company and for franchisees at acceptable rates and terms;
development costs exceeding budgeted or contracted amounts;
delays in completion of construction;
the inability to identify, or the unavailability of suitable sites onat acceptable cost and other leasing or purchase terms;
developed properties not achieving desired revenue or cash flow levels once opened;


the negative impact of a new restaurant upon sales at nearby existing restaurants;
the challenge of developing in areas where competitors are more established or have greater penetration or access to suitable development sites;
incurring substantial unrecoverable costs in the event a development project is abandoned prior to completion;
impairment charges resulting from underperforming restaurants or decisions to curtail or cease investment in certain locations or markets;
in new geographic markets where we have limited or no existing locations, the inability to successfully expand or acquire critical market presence for our brands, acquire name recognition, successfully market our products or attract new customers;
operating cost levels that reduce the demand for, or raise the cost of, developing new restaurants;
unique regulations or challenges applicable to operating in non-traditional locations, such as airports, college campuses, military or government facilities;
the challenge of identifying, recruiting and training qualified restaurant management;
the inability to obtain all required permits;
changes in laws, regulations and interpretations, including interpretations of the requirements of the Americans with Disabilities Act; and
general economic and business conditions.
Although we manage our growth and development activities to help reduce such risks, we cannot assure that our present or future growth and development activities will perform in accordance with our expectations. Our inability to expand in accordance with our plans or to manage the risks associated with our growth could have a material adverse effect on our results of operations and financial condition.
Risks Related to Franchisee Financial and Business Operations.  The opening and continued success of franchise restaurants depends on various factors, including the demand for our franchises, the selection of appropriate franchisee candidates, the identification and availability of suitable sites, and negotiation of acceptable lease or purchase terms for new locations, permitting and regulatory compliance, the ability to meet construction schedules, the availability of financing, and the financial and other capabilities of our franchisees and developers. See “Growth and Development Risks” above. Despite our due diligence performed during the recruiting process, we cannot assure you that franchisees and developers planning the opening of franchise restaurants

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will have the business abilities or sufficient access to financial resources necessary to open the restaurants required by their agreements, or will prove to be effective operators and remain aligned with us on operations, pricing, promotional or capital-intensive initiatives.
Our franchisees are contractually obligated to operate their restaurants in accordance with all applicable laws and regulations, as well as standards set forth in our agreements with them. However, franchisees are independent third parties whom we cannot and do not control.control beyond the terms of our agreements with them. If franchisees do not successfully operate restaurants in aan effective or profitable manner or consistent with applicable laws and required standards, royalty, and in some cases rent, payments to us may be adversely affected. If customers have negative perceptions or experiences with the operational execution, food quality or safety at our franchised locations, our brands’the image and reputation of our brands could be harmed, which in turn could negatively impact our business and operating results. Also, if franchisee employees have negative experiences and stage work stoppages or otherwise produce bad publicity, this could negatively impact brand equity.
With an increase in the proportion of Jack in the Box franchised restaurants, the percentage of our revenues derived from royalties and rents at Jack in the Box franchise restaurants willhas increased and is anticipated to continue to increase, as willhas the risk that earnings could be negatively impacted by defaults in the payment of royalties and rents. As small businesses, some of our franchise operators may be negatively and disproportionately impacted by strategic initiatives, capital requirements, inflation, labor costs, employee relations issues or other causes. In addition, franchiseefranchisees’ business obligations may not be limited to the operation of Jack in the Box or Qdoba restaurants, making them subject to business and financial risks unrelated to the operation of our restaurants. These unrelated risks could adversely affect a franchisee’s ability to make payments to us or to make payments on a timely basis. We cannot assure that franchisees will successfully participate in our strategic or marketing initiatives or operate their restaurants in a manner consistent with our concepts and standards. As compared to some of our competitors, our Jack in the Box brand has relatively fewer franchisees who, on average, operate more restaurants per franchisee. There are significant risks to our business if a franchisee, particularly one who operates a large number of restaurants, encounters financial difficulties or fails to adhere to our standards and projects an image inconsistent with our brands.


Risk Relating to Competition, Menu Innovation and Successful Execution of our Operational Strategies and Initiatives. WeAs part of our long term business plan, in addition to growth through development of new restaurants, we are focused on increasing same-store sales and average unit volumes as part of our long-term business plan.volumes. These resultsplans are subject to a number of risks and uncertainties, including risks related to competition, menu innovation and the successfulidentification and execution of oursuccessful operational strategies and initiatives. The restaurant industry is highly competitive with respect to price, service, location, personnel, advertising, brand identification and the type, quality and innovativenessappeal of menu items and new and differentiated service offerings. There are many well-established competitors. Each of our restaurants competes directly and indirectly with a large number of national and regional restaurant chains, as well as with locally-owned and/or independent quick-service restaurants, fast-casual restaurants, casual dining restaurants, sandwich shops and similar types of businesses. The trend toward convergence in grocery, deli and restaurant services has and may continue to increase the number of our competitors. Such increased competition could decrease the demand for our products and negatively affect our sales and profitability. Some of our competitors have substantially greater financial, marketing, operating and other resources than we have, which may give them a competitive advantage. Certain of our competitors have introduced a variety of new products and service offerings and engaged in substantial price discounting, in the past, and may adopt similar strategies in the future. In an effort to increase same-store sales and AUVs, we continue to make improvements to our facilities, to implement new service and training initiatives, and to introduce new products and discontinue other menu items. However, there can be no assurance that our facility improvements will foster increases in sales and yield the desired return on investment, that our service initiatives or our overall strategies will be successful, that our menu offerings and promotions will generate sufficient customer interest or acceptance to increase sales, or that competitive product offerings, pricing and promotions will not have an adverse effect upon our margins, sales results and financial condition. In addition, the success of our strategy depends on, among other factors, our ability to motivate restaurant personnel and franchisees to execute our initiatives and achieve sustained high service levels.
Advertising and Promotion Risks.  Some of our competitors have greater financial resources, which enable them to purchase significantly more advertising, particularly television and radio ads, than we are able to purchase. Should our competitors increase spending on advertising and promotion, or should the cost of advertising increase or our advertising funds decrease for any reason, including reduced sales or implementation of reduced spending strategies, or should our advertising and promotion be less effective than our competitors, there could be a material adverse effect on our results of operations and financial condition. Also, the fragmentation in the media favored by our target consumers, includingThe growing prevalence and importance of social media platforms, behavioral advertising and mobile media, posestechnology also pose challenges and risks for our marketing, advertising and promotional strategies. Failure to effectively tackleuse these challenges and risksplatforms or technology could cause our advertising to be less effective than our competitors.  Moreover, improper or damaging use of social media or mobile technology, including by our employees, franchisees, or guests could increase the Company’s costs, lead to litigation or result in negative publicity that could also have a materially adverse effect on our results.
Taxes.  Our income tax provision is sensitive to expected earnings and, as those expectations change, our income tax provisions may vary from quarter-to-quarter and year-to-year. In addition, from time to time, we may take positions for filing our tax returns that differ from the treatment for financial reporting purposes. The ultimate outcome of such positions could have an adverse impact on our effective tax rate.
Risks Related to Reducing Operating Costs. InDuring the current and recent years, we have identified strategies and taken steps to reduce operating costs to align with the increased Jack in the Box franchise ownership and to further integrate Jack in the Box and Qdoba brands

12


back office functions, andbrand restaurant systems. These strategies include outsourcing certain functions, reducing headcount, relocating the Qdoba corporate support center to San Diego and increasing shared back office servicesintegrating restaurant information systems between our brands. We continue to evaluate and implement further cost-saving initiatives. However, theThe ability to reduce our operating costs through these initiatives is subject to risks and uncertainties, and we cannot assure that these activities, or any other activities that we may undertake in the future, will achieve the desired cost savings and efficiencies. Failure to achieve such desired savings, or business disruption resulting from these strategies, could adversely affect our results of operations and financial condition.
Risks Related to Loss of Key Personnel.  We believe that our success will depend, in part, on our ability to attract and retain the services of skilled personnel, including key executives. The loss of services of any such personnel could have a material adverse effect on our business.
Risks Related to Government Regulations, Including Regulations Increasing Labor Costs.  The restaurant industry is subject to extensive federal, state and local governmental regulations as described in Item 1 under “Regulation.” We are subject to rules and regulations including but not limited to those related to:
the preparation, ingredients, labeling, packaging, advertising and sale of food;food and beverages;
building and zoning requirements;
sanitation and safety standards;
employee healthcare, requirements, including the implementation and uncertain legal, regulatory and cost implications of the Affordable Care Act;


labor and employment, including recently enacted and proposed minimum wage adjustments, overtime, working conditions, employment eligibility and documentation, sick leave, and other employee benefit and fringe benefit requirements;requirements, Service Contract Act requirements for restaurants located on military bases, and changing judicial, administrative or regulatory interpretations of federal or state labor laws;
the registration, offer, sale, termination and renewal of franchises;
truth-in-advertising, consumer protection and the security of information;
Americans with Disabilities Act;
payment card regulation and related industry rules;cards;
liquor licenses;alcohol sales; and
climate change, including regulations related to the potential impact of greenhouse gases, water consumption, or a tax on carbon emissions.
The increasing amount and complexity of regulations and their interpretation may increase the costs to us and our franchisees of labor and compliance, and increase our exposure to legal and regulatory claims which, in turn, could have a material adverse effect on our business. While we strive to comply with all applicable existing statutory and administrative rules, we cannot predict the effect on operations from issuance of additional requirements in the future.
Risks Related to Computer Systems, Information Technology and Cyber Security.  We and our franchisees rely on computer systems and information technology to conduct our business. A material failure or interruption of service, or a breach in security of our computer systems caused by malware or other attack, could cause reduced efficiency in operations, loss or misappropriation of data, or business interruptions, or could impact delivery of food to restaurants or financial functions such as vendor payment or employee payroll. We have business continuity plans that attempt to anticipate and mitigate such failures, but it is possible that significant capital investment could be required to rectify these problems, or more likely that cash flows could be impacted, in the shorter term.impacted.
We have instituted controls intended to protect our computer systems, our point of sale (“POS”) systems, and our information technology systems, to adhere to payment card industry data security standards and to limit third party access for vendors that require access to our restaurant networks. However, we cannot control every security risk, particularly those affecting our franchise locations which are independent businesses. Our security architecture is decentralized, such that payment card information is primarily confined to the restaurant where the specific transaction took place. However, a security breach involving our point of sale,POS, personnel, franchise operations reporting or other systems could result in disclosure or theft of confidential customer or employee or other proprietary data, and potentially cause loss of consumer confidence or potential costs, fines and litigation, including costs associated with reputational damage, consumer fraud or privacy breach. These risks may be magnified by the increased use of mobile communications and other new technologies, and are subject to increased and changing regulation.regulations. The costs of compliance and risk mitigation planning, including increased investment in technology or personnel in order to protect valuable business or consumer information, may negatively impact our margins.results of operations.
Risks Related to the Failure of Internal Controls Over Financial Reporting.  We maintain a documented system of internal controls over financial reporting, which is reviewed and monitored by an Internal Controls Committee and tested by the Company’s full-time internal audit department.Internal Audit Department. The internal audit departmentInternal Audit Department reports to the Audit Committee of the Board of Directors. We believe we have a well-designed system to maintain adequate internal controls on the business;over financial reporting; however, we cannot be certain that our controls will be adequate in the future or that adequate controls will be effective in preventing or detecting all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. If our internal controls are ineffective, we may not be able to accurately report our financial results or prevent fraud. Any failures in the effectiveness of our internal controls could have a material adverse effect on our operating results or cause us to fail to meet reporting obligations.
Environmental and Land Risks and Regulations.  We own or lease the real properties on which our Jack in the Box company-operated restaurants are located, and we either own or lease (and subsequently lease/sublease to the franchisee) a majority of our Jack in the Box franchised restaurant sites. We also own or lease the real properties upon which our company-operated Qdoba restaurants

13


are located.located, and lease (and subsequently sublease to the franchisee) one of our Qdoba franchised restaurant sites. Further, we own our principal executive offices, our Innovation Center and approximately four acres of undeveloped land directly adjacent to the Innovation Center, and lease the Qdoba corporate support center and some regional office space. We have engaged and maycontinue to engage in real estate development projects. As is the case with any owner or operator of real property, we are subject to eminent domain proceedings that can impact the value of investments we have made in real property, and we are subject to other potential liabilities and damages arising out of owning, operating, leasing or otherwise having interests in real property. In addition, we are subject to a variety of federal, state and local governmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply with environmental laws could result in the imposition of severe penalties or restrictions on operations by governmental agencies or courts of law which could adversely affectof severe penalties or restrictions on our operations. We are unaware of any significant hazardsh


azards for which we are responsible on properties we own or have owned, or operate or have operated. Accordingly, we do not have environmental liability insurance for our restaurants, nor do we maintain a reserve to cover such events. In the event of the determination of contamination on such properties, the Company, as owner or operator, could be held liable for severe penalties and costs of remediation, and this could result in material liability.
Risks Related to Leverage.  As of September 29, 2013,October 2, 2016, the Company has a credit facility comprised of a $400.0$900.0 million revolving credit facilityagreement and a $190.0$700.0 million term loan. We may also request the issuance of up to $75.0$75.0 million in letters of credit.credit, the outstanding amount of which reduces our net borrowing capacity under the credit agreement. For additional information related to our credit facility, refer to Note 7, Indebtedness, of the notes to the consolidated financial statements. Increased leverage resulting from borrowings under our credit facility could have certain material adverse effects on the Company, including but not limited to the following:
 
our ability to obtain additional financing in the future for acquisitions, working capital, capital expenditures, acquisitions and general corporate or other purposes could be impaired, or any such financing may not be available on terms favorable to us;
a substantial portion of our cash flows could be required for debt service and, as a result, might not be available for our operations or other purposes;
any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or could force us to modify our operations or sell assets;
our ability to operate our business as well asand our ability to repurchase stock or pay cash dividends to our stockholders may be restricted by the financial and other covenants set forth in the credit facility;
our ability to withstand competitive pressures may be decreased; and
our level of indebtedness may make us more vulnerable to economic downturns and reduce our flexibility in responding to changing business, regulatory and economic conditions.
Our ability to repay expected borrowings under our credit facility and to meet our other debt or contractual obligations (including compliance with applicable financial covenants) will depend upon our future performance and our cash flows from operations, both of which are subject to prevailing economic conditions and financial, business and other known and unknown risks and uncertainties, certain of which are beyond our control. In addition, to the extent that banks in our revolving credit facility become insolvent, our ability to borrow to the full level of our facility could be limited.
Risks of Market Volatility.  Many factors affect the trading price of our stock, including factors over which we have no control, such as reports on the economy, the industry or the price of commodities, as well as negative or positive announcements by competitors, regardless of whether the report relates directly to our business. In addition to investor expectations about our prospects, trading activity in our stock can reflect the portfolio strategies and investment allocation changes of institutional holders and non-operating initiatives such as a share repurchase program. Any failure to meet market expectations whether for sales, growth rates, refranchising goals, earnings per share or other metrics could cause our share price to drop.
Risks of Changes in Accounting Policies and Assumptions.  Changes in accounting standards, policies or related interpretations by accountants or regulatory entities may negatively impact our results. Many accounting standards require management to make subjective assumptions and estimates, such as those required for stock compensation, tax matters, pensionlong-lived assets, retirement benefits, self-insurance, restaurant closing costs, litigation, insurancegoodwill and other intangibles, legal accruals, and asset impairment calculations.income taxes. Changes in those underlying assumptions and estimates could significantly change our results.
Litigation.  We are subject to complaints or litigation brought by former, current or prospective employees, customers, franchisees, vendors, landlords, shareholders or others. We assess 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 if it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Because lawsuits are inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review contingencies to determine the adequacy of the accruals and related disclosures. However, the amount of ultimate loss may differ from these estimates. A judgment that is not covered by insurance or that is significantly in excess of our insurance coverage for any claims could materially adversely affect our financial condition or results of operations. In addition, regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend, and may divert management’s attention away from operations and hurt our performance. Further, adverse publicity resulting from claims against us or our franchisees may harm our business or that of our franchisees.

14


ITEM 1B.  UNRESOLVED STAFF COMMENTS
None.


ITEM 2.  PROPERTIES
The following table sets forth information regarding our operating Jack in the Box and Qdoba restaurant properties as of September 29, 2013October 2, 2016:
 
Company-
Operated
 Franchise Total      
Company-
Operated
 Franchise Total     
Company-owned restaurant buildings:            
On company-owned land 36
 188
 224
 44
 182
 226
On leased land 152
 489
 641
 135
 506
 641
Subtotal 188
 677
 865
 179
 688
 867
Company-leased restaurant buildings on leased land 573
 912
 1,485
 605
 924
 1,529
Franchise directly-owned or directly-leased restaurant buildings —
 516
 516
 —
 558
 558
Total restaurant buildings 761
 2,105
 2,866
 784
 2,170
 2,954
Our restaurant leases generally provide for fixed rental payments (with cost-of-living index adjustments) plus real estate taxes, insurance and other expenses. In addition, approximately 15% of our leases provide for contingent rental payments between 1% and 15% of the restaurant’s gross sales once certain thresholds are met. We have generally been able to renew our restaurant leases as they expire at then-current market rates. The remaining terms of ground leases range from approximately less than one year to 5552 years, including optional renewal periods. The remaining lease terms of our other leases range from approximately less than one year to 4441 years, including optional renewal periods. At September 29, 2013,As of October 2, 2016, our restaurant leases had initial terms expiring as follows:
  Number of Restaurants
Fiscal Year 
Ground
Leases
 
Land and
Building
Leases
2014 – 2018 195
 603
2019 – 2023 253
 634
2024 – 2028 137
 126
2029 and later 56
 122
  Number of Restaurants
Fiscal Year 
Ground
Leases
 
Land and
Building
Leases
2017 – 2021 295
 758
2022 – 2026 219
 542
2027 – 2031 111
 166
2032 and later 16
 63
Our principal executive offices are located in San Diego, California in an owned facility of approximately 150,000 square feet. We also own our 70,000 square foot Jack in the Box Innovation Center and approximately four acres of undeveloped land directly adjacent to it. Qdoba’s corporate support center is located in a leased facility in Wheat Ridge, Colorado. Historically,Lakewood, Colorado, that we also leased six distribution centers. In connection with the outsourcing of our distribution business completed inplan to exit during the first quarter of fiscal 2013, two of these centers were closed2017, relocating all operations to San Diego. We believe our principal executive offices and the remaining four were subleased or assigned toInnovation Center are suitable and adequate for our third-party distributor.present purposes.
ITEM 3. LEGAL PROCEEDINGS
See Note 16,15, Commitments, Contingencies and Legal Matters, of the notes to the consolidated financial statements for a discussion of our legal proceedings.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.

15





PART II


ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information.  Our common stock is traded on the Nasdaq Global Select Market under the symbol “JACK.” The following table sets forth the high and low sales prices for our common stock during the fiscal quarters indicated, as reported on the NASDAQ — Composite Transactions:
 12 Weeks Ended 16 Weeks 
Ended		 13 Weeks Ended 12 Weeks Ended 16 Weeks 
Ended
 September 29,
2013		 July 7,
2013		 April 14,
2013		 January 20,
2013		 October 2,
2016		 July 3,
2016		 April 10,
2016		 January 17,
2016
High $42.59
 $40.52
 $35.99
 $29.67
 $102.68
 $88.65
 $78.87
 $82.20
Low $38.45
 $34.81
 $28.71
 $24.71
 $83.64
 $64.30
 $61.78
 $69.60
 12 Weeks Ended 16 Weeks 
Ended		 12 Weeks Ended 16 Weeks 
Ended
 September 30,
2012		 July 8,
2012		 April 15,
2012		 January 22,
2012		 September 27,
2015		 July 5,
2015		 April 12,
2015		 January 18,
2015
High $29.07
 $28.07
 $24.59
 $22.67
 $98.26
 $96.40
 $99.99
 $87.50
Low $25.39
 $22.04
 $21.01
 $18.65
 $63.94
 $85.30
 $81.56
 $63.84
Dividends.  We did not pay anyDuring the third quarter of fiscal 2014, the Board of Directors approved the initiation of a regular quarterly cash or other dividends duringdividend. In fiscal 2016, the last three fiscal years and we have no current intentions to pay dividends. Our credit agreement provides for up to $500.0 million for the potential paymentBoard of Directors declared four cash dividends of $0.30 per share each. In fiscal 2015, we declared two cash dividends of $0.20 per share each, and stock repurchases,two cash dividends of $0.30 per share each. In fiscal 2014, we declared two cash dividends of $0.20 per share each. Our dividend is subject to certain limitations based onthe discretion and approval of our leverage ratio as definedBoard of Directors and our compliance with applicable law, and depends upon, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our credit agreement and other factors that our Board of which $386.8 million remained as of September 29, 2013.Directors may deem relevant.
Stock Repurchases. The following table summarizes shares repurchased pursuant to this program during the quarter ended September 29, 2013October 2, 2016:. The average price paid per share in column (b) below does not include the cost of brokerage fees:
  (a)
Total Number
of Shares
Purchased		 (b)
Average
Price Paid
Per Share		 (c)
Total Number of Shares Purchased as Part of Publicly
Announced Programs		 (d)
Maximum Dollar Value That May Yet Be Purchased Under These Programs
        $184,736,173
July 8, 2013 - August 4, 2013 —
 $—
 —
 $184,736,173
August 5, 2013 - September 1, 2013 530,676
 $40.64
 530,676
 $163,166,879
September 2, 2013 - September 29, 2013 667,399
 $39.56
 667,399
 $136,766,644
Total 1,198,075
 $40.01
 1,198,075
  
  (a)
Total Number
of Shares
Purchased		 (b)
Average
Price Paid
Per Share		 (c)
Total Number of Shares Purchased as Part of Publicly
Announced Programs		 (d)
Maximum Dollar Value That May Yet Be Purchased Under These Programs
        $150,025,646
July 4, 2016 - July 31, 2016 —
 $—
 —
 $150,025,646
August 1, 2016 - August 28, 2016 —
 $—
 —
 $150,025,646
August 29, 2016 - October 2, 2016 425,254
 $98.42
 425,254
 $408,172,440
Total 425,254
 $—
 425,254
  
Stockholders.  As of November 14, 2013,18, 2016, there were 590493 stockholders of record.

16



Securities Authorized for Issuance Under Equity Compensation Plans.  The following table summarizes the equity compensation plans under which Company common stock may be issued as of September 29, 2013October 2, 2016. Stockholders of the Company have approved all plans requiring such approval.
  (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) (b) Weighted-average exercise price of outstanding options (1) (c) Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a))(2)
Equity compensation plans approved by security holders (3) 3,511,229 $22.59 3,563,386
  (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) (b) Weighted-average exercise price of outstanding options (1) (c) Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders (2) 965,160 $61.73 2,465,612
 ____________________________
(1)Includes shares issuable in connection with our outstanding stock options, performance-vested stockperformance share awards, nonvested stock awards and units, and non-management director deferred stock equivalents. The weighted-average exercise price in column (b) includes the weighted-average exercise price of stock options only.options.
(2)
Includes 111,701 shares that are reserved for issuance under our Employee Stock Purchase Plan.
(3)
For a description of our equity compensation plans, refer to Note 12, Share-Based Employee Compensation, of the notes to the consolidated financial statements.


Performance Graph.  The following graph compares the cumulative return to holders of the Company’s common stock at September 30th of each year to the yearly weighted cumulative return of a Peer Group Index and to the Standard & Poor’s (“S&P”) 500 Index for the same period. As it does every year, the Compensation Committee of the Board of Directors (the “Committee”) reviews the make-up of the Peer Group as part of its process of setting the compensation of our executive officers. Working closely with its independent compensation consultant, and considering anticipated Company revenues, the Committee approved changes to the Peer Group to remove Ruby Tuesday, Inc. due to its size being relatively smaller than other members of the Peer Group based on defined criteria (i.e., revenue, market capitalization, and system-wide sales), and added Papa John's International, Inc, which more closely meets the established criteria for our Peer Group. The below comparison assumes $100 was invested on September 30, 20082011 in the Company’s common stock and in the comparison groups and assumes reinvestment of dividends. The Company paid no dividends during these periods.beginning in fiscal 2014.
200820092010201120122013201120122013201420152016
Jack in the Box Inc.$100$97$102$94$133$190$100$141$201$345$394$498
S&P 500 Index$100$93$103$104$135$161$100$130$155$186$185$213
Peer Group (1)
$100$109$146$177$232$287
Old Peer Group (1)$100$130$174$219$257$219
New Peer Group (2)$100$132$177$224$266$232
____________________________
(1)The Old Peer Group Index comprises the following companies: Brinker International, Inc.; Buffalo Wild Wings, Inc.; Chipotle Mexican Grill Inc.; Cracker Barrel Old Country Store, Inc.; Darden Restaurants Inc.; DineEquity, Inc.; Domino’s Pizza, Inc.; Panera Bread Company; Ruby Tuesday, Inc.; Sonic Corp.; The Cheesecake Factory Inc.; and The Wendy’s Company.

17
(2)The New Peer Group Index comprises the following companies: Brinker International, Inc.; Buffalo Wild Wings, Inc.; Chipotle Mexican Grill Inc.; Cracker Barrel Old Country Store, Inc.; DineEquity, Inc.; Domino’s Pizza, Inc.; Panera Bread Company; Papa John's Int'l, Inc.; Sonic Corp.; The Cheesecake Factory Inc.; and The Wendy’s Company.



ITEM 6.  SELECTED FINANCIAL DATA
Our fiscal year is 52 or 53 weeks, ending the Sunday closest to September 30. All years presented below include 52 weeks, except 2010for 2016 which includes 53 weeks. The selected financial data reflects, as discontinued operations, 62 closed Qdoba stores for years 2009 through 2013,and our distribution business for fiscalall years 2009 through 2013 and Quick Stuff, a convenience store and fuel station concept sold in fiscal 2009, for fiscal year 2009. The following selected financial data of Jack in the Box Inc. for each fiscal year was extracted or derived from our audited financial statements.presented. This selected financial data should be read in conjunction with our audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K. Our consolidated financial information may not be indicative of our future performance.
 
 Fiscal Year Fiscal Year
 2013 2012 2011 2010 2009 2016 2015 2014 2013 2012
 (in thousands, except per share data) (dollars in thousands, except per share data)
Statements of Earnings Data:          
Statements of Earnings Data (1):          
Total revenues $1,489,867
 $1,509,295
 $1,632,825
 $1,878,126
 $2,153,640
 $1,599,331
 $1,540,317
 $1,484,131
 $1,489,867
 $1,509,295
                    
Total operating costs and expenses $1,356,302
 $1,417,624
 $1,542,752
 $1,805,601
 $1,998,444
Gains on the sale of company-operated restaurants, net (4,640) (29,145) (61,125) (54,988) (78,642)
Operating costs and expenses $1,370,646
 $1,340,005
 $1,318,275
 $1,356,302
 $1,417,624
(Gains) losses on the sale of company-operated restaurants (1,230) 3,139
 3,548
 (4,640) (29,145)
Total operating costs and expenses, net $1,351,662
 $1,388,479
 $1,481,627
 $1,750,613
 $1,919,802
 $1,369,416
 $1,343,144
 $1,321,823
 $1,351,662
 $1,388,479
                    
Earnings from continuing operations $82,608
 $68,104
 $85,878
 $73,674
 $132,407
 $126,270
 $112,601
 $94,844
 $82,608
 $68,104
                    
Earnings per Share and Share Data:                    
Earnings per share from continuing operations:          
Earnings per share from continuing operations (1):          
Basic $1.91
 $1.55
 $1.74
 $1.34
 $2.33
 $3.74
 $3.00
 $2.33
 $1.91
 $1.55
Diluted $1.84
 $1.52
 $1.71
 $1.32
 $2.29
 $3.70
 $2.95
 $2.26
 $1.84
 $1.52
Weighted-average shares outstanding — Diluted (1) 44,899
 44,948
 50,085
 55,843
 57,733
Cash dividends declared per common share (1) $1.20
 $1.00
 $0.40
 $—
 $—
Weighted-average shares outstanding — Basic (1)(2) 33,735
 37,587
 40,781
 43,351
 43,999
Weighted-average shares outstanding — Diluted (1)(2) 34,146
 38,215
 41,973
 44,899
 44,948
Market price at year-end $40.10
 $28.11
 $19.92
 $21.47
 $20.07
 $95.94
 $79.71
 $65.73
 $40.10
 $28.11
Other Operating Data:                    
Jack in the Box restaurants:                    
Company-operated average unit volume (2) $1,606
 $1,557
 $1,405
 $1,297
 $1,420
Franchise-operated average unit volume (2)(3) $1,312
 $1,313
 $1,286
 $1,287
 $1,400
System average unit volume (2)(3) $1,381
 $1,379
 $1,331
 $1,292
 $1,412
Company-operated average unit volume (4) $1,870
 $1,858
 $1,708
 $1,606
 $1,557
Franchise-operated average unit volume (3)(4) $1,454
 $1,429
 $1,337
 $1,312
 $1,313
System average unit volume (3)(4) $1,530
 $1,510
 $1,412
 $1,381
 $1,379
Change in company-operated same-store sales 1.0% 4.6% 3.1% (8.6)% (1.2)% 0.0% 5.1% 2.0% 1.0% 4.6%
Change in franchise-operated same-store sales (3) 0.1% 3.0% 1.3% (7.8)% (1.3)% 1.6% 7.0% 2.0% 0.1% 3.0%
Change in system same-store sales (3) 0.3% 3.4% 1.8% (8.2)% (1.3)% 1.2% 6.5% 2.0% 0.3% 3.4%
Qdoba restaurants:                    
Company-operated average unit volume (2)(4) $1,080
 $1,060
 $1,003
 $972
 $1,010
Franchise-operated average unit volume (2)(3) $961
 $958
 $987
 $943
 $905
System average unit volume (2)(3)(4) $1,017
 $1,000
 $992
 $951
 $930
Change in company-operated same-store sales (4) 0.5% 3.2% 5.4% 0.6 % (4.3)%
Company-operated average unit volume (4) $1,209
 $1,199
 $1,114
 $1,080
 $1,060
Franchise-operated average unit volume (3)(4) $1,150
 $1,140
 $1,028
 $961
 $958
System average unit volume (3)(4) $1,179
 $1,169
 $1,070
 $1,017
 $1,000
Change in company-operated same-store sales 1.7% 8.3% 5.7% 0.5% 3.2%
Change in franchise-operated same-store sales (3) 1.1% 1.9% 5.4% 3.6 % (1.3)% 1.1% 10.4% 6.3% 1.1% 1.9%
Change in system same-store sales (3)(4) 0.8% 2.5% 5.4% 2.9 % (2.1)%
Change in system same-store sales (3) 1.4% 9.3% 6.0% 0.8% 2.5%
Capital expenditures $84,690
 $80,200
 $129,312
 $95,610
 $153,500
 $96,615
 $86,226
 $60,525
 $84,690
 $80,200
Balance Sheet Data (at end of period):          
Balance Sheet Data (at end of period) (1):          
Total assets $1,319,209
 $1,463,725
 $1,432,322
 $1,407,092
 $1,455,910
 $1,348,791
 $1,303,979
 $1,270,665
 $1,319,209
 $1,463,725
Long-term debt $349,393
 $405,276
 $447,350
 $352,630
 $357,270
Stockholders’ equity $472,018
 $411,945
 $405,956
 $520,463
 $524,489
Long-term debt, excluding current maturities $937,512
 $688,579
 $497,012
 $349,393
 $405,276
Stockholders’ (deficit) equity (5) $(217,206) $15,953
 $257,911
 $472,018
 $411,945
 ____________________________
(1)Financial data was extracted or derived from our audited financial statements.
(2)Weighted-average shares reflect the impact of common stock repurchases under Board-approved programs.
(2)
Fiscal 2010 average unit volumes have been adjusted to exclude the 53rd week for the purpose of comparison to other years.
(3)Changes in same-store sales and average unit volumevolumes are presented for franchise restaurants and on a system-wide basis, which includes company and franchise restaurants. Franchise sales represent sales at franchise restaurants and are revenues of our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and percentage rent revenues are calculated based on a percentage of franchise sales. We believe franchise and system sales growth and average unit volume information is useful to investors as a significant indicator of the overall strength of our business as it incorporates our significant revenue drivers which are company and franchise same-store sales as well as net unit development. Company, franchise and system changes in same-store sales include the results of all restaurants that have been open more than one year.
(4)Average2016 average unit volumes and same-store sales for all periods presented have been restatedvolume is adjusted to exclude salesthe 53rd week for restaurants reported as discontinued operations.the purpose of comparison to prior years.

18
(5)In 2016, the Company began to accumulate a stockholders’ deficit related to the execution of our share repurchase programs authorized by our Board of Directors.





 ITEM 7.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
For an understanding of the significant factors that influenced our performance during the past three fiscal years, we believe our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statementsconsolidated financial statements and related Notesnotes included in this Annual Reportannual report as indexed on page F-1.
Comparisons under this heading refer to the 5253-week period ended October 2, 2016, and 52-week periods ended September 29, 2013, September 30, 201227, 2015 and October 2, 2011September 28, 2014 for fiscal years 20132016, 20122015 and 20112014, respectively, unless otherwise indicated.
Our MD&A consists of the following sections: 
Overview — a general description of our business and fiscal 20132016 highlights.
Financial reporting — a discussion of changes in presentation.presentation, if any.
Results of operations — an analysis of our consolidated statements of earnings for the three years presented in our consolidated financial statements.
Liquidity and capital resources — an analysis of cash flows including pension and postretirement health contributions, capital expenditures, our credit facility, share repurchase activity, dividends, aggregate contractual obligations, share repurchase activity, known trends that may impact liquidity, and the impact of inflation.inflation, if applicable.
Discussion of critical accounting estimates — a discussion of accounting policies that require critical judgments and estimates.
Future application ofNew accounting principlespronouncements — a discussion of new accounting pronouncements, dates of implementation and the impact on our consolidated financial position or results of operations, if any.
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 the following:
Changes in sales at restaurants open more than one year (“same-store sales”) and average unit volumes (“AUVs”) are presented for franchised restaurants and on a system-wide basis, which includes company and franchise restaurants. Franchise sales represent sales at franchise restaurants and are revenues of our franchisees. We do not record franchise sales as revenues; however, our royalty revenues and percentage rent revenues are calculated based on a percentage of franchise sales. We believe franchise and system same-store sales and AUV information is useful to investors as a significant indicator of the overall strength of our business.
Company restaurant margin (“restaurant margin”) is defined as company restaurant sales less expenses incurred directly by our restaurants in generating those sales (food and packaging costs, payroll and employee benefits costs, and occupancy and other costs). We also present restaurant margin as a percentage of company restaurant sales.
Franchise margin is defined as franchise rental revenues and franchise royalties and other, less franchise occupancy expenses, and franchise support and other costs, and is also presented as a percentage of franchise revenues.
Same-store sales, AUVs, restaurant margin, and franchise margin are not measurements determined in accordance with generally accepted accounting principles (“GAAP”) and should not be considered in isolation, or as an alternative to income from operations, or other similarly titled measures of other companies.
OVERVIEW
As of September 29, 2013,October 2, 2016, we operated and franchised 2,2512,255 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including one in Guam, and 615699 Qdoba fast-casual restaurants operating primarily throughout the United States as well as the District of Columbia and including two in Canada.
Our primary source of revenue is from retail sales at Jack in the Box and Qdoba company-operated restaurants. We also derive revenue from Jack in the Box and Qdoba franchise restaurants, including rental revenue, royalties (based upon a percent of sales), and franchise fees and rents from Jack in the Box franchisees. Historically, we also generated revenue from distribution sales of food and packaging commodities to franchisees. We completed the outsourcing of this function in the first quarter of fiscal 2013, and franchisees who previously utilized our distribution services now purchase product directly from our distribution service providers or other approved suppliers.fees. In addition, we recognize gains or losses from the sale of company-operated restaurants to franchisees, which are presentedincluded as a reduction ofline item within operating costs and expenses, net in the accompanying consolidated statements of earnings.


The following summarizes the most significant events occurring in fiscal 20132016, and certain trends compared to prior years:
 
RestaurantSame-Store Sales — SalesSame-store sales were flat at company-operated Jack in the Box restaurants open more than one year (“as the impact of menu price increases offset a decline in transactions. Qdoba’s same-store sales”) changed as follows:sales increase of 1.7% at company-operated restaurants was driven primarily by transaction growth, menu price increases and catering.
  2013 2012 2011
Jack in the Box:      
Company 1.0% 4.6% 3.1%
Franchise 0.1% 3.0% 1.3%
System 0.3% 3.4% 1.8%
Qdoba:      
Company (1) 0.5% 3.2% 5.4%
Franchise 1.1% 1.9% 5.4%
System (1) 0.8% 2.5% 5.4%
 ____________________________  ____________________________
(1)
Same-store sales for all periods presented have been restated to exclude sales for restaurants reported as discontinued operations during fiscal 2013.
Commodity Costs—— Commodity costs decreased approximately 3.0% and 4.4% in 2016 at our Jack in the Box and Qdoba company restaurants, increasedrespectively, compared with a year ago. Beef represents the largest portion, or approximately 2.2% and 1.5%20%, respectively,of the Company’s overall commodity spend. We typically do not enter into fixed price contracts for our beef needs. In 2017, we currently expect our beef costs to be slightly deflationary as compared to last year.fiscal 2016. We expect our overall commodity costs in fiscal 2017 to be up approximately flat to down 1% in fiscal 2014 compared to fiscal 2013, with higher inflation in the first quarter.
New Unit Development —In 2013, we opened 17at both our Jack in the Box and Qdoba restaurants.
Restaurant Margins 68—Our consolidated company-operated restaurant margin decreased in 2016 to 20.2% from 20.4% in 2015. Jack in the Box’s company-operated restaurant margin improved in 2016 to 21.2% from 20.7% in 2015 due primarily to lower costs for food and packaging and benefits of refranchising, partially offset by minimum wage increases in California that went into effect in January 2016, and by higher costs for equipment upgrades. Restaurant margins at our Qdoba locations system-wide.company-operated restaurants decreased in 2016 to 18.1% from 19.7% in 2015 primarily reflecting an increase in new restaurant activity, unfavorable product mix including higher levels of discounting, and higher costs for equipment upgrades.

19


Jack in the Box Franchising Program — We refranchised In 2016,78 Jack in the Box restaurants, while Jack in the Box franchisees opened a total of 11 restaurants in 2013.12 restaurants. Our Jack in the Box system was approximately 79%82% franchised at the end of fiscal 2013, and we2016. We plan to maintainincrease franchise ownership inof the system to over 90%. In fiscal 2017, we expect to open approximately 20-25 new Jack in the Box system at a level between 80-85%. During fiscal 2013, Qdoba franchisees opened a totalrestaurants, the majority of 34 restaurants, including two in Canada.which will be franchise locations.
Credit FacilityQdoba New Unit Growth — During the first quarterIn 2016 we opened 35 company-operated restaurants and franchisees opened 18 restaurants of which six were in non-traditional locations such as airports and college campuses. In fiscal 2013, we entered into a2017, 60-70 new credit agreement consistingQdoba restaurants are expected to open system-wide, of a $400.0 million revolving credit facility and a $200.0 million term loan, both with a five-year maturity.which approximately 40 are expected to be company-operated locations
Restructuring Costs — During fiscal 2013,In 2016, we continuedannounced a plan to reduce our comprehensive reviewgeneral and administrative costs. In connection with this plan, we have recorded $10.1 million of our organization structure, including evaluating opportunities for outsourcing, restructuring of certain functions and workforce reductions. As a result, restructuring charges which are included in impairment and other charges, net in the accompanying consolidated statements of $3.5 million were recorded during fiscal 2013.earnings.
Discontinued OperationsPension Contribution — DuringIn September 2016, we made an $80.0 million tax-deductible accelerated contribution to our qualified defined benefit pension plan to reduce future pension costs including our exposure to Pension Benefit Guaranty Corporation (“PBGC”) variable-rate premiums that are paid on the first quarter of 2013, we completed the outsourcingunfunded portion of our Jack inpension liability, and to improve the Box distribution business. Additionally, duringfunded status of the third quarter of fiscal 2013, we closed 62 Qdoba company-operated restaurants. We expect the outsourcing and store closures to have a positive impact on future earnings and cash flows. As a result of these two transactions, we recognized an after tax loss of $31.5 million, or $0.70 per diluted share, in fiscal 2013.plan.
Share RepurchasesCredit Facility— In September 2016, we amended our existing credit facility to increase our overall borrowing capacity by $400.0 million to $1.6 billion, consisting of a $900.0 million revolving credit agreement and a $700.0 million term loan, both maturing in March 2019.
Return of Cash to Shareholders —  PursuantDuring 2016, we continued to return cash to shareholders in the form of share repurchase programs authorized by our Board of Directors, werepurchases and quarterly cash dividends. We repurchased 4.03.9 million shares of our common stock at an average price of $35.29$75.29 per share, totaling $291.9 million, including the cost of brokerage fees. We also declared dividends of $1.20 per share totaling $40.5 million.
FINANCIAL REPORTING
The consolidated statementsDuring fiscal 2012, we entered into an agreement to outsource our Jack in the Box distribution business. In fiscal 2013, we closed 62 Qdoba restaurants (the “2013 Qdoba Closures”) as part of earnings for all periods presented have been prepared reflecting the results of operations fora comprehensive Qdoba market performance review. All charges related to our distribution business and the 2013 Qdoba closures and charges incurred as a result of closing these restaurants as discontinued operations. The results of operations and costs incurred to outsource our distribution businessClosures are also reflectedreported as discontinued operations for all periods presented. Refer to Note 2, Discontinued Operations, in the notes to consolidated financial statements for additional information. Unless otherwise noted, amounts and disclosures throughout our MD&A relate to our continuing operations.
In 2016, we adopted an Accounting Standards Update which simplifies the presentation of deferred income taxes and requires deferred tax liabilities and assets to be classified as non-current in a classified statement of financial position. Upon adoption, we retrospectively applied the new standard which resulted in a $40.0 million reclassification of current deferred income taxes to other assets, net on our September 27, 2015 consolidated balance sheet. Refer to Note 1, Nature of Operations and Summary of Significant Accounting Policies, in the notes to consolidated financial statements for more information.


RESULTS OF OPERATIONS
The following table presents certain income and expense items included in our consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.
CONSOLIDATED STATEMENTS OF EARNINGS DATA 
 Fiscal Year Fiscal Year
 2013 2012 2011 2016 2015 2014
Revenues:            
Company restaurant sales 76.8 % 78.4 % 82.7 % 75.3 % 75.1% 75.5%
Franchise revenues 23.2 % 21.6 % 17.3 %
Franchise rental revenues 14.6 % 14.7% 14.6%
Franchise royalties and other 10.1 % 10.2% 9.8%
Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0% 100.0%
Operating costs and expenses, net:            
Company restaurant costs:            
Food and packaging (1) 32.6 % 32.9 % 33.5 % 30.1 % 31.3% 31.9%
Payroll and employee benefits (1) 28.0 % 28.6 % 29.7 % 27.8 % 27.1% 27.5%
Occupancy and other (1) 22.3 % 22.5 % 23.6 % 21.9 % 21.3% 22.1%
Total company restaurant costs (1) 82.9 % 84.0 % 86.7 % 79.8 % 79.6% 81.5%
Franchise costs (1) 50.2 % 51.0 % 48.3 %
Franchise occupancy expenses (2) 73.1 % 75.0% 77.8%
Franchise support and other costs (3) 9.9 % 10.0% 9.5%
Selling, general and administrative expenses 14.8 % 14.9 % 13.7 % 12.7 % 14.4% 13.9%
Impairment and other charges, net 0.9 % 2.2 % 0.8 % 1.2 % 0.8% 1.0%
Gains on the sale of company-operated restaurants (0.3)% (1.9)% (3.7)%
(Gains) losses on the sale of company-operated restaurants (0.1)% 0.2% 0.2%
Earnings from operations 9.3 % 8.0 % 9.3 % 14.4 % 12.8% 10.9%
Income tax rate (2) 32.8 % 33.2 % 36.1 %
Income tax rate (4) 36.5 % 36.9% 35.3%
  ____________________________
(1)As a percentage of the related sales and/orcompany restaurant sales.
(2)As a percentage of franchise rental revenues.
(2)(3)As a percentage of franchise royalties and other.
(4)As a percentage of earnings from continuing operations and before income taxes.

20


The following table presents Jack in the Box and Qdoba company restaurant sales, costs and costs as a percentage of the related sales. Percentages may not add due to rounding.
SUPPLEMENTAL COMPANY-OPERATED RESTAURANTS STATEMENTS OF EARNINGS DATA
(CHANGES IN SAME-STORE SALESdollars in thousands)
  Fiscal Year
  2013 2012 2011
Jack in the Box:            
Company restaurant sales $850,512
   $943,990
   $1,181,961
  
Company restaurant costs:            
Food and packaging 284,221
 33.4% 319,415
 33.8% 403,209
 34.1%
Payroll and employee benefits 241,149
 28.4% 275,678
 29.2% 355,583
 30.1%
Occupancy and other 182,493
 21.5% 207,920
 22.0% 274,806
 23.3%
Total company restaurant costs $707,863
 83.2% $803,013
 85.1% $1,033,598
 87.4%
Qdoba:            
Company restaurant sales $293,268
   $239,493
   $168,798
  
Company restaurant costs:            
Food and packaging 88,464
 30.2% 69,820
 29.2% 48,824
 28.9%
Payroll and employee benefits 79,235
 27.0% 62,532
 26.1% 44,946
 26.6%
Occupancy and other 73,093
 24.9% 58,520
 24.4% 43,740
 25.9%
Total company restaurant costs $240,792
 82.1% $190,872
 79.7% $137,510
 81.5%
  Fiscal Year
  2016 2015 2014
Jack in the Box:      
Company 0.0% 5.1% 2.0%
Franchise 1.6% 7.0% 2.0%
System 1.2% 6.5% 2.0%
Qdoba:      
Company 1.7% 8.3% 5.7%
Franchise 1.1% 10.4% 6.3%
System 1.4% 9.3% 6.0%


The following table summarizes the changes in the number and mix of Jack in the Box (“JIB”) and Qdoba company and franchise restaurants in each fiscal year:
 2013 2012 2011 2016 2015 2014
 Company Franchise Total Company Franchise Total Company Franchise Total Company Franchise Total Company Franchise Total Company Franchise Total
Jack in the Box:                                    
Beginning of year 547
 1,703
��2,250
 629
 1,592
 2,221
 956
 1,250
 2,206
 413
 1,836
 2,249
 431
 1,819
 2,250
 465
 1,786
 2,251
New 6
 11
 17
 19
 18
 37
 15
 16
 31
 4
 12
 16
 2
 16
 18
 1
 11
 12
Refranchised (78) 78
 —
 (97) 97
 —
 (332) 332
 —
 (1) 1
 —
 (21) 21
 —
 (37) 37
 —
Acquired from franchisees 1
 (1) —
 —
 —
 —
 —
 —
 —
 1
 (1) —
 7
 (7) —
 4
 (4) —
Closed (11) (5) (16) (4) (4) (8) (10) (6) (16) —
 (10) (10) (6) (13) (19) (2) (11) (13)
End of year 465
 1,786
 2,251
 547
 1,703
 2,250
 629
 1,592
 2,221
 417
 1,838
 2,255
 413
 1,836
 2,249
 431
 1,819
 2,250
% of JIB system 21% 79% 100% 24% 76% 100% 28% 72% 100% 18% 82% 100% 18% 82% 100% 19% 81% 100%
% of consolidated system 61% 85% 79% 63% 85% 78% 72% 82% 79%
Qdoba:                                    
Beginning of year 316
 311
 627
 245
 338
 583
 188
 337
 525
 322
 339
 661
 310
 328
 638
 296
 319
 615
New 34
 34
 68
 26
 32
 58
 25
 42
 67
 35
 18
 53
 17
 22
 39
 16
 22
 38
Refranchised (3) 3
 —
 —
 —
 —
 —
 —
 —
Acquired from franchisees 13
 (13) —
 46
 (46) —
 32
 (32) —
 14
 (14) —
 —
 —
 —
 —
 —
 —
Closed (64) (16) (80) (1) (13) (14) —
 (9) (9) (4) (11) (15) (5) (11) (16) (2) (13) (15)
End of year 296
 319
 615
 316
 311
 627
 245
 338
 583
 367
 332
 699
 322
 339
 661
 310
 328
 638
% of Qdoba system 48% 52% 100% 50% 50% 100% 42% 58% 100% 53% 47% 100% 49% 51% 100% 49% 51% 100%
% of consolidated system 39% 15% 21% 37% 15% 22% 28% 18% 21%
Consolidated:                 
                 
Total system 761
 2,105
 2,866
 863
 2,014
 2,877
 874
 1,930
 2,804
 784
 2,170
 2,954
 735
 2,175
 2,910
 741
 2,147
 2,888
% of consolidated system 27% 73% 100% 30% 70% 100% 31% 69% 100% 27% 73% 100% 25% 75% 100% 26% 74% 100%

21


Revenues
As we execute our Jack in the Box Brand
Company Restaurant Operations
The following table presents Jack in the Box company restaurant sales, costs and margin, and restaurant costs and margin as a percentage of the related sales. Percentages may not add due to rounding (dollars in thousands):
  2016 2015 2014
Company restaurant sales $789,040
   $782,525
   $782,461
  
Company restaurant costs:            
Food and packaging 235,538
 29.9% 247,931
 31.7% 254,891
 32.6%
Payroll and employee benefits 223,019
 28.3% 215,598
 27.6% 218,000
 27.9%
Occupancy and other 162,869
 20.6% 157,281
 20.1% 164,433
 21.0%
Total company restaurant costs 621,426
 78.8% 620,810
 79.3% 637,324
 81.5%
Restaurant margin $167,614
 21.2% $161,715
 20.7% $145,137
 18.5%
Company restaurant sales increased $6.5 million in 2016 and $0.1 million in 2015 as compared with the respective prior year. In 2016, higher AUVs and additional sales from a 53rd week in 2016 were partially offset by a decrease in sales attributable to the execution of our refranchising strategy which includes the sale of restaurants to franchisees, we expect the number of company-operated restaurants and the related sales tofranchisees. In 2015, higher AUV growth was offset by a decrease while revenues from franchise restaurants increase. As such, company restaurant sales decreased $39.7 million in 2013 and $167.3 million in 2012 as compared with the respective prior year. The decrease in restaurant sales in both years is due primarily to decreases in the average number of Jack in the Box company-operated restaurants partially offset by an increase inrelated to the numberexecution of Qdoba company-operated restaurants and increases in average unit volumes (“AUVs”) at our Jack in the Box and Qdoba restaurants.refranchising strategy. The following table presents the approximate impact of these increases (decreases) on Jack in the Box company restaurant sales (in millions):
  2013 vs. 2012 2012 vs. 2011
Decrease in the average number of Jack in the Box restaurants $(123.0) $(365.8)
Jack in the Box AUV increase 29.5
 127.8
Increase in the average number of Qdoba restaurants 49.3
 11.5
Qdoba AUV increase 4.5
 59.2
Total decrease in company restaurant sales $(39.7) $(167.3)
  2016 vs. 2015 2015 vs. 2014
Decrease in the average number of restaurants $(13.9) $(68.7)
AUV increase 5.3
 68.8
53rd week 15.1
 —
Total increase in company restaurant sales $6.5
 $0.1


Same-store sales at Jack in the Box company-operated restaurants increased 1.0%were flat in 2013 and 4.6% in 2012, primarily driven by2016 compared with 2015 as menu price increases were offset by a decline in both years in addition to transaction growth in 2012. Same-store sales at Qdoba company-operated restaurants increased 0.5% in 2013 and 3.2% in 2012 primarily driven bytransactions. In 2015, menu price increases, favorable product mix changes and an increase in 2013transactions drove same-store sales 5.1% higher catering sales.than the prior year. The following table summarizes the change in company-operated same-store sales.sales: 
  Increase/(Decrease)
  2013 vs. 2012 2012 vs. 2011
Jack in the Box transactions (0.9)% 2.3%
Jack in the Box average check (1) 1.9 % 2.3%
Jack in the Box change in same-store sales 1.0 % 4.6%
     
Qdoba change in same-store sales (2) 0.5 % 3.2%
  Increase/(Decrease)
  2016 vs. 2015 2015 vs. 2014
Average check (1) 2.9 % 4.2%
Transactions (2.9)% 0.9%
Change in same-store sales 0.0 % 5.1%
 ____________________________
(1)
Includes price increases of approximately 2.5%3.0% and 3.2%2.2% in 20132016 and 2012,2015, respectively.
(2)
Includes price increases of approximately 1.0% and 3.8% in 2013 and 2012, respectively.

Food and packaging costs as a percentage of company restaurant sales decreased to 29.9% in 2016 from 31.7% in 2015, and 32.6% in 2014. In 2016, the decrease was driven by lower commodity costs, favorable product mix, and menu price increases. In 2015, the benefits of menu price increases and product mix changes more than offset higher commodity costs.
Franchise revenuesIn 2016, commodity costs decreased 3.0% as lower costs for beef were partially offset by higher costs for pork, poultry and produce. Beef decreased most significantly by approximately18% in 2016 compared with a 10% increase in 2015 versus the prior year. In 2015, commodity costs increased $20.3 million1.3% as higher costs for beef, eggs and $43.7 millionproduce were partially offset by lower costs for pork and shortening. For fiscal 2017, we currently expect commodity costs to be approximately flat to down 1% at Jack in 2013 and 2012, respectively,the Box restaurants as compared with fiscal 2016.
Payroll and employee benefit costs as a percentage of company restaurant sales increased to 28.3% in 2016 from 27.6% in 2015, which decreased from 27.9% in 2014. In 2016, higher wages from minimum wage increases were partially offset by lower levels of incentive compensation driven by operating results, and by the respective prior year. The increase in franchise revenues in both years primarily reflectsbenefits of refranchising. In 2015, sales leverage, the benefits of refranchising and lower costs for group insurance driven by favorable claim trends were partially offset by higher wages from minimum wage increases, unfavorable development trends associated with workers’ compensation claims, and an increase in incentive compensation driven by strong operating performance.
As a percentage of company restaurant sales, occupancy and other costs increased to 20.6% in 2016 from 20.1% in 2015, which decreased from 21.0% in 2014. In 2016, the average numberincrease is related to higher costs for equipment upgrades, and maintenance and repair expenses, partially offset by lower costs for utilities and the benefits of refranchising. The decrease in 2015 was related to sales leverage and the benefits of refranchising, partially offset by higher costs for credit card fees, maintenance and repair expenses and equipment costs due to beverage and technology upgrades at our restaurants.


Jack in the Box Franchise Operations

The following table presents Jack in the Box franchise restaurants, which contributed additional royaltiesrevenues, costs, and rents of approximately $17.1 millionmargin in 2013 and $48.2 million in 2012. In 2013, a reduction in re-image contributions, partially offset by a $1.5 million decrease in revenues from initial franchise fees, also contributed to the increase. In 2012, higher AUVs at Jack in the Box franchised restaurants also contributed to the increase and were more than offset by lower revenues from initial franchise fees of $10.4 million related to a decrease in the number of restaurants sold to and developed by franchisees. The following table reflects the detail of our franchise revenues in each fiscal year and other information we believe is useful in analyzing the change in franchise revenuesoperating results (dollars in thousands):
  2013 2012 2011
Royalties $132,663
 $127,887
 $109,422
Rents 207,513
 195,746
 161,279
Re-image contributions to franchisees (1,990) (7,124) (8,208)
Franchise fees and other 7,901
 9,303
 19,573
Franchise revenues $346,087
 $325,812
 $282,066
% increase 6.2% 15.5% 
Average number of franchise restaurants 2,032
 1,952
 1,707
% increase 4.1% 14.4% 
Increase in franchise-operated same-store sales:      
Jack in the Box 0.1% 3.0%  
Qdoba 1.1% 1.9%  
Royalties as a percentage of estimated franchise restaurant sales:      
Jack in the Box 5.2% 5.3% 5.3%
Qdoba 4.9% 5.0% 5.0%
  2016 2015 2014
Franchise rental revenues $232,794
 $226,494
 $216,944
       
Royalties 138,424
 133,726
 124,538
Re-image contributions to franchisees —
 —
 (22)
Franchise fees and other 2,000
 2,431
 3,323
Franchise royalties and other 140,424
 136,157
 127,839
Total franchise revenues 373,218
 362,651
 344,783
       
Rental expense 137,706
 136,782
 134,975
Depreciation and amortization 32,344
 33,128
 33,844
Franchise occupancy expenses 170,050
 169,910
 168,819
Franchise support and other costs 11,107
 11,726
 10,052
Total franchise costs 181,157
 181,636
 178,871
Franchise margin $192,061
 $181,015
 $165,912
Franchise margin as a % of franchise revenue 51.5% 49.9% 48.1%
       
Average number of franchise restaurants 1,838
 1,828
 1,794
% increase 0.5% 1.9% 4.2%
Franchise restaurant AUV (1) $1,454
 $1,429
 $1,337
Increase in franchise-operated same-store sales 1.6% 7.0% 2.0%
Royalties as a percentage of franchise restaurant sales 5.1% 5.1% 5.2%
 ____________________________
(1) 2016 AUV is adjusted to exclude the 53rd week for the purpose of comparison to prior years.

Franchise rental revenues increased $6.3 million, or 2.8%, in 2016, and $9.6 million, or 4.4%, in 2015 as compared with the respective prior year, primarily reflecting higher AUVs resulting in an increase in revenues from percentage rent, and increased rental income due to routine rent increases. In 2016, additional rent revenue of approximately $4.4 million from a 53rd week also contributed to the increase.
22Franchise royalties and other increased $4.3 million, or 3.1%, in 2016, and $8.3 million, or 6.5%, in 2015 versus the respective prior year, primarily reflecting an increase in royalties driven by higher AUVs and, in 2016, additional royalties of approximately $2.6 million from a 53rd week. These increases were partially offset by a reduction in franchise fees of $0.1 million and $0.7 million in 2016 and 2015, respectively.
Franchise occupancy expenses, principally rents and depreciation on properties subleased or leased to franchisees, increased $0.1 million in 2016 and $1.1 million in 2015. In 2016, the increase relates to routine rent increases contributing to higher rental expense, and additional expenses of approximately $3.2 million from a 53rd week. These increases were partially offset by lower depreciation expense as our building assets become fully depreciated and favorable lease commitment adjustments of $1.9 million related to previously refranchised markets based on sales performance over the first year resulting in higher rent. In 2015, the increase was due to higher rental expense related to customary rent increases partially offset by a decrease in depreciation expense related to building assets becoming fully depreciated, which more than offset the additional depreciation expense driven by our refranchising strategy.
Franchise support and other costs decreased $0.6 million in 2016, and increased $1.7 million in 2015 as compared with the respective prior year. In 2016, costs decreased due to a decrease in bad debt expense and incentive compensation. In 2015, costs increased due to an increase in the average number of franchise restaurants and the recognition of bad debt expense of $0.8 million.



Qdoba Brand

Operating CostsCompany Restaurant Operations
The following table presents Qdoba company restaurant sales, costs and Expensesmargin, and restaurant costs and margin as a percentage of the related sales. Percentages may not add due to rounding (dollars in thousands):
  2016 2015 2014
Company restaurant sales $415,495
   $374,338
   $338,451
  
Company restaurant costs:            
Food and packaging 127,464
 30.7% 114,057
 30.5% 102,447
 30.3%
Payroll and employee benefits 111,451
 26.8% 97,704
 26.1% 90,494
 26.7%
Occupancy and other 101,289
 24.4% 88,742
 23.7% 83,428
 24.6%
Total company restaurant costs 340,204
 81.9% 300,503
 80.3% 276,369
 81.7%
Restaurant margin $75,291
 18.1% $73,835
 19.7% $62,082
 18.3%
Company restaurant sales increased $41.2 million in 2016 and $35.9 million in 2015 as compared with the respective prior year. The increase in 2016 is primarily related to an increase in the average number of Qdoba company-operated restaurants, and to a lesser extent, growth in AUVs, and additional sales from a 53rd week. In 2015, the increase was driven by growth in AUVs, and to a lesser extent, to an increase in the average number of restaurants. The following table presents the approximate impact of these increases on company restaurant sales (in millions):
  2016 vs. 2015 2015 vs. 2014
Increase in the average number of restaurants $29.6
 $10.0
AUV increase 3.4
 25.9
53rd week 8.2
 —
Total increase in company restaurant sales $41.2
 $35.9
Same-store sales at Qdoba company-operated restaurants increased 1.7% in 2016 and 8.3% in 2015. In 2016, the increase was driven by transaction growth resulting from increased discounting, menu price increases and catering. In 2015, the increase in same-store sales was primarily driven by the new simplified menu pricing structure, and growth in catering sales. The following table summarizes the change in company-operated same-store sales:
  Increase/(Decrease)
  2016 vs. 2015 2015 vs. 2014
Transactions 1.5 % (0.1)%
Average check (1) (0.4)% 7.3 %
Catering 0.6 % 1.1 %
Increase in same-store sales 1.7 % 8.3 %
 ____________________________
(1)Includes price increases of approximately 1.0% and 0.2% in 2016 and 2015, respectively.
Food and packaging costs were 32.6%as a percentage of company restaurant sales increased to 30.7% in 2013, 32.9%2016 from 30.5% in 20122015, and 33.5%30.3% in 2011.2014. In 2013, the benefit of selling price increases and favorable2016, unfavorable product mix at our Jack in the Box restaurants,and higher discounting were partially offset by higher commodity costs and greater promotional activity at our Qdoba restaurants. In 2012, higher commodity costs were more than offset by the benefit of price increaseslower commodity costs. In 2015, higher commodity costs were partially offset by the benefits from the new pricing structure.
In 2016, commodity costs decreased 4.4% at our Qdoba company-operated restaurants primarily due to lower costs for beef and poultry. Beef costs decreased most significantly by approximately 12% in 2016 compared with a greater proportion of Qdoba company restaurants which generally have lower food and packaging costs than our Jack12% increase in 2015 versus the Box company restaurants. Commodityrespective prior year. In 2015, commodity costs increased as follows compared with the prior year:
 2013 vs. 2012 2012 vs. 2011
Jack in the Box2.2% 2.7%
Qdoba1.5% 4.3%
In 2013, costs were higher for most commodities other than bakery and dairy, with the largest increases in pork, beef and produce. In 2012, commodity cost increases were driven by1.4% due to higher costs for most commodities other thanbeef, partially offset by lower costs for produce, pork and pork. Beef represents the largest portion, or approximately 20%, of the Company’s overall commodity spend, and we typically do not enter into fixed price contracts for our beef needs.beans. For fiscal 2014,2017, we currently expect beefQdoba commodity costs to increasebe approximately 3%-4%, and overall commoditiesflat to be up approximatelydown 1% compared with fiscal 2013.2016.
Payroll and employee benefit costs were 28.0%as a percentage of company restaurant sales increased to 26.8% in 2013, 28.6%2016 from 26.1% in 20122015, which decreased from 26.7% in 2014. The increase in 2016 is driven primarily by an increase in new restaurant openings and 29.7%higher costs for workers’ compensation insurance as well as increases in 2011. The decrease in 2013 reflects leverage from same-store sales increases, lower levels of incentive compensation at our Jack inlabor staffing. In 2015, the Box restaurants and the modest benefits of refranchising Jack in the Box restaurants, partially offset by higher staffing levels at our Qdoba restaurants. In 2012, the decrease reflects leverage from same-store sales increases, the benefits of refranchising and the favorable impact of recent Qdoba restaurant acquisitions.
Occupancy and other costs were 22.3% of company restaurant sales in 2013, 22.5% in 2012 and 23.6% in 2011. The lower percentages in 2013 and 2012 are duedecline primarily relates to leverage from same-store sales increases the benefitsand lower levels of refranchising Jack in the Box restaurants and the favorable impact of recent acquisitions of Qdoba franchised restaurants. These benefits wereincentive compensation, partially offset by increases in both years by higher depreciation expense related to the Jack in the Box re-image program. In 2012, the percentage was also impacted by higher debit card fees, and costs associated with the new menu board and uniform program at our Jack in the Box restaurants.labor staffing.
Franchise costs, principally rents and depreciation on properties leased to Jack in the Box franchisees, increased $7.5 million in 2013 and $29.9 million in 2012, due primarily to our refranchising strategy.

As a percentage of company restaurant sales, occupancy and other costs increased to 24.4% in 2016, from 23.7% in 2015, which decreased from 24.6% in 2014. In 2016, the increase is related to higher costs for equipment upgrades, higher per store average property rents associated with new restaurants, and higher costs for uniforms, which were partially offset by lower costs for utilities. In 2015, the decrease was primarily due to sales leverage, partially offset by higher costs for credit card fees, property rent, and start up costs associated with a new catering call center.
Qdoba Franchise Operations

The following table presents Qdoba franchise revenues, costs, were and margin in each fiscal year and other information we believe is useful in analyzing the change in franchise operating results (50.2%dollars in thousands):
  2016 2015 2014
Franchise rental revenues $113
 $208
 $238
       
Royalties 20,090
 19,033
 16,448
Franchise fees and other 1,375
 1,562
 1,750
Franchise royalties and other 21,465
 20,595
 18,198
Total franchise revenues 21,578
 20,803
 18,436
       
Rental expense (1) 102
 192
 215
Franchise support and other costs 4,884
 3,962
 3,800
Total franchise costs 4,986
 4,154
 4,015
Franchise margin $16,592
 $16,649
 $14,421
Franchise margin as a % of franchise revenue 76.9% 80.0% 78.2%
       
Average number of franchise restaurants 343
 333
 322
% increase 3.0% 3.4% 3.5%
Franchise restaurant AUV (2) $1,150
 $1,140
 $1,028
Increase in franchise-operated same-store sales 1.1% 10.4% 6.3%
Royalties as a percentage of franchise restaurant sales 5.0% 5.0% 5.0%
 ____________________________
(1)Included in franchise occupancy expenses in the accompanying consolidated statements of earnings.
(2)2016 AUV is adjusted to exclude the 53rd week for the purpose of comparison to prior years.
Franchise royalties and other increased $0.9 million, or 4.2%, 51.0%in 2016 and $2.4 million, or 13.2%, in 2015 as compared with the respective prior year. Increases in both years primarily relate to an increase in the average number of franchise restaurants, and 48.3%to a lesser extent, higher AUVs resulting in 2013, 2012an increase in revenue from royalties. In 2016, additional revenues of approximately $0.4 million from a 53rd week also contributed to the increase.
Franchise support and 2011, respectively. The percent of sales decreaseother costs increased $0.9 million in 2013 versus 20122016 and $0.2 million in 2015 in comparison with the respective prior year. In 2016, the increase is primarily due to a decrease in re-image contributions to franchisees, which are recorded as a reductionbad debt expense of franchise revenues. The higher percentage in 2012 as compared with 2011 is primarily due to a decline in revenue from franchise fees$0.2 million and higher rent and depreciation expenses resulting from an increase in the percentage of locations we lease to franchisees, partially offset by lower re-image contributions to franchisees.franchise support costs.
Selling, general and administrative (“SG&A”) expenses
The following table presents the change in selling, general and administrative (“SG&A”)&A expenses in each fiscal year compared with the prior year (in thousands):
 Increase/(Decrease) (Decrease)/Increase
 2013 vs. 2012 2012 vs. 2011 2016 vs. 2015 2015 vs. 2014
Incentive compensation (including share-based compensation and related payroll taxes) $(5,839) $3,851
Pension and postretirement benefits (5,265) 4,989
Cash surrender value of COLI policies, net (3,486) 3,833
Legal settlement (2,543) —
Region administration (2,081) (275)
Employee relocation (1,402) (463)
Insurance 3,423
 (1,163)
Advertising $(30) $(10,263) 886
 (982)
Refranchising strategy (2,005) (6,277)
Incentive compensation (1,357) 11,941
Cash surrender value of COLI policies, net 1,647
 (6,327)
Pension and postretirement benefits 4,409
 2,893
Pre-opening costs (2,497) 1,906
Qdoba region administration 1,366
 1,702
53rd week 2,970
 —
Other (5,744) 6,327
 (3,992) 4,567
 $(4,211) $1,902
 $(17,329) $14,357
Our refranchising strategy has resulted in a decrease in the number of Jack in the Box company-operated restaurants and the related overhead expenses to manage and support those restaurants, including advertising costs, which are primarily contributions to our marketing funds determined as a percentage of restaurant sales. As such, advertising costs decreased at Jack in the Box and

23


were nearly offset in 2013 and partially offset in 2012 by higher advertising expenses at Qdoba, as well as same-store sales growth at Jack in the Box and Qdoba restaurants.
In 2013,2016, incentive compensation declined due to a decrease in Qdoba’s results compared with performance goals, and was partially offset by an increase in share-based compensationdecreased due primarily to changes in the attribution period over which certain share-based compensation awards are recognized.forfeitures related to workforce reductions associated with our restructuring plan, and to a lesser extent, lower levels of performance at both brands as compared to target bonus levels. In 2012,2015, the higher levellevels of incentive compensation reflects improvements in the Company’s results compared with performance goals . goals. Higher incentive compensation in 2015 also relates to an increase in share-based compensation due to our annual grant of nonvested restricted stock units which vest over five years. As 2015 was our fifth year of offering such grants, we expensed one additional year of grants compared with the respective prior year.
Pension and postretirement benefit costs decreased primarily due to the sunsetting of our qualified pension plan on December 31, 2015, resulting in a decrease in the service cost component of our expense and a change in the amortization period for actuarial gains and losses from the average remaining service period to the average future lifetime of all participants. To a lesser extent, an increase in our discount rate also contributed to the decrease. These decreases were partially offset by an increase in PBGC premiums for 2016.
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 positive impact of $4.6$2.9 million in 2013 and $6.2 million in 2012 compared with2016, a negative impact of $0.1$0.6 million in 2011. 2015 and a positive impact of $3.2 million in 2014.
In 20132016, we received notice that a claim we made in connection with the Deepwater Horizon Court Supervised Settlement Program was approved by the United States District Court for the Eastern District of Louisiana, resulting in a recovery of $2.5 million. The program compensates businesses for economic damages they incurred in connection with the 2010 oil rig spill in the Gulf of Mexico. Our claim related to certain Jack in the Box restaurants in Louisiana and 2012, the increaseTexas.
Region administration costs decreased $2.1 million in pension and postretirement benefits principally relates2016 primarily related to a decrease in the discount ratesincentive compensation related to lower performance levels as compared to target bonus levels for our region administration personnel and to a lesser extent, workforce reductions related to our refranchising efforts.
Insurance costs in 2016 increased primarily due to unfavorable workers’ compensation and general liability claim developments compared with the respective prior year.
In 2013, pre-openinga year ago. Insurance costs in 2015 decreased primarily due to a declinean unfavorable $1.0 million general liability legal settlement recognized in the number of newprior year and favorable group insurance trends versus 2014.
In 2016, advertising costs associated with our Qdoba brand increased $2.4 million versus 2015 primarily related to an increase in television and digital advertising, and was partially offset by a decrease in Jack in the Box company restaurants and restaurants openingbrand advertising costs primarily due to a reduction in new markets as compared with fiscal 2012. The increasediscretionary marketing fund contributions. Advertising costs in fiscal 2012 pre-opening costs, as compared with 2011, primarily relates to higher expenses associated with restaurant openings in two new2015 were impacted by our refranchising strategy at Jack in the Box, markets,which resulted in a decrease in company-operated restaurants and the related overhead expenses to manage and support those restaurants, including advertising costs, which are primarily contributions to our marketing funds determined as well as an increasea percentage of gross restaurant sales. As such, in 2015, advertising costs decreased at Jack in the number of newBox and were partially offset by same-store sales growth at Jack in the Box and Qdoba company-operated restaurants.
Impairment and other charges, net decreased
$19.4 million in 2013 and increased $20.3 million in 2012 as compared to the respective prior year. The following table presents the components of impairment and other charges, net in each fiscal year (in thousands):
 2013 2012 2011 2016 2015 2014
Impairment charges $3,874
 $3,112
 $1,367
Losses on disposition of property and equipment, net 3,645
 5,904
 7,524
Restructuring costs $10,067
 $29
 $8,621
Costs of closed restaurants (primarily lease obligations) and other 2,469
 8,332
 3,655
 3,431
 3,592
 2,841
Restructuring costs 3,451
 15,461
 —
Losses on the disposition of property and equipment, net 2,801
 1,319
 1,674
Accelerated depreciation 2,214
 6,260
 1,202
Restaurant impairment charges 544
 557
 570
 $13,439
 $32,809
 $12,546
 $19,057
 $11,757
 $14,908
Impairment and other charges, net increased $7.3 million in 2016 versus 2015. The increase was primarily driven by $10.1 million of restructuring charges recorded in 2016 related to a plan announced in 2016 to reduce our corporate general and administrative costs. These increases were partially offset by decreases in accelerated depreciation primarily resulting from a decrease in 2013 versus a year ago primarily relatescharges related to beverage equipment, outdoor lighting, and certain technology upgrades at our Jack in the Box restaurants. Restructuring costs in 2016 included $7.6 million of severance and related costs, $2.0 million in accelerated depreciation related to the relocation of our Qdoba corporate support center in 2017, and $0.5 million of other costs. Approximately $2.0 million and $6.3 million of the 2016 restructuring costs are related to our Jack in the Box and Qdoba restaurant operating segments, respectively, and approximately $1.8 million is related to shared services functions.


In 2015, impairment and other charges, net decreased $3.2 million as compared to 2014 due to a decrease in restructuring costs incurredactivities, partially offset by an increase in accelerated depreciation recognized in connection with the comprehensive review ofvarious initiatives at our organization structure and a decline in lease obligation costs associated with closed restaurants. Additionally, higher impairment charges related to Jack in the Box restaurants we intend to close or have closed in fiscal 2013 were partially offset by income of $2.8 million from the resolution of four eminent domain matters involvingcompany-operated Jack in the Box restaurants. The increaseIn 2015, accelerated depreciation included $3.6 million recognized in fiscal 2012 relates to restructuring charges consisting primarily of pension benefitsconnection with beverage equipment upgrades and severance expenses$1.5 million related to a voluntary early retirement program offered byprojects designed to upgrade outdoor lighting and certain technology at our restaurants.
In 2015, losses on the Companydisposition of property and involuntary employee termination costs. To a lesser extent, adjustments madeequipment, net included income of $0.9 million in gains from the resolution of an eminent domain matter involving one Jack in the Box restaurant. For additional detail, refer to certain sublease assumptions associated with our lease obligations for closed locations also contributedNote 9, Impairment and Other Charges, Net, of the notes to the increase in 2012 versus 2011.consolidated financial statements.
Gains (losses) on the sale of company-operated restaurants
Gains (losses) on the sale of company-operated restaurants to franchisees, net are detailed in the following table (dollars in thousands):
  2013 2012 2011
Number of restaurants sold to franchisees 81
 97
 332
Gains on the sale of company-operated restaurants $4,640
 $29,145
 $61,125
Average gain on restaurants sold $57
 $300
 $184
  2016 2015 2014
Number of restaurants sold to franchisees 1
 21
 37
Gains (losses) on the sale of company-operated restaurants $1,230
 $(3,139) $(1,692)
Loss on the anticipated sale of a Jack in the Box market —
 —
 (1,856)
  Total gains (losses) on the sale of company-operated restaurants $1,230
 $(3,139) $(3,548)
Gains and losses are impacted by the number of restaurants sold and changes in average gains or losses recognized, which relate to specific sales and cash flows of those restaurants. In 20132016, 2015 and 2012,2014, gains (losses) on the sale of company-operated restaurants include additional gains of $3.2$1.4 million, $1.5 million and $2.2$2.1 million, respectively, recognized upon the extension of the underlying franchise and lease agreements related to eight and four Jack in the Box restaurants respectively, sold in previous years. In 2014, the loss on the anticipated sale of a prior year.Jack in the Box market relates to 25 company-operated restaurants of which we sold 20, and closed the remaining five in fiscal 2015. For additional detail, refer to Note 3, Summary of Refranchisings, Franchisee Development and Acquisitions, of the notes to the consolidated financial statements.
Interest Expense, Net
Interest expense, net is comprised of the following (in thousands):
 2013 2012 2011 2016 2015 2014
Interest expense $16,471
 $20,953
 $18,165
 $31,426
 $19,180
 $16,531
Interest income (1,220) (2,079) (1,310) (345) (377) (853)
Interest expense, net $15,251
 $18,874
 $16,855
 $31,081
 $18,803
 $15,678
Interest expense, net decreased $3.6increased $12.3 million in 2013 primarily2016 as compared to a year ago due to lowerhigher average borrowings and to a lesser extent, higher average interest rates,rates. In 2015, interest expense increased due to higher average borrowings that were partially offset in part by a $0.9charge of $0.8 million charge in 20132014 to write-off deferred financing fees in connection with the refinancing of our credit facility. In 2012 interest expense, net increased $2.0 million principally relating to higher average borrowings.

24


Income Taxes
The income tax provisions reflect effective tax rates of 32.8%36.5%, 33.2%36.9% and 36.1%35.3% of pretax earnings from continuing operations in 2013, 20122016, 2015 and 2011,2014, respectively. The changesIn 2016, the major components of the year-over-year change in tax rates are primarily due towere an increase in the market performance of insurance investment products used to fund certain non-qualified retirement plans coupled withwhich are excluded from taxable income, the impact of work opportunity tax credits. Changeswhich was partially offset by an increase in the cash valueCompany’s state tax rate. The tax rate change from 2015 versus 2014 was primarily related to a decrease in the market performance of the insurance products used to fund certain non-qualified retirement plans which are not included inexcluded from taxable income.
Earnings from Continuing Operations
Earnings from continuing operations were $82.6$126.3 million,, or $1.84$3.70 per diluted share, in 2013; $68.12016; $112.6 million,, or $1.52$2.95 per diluted share, in 2012;2015; and $85.9$94.8 million,, or $1.71$2.26 per diluted share, in 2011.2014. We estimate that the extra 53rd week benefited net earnings by approximately $3.1 million, or $0.09 per diluted share in fiscal 2016.


Losses from Discontinued Operations, Net
As described in Note 2, Discontinued Operations, in the notes to our consolidated financial statements, theThe losses from our distribution business and the 2013 Qdoba Closures have been reported as discontinued operations for all periods presented. Refer to Note 2, Discontinued Operations, in the notes to our consolidated financial statements for further information regarding our discontinued operations.
Losses from discontinued operations, net of income tax benefit, are as follows for each discontinued operation in each fiscal year (in thousands):
 2013 2012 2011 2016 2015 2014
Distribution business $(3,974) $(5,321) $(1,131) $(235) $(430) $(790)
2013 Qdoba Closures (27,482) (5,132) (4,147) (1,962) (3,359) (5,104)
 $(31,456) $(10,453) $(5,278) $(2,197) $(3,789) $(5,894)
The loss from discontinued operations related to our distribution business includes includes pre-tax charges of $1.9 million and $6.0 million for the accelerated depreciation of a long-lived asset disposed of upon completion of the transaction, $2.0 million and $0.7 million for future lease commitments, and $1.2 million and $1.1 million primarily related to costs incurred to exit certain vendor contracts in fiscal 2013 and 2012, respectively. In 2013, the loss from discontinued operations related to the 2013 Qdoba Closures includes pre-tax charges of $22.2 million for asset impairments, $10.3 million for future lease commitments, net of reversals for deferred rent and tenant improvement allowances of $4.3 million, $3.0 million of other exits costs (primarily severance, equipment removal costs and inventory write-offs) and a $8.8 million net loss from operations.
These losses from discontinued operations reduced diluted earnings per share by the following in each fiscal year (amounts may not add due to rounding):
 2013 2012 2011 2016 2015 2014
Distribution business $(0.09) $(0.12) $(0.02) $(0.01) $(0.01) $(0.02)
2013 Qdoba Closures (0.61) (0.11) (0.08) (0.06) (0.09) (0.012)
 $(0.70) $(0.23) $(0.11) $(0.06) $(0.10) $(0.14)
LIQUIDITY AND CAPITAL RESOURCES
General
Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and our revolving bank credit facility and the sale and leaseback of certain restaurant properties.facility.
We generally reinvest available cash flows from operations to develop new restaurants or enhance existing restaurants, to reduce debt, and to repurchase shares of our common stock.stock, and to pay cash dividends. Our cash requirements consist principally of:
 
working capital;
capital expenditures for new restaurant construction and restaurant renovations;
income tax payments;
debt service requirements; and
obligations related to our benefit plans.
Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with other financing alternatives in place or available, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

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As is common in the restaurant industry, we maintain relatively low levels of accounts receivable and inventories, and our vendors grant trade credit for purchases such as food and supplies. We also continually invest in our business through the addition of new units and refurbishment of existing units, which are reflected as long-term assets and not as part of working capital. As a result, we may at times maintain current liabilities in excess of current assets, which results in a working capital deficit.
Cash Flows
The table below summarizes our cash flows from operating, investing and financing activities for each of the past three fiscal years (in thousands):
 2013 2012 2011 2016 2015 2014
Total cash provided by (used in):            
Operating activities $198,872
 $136,730
 $124,260
 $134,182
 $226,875
 $201,022
Investing activities (33,939) (81,516) (35,802) (104,398) (84,473) (42,979)
Financing activities (163,762) (58,169) (87,641) (30,454) (135,208) (157,116)
Effect of exchange rate changes 4
 —
 —
 (43) (29) 7
Increase (decrease) in cash and cash equivalents $1,175
 $(2,955) $817
Net (decrease) increase in cash $(713) $7,165
 $934


Operating Activities.  Operating cash flows increased $62.1decreased $92.7 million in 20132016 compared with 20122015 due primarily to reductions in working capital expenditures primarily relatedan $80.0 million accelerated contribution to the outsourcing of our distribution business ($29.9 million), a decrease inqualified defined benefit pension plan, as well as, higher interest expense and income tax payments, for property rent related to fluctuations inand the timing of payments for the month of October ($25.1 million), as well as an increase in net income adjusted for non-cash items ($26.0 million). The impact of these increases in cash flows were partially offset by a higher bonus payout in fiscal 2013 versus 2012 ($11.2 million)working capital receipts and an increase in income tax payments ($7.6 million).
In 2012, operating cash flows increased $12.5 million compared with 2011 due primarily to reductions in payments for income taxes ($11.8 million), an increase in minimum rent receipts from franchisees attributable to the timing of collections for October rents ($13.9 million) as well as an increase in net income adjusted for non-cash items ($19.6 million). The impact of these increases in cash flows wereexpenditures, partially offset by an increase in payments for property rentdeferred tax asset utilization primarily related to fluctuationsadditional pension contributions in 2016 and an increase in net earnings in 2016.
In 2015, operating cash flows increased $25.9 million compared with 2014 due primarily to an increase in net earnings in fiscal 2015 and a reduction in prepaid income taxes of $20.3 million, offset by an income tax refund of $20.5 million received in the timingfourth quarter of payments for2014 as a result of a fixed asset cost segregation study.
Pension and Postretirement Contributions — Our policy is to fund our pension plans at or above the monthminimum required by law. As of October ($19.0 million)January 1, 2016, the date of our last actuarial funding valuation, there was no minimum contribution funding requirement. In 2016, we contributed $101.1 million to our pension and postretirement plans which includes an $80.0 million accelerated contribution to our qualified defined benefit pension plan. The accelerated contribution was made to reduce future pension costs including our exposure to PBGC variable-rate premiums that are paid on the unfunded portion of our pension liability, and improve the funded status of the plan. We do not anticipate making any contributions ($15.5 million).to our qualified defined benefit pension plan in fiscal 2017.
Investing Activities.  Cash flows used in investing activities decreased $47.6increased $19.9 million in 20132016 compared with 20122015 primarily due primarily to decreases in cash used to acquire 14 Qdoba franchise-operatedfranchise restaurants and assets which were held for sale and leaseback, as well asan increase in capital expenditures, partially offset by an increase in proceeds from assets held for sale and leaseback. The impact of these decreases in cash flows were partially offset by a decrease in proceeds from the sale of Jack in the Box restaurants to franchisees and an increase in capital expenditures. In 2012,2015, cash flows used in investing activities increased $45.7$41.5 million compared with 20112014 due primarily to lower proceeds from the sale of Jack in the Box restaurants to franchisees and collections of notes receivables related to prior years’ refranchising activity, as well as an increase in capital expenditures, cash used to acquire Qdoba franchise-operated restaurants. The impact of these decreases in cash flows were partially offset byassets held for sale and leaseback, a decrease in capital expenditures.proceeds from assets held for sale and leaseback and the sale of company-operated restaurants.
Capital Expenditures — The composition of capital expenditures in each fiscal year followsis summarized in the table below (in thousands):
 2013 2012 2011 2016 2015 2014
Jack in the Box:            
Restaurant facility expenditures $25,985
 $36,062
 $22,680
New restaurants $5,887
 $12,984
 $13,248
 11,526
 2,402
 3,533
Restaurant facility expenditures 40,670
 32,961
 73,758
Other, including corporate 8,664
 10,634
 18,070
Other, including information technology 1,096
 3,464
 4,645
 $55,221
 $56,579
 $105,076
 38,607
 41,928
 30,858
Qdoba:            
Restaurant facility expenditures 8,341
 3,762
 4,477
New restaurants $22,672
 $17,437
 $18,384
 40,235
 26,686
 13,189
Other, including corporate 6,797
 6,184
 5,852
Other, including information technology 4,740
 3,623
 301
 53,316
 34,071
 17,967
Shared Services:      
Information technology 4,413
 7,315
 5,786
Other, including facility improvements 279
 2,912
 5,914
 $29,469
 $23,621
 $24,236
 4,692
 10,227
 11,700
            
Consolidated capital expenditures $84,690
 $80,200
 $129,312
 $96,615
 $86,226
 $60,525
Our capital expenditure program includes, among other things, investments in new locations and equipment, restaurant remodeling, new equipment and information technology enhancements. In 2013,2016, capital expenditures increased $4.5$10.4 million primarily resulting from an increase in spending related to building new Qdoba and Jack in the Box restaurants, and remodels at our Qdoba restaurants as we roll out our new restaurant designs. These increases were partially offset by a decrease in spending related to site enhancements at our Jack in the Box restaurants, as well as a decrease in spending related to Jack in the Box and Shared Services information technology. In 2015, capital expenditures increased $25.7 million compared with 2014 due primarily to an increase in spending related to the exteriors ofbuilding new Qdoba restaurants, exterior lighting enhancements at our Jack in the Box restaurants, as well as new Qdoba restaurants,and information technology infrastructure at both brands, partially offset by a declinedecrease in spending related to new Jack in the Box restaurants. In 2012, capital expenditures decreased $49.1 million compared with 2011 due primarily to a decline in spending related to our Jack in the Box restaurant re-image and new logo program which was substantially complete in 2011, as well as lower spending for capital maintenance activities andQdoba’s corporate technology.support center.

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In fiscal 2014,2017, capital expenditures are expected to be approximately $105-$80-$90 million. We115 million. Increased spending in fiscal 2017 will primarily be related to remodels at Qdoba and Jack in the Box company-operated restaurants, as well as building new Qdoba company-operated restaurants, partially offset by decreases in spending for Jack in the Box company-operated restaurants. In 2017, we plan to open approximately 3four new Jack in the Box company-operated locations, and 30-35approximately 40 new Qdoba company-operated locations.


Assets Held for Sale and Leaseback— We use sale and leaseback financing to lower the initial cash investment in our restaurants to the cost of the equipment, whenever possible. During both 2016 and 2015, we exercised our right of first refusal related to five leased properties, which we intend to sell and leaseback within the next 12 months. The following table summarizes the cash flow activity related to sale and leaseback transactions in each fiscal year (2014dollars in thousands.):
  2016 2015 2014
Number of restaurants sold and leased back 8
 —
 3
Proceeds from sale and leaseback of assets $17,123
 $—
 $5,698
Purchases of assets intended for sale and leaseback $(9,785) $(10,396) $(2,801)
As of October 2, 2016, we had investments of approximately $14.3 million relating to six restaurant properties that we expect to sell and leaseback during fiscal 2017.
Sale of Company-Operated Restaurants — We have continued to expand franchise ownership in the Jack in the Box system primarily through the sale of company-operated restaurants to franchisees. The following table details proceeds received in connection with our refranchising activities (dollars in thousands):
  2013 2012 2011
Number of restaurants sold to franchisees 81
 97
 332
Cash $30,619
 $47,115
 $119,275
Notes receivable —
 1,200
 1,000
Total proceeds $30,619
 $48,315
 $120,275
Average proceeds $378
 $498
 $362
Fiscal years 2012 and 2011 include financing provided to facilitate the closing of certain transactions. As of September 29, 2013, notes receivable related to refranchisings were $1.2 million. We expect total proceeds from the sale of Jack in the Box restaurants in 2014 to be minimal based on the number of remaining markets for sale.
Assets Held for Sale and Leaseback— We use sale and leaseback financing to lower the initial cash investment in our Jack in the Box restaurants to the cost of the equipment, whenever possible. The following table summarizes the cash flow activity related to sale and leaseback transactions in each fiscal year (dollars in thousands): 
  2013 2012 2011
Number of restaurants sold and leased back 24
 15
 15
Proceeds from sale and leaseback transactions $47,431
 $27,844
 $28,536
Purchases of assets intended for sale and leaseback (26,058) (35,927) (31,798)
  2016 2015 2014
Number of restaurants sold to franchisees 1
 21
 37
Total proceeds $1,439
 $3,951
 $10,536
AsIn 2016, 2015 and 2014, proceeds include $1.4 million, $1.5 million and $2.1 million, respectively, recognized upon the extension of the underlying franchise and lease agreements related to Jack in the Box restaurants sold in previous years. For additional information, refer to Note 3, September 29, 2013Summary of Refranchisings, we had investmentsFranchisee Development and Acquisitions, of approximately $11.6 million in 7 operating or under-construction restaurant properties that we expectthe notes to sell and lease back during fiscal 2014.the consolidated financial statements.
Acquisition of Franchise-Operated Restaurants — In each year,2016, 2015 and 2014, we acquired Qdoba franchise restaurants in select markets where we believe there is continued opportunity for restaurant development. Additionally, in 2013 we exercised our right of first refusalone, seven and acquired onefour Jack in the Box restaurant.franchise restaurants, respectively. In 2016, we also acquired 14 Qdoba franchise restaurants. The following table details franchise-operated restaurant acquisition activity in each fiscal year (dollars in thousands): 
 2013 2012 2011 2016 2015 2014
Number of restaurants acquired from franchisees 14
 46
 32
 15
 7
 4
Cash used to acquire franchise-operated restaurants $12,064
 $48,945
 $31,077
 $19,816
 $—
 $1,750
The purchase prices wereprice was primarily allocated to property and equipment acquired and liabilities assumed in 2015, and primarily allocated to goodwill and reacquired franchise rights.property and equipment acquired in 2016 and 2014. For additional information, refer to Note 3, Summary of Refranchisings, Franchisee Development and Acquisitions, of the notes to the consolidated financial statements.
Franchise Finance, LLC(“FFE”) Loans to Franchisees — During fiscal 2012 and 2011, FFE processed loans to qualifying franchisees of $4.0 million and $14.5 million, respectively, for use in re-imaging their restaurants. These loans have terms ranging from five to seven years and bear a fixed or variable rate of interest. For additional information related to FFE, refer to Note 15, Variable Interest Entities, of the notes to the consolidated financial statements.
Financing Activities.  Cash used in financing activities increased $105.6decreased $104.8 million in 20132016 and decreased $29.5$21.9 million in 20122015 as compared with the previousrespective prior year. The increase in 2013 is primarily attributed to an increase in cash used to repurchase shares of our common stock and the change in our book overdraft related to the timing of working capital receipts and disbursements. The decrease in 20122016 is primarily attributabledue to a net increase in borrowings under our credit facility and a decrease in cash used to repurchase share ofour common stock, partially offset by a decrease in excess tax benefits from share-based compensation arrangements, a decrease in proceeds from the issuance of our common stock, and an increase in cash used to pay dividends. The decrease in 2015 is due primarily to an increase in borrowings under our credit facility.facility, partially offset by an increase in cash used to pay dividends and a decrease in proceeds from the issuance of common stock.

27


Credit Facility — In November 2012, we replaced our existingOn September 16, 2016, the Company amended its credit facility with a new five-year $600.0 million senior credit facility. As of September 29, 2013, ourto increase its overall borrowing capacity by $400.0 million. The amended credit facility comprisedwas increased to $1.6 billion, consisting of (i) a $400.0$900.0 million revolving credit facilityagreement and (ii) a $700.0 million term loan. Upon amendment, the Company borrowed $417.6 million under the amended term loan maturing on November 5, 2017, bearing interest at London Interbank Offered Rate (“LIBOR”) plus 2.00%. As part ofand used the credit agreement, we may request the issuance of upfull amount to $75.0 million in letters of credit, the outstanding amount of which reduces the net borrowing capacity under the agreement. The credit facility requires the payment of an annual commitment fee based on the unused portion of the credit facility. The credit facility’s interest rates and the annual commitment rate are based on a financial leverage ratio, as defined in the credit agreement. We can make voluntary prepayments of the loans under thepay down our revolving credit facility and term loan at any time without premium or penalty. Specific events, such as asset sales, certain issuances of debt and insurance and condemnation recoveries, could trigger a mandatory prepayment.agreement.
We are subject to a number of customary covenants under our credit facility, including limitations on additional borrowings, acquisitions, loans to franchisees, capital expenditures, lease commitments, stock repurchases, dividend payments and requirements to maintain certain financial ratios. We were in compliance with all covenants as of September 29, 2013.October 2, 2016.
At September 29, 2013,October 2, 2016, we had $190.0$694.1 million outstanding under the term loan, borrowings under the revolving credit facilityagreement of $175.0$282.4 million and letters of credit outstanding of $28.1 million.$25.1 million. For additional information related to our credit facility, refer to Note 7, Indebtedness, of the notes to the consolidated financial statements.


Interest Rate Swaps — To reduce our exposure to rising interest rates under our credit facility, we consider interest rate swaps. In August 2010,April 2014, we entered into two forward-looking swapsnine forward-starting interest rate swap agreements that effectively convert $100.0$300.0 million of our variable rate term loanborrowings to a fixed-rate basis beginning September 2011 through September 2014. Based on the term loan’s applicable margin of 2.00% as of September 29, 2013, these agreements have an average pay rate of 1.54%, yielding a fixed rate basis from October 2014 through October 2018. In June 2015, we entered into eleven forward-starting interest rate swap agreements that effectively convert an additional $200.0 million of 3.54%.our variable rate borrowings and future expected variable rate borrowings to a fixed rate from October 2015 through October 2018, and $500.0 million from October 2018 through October 2022. For additional information, related to our interest rate swaps, refer to Note 6, DerivativeInstruments, of the notes to the consolidated financial statements.statements and Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of this Report.
Repurchases of Common Stock —In November 2011, the Board of Directors (“Board”) approved a program, expiring November 2013 to repurchase up to $100.0 million in shares of our common stock. This authorization was fully utilized in fiscal 2013. In November 2012 and August 2013, the Board approved two new programs, each of which provide repurchase authorizations for up to an additional $100.0 million in shares of our common stock, expiring November 2014 and November 2015, respectively. During fiscal 2013,2016, we repurchased 4.03.9 million shares at an aggregate cost of $140.1$291.9 million. As of September 29, 2013,October 2, 2016, there was $136.8approximately $408.2 million remaining under the stock buyback programs, of which $108.2 million expires in November 20122017 and August 2013 authorizations.$300.0 million expires in November 2018.
Repurchases of common stock included in our consolidated statements of cash flows for 2016 include $7.2 million related to repurchase transactions traded in the current fiscal year that will settle in the subsequent year. Repurchases of common stock included in our statements of cash flows for 2015 and 2014 include $3.1 million and $7.3 million, respectively, related to repurchase transactions traded in the prior fiscal year and settled in the subsequent year. For additional information, refer to Note 13, Stockholders’ Equity, of the notes to the consolidated financial statements and Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, of this Report.
Dividends — On May 9, 2014, the Board of Directors approved the initiation of a regular quarterly cash dividend. Two quarterly cash dividend payments of $0.20 per share each were declared totaling $15.9 million in fiscal 2014. In fiscal 2015, the Board of Directors declared two cash dividends of $0.20 per share each, and two cash dividends of $0.30 per share each, totaling $37.6 million. In 2016, the Board of Directors declared four cash dividends of $0.30 cents per share each, totaling $40.5 million. Future dividends are subject to approval by our Board of Directors.
Off-Balance Sheet Arrangements
We have entered into certain off-balance sheet contractual obligations and commitments in the ordinary course of business, which are recognized in our consolidated financial statements in accordance with U.S. generally accepted accounting principles. The off-balance sheet arrangements that will have a material impact on our future results from operations are disclosed in the Contractual Obligations and Commitments table below. 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.

28


Contractual Obligations and Commitments
The following is a summary of our contractual obligations and commercial commitments as of September 29, 2013October 2, 2016 (in thousands):
 Payments Due by Year Payments Due by Fiscal Year
 Total 
Less than
1  year
 1-3 years 3-5 years After 5 years Total 
Less than
1  year
 1-3 years 3-5 years After 5 years
Contractual Obligations:                    
Credit facility term loan (1) $204,537
 $23,997
 $46,680
 $133,860
 $—
 $733,912
 $71,771
 $662,141
 $—
 $—
Revolving credit facility (1) 194,566
 4,348
 8,696
 181,522
 —
Revolving credit agreement (1) 300,237
 7,126
 293,111
 —
 —
Capital lease obligations 7,021
 1,384
 2,458
 1,864
 1,315
 22,354
 3,423
 6,206
 5,618
 7,107
Operating lease obligations 1,721,197
 229,287
 434,761
 333,265
 723,884
 1,494,313
 235,048
 404,213
 324,910
 530,142
Purchase commitments (2) 1,598,949
 662,729
 470,078
 222,337
 243,805
 3,633,400
 993,500
 1,010,100
 728,500
 901,300
Benefit obligations (3) 74,073
 13,178
 11,704
 12,102
 37,089
 68,644
 10,168
 12,339
 12,781
 33,356
Unrecognized tax benefits 769
 769
 —
 —
 —
Total contractual obligations $3,801,112
 $935,692
 $974,377
 $884,950
 $1,006,093
 $6,252,860
 $1,321,036
 $2,388,110
 $1,071,809
 $1,471,905
Other Commercial Commitments:                    
Stand-by letters of credit (4) $28,095
 $28,095
 $—
 $—
 $—
 $25,100
 $25,100
 $—
 $—
 $—
____________________________
(1)
Includes estimated interest expense estimated at interestbased on rates in effect on September 29, 2013. Does not consider impact of the refinancing of our credit facility.
October 2, 2016.
(2)Includes purchase commitments for food, beverage, and packaging items.items to support system-wide restaurant operations.
(3)Includes expected payments associated with our non-qualified defined benefit plan, postretirement benefithealthcare plans and our non-qualified deferred compensation plan through fiscal 2023.2026.
(4)Consists primarily of letters of credit for workers’ compensation and general liability insurance.


We maintain a noncontributory defined benefit pension plan (“Qualified Plan”) covering substantially all full-time employees hired before January 1, 2011. Our policy is to fund our Qualified Plan at amounts necessary to satisfy the minimum amount required by law, plus additional amounts as determined by management to improve the plan’s funded status. Contributions beyond fiscal 20132016 will depend on pension asset performance, future interest rates, future tax law changes, and future changes in regulatory funding requirements. Based on the funding status of our Qualified Plan as of our last measurement date, there was no minimum contribution required. For additional information related to our pension plans, refer to Note 11, Retirement Plans, of the notes to the consolidated financial statements.

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DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES
We have identified the following as our most critical accounting estimates, which are those that are most important to the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments. Information regarding our other significant accounting estimates and policies are disclosed in Note 1, Nature of Operations and Summary of Significant Accounting Policies, of the notes to the consolidated financial statements.
Long-lived Assets — Property, equipment and certain other assets, including amortized intangible assets, are reviewed for impairment when indicators of impairment are present.on an annual basis or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. This review generally includes a restaurant-level analysis, except when we are actively selling a group of restaurants, in which case we perform our impairment evaluations at the group level. Impairment evaluations for individual restaurants take into consideration a restaurant’s operating cash flows, the period of time since a restaurant has been opened or remodeled, refranchising expectations, and the maturity of the related market. Impairment evaluations for a group of restaurants take into consideration the group’s expected future cash flows and sales proceeds from bids received, if any, or fair market value based on, among other considerations, the specific sales and cash flows of those restaurants. If the assets of a restaurant or group of restaurants subject to our impairment evaluation are not recoverable based upon the forecasted, undiscounted cash flows, we recognize an impairment loss as the amount by which the carrying value of the assets exceeds fair value. Our estimates of cash flows used to assess impairment are subject to a high degree of judgment and may differ from actual cash flows due to, among other things, economic conditions or changes in operating performance. During fiscal year 2013,2016, we recorded impairment charges totaling $33.4$0.5 million to write down certain assetsone underperforming Qdoba restaurant to theirits estimated fair value.
Retirement Benefits — Our defined benefit and other postretirement plans’ costs and liabilities are determined using several statistical and other actuarial factors, which attempt to anticipate future events, including assumptions about thediscount rates, expected return on plan assets, health care cost trend rates and mortality rates. The assumed discount rate and expected return on plan assets. assets are the assumptions that generally have the most significant impact on our benefit costs and retirement obligations.
Our discount rate is set annually by us, with assistance from our actuaries, and is determined by considering the average of pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better meeting certain other criteria. As of September 29, 2013,October 2, 2016, our discount rates were 5.37%3.85% for our qualified defined benefit plan, 4.88%Qualified Plan, 3.60% for our non-qualified defined benefit plan, and 5.04%3.64% for our postretirement health plans.
Our expected long-term rate of return on assets is determined taking into consideration our projected asset allocation and economic forecasts prepared with the assistance of our actuarial consultants. As of September 29, 2013,October 2, 2016, our assumed expected long-term rate of return was 7.25%6.50% for our qualified defined benefit plan. Qualified Plan.
The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower turnover and retirement rates or longer or shorter life spans of participants. These differences may affect the amount of pension expense we record. A hypothetical 25 basis point reduction in the assumed discount rate and expected long-term rate of return on plan assets would have resulted in an estimated increase of $2.8$0.5 million and $0.8$0.8 million,, respectively, in our fiscal 20132016 pension and postretirement expense.
We expect our pension and postretirement expense to decrease $17.4$9.3 million in fiscal 20142017 principally due to an increase in fiscal 2016 contributions to our discount ratesQualified Plan which are expected to result in a higher return on plan assets in fiscal 2017, and lump sum payments made to vested and terminated participants.a resulting decrease in our fiscal 2017 PBGC premiums, which is a component of our pension expense. To a lesser extent, the sunsetting of our Qualified Plan on December 31, 2015, at which time participants stopped accruing benefits, will result in a reduction of the service cost component of our expense.
Self InsuranceSelf-Insurance — We are self-insured for a portion of our losses related to workers’ compensation, general liability automotive,and other legal claims and health benefits. In estimating our self-insurance accruals, we utilize independent actuarial estimates of expected losses, which are based on statistical analysis of historical data. These assumptions are closely monitored and adjusted when warranted by changing circumstances. Should a greater amount of claims occur compared to what was estimated, or should medical costs increase beyond what was expected, accruals might not be sufficient, and additional expense may be recorded.


Restaurant Closing Costs — Restaurant closing costs consist ofinclude future lease commitments, net of anticipated sublease rentals and expected ancillary costs. We record a liability for the net present value of any remaining lease obligations, net of estimated sublease income, at the date we cease using a property. Subsequent adjustments to the liability as a result of changes in estimates of sublease income or lease cancellations are recorded in the period incurred. The estimates we make related to sublease income are subject to a high degree of judgment and may differ from actual sublease income due to changes in economic conditions, desirability of the sites and other factors.
Share-based Compensation — We offer share-based compensation plans During fiscal year 2016, we recorded charges of $0.9 million related to attract, retainrevised sublease assumptions and incentivize key officers, non-employee directors and employees to work toward the financial success of the Company. Share-based compensation costadjustments for our stock option grants is estimated at the grant date based on the award’s fair-value as calculated by an option pricing model and is recognized as expense ratably over the requisite service period. The option pricing models require various highly judgmental assumptions including volatility and expected option life. If any of the assumptions used in the model change significantly, share-based compensation expense may differ materially in the future from that recorded in the current period.lease terminations.
Goodwill and Other Intangibles — We evaluate goodwill and non-amortizing intangible assets annually, or more frequently if indicators of impairment are present. Our impairment analyses first include a qualitative assessment to determine whether events

30


or circumstances indicate the carrying amount may not be recoverable. If this assessment results in a less-than 50% likelihood that impairment exists, then further analysis is not required. If the results of these analyses indicate otherwise, then we compare the fair value of the reporting unit for goodwill and the fair value of the intangible asset to their respective carrying values. If the determined fair values of the respective assets are less than the related carrying amounts, an impairment loss is recognized. The methods we use to estimate fair value include future cash flow assumptions, which may differ from actual cash flows due to, among other things, economic conditions or changes in operating performance. During the third quarter of fiscal 2013, due to the magnitude of the 2013 Qdoba closures, we performed a quantitative fair value analysis over our Qdoba goodwill and trademark assets and determined that the estimated fair values were substantially in excess of their carrying values as of July 7, 2013. We additionally performed our annual assessment of overall impairment over all of our goodwill and other intangibles assets during the fourth quarter of 2016, and qualitatively determined that no impairment existed as of September 29, 2013.October 2, 2016. As of the impairment testing date, the fair value of our reporting units significantly exceeded their carrying values.
Legal Accruals — The Company is subject to claims and lawsuits in the ordinary course of its business. A determination of the amount accrued, if any, for these contingencies is made after analysis of each matter. We continually evaluate such accruals and may increase or decrease accrued amounts as we deem appropriate. Because lawsuits are inherently unpredictable, and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgment about future events. As a result, the amount of ultimate loss may differ from those estimates.
Income Taxes — We estimate certain components of our provision for income taxes. These estimates include, among other items, depreciation and amortization expense allowable for tax purposes, allowable tax credits, effective rates for state and local income taxes, and the tax deductibility of certain other items. We adjust our effective income tax rate as additional information on outcomes or events becomes available. Our estimates are based on the best available information at the time that we prepare the income tax provision. We generally file our annual income tax returns several months after our fiscal year-end. Income tax returns are subject to audit by federal, state and local governments, generally years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws.

NEW ACCOUNTING PRONOUNCEMENTS
FUTURE APPLICATION OF ACCOUNTING PRINCIPLES
See Note 1, Nature of Operations and Summary of Significant Accounting standards that have been issued or proposed byPolicies, of the FASB or other standards-setting bodies that do not require adoption untilnotes to the consolidated financial statements for a future date are not expected to have a materialdiscussion of the impact of new accounting pronouncements on our consolidated financial statements upon adoption.statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to risks relating to financial instruments is changes in interest rates. Our credit facility is comprised of a revolving credit facility and a term loan, bearing interest at an annual rate equal to the prime rate or LIBOR plus an applicable margin based on a financial leverage ratio.ratio, with a 0% floor on the LIBOR. As of September 29, 2013,October 2, 2016, the applicable margin for the LIBOR-based revolving loans and term loan was set at 2.00%.
We use interest rate swap agreements to reduce exposure to interest rate fluctuations. In August 2010,April 2014, we entered into twonine forward-starting interest rate swap agreements that effectively convert $100.0$300.0 million of our variable rate term loan borrowings to a fixed-ratefixed rate basis beginning September 2011from October 2014 through September 2014.October 2018. In June 2015, we entered into eleven forward-starting interest rate swap agreements that effectively convert an additional $200.0 million of our variable rate borrowings to a fixed rate from October 2015 through October 2018, and $500.0 million from October 2018 through October 2022. Based on the term loan’s applicable margin of 2.00%in effect as of October 2, 2016, these twenty interest rate swaps would yield average fixed rates of 3.90%, 4.41%, 4.62%, 4.89%, 5.07% and 5.17% in fiscal years 2017 through 2022, respectively. For additional information related to our interest rate swaps, refer to Note 6, September 29, 2013DerivativeInstruments, these agreements would have an average pay rate of 1.54%, yielding a fixed rate of 3.54%.the notes to the consolidated financial statements.
A hypothetical 100 basis point increase in short-term interest rates, based on the outstanding unhedged balance of our revolving credit facility and term loan at September 29, 2013,October 2, 2016, would result in an estimated increase of $2.7$4.8 million in annual interest expense.


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. From time to time, we enter into futures and option contracts to manage these fluctuations. At September 29, 2013,October 2, 2016, we had no such contracts in place.
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, and related financial information, and the Report of Independent Registered Public Accounting Firm required to be filed are indexed on page F-1 and are incorporated herein.


31


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.  CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Based on an evaluation of the Company’s disclosure controls and procedures (as defined in RulesRule 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s fiscal year ended September 29, 2013October 2, 2016, the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) have concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 29, 2013October 2, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 29, 2013October 2, 2016. In making this assessment, our management used the criteria set forth in 19922013 by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Management has concluded that, as of September 29, 2013October 2, 2016, the Company’s internal control over financial reporting was effective, at a reasonable assurance level, based on these criteria.
The Company’s independent registered public accounting firm, KPMG LLP, has issued an audit report on the effectiveness of our internal control over financial reporting, which follows.

32




Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Jack in the Box Inc.:
We have audited the internal control over financial reporting of Jack in the Box Inc. (the Company) as of September 29, 2013October 2, 2016, based on criteria established in Internal Control — Integrated Framework (1992)(2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)(“COSO”). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Jack in the Box Inc.Company maintained, in all material respects, effective internal control over financial reporting as of September 29, 2013October 2, 2016, based on criteria established in Internal Control — Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Jack in the Box Inc. and subsidiaries as of September 29, 2013October 2, 2016 and September 30, 201227, 2015, and the related consolidated statements of earnings, comprehensive income, cash flows, and stockholders’ (deficit) equity for the fifty-twofifty-three weeks ended September 29, 2013, September 30, 2012October 2, 2016, and the fifty-two weeks ended October 2, 2011September 27, 2015 and September 28, 2014, and our report dated November 22, 20132016, expressed an unqualified opinion on those consolidated financial statements.
/s/    KPMG LLP
San Diego, California
November 22, 20132016

33




ITEM 9B.  OTHER INFORMATION
None.
PART III
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
That portion of our definitive Proxy Statement appearing under the captions “Election of Directors,” “Directors Qualifications and Biographical Information,” “Committees of the Board” and “Section 16(a) Beneficial Ownership Reporting Compliance” to be filed with the Commission pursuant to Regulation 14A within 120 days after September 29, 2013October 2, 2016 and to be used in connection with our 20142017 Annual Meeting of Stockholders is hereby incorporated by reference.
Information regarding our executive officers is set forth in Item 1 of Part I of this Report under the caption “Executive Officers.”
That portion of our definitive Proxy Statement appearing under the caption “Committees of the Board - Audit Committee,” relating to the members of the Company’s Audit Committee and the members of the Audit Committee who qualify as financial experts, is also incorporated herein by reference.
That portion of our definitive Proxy Statement appearing under the caption “Stockholder Proposals for the 20152017 Annual Meeting,” relating to the procedures by which stockholders may recommend candidates for director to the Nominating and Governance Committee of the Board of Directors, is also incorporated herein by reference.
We have adopted a Code of Ethics, which applies to all Jack in the Box Inc. directors, officers and employees, including the Chief Executive Officer, Chief Financial Officer, Controller and all of the financial team. The Code of Ethics is posted on the Company’s website, www.jackinthebox.com (under the “Investors — Corporate Governance — Code of Conduct” caption) and in print free of charge to any stockholder upon request. We intend to satisfy the disclosure requirement regarding any amendment to, or waiver of, a provision of the Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller or persons performing similar functions, by posting such information on our website. No such waivers have been issued during fiscal 20132016.
We have also adopted a set of Corporate Governance Principles and Practices for our Board of Directors and charters for all of our Board Committees, including the Audit, Compensation, and Nominating and Governance Committees. The Corporate Governance Principles and Practices and committee charters are available on our website at www.jackinthebox.com and in print free of charge to any shareholder who requests them. Written requests for our Code of Business Conduct and Ethics, Corporate Governance Principles and Practices and committee charters should be addressed to Jack in the Box Inc., 9330 Balboa Avenue, San Diego, California 92123, Attention: Corporate Secretary.
ITEM 11.  EXECUTIVE COMPENSATION
That portion of our definitive Proxy Statement appearing under the caption “Executive Compensation,” “Director Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” to be filed with the Commission pursuant to Regulation 14A within 120 days after September 29, 2013October 2, 2016 and to be used in connection with our 20142017 Annual Meeting of Stockholders is hereby incorporated by reference.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
That portion of our definitive Proxy Statement appearing under the caption “Security Ownership of Certain Beneficial Owners and Management” to be filed with the Commission pursuant to Regulation 14A within 120 days after September 29, 2013October 2, 2016 and to be used in connection with our 20142017 Annual Meeting of Stockholders is hereby incorporated by reference. Information regarding equity compensation plans under which Company common stock may be issued as of September 29, 2013October 2, 2016 is set forth in Item 5 of this Report. 

34





ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
That portion of our definitive Proxy Statement appearing under the caption “Certain Relationships and Related Transactions,Transactions” and “Director Independence,” if any, to be filed with the Commission pursuant to Regulation 14A within 120 days after September 29, 2013October 2, 2016 and to be used in connection with our 20142017 Annual Meeting of Stockholders is hereby incorporated by reference.

ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
That portion of our definitive Proxy Statement appearing under the caption “Independent Registered Public Accounting Fees and Services” to be filed with the Commission pursuant to Regulation 14A within 120 days after September 29, 2013October 2, 2016 and to be used in connection with our 20142017 Annual Meeting of Stockholders is hereby incorporated by reference.
PART IV
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15(a) (1) 
Financial Statements. See Index to Consolidated Financial Statements on page F-1 of this Report.
ITEM 15(a) (2) 
Financial Statement Schedules. None.


35


ITEM 15(a) (3)  Exhibits.
Number Description  Form  Filed with SEC
3.1 Restated Certificate of Incorporation, as amended, dated September 21, 2007  10-K  11/20/2009
    
3.1.1 Certificate of Amendment of Restated Certificate of Incorporation dated September 21, 2007  8-K  9/24/2007
    
3.2 Amended and Restated Bylaws dated August 7, 2013  10-Q  8/8/2013
    
       
10.1.1 Credit Agreement dated as of June 29, 2010 by and among Jack in the Box Inc. and the lenders named therein 8-K 7/1/2010
       
10.1.2 Collateral Agreement dated as of June 29, 2010 by and among Jack in the Box Inc. and the lenders named therein 8-K 7/1/2010
       
10.1.3 Guaranty Agreement dated as of June 29, 2010 by and among Jack in the Box Inc. and the lenders named therein 8-K 7/1/2010
       
10.1.4 First Amendment to the Credit Agreement dated as of February 16, 2012 by and among Jack in the Box Inc. and the lenders named therein  10-Q  2/23/2012
       
10.1.510.1.7 Second Amended and Restated Credit Agreement dated as of November 5, 2012,March 19, 2014, among Jack in the Box Inc., Wells Fargo Bank, National Association, as administrative agent, and the other lender and agent parties thereto 8-K 11/8/20123/20/2014
       
10.1.610.1.8 ReaffirmationAmended and AmendmentRestated Guaranty Agreement dated as of November 5, 2012,March 19, 2014, among Jack in the Box Inc., Wells Fargo Bank, National Association, as administrative agent, and the subsidiaries of Jack in the Box Inc. party thereto 8-K 11/8/20123/20/2014
10.1.9Amended and Restated Collateral Agreement dated as of March 19, 2014, among Jack in the Box Inc., Wells Fargo Bank, National Association, as administrative agent, and the subsidiaries of Jack in the Box Inc. party thereto8-K3/20/2014
10.1.10Waiver, Joinder and Second Amendment, dated as of July 1, 2015, among Jack in the Box Inc., the Guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto.8-K7/7/2015


NumberDescriptionFormFiled with SEC
10.1.11Third Amendment, dated as of September 16, 2016, by and among Jack in the Box Inc., the Guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto8-K9/22/2016
10.1.12Second Amended and Restated Collateral Agreement dated as of September 16, 2016, by and among Jack in the Box Inc., the Grantors party thereto and Wells Fargo Bank, National Association, as administrative agent8-K9/22/2016
       
10.2* Form of Compensation and Benefits Assurance Agreement for Executives  10-Q  2/20/2008
    
10.2.1* Form of Revised Compensation and Benefits Assurance Agreement for certain officers  10-Q  5/17/2012
    
10.2.2*Form of Revised Compensation and Benefits Assurance Agreement for certain officers, dated May 8, 201410-K11/21/2014
10.3* Amended and Restated Supplemental Executive Retirement Plan  10-Q  2/18/2009
10.3.1 *First Amendment to Jack in the Box Inc. Supplemental Executive Retirement Plan, As Amended and Restated Effective January 1, 20098-K9/22/2015
    
10.4* Amended and Restated Executive Deferred Compensation Plan  10-Q  2/18/2009
    
10.4.1 *Jack in the Box Inc. Executive Deferred Compensation Plan, As Amended and Restated Effective January 1, 20168-K9/22/2015
10.5* Amended and Restated Deferred Compensation Plan for Non-Management Directors  10-K  11/22/2006
10.6*Amended and Restated Non-Employee Director Stock Option Plan dated September 17, 199910-K12/2/1999
10.7*Jack in the Box Inc. 2002 Stock Incentive PlanDEF 14A1/18/2002
10.7.1*Form of Restricted Stock Award for certain executives under the 2002 Stock Incentive Plan10-Q4/3/2003
    
10.8* Amended and Restated 2004 Stock Incentive Plan  DEF 14A  1/12/2012
    
10.8.1* Form of Restricted Stock Award for officers and certain members of management under the 2004 Stock Incentive Plan  10-Q  8/5/2009
    
10.8.1(a)*Form of Restricted Stock Award for executives of Qdoba Restaurant Corporation under the 2004 Stock Incentive Plan10-Q8/5/2009
   
10.8.2*Form of Stock Option Agreement under the 2004 Stock Incentive Plan10-Q8/5/2009
10.8.2(a)*Form of Stock Option Award for officers of Qdoba Restaurant Corporation under the 2004 Stock Incentive Plan10-Q8/5/2009


36


NumberDescriptionFormFiled with SEC
10.8.3* Jack in the Box Inc. Non-Employee Director Stock Option Award Agreement under the 2004 Stock Incentive Plan  8-K  11/15/2005
       
10.8.4(a)*10.8.4* Form of Restricted Stock Unit Award Agreement for Non-Employee Director under the 2004 Stock Incentive Plan  10-K  11/20/2009
       
10.8.5*  Form of Time-Vested Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan  10-K  11/24/2010
    
10.8.6* Form of PerformanceRestricted Stock Unit AwardGrant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan 10-Q 5/14/20082015
    
10.8.7*  Form of Stock Option and Performance Unit Awards Agreement under the 2004 Stock Incentive Plan  10-K  11/20/2009
    
10.8.8*  Form of Stock Option and Performance Share Awards Agreement under the 2004 Stock Incentive Plan  10-Q  2/23/2012
    
10.8.9* Form of Stock Option and Performance Share Awards Agreement under the 2004 Stock Incentive Plan 10-K Fired herewith11/22/2013
       
10.8.10* Form of Time-Vested Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan 10-K Fired herewith11/22/2013
       
10.9*10.8.11* Form of QdobaTime-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan 10-K10-Q 11/24/20102/19/2015
10.8.12*Form of Stock Option and Performance Share Award Agreement under the 2004 Stock Incentive Plan10-Q2/19/2015


NumberDescriptionFormFiled with SEC
10.8.13*Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan10-Q2/18/2016
10.8.14*Form of Stock Option and Performance Share Award Agreement under the 2004 Stock Incentive Plan10-Q2/18/2016
10.8.15*Form of Restricted Stock Unit Grant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan10-Q5/12/2016
    
10.10.1*  Amended and Restated Performance Bonus Incentive Plan effective October 4, 2010  DEF 14A  1/13/2011
    
10.10.2* Employment Agreement, dated March 5, 2013, between Jack in the Box Inc. and Timothy CaseyPerformance Incentive Plan, Effective February 13, 2016 10-KDEF 14A Filed herewith1/11/2016
    
10.11*  Form of Amended and Restated Indemnification Agreement between the registrant and individual directors, officers and key employees  10-Q  8/10/2012
    
23.1  Consent of Independent Registered Public Accounting Firm  _____  Filed herewith
    
31.1  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  _____  Filed herewith
    
31.2  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  _____  Filed herewith
    
32.1  Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  _____  Filed herewith
    
32.2  Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  _____  Filed herewith
    
101.INS£101.INS  XBRL Instance Document      
    
101.SCH£101.SCH  XBRL Taxonomy Extension Schema Document      
    
101.CAL£101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document      
    
101.DEF£101.DEF  XBRL Taxonomy Extension Definition Linkbase Document      
    
101.LAB£101.LAB  XBRL Taxonomy Extension Label Linkbase Document      
    
101.PRE£101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document      
 
* Management contract or compensatory plan.
£ In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed to be “furnished” and not “filed.”

 ITEM 15(b) All required exhibits are filed herein or incorporated by reference as described in Item 15(a)(3).
 ITEM 15(c) All schedules have been omitted as the required information is inapplicable, immaterial or the information is presented in the consolidated financial statements or related notes.

37






38


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/s/ JERRY P. REBEL
  
Jerry P. Rebel
Executive Vice President and Chief Financial Officer (principal financial officer)
(Duly Authorized Signatory)
  November 22, 20132016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Each person whose signature appears below constitutes and appoints LindaLeonard A. LangComma and Jerry P. Rebel, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes may do or cause to be done by virtue hereof.
Signature  Title Date
   
/S/ LINDAs/ LEONARD A. LANGCOMMA  Chairman of the Board and Chief Executive Officer (principal executive officer) November 22, 20132016
LindaLeonard A. LangComma    
   
/S/s/ JERRY P. REBEL  Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer) November 22, 20132016
Jerry P. Rebel    
   
/S/s/ DAVID L. GOEBEL  Director November 22, 20132016
David L. Goebel    
   
/S/s/ SHARON P. JOHNDirectorNovember 22, 2016
Sharon P. John
/s/ MADELEINE A. KLEINER  Director November 22, 20132016
Madeleine A. Kleiner    
   
/S/s/ MICHAEL W. MURPHY  Director November 22, 20132016
Michael W. Murphy    
   
/S/s/ JAMES M. MYERS  Director November 22, 20132016
James M. Myers    
     
/S/s/ DAVID M. TEHLE  Director November 22, 20132016
David M. Tehle    
   
/S/ WINIFRED M. WEBBDirectorNovember 22, 2013
Winifred M. Webb
/S/s/ JOHN T. WYATT Director November 22, 20132016
John T. Wyatt     



39



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
   
   Page
Report of Independent Registered Public Accounting Firm  
F-2
Consolidated Balance Sheets  
F-3
Consolidated Statements of Earnings  
F-4
Consolidated Statements of Comprehensive Income 
F-5
Consolidated Statements of Cash Flows  
F-6
Consolidated Statements of Stockholders’ (Deficit) Equity  
F-7
Notes to Consolidated Financial Statements  
F-8F-7
Schedules not filed: All schedules have been omitted as the required information is inapplicable, immaterial or the information is presented in the consolidated financial statements or related notes.


F-1



Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Jack in the Box Inc.:
We have audited the accompanying consolidated balance sheets of Jack in the Box Inc. and subsidiaries (the Company) as of September 29, 2013October 2, 2016 and September 30, 2012,27, 2015, and the related consolidated statements of earnings, comprehensive income, cash flows, and stockholders’ (deficit) equity for the fifty-three weeks ended October 2, 2016, and the fifty-two weeks ended September 29, 201327, 2015, and September 30, 2012, and October 2, 201128, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Jack in the Box Inc. and subsidiaries as of September 29, 2013October 2, 2016 and September 30, 201227, 2015, and the results of their operations and their cash flows for the fifty-twofifty-three weeks ended September 29, 2013, September 30, 2012October 2, 2016, and the fifty-two weeks ended October 2, 2011September 27, 2015 and September 28, 2014, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the internal control over financial reporting of Jack in the Box Inc. as of September 29, 2013October 2, 2016, based on criteria established in Internal Control - Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated November 22, 2013,2016, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP
San Diego, California
November 22, 20132016


F-2






JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars inIn thousands, except share and per share data)


 September 29,
2013		 September 30,
2012		 October 2,
2016		 September 27,
2015
ASSETS
Current assets:        
Cash and cash equivalents $9,644
 $8,469
Cash $17,030
 $17,743
Accounts and other receivables, net 41,749
 78,798
 73,360
 47,975
Inventories 7,181
 7,752
 8,229
 7,376
Prepaid expenses 19,970
 32,821
 40,398
 16,240
Deferred income taxes 26,685
 26,932
Assets held for sale 11,875
 45,443
 14,259
 15,516
Assets of discontinued operations held for sale —
 30,591
Other current assets 108
 375
 2,129
 3,106
Total current assets 117,212
 231,181
 155,405
 107,956
Property and equipment, at cost:        
Land 112,673
 109,295
 117,166
 112,991
Buildings 1,068,405
 1,054,967
 1,116,244
 1,091,237
Restaurant and other equipment 305,769
 328,031
 331,644
 315,235
Construction in progress 30,066
 37,357
 40,522
 43,914
 1,516,913
 1,529,650
 1,605,576
 1,563,377
Less accumulated depreciation and amortization (746,054) (708,858) (886,526) (835,114)
Property and equipment, net 770,859
 820,792
 719,050
 728,263
Intangible assets, net 16,390
 17,206
 14,042
 14,765
Goodwill 148,988
 140,622
 166,046
 149,027
Other assets, net 265,760
 253,924
 294,248
 303,968
 $1,319,209
 $1,463,725
 $1,348,791
 $1,303,979
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITYLIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:        
Current maturities of long-term debt $20,889
 $15,952
 $57,574
 $26,677
Accounts payable 36,899
 94,713
 40,736
 32,137
Accrued liabilities 153,886
 164,637
 181,250
 170,575
Total current liabilities 211,674
 275,302
 279,560
 229,389
Long-term debt, net of current maturities 349,393
 405,276
 937,512
 688,579
Other long-term liabilities 286,124
 371,202
 348,925
 370,058
Stockholders’ equity:    
Stockholders’ (deficit) equity:    
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued —
 —
 —
 —
Common stock $0.01 par value, 175,000,000 shares authorized, 78,515,171 and 75,827,894 issued, respectively 785
 758
Common stock $0.01 par value, 175,000,000 shares authorized, 81,598,524 and 81,096,156 issued, respectively 816
 811
Capital in excess of par value 296,764
 221,100
 432,564
 402,986
Retained earnings 1,171,823
 1,120,671
 1,399,721
 1,316,119
Accumulated other comprehensive loss (62,662) (136,013) (187,021) (132,530)
Treasury stock, at cost, 35,926,269 and 31,955,606 shares, respectively (934,692) (794,571)
Total stockholders’ equity 472,018
 411,945
Treasury stock, at cost, 49,190,992 and 45,314,529 shares, respectively (1,863,286) (1,571,433)
Total stockholders’ (deficit) equity (217,206) 15,953
 $1,319,209
 $1,463,725
 $1,348,791
 $1,303,979
See accompanying notes to consolidated financial statements.


F-3


JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)



 Fiscal Year Fiscal Year
 2013 2012 2011 2016 2015 2014
Revenues:            
Company restaurant sales $1,143,780
 $1,183,483
 $1,350,759
 $1,204,535
 $1,156,863
 $1,120,912
Franchise revenues 346,087
 325,812
 282,066
Franchise rental revenues 232,907
 226,702
 217,182
Franchise royalties and other 161,889
 156,752
 146,037
 1,489,867
 1,509,295
 1,632,825
 1,599,331
 1,540,317
 1,484,131
Operating costs and expenses, net:            
Company restaurant costs:            
Food and packaging 372,685
 389,235
 452,033
 363,002
 361,988
 357,338
Payroll and employee benefits 320,384
 338,210
 400,529
 334,470
 313,302
 308,494
Occupancy and other 255,586
 266,440
 318,546
 264,158
 246,023
 247,861
Total company restaurant costs 948,655
 993,885
 1,171,108
 961,630
 921,313
 913,693
Franchise costs 173,567
 166,078
 136,148
Franchise occupancy expenses 170,152
 170,102
 169,034
Franchise support and other costs 15,991
 15,688
 13,852
Selling, general and administrative expenses 220,641
 224,852
 222,950
 203,816
 221,145
 206,788
Impairment and other charges, net 13,439
 32,809
 12,546
 19,057
 11,757
 14,908
Gains on the sale of company-operated restaurants (4,640) (29,145) (61,125)
(Gains) losses on the sale of company-operated restaurants
 (1,230) 3,139
 3,548
 1,351,662
 1,388,479
 1,481,627
 1,369,416
 1,343,144
 1,321,823
Earnings from operations 138,205
 120,816
 151,198
 229,915
 197,173
 162,308
Interest expense, net 15,251
 18,874
 16,855
 31,081
 18,803
 15,678
Earnings from continuing operations and before income taxes 122,954
 101,942
 134,343
 198,834
 178,370
 146,630
Income taxes 40,346
 33,838
 48,465
 72,564
 65,769
 51,786
Earnings from continuing operations 82,608
 68,104
 85,878
 126,270
 112,601
 94,844
Losses from discontinued operations, net of income tax benefit (31,456) (10,453) (5,278) (2,197) (3,789) (5,894)
Net earnings $51,152
 $57,651
 $80,600
 $124,073
 $108,812
 $88,950
            
Net earnings per share — basic:            
Earnings from continuing operations $1.91
 $1.55
 $1.74
 $3.74
 $3.00
 $2.33
Losses from discontinued operations (0.73) (0.24) (0.11) (0.07) (0.10) (0.14)
Net earnings per share $1.18
 $1.31
 $1.63
Net earnings per share (1) $3.68
 $2.89
 $2.18
Net earnings per share — diluted:            
Earnings from continuing operations $1.84
 $1.52
 $1.71
 $3.70
 $2.95
 $2.26
Losses from discontinued operations (0.70) (0.23) (0.11) (0.06) (0.10) (0.14)
Net earnings per share $1.14
 $1.28
 $1.61
Net earnings per share (1) $3.63
 $2.85
 $2.12
            
Weighted-average shares outstanding:            
Basic 43,351
 43,999
 49,302
 33,735
 37,587
 40,781
Diluted 44,899
 44,948
 50,085
 34,146
 38,215
 41,973
      
Cash dividends declared per common share $1.20
 $1.00
 $0.40
________________________
(1) Earnings per share may not add due to rounding.
See accompanying notes to consolidated financial statements.


F-4


JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)



 Fiscal Year Fiscal Year
 2013 2012 2011 2016 2015 2014
            
Net earnings $51,152
 $57,651
 $80,600
 $124,073
 $108,812
 $88,950
Cash flow hedges:            
Net change in fair value of derivatives (110) (1,055) (2,066) (25,439) (26,596) (1,890)
Net loss reclassified to earnings 1,353
 1,304
 117
 4,048
 2,011
 1,291
 1,243
 249
 (1,949) (21,391) (24,585) (599)
Tax effect (476) (97) 750
 8,281
 9,517
 229
 767
 152
 (1,199) (13,110) (15,068) (370)
Unrecognized periodic benefit costs:            
Actuarial gains (losses) arising during the period 98,764
 (78,619) (36,862)
Actuarial losses arising during the period (71,971) (54,407) (49,173)
Actuarial losses and prior service cost reclassified to earnings 18,895
 13,532
 10,544
 4,546
 9,863
 5,245
 117,659
 (65,087) (26,318) (67,425) (44,544) (43,928)
Tax effect (45,079) 24,862
 10,364
 26,087
 17,243
 16,821
 72,580
 (40,225) (15,954) (41,338) (27,301) (27,107)
Other:            
Foreign currency translation adjustments 8
 —
 —
 (70) (45) 10
Tax effect (4) —
 —
 27
 16
 (3)
 4
 —
 —
 (43) (29) 7
            
Other comprehensive income (loss), net of tax 73,351
 (40,073) (17,153)
Other comprehensive loss, net of tax (54,491) (42,398) (27,470)
            
Comprehensive income $124,503
 $17,578
 $63,447
 $69,582
 $66,414
 $61,480
See accompanying notes to consolidated financial statements.


F-5



JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars inIn thousands)


 Fiscal Year Fiscal Year
 2013 2012 2011 2016 2015 2014
Cash flows from operating activities:            
Net earnings $51,152
 $57,651
 $80,600
 $124,073
 $108,812
 $88,950
Adjustments to reconcile net earnings to net cash provided by operating activities:            
Depreciation and amortization 96,219
 97,958
 96,147
 92,844
 89,468
 91,384
Deferred finance cost amortization 2,277
 2,695
 2,554
 2,736
 2,309
 2,175
Excess tax benefits from share-based compensation arrangements (7,461) (18,602) (17,664)
Deferred income taxes (18,604) (6,615) (12,832) 34,973
 (3,191) 4,152
Share-based compensation expense 11,392
 6,883
 8,062
 11,455
 12,420
 10,358
Pension and postretirement expense 31,147
 33,526
 23,845
 13,484
 18,749
 13,760
(Gains) losses on cash surrender value of company-owned life insurance (8,998) (12,137) 1,094
 (5,365) 1,240
 (6,049)
Gains on the sale of company-operated restaurants (4,640) (29,145) (61,125)
Gains on the acquisition of franchise-operated restaurants —
 —
 (426)
(Gains) losses on the sale of company-operated restaurants
 (1,230) 3,139
 3,548
Losses on the disposition of property and equipment 3,344
 6,281
 7,650
 2,654
 1,847
 1,680
Impairment charges and other 28,230
 9,403
 1,367
 4,759
 6,815
 10,434
Loss on early retirement of debt 939
 —
 —
 —
 —
 789
Changes in assets and liabilities, excluding acquisitions and dispositions:      
Changes in assets and liabilities:      
Accounts and other receivables 33,994
 3,497
 (26,116) (28,181) (82) 19,589
Inventories 27,415
 4,334
 (1,540) (713) 105
 (300)
Prepaid expenses and other current assets 13,117
 (12,849) 19,163
 (15,367) 35,255
 14,051
Accounts payable (26,945) (3,264) 1,498
 2,225
 2,281
 (627)
Accrued liabilities (10,560) 247
 2,446
 8,662
 798
 7,140
Pension and postretirement contributions (23,886) (20,318) (4,790) (101,052) (25,374) (25,349)
Other (6,721) (1,417) (13,337) (4,314) (9,114) (16,999)
Cash flows provided by operating activities 198,872
 136,730
 124,260
 134,182
 226,875
 201,022
Cash flows from investing activities:            
Purchases of property and equipment (84,690) (80,200) (129,312) (96,615) (86,226) (60,525)
Purchases of assets intended for sale and leaseback (26,058) (35,927) (31,798) (9,785) (10,396) (2,801)
Proceeds from sale and leaseback of assets 47,431
 27,844
 28,536
 17,123
 —
 5,698
Proceeds from the sale of company-operated restaurants 30,619
 47,115
 119,275
 1,439
 3,951
 10,536
Collections on notes receivable 6,448
 12,230
 20,848
 3,555
 5,917
 2,974
Disbursements for loans to franchisees —
 (3,977) (14,473)
Acquisition of franchise-operated restaurants (12,064) (48,945) (31,077) (19,816) —
 (1,750)
Other 4,375
 344
 2,199
 (299) 2,281
 2,889
Cash flows used in investing activities (33,939) (81,516) (35,802) (104,398) (84,473) (42,979)
Cash flows from financing activities:            
Borrowings on revolving credit facilities 646,000
 576,380
 721,160
 705,000
 857,000
 652,000
Repayments of borrowings on revolving credit facilities (721,000) (602,540) (605,000) (817,578) (768,000) (521,000)
Proceeds from issuance of debt 200,000
 —
 —
 417,578
 300,000
 200,000
Principal repayments on debt (175,946) (21,110) (13,760) (26,154) (198,397) (193,399)
Debt issuance costs (4,392) (741) (989) (2,385) (2,030) (3,607)
Dividends paid on common stock (40,295) (37,390) (15,808)
Proceeds from issuance of common stock 61,993
 10,167
 5,530
 10,564
 15,170
 31,748
Repurchases of common stock (132,833) (30,013) (193,099) (284,645) (320,163) (323,866)
Excess tax benefits from share-based compensation arrangements 2,094
 1,115
 1,290
 7,461
 18,602
 17,664
Change in book overdraft (39,678) 8,573
 (2,773) —
 —
 (848)
Cash flows used in financing activities (163,762) (58,169) (87,641) (30,454) (135,208) (157,116)
Effect of exchange rate changes on cash and cash equivalents 4
 —
 —
Net increase (decrease) in cash and cash equivalents 1,175
 (2,955) 817
Cash and cash equivalents at beginning of year 8,469
 11,424
 10,607
Cash and cash equivalents at end of year $9,644
 $8,469
 $11,424
Effect of exchange rate changes on cash (43) (29) 7
Net (decrease) increase in cash (713) 7,165
 934
Cash at beginning of year 17,743
 10,578
 9,644
Cash at end of year $17,030
 $17,743
 $10,578
See accompanying notes to consolidated financial statements.


F-6


JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Dollars in thousands)



 
Number
of Shares
 Amount 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 Total 
Number
of Shares
 Amount 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 Total
Balance at October 3, 2010 74,461,632
 $745
 $187,544
 $982,420
 $(78,787) $(571,459) $520,463
Balance at September 29, 2013 78,515,171
 $785
 $296,764
 $1,171,823
 $(62,662) $(934,692) $472,018
Shares issued under stock plans, including tax benefit 530,855
 5
 7,078
 —
 —
 —
 7,083
 1,612,216
 16
 49,605
 —
 —
 —
 49,621
Share-based compensation —
 —
 8,062
 —
 —
 —
 8,062
 —
 —
 10,358
 —
 —
 —
 10,358
Purchases of treasury stock —
 —
 —
 —
 —
 (193,099) (193,099)
Net earnings —
 —
 —
 80,600
 —
 —
 80,600
Effect of interest rate swaps, net —
 —
 —
 —
 (1,199) —
 (1,199)
Effect of actuarial losses and prior service cost, net —
 —
 —
 —
 (15,954) —
 (15,954)
Balance at October 2, 2011 74,992,487
 750
 202,684
 1,063,020
 (95,940) (764,558) 405,956
Shares issued under stock plans, including tax benefit 835,407
 8
 11,533
 —
 —
 —
 11,541
Share-based compensation —
 —
 6,883
 —
 —
 —
 6,883
Purchases of treasury stock —
 —
 —
 —
 —
 (30,013) (30,013)
Net earnings —
 —
 —
 57,651
 —
 —
 57,651
Effect of interest rate swaps, net —
 —
 —
 —
 152
 —
 152
Effect of actuarial losses and prior service cost, net —
 —
 —
 —
 (40,225) —
 (40,225)
Balance at September 30, 2012 75,827,894
 758
 221,100
 1,120,671
 (136,013) (794,571) 411,945
Shares issued under stock plans, including tax benefit 2,687,277
 27
 64,272
 —
 —
 —
 64,299
Share-based compensation —
 —
 11,392
 —
 —
 —
 11,392
Dividends declared —
 —
 —
 (15,876) —
 —
 (15,876)
Purchases of treasury stock —
 —
 —
 —
 —
 (140,121) (140,121) —
 —
 —
 —
 —
 (319,690) (319,690)
Net earnings —
 —
 —
 51,152
 —
 —
 51,152
 —
 —
 —
 88,950
 —
 —
 88,950
Foreign currency translation adjustment —
 —
 —
 —
 4
 —
 4
 —
 —
 —
 —
 7
 —
 7
Effect of interest rate swaps, net —
 —
 —
 —
 767
 —
 767
 —
 —
 —
 —
 (370) —
 (370)
Effect of actuarial gains and prior service cost, net —
 —
 —
 —
 72,580
 —
 72,580
Balance at September 29, 2013 78,515,171
 $785
 $296,764
 $1,171,823
 $(62,662) $(934,692) $472,018
Effect of actuarial losses and prior service cost, net —
 —
 —
 —
 (27,107) —
 (27,107)
Balance at September 28, 2014 80,127,387
 801
 356,727
 1,244,897
 (90,132) (1,254,382) 257,911
Shares issued under stock plans, including tax benefit 968,769
 10
 33,762
 —
 —
 —
 33,772
Share-based compensation —
 —
 12,420
 —
 —
 —
 12,420
Dividends declared —
 —
 77
 (37,590) —
 —
 (37,513)
Purchases of treasury stock —
 —
 —
 —
 —
 (317,051) (317,051)
Net earnings —
 —
 —
 108,812
 —
 —
 108,812
Foreign currency translation adjustment —
 —
 —
 —
 (29) —
 (29)
Effect of interest rate swaps, net —
 —
 —
 —
 (15,068) —
 (15,068)
Effect of actuarial losses and prior service cost, net —
 —
 —
 —
 (27,301) —
 (27,301)
Balance at September 27, 2015 81,096,156
 811
 402,986
 1,316,119
 (132,530) (1,571,433) 15,953
Shares issued under stock plans, including tax benefit 502,368
 5
 18,020
 —
 —
 —
 18,025
Share-based compensation —
 —
 11,455
 —
 —
 —
 11,455
Dividends declared —
 —
 103
 (40,471) —
 —
 (40,368)
Purchases of treasury stock —
 —
 —
 —
 —
 (291,853) (291,853)
Net earnings —
 —
 —
 124,073
 —
 —
 124,073
Foreign currency translation adjustment —
 —
 —
 —
 (43) —
 (43)
Effect of interest rate swaps, net —
 —
 —
 —
 (13,110) —
 (13,110)
Effect of actuarial losses and prior service cost, net —
 —
 —
 —
 (41,338) —
 (41,338)
Balance at October 2, 2016 81,598,524
 $816
 $432,564
 $1,399,721
 $(187,021) $(1,863,286) $(217,206)







See accompanying notes to consolidated financial statements.


F-7

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.     NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® quick-service restaurants and Qdoba Mexican GrillEats® (“Qdoba”) fast-casual restaurants. The following table summarizes the number of restaurants as of the end of each fiscal year: 
 2013 2012 2011 2016 2015 2014
Jack in the Box:  
Company-operated 465 547 629 417 413 431
Franchise 1,786 1,703 1,592 1,838 1,836 1,819
Total system 2,251 2,250 2,221 2,255 2,249 2,250
Qdoba:    
Company-operated 296 316 245 367 322 310
Franchise 319 311 338 332 339 328
Total system 615 627 583 699 661 638
References to the Company throughout these notes to the consolidated financial statements are made using the first person notations of “we,” “us” and “our.”
Basis of presentation — The accompanying 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”). During fiscal 2012, we entered into an agreement to outsource our Jack in the Box distribution business. In the third quarter of fiscal 2013,, we closed 62 Qdoba restaurants (the “2013 Qdoba Closures”) as part of a comprehensive Qdoba market performance review. The results of operations for our distribution business and for the 622013 Qdoba restaurantsClosures are reported as discontinued operations for all periods presented. Refer to Note 2, Discontinued Operations, for additional information. Unless otherwise noted, amounts and disclosures throughout these notes to the consolidated financial statements relate to our continuing operations.
Reclassifications and adjustments — Certain prior year amounts have been reclassified in the table disclosing the fair values of our defined benefit pension plan’s assets within Note 11, Retirement Plans, to conform to the fiscal 2016 presentation.
Fiscal year — Our fiscal year is 53 or 52 weeks ending the Sunday closest to September 30. Comparisons throughout these notes to the consolidated financial statements refer to the 53-week period ended October 2, 2016 for the fiscal year 2016 and 52-week periods ended September 27, 2015 and September 28, 2014 for fiscal years 2015 and 2014, respectively.
Principles of consolidation — The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the accounts of any variable interest entities (“VIEs”) where we are deemed the primary beneficiary. All significant intercompany accounts and transactions are eliminated.
The Financial Accounting Standards Board (“FASB”) authoritative guidance on consolidation requires the primary beneficiary of a VIE to consolidate that entity. The primary beneficiary of a VIE is an enterprise that has a controlling financial interest in the VIE. Controlling financial interest exists when an enterprise has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
The primary entities in which we possess a variable interest are franchise entities, which operate our franchise restaurants. We do not possess any ownership interests in franchise entities. We have reviewed these franchise entities and determined that we are not the primary beneficiary of the entities and therefore, these entities have not been consolidated. We hold and consolidate a variable interest in a subsidiary formed for the purpose of operating a franchisee lending program. For information relatedThe financial results and position of our VIE are immaterial to this VIE, refer to Note 15, Variable Interest Entities.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2013, 2012 and 2011 include 52 weeks.our consolidated financial statements.
Use of estimates — In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting principles,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.
Cash and cash equivalents— We invest cash in excess of operating requirements in short-term, highly liquid investments with original maturities of three months or less, which are considered cash equivalents.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Accounts and other receivables, net is primarily comprised of receivables from franchisees, tenants and credit card processors. Franchisee receivables primarily include rents, royalties, and marketing fees associated with thelease and franchise agreements, and in 2012 receivables arising from distribution services provided to franchisees.agreements. Tenant receivables relate to subleased properties where we

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


are on the master lease agreement. We charge interest on past due accounts receivable and accrue interest on notes receivable based on the contractual terms. The allowance for doubtful accounts is based on historical experience and a review of existing receivables. Changes in accounts and other receivables are classified as an operating activity in the consolidated statements of cash flows.
Inventories consist principally of food, packaging and supplies, and are valued at the lower of cost or market on a first-in, first-out basis. Changes in inventories are classified as an operating activity in the consolidated statements of cash flows.
Assets held for sale typically represent the costs for new sites and existing sites that we plan to sell and lease back within the next year. Gains or losses realized on sale-leaseback transactions are deferred and amortized to income over the lease terms. If the determination is made that we no longer expect to sell an asset within the next year, the asset is reclassified out of assets held for sale and leaseback.sale. Assets held for sale also periodically includes the net book value of property and/or equipment we plan to sell within the next year. Assets held for sale consisted of the following at each fiscal year-end (in thousands):
 2013 2012 2016 2015
Assets held for sale and leaseback $11,574
 $45,443
 $14,259
 $15,216
Other property and equipment held for sale 301
 —
 —
 300
Assets held for sale $11,875
 $45,443
 $14,259
 $15,516
Property and equipment, at costnet — Expenditures for new facilities and equipment, and those that substantially increase the useful lives of the property, are capitalized. Facilities leased under capital leases are stated at the present value of minimum lease payments at the beginning of the lease term, not to exceed fair value. Maintenance and repairs are expensed as incurred. When propertiesproperty and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the dispositions are reflected in results of operations.
Buildings, equipment and leasehold improvements are generally depreciated using the straight-line method based on the estimated useful lives of the assets, over the initial lease term for certain assets acquired in conjunction with the lease commencement for leased properties, or the remaining lease term for certain assets acquired after the commencement of the lease for leased properties. In certain situations, one or more option periods may be used in determining the depreciable life of assets related to leased properties if we deem that an economic penalty would be incurred otherwise. In either circumstance, our policy requires lease term consistency when calculating the depreciation period, in classifying the lease and in computing straight-line rent expense. Building, leasehold improvement assets and equipment are assigned lives that range from 21 to 35 years. Depreciation and amortization expense related to property and equipment was $92.1 million, $88.8 million and $90.7 million in $92.0 million2016, $92.6 million and $91.8 million in 2013, 20122015, and 20112014, respectively.
Impairment of long-lived assets — We evaluate our long-lived assets, such as property and equipment, for impairment on an annual basis or whenever indicators of impairment are present.events or changes in circumstances indicate that their carrying value may not be recoverable. This review generally includes a restaurant-level analysis, except when we are actively selling a group of restaurants in which case we perform our impairment evaluations at the group level. Impairment evaluations for individual restaurants take into consideration a restaurant’s operating cash flows, the period of time since a restaurant has been opened or remodeled, refranchising expectations, and the maturity of the related market.market, which are all significant unobservable inputs (“Level 3 Inputs”). Impairment evaluations for a group of restaurants take into consideration the group’s expected future cash flows and sales proceeds from bids received, if any, or fair market value based on, among other considerations, the specific sales and cash flows of those restaurants. If the assets of a restaurant or group of restaurants subject to our impairment evaluation are not recoverable based upon the forecasted, undiscounted cash flows, we recognize an impairment loss by the amount which the carrying value of the assets exceeds fair value. Refer to Note 9, Impairment and Other Charges, Net, for additional information. Long-lived assets that meet the held for sale criteria, which excludes assets intended to be sold and leased back, are held for sale and reported at the lower of their carrying value or fair value, less estimated costs to sell.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Goodwill and intangible assets — Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired, if any. We generally record goodwill in connection with the acquisition of restaurants from franchisees. Likewise, upon the sale of restaurants to franchisees, goodwill is decremented. The amount of goodwill written-off is determined as the fair value of the reporting unit disposed of as a percentage of the fair value of the reporting unit retained. Goodwill is evaluated for impairment annually, or more frequently if indicators of impairment are present. We first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative factors indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we perform a two-step impairment test of goodwill. In the first step, we estimate the fair value of the reporting unit using Level 3 Inputs and compare it to the carrying value of the reporting unit. If the carrying value exceeds the fair value of the reporting unit, the second step is performed to measure the amount of the impairment loss, if any. In the second step, the amount of the impairment loss is the excess of the carrying amount of the goodwill over its implied fair value.
Intangible assets, net is comprised primarily of our Qdoba trademark, acquired franchise contract costs, our Qdoba trademark, lease acquisition costs and reacquired franchise rights. AcquiredOur Qdoba trademark and acquired franchise contract costs and our Qdoba trademark were recorded in connection with

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


our acquisition of Qdoba Restaurant Corporation in fiscal 2003. Acquired franchise contract costs represent the acquired value of franchise contracts, which are amortized over the term of the franchise agreements plus options based on the projected royalty revenue stream. Our Qdoba trademark asset has an indefinite life and is not amortized. Lease acquisition costs primarily represent the fair values of acquired lease contracts having contractual rents lower than fair market rents and are amortized on a straight-line basis over the remaining initial lease term. Reacquired franchise rights are recorded in connection with our acquisition of franchised restaurants and are amortized over the remaining contractual period of the franchise contract in which the right was granted.
Our non-amortizing intangible asset is evaluated for impairment annually, or more frequently if indicators of impairment are present. We first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If the qualitative factors indicate that it is more likely than not that the fair value of the intangible asset is less than its carrying amount, we compare the fair value of the non-amortizing intangible asset, established using Level 3 Inputs, with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized equal to the excess.
Refer to Note 4, Goodwill and Intangible Assets, Net, for additional information.
Company-owned life insurance— We have purchased company-owned life insurance (“COLI”) policies to support our non-qualified benefit plans. The cash surrender values of these policies were $94.5$106.0 million and $85.5$99.5 million as of October 2, 2016 and September 29, 2013 and September 30, 2012,27, 2015, respectively, and are included in other assets, net in the accompanying consolidated balance sheets. Changes in cash surrender values are included in selling, general and administrative expenses in the accompanying consolidated statements of earnings. These policies reside in an umbrella trust for use only to pay plan benefits to participants or to pay creditors if the Company becomes insolvent. As of September 29, 2013 and September 30, 2012, the trust also included cash of $0.2 million and $0.7 million, respectively.
Book overdraft — Accounts payable in our consolidated balance sheets include book overdrafts totaling $0.8 million and $40.5 million at September 29, 2013 and September 30, 2012, respectively. Changes in such amounts are classified as a financing activity in the consolidated statements of cash flows.
Leases — We review all leases for capital or operating classification at their inception under the FASB authoritative guidance for leases. Our operations are primarily conducted under operating leases. Within the provisions of certain leases, there are rent holidays and escalations in payments over the base lease term, as well as renewal periods. The effects of the holidays and escalations have been reflected in rent expense on a straight-line basis over the expected lease term. Differences between amounts paid and amounts expensed are recorded as deferred rent. The lease term commences on the date when we have the right to control the use of the leased property. Certain leases also include contingent rent provisions based on sales levels, which are accrued at the point in time we determine that it is probable such sales levels will be achieved. Refer to Note 8, Leases, for additional information.
Revenue recognition — Revenue from company restaurant sales is recognized when the food and beverage products are sold and are presented net of sales taxes.
Our franchise arrangements generally provide for franchise fees and continuing fees based upon a percentage of sales (“royalties”). In order to renew a franchise agreement upon expiration, a franchisee must obtain the Company’s approval and pay then current fees. Franchise development and license fees are recorded as deferred revenue until we have substantially performed all of our contractual obligations and the restaurant has opened for business. Franchise royalties are recorded in revenues on an accrual basis. Among other things, a franchisee may be provided the use of land and building, generally for a period of 20 years, and is required to pay negotiated rent, property taxes, insurance and maintenance. Franchise rents based on fixed rental payments are recognized as revenue over the term of the lease. Certain franchise rents, which are contingent upon sales levels, are recognized in the period in which the contingency is met.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Gift cards — We sell gift cards to our customers in our restaurants and through selected third parties. The gift cards sold to our customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the jurisdictions in which we operate. We recognize income from gift cards when redeemed by the customer.
While we will continue to honor all gift cards presented for payment, we may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent we determine there is no requirement for remitting balances to government agencies under unclaimed property laws, card balances may be recognized as a reduction to selling, general and administrative expenses in the accompanying consolidated statements of earnings.
Income recognized on unredeemed gift card balances was $0.7$1.0 million, $1.0 million and $0.8 million in fiscal 20132016, 2015 and $0.5 million and $0.6 million in fiscal 2012 and 2011,2014, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Pre-opening costs associated with the opening of a new restaurant consist primarily of property rent and employee training costs, and are expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of earnings.
Restaurant closure costs — All costs associated with exit or disposal activities are recognized when they are incurred. Restaurant closure costs, which are included in impairment and other charges, net and (gains) losses on the sale of company-operated restaurants in the accompanying consolidated statements of earnings, and gains on the sale of company-operated restaurants,primarily consist of future lease commitments, net of anticipated sublease rentals, and expected ancillary costs.
Self-insurance — We are self-insured for a portion of our workers’ compensation, general liability, employee medical and dental, and automotive claims. We utilize a paid-loss plan for our workers’ compensation, general liability and automotive programs, which have predetermined loss limits per occurrence and in the aggregate. We establish our insurance liability (undiscounted) and reserves using independent actuarial estimates of expected losses for determining reported claims and as the basis for estimating claims incurred, but not reported. As of October 2, 2016 and September 29, 2013,27, 2015, our estimated liability for general liability and workers’ compensation claims exceeded our self-insurance retention limits by $22.9$8.6 million, and $25.8 million, respectively, which we expect our insurance providers to pay on our behalf in accordance with the contractual terms of our insurance policies.
Advertising costs — We administer marketing funds which include contractual contributions. In fiscal years 2013, 20122016 and 20112015, the marketing funds at franchise and company-operated restaurants were generally 5% and 2% of gross revenues at Jack in the Box and Qdoba restaurants, respectively. In fiscal 2014 the marketing funds were approximately 5% and 1% of salesgross revenues at all franchise and company-operated Jack in the Box and Qdoba restaurants, respectively. We record contributions from franchisees as a liability included in accrued liabilities in the accompanying consolidated balance sheets until such funds are expended. The contributions to the marketing funds are designated for sales driving and marketing-related initiatives and advertising, and we act as an agent for the franchisees with regard to these contributions. Therefore, we do not reflect franchisee contributions to the funds in our consolidated statements of earnings or cash flows.earnings.
Production costs of commercials, programming and other marketing activities are charged to the marketing funds when the advertising is first used for its intended purpose, and the costs of advertising are charged to operations as incurred. Total contributions and other marketing expenses are included in selling, general, and administrative expenses in the accompanying consolidated statements of earnings. The following table provides a summary of advertising costs related to company-operated restaurants in each year. Qdoba advertising costs in fiscal years 2012 and 2011 have been reclassified to conform to the fiscal 2013 presentationyear (in thousands):
 2013 2012 2011 2016 2015 2014
Jack in the Box $46,739
 $49,757
 $63,094
 $41,189
 $41,895
 $42,349
Qdoba 16,123
 13,135
 10,061
 20,488
 17,687
 18,215
Total $62,862
 $62,892
 $73,155
 $61,677
 $59,582
 $60,564
Share-based compensation — We account for our share-based compensation as required byunder the FASB authoritative guidance on stock compensation, which generally requires, among other things, that all employee share-based compensation be measured using a fair value method and that the resulting compensation cost be recognized in the financial statements. Compensation expense for our share-based compensation awards is generally recognized on a straight-line basis over the shorter of the vesting period or the period from the date of grant to the date the employee becomes eligible to retire. Refer to Note 12,
Share-based Employee Compensation, for additional information.
Income taxes — Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize interest and, when applicable, penalties related to unrecognized tax benefits as a component of our income tax provision.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Authoritative guidance issued by the FASB prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Refer to Note 10, Income Taxes, for additional information.
Derivative instruments — From time to time, we use utility derivatives to reduce the risk of price fluctuations related to natural gas. We also use interest rate swap agreements to manage interest rate exposure. We do not speculate using derivative instruments. We purchase derivative instruments only for the purpose of risk management.
All derivatives are recognized on the consolidated balance sheets at fair value based upon quoted market prices. Changes in the fair values of derivatives are recorded in earnings or other comprehensive income (“OCI”), based on whether or not the instrument is designated as a hedge transaction. Gains or losses on derivative instruments that qualify for hedge designation are reported in other comprehensive income (“OCI”)OCI and are

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


reclassified to earnings in the period the hedged item affects earnings. If the underlying hedge transaction ceases to exist, any associated amounts reported in other comprehensive incomeOCI are reclassified to earnings at that time. Any ineffectiveness is recognized in earnings in the current period. Refer to Note 5, Fair Value Measurements, and Note 6, Derivative Instruments, for additional information regarding our derivative instruments.
Contingencies — We recognize liabilities for contingencies when we have an exposure that indicates it is probable that an asset has been impaired or that a liability has been incurred and the amount of impairment or loss can be reasonably estimated. Our ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best estimate within the range. We record legal settlement costs when those costs are probable and reasonably estimable. Refer to Note 15, Commitments, Contingencies and Legal Matters, for additional information.
Segment reporting — An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by our chief operating decision makers in deciding how to allocate resources. Similar operating segments can be aggregated into a single operating segment if the businesses are similar. We operate our business in two operating segments, Jack in the Box and Qdoba.Qdoba restaurant operations. Refer to Note 17,16, Segment Reporting, for additional discussion regarding our segments.
Effect of new accounting pronouncementspronouncement adopted in fiscal 2016 — Accounting standards that have been issued byIn November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. This standard requires deferred tax liabilities and assets to be classified as noncurrent in a classified statement of financial position. This standard is effective prospectively or retrospectively for all periods presented for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We early adopted this standard in 2016 and the prior period was retrospectively adjusted, resulting in a $40.0 million reclassification of current deferred income taxes to other standards-setting bodiesassets, net on our September 27, 2015 consolidated balance sheet.
Effect of new accounting pronouncements to be adopted in future periods — In April 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. Under this ASU, an entity presents such costs on the balance sheet as a direct deduction from the related debt liability rather than as an asset. This new standard is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. As such, we will be required to adopt this standard in the first quarter of fiscal 2017 and will reclassify debt issuance costs from other assets, net to long-term debt within our consolidated balance sheets. As of October 2, 2016, the carrying amount of unamortized debt issuance costs totaled $8.2 million. Other than this reclassification, the adoption of this ASU will not impact our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue Recognition - Revenue from Contracts with Customers (Topic 606), which provides a comprehensive new revenue recognition model that requires an entity to recognize revenue in an amount that reflects the consideration the entity expects to receive for the transfer of promised goods or services to its customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Further, in March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the guidance in ASU No. 2014-09 when evaluating when another party, along with the entity, is involved in providing a good or service to a customer.In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the guidance in ASU No. 2014-09 regarding assessing whether promises to transfer goods or services are distinct, and whether an entity's promise to grant a license provides a customer with a right to use, or right to access the entity's intellectual property. All standards are effective for annual periods beginning after December 15, 2017, and interim periods within that reporting period. As such, we will be required to adopt these standards in the first quarter of fiscal 2019.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


These standards are to be applied retrospectively or using a cumulative effect transition method, and early adoption is not permitted. We do not requirebelieve the new revenue recognition standard will impact our recognition of restaurant sales, rental revenues or royalty fees from franchisees. However, we are still evaluating the impact that this pronouncement will have on the recognition of transactions on our consolidated financial statements, including the initial franchise fees currently recognized upon the opening of a franchise restaurant and our advertising arrangements with franchisees currently reported on a net versus gross basis in our consolidated statements of earnings, and the effect it will have on our disclosures. We have not yet selected a transition method.
In August 2015, the FASB issued ASU No. 2015-15, “Interest-Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which addresses line-of-credit arrangements that were omitted from ASU No. 2015-03 (see below).  This ASU states that the SEC staff would not object to an entity deferring and presenting debt issuance costs related to a line-of-credit arrangement as an asset and subsequently amortizing those costs ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This new standard is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early adoption until a future date arepermitted. We do not expected toexpect that this standard will have a material impact on our condensed consolidated financial statements or disclosures upon adoption in fiscal 2017.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires a lessee to recognize assets and liabilities on the balance sheet for those leases classified as operating leases under previous guidance. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As such, we will be required to adopt this standard in the first quarter of fiscal 2020. This standard requires adoption based upon a modified retrospective transition approach, with early adoption permitted. Based on a preliminary assessment, we expect that most of our operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a significant increase in the assets and liabilities on our consolidated balance sheets. We are continuing our evaluation, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-04, Liabilities-Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products, which is designed to provide guidance and eliminate diversity in the accounting for the derecognition of financial liabilities related to certain prepaid stored-value products using a revenue-like breakage model. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. This standard is to be applied retrospectively or using a cumulative effect transition method as of the date of adoption. We are currently evaluating which transition method to use, but believe the impact this standard will have on our consolidated financial statements and related disclosures will be immaterial upon adoption.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting. This standard is intended to simplify various aspects of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. This standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period, with early adoption permitted. As such, we will be required to adopt this standard in fiscal 2018 and will classify the excess tax benefits from share-based compensation arrangements, which were $7.5 million in fiscal 2016, as a discrete item within income tax expense on the consolidated statements of earnings, rather than recognizing such excess income tax benefits in capital in excess of par value on the consolidated statements of stockholders’ (deficit) equity. This reclassification will be made on a prospective basis and will also impact the related classification on our consolidated statements of cash flows as excess tax benefits from share-based compensation arrangements are currently reported in cash flows from operating activities and cash flows used in investing activities. Other than these reclassifications, we do not believe the adoption of this ASU will materially impact our consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows ( Topic 230): Classification of Certain Cash Receipts and Cash Payments. This standard is intended to address eight classification issues related to the statement of cash flows to reduce diversity in practice in how certain transactions are classified. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. This standard requires adoption based upon a retrospective transition method. We are currently evaluating this standard, but do not believe it will have a material impact on the classification of cash flows within our statement of cash flows.



JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.     DISCONTINUED OPERATIONS
Distribution business — During fiscal 2012, we entered into an agreement with a third party distribution service provider pursuant to a plan approved by our board of directors to sell our Jack in the Box distribution business. During the first quarter of fiscal 2013, we completed the transition of our distribution centers. The distribution business assets sold in the transaction are classified as assets of discontinued operations held for sale in the consolidated balance sheet as of September 30, 2012. The operations and cash flows of the business have been eliminated and in accordance with the provisions of the Accounting Standards Codification (“ASC”) 205, PresentationFASB authoritative guidance on the presentation of Financial Statements,financial statements, the results are reported as discontinued operations for all periods presented.
AsIn 2016, 2015 and 2014, results of September 29, 2013, therediscontinued operations were no assets or liabilities classified as held for sale relatedimmaterial to our distribution business. The following is a summary of our distribution business assets held for sale as of September, 30, 2012 (in thousands):
Inventories$26,844
Property and equipment, net3,747
Total assets of discontinued operations$30,591
The following is a summary of our distribution business operating results, which are included in discontinued operations for each fiscal year (in thousands):
  2013 2012 2011
Revenue $37,743
 $616,982
 $530,959
Operating loss before income tax benefit $(6,446) $(8,777) $(2,429)
The loss on the sale of the distribution business was not material to ourconsolidated results of operations. The operating loss in fiscal 2013 and 2012 includes costs incurred to exit the distribution business consisting of $1.9 million and $6.0 million, respectively, for accelerated depreciation of a long-lived asset disposed of upon completion of the transaction, $1.6 million (net of reversals for deferred rent of $0.4 million) and $0.7 million, respectively, for future lease commitments, $1.2 million and $1.1 million, respectively, primarily related to costs incurred to terminate certain vendor contracts and in fiscal 2013, $1.3 million related to distribution center specific workers’ compensation claims. Our liability for lease commitments related to our distribution centers is includedimmaterial to our consolidated balance sheets as of October 2, 2016 and September 27, 2015. The lease commitment balance relates to one distribution center lease that expires in accrued liabilitiesfiscal 2017 and other long-term liabilities and has changed during 2013 as follows (in thousands):
Balance at beginning of year $697
Additions 1,846
Adjustments 119
Cash payments (1,344)
Balance at end of year $1,318

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


is currently subleased at a loss. The future minimum lease payments and receipts for the next five fiscal years and thereafteryear are included in the amounts disclosed in Note 8, Leases.
2013 Qdoba Closures — During the third quarter of fiscal 2013, we closed 62 Qdoba restaurants. The decision to close these restaurants was based on a comprehensive analysis that took into consideration levels of return on investment and other key operating performance metrics.
Given the absence of proximity of Since the closed locations torestaurants were not predominantly located near those remaining in operation, we dodid not expect the majority of cash flows and sales lost from these closures to be recovered. In addition, there willwe did not beanticipate any ongoing involvement or significant direct cash flows from the closed stores. Therefore, in accordance with the provisions of ASC 205, the FASB authoritative guidance on the presentation of financial statementsPresentation of Financial Statements,, the results of operations for these restaurants are reported as discontinued operations for all periods presented.
The following is a summary oftable summarizes the results of operations related to the 2013 Qdoba Closures for each fiscal year (in thousands):
  2013 2012 2011
Company restaurant sales $28,036
 $35,731
 $29,514
Operating loss before income tax benefit $(44,576) $(8,327) $(6,136)
  2016 2015 2014
Asset impairments $—
 $—
 $(2,170)
Unfavorable lease commitment adjustments (2,818) (4,594) (4,536)
Bad debt expense related to subtenants (234) (366) —
Brokers commissions (58) (234) (652)
Ongoing facility related and other costs (71) (302) (889)
   Loss before income tax benefit $(3,181) $(5,496) $(8,247)
In 2013,We do not expect the operating loss recognized includes exitremaining costs of $22.2 million for asset impairments, $10.3 million forto be incurred related to the closures to be material; however, the estimates we make related to our future lease commitments, netobligations, primarily sublease income, are subject to a high degree of reversals for deferred rentjudgment and tenant improvement allowancesmay differ from actual sublease income due to changes in economic conditions, desirability of $4.3 million,the sites and $3.0 million of other exits costs (primarily severance, equipment removal costs and inventory write-offs). factors.
Our liability for lease commitments related to the 2013 Qdoba closures is included in accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheets and has changed as follows during fiscal 2013year 2016 (in thousands):
Balance at beginning of year$—
Additions14,072
Adjustments530
Cash payments(3,890)
Balance at end of year$10,712
Balance at September 27, 2015 $4,256
Adjustments (1) 2,818
Cash payments (4,131)
Balance at October 2, 2016 (2) $2,943

(1)Adjustments relate to revisions to certain sublease and cost assumptions due to changes in market conditions, as well as a charge to terminate three lease agreements, and includes interest expense.
(2)The weighted average remaining lease term related to these commitments is approximately three years.
The balance at October 2, 2016 relates to six locations subleased at a loss and 16 locations we are marketing for sublease. The future minimum lease payments and receipts for the next five fiscal years and thereafter are included in the amounts disclosed in Note 8, Leases.


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.     SUMMARY OF REFRANCHISINGS, FRANCHISEE DEVELOPMENT AND ACQUISITIONS
Refranchisings and franchisee development — The following is a summary oftable summarizes the number of restaurants sold to franchisees, the number of restaurants developed by franchisees, and the related fees and gains and fees(losses) recognized in each fiscal year (dollars in thousands):
 2013 2012 2011 2016 2015 2014
Restaurants sold to franchisees 81
 97
 332
 1
 21
 37
New restaurants opened by franchisees 45
 50
 58
New restaurants opened by franchisees:      
Jack in the Box 12
 16
 11
Qdoba 18
 22
 22
      
Initial franchise fees $4,017
 $5,535
 $15,898
 $955
 $1,453
 $1,886
Proceeds from the sale of company-operated restaurants:      
Cash (1) $30,619
 $47,115
 $119,275
Notes receivable —
 1,200
 1,000
 30,619
 48,315
 120,275
      
Proceeds from the sale of company-operated restaurants (1) $1,439
 $3,951
 $10,536
Net assets sold (primarily property and equipment) (15,680) (16,833) (52,943) (195) (4,283) (5,558)
Goodwill related to the sale of company-operated restaurants (629) (1,334) (3,469) (15) (47) (170)
Other (2) (9,670) (1,003) (2,738) 1
 (2,760) (6,500)
Gains on the sale of company-operated restaurants $4,640
 $29,145
 $61,125
Gains (losses) on the sale of company-operated restaurants 1,230
 (3,139) (1,692)
Loss on anticipated sale of a Jack in the Box company-operated market (3) —
 —
 (1,856)
Gains (losses) on the sale of company-operated restaurants $1,230
 $(3,139) $(3,548)
 ____________________________
(1)
Amounts in 20132016, 2015 and 20122014 include additional proceeds of $3.3$1.4 million, $1.5 million and $2.3$2.1 million,, respectively, recognized upon the extension of the underlying franchise and lease agreements related to restaurants sold in a prior year.
(2)Amounts in all years presented2015 and 2014 primarily represent impairment and lease commitment charges related to restaurants closed in connection with the sale of the related markets, and in 2013, charges for operating restaurant leases with lease commitments in excess of our sublease rental income.

F-13
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(3)In 2014, the loss on the anticipated sale of a Jack in the Box market relates to 25 company-operated restaurants of which we sold 20, and closed the remaining five, in fiscal 2015.
Franchise acquisitions— In each of the last three years, we have acquired Qdoba franchised restaurants in select markets where we believe there is continued opportunity for restaurant development. Additionally, in 2013 we exercised our right of first refusal andWe acquired one, seven and four Jack in the Box franchise restaurant.restaurants in 2016, 2015 and 2014, respectively. In 2016, we acquired 14 Qdoba franchise 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 markets acquired and is expected to be deductible for income tax purposes. The following table provides detail of the combined acquisitions in each fiscal year (dollars in thousands):
 2013 2012 2011 2016 2015 2014
Restaurants acquired from franchisees 14
 46
 32
 15
 7
 4
            
Goodwill $17,034
 $—
 $256
Property and equipment $3,030
 $12,379
 $6,934
 2,954
 646
 1,398
Reacquired franchise rights 148
 604
 386
Goodwill 9,169
 36,084
 24,300
Gains on the acquisition of franchise-operated restaurants (289) (33) —
Liabilities assumed (283) (122) (117) (114) (613) —
Gains on the acquisition of franchise-operated restaurants (1) —
 —
 (426)
Other 231
 —
 96
Total consideration $12,064
 $48,945
 $31,077
 $19,816
 $—
 $1,750
  ____________________________
(1)
In 2011, the assets acquired and liabilities assumed exceeded the consideration for two of the units acquired. The gains are included in selling, general and administrative expenses in the accompanying consolidated statements of earnings.

4.     GOODWILL AND INTANGIBLE ASSETS, NET
The changes in the carrying amount of goodwill during fiscal 20132016 and 20122015 by reportable segment were as follows (in thousands):
  
Jack in the
Box
 Qdoba Total
Balance at October 2, 2011 $49,181
 $56,691
 $105,872
Acquisition of franchised restaurants —
 36,084
 36,084
Sale of company-operated restaurants to franchisees (1,334) —
 (1,334)
Balance at September 30, 2012 47,847
 92,775
 140,622
Acquisition of franchised restaurants 1,173
 7,996
 9,169
2013 Qdoba Closures —
 (174) (174)
Sale of company-operated restaurants to franchisees (629) —
 (629)
Balance at September 29, 2013 $48,391
 $100,597
 $148,988
  
Jack in the
Box
 Qdoba Total
Balance at September 28, 2014 $48,477
 $100,597
 $149,074
Sale of company-operated restaurants to franchisees (47) —
 (47)
Balance at September 27, 2015 48,430
 100,597
 149,027
Acquisition of franchise-operated restaurants —
 17,034
 17,034
Sale of company-operated restaurants to franchisees (15) —
 (15)
Balance at October 2, 2016 $48,415
 $117,631
 $166,046

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Intangible assets, net consist of the following as of the end of each fiscal year (in thousands):
 2013 2012 2016 2015
Amortized intangible assets:        
Gross carrying amount $17,203
 $17,319
 $17,205
 $17,267
Less accumulated amortization (9,613) (8,913) (11,963) (11,302)
Net carrying amount 7,590
 8,406
 5,242
 5,965
Non-amortized intangible assets:        
Trademark 8,800
 8,800
 8,800
 8,800
Net carrying amount $16,390
 $17,206
 $14,042
 $14,765
Amortized intangible assets include acquired franchise contracts recorded in connection with our acquisition of Qdoba in 2003, lease acquisition costs and reacquired Qdoba franchise rights. The weighted-average life of these amortized intangible assets is approximately 2427 years. Total amortization expense related to intangible assets was $1.0$0.8 million,, $0.9 $0.8 million and $0.8$0.9 million in fiscal 2013, 20122016, 2015 and 2011,2014, respectively.
     

F-14
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table summarizes, as of September 29, 2013October 2, 2016, the estimated amortization expense for each of the next five fiscal years (in thousands):
Fiscal Year 
2014$855
2015$798
2016$754
2017$706
2018$661
2017$777
2018$732
2019$671
2020$633
2021$592

5.     FAIR VALUE MEASUREMENTS
Financial assets and liabilities — The following table presents the financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 Total 
Quoted
Prices
in Active
Markets for
Identical
Assets (3)
(Level 1)
 
Significant
Other
Observable
Inputs (3)
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Total 
Quoted
Prices
in Active
Markets for
Identical
Assets (3)
(Level 1)
 
Significant
Other
Observable
Inputs (3)
(Level 2)
 
Significant
Unobservable
Inputs (3)
(Level 3)
Fair Value Measurements as of September 29, 2013:        
Fair value measurements as of October 2, 2016:        
Non-qualified deferred compensation plan (1) $(39,135) $(39,135) $—
 $—
 $(36,933) $(36,933) $—
 $—
Interest rate swaps (Note 6) (2) (1,190) —
 (1,190) —
 (47,765) —
 (47,765) —
Total liabilities at fair value $(40,325) $(39,135) $(1,190) $—
 $(84,698) $(36,933) $(47,765) $—
Fair Value Measurements as of September 30, 2012:        
Fair value measurements as of September 27, 2015:        
Non-qualified deferred compensation plan (1) $(37,523) $(37,523) $—
 $—
 $(35,003) $(35,003) $—
 $—
Interest rate swaps (Note 6) (2) (2,433) —
 (2,433) —
 (26,374) —
 (26,374) —
Total liabilities at fair value $(39,956) $(37,523) $(2,433) $—
 $(61,377) $(35,003) $(26,374) $—
 ____________________________
(1)We maintain an unfunded defined contribution plan for key executives and other members of management excluded from participation in our qualified savings plan.management. The fair value of this obligation is based on the closing market prices of the participants’ elected investments.
(2)We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable rate debt. The fair values of our interest rate swaps are based upon Level 2 inputs which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interestdiscount rates and forward yield curves.
(3)We did not have any transfers in or out of Level 1, 2 or Level 2.3.
The fair values of the Company’s debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company’s borrowing rate. At September 29, 2013,October 2, 2016, the carrying value of all financial instruments was not materially different from fair value, as the borrowings are prepayable without penalty. The estimated fair values of our capital lease obligations approximated their carrying values as of September 29, 2013.October 2, 2016.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Non-financial assets and liabilities — The Company’sOur non-financial instruments, which primarily consist of property and equipment, 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 a periodican annual basis (at least annually for goodwill and intangible assets and semi-annually for property and equipment) 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 not fully recoverable, they are written down to fair value.
The following table presents property and equipment long-lived assets measured atIn connection with our impairment reviews performed during fiscal 2016, we recorded an impairment charge of $0.5 million related to an underperforming Qdoba restaurant which is currently held for use. No other fair value on a non-recurring basis during fiscal year 2013 (in thousands):
   Fair Value Measurement Impairment Charges
Long-lived assets held and used $705
 $3,874
Long-lived assets held for sale $401
 5,356
Long-lived assets held and used consist primarily of Jack in the Box restaurants determined to be underperforming or which we intend to close. Long-lived assets held for sale primarily relate to restaurants refranchised during the year for less than their carrying value. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. The future cash flows are generally based on the assumption that the highest and best use of the asset is to sell the store to a franchisee (market participant). These fair value measurements require significant judgment using Level 3 inputs,

F-15
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


such as discounted cash flows, which are not observable from the market, directly or indirectly.adjustments were required. Refer to Note 9, Impairment Disposition of Property and Equipment, Restaurant Closing Costs and Restructuring,Other Charges, Net, for additional information regarding impairment charges.
Due to the magnitude of the 2013 Qdoba closures, during the third quarter of fiscal 2013 we tested Qdoba’s goodwill and trademark assets for impairment. To evaluate goodwill for impairment, we estimated the fair value of the Qdoba reporting unit and compared it to its carrying value. We engaged a valuation firm to assist us in the fair value analysis. To determine fair value, we used a multiple valuation technique approach, the results of which were weighted based on the technique that was assessed to be more representative of fair value. Based upon the fair value analysis, the estimated fair value of the Qdoba reporting unit was substantially in excess of its carrying value as of July 7, 2013. We also utilized the third party valuation firm to aid in our impairment analysis of the Qdoba trademark. To determine its fair value, we used the relief from royalty method and compared the estimated fair value to its carrying value. The estimated fair value of the Qdoba trademark was substantially in excess of its carrying value. During the fourth quarter of fiscal 2013, we performed our annual impairment test over all of our recorded goodwill and non-amortizing intangible assets. Based on this qualitative assessment, we determined there was no impairment as of September 29, 2013.
6.     DERIVATIVE INSTRUMENTS
Objectives and strategies — We are exposed to interest rate volatility with regard to our variable rate debt. ToIn April 2014, to reduce our exposure to rising interest rates, in August 2010, we entered into twonine forward-starting interest rate swap agreements that effectively converted $300.0 million of our variable rate borrowings to a fixed-rate basis from October 2014 through October 2018. Additionally, in June 2015, we entered into eleven forward-starting interest rate swap agreements that effectively convert $100.0an additional $200.0 million of our variable rate term loan borrowings to a fixed-rate basisfixed rate from September 2011October 2015 through October 2018, and $500.0 million from October 2018 through October 2022.September 2014.
These agreements have been designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. To the extent that they are effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives are not included in earnings, but are included in OCI. These changes in fair value are subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments are made on our termvariable rate debt.
Financial position — The following derivative instruments were outstanding as of the end of each fiscal year (in thousands):
 September 29, 2013 September 30, 2012 
Balance
Sheet
Location
 Fair Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 October 2, 2016 September 27, 2015
Derivatives designated as hedging instruments:        
Interest rate swaps (Note 5) Accrued
liabilities		 $(1,190) Accrued
liabilities		 $(2,433) Accrued
liabilities		 $(5,857) $(3,379)
Interest rate swaps (Note 5) Other long-term liabilities (41,908) (22,995)
Total derivatives $(1,190) $(2,433) $(47,765) $(26,374)
 
Financial performance — The following is a summary oftable summarizes the accumulated OCI activity related to our interest rate swap derivative instruments in each fiscal year (in thousands):
 
Location of
Loss
in Income
 2013 2012 2011 
Location of
Loss
in Income
 2016 2015 2014
Loss recognized in OCI N/A $(110) $(1,055) $(2,066) N/A $(25,439) $(26,596) $(1,890)
Loss reclassified from accumulated OCI into income 
Interest
expense, net
 $(1,353) $(1,304) $(117)
Loss reclassified from accumulated OCI into net earnings 
Interest
expense, net
 $4,048
 $2,011
 $1,291
Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparty for the effective portions of the interest rate swaps. During 2013, 2012 and 2011,the fiscal years presented, our interest rate swaps had no hedge ineffectiveness.

7.     INDEBTEDNESS
The detail of our long-term debt at the end of each fiscal year is as follows (in thousands):
  2013 2012
Revolver, variable interest rate based on an applicable margin plus LIBOR, 2.48% at September 29, 2013 $175,000
 $250,000
Term loan, variable interest rate based on an applicable margin plus LIBOR, 2.19% at September 29, 2013 190,000
 165,000
Capital lease obligations, 9.96% weighted average interest rate at September 29, 2013 5,282
 6,228
  370,282
 421,228
Less current portion (20,889) (15,952)
  $349,393
 $405,276
  2016 2015
Revolver, variable interest rate based on an applicable margin plus LIBOR, 2.52% at October 2, 2016 $282,422
 $395,000
Term loan, variable interest rate based on an applicable margin plus LIBOR, 2.53% at October 2, 2016 694,141
 300,000
Capital lease obligations, 3.6% weighted average interest rate at October 2, 2016
 18,523
 20,256
  995,086
 715,256
Less current portion (57,574) (26,677)
  $937,512
 $688,579

F-16
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


New credit facility — During the first quarter of fiscal 2013,On September 16, 2016, the Company refinancedamended its former credit facility and entered into anto increase its overall borrowing capacity. The amended and restated credit agreement. The new credit facility is comprisedwas increased to $1.6 billion, consisting of (i) a $400.0$900.0 million revolving credit facilityagreement and (ii) a $200.0$700.0 million term loan facility.loan. The interest rate on the newamended credit facility is based on the Company’s leverage ratio and can range from the London Interbank Offered Rate (“LIBOR”) plus 1.75%1.25% to 2.25% with no floor.a 0% floor on the LIBOR. The initial interest rate was LIBOR plus 2.00%. Theamendment also, among other things, amended certain covenants already contained in the credit agreement. Both the revolving credit facilityagreement and the term loan facility both have maturity dates of November 5, 2017.March 19, 2019 which did not change as part of the amendment. As part of the existing credit agreement, we may also request the issuance of up to $75.0$75.0 million in letters of credit, the outstanding amount of which reduces our net borrowing capacity under the agreement. As of September 29, 2013,October 2, 2016, our unused borrowing capacity was $196.9$592.5 million.
Use of proceeds — TheUpon amendment, the Company borrowed $200.0$417.6 million under the newamended term loan and approximately $220.0 million underused the newfull amount to pay down our revolving credit facility. The proceeds from the refinancing transaction were used to repay all borrowings under the former facility and to pay related transaction fees and expenses associated with the refinance of the facility, and will also be available for permitted share repurchases, permitted dividends, permitted acquisitions, ongoing working capital requirements and other general corporate purposes. At September 29, 2013, we had borrowings under the revolving credit facility of $175.0 million, $190.0 million outstanding under the term loan and letters of credit outstanding of $28.1 million.agreement.
Collateral — The Company’s obligations under the credit facility are secured by first priority liens and security interests in the capital stock, partnership and membership interests owned by the Company and (or)and/or its subsidiaries, and any proceeds thereof, subject to certain restrictions set forth in the credit agreement. Additionally, there is a negative pledge on all tangible and intangible assets (including all real and personal property) with customary exceptions as reflected in the credit agreement.
Covenants — We wereare subject to a number of customary covenants under our credit facility, including limitations on additional borrowings, acquisitions, loans to franchisees, capital expenditures, lease commitments, stock repurchases and dividend payments, and requirements to maintain certain financial ratios as defined in the credit agreement.
Future cash payments — Scheduled principal payments on our long-term debt outstanding at September 29, 2013October 2, 2016 for each of the next five fiscal years and thereafter are as follows (in thousands):
Fiscal Year  
2014 $20,889
2015 20,866
2016 25,900
2017 20,863
2018 280,668
Thereafter 1,096
  $370,282
2017 $57,574
2018 66,633
2019 860,353
2020 2,371
2021 2,440
Thereafter 5,715
  $995,086
We may make voluntary prepayments of the loans under the revolving credit facilityagreement and term loan at any time without premium or penalty. Specific events such as asset sales, certain issuances of debt, and insurance and condemnation recoveries, may trigger a mandatory prepayment.
Capitalized interest — We capitalize interest in connection with the construction of our restaurants and other facilities. Interest capitalized in was $0.1 million, $0.4 million and $0.3 million in 2013, 2012 and 2011, respectively.

8.     LEASES
As lessee — We lease restaurants and other facilities, which generally have renewal clauses of 51 to 20 years exercisable at our option. In some instances, ourthese leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurant and other facility leases also have rent escalation clauses and require the payment of property taxes, insurance and maintenance costs. We also lease certain restaurant and office equipment, as well as various transportation equipment. Minimum rental obligations are accounted for on a straight-line basis over the term of the initial lease.lease, plus lease option terms for certain locations.
The components of rent expense were as follows in each fiscal year (in thousands):
 2013 2012 2011 2016 2015 2014
Minimum rentals $214,462
 $211,050
 $207,745
 $222,437
 $212,722
 $213,082
Contingent rentals 1,840
 2,013
 1,788
 2,943
 2,549
 1,986
Total rent expense 216,302
 213,063
 209,533
 225,380
 215,271
 215,068
Less rental expense on subleased properties (136,970) (130,275) (109,300) (145,173) (141,946) (139,976)
Net rent expense $79,332
 $82,788
 $100,233
 $80,207
 $73,325
 $75,092

F-17
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The following table presents as of September 29, 2013October 2, 2016, future minimum lease payments under capital and operating leases, including leases recorded as divestmentlease obligations relating to continuing and discontinued operations (in thousands):
Fiscal Year 
Capital
Leases
 
Operating
Leases
 
Capital
Leases
 Operating
Leases
2014 $1,384
 $229,287
2015 1,260
 216,983
2016 1,198
 217,778
2017 1,072
 182,361
 $3,423
 $235,048
2018 792
 150,904
 3,295
 206,170
2019 2,911
 198,043
2020 2,808
 171,101
2021 2,810
 153,809
Thereafter 1,315
 723,884
 7,107
 530,142
Total minimum lease payments 7,021
 $1,721,197
 22,354
 $1,494,313
Less amount representing interest, 9.96% weighted average interest rate (1,739)  
Less amount representing interest, 3.6% weighted average interest rate (3,831)  
Present value of obligations under capital leases 5,282
   18,523
  
Less current portion (903)   (2,818)  
Long-term capital lease obligations $4,379
   $15,705
  
Total future minimum lease payments of $1.1approximately $1.0 billion included in the table above are expected to be recovered under our non-cancellablenon-cancelable operating subleases.
Assets recorded under capital leases are included in property and equipment, and consisted of the following at each fiscal year-end (in thousands):
 2013 2012 2016 2015
Buildings $19,105
 $19,431
 $9,716
 $10,716
Equipment 17,855
 16,770
Less accumulated amortization (14,808) (14,499) (10,325) (8,453)
 $4,297
 $4,932
 $17,246
 $19,033
Amortization of assets under capital leases is included in depreciation and amortization expense.expense in the consolidated statements of earnings.
As lessor — We lease or sublease restaurants to certain franchisees and others under agreements that generally provide for the payment of percentage rentals in excess of stipulated minimum rentals, usually for a period of up to 20 years. Most of our leases have rent escalation clauses and renewal clauses of 5 to 20 years. The following detailstable summarizes rents received under these agreements in each fiscal year (in thousands):
  2016 2015 2014
Total rental income (1) $238,375
 $232,264
 $222,443
Contingent rentals $31,632
 $28,348
 $19,551
  2013 2012 2011
Total rental income (1) $213,009
 $200,760
 $166,937
Contingent rentals $16,966
 $16,341
 $10,364
 ____________________________

(1)Includes contingent rentals.
The minimum rents receivable expected to be received under these non-cancelable operating leases and subleases, including leases recorded as lease obligations relating to continuing and discontinuing operations, and excluding contingent rentals, as of September 29, 2013October 2, 2016 are as follows (in thousands):
Fiscal Year  
2014$199,481
2015197,936
2016213,205
2017194,754
$207,754
2018175,720
187,029
2019202,471
2020199,072
2021210,909
Thereafter1,672,315
1,200,831
Total minimum future rentals$2,653,411
Total minimum future rent receivable$2,208,066


F-18
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Assets held for lease and included in property and equipment consisted of the following at each fiscal year-end (in thousands):
 2013 2012 2016 2015
Land $79,015
 $73,831
 $73,527
 $72,248
Buildings 684,288
 643,113
 674,690
 678,044
Equipment 3,887
 3,455
 4,382
 4,374
 767,190
 720,399
 752,599
 754,666
Less accumulated depreciation (400,211) (353,157) (480,600) (453,056)
 $366,979
 $367,242
 $271,999
 $301,610

9.     IMPAIRMENT DISPOSITION OF PROPERTY AND EQUIPMENT, RESTAURANT CLOSING COSTS AND RESTRUCTURINGOTHER CHARGES, NET
Impairment and other charges, net in the accompanying consolidated statements of earnings is comprised of the following (in thousands): 
 2013 2012 2011 2016 2015 2014
Impairment charges $3,874
 $3,112
 $1,367
Restructuring costs $10,067
 $29
 $8,621
Costs of closed restaurants (primarily lease obligations) and other 3,431
 3,592
 2,841
Losses on disposition of property and equipment, net 3,645
 5,904
 7,524
 2,801
 1,319
 1,674
Costs of closed restaurants (primarily lease obligations) and other 2,469
 8,332
 3,655
Restructuring costs 3,451
 15,461
 —
Accelerated depreciation 2,214
 6,260
 1,202
Restaurant impairment charges 544
 557
 570
 $13,439
 $32,809
 $12,546
 $19,057
 $11,757
 $14,908
ImpairmentRestructuring costs — Since the beginning of 2012, we have been engaged in a comprehensive review of our organization structure, including evaluating opportunities to decrease general and administrative expenses, as well as improve profitability across both brands. In 2016, management initiated a plan that includes cost saving initiatives from workforce reductions, the relocation of our Qdoba corporate support center, refranchising initiatives, and the consolidation of information technology across both brands.
The following is a summary of the costs incurred in connection with these activities during each fiscal year (in thousands):
  2016 2015 2014
Employee severance and related costs $7,583
 $29
 $2,141
Facility closing costs 2,004
 —
 —
Other (1) 480
 —
 6,480
  $10,067
 $29
 $8,621

(1)Other primarily represents employee relocation costs in 2016, and in 2014, an impairment charge related to a restaurant software asset we no longer planned to place in service.
In 2016, approximately $2.0 million and $6.3 million of the restructuring costs are related to our Jack in the Box and Qdoba restaurant operating segments, respectively, and approximately $1.8 million is related to shared services functions. At this time, we are unable to estimate additional charges to be incurred subsequent to fiscal 2016.
Total accrued severance costs related to our restructuring activities are included in accrued liabilities and changed as follows during fiscal 2016 (in thousands):
Balance as of September 27, 2015 $—
Additions 7,583
Cash payments (3,385)
Balance as of October 2, 2016 $4,198

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Restaurant closing costs — Costs of closed restaurants primarily consist of future lease commitments and expected ancillary costs, net of anticipated sublease rentals. Accrued restaurant closing costs, included in accrued liabilities and other long-term liabilities, changed as follows during fiscal 2016 (in thousands):
Balance as of September 27, 2015 $9,707
Additions 464
Adjustments (1) 946
Interest expense 1,442
Cash payments (5,328)
Balance as of October 2, 2016 (2) $7,231

(1)Adjustments relate primarily to revisions of certain sublease and cost assumptions. Our estimates related to our future lease obligations, primarily the sublease income we anticipate, are subject to a high degree of judgment and may differ from actual sublease income due to changes in economic conditions, desirability of the sites and other factors.
(2)The weighted average remaining lease term related to these commitments is approximately five years.
The future minimum lease payments and receipts for the next five fiscal years and thereafter are included in the amounts disclosed in Note 8, Leases. Our obligations under the leases included in the above table expire at various dates between fiscal 2017 and 2029.
Disposition of property and equipment — In 2015, losses on the disposition of property and equipment were offset by $0.9 million in gains from the resolution of one eminent domain matter involving a Jack in the Box restaurant.
Accelerated depreciation — When a long-lived asset will be replaced or otherwise disposed of prior to the end of its estimated useful life, the useful life of the asset is adjusted based on the estimated disposal date and accelerated depreciation is recognized. In 2016 and 2015, accelerated depreciation primarily relates to expenses at our Jack in the Box company-operated restaurants for exterior facility enhancements and the replacement of technology equipment, and in 2015 it also includes a $3.6 million charge related to the replacement of beverage equipment. In 2014, accelerated depreciation primarily relates to restaurant facility enhancements.
Restaurant impairment charges — When events and circumstances indicate that our long-lived assets might be impaired and their carrying amount is greater than the undiscounted cash flows we expect to generate from such assets, we recognize an impairment loss as the amount by which the carrying value exceeds the fair value of the assets. Impairment charges in 2013, 2012 and 2011 primarily represent chargesall years presented were not material to write down the carrying value of underperforming Jack in the Box restaurants and Jack in the Box restaurants we intend to or have closed.our consolidated financial statements.
Disposition of property and equipment — We also recognize accelerated depreciation and other costs on the disposition of property and equipment. When we decide to dispose of a long-lived asset, depreciable lives are adjusted based on the estimated disposal date and accelerated depreciation is recorded. Other disposal costs primarily relate to gains or losses recognized upon the sale of closed restaurant properties, and charges from our ongoing restaurant upgrade programs, remodels and rebuilds, and other corporate roll-out initiatives. In 2013, losses on the disposition of property and equipment includes income of $2.8 million from the resolution of four eminent domain matters involving Jack in the Box restaurants.

10.     INCOME TAXES
Restaurant closing costsIncome taxes consist of future lease commitments, net of anticipated sublease rentals and expected ancillary costs, and are includedthe following in impairment and other charges, net in the accompanying consolidated statements of earnings. Total accrued restaurant closing costs, included in accrued liabilities and other long-term liabilities, changed as follows during each fiscal year (in thousands):
  2013 2012
Balance at beginning of year $20,677
 $21,657
Additions —
 546
Adjustments 1,752
 5,241
Cash payments (6,108) (6,767)
Balance at end of year $16,321
 $20,677
  2016 2015 2014
Current:      
Federal $32,276
 $59,362
 $43,864
State 5,315
 9,598
 3,770
  37,591
 68,960
 47,634
Deferred:      
Federal 29,975
 (2,018) 3,700
State 4,998
 (1,173) 452
  34,973
 (3,191) 4,152
Income tax expense from continuing operations $72,564
 $65,769
 $51,786
       
Income tax benefit from discontinued operations $(1,365) $(2,410) $(3,629)

In each fiscal year, adjustments primarily relate to revisions to certain sublease costs and assumptions due to changes in market conditions.
The future minimum lease payments and receipts for the next five fiscal years and thereafter are included in the amounts disclosed in Note 8, Leases. Our obligations under the leases included in the above table expire at various dates between 2014 and 2030.

F-19
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Restructuring costs — Since the beginning of 2012, we have been engaged in a comprehensive review of our organization structure, including evaluating opportunities for outsourcing, restructuring of certain functions and workforce reductions. In fiscal 2012, as part of these cost saving initiatives, we offered a voluntary early retirement program (“VERP”) to eligible employees which are noted as enhanced pension benefits in the table below. The following is a summary of the costs incurred in connection with these activities during each fiscal year (in thousands):
  2013 2012
Enhanced pension benefits (Note 11) $—
 $6,167
Severance costs 2,821
 6,987
Other 630
 2,307
  $3,451
 $15,461
Refer to Note 11, Retirement Plans, for additional information regarding the costs associated with enhanced pension benefits in fiscal 2012.Total accrued severance costs related to our restructuring activities are included in accrued liabilities and changed as follows in each fiscal year (in thousands):
  2013 2012
Balance at beginning of year $1,758
 $—
Additions 2,821
 6,987
Cash payments (4,326) (5,229)
Balance at end of the year $253
 $1,758
As part of the ongoing review of our organization structure, we expect to incur additional charges related to our restructuring activities; however, we are unable to make a reasonable estimate of the additional costs at this time. Our continuing efforts to lower our cost structure include identifying opportunities to reduce general and administrative costs as well as improve restaurant profitability across both brands.

10.     INCOME TAXES
The fiscal year income taxes consist of the following (in thousands):
  2013 2012 2011
Current:      
Federal $51,367
 $35,205
 $50,255
State 7,583
 5,248
 11,042
  58,950
 40,453
 61,297
Deferred:      
Federal (16,897) (5,553) (8,077)
State (1,707) (1,062) (4,755)
  (18,604) (6,615) (12,832)
Income tax expense from continuing operations $40,346
 $33,838
 $48,465
       
Income tax benefit from discontinued operations $(19,566) $(6,651) $(3,287)
A reconciliation of the federal statutory income tax rate to our effective tax rate for continuing operations is as follows:
 2013 2012 2011 2016 2015 2014
Computed at federal statutory rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 3.4
 3.3
 3.4
 3.7
 3.7
 3.3
Benefit of jobs tax credits (1.9) (1.0) (1.4)
Expense (benefit) related to COLIs (2.9) (4.6) 0.3
Benefit of jobs tax credits, net of valuation allowance (1.0) (1.1) (1.2)
(Benefit) expense related to COLIs (1.3) 0.3
 (1.6)
Other, net (0.8) 0.5
 (1.2) 0.1
 (1.0) (0.2)
 32.8% 33.2% 36.1% 36.5% 36.9% 35.3%


F-20
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at each year-end are presented below (in thousands):
 2013 2012 2016 2015
Deferred tax assets:        
Accrued pension and postretirement benefits $66,698
 $109,443
Accrued defined benefit pension and postretirement benefits $89,253
 $92,456
Impairment 21,904
 23,982
Interest rate swaps 18,483
 10,208
Accrued insurance 13,115
 12,096
 14,378
 13,245
Accrued vacation pay expense 3,259
 4,611
Deferred income 1,441
 1,969
Impairment 27,944
 22,763
Divestment 11,361
 6,252
Other reserves and allowances 3,964
 3,489
Tax loss and tax credit carryforwards 4,619
 5,093
 13,624
 14,081
Leasing transactions 7,471
 10,893
 11,144
 11,442
Share-based compensation 13,128
 18,722
 9,091
 9,331
Lease commitments related to closed or refranchised locations 7,440
 11,471
Accrued incentive compensation 5,536
 6,412
Accrued vacation pay expense 2,137
 2,193
Other reserves and allowances 1,935
 1,584
Deferred income 1,887
 1,417
Other, net 4,280
 3,297
 3,876
 2,030
Total gross deferred tax assets 157,280
 198,628
 200,688
 199,852
Valuation allowance (4,619) (5,093) (11,365) (11,563)
Total net deferred tax assets 152,661
 193,535
 189,323
 188,289
Deferred tax liabilities:        
Property and equipment, principally due to differences in depreciation (9,753) (27,230) (38,859) (38,403)
Intangible assets (27,350) (23,837) (31,827) (30,132)
Other (40) —
 (1,050) (1,568)
Total gross deferred tax liabilities (37,143) (51,067) (71,736) (70,103)
Net deferred tax assets $115,518
 $142,468
 $117,587
 $118,186
Deferred tax assets at September 29, 2013as of October 2, 2016 include state net operating loss carryforwardscarry-forwards of approximately $78.1$72.5 million expiring at various times between 2017 and 2034.2036. At October 2, 2016 and September 29, 2013 and September 30, 2012,27, 2015, we recorded a valuation allowance related to losses and state net operating lossestax credits of $4.6$11.4 million and $5.1$11.6 million,, respectively. The current year change in the valuation allowance of $0.5 million relates to net operating losses. We believe that it is more likely than not that these net operating loss carryforwardsand credit carry-forwards will not be realized and that the remaining deferred tax assets will be realized through future taxable income or alternative tax strategies.
Our gross unrecognized tax benefits associated with uncertain income tax positions decreased during fiscal 2013 based on2015 due to the conclusion of an audit regarding a preliminary assessment of a state income tax audit.specific claim with California. A reconciliation of the beginning and ending amountamounts of unrecognized tax benefits follows (in thousands):
 2013 2012 2016 2015
Balance beginning of year $905
 $629
 $—
 $374
Change related to tax positions (136) 276
 —
 (374)
Balance at end of year $769
 $905
 $—
 $—
From time to time, we may take positions for filing our tax returns which may differ from the treatment of the same item for financial reporting purposes. The ultimate outcome of these items will not be known until the IRSInternal Revenue Service or state has completed its examination or until the statute of limitations has expired.
It is reasonably possible that changes of approximately $0.8 million to the gross unrecognized tax benefits will be required within the next twelve months. These changes relate to the possible settlement of state tax audits.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The major jurisdictions in which the Company files income tax returns include the United States and states in which we operate that impose an income tax. The federal statutes of limitations have not expired for fiscal years 20082013 and forward. The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for fiscal years 20012012 and 2007, respectively,forward and forward. Generally, the statutes of limitations for the other state jurisdictions have not expired for fiscal years 20092011 and forward.forward, respectively.


F-21
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.     RETIREMENT PLANS
We sponsor programs that provide retirement benefits to most of our employees. These programs include defined contribution plans, defined benefit pension plans and postretirement healthcare plans.
Defined contribution plans — We maintain a qualified savings plan pursuant to Section 401(k) of the Internal Revenue Code (“IRC”). Effective January 1, 2016, the plan was amended and restated to incorporate Safe Harbor Plan design features which allow administrativeinclude changes to participant eligibility and clericalcompany contribution amounts and vesting. The plan allows all employees who have satisfied the service requirements and reached age 21 to defer a percentage of their pay on a pre-tax basis. WeBeginning January 1, 2016, we match 50%100% of the first 4% of compensation deferred by the participant. Prior to January 1, 2016, we matched 50% of the first 4% of compensation deferred by the participant. Our contributions under these plansthis plan were $1.0$3.8 million in 2013,fiscal 2016, and $1.2$1.2 million and $1.0 million in both 20122015 and 2014, respectively.2011.
We also maintain an unfunded, non-qualified deferred compensation plan for key executives and other members of management who are excluded from participation inwhose compensation deferrals or company matching contributions to the qualified savings plans.plan are limited due to IRC rules. Effective January 1, 2016, this non-qualified plan was amended to replace the company matching contribution with an annual restoration match that is intended to “restore” up to the full 4% match for participants whose elective deferrals (and related company matching contributions) to the qualified savings plan were limited due to IRC rules. Prior to January 1, 2016, we matched 100% of the first 3% contributed by the participant. This plan allows participants to defer up to 50% of their salary and 85% of their bonus, on a pre-tax basis. We match 100% of the first 3% contributed by the participant. ToIn addition, to compensate executives who were hired or promoted into an eligible position prior to May 7, 2015 and who may no longer eligible to participate in our supplemental defined benefit pension plan, we also contribute a supplemental amount equal to 4% of an eligible employee’s salary and bonus for a period of ten10 years in such eligible position. Our contributions under the non-qualified deferred compensation plan were $1.1$0.3 million in 2013, 2012,fiscal 2016, and 2011. In all plans, a$1.3 million and $1.1 million in fiscal 2015 and 2014, respectively. A participant’s right to Company contributions vestin the qualified plan vests immediately, and in the non-qualified plan vests at a rate of 25% per year of service.
Defined benefit pension plans — We sponsor two defined benefit pension plans, a “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. In fiscal 2011,, the Board of Directors approved changes to our Qualified Plan whereby participants will no longer accrue benefits effective December 31, 2015. This change was accounted for as a plan “curtailment” in accordance with theFASB authoritative guidance issued by the FASB.guidance. Benefits under both plans are based on the employees’ years of service and compensation over defined periods of employment.
In April 2012, we announced a voluntary early retirement program to eligible employees. The offering period for participation in the VERP ended during the third quarter of fiscal 2012. In connection with the VERP, we were required to re-measure the liability for our Qualified Plan as of June 30, 2012. As a result, we incurred a charge and an increase to our pension benefit obligation (“PBO”) in fiscal 2012 of $6.2 million for enhanced retirement benefits under our Qualified Plan.
Postretirement healthcare plans — We also sponsor two 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 contain other cost-sharing features such as deductibles and coinsurance.


F-22
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Obligations and funded status — The following table provides a reconciliation of the changes in benefit obligations, plan assets and funded status of our retirement plans as of September 29, 2013 and September 30, 2012for each fiscal year (in thousands):
 
 Qualified Plan SERP Postretirement Health Plans Qualified Plan SERP Postretirement Health Plans
 2013 2012 2013 2012 2013 2012 2016 2015 2016 2015 2016 2015
Change in benefit obligation:                        
Obligation at beginning of year $466,097
 $354,472
 $63,156
 $55,604
 $37,307
 $29,578
 $442,264
 $434,896
 $75,346
 $69,733
 $28,911
 $27,626
Service cost 10,210
 9,068
 543
 466
 —
 61
 4,479
 7,592
 773
 676
 —
 —
Interest cost 19,964
 19,891
 2,664
 3,056
 1,586
 1,617
 20,926
 19,750
 3,253
 2,945
 1,263
 1,196
Participant contributions —
 —
 —
 —
 131
 134
 —
 —
 —
 —
 127
 114
Actuarial (gain) loss (85,578) 98,120
 1,773
 6,767
 (4,612) 6,574
Actuarial loss (gain) 75,456
 16,757
 6,938
 6,447
 (768) 1,008
Benefits paid (28,625) (21,621) (3,419) (3,404) (1,331) (1,512) (9,791) (10,261) (4,860) (4,455) (1,161) (1,184)
Settlements (10,875) (26,470) —
 —
 —
 —
Other —
 —
 —
 667
 162
 855
 —
 —
 —
 —
 (158) 151
Cost of VERP —
 6,167
 —
 —
 —
 —
Obligation at end of year $382,068
 $466,097
 $64,717
 $63,156
 $33,243
 $37,307
 $522,459
 $442,264
 $81,450
 $75,346
 $28,214
 $28,911
Change in plan assets:                        
Fair value at beginning of year $311,988
 $261,835
 $—
 $—
 $—
 $—
 $332,657
 $356,312
 $—
 $—
 $—
 $—
Actual return on plan assets 33,062
 53,174
 —
 —
 —
 —
 31,411
 (6,924) —
 —
 —
 —
Participant contributions —
 —
 —
 —
 131
 134
 —
 —
 —
 —
 127
 114
Employer contributions 20,000
 18,600
 3,419
 3,404
 1,038
 523
 95,000
 20,000
 4,860
 4,455
 1,192
 919
Benefits paid and other (28,625) (21,621) (3,419) (3,404) (1,169) (657)
Benefits paid (9,791) (10,261) (4,860) (4,455) (1,161) (1,184)
Settlements (10,875) (26,470) —
 —
 —
 —
Other —
 —
 —
 —
 (158) 151
Fair value at end of year $336,425
 $311,988
 $—
 $—
 $—
 $—
 $438,402
 $332,657
 $—
 $—
 $—
 $—
Funded status at end of year $(45,643) $(154,109) $(64,717) $(63,156) $(33,243) $(37,307) $(84,057) $(109,607) $(81,450) $(75,346) $(28,214) $(28,911)
Amounts recognized on the balance sheet:                        
Current liabilities $—
 $—
 $(4,392) $(3,411) $(1,438) $(1,440) $—
 $—
 $(4,504) $(4,477) $(1,325) $(1,294)
Noncurrent liabilities (45,643) (154,109) (60,325) (59,745) (31,805) (35,867) (84,057) (109,607) (76,946) (70,869) (26,889) (27,617)
Total liability recognized $(45,643) $(154,109) $(64,717) $(63,156) $(33,243) $(37,307) $(84,057) $(109,607) $(81,450) $(75,346) $(28,214) $(28,911)
Amounts in AOCI not yet reflected in net periodic benefit cost:                        
Unamortized actuarial loss, net $68,454
 $180,044
 $21,632
 $22,029
 $9,024
 $14,427
 $216,129
 $153,156
 $37,417
 $31,738
 $2,239
 $3,226
Unamortized prior service cost —
 —
 1,349
 1,618
 —
 —
 —
 —
 571
 811
 —
 —
Total $68,454
 $180,044
 $22,981
 $23,647
 $9,024
 $14,427
 $216,129
 $153,156
 $37,988
 $32,549
 $2,239
 $3,226
Other changes in plan assets and benefit obligations recognized in OCI:                        
Net actuarial (gain) loss $(95,925) $65,278
 $1,773
 $6,767
 $(4,612) $6,574
Net actuarial loss (gain) $65,801
 $46,952
 $6,938
 $6,447
 $(768) $1,008
Amortization of actuarial loss (15,665) (11,871) (2,170) (1,140) (791) (89) (2,828) (8,278) (1,259) (1,134) (219) (182)
Amortization of prior service cost —
 —
 (269) (432) —
 —
 —
 —
 (240) (269) —
 —
Total recognized in OCI (111,590) 53,407
 (666) 5,195
 (5,403) 6,485
 62,973
 38,674
 5,439
 5,044
 (987) 826
Net periodic benefit cost and other losses 23,124
 26,665
 5,646
 5,094
 2,377
 1,767
 6,477
 12,347
 5,525
 5,024
 1,482
 1,378
Total recognized in comprehensive income $(88,466) $80,072
 $4,980
 $10,289
 $(3,026) $8,252
 $69,450
 $51,021
 $10,964
 $10,068
 $495
 $2,204
Amounts in AOCI expected to be amortized in fiscal 2014 net periodic benefit cost:            
Amounts in AOCI expected to be amortized in fiscal 2017 net periodic benefit cost:            
Net actuarial loss $3,574
   $859
   $542
   $4,455
   $1,658
   $161
  
Prior service cost —
   269
   —
   —
   153
   —
  
Total $3,574
   $1,128
   $542
   $4,455
   $1,811
   $161
  
 
Additional year-end pension plan information — The pensionprojected benefit obligation (“PBO”) is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases. The accumulated benefit obligation (“ABO”) also reflects the actuarial present value of benefits attributable to employee service rendered to date but does not include the effects of estimated future pay increases. Therefore, the ABO as compared to plan assets is an indication of the assets currently available to fund vested and nonvested benefits accrued through the end of the fiscal year. The funded status is measured as the difference between the fair value of a plan’s assets and its PBO.

F-23
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


As of September 29, 2013October 2, 2016 and September 30, 201227, 2015, the Qualified Plan’s ABO exceeded the fair value of its plan assets. The SERP is an unfunded plan and, as such, had no plan assets as of September 29, 2013October 2, 2016 and September 30, 201227, 2015. The following sets forth the PBO, ABO and fair value of plan assets of our pension plans as of the measurement date in each fiscal year (in thousands):
 
 2013 2012 2016 2015
Qualified Plan:        
Projected benefit obligation $382,068
 $466,097
 $522,459
 $442,264
Accumulated benefit obligation $377,800
 $458,493
 $522,459
 $441,451
Fair value of plan assets $336,425
 $311,988
 $438,402
 $332,657
SERP:        
Projected benefit obligation $64,717
 $63,156
 $81,450
 $75,346
Accumulated benefit obligation $64,385
 $60,602
 $80,815
 $74,388
Fair value of plan assets $—
 $—
 $—
 $—
Net periodic benefit cost — The components of the fiscal year net periodic benefit cost were as follows (in thousands):
 
 2013 2012 2011 2016 2015 2014
Qualified Plan:            
Service cost $10,210
 $9,068
 $9,982
 $4,479
 $7,592
 $7,633
Interest cost 19,964
 19,891
 18,557
 20,926
 19,750
 20,196
Expected return on plan assets (22,715) (20,332) (20,732) (21,756) (23,273) (24,492)
Actuarial loss 15,665
 11,871
 8,518
 2,828
 8,278
 3,575
Cost of VERP —
 6,167
 —
Net periodic benefit cost $23,124
 $26,665
 $16,325
 $6,477
 $12,347
 $6,912
SERP:            
Service cost $543
 $466
 $806
 $773
 $676
 $490
Interest cost 2,664
 3,056
 3,023
 3,253
 2,945
 3,049
Actuarial loss 2,170
 1,140
 1,305
 1,259
 1,134
 859
Amortization of unrecognized prior service cost 269
 432
 488
 240
 269
 269
Net periodic benefit cost $5,646
 $5,094
 $5,622
 $5,525
 $5,024
 $4,667
Postretirement health plans:            
Service cost $—
 $61
 $80
Interest cost 1,586
 1,617
 1,585
 $1,263
 $1,196
 $1,639
Actuarial loss 791
 89
 202
 219
 182
 542
Amortization of unrecognized prior service cost —
 —
 31
Net periodic benefit cost $2,377
 $1,767
 $1,898
 $1,482
 $1,378
 $2,181
 
Prior service costs are amortized on a straight-line basis from date of participation to full eligibility.  Unrecognized gains or losses are amortized using the “corridor approach.” Under the corridor approach,approach” under which the net gain or loss in excess of 10% of the greater of the PBO or the market-related value of the assets, if applicable, is amortized. For our Qualified Plan in fiscal year 2016, actuarial losses were amortized over the average future expected lifetime of all participants expected to receive benefits, and in 2015 and 2014, actuarial losses were amortized on a straight-line basis over the expected remaining service period of plan participants. For our SERP, actuarial losses are amortized over the expected remaining future lifetime for inactive participants, and for our postretirement health plans, actuarial losses are amortized over the expected remaining future lifetime of inactive participants expected to receive benefits.


F-24
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Assumptions — We determine our actuarial assumptions on an annual basis. In determining the present values of our benefit obligations and net periodic benefit costs as of and for the fiscal years ended September 29, 2013October 2, 2016, September 30, 201227, 2015 and October 2, 2011September 28, 2014, respectively, we used the following weighted-average assumptions:
 
 2013 2012 2011 2016 2015 2014
Assumptions used to determine benefit obligations (1):            
Qualified Plan:            
Discount rate 5.37% 4.34% 5.60% 3.85% 4.79% 4.60%
Rate of future pay increases 3.50% 3.50% 3.50% —% 3.50% 3.50%
SERP:            
Discount rate 4.88% 4.34% 5.60% 3.60% 4.45% 4.36%
Rate of future pay increases 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Postretirement health plans:            
Discount rate 5.04% 4.34% 5.60% 3.64% 4.47% 4.43%
Assumptions used to determine net periodic benefit cost:      
Qualified Plan (2):      
Assumptions used to determine net periodic benefit cost (2):      
Qualified Plan:      
Discount rate 4.34% 4.78% 5.82% 4.79% 4.60% 5.37%
Long-term rate of return on assets 7.25% 7.25% 7.75% 6.50% 6.50% 7.25%
Rate of future pay increases 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
SERP (3):      
SERP:      
Discount rate 4.34% 5.60% 5.82% 4.45% 4.36% 4.88%
Rate of future pay increases 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Postretirement health plans (3):      
Postretirement health plans:      
Discount rate 4.34% 5.60% 5.82% 4.47% 4.43% 5.04%
 ____________________________
(1)Determined as of end of year.
(2)
During fiscal year 2012, the discount rate and long-term rate of return on plan assets used to determine net period benefit costs were updated as of June 30, 2012, in connection with the VERP re-measurement from the rates determined at the beginning of the year of 5.60% and 7.75%, respectively.
(3)Determined as of beginning of year.
The assumed discount rates were determined by considering the average of pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better whose cash flow from coupons and maturities match the year-by-year projected benefit payments from the plans. SinceAs benefit payments typically extend beyond the date of the longest maturing bond, cash flows beyond 30 years were discounted back to the 30th year and then matched like any other payment.
The assumed expected long-term rate of return on assets is the weighted averageweighted-average rate of earnings expected on the funds invested or to be invested to provide for the pension obligations. The long-term rate of return on assets was determined taking into consideration our projected asset allocation and economic forecasts prepared with the assistance of our actuarial consultants.
The assumed discount rate and expected long-term rate of return on assets have a significant effect on amounts reported for our pension and postretirement plans. A quarter percentage point decrease in the discount rate and long-term rate of return used would have decreased fiscal 20132016 earnings before income taxes by $2.8$0.5 million and $0.8$0.8 million,, respectively.
The assumed average rate of compensation increase is the average annual compensation increase expected over the remaining employment periods for the participating employees. For determining our Qualified Plan’s projected benefit obligation as of October 2, 2016, no future pay increases were included in our assumptions as our plan participants no longer accrue benefits effective December 31, 2015.


F-25
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For measurement purposes, the weighted-average assumed health care cost trend rates for our postretirement health plans were as follows for each fiscal year:
 2013 2012 2011 2016 2015 2014
Healthcare cost trend rate for next year:            
Participants under age 65 8.50% 8.50% 7.70% 7.75% 8.00% 8.25%
Participants age 65 or older 8.00% 8.00% 7.00% 7.25% 7.50% 7.75%
Rate to which the cost trend rate is assumed to decline:            
Participants under age 65 (1) 4.80% / 4.90%
 4.50% 5.10% 4.50% 4.50% 4.50%
Participants age 65 or older (1) 4.80% / 4.90%
 4.50% 4.50% 4.50% 4.50% 4.50%
Year the rate reaches the ultimate trend rate:            
Participants under age 65 (1) 2038 / 2045
 2029
 2040
Participants age 65 or older (1) 2037 / 2045
 2027
 2028
Participants under age 65 2030
 2030
 2030
Participants age 65 or older 2028
 2028
 2028
 ____________________________
(1)
In fiscal 2013, rates and years are stated for the two post retirement health plans sponsored by The Company. In 2012 and 2011, rates and years were the same for both plans.
The assumed healthcare cost trend rate represents our estimate of the annual rates of change in the costs of the healthcare benefits currently provided by our postretirement plans. The healthcare cost trend rate implicitly considers estimates of healthcare inflation, changes in healthcare utilization and delivery patterns, technological advances and changes in the health status of the plan participants. The healthcare cost trend rate assumption has a significant effect on the amounts reported. For example, a 1.0% change in the assumed healthcare cost trend rate would have the following effect on the 2016 net periodic benefit cost and end of year PBO (in thousands):
 
1% Point
  Increase   
 
1% Point
  Decrease   
 
1% Point
  Increase   
 
1% Point
  Decrease   
Total interest and service cost $206
 $(176) $156
 $(132)
Postretirement benefit obligation $4,046
 $(3,452) $3,373
 $(2,875)
Plan assets — Our investment philosophy is to (1) protect the corpus of the fund; (2) establish investment objectives that will allow the market value to exceed the present value of the vested and unvested liabilities over time; while (3) obtaining adequate investment returns to protect benefits promised to the participants and their beneficiaries. Our asset allocation strategy utilizes multiple investment managers in order to maximize the plan’s return while minimizing risk. We regularly monitor our asset allocation, and senior financial management and the Finance Committee of the Board of Directors review performance results at least semi-annually. In August 2012, we adjustedquarterly. We continually review our target asset allocation for our Qualified Plan and when changes are made, we plan to reallocate our plan assets over a period of time, as deemed appropriate by senior financial management, to achieve our target asset allocation. Our plan asset allocation at the end of fiscal 20132016 and target allocations were as follows:
 2013 Target Minimum Maximum 2016 Target Minimum Maximum
Cash and cash equivalents 1% —% —% —%
Domestic equity 32% 25% 15% 35% 23
 25
 15% 35%
International equity 24
 25
 15
 35
 28
 25
 15% 35%
Core fixed funds 24
 25
 20
 30
 27
 25
 20% 30%
Real return bonds 3
 3
 —
 10
High yield 6
 5
 —% 10%
Alternative investments 5
 5
 —
 10
 6
 9
 —% 20%
Real estate 9
 8
 —
 10
 9
 8
 —% 10%
High yield 1
 5
 —
 10
Commodities 2
 4
 —
 10
Real return bonds —
 3
 —% 10%
 100% 100%     100% 100%    
 


F-26
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Company measures its defined benefit plan assets and obligations as of the month-end date closest to its fiscal year end, which is a practical expedient under FASB authoritative guidance. The fair values of the Qualified Plan’s assets at September 29, 2013 and September 30, 2012 by asset category are as follows (in thousands):
  
 
  
 Total 
Quoted Prices
in Active
Markets for
Identical
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Items Measured at Fair Value at September 30, 2016:          
Asset Category:          
Cash and cash equivalents (1) $5,479
 $—
 $5,479
 $—
Equity:          
U.S (3) 101,174
 101,174
 —
 —
International (4) 121,884
 118,960
 2,924
 —
Fixed income:          
Investment grade (5) 120,439
 46,152
 74,287
 —
High yield (6) 24,638
 24,638
 —
 —
Alternatives (7) 24,642
 24,642
 —
 —
Real estate (8) 40,146
 —
 —
 40,146
    $438,402
 $315,566
 $82,690
 $40,146
Items Measured at Fair Value at September 30, 2015:          
Asset Category:          
Cash and cash equivalents (2) $3,629
 $3,629
 $—
 $—
Equity:          
U.S (3) 83,034
 83,034
 —
 —
International (4) 88,827
 88,827
 —
 —
Fixed income:          
Investment grade (5) 88,621
 29,054
 59,567
 —
High yield (6) 7,243
 7,243
 —
 —
Alternatives (7) 24,336
 24,336
 —
 —
Real estate (8) 36,967
 —
 —
 36,967
    $332,657
 $236,123
 $59,567
 $36,967
  
 
  
 Total 
Quoted Prices
in Active
Markets for
Identical
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Items Measured at Fair Value at September 29, 2013:          
Asset Category:          
Cash and cash equivalents (1) $4,344
 $4,344
 $—
 $—
Equity:          
U.S (2) 26,317
 26,317
 —
 —
Commingled (3) 159,612
 159,612
 —
 —
Fixed income:          
Corporate bonds (5) 4,017
 —
 4,017
 —
Government and mortgage securities (7) 9,121
 9,121
 —
 —
Other (8) 98,654
 16,553
 82,101
 —
Real estate (10) 29,352
 —
 —
 29,352
Diversified funds (11) 5,008
 5,008
 —
 —
    $336,425
 $220,955
 $86,118
 $29,352
Items Measured at Fair Value at September 30, 2012:          
Asset Category:          
Cash and cash equivalents (1) $2,689
 $2,689
 $—
 $—
Equity:          
U.S. (2) 44,103
 44,103
 —
 —
Commingled (3) 128,919
 128,919
 —
 —
Fixed income:          
Asset-backed securities (4) 5,406
 —
 5,406
 —
Corporate bonds (5) 9,621
 —
 9,621
 —
Non-government-backed C.M.O.’s (6) 4,234
 —
 4,234
 —
Government and mortgage securities (7) 74,925
 51,439
 23,486
 —
Other (8) 16,185
 16,185
 —
 —
Interest rate swaps (9) 121
 —
 121
 —
Real estate (10) 25,785
 —
 —
 25,785
    $311,988
 $243,335
 $42,868
 $25,785
 _____________________________________________________
(1)Cash and cash equivalents are comprised of commercial paper, short-term bills and notes, and short-term investment funds, which are valued at quoted prices in active markets for similar securities.
(2)Cash and cash equivalents are comprised of commercial paper, short-term bills and notes, and short-term investment funds, which are valued at unadjusted quoted market prices.
(2)(3)U.S. equity securities are comprised of investments in common stock of U.S. companies for total return purposes. These investments are valued by the trustee at closing prices from national exchanges on the valuation date.
(3)(4)CommingledInternational equity securities are comprised of investments in mutual funds,common stock of companies located outside of the fair valueU.S for total return purposes. These investments are valued by the trustee at closing prices from national exchanges on the valuation date, or the values are adjusted as a result of which is determined by referencemarket movements following the close of local trading using inputs to the fund’s underlying assets, which are primarily marketable equity securitiesmodels that are tradedobservable either directly or indirectly.
(5)Investment grade fixed income consists of debt obligations either issued by the US government or have a rating of BBB- / Baa or higher assigned by a major credit rating agency. These investments are valued based on national exchanges andunadjusted quoted market prices (Level 1), or based on quoted prices in inactive markets, or whose values are based on models, but the inputs to those models are observable either directly or indirectly (Level 2).
(6)High yield fixed income consists primarily of debt obligations that have a rating of below BBB- / Baa or lower assigned by a major credit rating agency.  These investments are valued atbased on unadjusted quoted market prices.
(4)(7)Asset-backed securities are comprisedAlternative investments consists primarily of collateralized obligationsan investment in asset classes other than stocks, bonds, and mortgage-backed securities, which are valued by the trustee using observable, market-based inputs.
(5)Corporate bonds are comprised of mutualcash.  Alternative investments can include commodities, hedge funds, traded on national securities exchanges, valued at unadjusted quoted market prices, as well as securities traded in markets that are not considered active, whichprivate equity, managed futures, and derivatives.  These investments are valued based on unadjusted quoted market prices, broker/dealer quotations, or alternative pricing sources with reasonable levels of price transparency.
(6)Non-government backed securities are comprised of collateralized obligations and mortgage-back securities, which the trustee values using observable, market-based inputs.
(7)Government and mortgage securities are comprised of government and municipal bonds, including treasury bills, notes and index linked bonds which are valued using an unadjusted quoted price in an active market or observable, market-based inputs.prices.
(8)Other fixed income securities are comprised of other commingled funds invested in registered securities which are valued at the unadjusted quoted price in an active market or exchange and long-duration US government/credit funds which are valued based on observable inputs, which include quoted market prices in active markets for similar securities, valuations based on commonly quoted benchmark interest rates, maturities, ratings and/or securities indices.
(9)Interest rate swaps are derivative instruments used to reduce exposure to the impact of changing interest rates and are valued using observable, market-based inputs.
(10)Real estate is investments in a real estate investmentcollective trust for purposes of total return. These investments are valued at unit values provided bybased on prices or valuation techniques that require inputs that are both unobservable and significant to the investment managers and their consultants.overall fair value measurement.
(11)Diversified funds are comprised of exchange-traded commodities futures and treasury bills, which are valued at unadjusted quoted market prices.

F-27
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table presents the changes in Level 3 investments for the qualified planQualified Plan during 20122015 and 20132016 (in thousands):
 Real EstateReal Estate
Balance at October 2, 2011 $8,415
Balance at September 30, 2014$32,593
Actual return on plan assets:Actual return on plan assets:   
Relating to assets still held at the reporting dateRelating to assets still held at the reporting date 2,513
4,665
Relating to assets sold during the periodRelating to assets sold during the period (15)40
Purchases, sales and settlementsPurchases, sales and settlements 14,872
(331)
Balance at September 30, 2012 $25,785
Balance at September 30, 2015$36,967
Actual return on plan assets:Actual return on plan assets:   
Relating to assets still held at the reporting dateRelating to assets still held at the reporting date $3,831
$3,486
Relating to assets sold during the periodRelating to assets sold during the period (6)67
Purchases, sales and settlementsPurchases, sales and settlements (258)(374)
Balance at September 29, 2013 $29,352
Balance at September 30, 2016$40,146
 
Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of the date of our last actuarial funding valuation, there was no minimum requirement. We do not anticipate making any contributions to our Qualified Plan in fiscal 2017. Contributions expected to be paid in the next fiscal year, and the projected benefit payments for each of the next five fiscal years, and the total aggregate amount for the subsequent five fiscal years are as follows (in thousands):
  Pension Plans 
Postretirement
Health Plans
Estimated net contributions during fiscal 2014 $24,392
 $1,438
Estimated future year benefit payments during fiscal years:    
2014 $15,785
 $1,438
2015 $15,959
 $1,470
2016 $16,028
 $1,518
2017 $16,237
 $1,617
2018 $16,941
 $1,788
2019-2023 $101,388
 $11,199
  Defined Benefit Pension Plans 
Postretirement
Health Plans
Estimated net contributions during fiscal 2017 $4,504
 $1,349
Estimated future year benefit payments during fiscal years:    
2017 $15,413
 $1,349
2018 $15,708
 $1,411
2019 $16,455
 $1,471
2020 $17,125
 $1,524
2021 $17,651
 $1,625
2022-2026 $106,805
 $8,564
We will 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 economic environment. Expected benefit payments are based on the same assumptions used to measure our benefit obligationobligations at September 29, 2013October 2, 2016 and include estimated future employee service.service, if applicable. 

12.     SHARE-BASED EMPLOYEE COMPENSATION
Stock incentive plans — We offer share-based compensation plans to attract, retain and motivate key officers, employees and non-employee directors to work toward the financial success of the Company.
Our stock incentive plans are administered by the Compensation Committee of the Board of Directors and have been approved by the stockholders of the Company. The terms and conditions of our share-based awards are determined by the Compensation Committee for each award date and may include provisions for the exercise price, expirations, vesting, restriction on sales and forfeitures, as applicable. We issue new shares to satisfy stock issuances under our stock incentive plans.
Our Amended and Restated 2004 Stock Incentive Plan authorizes the issuance of up to 11,600,000 common shares in connection with the granting of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units or performance units to key employees, directors, and other designated employees. As of September 29, 2013October 2, 2016, 3,297,9472,322,490 shares of common stock were available for future issuance under this plan.
There are two other plans under which we can no longer issue awards, although awards outstanding under these plans may still vest and be exercised: the 2002 Stock Incentive Plan and the Non-Employee Director Stock Option Plan.
We also maintain a deferred compensation plan for non-management directors under which those who are eligible to receive fees or retainers may choose to defer receipt of their compensation. The deferred amounts are converted to stock equivalents. The plan requires settlement in shares of our common stock based on the number of stock equivalents and dividend equivalents at the time of a participant’s separation from the Board of Directors. This plan provides for the issuance of up to 350,000 shares of common stock in connection with the crediting of stock equivalents. As of September 29, 2013, 153,738October 2, 2016, 143,122 shares of common stock were available for future issuance under this plan.
 

F-28
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


We maintain anterminated our employee stock purchase plan (“ESPP”) on February 26, 2015. The ESPP plan was available for all eligible employees to purchase shares of common stock at 95% of the fair market value on the date of purchase. Employees maycould authorize us to withhold up to 15% of their base compensation during any offering period, subject to certain limitations. A maximum of 200,000 shares of common stock may be issued under the plan. As of September 29, 2013, 111,701 shares of common stock were available for future issuance under this plan.
Compensation expense — The components of share-based compensation expense recognized in each year are as follows (in thousands):
 2013 2012 2011 2016 2015 2014
Nonvested stock units $5,520
 $4,989
 $3,247
Performance share awards 3,068
 4,229
 3,923
Stock options $5,075
 $3,549
 $5,118
 2,509
 2,782
 2,660
Performance share awards 2,311
 897
 443
Nonvested stock awards 430
 408
 602
Nonvested stock units 3,356
 1,874
 1,727
Nonvested restricted stock awards 88
 156
 310
Deferred compensation for directors 220
 155
 172
 270
 264
 218
Total share-based compensation expense $11,392
 $6,883
 $8,062
 $11,455
 $12,420
 $10,358
Associated tax benefits $2,094
 $1,115
 $1,290
Stock optionsNonvested restricted stock units —Nonvested restricted stock units (“RSUs”) are generally issued to executives, non-management directors and certain other members of management and employees. Prior to fiscal 20072011, optionsRSUs were granted had contractual termsto certain Executive and Senior Vice Presidents pursuant to our share ownership guidelines. These awards vest upon retirement or termination based on years of service. As of October 2, 2016, 60,272 of such RSUs were outstanding.10 or 11
Beginning fiscal 2011, we replaced the ownership share grants with time-vested RSUs for certain Vice Presidents and Officers that vest ratably over four to five years and employee options generally vested overhave a 4-year period. Beginning fiscal 2007, option grants have contractual terms50% or 100% holding requirement on settled shares, which must be held until termination. As of 7 years and employee options vest over a 3-year period. Options may vest sooner for employees meeting certain age and yearsOctober 2, 2016, 146,063 of service thresholds. Prior to 2009, we granted optionssuch RSUs were outstanding. RSUs issued to non-management directors that vested 6vest 12 months from the date of grant. All option grants provide for an option exercise price equalgrant, or upon termination of board service if the director elects to defer receipt, and totaled 48,456 units outstanding as of October 2, 2016. RSUs issued to certain other employees either cliff vest or vest ratably over three years and totaled 74,114 units outstanding as of October 2, 2016. These awards are amortized to compensation expense over the closing marketestimated vesting period based upon the fair value of theour common stock on the award date discounted by the present value of grant.the expected dividend stream over the vesting period.
The following is a summary of stock optionRSU activity for fiscal 20132016:
  Shares 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
(in thousands)
Options outstanding at September 30, 2012 4,648,587
 $22.95    
Granted 376,793
 $27.49    
Exercised (2,584,413) $23.99    
Forfeited (28,701) $22.20    
Expired (7,410) $12.50    
Options outstanding at September 29, 2013 2,404,856
 $22.59 3.67 $42,111
Options exercisable at September 29, 2013 1,588,209
 $22.45 2.76 $28,027
Options exercisable and expected to vest at September 29, 2013 2,394,255
 $22.58 3.66 $41,953
  Shares 
Weighted-
Average Grant
Date Fair
Value
RSUs outstanding at September 27, 2015 332,973
 $44.34
Granted 140,794
 $72.06
Released (105,254) $42.65
Forfeited (39,608) $64.30
RSUs outstanding at October 2, 2016 328,905
 $54.05
The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on September 29, 2013 exceeds the exercise price.

We use a valuation model to determine the fair value of options granted which requires the input of highly subjective assumptions, including the expected volatility of the stock price. The following table presents the weighted-average assumptions used for stock option grants in each year, along with the related weighted-average grant date fair value:
  2013 2012 2011
Risk-free interest rate 1.09% 1.98% 1.19%
Expected dividends yield —% —% —%
Expected stock price volatility 42.24% 39.84% 43.17%
Expected life of options (in years) 6.50
 6.64
 6.05
Weighted-average grant date fair value $11.84
 $7.37
 $8.25
The risk-free interest rate was determined by a yield curve of risk-free rates based on published U.S. Treasury spot rates in effect at the time of grant and has a term equal to the expected life of the related options. The dividend yield assumption is based on the Company’s history and expectations of dividend payouts. The expected stock price volatility in all years represents an average of the implied volatility and the Company’s historical volatility. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends.

F-29
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


As of September 29, 2013,October 2, 2016, there was approximately $2.0$8.7 million of total unrecognized compensation cost net of estimated forfeitures, related to stock options grantsRSUs, which is expected to be recognized over a weighted-average period of 1.52.9 years. The total intrinsicweighted-average grant date fair value of stock options exercisedawards granted was $25.9$72.06, $75.07 and $49.79 in 2016, 2015 and 2014, respectively. In 2016, 2015 and 2014, the total fair value of RSUs that vested and were released was $4.5 million,, $6.0 $2.4 million and $4.2$3.5 million, in 2013, 2012 and 2011, respectively.
Performance share awards — Performance share awards, granted in the form of stock units, represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period. Performance share awards issued to executives vest at the end of a 3-yearthree-year period and vested amounts may range from 0% to as high as a maximum of 150% of targeted amounts depending on the achievement of performance measures at the end of a3-year period. Prior to 2012, we issued performance share awards to other members of management that vest at the end of a 3-year period with vested amounts ranging from 0% to 100% depending on the achievement of performance measures at the end of the first year of the three-year period. The expected cost of the shares is based on the fair value of our stock on the date of grant and is reflected over the vesting period with a reduction for estimated forfeitures. These awards may be settled in cash or shares of common stock at the election of the Company on the date of grant. It is our intent to settle these awards with shares of common stock.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following is a summary of performance share award activity for fiscal 20132016:
  Shares 
Weighted-
Average Grant
Date Fair
Value
Performance share awards outstanding at September 30, 2012 374,059
 $19.79
Granted 89,236
 $27.49
Issued (31,209) $19.27
Forfeited (32,745) $21.36
Canceled (74,116) $20.00
Performance share awards outstanding at September 29, 2013 325,225
 $21.73
Vested and subject to release at September 29, 2013 48,569
 $21.45
  Shares 
Weighted-
Average Grant
Date Fair
Value
Performance share awards outstanding at September 27, 2015 162,914
 $59.37
Granted 20,685
 $75.25
Issued (63,708) $49.44
Forfeited (11,632) $69.16
Performance adjustments 9,360
 $62.87
Performance share awards outstanding at October 2, 2016 117,619
 $62.13

As of September 29, 2013,October 2, 2016, there was approximately $5.1$1.7 million of total unrecognized compensation cost related to performance-vested stockperformance share awards which is expected to be recognized over a weighted-average period of 1.5 years. The weighted-average grant date fair value of awards granted was $27.49, $19.62,$75.25, $73.53 and $21.74$47.29 in 2013, 20122016, 2015 and 2011,2014, respectively. The total fair value of awards that became fully vested during 2016, 2015 and 2014 was $3.5 million, $3.5 million and $3.6 million, respectively.
Stock options—2013 Prior to fiscal 2007, options granted had contractual terms of 10 or 11 years and employee options generally vested over a four-year period. Beginning fiscal 2007, option grants have contractual terms of seven years and employee options vest over a three-year period. Options may vest sooner for employees meeting certain age and years of service thresholds. All option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant.
The following is a summary of stock option activity for fiscal 2016:
  Shares 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
(in thousands)
Options outstanding at September 27, 2015 594,348
 $42.72
    
Granted 99,923
 $75.24
    
Exercised (333,406) $31.68
    
Forfeited (22,408) $64.96
    
Options outstanding at October 2, 2016 338,457
 $61.73
 5.23 $11,579
Options exercisable at October 2, 2016 113,880
 $50.25
 4.20 $5,203
Options exercisable and expected to vest at October 2, 2016 338,457
 $61.73
 5.23 $11,579
The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on October 2, 2016 exceeds the weighted average exercise price.

We use a valuation model to determine the fair value of options granted which requires the input of highly subjective assumptions, including the expected volatility of the stock price. The following table presents the weighted-average assumptions used for stock option grants in each fiscal year, along with the related weighted-average grant date fair value:
  2016 2015 2014
Risk-free interest rate 1.66% 1.78% 2.05%
Expected dividends yield 1.59% 1.09% —%
Expected stock price volatility 26.68% 32.09% 39.18%
Expected life of options (in years) 4.90
 6.00
 6.50
Weighted-average grant date fair value $16.21
 $22.04
 $20.04
The risk-free interest rate was determined by a yield curve of risk-free rates based on published U.S. Treasury spot rates in effect at the time of grant and has a term equal to the expected life of the related options. The dividend yield assumption is based on the Company’s history and expectations of dividend payouts at the grant date. We declared our first dividend on May 9, 2014. The expected stock price volatility in all years represents the Company’s historical volatility. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


As of October 2, 2016, 2012there was approximately $1.8 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock options grants which is expected to be recognized over a weighted-average period of 1.3 years. The total intrinsic value of stock options exercised was $18.6 million, $41.8 million and 2011 was $1.0$42.4 million, $0.5 million in 2016, 2015 and $0.6 million,2014, respectively.
Nonvested stock awards — We previously issued nonvested stock awards (“RSAs”) to certain executives under our share ownership guidelines. Effective fiscal 2009,, we no longer issue RSA awards and have replaced them with grants of nonvested restricted stock units.RSUs. The RSAs vest, subject to the discretion of our Board of Directors in certain circumstances, upon retirement or termination based upon years of service. These awards are amortized to compensation expense over the estimated vesting period based upon the fair value of our common stock on the award date.
The following is a summary of RSA activity for fiscal 2013:
  Shares 
Weighted-
Average Grant
Date Fair
Value
Nonvested stock awards outstanding at September 30, 2012 394,117
 $14.81
Released (56,681) $9.94
Forfeited (21,621) $26.67
Nonvested stock awards outstanding at September 29, 2013 315,815
 $14.87
Vested 204,505
 $13.00
As of October 2, 2016, RSAs outstanding totaled 95,815 shares with a weighted average grant date fair value of $20.56 per share.September 29, 2013,
In fiscal 2016, there was no activity related to RSAs. As of October 2, 2016, there was approximately $0.7$0.1 million of total unrecognized compensation cost related to RSAs, which is expected to be recognized over a weighted-average period of 2.81.5 years. In 2013, 2012 and 2011, the total fair value of RSAs that vested in each year was $1.2 million, $0.3 million and $0.2 million, respectively.
Nonvested stock units— In February 2009, the Board of Directors approved the issuance of a new type of stock award, nonvested restricted stock units (“RSUs”). RSUs are generally issued to executives, non-management directors and certain other members of management and employees. Prior to fiscal 2011, RSUs were granted to certain Executive and Senior Vice Presidents pursuant to our share ownership guidelines. These awards vest upon retirement or termination based on years of service. As of September 29, 2013, 60,272 such RSUs were outstanding.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Beginning fiscal 2011, we replaced the ownership share grants with time-vested RSUs for all Vice Presidents and Officers that vest ratably over 5 years and have a 50% or 100% holding requirement on settled shares, which must be held until termination. As of September 29, 2013, 207,240 such RSUs were outstanding. RSUs issued to non-management directors vest 12 months from the date of grant or upon termination of board service and totaled 51,649 units as of September 29, 2013. RSUs issued to certain other employees either cliff vest or vest over 3 years and totaled 64,460 units as of September 29, 2013. These awards are amortized to compensation expense over the estimated vesting period based upon the fair value of our common stock on the award date.
The following is a summary of RSU activity for fiscal 2013:
  Shares 
Weighted-
Average Grant
Date Fair
Value
Nonvested stock units outstanding at September 30, 2012 290,616
 $21.25
Granted 151,716
 $28.95
Released (41,418) $21.51
Canceled (17,293) $23.22
Nonvested stock units outstanding at September 29, 2013 383,621
 $24.17
As of September 29, 2013, there was approximately $4.6 million of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 3.0 years. The weighted-average grant date fair value of awards granted was $28.95, $22.26 and $20.02 in 2013, 2012 and 2011, respectively. In 2013, 2012 and 2011, the total fair value of RSUs that vested and were released was $0.9 million, $1.8 million and $0.9 million, respectively.
Non-management directors’ deferred compensation — All awards outstanding under our directors’ deferred compensation plan are accounted for as equity-based awards and deferred amounts are converted into stock equivalents at the then-current market price of our common stock. During fiscal 2013, 20122016 and 2011, 44,714, 44,713 and 20,2592015 no common stock was issued in connection with director retirements. In 2014, 10,616 shares of common stock were issued in connection with director retirements havinga director’s retirement with a fair value of $1.4 million, $1.0 million and $0.5 million, respectively.$0.6 million.
The following is a summary of the stock equivalent activity for fiscal 20132016:
  
Stock
Equivalents
 
Weighted-
Average Grant
Date Fair
Value
Stock equivalents outstanding at September 30, 2012 119,343
 $16.21
Deferred directors’ compensation 7,083
 $31.06
Stock distribution (44,714) $11.02
Stock equivalents outstanding at September 29, 2013 81,712
 $20.34
  
Stock
Equivalents
 
Weighted-
Average Grant
Date Fair
Value
Stock equivalents outstanding at September 27, 2015 79,158
 $26.64
Deferred directors’ compensation 3,924
 $68.81
Dividend equivalents 1,282
 $80.57
Stock equivalents outstanding at October 2, 2016 84,364
 $29.43
Employee stock purchase plan — The ESPP plan was terminated during fiscal 2015. The following is a summary of shares issued pursuant to our ESPP in each year:fiscal 2015 and 2014:
 2013 2012 2011 2015 2014
Common stock issued 7,144
 11,087
 13,140
 1,371
 4,055
Fair value of common stock issued $29.71
 $21.65
 $19.99
 $70.78
 $49.25

13.     STOCKHOLDERS’ EQUITY
Repurchases of common stock —  In November 2011,February and May 2016, the Board of Directors (“Board”) approved a program, expiring November 2013 to repurchase up to $100.0 million in shares of our common stock. This authorization was fully utilized in fiscal 2013. In November 2012 and August 2013, the Board approved two newstock buyback programs each of which provideprovided repurchase authorizations for up to an additional $100.0$100.0 million each, in shares of our common stock, expiring November 2014 and2017. In September 2016, the Board of Directors approved an additional stock buyback program for up to $300.0 million in shares of our common stock, expiring in November 2015, respectively.2018. During fiscal 2013,2016, we repurchased 4.03.9 million shares at an aggregate cost of $140.1$291.9 million. As of September 29, 2013,October 2, 2016, there was $136.8approximately $408.2 million remaining under the stock buyback programs, of which $108.2 million expires in November 20122017 and August 2013 authorizations.$300.0 million expires in November 2018.
Dividends — In fiscal 2016, the Board of Directors declared four cash dividends of $0.30 per share totaling $40.5 million. Future dividends are subject to approval by our Board of Directors.

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


equivalents and shares issuable under our ESPP. Performance-vested stock equivalents. Performance share awards are included in the average diluted shares outstanding each period if the performance criteria have been met at the end of the respective periods.
The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):
 2013 2012 2011 2016 2015 2014
Weighted-average shares outstanding — basic 43,351
 43,999
 49,302
 33,735
 37,587
 40,781
Effect of potentially dilutive securities:            
Stock options 957
 462
 422
 150
 274
 641
Nonvested stock awards and units 371
 270
 225
 188
 199
 281
Performance-vested stock awards 220
 217
 136
Performance share awards 73
 155
 270
Weighted-average shares outstanding — diluted 44,899
 44,948
 50,085
 34,146
 38,215
 41,973
Excluded from diluted weighted-average shares outstanding:            
Antidilutive 145
 2,753
 3,157
 147
 84
 153
Performance conditions not satisfied at the end of the period 209
 358
 328
 38
 15
 20

15.     VARIABLE INTEREST ENTITIES
In January 2012, 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 (“FFE Facility”) entered into with a third party. The lending period and the revolving period expired in June 2012. At September 29, 2013 and September 30, 2012, we had no borrowings under the FFE Facility and do not plan to make any further contributions.
We determined that FFE is a VIE and that the Company is its 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 determined that the Company is the primary beneficiary and the entity is reflected in the accompanying consolidated financial statements.
FFE’s assets consolidated by the Company represent assets that can be used only to settle obligations of the consolidated VIE. Likewise, FFE’s liabilities consolidated by the Company do not represent additional claims on the Company’s general assets; rather they represent claims against the specific assets of FFE. The impact of FFE’s results were not material to the Company’s consolidated statement of earnings or cash flows. The FFE’s balance sheet consisted of the following at September 29, 2013 and September 30, 2012 (in thousands):
 2013 2012
Cash$250
 $444
Other current assets (1)2,368
 2,536
Other assets, net (1)8,367
 11,051
Total assets$10,985
 $14,031
    
Current liabilities (2)$3,010
 $14
Other long-term liabilities (2)8,076
 14,428
Retained earnings(101) (411)
Total liabilities and stockholders’ equity$10,985
 $14,031
  ____________________________
(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.
The Company’s maximum exposure to loss is equal to its outstanding contributions as of September 29, 2013. This amount represents estimated losses that would be incurred should all franchisees default on their loans without any consideration of recovery. To offset the credit risk associated with the Company’s variable interest in FFE, the Company holds a security interest in the assets of FFE subordinate and junior to all other obligations of FFE.


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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


16.     COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS
Commitments — As of September 29, 2013October 2, 2016, we had unconditional purchase obligations during the next five fiscal years as follows (in thousands):
Fiscal Year Purchase Obligations
2014 $662,729
2015 298,207
2016 171,871
2017 142,830
2018 79,507
Total $1,355,144
2017 $993,500
2018 554,900
2019 455,200
2020 369,600
2021 358,900
Total $2,732,100
These obligations primarily represent amounts payable under purchase contracts for goods related to system-wide restaurant operations.
Legal matters — The Company assesses contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matter.  In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability.liability or financial exposure. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures. The ultimate amount of loss may differ from these estimates. 

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 (“FLSA”) and Oregon wage and hour laws. The plaintiffs allegealleged that the Company failed to pay non-exempt employees for certain mealstate-mandated breaks and improperly recordedmade payroll deductions for shoe purchases and for workers’ compensation expenses.expenses, and later added additional claims relating to timing of final pay and related wage and hour claims involving employees of a franchisee. The most recent complaint seeks damages of $45.0 million but does not provide a basis for that amount. In April 2013, the district court: (i) granted certification of the Oregon state law claims with respect to payroll deductions for shoe purchases and workers’ compensation expenses, (ii) granted conditional certification for these same claims under the FLSA, and (iii) denied certification for meal break claims under both federal and Oregon law.  We intend to vigorously defend against this lawsuit.  We have made an accrualfiscal 2012, we accrued for a single claim for which we believe a loss is both probable and estimable.  Thisestimable; this accrued loss contingency did not have a material effect on our results of operations. Due to the procedural status of the other claims in this case, weWe have not established a loss contingency accrual for thesethose claims as theto which we believe liability with respect to these claims is not probable or estimable, and we are currently unableplan to estimate a range of loss.vigorously defend against this lawsuit. Nonetheless, an unfavorable resolution of this matter in excess of our current accrued loss contingencies could have a material adverse effect on our business, results of operations, liquidity or financial condition.
Lease guarantees —In connection with the sale of the distribution business, we have assigned the leases at two of our distribution centers to third parties. Under these agreements, which expire in 2015 and 2017, the Company remains secondarily liable for the lease payments for which we were responsible under the original lease. As of September 29, 2013, the amount remaining under these lease guarantees totaled $2.9 million. We have not recorded a liability for the guarantees as the likelihood of the third party defaulting on the assignment agreements was deemed to be less than probable.
Other legal matters — In addition to the matter described above, the Company is subject to normal and routine litigation brought by former, current or prospective 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 partly,in part, by insurance. Although the CompanyOur insurance liability (undiscounted) and reserves are established in part by using independent actuarial estimates of expected losses for reported claims and expected losses for claims incurred but not reported. Our estimated liability for general liability and workers’ compensation claims, which exceeded our self-insurance retention limits by $25.8 million as of September 27, 2015, was reduced by $21.7 million in 2016 due to a judgment paid by our insurance providers. We currently believesexpect to be fully covered by our insurance providers for any amounts that may exceed our self-insurance retention limits. We believe that the ultimate determination of liability in connection with legal claims pending against it,us, if any, in excess of amounts already provided for thesesuch matters in the consolidated financial statements, will not have a material adverse effect on our business, the Company’sour annual results of operations, liquidity or financial position,position; however, it is possible that our business, results of operations, liquidity, or financial positioncondition could be materially affected in ana particular future reporting period by the unfavorable resolution of one or more of these matters or contingencies during such period.
17.     SEGMENT REPORTING
ReflectingLease guarantees —In connection with the information currently being usedsale of the distribution business, we have assigned the lease at one of our distribution centers to a third party. Under this agreement, which expires in managing2017, the Company remains secondarily liable for the lease payments for which we were responsible under the original lease. As of October 2, 2016, the amount remaining under this lease guarantee totaled $0.7 million. We have not recorded a liability for this guarantee as a two-branded restaurant operations business, our segments comprise results relatedthe likelihood of the third party defaulting on the assignment agreements was deemed to system restaurant operations for our Jack in the Box and Qdoba brands. This segment reportingbe less than probable.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


16.     SEGMENT REPORTING
Our principal business consists of developing, operating and franchising our Jack in the Box and Qdoba restaurant concepts, each of which we consider reportable operating segments. This segment reporting structure reflects the Company’s current management structure, internal reporting method and financial information used in deciding how to allocate Companythe Company’s resources. Based upon certain quantitative thresholds, botheach operating segments aresegment is considered a reportable segments.segment.
We measure and evaluate our segments based on segment revenues and earnings from operations. Summarized financial information concerning ourThe reportable segments is showndo not include an allocation of the costs related to shared service functions, such as accounting/finance, human resources, audit services, legal, tax and treasury; nor do they include unallocated costs such as pension expense, share-based compensation and restructuring expense. These costs are reflected in the caption “Shared services and unallocated costs.” The following table provides information related to our operating segments in each fiscal year (in thousands):
  2013 2012 2011
Revenues by Segment:      
Jack in the Box restaurant operations segment $1,179,295
 $1,252,028
 $1,445,105
Qdoba restaurant operations segment 310,572
 257,267
 187,720
Consolidated revenues $1,489,867
 $1,509,295
 $1,632,825
Earnings from Operations by Segment:      
Jack in the Box restaurant operations segment $113,864
 $96,302
 $133,898
Qdoba restaurant operations segment 24,470
 24,717
 17,545
FFE operations (129) (203) (245)
Consolidated earnings from operations $138,205
 $120,816
 $151,198
Total Expenditures for Long-Lived Assets by Segment (Including Discontinued Operations):      
Jack in the Box restaurant operations segment $55,221
 $56,378
 $100,142
Qdoba restaurant operations segment 29,469
 23,621
 24,236
Distribution operations —
 201
 4,934
Consolidated expenditures for long-lived assets $84,690
 $80,200
 $129,312
Total Depreciation Expense by Segment:      
Jack in the Box restaurant operations segment $76,191
 $79,287
 $81,826
Qdoba restaurant operations segment 15,815
 13,309
 10,015
Consolidated depreciation expense $92,006
 $92,596
 $91,841
 2016 2015 2014
Revenues by segment:     
Jack in the Box restaurant operations$1,162,258
 $1,145,176
 $1,127,243
Qdoba restaurant operations437,073
 395,141
 356,888
Consolidated revenues$1,599,331
 $1,540,317
 $1,484,131
Earnings from operations by segment:     
Jack in the Box restaurant operations$290,346
 $265,230
 $235,574
Qdoba restaurant operations47,250
 47,264
 34,287
Shared services and unallocated costs(108,911) (112,182) (104,005)
Gains (losses) on the sale of company-operated restaurants1,230
 (3,139) (3,548)
Consolidated earnings from operations229,915
 197,173
 162,308
Interest expense, net31,081
 18,803
 15,678
Consolidated earnings from continuing operations and before income taxes$198,834
 $178,370
 $146,630
Total expenditures for long-lived assets by segment (including discontinued operations):     
Jack in the Box restaurant operations$38,607
 $41,928
 $30,858
Qdoba restaurant operations53,316
 34,071
 17,967
Shared services and unallocated costs4,692
 10,227
 11,700
Consolidated expenditures for long-lived assets$96,615
 $86,226
 $60,525
Total depreciation expense by segment:     
Jack in the Box restaurant operations$66,287
 $64,597
 $66,409
Qdoba restaurant operations19,306
 17,103
 16,992
Shared services and unallocated costs6,489
 7,078
 7,254
Consolidated depreciation expense$92,082
 $88,778
 $90,655
InterestWe do not evaluate, manage or measure performance of segments using asset, interest income and expense, or income taxes and total assets aretax information; accordingly, this information by segment is not reported for our segments, in accordance with our method of internal reporting.prepared or disclosed.
    
18.17.     SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION
Additional information related to cash flows is as follows (in thousands):
 2013 2012 2011 2016 2015 2014
Cash paid during the year for:            
Interest, net of amounts capitalized $12,824
 $19,471
 $14,801
 $28,576
 $16,233
 $13,754
Income tax payments $43,365
 $35,751
 $47,541
 $33,454
 $28,764
 $29,145
Non cash transactions:            
Stock repurchase accrual at fiscal year end $7,288
 $—
 $—
Equipment capital lease obligations incurred $1,085
 $16,770
 $—
Increase (decrease) in accrued stock repurchases $7,208
 $(3,112) $(4,176)
Increase in dividends accrued or converted to common stock equivalents $176
 $174
 $68
(Decrease) increase in obligations for purchases of property and equipment $(3,122) $5,388
 $(1,187)

 

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


19.18.     SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION (in thousands)
 September 29,
2013		 September 30,
2012		 October 2,
2016		 September 27,
2015
Accounts and other receivables, net:        
Trade $31,301
 $67,478
 $66,837
 $36,990
Notes receivable 2,877
 5,324
 1,603
 1,726
Other 8,244
 7,708
 7,680
 10,814
Allowances for doubtful accounts (673) (1,712)
Allowance for doubtful accounts (2,760) (1,555)
 $73,360
 $47,975
Prepaid expenses:    
Prepaid rent $18,613
 $318
Prepaid income taxes 12,113
 7,645
Other 9,672
 8,277
 $41,749
 $78,798
 $40,398
 $16,240
Other assets, net:        
Company-owned life insurance policies $94,704
 $86,276
 $105,957
 $99,513
Deferred tax assets 117,587
 118,186
Deferred rent receivable 36,732
 30,846
 47,485
 45,330
Deferred tax asset 88,833
 115,537
Other 45,491
 21,265
 23,219
 40,939
 $265,760
 $253,924
 $294,248
 $303,968
Accrued liabilities:        
Payroll and related taxes $46,970
 $58,503
 $44,627
 $56,223
Sales and property taxes 11,386
 13,055
Insurance 35,209
 33,391
 38,368
 35,370
Advertising 17,706
 21,400
 21,827
 20,692
Deferred rent income 15,909

1,806
Sales and property taxes 14,311
 11,574
Gift card liability 3,629
 3,247
 5,183
 4,608
Deferred franchise fees 1,537
 1,725
 929
 1,198
Lease commitments related to closed or refranchised locations 12,737
 5,387
Other 24,712
 27,929
 40,096
 39,104
 $153,886
 $164,637
 $181,250
 $170,575
Other long-term liabilities:        
Pension plans $105,968
 $213,854
Defined benefit pension plans $161,003
 $180,476
Straight-line rent accrual 50,726
 54,288
 47,070
 46,807
Deferred franchise fees 1,143
 1,977
Other 128,287
 101,083
 140,852
 142,775
 $286,124
 $371,202
 $348,925
 $370,058
Notes receivable consist primarily of temporary financing provided to franchisees to facilitate the closing of certain refranchising transactions.

F-35

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



20.19.    UNAUDITED QUARTERLY RESULTS OF OPERATIONS (in thousands, except per share data)
 
16 Weeks
Ended
 12 Weeks Ended 
16 Weeks
Ended
 12 Weeks Ended 13 Weeks Ended
Fiscal Year 2013 January 20,
2013		 April 14,
2013		 July 7,
2013		 September 29,
2013
Revenues $454,335
 $347,222
 $350,329
 $337,981
Earnings from operations $43,175
 $27,447
 $30,884
 $36,699
Net earnings (losses) $20,689
 $13,291
 $(5,656) $22,828
Net earnings (losses) per share:        
Basic $0.48
 $0.30
 $(0.13) $0.53
Diluted $0.47
 $0.29
 $(0.12) $0.51
 16 Weeks
Ended		 12 Weeks Ended
Fiscal Year 2012 January 22,
2012		 April 15,
2012		 July 8,
2012		 September 30,
2012
Fiscal Year 2016 January 17,
2016		 April 10,
2016		 July 3,
2016		 October 2,
2016
Revenues $448,090
 $358,256
 $354,052
 $348,897
 $470,823
 $361,151
 $368,938
 $398,419
Earnings from operations $26,803
 $39,173
 $23,728
 $31,112
 $62,514
 $52,786
 $55,705
 $58,910
Net earnings $11,950
 $21,632
 $11,592
 $12,477
 $33,221
 $28,682
 $30,189
 $31,981
Net earnings per share:                
Basic $0.27
 $0.49
 $0.26
 $0.28
 $0.94
 $0.85
 $0.92
 $0.98
Diluted $0.27
 $0.48
 $0.26
 $0.27
 $0.92
 $0.84
 $0.91
 $0.97
 16 Weeks
Ended		 12 Weeks Ended
Fiscal Year 2015 January 18,
2015		 April 12,
2015		 July 5,
2015		 September 27,
2015
Revenues $468,621
 $358,122
 $359,506
 $354,068
Earnings from operations $63,236
 $41,868
 $50,395
 $41,674
Net earnings $35,835
 $23,005
 $26,831
 $23,141
Net earnings per share:        
Basic $0.93
 $0.61
 $0.72
 $0.64
Diluted $0.91
 $0.60
 $0.71
 $0.63

20.     SUBSEQUENT EVENTS

The amounts reported in prior quarters have been adjusted inDeclaration of dividend— On November 17, 2016, the table aboveBoard of Directors declared a cash dividend of $0.40 per share, to conformbe paid on December 16, 2016 to shareholders of record as of the fiscal 2013 third quarter discontinued operations presentation relatedclose of business on December 5, 2016. Future dividends will be subject to the 2013 Qdoba Closures. Refer to Note 2, Discontinued Operations, for additional information.approval by our Board of Directors.



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F-37