UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ____________________________________________________
FORM 10-Q
 ___________________________________________________________________________________________________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 8, 20127, 2013
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
   ___________________________________________________________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  þ    No   ¨
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 filerþAccelerated filer¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
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
As of the close of business August 3, 20122, 2013, 44,579,11543,301,720 shares of the registrant’s common stock were outstanding.



JACK IN THE BOX INC. AND SUBSIDIARIES
INDEX
 
  Page
 PART I – FINANCIAL INFORMATION 
Item 1. 
 
Condensed Consolidated Statements of Operations
 
 
 
Item 2.
Item 3.
Item 4.
 PART II – OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 4.
Item 5.
Item 6.
 

21


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

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
 July 7,
2013
 September 30,
2012
ASSETS   
Current assets:   
Cash and cash equivalents$9,783
 $8,469
Accounts and other receivables, net41,972
 78,798
Inventories8,203
 7,752
Prepaid expenses56,816
 32,821
Deferred income taxes26,931
 26,932
Assets held for sale31,253
 45,443
Assets of discontinued operations held for sale
 30,591
Other current assets471
 375
Total current assets175,429
 231,181
Property and equipment, at cost1,489,407
 1,529,650
Less accumulated depreciation and amortization(726,552) (708,858)
Property and equipment, net762,855
 820,792
Goodwill148,632
 140,622
Other assets, net273,502
 271,130
 $1,360,418
 $1,463,725
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Current maturities of long-term debt$20,931
 $15,952
Accounts payable26,594
 94,713
Accrued liabilities169,792
 164,637
Total current liabilities217,317
 275,302
Long-term debt, net of current maturities359,514
 405,276
Other long-term liabilities366,356
 371,202
Stockholders’ 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, 77,991,876 and 75,827,894 issued, respectively780
 758
Capital in excess of par value280,600
 221,100
Retained earnings1,148,995
 1,120,671
Accumulated other comprehensive loss(126,421) (136,013)
Treasury stock, at cost, 34,728,194 and 31,955,606 shares, respectively(886,723) (794,571)
Total stockholders’ equity417,231
 411,945
 $1,360,418
 $1,463,725
See accompanying notes to condensed consolidated financial statements.

2


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 July 8,
2012
 October 2,
2011
ASSETS   
Current assets:   
Cash and cash equivalents$10,815
 $11,424
Accounts and other receivables, net84,899
 86,213
Inventories36,997
 38,931
Prepaid expenses32,175
 18,737
Deferred income taxes44,166
 45,520
Assets held for sale and leaseback62,400
 51,793
Other current assets517
 1,793
Total current assets271,969
 254,411
Property and equipment, at cost1,532,655
 1,518,799
Less accumulated depreciation and amortization(707,105) (663,373)
Property and equipment, net825,550
 855,426
Goodwill140,470
 105,872
Other assets, net241,099
 216,613
 $1,479,088
 $1,432,322
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Current maturities of long-term debt$21,400
 $21,148
Accounts payable67,541
 94,348
Accrued liabilities176,766
 167,487
Total current liabilities265,707
 282,983
Long-term debt, net of current maturities430,441
 447,350
Other long-term liabilities340,376
 290,723
Deferred income taxes5,310
 5,310
Stockholders’ 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, 75,600,656 and 74,992,487 issued, respectively756
 750
Capital in excess of par value215,539
 202,684
Retained earnings1,108,194
 1,063,020
Accumulated other comprehensive loss, net(115,776) (95,940)
Treasury stock, at cost, 31,072,631 and 30,746,099 shares, respectively(771,459) (764,558)
Total stockholders’ equity437,254
 405,956
 $1,479,088
 $1,432,322
 Quarter Year-to-Date
 July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Revenues:       
Company restaurant sales$270,863
 $276,447
 $888,565
 $913,292
Franchise revenues79,466
 77,605
 263,321
 247,105
 350,329
 354,052
 1,151,886
 1,160,397
Operating costs and expenses, net:       
Company restaurant costs:       
Food and packaging88,712
 89,456
 289,259
 301,067
Payroll and employee benefits74,242
 78,055
 250,006
 262,670
Occupancy and other59,360
 60,691
 195,372
 203,679
Total company restaurant costs222,314
 228,202
 734,637
 767,416
Franchise costs40,116
 38,604
 132,265
 126,459
Selling, general and administrative expenses52,078
 52,090
 171,246
 171,195
Impairment and other charges, net3,428
 15,161
 9,053
 24,556
Losses (gains) on the sale of company-operated restaurants1,509
 (3,733) 3,179
 (18,933)
 319,445
 330,324
 1,050,380
 1,070,693
Earnings from operations30,884
 23,728
 101,506
 89,704
Interest expense, net3,270
 4,371
 12,061
 14,962
Earnings from continuing operations and before income taxes27,614
 19,357
 89,445
 74,742
Income taxes10,318
 6,753
 30,954
 25,854
Earnings from continuing operations17,296
 12,604
 58,491
 48,888
Losses from discontinued operations, net of income tax benefit(22,952) (1,012) (30,167) (3,714)
Net earnings (losses)$(5,656) $11,592
 $28,324
 $45,174
        
Net earnings (losses) per share - basic:       
Earnings from continuing operations$0.40
 $0.29
 $1.35
 $1.11
Losses from discontinued operations(0.52) (0.02) (0.69) (0.08)
Net earnings (losses) per share (1)$(0.13) $0.26
 $0.65
 $1.03
Net earnings (losses) per share - diluted:       
Earnings from continuing operations$0.38
 $0.28
 $1.30
 $1.09
Losses from discontinued operations(0.51) (0.02) (0.67) (0.08)
Net earnings (losses) per share (1)$(0.12) $0.26
 $0.63
 $1.01
        
Weighted-average shares outstanding:       
Basic43,772
 44,156
 43,435
 43,975
Diluted45,247
 45,153
 44,978
 44,892
____________________________
(1)Earnings per share may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

3


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSCOMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)Dollars in thousands)
(Unaudited)
 Quarter Year-to-Date
 July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
Revenues:       
Company restaurant sales$285,376
 $326,033
 $940,281
 $1,084,182
Distribution sales138,839
 125,704
 473,779
 393,753
Franchise revenues77,605
 67,542
 247,105
 211,194
 501,820
 519,279
 1,661,165
 1,689,129
Operating costs and expenses, net:       
Company restaurant costs:       
Food and packaging92,155
 110,596
 309,172
 359,725
Payroll and employee benefits81,806
 96,723
 274,875
 329,235
Occupancy and other64,316
 78,100
 214,751
 259,896
Total company restaurant costs238,277
 285,419
 798,798
 948,856
Distribution costs138,839
 126,063
 473,779
 395,242
Franchise costs38,604
 31,589
 126,459
 101,268
Selling, general and administrative expenses52,566
 51,344
 172,780
 170,854
Impairment and other charges, net15,181
 2,101
 24,606
 10,191
Gains on the sale of company-operated restaurants(3,733) (10,190) (18,933) (38,940)
 479,734
 486,326
 1,577,489
 1,587,471
Earnings from operations22,086
 32,953
 83,676
 101,658
Interest expense, net4,371
 4,016
 14,962
 12,573
Earnings before income taxes17,715
 28,937
 68,714
 89,085
Income taxes6,123
 10,192
 23,540
 31,138
Net earnings$11,592
 $18,745
 $45,174
 $57,947
Net earnings per share:       
Basic$0.26
 $0.39
 $1.03
 $1.15
Diluted$0.26
 $0.38
 $1.01
 $1.13
Weighted-average shares outstanding:       
Basic44,156
 48,498
 43,975
 50,435
Diluted45,153
 49,252
 44,892
 51,225
 Quarter Year-to-Date
 July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
        
Net earnings (losses)$(5,656) $11,592
 $28,324
 $45,174
Other comprehensive income (loss):       
Foreign currency translation adjustments, net of tax expense of $2, $0, $3 and $0, respectively.5
 
 9
 
Actuarial losses and prior service cost reclassified to earnings, net of tax benefit of $1,672, $1,188, $5,571 and $3,861, respectively2,689
 1,906
 8,963
 6,197
Actuarial losses arising during the period, net of tax benefit of $0, $16,266, $0, $16,266, respectively.
 (26,105) 
 (26,105)
Cash flow hedges:       
Change in fair value of derivatives, net of tax (expense)/benefit of ($23), $101, $12 and $338, respectively36
 (163) (19) (545)
Net loss reclassified to earnings, net of tax benefit of $120, $116, $398 and $384, respectively193
 188
 639
 617
Other comprehensive income (loss)2,923
 (24,174) 9,592
 (19,836)
        
Comprehensive income (loss)$(2,733) $(12,582) $37,916
 $25,338
See accompanying notes to condensed consolidated financial statements.


4


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Year-to-DateYear-to-Date
July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
Cash flows from operating activities:      
Net earnings$45,174
 $57,947
$28,324
 $45,174
Adjustments to reconcile net earnings to net cash provided by operating activities:      
Depreciation and amortization74,210
 74,342
74,870
 74,210
Deferred finance cost amortization2,068
 1,954
1,764
 2,068
Deferred income taxes(2,314) (7,771)2,523
 (2,314)
Share-based compensation expense5,001
 6,755
10,049
 5,001
Pension and postretirement expense26,853
 18,343
23,959
 26,853
Gains on cash surrender value of company-owned life insurance(8,781) (8,287)(5,209) (8,781)
Gains on the sale of company-operated restaurants(18,933) (38,940)
Gains on the acquisition of franchised-operated restaurants
 (426)
Losses on the disposition of property and equipment, net3,762
 6,084
Impairment charges2,765
 1,684
Losses (gains) on the sale of company-operated restaurants3,179
 (18,933)
Losses on the disposition of property and equipment2,525
 3,762
Impairment charges and other28,237
 2,765
Loss on early retirement of debt939
 
Changes in assets and liabilities, excluding acquisitions and dispositions:      
Accounts and other receivables(2,891) (14,198)33,776
 (2,891)
Inventories1,934
 (754)26,393
 1,934
Prepaid expenses and other current assets(12,346) 2,453
(24,091) (12,346)
Accounts payable(5,395) (3,071)(27,857) (5,395)
Accrued liabilities13,210
 4,950
7,196
 13,210
Pension and postretirement contributions(9,998) (3,522)(13,168) (9,998)
Other(2,737) (5,527)(6,121) (2,737)
Cash flows provided by operating activities111,582
 92,016
167,288
 111,582
Cash flows from investing activities:      
Purchases of property and equipment(56,205) (99,485)(57,971) (56,205)
Purchases of assets held for sale and leaseback(31,565) (17,442)
Proceeds from the sale of assets held for sale and leaseback18,457
 25,753
Purchases of assets intended for sale and leaseback(25,198) (31,565)
Proceeds from sale and leaseback of assets36,553
 18,457
Proceeds from the sale of company-operated restaurants29,253
 76,915
8,415
 29,253
Collections on notes receivable10,198
 20,014
5,837
 10,198
Disbursements for loans to franchisees(3,976) (7,582)
 (3,976)
Acquisitions of franchise-operated restaurants(48,262) (22,077)(11,014) (48,262)
Other315
 2,170
4,054
 315
Cash flows used in investing activities(81,785) (21,734)(39,324) (81,785)
Cash flows from financing activities:      
Borrowings on revolving credit facility444,380
 543,000
Repayments of borrowings on revolving credit facility(445,104) (453,000)
Borrowings on revolving credit facilities554,000
 444,380
Repayments of borrowings on revolving credit facilities(619,000) (445,104)
Proceeds from issuance of debt200,000
 
Principal repayments on debt(15,933) (8,549)(175,783) (15,933)
Debt issuance costs(741) (989)(4,392) (741)
Proceeds from issuance of common stock7,096
 4,260
48,000
 7,096
Repurchases of common stock(6,901) (138,050)(92,152) (6,901)
Excess tax benefits from share-based compensation arrangements525
 883
1,261
 525
Change in book overdraft(13,728) (16,418)(38,584) (13,728)
Cash flows used in financing activities(30,406) (68,863)(126,650) (30,406)
Net increase (decrease) in cash and cash equivalents(609) 1,419
1,314
 (609)
Cash and cash equivalents at beginning of period11,424
 10,607
8,469
 11,424
Cash and cash equivalents at end of period$10,815
 $12,026
$9,783
 $10,815

See accompanying notes to condensed consolidated financial statements.

5


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




1.BASIS OF PRESENTATION
Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® quick-service restaurants and Qdoba Mexican Grill® (“Qdoba”) fast-casual restaurants in 44 states.restaurants. The following table summarizes the number of restaurants as of the end of each period:
July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
Jack in the Box:      
Company-operated586
 735
526
 586
Franchise1,661
 1,485
1,729
 1,661
Total system2,247
 2,220
2,255
 2,247
Qdoba:      
Company-operated304
 229
284
 304
Franchise310
 335
308
 310
Total system614
 564
592
 614
References to the Company throughout these Notes to Condensed Consolidated Financial Statements are made using the first person notations of “we,” “us” and “our.”
Basis of presentation — The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“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 as part of a comprehensive market performance review of Qdoba. The results of operations for our distribution business and for the 62 closed Qdoba restaurants 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 Condensed Consolidated Financial Statements relate to our continuing operations. In our opinion, all adjustments considered necessary for a fair presentation of financial condition and results of operations for these interim periods have been included. Operating results for one interim period are not necessarily indicative of the results for any other interim period or for the full year.
These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended October 2, 2011September 30, 2012. The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our Form 10-K.
Principles of consolidation — The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the accounts of any variable interest entities (“VIEs”) where we are deemed the primary beneficiary. All significant intercompany accounts and transactions are eliminated. For information related to the variable interest entityVIE included in our condensed consolidated financial statements, refer to Note 11,13, Variable Interest Entities.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 20122013 and 20112012 include 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks. All comparisons between 20122013 and 20112012 refer to the 12-weeks (“quarter”) and 40-weeks (“year-to-date”) ended July 8, 20127, 2013 and July 10, 20118, 2012, respectively, unless otherwise indicated.
Use of estimates — In preparing the condensed consolidated financial statements in conformity with U.S. GAAP,generally accepted accounting principles, 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.


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 condensed 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, Presentation of Financial Statements, the results are reported as discontinued operations for all periods presented.

6

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



As of July 7, 2013, there were no assets or liabilities classified as held for sale related 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 period (in thousands):
 Quarter Year-to-Date

July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Revenue$
 $138,839
 $37,743
 $473,779
Operating loss before income tax benefit$(557) $
 $(6,030) $
The loss on the sale of the distribution business was not material to our results of operations. The operating loss year-to-date includes $1.9 million for accelerated depreciation of a long-lived asset disposed of upon completion of the transaction, $1.8 million for future lease commitments and $1.2 million primarily related to costs incurred to exit certain vendor contracts. Our liability for lease commitments related to our distribution centers is included in other long-term liabilities and has changed during 2013 as follows (in thousands):

Quarter Year-to-Date
Balance at beginning of period$2,116
 $697
Additions
 1,846
Adjustments29
 237
Cash payments(349) (984)
Balance at end of quarter$1,796
 $1,796
Qdoba restaurant closures — During the third quarter of fiscal 2013, we closed 62 Qdoba restaurants (the “2013 Qdoba Closures”). 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 proximity of the closed locations to those remaining in operation, we do not expect the majority of cash flows and sales lost from these closures to be recovered. In addition, there will not be any ongoing involvement or significant direct cash flows from the closed stores. Therefore, in accordance with the provisions of ASC 205, Presentation of Financial Statements, the results of operations for the 2013 Qdoba Closures are reported as discontinued operations for all periods presented.
The following is a summary of the unaudited quarterly results of operations for fiscal years 2013 and 2012 related to the 2013 Qdoba Closures (in thousands, except per share data):
 16 Weeks Ended 12 Weeks Ended
 January 20,
2013
 April 14,
2013
 July 7,
2013
Company restaurant sales$11,188
 $8,400
 $8,448
Operating loss before income tax benefit$(3,510) $(2,717) $(36,660)
Net losses$(2,165) $(1,675) $(22,608)
Net losses per share:     
Basic$(0.05) $(0.04) $(0.52)
Diluted$(0.05) $(0.04) $(0.50)

7

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



 16 Weeks Ended 12 Weeks Ended 52 Weeks Ended
 January 22,
2012
 April 15,
2012
 July 8,
2012
 September 30,
2012
 September 30,
2012
Company restaurant sales$9,831
 $8,228
 $8,930
 $8,743
 $35,732
Operating loss before income tax benefit$(2,547) $(1,838) $(1,643) $(2,299) $(8,327)
Net losses$(1,569) $(1,133) $(1,012) $(1,418) $(5,132)
Net losses per share:         
Basic$(0.04) $(0.03) $(0.02) $(0.03) $(0.12)
Diluted$(0.04) $(0.03) $(0.02) $(0.03) $(0.11)
In 2013, the operating loss recognized includes $22.7 million for asset impairments, $9.8 million for future lease commitments, net of reversals for deferred rent and tenant improvement allowances of $4.3 million, $1.6 million of other exits costs (primarily severance and inventory write-offs) and a $2.6 million net loss from operations in the quarter and $8.8 million year-to-date. We do not expect the remaining costs to be incurred related to this transaction to be material. Our liability for lease commitments related to the 2013 Qdoba closures is included in other long-term liabilities and has changed as follows during the quarter and year-to-date periods ended July 7, 2013 (in thousands):
Balance at beginning of period  $
Additions  14,072
Cash payments  (928)
Balance at end of quarter  $13,144

3.INDEBTEDNESS
New Credit Facility — On November 5, 2012, the Company refinanced its former credit facility and entered into an amended and restated credit agreement. The new credit facility is comprised of (i) a $400.0 million revolving credit facility and (ii) a $200.0 million term loan facility. The interest rate on the new credit facility is based on the Company’s leverage ratio and can range from London Interbank Offered Rate (“LIBOR”) plus 1.75% to 2.25% with no floor. The initial interest rate was LIBOR plus 2.00%. The revolving credit facility and the term loan facility both have maturity dates of November 5, 2017. As part of the credit agreement, we could also request the issuance of up to $75.0 million in letters of credit, the outstanding amount of which reduces our net borrowing capacity under the agreement.
Use of proceeds — The Company borrowed $200.0 million under the new term loan and approximately $220.0 million under the new 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 July 7, 2013, we had borrowings under the revolving credit facility of $185.0 million, $190.0 million outstanding under the term loan and letters of credit outstanding of $29.1 million.
Collateral — The Company’s obligations under the new 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 its subsidiaries, and any proceeds thereof, subject to certain restrictions. Additionally, there is a negative pledge on all tangible and intangible assets (including all real and personal property), with customary exceptions.
Covenants — We are subject to a number of customary covenants under our new 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 defined in the credit agreement.
Repayments — The term loan requires amortization in the form of quarterly installments of $5.0 million that began in March 2013. We are required to make certain mandatory prepayments under certain circumstances and we have the option to make certain prepayments without premium or penalty. The new credit facility includes events of default (and related remedies, including acceleration and increased interest rates following an event of default) that are customary for facilities and transactions of this type.

8

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



4.SUMMARY OF REFRANCHISINGS, FRANCHISE DEVELOPMENT AND ACQUISITIONS
Refranchisings and franchise development — The following is a summary of the number of Jack in the Box restaurants sold to franchisees, the number of restaurants developed by franchisees and the related gains (losses) and fees recognized (dollars in thousands):

6


Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Restaurants sold to franchisees18
 112
 55
 226
18
 18
 22
 55
New restaurants opened by franchisees7
 12
 36
 40
6
 7
 35
 36
              
Initial franchise fees$933
 $5,130
 $3,423
 $11,009
$1,005
 $933
 $2,040
 $3,423
              
Proceeds from the sale of company-operated restaurants (1)$7,289
 $27,327
 $29,253
 $76,915
$5,549
 $7,289
 $8,415
 $29,253
Net assets sold (primarily property and equipment)(2,586) (16,372) (8,419) (36,244)(3,554) (2,586) (5,274) (8,419)
Goodwill related to the sale of company-operated restaurants(199) (556) (851) (1,522)(129) (199) (196) (851)
Other(2)(771) (209) (1,050) (209)(2,292) (771) (2,292) (1,050)
Gains on the sale of company-operated restaurants$3,733
 $10,190
 $18,933
 $38,940
Gains (losses) on the sale of company-operated restaurants(426) 3,733
 653
 18,933
       
Loss on anticipated sale of Jack in the Box company-operated market
 
 (2,749) 
Loss on anticipated sale of Qdoba company-operated market(1,083) 
 (1,083) 
Total gains (losses) on the sale of company-operated restaurants$(1,509) $3,733
 $(3,179) $18,933
____________________________
(1)
Amounts in 2013 and 2012 include additional proceeds of $0.2 million in the quarter and $2.3 million year-to-date recognized upon the extension of the underlying franchise and lease agreements related to restaurants sold in a prior year.year of $0.8 million and $0.2 million, respectively, in the quarter and $1.9 million and $2.3 million, respectively, year-to-date.
(2)Amounts in both years primarily represent impairment and lease commitment charges related to restaurants closed in connection with the sale of the related market.
Franchise acquisitions — During fiscal 20122013 and 20112012, we acquired 12 and 45Qdoba franchise restaurants, respectively, in select markets where we believe there is continued opportunity for restaurant development. Additionally, in 2013 we exercised our right of first refusal and acquired one Jack in the Box franchise restaurant. 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.locations acquired and is expected to be deductible for tax purposes. The following table provides detail of the combined allocations in each year-to-date period (dollars in thousands):
Year-to-DateJuly 7, 2013 July 8, 2012
July 8,
2012
 July 10, 2011Qdoba Jack in the Box Total Qdoba
Restaurants acquired from franchisees45
 24
12
 1
 13
 45
       
Property and equipment$12,330
 $4,858
$2,632
 $145
 $2,777
 $12,330
Reacquired franchise rights604
 280
106
 34
 140
 604
Liabilities assumed(121) (74)(281) (2) (283) (121)
Goodwill35,449
 17,439
7,207
 1,173
 8,380
 35,449
Gain on the acquisition of franchise-operated restaurants
 (426)
Total consideration$48,262
 $22,077
$9,664
 $1,350
 $11,014
 $48,262


9

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



3.5.FAIR VALUE MEASUREMENTS
Financial assets and liabilities — The following table presents the financial assets and liabilities measured at fair value on a recurring basis at the end of each period (in thousands):
 Total       
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) (3)
 
Significant
Other
Observable
Inputs
(Level 2) (3)
 
Significant
Unobservable
Inputs
(Level 3)
Fair value measurements as of July 8, 2012:       
Interest rate swaps (Note 4) (1) $(2,564) $
 $(2,564) $
Non-qualified deferred compensation plans (2)(38,151) (38,151) 
 
Total liabilities at fair value$(40,715) $(38,151) $(2,564) $
Fair value measurements as of October 2, 2011:       
Interest rate swaps (Note 4) (1) $(2,682) $
 $(2,682) $
Non-qualified deferred compensation plan (2)(34,288) (34,288) 
 
Total liabilities at fair value$(36,970) $(34,288) $(2,682) $
 Total       
Quoted Prices
in Active
Markets for
Identical
Assets (3)
(Level 1)
 
Significant
Other
Observable
Inputs (3)
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Fair value measurements as of July 7, 2013:       
Non-qualified deferred compensation plan (1)$(37,997) $(37,997) $
 $
Interest rate swaps (Note 6) (2) (1,427) 
 (1,427) 
Total liabilities at fair value$(39,424) $(37,997) $(1,427) $
Fair value measurements as of September 30, 2012:       
Non-qualified deferred compensation plan (1)$(38,537) $(38,537) $
 $
Interest rate swaps (Note 6) (2) (2,433) 
 (2,433) 
Total liabilities at fair value$(40,970) $(38,537) $(2,433) $
 
____________________________
(1)We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable debt. The fair values of our interest

7


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, interest rates and forward yield curves.
(2)We maintain an unfunded defined contribution plan for key executives and other members of management excluded from participation in our qualified savings plan. 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 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, interest rates and forward yield curves.
(3)We did not have any transfers in or out of Level 1 or Level 2.
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 July 8, 20127, 2013, the carrying valuevalues of all financial instruments wasthe credit facility obligations were not materially different from fair value, as the interest rates on variable rate debt approximated rates currently available to the Company.borrowings are prepayable without penalty. The estimated fair values of our capital lease obligations approximated their carrying values as of July 8, 20127, 2013.
Non-financial assets and liabilities — The Company’s 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 periodic basis (at least annually for goodwill 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 of the assets are written down to fair value.
In connection with our propertyThe following table presents non-financial assets and equipment impairment reviewsliabilities measured at fair value on a non-reoccurring basis during the fiscal 2013 (40-weeksin thousands ended ):
   Fair Value Measurement Impairment Charges
Long-lived assets held and used $705
 $3,385
Long-lived assets held for sale $625
 $4,821
July 8, 2012, eightLong-lived assets held and used consist primarily of Jack in the Box restaurants determined to be underperforming or which we intend to close having a carrying amount of $2.7 million were written down to their implied fair value of $0.5 million, resulting in an impairment charge of $2.2 million.close. 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, such as discounted cash flows, which are not observable from the market, directly or indirectly. Refer to Note 5,7, Impairment, Disposition of Property and Equipment, Restaurant Closing Costs and Restructuring, for additional information regarding impairment charges.
Long-lived assets held for sale were written down to fair value less costs to sell and relate to the anticipated sales of Jack in the Box and Qdoba company-operated restaurants.
During the third quarter, due to the magnitude of the 2013 Qdoba Closures, we evaluated 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 an independent 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 most representative of fair value. Based upon the independent fair value analysis, the

10

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



estimated fair value of the Qdoba reporting unit was substantially in excess of its carrying value as of July 7, 2013. To evaluate the Qdoba trademark for impairment, we engaged an independent valuation firm who assisted us in our estimation of the fair value of the trademark. To determine 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. Refer to Note 2, Discontinued Operations, for additional information regarding the 2013 Qdoba Closures.
 
4.6.DERIVATIVE INSTRUMENTS
Objectives and strategies — We are exposed to interest rate volatility with regardrelated to our variable rate debt. To reduce our exposure to rising interest rates, in August 2010, we entered into two interest rate swap agreements that effectively convert the first $100.0 million of our variable rate term loan borrowings to a fixed-rate basis from September 2011 through September 2014. These agreements have been designated as cash flow hedges.
Financial position — The following derivative instruments were outstanding as of the end of each period (in thousands):

July 8, 2012 October 2, 2011July 7, 2013 September 30, 2012
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments:        
Interest rate swaps (Note 3)
Accrued
liabilities
 $(2,564) 
Accrued
liabilities
 $(2,682)
Interest rate swaps (Note 5)
Accrued
liabilities
 $(1,427) 
Accrued
liabilities
 $(2,433)
Total derivatives $(2,564) $(2,682) $(1,427) $(2,433)
Financial performance — The following is a summary of the accumulated other comprehensive income (“OCI”) gain or loss activity related to our interest rate swap derivative instruments (in thousands):
 Location of Loss in Income Quarter Year-to-Date
  July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
Loss recognized in OCI (Note 9)N/A $(264) $(1,936) $(883) $(746)
Loss reclassified from accumulated OCI into income (Note 9)
Interest
expense, net
 $304
 $
 $1,001
 $
 Location of Loss in Income Quarter Year-to-Date
  July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Gain (loss) recognized in OCIN/A $59
 $(264) $(31) $(883)
Loss reclassified from accumulated OCI into income
Interest
expense, 
net
 $(313) $(304) $(1,037) $(1,001)
Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparty for the effective portions of the interest rate swaps.swaps. During the periods presented, our interest rate swaps had no hedge ineffectiveness.

8



5.7.IMPAIRMENT, DISPOSITION OF PROPERTY AND EQUIPMENT, RESTAURANT CLOSING COSTS AND RESTRUCTURING
Impairment and other charges, net in the accompanying condensed consolidated statements of earningsoperations is comprised of the following (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Impairment charges$656
 $517
 $2,765
 $1,684
$501
 $656
 $3,385
 $2,765
Losses on the disposition of property and equipment, net904
 660
 3,762
 6,084
2,055
 884
 2,525
 3,712
Costs of closed restaurants (primarily lease obligations) and other2,337
 924
 5,270
 2,423
733
 2,337
 1,849
 5,270
Restructuring costs11,284
 
 12,809
 
139
 11,284
 1,294
 12,809
$15,181
 $2,101
 $24,606
 $10,191
$3,428
 $15,161
 $9,053
 $24,556
Impairment — 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. We typically estimate fair value based on the estimated discounted cash flows of the related asset using marketplace participant assumptions. Impairment charges in 2013 and in 2012 primarily represent charges to write down the carrying value of fiveunderperforming Jack in the Box restaurants andthree Jack in the Box restaurants we intend to or have closed.

11

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



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 re-image and logo program and normal capital maintenance activities. Losses on the disposition of property and equipment, net for the year-to-date period ended July 7, 2013 includes income of

$2.4 million from the resolution of two eminent domain matters involving Jack in the Box restaurants.
Restaurant closing costsconsist of future lease commitments, net of anticipated sublease rentals and expected ancillary costs.costs, and are included in impairment and other charges, net in the accompanying condensed consolidated statements of operations. Total accrued restaurant closing costs, included in accrued liabilities and other long-term liabilities, changed as follows (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Balance at beginning of period$20,167
 $22,163
 $21,657
 $25,020
$18,437
 $20,167
 $20,677
 $21,657
Additions and adjustments1,801
 379
 3,713
 1,163
Additions1,285
 119
 1,285
 546
Adjustments367
 1,682
 1,105
 3,167
Cash payments(1,649) (1,661) (5,051) (5,302)(1,480) (1,649) (4,458) (5,051)
Balance at end of quarter$20,319
 $20,881
 $20,319
 $20,881
$18,609
 $20,319
 $18,609
 $20,319
AdditionsIn fiscal 2013, additions in the quarter and adjustmentsyear-to-date periods primarily relate to two Jack in all periodsthe Box restaurants which were closed in connection with the sale of a market. Refer to Note 4, Summary of Refranchisings, Franchise Development and Acquisitions, for additional information. In fiscal 2012, adjustments primarily relate to revisions to certain sublease and cost assumptions.
Restructuring costs During fiscalSince 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. As part of these cost-saving initiatives, we announced a voluntary early retirement program (“VERP”) to eligible employees and initiated workforce reductions. Restructuring costs consist primarily of pension and employee termination costs related to the VERP offered by the Company. The following is a summary of these costs in each period (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Enhanced pension benefits$6,167
 $
 $6,167
 $
$
 $6,167
 $
 $6,167
Severance costs3,972
 
 5,497
 
4
 3,972
 674
 5,497
Other1,145
 
 1,145
 
135
 1,145
 620
 1,145
$11,284
 $
 $12,809
 $
$139
 $11,284
 $1,294
 $12,809
Refer to Note 7, Retirement Plans, for further information regarding the costs associated with enhanced pension benefits. Total accrued severance costs related to our restructuring activities are included in accrued liabilities and changed as follows in each period (in thousands):

9


Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Balance at beginning of period$1,525
 $
 $
 $
$39
 $1,525
 $1,758
 $
Additions3,972
 
 5,497
 
4
 3,972
 674
 5,497
Cash payments(2,826) 
 (2,826) 
(15) (2,826) (2,404) (2,826)
Balance at end of quarter$2,671
 $
 $2,671
 $
$28
 $2,671
 $28
 $2,671
As part of the ongoing review of our organization structure, we expect to incur additional charges related to this activity;our restructuring activities; however, we are unable to reasonablymake 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.

6.8.INCOME TAXES
The income tax provisions reflect year-to-date effective tax rates of 34.3%34.6% in 2012 and 35.0% in 2011.both years. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 20122013 rate could differ from our current estimates.

12

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



At July 8, 20127, 2013, our gross unrecognized tax benefits associated with uncertain income tax positions were $0.90.6 million, which if recognized would favorably impact the effective income tax rate. The gross unrecognized tax benefits increased bydecreased $0.3 million from the end of fiscal year 20112012 based on a preliminary assessmentthe settlement of a state income tax audit. It is reasonably possible that changes to the gross unrecognized tax benefits will be required within the next twelve months due to the possible settlement of state tax audits.
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 20092010 and forward. The Company also has refund claims related to fiscal years 2006, 2008, and 2009 that allow the statute to remain open for the specific claim. The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for fiscal years 2001 and 2007, respectively, and forward. Generally, the statutes of limitations for the other state jurisdictions have not expired for fiscal years 2009 and forward.
 
7.9.RETIREMENT PLANS
Defined benefit pension plans — We sponsor a qualified defined benefit pension plan (our “Primary Plan”) covering substantially all full-time employees whichhired prior to January 1, 2011. Participants will no longer accrue benefits under this plan effective December 31, 2015 and was closed to new participants effective January 1, 2011. We also sponsor an unfunded supplemental executive retirement plan, which provides certain employees additional pension benefits and was closed to new participants effective January 1, 2007. Benefits under both plans are based on the 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 had ended as of July 8, 2012. As a result, we incurred a charge in the quarter and an increase to our pension benefit obligation (“PBO”) of $6.2 million for enhanced retirement benefits under our Primary Plan. Additionally, we were required to re-measure the liability for our Primary Plan as of June 30, 2012.  The discount rate and long-term rate of return on plan assets used for the June 30th  re-measurement were 4.78% and 7.25% compared to 5.60% and 7.75%, respectively, at the end of fiscal 2011.  In connection with the re-measurement, the PBO of our Primary Plan increased $42.4 million due to actuarial losses arising during the period with a corresponding increase to accumulated other comprehensive loss, net. Refer to Note 9, StockholdersEquity, for additional information.  
Postretirement healthcare plans — We also sponsor healthcare plans that provide postretirement medical benefits to certain employees who meet 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.
Net periodic benefit cost — The components of net periodic benefit cost in each period were as follows in each period (in thousands): 

10


Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Defined benefit pension plans:              
Service cost$2,229
 $2,489
 $7,304
 $8,298
$2,481
 $2,229
 $8,271
 $7,304
Interest cost5,347
 4,980
 17,538
 16,600
5,222
 5,347
 17,406
 17,538
Expected return on plan assets(4,743) (4,785) (15,504) (15,948)(5,242) (4,743) (17,472) (15,504)
Actuarial loss2,974
 2,268
 9,657
 7,557
4,116
 2,974
 13,719
 9,657
Amortization of unrecognized prior service cost99
 113
 332
 376
62
 99
 207
 332
Net periodic benefit cost$5,906
 $5,065
 $19,327
 $16,883
$6,639
 $5,906
 $22,131
 $19,327
Postretirement healthcare plans:              
Service cost$14
 $19
 $47
 $61
$
 $14
 $
 $47
Interest cost374
 366
 1,244
 1,220
366
 374
 1,220
 1,244
Actuarial loss21
 46
 69
 155
183
 21
 608
 69
Amortization of unrecognized prior service cost
 7
 
 24
Net periodic benefit cost$409
 $438
 $1,360
 $1,460
$549
 $409
 $1,828
 $1,360
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 a $14.9 millionno minimum requirement that will be satisfied by September 15, 2013.contribution funding requirement. Details regarding fiscal 20122013 contributions are as follows (in thousands):
Defined Benefit
Pension Plans
 
Postretirement
Healthcare Plans
Defined Benefit
Pension Plans
 
Postretirement
Healthcare Plans
Net year-to-date contributions$11,148
 $1,058
$12,850
 $889
Remaining estimated net contributions during fiscal 2012$6,000
 $300
Remaining estimated net contributions during fiscal 2013$10,600
 $551
We will continue to evaluate contributions to our funded defined benefit pension plan based on changes in pension assets as a result of asset performance in the current market and economic environment.
 

13

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



8.10.SHARE-BASED COMPENSATION
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. In fiscal 20122013, we granted the following shares related to our share-based compensation awards:
 SharesYear-to-Date
Stock options485,057376,793
Performance-vested stockPerformance share awards234,25889,236
Nonvested stock units86,052121,491
The components of share-based compensation expense recognized in each period are as follows (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Stock options$788
 $1,175
 $2,763
 $3,861
$1,321
 $788
 $4,480
 $2,763
Performance-vested stock awards222
 270
 724
 1,479
Performance share awards421
 222
 2,085
 724
Nonvested stock awards134
 139
 449
 465
82
 134
 301
 449
Nonvested stock units295
 199
 910
 777
626
 295
 2,963
 910
Deferred compensation for non-management directors
 
 155
 173

 
 220
 155
Total share-based compensation expense$1,439
 $1,783
 $5,001
 $6,755
$2,450
 $1,439
 $10,049
 $5,001

9.11.    STOCKHOLDERS’ EQUITY
Repurchases of common stock In MayNovember 2011, the Board of Directors approved a program, to repurchase up to $100.0 million in shares of our common stock expiring November 2012. During the first quarter, we repurchased approximately 0.3 million shares at an aggregate cost of $6.4 million2013, completing the May 2011 authorization. In November 2011, the

11


Board of Directors approved a new program to repurchase $100.0 million in shares of our common stock expiringstock. In November 2013. As2012, the Board of the end of the third quarter,Directors approved a new program to repurchase up to an additional $100.0 million remains availablein shares of our common stock through November 2014. During 2013, we repurchased approximately 2.8 million shares at an aggregate cost of $92.2 million. As of July 7, 2013, there were no amounts remaining under thisthe November 2011 authorization and $84.7 million remaining under the November 2012 authorization.
Comprehensive income Our total comprehensive income, net of taxes, was as follows (in thousands):
 Quarter Year-to-Date
 July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
Net earnings$11,592
 $18,745
 $45,174
 $57,947
Cash flow hedges:       
Net change in fair value of derivatives(264) (1,936) (883) (746)
Net loss reclassified to earnings304
 
 1,001
 
Total40
 (1,936) 118
 (746)
Tax effect(15) 739
 (46) 285
 25
 (1,197) 72
 (461)
Unrecognized periodic benefit costs:       
Actuarial losses arising during the period(42,371) 
 (42,371) 
Actuarial losses and prior service cost reclassified to earnings3,094
 2,434
 10,058
 8,112
Total(39,277) 2,434
 (32,313) 8,112
Tax effect15,078
 (929) 12,405
 (3,097)
 (24,199) 1,505
 (19,908) 5,015
Total comprehensive income (loss)$(12,582) $19,053
 $25,338
 $62,501
Accumulated other comprehensive loss The components of accumulated other comprehensive loss, net of taxes, were as follows at the end of each period (in thousands):
 July 8,
2012
 October 2,
2011
Unrecognized periodic benefit costs, net of tax benefits of $71,148 and $58,743, respectively$(114,196) $(94,288)
Net unrealized losses related to cash flow hedges, net of tax benefits of $984 and $1,030, respectively(1,580) (1,652)
Accumulated other comprehensive loss, net$(115,776) $(95,940)
 July 7,
2013
 September 30,
2012
Unrecognized periodic benefit costs, net of tax benefits of $78,034 and $83,605, respectively$(125,550) $(134,513)
Net unrealized losses related to cash flow hedges, net of tax benefits of $547 and $933, respectively(880) (1,500)
Foreign currency translation adjustment, net of tax expense of $3 and $0, respectively9
 
Accumulated other comprehensive loss$(126,421) $(136,013)
 
10.12.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, non-management director stock equivalents and shares issuable under our employee stock purchase plan. Performance-vested stockPerformance share awards are included in the weighted-average diluted shares outstanding each period if the performance criteria have been met at the end of the respective periods.


14

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



The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Weighted-average shares outstanding – basic44,156
 48,498
 43,975
 50,435
43,772
 44,156
 43,435
 43,975
Effect of potentially dilutive securities:              
Stock options505
 397
 431
 440
895
 505
 957
 431
Nonvested stock awards and units264
 224
 267
 216
375
 264
 366
 267
Performance-vested stock awards228
 133
 219
 134
Performance share awards205
 228
 220
 219
Weighted-average shares outstanding – diluted45,153
 49,252
 44,892
 51,225
45,247
 45,153
 44,978
 44,892
Excluded from diluted weighted-average shares outstanding:              
Antidilutive2,583
 3,059
 3,006
 3,009

 2,583
 172
 3,006
Performance conditions not satisfied at the end of the period343
 354
 343
 354
220
 343
 220
 343

12



11.13.VARIABLE INTEREST ENTITIES (“VIEs”)
WeIn January 2011, we formed Jack in the Box Franchise Finance, LLC (“FFE”) for the purpose of operating a franchisee lending program which may provide up to $100.0 million to assist Jack in the Box franchisees in re-imaging their restaurants. We are the sole equity investor in FFE. The $100.0 millionlending program iswas 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 FFE Facility is a revolving loanlending period and security agreement bearing a variable interest rate. Thethe revolving period expired in June 2012 and we do not plan to make any future contributions.the third party facility repayments were completed in August 2012.
We have determined that FFE is a VIE and that the Company is its primary beneficiary.VIE. We considered a variety of factors in identifying the primary beneficiary of FFE including, but not limited to, who holds the power to direct matters that most significantly impact FFE’s economic performance (such as determining the underwriting standards and credit management policies), as well as what party has the obligation to absorb the losses of FFE. Based on these considerations, we have determined that the Company is the primary beneficiary and have reflected the entity in the accompanying condensed 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 impacts of FFE’s results were not material to the Company’s condensed consolidated statements of earningsoperations or cash flows. The FFE’s balance sheet consisted of the following at the end of each period (in thousands):
July 8,
2012
 October 2,
2011
July 7,
2013
 September 30,
2012
Cash$707
 $531
$246
 $444
Other current assets (1) 2,286
 2,086
2,329
 2,536
Other assets, net (1) 11,876
 12,292
9,012
 11,051
Total assets$14,869
 $14,909
$11,587
 $14,031
      
Current liabilities$89
 $140
$129
 $14
Revolving credit facility
 1,160
Other long-term liabilities (2) 15,248
 14,046
11,639
 14,428
Retained earnings(468) (437)(181) (411)
Total liabilities and stockholders’ equity$14,869
 $14,909
$11,587
 $14,031
____________________________
(1)Consists primarily of amounts due from franchisees.
(2)Consists primarily of the capital note contributions from Jack in the Box which are eliminated in consolidation.
The Company’s maximum exposure to loss is equal to its outstanding contributions which were approximately $15.2 millionas of July 8, 20127, 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.


15

12.
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



14.    CONTINGENCIES AND LEGAL MATTERS
The Company is subject to normal and routineassesses contingencies, including litigation brought by former, current or prospective employees, customers, franchisees, vendors, landlords, shareholders or others. The Company assesses 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 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. 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. Although
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 allege that the Company failed to pay non-exempt employees for certain meal breaks and improperly recorded payroll deductions for shoe purchases and for workers’ compensation expenses.  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 accrual for a single claim for which we believe a loss is both probable and estimable.  This accrued loss contingency did not have a material effect on our results of operations.  Due to the procedural status of the other claims in this case, we have not established a loss contingency accrual for these claims as the liability with respect to these claims is not probable and we are currently believesunable to estimate a range of loss. Nonetheless, an unfavorable resolution of this matter could have a material adverse effect on our business, results of operations, liquidity or financial condition.
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.  Although we currently believe that the ultimate outcome of these matters will not have a material adverse effect on theour business, results of operations, liquidity or financial position of the Company, it is possible that theour business, results of operations, liquidity, or financial position of the Company could be materially affected in any particular future reporting period by the unfavorable resolution of one or more of these matters or contingencies.
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 July 7, 2013, the amount remaining under these lease guarantees totaled $3.1 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.

13



13.15.SEGMENT REPORTING
Reflecting the information currently being usedWe are principally engaged in managing the Company as a two-branded restaurant operations business, our segments comprise results related to system restaurant operations fordeveloping, operating and franchising our Jack in the Box and Qdoba brands.quick-service restaurant concepts, both 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 Company resources. Based upon certain quantitative thresholds, both operating segments are considered reportable segments.

16

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



We measure and evaluate our segments based on segment earnings from operations. Summarized financial information concerning our reportable segments is shown in the following tables (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Revenues by segment:              
Jack in the Box restaurant operations segment$288,178
 $337,980
 $970,254
 $1,135,626
$272,755
 $288,178
 $918,246
 $970,254
Qdoba restaurant operations segment74,803
 55,595
 217,132
 159,750
77,574
 65,874
 233,640
 190,143
Distribution operations138,839
 125,704
 473,779
 393,753
Consolidated revenues$501,820
 $519,279
 $1,661,165
 $1,689,129
$350,329
 $354,052
 $1,151,886
 $1,160,397
Earnings from operations by segment:              
Jack in the Box restaurant operations segment$15,439
 $28,500
 $71,085
 $95,675
$23,485
 $15,439
 $83,002
 $71,085
Qdoba restaurant operations segment6,705
 4,698
 12,748
 7,582
7,410
 8,347
 18,602
 18,776
Distribution operations
 (217) 
 (1,399)
FFE operations(58) (28) (157) (200)(11) (58) (98) (157)
Consolidated earnings from operations$22,086
 $32,953
 $83,676
 $101,658
$30,884
 $23,728
 $101,506
 $89,704
Total depreciation expense by segment:              
Jack in the Box restaurant operations segment$17,873
 $19,001
 $60,201
 $63,658
$17,350
 $17,873
 $58,783
 $60,199
Qdoba restaurant operations segment4,120
 3,195
 12,872
 9,657
3,741
 3,190
 12,054
 9,933
Distribution operations158
 158
 556
 548
Consolidated depreciation expense$22,151
 $22,354
 $73,629
 $73,863
$21,091
 $21,063
 $70,837
 $70,132
Interest income and expense, income taxes and total assets are not reported for our segments, in accordance with our method of internal reporting.


The following table provides detail of the change in the balance of goodwill for each of our reportable segments (in thousands):
 July 8,
2012
 October 2,
2011
Goodwill by segment (in thousands):
   
Jack in the Box$48,330
 $49,181
Qdoba92,140
 56,691
Consolidated goodwill$140,470
 $105,872
 Qdoba Jack in the Box Total
Balance at September 30, 2012$92,775
 $47,847
 $140,622
Additions7,207
 1,173
 8,380
Disposals(174) (196) (370)
Balance at July 7, 2013$99,808
 $48,824
 $148,632

Refer to Note 2,4, Summary of Refranchisings, Franchise Development and Acquisitions, for information regarding the segment changes in goodwill during 20122013.

14.16.
SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)
Year-to-DateJuly 7,
2013
 July 8,
2012
July 8,
2012
 July 10,
2011
Cash paid during the quarter for:   
Cash paid during the year for:   
Interest, net of amounts capitalized$16,812
 $10,811
$11,392
 $16,812
Income tax payments$31,852
 $40,367
$36,692
 $31,852


1417

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



15.17.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)
��July 8,
2012
 October 2,
2011
July 7,
2013
 September 30,
2012
Other assets, net:      
Company-owned life insurance policies$83,775
 $75,202
$90,915
 $86,276
Deferred income tax asset86,910
 70,882
Deferred tax assets107,056
 115,537
Other70,414
 70,529
75,531
 69,317
$241,099
 $216,613
$273,502
 $271,130
Accrued liabilities:      
Payroll and related$50,431
 $40,438
Payroll and related taxes$46,173
 $58,503
Sales and property taxes10,551
 13,055
Advertising24,969
 21,899
19,407
 21,400
Insurance32,866
 37,987
34,162
 33,391
Lease commitments related to closed locations13,561
 5,387
Deferred rent income12,661
 132
Deferred beverage allowance10,244
 4,583
Other68,500
 67,163
23,033
 28,186
$176,766
 $167,487
$169,792
 $164,637
Other long-term liabilities:      
Pension$191,586
 $144,860
Pension plans$209,210
 $213,854
Straight-line rent accrual54,080
 53,659
51,568
 54,288
Other94,710
 92,204
105,578
 103,060
$340,376
 $290,723
$366,356
 $371,202

16.18.SUBSEQUENT EVENTEVENTS

Sale of Company-Operated Restaurants Subsequent to the end of the third quarter, we completed the Company entered into an agreement to outsource its distribution business. Subject to the anticipated completionsale of certain closing conditions, the transition should begin27 Jack in the Box company-operated restaurants to two franchisees for fourth quarter of fiscal 2012, and is expected to be completed by the end of the first quarter of fiscal 2013. We expect that the distribution business, including exit costs, will be reflected as discontinued operations beginning in the fourth quarter of fiscal 2012$13.7 million.

17.NEW ACCOUNTING PRINCIPLES
Authorization for Repurchase of Common Stock In May 2011,August 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04,of Directors approved a new program to repurchase up to an additional Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements$100.0 million in U.S. GAAP and IFRS, which was issued to update the language used in existing guidance to better align U.S. GAAP and IFRS fair value measurement guidance. This update also requires increased disclosureshares of quantitative and qualitative information about unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. Other than requiring additional disclosures, adoption of this new guidance in the second quarter did not have a significant impact on our consolidated financial statements.common stock through November 2015.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which was issued to enhance comparability between entities that report under U.S. GAAP and IFRS, and to provide a more consistent method of presenting non-owner transactions that affect an entity’s equity. ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption of the new guidance is permitted, and full retrospective application is required.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.


1518


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
All comparisons between 20122013 and 20112012 refer to the 12-weeks (“quarter”) and 40-weeks (“year-to-date”) ended July 8, 20127, 2013 and July 10, 20118, 2012, respectively, unless otherwise indicated.
For an understanding of the significant factors that influenced our performance during the quarterly and year-to-date periods ended July 8, 20127, 2013 and July 10, 20118, 2012, our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes included in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended October 2, 2011September 30, 2012.
Our MD&A consists of the following sections:
Overview — a general description of our business and fiscal 20122013 highlights.
Financial reporting — a discussion of changes in presentation.
Results of operations — an analysis of our consolidated statements of earningsoperations for the periods presented in our condensed consolidated financial statements.
Liquidity and capital resources — an analysis of our cash flows including capital expenditures, share repurchase activity, known trends that may impact liquidity and the impact of inflation.
Discussion of critical accounting estimates — a discussion of accounting policies that require critical judgments and estimates.
New accounting pronouncements — a discussion of new accounting pronouncements, dates of implementation and the impact on our consolidated financial position or results of operations, if any.
Cautionary statements regarding forward-looking statements — a discussion of the risks and uncertainties that may cause our actual results to differ materially from any forward-looking statements made by management.
OVERVIEW
As of July 8, 20127, 2013, we operated and franchised 2,2472,255 Jack in the Box quick-service restaurants, primarily in the western and southern United States, and 614592 Qdoba Mexican Grill (“Qdoba”) fast-casual restaurants throughout the United States.States 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 royalties (based upon a percent of sales), rents, franchise fees and rents from Jack in the Box franchisees. Historically, we also generated revenue from distribution sales of food and packaging commodities.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. In addition, we recognize gains from the sale of company-operated restaurants to franchisees, whichfranchisees. These gains are presented as a reduction of operating costs and expenses, net in the accompanying condensed consolidated statements of earnings.operations.

19


The following summarizes the most significant events occurring in fiscal 20122013 and certain trends compared to a year ago:
Restaurant Sales Sales at restaurants open more than one year (“same-store sales”) increasedchanged as follows:
 Quarter Year-to-Date
 July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Jack in the Box:       
Company1.2% 3.4% 1.4% 4.9%
Franchise(0.3)% 2.6% 0.6% 3.0%
System0.1% 2.8% 0.8% 3.5%
Qdoba:       
Company (1)0.5% 3.8% 0.3% 3.9%
Franchise2.1% 0.9% 0.6% 2.5%
System (1)1.3% 2.2% 0.4% 3.1%
____________________________
 Quarter Year-to-Date
 July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
Jack in the Box:       
Company3.4% 4.7% 4.9% 2.4%
Franchise2.6% 2.4% 3.0% 0.9%
System2.8% 3.2% 3.5% 1.4%
Qdoba:       
Company3.3% 5.3% 3.5% 5.4%
Franchise0.9% 5.0% 2.5% 6.1%
System2.1% 5.1% 3.0% 5.8%

(1)
Same-store sales for all periods presented have been restated to exclude sales for restaurants reported as discontinued operations.
Commodity Costs In the quarter, Jack in the Box commodity costs decreased approximately 0.3% compared to a year ago, while Qdoba commodityCommodity costs increased approximately 2.5%3.0%. and 1.9% at our Jack in the Box and Qdoba commodity costs increased byrestaurants, respectively, in the quarter and 3.1%1.6% and 7.8%1.5%, respectively, year-to-date.year-to-date compared to a year ago. We expect our overall commodity costs to increase

16


approximately 3.5%2.0% in fiscal 20122013 compared to a year ago..
New Unit Development We continued to grow our brands with the opening of new company-operated and franchise-operated restaurants. Year-to-date, we opened 3015 Jack in the Box locations and 3443 Qdoba locations system-wide.
Franchising Program Qdoba and Jack in the Box franchisees opened a total of 3635 restaurants year-to-date.year-to-date, including two Qdoba franchise locations in Canada. Our Jack in the Box system was approximately 74%77% franchised at the end of the third quarter and we plan to furtherultimately increase franchise ownership to approximatelybe between 80% over the next couple years.to 85%.
Credit Facility In November 2012, we entered into a new credit agreement consisting of a $400.0 million revolving credit facility and a $200.0 million term loan, both with a five-year maturity.
Discontinued Operations During the first quarter of 2013, we completed the outsourcing of our Jack in the Box distribution business. Additionally, during the third quarter of fiscal 2013, we closed 62 Qdoba company-operated restaurants (the “2013 Qdoba Closures”). These closures are expected to have a positive impact on future earnings and cash flows. As a result of these two transactions, we recognized after-tax losses in the third quarter totaling $23.0 million, or $0.51 per diluted share, and $30.2 million, or $0.67 per diluted share, year-to-date.
Share Repurchases Pursuant to a share repurchase program authorized by our Board of Directors, we repurchased approximately 2.8 million shares of our common stock at an average price of $33.24 per share year-to-date, including the cost of brokerage fees.
FINANCIAL REPORTING
The condensed consolidated statements of operations for all periods presented have been prepared reflecting the results of operations for the 2013 Qdoba Closures and charges incurred as a result of closing these restaurants as discontinued operations. Refer to Note 2, Discontinued Operations, in the notes to our condensed consolidated financial statements for more information.


20


RESULTS OF OPERATIONS

The following table presents certain income and expense items included in our condensed consolidated statements of earningsoperations as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.
CONSOLIDATED STATEMENTS OF EARNINGSOPERATIONS DATA
Quarter Year-to-DateQuarter Year-to-Date
July 8,
2012
 July 10,
2011
 July 8,
2012
 July 10,
2011
July 7,
2013
 July 8,
2012
 July 7,
2013
 July 8,
2012
Revenues:              
Company restaurant sales56.9 % 62.8 % 56.6 % 64.2 %77.3% 78.1 % 77.1% 78.7 %
Distribution sales27.7 % 24.2 % 28.5 % 23.3 %
Franchise revenues15.5 % 13.0 % 14.9 % 12.5 %22.7% 21.9 % 22.9% 21.3 %
Total revenues100.0 % 100.0 % 100.0 % 100.0 %100.0% 100.0 % 100.0% 100.0 %
Operating costs and expenses, net:              
Company restaurant costs:              
Food and packaging (1)32.3 % 33.9 % 32.9 % 33.2 %32.8% 32.4 % 32.6% 33.0 %
Payroll and employee benefits (1)28.7 % 29.7 % 29.2 % 30.4 %27.4% 28.2 % 28.1% 28.8 %
Occupancy and other (1)22.5 % 24.0 % 22.8 % 24.0 %21.9% 22.0 % 22.0% 22.3 %
Total company restaurant costs (1)83.5 % 87.5 % 85.0 % 87.5 %82.1% 82.5 % 82.7% 84.0 %
Distribution costs (1) 100.0 % 100.3 % 100.0 % 100.4 %
Franchise costs (1) 49.7 % 46.8 % 51.2 % 48.0 %50.5% 49.7 % 50.2% 51.2 %
Selling, general and administrative expenses10.5 % 9.9 % 10.4 % 10.1 %14.9% 14.7 % 14.9% 14.8 %
Impairment and other charges, net3.0 % 0.4 % 1.5 % 0.6 %1.0% 4.3 % 0.8% 2.1 %
Gains on the sale of company-operated restaurants(0.7)% (2.0)% (1.1)% (2.3)%
Losses (gains) on the sale of company-operated restaurants0.4% (1.1)% 0.3% (1.6)%
Earnings from operations4.4 % 6.3 % 5.0 % 6.0 %8.8% 6.7 % 8.8% 7.7 %
Income tax rate (2) 34.6 % 35.2 % 34.3 % 35.0 %37.4% 34.9 % 34.6% 34.6 %
____________________________
(1)As a percentage of the related sales and/or revenues.
(2)As a percentage of earnings from continuing operations and before income taxes.
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.





17



SUPPLEMENTAL COMPANY-OPERATED RESTAURANTS STATEMENTS OF EARNINGSOPERATIONS DATA
(dollars in thousands)
Quarter Year-to-DateQuarter Year-to-Date
July 8, 2012 July 10, 2011 July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Jack in the Box:                              
Company restaurant sales$214,679
   $274,876
   $736,860
   $938,930
  $197,239
   $214,679
   $667,854
   $736,860
  
Company restaurant costs:                              
Food and packaging71,582
 33.3% 95,727
 34.8% 249,681
 33.9% 318,030
 33.9%66,552
 33.7% 71,582
 33.3% 222,545
 33.3% 249,681
 33.9%
Payroll and employee benefits63,372
 29.5% 82,789
 30.1% 218,761
 29.7% 288,183
 30.7%55,019
 27.9% 62,772
 29.2% 190,129
 28.5% 216,470
 29.4%
Occupancy and other45,842
 21.4% 63,920
 23.3% 158,341
 21.5% 216,849
 23.1%42,258
 21.4% 46,442
 21.6% 141,267
 21.2% 160,632
 21.8%
Total company restaurant costs$180,796
 84.2% $242,436
 88.2% $626,783
 85.1% $823,062
 87.7%$163,829
 83.1% $180,796
 84.2% $553,941
 82.9% $626,783
 85.1%
Qdoba:                              
Company restaurant sales$70,697
   $51,157
   $203,421
   $145,252
  $73,624
   $61,768
   $220,711
   $176,432
  
Company restaurant costs:                              
Food and packaging20,573
 29.1% 14,869
 29.1% 59,491
 29.2% 41,695
 28.7%22,160
 30.1% 17,874
 28.9% 66,714
 30.2% 51,386
 29.1%
Payroll and employee benefits18,434
 26.1% 13,934
 27.2% 56,114
 27.6% 41,052
 28.3%19,223
 26.1% 15,283
 24.7% 59,877
 27.1% 46,200
 26.2%
Occupancy and other18,474
 26.1% 14,180
 27.7% 56,410
 27.7% 43,047
 29.6%17,102
 23.2% 14,249
 23.1% 54,105
 24.5% 43,047
 24.4%
Total company restaurant costs$57,481
 81.3% $42,983
 84.0% $172,015
 84.6% $125,794
 86.6%$58,485
 79.4% $47,406
 76.7% $180,696
 81.9% $140,633
 79.7%

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The following table summarizes the year-to-date changes in the number of Jack in the Box (“JIB”) and Qdoba company and franchise restaurants:
July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012
Company Franchise Total Company Franchise TotalCompany Franchise Total Company Franchise Total
Jack in the Box:                      
Beginning of year629
 1,592
 2,221
 956
 1,250
 2,206
547
 1,703
 2,250
 629
 1,592
 2,221
New14
 16
 30
 11
 10
 21
4
 11
 15
 14
 16
 30
Refranchised(55) 55
 
 (226) 226
 
(22) 22
 
 (55) 55
 
Acquired from franchisees1
 (1) 
 
 
 
Closed(2) (2) (4) (6) (1) (7)(4) (6) (10) (2) (2) (4)
End of period586
 1,661
 2,247
 735
 1,485
 2,220
526
 1,729
 2,255
 586
 1,661
 2,247
% of system26% 74% 100% 33% 67% 100%
% of JIB system23% 77% 100% 26% 74% 100%
% of consolidated system65% 85% 79% 66% 84% 79%
Qdoba:                      
Beginning of year245
 338
 583
 188
 337
 525
316
 311
 627
 245
 338
 583
New14
 20
 34
 17
 30
 47
19
 24
 43
 14
 20
 34
Acquired from franchisees45
 (45) 
 24
 (24) 
12
 (12) 
 45
 (45) 
Closed
 (3) (3) 
 (8) (8)(63) (15) (78) 
 (3) (3)
End of period304
 310
 614
 229
 335
 564
284
 308
 592
 304
 310
 614
% of system50% 50% 100% 41% 59% 100%
% of Qdoba system48% 52% 100% 50% 50% 100%
% of consolidated system35% 15% 21% 34% 16% 21%
Consolidated:                      
Total system890
 1,971
 2,861
 964
 1,820
 2,784
810
 2,037
 2,847
 890
 1,971
 2,861
% of system31% 69% 100% 35% 65% 100%
% of consolidated system28% 72% 100% 31% 69% 100%

Revenues
As we continue to execute our refranchising strategy for Jack in the Box, which includes the sale of restaurants to franchisees, we expect the number of Jack in the Box company-operated restaurants and the related sales to decrease while revenues from franchise restaurants increase. As such, company restaurant sales decreased $40.75.6 million, or 12.5%2.0%, in the quarter and $143.924.7 million, or 13.3%2.7%, year-to-date. This decrease isyear-to-date compared with the prior year. The decreases in restaurant sales are due primarily to a decreasedecreases in the average number of Jack in the Box company-operated restaurants,

18


partially offset by an increaseincreases in the number of Qdoba company-operated restaurants and increases in per-store average unit sales volumes (“PSA”AUVs”) at our Jack in the Box and Qdoba company-operated restaurants.
The following table representspresents the approximate impact of these increases (decreases) on company restaurant sales (in thousands):
 Quarter Year-to-Date
Reduction in the average number of Jack in the Box restaurants$(87,600) $(313,000)
Jack in the Box PSA sales increase27,400
 111,000
Increase in the average number of Qdoba restaurants15,800
 49,100
Qdoba PSA sales increase3,700
 9,000
Total decrease in company restaurant sales$(40,700) $(143,900)
 Quarter Year-to-Date
Decrease in the average number of Jack in the Box restaurants$(23,200) $(93,400)
Jack in the Box AUV increase5,700
 24,400
Increase in the average number of Qdoba restaurants11,800
 39,800
Qdoba AUV increase100
 4,500
Total decrease in company restaurant sales$(5,600) $(24,700)

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Same-store sales at Jack in the Box company-operated restaurants increased 3.4%1.2% in the quarter and 4.9%1.4% year-to-date primarily driven by price increases. Same-store sales at Qdoba company-operated restaurants increased 0.5% in the quarter and 0.3% year-to-date primarily driven by a combination of price increases and higher catering sales partially offset by transaction growth. Same-store sales at Qdoba company-operated restaurants increased 3.3% indeclines and the quarter and 3.5% year-to-date primarily driven by price increases.impact of greater promotional activity year-to-date. The following table summarizes the change in company-operated same-store sales:
 Quarter Year-to-Date
Jack in the Box transactions1.2% 2.5%
Jack in the Box average check (1)2.2% 2.4%
Jack in the Box change in same-store sales3.4% 4.9%
Qdoba change in same-store sales (2)3.3% 3.5%
 Quarter Year-to-Date
Jack in the Box:   
Transactions(0.1)% (0.3)%
Average check (1)1.3% 1.8%
Change in same-store sales1.2% 1.4%
Qdoba:   
Change in same-store sales (2)0.5% 0.3%
____________________________
(1)
Includes price increases of approximately 3.1%2.2% and 3.3%2.5%, in the quarter and year-to-date, respectively.
(2)
Includes price increases of approximately 3.2%0.3% and 3.8%1.3%, in the quarter and year-to-date, respectively.
Distribution sales to Jack in the Box and Qdoba franchisees grewFranchise revenues increased $13.11.9 million in the quarter and $80.016.2 million year-to-date from a year ago. This growth primarily reflects an increase in the number of Jack in the Box franchise restaurants that purchase ingredients and supplies from our distribution centers, which contributed additional sales of approximately $21.6 million and $80.8 million, respectively. Year-to-date, higher commodity prices also contributed to the sales increase. During the second quarter, Qdoba franchised restaurants ceased using our distribution services resulting in decreases in distribution sales of $8.0 million in the quarter and $10.5 million year-to-date. For additional information regarding our distribution operations, refer to Note 16, Subsequent Event, of the notes to the condensed consolidated financial statements.
Franchise revenues increased $10.1 million, or 14.9%, in the quarter and $35.9 million, or 17.0%, year-to-date due primarily toreflecting an increase in the average number of Jack in the Box franchise restaurants, which contributed additional royalties and rents of approximately $11.63.1 million and $41.113.7 million, respectively. ThisIn the quarter, this increase was partially offset by a decrease in revenues from franchise fees and other driven primarily by a decline in the number of restaurants sold to franchisees and a year-to-datean increase in re-image contributions to franchisees, which are recorded as a reduction of franchise revenues.revenues, and lower AUVs at franchised Jack in the Box restaurants. Year-to-date, a reduction in re-image contributions to franchisees also contributed to the increase in franchise revenues, partially offset by a decrease in revenues from initial franchise fees. The following table reflects the detail of our franchise revenues in each period and other information we believe is useful in analyzing the change in franchise revenues (dollars in thousands):

19


Quarter Year-to-DateQuarter Year-to-Date
July 8, 2012 July 10, 2011 July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Royalties$29,988
 $25,637
 $97,499
 $81,982
$30,785
 $29,988
 $101,578
 $97,499
Rents45,982
 37,587
 150,076
 120,313
47,828
 45,982
 158,879
 150,076
Re-image contributions to franchisees(189) (1,905) (6,723) (4,620)(902) (189) (2,030) (6,723)
Franchise fees and other1,824
 6,223
 6,253
 13,519
1,755
 1,824
 4,894
 6,253
Franchise revenues$77,605
 $67,542
 $247,105
 $211,194
$79,466
 $77,605
 $263,321
 $247,105
% increase14.9% 

 17.0% 

2.4 % 

 6.6% 

Average number of franchise restaurants1,968
 1,715
 1,943
 1,669
2,031
 1,968
 2,020
 1,943
% increase14.8%   16.4%  3.2 %   4.0%  
Increase in franchise-operated same-store sales:       
Changes in franchise-operated same-store sales:       
Jack in the Box2.6% 2.4% 3.0% 0.9%(0.3)% 2.6% 0.6% 3.0%
Qdoba0.9% 5.0% 2.5% 6.1%2.1 % 0.9% 0.6% 2.5%
Royalties as a percentage of estimated franchise restaurant sales:              
Jack in the Box5.3% 5.3% 5.3% 5.3%5.2 % 5.3% 5.2% 5.3%
Qdoba5.0% 5.0% 5.0% 5.0%5.0 % 5.0% 5.0% 5.0%
Operating Costs and Expenses
Food and packaging costs decreased towere 32.3%32.8% of company restaurant sales in the quarter and 32.9%32.6% year-to-date compared with 33.9%32.4% and 33.2%33.0%, respectively, a year ago. In 2012, higherHigher commodity costs in both periods and greater promotional activity at our Qdoba restaurants year-to-date were more thanpartially offset in the quarter and partiallymore than offset year-to-date by the benefit of selling price increases, favorable product mix at our Jack in the Box restaurants, and a greater proportion of Qdoba company restaurants which generally have lower food and packaging costs than our Jack in the Box restaurants.
Commodity costs increased (decreased) as follows compared with the prior year:
Quarter Year-to-DateQuarter Year-to-Date
Jack in the Box(0.3)% 3.1%3.0% 1.6%
Qdoba2.5 % 7.8%1.9% 1.5%

23


Commodity cost increasesCosts were driven by higher costs for most commodities other than producebakery and poultry.beans in both periods and dairy year-to-date. We expect overall commodity costs for fiscal 20122013 to increase approximately 3.5%2.0%. Beef represents the largest portion, or approximately 20%, of the Company’s overall commodity spend, and wespend. We typically do not enter into fixed price contracts for our beef needs. For the full year, we currently expect beef costs to increase approximately 5%2.0%, and most other major commodities to be higher in 20122013 compared with last year.
Payroll and employee benefit costs decreased to 28.7%27.4% of company restaurant sales in the quarter and 29.2%28.1% year-to-date compared tofrom 29.7%28.2% and 30.4%28.8%, respectively, in 20112012, reflecting the leverage from Jack in the Box same-store sales increases, lower levels of incentive compensation at our Jack in the Box locations, the modest benefits of refranchising Jack in the Box restaurants and the favorable impact of recent acquisitions of Qdoba restaurants. These decreases werefranchised restaurants, partially offset by higher staffing levels of incentive compensation.at our Qdoba restaurants.
Occupancy and other costs decreased towere 22.5%21.9% of company restaurant sales in the quarter and 22.8%22.0% year-to-date, compared with 24.0%22.0% for both periods,and 22.3%, respectively, last year. The lower percentage in 20122013 is due primarily to the leverage from same-store sales increases, the benefits of refranchising Jack in the Box restaurants,same-store sales increases and the favorable impact of recent acquisitions of Qdoba franchised restaurants, partially offset by a greater proportion of Qdoba company restaurants which generally have higher occupancy and a reduction of approximately 50 basis points due toother costs associated with the roll-out of new menu boards and uniforms during the prior year quarter atthan our Jack in the Box restaurants. These benefits were partially offset by higher fees associated with debit card transactions and depreciation expense related to the Jack in the Box re-image program compared with last year.
Distribution costs increased $12.8 million in the quarter and $78.5 million year-to-date, primarily reflecting an increase in the related sales. The 2012 supply chain agreement provides that any profits or losses related to our distribution operations are shared by all company and franchise restaurants who utilize our distribution services. For additional information regarding our distribution operations, refer to Note 16, Subsequent Event, of the notes to the condensed consolidated financial statements.
Franchise costs, principally rents and depreciation on properties we leaseleased to Jack in the Box franchisees, increased $7.01.5 million to 49.7% of the related revenues in the quarter and $25.25.8 million to 51.2%year-to-date, from 46.8% and 48.0%, respectively, a year ago. The increase as a percent of revenues isdue primarily due to a decline in revenue from franchise fees and higher rent and depreciation expenses resulting from an increase in the number of franchised restaurants, partially offset by cost savings associated with our restructuring initiatives. As a percentage of locations we lease to franchisees. Inthe related revenues, franchise costs in the quarter these increases were offsetincreased to 50.5% in part2013 from 49.7% in 2012 and decreased to 50.2% from 51.2%, respectively, year-to-date. The franchise cost percentages are impacted by changes in franchise fees, re-image contributions to franchisees, which are recorded as a decreasereduction of franchise revenues, and same-store sales. The higher percentage in the quarter is primarily attributable to an increase in re-image contributions while the lower percentage year-to-date primarily relates to a reduction in re-image contributions to franchisees.franchisees which more than offset the impact of lower franchise fees.

20


The following table presents the change in selling, general and administrative (“SG&A”) expenses compared with the prior year (in thousands):
Increase / (Decrease)Increase / (Decrease)
Quarter Year-to-DateQuarter Year-to-Date
Advertising$(1,894) $(9,579)$191
 $(79)
Refranchising strategy(2,100) (4,476)(332) (1,385)
Incentive compensation2,661
 4,351
Incentive compensation (including share-based compensation)(643) 2,617
Cash surrender value of COLI policies, net109
 190
107
 1,693
Pension and postretirement benefits658
 2,190
873
 3,272
Pre-opening costs563
 1,712
(586) (2,091)
Qdoba general and administrative1,141
 3,216
Other84
 4,322
Other, including savings from restructuring initiatives378
 (3,976)
$1,222
 $1,926
$(12) $51
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 fund determined as a percentage of restaurant sales. TheAs such, advertising and region administration costs decreased at Jack in the Box but were higher levels ofat Qdoba.
In 2013 incentive compensation reflect an improvementdeclined due to a decrease in the Company’sQdoba’s results compared with performance goals.goals and was partially offset in the quarter and more than offset year-to-date by increases in share-based compensation expense due to changes in the attribution period over which certain share-based compensation awards are recognized and a change in the timing of share-based compensation grants to non-management directors from the fourth quarter last year to the second quarter of 2013. 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 negative impact of $0.10.2 million in the quarter compared with no impact in the same quarter$0.1 million last year and positively impacted SG&A by $4.22.5 million year to dateyear-to-date compared with $4.44.2 million a year ago. The increase in pension and postretirement benefits expense principally relates to a decrease in the discount rate as compared with a year ago. The increase in pre-openingthe prior year. Pre-opening costs decreased primarily relatesdue to higher expenses associated withincurred in the prior year related to restaurant openings in new Jack in the Box markets. Qdoba general and administrative costs increased primarily due to higher overhead to support our growing number of company-operated restaurants.

24


Impairment and other charges, net is comprised of the following (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8, 2012 July 10, 2011 July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Impairment charges$656
 $517
 $2,765
 $1,684
$501
 $656
 $3,385
 $2,765
Losses on the disposition of property and equipment, net904
 660
 3,762
 6,084
2,055
 884
 2,525
 3,712
Costs of closed restaurants (primarily lease obligations) and other2,337
 924
 5,270
 2,423
733
 2,337
 1,849
 5,270
Restructuring costs11,284
 
 12,809
 
139
 11,284
 1,294
 12,809
$15,181
 $2,101
 $24,606
 $10,191
$3,428
 $15,161
 $9,053
 $24,556
Impairment and other charges, net increaseddecreased $13.111.7 million in the quarter and $14.415.5 million year-to-date compared to a year ago. These increases primarily relate toago reflecting decreases in restructuring costs incurred in connection with the comprehensive review of our organizationorganizational structure which includes evaluating outsourcing opportunities, restructuringand declines in lease obligation costs associated with closed restaurants. Year-to-date, income of certain functions$2.4 million recognized on the disposition of property and workforce reductions. Inequipment in 2013 from the quarter and year-to-date, these costs consist primarilyresolution of pension benefits and employee termination coststwo eminent domain matters involving Jack in the Box restaurants, partially offset by higher impairment charges related to a voluntary early retirement program offered byJack in the Company. With our broad-reaching restructuring activities, including the early retirement plan,Box restaurants we intend to close or have identified approximately $10 million of annualized reductions, and we expect to see the benefits of this in our cost structure beginning in fiscal 2013. To a lesser extent, adjustments made to certain sublease assumptions associated with our lease obligations for closed, locations also contributed to the increase in impairment charges and other.decrease. Refer to Note 5,7, Impairment, Disposition of Property and Equipment, Restaurant Closing Costs and Restructuring, of the notes to the condensed consolidated financial statements for additional information regarding the impairment and other charges.costs associated with closed restaurants.
Gains (losses) on the sale of company-operated restaurants to franchisees, net are detailed in the following table (dollars in thousands):
 Quarter Year-to-Date
 July 8, 2012 July 10, 2011 July 8, 2012 July 10, 2011
Number of restaurants sold to franchisees18
 112
 55
 226
Gains on the sale of company-operated restaurants$3,733
 $10,190
 $18,933
 $38,940
Average gain on restaurants sold$207
 $91
 $344
 $172
 Quarter Year-to-Date
 July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Number of restaurants sold to franchisees18
 18
 22
 55
        
Gains (losses) on the sale of company-operated restaurants$(426) $3,733
 $653
 $18,933
Loss on expected sale of company-operated restaurants(1,083) 
 (3,832) 
Gains (losses) on the sale of company-operated restaurants, net$(1,509) $3,733
 $(3,179) $18,933
In 2012, gains on the sale of company-operated restaurants include additional gains of $0.2 million in the quarter and $2.2

21


million year-to-date recognized upon the extension of the underlying franchise and lease agreements related to one and four restaurants, respectively. Gains wereare impacted by the number of restaurants sold and changes in average gains recognized, which relate to the specific sales and cash flows of those restaurants. The lower averageIn 2013 and 2012, gains in the prior year relate to(losses) on the sale of markets with lower-than-average sales volumescompany-operated restaurants include additional gains recognized upon the extension of the underlying franchise and cash flowslease agreements related to restaurants sold in a prior year of $0.8 million and $0.2 million, respectively, in the quarter and $1.9 million and $2.3 million, respectively, year-to-date. In 2013, gains (losses) on the sale of company-operated restaurants, net also includes a loss of $2.7 million recognized in the second quarter relating to the anticipated sale of a Jack in the Box market and $1.1 million recognized in the third quarters.quarter relating to the anticipated sale of three Qdoba company-operated restaurants.
Interest Expense, Net
Interest expense, net is comprised of the following (in thousands):
Quarter Year-to-DateQuarter Year-to-Date
July 8, 2012 July 10, 2011 July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Interest expense$4,794
 $4,369
 $16,550
 $13,520
$3,501
 $4,794
 $13,015
 $16,550
Interest income(423) (353) (1,588) (947)(231) (423) (954) (1,588)
Interest expense, net$4,371
 $4,016
 $14,962
 $12,573
$3,270
 $4,371
 $12,061
 $14,962
Interest expense, net increaseddecreased $0.41.1 million in the quarter and $2.42.9 million year-to-date compared with a year ago primarily due to higherlower average borrowings.borrowings and average interest rates, partially offset year-to-date by a $0.9 million charge in 2013 to write-off deferred financing fees in connection with the refinancing of our credit facility.
Income Taxes
The tax rate in 20122013 was 34.6%37.4% in the quarter and 34.3%34.6% year-to-date, compared with 35.2%34.9% and 35.0%34.6%, respectively, in the prior year. The changestax rate in the third quarter of fiscal 2013 was affected by discontinued operations as a result of Qdoba’s restaurant closures. The tax benefit attributed to the discontinued operations is separately presented in losses from discontinued operations, net of income tax benefit in the accompanying condensed consolidated statements of operations. The tax rates in all periods were impacted by the market performance of insurance investment products used to fund certain non-qualified retirement plans and estimated earnings.

25


plans. Changes in the cash value of the insurance products are not included in taxable income. We expect the fiscal year tax rate to be approximately 35%-36%. The annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual rate could differ from our current estimates.
Net Earnings from Continuing Operations
Net earningsEarnings from continuing operations were $11.617.3 million, or $0.260.38 per diluted share, in the quarter compared with $18.712.6 million, or $0.380.28 per diluted share, a year ago. Year-to-date net earnings from continuing operations were $45.258.5 million, or $1.011.30 per diluted share, compared with $57.948.9 million or $1.131.09 per diluted share, a year ago.
Losses from Discontinued Operations, Net
As described in Note 2, Discontinued Operations, in the notes to the condensed consolidated financial statements, the results of operations from our distribution business and the 2013 Qdoba Closures have been reported as discontinued operations for all periods presented.
Losses from discontinued operations net of tax, are as follows for each discontinued operation (in thousands):
 Quarter Year-to-Date
 July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Distribution business$(344) $
 $(3,719) $
2013 Qdoba Closures(22,608) (1,012) (26,448) (3,714)
 $(22,952) $(1,012) $(30,167) $(3,714)
In 2013, the year-to-date loss from discontinued operations related to our distribution business includes pre-tax charges of $1.9 million for accelerated depreciation of a long-lived asset disposed of upon completion of the transaction, $1.8 million for future lease commitments and $1.2 million primarily related to costs incurred to exit certain vendor contracts. In 2013, the loss from discontinued operations related to the 2013 Qdoba Closures includes $22.7 million for asset impairments, $9.8 million for future lease commitments, net of reversals for deferred rent and tenant improvement allowances of $4.3 million, $1.6 million of other exits costs (primarily severance and inventory write-offs) and a $2.6 million net loss from operations in the quarter and $8.8 million year-to-date.
These losses reduced diluted earnings per share by approximately the following:
 Quarter Year-to-Date
 July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Distribution business$(0.01) $
 $(0.08) $
2013 Qdoba Closures(0.50) (0.02) (0.59) (0.08)

$(0.51) $(0.02) $(0.67) $(0.08)


26


LIQUIDITY AND CAPITAL RESOURCES
General
Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations, theour revolving bank credit facility and the sale and leaseback of certain restaurant properties and the sale of Jack in the Box company-operated restaurants to franchisees.properties.
We generally reinvest available cash flows from operations to improve our restaurant facilities and develop new restaurants, to reduce debt and to repurchase shares of our common stock. 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 the foreseeable future.
As is common in the restaurant industry, we maintain relatively low levels of accounts receivable and inventories, and our vendors grant trade credit for purchases such as food and supplies. We also continually invest in our business through the addition of new units and refurbishment of existing units, which are reflected as long-term assets and not as part of working capital. As a result, we typicallymay 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 (in thousands):


22


Year-to-DateYear-to-Date
July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012
Total cash provided by (used in):      
Operating activities$111,582
 $92,016
$167,288
 $111,582
Investing activities(81,785) (21,734)(39,324) (81,785)
Financing activities(30,406) (68,863)(126,650) (30,406)
Net increase (decrease) in cash and cash equivalents$(609) $1,419
$1,314
 $(609)
Operating Activities. Operating cash flows increased $19.655.7 million compared with a year ago due primarily to anthe outsourcing of our distribution business which freed up working capital previously tied up in franchise receivables and distribution inventory. Additionally, a $18.141.4 million increase in net income adjusted for non-cash items excluded from cash flows and a $8.5 million and $7.5 million decrease intiming differences associated with rent payments for income taxes and advertising costs, respectively.the month of October also contributed to the increase in operating cash flows. The impact of these increases in cash flows were partially offset by increasesan increase in incentive compensation payments as follows: $9.5 million related to fluctuations in the timing of October rent payments; $6.5 million in pension contributions; and $6.0 million for interest expense. In connection with the transition of our distribution services to an outsourcing arrangement by the end of the first quarter of fiscal 2013 we expect to free up approximately $60 million in working capital currently tied up in franchise receivables and distribution center inventories. For additional information regardingcompared with the outsourcing arrangement, refer to Note 16, Subsequent Event, of the notes to the condensed consolidated financial statements.same period a year ago.
Investing Activities. Cash used in investing activities increaseddecreased $60.142.5 million compared with a year ago due primarily to decreasesa decrease in (1) proceeds from the sale ofcash used to acquire franchise-operated Qdoba restaurants to franchisees, (2) proceeds from the sale and leaseback of restaurant properties and (3) collections of notes receivable related to prior years’ refranchising activities, as well as an increase in cash used to acquire Qdoba franchise-operated restaurants and purchaseproceeds from assets held for sale and leaseback. The impact of these decreaseschanges in cash flowsoutflows were partially offset by a decrease in capital expenditures.proceeds from the sale of Jack in the Box company-operated restaurants.

27


Capital Expenditures The composition of capital expenditures in each period follows (in thousands):
Year-to-DateYear-to-Date
July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012
Jack in the Box:      
New restaurants$10,736
 $10,600
$3,327
 $10,736
Restaurant facility improvements22,052
 61,904
28,035
 22,052
Other, including corporate8,417
 10,204
5,332
 8,417
Qdoba15,000
 16,777
Total capital expenditures$56,205
 $99,485
36,694
 41,205
Qdoba:   
New restaurants16,684
 10,788
Other, including corporate4,593
 4,212
21,277
 15,000
   
Consolidated capital expenditures$57,971
 $56,205
Our capital expenditure program includes, among other things, investments in new locations, restaurant remodeling, new equipment and information technology enhancements. Capital expenditures decreasedincreased compared to a year ago due primarily to an increase in spending related to the exteriors of Jack in the Box restaurants as well as new Qdoba restaurants partially offset by a decrease in spending related to ournew Jack in the Box restaurant re-image and new logo program.restaurants. We expect fiscal 20122013 capital expenditures to be approximately $8090-$9095 million. We plan to open approximately 206 Jack in the Box and 25-3035 Qdoba company-operated restaurants in 20122013.
Sale of Company-Operated Restaurants We continue 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 in each period (dollars in thousands):
Year-to-DateYear-to-Date
July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012
Number of restaurants sold to franchisees55
 226
22
 55
      
Total proceeds$29,253
 $76,915
$8,415
 $29,253
Average proceeds$532
 $340
We expect total proceeds of approximately $45 million from the sale of approximately 100 Jack in the Box restaurants in 2012. In certain instances, we may provide financing to facilitate the closing of certain transactions. As of July 8, 20127, 2013, notes receivable related to prior year refranchisings were $2.91.2 million. As of July 7, 2013, we classified as assets held for sale $9.2 million relating to Jack in the Box operating restaurant properties that we expect to sell to franchisees during the next 12 months and for which we have a signed letter of intent.
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 period (dollars in thousands):

23


Year-to-DateYear-to-Date
July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012
Number of restaurants sold and leased back10
 14
19
 10
      
Purchases of assets held for sale and leaseback$(31,565) $(17,442)
Proceeds from the sale of assets held for sale and leaseback18,457
 25,753
Proceeds from sale and leaseback of assets$36,553
 $18,457
Purchases of assets intended for sale and leaseback(25,198) (31,565)
Net cash flows related to assets held for sale and leaseback$(13,108) $8,311
$11,355
 $(13,108)
As of July 8, 20127, 2013, we had investments of $62.422.1 million in approximately 3611 operating orand under construction restaurant properties that we expect to sell and leaseback during the next 12 months.

28


Acquisition of Franchise-Operated Restaurants During 2012,In each period, 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 refusal and acquired one Jack in the Box franchise restaurant. The following table details franchise-operated restaurant acquisition activity (dollars in thousands):
Year-to-DateYear-to-Date
July 8, 2012 July 10, 2011July 7, 2013 July 8, 2012
Number of restaurants acquired from franchisees45
 24
Number of Jack in the Box restaurants acquired from franchisees1
 
Number of Qdoba restaurants acquired from franchisees12
 45
Cash used to acquire franchise-operated restaurants$48,262
 $22,077
$11,014
 $48,262
The purchase prices were primarily allocated to property and equipment, goodwill and reacquired franchise rights. For additional information, refer to Note 2,4, Summary of Refranchisings, Franchise Development and Acquisitions, of the notes to the condensed consolidated financial statements.
Financing Activities. Cash flows used in financing activities decreasedincreased $38.596.2 million compared with a year ago primarily attributable to a decreasean increase in cash used to repurchase shares of our common stock, an increase in payments made under our credit facility, and the change in our book overdraft related to the timing of working capital receipts and disbursements. These increases in cash outflows were partially offset by a decreasean increase in borrowings under our credit facility.proceeds from the issuance of common stock related to stock option exercises.
New Credit Facility OurIn November 2012, we replaced our existing credit facility with a new credit facility intended to provide a more flexible capital structure and take advantage of lower interest rates. The new facility is comprised of (i) a $400.0 million revolving credit facility and (ii) a $200.0 million term loan, both maturing on June 29, 2015,November 5, 2017, and both bearing interest at London Interbank Offered Rate (“LIBOR”) plus 2.50%2.00%, as of July 8, 20127, 2013. As part of the 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 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 areis based on athe Company’s financial leverage ratio, as defined in the credit agreement.agreement, and can range from LIBOR plus 1.75% to 2.25%with no floor. We may make voluntary prepayments of the loans under the 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, maycould trigger a mandatory prepayment.
The Company borrowed approximately $220.0 million under the revolving credit facility and $200.0 million under the term loan. The proceeds were used to repay all borrowings under the prior credit facility and the related transaction fees and expenses, including those associated with the new credit facility. Loan origination costs associated with the new credit facility were $4.4 million and are included as deferred costs in other assets, net in the accompanying condensed consolidated balance sheet as of July 7, 2013. At July 7, 2013, we had $190.0 million outstanding under the term loan, borrowings under the revolving credit facility of $185.0 million and letters of credit outstanding of $29.1 million.
We are subject to a number of customary covenants under our new 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.ratios defined in our credit agreement. We were in compliance with all covenants as of July 8, 20127, 2013.
At July 8, 2012, we had $170.0 million outstanding under the term loan, borrowings under the revolving credit facility of $275.0 million and letters of credit outstanding of $30.9 million.
FFE Credit Facility FFE entered into an $80.0 million Senior Secured Revolving Securitization Facility (“FFE Facility”) with a third party to assist in funding our franchisee lending program. The FFE Facility is a revolving loan and security agreement bearing a variable interest rate. The revolving period expired in June 2012. As of July 8, 2012, FFE had borrowings outstanding of $0.4 million against this facility.
Interest Rate Swaps To reduce our exposure to rising interest rates under our credit facility,variable rate debt, we consider interest rate swaps. In August 2010, we entered into two forward-looking swaps that effectively convert the first $100.0 million of our variable rate term loan to a fixed-rate basis from September 2011 through September 2014. Based on the term loan’s applicable margin of 2.50%2.00% as of July 8, 20127, 2013, these agreements would have an average pay rate of 1.54%, yielding an “all-in” fixed rate of 4.04%3.54%. For additional information related to our interest rate swaps, refer to Note 4,6, Derivative Instruments, of the notes to the condensed consolidated financial statements.
Repurchases of Common Stock In MayNovember 2011, the Board of Directors approved a program, expiring November 2013, to repurchase $100.0 million in shares of our common stock. In November 2012, the Board of Directors approved a new program to repurchase up to an additional $100.0 million in shares of our common stock expiringthrough November 2012.2014. During the first quarter,2013, we repurchased approximately 0.32.8 million shares at an aggregate cost of $6.492.2 million. As of July 7, 2013, completingthere were no amounts remaining under the MayNovember 2011 authorization and $84.7 million remaining under the November 2012 authorization. In November 2011,August 2013, the Board of

24


Directors approved a new program to repurchase $100.0up to an additional $100.0 million in shares of our common stock expiringthrough November 2013. As of the end of the third quarter, $100.0 million remains available under this authorization.2015.

29


Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those the Company believes are most important for the portrayal of the Company’s financial condition and results and that require management’s most subjective and complex judgments. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2011September 30, 2012.
NEW ACCOUNTING PRONOUNCEMENTS
In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which was issued to update the language used in existing guidance to better align U.S. GAAP and IFRS fair value measurement guidance. This update also requires increased disclosure of quantitative and qualitative information about unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. Other than requiring additional disclosures, adoption of this new guidance in the second quarter did not have a significant impact on our consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which was issued to enhance comparability between entities that report under U.S. GAAP and IFRS, and to provide a more consistent method of presenting non-owner transactions that affect an entity’s equity. ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption of the new guidance is permitted, and full retrospective application is required. This pronouncement is not expected to have a material impact on our consolidated financial statements upon adoption.
Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the federal securities laws. Any statements contained herein that are not historical facts may be deemed to be forward-looking statements. Forward-looking statements may be identified by words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would”, “should” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to, the important factors described in the “Discussion of Critical Accounting Estimates,” and in other sections in this Form 10-Q and in our most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2012 (“Form 10-K”) and other Securities and Exchange Commission filings, including:
Food service businesses such as ours may be materially and adversely affected by changes in consumer tastespreferences or eatingdining habits, and economic, political and socioeconomic conditions. Adverse economic conditions such as unemployment (particularly in California and Texas where our Jack in the Box restaurants are concentrated)decreased discretionary spending may result in reduced restaurant traffic and sales and impose practical limits on pricing.
Our profitability depends in part on changes in food and commodity costs and availability, including animal feed costs and fuel costs and other supply and distribution costs. The risks of increased commodities costs and volatility in costs could negatively impactadversely affect our margins as well as franchisee margins.profitability and results of operations.
Multi-unit food service businesses such as ours can be materially and adversely affected by widespread negative publicity of any type, particularly regarding food quality or public health issues. Negative publicity regarding our brands or the restaurant industry in general could cause a decline in system restaurant sales and could have a material adverse effect on our financial condition and results of operations.

25


FoodSimilarly, food service businesses such as ours are subject to the risk that shortages or interruptions in supply could adversely affect the availability, quality and cost of ingredients.
Our business can be materially and adversely affected by severe weather conditions, which can result in lost restaurant sales, supply chain interruptions and increased costs.
NewGrowth and new restaurant development which is critical to our long-term success, involvesinvolve substantial risks, including availabilityrisks associated with unavailability of acceptablesuitable franchisees, limited financing availability, cost overruns and the inability to secure suitable sites on acceptable terms.
Our In addition, our growth strategy includes opening restaurants in new markets where we cannot assure that we will be able to successfully expand compete with existing restaurants,or acquire critical market presence, attract customers or otherwise operate profitably.
The restaurant industry is highly competitive with respect to price, service, location, brand identification and themenu quality of food.and innovation. We cannot assure that we will be able to effectively respond to aggressive competitors (including competitors with significantly greater financial resources); that our facility improvements and related strategies will yield the desired return on investment;increase our same-store sales and AUVs; or that our new products, service initiatives or our overall strategies will be successful.
The cost of compliance with labor and other regulations could negatively affect our results of operations and financial condition. The increasing amount and complexity of federal, state and local governmental regulations applicable to our industry may increase both our costs of compliance and our exposure to regulatory claims.
Should our advertising and promotionpromotions be less effective than our competitors, there could be a material adverse effect on our results of operations and financial condition.

We may not be able to achieve or maintain
30


The cost-saving initiatives taken in recent years, including the ownership mixoutsourcing of franchisee to company-operated restaurants that we desire. Additionally, our ability to reduce operating costs through increased franchise ownership isdistribution business, are subject to risksrisk and uncertainties.
Weuncertainties, and we cannot assure that franchiseesthese activities, or any other activities we undertake in the future, will achieve the desired savings and developers planning the opening of franchisee restaurants will have the ability or resources to open restaurants or be effective operators, remain aligned with our operations, promotional and capital-intensive initiatives, or successfully operate restaurants in a manner consistent with our standards. In addition, a franchisee's unrelated business obligations could adversely affect a franchisee’s ability to make timely payments to us or adhere to our standards and project an image consistent with our brands.efficiencies.
The loss of key personnel could have a material adverse effect on our business.
We cannot assure thatThe costs of compliance with government regulations, including those resulting in increased labor costs, could negatively affect our current cost reductionresults of operations and outsourcing activities, or any other activities that we may undertake in the future, will achieve the desired cost savings and efficiencies.financial condition.
A material failure or interruption of service or a breach in security of our computerinformation technology systems or databases could cause reduced efficiency in operations, loss or misappropriation of data or business interruptions.
We maintain a documented system of internal controls, which is reviewed and monitored by an Internal Controls Committee and tested by the Company’s full-time internal audit department. 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.
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 affect operations.
Our ability to repay expected borrowings under our credit facility and to meet our other debt or contractual obligations 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.
Changes in accounting standards, policies or related interpretations by accountants or regulatory entities may negatively impact our results.
We are subject to litigation which is inherently unpredictable and can result in unfavorable resolutions where the amount of ultimate loss may differ fromexceed our estimated loss contingencies, or impose other costs in defense of claims.claims or distract management from our operations.
Potential investors are urged to consider these factors, more fully described in our Form 10-K, carefully in evaluating any forward-looking statements, and are cautioned not to place undue reliance on the forward-looking statements. All forward-looking statements are made only as of the date issued, and we do not undertake any obligation to update any forward-looking statements.
 

31


ITEM 3.        QUANITATIVEQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to risks relating to our financial instruments isare changes in interest rates. Our credit facility, which is comprised of a revolving credit facility and a term loan, bears interest at an annual rate equal to the prime rate orof LIBOR plus an applicable margin based on a financial leverage ratio. As of July 8, 20127, 2013, the applicable margin for the LIBOR-based revolving loans and term loan was set at 2.50%2.00%.
We use interest rate swap agreements to reduce exposure to interest rate fluctuations. In August 2010, we entered into two interest rate swap agreements that will effectively convert $100.0 million of our variable rate term loan borrowings to a fixed-rate

26


basis beginning September 2011 through September 2014. Based on the term loan’s applicable margin of 2.50%2.00% as of July 8, 20127, 2013, these agreements would have an average pay rate of 1.54%, yielding an “all-in”a fixed rate of 4.04%3.54%.
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 July 8, 20127, 2013, would result in an estimated increase of $3.52.8 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 July 8, 20127, 2013, we had no such contracts in place.

ITEM 4.        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 Rules 13a - 15 and 15d - 15 of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s quarter ended July 8, 20127, 2013, 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 changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended July 8, 20127, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2732


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

ITEM 1.        LEGAL PROCEEDINGS
The Company is subjectSee Note 14, Contingencies and Legal Matters, of the notes to normal and routine litigation brought by former, current or prospective employees, customers, franchisees, vendors, landlords, shareholders or others. The Company assesses 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 theunaudited condensed consolidated financial statements if it is probable thatfor a liability has been incurreddiscussion of our contingencies 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. 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. Although the Company currently believes that the ultimate outcome of these matters will not have a material adverse effect on the results of operations, liquidity or financial position of the Company, it is possible that the results of operations, liquidity, or financial position of the Company could be materially affected in any particular future reporting period by the unfavorable resolution of one or more of these matters or contingencies.legal matters.

ITEM 1A.    RISK FACTORS
You should consider the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended October 2, 2011September 30, 2012, which we filed with the SEC on November 23, 2011,21, 2012, together with the risks and uncertainties discussed under the heading “Cautionary Statements Regarding Forward-Looking Statements” in Item 2 of this Quarterly Report on Form 10-Q when evaluating our business and our prospects. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012, including our financial statements and the related notes. There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended October 2, 2011September 30, 2012. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the risks or uncertainties actually occurs, our business and financial results could be harmed. In that case, the market price of our common stock could decline. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended October 2, 2011, including our financial statements and the related notes.

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our credit agreement provides for up to $500.0 million for the potential payment of cash dividends and stock repurchases, subject to certain limitations based on our leverage ratio as defined in our credit agreement, of which $434.7 million remained as of July 7, 2013.
Dividends— We did not pay any cash or other dividends during the last two fiscal years and do not anticipate paying dividends in the foreseeable future.
Stock Repurchases— In November 2011, the Board of Directors approved a program, expiring November 2013, to repurchase $100.0 million in shares of our common stock. In November 2012, the Board of Directors approved a new program to repurchase up to an additional $100.0 million in shares of our common stock through November 2014. During 2013, we repurchased approximately 2.8 million shares at an aggregate cost of $92.2 million. As of July 7, 2013, there were no amounts remaining under the November 2011 authorization, and $84.7 million remaining under the November 2012 authorization. The following table summarizes shares repurchased during the quarter ended July 7, 2013:
 
(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
       $135,554,862
April 15, 2013 - May 12, 201323,390
 $35.00
 23,390
 $134,736,146
May 13, 2013 - June 9, 2013936,498
 $36.90
 936,498
 $100,180,506
June 10, 2013 - July 7, 2013406,144
 $38.03
 406,144
 $84,736,173
Total1,366,032
 $37.20
 1,366,032
  

Subsequent to the end of the third quarter, in August 2013, the Board of Directors approved an additional program to repurchase up to $100.0 million in shares of our common stock through November 2015.
ITEM 4.        MINE SAFETY DISCLOSURES
Not applicable.

33


ITEM 5.              OTHER INFORMATION
Item 1.01 Entry into a Material Definitive Agreement.5.03  Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The
Effective August 7, 2013, the Board of Directors (the “Board”)Jack in the Box Inc., following aupon the recommendation of the Nominating and& Governance Committee of the Board, approved an amended and restated form of Indemnification Agreement for the Company’s directors, officers, key employees and key agents. The Board also authorized the Company to enter into the amended and restated form of Indemnification Agreement with each of its existing directors, officers and key employees, effective August 6, 2012.
The amended and restated Indemnification Agreement reflects changes in Delaware law and best practices since the Board’s adoption of the prior form, and complies with the Company’s Bylaws and Delaware law. The Board determined that it was in the best interestsBy-Laws of the Company and its(the “By-Laws”) to make clarifying changes.  Among the changes to the By-Laws, the Board:

Amended Article II, Sections 2.02, to provide for the Chief Executive Officer, rather than the President, to call special meetings of  stockholders, along with the Board;
Amended Article III, Section 3.09 to approveprovide for the amended and restated Indemnification AgreementChief Executive Officer, rather than the President, to help the Company attract and retain the services of talented and experienced individuals to serve as directors, officers, employees and agentscall special meetings of the CompanyBoard, along with a majority of the authorized directors;
Amended Article III, Section 3.11, to provide that written consent of the Board or any committee thereof may be delivered by electronic transmission; and its subsidiaries.
ThisAmended Article V, Section 5.03 to provide that the Chief Executive Officer, in addition to the President or any Vice-President, may endorse checks and other orders of payment payable to the Company.
The foregoing is a summary of the amended and restated Indemnification Agreementamendments made to the By-Laws.  This summary is qualified in its entirety by reference to the form of Indemnification Agreement attachedBy-Laws, as amended and restated and filed as Exhibit 10.11 to this report,3.2, attached hereto and is incorporated herein by reference.


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ITEM 6.    EXHIBITS
NumberDescriptionFormFiled with SEC
3.1Restated Certificate of Incorporation, as amended, dated March 6, 1992September 21, 200710-K12/2/199911/20/2009
3.1.1Certificate of Amendment of Restated Certificate of Incorporation, dated September 21, 20078-K9/24/2007
3.2Amended and Restated Bylaws, dated April 9, 2012August 7, 20138-K4/10/2012
10.11 ~Form of Amended and Restated Indemnification Agreement between the registrant and individual directors, officers and key employees.10-QFiled herewith
31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Filed herewith
32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Filed herewith
101.INS*XBRL Instance Document  
101.SCH*XBRL Taxonomy Extension Schema Document  
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document  
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document  
101.LAB*XBRL Taxonomy Extension Label Linkbase Document  
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 Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”



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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 JACK IN THE BOX INC.
   
 By:
/S/    JERRY P. REBEL        
  Jerry P. Rebel
  
Executive Vice President and Chief Financial Officer (principal financial officer)
(Duly Authorized Signatory)
Date: August 10, 20128, 2013

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