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, 2012~~7, 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 filer	þ	Accelerated 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, 2012~~2, 2013, ~~44,579,115~~43,301,720 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 Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of ~~Earnings~~Comprehensive Income and Loss	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1619
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2632
Item 4.	Controls and Procedures	2732
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	2833
Item 1A.	Risk Factors	2833
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	2834
Item 6.	Exhibits	2935
	Signature	3036

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, net	41,972			78,798
Inventories	8,203			7,752
Prepaid expenses	56,816			32,821
Deferred income taxes	26,931			26,932
Assets held for sale	31,253			45,443
Assets of discontinued operations held for sale	—			30,591
Other current assets	471			375
Total current assets	175,429			231,181
Property and equipment, at cost	1,489,407			1,529,650
Less accumulated depreciation and amortization	(726,552		)	(708,858		)
Property and equipment, net	762,855			820,792
Goodwill	148,632			140,622
Other assets, net	273,502			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 payable	26,594			94,713
Accrued liabilities	169,792			164,637
Total current liabilities	217,317			275,302
Long-term debt, net of current maturities	359,514			405,276
Other long-term liabilities	366,356			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, respectively	780			758
Capital in excess of par value	280,600			221,100
Retained earnings	1,148,995			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’ equity	417,231			411,945
	$	1,360,418		$	1,463,725

See accompanying notes to condensed consolidated financial statements.

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, net 84,899
86,213
Inventories 36,997
38,931
Prepaid expenses 32,175
18,737
Deferred income taxes 44,166
45,520
Assets held for sale and leaseback 62,400
51,793
Other current assets 517
1,793
Total current assets 271,969
254,411
Property and equipment, at cost 1,532,655
1,518,799
Less accumulated depreciation and amortization (707,105 ) (663,373 )
Property and equipment, net 825,550
855,426
Goodwill 140,470
105,872
Other assets, net 241,099
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 payable 67,541
94,348
Accrued liabilities 176,766
167,487
Total current liabilities 265,707
282,983
Long-term debt, net of current maturities 430,441
447,350
Other long-term liabilities 340,376
290,723
Deferred income taxes 5,310
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, respectively 756
750
Capital in excess of par value 215,539
202,684
Retained earnings 1,108,194
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’ equity 437,254
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 revenues	79,466			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 packaging	88,712			89,456			289,259			301,067
Payroll and employee benefits	74,242			78,055			250,006			262,670
Occupancy and other	59,360			60,691			195,372			203,679
Total company restaurant costs	222,314			228,202			734,637			767,416
Franchise costs	40,116			38,604			132,265			126,459
Selling, general and administrative expenses	52,078			52,090			171,246			171,195
Impairment and other charges, net	3,428			15,161			9,053			24,556
Losses (gains) on the sale of company-operated restaurants	1,509			(3,733		)	3,179			(18,933		)
	319,445			330,324			1,050,380			1,070,693
Earnings from operations	30,884			23,728			101,506			89,704
Interest expense, net	3,270			4,371			12,061			14,962
Earnings from continuing operations and before income taxes	27,614			19,357			89,445			74,742
Income taxes	10,318			6,753			30,954			25,854
Earnings from continuing operations	17,296			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:
Basic	43,772			44,156			43,435			43,975
Diluted	45,247			45,153			44,978			44,892

____________________________


(1)	Earnings per share may not add due to rounding.

See accompanying notes to condensed consolidated financial statements.

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~EARNINGS~~COMPREHENSIVE 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 sales 138,839
125,704
473,779
393,753
Franchise revenues 77,605
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 packaging 92,155
110,596
309,172
359,725
Payroll and employee benefits 81,806
96,723
274,875
329,235
Occupancy and other 64,316
78,100
214,751
259,896
Total company restaurant costs 238,277
285,419
798,798
948,856
Distribution costs 138,839
126,063
473,779
395,242
Franchise costs 38,604
31,589
126,459
101,268
Selling, general and administrative expenses 52,566
51,344
172,780
170,854
Impairment and other charges, net 15,181
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 operations 22,086
32,953
83,676
101,658
Interest expense, net 4,371
4,016
14,962
12,573
Earnings before income taxes 17,715
28,937
68,714
89,085
Income taxes 6,123
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:
Basic 44,156
48,498
43,975
50,435
Diluted 45,153
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, respectively	2,689			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, respectively	36			(163		)	(19		)	(545		)
Net loss reclassified to earnings, net of tax benefit of $120, $116, $398 and $384, respectively	193			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.

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Year-to-Date						Year-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 amortization	74,210			74,342			74,870			74,210
Deferred finance cost amortization	2,068			1,954			1,764			2,068
Deferred income taxes	(2,314		)	(7,771		)	2,523			(2,314		)
Share-based compensation expense	5,001			6,755			10,049			5,001
Pension and postretirement expense	26,853			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, net	3,762			6,084
Impairment charges	2,765			1,684
Losses (gains) on the sale of company-operated restaurants							3,179			(18,933		)
Losses on the disposition of property and equipment							2,525			3,762
Impairment charges and other							28,237			2,765
Loss on early retirement of debt							939			—
Changes in assets and liabilities, excluding acquisitions and dispositions:
Accounts and other receivables	(2,891		)	(14,198		)	33,776			(2,891		)
Inventories	1,934			(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 liabilities	13,210			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 activities	111,582			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 leaseback	18,457			25,753
Purchases of assets intended for sale and leaseback							(25,198		)	(31,565		)
Proceeds from sale and leaseback of assets							36,553			18,457
Proceeds from the sale of company-operated restaurants	29,253			76,915			8,415			29,253
Collections on notes receivable	10,198			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		)
Other	315			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 facility	444,380			543,000
Repayments of borrowings on revolving credit facility	(445,104		)	(453,000		)
Borrowings on revolving credit facilities							554,000			444,380
Repayments of borrowings on revolving credit facilities							(619,000		)	(445,104		)
Proceeds from issuance of debt							200,000			—
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 stock	7,096			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 arrangements	525			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 period	11,424			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.

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-operated	586	735	526	586
Franchise	1,661	1,485	1,729	1,661
Total system	2,247	2,220	2,255	2,247
Qdoba:
Company-operated	304	229	284	304
Franchise	310	335	308	310
Total system	614	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, 2011~~September 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 entity~~VIE 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 ~~2012~~2013 and ~~2011~~2012 include 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks. All comparisons between ~~2012~~2013 and ~~2011~~2012 refer to the 12-weeks (“quarter”) and 40-weeks (“year-to-date”) ended July ~~8, 2012~~7, 2013 and July ~~10, 2011~~8, 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.

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, net	3,747
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
Adjustments	29			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	)

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.

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):


	Quarter						Year-to-Date						Quarter						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 franchisees	18			112			55			226			18			18			22			55
New restaurants opened by franchisees	7			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~~ ~~2012~~2013 and ~~2011~~2012, 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-Date						July 7, 2013									July 8, 2012
	July 8, 2012			July 10, 2011			Qdoba			Jack in the Box			Total			Qdoba
Restaurants acquired from franchisees	45			24			12			1			13			45

Property and equipment	$	12,330		$	4,858		$	2,632		$	145		$	2,777		$	12,330
Reacquired franchise rights	604			280			106			34			140			604
Liabilities assumed	(121		)	(74		)	(281		)	(2		)	(283		)	(121		)
Goodwill	35,449			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

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~~

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, 2012~~7, 2013, the carrying ~~value~~values of ~~all financial instruments was~~the 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, 2012~~7, 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 property~~The following table presents non-financial assets and ~~equipment impairment reviews~~liabilities measured at fair value on a non-reoccurring basis during ~~the~~ fiscal 2013 (~~40-weeks~~in 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~~, ~~eight~~Long-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

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 regard~~related 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, 2011				July 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
	Location of Loss in Income	July 7, 2013			July 8, 2012			July 7, 2013			July 8, 2012
Gain (loss) recognized in OCI	N/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.


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 ~~earnings~~operations is comprised of the following (in thousands):


	Quarter				Year-to-Date				Quarter				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, net	904		660		3,762		6,084		2,055		884		2,525		3,712
Costs of closed restaurants (primarily lease obligations) and other	2,337		924		5,270		2,423		733		2,337		1,849		5,270
Restructuring costs	11,284		—		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 ~~five~~underperforming Jack in the Box restaurants and~~three~~ Jack in the Box restaurants we intend to or have closed.

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-Date						Quarter						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 adjustments	1,801			379			3,713			1,163
Additions													1,285			119			1,285			546
Adjustments													367			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

~~Additions~~In fiscal 2013, additions in the quarter and ~~adjustments~~year-to-date periods primarily relate to two Jack in ~~all periods~~the 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 fiscal~~Since the beginning of 2012, we have been engaged in a comprehensive review of our organization structure, including evaluating opportunities for outsourcing, restructuring of certain functions and workforce reductions. 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-Date				Quarter				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 costs	3,972		—		5,497		—		4		3,972		674		5,497
Other	1,145		—		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):


	Quarter					Year-to-Date					Quarter						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		$	—
Additions	3,972			—		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 ~~reasonably~~make a reasonable estimate of the additional costs at this time. Our continuing efforts to lower our cost structure include identifying opportunities to reduce general and administrative costs as well as improve restaurant profitability across both brands.


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 ~~2012~~2013 rate could differ from our current estimates.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

At July ~~8, 2012~~7, 2013, our gross unrecognized tax benefits associated with uncertain income tax positions were $~~0.9~~0.6 million, which if recognized would favorably impact the effective income tax rate. The gross unrecognized tax benefits ~~increased by~~decreased $0.3 million from the end of fiscal year ~~2011~~2012 based on ~~a preliminary assessment~~the 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 ~~2009~~2010 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 ~~which~~hired 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,~~ ~~Stockholders~~’ ~~Equity, 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):


	Quarter						Year-to-Date						Quarter						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 cost	5,347			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 loss	2,974			2,268			9,657			7,557			4,116			2,974			13,719			9,657
Amortization of unrecognized prior service cost	99			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 cost	374			366			1,244			1,220			366			374			1,220			1,244
Actuarial loss	21			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 million~~no minimum ~~requirement that will be satisfied by~~ ~~September 15, 2013~~.contribution funding requirement. Details regarding fiscal ~~2012~~2013 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.

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~~ ~~2012~~2013, we granted the following shares related to our share-based compensation awards:



	~~Shares~~Year-to-Date
Stock options	~~485,057~~376,793
~~Performance-vested stock~~Performance share awards	~~234,258~~89,236
Nonvested stock units	~~86,052~~121,491

The components of share-based compensation expense recognized in each period are as follows (in thousands):


	Quarter				Year-to-Date				Quarter				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 awards	222		270		724		1,479
Performance share awards									421		222		2,085		724
Nonvested stock awards	134		139		449		465		82		134		301		449
Nonvested stock units	295		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 ~~May~~November 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 million~~2013, ~~completing the May 2011 authorization. In~~ ~~November 2011, the~~

~~Board of Directors approved a new program~~ to repurchase $100.0 million in shares of our common ~~stock expiring~~stock. In November ~~2013. As~~2012, the Board of ~~the end of the~~ ~~third~~ ~~quarter,~~Directors approved a new program to repurchase up to an additional $100.0 million ~~remains available~~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 ~~this~~the 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 earnings 304
—
1,001
—
Total 40
(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 earnings 3,094
2,434
10,058
8,112
Total (39,277 ) 2,434
(32,313 ) 8,112
Tax effect 15,078
(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, respectively	9			—
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 stock~~Performance 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.

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-Date		Quarter		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 – basic	44,156	48,498	43,975	50,435	43,772	44,156	43,435	43,975
Effect of potentially dilutive securities:
Stock options	505	397	431	440	895	505	957	431
Nonvested stock awards and units	264	224	267	216	375	264	366	267
Performance-vested stock awards	228	133	219	134
Performance share awards					205	228	220	219
Weighted-average shares outstanding – diluted	45,153	49,252	44,892	51,225	45,247	45,153	44,978	44,892
Excluded from diluted weighted-average shares outstanding:
Antidilutive	2,583	3,059	3,006	3,009	—	2,583	172	3,006
Performance conditions not satisfied at the end of the period	343	354	343	354	220	343	220	343


~~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 million~~lending 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 loan~~lending period and ~~security agreement bearing a variable interest rate. The~~the 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 ~~earnings~~operations 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 million~~as of July ~~8, 2012~~7, 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.

~~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 routine~~assesses 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 ~~believes~~unable 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 ~~the~~our business, results of operations, liquidity or financial position of the Company, it is possible that ~~the~~our 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.~~15.	SEGMENT REPORTING

~~Reflecting the information currently being used~~We are principally engaged in ~~managing the Company as a~~ ~~two-branded restaurant operations business, our segments comprise results related to system restaurant operations for~~developing, 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.

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-Date						Quarter						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 segment	74,803			55,595			217,132			159,750			77,574			65,874			233,640			190,143
Distribution operations	138,839			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 segment	6,705			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 segment	4,120			3,195			12,872			9,657			3,741			3,190			12,054			9,933
Distribution operations	158			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
Qdoba 92,140
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
Additions	7,207			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 ~~2012~~2013.


~~14.~~16.	SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)


	Year-to-Date				July 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 asset	86,910		70,882
Deferred tax assets					107,056		115,537
Other	70,414		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 taxes					10,551		13,055
Advertising	24,969		21,899		19,407		21,400
Insurance	32,866		37,987		34,162		33,391
Lease commitments related to closed locations					13,561		5,387
Deferred rent income					12,661		132
Deferred beverage allowance					10,244		4,583
Other	68,500		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 accrual	54,080		53,659		51,568		54,288
Other	94,710		92,204		105,578		103,060
	$	340,376	$	290,723	$	366,356	$	371,202


~~16.~~18.	SUBSEQUENT ~~EVENT~~EVENTS

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 completion~~sale of ~~certain closing conditions, the transition should begin~~27 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 disclosure~~shares 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 ~~2012~~2013 and ~~2011~~2012 refer to the 12-weeks (“quarter”) and 40-weeks (“year-to-date”) ended July ~~8, 2012~~7, 2013 and July ~~10, 2011~~8, 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, 2012~~7, 2013 and July ~~10, 2011~~8, 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, 2011~~September 30, 2012.

Our MD&A consists of the following sections:

Overview — a general description of our business and fiscal ~~2012~~2013 highlights.

Financial reporting — a discussion of changes in presentation.

Results of operations — an analysis of our consolidated statements of ~~earnings~~operations 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, 2012~~7, 2013, we operated and franchised ~~2,247~~2,255 Jack in the Box quick-service restaurants, primarily in the western and southern United States, and ~~614~~592 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, which~~franchisees. These gains are presented as a reduction of operating costs and expenses, net in the accompanying condensed consolidated statements of ~~earnings.~~operations.

The following summarizes the most significant events occurring in fiscal ~~2012~~2013 and certain trends compared to a year ago:

Restaurant Sales — Sales at restaurants open more than one year (“same-store sales”) ~~increased~~changed as follows:



	Quarter		Year-to-Date
	July 7, 2013	July 8, 2012	July 7, 2013	July 8, 2012
Jack in the Box:
Company	1.2%	3.4%	1.4%	4.9%
Franchise	(0.3)%	2.6%	0.6%	3.0%
System	0.1%	2.8%	0.8%	3.5%
Qdoba:
Company (1)	0.5%	3.8%	0.3%	3.9%
Franchise	2.1%	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:
Company 3.4 % 4.7 % 4.9 % 2.4 %
Franchise 2.6 % 2.4 % 3.0 % 0.9 %
System 2.8 % 3.2 % 3.5 % 1.4 %
Qdoba:
Company 3.3 % 5.3 % 3.5 % 5.4 %
Franchise 0.9 % 5.0 % 2.5 % 6.1 %
System 2.1 % 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 commodity~~Commodity costs increased approximately ~~2.5%~~3.0%. and 1.9% at our Jack in the Box and Qdoba ~~commodity costs increased by~~restaurants, 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

approximately ~~3.5%~~2.0% in fiscal ~~2012~~2013 ~~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 ~~further~~ultimately increase franchise ownership to ~~approximately~~be 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.

RESULTS OF OPERATIONS

The following table presents certain income and expense items included in our condensed consolidated statements of ~~earnings~~operations as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

CONSOLIDATED STATEMENTS OF ~~EARNINGS~~OPERATIONS DATA


	Quarter				Year-to-Date				Quarter				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 sales	56.9	%	62.8	%	56.6	%	64.2	%	77.3	%	78.1	%	77.1	%	78.7	%
Distribution sales	27.7	%	24.2	%	28.5	%	23.3	%
Franchise revenues	15.5	%	13.0	%	14.9	%	12.5	%	22.7	%	21.9	%	22.9	%	21.3	%
Total revenues	100.0	%	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 expenses	10.5	%	9.9	%	10.4	%	10.1	%	14.9	%	14.7	%	14.9	%	14.8	%
Impairment and other charges, net	3.0	%	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 restaurants									0.4	%	(1.1	)%	0.3	%	(1.6	)%
Earnings from operations	4.4	%	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.

SUPPLEMENTAL COMPANY-OPERATED RESTAURANTS STATEMENTS OF ~~EARNINGS~~OPERATIONS DATA

(dollars in thousands)


	Quarter								Year-to-Date								Quarter								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
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 packaging	71,582		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 benefits	63,372		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 other	45,842		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 packaging	20,573		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 benefits	18,434		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 other	18,474		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	%

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, 2011						July 7, 2013						July 8, 2012
	Company		Franchise		Total		Company		Franchise		Total		Company		Franchise		Total		Company		Franchise		Total
Jack in the Box:
Beginning of year	629		1,592		2,221		956		1,250		2,206		547		1,703		2,250		629		1,592		2,221
New	14		16		30		11		10		21		4		11		15		14		16		30
Refranchised	(55	)	55		—		(226	)	226		—		(22	)	22		—		(55	)	55		—
Acquired from franchisees													1		(1	)	—		—		—		—
Closed	(2	)	(2	)	(4	)	(6	)	(1	)	(7	)	(4	)	(6	)	(10	)	(2	)	(2	)	(4	)
End of period	586		1,661		2,247		735		1,485		2,220		526		1,729		2,255		586		1,661		2,247
% of system	26	%	74	%	100	%	33	%	67	%	100	%
% of JIB system													23	%	77	%	100	%	26	%	74	%	100	%
% of consolidated system													65	%	85	%	79	%	66	%	84	%	79	%
Qdoba:
Beginning of year	245		338		583		188		337		525		316		311		627		245		338		583
New	14		20		34		17		30		47		19		24		43		14		20		34
Acquired from franchisees	45		(45	)	—		24		(24	)	—		12		(12	)	—		45		(45	)	—
Closed	—		(3	)	(3	)	—		(8	)	(8	)	(63	)	(15	)	(78	)	—		(3	)	(3	)
End of period	304		310		614		229		335		564		284		308		592		304		310		614
% of system	50	%	50	%	100	%	41	%	59	%	100	%
% of Qdoba system													48	%	52	%	100	%	50	%	50	%	100	%
% of consolidated system													35	%	15	%	21	%	34	%	16	%	21	%
Consolidated:
Total system	890		1,971		2,861		964		1,820		2,784		810		2,037		2,847		890		1,971		2,861
% of system	31	%	69	%	100	%	35	%	65	%	100	%
% of consolidated system													28	%	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 $~~40.7~~5.6 million, or ~~12.5%~~2.0%, in the quarter and $~~143.9~~24.7 million, or ~~13.3%~~2.7%, ~~year-to-date. This decrease is~~year-to-date compared with the prior year. The decreases in restaurant sales are due primarily to ~~a decrease~~decreases in the average number of Jack in the Box company-operated restaurants,

partially offset by ~~an increase~~increases 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 ~~represents~~presents 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 increase 27,400
111,000
Increase in the average number of Qdoba restaurants 15,800
49,100
Qdoba PSA sales increase 3,700
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 increase	5,700			24,400
Increase in the average number of Qdoba restaurants	11,800			39,800
Qdoba AUV increase	100			4,500
Total decrease in company restaurant sales	$	(5,600	)	$	(24,700	)

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 transactions 1.2 % 2.5 %
Jack in the Box average check (1) 2.2 % 2.4 %
Jack in the Box change in same-store sales 3.4 % 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 sales	1.2%	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 grew~~Franchise revenues increased $~~13.1~~1.9 million in the quarter and $~~80.0~~16.2 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 to~~reflecting an increase in the average number of Jack in the Box franchise restaurants, which contributed additional royalties and rents of approximately $~~11.6~~3.1 million and $~~41.1~~13.7 million, respectively. ~~This~~In 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-date~~an 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):


	Quarter						Year-to-Date						Quarter						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
Royalties	$	29,988		$	25,637		$	97,499		$	81,982		$	30,785		$	29,988		$	101,578		$	97,499
Rents	45,982			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 other	1,824			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
% increase	14.9		%				17.0		%				2.4		%				6.6		%
Average number of franchise restaurants	1,968			1,715			1,943			1,669			2,031			1,968			2,020			1,943
% increase	14.8		%				16.4		%				3.2		%				4.0		%
Increase in franchise-operated same-store sales:
Changes in franchise-operated same-store sales:
Jack in the Box	2.6		%	2.4		%	3.0		%	0.9		%	(0.3		)%	2.6		%	0.6		%	3.0		%
Qdoba	0.9		%	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 Box	5.3		%	5.3		%	5.3		%	5.3		%	5.2		%	5.3		%	5.2		%	5.3		%
Qdoba	5.0		%	5.0		%	5.0		%	5.0		%	5.0		%	5.0		%	5.0		%	5.0		%

Operating Costs and Expenses

Food and packaging costs ~~decreased to~~were ~~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, higher~~Higher commodity costs in both periods and greater promotional activity at our Qdoba restaurants year-to-date were ~~more than~~partially offset in the quarter and ~~partially~~more 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-Date		Quarter	Year-to-Date
Jack in the Box	(0.3	)%	3.1	%	3.0%	1.6%
Qdoba	2.5	%	7.8	%	1.9%	1.5%

~~Commodity cost increases~~Costs were ~~driven by~~ higher ~~costs~~ for most commodities other than ~~produce~~bakery and ~~poultry.~~beans in both periods and dairy year-to-date. We expect overall commodity costs for fiscal ~~2012~~2013 to increase approximately ~~3.5%~~2.0%. Beef represents the largest portion, or approximately 20%, of the Company’s overall commodity ~~spend, and we~~spend. 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 ~~2012~~2013 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 to~~from ~~29.7%~~28.2% and ~~30.4%~~28.8%, respectively, in ~~2011~~2012, 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 were~~franchised restaurants, partially offset by higher staffing levels ~~of incentive compensation.~~at our Qdoba restaurants.

Occupancy and other costs ~~decreased to~~were ~~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 ~~2012~~2013 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 to~~other costs ~~associated with the roll-out of new menu boards and uniforms during the prior year quarter at~~than 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 lease~~leased to Jack in the Box franchisees, increased $~~7.0~~1.5 million to ~~49.7%~~ ~~of the related revenues~~ in the quarter and $~~25.2~~5.8 million to ~~51.2%~~year-to-date, ~~from~~ ~~46.8%~~ ~~and~~ ~~48.0%, respectively, a year ago. The increase as a percent of revenues is~~due 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. In~~the related revenues, franchise costs in the quarter ~~these increases were offset~~increased to 50.5% in ~~part~~2013 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 ~~decrease~~reduction 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.

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-Date			Quarter			Year-to-Date
Advertising	$	(1,894	)	$	(9,579	)	$	191		$	(79	)
Refranchising strategy	(2,100		)	(4,476		)	(332		)	(1,385		)
Incentive compensation	2,661			4,351
Incentive compensation (including share-based compensation)							(643		)	2,617
Cash surrender value of COLI policies, net	109			190			107			1,693
Pension and postretirement benefits	658			2,190			873			3,272
Pre-opening costs	563			1,712			(586		)	(2,091		)
Qdoba general and administrative	1,141			3,216
Other	84			4,322
Other, including savings from restructuring initiatives							378			(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. ~~The~~As such, advertising and region administration costs decreased at Jack in the Box but were higher ~~levels of~~at Qdoba.

In 2013 incentive compensation ~~reflect an improvement~~declined due to a decrease in ~~the Company’s~~Qdoba’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 $~~0.1~~0.2 million in the quarter compared with ~~no impact in the same quarter~~$0.1 million last year and positively impacted SG&A by $~~4.2~~2.5 million ~~year to date~~year-to-date compared with $~~4.4~~4.2 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-opening~~the prior year. Pre-opening costs decreased primarily ~~relates~~due to higher expenses ~~associated with~~incurred 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.~~

Impairment and other charges, net is comprised of the following (in thousands):


	Quarter				Year-to-Date				Quarter				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, net	904		660		3,762		6,084		2,055		884		2,525		3,712
Costs of closed restaurants (primarily lease obligations) and other	2,337		924		5,270		2,423		733		2,337		1,849		5,270
Restructuring costs	11,284		—		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 ~~increased~~decreased $~~13.1~~11.7 million in the quarter and $~~14.4~~15.5 million year-to-date compared to a year ~~ago. These increases primarily relate to~~ago reflecting decreases in restructuring costs incurred in connection with the comprehensive review of our ~~organization~~organizational structure ~~which includes evaluating outsourcing opportunities, restructuring~~and 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. In~~equipment in 2013 from the ~~quarter and year-to-date, these costs consist primarily~~resolution of ~~pension benefits and employee termination costs~~two eminent domain matters involving Jack in the Box restaurants, partially offset by higher impairment charges related to ~~a voluntary early retirement program offered by~~Jack 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 franchisees 18
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 franchisees	18			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~~

~~million year-to-date recognized upon the extension of the underlying franchise and lease agreements related to one and four restaurants, respectively.~~ Gains ~~were~~are 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 average~~In 2013 and 2012, gains ~~in the prior year relate to~~(losses) on the sale of ~~markets with lower-than-average sales volumes~~company-operated restaurants include additional gains recognized upon the extension of the underlying franchise and ~~cash flows~~lease 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-Date						Quarter						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
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 ~~increased~~decreased $~~0.4~~1.1 million in the quarter and $~~2.4~~2.9 million year-to-date compared with a year ago primarily due to ~~higher~~lower 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 ~~2012~~2013 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 ~~changes~~tax 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.~~

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 earnings~~Earnings from continuing operations were $~~11.6~~17.3 million, or $~~0.26~~0.38 per diluted share, in the quarter compared with $~~18.7~~12.6 million, or $~~0.38~~0.28 per diluted share, a year ago. Year-to-date ~~net~~ earnings from continuing operations were $~~45.2~~58.5 million, or $~~1.01~~1.30 per diluted share, compared with $~~57.9~~48.9 million or $~~1.13~~1.09 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	)

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations, ~~the~~our 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 ~~typically~~may at times maintain current liabilities in excess of current assets, which results in a working capital deficit.

Cash Flows

The table below summarizes our cash flows from operating, investing and financing activities (in thousands):


	Year-to-Date						Year-to-Date
	July 8, 2012			July 10, 2011			July 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 $~~19.6~~55.7 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 $~~18.1~~41.4 million increase in net income adjusted for non-cash items excluded from cash flows and ~~a $8.5 million and $7.5 million decrease in~~timing 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 ~~increases~~an 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 regarding~~compared 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 ~~increased~~decreased $~~60.1~~42.5 million compared with a year ago due primarily to ~~decreases~~a decrease in ~~(1) proceeds from the sale of~~cash 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 purchase~~proceeds from assets held for sale and leaseback. The impact of these ~~decreases~~changes in cash ~~flows~~outflows were partially offset by a decrease in ~~capital expenditures.~~proceeds from the sale of Jack in the Box company-operated restaurants.

Capital Expenditures — The composition of capital expenditures in each period follows (in thousands):


	Year-to-Date				Year-to-Date
	July 8, 2012		July 10, 2011		July 7, 2013		July 8, 2012
Jack in the Box:
New restaurants	$	10,736	$	10,600	$	3,327	$	10,736
Restaurant facility improvements	22,052		61,904		28,035		22,052
Other, including corporate	8,417		10,204		5,332		8,417
Qdoba	15,000		16,777
Total capital expenditures	$	56,205	$	99,485
					36,694		41,205
Qdoba:
New restaurants					16,684		10,788
Other, including corporate					4,593		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 ~~decreased~~increased 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 ~~our~~new Jack in the Box ~~restaurant re-image and new logo program.~~restaurants. We expect fiscal ~~2012~~2013 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 ~~2012~~2013.

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-Date				Year-to-Date
	July 8, 2012		July 10, 2011		July 7, 2013		July 8, 2012
Number of restaurants sold to franchisees	55		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, 2012~~7, 2013, notes receivable related to prior year refranchisings were $~~2.9~~1.2 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):


	Year-to-Date						Year-to-Date
	July 8, 2012			July 10, 2011			July 7, 2013			July 8, 2012
Number of restaurants sold and leased back	10			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 leaseback	18,457			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, 2012~~7, 2013, we had investments of $~~62.4~~22.1 million in ~~approximately~~ 3611 operating orand under construction restaurant properties that we expect to sell and leaseback during the next 12 months.

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-Date				Year-to-Date
	July 8, 2012		July 10, 2011		July 7, 2013		July 8, 2012
Number of restaurants acquired from franchisees	45		24
Number of Jack in the Box restaurants acquired from franchisees					1		—
Number of Qdoba restaurants acquired from franchisees					12		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 ~~decreased~~increased $~~38.5~~96.2 million compared with a year ago primarily attributable to ~~a decrease~~an 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 decrease~~an increase in ~~borrowings under our credit facility.~~proceeds from the issuance of common stock related to stock option exercises.

New Credit Facility — ~~Our~~In 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, 2012~~7, 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 ~~are~~is 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, ~~may~~could 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, 2012~~7, 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, 2012~~7, 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 ~~May~~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 ~~expiring~~through November ~~2012.~~2014. During ~~the first quarter,~~2013, we repurchased approximately ~~0.3~~2.8 million shares at an aggregate cost of $~~6.4~~92.2 million. As of July 7, 2013, ~~completing~~there were no amounts remaining under the ~~May~~November 2011 authorization and $84.7 million remaining under the November 2012 authorization. In ~~November 2011,~~August 2013, the Board of

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

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, 2011~~September 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 ~~tastes~~preferences or ~~eating~~dining 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 impact~~adversely 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.

~~Food~~Similarly, 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.

~~New~~Growth and new restaurant development ~~which is critical to our long-term success, involves~~involve substantial risks, including ~~availability~~risks associated with unavailability of ~~acceptable~~suitable 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 ~~the~~menu 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 ~~promotion~~promotions 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~~

The cost-saving initiatives taken in recent years, including the ~~ownership mix~~outsourcing of ~~franchisee to company-operated restaurants that we desire. Additionally,~~ our ~~ability to reduce operating costs through increased franchise ownership is~~distribution business, are subject to ~~risks~~risk and ~~uncertainties.~~

Weuncertainties, and we cannot assure that ~~franchisees~~these 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 that~~The costs of compliance with government regulations, including those resulting in increased labor costs, could negatively affect our ~~current cost reduction~~results 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 ~~computer~~information 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 from~~exceed 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.

ITEM 3. ~~QUANITATIVE~~QUANTITATIVE 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, 2012~~7, 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

basis beginning September 2011 through September 2014. Based on the term loan’s applicable margin of ~~2.50%~~2.00% as of July ~~8, 2012~~7, 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, 2012~~7, 2013, would result in an estimated increase of $~~3.5~~2.8 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, 2012~~7, 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, 2012~~7, 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, 2012~~7, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

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

ITEM 1. LEGAL PROCEEDINGS

~~The Company is subject~~See 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 the~~unaudited condensed consolidated financial statements ~~if it is probable that~~for a ~~liability has been incurred~~discussion 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, 2011~~September 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, 2011~~September 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, 2013	23,390	$	35.00	23,390	$	134,736,146
May 13, 2013 - June 9, 2013	936,498	$	36.90	936,498	$	100,180,506
June 10, 2013 - July 7, 2013	406,144	$	38.03	406,144	$	84,736,173
Total	1,366,032	$	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.

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 a~~upon 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 ~~approve~~provide for the ~~amended and restated Indemnification Agreement~~Chief 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 agents~~call special meetings of the ~~Company~~Board, 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.~~

~~This~~Amended 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 Agreement~~amendments made to the By-Laws. This summary is qualified in its entirety by reference to the ~~form of Indemnification Agreement attached~~By-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



Number	Description	Form	Filed with SEC
3.1	Restated Certificate of Incorporation, as amended, dated ~~March 6, 1992~~September 21, 2007	10-K	~~12/2/1999~~11/20/2009
3.1.1	Certificate of Amendment of Restated Certificate of Incorporation, dated September 21, 2007	8-K	9/24/2007
3.2	Amended and Restated Bylaws, dated ~~April 9, 2012~~August 7, 2013	~~8-K~~	~~4/10/2012~~
~~10.11 ~~~	~~Form of Amended and Restated Indemnification Agreement between the registrant and individual directors, officers and key employees.~~	—10-Q	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
101.INS*	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.”

2935

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, 2012~~8, 2013

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	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	)	$	—



	July 8, 2012		October 2, 2011
Goodwill by segment (in thousands):
Jack in the Box	$	48,330	$	49,181
Qdoba	92,140		56,691
Consolidated goodwill	$	140,470	$	105,872



	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 increase	27,400			111,000
Increase in the average number of Qdoba restaurants	15,800			49,100
Qdoba PSA sales increase	3,700			9,000
Total decrease in company restaurant sales	$	(40,700	)	$	(143,900	)



	Quarter		Year-to-Date
Jack in the Box transactions	1.2	%	2.5	%
Jack in the Box average check (1)	2.2	%	2.4	%
Jack in the Box change in same-store sales	3.4	%	4.9	%
Qdoba change in same-store sales (2)	3.3	%	3.5	%