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 endedJuly 4, 2010April 17, 2011
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.
Yesþ Noo
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).
Yesþ Noo
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. (Check one):
       
Large accelerated filerþAccelerated filero Accelerated fileroNon-accelerated filero Smaller reporting companyo
    (Do not check if a smaller reporting company)  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso Noþ
As of the close of business August 2, 2010, 55,095,553May 13, 2011, 49,697,537 shares of the registrant’s common stock were outstanding.
 
 

 


 

JACK IN THE BOX INC. AND SUBSIDIARIES
INDEX
       
    Page
PART I — FINANCIAL INFORMATION
       
     
       
    3 
       
    4 
       
    5 
       
    6 
       
   1615 
       
   26 
       
   26 
       
PART II — OTHER INFORMATION
       
   27 
       
   27 
       
   27 
       
   2728 
       
    2829 
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

2


PART I.FINANCIAL INFORMATION
ITEM 1. ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
                
 July 4, September 27,  April 17, October 3, 
 2010 2009  2011 2010 
ASSETS  
Current assets:  
Cash and cash equivalents $12,870 $53,002  $14,712 $10,607 
Accounts and other receivables, net 56,053 49,036  60,061 81,150 
Inventories 39,927 37,675  36,830 37,391 
Prepaid expenses 33,387 8,958  30,223 36,100 
Deferred income taxes 44,614 44,614  46,328 46,185 
Assets held for sale 71,091 99,612  51,349 59,897 
Other current assets 4,953 7,152  3,882 3,592 
          
Total current assets 262,895 300,049  243,385 274,922 
          
Property and equipment, at cost 1,598,105 1,602,247  1,551,432 1,562,729 
Less accumulated depreciation and amortization  (714,812)  (665,957)  (685,614)  (684,690)
          
Property and equipment, net 883,293 936,290  865,818 878,039 
Other assets, net 229,627 219,571  293,992 254,131 
          
 $1,375,815 $1,455,910  $1,403,195 $1,407,092 
          
  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current maturities of long-term debt $11,309 $67,977  $18,695 $13,781 
Accounts payable 65,616 63,620  68,900 101,216 
Accrued liabilities 162,733 206,100  173,471 168,186 
          
Total current liabilities 239,658 337,697  261,066 283,183 
          
Long-term debt, net of current maturities 345,837 357,270  388,672 352,630 
Other long-term liabilities 227,720 234,190  255,377 250,440 
Deferred income taxes 225 2,264  41 376 
Stockholders’ equity:  
Preferred stock $.01 par value, 15,000,000 authorized, none issued   
Common stock $.01 par value, 175,000,000 authorized, 74,369,998 and 73,987,070 issued, respectively 744 740 
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued   
Common stock $0.01 par value, 175,000,000 shares authorized, 74,812,157 and 74,461,632 issued, respectively 748 745 
Capital in excess of par value 182,593 169,440  196,668 187,544 
Retained earnings 978,380 912,210  1,021,623 982,420 
Accumulated other comprehensive loss, net  (74,883)  (83,442)  (74,541)  (78,787)
Treasury stock, at cost, 19,294,745 and 16,726,032 shares  (524,459)  (474,459)
Treasury stock, at cost, 25,116,010 and 21,640,400 shares, respectively  (646,459)  (571,459)
          
Total stockholders’ equity 562,375 524,489  498,039 520,463 
          
 $1,375,815 $1,455,910  $1,403,195 $1,407,092 
          
See accompanying notes to condensed consolidated financial statements.

3


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
                 
  Quarter  Year-to-Date 
  July 4,  July 5,  July 4,  July 5, 
  2010  2009  2010  2009 
Revenues:                
Restaurant sales $376,143  $457,586  $1,276,538  $1,554,561 
Distribution sales  94,039   72,534   289,419   231,517 
Franchised restaurant revenues  53,112   45,602   168,361   144,728 
             
   523,294   575,722   1,734,318   1,930,806 
             
Operating costs and expenses:                
Food and packaging  119,642   143,884   404,285   508,212 
Payroll and employee benefits  114,526   132,186   388,011   462,684 
Occupancy and other  88,381   97,309   298,422   330,683 
             
Company restaurant costs  322,549   373,379   1,090,718   1,301,579 
Distribution costs of sales  94,652   72,456   290,931   230,070 
Franchised restaurant costs  23,798   18,961   76,310   58,651 
Selling, general and administrative expenses  64,134   62,532   195,684   220,221 
Gains on the sale of company-operated restaurants, net  (23,687)  (8,725)  (36,054)  (44,320)
             
   481,446   518,603   1,617,589   1,766,201 
             
                 
Earnings from operations  41,848   57,119   116,729   164,605 
                 
Interest expense, net  2,421   4,372   11,729   16,672 
             
                 
Earnings from continuing operations and before income taxes  39,427   52,747   105,000   147,933 
                 
Income taxes  15,185   19,871   38,830   57,504 
             
                 
Earnings from continuing operations  24,242   32,876   66,170   90,429 
                 
Loss from discontinued operations, net     (13,318)     (12,613)
             
                 
Net earnings $24,242  $19,558  $66,170  $77,816 
             
                 
Net earnings per share — basic:                
Earnings from continuing operations $0.44  $0.58  $1.19  $1.59 
Loss from discontinued operations, net     (0.24)     (0.22)
             
Net earnings per share $0.44  $0.34  $1.19  $1.37 
             
                 
Net earnings per share — diluted:                
Earnings from continuing operations $0.44  $0.57  $1.18  $1.57 
Loss from discontinued operations, net     (0.23)     (0.22)
             
Net earnings per share $0.44  $0.34  $1.18  $1.35 
             
                 
Weighted-average shares outstanding:                
Basic  54,937   56,921   55,478   56,728 
Diluted  55,711   57,975   56,264   57,697 
(Unaudited)
                 
  Quarter  Year-to-Date 
  April 17,  April 11,  April 17,  April 11, 
  2011  2010  2011  2010 
Revenues:                
Company restaurant sales $321,242  $388,301  $758,152  $900,395 
Distribution sales  121,362   90,762   268,049   195,380 
Franchise revenues  62,531   50,643   143,652   115,249 
             
   505,135   529,706   1,169,853   1,211,024 
             
Operating costs and expenses, net:                
Company restaurant costs:                
Food and packaging  107,275   122,316   249,130   284,643 
Payroll and employee benefits  97,998   117,133   232,514   273,485 
Occupancy and other  76,393   89,888   181,802   210,041 
             
Total company restaurant costs  281,666   329,337   663,446   768,169 
Distribution costs  121,837   90,910   269,178   196,279 
Franchise costs  31,328   23,102   69,680   52,512 
Selling, general and administrative expenses  52,619   54,742   119,504   125,419 
Impairment and other charges, net  4,494   3,452   8,090   6,131 
Gains on the sale of company-operated restaurants  (878)  (2,987)  (28,750)  (12,367)
             
   491,066   498,556   1,101,148   1,136,143 
             
                 
Earnings from operations  14,069   31,150   68,705   74,881 
                 
Interest expense, net  3,945   3,873   8,556   9,308 
             
                 
Earnings before income taxes  10,124   27,277   60,149   65,573 
                 
Income taxes  3,322   9,597   20,946   23,645 
             
                 
Net earnings $6,802  $17,680  $39,203  $41,928 
             
                 
Net earnings per share:                
Basic $0.14  $0.32  $0.76  $0.75 
Diluted $0.13  $0.32  $0.75  $0.74 
                 
Weighted-average shares outstanding:                
Basic  50,183   54,972   51,265   55,711 
Diluted  50,984   55,797   52,069   56,499 
See accompanying notes to condensed consolidated financial statements.

4


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
                
 Year-to-Date  Year-to-Date 
 July 4, July 5,  April 17, April 11, 
 2010 2009  2011 2010 
Cash flows from operating activities:  
Net earnings $66,170 $77,816  $39,203 $41,928 
Loss from discontinued operations, net  12,613 
     
Net earnings from continuing operations 66,170 90,429 
Adjustments to reconcile net earnings to net cash provided by operating activities:  
Depreciation and amortization 76,643 77,389  51,817 54,152 
Deferred finance cost amortization 1,063 1,195  1,350 724 
Deferred income taxes  (5,758)  (1,283)  (4,965)  (3,267)
Share-based compensation expense 7,564 6,926  4,972 5,500 
Pension and postretirement expense 22,373 9,419  12,840 15,661 
Losses (gains) on cash surrender value of company-owned life insurance  (1,006) 7,690 
Gains on the sale of company-operated restaurants, net  (36,054)  (44,320)
Gains on the acquisition of franchise-operated restaurants   (958)
Gains on cash surrender value of company-owned life insurance  (7,841)  (6,026)
Gains on the sale of company-operated restaurants  (28,750)  (12,367)
Losses on the disposition of property and equipment, net 5,858 9,269  5,424 2,360 
Loss on early retirement of debt 513  
Impairment charges 4,083 6,243  1,167 1,503 
Changes in assets and liabilities, excluding acquisitions and dispositions:  
Accounts and other receivables  (9,746)  (5,489)  (2,359)  (11,811)
Inventories  (2,252) 5,663  561  (93)
Prepaid expenses and other current assets  (23,002)  (15,864) 6,848  (19,833)
Accounts payable  (3,555) 2,127   (2,851)  (3,309)
Pension and postretirement contributions  (18,715)  (19,040)  (2,472)  (11,824)
Other  (36,298)  (17,293) 6,900  (26,652)
          
Cash flows provided by operating activities from continuing operations 47,881 112,103  81,844 26,646 
Cash flows provided by (used in) operating activities from discontinued operations  (2,172) 2,953 
Cash flows used in operating activities from discontinued operations   (2,172)
          
Cash flows provided by operating activities 45,709 115,056  81,844 24,474 
          
  
Cash flows from investing activities:  
Purchases of property and equipment  (62,173)  (118,760)  (74,129)  (42,632)
Proceeds from the sale of company-operated restaurants 52,035 49,447  49,588 19,093 
Proceeds from (purchases of) assets held for sale and leaseback, net 31,333  (27,981)
Proceeds from assets held for sale and leaseback, net 6,669 8,889 
Collections on notes receivable 8,074 23,659  19,062 7,675 
Acquisition of franchise-operated restaurants  (8,115)  (6,760)  (21,477)  
Other 2,507  (2,076)  (6,618) 1,031 
          
Cash flows provided by (used in) investing activities from continuing operations 23,661  (82,471)
Cash flows used in investing activities from discontinued operations   (1,765)
     
Cash flows provided by (used in) investing activities 23,661  (84,236)
Cash flows used in investing activities  (26,905)  (5,944)
          
  
Cash flows from financing activities:  
Borrowings on revolving credit facility 660,000 381,000  396,000 313,000 
Repayments of borrowings on revolving credit facility  (512,000)  (442,000)  (349,000)  (293,000)
Proceeds from issuance of debt 200,000  
Principal repayments on debt  (416,101)  (2,095)  (5,731)  (46,031)
Debt issuance costs  (9,126)    (989)  
Proceeds from issuance of common stock 4,079 4,117  3,376 2,445 
Repurchase of common stock  (50,000)  
Repurchases of common stock  (75,000)  (50,000)
Excess tax benefits from share-based compensation arrangements 1,234 1,228  640 690 
Change in book overdraft 12,412  (8,801)  (20,130) 13,825 
          
Cash flows used in financing activities  (109,502)  (66,551)  (50,834)  (59,071)
          
  
Net decrease in cash and cash equivalents  (40,132)  (35,731)
Net increase (decrease) in cash and cash equivalents 4,105  (40,541)
Cash and cash equivalents at beginning of period 53,002 47,884  10,607 53,002 
          
Cash and cash equivalents at end of period $12,870 $12,153  $14,712 $12,461 
          
See accompanying notes to condensed consolidated financial statements.

5


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
  Nature of operations— Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box®Box® quick-service restaurants and Qdoba Mexican Grill®Grill® (“Qdoba”) fast-casual restaurants in 45 states. The following table summarizes the number of restaurants:
         
  April 17, April 11,
  2011 2010
Jack in the Box:
        
Company-operated  848   1,153 
Franchised  1,372   1,080 
         
Total system  2,220   2,233 
         
Qdoba:
        
Company-operated  221   160 
Franchised  328   345 
         
Total system  549   505 
         
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”). 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 September 27, 2009.October 3, 2010. The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our Form 10-K, with the exception of new accounting pronouncements adopted in fiscal 2010.2011.
During fiscal 2009, we sold all of our Quick Stuff® convenience stores and fuel stations. These stores and their related activities have been presented as discontinued operations for all periods presented. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to our continuing operations.
  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 where we are deemed the primary beneficiary. All significant intercompany transactions are eliminated. For information related to the variable interest entity included in our condensed consolidated financial statements, refer to Note 11,Variable Interest Entities.
  Reclassifications and adjustments— Certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform to the fiscal 2011 presentation. At the end of 2010, presentation, including the separationwe separated impairment and other charges, net from selling, general and administrative expenses in our consolidated statements of restaurant operating costs into two components; payroll and employee benefits, and occupancy and other.earnings. We believe the additional detail provided is useful when analyzing the operatingour results of our restaurants.operations.
  Fiscal year— Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal year 2011 includes 52 weeks while 2010 includes 53 weeks while 2009 includes 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks, with the exception of the fourth quarter of fiscal 2010, which includes 13 weeks. All comparisons between 20102011 and 20092010 refer to the twelve weeks (“quarter”) and fortytwenty-eight weeks (“year-to-date”) weeks ended July 4,April 17, 2011 and April 11, 2010, and July 5, 2009, respectively, unless otherwise indicated.
  Use of estimates— In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make certain assumptions and estimates that affect reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies. In making these assumptions and estimates, management may from time to time seek advice and consider information provided by actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates.
2.INDEBTEDNESS
New Credit Facility— On June 29, 2010, the Company replaced its existing credit facility with a new credit facility intended to provide a more flexible capital structure. The new credit facility is comprised of (i) a $400.0 million revolving credit facility and (ii) a $200.0 million term loan with a five-year maturity, initially both with London Interbank Offered Rate (“LIBOR”) plus 2.50%.As part of the credit agreement, we may also request the issuance of up to $75.0 million in letters of credit, the outstanding amount of which reduces the net borrowing capacity under the agreement. The new credit facility requires the payment of an annual commitment fee based on the unused portion of the credit facility. The credit facility’s interest rates and the annual commitment rate are based on a financial leverage ratio, as defined in the credit agreement.

6


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. Repayments—The term loan requires amortization in the form of quarterly scheduled principal installments in the annual amounts set forth below (in thousands):
     
Fiscal Year
    
2010 $2,500 
2011  12,500 
2012  20,000 
2013  15,000 
2014  30,000 
2015  120,000 
    
Total principal installments $200,000 
    
The first such scheduled installment is required to be made on September 30, 2010, and the maturity date of the term loan is June 29, 2015. The Company may make voluntary prepayments of the loans under the revolving credit facility and term loan at any time without premium or penalty. Certain events such as asset sales, certain issuances of debt, and insurance and condemnation recoveries, may trigger a mandatory prepayment.
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 set forth in the credit agreement. Additionally, there is a negative pledge on all tangible and intangible assets (including all real and personal property) with customary exceptions as reflected in the credit agreement.
Covenants— We are subject to a number of customary covenants under our credit facility, including limitations on additional borrowings, acquisitions, loans to franchisees, capital expenditures, lease commitments, stock repurchases and dividend payments, and requirements to maintain certain financial ratios.
Use of proceeds— The Company borrowed $200.0 million under the term loan and $169.0 million under the revolving credit facility. The proceeds were used to repay all borrowings under the prior credit facility and related transaction fees and expenses, including those associated with the new credit facility. At July 4, 2010, we had borrowings under the revolving credit facility of $148.0 million and letters of credit outstanding of $34.9 million. Loan origination costs associated with the new credit facility were $9.2 million and are included as deferred costs in other assets, net in the accompanying condensed consolidated balance sheet as of July 4, 2010. Deferred financing fees of $0.5 million related to the prior credit facility were written-off and are included in interest expense, net in the accompanying condensed consolidated statement of earnings.
3.FRANCHISE ARRANGEMENTS
Franchise agreements generally provide for franchise fees, which are included in franchised restaurant revenues in the accompanying condensed consolidated statements of earnings. We also recognize gains on the sale of company-operated restaurants to franchisees, which are recorded when the sales are consummated and certain other gain recognition criteria are met. The following is a summary of these transactions (dollars in thousands):

7


JACK IN THE BOX INC.SUMMARY OF REFRANCHISINGS, FRANCHISEE DEVELOPMENT AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                 
  Quarter  Year-to-Date 
  July 4,  July 5,  July 4,  July 5, 
  2010  2009  2010  2009 
 
Number of restaurants sold to franchisees  58   23   111   98 
Number of restaurants opened by franchisees  10   10   29   41 
                 
Initial franchise fees received $2,583  $1,402  $5,558  $5,590 
                 
Cash proceeds from the sale of company-operated restaurants $32,942  $9,018  $52,035  $49,447 
Notes receivable (1)     5,264   2,730   13,816 
             
Total proceeds  32,942   14,282   54,765   63,263 
Net assets sold (primarily equipment)  (8,585)  (2,875)  (17,597)  (15,205)
Goodwill related to the sale of company-operated restaurants  (670)  (311)  (1,114)  (1,367)
             
Gains on the sale of company-operated restaurants $23,687  $11,096  $36,054  $46,691 
             
                 
Average proceeds $568  $621  $493  $646 
Average gains on the sale of company-operated restaurants $408  $482  $325  $476 
(1)Temporary financing was provided to franchisees in connection with certain refranchising transactions.
In the third quarter of fiscal 2009, we recognized a loss of $2.4 million related to the anticipated sale of a lower performing Jack in the Box company-operated market. This loss was included in gains on the sale of company-operated restaurants, net in the accompanying condensed consolidated statement of earnings.
4.FRANCHISE ACQUISITIONS
  We account forRefranchisings and franchisee development — The following is a summary of the acquisitionnumber of franchised restaurants usingsold and developed by franchisees and the purchase method of accounting for business combinations. Inrelated gains and fees recognized (dollars in thousands):
                 
  Quarter  Year-to-Date 
  April 17,  April 11,  April 17,  April 11, 
  2011  2010  2011  2010 
 
Number of restaurants sold to franchisees  26   30   114   53 
Number of new restaurants opened by franchisees  11   7   28   19 
                 
Initial franchise fees $1,640  $1,562  $5,879  $2,975 
                 
Cash $5,505  $7,518  $49,588  $19,093 
Notes receivable           2,730 
             
Total proceeds from the sale of company-operated restaurants  5,505   7,518   49,588   21,823 
Net assets sold (primarily property and equipment)  (4,520)  (4,375)  (19,872)  (9,012)
Goodwill related to the sale of company-operated restaurants  (107)  (156)  (966)  (444)
             
Gains on the sale of company-operated restaurants $878  $2,987  $28,750  $12,367 
             
Franchise acquisitions— During the thirdsecond quarter, we acquired 1620 Qdoba franchise-operated restaurants from a franchiseein the Indianapolis market and two in Northern Florida, consistent with our strategy to opportunistically acquire franchise markets where we believe there is continued opportunity for net consideration of $8.1 million.restaurant development. The purchase price allocation wasallocations were based on fair value estimates determined using significant unobservable inputs (Level 3). The following table provides detail of the allocationallocations (in thousands):
    
    
Property and equipment $6,771  $3,877 
Reacquired franchise rights 301  232 
Liabilities assumed  (71)
Goodwill 1,043  17,439 
      
Total consideration $8,115 
Total $21,477 
      
  In 2009, we acquired 22 Qdoba restaurants from franchisees for net considerationThe goodwill recorded relates primarily to the Indianapolis transaction and is largely attributable to the growth potential of $6.8 million. The purchase price was allocated to property and equipment, goodwill and other income (included in selling, general and administrative expenses in the accompanying condensed consolidated statement of earnings).market.
5.3. FAIR VALUE MEASUREMENTS
On September 29, 2008, we adopted the authoritative guidance issued by the Financial Accounting Standards Board (“FASB”), which defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements for our financial assets and liabilities. As permitted by the authoritative guidance, we elected to defer adoption of the fair value guidance for our non-financial assets and liabilities until the first quarter of fiscal 2010. The adoption did not have a material impact on our condensed consolidated financial statements.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Financial assets and liabilities— The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of July 4, 2010April 17, 2011 (in thousands):
                 
  Fair Value Measurements 
      Quoted Prices       
      in Active  Significant    
      Markets for  Other  Significant 
      Identical  Observable  Unobservable 
      Assets  Inputs  Inputs 
  Total  (Level 1)  (Level 2)  (Level 3) 
 
Non-qualified deferred compensation plan (1) $34,031  $34,031  $  $ 
                 
      Fair Value Measurements 
      Quoted Prices in  Significant    
      Active Markets  Other  Significant 
      for Identical  Observable  Unobservable 
      Assets  Inputs  Inputs 
  Total  (Level 1)  (Level 2)  (Level 3) 
 
Interest rate swaps (Note 4) (1) $457  $  $457  $ 
Non-qualified deferred compensation plan (2)  (37,803)  (37,803)      
             
Total assets (liabilities) at fair value $(37,346) $(37,803) $457  $ 
             
 
(1)We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable debt. The fair value of our interest rate swaps is based upon valuation models as reported by our counterparties.
(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.
  The fair values of each of our long-term debt instruments are based on quoted market values, where available, or on the amount of future cash flows associated with each instrument, discounted using our current borrowing rate for similar debt instruments of comparable maturity. The estimated fair values of our term loan and capital lease obligations approximated their carrying values as of July 4, 2010.April 17, 2011.

7


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Non-financial assets and liabilities— The Company’s non-financial instruments, which primarily consist of goodwill, intangible assets and 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, (at least annually for goodwill and semi-annually for property and equipment), non-financial instruments are assessed for impairment and, ifimpairment. If applicable, the carrying values of the assets are written down to fair value.
In connection with our semi-annual property and equipment impairment reviews, long-lived assets held and used at 13 Jack in the Box restaurants having a carrying value of $2.9 million were written down toreview during fiscal 2011, no material fair value using significant unobservable inputs (Level 3). The resultingadjustments were required. Refer to Note 5,Impairment, Disposition of Property and Equipment, and Restaurant Closing Costs,for additional information regarding impairment charge of $2.9 million was included in selling, general and administrative expenses in the accompanying condensed consolidated statement of earnings for the year-to-date period ended July 4, 2010.charges.
6.4. DERIVATIVE INSTRUMENTS
  Objectives and strategies— We are exposed to interest rate volatility with regard 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 will effectively convert $100.0 million of our variable rate term loan borrowings to a fixed-rate basis beginning September 2011 through September 2014. Previously, we held two interest rate swaps that effectively converted $200.0 million of our variable rate term loan borrowings to a fixed ratefixed-rate basis untilfrom March 2007 to April 1, 2010. These agreements werehave been designated as cash flow hedges under the terms of the FASBFinancial Accounting Standards Board (“FASB”) authoritative guidance for derivative instrumentsderivatives and hedging with effectiveness assessed based onhedging. To the extent that they are effective in offsetting the variability of the hedged cash flows, changes in the presentfair value of the derivatives are not included in net earnings but are included in other comprehensive income (“OCI”). These changes in fair value are subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments are made on our term loan interest payments.debt.
  We are also 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 through higher prices is limited by the competitive environment in which we operate. Therefore, fromFrom time to time, we enter into futures and option contracts to manage these fluctuations. These contracts have not been designated as hedging instruments under the FASB authoritative guidance for derivative instruments and hedging.
  Financial position— The following derivative instruments were outstanding as of the end of each period(in thousands):
                 
  July 4, 2010 September 27, 2009
  Balance     Balance  
  Sheet Fair Sheet Fair
  Location Value Location Value
 
Derivatives designated hedging instruments:                
Interest rate swaps     $  Accrued $4,615 
          liabilities    

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                 
  April 17, 2011  October 3, 2010 
  Balance      Balance    
  Sheet  Fair  Sheet  Fair 
  Location  Value  Location  Value 
 
Derivatives designated as hedging instruments:                
Interest rate swaps (Note 3) Other current
assets
 $457  Accrued
liabilities
 $(733)
               
Total derivatives     $457      $(733)
               
  Financial performance— The following is a summary of the gains or losses recognized on our interest rate swap derivative instruments (Note 9) designated as cash flow hedges(in thousands):
                     
  Location of  Quarter  Year-to-Date 
  Loss  April 17,  April 11,  April 17,  April 11, 
  in Income  2011  2010  2011  2010 
 
Gain/(loss) recognized in OCI  N/A  $(247) $(2) $1,190  $(104)
 
Gain/(loss) reclassified from accumulated OCI into income Interest
expense, net
 $  $(1,871) $  $(4,719)
During 2011 and 2010, our interest rate swaps had no hedge ineffectiveness.
The following is a summary of the gains or losses recognized in income related to our derivative instruments not designated as hedging instruments(in thousands):
                 
  Amount of Gain/(Loss) Recognized in OCI
  Quarter Year-to-Date
  July 4, July 5, July 4, July 5,
  2010 2009 2010 2009
 
Derivatives in cash flow hedging relationship:                
Interest rate swaps (Note 11) $  $1,071  $4,615  $(1,363)
                     
  Location of  Quarter  Year-to-Date 
  Loss  April 17,  April 11,  April 17,  April 11, 
  in Income  2011  2010  2011  2010 
 
Natural gas contracts Occupancy and other $  $(40) $  $(99)

8


               
  Location of Amount of Gain/(Loss) Recognized in Income
  Gain/(Loss) Quarter Year-to-Date
  Recognized July 4, July 5, July 4, July 5,
  in Income 2010 2009 2010 2009
 
Derivatives not designated hedging instruments:              
  Occupancy            
Natural gas contracts and other $— $— $(99) $(544)
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
During 2010 and 2009, our interest rate swaps had no hedge ineffectiveness, and no gains or losses were reclassified into net earnings.
7.5. IMPAIRMENT, DISPOSALDISPOSITION OF PROPERTY AND EQUIPMENT, AND RESTAURANT CLOSING COSTS
  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 were not material in any period and primarily relate to certain excess Jack in the Box property and restaurants we have closed or plan to close. Additionally, these charges include the write-down of the carrying value of certainone underperforming Jack in the Box restaurants we continue to operate and restaurants we have closed.restaurant in the first quarter of 2010.
  DisposalDisposition 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 propertiescharges from our ongoing re-image program and normal ongoing capital maintenance activities.
  The following impairment and disposal costs are included in selling, generalimpairment and administrative expensesother charges, net in the accompanying condensed consolidated statements of earnings (in thousands):
                                
 Quarter Year-to-Date Quarter Year-to-Date 
 July 4, July 5, July 4, July 5, April 17, April 11, April 17, April 11, 
 2010 2009 2010 2009 2011 2010 2011 2010 
Impairment charges $2,580 $1,386 $4,083 $6,243  $878 $895 $1,167 $1,503 
Losses on the disposition of property and equipment, net $3,498 $3,485 $5,858 $9,269  $2,628 $1,178 $5,424 $2,360 
  Restaurant closing costsconsist of future lease commitments, net of anticipated sublease rentals and expected ancillary costs, and are included in selling, generalimpairment and administrative expenses.other charges, net. 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 4, July 5, July 4, July 5,  April 17, April 11, April 17, April 11, 
 2010 2009 2010 2009  2011 2010 2011 2010 
Balance at beginning of period $5,230 $4,504 $4,234 $4,712  $23,938 $4,358 $25,020 $4,234 
Additions and adjustments 310 287 1,934 766   (21) 1,204 784 1,624 
Cash payments  (379)  (298)  (1,007)  (985)  (1,754)  (332)  (3,641)  (628)
                  
Balance at end of period $5,161 $4,493 $5,161 $4,493  $22,163 $5,230 $22,163 $5,230 
                  
  Additions and adjustments primarily relate to revisions to certain sublease and cost assumptions and, in 2010, the closuresclosure of certaintwo Jack in the Box restaurants.restaurants in the quarter and three year-to-date.

10


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8.6. INCOME TAXES
  The income tax provisions reflect year-to-date effective tax rates of 37.0%34.8% in 20102011 and 38.9%36.1% in 2009.2010. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 20102011 rate could differ from our current estimates.
  At September 27, 2009,April 17, 2011, our gross unrecognized tax benefits associated with uncertain income tax positions were $0.6 million, which if recognized would favorably affectimpact the effective income tax rate. As of July 4, 2010, theThe gross unrecognized tax benefits changed to $0.4 million due to beneficial settlementremain unchanged from the beginning of an Internal Revenue Service appeal.
the fiscal year. It is reasonably possible that changes of approximately $0.4 million to the gross unrecognized tax benefits will be required within the next twelve months. These changes relate to the possible settlement of state tax audits.
  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 tax years 20072006 and forward. The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for tax years 2000 and 2005,2006, respectively, and forward. Generally, the statutes of limitations for the other state jurisdictions have not expired for tax years 2006 and forward.

9


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9.7. RETIREMENT PLANS
  Defined benefit pension plans— We sponsor a defined benefit pension plan covering substantially all full-time employees. In September 2010, the Board of Directors approved changes to this plan whereby participants will no longer accrue benefits effective December 31, 2015, and the plan was closed to new participants effective January 1, 2011. This change was accounted for as a plan “curtailment” in accordance with the authoritative guidance issued by the FASB. We also sponsor an unfunded supplemental executive retirement plan which provides certain employees additional pension benefits and which was closed to any new participants effective January 1, 2007. Benefits under allboth plans are based on the employees’ years of service and compensation over defined periods of employment.
  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 were as follows in each period (in thousands):
                                
 Quarter Year-to-Date  Quarter Year-to-Date 
 July 4, July 5, July 4, July 5,  April 17, April 11, April 17, April 11, 
 2010 2009 2010 2009  2011 2010 2011 2010 
Defined benefit pension plans:
  
Service cost $2,898 $2,233 $9,658 $7,442  $2,490 $2,897 $5,809 $6,760 
Interest cost 4,779 4,213 15,929 14,042  4,980 4,778 11,620 11,150 
Expected return on plan assets  (4,088)  (4,035)  (13,626)  (13,450)  (4,784)  (4,087)  (11,163)  (9,538)
Actuarial loss 2,575 104 8,583 347  2,266 2,575 5,289 6,008 
Amortization of unrecognized prior service cost 135 191 452 639  113 136 263 317 
                  
Net periodic benefit cost $6,299 $2,706 $20,996 $9,020  $5,065 $6,299 $11,818 $14,697 
                  
  
Postretirement health plans:
 
Postretirement healthcare plans:
 
Service cost $25 $21 $82 $75  $18 $24 $42 $57 
Interest cost 331 277 1,104 923  366 331 854 773 
Actuarial loss (gains) 15  (222) 49  (741)
Actuarial loss 47 43 109 100 
Amortization of unrecognized prior service cost 42 43 142 142  7 15 17 34 
                  
Net periodic benefit cost $413 $119 $1,377 $399  $438 $413 $1,022 $964 
                  
  CashFuture cash flows— Our policy is to fund our plans at or above the minimum required by law. Details regarding 20102011 contributions are as follows (in thousands):
        
 Postretirement        
 Defined Benefit Health Care Defined
Benefit
 Postretirement 
 Pension Plans Plans(1) Pension Plans Healthcare Plans 
Net year-to-date contributions $16,906 $1,809  $1,560 $912 
Remaining estimated net contributions during fiscal 2010 $8,100 $300 
Remaining estimated net contributions during fiscal 2011 $1,400 $300 
(1) NetWe will continue to evaluate contributions to our defined benefit pension plans based on changes in pension assets as a result of Medicare Part D subsidy.asset performance in the current market and economic environment.

1110


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10.8. SHARE-BASED EMPLOYEE COMPENSATION
  Compensation expenseWe 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 2011, we granted share-based compensation awards in each period as follows:
                 
  Quarter  Year-to-Date 
      Weighted-      Weighted- 
      Average      Average 
      Grant Date      Grant Date 
  Shares  Fair Value  Shares  Fair Value 
 
Stock options    $   444,890  $8.25 
Performance-vested stock awards    $   220,343  $21.74 
Nonvested stock units  7,622  $24.02   68,784  $20.49 
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 4, July 5, July 4, July 5,  April 17, April 11, April 17, April 11, 
 2010 2009 2010 2009  2011 2010 2011 2010 
Stock options $1,672 $1,594 $5,415 $7,241  $1,174 $1,667 $2,686 $3,743 
Performance-based stock awards 187 97 899  (1,162)
Performance-vested stock awards 471 341 1,209 712 
Nonvested stock awards 140 157 783 552  140 440 326 643 
Nonvested stock units 65 48 188 80  348 59 578 123 
Deferred compensation for non-management directors  68 279 215  173 188 173 279 
                  
Total share-based compensation expense $2,064 $1,964 $7,564 $6,926  $2,306 $2,695 $4,972 $5,500 
                  
9. Share-based compensation awards are granted annually by the Company. Beginning fiscal 2010, stock awards granted to certain executives are comprised of stock options and performance awards whereas previously only stock options were granted.
Stock optionsIn November 2009, we granted 550,000 stock options to certain executives at a grant date fair value of $6.54.
Performance-based stock awardsIn November 2009, we granted 225,440 performance-based stock awards to certain executives and non-officer employees at a grant date price of $19.26. These performance awards represent the right to receive shares of common stock at the end of a three-year service period based on the achievement of performance goals. In November 2009, we also issued 42,693 shares of common stock pursuant to performance awards, which vested at the end of fiscal 2009.
In November 2008, we modified the performance periods and goals of our outstanding performance-based stock awards to address challenges associated with establishing long-term performance measures. The modifications and changes to expectations regarding achievement levels resulted in a $2.2 million reduction in selling, general and administrative expense in fiscal 2009.STOCKHOLDERS’ EQUITY
  NonvestedPreferred stock awardsIn January 2010, we released 30,168 nonvestedWe have 15,000,000 shares of preferred stock awards related to the retirement of an executive.
Nonvested stock unitsIn February 2010, we granted 34,700 nonvested stock unitsauthorized for issuance at a grant date pricepar value of $21.24 to an executive.
11.STOCKHOLDERS’ EQUITY$0.01 per share. No preferred shares have been issued.
  Repurchases of common stockIn November 2007,2010, the Board of Directors approved a program to repurchase up to $200.0$100.0 million in shares of our common stock over three years expiring November 9, 2010.2011. During 2010,2011, we repurchased approximately 2.63.5 million shares at an aggregate cost of $50.0$75.0 million. As of July 4, 2010,April 17, 2011, the aggregate remaining amount authorized for repurchase was $47.4$25.0 million. In May 2011, the Board of Directors authorized a new program to repurchase up to $100.0 million in shares of our common stock expiring November 2012.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Comprehensive incomeOur total comprehensive income, net of taxes, was as follows (in thousands):
                                
 Quarter Year-to-Date  Quarter Year-to-Date 
 July 4, July 5, July 4, July 5,  April 17, April 11, April 17, April 11, 
 2010 2009 2010 2009  2011 2010 2011 2010 
Net earnings $24,242 $19,558 $66,170 $77,816  $6,802 $17,680 $39,203 $41,928 
Cash flow hedges: 
Net change in fair value of derivatives  (247)  (2) 1,190  (104)
Net loss reclassified to earnings  1,871  4,719 
          
Net unrealized gains (losses) related to cash flow hedges (Note 6)  1,071 4,615  (1,363)
Total  (247) 1,869 1,190 4,615 
Tax effect   (410)  (1,761) 522  95  (713)  (454)  (1,761)
                  
  661 2,854  (841)  (152) 1,156 736 2,854 
 
Effect of amortization of unrecognized net actuarial losses and prior service cost 2,767 116 9,226 387 
Unrecognized periodic benefit costs: 
Actuarial losses and prior service cost reclassified to earnings 2,433 2,769 5,678 6,459 
Tax effect  (1,056)  (44)  (3,521)  (148)  (929)  (1,056)  (2,168)  (2,465)
                  
 1,711 72 5,705 239  1,504 1,713 3,510 3,994 
                  
Total comprehensive income $25,953 $20,291 $74,729 $77,214  $8,154 $20,549 $43,449 $48,776 
                  

11


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Accumulated other comprehensive lossThe components of accumulated other comprehensive loss, net of taxes, were as follows at the end of each period (in thousands):
         
  July 4,  September 27, 
  2010  2009 
 
Unrecognized periodic benefit costs, net of tax benefits of $46,229 and $49,750, respectively $(74,883) $(80,588)
Net unrealized losses related to cash flow hedges, net of tax benefits of $0 and $1,761, respectively     (2,854)
       
Accumulated other comprehensive loss $(74,883) $(83,442)
       
         
  April 17,  October 3, 
  2011  2010 
 
Unrecognized periodic benefit costs, net of tax benefits of $46,211 and $48,379, respectively $(74,824) $(78,334)
Net unrealized gains (losses) related to cash flow hedges, net of tax benefit (expense) of ($174) and $280, respectively  283   (453)
       
Accumulated other comprehensive loss, net $(74,541) $(78,787)
       
12.10. AVERAGE SHARES OUTSTANDING
  Our basic earnings per share calculation iscalculations are computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation iscalculations are 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 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.
  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 4, July 5, July 4, July 5,  April 17, April 11, April 17, April 11,
 2010 2009 2010 2009  2011 2010 2011 2010
Weighted-average shares outstanding — basic 54,937 56,921 55,478 56,728  50,183 54,972 51,265 55,711 
Effect of potentially dilutive securities:  
Stock options 533 694 534 632  456 569 460 532 
Nonvested stock awards 180 170 178 171 
Nonvested stock units 5  2  
Nonvested stock awards and units 214 178 210 177 
Performance-vested stock awards 56 190 72 166  131 78 134 79 
                  
Weighted-average shares outstanding — diluted 55,711 57,975 56,264 57,697  50,984 55,797 52,069 56,499 
                  
  
Excluded from diluted weighted-average shares outstanding:  
Antidilutive 3,202 2,774 3,146 2,757  3,054 3,225 2,968 3,102 
Performance conditions not satisfied at end of the period 263 98 263 122 
Performance conditions not satisfied at the end of the period 366 244 366 244 
13.11. VARIABLE INTEREST ENTITIES
  In January 2011, we formed an entity, Jack in the Box Franchise Finance, LLC (“FFE”), for the purpose of operating a franchisee lending program which will provide up to $100.0 million to assist franchisees in reimaging their restaurants. We are the sole equity investor in FFE. The primary entities$100.0 million lending program is comprised of a $20.0 million commitment from the Company in which we possessthe 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 12-month revolving loan and security agreement bearing a variable interest are franchise entities,rate. As of April 17, 2011, we have contributed $8.0 million to FFE, $6.7 million of which operate our franchised restaurants.has been used to assist franchisees in reimaging their restaurants, and FFE has not borrowed against its third party revolving credit facility. We do not possess any ownership interests in franchise entities. We have reviewed these franchise entities and determined that we are notexpect to make additional contributions of $5.0 — $10.0 million to FFE during the primary beneficiaryremainder of the entities and therefore, these entities have not been consolidated.fiscal 2011.
  We use advertising funds for both our restaurant concepts to administer our advertising programs. These funds are consolidated into our financial statements as they are deemedhave determined that FFE is a variable interest entitiesentity (“VIEs”VIE”) for which we areand that the Company is its primary beneficiary. The primary beneficiary of a VIE is an enterprise that has a controlling financial interest in the VIE. Controlling financial interest exists when an enterprise has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. We considered a variety of factors in identifying the primary beneficiary. Consolidationbeneficiary 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 funds had no impact on ourconsiderations, we have determined that the Company is the primary beneficiary and have reflected the entity in the accompanying condensed consolidated statementsfinancial 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

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  earnings or cash flows. Contributionsthe Company’s general assets; rather they represent claims against the specific assets of FFE. The impact of FFE’s liabilities and net loss were not material to these funds are designated for advertising, and we administer the funds’ contributions. The Company’s maximum loss exposure for these funds is limited to its investment.
The following table reflects the assets and liabilities of our advertising funds that were included in our condensed consolidated balance sheetfinancial statements. The assets of FFE consisted of the following at July 4, 2010April 17, 2011 (in thousands):
         
  Jack in the Box  Qdoba 
 
Cash $  $254 
Accounts receivable     163 
Prepaid assets  3,769   37 
Other     36 
       
Total assets $3,769  $490 
       
         
Accounts payable $  $459 
Accrued liabilities  12,509   31 
       
Total liabilities $12,509  $490 
       
     
Cash $192 
Other current assets (1)  804 
Other assets, net (1)  6,808 
    
Total assets $7,804 
    
(1)Consists primarily of amounts due from franchisees and $1.0 million of deferred finance fees included in other assets, net.
The Company’s maximum exposure to loss is equal to its outstanding contributions that are expected to range from $10.0 — $20.0 million and 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.
14.12. CONTINGENCIES AND LEGAL MATTERS
  Legal matters— We areThe Company is subject to normal and routine legal proceedings, including litigation. InWe have reserves for certain of these legal proceedings; however, the opinionoutcomes of such proceedings are subject to inherent uncertainties. Based on current information, including our reserves and insurance coverage, management based in part on the advice of legal counsel,believes that the ultimate liability from all pending legal proceedings, asserted legal claimsindividually and known potential legal claims shouldin the aggregate, will not materially affect ourhave a material adverse effect on the Company’s operating results, financial position or liquidity.
15.13. SEGMENT REPORTING
  We manageReflecting the information currently being used in managing the Company as a two-branded restaurant operations business, and as such, our segments comprise results related to system restaurant operations for our Jack in the Box and Qdoba brands. 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.
  We measure and evaluate our segments based on segment earnings from operations. Summarized financial information concerning our reportable segments is shown in the following table (in thousands):
                                
 Quarter Year-to-Date  Quarter Year-to-Date 
 July 4, July 5, July 4, July 5,  April 17, April 11, April 17, April 11, 
 2010 2009 2010 2009  2011 2010 2011 2010 
Revenues by segment:
  
Jack in the Box restaurant operations $388,649 $467,888 $1,323,259 $1,592,091 
Qdoba restaurant operations 40,606 35,300 121,640 107,198 
Jack in the Box restaurant operations segment $335,318 $403,361 $797,649 $934,610 
Qdoba restaurant operations segment 48,455 35,583 104,155 81,034 
Distribution operations 94,039 72,534 289,419 231,517  121,362 90,762 268,049 195,380 
                  
Consolidated revenues $523,294 $575,722 $1,734,318 $1,930,806  $505,135 $529,706 $1,169,853 $1,211,024 
                  
 
Earnings from operations by segment:
  
Jack in the Box restaurant operations $39,097 $53,759 $110,342 $154,891 
Qdoba restaurant operations 3,357 3,117 7,864 7,700 
Distribution operations  (606) 243  (1,477) 2,014 
Jack in the Box restaurant operations segment $12,973 $29,311 $67,175 $71,245 
Qdoba restaurant operations segment 1,795 1,992 2,884 4,507 
Distribution operations and other  (699)  (153)  (1,354)  (871)
                  
Consolidated earnings from operations $41,848 $57,119 $116,729 $164,605  $14,069 $31,150 $68,705 $74,881 
                  
  Interest income and expense, and income taxes and total assets are not reported for our segments, in accordance with our method of internal reporting.

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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
16.14. SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION
  Additional information related to cash flows is as follows (in thousands):
         
  Year-to-Date
  July 4, July 5,
  2010 2009
 
Cash paid during the year for:        
Interest, net of amounts capitalized $14,374  $21,979 
Income tax payments $58,396  $57,787 

14


JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
         
  Year-to-Date 
  April 17,  April 11, 
  2011  2010 
 
Cash paid during the year for:        
Interest, net of amounts capitalized $7,068  $12,299 
Income tax payments $22,601  $46,305 
17.15. SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION(in thousands)
Other assets, net— We have purchased company-owned life insurance (“COLI”) policies to support our non-qualified benefit plans. The cash surrender values of these policies were $70.6 million and $66.9 million as of July 4, 2010 and September 27, 2009, respectively, and are included in other assets, net in the accompanying condensed consolidated balance sheets. These policies reside in an umbrella trust for use only to pay plan benefits to participants or to pay creditors if the Company becomes insolvent. As of July 4, 2010 and September 27, 2009, the trust also included cash of $0.5 million and $1.4 million, respectively.
         
  April 17,  October 3, 
  2011  2010 
 
Other assets, net:        
Goodwill $101,514  $85,041 
Company-owned life insurance policies  84,137   76,296 
Other  108,341   92,794 
       
  $293,992  $254,131 
       
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired. As of July 4, 2010 and September 27, 2009, other assets, net included goodwill of $85.8 million. Refer to Note 3,Franchise Arrangements, and Note 4,Franchise Acquisitions, for detail regarding goodwill activity since the end of last fiscal year.
Accrued liabilities— Accrued liabilities included accrued advertising costs of $12.5 million and $21.2 million as of July 4, 2010 and September 27, 2009, respectively.
18.16. FUTURE APPLICATION OF ACCOUNTING PRINCIPLES
  In June 2009, the FASB issued authoritative guidance for consolidation, which changes the approach for determining which enterprise has a controlling financial interest in a variable interest entity and requires more frequent reassessments of whether an enterprise is a primary beneficiary. This guidance is effective for annual periods beginning after November 15, 2009. We are currently in the process of assessing the impact this guidance may have on our consolidated financial statements.
OtherAny 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.

1514


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
     All comparisons between 20102011 and 20092010 refer to the 12-week (“quarter”) and 40-week28-week (“year-to-date”) periods ended July 4,April 17, 2011 and April 11, 2010, and July 5, 2009, 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 4,April 17, 2011 and April 11, 2010, and July 5, 2009, we believe 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 September 27, 2009.October 3, 2010.
     Our MD&A consists of the following sections:
  Overview— a general description of our business the quick-service dining segment of the restaurant industry and fiscal 20102011 highlights.
Financial reporting— a discussion of changes in presentation.
 
  Results of operations— an analysis of our consolidated statements of earnings for the periods presented in our condensed consolidated financial statements.
 
  Liquidity and capital resources— an analysis of our cash flows including capital expenditures, aggregate contractual obligations, 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 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 usedmade by management.
OVERVIEW
     As of July 4, 2010,April 17, 2011, we operated and franchised 2,2342,220 Jack in the Box quick-service restaurants (“QSR”), primarily in the western and southern United States, and 515549 Qdoba Mexican Grill (“Qdoba”) fast-casual restaurants throughout the United States.
     Our primary source of revenue is from retail sales at Jack in the Box and Qdoba company-operated restaurants. We also derive revenue from sales of food and packaging to Jack in the Box and Qdoba franchised restaurantsand revenue from franchiseesfranchise restaurants, including royalties (based upon a percent of sales), rents, franchise fees and franchise fees.distribution sales of food and packaging commodities. In addition, we recognize gains from the sale of company-operated restaurants to franchisees, which are presented as a reduction of operating costs and expenses, net in the accompanying condensed consolidated statements of earnings.
     The QSR industry is complex and challenging. Challenges presently facing the sector include higher levels of consumer expectations, intense competition with respect to market share, restaurant locations, labor, menu and product development, changes in the economy, including the current recessionary environment, high rates of unemployment, costs of commodities and trends for healthier eating.
     To address these challenges and others, management has a strategic plan focused on four key initiatives. The first initiative is a holistic reinvention of the Jack in the Box brand through menu innovation, upgrading guest service and a major re-imaging of the Jack in the Box restaurant facilities, including a complete redesign of the dining room and common areas, as well as other exterior enhancements. The second initiative is to expand franchising through new restaurant development and the sale of company-operated restaurants to franchisees, to create a business model that is less capital intensive and which we expect will generate greater free cash flows for the Company. The third strategic initiative is to improve our business model by focusing our entire organization on improving restaurant profitability and administrative efficiencies as we transition to becoming a predominantly franchised company. The fourth initiative is a growth strategy that includes opening new restaurants and increasing sales at existing restaurants.

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     The following summarizes the most significant events occurring in fiscal 20102011 and certain trends compared to a year ago:
  Restaurant Sales.SalesSales at Jack in the Box company-operated restaurants open more than one fiscal year (“same-store”same-store sales”) decreased 9.4% in the quarter and 9.9% year-to-date. System same-store sales at Qdoba restaurants increased 4.6% in the quarter and 1.8% year-to-date. Sales(decreased) as follows:
                 
  Quarter Year-to-Date
  April 17, April 11, April 17, April 11,
  2011 2010 2011 2010
 
Jack in the Box:                
Company  0.8%  (8.6%)  1.2%  (10.1%)
Franchise  (0.3%)  (7.3%)  0.4%  (9.4%)
System  0.1%  (8.1%)  0.7%  (9.9%)
Qdoba system  6.0%  3.1%  6.2%  0.4%

15


Commodity CostsPressures from higher commodity costs continue to impact our business. Overall commodity costs at our Jack in the Box restaurants continue to be impacted by high unemployment rates in our major markets for our key customer demographics. Our average check at Jackincreased approximately 5.0% in the Box company restaurants declinedquarter and 3.4% year-to-date compared to a year ago. We expect our overall commodity costs to increase approximately 2.5% during the quarter as promotions had a negative impact which more than offset price increases of approximately 1.2%.4.5-5.5% in fiscal 2011.
 
  Commodity Costs.New Unit DevelopmentPressures from higher commodity costs, which negatively impacted our business in fiscal 2009, have moderated somewhat in 2010. Year-to-date, overall commodity costs at our Jack in the Box restaurants decreased approximately 3.0%. We expect our overall commodity costs to increase approximately 4.0% in the fourth quarter as compared to last year and to decrease approximately 1.0% in fiscal 2010.
Restaurant Growth.We continued to grow our brands with the opening of new company-operated and franchisedfranchise restaurants. Year-to-date, we opened 3216 Jack in the Box locations system-wide, including several in our newer markets, and 2330 Qdoba locations.
 
  Franchising Program.ProgramWe refranchised 111114 Jack in the Box restaurants, year-to-date, while Qdoba and Jack in the Box franchisees opened 29a total of 28 restaurants year-to-date. We remain on track to achieveare ahead of our goaltimeline to increase the percentage of franchise ownership into 70-80% of the Jack in the Box system, to 70-80% byand we were approximately 62% franchised at the end of fiscal year 2013, and crossed the 50% mark during the thirdsecond quarter.
 
  Credit Facility.Share RepurchasesOn June 29, 2010,Pursuant to a share repurchase program authorized by our Board of Directors, we entered intorepurchased approximately 3.5 million shares of our common stock at an average price of $21.58 per share year-to-date, including the cost of brokerage fees.
Franchise Financing EntityWe formed an entity, Jack in the Box Franchise Finance, LLC, for the purpose of operating a new credit agreement consistingfranchisee lending program used primarily to assist franchisees in reimaging their restaurants. During the quarter, FFE provided $6.7 million to franchisees. The impact of a $400 million revolving credit facilitythis entity on the Company’s condensed consolidated financial statements as of and a $200 million term loan, both with a five-year maturity.for the period ended April 17, 2011 was not material.
FINANCIAL REPORTING
     At the end of fiscal 2010, we separated impairment and other charges, net from selling, general and administrative expenses in our consolidated statements of earnings. Prior year amounts have been reclassified to conform to this new presentation.
RESULTS OF OPERATIONS
     The following table sets forth, unless otherwise indicated, the percentage relationship to total revenues ofpresents certain income and expense items included in our condensed consolidated statements of earnings.earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.
                
                 Quarter Year-to-Date
 Quarter Year-to-Date April 17, April 11, April 17, April 11,
 July 4, July 5, July 4, July 5, 2011 2010 2011 2010
 2010 2009 2010 2009
Statement of Earnings Data:
  
Revenues:  
Restaurant sales  71.9%  79.5%  73.6%  80.5%
Company restaurant sales  63.6%  73.3%  64.8%  74.4%
Distribution sales  18.0%  12.6%  16.7%  12.0%  24.0%  17.1%  22.9%  16.1%
Franchised restaurant revenues  10.1%  7.9%  9.7%  7.5%
         
Total revenues  100.0%  100.0%  100.0%  100.0%
Franchise revenues  12.4%  9.6%  12.3%  9.5%
                  
  100.0%  100.0%  100.0%  100.0%
Operating costs and expenses: 
         
 
Operating costs and expenses, net: 
Company restaurant costs: 
Food and packaging (1)  31.8%  31.4%  31.7%  32.7%  33.4%  31.5%  32.9%  31.6%
Payroll and employee benefits (1)  30.4%  28.9%  30.4%  29.8%  30.5%  30.2%  30.7%  30.4%
Occupancy and other (1)  23.5%  21.3%  23.4%  21.3%  23.8%  23.1%  24.0%  23.3%
                  
Company restaurant costs (1)  85.8%  81.6%  85.4%  83.7%
Total company restaurant costs (1)  87.7%  84.8%  87.5%  85.3%
                  
 
Distribution costs of sales (1)  100.7%  99.9%  100.5%  99.4%
Franchised restaurant costs (1)  44.8%  41.6%  45.3%  40.5%
Distribution costs (1)  100.4%  100.2%  100.4%  100.5%
Franchise costs (1)  50.1%  45.6%  48.5%  45.6%
Selling, general and administrative expenses  12.3%  10.9%  11.3%  11.4%  10.4%  10.3%  10.2%  10.4%
Gains on the sale of company-operated restaurants, net  (4.5%)  (1.5%)  (2.1%)  (2.3%)
Impairment and other charges, net  0.9%  0.7%  0.7%  0.5%
Gains on the sale of company-operated restaurants  (0.2%)  (0.6%)  (2.5%)  (1.0%)
Earnings from operations  8.0%  9.9%  6.7%  8.5%  2.8%  5.9%  5.9%  6.2%
Income tax rate (2)  38.5%  37.7%  37.0%  38.9%  32.8%  35.2%  34.8%  36.1%
 
(1) As a percentage of the related sales and/or revenues.
 
(2) As a percentage of earnings from continuing operations and before income taxes.

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     The following table summarizes the year-to-date changes in the number of Jack in the Box and Qdoba company-operated and franchisedfranchise restaurants:
                        
                         April 17, 2011 April 11, 2010
 July 4, 2010 July 5, 2009 Company Franchise Total Company Franchise Total
 Company Franchised Total Company Franchised Total
Jack in the Box:
  
Beginning of period 1,190 1,022 2,212 1,346 812 2,158  956 1,250 2,206 1,190 1,022 2,212 
New 18 14 32 35 14 49  7 9 16 16 12 28 
Refranchised  (111) 111   (98) 98    (114) 114   (53) 53  
Acquired by the Company 1  (1)     
Acquired from franchisees    1  (1)  
Closed  (4)  (6)  (10)  (5)  (3)  (8)  (1)  (1)  (2)  (1)  (6)  (7)
                          
End of period 1,094 1,140 2,234 1,278 921 2,199  848 1,372 2,220 1,153 1,080 2,233 
                          
% of system  49%  51%  100%  58%  42%  100%  38%  62%  100%  52%  48%  100%
Qdoba:
  
Beginning of period 157 353 510 111 343 454  188 337 525 157 353 510 
New 8 15 23 14 27 41  11 19 30 3 7 10 
Acquired by the Company 16  (16)  22  (22)  
Acquired from franchisees 22  (22)     
Closed   (18)  (18)   (4)  (4)   (6)  (6)   (15)  (15)
                          
End of period 181 334 515 147 344 491  221 328 549 160 345 505 
                          
% of system  35%  65%  100%  30%  70%  100%  40%  60%  100%  32%  68%  100%
Consolidated:
  
                          
Total system 1,275 1,474 2,749 1,425 1,265 2,690  1,069 1,700 2,769 1,313 1,425 2,738 
                          
% of system  46%  54%  100%  53%  47%  100%  39%  61%  100%  48%  52%  100%
Revenues
     As we execute our refranchising strategy, 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 continually decrease while revenues from franchisedfranchise restaurants increase. Company-operatedAs such, company restaurant sales decreased $81.4$67.1 million, or 17.8%17.3%, in the quarter and $278.0$142.2 million, or 17.9%15.8%, year-to-date. These decreases are due to a decreaseyear-to-date, reflecting the decline in the number of Jack in the Box company-operated restaurants and declinesrestaurants. This decrease was partially offset by increases in same-store sales at Jack in the Box and Qdoba restaurants partially offset byand an increase in the number of Qdoba company-operated restaurants. The following table represents the approximate impact of these increases (decreases) on restaurant sales(in thousands):
         
  Quarter  Year-to-Date 
Reduction in the average number of Jack in the Box company-operated restaurants $(101,100) $(209,000)
Jack in the Box per-store average (“PSA”) sales increase  21,200   44,400 
Qdoba  12,800   22,400 
       
Total decrease in restaurant sales $(67,100) $(142,200)
       
Same-store sales at Jack in the Box company-operated restaurants decreased 9.4%grew 0.8% in the quarter and 9.9%1.2% year-to-date compared with a year ago.as follows:
         
  Quarter Year-to-Date
Increase in transactions  0.1%  0.7%
Average check growth (1)  0.7%  0.5%
(1)Includes price increases of approximately 1.3% in the quarter and year-to-date compared with a year ago.
     Distribution sales to Jack in the Box and Qdoba franchisees grew $21.5$30.6 million in the quarter and $57.9$72.7 million respectively,year-to-date from a year ago, primarily reflecting anago. The increase in thereflects a higher number of Jack in the Box franchisedfranchise restaurants serviced bythat purchase ingredients and supplies from our distribution centers, partially offset by lower Jackwhich contributed additional sales of approximately $28.0 million and $64.2 million, respectively. Higher commodity prices also contributed to the increase in the Box per-store-average (“PSA”) unit volumes.distribution sales in both periods.
     Franchised restaurantFranchise revenues increased $7.5$11.9 million, or 16.5%23.5%, in the quarter and $23.6$28.4 million, or 16.3%24.6%, year-to-date due primarily to ana 28.6% and 26.0% increase in the average number of Jack in the Box franchise restaurants, which contributed additional royalties and rents of approximately $12.6 million and $26.4 million, respectively. In addition,

17


year-to-date increases in the number of franchised restaurants sold to and developed by franchisees resulted in higher revenues from initial franchise fees. These increases were partially offset by an increase in part byre-image contributions to franchisees, which are recorded as a decrease in PSA sales at Jack in the Box franchised restaurants.reduction of franchise revenues. The following table reflects the detail of our franchised restaurantfranchise 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  April 17, April 11, April 17, April 11, 
 July 4, July 5, July 4, July 5,  2011 2010 2011 2010 
 2010 2009 2010 2009 
Royalties $21,120 $19,270 $67,506 $60,717  $25,120 $20,352 $56,345 $46,386 
Rents 29,087 24,517 94,133 78,445  36,643 28,190 82,726 65,046 
Re-image contributions to franchisees  (235)  (370)  (885)  (1,865)  (1,435)  (95)  (2,715)  (650)
Fees and other 3,140 2,185 7,607 7,431 
Franchise fees and other 2,203 2,196 7,296 4,467 
                  
Total franchised restaurant revenues $53,112 $45,602 $168,361 $144,728 
Franchise revenues $62,531 $50,643 $143,652 $115,249 
                  
Average number of franchised restaurants 1,445 1,244 1,406 1,192 
Increase (decrease) in Jack in the Box franchise-operated same-store sales  (0.3%)  (7.3%)  0.4%  (9.4%)
  
Royalties as a percentage of estimated franchised restaurant sales 
Royalties as a percentage of estimated franchise restaurant sales: 
Jack in the Box  5.3%  5.3%  5.3%  5.2%  5.3%  5.3%  5.3%  5.3%
Qdoba  5.0%  5.0%  5.0%  5.0%  5.0%  5.0%  5.0%  5.0%

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Operating Costs and Expenses
     Food and packaging costs were 31.8%increased to 33.4% of company restaurant sales in the quarter versus 31.4% last year and 31.7%32.9% year-to-date compared with 32.7%from 31.5% and 31.6%, respectively, a year ago. CommodityOverall commodity costs at our Jack in the Box restaurants increased approximately 2.0%5.0% in the quarter principally related toand 3.4% year-to-date, driven by higher costs for beef, cheese, pork, dairy, shortening and pork, and decreased approximately 3.0% year-to-date due primarily to declines in beef, shortening,produce, partially offset by lower costs for poultry and cheese. In both periods, our margin improvement initiatives and modest selling price increases more than offsetbakery. Additionally, the unfavorable impact of unfavorable product mix and promotions.promotions was partially offset by the benefit of higher prices.
     Payroll and employee benefit costs were 30.4%30.5% of company restaurant sales in the quarter and 30.7% year-to-date, compared to 28.9%30.2% and 29.8%30.4%, respectively, in 2009,2010, reflecting higher levels of staffing designed to improve the impact of same-store sales deleverage and an increaseguest experience. In addition, increases in our workers’ compensation costs,unemployment taxes in several states in which more than offset the benefits derived from our labor productivity initiatives. Workers’ compensation costs have increased as the cost per claim is trending higher even though the number of claims is lower.we operate negatively impacted these costs.
     Occupancy and other costs were 23.5%23.8% of company restaurant sales in the quarter and 23.4%24.0% year-to-date compared with 21.3% in both periods a year ago.23.1% and 23.3%, respectively, last year. The higher percentagespercentage in 20102011 primarily relaterelates to sales deleverageguest service initiatives and higher depreciationrent expense as a percentage of sales resulting from the ongoing re-image program at Jack in the Box, whicha greater proportion of company-operated Qdoba restaurants compared with last year. These increases were partially offset by lower utilities expense and restaurant managed costs.expense.
     Distribution costs of sales increased $22.2$30.9 million in the quarter and $60.9$72.9 million respectively, from last yearyear-to-date, primarily reflecting an increase in the related sales. AsIn the quarter, these costs were 100.4% of distribution sales in 2011 compared with 100.2% a year ago primarily reflecting lower PSA volumes. Year-to-date, these costs remained fairly consistent as a percentage of distributionthe related sales these costs increaseddecreasing slightly to 100.7% in the quarter and100.4% from 100.5% year-to-date compared with 99.9% and 99.4%, respectively, a year ago due primarily to deleverage from lower PSA sales at Jack in the Box franchised restaurants.last year.
     Franchised restaurantFranchise costs, principally rents and depreciation on properties leased to Jack in the Box franchisees, increased $4.8$8.2 million in the quarter and $17.7 million year-to-date from a year ago, due primarily to an increase in the number of franchised restaurants that sublease property from us as a result of our refranchising activities. Franchised restaurant costs increased to 44.8%50.1% of the related revenues in the quarter and 45.3%$17.2 million to 48.5% year-to-date, from 41.6% and 40.5%, respectively,45.6% of the related revenues in each period a year agoago. The percentage increase is primarily due primarily to revenue deleveragehigher depreciation and rent expense as a greater proportion of properties are leased to franchisees and the impact of higher re-image contributions, which were partially offset year-to-date by leverage from lower sales at franchised restaurants against fixed rental costs.higher franchise fee revenue.

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     The following table summarizespresents the change in selling, general and administrative (“SG&A”) expenses in each period compared with the prior year (in thousands):
                
 Increase/(Decrease)  Increase/(Decrease) 
 Quarter Year-to-Date  Quarter Year-to-Date 
Refranchising strategy and planned overhead reductions $(3,237) $(12,308)
Advertising  (1,079)  (10,258) $(4,221) $(6,734)
Facility charges 1,670  (4,446)
Refranchising strategy  (713)  (5,058)
Incentive compensation  (1,730)  (3,904) 1,651 3,717 
Cash surrender value of COLI policies, net 3,237  (3,432)  (599)  (1,613)
Pension and postretirement benefits 3,886 12,953   (1,209)  (2,821)
Hurricane Ike insurance proceeds  (2,000)  (3,004)
Qdoba general and administrative 1,642 3,056 
Hurricane Ike insurance proceeds in 2010  1,004 
Other 855 (138) 1,326 2,534 
          
 $1,602 $(24,537) $(2,123) $(5,915)
          
     Our refranchising strategy has resulted in a decrease in the number of company-operated restaurants and the related overhead expenses to manage and support those restaurants. AdvertisingAs such, advertising costs, which are primarily contributions to our marketing fund that are generally determined as a percentage of restaurant sales, decreased reflecting our refranchising strategy and lower PSA sales at Jack in the Box company-operated restaurants, whichand were partially offset by incremental company contributions. Facility charges, which include impairment charges, accelerated depreciationhigher advertising expense at Qdoba due to sales growth and other costs related totiming. The increase in our incentive compensation accruals in 2011 reflects the disposition of property and equipment, increasedexpected improvement in the quarter primarily due to an increase in the number of underperforming restaurants impaired. Year-to-date, facility charges decreased due to the substantial completion of our Jack in the Box exterior re-image enhancements by the end of last fiscal year and lower impairment charges.Company’s results compared with performance goals. Changes in the cash surrender value of our COLIcompany-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 year-to-date market adjustments of the investments were a $0.5 million benefit in 2010fluctuations and a negative impact of $2.9positively impacted SG&A by $1.3 million in 2009.the quarter and $4.4 million year-to-date compared to $0.7 million and $2.8 million, respectively, a year ago. The increasedecrease in pension and postretirement benefits expense principally relates to changes to the Company’s pension plan whereby participants will no longer accrue benefits after December 31, 2015. The increase in Qdoba costs is primarily due to higher pre-opening expenses and overhead to support our growing company-operated restaurant base.
     Impairment and other charges, net is comprised of the following(in thousands):
                 
  Quarter  Year-to-Date 
  April 17,  April 11,  April 17,  April 11, 
  2011  2010  2011  2010 
 
Impairment charges $878  $895  $1,167  $1,503 
Losses on the disposition of property and equipment, net  2,628   1,178   5,424   2,360 
Costs of closed restaurants (primarily lease obligations) and other  988   1,379   1,499   2,268 
             
  $4,494  $3,452  $8,090  $6,131 
             
     Impairment and other charges, net increased $1.0 million in the quarter and $2.0 million year-to-date from a decrease inyear ago due primarily to losses associated with our discount rate.ongoing re-image program, which is targeted to be completed by the end of 2011, and the rollout of signage related to our new logo.

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     Gains on the sale of company-operated restaurants to franchisees, net are detailed in the following table (dollars in thousands):
                
                 Quarter Year-to-Date 
 Quarter Year-to-Date  April 17, April 11, April 17, April 11, 
 July 4, July 5, July 4, July 5,  2011 2010 2011 2010 
 2010 2009 2010 2009 
Number of restaurants sold to franchisees 58 23 111 98  26 30 114 53 
 
Gains on the sale of company-operated restaurants $23,687 $11,096 $36,054 $46,691  $878 $2,987 $28,750 $12,367 
Loss on expected sale of underperforming market   (2,371)   (2,371)
         
Gains on the sale of company-operated restaurants, net $23,687 $8,725 $36,054 $44,320 
         
  
Average gain on restaurants sold $408 $482 $325 $476  $34 $100 $252 $233 
     Gains were 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. In 2009,restaurants, which affected the changes in average gains on the sale of company-operated restaurants to franchisees, net included a loss of $2.4 million relating to the anticipated sale of a lower performing Jack in the Box market.recognized.

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Interest Expense, Net
     Interest expense, net is comprised of the following (in thousands):
                
                   Quarter Year-to-Date 
   Quarter Year-to-Date  April 17, April 11, April 17, April 11, 
   July 4, July 5, July 4, July 5,  2011 2010 2011 2010 
   2010 2009 2010 2009 
Interest expense $2,747 $4,622 $12,644 $17,802  $4,204 $4,125 $9,151 $9,897 
Interest income  (326)  (250)  (915)  (1,130)  (259)  (252)  (595)  (589)
                    
Interest expense, net $2,421 $4,372 $11,729 $16,672  $3,945 $3,873 $8,556 $9,308 
                    
     Interest expense, net decreased $2.0 millionincreased slightly in the quarter and $4.9decreased $0.7 million year-to-date compared with last year due primarily toreflecting lower average borrowingsinterest rates and interest ratesborrowings compared to a year ago, partially offset in the quarter by a $0.5 million charge to write-off deferred financing feesinterest expense incurred in connection with the refinancing of our credit facility.FFE.
Income Taxes
     The tax rate fordecreased to 32.8% in the third quarter was 38.5%and 34.8% year-to-date, compared with 37.7%35.2% and 36.1%, respectively, in the prior year, with the increase2010. The decreases are due primarily to the market performanceimpact of insurance investment products used to fund certain non-qualified retirement plans. Year-to-date, the income tax provisions reflect effective tax rates of 37.0% in 2010 and 38.9% in 2009. The lower tax rate is largely attributable to market performance of insurance investment products used to fund certain non-qualified retirement 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 37%35%. The final 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
     Net earnings were $6.8 million, or $0.13 per diluted share, in the quarter compared with $17.7 million, or $0.32 per diluted share, a year ago. Year-to-date, net earnings were $39.2 million, or $0.75 per diluted share, compared with $41.9 million, or $0.74 per diluted share, a year ago.
LIQUIDITY AND CAPITAL RESOURCES
General.General
Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations, the revolving bank credit facility, the sale of company-operated restaurants to franchisees and the sale and leaseback of certain restaurant properties.
     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 employee 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

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part of working capital. As a result, we typically maintain current liabilities in excess of current assets, that resultwhich results in a working capital deficit.
     Cash and cash equivalents decreased $40.1increased $4.1 million to $12.9$14.7 million at the end of the quarter from $53.0$10.6 million at the beginning of the fiscal year. This decreaseincrease is primarily due to net repayments under our credit facility, property and equipment expenditures and repurchases of common stock. These uses of cash were offset in part by cash flows provided by operating activities, proceeds and collections of notes receivable from the sale of restaurants to franchisees, and net proceeds from the saleborrowings under our revolving credit facility, offset in part by cash used to repurchase common stock, purchase property and leaseback of restaurant properties.equipment and acquire Qdoba franchise-operated restaurants. We generally reinvest available cash flows from operations to improve our restaurant facilities and develop new restaurants or enhance existing restaurants, to reduce debt and to repurchase shares of our common stock.

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Cash Flows
      Cash Flows.The table below summarizes our cash flows from operating, investing and financing activities (in thousands):
        
         Year-to-Date 
 Year-to-Date  April 17, April 11, 
 July 4, July 5,  2011 2010 
 2010 2009 
Total cash provided by (used in):  
Operating activities:  
Continuing operations $47,881 $112,103  $81,844 $26,646 
Discontinued operations  (2,172) 2,953    (2,172)
Investing activities: 
Continuing operations 23,661  (82,471)
Discontinued operations   (1,765)
Investing activities  (26,905)  (5,944)
Financing activities  (109,502)  (66,551)  (50,834)  (59,071)
          
Decrease in cash and cash equivalents $(40,132) $(35,731)
Increase (decrease) in cash and cash equivalents $4,105 $(40,541)
          
     Operating Activities.Operating cash flows from continuing operations decreased $64.2increased $55.2 million compared with a year ago due primarily to the timing of working capital receipts and disbursementsproperty rent payments and a decreasereduction in earnings from continuing operations adjusted for non-cash items.bonus and estimated income tax payments.
     Investing Activities.Investing activity cash flows from continuing operationsCash used in investing activities increased $106.1$21.0 million compared with a year ago. This increase isago due primarily due to an increase in proceedscapital expenditures and cash used to acquire Qdoba franchise-operated restaurants in 2011, partially offset by an increase in the number of restaurants sold to franchisees and collections of notes receivables related to new sitesprior year refranchising activity.
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. In 2011 we sold and leased back 12 restaurants, generating proceeds of $21.8 million compared with 19 restaurants and $36.0 million a year ago. As of April 17, 2011, we had cash investments of $51.3 million in 56 operating and under-construction restaurant properties that we expect to sell and leaseback when construction is complete and lower spending for purchases of property and equipment. Cash flows used in investing activities were also impacted by a decrease in collections on notes receivable.during the next twelve months.
     Capital Expenditures.Expenditures —The composition of capital expenditures used in continuing operations in each period follows (in thousands):
         
  Year-to-Date 
  July 4,  July 5, 
  2010  2009 
Jack in the Box:        
New restaurants $18,510  $42,773 
Restaurant facility improvements  28,203   54,571 
Other, including corporate  7,577   8,556 
Qdoba  7,883   12,860 
       
Total capital expenditures $62,173  $118,760 
       
Our capital expenditure program includes, among other things, investments in new locations, restaurant remodeling, and other facility improvements, new equipment and information technology enhancements. The composition of capital expenditures in each period is as follows (in thousands):
         
  Year-to-Date 
  April 17,  April 11, 
  2011  2010 
 
Jack in the Box:        
New restaurants $3,905  $15,901 
Restaurant facility improvements  51,734   17,769 
Other, including corporate  5,868   4,482 
Qdoba  12,622   4,480 
       
Total capital expenditures $74,129  $42,632 
       
Capital expenditures decreasedincreased compared to a year ago due primarily to the development of 23 fewer company-operated restaurants and loweran increase in spending related to our Jack in the Box re-image program.program and new logo rollout, as well as new Qdoba restaurants, partially offset by a decrease in spending for new Jack in the Box locations. We expect fiscal 20102011 capital expenditures to be approximately $125-$135 million, including investment costs related to the Jack in the Box restaurant re-image program. We plan to open approximately 3018 Jack in the Box and 1525 Qdoba company-operated restaurants in 2010.2011.

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     Sale of Company-Operated Restaurants. We continuehave continued to expand franchise ownership in the Jack in the Box system primarily through the sale of company-operated restaurants to franchisees. Year-to-date,The following table details proceeds received in connection with our refranchising activities(dollars in thousands):
         
  Year-to-Date
  April 17, April 11,
  2011 2010
 
Number of restaurants sold to franchisees  114   53 
         
Cash $49,588  $19,093 
Notes receivable     2,730 
       
Total proceeds $49,588  $21,823 
       
         
Average proceeds $435  $412 
     In certain instances, we generated cash proceeds andmay provide financing to facilitate the closing of certain transactions. As of April 17, 2011, the notes receivable of $54.8 million from the sale of 111 restaurants compared with $63.3 million from the sale of 98 restaurants in 2009. Sales proceeds include $2.7 million in financingbalance related to certain transactions in 2010, which have

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been repaid, and $13.8prior year refranchisings was $10.9 million, in 2009$4.3 million of which $11.6 million has been repaid. Inis expected to be fully repaid by the end of the fiscal year 2010, weyear. We expect total proceeds of $90–$85-$95 million from the sale of approximately 200 company-operated175-225 Jack in the Box restaurants to franchisees.in 2011.
     Acquisition of Franchise-Operated Restaurants.Restaurants —In the third quarter of 2010,2011, we acquired all 1620 Qdoba franchise-operated restaurants in the BostonIndianapolis market and two in Northern Florida for approximately $8.1$21.5 million. The purchase price was allocated primarily to goodwill, property and equipment goodwill and reacquired franchise rights.
     In For additional information, refer to Note 2,Summary of Refranchisings, Franchisee Development and Acquisitions, of the first quarter of 2009, we acquired 22 Qdoba franchise-operated restaurants in Michigan and California for approximately $6.8 million, net of cash received. The total purchase price was allocatednotes to property and equipment, goodwill and other income.the condensed consolidated financial statements.
     Financing Activities.Cash used in financing activities increased $43.0decreased $8.2 million compared with a year ago primarily attributable to purchases oflower principal repayments on debt and an increase in borrowings under our common stockrevolving credit facility, offset in fiscal 2010 and debt issuance costs incurredpart by the change in 2010our book overdraft related to the refinancingtiming of our credit facility.working capital receipts and disbursements and an increase in cash used to repurchase shares of the Company’s common stock.
     New Credit Facility.Facility —On June 29, 2010, the Company replaced its existing credit facility with a new credit facility intended to provide a more flexible capital structure. The newOur credit facility is comprised of (i) a $400.0 million revolving credit facility and (ii) a $200.0 million term loan with a five-year maturity,maturing on June 29, 2015, initially both with London Interbank Offered Rate (“LIBOR”) plus 2.50%.As part of the credit agreement, we may also request the issuance of up to $75.0 million in letters of credit, the outstanding amount of which reduces the net borrowing capacity under the agreement. The new credit facility requires the payment of an annual commitment fee based on the unused portion of the credit facility. The credit facility’s interest rates and the annual commitment rate are based on a financial leverage ratio, as defined in the credit agreement.
Repayments—The term loan requires amortization in the form of quarterly scheduled principal installments in the annual amounts set forth below (in thousands):
     
Fiscal Year    
2010 $2,500 
2011  12,500 
2012  20,000 
2013  15,000 
2014  30,000 
2015  120,000 
    
Total principal installments $200,000 
    
     The first such scheduled installment is required to be made on September 30, 2010, and the maturity date of the term loan is June 29, 2015. The Company 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 trigger a mandatory prepayment.
     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 set forth in the credit agreement. Additionally, there is a negative pledge on all tangible and intangible assets (including all real and personal property) with customary exceptions as reflected in the credit agreement.
Covenants. We are subject to a number of customary covenants under our credit facility, including limitations on additional borrowings, acquisitions, loans to franchisees, capital expenditures, lease commitments, stock repurchases, and dividend payments and requirements to maintain certain financial ratios. We were in compliance with all covenants as of April 17, 2011.
     Use of Proceeds. The Company borrowed $200.0At April 17, 2011, we had $192.5 million outstanding under the term loan, and $169.0 million under the revolving credit facility. The proceeds were used to repay all borrowings under the prior credit facility and related transaction fees and expenses, including those associated with the new credit facility. At July 4, 2010, we had borrowings under the revolving credit facility of $148.0$207.0 million and letters of credit outstanding of $34.9$35.8 million. Loan origination costs associated
Franchise Financing Entity Facility —FFE has a $100.0 million lending program 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 the newa third party. The FFE Facility is a 12-month revolving loan and security agreement bearing a variable interest rate. As of April 17, 2011, we have contributed $8.0 million to FFE, $6.7 million of which has been used to assist franchisees in reimaging their restaurants, and FFE has not borrowed against its third party revolving credit facility.
Interest Rate Swaps —To reduce our exposure to rising interest rates under our credit facility, were $9.2we consider interest rate swaps. In August 2010, we entered into two forward looking swaps that will effectively convert $100.0 million and are includedof our variable rate term loan to a fixed-rate basis beginning September 2011 through September 2014. Based on the term loan applicable margin of 2.50% as deferred costs in other assets, net inof April 17, 2011, these agreements would have an average pay rate of 1.54%, yielding an “all-in” fixed rate of 4.04%. From March 2007 to April 2010, we held two interest rate swaps that

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effectively converted $200.0 million of our variable rate term loan borrowings to a fixed-rate basis. For additional information related to our interest rate swaps, refer to Note 4,Derivative Instruments, of the accompanyingnotes to the condensed consolidated balance sheet as of July 4, 2010.financial statements.
     Repurchases of Common Stock.Stock —In November 2007,2010, the Board of Directors approved a program to repurchase up to $200.0$100.0 million in shares of our common stock over three years expiring November 9, 2010.2011. During 2010,2011, we repurchased approximately 2.6

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3.5 million shares at an aggregate cost of $50.0$75.0 million. As of July 4, 2010,April 17, 2011, the aggregate remaining amount authorized for repurchase was $47.4$25.0 million. In May 2011, the Board of Directors authorized a new program to repurchase up to $100.0 million in shares of our common stock expiring November 2012.
Off-Balance Sheet Arrangements.
Other than operating leases, 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. We finance a portion of our new restaurant development through sale-leaseback transactions. These transactions involve selling restaurants to unrelated parties and leasing the restaurants back.
DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES
     We have identified the following as our most critical accounting estimates, which are those that are most important to the portrayal of the Company’s financial condition and results and that require management’s most subjective and complex judgments. Information regarding our other significant accounting estimates and policies is disclosed in Note 1 of our most recent Annual Report on Form 10-K filed with the SEC.
Share-based CompensationWe offer share-based compensation plans to attract, retain and motivate key officers, non-employee directors and employees to work toward the financial success of the Company. Share-based compensation cost for our stock option grants is estimated at the grant date based on the award’s fair-value as calculated by an option pricing model and is recognized as expense ratably over the requisite service period. The option pricing models require various highly judgmental assumptions including volatility, forfeiture rates and expected option life. If any of the assumptions used in the model change significantly, share-based compensation expense may differ materially in the future from that recorded in the current period.
Retirement Benefits— Our defined benefit and other postretirement plans’ costs and liabilities are determined using several statistical and other factors, which attempt to anticipate future events, including assumptions about the discount rate and expected return on plan assets. Our discount rate is set annually by us, with assistance from our actuaries, and is determined by considering the average of pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better meeting certain other criteria. As of September 27, 2009, our discount rate was 6.16% for our defined benefit and postretirement benefit plans. Our expected long-term rate of return on assets is determined taking into consideration our projected asset allocation and economic forecasts prepared with the assistance of our actuarial consultants. As of September 27, 2009, our assumed expected long-term rate of return was 7.75% for our qualified defined benefit plan. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower turnover and retirement rates or longer or shorter life spans of participants. These differences may affect the amount of pension expense we record. A hypothetical 25 basis point reduction in the assumed discount rate and expected long-term rate of return on plan assets would have resulted in an estimated increase of $2.4 million and $4.7 million, respectively, in our fiscal 2010 pension expense.
Self Insurance— We are self-insured for a portion of our losses related to workers’ compensation, general liability, automotive, medical and dental programs. In estimating our self-insurance accruals, we utilize independent actuarial estimates of expected losses, which are based on statistical analysis of historical data. These assumptions are closely monitored and adjusted when warranted by changing circumstances. Should a greater amount of claims occur compared to what was estimated or medical costs increase beyond what was expected, accruals might not be sufficient, and additional expense may be recorded.
     Long-lived Assets— Property, equipment and certain other assets, including amortized intangible assets, are reviewed for impairment when indicators of impairment are present. This review generally includes a restaurant-level analysis, except when we are actively selling a group of restaurants, in which case we perform our impairment evaluations at the group level. Impairment evaluations for individual restaurants take into consideration a restaurant’s operating cash flows, the period of time since a restaurant has been opened or remodeled, refranchising expectations and the maturity of the related market. Impairment evaluations for a group of restaurants take into consideration the group’s expected future cash flows and sales proceeds from bids received, if any, or fair market value based on, among other

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considerations, the specific sales and cash flows of those restaurants. If the assets of a restaurant or group of restaurants subject to our impairment evaluation are not recoverable based upon the forecasted, undiscounted cash flows, we recognize an impairment loss byas the amount by which the carrying value of the assets exceeds fair value. Our estimates of cash flows used to assess impairment are subject to a high degree of judgment and may differ from actual cash flows due to, among other things, economic conditions or changes in operating performance.
     Retirement Benefits— Our defined benefit and other postretirement plans’ costs and liabilities are determined using several statistical and other factors, which attempt to anticipate future events, including assumptions about the discount rate and expected return on plan assets. We determine and set our discount rate annually, with assistance from our actuaries, by considering the average of pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better meeting certain other criteria. As of October 3, 2010, our discount rate was 5.82% for our defined benefit and postretirement benefit plans. Our expected long-term rate of return on assets is determined taking into consideration our projected asset allocation and economic forecasts prepared with the assistance of our actuarial consultants. As of October 3, 2010, our assumed expected long-term rate of return was 7.75% for our qualified defined benefit plan. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower turnover and retirement rates or longer or shorter life spans of participants. These differences may affect the amount of pension expense we record. A hypothetical 25 basis point reduction in the assumed discount rate and expected long-term rate of return on plan assets would have resulted in an estimated increase of $2.7 million and $0.7 million, respectively, in our fiscal 2011 pension and postretirement plan expense. We expect our pension and postretirement expense to decrease in fiscal 2011 principally due to the curtailment of our qualified plan, which will be partially offset by a decrease in our discount rate from 6.16% to 5.82%.
Self Insurance— We are self-insured for a portion of our losses related to workers’ compensation, general liability, automotive and health benefits. In estimating our self-insurance accruals, we utilize independent actuarial estimates of expected losses, which are based on statistical analysis of historical data. These assumptions are closely monitored and adjusted when warranted by changing circumstances. Should a greater amount of claims occur

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compared to what was estimated or medical costs increase beyond what was expected, accruals might not be sufficient, and additional expense may be recorded.
Restaurant Closing Costs— Restaurant closing costs consist of net future lease commitments and expected ancillary costs. We record a liability for the net present value of any remaining lease obligations, less estimated sublease income, at the date we cease using a property. Subsequent adjustments to the liability as a result of changes in estimates of sublease income or lease cancellations are recorded in the period incurred. The estimates we make related to sublease income are subject to a high degree of judgment and may differ from actual sublease income due to changes in economic conditions, desirability of the sites and other factors.
Share-based CompensationWe 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. Share-based compensation cost for our stock option grants is estimated at the grant date based on the award’s fair-value as calculated by an option pricing model and is recognized as expense ratably over the requisite service period. The option pricing models require various highly judgmental assumptions, including volatility, forfeiture rates and expected option life. If any of the assumptions used in the model change significantly, share-based compensation expense may differ materially in the future from that recorded in the current period.
Goodwill and Other Intangibles— We also evaluate goodwill and non-amortizable intangible assets not subject to amortization annually, or more frequently if indicators of impairment are present. If the determined fair values of these assets are less than the related carrying amounts, an impairment loss is recognized. The methods we use to estimate fair value include future cash flow assumptions, which may differ from actual cash flows due to, among other things, economic conditions or changes in operating performance. During the fourth quarter of fiscal 2009,2010, we reviewed the carrying value of our goodwill and indefinite life intangible assets and determined that no impairment existed as of September 27, 2009.
Allowances for Doubtful Accounts— Our trade receivables consist primarily of amounts due from franchisees for rents on subleased sites, royalties and distribution sales. We continually monitor amounts due from franchisees and maintain an allowance for doubtful accounts for estimated losses. This estimate is based on our assessment of the collectibility of specific franchisee accounts, as well as a general allowance based on historical trends, the financial condition of our franchisees, consideration of the general economy and the aging of such receivables. We have good relationships with our franchisees and high collection rates; however, if the future financial condition of our franchisees were to deteriorate, resulting in their inability to make specific required payments, we may be required to increase the allowance for doubtful accounts.October 3, 2010.
     Legal AccrualsThe Company is subject to claims and lawsuits in the ordinary course of its business. A determination of the amount accrued, if any, for these contingencies is made after analysis of each matter. We continually evaluate such accruals and may increase or decrease accrued amounts, as we deem appropriate.
     Income TaxesWe estimate certain components of our provision for income taxes. These estimates include, among other items, depreciation and amortization expense allowable for tax purposes, allowable tax credits, effective rates for state and local income taxes and the tax deductibility of certain other items. We adjust our annual effective income tax rate as additional information on outcomes or events becomes available.
Our estimates are based on the best available information at the time that we prepare the income tax provision. We generally file our annual income tax returns several months after our fiscal year-end. Income tax returns are subject to audit by federal, state and local governments, generally years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws.
NEW ACCOUNTING PRONOUNCEMENTS
     In June 2009, the FASB issued authoritative guidance for consolidation, which changes the approach for determining which enterprise has a controlling financial interest in a variable interest entity and requires more frequent reassessments of whether an enterprise is a primary beneficiary. This guidance is effective for annual periods beginning after November 15, 2009. We are currently in the process of assessing the impact this guidance may have on our consolidated financial statements.
     OtherAny 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.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
     This report contains forward-looking statements within the meaning of the federal securities law.laws. Forward-looking statements use such words as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would,”“would” and similar expressions. These statements are based on management’s current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from expectations. You should not rely unduly on forward-looking statements. All forward-looking statements are made only as of the date issued. The estimates and assumptions underlying those forward-looking statements can and do change. We do not undertake any obligation to update any forward-looking statements. We caution the reader that the following important factors and the important factors described in the “Discussion of Critical Accounting Estimates,” and in other sections in this Form 10-Q and in our Annual Report on Form 10-K and other

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Securities and Exchange Commission filings, could cause our results to vary materially from those expressed in any forward-looking statement.statement:

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 Any widespread negative publicity, whether or not based in fact, about public health issues or pandemics, or the prospect of such events, which negatively affects consumer perceptions about the health, safety or quality of food and beverages served at our restaurants may adversely affect our results.
 
 While there are reports pointing toward U.S.Food service businesses such as ours may be materially and adversely affected by changes in national and regional political and economic recovery, many of our largest markets continue to experience adverseconditions. Unstable economic conditions, including higher levels of unemployment,inflation, lower levels of consumer confidence, andlow levels of employment, decreased consumer spending. Regional economic conditions that fail to improve could reduce trafficspending and changes in discretionary spending priorities may adversely impact our restaurantssales, operating results and impose practical limits on pricing, resulting in a negative impact on sales and profitability. If unstable economic conditions persist for an extended period of time, consumers may make long-lasting changes to their spending behavior.profits.
 
 Costs may exceed projections, including costs for food ingredients, labor (including increases in minimum wage, workersworkers’ compensation, healthcare and other insurance), fuel, utilities, real estate, insurance, equipment, technology and construction of new and remodeled restaurants. Inflationary pressures affecting the cost of commodities may adversely affect our food costs and our operating margins. Because a significant number of our restaurants are company-operated, we may have greater exposure to operating cost issues than chains that areif we were more heavily franchised.
 
 Regulatory changes, such as the new federal healthcare legislation or possible changes to labor or other laws and regulations, could result in increased operating costs. We are currently assessing the potential costs of new federal healthcare legislation.
 
 There can be no assurances that new interior and exterior designs, kitchen enhancements or new equipment will foster increases in sales at remodeled restaurants and yield the desired return on investment.
 
 There can be no assurances that our growth objectives in the regional markets in which we operate restaurants will be met or that the new facilities will be profitable. Delays in development,Development delays, sales softness and restaurant closures may have a material adverse effect on our results of operations. The development and profitability of restaurants can be adversely affected by many factors, including the ability of the Company and its franchisees to select and secure suitable sites on satisfactory terms, costs of construction, and general business and economic conditions. In addition, tight credit markets may negatively impact the ability of franchisees to fulfill their restaurant development commitments.
 
 There can be no assurances that we will be able to effectively respond to aggressive competition from numerous and varied competitors (some with significantly greater financial resources) in all areas of business, including new concepts, facility design, competition for labor, new product introductions, customer service initiatives, promotions (including value promotions) and discounting. Additionally, the trend toward convergence in grocery, deli, convenience store and other types of food services may increase the number of our competitors. Such increased competition could decrease the demand for our products and negatively affect our sales and profitability. Moreover, there can be no assurance of the success of any new products, initiatives or overall strategies that we choose to pursue.
 
 The realization of gains from the sale of company-operated restaurants to existing and new franchisees depends upon various factors, including sales trends, cost trends and economic conditions. The financing market, including the cost and availability of borrowed funds and the terms required by lenders, can impact the ability of franchisee candidates to purchase franchises and can potentially impact the sales prices and number of franchises sold. The number of franchises sold and the amount of gain realized from the sale of an on-going business may not be consistent from quarter-to-quarterquarter to quarter and may not meet expectations.
As the number of franchisees increases, our revenues derived from rents and royalties at franchisedfranchise restaurants will increase, as well as the risk that revenues could be negatively impacted by defaults in payment of rents and royalties. In addition, franchisee
Franchisee business obligations may not be limited to the operation of Jack in the Box or Qdoba restaurants, making them subject to business and financial risks unrelated to the operation of ourtheir restaurants. These unrelated risks could adversely affect a franchisee’s ability to make full or timely payments to us or to make payments on a timely basis.us.
 
 The costs related to legal claims such as class actions involving employees, franchisees, shareholders or consumers, including costs related to potential settlement or judgments, may adversely affect our results.
 
 Changes in accounting standards, policies or practices or related interpretations by auditors or regulatory entities, including changes in tax accounting or tax laws, may adversely affect our results.

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 The costs or exposures associated with maintaining the security of information and the use of cashless payments may exceed expectations. Such risks include increased investment in technology and costs of compliance with consumer protection and other laws.
 
 Many factors affect the trading price of our stock, including factors over which we have no control, such as the current financial environment, government actions, reports on the economy as well as negative or positive announcements by competitors, regardless of whether the report relates directly to our business.
 
 Significant demographic changes, adverse weather, pressures on consumer spending, economic conditions such as inflation or recession or political conditions such as terrorist activity or the effects of war, or other significant events (particularly in California and Texas where nearly 60%70% of our Jack in the Box system restaurants are located), new legislation, and governmental regulation, the possibility of unforeseen events affecting the food service industry in general and other factors over which we have no control can each adversely affect our results of operation.
     This discussion of uncertainties is by no means exhaustive but is intended to highlight some important factors that may materially affect our results.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     Our primary exposure to risks relating to financial instruments is 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 or LIBOR plus an applicable margin based on a financial leverage ratio. As of July 4, 2010,April 17, 2011, the applicable margin for the LIBOR-based revolving loans and term loan was set at 2.50%.
     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% as of April 17, 2011, these agreements would have an average pay rate of 1.54%, yielding an “all-in” fixed rate of 4.04%.
     A hypothetical 100 basis point increase in short-term interest rates, based on the outstanding balance of our revolving credit facility and term loan at July 4, 2010April 17, 2011, would result in an estimated increase of $3.5$4.0 million in annual interest expense.
     We are also exposed to the impact of commodity and utility price fluctuations related to unpredictable factors such as weather and various other market conditions outside our control. Our ability to recover increased costs 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 4, 2010,April 17, 2011, we had no such contracts in place.
ITEM 4.CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
     We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
     Under the supervision and with the participation of our management, including our principal executive officerChief Executive Officer and principal financial officer,Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Securities and Exchange Act Rules 13a-15(e). Based on this evaluation, our principal executive officerChief Executive Officer and principal financial officerChief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Changes in Internal Control Over Financial Reporting
     There have been no significant changes in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, ourthe 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 to normal and routine legal proceedings, including litigation. InWe have reserves for certain of these legal proceedings; however, the opinionoutcomes of such proceedings are subject to inherent uncertainties. Based on current information, including our reserves and insurance coverage, management based in part on the advice of legal counsel,believes that the ultimate liability from all pending legal proceedings, asserted legal claimsindividually and known potential legal claims shouldin the aggregate, will not materially affect ourhave a material adverse effect on the Company’s operating results, financial position andor liquidity.
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 September 27, 2009,October 3, 2010, which we filed with the SEC on November 20, 2009,24, 2010, 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. 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 September 27, 2009,October 3, 2010, including our financial statements and the related notes.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
     Our credit agreement provides for $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. As of April 17, 2011, the aggregate remaining amount authorized and available under our credit agreement was $378.0 million.
     Dividends.We did not pay any cash or other dividends during the last two fiscal years with the exception of a stock split that was effected in the form of a stock dividend on October 15, 2007, with shareholders receiving an additional share of stock for each share held. Weand do not anticipate paying any dividends in the foreseeable future.
     Stock Repurchases.In November 2007,2010, the Board of Directors approved a program to repurchase up to $200.0$100.0 million in shares of our common stock over three years expiring November 9, 2010.2011. As of July 4, 2010,April 17, 2011, the aggregate remaining amount authorized for repurchase was $47.4$25.0 million. The following table summarizes shares repurchased pursuant to this program during the quarter ended April 17, 2011:
                 
          (c)  
          Total number  
          of shares (d)
  (a) (b) purchased as Maximum dollar
  Total number Average part of publicly value that may yet
  of shares price paid announced be purchased under
  purchased per share programs these programs
              $  50,000,012 
January 24, 2011 - February 20, 2011          $  50,000,012 
February 21, 2011 - March 20, 2011  696,800  $  22.19   696,800  $  34,523,720 
March 21, 2011 - April 17, 2011  427,712  $  22.24   427,712  $  25,000,022 
                 
Total  1,124,512  $  22.21   1,124,512     
                 
      PerIn May 2011, the termsBoard of Directors authorized a new program to repurchase up to $100.0 million in shares of our credit facility, the aggregate amount of cash dividends andcommon stock repurchases may not exceed $500.0 million, subject to reduction to $200.0 million based on our leverage ratio.expiring November 2012.

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ITEM 6.EXHIBITS
   
Number Description
3.1 Restated Certificate of Incorporation, as amended, which is incorporated herein by reference from the registrant’s CurrentAnnual Report on Form 8-K dated September 21, 2007.10-K for the fiscal year ended October 3, 1999.
   
3.1.1 Certificate of Amendment of Restated Certificate of Incorporation, which is incorporated herein by reference from the registrant’s Current Report on Form 8-K dated September 21, 2007.
   
3.2 Amended and Restated Bylaws, which are incorporated herein by reference from the registrant’s Current Report on Form 8-K dated May 11, 2010.
   
10.1610.15(a) Amended and Restated 2004 Stock Incentive Plan,Memorandum of Understanding clarifying date of employment with Qdoba Restaurant Corporation, which is incorporated herein by reference from the registrant’s Quarterly Report on Form 10-Q dated April 11, 2010.for the quarter ended January 23, 2011.
   
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
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.
   
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.
   
101.INS* XBRL Instance Document
   
101.SCH* XBRL Taxonomy Extension Schema Document
   
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

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NumberDescription
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
 
* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”

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SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
     
 JACK IN THE BOX INC.
 
 
 By:  /S/ JERRY P. REBEL   
  Jerry P. Rebel  
  Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)principal financial officer)
(Duly Authorized Signatory) 
 
 
Date: August 5, 2010May 19, 2011

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