FY15 10-Q/A Q2 v2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ____________________________________________________
FORM 10-Q/A
 _______________________________________________________________________________________ 
Amendment No. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 12, 2015
Commission File Number: 1-9390
 
___________________________________________________________________________________
JACK IN THE BOX INC.
(Exact name of registrant as specified in its charter)
 _______________________________________________________________________________________ 
DELAWARE
 
95-2698708
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
9330 BALBOA AVENUE, SAN DIEGO, CA
 
92123
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (858) 571-2121
   _______________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  þ    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨    No  þ
As of the close of business May 8, 2015, 37,380,529 shares of the registrant’s common stock were outstanding.



JACK IN THE BOX INC. AND SUBSIDIARIES
INDEX
 
 
 
Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
 
 
 
Condensed Consolidated Statements of Earnings
 
 
 
 
PART II – OTHER INFORMATION
 
Item 6.
 

EXPLANATORY NOTE
 
This Amendment No. 1 on Form 10-Q/A to the Jack in the Box Inc. Quarterly Report on Form 10-Q, as originally filed with the Securities and Exchange Commission on May 14, 2015 (the “Original Filing”), is being filed solely to correct the allocation of total depreciation expense by segment noted in a table in Note 14 Segment Reporting of the Notes to Condensed Consolidated Financial Statements included within Item 1. The depreciation amounts for the Qdoba restaurant operations segment and Shared services and allocated costs caption for the quarter and year-to-date 2015 periods were inadvertently transposed in the Original Filing.

Except as described above, no other changes have been made to the Original Filing and this Form 10-Q/A does not does reflect subsequent events that may have occurred since the date of the Original Filing or amend, update or change the financial statements or any other items or disclosures in the Original Filing.

In accordance with Rule 12b-5 under the Securities Exchange Act of 1934, as amended, we have included new certifications from our Chief Executive Officer and Chief Financial Officer dated the date of this Form 10-Q/A.



1


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

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
 
April 12,
2015
 
September 28,
2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
10,386

 
$
10,578

Accounts and other receivables, net
69,455

 
50,014

Inventories
7,335

 
7,481

Prepaid expenses
29,448

 
36,314

Deferred income taxes
36,810

 
36,810

Assets held for sale
10,505

 
4,766

Other current assets
2,097

 
597

Total current assets
166,036

 
146,560

Property and equipment, at cost
1,508,360

 
1,519,947

Less accumulated depreciation and amortization
(812,898
)
 
(797,818
)
Property and equipment, net
695,462

 
722,129

Intangible assets, net
15,146

 
15,604

Goodwill
149,042

 
149,074

Other assets, net
236,717

 
237,298

 
$
1,262,403

 
$
1,270,665

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
10,898

 
$
10,871

Accounts payable
28,505

 
31,810

Accrued liabilities
159,633

 
163,626

Total current liabilities
199,036

 
206,307

Long-term debt, net of current maturities
592,989

 
497,012

Other long-term liabilities
307,433

 
309,435

Stockholders’ equity:
 
 
 
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued

 

Common stock $0.01 par value, 175,000,000 shares authorized, 81,036,074 and 80,127,387 issued, respectively
810

 
801

Capital in excess of par value
395,087

 
356,727

Retained earnings
1,288,272

 
1,244,897

Accumulated other comprehensive loss
(90,285
)
 
(90,132
)
Treasury stock, at cost, 43,655,712 and 41,571,752 shares, respectively
(1,430,939
)
 
(1,254,382
)
Total stockholders’ equity
162,945

 
257,911

 
$
1,262,403

 
$
1,270,665

See accompanying notes to condensed consolidated financial statements.

2


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Revenues:
 
 
 
 
 
 
 
Company restaurant sales
$
268,904

 
$
257,773

 
$
620,800

 
$
596,602

Franchise revenues
89,218

 
83,097

 
205,943

 
194,350

 
358,122

 
340,870

 
826,743

 
790,952

Operating costs and expenses, net:
 
 
 
 
 
 
 
Company restaurant costs:
 
 
 
 
 
 
 
Food and packaging
84,032

 
81,422

 
197,141

 
189,660

Payroll and employee benefits
73,073

 
71,616

 
168,752

 
165,432

Occupancy and other
56,468

 
56,998

 
131,499

 
131,707

Total company restaurant costs
213,573

 
210,036

 
497,392

 
486,799

Franchise costs
43,059

 
41,996

 
100,200

 
97,507

Selling, general and administrative expenses
52,472

 
48,660

 
115,567

 
107,816

Impairment and other charges, net
2,130

 
9,056

 
4,310

 
10,965

Losses (gains) on the sale of company-operated restaurants
5,020

 
(1,757
)
 
4,170

 
(2,218
)
 
316,254

 
307,991

 
721,639

 
700,869

Earnings from operations
41,868

 
32,879

 
105,104

 
90,083

Interest expense, net
4,220

 
4,311

 
9,433

 
8,853

Earnings from continuing operations and before income taxes
37,648

 
28,568

 
95,671

 
81,230

Income taxes
14,286

 
10,304

 
35,211

 
29,956

Earnings from continuing operations
23,362

 
18,264

 
60,460

 
51,274

Losses from discontinued operations, net of income tax benefit
(357
)
 
(2,463
)
 
(1,620
)
 
(3,187
)
Net earnings
$
23,005

 
$
15,801

 
$
58,840

 
$
48,087

 
 
 
 
 
 
 
 
Net earnings per share - basic:
 
 
 
 
 
 
 
Earnings from continuing operations
$
0.62

 
$
0.44

 
$
1.58

 
$
1.22

Losses from discontinued operations
(0.01
)
 
(0.06
)
 
(0.04
)
 
(0.08
)
Net earnings per share (1)
$
0.61

 
$
0.38

 
$
1.53

 
$
1.14

Net earnings per share - diluted:
 
 
 
 
 
 
 
Earnings from continuing operations
$
0.61

 
$
0.43

 
$
1.55

 
$
1.18

Losses from discontinued operations
(0.01
)
 
(0.06
)
 
(0.04
)
 
(0.07
)
Net earnings per share (1)
$
0.60

 
$
0.37

 
$
1.51

 
$
1.11

 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
Basic
37,970

 
41,464

 
38,353

 
42,018

Diluted
38,566

 
42,632

 
39,039

 
43,336

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.20

 
$

 
$
0.40

 
$

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

See accompanying notes to condensed consolidated financial statements.

3


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Net earnings
$
23,005

 
$
15,801

 
$
58,840

 
$
48,087

Cash flow hedges:
 
 
 
 
 
 
 
Net change in fair value of derivatives
86

 
(31
)
 
(6,672
)
 
(85
)
Net loss reclassified to earnings
468

 
322

 
1,095

 
748

 
554

 
291

 
(5,577
)
 
663

Tax effect
(212
)
 
(112
)
 
2,135

 
(254
)
 
342

 
179

 
(3,442
)
 
409

Unrecognized periodic benefit costs:
 
 
 
 
 
 
 
Actuarial losses and prior service costs reclassified to earnings
2,276

 
1,210

 
5,311

 
2,825

Tax effect
(871
)
 
(464
)
 
(2,033
)
 
(1,084
)
 
1,405

 
746

 
3,278

 
1,741

Other:
 
 
 
 
 
 
 
Foreign currency translation adjustments
10

 

 
16

 
7

Tax effect
(2
)
 

 
(5
)
 
(3
)
 
8

 

 
11

 
4

 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
1,755

 
925

 
(153
)
 
2,154

 
 
 
 
 
 
 
 
Comprehensive income
$
24,760

 
$
16,726

 
$
58,687

 
$
50,241

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
 
April 12,
2015
 
April 13,
2014
Cash flows from operating activities:
 
 
 
Net earnings
$
58,840

 
$
48,087

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
47,875

 
49,725

Deferred finance cost amortization
1,155

 
1,177

Excess tax benefits from share-based compensation arrangements
(17,073
)
 
(12,017
)
Deferred income taxes
(2,785
)
 
(384
)
Share-based compensation expense
7,367

 
6,348

Pension and postretirement expense
10,096

 
7,410

Gains on cash surrender value of company-owned life insurance
(3,635
)
 
(3,428
)
Losses (gains) on the sale of company-operated restaurants
4,170

 
(2,218
)
Losses on the disposition of property and equipment
466

 
594

Impairment charges and other
2,180

 
8,088

Loss on early retirement of debt

 
789

Changes in assets and liabilities, excluding acquisitions and dispositions:
 
 
 
Accounts and other receivables
(21,841
)
 
(14,274
)
Inventories
146

 
(640
)
Prepaid expenses and other current assets
27,181

 
(8,746
)
Accounts payable
(1,459
)
 
1,725

Accrued liabilities
(8,991
)
 
(13,543
)
Pension and postretirement contributions
(8,113
)
 
(7,831
)
Other
(4,659
)
 
(9,910
)
Cash flows provided by operating activities
90,920

 
50,952

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(32,959
)
 
(31,196
)
Purchases of assets intended for sale and leaseback
(5,355
)
 
(19
)
Proceeds from the sale of assets

 
2,105

Proceeds from the sale of company-operated restaurants
2,630

 
7,842

Collections on notes receivable
5,314

 
1,774

Acquisitions of franchise-operated restaurants

 
(1,750
)
Other
1,786

 
36

Cash flows used in investing activities
(28,584
)
 
(21,208
)
Cash flows from financing activities:
 
 
 
Borrowings on revolving credit facilities
264,000

 
509,000

Repayments of borrowings on revolving credit facilities
(160,000
)
 
(379,000
)
Proceeds from issuance of debt

 
200,000

Principal repayments on debt
(7,996
)
 
(190,549
)
Debt issuance costs

 
(3,527
)
Dividends paid on common stock
(15,395
)
 

Proceeds from issuance of common stock
13,894

 
22,457

Repurchases of common stock
(174,115
)
 
(205,453
)
Excess tax benefits from share-based compensation arrangements
17,073

 
12,017

Change in book overdraft

 
4,774

Cash flows used in financing activities
(62,539
)
 
(30,281
)
Effect of exchange rate changes on cash and cash equivalents
11

 
5

Net decrease in cash and cash equivalents
(192
)
 
(532
)
Cash and cash equivalents at beginning of period
10,578

 
9,644

Cash and cash equivalents at end of period
$
10,386

 
$
9,112


See accompanying notes to condensed consolidated financial statements.

5

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




1.    BASIS OF PRESENTATION
Nature of operations — Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® quick-service restaurants and Qdoba Mexican Grill® (“Qdoba”) fast-casual restaurants. The following table summarizes the number of restaurants as of the end of each period:
 
April 12,
2015
 
April 13,
2014
Jack in the Box:
 
 
 
Company-operated
412

 
455

Franchise
1,836

 
1,799

Total system
2,248

 
2,254

Qdoba:
 
 
 
Company-operated
310

 
303

Franchise
334

 
323

Total system
644

 
626

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 and the rules and regulations of the Securities and Exchange Commission (“SEC”). During fiscal 2012, we entered into an agreement to outsource our Jack in the Box distribution business. In the third quarter of fiscal 2013, we closed 62 Qdoba restaurants (the “2013 Qdoba Closures”) as part of a comprehensive Qdoba market performance review. The results of operations for our distribution business and for the 2013 Qdoba Closures are reported as discontinued operations for all periods presented. Refer to Note 2, Discontinued Operations, for additional information. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to our continuing operations. In our opinion, all adjustments considered necessary for a fair presentation of financial condition and results of operations for these interim periods have been included. Operating results for one interim period are not necessarily indicative of the results for any other interim period or for the full year.
These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended September 28, 2014. 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 2015 which are described below.
Principles of consolidation — The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the accounts of any variable interest entities (“VIEs”) where we are deemed the primary beneficiary. All significant intercompany accounts and transactions are eliminated. For information related to the VIE included in our condensed consolidated financial statements, refer to Note 12, Variable Interest Entities.
Reclassifications and adjustments — Certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform to the fiscal 2015 presentation.
Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2015 and 2014 include 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks. All comparisons between 2015 and 2014 refer to the 12-weeks (“quarter”) and 28-weeks (“year-to-date”) ended April 12, 2015 and April 13, 2014, respectively, unless otherwise indicated.
Use of estimates — In preparing the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make certain assumptions and estimates that affect reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies. In making these assumptions and estimates, management may from time to time seek advice and consider information provided by actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates.
Effect of new accounting pronouncements — In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which modifies the definition of discontinued operations to include only disposals of an entity that represent strategic shifts that have or will have a major effect on an entity's operations and financial results. This ASU also expands the disclosure requirements for disposals which meet the definition of a discontinued operation and requires entities to

6

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



disclose information about disposals of individually significant components that do not meet the definition of discontinued operations. The standard is effective prospectively for annual and interim periods beginning after December 15, 2014, with early adoption permitted. We early adopted this standard on September 29, 2014. This pronouncement did not have a material impact on our condensed consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides a comprehensive new revenue recognition model that requires a company to recognize revenue in an amount that reflects the consideration it expects to receive for the transfer of promised goods or services to its customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This ASU is effective for annual periods and interim periods beginning after December 15, 2016. The ASU is to be applied retrospectively or using a cumulative effect transition method and early adoption is not permitted. In April 2015, the FASB proposed a deferral of this ASU's effective date by one year, to December 15, 2017. The proposed deferral allows early adoption at the original effective date. We are currently evaluating the effect that this pronouncement will have on our consolidated financial statements and related disclosures.
In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments when the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period, which requires a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. This standard is to be applied prospectively for annual and interim periods beginning after December 15, 2015, with early adoption permitted. We early adopted this standard on September 29, 2014. This pronouncement did not have a material impact on our condensed consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. Under this ASU, an entity presents such costs on the balance sheet as a direct deduction from the related debt liability rather than as an asset. This new standard is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early adoption permitted. We do not plan to adopt this standard early and do not expect that it will have a material impact on our consolidated financial statements or disclosures upon adoption.
In April 2015, the FASB issued ASU 2015-04, Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets, which provides a practical expedient that permits a company to measure defined benefit plan assets and obligations using the month-end date that is closest to the company's fiscal year-end and apply that practical expedient consistently from year to year. The practical expedient should be applied consistently to all plans if the company has more than one plan. This ASU is effective prospectively for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted. We do not expect this standard to have a material impact our consolidated financial statements upon adoption.
2.
DISCONTINUED OPERATIONS
Distribution business — During fiscal 2012, we entered into an agreement with a third party distribution service provider pursuant to a plan approved by our board of directors to sell our Jack in the Box distribution business. During the first quarter of fiscal 2013, we completed the transition of our distribution centers. The operations and cash flows of the business have been eliminated and in accordance with the provisions of ASC 205, Presentation of Financial Statements, the results are reported as discontinued operations for all periods presented.
We recognized operating losses before taxes of $0.1 million in both periods of 2015, and $0.1 million and $0.7 million in the quarter and year-to-date, respectively, in 2014. Year-to-date, operating losses before taxes include $0.1 million and $0.2 million in 2015 and 2014, respectively, related to our lease commitments, and $0.4 million in 2014 related to insurance settlements.
Our liability for lease commitments related to our distribution centers is included in accrued liabilities and other long-term liabilities, and was $0.3 million and $0.5 million as of April 12, 2015 and September 28, 2014, respectively. The lease commitment balance as of April 12, 2015 relates to one distribution center subleased at a loss.
2013 Qdoba Closures — During the third quarter of fiscal 2013, we closed 62 Qdoba restaurants. The decision to close these restaurants was based on a comprehensive analysis that took into consideration levels of return on investment and other key operating performance metrics. Since the closed locations were not predominantly located near those remaining in operation, we did not expect the majority of cash flows and sales lost from these closures to be recovered. In addition, we did not anticipate any ongoing involvement or significant direct cash flows from the closed stores. Therefore, in accordance with the provisions of ASC 205, Presentation of Financial Statements, the results of operations for these restaurants are reported as discontinued operations for all periods presented. In the quarter and year-to-date periods, we recognized operating losses before income taxes of $0.5 million and $2.5 million, respectively, in 2015, and $3.8 million and $4.4 million, respectively, in 2014.

7

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



In 2015, the year-to-date operating losses include $2.2 million of unfavorable lease commitment adjustments, $0.2 million of ongoing facility related costs and $0.1 million of broker commissions. In 2014, the year-to-date operating losses include $3.0 million of unfavorable lease commitment adjustments, $0.4 million for asset impairments, $0.6 million of ongoing facility related costs and $0.3 million of broker commissions. We do not expect the remaining costs to be incurred related to these closures to be material; however, the estimates we make related to our future lease obligations, primarily 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.
Our liability for lease commitments related to the 2013 Qdoba Closures is included in accrued liabilities and other long-term liabilities and changed as follows in 2015 (in thousands):
 
 
Year-to-date
Balance as of September 28, 2014
 
$
5,737

Adjustments
 
2,185

Cash payments
 
(4,060
)
Balance as of April 12, 2015
 
$
3,862

Adjustments primarily relate to revisions to certain sublease and cost assumptions due to changes in market conditions as well as charges to terminate four lease agreements. These amounts were partially offset by favorable adjustments for locations that we have subleased.


8

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



3.
SUMMARY OF REFRANCHISINGS, FRANCHISEE DEVELOPMENT AND ACQUISITIONS
Refranchisings and franchisee development — The following is a summary of the number of restaurants sold to franchisees, number of restaurants developed by franchisees and the related gains or losses and fees recognized (dollars in thousands):
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Restaurants sold to Jack in the Box franchisees
20

 
14

 
21

 
14

New restaurants opened by franchisees
10

 
6

 
22

 
19

 
 
 
 
 
 
 
 
Initial franchise fees
$
608

 
$
755

 
$
983

 
$
1,154

 
 
 
 
 
 
 
 
Proceeds from the sale of company-operated restaurants (1)
$
1,456

 
$
7,374

 
$
2,630

 
$
7,842

Net assets sold (primarily property and equipment)
(1,945
)
 
(2,240
)
 
(2,434
)
 
(2,240
)
Goodwill related to the sale of company-operated restaurants
(16
)
 
(120
)
 
(32
)
 
(129
)
Other (2)
(4,515
)
 
(142
)
 
(4,334
)
 
(140
)
(Losses) gains on the sale of company-operated restaurants
$
(5,020
)
 
$
4,872

 
$
(4,170
)
 
$
5,333

 
 
 
 
 
 
 
 
Losses on expected sale of Jack in the box company-operated markets (3)

 
(3,115
)
 

 
(3,115
)
 
 
 
 
 
 
 
 
Total (losses) gains on the sale of company-operated restaurants
$
(5,020
)
 
$
1,757

 
$
(4,170
)
 
$
2,218

____________________________
(1)
Amounts in 2015 and 2014 include additional proceeds recognized upon the extension of the underlying franchise and lease agreements related to restaurants sold in a prior year of $0.0 million and $0.7 million, respectively, in the quarter, and $0.1 million and $1.2 million, respectively, year-to-date.
(2)
Amounts in 2015 include lease commitment charges related to restaurants closed in connection with the sale of the related market, and charges for operating restaurant leases with lease commitments in excess of our sublease rental income.
(3)
Amounts in 2014 relate to losses on the expected sale of approximately 30 company-operated restaurants in two Jack in the Box markets sold in the fourth quarter of 2014 and the second quarter of 2015.
Franchise acquisitions — In 2015, we acquired six Jack in the Box franchise restaurants in one market, and during 2014 we repurchased four Jack in the Box franchise restaurants in another market. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3). Acquisitions were not material to our condensed consolidated financial statements in either year.


9

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



4.
FAIR VALUE MEASUREMENTS
Financial assets and liabilities — The following table presents the financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 
Total      
 
Quoted Prices
in Active
Markets for
Identical
Assets (3)
(Level 1)
 
Significant
Other
Observable
Inputs (3)
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Fair value measurements as of April 12, 2015:
 
 
 
 
 
 
 
Non-qualified deferred compensation plan (1)
$
(37,701
)
 
$
(37,701
)
 
$

 
$

Interest rate swaps (Note 5) (2) 
(7,366
)
 

 
(7,366
)
 

Total liabilities at fair value
$
(45,067
)
 
$
(37,701
)
 
$
(7,366
)
 
$

Fair value measurements as of September 28, 2014:
 
 
 
 
 
 
 
Non-qualified deferred compensation plan (1)
$
(35,602
)
 
$
(35,602
)
 
$

 
$

Interest rate swaps (Note 5) (2) 
(1,789
)
 

 
(1,789
)
 

Total liabilities at fair value
$
(37,391
)
 
$
(35,602
)
 
$
(1,789
)
 
$

 
____________________________
(1)
We maintain an unfunded defined contribution plan for key executives and other members of management excluded from participation in our qualified savings plan. The fair value of this obligation is based on the closing market prices of the participants’ elected investments.
(2)
We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable debt. The fair values of our interest rate swaps are based upon Level 2 inputs which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves.
(3)
We did not have any transfers in or out of Level 1 or Level 2.
The fair values of our debt instruments are based on the amount of future cash flows associated with each instrument discounted using our borrowing rate. At April 12, 2015, the carrying value of all financial instruments was not materially different from fair value, as the borrowings are prepayable without penalty. The estimated fair values of our capital lease obligations approximated their carrying values as of April 12, 2015.
Non-financial assets and liabilities — Our non-financial instruments, which primarily consist of property and equipment, goodwill and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis. However, on a periodic basis (at least annually for goodwill and intangible assets, and semi-annually for property and equipment) or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment. If applicable, the carrying values are written down to fair value.
In connection with our impairment reviews performed during 2015, no material fair value adjustments were required. Refer to Note 6, Impairment and Other Charges, Net for additional information regarding impairment charges.


10

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



5.
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 effectively converted $100.0 million of our variable rate term loan borrowings to a fixed-rate basis from September 2011 through September 2014. In April 2014, we entered into nine forward-starting interest rate swap agreements that effectively convert $300.0 million of our variable rate borrowings to a fixed rate basis from October 2014 through October 2018. These agreements have been designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging. To the extent that they are effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives are not included in earnings, but are included in 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 debt.
Financial position — The following derivative instruments were outstanding as of the end of each period (in thousands):
 
April 12, 2015
 
September 28, 2014
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Interest rate swaps (Note 4)
Accrued
liabilities
 
$
(7,366
)
 
Accrued
liabilities
 
$
(1,789
)
Total derivatives
 
 
$
(7,366
)
 
 
 
$
(1,789
)
Financial performance — The following is a summary of the OCI activity related to our interest rate swap derivative instruments (in thousands):
 
Location of Loss in Income
 
Quarter
 
Year-to-date
 
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Gain (loss) recognized in OCI
N/A
 
$
86

 
$
(31
)
 
$
(6,672
)
 
$
(85
)
Loss reclassified from accumulated OCI into net earnings
Interest
expense, 
net
 
$
(468
)
 
$
(322
)
 
$
(1,095
)
 
$
(748
)
Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparties for the effective portions of the interest rate swaps. During the periods presented, our interest rate swaps had no hedge ineffectiveness.

6.
IMPAIRMENT AND OTHER CHARGES, NET
Impairment and other charges, net in the accompanying condensed consolidated statements of earnings is comprised of the following (in thousands):
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Accelerated depreciation
$
1,387

 
$
487

 
$
2,139

 
$
1,151

Restaurant impairment charges
27

 
85

 
41

 
180

(Gains) losses on the disposition of property and equipment, net
(269
)
 
262

 
352

 
550

Costs of closed restaurants (primarily lease obligations) and other
973

 
731

 
1,759

 
1,295

Restructuring costs
12

 
7,491

 
19

 
7,789

 
$
2,130

 
$
9,056

 
$
4,310

 
$
10,965

Accelerated depreciation — When a long-lived asset will be replaced or otherwise disposed of prior to the end of its estimated useful life, the useful life of the asset is adjusted based on the estimated disposal date and accelerated depreciation is recognized. Accelerated depreciation primarily relates to expenses at our Jack in the Box company restaurants for the replacement of technology and beverage equipment in 2015 and restaurant facility enhancement programs in 2014.
Impairment charges — When events and circumstances indicate that our long-lived assets might be impaired and their carrying amount is greater than the undiscounted cash flows we expect to generate from such assets, we recognize an impairment loss as the amount by which the carrying value exceeds the fair value of the assets. Impairment charges in

11

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



all periods include charges for restaurants we intend to or have closed.
Disposition of property and equipment — Disposal costs primarily relate to gains or losses recognized upon the sale of closed restaurant properties. In 2015, losses on the disposition of property and equipment includes a gain of $0.9 million from the resolution of one eminent domain matter involving a Jack in the Box restaurant.
Costs of closed restaurants — Costs of closed restaurants primarily consists of future lease commitments, net of anticipated sublease rentals and expected ancillary costs. Accrued restaurant closing costs, included in accrued liabilities and other long-term liabilities, changed as follows in 2015 (in thousands):
 
 
Year-to-date
Balance as of September 28, 2014
 
$
13,173

Adjustments (1)
 
1,427

Cash payments
 
(3,319
)
Balance as of April 12, 2015
 
$
11,281

___________________________
(1)    Adjustments relate primarily to revisions to certain sublease and cost assumptions due to changes in market conditions.
Restructuring costs — Since the beginning of 2012, we have been engaged in efforts to improve our cost structure and identify opportunities to reduce general and administrative expenses as well as improve profitability across both brands. The following is a summary of the costs incurred in connection with these activities (in thousands):
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Severance costs
$
12

 
$
1,098

 
$
19

 
$
1,396

Other

 
6,393

 

 
6,393

 
$
12

 
$
7,491

 
$
19

 
$
7,789

In 2014, other costs represent a $6.4 million impairment charge recognized in the second quarter of fiscal 2014 related to a restaurant software asset we no longer planned to place in service as we integrate certain systems across both of our brands. We may incur additional charges related to our restructuring activities; however, we are unable to make a reasonable estimate at this time.
7.
INCOME TAXES
The income tax provisions reflect tax rates of 37.9% in the quarter and 36.8% year-to-date in 2015, compared with 36.1% and 36.9%, respectively, a year ago. The quarter tax rates reflect the timing of the benefit recognized from the reenactment of the Work Opportunity Tax Credit and the benefit of the market performance of insurance products used to fund certain non-qualified retirement plans which are excluded from taxable income. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual 2015 rate could differ from our current estimates.
 
8.
RETIREMENT PLANS
Defined benefit pension plans — We sponsor two defined benefit pension plans: a qualified plan covering substantially all full-time Jack in the Box employees hired prior to January 1, 2011, and an unfunded supplemental executive plan which provides certain employees additional pension benefits and was closed to new participants effective January 1, 2007. In fiscal 2011, the Board of Directors approved changes to our qualified plan whereby participants will no longer accrue benefits effective December 31, 2015. Benefits under both plans are based on the employees’ years of service and compensation over defined periods of employment.
Postretirement healthcare plans — We also sponsor two healthcare plans, closed to new participants, that provide postretirement medical benefits to certain employees who have met minimum age and service requirements. The plans are contributory, with retiree contributions adjusted annually, and contain other cost-sharing features such as deductibles and coinsurance.

12

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



Net periodic benefit cost — The components of net periodic benefit cost in each period were as follows (in thousands): 
  
Quarter
 
Year-to-date
  
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Defined benefit pension plans:
 
 
 
 
 
 
 
Service cost
$
1,908

 
$
1,875

 
$
4,452

 
$
4,374

Interest cost
5,237

 
5,364

 
12,220

 
12,516

Expected return on plan assets
(5,370
)
 
(5,652
)
 
(12,531
)
 
(13,188
)
Actuarial loss
2,172

 
1,024

 
5,068

 
2,388

Amortization of unrecognized prior service costs
62

 
62

 
145

 
145

Net periodic benefit cost
$
4,009

 
$
2,673

 
$
9,354

 
$
6,235

Postretirement healthcare plans:
 
 
 
 
 
 
 
Interest cost
$
276

 
$
379

 
$
644

 
$
883

Actuarial loss
42

 
125

 
98

 
292

Net periodic benefit cost
$
318

 
$
504

 
$
742

 
$
1,175

Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of the date of our last actuarial funding valuation, there was no minimum contribution funding requirement. Details regarding fiscal 2015 contributions are as follows (in thousands):
 
Defined Benefit
Pension Plans
 
Postretirement
Healthcare Plans
Net year-to-date contributions
$
7,543

 
$
570

Remaining estimated net contributions during fiscal 2015
$
17,000

 
$
700

We will continue to evaluate contributions to our qualified defined benefit pension plan based on changes in pension assets as a result of asset performance in the current market and economic environment.
 
9.
SHARE-BASED COMPENSATION
We offer share-based compensation plans to attract, retain and motivate key officers, employees and non-employee directors to work toward the financial success of the Company. In fiscal 2015, we granted the following shares related to our share-based compensation awards:
Stock options
123,042

Performance share awards
40,594

Nonvested stock units
93,570

The components of share-based compensation expense recognized in each period are as follows (in thousands):
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Stock options
$
555

 
$
489

 
$
1,554

 
$
1,778

Performance share awards
991

 
999

 
2,072

 
2,496

Nonvested stock awards
35

 
45

 
96

 
218

Nonvested stock units
1,638

 
796

 
3,382

 
1,638

Deferred compensation for non-management directors
263

 
218

 
263

 
218

Total share-based compensation expense
$
3,482

 
$
2,547

 
$
7,367

 
$
6,348


13

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




10.    STOCKHOLDERS’ EQUITY
Repurchases of common stock In February 2014 and July 2014, the Board of Directors approved two programs, both expiring in November 2015, which provided repurchase authorizations for up to $200.0 million and $100.0 million, respectively, in shares of our common stock. Additionally, in November 2014, the Board of Directors approved another $100.0 million stock buyback program that expires in November 2016. During fiscal 2015, we repurchased 2.08 million shares at an aggregate cost of $176.6 million and fully utilized the February and July 2014 authorizations. As of April 12, 2015, there was $40.5 million remaining under our November 2014 stock-buyback program which expires in November 2016.
Repurchases of common stock included in our condensed consolidated statements of cash flows for 2015 and 2014 include $3.1 million and $7.3 million, respectively, related to repurchase transactions traded in the prior fiscal year and settled in the subsequent quarter. Additionally, these cash flows exclude $5.6 million and $3.9 million related to repurchase transactions traded in the second quarter and settled in the third quarter of 2015 and 2014, respectively.
Dividends During the third quarter of fiscal 2014, the Board of Directors approved the initiation of a regular quarterly cash dividend. In fiscal 2015, the Board of Directors declared two cash dividends of $0.20 per share each, which were paid to shareholders of record as of December 1, 2014 and March 6, 2015 and totaled $15.5 million. Future dividends are subject to approval by our Board of Directors.

11.
AVERAGE SHARES OUTSTANDING
Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive common shares include stock options, nonvested stock awards and units, non-management director stock equivalents and shares issuable under our employee stock purchase plan. Performance share awards are included in the average diluted shares outstanding each period if the performance criteria have been met at the end of the respective periods.

The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Weighted-average shares outstanding – basic
37,970

 
41,464

 
38,353

 
42,018

Effect of potentially dilutive securities:
 
 
 
 
 
 
 
Stock options
246

 
640

 
337

 
725

Nonvested stock awards and units
190

 
243

 
195

 
318

Performance share awards
160

 
285

 
154

 
275

Weighted-average shares outstanding – diluted
38,566

 
42,632

 
39,039

 
43,336

Excluded from diluted weighted-average shares outstanding:
 
 
 
 
 
 
 
Antidilutive

 
185

 
78

 
152

Performance conditions not satisfied at the end of the period
6

 
20

 
14

 
30


12.
VARIABLE INTEREST ENTITIES
In January 2011, we formed Jack in the Box Franchise Finance, LLC (“FFE”) for the purpose of operating a franchisee lending program to assist Jack in the Box franchisees in re-imaging their restaurants. We are the sole equity investor in FFE. The lending program was comprised of a $20.0 million commitment from the Company in the form of a capital note and an $80.0 million Senior Secured Revolving Securitization Facility entered into with a third party. The lending period and the revolving period expired in June 2012. At April 12, 2015, we had no borrowings under the FFE Facility and we do not plan to make any further contributions.
We have determined that FFE is a VIE, and that we are the primary beneficiary. We considered a variety of factors in identifying the primary beneficiary of FFE including, but not limited to, who holds the power to direct matters that most significantly impact FFE’s economic performance (such as determining the underwriting standards and credit management policies), as well as what party has the obligation to absorb the losses of FFE. Based on these considerations, we have

14

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



determined that we are the primary beneficiary and the entity is reflected in the accompanying condensed consolidated financial statements.
FFE’s assets consolidated by us represent assets that can be used only to settle obligations of the consolidated VIE. Likewise, FFE’s liabilities consolidated by us do not represent additional claims on our general assets; rather they represent claims against the specific assets of FFE. The impacts of FFE’s results were not material to our condensed consolidated statements of earnings.
The FFE’s balance sheet consisted of the following at the end of each period (in thousands):
 
April 12,
2015
 
September 28,
2014
Cash
$

 
$

Other current assets (1) 
1,072

 
2,494

Other assets, net (1) 
2,539

 
5,776

Total assets
$
3,611

 
$
8,270

 
 
 
 
Current liabilities (2)
$
1,203

 
$
2,833

Other long-term liabilities (2) 
2,276

 
5,367

Retained earnings
132

 
70

Total liabilities and stockholders’ equity
$
3,611

 
$
8,270

____________________________
(1)
Consists primarily of amounts due from franchisees.
(2)
Consists primarily of the capital note contribution from Jack in the Box which is eliminated in consolidation.
In 2015, we received $3.9 million of early prepayments on notes receivable due from franchisees, which increased our cash flows from investing activities in the year-to-date period.
Our maximum exposure to loss is equal to its outstanding contributions as of April 12, 2015. This amount represents estimated losses that would be incurred should all franchisees default on their loans without any consideration of recovery. To offset the credit risk associated with our variable interest in FFE, we hold a security interest in the assets of FFE subordinate and junior to all other obligations of FFE.

13.    CONTINGENCIES AND LEGAL MATTERS 
Legal matters — The Company assesses contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. We regularly review contingencies to determine the adequacy of the accruals and related disclosures. The ultimate amount of loss may differ from these estimates. 
Gessele v. Jack in the Box Inc. — In August 2010, five former employees instituted litigation in federal court in Oregon alleging claims under the federal Fair Labor Standards Act and Oregon wage and hour laws. The plaintiffs alleged that the Company failed to pay non-exempt employees for certain meal breaks and improperly made payroll deductions for shoe purchases and for workers’ compensation expenses. In April 2014, the district court granted our motion for summary judgment, and dismissed all claims without prejudice to re-filing in state court. In July 2014, the plaintiffs re-filed similar claims, and additional claims relating to timing of final pay and related wage and hour claims involving employees of a franchisee, in Oregon state court. The amended complaint seeks damages of $45.0 million but does not provide a basis for that amount. In fiscal 2012, we accrued for a single claim for which we believe a loss is both probable and estimable; this accrued loss contingency did not have a material effect on our results of operations. We have not established a loss contingency accrual for those claims as to which we believe liability is not probable or estimable, and we plan to vigorously defend against this lawsuit. Nonetheless, an unfavorable resolution of this matter in excess of our current accrued loss contingencies could have a material adverse effect on our business, results of operations, liquidity or financial condition.

15

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



Other legal matters — In addition to the matter described above, we are subject to normal and routine litigation brought by former, current or prospective employees, customers, franchisees, vendors, landlords, shareholders or others, whether individually, collectively or on behalf of a proposed class. We intend to defend ourselves in any such matters. Some of these matters may be covered, at least in part, by insurance. Our insurance liability (undiscounted) and reserves are established in part by using independent actuarial estimates of expected losses for reported claims and for estimating claims incurred but not reported. As of April 12, 2015, our estimated liability for general liability and workers’ compensation claims exceeded our self-insurance retention limits by $24.6 million. We expect to be fully covered for these amounts by surety bond issuers or our insurance providers. Although we currently believe that the ultimate determination of liability in connection with legal claims pending against it, if any, in excess of amounts already provided for these matters in the consolidated financial statements will not have a material adverse effect on our business, our annual results of operations, liquidity or financial position, it is possible that our results of operations, liquidity, or financial position could be materially affected in a particular future reporting period by the unfavorable resolution of one or more of these matters or contingencies during such period.
Lease guarantees In connection with the sale of the Jack in the Box distribution business, we have assigned the leases at two of our distribution centers to third parties. Under these agreements, which expire in 2015 and 2017, we remain secondarily liable for the lease payments for which we were responsible under the original lease. As of April 12, 2015, the amount remaining under these lease guarantees totaled $1.5 million. We have not recorded a liability for the guarantees as the likelihood of the third party defaulting on the assignment agreements was deemed to be less than probable.

14.
SEGMENT REPORTING
Our principal business consists of developing, operating and franchising our Jack in the Box and Qdoba restaurant concepts, each of which we consider reportable operating segments. This segment reporting structure reflects our current management structure, internal reporting method and financial information used in deciding how to allocate our resources. Based upon certain quantitative thresholds, each operating segment is considered a reportable segment.
We measure and evaluate our segments based on segment revenues and earnings from operations. The reportable segments do not include an allocation of the costs related to shared service functions, such as accounting/finance, human resources, audit services, legal, tax and treasury; nor do they include unallocated costs such as pension expense and share-based compensation. These costs are reflected in the caption “Shared services and unallocated costs,” and therefore, the measure of segment profit or loss is before such items. The following table provides information related to our segments in each period (in thousands):
 
Quarter
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
 
April 12,
2015
 
April 13,
2014
Revenues by segment:
 
 
 
 
 
 
 
Jack in the Box restaurant operations
$
269,444

 
$
260,089

 
$
621,395

 
$
609,912

Qdoba restaurant operations
88,678

 
80,781

 
205,348

 
181,040

Consolidated revenues
$
358,122

 
$
340,870

 
$
826,743

 
$
790,952

Earnings from operations by segment:
 
 
 
 
 
 
 
Jack in the Box restaurant operations
$
64,313

 
$
53,617

 
$
145,168

 
$
129,920

Qdoba restaurant operations
8,778

 
7,105

 
23,460

 
16,713

Shared services and unallocated costs
(26,203
)
 
(29,600
)
 
(59,354
)
 
(58,768
)
(Losses) gains on the sale of company-operated restaurants
(5,020
)
 
1,757

 
(4,170
)
 
2,218

Consolidated earnings from operations
41,868

 
32,879

 
105,104

 
90,083

Interest expense, net
4,220

 
4,311

 
9,433

 
8,853

Consolidated earnings from continuing operations and before income taxes
$
37,648

 
$
28,568

 
$
95,671

 
$
81,230

Total depreciation expense by segment:
 
 
 
 
 
 
 
Jack in the Box restaurant operations
$
14,699

 
$
15,418

 
$
34,314

 
$
36,269

Qdoba restaurant operations
4,035

 
3,906

 
9,315

 
9,136

Shared services and unallocated costs
1,612

 
1,785

 
3,872

 
3,924

Consolidated depreciation expense
$
20,346

 
$
21,109

 
$
47,501

 
$
49,329

Income taxes and total assets are not reported for our segments in accordance with our method of internal reporting.


16

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



The following table provides detail of the change in the balance of goodwill for each of our reportable segments (in thousands):
 
Qdoba
 
Jack in the Box
 
Total
Balance at September 28, 2014
$
100,597

 
$
48,477

 
$
149,074

Disposals

 
(32
)
 
(32
)
Balance at April 12, 2015
$
100,597

 
$
48,445

 
$
149,042

Refer to Note 3, Summary of Refranchisings, Franchisee Development and Acquisitions, for information regarding the transactions resulting in the changes in goodwill.

15.
SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)
 
Year-to-date
 
April 12,
2015
 
April 13,
2014
Cash paid during the year for:
 
 
 
Interest, net of amounts capitalized
$
9,166

 
$
9,114

Income tax payments
$
1,087

 
$
28,701

Non-cash transactions:
 
 
 
Increase in dividends accrued at period end
$
70

 
$

Increase in property and equipment through accrued purchases at period end
$
5,395

 
$
9,070



17

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



16.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)

 
April 12,
2015
 
September 28,
2014
Prepaid expenses:
 
 
 
Prepaid income taxes
$
13,493

 
$
27,956

Prepaid rent
8,961

 
178

Other
6,994

 
8,180

 
$
29,448

 
$
36,314

Other assets, net:
 
 
 
Company-owned life insurance policies
$
104,388

 
$
100,753

Deferred tax assets
48,953

 
50,807

Other
83,376

 
85,738

 
$
236,717

 
$
237,298

Accrued liabilities:
 
 
 
Payroll and related taxes
$
49,404

 
$
54,905

Insurance
33,569

 
34,834

Advertising
17,029

 
21,452

Deferred rent income
11,044

 
2,432

Lease commitments related to closed or refranchised locations
10,383

 
10,258

Sales and property taxes
8,958

 
11,760

Other
29,246

 
27,985

 
$
159,633

 
$
163,626

Other long-term liabilities:
 
 
 
Pension plans
$
140,436

 
$
143,838

Straight-line rent accrual
47,052

 
48,835

Other
119,945

 
116,762

 
$
307,433

 
$
309,435


17.
SUBSEQUENT EVENTS

Declaration of dividend — On May 7, 2015, the Board of Directors declared a cash dividend of $0.30 per share, to be paid on June 12, 2015 to shareholders of record as of the close of business on June 1, 2015. Future dividends will be subject to approval by our Board of Directors.

On May 7, 2015, the Board of Directors authorized an additional $100.0 million stock-buyback program that expires in November 2016.


18


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

ITEM 6.    EXHIBITS
Number
Description
Form
Filed with SEC
3.1
Restated Certificate of Incorporation, as amended, dated September 21, 2007
10-K
11/20/2009
3.1.1
Certificate of Amendment of Restated Certificate of Incorporation, dated September 21, 2007
8-K
9/24/2007
3.2
Amended and Restated Bylaws, dated August 7, 2013
10-Q
8/8/2013
10.3
Form of Restricted Stock Unit Grant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan (dated Feb. 11, 2015)
10-Q
5/14/2015
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Filed herewith
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Filed herewith
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 



SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
JACK IN THE BOX INC.
 
 
 
 
By:
/S/    JERRY P. REBEL        
 
 
Jerry P. Rebel
 
 
Executive Vice President and Chief Financial Officer (principal financial officer)
(Duly Authorized Signatory)
Date: May 15, 2015

19
FY15 10-Q/A Q2 EX31.1 v2


Exhibit 31.1
CERTIFICATION
I, Lenny Comma, certify that:

1.
I have reviewed this quarterly report on Form 10-Q/A of Jack in the Box Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
 
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Dated:
May 15, 2015
/S/ LENNY COMMA
 
 
Lenny Comma
 
 
Chief Executive Officer & Chairman of the
Board



FY15 10-Q/A Q2 EX31.2 v2


Exhibit 31.2
CERTIFICATION
I, Jerry P. Rebel, certify that:

1.
I have reviewed this quarterly report on Form 10-Q/A of Jack in the Box Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
 Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles

c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.
 All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
Dated:
May 15, 2015
/S/ JERRY P. REBEL
 
 
Jerry P. Rebel
 
 
Chief Financial Officer




FY15 10-Q/A Q2 EX32.1 v2


Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Lenny Comma, Chief Executive Officer of Jack in the Box Inc. (the “Registrant”), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
the Quarterly Report on Form 10-Q/A of the Registrant, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
 
Dated:
May 15, 2015
/S/ LENNY COMMA
 
 
Lenny Comma
 
 
Chief Executive Officer



FY15 10-Q/A Q2 EX32.2 v2


Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Jerry P. Rebel, Chief Financial Officer of Jack in the Box Inc. (the “Registrant”), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
the Quarterly Report on Form 10-Q/A of the Registrant, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
  
Date:
May 15, 2015
/S/ JERRY P. REBEL
 
 
Jerry P. Rebel
 
 
Chief Financial Officer