Fair Value Measurements

9 Months Ended

Jul. 08, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

Financial assets and liabilities — The following table presents the financial assets and liabilities measured at fair value on a recurring basis at the end of each period (in thousands):

	Total			Quoted Prices in Active Markets for Identical Assets (Level 1) (3)			Significant Other Observable Inputs (Level 2) (3)			Significant Unobservable Inputs (Level 3)
Fair value measurements as of July 8, 2012:
Interest rate swaps (Note 4) (1)	$	(2,564	)	$	—		$	(2,564	)	$	—
Non-qualified deferred compensation plans (2)	(38,151		)	(38,151		)	—			—
Total liabilities at fair value	$	(40,715	)	$	(38,151	)	$	(2,564	)	$	—
Fair value measurements as of October 2, 2011:
Interest rate swaps (Note 4) (1)	$	(2,682	)	$	—		$	(2,682	)	$	—
Non-qualified deferred compensation plan (2)	(34,288		)	(34,288		)	—			—
Total liabilities at fair value	$	(36,970	)	$	(34,288	)	$	(2,682	)	$	—

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(1) We entered into interest rate swaps to reduce our exposure to rising interest rates on our variable debt. The fair values of our interest rate swaps are based upon Level 2 inputs which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves.

(2) We maintain an unfunded defined contribution plan for key executives and other members of management excluded from participation in our qualified savings plan. The fair value of this obligation is based on the closing market prices of the participants’ elected investments.

(3) We did not have any transfers in or out of Level 1 or Level 2.

The fair values of the Company’s debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company’s borrowing rate. At July 8, 2012, the carrying value of all financial instruments was not materially different from fair value, as the interest rates on variable rate debt approximated rates currently available to the Company. The estimated fair values of our capital lease obligations approximated their carrying values as of July 8, 2012.

Non-financial assets and liabilities — The Company’s non-financial instruments, which primarily consist of property and equipment, goodwill and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis. However, on a periodic basis (at least annually for goodwill and semi-annually for property and equipment) or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment. If applicable, the carrying values of the assets are written down to fair value.

In connection with our property and equipment impairment reviews during the 40-weeks ended July 8, 2012, eight Jack in the Box restaurants determined to be underperforming or which we intend to close having a carrying amount of $2.7 million were written down to their implied fair value of $0.5 million, resulting in an impairment charge of $2.2 million. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. The future cash flows are generally based on the assumption that the highest and best use of the asset is to sell the store to a franchisee (market participant). These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows, which are not observable from the market, directly or indirectly. Refer to Note 5, Impairment, Disposition of Property and Equipment, Restaurant Closing Costs and Restructuring, for additional information regarding impairment charges.