Fair Value Measurements

9 Months Ended

Jul. 07, 2013

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 (3) (Level 1)			Significant Other Observable Inputs (3) (Level 2)			Significant Unobservable Inputs (Level 3)
Fair value measurements as of July 7, 2013:
Non-qualified deferred compensation plan (1)	$	(37,997	)	$	(37,997	)	$	—		$	—
Interest rate swaps (Note 6) (2)	(1,427		)	—			(1,427		)	—
Total liabilities at fair value	$	(39,424	)	$	(37,997	)	$	(1,427	)	$	—
Fair value measurements as of September 30, 2012:
Non-qualified deferred compensation plan (1)	$	(38,537	)	$	(38,537	)	$	—		$	—
Interest rate swaps (Note 6) (2)	(2,433		)	—			(2,433		)	—
Total liabilities at fair value	$	(40,970	)	$	(38,537	)	$	(2,433	)	$	—

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(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 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 7, 2013, the carrying values of the credit facility obligations were 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 July 7, 2013.

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

The following table presents non-financial assets and liabilities measured at fair value on a non-reoccurring basis during fiscal 2013 (in thousands):

	Fair Value Measurement		Impairment Charges
Long-lived assets held and used	$	705	$	3,385
Long-lived assets held for sale	$	625	$	4,821

Long-lived assets held and used consist primarily of Jack in the Box restaurants determined to be underperforming or which we intend to close. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. The future cash flows are generally based on the assumption that the highest and best use of the asset is to sell the store to a franchisee (market participant). These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows, which are not observable from the market, directly or indirectly. Refer to Note 7, Impairment, Disposition of Property and Equipment, Restaurant Closing Costs and Restructuring, for additional information regarding impairment charges.

Long-lived assets held for sale were written down to fair value less costs to sell and relate to the anticipated sales of Jack in the Box and Qdoba company-operated restaurants.

During the third quarter, due to the magnitude of the 2013 Qdoba Closures, we evaluated Qdoba’s goodwill and trademark assets for impairment. To evaluate goodwill for impairment, we estimated the fair value of the Qdoba reporting unit and compared it to its carrying value. We engaged an independent valuation firm to assist us in the fair value analysis. To determine fair value, we used a multiple valuation technique approach, the results of which were weighted based on the technique that was assessed to be most representative of fair value. Based upon the independent fair value analysis, the estimated fair value of the Qdoba reporting unit was substantially in excess of its carrying value as of July 7, 2013. To evaluate the Qdoba trademark for impairment, we engaged an independent valuation firm who assisted us in our estimation of the fair value of the trademark. To determine fair value, we used the relief from royalty method and compared the estimated fair value to its carrying value. The estimated fair value of the Qdoba trademark was substantially in excess of its carrying value. Refer to Note 2, Discontinued Operations, for additional information regarding the 2013 Qdoba Closures.