Jack In The Box 2012 Annual Report Download

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(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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $0.01 par value The NASDAQ Stock Market LLC (NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes ¨ No
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 No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 and Regulations 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 No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
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 Accelerated filer ¨ Nonaccelerated filer ¨ 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
The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price reported in the NASDAQ — Composite Transactions as
of April 13, 2012, was approximately $969.8 million.
Number of shares of common stock, $0.01 par value, outstanding as of the close of business on November 16, 201242,908,661.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange Commission in connection with the 2013 Annual Meeting of Stockholders are incorporated by reference into
Part III hereof.
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Table of contents

  • Page 1
    ... . Number of shares of common stock, $0.01 par value, outstanding as of the close of business on November 16, 2012 - 42,908,661. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement to be filed with the Securities and Exchange Commission in connection with the 2013 Annual Meeting of...

  • Page 2
    ... Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PTRT III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 3
    .... Our menu features a variety of items including hamburgers, tacos, specialty sandwiches, drinks, real ice cream shakes, salads and side items. Jack in the Box restaurants also offer guests the ability to customize their meals and to order any product, including breakfast items, any time of the day...

  • Page 4
    ... 2013, we plan to open 70-85 new company and franchise restaurants. The following table summarizes the changes in the number of company-operated and franchise Qdoba restaurants over the past five years: Fiscal Year 2012 2011 2010 2009 2008 Company-operated restaurants: Beginning of period...

  • Page 5
    ... a company manager or franchise operator who is directly responsible for the operations of the restaurant, including product quality, service, food safety, cleanliness, inventory, cash control and the conduct and appearance of employees. Jack in the Box. Company restaurant managers are required to...

  • Page 6
    ... of our restaurants offer quality food and good service. To help us maintain a high level of customer satisfaction, our Voice of Guest program provides restaurant managers, district managers, and franchise operators with ongoing feedback from guests who complete a short guest satisfaction survey via...

  • Page 7
    ... restaurants directly. We use standardized Windows-based touch screen point-of-sale ("POS") platforms in our company and traditional site franchise restaurants, which allows us to accept cash, credit cards and our re-loadable gift cards. Our Qdoba POS system is also enhanced with an integrated guest...

  • Page 8
    ... Jack in the Box Inc.: Name Tge Positions Years with the Company Linda A. Lang Leonard A. Comma 54 42 55 54 51 Chairman of the Board and Chief Executive Officer President and Chief Operating Officer 25 11 Jerry P. Rebel Phillip H. Rudolph Executive Vice President and Chief Financial Officer...

  • Page 9
    ... in the food products offered, price and perceived value, quality of service experience, speed of service, personnel, advertising, name identification, restaurant location, and image and attractiveness of the facilities. Each Jack in the Box and Qdoba restaurant competes directly and indirectly...

  • Page 10
    ... and employee benefits (including increases in hourly wages, healthcare costs, workers' compensation and other insurance costs and premiums); the impact of initiatives by competitors and increased competition generally; lack of customer acceptance of new menu items or potential price increases...

  • Page 11
    ... franchise margins and franchisee financial health. Risk Related to Our Brands and Reputation. Multi-unit food service businesses such as ours can also be materially and adversely affected by widespread negative publicity of any type, particularly regarding food quality, nutritional content, safety...

  • Page 12
    ... same-store sales and average unit volumes as part of our long-term business plan. These results are subject to a number of risks and uncertainties, including risks related to competition, menu innovation and the successful execution of our operational strategies and initiatives. The restaurant...

  • Page 13
    ... to time, we may take positions for filing our tax returns that differ from the treatment for financial reporting purposes. The ultimate outcome of such positions could have an adverse impact on our effective tax rate. Risks Related to Reducing Operating Costs . During 2012, we identified strategies...

  • Page 14
    ...) a majority of our Jack in the Box franchised restaurant sites. We lease the real properties upon which our company-operated Qdoba restaurants are located. We have engaged and may engage in real estate development projects. As is the case with any owner or operator of real property, we are subject...

  • Page 15
    ... 30, 2012 , our restaurant leases had initial terms expiring as follows: Number of Restaurants Ground Leases Fiscal Year Land and Building Leases 2013 - 2017 168 240 164 576 685 136 111 2018 - 2022 2023 - 2027 2028 and later 66 Our principal executive offices are located in San Diego...

  • Page 16
    ..., it is possible that the results of operations, liquidity, or financial position of the Company could be materially affected in any particular future reporting period by the unfavorable resolution of one or more of these matters or contingencies. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 17

  • Page 17
    ... payment of cash dividends, subject to certain limitations based on our leverage ratio. The following table summarizes shares repurchased pursuant to this program during the quarter ended September 30, 2012 : (c) (d) (a) (b) Total Number of Shares Purchased Tverage Price Paid Total Number...

  • Page 18
    ...awards and units, and non-management director deferred stock equivalents. The weighted-average exercise price in column (b) includes the weighted-average exercise price of stock options only. (2) (3) Includes 118,845 shares that are reserved for issuance under our Employee Stock Purchase Plan. For...

  • Page 19
    ... and average unit volume information is useful to investors as a significant indicator of the overall strength of our business as it incorporates our significant revenue drivers which are company and franchise same-store sales as well as net unit development. Company, franchise and system changes in...

  • Page 20
    ... last year. We expect overall commodity costs to increase approximately 2%-3% in fiscal 2013 compared to fiscal 2012. New Unit Development. We continued to grow our brands with the opening of new company and franchise-operated restaurants. In 2012, we opened 37 Jack in the Box and 58 Qdoba locations...

  • Page 21
    ... DTTT Fiscal Year 2012 2011 2010 Revenues: Company restaurant sales 78.9 % 21.1 % 100.0 % 83.0 % 17.0 % 100.0 % 87.8 % 12.2 % 100.0 % Franchise revenues Total revenues Operating costs and expenses, net: Company restaurant costs: Food and packaging (1) Payroll and employee benefits (1) 32...

  • Page 22
    ... following table summarizes the changes in the number and mix of Jack in the Box ("JIB") and Qdoba company and franchise restaurants in each fiscal year: 2012 Company Franchise 2011 Total Company Franchise 2010 Total Company Franchise Total Jack in the Box: Beginning of year 629 19 1,592 18...

  • Page 23
    ... 53rd week Total decrease in company restaurant sales - $ (161.1) Same-store sales at Jack in the Box company-operated restaurants increased 4.6% in 2012 and 3.1% in 2011, primarily driven by transaction growth and price increases. Same-store sales at Qdoba company-operated restaurants increased...

  • Page 24
    ... decrease relates to same-store sales increases and lower insurance costs, offset by increases in unemployment taxes and higher levels of staffing designed to improve the guest experience at our Jack in the Box restaurants. Occupancy and other costs were 23.1% of company restaurant sales in 2012 and...

  • Page 25
    ... benefits after December 31, 2015. The increase in fiscal 2012 pre-opening costs primarily relates to higher expenses associated with restaurant openings in two new Jack in the Box markets, as well as an increase in the number of new Jack in the Box and Qdoba company-operated restaurants. In 2011...

  • Page 26
    ... operations in 2012, 2011 and 2010, respectively. The changes in tax rates are primarily due to the 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...

  • Page 27
    ...common stock. Our cash requirements consist principally of: working capital; capital expenditures for new restaurant construction and restaurant renovations; income tax payments; debt service requirements; and obligations related to our benefit plans. Based upon current levels of operations and...

  • Page 28
    ... spending related to a decrease in the number of new Jack in the Box restaurants developed. In fiscal 2013, capital expenditures are expected to be approximately $ 9 5-$105 million . We plan to open approximately 10 new Jack in the Box and 40-45 new Qdoba company-operated restaurants in 2013. Sale...

  • Page 29
    ... 2012 2011 2010 Number of restaurants acquired from franchisees 46 $ 48,945 $ 32 31,077 16 Cash used to acquire franchise-operated restaurants $ 8,115 The purchase prices were primarily allocated to property and equipment, goodwill and reacquired franchise rights. For additional information...

  • Page 30
    ... rates in effect on September 30, 2012 . Does not consider impact of the refinancing of our credit facility. Includes purchase commitments for food, beverage, and packaging items. (2) (3) (4) Includes expected payments associated with our non-qualified defined benefit plan, postretirement benefit...

  • Page 31
    ... 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...

  • Page 32
    ... our 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...

  • Page 33
    ...From time to time, we enter into futures and option contracts to manage these fluctuations. At September 30, 2012 , we had no such contracts in place. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and related financial information required to be filed are...

  • Page 34
    ..., cash flows, and stockholders' equity for the fifty-two weeks ended September 30, 2012 and October 2, 2011, and the fifty-three weeks ended October 3, 2010 , and our report dated November 21, 2012 , expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLP San Diego...

  • Page 35
    ... and Management" to be filed with the Commission pursuant to Regulation 14A within 120 days after September 30, 2012 and to be used in connection with our 2013 Annual Meeting of Stockholders is hereby incorporated by reference. Information regarding equity compensation plans under which company...

  • Page 36
    ...of our definitive Proxy Statement appearing under the caption "Independent Registered Public Accounting Fees and Services" to be filed with the Commission pursuant to Regulation 14A within 120 days after September 30, 2012 and to be used in connection with our 2013 Annual Meeting of Stockholders is...

  • Page 37
    ... DEF 14A 5/17/2012 2/18/2009 2/18/2009 Amended and Restated Executive Deferred Compensation Plan 10.5* 10.6* 10.7* Amended and Restated Deferred Compensation Plan for Non-Management Directors 11/22/2006 Amended and Restated Non-Employee Director Stock Option Plan dated September 17, 12/2/1999...

  • Page 38
    ...of Stock Option and Performance Share Awards Agreement under the 2004 Stock Incentive Plan Form of Qdoba Unit Award Agreement Amended and Restated Performance Bonus Incentive Plan effective October 4, 2010 11/20/2009 2/23/2012 11/24/2010 10.9* 10.10.1* 10.10.2* 1/13/2011 2/24/2011 8/10/2012 Filed...

  • Page 39
    ... 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) November 21, 2012 Pursuant to the requirements...

  • Page 40
    ... Statements of Stockholders' Equity Notes to Consolidated Financial Statements F-1 F-2 F-3 F-4 F-5 F-6 Schedules not filed: All schedules have been omitted as the required information is inapplicable, immaterial or the information is presented in the consolidated financial statements or related...

  • Page 41
    ... fifty-three weeks ended October 3, 2010 , in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the internal control over financial reporting of Jack in the Box Inc...

  • Page 42
    ...per share data) September 30, 2012 October 2, 2011 TSSETS Current assets: Cash and cash ...income taxes Assets held for sale and leaseback Assets of discontinued operations held for sale Other current assets Total current assets 375 231,181 109,295 Property and equipment, at cost: Land Buildings...

  • Page 43
    ...per share data) Fiscal Year 2012 2011 2010 Revenues: Company restaurant sales $ 1,219,214 325,812 1,545,026 $ 1,380,273 282,066 1,662,339 $ 1,668,527 231,027 Franchise revenues 1,899,554 Operating costs and expenses, net: Company restaurant costs: Food and packaging Payroll and employee...

  • Page 44
    ...27,554) 10,605 Deferred income taxes Share-based compensation expense Pension and postretirement expense 29,140 Losses (gains) on cash surrender value of company-owned life insurance (6,199) (54,988) - 10,757 12,970 513 Gains on the sale of company-operated restaurants (29,145) - 6,281 9,403...

  • Page 45
    ... plans, including tax benefit Share-based compensation Purchases of treasury stock Comprehensive income: Net earnings - - - - (764,558) - - (30,013) 80,600 (1,199) Unrealized losses on interest rate swaps, net Effect of actuarial losses and prior service cost, net Total comprehensive income...

  • Page 46
    ...operates and franchises Jack in the Box Qdoba Mexican Grill ® ("Qdoba") fast-casual restaurants. The following summarizes the number of restaurants: 2012 quick-service restaurants and 2011 2010 Jack in the Box: Company-operated 547 1,703 629 1,592 2,221 245 338 583 956 1,250 Franchise Total...

  • Page 47
    ... Restaurant Corporation in fiscal 2003. Acquired franchise contract costs represent the acquired value of franchise contracts, which are amortized over the term of the franchise agreements plus options based on the projected royalty revenue stream. Our Qdoba trademark asset has an indefinite life...

  • Page 48
    ...obligations. Franchise royalties are recorded in revenues on an accrual basis. Among other things, a franchisee may be provided the use of land and building, generally for a period of 20 years, and is required to pay negotiated rent, property taxes, insurance and maintenance. Certain franchise rents...

  • Page 49
    ...of advertising costs related to company-operated restaurants in each year ( in thousands ): 2012 2011 2010 Jack in the Box Qdoba Total $ $ 49,757 9,970 59,727 $ $ 63,094 7,433 70,527 $ $ 83,971 5,860 89,831 Share-based compensation - We account for our share-based compensation as required by...

  • Page 50
    ...443 Property and equipment, net Total assets of discontinued operations The following is a summary of our distribution business's operating results, which are included in discontinued operations for fiscal 2012, 2011 and 2010 (in thousands): 2012 2011 2010 Revenue Operating loss before income tax...

  • Page 51
    ... impairment costs associated with the closure of one location in 2012 and three in 2011. These locations were closed in conjunction with the sale of the related markets. Franchise acquisitions - In each of the last three years, we have acquired Qdoba franchised restaurants in select markets where...

  • Page 52
    ... quoted market prices, interest rates and forward yield curves. We did not have any transfers in or out of Level 1 or Level 2. (3) 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...

  • Page 53
    ...of Jack in the Box restaurants determined to be underperforming or which we intend to close. Long-lived assets held for sale relate to surplus property. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. The future cash...

  • Page 54
    ... facility required 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 were based on a financial leverage ratio, as defined in the credit agreement dated June 29, 2010 . At September 30, 2012...

  • Page 55
    ...clauses and require the payment of property taxes, insurance and maintenance costs. We also lease certain restaurant, office and warehouse equipment, as well as various transportation equipment. Minimum rental obligations are accounted for on a straight-line basis over the term of the initial lease...

  • Page 56
    ... we decide to dispose of a long-lived asset, depreciable lives are adjusted based on the estimated disposal date and accelerated depreciation is recorded. Other disposal costs primarily relate to gains or losses recognized upon the sale of closed restaurant properties, and charges from our ongoing...

  • Page 57
    ... statements of earnings. Total accrued restaurant closing costs, included in accrued liabilities and other long-term liabilities, changed as follows ( in thousands ): 2012 Balance at beginning of year 2011 $ 21,657 5,787 (6,767) 20,677 $ 25,020 Additions and adjustments Cash payments...

  • Page 58
    ... tax rate to our effective tax rate of continuing operations is as follows: 2012 2011 2010 Computed at federal statutory rate State income taxes, net of federal tax benefit 35.0% 35.0% 35.0% 3.3 (1.2) (5.0) 3.4 (1.5) 3.2 (1.8) (2.2) (0.2) Benefit of jobs tax credits Expense/(benefit) related...

  • Page 59
    ... plan which provides certain employees additional pension benefits. Benefits under both plans are based on the employees' years of service and compensation over defined periods of employment. In April 2012 , we announced a voluntary early retirement program to eligible employees. The offering period...

  • Page 60
    ... 2,439 - 791 Additional year-end pension plan information - The pension benefit obligation ("PBO") is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases. The accumulated benefit obligation ("ABO") also...

  • Page 61
    ... value of plan assets Non-qualified plan: Projected benefit obligation Accumulated benefit obligation Fair value of plan assets - Net periodic benefit cost - The components of the fiscal year net periodic benefit cost were as follows ( in thousands ): 2012 Qualified Plan: 2011 2010 Service...

  • Page 62
    ... rate 5.82% 3.50% Rate of future pay increases Postretirement health plans(3): Discount rate 5.82% 6.16% _____ (1) Determined as of end of year. (2) (3) The discount rate and long-term rate of return on plan assets used to determine net period benefit costs were updated June 30, 2012...

  • Page 63
    ... effect on the amounts reported. For example, a 1.0% change in the assumed healthcare cost trend rate would have the following effect ( in thousands ): 1% Point Increase 1% Point Decrease 210 Total interest and service cost Postretirement benefit obligation $ $ $ $ (180) 4,754 (4,065) Plan...

  • Page 64
    ... funds, which are valued at unadjusted quoted market prices. U.S. equity securities are comprised of investments in common stock of U.S. companies for total return purposes. These investments are valued by the trustee at closing prices from national exchanges on the valuation date. Commingled equity...

  • Page 65
    ...2012 and include estimated future employee service. 12. SHTRE-BTSED EMPLOYEE COMPENSTTION Stock incentive plans - 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. Our stock...

  • Page 66
    ...-year period. Options may vest sooner for employees meeting certain age and years of service thresholds. Options granted to non-management directors vest six months from the date of grant. All option grants provide for an option exercise price equal to the closing market value of the common stock...

  • Page 67
    ... Treasury spot rates in effect at the time of grant and has a term equal to the expected life of the related options. The dividend yield assumption is based on the Company's history and expectations of dividend payouts. The expected stock price volatility in all years represents an average of the...

  • Page 68
    ...' compensation 157,466 6,590 (44,713) 119,343 $ 14.43 23.52 11.02 Stock distribution Stock equivalents outstanding at September 30, 2012 $ 16.21 Employee stock purchase plan - The following is a summary of shares issued pursuant to our ESPP in each year: 2012 Common stock issued 2011 2010...

  • Page 69
    ...-average shares outstanding to diluted weighted-average shares outstanding ( in thousands ): 2012 2011 2010 Weighted-average shares outstanding - basic Effect of potentially dilutive securities: Stock options 43,999 462 270 217 49,302 422 225 136 55,070 512 Nonvested stock awards and units...

  • Page 70
    ... primarily represent amounts payable under purchase contracts for goods related to restaurant operations. Legal matters - The Company is subject to normal and routine litigation brought by former, current or prospective employees, customers, franchisees, vendors, landlords, shareholders or...

  • Page 71
    ...-branded restaurant operations business, 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...

  • Page 72
    ... 53,659 1,287 90,917 Insurance Advertising Gift card liability 33,391 21,400 3,247 1,725 $ 31,999 164,637 213,854 54,288 1,977 101,083 Deferred franchise fees Other Other long-term liabilities: Pension plans $ Straight-line rent accrual Deferred franchise fees Other $ 371,202 $ 290,723...

  • Page 73
    ... and to pay related transaction fees and expenses associated with the refinance of the Existing Facility, and will also be available for permitted share repurchases, permitted dividends, permitted acquisitions, ongoing working capital requirements and other general corporate purposes. The New Credit...

  • Page 74
    ... of 2013. We will be required to make certain mandatory prepayments under certain circumstances and will have the option to make certain prepayments under the New Facility. The New Credit Facility includes events of default (and related remedies, including acceleration and increased interest rates...

  • Page 75
    ... 30, 2012 and October 2, 2011, and the fifty-three weeks ended October 3, 2010 , and the effectiveness of internal control over financial reporting as of September 30, 2012 , which reports appear in the September 30, 2012 annual report on Form 10 â€'K of Jack in the Box Inc. /s/ KPMG LLP San Diego...

  • Page 76
    ... 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: November 21, 2012 /S/ LINDA A. LANG Linda A. Lang Chief Executive Officer...

  • Page 77
    ... 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: November 21, 2012 /S/ JERRY P. REBEL Jerry P. Rebel Chief Financial Officer

  • Page 78
    ...(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: November 21, 2012 /S/ LINDA A. LANG Linda A. Lang Chief Executive Officer

  • Page 79
    ...(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 21, 2012 /S/ JERRY P. REBEL Jerry P. Rebel Chief Financial Officer

  • Page 80