Jack In The Box 2010 Annual Report Download - page 30

Table of Contents
(1) Obligations related to our credit facility include interest expense estimated at interest rates in effect on October 3, 2010.
(2) Includes purchase commitments for food, beverage, packaging items and certain utilities.
(3) Includes expected payments associated with our defined benefit plans, postretirement benefit plans and our non-qualified deferred compensation plan
through fiscal 2020.
(4) Consists primarily of letters of credit for workers’ compensation and general liability insurance.
We maintain a noncontributory defined benefit pension plan (“qualified plan”) covering substantially all full-time employees. Our
policy is to fund our qualified plan at amounts necessary to satisfy the minimum amount required by law, plus additional amounts as
determined by management to improve the plan’s funded status. Based on the funding status of our qualified plan as of our last
measurement date, we are not required to make a minimum contribution in 2011. However, we expect to make discretionary contributions
of $10.0 million which have been included in the table above. Effective September 2010, we amended our qualified plan whereby
participants will no longer accrue benefits after December 31, 2015. As a result, our discretionary contributions will likely be lower in the
future when compared with recent years. Contributions beyond fiscal 2011 will depend on pension asset performance, future interest
rates, future tax law changes, and future changes in regulatory funding requirements. For additional information related to our pension
plans, refer to Note 11, , of the notes to the consolidated financial statements.

We have identified the following as our most critical accounting estimates, which are those that are most important to the portrayal of
the Company’s financial condition and results, and that require management’s most subjective and complex judgments. Information
regarding our other significant accounting estimates and policies are disclosed in Note 1 to our consolidated financial statements.
 — Property, equipment and certain other assets, including amortized intangible assets, are reviewed for impairment
when indicators of impairment are present. This review generally includes a restaurant-level analysis, except when we are actively selling
a group of restaurants, in which case we perform our impairment evaluations at the group level. Impairment evaluations for individual
restaurants take into consideration a restaurant’s operating cash flows, the period of time since a restaurant has been opened or remodeled,
refranchising expectations, and the maturity of the related market. Impairment evaluations for a group of restaurants take into
consideration the group’s expected future cash flows and sales proceeds from bids received, if any, or fair market value based on, among
other considerations, the specific sales and cash flows of those restaurants. If the assets of a restaurant or group of restaurants subject to
our impairment evaluation are not recoverable based upon the forecasted, undiscounted cash flows, we recognize an impairment loss as
the amount by which the carrying value of the assets exceeds fair value. Our estimates of cash flows used to assess impairment are
subject to a high degree of judgment and may differ from actual cash flows due to, among other things, economic conditions or changes
in operating performance. During fiscal year 2010, we recorded impairment charges totaling $13.0 million to write down certain assets to
their estimated fair value.
 — Our defined benefit and other postretirement plans’ costs and liabilities are determined using several statistical
and other factors, which attempt to anticipate future events, including assumptions about the discount rate and expected return on plan
assets. Our discount rate is set annually by us, with assistance from our actuaries, and is determined by considering the average of
pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better
meeting certain other criteria. As of October 3, 2010, our discount rate was 5.82% for our defined benefit and postretirement benefit plans.
Our expected long-term rate of return on assets is determined taking into consideration our projected asset allocation and economic
forecasts prepared with the assistance of our actuarial consultants. As of October 3, 2010, our assumed expected long-term rate of return
was 7.75% for our qualified defined benefit plan. The actuarial assumptions used may differ materially from actual results due to
changing market and economic conditions, higher or lower turnover and retirement rates or longer or shorter life spans of participants.
These differences may affect the amount of pension expense we record. A hypothetical 25 basis point reduction in the assumed discount
rate and expected long-term rate of return on plan assets would have resulted in an estimated increase of $2.7 million and $0.7 million,
respectively, in our fiscal 2011 pension and postretirement plan expense. We expect our pension and
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