Jack In The Box 2011 Annual Report Download - page 34

Table of Contents
(3) Includes expected payments associated with our non-qualified defined benefit plan, postretirement benefit plans and our non-qualified deferred compensation plan through fiscal 2021.
(4) Consists primarily of letters of credit for workers’ compensation and general liability insurance.
In addition to the amounts shown in the table above, $0.6 million of unrecognized tax benefits have been recorded as liabilities. The timing and amounts of
future cash payments related to these liabilities are uncertain.
We maintain a noncontributory defined benefit pension plan (“qualified plan”) covering substantially all full-time employees hired before January 1, 2011.
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. 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. 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 2012. For additional information related to our pension plans, refer to Note 11, Retirement Plans, of the notes to the consolidated financial statements.
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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.
Long-lived Assets — 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 2011,
impairment charges to write down certain assets to their estimated fair value were not material.
Retirement Benefits — 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 2, 2011, our discount rate was 5.60% 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 2, 2011, 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
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