Jack In The Box 2013 Annual Report Download - page 54

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
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reclassified to earnings in the period the hedged item affects earnings. If the underlying hedge transaction ceases to exist, any associated amounts reported in
other comprehensive income are reclassified to earnings at that time. Any ineffectiveness is recognized in earnings in the current period. Refer to Note 5, Fair
Value Measurements, and Note 6, Derivative Instruments, for additional information regarding our derivative instruments.
Contingencies — We recognize liabilities for contingencies when we have an exposure that indicates it is probable that an asset has been impaired or that a
liability has been incurred and the amount of impairment or loss can be reasonably estimated. Our ultimate legal and financial liability with respect to such
matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best estimate
within the range. We record legal settlement costs when those costs are probable and reasonably estimable.
Segment reporting — An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues
and incur expenses, and about which separate financial information is regularly evaluated by our chief operating decision makers in deciding how to allocate
resources. Similar operating segments can be aggregated into a single operating segment if the businesses are similar. We operate our business in two operating
segments, Jack in the Box and Qdoba. Refer to Note 17, Segment Reporting, for additional discussion regarding our segments.
Effect of new accounting pronouncements — Accounting standards that have been issued by the FASB or other standards-setting bodies that do not
require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.
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Distribution business — During fiscal 2012, we entered into an agreement with a third party distribution service provider pursuant to a plan approved by
our board of directors to sell our Jack in the Box distribution business. During the first quarter of fiscal 2013, we completed the transition of our distribution
centers. The distribution business assets sold in the transaction are classified as assets of discontinued operations held for sale in the consolidated balance
sheet as of September 30, 2012. The operations and cash flows of the business have been eliminated and in accordance with the provisions of the Accounting
Standards Codification (“ASC”) 205, Presentation of Financial Statements, the results are reported as discontinued operations for all periods presented.
As of September 29, 2013, there were no assets or liabilities classified as held for sale related to our distribution business. The following is a summary of our
distribution business assets held for sale as of September, 30, 2012 ( in thousands):
Inventories $26,844
Property and equipment, net 3,747
Total assets of discontinued operations $30,591
The following is a summary of our distribution business operating results, which are included in discontinued operations for each fiscal year ( in thousands):



Revenue
$37,743
$616,982
$530,959
Operating loss before income tax benefit
$(6,446)
$(8,777)
$(2,429)
The loss on the sale of the distribution business was not material to our results of operations. The operating loss in fiscal 2013 and 2012 includes costs
incurred to exit the distribution business consisting of $1.9 million and $6.0 million, respectively, for accelerated depreciation of a long-lived asset disposed
of upon completion of the transaction, $1.6 million (net of reversals for deferred rent of $0.4 million) and $0.7 million, respectively, for future lease
commitments, $1.2 million and $1.1 million, respectively, primarily related to costs incurred to terminate certain vendor contracts and in fiscal 2013, $1.3
million related to distribution center specific workers’ compensation claims. Our liability for lease commitments related to our distribution centers is included
in accrued liabilities and other long-term liabilities and has changed during 2013 as follows ( in thousands):
Balance at beginning of year
$ 697
Additions
1,846
Adjustments
119
Cash payments
(1,344)
Balance at end of year
$1,318
F-12