• Financial reporting - a discussion of changes in presentation.

• Results of operations - an analysis of our consolidated statements of earnings for the three years presented in our consolidated financial statements.

• Liquidity and capital resources - an analysis of cash flows including capital expenditures, aggregate contractual obligations, share repurchase activity, known trends that may impact liquidity, and the impact of inflation.

• Discussion of critical accounting estimates - a discussion of accounting policies that require critical judgments and estimates.

• Future application of accounting principles - a discussion of new accounting pronouncements, dates of implementation and impact on our consolidated financial position or results of operations, if any.

OVERVIEW
As of September 30, 2012, we operated and franchised 2,250 Jack in the Box restaurants, primarily in the western and southern United States, and 627 Qdoba restaurants throughout the United States.
Our primary source of revenue is from retail sales at Jack in the Box and Qdoba company-operated restaurants. We also derive revenue from Jack in the Box and Qdoba franchise restaurants, including royalties (based upon a percent of sales), rents and franchise fees. Historically, we also generated revenue from distribution sales of food and packaging commodities to franchisees; however this function has been outsourced, and franchisees who previously utilized our distribution services now purchase product directly from our distribution service providers or other approved suppliers. In addition, we recognize gains from the sale of company-operated restaurants to franchisees, which are presented as a reduction of operating costs and expenses, net in the accompanying consolidated statements of earnings.
The following summarizes the most significant events occurring in fiscal 2012 and certain trends compared to prior years:

• Restaurant Sales. Sales at restaurants open more than one year ("same-store sales") changed as follows:

                   2012    2011     2010
Jack in the Box:
Company            4.6 %   3.1 %   (8.6 )%
Franchise          3.0 %   1.3 %   (7.8 )%
System             3.4 %   1.8 %   (8.2 )%
Qdoba:
Company            2.8 %   5.1 %    0.8  %
Franchise          1.9 %   5.4 %    3.6  %
System             2.4 %   5.3 %    2.8  %

• Commodity Costs. Commodity costs at Jack in the Box and Qdoba company restaurants increased approximately 2.7% and 4.3%, respectively, as compared to 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 system-wide.

• Franchising Program. We refranchised 97 Jack in the Box restaurants, while Jack in the Box franchisees opened a total of 18 restaurants in 2012. Our Jack in the Box system was approximately 76% franchised at the end of fiscal 2012, and we plan to ultimately increase franchise ownership to approximately 80%. During fiscal 2012, we acquired 46 Qdoba franchised restaurants and Qdoba franchisees opened a total of 32 restaurants.

• Restructuring Costs. During fiscal 2012, we engaged in a comprehensive review of our organization structure, including evaluating opportunities for outsourcing, restructuring of certain functions and workforce reductions. As a result, restructuring charges of $15.5 million were recorded during fiscal 2012.

• Distribution Outsourcing. During the fourth quarter of 2012, we began outsourcing our Jack in the Box distribution business. As a result, we recorded after-tax charges totaling $5.3 million, or $0.12 per diluted share, in the fourth quarter of fiscal 2012.

• Share Repurchases. Pursuant to share repurchase programs authorized by our Board of Directors, in 2012, we repurchased 1.2 million shares of our common stock at an average price of $24.36 per share, including the cost of brokerage fees.

FINANCIAL REPORTING
The losses for our distribution business are reflected as discontinued operations for all periods presented. Refer to Note 2, Discontinued Operations, in the notes to our consolidated financial statements for more information.
RESULTS OF OPERATIONS
The following table presents certain income and expense items included in our consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

                   CONSOLIDATED STATEMENTS OF EARNINGS DATA
                                                             Fiscal Year
                                                      2012       2011       2010
Revenues:
Company restaurant sales                             78.9  %    83.0  %    87.8  %
Franchise revenues                                   21.1  %    17.0  %    12.2  %
Total revenues                                      100.0  %   100.0  %   100.0  %
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging (1)                               32.8  %    33.4  %    31.8  %
Payroll and employee benefits (1)                    29.0  %    30.0  %    30.3  %
Occupancy and other (1)                              23.1  %    23.9  %    23.9  %
Total company restaurant costs (1)                   84.9  %    87.3  %    85.9  %
Franchise costs (1)                                  51.0  %    48.3  %    45.4  %
Selling, general and administrative expenses         14.7  %    13.5  %    12.8  %
Impairment and other charges, net                     2.1  %     0.8  %     2.6  %
Gains on the sale of company-operated restaurants    (1.9 )%    (3.7 )%    (2.9 )%
Earnings from operations                              7.3  %     8.7  %     6.5  %
Income tax rate (2)                                  32.7  %    36.3  %    34.0  %


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(2) As a percentage of earnings from continuing operations and before income taxes.

The following table presents Jack in the Box and Qdoba company restaurant sales, costs and costs as a percentage of the related sales. Percentages may not add due to rounding.

     SUPPLEMENTAL COMPANY-OPERATED RESTAURANTS STATEMENTS OF EARNINGS DATA
                             (dollars in thousands)
                                                             Fiscal Year
                                        2012                   2011                    2010
Jack in the Box:
Company restaurant sales         $ 943,990             $ 1,181,961             $ 1,518,434
Company restaurant costs:
Food and packaging                 319,415    33.8 %       403,209    34.1 %       488,179    32.2 %
Payroll and employee benefits      278,464    29.5 %       358,917    30.4 %       463,625    30.5 %
Occupancy and other                205,134    21.7 %       271,432    23.0 %       353,056    23.3 %
Total company restaurant costs   $ 803,013    85.1 %   $ 1,033,558    87.4 %   $ 1,304,860    85.9 %
Qdoba:
Company restaurant sales         $ 275,224             $   198,312             $   150,093
Company restaurant costs:
Food and packaging                  80,597    29.3 %        57,581    29.0 %        42,434    28.3 %
Payroll and employee benefits       75,677    27.5 %        55,546    28.0 %        41,513    27.7 %
Occupancy and other                 76,382    27.8 %        58,334    29.4 %        45,010    30.0 %
Total company restaurant costs   $ 232,656    84.5 %   $   171,461    86.5 %   $   128,957    85.9 %

The 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                               2011                               2010
                   Company    Franchise     Total     Company    Franchise     Total     Company    Franchise     Total
Jack in the Box:
Beginning of
year                  629        1,592      2,221        956        1,250      2,206      1,190        1,022      2,212
New                    19           18         37         15           16         31         30           16         46
Refranchised          (97 )         97          -       (332 )        332          -       (219 )        219          -
Acquired from
franchisees             -            -          -          -            -          -          1           (1 )        -
Closed                 (4 )         (4 )       (8 )      (10 )         (6 )      (16 )      (46 )         (6 )      (52 )
End of year           547        1,703      2,250        629        1,592      2,221        956        1,250      2,206
% of JIB system        24 %         76 %      100 %       28 %         72 %      100 %       43 %         57 %      100 %
% of
consolidated
system                 63 %         85 %       78 %       72 %         82 %       79 %       84 %         79 %       81 %
Qdoba:
Beginning of
year                  245          338        583        188          337        525        157          353        510
New                    26           32         58         25           42         67         15           21         36
Acquired from
franchisees            46          (46 )        -         32          (32 )        -         16          (16 )        -
Closed                 (1 )        (13 )      (14 )        -           (9 )       (9 )        -          (21 )      (21 )
End of year           316          311        627        245          338        583        188          337        525
% of Qdoba
system                 50 %         50 %      100 %       42 %         58 %      100 %       36 %         64 %      100 %
% of
consolidated
system                 37 %         15 %       22 %       28 %         18 %       21 %       16 %         21 %       19 %
Consolidated:
Total system          863        2,014      2,877        874        1,930      2,804      1,144        1,587      2,731
% of
consolidated
system                 30 %         70 %      100 %       31 %         69 %      100 %       42 %         58 %      100 %

Revenues
As we execute our Jack in the Box refranchising strategy, which includes the sale of restaurants to franchisees, we expect the number of company-operated restaurants and the related sales to decrease while revenues from franchise restaurants increase. As such, company restaurant sales decreased $161.1 million in 2012 and $288.3 million in 2011 as compared with the respective prior year. The decrease in restaurant sales in both years is due primarily to decreases in the average number of Jack in the Box company-operated restaurants, partially offset by an increase in the number of Qdoba company-operated restaurants and increases in average unit volumes ("AUVs") at our Jack in the Box and Qdoba restaurants. The following table presents the approximate impact of these increases (decreases) on company restaurant sales and the effect of additional sales from a 53rd week in 2010 (in millions):

                                                                 2012 vs. 2011     2011 vs. 2010
Decrease in the average number of Jack in the Box restaurants   $      (365.8 )   $      (431.7 )
Jack in the Box AUV increase                                            127.8             120.8
Increase in the average number of Qdoba restaurants                      65.2              45.0
Qdoba AUV increase                                                       11.7               6.5
53rd week                                                                   -             (28.9 )
Total decrease in company restaurant sales                      $      (161.1 )   $      (288.3 )

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 2.8% in 2012 and 5.1% in 2011 primarily driven by price increases in 2012 and a combination of transaction growth, pricing and higher catering sales in 2011. The following table summarizes the change in company-operated same-store sales.

                                                    Increase/(Decrease)
                                              2012 vs. 2011     2011 vs. 2010
Jack in the Box transactions                        2.3 %               3.2  %
Jack in the Box average check (1)                   2.3 %              (0.1 )%
Jack in the Box change in same-store sales          4.6 %               3.1  %

Qdoba change in same-store sales (2)                2.8 %               5.1  %


 ____________________________

(2) Includes price increases of approximately 3.8% and 1.7% in 2012 and 2011, respectively.

Franchise revenues increased $43.7 million and $51.0 million in 2012 and 2011, respectively, as compared with the respective prior year. The increase in franchise revenues in both years primarily reflects an increase in the average number of Jack in the Box franchise restaurants, which contributed additional royalties and rents of approximately $48.2 million in 2012 and $53.5 million in 2011. In 2012, higher AUVs at Jack in the Box franchised restaurants also contributed to the increase and were more than offset by lower revenues from initial franchise fees of $10.4 million related to a decrease in the number of restaurants sold to and developed by franchisees. In 2011, the change in franchise revenues as compared with 2010 was also impacted by higher franchise fees from increases in the number of restaurants sold to and developed by franchises, an increase in re-image contributions to franchisees, which are recorded as a reduction of franchise revenues, and additional revenues in 2010 of $4.6 million from a 53rd week. The following table reflects the detail of our franchise revenues in each year and other information we believe is useful in analyzing the change in franchise revenues (dollars in thousands):

                                                        2012          2011          2010
Royalties                                            $ 127,887     $ 109,422     $  91,216
Rents                                                  195,746       161,279       128,143
Re-image contributions to franchisees                   (7,124 )      (8,208 )      (1,455 )
Franchise fees and other                                 9,303        19,573        13,123
Franchise revenues                                   $ 325,812     $ 282,066     $ 231,027
% increase                                                15.5 %        22.1 %
Average number of franchise restaurants                  1,952         1,707         1,424
% increase                                                14.4 %        19.9 %
Increase in franchise-operated same-store sales:
Jack in the Box                                            3.0 %         1.3 %
Qdoba                                                      1.9 %         5.4 %
Royalties as a percentage of estimated franchise
restaurant sales:
Jack in the Box                                            5.3 %         5.3 %         5.3 %
Qdoba                                                      5.0 %         5.0 %         5.0 %

Operating Costs and Expenses
Food and packaging costs were 32.8% of company restaurant sales in 2012, 33.4%
in 2011 and 31.8% in 2010. In 2012, higher commodity costs were more than offset
by the benefit of price increases and a greater proportion of Qdoba company
restaurants which generally have lower food and packaging costs than our Jack in
the Box company restaurants. The increase in 2011 primarily relates to higher
commodity costs and the unfavorable impact of product mix and promotions,
partially offset by the benefit of selling price increases. Commodity costs
increased as follows compared with the prior year:
                2012 vs. 2011   2011 vs. 2010
Jack in the Box     2.7%            4.7%
Qdoba               4.3%            7.0%

In 2012, commodity cost increases were driven by higher costs for most commodities other than produce and pork. In 2011, higher costs for beef, cheese, pork, dairy, eggs and shortening were partially offset by lower costs for poultry and bakery. Beef represents the largest portion, or approximately 20%, of the Company's overall commodity spend, and we typically do not enter into fixed price contracts for our beef needs. For fiscal 2013, we currently expect beef costs to increase approximately 4%-5%, and overall commodities to be 2%-3% higher compared with fiscal 2012.
Payroll and employee benefit costs were 29.0% of company restaurant sales in 2012, 30.0% in 2011 and 30.3% in 2010. The decrease in 2012 reflects leverage from same-store sales increases, the benefits of refranchising and the favorable impact of recent Qdoba restaurant acquisitions. In 2011, the 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 23.9% in 2011 and 2010. The lower percent in 2012 and in 2011 are due primarily to leverage from same-store sales increases, the benefits of refranchising Jack in the Box restaurants and the favorable impact of recent acquisitions of Qdoba franchised restaurants. These benefits were partially offset in both years by higher depreciation expense related to the Jack in the Box re-image program. In 2012, the percentages were impacted by higher debit card fees and costs associated with the new menu board and uniform program at Jack in the Box restaurants.
Franchise costs, principally rents and depreciation on properties leased to Jack in the Box franchisees, increased $29.9 million in 2012 and $31.3 million in 2011, due primarily to our refranchising strategy. Franchise costs increased to 51.0% of the related

revenues in 2012 from 48.3% in 2011 and 45.4% in 2010. The higher percentage in 2012 as compared with 2011 is primarily due to a decline in revenue from franchise fees and higher rent and depreciation expenses resulting from an increase in the percentage of locations we lease to franchisees, partially offset by lower re-image contributions to franchisees. The percent of sales increase in 2011 versus 2010 is primarily due to higher PSA depreciation expense for refranchised locations relating to our re-image program, an increase in re-image contributions to franchisees and higher rent and depreciation expense resulting from an increase in the percentage of locations we lease to franchisees. These increases were partially offset by the leverage provided from same-store sales growth and higher franchise fee revenue.
The following table presents the change in selling, general and administrative ("SG&A") expenses in each year compared with the prior year (in thousands):

                                                     Increase/(Decrease)
                                              2012 vs. 2011      2011 vs. 2010
Advertising                                  $      (10,800 )   $      (17,867 )
Refranchising strategy                               (6,277 )           (5,857 )
Incentive compensation                               12,291              2,202
Cash surrender value of COLI policies, net           (6,327 )            2,818
Pension and postretirement benefits                   2,893             (5,295 )
Pre-opening costs                                     1,902               (512 )
Qdoba general and administrative costs                4,131              4,430
Hurricane Ike insurance proceeds                          -              4,223
53rd week                                                 -             (3,597 )
Other                                                 4,537                655
                                             $        2,350     $      (18,800 )

Our refranchising strategy has resulted in a decrease in the number of Jack in the Box company-operated restaurants and the related overhead expenses to manage and support those restaurants, including advertising costs, which are primarily contributions to our marketing funds determined as a percentage of restaurant sales. As such, advertising costs decreased at Jack in the Box and were partially offset by higher advertising expenses at Qdoba due to an increase in the number of company-operated restaurants, as well as same-store sales growth at Jack in the Box and Qdoba restaurants.
The higher levels of incentive compensation reflect improvements in the Company's results compared with performance goals in 2012 and 2011. The cash surrender value of our Company-owned life insurance ("COLI") policies, net of changes in our non-qualified deferred compensation obligation supported by these policies, are subject to market fluctuations. The changes in market values had a positive impact of $6.2 million in 2012 compared with a negative impact of $0.1 million in 2011 and a positive impact of $2.7 million in 2010. In 2012, the increase in pension and postretirement benefits principally relates to a decrease in the discount rate as compared with a year ago. In 2011, the decrease in pension and postretirement benefits expense principally relates to the curtailment of the Company's qualified pension plan, whereby participants will no longer accrue 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, the decrease in pre-opening costs is primarily due to a decrease in the number of new company restaurants compared with fiscal 2010. Qdoba general and administrative costs increased primarily due to higher overhead to support our growing number of company-operated restaurants.
Impairment and other charges, net increased $20.3 million in 2012 and decreased $36.3 million in 2011 as compared to the respective prior year. The following table presents the components of impairment and other charges, net in each year (in thousands):

                                                        2012          2011          2010
Impairment charges                                   $   3,112     $   1,367     $  12,970
Losses on disposition of property and equipment,
net                                                      6,027         7,561        10,734
Costs of closed restaurants (primarily lease
obligations) and other                                   8,332         3,655        25,160
Restructuring costs                                     15,461             -             -
                                                     $  32,932     $  12,583     $  48,864

The increase in 2012 primarily relates to restructuring costs incurred in connection with the comprehensive review of our organization structure, including evaluating opportunities for outsourcing, restructuring of certain functions and workforce reductions. Restructuring costs consist primarily of pension benefits and severance expenses related to a voluntary early retirement program ("VERP") offered by the Company and involuntary employee termination costs. We expect to see the benefits of our

restructuring activities, including our early retirement plan, in our cost structure beginning in fiscal 2013. To a lesser extent, adjustments made to certain sublease assumptions associated with our lease obligations for closed locations also contributed to the increase in 2012 versus a year ago. Fiscal 2010 included a charge of $28.0 million (primarily including future lease obligations of $19.0 million and property and equipment impairment charges of $8.4 million) related to the closure of 40 underperforming Jack in the Box restaurants. After consideration of the fiscal 2010 closure charge, impairment and other charges, net decreased an additional $8.2 million in 2011 due primarily to declines in costs related to our restaurant re-image and new logo program as this program neared completion and lower impairment charges for underperforming Jack in the Box restaurants as compared with 2010. Gains on the sale of company-operated restaurants to franchisees, net are detailed in the following table (dollars in thousands):

                                                      2012        2011        2010
Number of restaurants sold to franchisees                 97         332         219
Gains on the sale of company-operated restaurants   $ 29,145    $ 61,125    $ 54,988
Average gain on restaurants sold                    $    300    $    184    $    251

In 2012, gains on the sale of company-operated restaurants include additional gains of $2.2 million recognized upon the extension of the underlying franchise and lease agreements related to four restaurants sold in a prior year. Gains were impacted by the number of restaurants sold and changes in average gains recognized, which relate to the specific sales and cash flows of those restaurants. The lower average gains in 2011 relate to the sale of markets with lower-than-average sales volumes and cash flows. Interest Expense, Net
Interest expense, net is comprised of the following (in thousands):

                           2012         2011         2010
Interest expense        $ 20,953     $ 18,165     $ 17,011
Interest income           (2,079 )     (1,310 )     (1,117 )
Interest expense, net   $ 18,874     $ 16,855     $ 15,894

Interest expense, net increased $2.0 million in 2012 and $1.0 million in 2011. In 2012, the increase versus a year ago relates principally to higher average borrowings. The increase in 2011 is primarily attributable to an increase in the amortization of deferred finance fees related to the refinancing of our credit facility in 2010 and higher average borrowings, offset in part by lower average interest rates.
Income Taxes . . .