UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July ~~10, 2022~~9, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from ________to________.

Commission File Number: 1-9390

JACK IN THE BOX INC.

(Exact name of registrant as specified in its charter)

_______________________________________________________________________________________

Delaware

95-2698708

(State of Incorporation)

(I.R.S. Employer Identification No.)

9357 Spectrum Center Blvd.

San Diego, California 92123

(Address of principal executive offices)

Registrant’s telephone number, including area code (858) 571-2121

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	JACK	NASDAQ Global Select Market

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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	þ	Smaller reporting company	☐
Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No þ

As of the close of business August ~~4, 2022, 21,057,109~~3, 2023, 20,107,964 shares of the registrant’s common stock were outstanding.

JACK IN THE BOX INC. AND SUBSIDIARIES

INDEX


		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	2
	C ~~ondensed~~Condensed Consolidated Statements of Earnings	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2421
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3635
Item 4.	Controls and Procedures	3635
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3736
Item 1A.	Risk Factors	3736
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3936
Item 3.	Defaults of Senior Securities	3936
Item 4.	Mine Safety Disclosures	3936
Item 5.	Other Information	3936
Item 6.	Exhibits	4037
	Signature	4138

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)


		July 10, 2022		October 3, 2021			July 9, 2023		October 2, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash	Cash	$	65,857	$	55,346	Cash	$	154,073	$	108,890
Restricted cash	Restricted cash	27,058		18,222		Restricted cash	27,947		27,150
Accounts and other receivables, net	Accounts and other receivables, net	78,490		74,335		Accounts and other receivables, net	82,776		103,803
Inventories	Inventories	5,704		2,335		Inventories	4,606		5,264
Prepaid expenses	Prepaid expenses	15,529		12,682		Prepaid expenses	10,323		16,095
Current assets held for sale	Current assets held for sale	7,519		1,692		Current assets held for sale	10,012		17,019
Other current assets	Other current assets	4,775		4,346		Other current assets	5,799		4,772
Total current assets	Total current assets	204,932		168,958		Total current assets	295,536		282,993
Property and equipment:	Property and equipment:					Property and equipment:
Property and equipment, at cost	Property and equipment, at cost	1,270,362		1,133,038		Property and equipment, at cost	1,249,618		1,228,916
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(828,723)		(810,124)		Less accumulated depreciation and amortization	(834,669)		(810,752)
Property and equipment, net	Property and equipment, net	441,639		322,914		Property and equipment, net	414,949		418,164
Other assets:	Other assets:					Other assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	1,334,300		934,066		Operating lease right-of-use assets	1,368,133		1,332,135
Intangible assets, net	Intangible assets, net	12,544		470		Intangible assets, net	11,515		12,324
Trademarks	Trademarks	283,500		—		Trademarks	283,500		283,500
Goodwill	Goodwill	367,507		47,774		Goodwill	339,389		366,821
Deferred tax assets		—		51,517

Other assets, net	Other assets, net	219,350		224,438		Other assets, net	238,757		226,569
Total other assets	Total other assets	2,217,201		1,258,265		Total other assets	2,241,294		2,221,349
		$	2,863,772	$	1,750,137		$	2,951,779	$	2,922,506
LIABILITIES AND STOCKHOLDERS’ DEFICIT	LIABILITIES AND STOCKHOLDERS’ DEFICIT					LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:	Current liabilities:					Current liabilities:
Current maturities of long-term debt	Current maturities of long-term debt	$	30,201	$	894	Current maturities of long-term debt	$	29,970	$	30,169
Current operating lease liabilities	Current operating lease liabilities	173,057		150,636		Current operating lease liabilities	161,398		171,311
Accounts payable	Accounts payable	49,286		29,119		Accounts payable	50,885		66,271
Accrued liabilities	Accrued liabilities	215,286		148,417		Accrued liabilities	281,781		253,932
Total current liabilities	Total current liabilities	467,830		329,066		Total current liabilities	524,034		521,683
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Long-term debt, net of current maturities	Long-term debt, net of current maturities	1,806,074		1,273,420		Long-term debt, net of current maturities	1,731,406		1,799,540
Long-term operating lease liabilities, net of current portion	Long-term operating lease liabilities, net of current portion	1,166,977		809,191		Long-term operating lease liabilities, net of current portion	1,220,968		1,165,097
Deferred tax liabilities	Deferred tax liabilities	33,704		—		Deferred tax liabilities	41,113		37,684
Other long-term liabilities	Other long-term liabilities	157,051		156,342		Other long-term liabilities	139,675		134,694
Total long-term liabilities	Total long-term liabilities	3,163,806		2,238,953		Total long-term liabilities	3,133,162		3,137,015
Stockholders’ deficit:	Stockholders’ deficit:					Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued	Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued	—		—		Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued	—		—
Common stock $0.01 par value, 175,000,000 shares authorized, 82,580,296 and 82,536,059 issued, respectively		826		825
Common stock $0.01 par value, 175,000,000 shares authorized, 82,645,814 and 82,580,599 issued, respectively						Common stock $0.01 par value, 175,000,000 shares authorized, 82,645,814 and 82,580,599 issued, respectively	826		826
Capital in excess of par value	Capital in excess of par value	506,674		500,441		Capital in excess of par value	516,789		508,323
Retained earnings	Retained earnings	1,806,352		1,764,412		Retained earnings	1,924,466		1,842,947
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(72,410)		(74,254)		Accumulated other comprehensive loss	(52,761)		(53,982)
Treasury stock, at cost, 61,523,475 shares		(3,009,306)		(3,009,306)
Treasury stock, at cost, 62,538,138 and 61,799,221 shares, respectively						Treasury stock, at cost, 62,538,138 and 61,799,221 shares, respectively	(3,094,737)		(3,034,306)
Total stockholders’ deficit	Total stockholders’ deficit	(767,864)		(817,882)		Total stockholders’ deficit	(705,417)		(736,192)
		$	2,863,772	$	1,750,137		$	2,951,779	$	2,922,506

See accompanying notes to condensed consolidated financial statements.

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Revenues:	Revenues:									Revenues:
Company restaurant sales	Company restaurant sales	$	215,231	$	91,892	$	486,596	$	292,132	Company restaurant sales	$	198,516	$	215,231	$	671,311	$	486,596
Franchise rental revenues	Franchise rental revenues	80,068		80,598		259,723		262,248		Franchise rental revenues	86,248		80,068		278,598		259,723
Franchise royalties and other	Franchise royalties and other	52,059		48,582		159,915		155,461		Franchise royalties and other	54,970		52,059		185,342		159,915
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services	50,947		48,386		159,076		155,375		Franchise contributions for advertising and other services	57,208		50,947		184,531		159,076
		398,305		269,458		1,065,310		865,216			396,942		398,305		1,319,782		1,065,310
Operating costs and expenses, net:	Operating costs and expenses, net:									Operating costs and expenses, net:
Food and packaging	Food and packaging	65,755		27,061		150,163		83,376		Food and packaging	58,556		65,755		199,799		150,163
Payroll and employee benefits	Payroll and employee benefits	71,366		27,356		162,001		88,727		Payroll and employee benefits	63,871		71,366		217,547		162,001
Occupancy and other	Occupancy and other	42,054		14,103		92,102		45,287		Occupancy and other	37,274		42,054		127,920		92,102
Franchise occupancy expenses	Franchise occupancy expenses	50,971		48,824		164,198		162,897		Franchise occupancy expenses	53,930		50,971		173,803		164,198
Franchise support and other costs	Franchise support and other costs	3,768		2,722		12,694		9,336		Franchise support and other costs	4,079		3,768		8,623		12,694
Franchise advertising and other services expenses	Franchise advertising and other services expenses	52,398		49,168		164,964		158,967		Franchise advertising and other services expenses	59,569		52,398		192,875		164,964
Selling, general and administrative expenses	Selling, general and administrative expenses	40,086		21,796		93,904		61,156		Selling, general and administrative expenses	39,617		40,032		129,164		93,274
Depreciation and amortization	Depreciation and amortization	16,713		10,389		40,754		35,656		Depreciation and amortization	14,460		16,713		48,460		40,754
Pre-opening costs										Pre-opening costs	182		54		667		630
Other operating expenses, net	Other operating expenses, net	4,129		922		22,339		1,698		Other operating expenses, net	7,656		4,129		5,135		22,339
Gains on the sale of company-operated restaurants	Gains on the sale of company-operated restaurants	(802)		(264)		(1,660)		(3,079)		Gains on the sale of company-operated restaurants	(5,794)		(802)		(10,323)		(1,660)
		346,438		202,077		901,459		644,021			333,400		346,438		1,093,670		901,459
Earnings from operations	Earnings from operations	51,867		67,381		163,851		221,195		Earnings from operations	63,542		51,867		226,112		163,851
Other pension and post-retirement expenses, net	Other pension and post-retirement expenses, net	70		204		233		678		Other pension and post-retirement expenses, net	1,608		70		5,359		233
Interest expense, net	Interest expense, net	19,703		15,158		66,371		51,120		Interest expense, net	18,662		19,703		64,167		66,371
Earnings before income taxes	Earnings before income taxes	32,094		52,019		97,247		169,397		Earnings before income taxes	43,272		32,094		156,586		97,247
Income taxes	Income taxes	9,237		11,991		27,324		42,576		Income taxes	14,104		9,237		47,657		27,324
Net earnings	Net earnings	$	22,857	$	40,028	$	69,923	$	126,821	Net earnings	$	29,168	$	22,857	$	108,929	$	69,923

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.08	$	1.80	$	3.29	$	5.59	Basic	$	1.42	$	1.08	$	5.25	$	3.29
Diluted	Diluted	$	1.08	$	1.79	$	3.29	$	5.57	Diluted	$	1.41	$	1.08	$	5.22	$	3.29

Cash dividends declared per common share	Cash dividends declared per common share	$	0.44	$	0.44	$	1.32	$	1.24	Cash dividends declared per common share	$	0.44	$	0.44	$	1.32	$	1.32

See accompanying notes to condensed consolidated financial statements.

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Net earnings	Net earnings	$	22,857	$	40,028	$	69,923	$	126,821	Net earnings	$	29,168	$	22,857	$	108,929	$	69,923
Other comprehensive income:	Other comprehensive income:									Other comprehensive income:

Actuarial losses and prior service costs reclassified to earnings	Actuarial losses and prior service costs reclassified to earnings	748		1,139		2,491		3,794		Actuarial losses and prior service costs reclassified to earnings	498		748		1,657		2,491
		748		1,139		2,491		3,794			498		748		1,657		2,491
Tax effect	Tax effect	(195)		(297)		(647)		(987)		Tax effect	(132)		(195)		(436)		(647)
Other comprehensive income, net of taxes	Other comprehensive income, net of taxes	553		842		1,844		2,807		Other comprehensive income, net of taxes	366		553		1,221		1,844

Comprehensive income	Comprehensive income	$	23,410	$	40,870	$	71,767	$	129,628	Comprehensive income	$	29,534	$	23,410	$	110,150	$	71,767

See accompanying notes to condensed consolidated financial statements.

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Year-to-date					Year-to-date
		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	69,923	$	126,821	Net earnings	$	108,929	$	69,923
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:					Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	40,754		35,656		Depreciation and amortization	48,460		40,754
Amortization of franchise tenant improvement allowances and incentives	Amortization of franchise tenant improvement allowances and incentives	3,046		2,330		Amortization of franchise tenant improvement allowances and incentives	3,295		3,046
Deferred finance cost amortization	Deferred finance cost amortization	4,280		4,304		Deferred finance cost amortization	3,915		4,280
Loss on extinguishment of debt	Loss on extinguishment of debt	7,700		—		Loss on extinguishment of debt	—		7,700
Tax deficiency (excess tax benefit) from share-based compensation arrangements		123		(1,164)
Tax deficiency from share-based compensation arrangements						Tax deficiency from share-based compensation arrangements	71		123
Deferred income taxes	Deferred income taxes	8,058		(2,599)		Deferred income taxes	1,648		8,058
Share-based compensation expense	Share-based compensation expense	5,541		3,338		Share-based compensation expense	7,991		5,541
Pension and post-retirement expense	Pension and post-retirement expense	233		678		Pension and post-retirement expense	5,359		233
Losses (gains) on cash surrender value of company-owned life insurance		9,024		(12,561)
(Gains) losses on cash surrender value of company-owned life insurance						(Gains) losses on cash surrender value of company-owned life insurance	(8,331)		9,024
Gains on the sale of company-operated restaurants	Gains on the sale of company-operated restaurants	(1,660)		(3,079)		Gains on the sale of company-operated restaurants	(10,323)		(1,660)
Gains on the disposition of property and equipment, net	Gains on the disposition of property and equipment, net	(1,746)		(1,754)		Gains on the disposition of property and equipment, net	(9,155)		(1,746)
Impairment charges and other	Impairment charges and other	3,863		1,951		Impairment charges and other	6,232		3,863
Changes in assets and liabilities, excluding acquisitions:	Changes in assets and liabilities, excluding acquisitions:					Changes in assets and liabilities, excluding acquisitions:
Accounts and other receivables	Accounts and other receivables	571		14,485		Accounts and other receivables	12,902		571
Inventories	Inventories	(137)		(250)		Inventories	658		(137)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(3,261)		1,194		Prepaid expenses and other current assets	5,714		(3,261)
Operating lease right-of-use assets and lease liabilities	Operating lease right-of-use assets and lease liabilities	6,074		(23,735)		Operating lease right-of-use assets and lease liabilities	5,357		6,074
Accounts payable	Accounts payable	2,627		(2,597)		Accounts payable	(28,068)		2,627
Accrued liabilities	Accrued liabilities	(42,701)		20,611		Accrued liabilities	32,525		(42,701)
Pension and post-retirement contributions	Pension and post-retirement contributions	(5,109)		(4,961)		Pension and post-retirement contributions	(4,674)		(5,109)
Franchise tenant improvement allowance and incentive disbursements	Franchise tenant improvement allowance and incentive disbursements	(2,206)		(8,009)		Franchise tenant improvement allowance and incentive disbursements	(2,745)		(2,206)
Other	Other	(1,185)		(778)		Other	2,311		(1,185)
Cash flows provided by operating activities	Cash flows provided by operating activities	103,812		149,881		Cash flows provided by operating activities	182,071		103,812
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(34,349)		(35,157)		Purchases of property and equipment	(56,669)		(34,349)
Acquisition of Del Taco, net of cash acquired	Acquisition of Del Taco, net of cash acquired	(580,792)		—		Acquisition of Del Taco, net of cash acquired	—		(580,792)
Proceeds from the sale of property and equipment	Proceeds from the sale of property and equipment	4,691		5,272		Proceeds from the sale of property and equipment	25,174		4,691
Proceeds from the sale and leaseback of assets	Proceeds from the sale and leaseback of assets	5,968		—		Proceeds from the sale and leaseback of assets	3,673		5,968
Proceeds from the sale of company-operated restaurants	Proceeds from the sale of company-operated restaurants	1,402		1,229		Proceeds from the sale of company-operated restaurants	51,845		1,402
Other	Other	(1,315)		2,616		Other	1,465		(1,315)
Cash flows used in investing activities		(604,395)		(26,040)
Cash flows provided by (used in) investing activities						Cash flows provided by (used in) investing activities	25,488		(604,395)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings on revolving credit facilities	Borrowings on revolving credit facilities	68,000		—		Borrowings on revolving credit facilities	—		68,000
Repayments of borrowings on revolving credit facilities	Repayments of borrowings on revolving credit facilities	(18,000)		(107,875)		Repayments of borrowings on revolving credit facilities	(50,000)		(18,000)
Proceeds from the issuance of debt	Proceeds from the issuance of debt	1,100,000		—		Proceeds from the issuance of debt	—		1,100,000
Principal repayments on debt	Principal repayments on debt	(580,518)		(640)		Principal repayments on debt	(22,620)		(580,518)
Payment of debt issuance and extinguishment costs	Payment of debt issuance and extinguishment costs	(20,599)		—		Payment of debt issuance and extinguishment costs	—		(20,599)
Dividends paid on common stock	Dividends paid on common stock	(27,789)		(27,886)		Dividends paid on common stock	(27,198)		(27,789)
Proceeds from issuance of common stock	Proceeds from issuance of common stock	51		6,646		Proceeds from issuance of common stock	263		51
Repurchases of common stock	Repurchases of common stock	—		(124,399)		Repurchases of common stock	(60,431)		—
Payroll tax payments for equity award issuances	Payroll tax payments for equity award issuances	(1,215)		(4,166)		Payroll tax payments for equity award issuances	(1,593)		(1,215)
Cash flows provided by (used in) financing activities		519,930		(258,320)
Net increase (decrease) in cash and restricted cash		19,347		(134,479)
Cash flows (used in) provided by financing activities						Cash flows (used in) provided by financing activities	(161,579)		519,930
Net increase in cash and restricted cash						Net increase in cash and restricted cash	45,980		19,347
Cash and restricted cash at beginning of period	Cash and restricted cash at beginning of period	73,568		236,920		Cash and restricted cash at beginning of period	136,040		73,568
Cash and restricted cash at end of period	Cash and restricted cash at end of period	$	92,915	$	102,441	Cash and restricted cash at end of period	$	182,020	$	92,915

See accompanying notes to condensed consolidated financial statements.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.BASIS OF PRESENTATION

Nature of operations — Jack in the Box Inc. (the “Company”), together with its consolidated subsidiaries, develops, operates, and franchises quick-service restaurants under the Jack in the Box® and Del Taco® restaurant brands.

On March 8, 2022, the Company acquired Del Taco Restaurants, Inc. (“Del Taco”) for cash according to the terms and conditions of the Agreement and Plan of Merger, dated as of December 5, 2021. Del Taco is a nationwide operator and franchisor of restaurants featuring fresh and fast Mexican and American inspired cuisines. ~~Refer to Note 3,~~ ~~Business Combination, for further details.~~

As of July ~~10, 2022,~~9, 2023, there were ~~171~~140 company-operated and ~~2,036~~2,051 franchise-operated Jack in the Box restaurants and ~~291~~221 company-operated and ~~303~~373 franchise-operated Del Taco restaurants.

References to the Company throughout these notes to condensed consolidated financial statements are made using the first person notations of “we,” “us” and “our.”

Basis of presentation — The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

~~Certain reclassifications have been made to the prior year presentation to conform to the current year presentation.~~

These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in ~~our~~the Company’s Annual Report on Form 10-K for the fiscal year ended October ~~3, 2021~~2, 2022 (“~~2021~~2022 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our ~~2021~~2022 Form ~~10-K, with the exception of the significant accounting policies below that were adopted or applied upon the acquisition of Del Taco.~~10-K.

In our opinion, all adjustments considered necessary for a fair presentation of financial condition and results of operations for these interim periods have been included. Operating results for one interim period are not necessarily indicative of the results for any other interim period or for the full year.

Fiscal year — The Company’s fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Our Del Taco subsidiary operates on a fiscal year ending the Tuesday closest to September 30. Fiscal years ~~2022~~2023 and ~~2021~~2022 include 52 ~~and 53 weeks, respectively.~~weeks. Our first quarter includes 16 weeks and all other quarters include 12 ~~weeks, with the exception of the fourth quarter of fiscal 2021, which includes 13~~ weeks. All comparisons between ~~2022~~2023 and ~~2021~~2022 refer to the 12 weeks (“quarter”) and 40 weeks ~~(“year-to-date”~~(year-to-date”) ended July ~~10, 2022~~9, 2023 and July ~~4, 2021,~~10, 2022, respectively, unless otherwise indicated.

Use of estimates — In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make certain assumptions and estimates that affect reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies. In making these assumptions and estimates, management may from time to time seek advice and consider information provided by actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates.

Advertising costs — ~~We administer~~The Company administers marketing funds at each of ~~our~~its restaurant brands that include contractual contributions. In ~~2022~~2023 and ~~2021,~~2022, marketing fund contributions from Jack in the Box franchise and company-operated restaurants were approximately 5.0% of ~~sales. In 2022,~~sales, and marketing fund contributions from Del Taco franchise and company-operated restaurants were approximately 4.0% of sales. Year-to-date incremental contributions made by the Company for Jack in the Box brand were less than $0.1 million in 2023. No incremental contributions were made in 2022.

Total contributions made by the Company are included in “Selling, general, and administrative expenses” in the accompanying condensed consolidated statements of earnings and for the quarter and year-to-date totaled $9.0 million and $30.3 million, respectively, in 2023 and $9.8 million and $22.9 million, respectively, in ~~2022 and $4.6 million and $14.8 million, respectively, in 2021.~~2022.

Allowance for credit losses — The Company closely monitors the financial condition of ~~our~~its franchisees and estimates the allowance for credit losses based on the lifetime expected loss on receivables. These estimates are based on historical collection experience with ~~our~~ franchisees as well as other factors, including current market conditions and events. Credit quality is monitored through the timing of payments compared to predefined aging criteria and known facts regarding the financial condition of the franchisee or customer. Account balances are charged off against the allowance after recovery efforts have ceased.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the activity in ~~our~~the allowance for doubtful accounts (in thousands):


		Year-to-date					Year-to-date
		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022
Balance as of beginning of period	Balance as of beginning of period	$	(6,292)	$	(5,541)	Balance as of beginning of period	$	(5,975)	$	(6,292)
Provision for expected credit losses		(4,162)		(502)
Reversal (provision) for expected credit losses						Reversal (provision) for expected credit losses	1,833		(4,162)
Write-offs charged against the allowance	Write-offs charged against the allowance	5,226		19		Write-offs charged against the allowance	41		5,226
Balance as of end of period	Balance as of end of period	$	(5,228)	$	(6,024)	Balance as of end of period	$	(4,101)	$	(5,228)

Business combinations — ~~We account~~The Company accounts for acquisitions using the acquisition method of accounting. Accordingly, assets acquired and liabilities assumed are recorded at their estimated fair values at the acquisition date. The excess of purchase price over fair value of net assets acquired, including the amount assigned to identifiable intangible assets, is recorded as goodwill.

Goodwill and trademarks — Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired, if any. We generally record goodwill in connection with the acquisition of restaurants from franchisees or the acquisition of another business. Likewise, upon the sale of restaurants to franchisees, goodwill is decremented. The amount of goodwill written-off is determined as the fair value of the business disposed of as a percentage of the fair value of the reporting unit prior to the disposal. If the business disposed of was never fully integrated into the reporting unit after its acquisition, and thus the benefits of the acquired goodwill were never realized, the current carrying amount of the acquired goodwill is written off.

Goodwill is not amortized and has been assigned to reporting units for purposes of impairment testing. The Company’s two restaurant brands, Jack in the Box and Del Taco, are both operating segments and reporting units. Goodwill is evaluated for impairment by determining whether the fair value of our reporting units exceed their carrying values.

The Company tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events and circumstances warrant. Historically, this testing has been performed as of at the end of the fourth quarter of each fiscal year; however, the Company determined that the testing date should be moved up to be performed during the third quarter of each fiscal year. The Company does not consider this change to be material and believes the timing of assessment is preferable as it better aligns with its planning and forecasting process and also provides additional time to complete the annual assessment in advance of quarterly reporting deadlines. The change in assessment date did not delay, accelerate, or cause avoidance of a potential impairment charge.

Our impairment analyses first include a qualitative assessment to determine whether events or circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value. Significant factors considered in this assessment include, but are not limited to, macro-economic conditions, market and industry conditions, cost considerations, the competitive environment, share price fluctuations, overall financial performance, and results of past impairment tests. If the qualitative factors indicate that it is more likely than not that the fair value is less than the carrying value, we perform a quantitative impairment test.

In performing a quantitative test for impairment of goodwill, we primarily use the income approach method of valuation that includes the discounted cash flow method and the market approach that includes the guideline public company method to determine the fair value of the reporting unit. Significant assumptions made by management to estimate fair value under the discounted cash flow method include future cash flow assumptions, which may differ from actual cash flows due to, among other things, economic conditions, or changes in operating performance. The discount rate is our estimate of the required rate of return that a third-party buyer would expect to receive when purchasing a business from us that constitutes a reporting unit. We believe the discount rate is commensurate with the risk and uncertainty inherent in the forecasted cash flows. Significant assumptions used to determine fair value under the guideline public company method include the selection of guideline companies and the valuation multiples applied.

In the process of a quantitative test, if necessary, of the Del Taco trademark intangible asset, we primarily use the relief from royalty method under the income approach method of valuation. Significant assumptions used to determine fair value under the relief from royalty method include future trends in sales, a royalty rate, an estimated income tax rate, and a discount rate to be applied to the forecast revenue stream.

During the third quarter of 2023, we performed a qualitative test for the fair value of the Jack in the Box reporting unit, noting that the fair value was substantially in excess of its respective carrying value. We performed quantitative tests over the Del Taco reporting unit using the approaches described above. The fair value of the Del Taco reporting unit and of the Del Taco indefinite-lived trademarks were in excess of their carrying values by approximately 9% and 13%, respectively, as of the testing date.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recent accounting pronouncements — ~~In October 2021 the Financial Accounting Standards Board (“FASB”) issued ASU 2021-08, “Business Combinations - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).~~” This standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under Accounting Standards Codification (“ASC”) Topic 606 in order to align the recognition of a contract liability with the definition of a performance obligation. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. We elected to early adopt this standard in the second quarter of 2022. The adoption of ASU 2021-08 did not have a material impact on our condensed consolidated financial statements.

The Company reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on ~~our~~its condensed consolidated financial statements.

2.REVENUE

Nature of products and services — ~~We derive~~The Company derives revenue from retail sales at Jack in the Box and Del Taco company-operated restaurants and rental revenue, royalties, advertising, and franchise and other fees from franchise-operated restaurants.

Our franchise arrangements generally provide for an initial franchise fee per restaurant for a 20-year term, and generally require that franchisees pay royalty and marketing fees based upon a percentage of gross sales. The agreements also require franchisees to pay technology fees, as well as sourcing fees for Jack in the Box franchise agreements.

Disaggregation of revenue — The following table disaggregates revenue by segment and primary source for the ~~period~~quarter ended July ~~10, 2022~~9, 2023 (in thousands):

Quarter Year-to-date
Jack in the Box Del Taco Total Jack in the Box Del Taco Total
Company restaurant sales $ 100,899 $ 114,332 $ 215,231 $ 315,205 $ 171,391 $ 486,596
Franchise rental revenues 78,278 1,790 80,068 257,069 2,654 259,723
Franchise royalties 44,291 5,361 49,652 144,872 8,006 152,878
Marketing fees 42,620 4,359 46,979 139,811 6,517 146,328
Technology and sourcing fees 3,548 420 3,968 12,123 625 12,748
Franchise fees and other services 2,340 67 2,407 6,944 93 7,037
Total revenue $ 271,976 $ 126,329 $ 398,305 $ 876,024 $ 189,286 $ 1,065,310

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~


	Quarter						Year-to-date
	Jack in the Box		Del Taco		Total		Jack in the Box		Del Taco		Total
Company restaurant sales	$	96,820	$	101,696	$	198,516	$	318,451	$	352,860	$	671,311
Franchise rental revenues	83,271		2,977		86,248		270,277		8,321		278,598
Franchise royalties	47,373		6,130		53,503		161,343		18,721		180,064
Marketing fees	47,323		5,004		52,327		154,153		15,268		169,421
Technology and sourcing fees	4,037		844		4,881		12,881		2,230		15,111
Franchise fees and other services	1,387		80		1,467		4,855		422		5,277
Total revenue	$	280,211	$	116,731	$	396,942	$	921,960	$	397,822	$	1,319,782

The following table disaggregates revenue by segment and primary source for the ~~period~~quarter ended July ~~4, 2021~~10, 2022 (in thousands):


		Quarter						Year-to-date							Quarter						Year-to-date
		Jack in the Box		Del Taco		Total		Jack in the Box		Del Taco		Total			Jack in the Box		Del Taco		Total		Jack in the Box		Del Taco		Total
Company restaurant sales	Company restaurant sales	$	91,892	$	—	$	91,892	$	292,132	$	—	$	292,132	Company restaurant sales	$	100,899	$	114,332	$	215,231	$	315,205	$	171,391	$	486,596
Franchise rental revenues	Franchise rental revenues	80,598		—		80,598		262,248		—		262,248		Franchise rental revenues	78,278		1,790		80,068		257,069		2,654		259,723
Franchise royalties	Franchise royalties	45,950		—		45,950		146,913		—		146,913		Franchise royalties	44,291		5,361		49,652		144,872		8,006		152,878
Marketing fees	Marketing fees	44,305		—		44,305		142,398		—		142,398		Marketing fees	42,620		4,359		46,979		139,811		6,517		146,328
Technology and sourcing fees	Technology and sourcing fees	4,081		—		4,081		12,977		—		12,977		Technology and sourcing fees	3,548		420		3,968		12,123		625		12,748
Franchise fees and other services	Franchise fees and other services	2,632		—		2,632		8,548		—		8,548		Franchise fees and other services	2,340		67		2,407		6,944		93		7,037
Total revenue	Total revenue	$	269,458	$	—	$	269,458	$	865,216	$	—	$	865,216	Total revenue	$	271,976	$	126,329	$	398,305	$	876,024	$	189,286	$	1,065,310

In October 2022, a Jack in the Box franchise operator paid the Company $7.3 million in order to sell his restaurants to a new franchisee at the current standard royalty rate, which is lower than the royalty rate in the existing franchise agreements. The payment represented the difference between the existing royalty rate and the new royalty rate based on projected future sales for the remaining term of the existing agreements. The payment is non-refundable and not subject to any adjustments based on actual future sales. The Company determined the transaction represented the termination of the existing agreement rather than the transfer of an agreement between franchisees. As such, the $7.3 million was recognized in franchise royalty revenue during the first quarter of 2023.

Contract liabilities — ~~Our contract~~Contract liabilities consist of deferred revenue resulting from initial franchise and development fees received from franchisees for new restaurant openings or new franchise terms, which are recognized over the franchise term. ~~We classify~~The Company classifies these contract liabilities as “Accrued liabilities” and “Other long-term liabilities” in our condensed consolidated balance sheets.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

A summary of significant changes in ~~our~~ contract liabilities is presented below (in thousands):


		Year-to-date			Year-to-date
			July 10, 2022			July 4, 2021			July 9, 2023		July 10, 2022
Deferred franchise and development fees at beginning of period	Deferred franchise and development fees at beginning of period		$	41,520		$	43,541	Deferred franchise and development fees at beginning of period	$	46,449	$	41,520
Changes due to business combinations	Changes due to business combinations		6,193			—		Changes due to business combinations	—		6,193
Revenue recognized	Revenue recognized		(4,238)			(4,415)		Revenue recognized	(4,140)		(4,238)
Additions	Additions		3,023			1,718		Additions	6,665		3,023
Deferred franchise and development fees at end of period	Deferred franchise and development fees at end of period		$	46,498		$	40,844	Deferred franchise and development fees at end of period	$	48,974	$	46,498

As of July ~~10, 2022,~~9, 2023, approximately ~~$5.2~~$7.4 million of development fees related to unopened ~~stores~~restaurants are included in deferred revenue. Timing of revenue recognition for development fees related to unopened restaurants is dependent upon the timing of ~~store~~restaurant openings and are recognized over the franchise term at the date of opening.

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied as of July ~~10, 2022~~9, 2023 (in thousands):


Remainder of 2022		$	1,202
2023		5,003
Remainder of 2023				Remainder of 2023	$	1,206
2024	2024	4,792		2024	5,074
2025	2025	4,555		2025	4,840
2026	2026	4,228		2026	4,513
2027				2027	4,158
Thereafter	Thereafter	21,553		Thereafter	21,775
		$	41,333		$	41,566

~~We have~~The Company has applied the optional exemption, as provided for under ASC Topic 606, Revenue from Contracts with Customers, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

3.BUSINESS COMBINATION

On March 8, 2022, ~~(the “Closing Date”),~~ the Company acquired 100% of the outstanding equity interest of Del Taco ~~Restaurants, Inc. (“Del Taco”)~~ for cash according to the terms and conditions of the Agreement and Plan of Merger, dated as of December 5, ~~2021 (the “Merger Agreement”). Del Taco is a nationwide operator and franchisor of restaurants featuring fresh and fast Mexican and American inspired cuisines.~~2021. Jack in the Box acquired Del Taco as a part of the Company’s goal to gain greater scale and accelerate growth.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~In connection with the transaction, the Company repaid Del Taco's existing debt of $115.2 million related to a syndicated credit facility and Del Taco entered into a new syndicated credit facility.~~

The total purchase consideration for Del Taco was $593.3 million. Each share of Del Taco common stock issued and outstanding was converted into the right to receive $12.51 in cash without interest, less any applicable withholding taxes (“Merger Consideration”). Additionally, in connection with the transaction, each Del Taco equity award granted under Del Taco’s equity compensation plans was either (i) converted into the right to receive Merger Consideration or (ii) converted into equity awards with respect to Jack in the Box common stock. Other components of purchase consideration include cash paid to settle Del Taco’s existing debt and $7.1 million of seller transaction costs funded by Jack in the Box.

As part of the Merger Agreement, on the Closing Date, the Company assumed Del Taco’s historical equity compensation plans. The awards under Del Taco’s historical equity compensation plans that were not subject to accelerated vesting were exchanged for replacement awards of the Company, which included Del Taco’s non-accelerating restricted stock awards (“non-accelerating RSAs”). Immediately following the Merger, these replacement awards were modified to accelerate the remaining vesting period to be one year following the Closing Date, other than the awards already scheduled to vest on June 30, 2022. The portion of the fair value of the replacement awards associated with pre-acquisition service of Del Taco’s employees represented a component of the total purchase consideration. The remaining fair value of these replacement awards are subject Refer to the ~~recipients’ continued service and thus were excluded from~~Company’s Annual Report on Form 10-K for the ~~purchase price. The awards which are subject to continued service will be recognized ratably as stock-based compensation expense over the requisite service period.~~

~~The acquisition of Del Taco was funded by cash on hand and borrowings under our~~fiscal year ended October 2, 2022 Class A-2 Notes and 2022 Variable Funding Notes. The Company recognized transaction costs of $1.2 million and $12.4 million in the quarter and year-to-date of 2022, respectively. These costs were associated with advisory, legal, and consulting services and are presented in “Other operating expenses, net” in the condensed consolidated statement of earnings.

~~The acquisition of Del Taco has been accounted~~ for ~~using~~further discussion regarding the acquisition, ~~method of accounting in accordance with ASC 805,~~ ~~Business Combinations, with the Company treated as the accounting acquirer, which requires, among other things, that the assets acquired, and liabilities assumed be recognized at their acquisition date fair value.~~

~~Purchase consideration— The following summarizes~~including the purchase consideration, ~~paid to Del Taco shareholders~~ ~~(in thousands, except per share data)~~:


	~~Amount~~
~~Del Taco shares outstanding as of March 8, 2022~~	~~36,442~~
~~Del Taco RSAs subject to accelerated vesting~~	~~805~~
~~Del Taco RSUs subject to accelerated vesting~~	70
~~Del Taco options subject to accelerated vesting~~	~~292~~
~~Total Del Taco shares outstanding~~	~~37,610~~
~~Merger Consideration (per Del Taco share)~~	$	~~12.51~~
~~Total cash consideration paid to selling shareholders~~	$	~~470,500~~
~~Del Taco transaction costs paid by Jack in the Box (1)~~	~~7,141~~
~~Del Taco closing indebtedness settled by Jack in the Box (2)~~	~~115,219~~
~~Replacement share-based payment awards pre-combination vesting expense~~	~~449~~
~~Preliminary aggregate purchase consideration~~	$	~~593,309~~

~~____________________________~~

~~(1)Represents the portion of Del Taco merger-related transaction costs that were paid at the Closing Date by the Company.~~

~~(2)Represents the closing indebtedness of Del Taco’s existing debt that was paid at the Closing Date by the Company.~~

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~Purchase price allocation— The preliminary allocation of the purchase consideration to tangible and intangible assets acquired and liabilities assumed is based on the estimated fair values and is as follows~~ ~~(in thousands)~~:

Initial Allocation of Consideration Measurement Period Adjustments (1) July 10,
2022
Total preliminary aggregate purchase consideration, net of $12,068 cash acquired $ 581,241 $ — $ 581,241
Assets:
Accounts and other receivables 3,809 — 3,809
Inventories 3,233 — 3,233
Prepaid expenses 2,950 — 2,950
Other current assets 105 — 105
Property and equipment 150,826 (5,341) 145,485
Operating lease right-of-use assets 349,489 — 349,489
Intangible assets 12,371 — 12,371
Trademarks 283,500 — 283,500
Other assets 5,128 — 5,128
Liabilities:
Current maturities of long-term debt 22 — 22
Current operating lease liabilities 21,991 — 21,991
Accounts payable 18,808 — 18,808
Accrued liabilities 66,739 45,076 111,815
Long-term debt, net of current maturities 349 — 349
Long-term operating lease liabilities, net of current portion 302,688 — 302,688
Deferred tax liabilities 88,203 (12,668) 75,535
Other long-term liabilities 13,080 — 13,080
Net assets acquired, excluding goodwill $ 299,531 $ (37,749) $ 261,782
Goodwill $ 281,710 $ 37,749 $ 319,459

~~____________________________~~

~~(1)~~The Company recorded measurement period adjustments in the third quarter of fiscal 2022 attributable to the Company’s review of inputs and assumptions utilized in valuation models, in addition to new information obtained during the quarter surrounding the settlement of a litigation matter which existed at the date of acquisition. Refer to Note 15, ~~Commitments and Contingencies, for further details regarding the litigation matter.~~

The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions regarding certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, loss contingencies, and goodwill are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities is recorded as goodwill. The goodwill of $319.5 million arising from the acquisition is primarily attributable to the market position and future growth potential of Del Taco for both company-operated and franchised restaurants related to future store openings, expansion into new markets, and expected synergies. None of the goodwill resulting from the acquisition is deductible for tax purposes. We have not yet allocated goodwill related to the Del Taco acquisition to reporting units for goodwill impairment testing purposes. Goodwill will be allocated to reporting units when the purchase price allocation, ~~is finalized during the measurement period.~~

~~Identifiable intangible assets~~—~~The~~goodwill and identifiable intangible assets acquired consist of trademarks, franchise and development agreements, and favorable subleases. The Company amortizes the fair value of the franchise and development agreements and favorable and unfavorable sublease assets and liabilities on a straight-line basis over their respective useful lives.

The trademarks were valued using the relief from royalty method of the income approach, which was applied by discounting the after-tax royalties avoided by owning the trade name to present value. The key inputs and assumptions included the Company's estimates of the projected system wide sales, royalty rate and discount rate applicable to the trade name.

The franchise and development agreements were valued using the income approach, which was applied by discounting the projected after-tax cash flows associated with the agreements to present value. The key inputs and assumptions included the

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~Company's estimates of the projected royalties received under the existing franchise and development agreements (including the impact of franchise churn) and the applicable discount rate.~~

The favorable and unfavorable sublease assets and liabilities were valued using the income approach, which was applied by discounting the differential between the market rent and contract rent to present value. The key inputs and assumptions included the Company's estimates of the market rent, contract rent and discount rate applicable to the favorable and unfavorable subleases.

~~The preliminary values allocated to intangible assets and the useful lives are as follows~~ ~~(in thousands)~~:

Amount Useful life (Years)
Trademarks $ 283,500 Indefinite
Franchise contracts 9,700 18
Sublease assets 2,671 13
Estimated fair value of acquired intangible assets $ 295,871

~~Taxes~~ —The preliminary allocation of the purchase price is based on preliminary valuations performed to determine the fair value of the net assets as of the Closing Date. The Company has conducted a preliminary assessment of the valuations, and has recognized provisional deferred income tax amounts in its preliminary allocation for the identified assets and liabilities. However, the Company is continuing its procedures to identify information pertaining to these matters during the measurement period. If new information is obtained about facts and circumstances that existed at the Closing Date, the Company will either adjust its measurement of provisional deferred income tax amounts or recognize and measure assets and liabilities not previously identified.assets.

Unaudited pro forma results — The following unaudited pro forma combined financial information presents the Company’s results as though Del Taco and the Company had been combined as of the beginning of fiscal year 2021 (in thousands):

Quarter Year-to-date
July 4,
2021 July 10,
2022 July 4,
2021
Total revenue $ 393,521 $ 1,283,387 $ 1,263,299
Net earnings $ 42,491 $ 74,711 $ 102,305


	Year-to-date
	July 10, 2022
Total revenue	$	1,283,387
Net earnings	$	74,711

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The unaudited pro forma financial information for ~~all periods~~the period presented includes the business combination accounting effects resulting from ~~this~~the acquisition, mainly including adjustments to reflect additional amortization expense from acquired intangibles, incremental depreciation expense from the fair value property and equipment, elimination of historical interest expense associated with both Del Taco’s and the Company’s historical indebtedness, additional interest expense associated with the new Del Taco revolving credit facility and the Company’s new borrowings as part of the refinancing to fund the acquisition, adjusted rent expense reflecting the acquired right-of-use assets and liabilities to their estimated acquisition-date values based upon ~~preliminary~~ valuation of related lease intangibles and remaining payments, as well as the fair value adjustments made to leasehold improvements, certain material non-recurring adjustments and the tax-related effects as though Del Taco was combined as of the beginning of fiscal 2021. The unaudited pro forma financial information as presented ~~below~~above is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2021, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.

For the periods subsequent to the acquisition that are included in the ~~quarter and~~ year-to-date ofperiod in 2022, Del Taco had total revenues of $189.3 million and net earnings of $5.2 million.

4.SUMMARY OF REFRANCHISINGS AND FRANCHISE ACQUISITIONS

Refranchisings — ~~In 2022 and 2021, no company-operated~~The following table summarizes the number of restaurants ~~were~~ sold to ~~franchisees.~~ franchisees and gains recognized (dollars in thousands):


	Quarter				Year-to-date
	July 9, 2023		July 10, 2022 (1)		July 9, 2023		July 10, 2022 (1)
Restaurants sold to Jack in the Box franchisees	—		—		5		—
Restaurants sold to Del Taco franchisees	50		—		66		—

Proceeds from the sale of company-operated restaurants	$	33,428	$	802	$	51,845	$	1,402
Broker commissions	(1,014)		—		(1,014)		—
Net assets sold (primarily property and equipment)	(6,705)		—		(10,798)		—
Goodwill related to the sale of company-operated restaurants	(14,194)		—		(21,503)		—
Franchise fees	(1,385)		—		(1,962)		—
Sublease liabilities, net	(3,580)		—		(4,777)		—
Lease termination	—		—		(393)		—
Other (2)	(756)		—		(1,075)		258
Gains on the sale of company-operated restaurants	$	5,794	$	802	$	10,323	$	1,660

____________________________

(1)Amounts ~~included~~ in ~~“Gains on~~periods presented for 2022 primarily relate to additional proceeds received in connection with the ~~sale~~extension of ~~company-operated restaurants” in both periods related to resolutions of certain contingencies~~franchise and lease agreements from the sale of ~~Jack in the Box~~ restaurants in prior years.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

(2)The quarter and year-to-date amounts include $0.3 million relating to impairment on two restaurants that will be refranchised in the fourth quarter of 2023.

Franchise acquisitions — In 2023, the Company did not acquire any franchise restaurants. In 2022, wethe Company acquired ~~13 Jack in the Box restaurants in two markets, and during 2021 we acquired 4~~thirteen Jack in the Box franchise restaurants in ~~one market.~~two markets. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3). These acquisitions were not material to our condensed consolidated financial ~~statements in either year.~~statements.

Assets held for sale — Assets classified as held for sale on our condensed consolidated balance sheets as of July ~~10, 2022~~9, 2023 and October ~~3, 2021, primarily~~2, 2022 have carrying amounts of $10.0 million and $17.0 million, respectively. These amounts relate to ~~closed~~i) company-owned restaurants to be refranchised, ii) operating restaurant properties which we intend to sell to franchisees and/or sell and ~~owned~~leaseback with a third party and iii) closed restaurant properties which we are ~~actively~~ marketing for ~~sale and/or sales and leaseback within the next 12 months with carrying amounts of $7.5 million and $1.7 million, respectively.~~sale.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.GOODWILL AND INTANGIBLE ASSETS, NET

The changes in the carrying amount of goodwill during fiscal ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands):


~~Balance at September 27, 2020~~	$	~~47,161~~
~~Acquisition of Jack in the Box franchise-operated restaurants~~	~~613~~
~~Balance at October 3, 2021~~	~~47,774~~
~~Acquisition of Del Taco Restaurants, Inc.~~	~~319,459~~
~~Acquisition of Jack in the Box franchise-operated restaurants~~	~~274~~
~~Balance at July 10, 2022~~	$	~~367,507~~


	Jack in the Box		Del Taco		Total
Balance at October 2, 2022	$	136,099	$	230,722	$	366,821
Sale of Del Taco company-operated restaurants to franchisees	—		(21,431)		(21,431)
Sale of Jack in the Box company-operated restaurants to franchisees	(72)		—		(72)
Reclassified to assets held for sale	—		(5,929)		(5,929)
Balance at July 9, 2023	$	136,027	$	203,362	$	339,389

The net carrying amounts of intangible assets other than goodwill with definite lives are as follows (in thousands):


		July 10, 2022						October 3, 2021							July 9, 2023						October 2, 2022
		Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount			Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Definite-lived intangible assets:														Definite-lived intangible assets:
Sublease assets	Sublease assets	$	2,671	$	(83)	$	2,588	$	—	$	—	$	—	Sublease assets	$	2,671	$	(325)	$	2,346	$	2,671	$	(139)	$	2,532
Franchise contracts	Franchise contracts	9,700		(187)		9,513		—		—		—		Franchise contracts	9,700		(725)		8,975		9,700		(311)		9,389
Reacquired franchise rights	Reacquired franchise rights	557		(114)		443		542		(72)		470		Reacquired franchise rights	297		(103)		194		530		(127)		403
Total		$	12,928	$	(384)	$	12,544	$	542	$	(72)	$	470
															$	12,668	$	(1,153)	$	11,515	$	12,901	$	(577)	$	12,324
Indefinite-lived intangible assets:														Indefinite-lived intangible assets:
Del Taco trademark														Del Taco trademark	$	283,500	$	—	$	283,500	$	283,500	$	—	$	283,500
															$	283,500	$	—	$	283,500	$	283,500	$	—	$	283,500

The following table summarizes, as of July ~~10, 2022,~~9, 2023, the estimated amortization expense for each of the next five fiscal years (in thousands):


Remainder of 2022		$	198
2023		$	839
Remainder of 2023				Remainder of 2023	$	213
2024	2024	$	836	2024	901
2025	2025	$	836	2025	901
2026	2026	$	835	2026	901
2027				2027	901
Thereafter				Thereafter	7,698
					$	11,515

6.LEASES

Nature of leases —~~We own~~ The Company owns restaurant sites and we also ~~lease~~leases restaurant sites from third parties. Some of these owned or leased sites are leased and/or subleased to franchisees. Initial terms of our real estate leases are generally 20 years, exclusive of options to renew, which are generally exercisable at our sole discretion for 1 to 20 years. In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurants also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs. Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance, and common area maintenance, which are excluded from the measurement of the lease liability.

As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees in connection with refranchising transactions. Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the accompanying condensed consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”

1211

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents rental income (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Operating lease income - franchise	Operating lease income - franchise	$	53,703	$	53,762	$	178,048	$	180,146	Operating lease income - franchise	$	56,052	$	53,703	$	185,285	$	178,048
Variable lease income - franchise	Variable lease income - franchise	26,274		26,836		81,556		82,102		Variable lease income - franchise	29,857		26,274		92,836		81,556
Amortization of favorable and unfavorable lease contracts, net		91		—		119		—
Amortization of favorable and unfavorable sublease contracts, net										Amortization of favorable and unfavorable sublease contracts, net	339		91		477		119
Franchise rental revenues	Franchise rental revenues	$	80,068	$	80,598	$	259,723	$	262,248	Franchise rental revenues	$	86,248	$	80,068	$	278,598	$	259,723

Operating lease income - closed restaurants and other (1)	Operating lease income - closed restaurants and other (1)	$	1,663	$	1,377	$	4,728	$	4,602	Operating lease income - closed restaurants and other (1)	$	1,692	$	1,663	$	5,717	$	4,728

____________________________

(1)Primarily relates to closed restaurant properties included in “Other operating expenses, net” in our condensed consolidated statements of earnings.

~~The following table presents as of July 10, 2022, the annual maturities of our lease liabilities (in thousands~~):

Finance Leases Operating Leases
Fiscal year:
Remainder of 2022 $ 244 $ 55,942
2023 972 227,605
2024 399 191,112
2025 39 185,347
2026 27 168,451
Thereafter 26 874,345
Total future lease payments (1) $ 1,707 $ 1,702,802
Less imputed interest (84) (362,768)
Present value of lease liabilities $ 1,623 $ 1,340,034
Less current portion (929) (173,057)
Long-term lease obligations $ 694 $ 1,166,977

~~____________________________~~

~~(1)Total future lease payments include non-cancellable commitments of $1.7 million for finance leases and $1,468.4 million for operating leases.~~

7.FAIR VALUE MEASUREMENTS

Financial assets and liabilities — The following table presents our financial assets and liabilities measured at fair value on a recurring basis (in thousands):


		Total		Quoted Prices in Active Markets for Identical Assets (2) (Level 1)		Significant Other Observable Inputs (2) (Level 2)		Significant Unobservable Inputs (2) (Level 3)			Total		Quoted Prices in Active Markets for Identical Assets (2) (Level 1)		Significant Other Observable Inputs (2) (Level 2)		Significant Unobservable Inputs (2) (Level 3)
Fair value measurements as of July 10, 2022:
Fair value measurements as of July 9, 2023:										Fair value measurements as of July 9, 2023:
Non-qualified deferred compensation plan (1)	Non-qualified deferred compensation plan (1)	$	14,481	$	14,481	$	—	$	—	Non-qualified deferred compensation plan (1)	$	15,259	$	15,259	$	—	$	—
Total liabilities at fair value	Total liabilities at fair value	$	14,481	$	14,481	$	—	$	—	Total liabilities at fair value	$	15,259	$	15,259	$	—	$	—
Fair value measurements as of October 3, 2021:
Fair value measurements as of October 2, 2022:										Fair value measurements as of October 2, 2022:
Non-qualified deferred compensation plan (1)	Non-qualified deferred compensation plan (1)	$	18,555	$	18,555	$	—	$	—	Non-qualified deferred compensation plan (1)	$	13,820	$	13,820	$	—	$	—
Total liabilities at fair value	Total liabilities at fair value	$	18,555	$	18,555	$	—	$	—	Total liabilities at fair value	$	13,820	$	13,820	$	—	$	—

____________________________

(1)~~We maintain~~The Company maintains an unfunded defined contribution plan for key executives and other members of management. The fair value of this obligation is based on the closing market prices of the participants’ elected investments. The obligation is included in “Accrued liabilities” and “Other long-term liabilities” on our condensed consolidated balance sheets.

(2)WeThe Company did not have any transfers in or out of Level 1, 2 or 3.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

The following table presents the carrying value and estimated fair value of our Class A-2 Notes as of July ~~10, 2022~~9, 2023 and October ~~3, 2021~~2, 2022 (in thousands):


		July 10, 2022				October 3, 2021					July 9, 2023				October 2, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
Series 2019 Class A-2 Notes	Series 2019 Class A-2 Notes	$	715,938	$	667,207	$	1,290,251	$	1,351,057	Series 2019 Class A-2 Notes	$	708,688	$	634,271	$	714,125	$	641,851
Series 2022 Class A-2 Notes	Series 2022 Class A-2 Notes	$	1,094,500	$	959,220	$	—	$	—	Series 2022 Class A-2 Notes	$	1,072,500	$	901,704	$	1,089,000	$	917,428

The fair value of the Class A-2 Notes was estimated using Level 2 inputs based on quoted market prices in markets that are not considered active markets. As of July 10, 2022, we had $50.0 million of outstanding borrowings under our Variable Funding Notes. The fair value of these loans approximates their carrying value due to the variable rate nature of these borrowings.

Non-financial assets and liabilities — ~~Our~~The Company’s non-financial instruments, which primarily consist of property and equipment, operating lease right-of-use assets, goodwill and intangible assets, are reported at carrying value and are not required to be measured at fair value on a recurring basis. However, on an annual basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment. If applicable, the carrying values are written down to fair value.

In connection with our impairment reviews performed during ~~2022, no material fair value adjustments were required.~~

8.~~INDEBTEDNESS~~

~~Our long-term debt obligations consist of the following (in thousands~~):

July 10,
2022 October 3,
2021
Series 2019-1 Class A-2-I Notes $ — $ 570,688
Series 2019-1 Class A-2-II Notes 271,563 272,938
Series 2019-1 Class A-2-III Notes 444,375 446,625
Series 2022-1 Class A-2-I Notes 547,250 —
Series 2022-1 Class A-2-II Notes 547,250 —
Series 2022-1 Class A-2-I Variable Funding Notes 50,000 —
Revolving Credit Facility — —
Finance lease obligations and other debt 1,986 2,275
Total debt 1,862,424 1,292,526
Less current maturities of long-term debt (30,201) (894)
Less unamortized debt issuance costs (26,149) (18,212)
Long-term debt $ 1,806,074 $ 1,273,420

~~Securitization refinancing transaction —~~ ~~On February 11, 2022,~~2023, the Company completed the sale of $550.0 million of its Series 2022-1 3.445% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) and $550.0 million of its Series 2022-1 4.136% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II” and, together with the Class A-2-I Notes, the “2022 Notes”). Interest payments on the 2022 Notes are payable on a quarterly basis. The anticipated repayment dates of the Class A-2-I Notes and the Class A-2-II Notes will be February 2027 and February 2032, respectively (the “Anticipated Repayment Dates”), unless earlier prepaid to the extent permitted under the indenture that will govern the 2022 Notes.

The Company also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Secured Notes (the “Variable Funding Notes”), which permits borrowings up to a maximum of $150.0 million, subject toimpaired certain borrowing conditions, a portion of which may be used to issue letters of credit. The Company’s existing revolving financing facility of Series 2019-1 Class A-1 Notes was terminated in connection with the transaction. As of July 10, 2022, we had outstanding borrowings of $50.0 million and available borrowing capacity of $58.0 million under our 2022 Variable Funding Notes, net of letters of credits issued of $42.0 million.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

The net proceeds of the sale of the 2022 Notes were used to repay in full of $570.7 million in aggregate outstanding principal amount of the Company’s Series 2019-1 Class A-2-I Notes, together with the applicable make-whole premium and unpaid interest, and was used to fund a portion of the Company’s acquisition ofunder-performing Del Taco ~~Restaurants, Inc. As a result,~~restaurants. For further information, see Note 8, Other operating expenses, net, below in the Company recorded a loss on early extinguishment of debt of $5.6 million during the second quarter of 2022, which was comprised of the write-off of certain deferred financing costs and a specified make-whole premium payment, and is presented in “Interest expense, net” innotes to the condensed consolidated statement of earnings. Additionally, in connection with the 2022 Notes, the Company capitalized $17.4 million of debt issuance costs, which are being amortized into interest expense over the Anticipated Repayment Dates, utilizing the effective interest rate method. The costs related to our Variable Funding Notes are presented within “Other assets, net” and are being amortized over the Anticipated Repayment Date of February 2027 using the straight-line method.

The 2022 Notes were issued in a privately placed securitization transaction pursuant to which certain of the Company’s revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly owned indirect subsidiaries of the Company that act as Guarantors of the Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Notes.

The quarterly principal payment on the Class A-2 Notes may be suspended when the specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in the Indenture), is less than or equal to 5.0x. Exceeding the leverage ratio of 5.0x does not violate any covenant related to the Class A-2 Notes. Subsequent to closing the issuance of the 2022 Notes, the Company has had a leverage ratio of greater than 5.0x and, accordingly, the Company resumed making the scheduled amortization payments on its 2022 Notes and Series 2019-1 Notes beginning in the second quarter of 2022.

~~Revolving credit facility —~~ financial statements.In connection with the Del Taco acquisition, Del Taco’s existing debt of $115.2 million related to a Syndicated Credit Facility dated August 5, 2015, was repaid and extinguished on the Closing Date. On the Closing Date, Del Taco entered into a new syndicated credit facility with an aggregate principal amount of up to $75.0 million, maturing on March 7, 2023. The revolving credit facility, as amended, includes a limit of $20.0 million for letters of credit. As of July 10, 2022, we had no outstanding borrowings and available borrowing capacity of $61.9 million under the facility, net of letters of credit of $13.1 million. The Company capitalized $0.3 million of debt issuance costs, which are being amortized into interest expense over the expected term of the credit facility.

~~Bridge commitment letter —~~ In connection with the Merger Agreement, the Company secured commitments for a bridge financing facility in an amount of up to $600.0 million (the “Bridge Facility”). No amounts were drawn under the Bridge Facility, which was terminated as a result of our securitization refinancing transaction. The Company expensed approximately $2.1 million for the unamortized issuance costs associated with this commitment which is presented in “Interest expense, net” in the condensed consolidated statement of earnings.

~~Maturities of long-term debt —~~ Assuming repayment by the Anticipated Repayment Dates and based on the leverage ratio as of July 10, 2022, principal payments on our long-term debt outstanding at July 10, 2022 for each of the next five fiscal years and thereafter are as follows (~~in thousands~~):

Remainder of 2022 $ 8,246
2023 29,891
2024 29,373
2025 29,338
2026 289,204
Thereafter 1,476,372
$ 1,862,424

1512

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9.8.OTHER OPERATING ~~EXPENSE,~~EXPENSES, NET

Other operating expenses, net in the accompanying condensed consolidated statements of earnings is comprised of the following (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Acquisition, integration, and restructuring costs (1)	Acquisition, integration, and restructuring costs (1)	$	2,753	$	—	$	18,864	$	4	Acquisition, integration, and restructuring costs (1)	$	2,463	$	2,753	$	5,359	$	18,864
Costs of closed restaurants and other (2)	Costs of closed restaurants and other (2)	837		622		2,559		2,086		Costs of closed restaurants and other (2)	1,272		837		4,017		2,559
Operating restaurant impairment charges (3)	Operating restaurant impairment charges (3)	1,653		—		1,653		—		Operating restaurant impairment charges (3)	4,395		1,653		4,395		1,653
Accelerated depreciation	Accelerated depreciation	346		123		1,009		1,362		Accelerated depreciation	66		346		519		1,009
(Gains) losses on disposition of property and equipment, net		(1,460)		177		(1,746)		(1,754)
Gains on disposition of property and equipment, net (4)										Gains on disposition of property and equipment, net (4)	(540)		(1,460)		(9,155)		(1,746)
		$	4,129	$	922	$	22,339	$	1,698		$	7,656	$	4,129	$	5,135	$	22,339

____________________________

(1)Acquisition, integration, and restructuring costs ~~include costs incurred by the Company, including integration costs and fees~~are related to ~~advisory, legal, investment banking,~~the acquisition and ~~other professional services, all~~integration of ~~which are directly attributable to the~~ Del ~~Taco acquisition.~~Taco.

(2)Costs of closed restaurants and other primarily include impairment charges as a result of our decision to close restaurants, ongoing costs associated with closed restaurants, and canceled project costs.

(3)In ~~2022,~~2023, restaurant impairment charges ~~included $1.7 million~~ related to the impairment of ~~five~~under-performing Del Taco restaurants currently held for use, whereas in 2022, the charges related to the impairment of under-performing Jack in the Box company-operated restaurants ~~which are~~ currently held for use.

(4)The 2023 year-to-date gains on disposition of property and equipment primarily relate to the sale of Jack in the Box restaurant properties to franchisees who were leasing the properties from us prior to the sale.

~~10.~~9.SEGMENT REPORTING

~~Our~~The Company’s principal business consists of developing, operating and franchising our Jack in the Box and Del Taco restaurant brands, each of which ~~we consider~~is considered a reportable operating segment. This segment reporting structure reflects our current management structure, internal reporting method and financial information used in deciding how to allocate our resources. Based upon certain quantitative thresholds, each operating segment is considered a reportable segment.

~~We measure~~The Company measures and ~~evaluate~~evaluates our segments based on segment revenues and segment profit. Our measure of segment profit excludes depreciation and amortization, share-based compensation, company-owned life insurance (“COLI”) gains/losses, net of changes in our non-qualified deferred compensation obligation supported by these policies, acquisition, integration, and restructuring ~~expenses,~~costs, gains on the sale of company-operated restaurants, and amortization of favorable and unfavorable leases and subleases, net.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table provides information related to our operating segments in each period (in thousands):

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~


	Quarter				Year-to-date
	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Revenues by segment:
Jack in the Box	$	280,211	$	271,976	$	921,960	$	876,024
Del Taco	116,731		126,329		397,822		189,286
Consolidated revenues	$	396,942	$	398,305	$	1,319,782	$	1,065,310
Segment operating profit:
Jack in the Box	$	72,067	$	64,951	$	246,779	$	216,935
Del Taco	4,167		12,209		25,131		18,265
Total segment operating profit	$	76,234	$	77,160	$	271,910	$	235,200
Depreciation and amortization	14,460		16,713		48,460		40,754
Acquisition, integration, and restructuring costs	2,463		2,753		5,359		18,864
Share-based compensation	2,059		1,607		7,991		5,541
Net COLI (gains) losses	(579)		4,585		(7,147)		7,165
Gains on the sale of company-operated restaurants	(5,794)		(802)		(10,323)		(1,660)
Amortization of favorable and unfavorable leases and subleases, net	83		437		1,458		685
Earnings from operations	$	63,542	$	51,867	$	226,112	$	163,851
Total capital expenditures by segment:
Jack in the Box	$	24,588	$	7,603	$	39,844	$	24,933
Del Taco	8,053		5,965		16,825		9,416
Total capital expenditures	$	32,641	$	13,568	$	56,669	$	34,349
Total depreciation and amortization by segment:
Jack in the Box	$	8,319	$	9,202	$	27,631	$	31,038
Del Taco	6,141		7,511		20,829		9,716
Total depreciation and amortization	$	14,460	$	16,713	$	48,460	$	40,754

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Quarter Year-to-date
July 10,
2022 July 4,
2021 July 10,
2022 July 4,
2021
Revenues by segment:
Jack in the Box $ 271,976 $ 269,458 $ 876,024 $ 865,216
Del Taco 126,329 — 189,286 —
Consolidated revenues $ 398,305 $ 269,458 $ 1,065,310 $ 865,216
Segment operating profit:
Jack in the Box $ 64,951 $ 75,397 $ 216,935 $ 248,163
Del Taco 12,209 — 18,265 —
Total segment operating profit $ 77,160 $ 75,397 $ 235,200 $ 248,163
Depreciation and amortization 16,713 10,389 40,754 35,656
Acquisition, integration, and restructuring costs 2,753 — 18,864 4
Share-based compensation 1,607 502 5,541 3,338
Net COLI losses (gains) 4,585 (2,611) 7,165 (8,951)
Gains on the sale of company-operated restaurants (802) (264) (1,660) (3,079)
Amortization of favorable and unfavorable leases and subleases, net 437 — 685 —
Earnings from operations $ 51,867 $ 67,381 $ 163,851 $ 221,195
Total capital expenditures by segment:
Jack in the Box $ 7,603 $ 12,229 $ 24,933 $ 35,157
Del Taco 5,965 — 9,416 —
Total capital expenditures $ 13,568 $ 12,229 $ 34,349 $ 35,157
Total depreciation and amortization by segment:
Jack in the Box $ 9,202 $ 10,389 $ 31,038 $ 35,656
Del Taco 7,511 — 9,716 —
Total depreciation and amortization $ 16,713 $ 10,389 $ 40,754 $ 35,656

~~We do~~The Company does not evaluate, manage or measure performance of segments using asset, interest income and expense, or income tax information; accordingly, this information by segment is not prepared or disclosed.

~~11.~~10.INCOME TAXES

The income tax provisions reflect effective tax ~~rates~~rate of 32.6% in the third quarter of 2023 as compared to 28.8% in the third quarter ~~and 28.1%~~of 2022, as well as 30.4% for the year-to-date period in 2023, compared with ~~23.1% and 25.1%, respectively,~~28.1% in the same period in fiscal year ~~2021.~~2022. The major components of the year-over-year increase in tax rates were ~~non-deductibles losses~~the annual impact of both actual and estimated disposals of non-deductible goodwill attributable to refranchising transactions, partially offset by non-taxable gains in the current year ~~versus non-taxable gains~~as opposed to non-deductible losses in the prior year from the market performance of insurance products used to fund certain non-qualified retirement plans ~~a decrease in the impact of excess tax benefit on share-based compensation,~~ and ~~an increase in~~ non-deductible transaction costs resulting from the Del Taco acquisition ~~partially offset by an adjustment related to state taxes~~ recorded in the ~~second quarter of fiscal year 2021.~~prior year.

~~12.~~11.RETIREMENT PLANS

Defined benefit pension plans — ~~We sponsor 2~~The Company sponsors two defined benefit pension plans, a frozen “Qualified Plan” covering substantially all full-time employees hired prior to January 1, 2011, and an unfunded supplemental executive retirement plan (“SERP”) which provides certain employees additional pension benefits and was closed to new participants effective January 1, 2007. Benefits under both plans are based on the employee’s years of service and compensation over defined periods of employment.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Post-retirement healthcare plans — WeThe Company also ~~sponsor 2~~sponsors two healthcare plans, closed to new participants, that provide post-retirement medical benefits to certain employees who have met minimum age and service requirements. The plans are contributory, with retiree contributions adjusted annually, and they contain other cost-sharing features such as deductibles and coinsurance.

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Net periodic benefit cost (credit) — The components of net periodic benefit cost in each period were as follows (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Defined benefit pension plans:	Defined benefit pension plans:									Defined benefit pension plans:
Interest cost	Interest cost	$	3,388	$	3,398	$	11,292	$	11,328	Interest cost	$	4,434	$	3,388	$	14,782	$	11,292
Expected return on plan assets	Expected return on plan assets	(4,179)		(4,463)		(13,926)		(14,877)		Expected return on plan assets	(3,486)		(4,179)		(11,619)		(13,926)
Actuarial losses (1)	Actuarial losses (1)	890		1,212		2,968		4,041		Actuarial losses (1)	708		890		2,359		2,968
Amortization of unrecognized prior service costs (1)	Amortization of unrecognized prior service costs (1)	5		5		15		15		Amortization of unrecognized prior service costs (1)	5		5		15		15
Net periodic benefit cost	Net periodic benefit cost	$	104	$	152	$	349	$	507	Net periodic benefit cost	$	1,661	$	104	$	5,537	$	349
Post-retirement healthcare plans:	Post-retirement healthcare plans:									Post-retirement healthcare plans:
Interest cost	Interest cost	$	113	$	130	$	376	$	433	Interest cost	$	162	$	113	$	539	$	376
Actuarial gains (1)	Actuarial gains (1)	(147)		(78)		(492)		(262)		Actuarial gains (1)	(215)		(147)		(717)		(492)
Net periodic benefit cost		$	(34)	$	52	$	(116)	$	171
Net periodic benefit credit										Net periodic benefit credit	$	(53)	$	(34)	$	(178)	$	(116)

____________________________

(1)Amounts were reclassified from accumulated other comprehensive income into net earnings as a component of “Other pension and post-retirement expenses, net.”

Future cash flows — ~~Our~~The Company’s policy is to fund our plans at or above the minimum required by law. As of January 1, ~~2021,~~2022, the date of our last actuarial funding valuation, there was no minimum contribution funding requirement for the Qualified Plan. Details regarding ~~2022~~2023 contributions are as follows (in thousands):


		SERP		Post-Retirement Healthcare Plans			SERP		Post-Retirement Healthcare Plans
Net year-to-date contributions	Net year-to-date contributions	$	4,366	$	743	Net year-to-date contributions	$	3,930	$	744
Remaining estimated net contributions during fiscal 2022		$	850	$	389
Remaining estimated net contributions during fiscal 2023						Remaining estimated net contributions during fiscal 2023	$	1,283	$	368

~~We continue~~The Company continues to evaluate contributions to our Qualified Plan based on changes in pension assets as a result of asset performance in the current market and the economic environment. ~~We do~~The Company does not anticipate making any contributions to our Qualified Plan in fiscal ~~2022.~~2023.

1815

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~13.~~12.STOCKHOLDERS’ DEFICIT

Summary of changes in stockholders’ deficit — A reconciliation of the beginning and ending amounts of stockholders’ deficit is presented below (in thousands):


		Number of Shares	Amount		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total			Number of Shares	Amount		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balance at October 3, 2021		82,536	$	825	$	500,441	$	1,764,412	$	(74,254)	$	(3,009,306)	$	(817,882)
Balance at October 2, 2022															Balance at October 2, 2022	82,581	$	826	$	508,323	$	1,842,947	$	(53,982)	$	(3,034,306)	$	(736,192)
Shares issued under stock plans, including tax benefit	Shares issued under stock plans, including tax benefit	28	1		48		—		—		—		49		Shares issued under stock plans, including tax benefit	36	—		—		—		—		—		—
Share-based compensation	Share-based compensation	—	—		1,018		—		—		—		1,018		Share-based compensation	—	—		3,534		—		—		—		3,534
Dividends declared	Dividends declared	—	—		63		(9,320)		—		—		(9,257)		Dividends declared	—	—		67		(9,221)		—		—		(9,154)
Purchases of treasury stock															Purchases of treasury stock	—	—		—		—		—		(14,999)		(14,999)
Net earnings	Net earnings	—	—		—		39,270		—		—		39,270		Net earnings	—	—		—		53,254		—		—		53,254
Other comprehensive income	Other comprehensive income	—	—		—		—		738		—		738		Other comprehensive income	—	—		—		—		489		—		489
Balance at January 23, 2022		82,564	$	826	$	501,570	$	1,794,362	$	(73,516)	$	(3,009,306)	$	(786,064)
Balance at January 22, 2023															Balance at January 22, 2023	82,617	$	826	$	511,924	$	1,886,980	$	(53,493)	$	(3,049,305)	$	(703,068)
Shares issued under stock plans, including tax benefit	Shares issued under stock plans, including tax benefit	5	—		2		—		—		—		2		Shares issued under stock plans, including tax benefit	12	—		—		—		—		—		—
Share-based compensation	Share-based compensation	—	—		2,916		—		—		—		2,916		Share-based compensation	—	—		2,398		—		—		—		2,398
Dividends declared	Dividends declared	—	—		65		(9,334)		—		—		(9,269)		Dividends declared	—	—		73		(9,139)		—		—		(9,066)
Fair value of assumed Del Taco RSAs attributable to pre-combination service		—	—		449		—		—		—		449
Purchases of treasury stock															Purchases of treasury stock	—	—		—		—		—		(18,580)		(18,580)
Net earnings	Net earnings	—	—		—		7,796		—		—		7,796		Net earnings	—	—		—		26,507		—		—		26,507
Other comprehensive income	Other comprehensive income	—	—		—		—		553		—		553		Other comprehensive income	—	—		—		—		366		—		366
Balance at April 17, 2022		82,569	$	826	$	505,002	$	1,792,824	$	(72,963)	$	(3,009,306)	$	(783,617)
Balance at April 16, 2023															Balance at April 16, 2023	82,629	$	826	$	514,395	$	1,904,348	$	(53,127)	$	(3,067,885)	$	(701,443)
Shares issued under stock plans, including tax benefit	Shares issued under stock plans, including tax benefit	11	—		—		—		—		—		—		Shares issued under stock plans, including tax benefit	17	—		263		—		—		—		263
Share-based compensation	Share-based compensation	—	—		1,607		—		—		—		1,607		Share-based compensation	—	—		2,059		—		—		—		2,059
Dividends declared	Dividends declared	—	—		65		(9,329)		—		—		(9,264)		Dividends declared	—	—		72		(9,050)		—		—		(8,978)
Purchases of treasury stock															Purchases of treasury stock	—	—		—		—		—		(26,852)		(26,852)
Net earnings	Net earnings	—	—		—		22,857		—		—		22,857		Net earnings	—	—		—		29,168		—		—		29,168
Other comprehensive income	Other comprehensive income	—	—		—		—		553		—		553		Other comprehensive income	—	—		—		—		366		—		366
Balance at July 10, 2022		82,580	$	826	$	506,674	$	1,806,352	$	(72,410)	$	(3,009,306)	$	(767,864)
Balance at July 9, 2023															Balance at July 9, 2023	82,646	$	826	$	516,789	$	1,924,466	$	(52,761)	$	(3,094,737)	$	(705,417)

1916

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


		Number of Shares	Amount		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total			Number of Shares	Amount		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balance at September 27, 2020		82,370	$	824	$	489,515	$	1,636,211	$	(110,605)	$	(2,809,306)	$	(793,361)
Balance at October 3, 2021															Balance at October 3, 2021	82,536	$	825	$	500,441	$	1,764,412	$	(74,254)	$	(3,009,306)	$	(817,882)
Shares issued under stock plans, including tax benefit	Shares issued under stock plans, including tax benefit	24	—		114		—		—		—		114		Shares issued under stock plans, including tax benefit	28	1		48		—		—		—		49
Share-based compensation	Share-based compensation	—	—		1,231		—		—		—		1,231		Share-based compensation	—	—		1,018		—		—		—		1,018
Dividends declared	Dividends declared	—	—		53		(9,142)		—		—		(9,089)		Dividends declared	—	—		63		(9,320)		—		—		(9,257)
Net earnings	Net earnings	—	—		—		50,859		—		—		50,859		Net earnings	—	—		—		39,270		—		—		39,270
Other comprehensive income	Other comprehensive income	—	—		—		—		1,123		—		1,123		Other comprehensive income	—	—		—		—		738		—		738
Balance at January 17, 2021		82,394	$	824	$	490,913	$	1,677,928	$	(109,482)	$	(2,809,306)	$	(749,123)
Balance at January 23, 2022															Balance at January 23, 2022	82,564	$	826	$	501,570	$	1,794,362	$	(73,516)	$	(3,009,306)	$	(786,064)
Shares issued under stock plans, including tax benefit	Shares issued under stock plans, including tax benefit	116	1		4,225		—		—		—		4,226		Shares issued under stock plans, including tax benefit	5	—		2		—		—		—		2
Share-based compensation	Share-based compensation	—	—		1,605		—		—		—		1,605		Share-based compensation	—	—		2,916		—		—		—		2,916
Dividends declared	Dividends declared	—	—		55		(9,096)		—		—		(9,041)		Dividends declared	—	—		65		(9,334)		—		—		(9,269)
Purchases of treasury stock		—	—		—		—		—		(65,000)		(65,000)
Fair value of assumed Del Taco RSAs attributable to pre-combination service															Fair value of assumed Del Taco RSAs attributable to pre-combination service	—	—		449		—		—		—		449
Net earnings	Net earnings	—	—		—		35,934		—		—		35,934		Net earnings	—	—		—		7,796		—		—		7,796
Other comprehensive income	Other comprehensive income	—	—		—		—		842		—		842		Other comprehensive income	—	—		—		—		553		—		553
Balance at April 11, 2021		82,510	$	825	$	496,798	$	1,704,766	$	(108,640)	$	(2,874,306)	$	(780,557)
Balance at April 17, 2022															Balance at April 17, 2022	82,569	$	826	$	505,002	$	1,792,824	$	(72,963)	$	(3,009,306)	$	(783,617)
Shares issued under stock plans, including tax benefit	Shares issued under stock plans, including tax benefit	26	—		2,306		—		—		—		2,306		Shares issued under stock plans, including tax benefit	11	—		—		—		—		—		—
Share-based compensation	Share-based compensation	—	—		502		—		—		—		502		Share-based compensation	—	—		1,607		—		—		—		1,607
Dividends declared	Dividends declared	—	—		62		(9,818)		—		—		(9,756)		Dividends declared	—	—		65		(9,329)		—		—		(9,264)
Purchases of treasury stock		—	—		—		—		—		(64,967)		(64,967)
Net earnings	Net earnings	—	—		—		40,028		—		—		40,028		Net earnings	—	—		—		22,857		—		—		22,857
Other comprehensive income	Other comprehensive income	—	—		—		—		842		—		842		Other comprehensive income	—	—		—		—		553		—		553
Balance at July 4, 2021		82,536	$	825	$	499,668	$	1,734,976	$	(107,798)	$	(2,939,273)	$	(811,602)
Balance at July 10, 2022															Balance at July 10, 2022	82,580	$	826	$	506,674	$	1,806,352	$	(72,410)	$	(3,009,306)	$	(767,864)

Repurchases of common stock — ~~There were no repurchases~~The Company repurchased 0.7 million shares of its common stock in fiscal ~~2022.~~2023 for an aggregate cost of $60.4 million, including applicable excise tax. As of July ~~10, 2022,~~9, 2023, there was ~~$200.0~~$115.0 million remaining under share repurchase programs authorized by the Board of Directors which ~~expires~~expire in November 2023.

Dividends — ~~During 2022,~~Through July 9, 2023, the Board of Directors declared three cash dividends of $0.44 per common share totaling ~~$28.0~~$27.4 million. Future dividends are subject to approval by our Board of Directors.

~~14.~~13.AVERAGE SHARES OUTSTANDING

The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding (in thousands):


		Quarter		Year-to-date			Quarter		Year-to-date
		July 10, 2022	July 4, 2021	July 10, 2022	July 4, 2021		July 9, 2023	July 10, 2022	July 9, 2023	July 10, 2022
Weighted-average shares outstanding – basic	Weighted-average shares outstanding – basic	21,236	22,263	21,221	22,683	Weighted-average shares outstanding – basic	20,487	21,236	20,738	21,221
Effect of potentially dilutive securities:	Effect of potentially dilutive securities:					Effect of potentially dilutive securities:
Nonvested stock awards and units	Nonvested stock awards and units	24	52	42	66	Nonvested stock awards and units	161	24	122	42
Stock options	Stock options	—	9	1	10	Stock options	1	—	1	1
Performance share awards	Performance share awards	—	2	—	2	Performance share awards	—	—	—	—
Weighted-average shares outstanding – diluted	Weighted-average shares outstanding – diluted	21,260	22,326	21,264	22,761	Weighted-average shares outstanding – diluted	20,649	21,260	20,861	21,264
Excluded from diluted weighted-average shares outstanding:	Excluded from diluted weighted-average shares outstanding:					Excluded from diluted weighted-average shares outstanding:
Antidilutive	Antidilutive	32	—	23	33	Antidilutive	15	32	26	23
Performance conditions not satisfied at the end of the period	Performance conditions not satisfied at the end of the period	63	30	63	30	Performance conditions not satisfied at the end of the period	105	63	105	63

2017

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~15.~~14.COMMITMENTS AND CONTINGENCIES

Legal matters — ~~We assess~~The Company assesses contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. WeThe Company regularly ~~review~~reviews contingencies to determine the adequacy of the accruals and related disclosures. The ultimate amount of loss may differ from these estimates. As of July 10, 2022, we estimate the aggregate range of reasonably possible losses, in excess of amounts accrued for these matters as of such date, to be up to approximately $10 million, excluding interest and attorney fees. Any estimate is not an indication of expected loss, if any, or of the Company’s maximum possible loss exposure and the ultimate amount of loss may differ materially from these estimates in the near term.

Gessele v. Jack in the Box Inc.— In August 2010, 5five former Jack in the Box employees instituted litigation in federal court in Oregon alleging claims under the federal Fair Labor Standards Act and Oregon wage and hour laws. The plaintiffs alleged that Jack in the Box failed to pay non-exempt employees for certain meal breaks and improperly made payroll deductions for shoe purchases and for workers’ compensation expenses, and later added additional claims relating to timing of final pay and related wage and hour claims involving employees of a franchisee. In 2016, the court dismissed the federal claims and those relating to franchise employees. In June 2017, the court granted class certification with respect to state law claims of improper deductions and late payment of final wages. ~~The parties participated~~On October 24, 2022, a jury awarded the plaintiffs approximately $6.4 million in ~~a voluntary mediation on March 16, 2020, but the matter did not settle.~~damages and penalties. The Company continues to dispute liability and the ~~plaintiffs’ damages calculations~~damage award and will defend against both through post-trial motions and all other available appellate remedies. As of July 9, 2023, the Company has accrued the verdict amount as well as estimated pre-judgment and post-judgment interest of $6.6 million, and included it within “Accrued liabilities” on our condensed consolidated balance sheet. The Company will continue to ~~vigorously defend against~~accrue for post-judgment interest until the ~~lawsuit.~~matter is settled.

Torrez — In March 2014, a former Del Taco employee filed a purported Private Attorneys General Act claim and class action alleging various causes of action under California’s labor, wage, and hour laws. The plaintiff generally alleges Del Taco did not appropriately provide meal and rest breaks and failed to pay wages and reimburse business expenses to its California non-exempt employees. On November 12, 2021, the court granted, in part, the plaintiff's motion for class certification. The parties participated in a voluntary mediation on May 24, 2022 and June 3, 2022. On June 4, 2022, we entered into a Settlement Memorandum of Understanding (the “Agreement”) which obligates the Company to pay a gross settlement amount of $50.0 million, for which in exchange we will be released from all claims by the parties. The Agreement contains no admission of wrongdoing and is contingent upon various conditions, including, but not limited to, court approvals. There can be no assurance that the Agreement will be approved by the court nor upheld if challenged on appeal. As of July ~~10, 2022,~~9, 2023, the Company has accrued the settlement amount, and included it within “Accrued liabilities” on our condensed consolidated balance sheet.

J&D Restaurant Group — On April 17, 2019, the trustee for a bankrupt former franchisee filed a complaint ~~seeking to recover assets in the form of actual and exemplary damages for the bankruptcy trust and~~ generally alleging the Company wrongfully terminated the franchise agreements and unreasonably denied two perspective purchasers ~~that~~ the former franchisee presented. The parties participated in a mediation in April 2021, and again in December 2022, but the matter did not settle. Trial commenced on January 9, 2023. On February 8, 2023, the jury returned a verdict finding the Company had not breached any contracts in ~~this matter is currently set~~terminating the franchise agreements or denying the proposed buyers. While the jury also found the Company had not violated the California Unfair Practices Act, it found for ~~January~~the plaintiff on the claim for breach of implied covenant of good faith and fair dealing, and awarded $8.0 million in damages. On May 9, 2023, ~~with~~ the court granted the Company’s post-trial motion, overturning the jury verdict and ordering the ~~parties to participate in another mediation.~~plaintiff take nothing on its claims. As a result, the Company reversed the prior $8.0 million accrual, and as of July 9, 2023, the Company has no amounts accrued for this case on its condensed consolidated balance sheet.

Other legal matters — In addition to the ~~matter~~matters described above, we are subject to normal and routine litigation brought by former or current employees, customers, franchisees, vendors, landlords, shareholders, or others. ~~We intend~~The Company intends to defend ourselves in any such matters. Some of these matters may be covered, at least in part, by insurance or other ~~third party~~third-party indemnity obligation. ~~We record~~The Company records receivables from third party insurers when recovery has been determined to be probable.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Lease guarantees — ~~We remain~~The Company remains contingently liable for certain leases relating to our former Qdoba business which we sold in fiscal 2018. Under the Qdoba Purchase Agreement, the buyer has indemnified the Company of all claims related to these guarantees. As of July ~~10, 2022,~~9, 2023, the maximum potential liability of future undiscounted payments under these leases is approximately ~~$24.8~~$22.9 million. The lease terms extend for a maximum of approximately 1615 more years and we would remain a guarantor of the leases in the event the leases are extended for any established renewal periods. In the event of default, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer. The Company has not recorded a liability for these guarantees as we believe the likelihood of making any future payments is remote.

15.SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands)


	Year-to-date
	July 9, 2023		July 10, 2022
Non-cash investing and financing transactions:

Decrease in obligations for purchases of property and equipment	$	2,472	$	3,371

Increase in dividends accrued or converted to common stock equivalents	$	212	$	193
Right-of use assets obtained in exchange for operating lease obligations	$	181,874	$	179,726
Right-of use assets obtained in exchange for finance lease obligations	$	870	$	45

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

16.SUPPLEMENTAL CONSOLIDATED ~~CASH FLOW INFORMATION~~ ~~(in thousands)~~

Year-to-date
July 10,
2022 July 4,
2021
Non-cash investing and financing transactions:
Increase in obligations for treasury stock repurchases $ — $ 5,568
Increase (decrease) in obligations for purchases of property and equipment $ (3,371) $ 258
Increase in dividends accrued or converted to common stock equivalents $ 193 $ 170
Right-of use assets obtained in exchange for operating lease obligations $ 179,726 $ 138,163
Right-of use assets obtained in exchange for finance lease obligations $ 45 $ 103

~~JACK IN THE BOX INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~17.SUPPLEMENTAL CONSOLIDATED~~ BALANCE SHEET INFORMATION (in thousands)


		July 10, 2022		October 3, 2021			July 9, 2023		October 2, 2022
Accounts and other receivables, net:	Accounts and other receivables, net:					Accounts and other receivables, net:
Trade	Trade	$	73,653	$	75,273	Trade	$	74,988	$	90,105
Notes receivable, current portion	Notes receivable, current portion	1,662		1,467		Notes receivable, current portion	1,974		8,643
Income tax receivable	Income tax receivable	919		1,157		Income tax receivable	997		878
Other	Other	7,484		2,730		Other	8,918		10,152
Allowance for doubtful accounts	Allowance for doubtful accounts	(5,228)		(6,292)		Allowance for doubtful accounts	(4,101)		(5,975)
		$	78,490	$	74,335		$	82,776	$	103,803
Prepaid expenses:
Prepaid income taxes		$	4,767	$	651
Other		10,762		12,031

		$	15,529	$	12,682
Property and equipment, net	Property and equipment, net					Property and equipment, net
Land	Land	$	97,102	$	105,393	Land	$	95,517	$	86,134
Buildings	Buildings	989,452		907,792		Buildings	963,375		960,984
Restaurant and other equipment	Restaurant and other equipment	166,764		112,959		Restaurant and other equipment	165,643		163,527
Construction in progress	Construction in progress	17,044		6,894		Construction in progress	25,083		18,271
		1,270,362		1,133,038			1,249,618		1,228,916
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(828,723)		(810,124)		Less accumulated depreciation and amortization	(834,669)		(810,752)
		$	441,639	$	322,914		$	414,949	$	418,164
Other assets, net:	Other assets, net:					Other assets, net:
Company-owned life insurance policies	Company-owned life insurance policies	$	114,542	$	123,566	Company-owned life insurance policies	$	115,790	$	108,924
Deferred rent receivable	Deferred rent receivable	44,649		46,234		Deferred rent receivable	42,193		43,891
Franchise tenant improvement allowance	Franchise tenant improvement allowance	32,819		34,124		Franchise tenant improvement allowance	40,968		32,429
Notes receivable, less current portion	Notes receivable, less current portion	4,525		4,544		Notes receivable, less current portion	10,040		11,624
Other	Other	22,815		15,970		Other	29,766		29,701
		$	219,350	$	224,438		$	238,757	$	226,569
Accrued liabilities:	Accrued liabilities:					Accrued liabilities:
Legal accruals	Legal accruals	$	58,553	$	7,540	Legal accruals	$	64,171	$	59,165
Payroll and related taxes	Payroll and related taxes	39,008		34,649		Payroll and related taxes	43,972		43,837
Insurance	Insurance	32,340		21,218		Insurance	32,359		32,272
Sales and property taxes	Sales and property taxes	22,662		23,174		Sales and property taxes	21,716		30,947
Deferred rent income	Deferred rent income	13,677		17,892		Deferred rent income	14,499		18,525
Advertising	Advertising	4,357		13,097		Advertising	19,375		11,028
Deferred franchise and development fees	Deferred franchise and development fees	5,588		4,949		Deferred franchise and development fees	6,019		5,647
Other	Other	39,101		25,898		Other	79,670		52,511
		$	215,286	$	148,417		$	281,781	$	253,932
Other long-term liabilities:	Other long-term liabilities:					Other long-term liabilities:
Defined benefit pension plans	Defined benefit pension plans	$	67,314	$	70,354	Defined benefit pension plans	$	50,170	$	51,679
Deferred franchise and development fees	Deferred franchise and development fees	40,910		36,571		Deferred franchise and development fees	42,955		40,802
Other	Other	48,827		49,417		Other	46,550		42,213
		$	157,051	$	156,342		$	139,675	$	134,694

~~18.~~17.SUBSEQUENT EVENTS

Refranchising — Subsequent to the end of the third quarter of 2023, the Company closed on the sale of 23 Del Taco company-operated restaurants to two franchisees for $13.8 million.

Dividends — On August ~~5, 2022,~~4, 2023, the Board of Directors declared a cash dividend of $0.44 per common share, to be paid on September ~~9, 2022,~~18, 2023, to shareholders of record as of the close of business on ~~August 24, 2022.~~September 6, 2023.

2320

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

All comparisons between ~~2022~~2023 and ~~2021~~2022 refer to the 12 weeks (“quarter”) and 40 weeks (“year-to-date”) ended July ~~10, 2022~~9, 2023 and July ~~4, 2021,~~10, 2022, respectively, unless otherwise indicated.

For an understanding of the significant factors that influenced our performance during ~~2022~~2023 and ~~2021,~~2022, our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and related notes included in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended October ~~3, 2021.~~2, 2022.

Our MD&A consists of the following sections:

•Overview — a general description of our business.

•Results of operations — an analysis of our condensed consolidated statements of earnings for the periods presented in our condensed consolidated financial statements.

•Liquidity and capital resources — an analysis of our cash flows, including capital expenditures, share repurchase activity, dividends, and ~~known~~ known trends that may impact liquidity.

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

•New accounting pronouncements — a discussion of new accounting pronouncements, dates of implementation and the impact on our consolidated financial position or results of operations, if any.

•Cautionary statements regarding forward-looking statements — a discussion of the risks and uncertainties that may cause our actual results to differ materially from any forward-looking statements made by management.

We have included in our MD&A certain performance metrics that management uses to assess company performance and which we believe will be useful in analyzing and understanding our results of operations. These metrics include:

•Changes in sales at restaurants open more than one year (“same-store sales”), systemwide sales, franchised restaurant sales, and average unit volumes (“AUVs”). Same-store sales, restaurant sales, and AUVs are presented for franchised restaurants and on a system-wide basis, which includes company and franchise restaurants. Franchise sales represent sales at franchise restaurants and are revenues of our franchisees. We do not record franchise sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchise sales. We believe franchise and system same-store sales, franchised and system restaurant sales, and AUV information are useful to investors as they have a direct effect on the Company’s profitability.

•Adjusted EBITDA represents net earnings on a generally accepted accounting principles (“GAAP”) basis excluding income taxes, interest expense, net, gains on the sale of company-operated restaurants, other operating expenses, net, depreciation and amortization, amortization of favorable and unfavorable leases and subleases, net, and amortization of tenant improvement allowances and incentives. We are presenting Adjusted EBITDA because we believe that it provides a meaningful supplement to net earnings of the Company's core business operating results, as well as a comparison to those of other similar companies. Management believes that Adjusted EBITDA, when viewed with the Company's results of operations in accordance with GAAP and the accompanying reconciliations within MD&A, provides useful information about operating performance and period-over-period change, and provides additional information that is useful for evaluating the operating performance of the Company's core business without regard to potential distortions. Additionally, management believes that Adjusted EBITDA permits investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.

Same-store sales, systemwide sales, franchised restaurant sales, AUVs, and Adjusted EBITDA are not measurements determined in accordance with GAAP and should not be considered in isolation, or as an alternative to earnings from operations, or other similarly titled measures of other companies.

2421

OVERVIEW

Our Business

Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® and Del Taco®quick-service restaurants. As of July ~~10, 2022,~~9, 2023, we operated and franchised ~~2,207~~2,191 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including one in ~~Guam. On March 8, 2022, we completed the acquisition of~~Guam, and 594 Del Taco ~~Restaurants, Inc. (“Del Taco”), the nation’s second largest Mexican quick service restaurant chain by number of restaurants and has approximately 594~~quick-service restaurants across 16 states, including one in Guam.

We derive revenue from retail sales at company-operated restaurants and rental revenue, royalties (based upon a percent of sales), franchise fees and contributions for advertising and other services from franchisees.

~~Impact of COVID-19~~

The COVID-19 pandemic has continued to have varying degrees of disruption on our business. Our business has continued to be challenged by availability and cost of labor resulting in occasional temporarily closed restaurants and reduced operating hours. We have continued to have limited shortages in our supply chain; however, inflationary pressures have continued to have a significant impact on our business.

~~We expect these operating margin pressures due to labor and supply chain challenges to continue for the remainder of fiscal 2022.~~

~~Other Developments~~

As previously announced, a franchisee that operated 68 restaurants in Missouri and Illinois filed for chapter 11 bankruptcy in February 2021. Of the 68 restaurants, we sublease 50 of the locations to the franchisee and own the land and building for the remaining 18 locations. Since the inception of the bankruptcy proceedings, the franchisee has filed motions to reject 11 locations, which the court has authorized. No material impairment costs were recorded in the financial statements as a result of these locations being rejected near the expiration of our master lease agreements. We currently do not anticipate any additional locations being rejected.

On July 18, 2022, the Court approved the franchisee’s plan of reorganization with the same terms we previously agreed to in May 2022. The reorganization plan includes a waiver of a portion of damages associated with the rejected locations, reduced royalties following plan confirmation, and the settlement of the remaining cure costs via a secured note upon emergence from bankruptcy, in addition to deferring all amounts owed under the franchise agreements starting in February through the bankruptcy resolution date. The secured note provides for repayment based on a calculation of net free cash flows generated from the franchisee’s restaurants. To the extent future net free cash flows are insufficient to satisfy the secured note at a future specified date, then we agreed to waive any remaining balance due to the Company.

Based on the events above, we concluded that the collectability of the deferrals starting in February 2022 were doubtful and therefore no revenue has been recognized. Furthermore, we increased our bad debt reserve related to this matter to fully reserve the $3.8 million owed to the Company.

RESULTS OF OPERATIONS

The following ~~table summarizes~~tables summarize changes in same-store sales for Jack in the Box and Del Taco company-operated, franchised, and system restaurants:


		Quarter			Year-to-date				Quarter						Year-to-date
Jack in the Box:	Jack in the Box:		July 10, 2022 (1)		July 4, 2021		July 10, 2022 (1)			July 4, 2021		Jack in the Box:	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Company	Company		3.5	%	9.0	%	1.5	%		10.0	%	Company	6.9	%	3.5	%	10.3	%	1.5	%
Franchise	Franchise		(1.0)	%	10.3	%	(0.1)	%		14.5	%	Franchise	8.0	%	(1.0)	%	8.2	%	(0.1)	%
System	System		(0.6)	%	10.2	%	—	%		14.0	%	System	7.9	%	(0.6)	%	8.4	%	0.0	%


	Quarter				Year-to-date
Del Taco:	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022 (1)
Company	1.7	%	2.3	%	2.8	%	2.5	%
Franchise	1.8	%	4.8	%	2.5	%	4.6	%
System	1.7	%	3.5	%	2.6	%	3.5	%

____________________________

(1)~~Due to the transition from a 53-week year to a 52-week year, year-over-year fiscal period comparisons are off by one week. The change in~~Fiscal 2022 full year-to-date same store sales ~~uses comparable calendar periods to balance a one week shift and to provide a clearer year over year comparison.~~figures are shown for information purposes only.

The following ~~table summarizes~~tables summarize year-to-date changes in the number and mix of ~~Jack in the Box~~ company and franchise ~~restaurants:~~restaurants for our two brands:


		2022						2021							2023						2022
Jack in the Box:	Jack in the Box:	Company		Franchise		Total		Company		Franchise		Total		Jack in the Box:	Company		Franchise		Total		Company		Franchise		Total
Beginning of year	Beginning of year	163		2,055		2,218		144		2,097		2,241		Beginning of year	146		2,035		2,181		163		2,055		2,218
New	New	—		10		10		—		10		10		New	—		14		14		—		10		10
Acquired from franchisees	Acquired from franchisees	13		(13)		—		4		(4)		—		Acquired from franchisees	—		—		—		13		(13)		—
Refranchised														Refranchised	(5)		5		—		—		—		—
Closed	Closed	(5)		(16)		(21)		—		(32)		(32)		Closed	(1)		(3)		(4)		(5)		(16)		(21)
End of period	End of period	171		2,036		2,207		148		2,071		2,219		End of period	140		2,051		2,191		171		2,036		2,207
% of system	% of system	8	%	92	%	100	%	7	%	93	%	100	%	% of system	6	%	94	%	100	%	8	%	92	%	100	%


	2023						2022 (1)
Del Taco:	Company		Franchise		Total		Company		Franchise		Total
Beginning of year	290		301		591		296		306		602
New	—		7		7		1		2		3
Refranchised	(66)		66		—		—		—		—
Closed	(3)		(1)		(4)		(6)		(5)		(11)
End of period	221		373		594		291		303		594
% of system	37	%	63	%	100	%	49	%	51	%	100	%

____________________________

(1)Fiscal 2022 full year-to-date restaurant activity figures are shown for information purposes only.

The following ~~table summarizes~~tables summarize restaurant sales for ~~Jack in the Box~~ company-operated, franchised, and systemwide sales for our two brands (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
Jack in the Box:	Jack in the Box:	July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021		Jack in the Box:	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Company-operated restaurant sales	Company-operated restaurant sales	$	100,899	$	91,892	$	315,205	$	292,132	Company-operated restaurant sales	$	96,820	$	100,899	$	318,451	$	315,205
Franchised restaurant sales (1)	Franchised restaurant sales (1)	867,210		889,558		2,825,353		2,852,746		Franchised restaurant sales (1)	948,457		867,210		3,088,697		2,825,353
Systemwide sales (1)	Systemwide sales (1)	$	968,109	$	981,450	$	3,140,558	$	3,144,878	Systemwide sales (1)	$	1,045,277	$	968,109	$	3,407,148	$	3,140,558


	Quarter				Year-to-date
Del Taco:	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022 (2)
Company-operated restaurant sales	$	101,696	$	114,333	$	352,860	$	368,893
Franchised restaurant sales (1)	129,112		112,774		394,105		359,243
Systemwide sales (1)	$	230,808	$	227,107	$	746,965	$	728,136

____________________________

(1)Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. System sales include company and franchised restaurant sales. We do not record franchised sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchised sales. We believe franchised and system restaurant sales information is useful to investors as they have a direct effect on the Company's profitability.

~~Below is a reconciliation of Non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net earnings (~~(2)~~in thousands~~):Fiscal 2022 full year-to-date systemwide sales figures are shown for information purposes only.

Quarter Year-to-date
Consolidated: July 10,
2022 July 4,
2021 July 10,
2022 July 4,
2021
Net earnings - GAAP $ 22,857 $ 40,028 $ 69,923 $ 126,821
Income tax expense 9,237 11,991 27,324 42,576
Interest expense, net 19,703 15,158 66,371 51,120
Gains on the sale of company-operated restaurants (802) (264) (1,660) (3,079)
Other operating expenses, net 4,129 922 22,339 1,698
Depreciation and amortization 16,713 10,389 40,754 35,656
Amortization of favorable and unfavorable leases and subleases, net 437 — 685 —
Amortization of franchise tenant improvement allowances and incentives 919 796 3,046 2,330
Adjusted EBITDA - Non-GAAP $ 73,193 $ 79,020 $ 228,782 $ 257,122

Jack in the Box Brand

Company Restaurant Operations

The following table presents company restaurant sales and costs as a percentage of the related sales (dollars in thousands):


		Quarter								Year-to-date									Quarter								Year-to-date
		July 10, 2022				July 4, 2021				July 10, 2022				July 4, 2021					July 9, 2023				July 10, 2022				July 9, 2023				July 10, 2022
Company restaurant sales	Company restaurant sales	$	100,899			$	91,892			$	315,205			$	292,132			Company restaurant sales	$	96,820			$	100,899			$	318,451			$	315,205
Company restaurant costs:	Company restaurant costs:																	Company restaurant costs:
Food and packaging	Food and packaging	$	33,319	33.0	%	$	27,061	29.4	%	$	101,543	32.2	%	$	83,376	28.5	%	Food and packaging	$	30,384	31.4	%	$	33,319	33.0	%	$	101,551	31.9	%	$	101,543	32.2	%
Payroll and employee benefits	Payroll and employee benefits	$	33,699	33.4	%	$	27,356	29.8	%	$	105,431	33.4	%	$	88,727	30.4	%	Payroll and employee benefits	$	29,292	30.3	%	$	33,699	33.4	%	$	97,930	30.8	%	$	105,431	33.4	%
Occupancy and other	Occupancy and other	$	17,959	17.8	%	$	14,103	15.3	%	$	56,220	17.8	%	$	45,287	15.5	%	Occupancy and other	$	16,021	16.5	%	$	17,959	17.8	%	$	52,397	16.5	%	$	56,220	17.8	%

Company restaurant sales ~~increased $9.0~~decreased $4.1 million or ~~9.8%~~4.0% in the quarter and ~~$23.1~~increased $3.2 million or ~~7.9%~~1.0% year-to-date compared to the prior ~~year,~~year. In the quarter, the decrease is primarily due to ~~an increase~~a decline in the number of company-operated restaurants, partially offset by average check and traffic growth. Year-to-date, the increase is primarily due to higher same-store sales driven by average check and traffic growth, ~~and~~ partially offset by a ~~decline~~decrease in ~~traffic.~~the number of company-operated restaurants. The following table presents the approximate impact of these items on company restaurant sales (in millions):


		Quarter	Year-to-date				Quarter		Year-to-date
Increase in the average number of restaurants			$	4.3	$	11.4
AUV increase	AUV increase		4.7		11.7			AUV increase	$	5.6	$	29.5
Decrease in the average number of restaurants								Decrease in the average number of restaurants	(9.7)		(26.3)
Total change in company restaurant sales	Total change in company restaurant sales		$	9.0	$	23.1		Total change in company restaurant sales	$	(4.1)	$	3.2

Same-store sales at company-operated restaurants increased ~~3.5%~~6.9% in the quarter and ~~1.5%~~10.3% year-to-date compared to a year ago. The following table summarizes the change versus a year ago:

Quarter Year-to-date
July 10,
2022 July 4,
2021 July 10,
2022 July 4,
2021
Average check (1) 5.6 % 4.8 % 4.2 % 16.4 %
Transactions (2.1) % 4.2 % (2.7) % (6.4) %
Change in same-store sales 3.5 % 9.0 % 1.5 % 10.0 %


	Quarter				Year-to-date
	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Average check (1)	5.8	%	5.6	%	7.1	%	4.2	%
Transactions	1.1	%	(2.1)	%	3.2	%	(2.7)	%
Change in same-store sales	6.9	%	3.5	%	10.3	%	1.5	%

____________________________

(1)Includes price increases of approximately ~~9.7%~~7.3% in the quarter and ~~7.6%~~9.0% year-to-date.

Food and packaging costs as a percentage of company restaurant sales ~~increased 3.6%~~decreased 1.6% in the quarter ~~including 4.0% of higher commodity costs,~~ and ~~2.5% of unfavorable~~decreased 0.3% year-to-date compared to the prior year primarily due to increased menu pricing and favorable menu item mix, ~~and other,~~ partially offset by ~~2.9% of increased menu pricing. Food and packaging costs as a percentage of company restaurant sales increased 3.7% year-to-date, including 3.5% of~~ higher commodity ~~costs, and 2.4% of unfavorable menu item mix and other, partially offset by 2.2% of increased menu pricing.~~costs.

Commodity costs increased in the quarter and year-to-date by approximately ~~16.8%~~5.2% and ~~14.2%~~10.0%, ~~respectively.~~respectively, compared to the prior year. The inflation we have experienced is across nearly all categories with the greatest impact on a year-to-date basis seen in ~~proteins,~~produce, sauces, ~~oils,~~potatoes and beverages. For fiscal ~~2022,~~2023, we expect annual commodity cost inflation to be up ~~12%~~8% to ~~14%~~10% compared with fiscal ~~2021.~~2022.

Payroll and employee benefit costs as a percentage of company restaurant sales ~~increased 3.6%~~decreased 3.1% in the quarter and ~~3.0%~~decreased 2.6% year-to-date compared to the prior year primarily due to ~~labor inflation,~~sales leverage and a change in the mix of restaurants ~~due to franchisee acquisitions,~~in connection with refranchising transactions, partially offset by ~~lower~~higher incentive compensation. Labor inflation ~~was approximately 13.2%~~ in the quarter and ~~12.8%~~ year-to-date ~~for the current fiscal year.~~was approximately 4.2% and 6.5%, respectively. For fiscal ~~2022,~~2023, we expect annual wage inflation to be up ~~12%~~3% to ~~13%~~6% compared with fiscal ~~2021.~~2022.

Occupancy and other costs, as a percentage of company restaurant sales, ~~increased 2.5%~~decreased 1.3% in both the quarter and ~~2.3%~~ year-to-date compared to the prior year primarily due to sales leverage and a change in the ~~acquisition~~mix of 29 restaurants ~~since a year ago~~in connection with ~~lower than average sales volumes,~~refranchising transactions, partially offset by higher other operating costs including utilities, delivery fees and ~~higher costs for maintenance and repair and utilities.~~security as compared with fiscal 2022.

2724

Jack in the Box Franchise Operations

The following table presents franchise revenues and costs in each period and other information we believe is useful in analyzing the change in franchise operating results (dollars in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Franchise rental revenues	Franchise rental revenues	$	78,278	$	80,598	$	257,069	$	262,248	Franchise rental revenues	$	83,271	$	78,278	$	270,277	$	257,069

Royalties	Royalties	44,291		45,950		144,872		146,913		Royalties	47,373		44,291		161,343		144,872
Franchise fees and other	Franchise fees and other	2,340		2,632		6,944		8,548		Franchise fees and other	1,387		2,340		4,855		6,944
Franchise royalties and other	Franchise royalties and other	46,631		48,582		151,816		155,461		Franchise royalties and other	48,760		46,631		166,198		151,816
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services	46,168		48,386		151,934		155,375		Franchise contributions for advertising and other services	51,360		46,168		167,034		151,934
Total franchise revenues	Total franchise revenues	$	171,077	$	177,566	$	560,819	$	573,084	Total franchise revenues	$	183,391	$	171,077	$	603,509	$	560,819

Franchise occupancy expenses	Franchise occupancy expenses	$	49,216	$	48,824	$	161,602	$	162,897	Franchise occupancy expenses	$	51,012	$	49,216	$	165,575	$	161,602
Franchise support and other costs	Franchise support and other costs	3,422		2,722		12,161		9,336		Franchise support and other costs	3,528		3,422		7,086		12,161
Franchise advertising and other services expenses	Franchise advertising and other services expenses	47,622		49,168		157,779		158,967		Franchise advertising and other services expenses	53,519		47,622		174,730		157,779
Total franchise costs	Total franchise costs	$	100,260	$	100,714	$	331,542	$	331,200	Total franchise costs	$	108,059	$	100,260	$	347,391	$	331,542
Franchise costs as a percentage of total franchise revenues	Franchise costs as a percentage of total franchise revenues	58.6%		56.7%		59.1%		57.8%		Franchise costs as a percentage of total franchise revenues	58.9%		58.6%		57.6%		59.1%

Average number of franchise restaurants	Average number of franchise restaurants	2,028		2,063		2,032		2,072		Average number of franchise restaurants	2,035		2,028		2,035		2,032
% decrease		(1.7)%				(1.9)%
% increase										% increase	0.3%				0.1%
Franchised restaurant sales	Franchised restaurant sales	$	867,210	$	889,558	$	2,825,353	$	2,852,746	Franchised restaurant sales	$	948,457	$	867,210	$	3,088,697	$	2,825,353
Franchised restaurant AUVs	Franchised restaurant AUVs	$	428	$	431	$	1,391	$	1,377	Franchised restaurant AUVs	$	466	$	428	$	1,518	$	1,391
Royalties as a percentage of total franchised restaurant sales(1)	Royalties as a percentage of total franchised restaurant sales(1)	5.1%		5.2%		5.1%		5.1%		Royalties as a percentage of total franchised restaurant sales(1)	5.0%		5.1%		5.2%		5.1%

____________________________

(1)Excluding the impact of the $7.3 million termination fee in the first quarter of the current year, royalties as a percentage of total franchised restaurant sales would be 5.0% year-to-date for the period ended July 9, 2023.

Franchise rental revenues ~~decreased $2.3~~increased $5.0 million, or ~~2.9%~~6.4% in the quarter, and ~~$5.2~~$13.2 million, or ~~2.0%~~5.1% year-to-date, as compared to the prior year, primarily due to higher percentage rent of $2.9 million in the quarter and $10.1 million year-to-date driven by ~~a reduction in the number~~higher franchise restaurant sales as well as higher minimum rent of ~~franchise subleases compared to prior year in addition to the impact of deferring $1.4~~$1.8 million and ~~$2.6~~$3.5 million, ~~respectively, in connection with a franchisee currently in bankruptcy proceedings for which revenue will be recognized upon payment.~~respectively.

Franchise royalties and other ~~decreased $2.0~~increased $2.1 million, or ~~4.0%~~4.6% in the quarter, and ~~$3.6~~increased $14.4 million, or ~~2.3%~~9.5% year-to-date, ~~primarily due~~as compared to ~~lower fees received~~the prior year. Higher franchise restaurant sales drove royalties higher in ~~connection with~~both the ~~early~~quarter and year-to-date periods. Additionally, in the year-to-date period, a $7.3 million termination fee paid by a franchise operator who sold his restaurants to a new franchisee, also contributed to the increase versus a year ago. Refer to Note 2, Revenue, of ~~franchise agreements as well as~~ the ~~deferral of $0.9~~notes to the condensed consolidated financial statements for additional information related to the $7.3 million ~~and $1.7 million respectively, in connection with the franchisee bankruptcy matter.~~termination fee.

Franchise contributions for advertising and other services revenues ~~decreased $2.2~~increased $5.2 million, or ~~4.6%~~11.2% in the quarter, and ~~$3.4~~increased $15.1 million, or ~~2.2%~~9.9% year-to-date, compared to the prior year primarily driven by higher marketing contribution in connection with higher franchise restaurant sales.

Franchise occupancy expenses, primarily rent, increased $1.8 million, or 3.6% in the quarter, and increased $4.0 million, or 2.5% year-to-date, compared to the prior year primarily due to ~~lower marketing contributions of $1.7 million~~ongoing rent increases and ~~$2.6 million respectively, driven by~~to a ~~decrease~~lesser extent, higher property tax assessments in the ~~number of franchise restaurants as well as deferrals in connection with the franchisee bankruptcy matter.~~current year.

Franchise ~~occupancy expenses, primarily rent,~~support and other costs increased ~~$0.4~~$0.1 million ~~or 0.8%~~ in the quarter, and decreased ~~$1.3~~$5.1 million ~~or 0.8%~~ year-to-date, compared to the prior year. In the quarter, the increase is primarily due to higher ~~property tax assessments in the current year.~~costs for technology fees, overhead relating to new and remodeled restaurants and franchise business conferences, partially offset by lower bad debt expense. Year-to-date the decrease is primarily due to a ~~reduction~~decrease in ~~the number~~bad debt expense of ~~franchise subleases compared to prior year.~~$6.0 million, partially offset with higher technology fees.

Franchise ~~support~~advertising and other ~~costs~~service expenses increased ~~$0.7~~$5.9 million, or 12.4% in the quarter, and ~~$2.8~~increased $17.0 million, or 10.7% year-to-date, compared to the prior year primarily driven by higher franchise sales.

Del Taco Brand

Jack in the Box Inc. acquired Del Taco on March 8, 2022. Fiscal 2022 results include 12 and approximately 18 weeks of operating results, compared with 12 and 40 weeks in the current year quarter and year-to-date periods, respectively.

Company Restaurant Operations

The following table presents company restaurant sales and costs as a percentage of the related sales (dollars in thousands):


	Quarter								Year-to-date
	July 9, 2023				July 10, 2022				July 9, 2023				July 10, 2022
Company restaurant sales	$	101,696			$	114,332			$	352,860			$	171,391
Company restaurant costs:
Food and packaging	$	28,171	27.7	%	$	32,435	28.4	%	$	98,247	27.8	%	$	48,619	28.4	%
Payroll and employee benefits	$	34,579	34.0	%	$	37,666	32.9	%	$	119,617	33.9	%	$	56,570	33.0	%
Occupancy and other	$	21,254	20.9	%	$	24,094	21.1	%	$	75,523	21.4	%	$	35,882	20.9	%

Company restaurant sales decreased $12.6 million or 11.1% in the quarter compared to the prior year. The year-to-date period for 2022 only includes 18 weeks of operating results versus the full 40 weeks due to the timing of the Del Taco acquisition. As a result, the comments below are focused on the quarter-over-quarter comparisons.

The following table presents the approximate impact of these items on company restaurant sales (in millions):


	Quarter
AUV increase	$	1.4
Decrease in the average number of restaurants	(14.0)
Total change in company restaurant sales	$	(12.6)

Same-store sales at company-operated restaurants increased 1.7% in the quarter and 2.8% year-to-date compared to a year ago. The following table summarizes the change for the current quarter versus a year ago:


	Quarter
	July 9, 2023		July 10, 2022
Average check (1)	4.1	%	8.9	%
Transactions	(2.4)	%	(6.6)	%
Change in same-store sales	1.7	%	2.3	%

________________________

(1)Includes price increases of approximately 8.1% in the third quarter of 2023.

Food and packaging costs as a percentage of company restaurant sales, decreased 0.7% in the quarter as compared to the prior year. This decrease as a percentage was primarily due to menu price increases, partially offset by commodity inflation.

Commodity costs inflation was 2.1% in the third quarter of 2023 and was 20.1% in the third quarter of 2022. The largest sources of inflation in the current quarter were due to tortillas, shells and potatoes, and partially offset by favorability in chicken, cheese and produce. For fiscal 2023, we expect annual commodity cost inflation to be up 8% to 10% compared with fiscal 2022.

Payroll and employee benefit costs as a percentage of company restaurant sales, increased 1.1% in the quarter as compared to the prior year. This increase was primarily due to labor inflation, which was 4.8% in the third quarter of 2023 and was 9.7% in the third quarter of 2022.

Occupancy and other costs, as a percentage of company restaurant sales, decreased 0.2% in the quarter as compared to the prior year. The decrease in the quarter was primarily due to lower common area maintenance costs, partially offset by higher maintenance and repair costs.

Del Taco Franchise Operations

The following table presents franchise revenues and costs in each period and other information we believe is useful in analyzing the change in franchise operating results (dollars in thousands):


	Quarter				Year-to-date
	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Franchise rental revenues	$	2,977	$	1,790	$	8,321	$	2,654

Royalties	6,129		5,361		18,721		8,006
Franchise fees and other	79		65		422		93
Franchise royalties and other	6,208		5,426		19,143		8,099
Franchise contributions for advertising and other services	5,849		4,781		17,497		7,142
Total franchise revenues	$	15,034	$	11,997	$	44,961	$	17,895

Franchise occupancy expenses	$	2,918	$	1,755	$	8,228	$	2,596
Franchise support and other costs	553		346		1,540		532
Franchise advertising and other services expenses	6,050		4,776		18,145		7,185
Total franchise costs	$	9,521	$	6,877	$	27,913	$	10,313
Franchise costs as a percentage of total franchise revenues	63.3%		57.3%		62.1%		57.6%

Number of franchise restaurants at end of period	373		303		373		303
% increase	23.1%				23.1%
Franchised restaurant sales	$	129,112	$	112,774	$	394,105	$	168,494
Franchised restaurant AUVs	$	346	$	372	$	1,057	$	556
Royalties as a percentage of total franchised restaurant sales	4.7%		4.8%		4.8%		4.8%

Franchise rental revenues increased $1.2 million, or 66.3% in the quarter as compared to the prior year, primarily due to ~~an increase~~higher rental income resulting from new subleases related to the 66 restaurants refranchised in ~~franchisee bad debt expense as a result of developments in a franchisee’s ongoing bankruptcy proceedings.~~2023.

Franchise ~~advertising~~royalties and other ~~service expenses decreased $1.5~~increased $0.8 million, or ~~3.1%~~14.4% in the quarter ~~and $1.2 million, or 0.7% year-to-date~~as compared to the prior year, primarily due to ~~a reduction~~higher franchise restaurant sales resulting from the 66 restaurants refranchised in ~~the number of franchise restaurants.~~2023.

~~Del Taco Brand~~

~~As of July 10, 2022, there were 291 company-operated~~Franchise contributions for advertising and ~~303 franchise-operated Del Taco restaurants. System same-store sales~~other services revenues increased ~~3.5% and total revenues and segment operating profit were $126.3~~$1.1 million, ~~and $12.2 million~~or 22.3% in the quarter as compared to the prior year, primarily driven by higher marketing contribution related to higher franchise restaurant sales resulting from the 66 restaurants refranchised in 2023.

Franchise occupancy expenses, primarily rent, increased $1.2 million, or 66.3% in the quarter as compared to the prior year, primarily due to higher rent related to franchise subleases for the 66 restaurants refranchised in 2023.

Franchise support and ~~$189.3~~other costs increased $0.2 million, or 59.8% in the quarter as compared to the prior year, primarily due to higher franchise development support costs.

Franchise advertising and ~~$18.3~~other service expenses increased $1.3 million, ~~year-to-date.~~or 26.7% in the quarter as compared to the prior year, primarily driven by higher franchise sales resulting from the 66 restaurants refranchised in 2023.

Company-Wide Results

Depreciation and Amortization

Depreciation and amortization ~~increased by $6.3~~decreased $2.3 million in the quarter and ~~$5.1~~increased $7.7 million year-to-date ~~primarily due~~compared to the prior year. Certain franchise buildings becoming fully depreciated in the current year resulted in the decrease in the quarter and was more than offset year-to-date by the acquisition of Del Taco ~~contributing an additional $7.5 million and $9.7 million of depreciation~~ in the second quarter ~~and year-to-date; more than offsetting lower Jack in the Box depreciation as a result~~ of ~~certain franchise buildings becoming fully depreciated.~~2022.

Selling, General and Administrative (“SG&A”) Expenses

The following table presents the change in SG&A expenses compared with the prior year (in thousands):


		Increase/(Decrease)					Increase/(Decrease)
		Quarter		Year-to-date			Quarter		Year-to-date
Advertising	Advertising	$	5,123	$	8,145	Advertising	$	(773)	$	7,411
Incentive compensation (including share-based compensation and related payroll taxes)	Incentive compensation (including share-based compensation and related payroll taxes)	(150)		(4,335)		Incentive compensation (including share-based compensation and related payroll taxes)	2,761		15,312
Cash surrender value of COLI policies, net	Cash surrender value of COLI policies, net	7,198		16,117		Cash surrender value of COLI policies, net	(5,166)		(14,313)
Litigation matters	Litigation matters	(2,125)		(2,141)		Litigation matters	(1,138)		3,746
Insurance	Insurance	465		1,665		Insurance	1,085		3,913
Other	Other	7,779		13,297		Other	2,816		19,821
		$	18,290	$	32,748		$	(415)	$	35,890

Advertising costs represent company contributions to our marketing funds and are generally determined as a percentage of company-operated restaurant sales. Advertising costs ~~increased $5.1~~decreased $0.8 million in the quarter compared to the prior year, and ~~$8.1~~increased $7.4 million year-to-date compared to the prior ~~year~~year. In the quarter, the decrease is primarily due to a decrease in the number of company-operated restaurants, partially offset with higher company-operated restaurant sales. Year-to-date, the increase is primarily due to the acquisition of Del Taco ~~which resulted~~ in ~~higher advertising costs~~the second quarter of ~~$4.7~~2022 and therefore only includes 18 weeks of Del Taco operating results in 2022, versus 40 weeks of Del Taco operations in 2023.

Incentive compensation increased $2.8 million in the quarter compared to the prior year, and ~~$7.0 million year-to-date.~~

~~Incentive compensation decreased by $0.2 million in the quarter and $4.3~~$15.3 million year-to-date compared to the prior year. ~~Year-to-date,~~In the ~~decrease~~quarter, the increase is primarily due to a ~~$6.2~~$2.3 million ~~decrease~~increase in the annual incentives ~~partially offset by~~as a ~~$2.2 million increase in stock-based compensation mainly from timing~~result of ~~annual grants~~higher achievement levels compared to the prior ~~year.~~year as well as a $0.5 million increase in share-based compensation. Year-to-date, the increase is primarily due to a $12.4 million increase in the annual incentives as a result of higher achievement levels compared to the prior year, a $2.5 million increase in share-based compensation due to the likelihood of achieving certain performance targets on awards, and other minor increases in payroll taxes.

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 ~~negative~~positive impact of ~~$7.2~~$5.2 million in the quarter compared to the prior year and ~~$16.1~~$14.3 million year-to-date versus the prior year.

~~Insurance costs increased by $0.5~~Litigation matters decreased $1.1 million in the quarter ~~and $1.7~~compared to the prior year, due to the timing of when we accrued for the J&D Restaurant Group legal matter in the third quarter of 2022. Litigation matters increased by $3.7 million year-to-date compared to the prior year due to the timing of litigation developments in the current year. In 2023, we recorded a ~~more~~litigation charge of $6.6 million for Gessele vs. Jack in the Box Inc, which was partially offset by a $1.6 million net reversal of litigation charges in connection with the J&D Restaurant Group legal matter based on the Court’s final ruling. Refer also to Note 14, Commitments and Contingencies, in the condensed consolidated financial statements for additional information related to the legal matters.

Insurance increased $1.1 million in the quarter and $3.9 million year-to-date compared to a year ago due to specific claim reserves, as well as a prior year benefit from a favorable change in the loss development factors related to our worker’s compensation ~~liabilities a year ago.~~liabilities.

The increase in the other balance within SG&A of $2.8 million for the quarter as compared to the prior year is primarily due to additional consulting costs in the period. The year-to-date increase is mainly due to the timing of the acquisition of Del Taco in the second quarter ~~which resulted~~of 2022 and therefore only includes 18 weeks of Del Taco operating results in ~~an increase~~2022, versus 40 weeks of ~~additional general and administrative costs of $8.5 million~~Del Taco operations in ~~the quarter and $12.8 million year-to-date compared to the prior year.~~2023.

Other Operating Expenses, Net

Other operating expenses, net is comprised of the following (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Acquisition, integration, and restructuring costs	Acquisition, integration, and restructuring costs	$	2,753	$	—	$	18,864	$	4	Acquisition, integration, and restructuring costs	$	2,463	$	2,753	$	5,359	$	18,864
Costs of closed restaurants and other	Costs of closed restaurants and other	837		622		2,559		2,086		Costs of closed restaurants and other	1,272		837		4,017		2,559
Operating restaurant impairment charges	Operating restaurant impairment charges	1,653		—		1,653		—		Operating restaurant impairment charges	4,395		1,653		4,395		1,653
Accelerated depreciation	Accelerated depreciation	346		123		1,009		1,362		Accelerated depreciation	66		346		519		1,009
(Gains) losses on disposition of property and equipment, net	(Gains) losses on disposition of property and equipment, net	(1,460)		177		(1,746)		(1,754)		(Gains) losses on disposition of property and equipment, net	(540)		(1,460)		(9,155)		(1,746)
		$	4,129	$	922	$	22,339	$	1,698		$	7,656	$	4,129	$	5,135	$	22,339

Other operating expenses, net increased ~~by $3.2~~$3.5 million in the quarter and ~~$20.6~~decreased $17.2 million year-to-date compared to the prior ~~year,~~year. In the quarter, the increase is primarily due to ~~$2.8 million, and $18.9 million~~the impairment of ~~costs incurred in~~certain underperforming Del Taco restaurants currently held for use. Year-to-date, the ~~quarter and year-to-date, respectively, relating~~decrease is primarily due to the acquisition ~~and integration~~ of Del ~~Taco.~~

Taco in the prior year resulting in acquisition, integration and restructuring costs of $18.9 million as well as $9.5 million of gains recognized in the current year from the sale of Jack in the Box restaurant properties to franchisees who were leasing the properties from us prior to the sale.

Gains on the Sale of Company-Operated Restaurants

For the year-to-date period 2023, the Company sold five Jack in the Box company-operated restaurants and 66 Del Taco company-operated restaurants to franchisees and recognized a net gain of $10.3 million. Refer to Note 4, Summary of Refranchisings and Franchise Acquisitions, of the notes to the condensed consolidated financial statements for additional information regarding these transactions. In fiscal 2022, ~~and 2021,~~ no company-operated restaurants were sold to franchisees. Amounts included in “Gains on the sale of company-operated restaurants” in ~~both periods~~2022 related to ~~resolutions~~additional proceeds received in connection with the extension of ~~certain contingencies from~~franchise and lease agreements form the sale of ~~Jack in the Box~~ restaurants in prior years.

Interest Expense, Net

Interest expense, net is comprised of the following (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Interest expense	Interest expense	$	19,792	$	15,206	$	66,627	$	51,186	Interest expense	$	19,201	$	19,792	$	65,462	$	66,627
Interest income	Interest income	(89)		(48)		(256)		(66)		Interest income	(539)		(89)		(1,295)		(256)
Interest expense, net	Interest expense, net	$	19,703	$	15,158	$	66,371	$	51,120	Interest expense, net	$	18,662	$	19,703	$	64,167	$	66,371

Interest expense, net ~~increased by $4.5~~decreased $1.0 million in the quarter and ~~$15.3~~$2.2 million year-to-date compared to ~~the prior year.~~a year ago. In the quarter, the ~~increase~~decrease is primarily due to ~~higher~~lower average borrowings, ~~resulting in higher interest expense of $5.5 million,~~ partially offset by ~~lower~~higher average borrowing rates. Year-to-date, the ~~increase~~decrease is primarily due to a loss on early extinguishment of debt of $7.7 million ~~during~~in the ~~second quarter as well as~~prior year and lower average borrowing rates, partially offset by higher average ~~borrowings resulting in higher interest expense of $8.6 million.~~borrowings.

Income Tax Expense

Non-GAAP Adjusted EBITDA

Below is a consolidated reconciliation of ~~fiscal year 2021.~~Non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net earnings (in thousands):


	Quarter				Year-to-date
Consolidated:	July 9, 2023		July 10, 2022		July 9, 2023		July 10, 2022
Net earnings - GAAP	$	29,168	$	22,857	$	108,929	$	69,923
Income tax expense	14,104		9,237		47,657		27,324
Interest expense, net	18,662		19,703		64,167		66,371
Gains on the sale of company-operated restaurants	(5,794)		(802)		(10,323)		(1,660)
Other operating expenses, net	7,656		4,129		5,135		22,339
Depreciation and amortization	14,460		16,713		48,460		40,754
Amortization of favorable and unfavorable leases and subleases, net	83		437		1,458		685
Amortization of franchise tenant improvement allowances and incentives	1,057		919		3,295		3,046
Adjusted EBITDA - Non-GAAP	$	79,396	$	73,193	$	268,778	$	228,782

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings available under our securitized financing facility. Our cash requirements consist principally of working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements, franchise tenant improvement allowance and incentive distributions, dividend payments, and obligations related to our benefit plans. We generally ~~reinvest~~use available cash flows from operations to invest in our business, service our debt obligations, pay dividends and repurchase shares of our common stock.

Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our credit facilities. As of July ~~10, 2022,~~9, 2023, the Company had ~~$92.9~~$182.0 million of cash and restricted cash on its consolidated balance sheet and available borrowings of ~~$120.0~~$172.0 million under our $150.0 million Variable Funding Notes and our $75.0 million revolving credit facility. The Company continually assesses the optimal sources and uses of cash for our business. Since closing the Del Taco acquisition, we have undertaken a process to review our balance sheet for any undervalued assets, and pursue opportunities for capital sources, including ~~leasebacks for~~the sale of our owned Jack in the Box properties, and refranchising, primarily for Del Taco in the near term.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility and revolving credit facility, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

Cash Flows

The table below summarizes our cash flows from continuing operations (in thousands):


		Year-to-date					Year-to-date
		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022
Total cash provided by (used in):	Total cash provided by (used in):					Total cash provided by (used in):
Operating activities	Operating activities	$	103,812	$	149,881	Operating activities	$	182,071	$	103,812
Investing activities	Investing activities	(604,395)		(26,040)		Investing activities	25,488		(604,395)
Financing activities	Financing activities	519,930		(258,320)		Financing activities	(161,579)		519,930
Net cash flows	Net cash flows	$	19,347	$	(134,479)	Net cash flows	$	45,980	$	19,347

Operating Activities. Operating cash flows ~~decreased $46.1~~increased $78.3 million compared with a year ago. This is primarily due to higher net income, when adjusted for non-cash items, of $9.0 million, as well as a favorable change in working capital of $69.3 million. The change in working capital is primarily a result of higher income tax accruals of $28.2 million due to timing of tax payments, higher advertising accruals of $21.3 million due to the timing of media payments, higher bonus accrual of $15.2 million, a decrease in receivables of $12.3 million which included the timing of minimum rent collected, partially offset by a decrease in accounts payable of $30.7 million which included the timing the rent payments.

Investing Activities. Cash flows from investing activities increased by $629.9 million compared with a year ago ~~primarily~~ due to ~~an unfavorable change~~the Del Taco acquisition in ~~working capital of $41.3 million as a result of higher advertising spend compared to~~the prior year ~~timing~~ of ~~deferred rent driven by collections of October rent~~$580.8 million, and higher proceeds in the ~~53rd week~~current year from the sale of Jack in ~~fiscal 2021,~~the Box restaurant properties to franchisees of $20.5 million and higher ~~annual incentive payments compared to~~proceeds from the ~~prior year.~~

~~Pension~~sale of company-operated restaurants of $50.4 million. These increases are partially offset by higher purchases of property and ~~post-retirement contributions~~ — ~~Our policy is to fund our pension plans at or above the minimum required by law. As~~equipment of January 1, 2021, the date of our last actuarial funding valuation, there was no minimum contribution funding requirement for our qualified pension plan. In 2022, we contributed $5.1 million to our non-qualified pension plan and post-retirement plans.

~~Investing Activities. Cash used in investing activities increased by $578.4 million compared with a year ago, primarily due to $580.8 million paid for the acquisition of Del Taco, net of cash acquired.~~$22.3 million.

Capital Expenditures — The composition of capital expenditures in each period follows (in thousands):


		Year-to-date					Year-to-date
		July 10, 2022		July 4, 2021			July 9, 2023		July 10, 2022
Restaurants:	Restaurants:					Restaurants:
Remodel / refresh programs	Remodel / refresh programs	$	7,406	$	7,877	Remodel / refresh programs	$	6,222	$	7,406
Restaurant facility expenditures	Restaurant facility expenditures	14,962		4,984		Restaurant facility expenditures	21,924		14,962
Purchases of assets intended for sale and leaseback	Purchases of assets intended for sale and leaseback	1,877		15,528		Purchases of assets intended for sale and leaseback	13,241		1,877
Restaurant information technology	Restaurant information technology	6,016		2,482		Restaurant information technology	10,463		6,016
		30,261		30,871			51,850		30,261
Corporate Services:	Corporate Services:					Corporate Services:
Information technology	Information technology	2,863		1,250		Information technology	4,559		2,863
Corporate facilities	Corporate facilities	1,225		3,036		Corporate facilities	260		1,225
		4,088		4,286			4,819		4,088

Total capital expenditures	Total capital expenditures	$	34,349	$	35,157	Total capital expenditures	$	56,669	$	34,349

The increase in restaurant facility expenditures includes amounts spent on capital maintenance, our digital menu board efforts and other operational initiatives. The increase for the purchases of assets intended for sale and leaseback includes amounts spent on exercising our right of first refusal to purchase land and building during 2023 which we intend to sell and leaseback. The increase for information technology includes amounts capitalized for our enterprise resource planning system and digital workflow platform.

Sale of Company-Operated Restaurants— The following table details proceeds received in connection with our refranchising activities in each period (dollars in thousands).


	Year-to-date
	July 9, 2023		July 10, 2022
Number of Jack in the Box restaurants sold to franchisees	5		—
Number of Del Taco restaurants sold to franchisees	66		—
Total proceeds (1)	$	51,845	$	1,402

(1) The proceeds in fiscal 2022 were received in connection with the extension of franchise and lease agreements from the sale of restaurants in prior years.

For further information, see Note 4, Summary of refranchisings and franchise acquisitions, in the notes to the condensed consolidated financial statements.

Financing Activities. Cash flows ~~from~~used in financing activities increased by ~~$778.3~~$681.5 million compared with a year ~~ago, primarily as a result of~~ago. The primary change is due an increase in net borrowings ~~of $657.4 million,~~in the prior year driven by the issuance of the 2022 Notes as further detailed below. The repayment of $50.0 million of borrowings outstanding under our Variable Funding Notes and an$60.4 million of stock repurchases in the current year also contributed to the increase ~~of $124.4 million from lower share repurchases compared to~~in cash flows used in financing activities versus the prior year.

Repurchases of common stock — The Company ~~did not~~repurchased 0.7 million shares of its common stock in fiscal 2023 for an aggregate cost of $60.4 million. As of July 9, 2023, there was $115.0 million remaining under share repurchase ~~any shares in 2022. On November 19, 2021,~~programs authorized by the Board of Directors ~~authorized a $200.0 million stock buy-back program that expires on~~which expire in November ~~20,~~ 2023.

Dividends — ~~During 2022,~~Up through July 9, 2023, the Board of Directors declared three cash dividends of $0.44 per common share totaling ~~$28.0~~$27.4 million. On August ~~5, 2022,~~4, 2023, the Board of Directors declared a cash dividend of ~~0.44~~$0.44 per common share, to be paid on September ~~9, 2022,~~18, 2023, to shareholders of record as of the close of business on ~~August 24, 2022.~~September 6, 2023.

Securitized Refinancing Transaction — On February 11, 2022, the Company completed the sale of $550.0 million of its Series 2022-1 3.445% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) and $550.0 million of its Series

2022-1 4.136% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class ~~A-2-II”~~A-2-II Notes” and, together with the Class A-2-I Notes, the “2022 Notes”). Interest payments on the 2022 Notes are payable on a quarterly basis. The anticipated repayment dates of the

2022 Class A-2-I Notes and the Class A-2-II Notes will be February 2027 and February 2032, respectively, unless earlier prepaid to the extent permitted under the indenture that ~~will govern~~governs the 2022 Notes. The anticipated repayment dates of the existing 2019-1 Class A-2-II Notes and the Class A-2-III Notes are August 2026 and August 2029, respectively.

The Company also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Secured Notes (the “Variable Funding Notes”), which permits borrowings up to a maximum of $150.0 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit. ~~The Company’s existing revolving financing facility of Series 2019-1 Class A-1 Notes was terminated in connection with the transaction.~~ As of July ~~10, 2022,~~9, 2023, we ~~had~~did not have any outstanding borrowings ~~of $50.0 million~~ and had available borrowing capacity of ~~$58.0~~$109.8 million under our ~~2022~~ Variable Funding Notes, net of letters of credits issued of ~~$42.0~~$40.2 million.

Restricted cash — In accordance with the terms of the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the note holders and are restricted in their use. As of July ~~10, 2022,~~9, 2023, the Company had restricted cash of ~~$27.1~~$27.9 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees required for the Class A-1 and A-2 Notes.

Covenants and restrictions — The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date. The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments. As of July ~~10, 2022,~~9, 2023, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.

Revolving credit facility — In connection with the Del Taco acquisition, Del Taco’s existing debt of $115.2 million related to a Syndicated Credit Facility dated August 5, 2015, was repaid and extinguished on the Closing Date. On the Closing Date, Del Taco entered into a new syndicated credit facility with an aggregate principal amount of up to $75.0 million, ~~maturing~~which matures on March ~~7, 2023.~~1, 2024. The revolving credit facility, as amended, includes a limit of $20.0 million for letters of credit. As of July ~~10, 2022,~~9, 2023, we had no outstanding borrowings and available borrowing capacity of ~~$61.9~~$62.2 million of under the facility, net of letters of credit of ~~$13.1~~$12.8 million.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies and estimates are those that we believe are most important for the portrayal of the Company’s financial condition and results, and that require management’s most subjective and complex judgments. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. ~~In addition~~There have been no material changes to the critical accounting policies and estimates previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2021, due to recent transactions and events, we also consider the following to be part of our critical accounting policies and estimates due to the high degree of judgment and complexity in its application:

~~Business Combinations~~ — The Del Taco Acquisition was accounted for using the acquisition method of accounting, or acquisition accounting, in accordance with ASC Topic 805, Business Combinations. The acquisition method of accounting involved the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. This allocation process involves the use of estimates and assumptions made in connection with estimating the fair value of assets acquired and liabilities assumed including cash flows expected to be derived from the use of the asset, the timing of such cash flows, the remaining useful life of assets and applicable discount rates. Acquisition accounting allows for up to one year to obtain the information necessary to finalize the fair value of all assets acquired and liabilities assumed at March 8,2, 2022. As of July 10, 2022, we have recorded a preliminary allocation of consideration to net tangible and intangible assets acquired, which is subject to revision as we obtain additional information necessary to complete the fair value studies and acquisition accounting.

In the event that actual results vary from the estimates or assumptions used in the valuation or allocation process, we may be required to record an impairment charge or an increase in depreciation or amortization in future periods, or both. Refer to Note 3, ~~Business Combination, to the accompanying condensed consolidated financial statements for additional information about accounting for the Del Taco Acquisition.~~

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1, Basis of Presentation, of the notes to condensed consolidated financial statements.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the federal securities laws, including further impacts that COVID-19 pandemic may have on our future operations. Any statements contained herein that are not historical facts may be deemed to be forward-looking statements. Forward-looking statements may be identified by words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would”, “should” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to:

•The COVID-19 pandemic has disrupted and may continue to disrupt our business, which has affected and could continue to materially affect our operations, financial condition, and results of operations for an extended period of time.

•~~We face significant competition~~Changes in the ~~food service industry~~availability of and ~~our inability to compete may~~the cost of labor could adversely affect our business.

•~~Changes in demographic trends and in customer tastes and preferences could cause sales and the royalties we receive from franchisees to decline.~~

•Changes in consumer confidence and declines in general economic conditions could negatively impact our financial results.

•Increases in food and commodity costs could decrease our profit margins or result in a modified menu, which could adversely affect our financial results.

•Failure to receive scheduled deliveries of high-quality food ingredients and other supplies could harm our operations and reputation.

•~~We have a limited number of suppliers for~~Inability to attract, train and retain top-performing personnel could adversely impact our ~~major products and rely on a distribution network with a limited number of distribution partners for the majority of our national distribution program. If our suppliers~~financial results or ~~distributors are unable to fulfill their obligations under their contracts, it could harm our operations.~~business.

•~~Food safety~~Our business could be adversely affected by increased labor costs.

•Unionization activities or labor disputes may disrupt our operations and ~~food-borne illness concerns~~affect our profitability.

•Our insurance may ~~have an adverse effect on~~not provide adequate levels of coverage against claims.

•We face significant competition in the food service industry and our ~~business by reducing demand~~inability to compete may adversely affect our business.

•Changes in demographic trends and ~~increasing costs.~~in customer tastes and preferences could cause sales and the royalties we receive from franchisees to decline.

•Negative publicity relating to our business or industry could adversely impact our reputation.

•~~Changes in the availability of and the cost of labor could adversely affect our business.~~

•~~Inability to attract, train and retain top-performing personnel could adversely impact our financial results or business.~~

•We may not have the same resources as our competitors for marketing, advertising and promotion.

•We may be adversely impacted by severe weather conditions, natural disasters, terrorist acts or civil unrest that could result in property damage, injury to employees and staff, and lost restaurant sales.

•Food safety and food-borne illness concerns may have an adverse effect on our business by reducing demand and increasing costs.

•We may not achieve our development goals.

•Our business and Del Taco’s business may not be integrated successfully, or such integration may be more difficult, time consuming, or costly than expected. Operating costs, customer loss, and business disruptions, including difficulties maintaining relationships with employees, customers, suppliers or vendors, may be greater than expected.

•Our highly franchised business model presents a number of risks, and the failure of our franchisees to operate successful and profitable restaurants could negatively impact our business.

•We are subject to financial and regulatory risks associated with our owned and leased properties and real estate development projects.

•We have a limited number of suppliers for our major products and rely on a distribution network with a limited number of distribution partners for the majority of our national distribution program. If our suppliers or distributors are unable to fulfill their obligations under their contracts, it could harm our operations.

•Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results.

•Governmental regulation may adversely affect our existing and future operations and results, including by harming our ability to profitably operate our restaurants.

•The proliferation of federal, state, and local regulations increases our compliance risks, which in turn could adversely affect our business.

•Legislation and regulations regarding our products and ingredients, including the nutritional content of our products, could impact customer preferences and negatively impact our financial results.

•We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.

•We are subject to increasing legal complexity and may be subject to claims or lawsuits that are costly to defend and could result in our payment of substantial damages or settlement costs.

•If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, the Company’s stockholders could lose confidence in our financial results, which would harm our business and the value of the Company’s common shares.

•Changes in tax laws, interpretations of existing tax law, or adverse determinations by tax authorities could adversely affect our income tax expense and income tax payments.

•We may be subject to risk associated with disagreements with key stakeholders, such as franchisees.

•Actions of activist stockholders could cause us to incur substantial costs, divert management’s attention and resources, and have an adverse effect on our business.

•We are subject to the risk of cybersecurity breaches, intrusions, data loss, or other data security incidents.

•We are subject to risks associated with our increasing dependence on digital commerce platforms and technologies to maintain and grow sales, and we cannot predict the impact that these digital commerce platforms and technologies, other new or improved technologies or alternative methods of delivery may have on consumer behavior and our financial results.

•We are dependent on information technology and digital service providers and any material failure, misuse or interruption of our computer systems, supporting infrastructure, consumer-facing digital capabilities or social media platforms could adversely affect our business.

•~~We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.~~

•~~Jack in the Box may be subject to risk associated with disagreements with key stakeholders, such as franchisees.~~

•The securitized debt instruments issued by certain of our wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, which could harm the value of our brand and adversely affect our business.

•We have a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of our Company or its subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations.

•The securitization transaction documents impose certain restrictions on our activities or the activities of our subsidiaries, and the failure to comply with such restrictions could adversely affect our business.

•~~We are subject to increasing legal complexity and may be subject to claims or lawsuits that are costly to defend and could result in our payment of substantial damages or settlement costs.~~

•~~Unionization activities or labor disputes may disrupt our operations and affect our profitability.~~

•~~Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results.~~

•~~Our insurance may not provide adequate levels of coverage against claims.~~

•~~Changes in tax laws, interpretations of existing tax law, or adverse determinations by tax authorities could adversely affect our income tax expense and income tax payments.~~

•~~Increasing regulatory and legal complexity may adversely affect restaurant operations and our financial results.~~

•~~Governmental regulation may adversely affect our existing and future operations and results, including by harming our ability to profitably operate our restaurants.~~

•~~The proliferation of federal, state, and local regulations increases our compliance risks, which in turn could adversely affect our business.~~

•~~Legislation and regulations regarding our products and ingredients, including the nutritional content of our products, could impact customer preferences and negatively impact our financial results.~~

•~~Our quarterly results and, as a result, the price of our common stock, may fluctuate significantly and could fall below the expectations of securities analysts and investors due to various factors.~~

•~~Actions of activist stockholders could cause us to incur substantial costs, divert management’s attention and resources, and have an adverse effect on our business.~~

These and other factors are identified and described in more detail in our filings with the Securities and Exchange Commission, including, but not limited to: the “Discussion of Critical Accounting Estimates,” and other sections in this Form 10-Q and the “Risk Factors” section of our most recent Annual Report on Form 10-K for the fiscal year ended October ~~3, 2021~~2, 2022 (“Form 10-K”). These documents may be read free of charge on the SEC’s website at www.sec.gov. Potential investors are urged to consider these factors, more fully described in our Form 10-K, carefully in evaluating any forward-looking statements, and are cautioned not to place undue reliance on the forward-looking statements. All forward-looking statements are made only as of the date issued, and we do not undertake any obligation to update any forward-looking statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~We are exposed to interest rate risk~~There have been no material changes in our quantitative and qualitative market risks set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on borrowings under our $150.0 million Variable Funding Notes and our $75.0 million revolving credit facility. As of July 10, 2022, we had outstanding variable rate borrowings of $50.0 million. A 100 basis point increase inForm 10-K for the ~~effective interest rate applied to these borrowings would result in additional interest expense of approximately $0.5 million on an annualized basis.~~

The Company is also exposed to the impact of commodity and utility price fluctuations. Many of the ingredients we use are commodities or ingredients that are affected by the price of other commodities, weather, seasonality, production, availability, and various other factors outside our control. In order to minimize the impact of fluctuations in price and availability, we monitor the primary commodities we purchase and may enter into purchasing contracts and pricing arrangements when considered to be advantageous. However, certain commodities remain subject to price fluctuations. We are exposed to the impact of utility price fluctuations related to unpredictable factors such as weather and various other market conditions outside our control. Our ability to recover increased costs for commodities and utilities through higher prices is limited by the competitive environment in which we operate.fiscal year ended October 2, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s quarter ended July ~~10, 2022,~~9, 2023, the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) have concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended July ~~10, 2022~~9, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

There is no information required to be reported for any items under Part II, except as follows:

ITEM 1. LEGAL PROCEEDINGS

See Note ~~15,~~14, Commitments and Contingencies, of the notes to the condensed consolidated financial statements for a discussion of our contingencies and legal matters.

ITEM 1A. RISK FACTORS

~~The risk factors set forth below contain material changes to~~When evaluating our business and our prospects, you should consider the ~~risk factors previously disclosed in~~risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended October ~~3, 2021,~~2, 2022, which we filed with the SEC on November ~~23, 2021,~~22, 2022, as updated in this Item 1A. You should also consider the risks and uncertainties discussed under the heading “Cautionary Statements Regarding Forward-Looking Statements” in Item 2 of this Quarterly Report on Form 10-Q. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended October ~~3, 2021,~~2, 2022, including our financial statements and the related notes. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the risks or uncertainties actually ~~occurs,~~occur, our business and financial results could be harmed. In that case, the market price of our common stock could decline.

Our business and Del Taco’s business may not be integrated successfully, or such integration may be more difficult, time consuming, or costly than expected. Operating costs, customer loss, and business disruption, including difficulties maintaining relationships with employees, customers, suppliers or vendors, may be greater than expected.

The combination of two independent businesses can be complex, costly, and time-consuming, and it may divert significant management attention and resources to combining ours and Del Taco’s business practices and operations. This process may disrupt our business or otherwise impact our ability to compete. The failure to meet the challenges involved in combining ours and Del Taco’s business and to realize the anticipated benefits of the acquisition could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of operations.

The overall combination of ours and Del Taco’s business may also result in material unanticipated problems, expenses, liabilities, competitive responses and impacts, and loss of customer and other business relationships. The difficulties of combining the operations of the companies, include, among others:

•~~diversion of management attention to integration matters;~~

•difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure, supplier and vendor arrangements and financial reporting and internal control systems;

•~~challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;~~

•~~differences in control environments and cultures, and the potential identification of material weaknesses while we work to integrate and align policies, principles and practices;~~

•~~alignment of key performance measurements may result in a greater need to communicate and manage clear expectations while we work to integrate and align policies and practices;~~

•~~difficulties in integrating employees and attracting and retaining key personnel;~~

•~~the transition to a combined management team, and the need to address possible differences in corporate cultures and management philosophies;~~

•~~challenges in retaining existing customers and obtaining new customers;~~

•~~difficulties in achieving anticipated cost savings, synergies, accretion targets, business opportunities, financing plans and growth prospects from the combination; and~~

•~~difficulties in managing the expanded operations of a significantly larger and more complex company.~~

Additionally, uncertainties over the integration process could cause customers, suppliers, distributors, and others to seek to change or cancel our existing business relationships or to refuse to renew existing relationships. Competitors may also target our existing customers by highlighting potential uncertainties and integration difficulties.

Some of these factors are outside our control, and any one of them could result in lower revenues, higher costs, and diversion of management time and energy, which could materially impact our business, financial condition and results of operations.

Similar to our Series 2019-1 Class A-2-I Notes, the new securitized debt instruments issued by certain of our wholly-owned subsidiaries have restrictive terms, and any failure to comply with such terms could result in default, which could harm the value of our brand and adversely affect our business.

The Series 2022-1 Senior Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Series 2022-1 Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Series 2022-1 Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Series 2022-1 Senior Notes are in stated ways defective or ineffective and (iv) covenants relating to record keeping, access to information and similar matters. The Series 2022-1 Senior Notes are also subject to customary rapid amortization events provided for in the indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Series 2022-1 Class A-2 Notes on the applicable scheduled maturity date. The Series 2022-1 Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Series 2022-1 Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.

In the event that a rapid amortization event occurs under the indenture (including, without limitation, upon an event of default under the indenture or the failure to repay the securitized debt at the end of the applicable term) which would require repayment of the Series 2022-1 Senior Notes, the funds available to us would be reduced or eliminated, which would in turn reduce our ability to operate and/or grow our business. If our subsidiaries are not able to generate sufficient cash flow to service their debt obligations, they may need to refinance or restructure debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If our subsidiaries are unable to implement one or more of these alternatives, they may not be able to meet debt payment and other obligations which could have a material adverse effect on our financial condition.

We have a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of our Company or its subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations.

~~As of July 10, 2022, the Company has debt outstanding of $1.86 billion. This level of debt could have certain material adverse effects on the Company, including but not limited to:~~

•our available cash flow in the future to fund working capital, capital expenditures, acquisitions, and general corporate or other purposes could be impaired, and our ability to obtain additional financing for such purposes is limited;

•~~a substantial portion of our cash flows could be required for debt service and, as a result, might not be available for our operations or other purposes;~~

•any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or could force us to modify our operations or sell assets;

•~~our ability to operate our business and our ability to repurchase stock or pay cash dividends to our stockholders may be restricted by the financial and other covenants set forth in the indenture;~~

•~~our ability to withstand competitive pressures may be decreased; and~~

•~~our level of indebtedness may make us more vulnerable to economic downturns and reduce our flexibility in responding to changing business, regulatory, and economic conditions.~~

In addition, we may incur additional indebtedness in the future. If new debt or other liabilities are added to our current consolidated debt levels, the related risks that it now faces could intensify.

Similar to the Series 2019-1 Class A-2-I Notes, the securitization transaction documents impose certain restrictions on our activities or the activities of our subsidiaries, and the failure to comply with such restrictions could adversely affect our business.

The indenture and the management agreement entered into between certain of our subsidiaries and the indenture trustee (the “Management Agreement”) contain various covenants that limit our and our subsidiaries’ ability to engage in specified types of transactions. For example, the indenture and the Management Agreement contain covenants that, among other things, restrict, subject to certain exceptions, the ability of certain subsidiaries to:

•~~incur or guarantee additional indebtedness;~~

•~~sell certain assets;~~

•~~alter the business conducted by our subsidiaries;~~

•~~create or incur liens on certain assets; or~~

•~~consolidate, merge, sell or otherwise dispose of all or substantially all of the assets held within the securitization entities.~~

As a result of these restrictions, we may not have adequate resources or the flexibility to continue to manage the business and provide for growth of the Jack in the Box system, including product development and marketing for the Jack in the Box brand, which could adversely affect our future growth prospects, financial condition, results of operations and liquidity.

~~Changes in the availability of and the cost of labor could adversely affect our business.~~

Our business could be adversely impacted by increases in labor costs, including those increases triggered by regulatory actions regarding wages, scheduling and benefits; increased health care and workers’ compensation insurance costs; increased wages and costs of other benefits necessary to attract and retain high quality employees with the right skill sets and increased wages, benefits and costs related to the COVID-19 pandemic and inflationary and other pressure on wages now being experienced. The growth of our business can make it increasingly difficult to locate and hire sufficient numbers of employees, to maintain an effective system of internal controls, and to train employees to deliver a consistently high-quality product and customer experience, which could materially harm our business and results of operations. Furthermore, we have experienced, and could continue to experience, a shortage of labor for restaurant positions, including due to concerns around and illnesses arising from COVID-19 and its various novel variants and other factors, which could decrease the pool of available qualified talent for key functions and require restaurants to operate on reduced hours. Such labor shortages could be further exacerbated by expanded federal, state and local COVID-19 vaccination requirements. In addition, our wages and benefits programs may be insufficient to attract and retain the top performing employees especially in a rising wage market.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock Repurchases — ~~We did not repurchase any~~In the third quarter of 2023, we repurchased 0.3 million shares of our common stock infor an aggregate cost of $26.9 million, including the ~~third quarter of 2022.~~applicable excise tax. As of July ~~10, 2022, there was $200.0~~9, 2023, this leaves $115.0 million remaining under share repurchase programs authorized by the ~~Board-authorized stock buyback program which expires~~Board of Directors that expire in November 2023.


	(a) Total number of shares purchased	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced programs	(d) Maximum dollar value that may yet be purchased under these programs (in thousands)
					$	141,571
April 17, 2023 - May 14, 2023	—	$	—	—	$	141,571
May 15, 2023 - June 11, 2023	258,045	$	89.02	258,045	$	118,601
June 12, 2023 - July 9, 2023	39,932	$	90.91	39,932	$	114,971
Total	297,977			297,977

ITEM 3. DEFAULTS OF SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended July 9, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term in defined in Item ~~5.03. None.~~408(a) of Regulation S-K.

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ITEM 6. EXHIBITS


Number	Description	Form	Filed with SEC
3.3	Amended and Restated Bylaws of Jack in the Box Inc., effective as of August 3, 2023	8-K	8/8/2023
10.8.21*	Jack in the Box, Inc. 2023 Omnibus Incentive Plan - Option Grant Notice	10-Q	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
31.2	Certification of ~~Chief~~Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
32.2	Certification of ~~Chief~~Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—	Filed herewith
101.INS	iXBRL Instance Document
101.SCH	iXBRL Taxonomy Extension Schema Document
101.CAL	iXBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	iXBRL Taxonomy Extension Definition Linkbase Document
101.LAB	iXBRL Taxonomy Extension Label Linkbase Document
101.PRE	iXBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File formatted in iXBRL

*Management contract or compensatory plan

4037

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			JACK IN THE BOX INC.

			By:			/S/ ~~TIM MULLANY~~DAWN HOOPER
						~~Tim Mullany~~Dawn Hooper
						~~Executive~~Senior Vice President, ~~and Chief Financial Officer~~Controller (principal financial officer) (Duly Authorized Signatory)

Date: August ~~10, 2022~~9, 2023

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	Initial Allocation of Consideration		Measurement Period Adjustments (1)		July 10, 2022
Total preliminary aggregate purchase consideration, net of $12,068 cash acquired	$	581,241	$	—	$	581,241
Assets:
Accounts and other receivables	3,809		—		3,809
Inventories	3,233		—		3,233
Prepaid expenses	2,950		—		2,950
Other current assets	105		—		105
Property and equipment	150,826		(5,341)		145,485
Operating lease right-of-use assets	349,489		—		349,489
Intangible assets	12,371		—		12,371
Trademarks	283,500		—		283,500
Other assets	5,128		—		5,128
Liabilities:
Current maturities of long-term debt	22		—		22
Current operating lease liabilities	21,991		—		21,991
Accounts payable	18,808		—		18,808
Accrued liabilities	66,739		45,076		111,815
Long-term debt, net of current maturities	349		—		349
Long-term operating lease liabilities, net of current portion	302,688		—		302,688
Deferred tax liabilities	88,203		(12,668)		75,535
Other long-term liabilities	13,080		—		13,080
Net assets acquired, excluding goodwill	$	299,531	$	(37,749)	$	261,782
Goodwill	$	281,710	$	37,749	$	319,459


	Amount		Useful life (Years)
Trademarks	$	283,500	Indefinite
Franchise contracts	9,700		18
Sublease assets	2,671		13
Estimated fair value of acquired intangible assets	$	295,871


	Finance Leases		Operating Leases
Fiscal year:
Remainder of 2022	$	244	$	55,942
2023	972		227,605
2024	399		191,112
2025	39		185,347
2026	27		168,451
Thereafter	26		874,345
Total future lease payments (1)	$	1,707	$	1,702,802
Less imputed interest	(84)		(362,768)
Present value of lease liabilities	$	1,623	$	1,340,034
Less current portion	(929)		(173,057)
Long-term lease obligations	$	694	$	1,166,977


	July 10, 2022		October 3, 2021
Series 2019-1 Class A-2-I Notes	$	—	$	570,688
Series 2019-1 Class A-2-II Notes	271,563		272,938
Series 2019-1 Class A-2-III Notes	444,375		446,625
Series 2022-1 Class A-2-I Notes	547,250		—
Series 2022-1 Class A-2-II Notes	547,250		—
Series 2022-1 Class A-2-I Variable Funding Notes	50,000		—
Revolving Credit Facility	—		—
Finance lease obligations and other debt	1,986		2,275
Total debt	1,862,424		1,292,526
Less current maturities of long-term debt	(30,201)		(894)
Less unamortized debt issuance costs	(26,149)		(18,212)
Long-term debt	$	1,806,074	$	1,273,420


Remainder of 2022	$	8,246
2023	29,891
2024	29,373
2025	29,338
2026	289,204
Thereafter	1,476,372
	$	1,862,424