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

Commission File Number: 1-9390

____________________________________________________

 _______________________________________________________________________________________

Delaware

95-2698708

(State of Incorporation)

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

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

_______________________________________________________________________________________

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.

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).

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.

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 3, 2023, 20,107,964 shares of the registrant’s common stock were outstanding.

 

						Page
			PART I – FINANCIAL INFORMATION
Item 1.			Condensed Consolidated Financial Statements (Unaudited):
			Condensed Consolidated Balance Sheets			2
			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			21
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			35
Item 4.			Controls and Procedures			35
			PART II – OTHER INFORMATION
Item 1.			Legal Proceedings			36
Item 1A.			Risk Factors			36
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3.			Defaults of Senior Securities			36
Item 4.			Mine Safety Disclosures			36
Item 5.			Other Information			36
Item 6.			Exhibits			37
			Signature			38

PART I. FINANCIAL INFORMATION

ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(Unaudited)

			July 9, 2023						October 2, 2022
ASSETS
Current assets:
Cash			$	154,073					$	108,890
Restricted cash			27,947						27,150
Accounts and other receivables, net			82,776						103,803
Inventories			4,606						5,264
Prepaid expenses			10,323						16,095
Current assets held for sale			10,012						17,019
Other current assets			5,799						4,772
Total current assets			295,536						282,993
Property and equipment:
Property and equipment, at cost			1,249,618						1,228,916
Less accumulated depreciation and amortization			(834,669)						(810,752)
Property and equipment, net			414,949						418,164
Other assets:
Operating lease right-of-use assets			1,368,133						1,332,135
Intangible assets, net			11,515						12,324
Trademarks			283,500						283,500
Goodwill			339,389						366,821
Other assets, net			238,757						226,569
Total other assets			2,241,294						2,221,349
			$	2,951,779					$	2,922,506
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt			$	29,970					$	30,169
Current operating lease liabilities			161,398						171,311
Accounts payable			50,885						66,271
Accrued liabilities			281,781						253,932
Total current liabilities			524,034						521,683
Long-term liabilities:
Long-term debt, net of current maturities			1,731,406						1,799,540
Long-term operating lease liabilities, net of current portion			1,220,968						1,165,097
Deferred tax liabilities			41,113						37,684
Other long-term liabilities			139,675						134,694
Total long-term liabilities			3,133,162						3,137,015
Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued			—						—
Common stock $0.01 par value, 175,000,000 shares authorized, 82,645,814 and 82,580,599 issued, respectively			826						826
Capital in excess of par value			516,789						508,323
Retained earnings			1,924,466						1,842,947
Accumulated other comprehensive loss			(52,761)						(53,982)
Treasury stock, at cost, 62,538,138 and 61,799,221 shares, respectively			(3,094,737)						(3,034,306)
Total stockholders’ deficit			(705,417)						(736,192)
			$	2,951,779					$	2,922,506

(In thousands, except per share data)

(Unaudited)

			Quarter												Year-to-date
			July 9, 2023						July 10, 2022						July 9, 2023						July 10, 2022
Revenues:
Company restaurant sales			$	198,516					$	215,231					$	671,311					$	486,596
Franchise rental revenues			86,248						80,068						278,598						259,723
Franchise royalties and other			54,970						52,059						185,342						159,915
Franchise contributions for advertising and other services			57,208						50,947						184,531						159,076
			396,942						398,305						1,319,782						1,065,310
Operating costs and expenses, net:
Food and packaging			58,556						65,755						199,799						150,163
Payroll and employee benefits			63,871						71,366						217,547						162,001
Occupancy and other			37,274						42,054						127,920						92,102
Franchise occupancy expenses			53,930						50,971						173,803						164,198
Franchise support and other costs			4,079						3,768						8,623						12,694
Franchise advertising and other services expenses			59,569						52,398						192,875						164,964
Selling, general and administrative expenses			39,617						40,032						129,164						93,274
Depreciation and amortization			14,460						16,713						48,460						40,754
Pre-opening costs			182						54						667						630
Other operating expenses, net			7,656						4,129						5,135						22,339
Gains on the sale of company-operated restaurants			(5,794)						(802)						(10,323)						(1,660)
			333,400						346,438						1,093,670						901,459
Earnings from operations			63,542						51,867						226,112						163,851
Other pension and post-retirement expenses, net			1,608						70						5,359						233
Interest expense, net			18,662						19,703						64,167						66,371
Earnings before income taxes			43,272						32,094						156,586						97,247
Income taxes			14,104						9,237						47,657						27,324
Net earnings			$	29,168					$	22,857					$	108,929					$	69,923
Earnings per share:
Basic			$	1.42					$	1.08					$	5.25					$	3.29
Diluted			$	1.41					$	1.08					$	5.22					$	3.29
Cash dividends declared per common share			$	0.44					$	0.44					$	1.32					$	1.32

(Unaudited)

			Quarter												Year-to-date
			July 9, 2023						July 10, 2022						July 9, 2023						July 10, 2022
Net earnings			$	29,168					$	22,857					$	108,929					$	69,923
Other comprehensive income:
Actuarial losses and prior service costs reclassified to earnings			498						748						1,657						2,491
			498						748						1,657						2,491
Tax effect			(132)						(195)						(436)						(647)
Other comprehensive income, net of taxes			366						553						1,221						1,844
Comprehensive income			$	29,534					$	23,410					$	110,150					$	71,767

(Unaudited)

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

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.

As of July 9, 2023, there were 140 company-operated and 2,051 franchise-operated Jack in the Box restaurants and 221 company-operated and 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”).

These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2022 (“2022 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our 2022 Form 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 2023 and 2022 include 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks. All comparisons between 2023 and 2022 refer to the 12 weeks (“quarter”) and 40 weeks (year-to-date”) ended July 9, 2023 and July 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 — The Company administers marketing funds at each of its restaurant brands that include contractual contributions. In 2023 and 2022, marketing fund contributions from Jack in the Box franchise and company-operated restaurants were approximately 5.0% of 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.

Allowance for credit losses — The Company closely monitors the financial condition of 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 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.

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

Business combinations — 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.

Recent accounting pronouncements — 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 its condensed consolidated financial statements.

2.REVENUE

Nature of products and services — 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 quarter ended July 9, 2023 (in thousands):

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

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 — 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. The Company classifies these contract liabilities as “Accrued liabilities” and “Other long-term liabilities” in our condensed consolidated balance sheets.

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

As of July 9, 2023, approximately $7.4 million of development fees related to unopened restaurants are included in deferred revenue. Timing of revenue recognition for development fees related to unopened restaurants is dependent upon the timing of 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 9, 2023 (in thousands):

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 Company acquired 100% of the outstanding equity interest of Del Taco for cash according to the terms and conditions of the Agreement and Plan of Merger, dated as of December 5, 2021. Jack in the Box acquired Del Taco as a part of the Company’s goal to gain greater scale and accelerate growth. Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2022 for further discussion regarding the acquisition, including the purchase consideration, purchase price allocation, goodwill and identifiable intangible 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):

The unaudited pro forma financial information for the period presented includes the business combination accounting effects resulting from 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 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 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 year-to-date period 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 — The following table summarizes the number of restaurants sold to franchisees and gains recognized (dollars in thousands):

____________________________

(1)Amounts in periods presented for 2022 primarily relate to additional proceeds received in connection with the extension of franchise and lease agreements from the sale of restaurants in prior years.

(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, the Company acquired thirteen Jack in the Box franchise restaurants in 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.

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

5.GOODWILL AND INTANGIBLE ASSETS, NET

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

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

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

6.LEASES

Nature of leases — The Company owns restaurant sites and also 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.”

The following table presents rental income (in thousands):

____________________________

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

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):

____________________________

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

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

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.

Non-financial assets and liabilities — 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 2023, the Company impaired certain under-performing Del Taco restaurants. For further information, see Note 8, Other operating expenses, net, below in the notes to the condensed consolidated financial statements.

8.OTHER OPERATING EXPENSES, NET

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

____________________________

(1)Acquisition, integration, and restructuring costs are related to the acquisition and integration of Del 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 2023, restaurant impairment charges related to the impairment of 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 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.

9.SEGMENT REPORTING

The Company’s principal business consists of developing, operating and franchising our Jack in the Box and Del Taco restaurant brands, each of which 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.

The Company measures and 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 costs, gains on the sale of company-operated restaurants, and amortization of favorable and unfavorable leases and subleases, net.

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

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.

10.INCOME TAXES

11.RETIREMENT PLANS

Defined benefit pension plans — 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.

Post-retirement healthcare plans — The Company also 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.

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

____________________________

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

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. The Company does not anticipate making any contributions to our Qualified Plan in fiscal 2023.

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):

Repurchases of common stock — The Company repurchased 0.7 million shares of its common stock in fiscal 2023 for an aggregate cost of $60.4 million, including applicable excise tax. As of July 9, 2023, there was $115.0 million remaining under share repurchase programs authorized by the Board of Directors which expire in November 2023.

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

13.AVERAGE SHARES OUTSTANDING

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

14.COMMITMENTS AND CONTINGENCIES

Legal matters — 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. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures. The ultimate amount of loss may differ from these estimates. 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, five 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. On October 24, 2022, a jury awarded the plaintiffs approximately $6.4 million in damages and penalties. The Company continues to dispute liability and the 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 accrue for post-judgment interest until the 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 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 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 generally alleging the Company wrongfully terminated the franchise agreements and unreasonably denied two perspective purchasers 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 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 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, the court granted the Company’s post-trial motion, overturning the jury verdict and ordering the 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 matters described above, we are subject to normal and routine litigation brought by former or current employees, customers, franchisees, vendors, landlords, shareholders, or others. 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 indemnity obligation. The Company records receivables from third party insurers when recovery has been determined to be probable.

Lease guarantees — 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 9, 2023, the maximum potential liability of future undiscounted payments under these leases is approximately $22.9 million. The lease terms extend for a maximum of approximately 15 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)

16.SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)