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 4, 2021~~April 17, 2022

☐ 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 ~~July 29, 2021, 21,671,547~~May 20, 2022, 21,045,960 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
	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	1523
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2935
Item 4.	Controls and Procedures	2935
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3036
Item 1A.	Risk Factors	3036
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3038
Item 3.	Defaults of Senior Securities	3038
Item 4.	Mine Safety Disclosures	3038
Item 5.	Other Information	3038
Item 6.	Exhibits	3139
	Signature	3240

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 4, 2021		September 27, 2020			April 17, 2022		October 3, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash	Cash	$	84,220	$	199,662	Cash	$	55,719	$	55,346
Restricted cash	Restricted cash	18,221		37,258		Restricted cash	28,914		18,222
Accounts and other receivables, net	Accounts and other receivables, net	68,278		78,417		Accounts and other receivables, net	52,461		74,335
Inventories	Inventories	2,120		1,808		Inventories	5,845		2,335
Prepaid expenses	Prepaid expenses	8,990		10,114		Prepaid expenses	20,486		12,682
Current assets held for sale	Current assets held for sale	3,255		4,598		Current assets held for sale	3,695		1,692
Other current assets	Other current assets	4,123		3,724		Other current assets	4,828		4,346
Total current assets	Total current assets	189,207		335,581		Total current assets	171,948		168,958
Property and equipment:	Property and equipment:					Property and equipment:
Property and equipment, at cost	Property and equipment, at cost	1,140,824		1,132,430		Property and equipment, at cost	1,282,161		1,133,038
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(809,375)		(796,448)		Less accumulated depreciation and amortization	(819,037)		(810,124)
Property and equipment, net	Property and equipment, net	331,449		335,982		Property and equipment, net	463,124		322,914
Other assets:	Other assets:					Other assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	924,210		904,548		Operating lease right-of-use assets	1,337,950		934,066
Intangible assets, net	Intangible assets, net	256		277		Intangible assets, net	12,726		470
Trademarks						Trademarks	283,500		—
Goodwill	Goodwill	47,161		47,161		Goodwill	329,758		47,774
Deferred tax assets	Deferred tax assets	72,419		72,322		Deferred tax assets	—		51,517
Other assets, net	Other assets, net	222,771		210,623		Other assets, net	224,747		224,438
Total other assets	Total other assets	1,266,817		1,234,931		Total other assets	2,188,681		1,258,265
		$	1,787,473	$	1,906,494		$	2,823,753	$	1,750,137
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	$	858	$	818	Current maturities of long-term debt	$	34,202	$	894
Current operating lease liabilities	Current operating lease liabilities	153,217		179,000		Current operating lease liabilities	174,065		150,636
Accounts payable	Accounts payable	34,557		31,105		Accounts payable	48,559		29,119
Accrued liabilities	Accrued liabilities	137,018		129,431		Accrued liabilities	161,897		148,417
Total current liabilities	Total current liabilities	325,650		340,354		Total current liabilities	418,723		329,066
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Long-term debt, net of current maturities	Long-term debt, net of current maturities	1,272,405		1,376,913		Long-term debt, net of current maturities	1,812,585		1,273,420
Long-term operating lease liabilities, net of current portion	Long-term operating lease liabilities, net of current portion	797,803		776,094		Long-term operating lease liabilities, net of current portion	1,172,708		809,191
Deferred tax liabilities						Deferred tax liabilities	43,399		—
Other long-term liabilities	Other long-term liabilities	203,217		206,494		Other long-term liabilities	159,955		156,342
Total long-term liabilities	Total long-term liabilities	2,273,425		2,359,501		Total long-term liabilities	3,188,647		2,238,953
Stockholders’ deficit:	Stockholders’ deficit:					Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, NaN issued		0		0
Common stock $0.01 par value, 175,000,000 shares authorized, 82,536,059 and 82,369,714 issued, respectively		825		824
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, 82,568,575 and 82,536,059 issued, respectively						Common stock $0.01 par value, 175,000,000 shares authorized, 82,568,575 and 82,536,059 issued, respectively	826		825
Capital in excess of par value	Capital in excess of par value	499,668		489,515		Capital in excess of par value	505,002		500,441
Retained earnings	Retained earnings	1,734,976		1,636,211		Retained earnings	1,792,824		1,764,412
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(107,798)		(110,605)		Accumulated other comprehensive loss	(72,963)		(74,254)
Treasury stock, at cost, 60,846,347 and 59,646,773 shares, respectively		(2,939,273)		(2,809,306)
Treasury stock, at cost, 61,523,475 shares						Treasury stock, at cost, 61,523,475 shares	(3,009,306)		(3,009,306)
Total stockholders’ deficit	Total stockholders’ deficit	(811,602)		(793,361)		Total stockholders’ deficit	(783,617)		(817,882)
		$	1,787,473	$	1,906,494		$	2,823,753	$	1,750,137

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
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Revenues:
Company restaurant sales $ 91,892 $ 82,444 $ 292,132 $ 262,188
Franchise rental revenues 80,598 76,021 262,248 241,990
Franchise royalties and other 48,582 43,239 155,461 133,469
Franchise contributions for advertising and other services 48,386 40,571 155,375 128,458
269,458 242,275 865,216 766,105
Operating costs and expenses, net:
Food and packaging 27,061 24,077 83,376 77,662
Payroll and employee benefits 27,356 25,085 88,727 81,236
Occupancy and other 14,103 12,334 45,287 40,862
Franchise occupancy expenses 48,824 48,612 162,897 161,470
Franchise support and other costs 2,722 2,692 9,336 10,339
Franchise advertising and other services expenses 49,168 42,176 158,967 133,134
Selling, general and administrative expenses 21,796 13,680 61,156 66,131
Depreciation and amortization 10,389 12,141 35,656 41,151
Impairment and other charges (gains), net 922 738 1,698 (7,837)
Gains on the sale of company-operated restaurants (264) (1,050) (3,079) (2,625)
202,077 180,485 644,021 601,523
Earnings from operations 67,381 61,790 221,195 164,582
Other pension and post-retirement expenses, net 204 1,482 678 40,972
Interest expense, net 15,158 15,700 51,120 51,051
Earnings before income taxes 52,019 44,608 169,397 72,559
Income taxes 11,991 12,432 42,576 21,023
Earnings from continuing operations 40,028 32,176 126,821 51,536
Earnings from discontinued operations, net of income taxes 0 379 0 379
Net earnings $ 40,028 $ 32,555 $ 126,821 $ 51,915
Net earnings per share - basic:
Earnings from continuing operations $ 1.80 $ 1.41 $ 5.59 $ 2.22
Earnings from discontinued operations 0 0.02 0 0.02
Net earnings per share (1) $ 1.80 $ 1.42 $ 5.59 $ 2.24
Net earnings per share - diluted:
Earnings from continuing operations $ 1.79 $ 1.40 $ 5.57 $ 2.21
Earnings from discontinued operations 0 0.02 0 0.02
Net earnings per share (1) $ 1.79 $ 1.42 $ 5.57 $ 2.23
Dividends declared per common share $ 0.44 $ 0 $ 1.24 $ 0.80

~~____________________________~~


	Quarter				Year-to-date
	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Revenues:
Company restaurant sales	$	151,309	$	85,962	$	271,365	$	200,240
Franchise rental revenues	76,556		77,901		179,655		181,650
Franchise royalties and other	47,101		47,231		107,856		106,879
Franchise contributions for advertising and other services	47,328		46,123		108,129		106,989
	322,294		257,217		667,005		595,758
Operating costs and expenses, net:
Food and packaging	46,871		23,938		84,408		56,315
Payroll and employee benefits	50,910		26,440		90,635		61,371
Occupancy and other	29,171		13,349		50,048		31,184
Franchise occupancy expenses	49,244		48,904		113,227		114,073
Franchise support and other costs	5,015		3,341		8,926		6,614
Franchise advertising and other services expenses	49,258		47,104		112,566		109,799
Selling, general and administrative expenses	28,479		18,861		53,818		39,360
Depreciation and amortization	11,545		10,696		24,041		25,267
Other operating expenses, net	14,367		1,228		18,210		776
Gains on the sale of company-operated restaurants	(810)		(1,532)		(858)		(2,815)
	284,050		192,329		555,021		441,944
Earnings from operations	38,244		64,888		111,984		153,814
Other pension and post-retirement expenses, net	70		203		163		474
Interest expense, net	26,481		15,227		46,668		35,962
Earnings before income taxes	11,693		49,458		65,153		117,378
Income taxes	3,897		13,524		18,087		30,585
Net earnings	$	7,796	$	35,934	$	47,066	$	86,793

Earnings per share:
Basic	$	0.37	$	1.58	$	2.22	$	3.80
Diluted	$	0.37	$	1.58	$	2.21	$	3.78

Cash dividends declared per common share	$	0.44	$	0.40	$	0.88	$	0.80

~~(1)Earnings per share may not add due to rounding.~~

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 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020			April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Net earnings	Net earnings	$	40,028	$	32,555	$	126,821	$	51,915	Net earnings	$	7,796	$	35,934	$	47,066	$	86,793
Other comprehensive income (loss):
Actuarial income (losses) arising during the period		0		19,666		0		(12,841)
Other comprehensive income:										Other comprehensive income:

Actuarial losses and prior service costs reclassified to earnings	Actuarial losses and prior service costs reclassified to earnings	1,139		1,494		3,794		43,166		Actuarial losses and prior service costs reclassified to earnings	746		1,138		1,743		2,655
		1,139		21,160		3,794		30,325			746		1,138		1,743		2,655
Tax effect	Tax effect	(297)		(5,493)		(987)		(7,872)		Tax effect	(193)		(296)		(452)		(690)
Other comprehensive income, net of taxes	Other comprehensive income, net of taxes	842		15,667		2,807		22,453		Other comprehensive income, net of taxes	553		842		1,291		1,965

Comprehensive income	Comprehensive income	$	40,870	$	48,222	$	129,628	$	74,368	Comprehensive income	$	8,349	$	36,776	$	48,357	$	88,758

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 4, 2021		July 5, 2020			April 17, 2022		April 11, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	126,821	$	51,915	Net earnings	$	47,066	$	86,793
Earnings from discontinued operations		0		379
Earnings from continuing operations		126,821		51,536
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	35,656		41,151		Depreciation and amortization	24,041		25,267
Amortization of franchise tenant improvement allowances and incentives	Amortization of franchise tenant improvement allowances and incentives	2,330		2,383		Amortization of franchise tenant improvement allowances and incentives	2,127		1,534
Deferred finance cost amortization	Deferred finance cost amortization	4,304		4,337		Deferred finance cost amortization	3,060		3,013
Excess tax benefit from share-based compensation arrangements		(1,164)		(71)
Loss on extinguishment of debt						Loss on extinguishment of debt	7,700		—
Tax deficiency (excess tax benefit) from share-based compensation arrangements						Tax deficiency (excess tax benefit) from share-based compensation arrangements	49		(1,112)
Deferred income taxes	Deferred income taxes	(2,599)		12,567		Deferred income taxes	5,529		(882)
Share-based compensation expense	Share-based compensation expense	3,338		7,612		Share-based compensation expense	3,934		2,836
Pension and post-retirement expense	Pension and post-retirement expense	678		40,972		Pension and post-retirement expense	163		474
Gains on cash surrender value of company-owned life insurance		(12,561)		(1,861)
Losses (gains) on cash surrender value of company-owned life insurance						Losses (gains) on cash surrender value of company-owned life insurance	3,163		(9,352)
Gains on the sale of company-operated restaurants	Gains on the sale of company-operated restaurants	(3,079)		(2,625)		Gains on the sale of company-operated restaurants	(858)		(2,815)
Gains on the disposition of property and equipment, net	Gains on the disposition of property and equipment, net	(1,754)		(10,386)		Gains on the disposition of property and equipment, net	(286)		(1,931)
Non-cash operating lease costs		(16,511)		(5,689)
Impairment charges and other	Impairment charges and other	1,951		195		Impairment charges and other	1,109		1,340
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	14,485		(38,783)		Accounts and other receivables	26,257		(4,490)
Inventories	Inventories	(250)		14		Inventories	(277)		(288)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,194		(5,034)		Prepaid expenses and other current assets	(6,716)		3,461
Operating lease right-of-use assets and lease liabilities						Operating lease right-of-use assets and lease liabilities	9,155		(19,075)
Accounts payable	Accounts payable	(9,821)		(2,756)		Accounts payable	1,297		(7,409)
Accrued liabilities	Accrued liabilities	20,611		15,755		Accrued liabilities	(52,286)		6,499
Pension and post-retirement contributions	Pension and post-retirement contributions	(4,961)		(4,921)		Pension and post-retirement contributions	(3,693)		(3,577)
Franchise tenant improvement allowance and incentive disbursements	Franchise tenant improvement allowance and incentive disbursements	(8,009)		(9,384)		Franchise tenant improvement allowance and incentive disbursements	(1,629)		(567)
Other	Other	(778)		(4,844)		Other	(1,077)		(1,175)
Cash flows provided by operating activities	Cash flows provided by operating activities	149,881		90,168		Cash flows provided by operating activities	67,828		78,544
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures		(35,157)		(16,736)
Purchases of property and equipment						Purchases of property and equipment	(20,781)		(22,928)
Acquisition of Del Taco, net of cash acquired						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	5,272		22,790		Proceeds from the sale of property and equipment	2,245		3,629
Proceeds from the sale and leaseback of assets	Proceeds from the sale and leaseback of assets	0		19,828		Proceeds from the sale and leaseback of assets	1,861		—
Proceeds from the sale of company-operated restaurants	Proceeds from the sale of company-operated restaurants	1,229		2,625		Proceeds from the sale of company-operated restaurants	600		965
Other	Other	2,616		1,036		Other	(1,315)		2,616
Cash flows (used in) provided by investing activities		(26,040)		29,543
Cash flows used in investing activities						Cash flows used in investing activities	(598,182)		(15,718)
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	0		111,376		Borrowings on revolving credit facilities	63,000		—
Repayments of borrowings on revolving credit facilities	Repayments of borrowings on revolving credit facilities	(107,875)		(3,500)		Repayments of borrowings on revolving credit facilities	(9,000)		(107,875)
Proceeds from the issuance of debt						Proceeds from the issuance of debt	1,100,000		—
Principal repayments on debt	Principal repayments on debt	(640)		(7,094)		Principal repayments on debt	(572,958)		(415)
Debt issuance costs		0		(216)
Payment of debt issuance and extinguishment costs						Payment of debt issuance and extinguishment costs	(20,274)		—
Dividends paid on common stock	Dividends paid on common stock	(27,886)		(18,466)		Dividends paid on common stock	(18,526)		(18,130)
Proceeds from issuance of common stock	Proceeds from issuance of common stock	6,646		3,559		Proceeds from issuance of common stock	51		4,340
Repurchases of common stock	Repurchases of common stock	(124,399)		(155,576)		Repurchases of common stock	—		(65,000)
Payroll tax payments for equity award issuances	Payroll tax payments for equity award issuances	(4,166)		(4,442)		Payroll tax payments for equity award issuances	(874)		(3,892)
Cash flows used in financing activities		(258,320)		(74,359)
Net (decrease) increase in cash and restricted cash		(134,479)		45,352
Cash flows provided by (used in) financing activities						Cash flows provided by (used in) financing activities	541,419		(190,972)
Net increase (decrease) in cash and restricted cash						Net increase (decrease) in cash and restricted cash	11,065		(128,146)
Cash and restricted cash at beginning of period	Cash and restricted cash at beginning of period	236,920		151,561		Cash and restricted cash at beginning of period	73,568		236,920
Cash and restricted cash at end of period	Cash and restricted cash at end of period	$	102,441	$	196,913	Cash and restricted cash at end of period	$	84,633	$	108,774

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 — ~~Founded in 1951,~~ 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® ~~quick-service restaurants. The following table summarizes~~and Del Taco® restaurant brands.

On March 8, 2022, the ~~number~~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 asfeaturing fresh and fast Mexican and American inspired cuisines. Refer to Note 3, Business Combination, for further details.

As of April 17, 2022, there were 172 company-operated and 2,035 franchise-operated Jack in the ~~end of each period:~~

July 4,
2021 July 5,
2020
Company-operated 148 144
Franchise 2,071 2,100
System 2,219 2,244
Box restaurants and 293 company-operated and 306 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 prior period information on the ~~condensed~~ consolidated statement of cash flows has been reclassified 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 Annual Report on Form 10-K for the fiscal year ended ~~September 27, 2020~~October 3, 2021 (“~~2020~~2021 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our ~~2020~~2021 Form 10-K, with the exception of the significant accounting ~~standards~~policies below that were adopted ~~in fiscal 2021, which are described below.~~or applied upon the acquisition of Del Taco.

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.

~~Segment reporting~~ ~~— The Company is comprised of 1 operating segment.~~

Fiscal year — ~~Our~~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 and 2021 include 52 and ~~2020 include~~ 53 ~~and 52~~ weeks, respectively. 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 ~~2021~~2022 and ~~2020~~2021 refer to the ~~12-weeks~~12 weeks (“quarter”) and ~~40-weeks~~28 weeks (“year-to-date”) ended ~~July 4,~~April 17, 2022 and April 11, 2021, ~~and July 5, 2020,~~ 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 a marketing ~~fund which includes~~funds at each of our restaurant brands that include contractual contributions. In ~~2021~~2022 and ~~2020,~~2021, marketing fund contributions from Jack in the Box franchise and company-operated restaurants were approximately 5.0% of ~~gross revenues, with the exception~~sales. In 2022, marketing fund contributions from Del Taco franchise and company-operated restaurants were approximately 4.0% of our March and April 2020 marketing fees. In response to the economic burden associated with the COVID-19 pandemic, the Company reduced March 2020 marketing fees to 4.0% and postponed the collection of these fees over the course of 24 months. April 2020 marketing fees ranged from 2% to 4% based on annualized sales volumes and these fees were collected over three months beginning October 2020. As of July 4, 2021, postponed marketing fees which remain uncollected were $5.5 million, of which $4.4 million is included within “Accounts and other receivable, net” and $1.1 million is included within “Other assets, net” in our condensed consolidated balance sheet.sales.

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 ~~$4.6~~$7.1 million and ~~$14.8~~$13.1 million, respectively, in ~~2021~~2022 and ~~$3.9~~$4.3 million and ~~$12.8~~$10.1 million, respectively, in ~~2020.~~2021.

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

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

~~Restricted cash~~ — In accordance with the terms of our securitized financing facility, certain cash balances are required to be held in trust. Such restricted cash primarily represents cash collections and cash reserves held by the trustee to be usedAllowance for payments of quarterly interest and commitment fees required for the Class A-1 and Class A-2 Notes. Starting in the second quarter of 2020, with uncertainty surrounding COVID-19 events, we voluntarily elected to fund cash held in trust for one additional quarterly interest and commitment fee payment. This voluntary election was discontinued in the second quarter of 2021. As of July 4, 2021 and September 27, 2020, restricted cash balances were $18.2 million and $37.3 million, respectively.

~~Effect of new accounting pronouncements~~ — In August 2018, the Financial Accounting Standards Board (“FASB”) issued guidance which aligns the requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted the standard in the first quarter of 2021. The adoption of this standard did not have a material impact to our consolidated financial statements.

In June 2016, the FASB issued guidance replacing the incurred loss impairment methodology with a new methodology that reflects current expected losses on financial assets, including trade accounts receivables. The new methodology requires entities to estimate and recognize credit losses each reporting period. The Company adopted the new guidance in the first quarter of 2021 using the modified retrospective method. The adoption did not have a material impact to our consolidated financial statements.

— The Company closely monitors the financial condition of our 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. ~~The Company’s allowance for receivables have not historically been material.~~

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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


~~Balance as of September 27, 2020~~	$	~~(5,541)~~
~~Provision for expected credit losses~~	~~(502)~~
~~Write-offs charged against the allowance~~	19
~~Balance as of July 4, 2021~~	$	~~(6,024)~~


	Year-to-date
	April 17, 2022		April 11, 2021
Balance as of beginning of period	$	(6,292)	$	(5,541)
Provision for expected credit losses	(3,445)		(476)
Write-offs charged against the allowance	3,993		19
Balance as of end of period	$	(5,744)	$	(5,998)

Business combinations — We account 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.

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

2.REVENUE

Nature of products and services — We derive 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 ~~of $50,000~~ per restaurant for a 20-year term, and generally require that franchisees pay royalty and marketing fees ~~at 5%~~based upon a percentage of gross sales. ~~These arrangements~~The agreements also require franchisees to pay technology fees, as well as sourcing ~~technology, and other miscellaneous fees.~~fees for Jack in the Box franchise agreements.

Disaggregation of revenue — The following table disaggregates revenue by segment and primary source (in thousands):


		Quarter				Year-to-date					12 Weeks Ended April 17, 2022
		July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020			Jack in the Box		Del Taco		Total
Sources of revenue:	Sources of revenue:									Sources of revenue:
Company restaurant sales	Company restaurant sales	$	91,892	$	82,444	$	292,132	$	262,188	Company restaurant sales	$	94,250	$	57,059	$	151,309
Franchise rental revenues	Franchise rental revenues	80,598		76,021		262,248		241,990		Franchise rental revenues	75,692		864		76,556
Franchise royalties	Franchise royalties	45,950		41,537		146,913		127,829		Franchise royalties	42,933		2,645		45,578
Marketing fees	Marketing fees	44,305		36,757		142,398		116,142		Marketing fees	41,390		2,158		43,548
Technology and sourcing fees	Technology and sourcing fees	4,081		3,814		12,977		12,316		Technology and sourcing fees	3,575		205		3,780
Franchise fees and other services	Franchise fees and other services	2,632		1,702		8,548		5,640		Franchise fees and other services	1,497		26		1,523
Total revenue	Total revenue	$	269,458	$	242,275	$	865,216	$	766,105	Total revenue	$	259,337	$	62,957	$	322,294

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


	12 Weeks Ended April 11, 2021
	Jack in the Box		Del Taco		Total
Sources of revenue:
Company restaurant sales	$	85,962	$	—	$	85,962
Franchise rental revenues	77,901		—		77,901
Franchise royalties	43,620		—		43,620
Marketing fees	42,317		—		42,317
Technology and sourcing fees	3,806		—		3,806
Franchise fees and other services	3,611		—		3,611
Total revenue	$	257,217	$	—	$	257,217


	28 Weeks Ended April 17, 2022
	Jack in the Box		Del Taco		Total
Sources of revenue:
Company restaurant sales	$	214,306	$	57,059	$	271,365
Franchise rental revenues	178,791		864		179,655
Franchise royalties	100,581		2,645		103,226
Marketing fees	97,191		2,158		99,349
Technology and sourcing fees	8,575		205		8,780
Franchise fees and other services	4,604		26		4,630
Total revenue	$	604,048	$	62,957	$	667,005


	28 Weeks Ended April 11, 2021
	Jack in the Box		Del Taco		Total
Sources of revenue:
Company restaurant sales	$	200,240	$	—	$	200,240
Franchise rental revenues	181,650		—		181,650
Franchise royalties	100,963		—		100,963
Marketing fees	98,093		—		98,093
Technology and sourcing fees	8,896		—		8,896
Franchise fees and other services	5,916		—		5,916
Total revenue	$	595,758	$	—	$	595,758

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

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


		Year-to-date					Year-to-date
		July 4, 2021		July 5, 2020				April 17, 2022		April 11, 2021
Deferred franchise fees at beginning of period		$	43,541	$	46,272
Deferred franchise and development fees at beginning of period						Deferred franchise and development fees at beginning of period		$	41,520	$	43,541
Changes due to business combinations						Changes due to business combinations		6,193		—
Revenue recognized	Revenue recognized	(4,415)		(4,249)		Revenue recognized		(2,995)		(3,075)
Additions	Additions	1,718		1,923		Additions		2,379		1,118
Deferred franchise fees at end of period		$	40,844	$	43,946
Deferred franchise and development fees at end of period						Deferred franchise and development fees at end of period		$	47,097	$	41,584

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of April 17, 2022, approximately $4.9 million of development fees related to unopened stores are included in deferred revenue. Timing of revenue recognition is dependent upon the timing of store 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 4, 2021~~April 17, 2022 (in thousands):


Remainder of 2021		$	1,225
2022		4,828
Remainder of 2022				Remainder of 2022	$	2,361
2023	2023	4,677		2023	4,977
2024	2024	4,487		2024	4,778
2025	2025	4,257		2025	4,543
2026				2026	4,214
Thereafter	Thereafter	21,370		Thereafter	21,312
		$	40,844		$	42,185

We have applied the optional exemption, as provided for under ~~Accounting Standards Codification~~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. Jack in the Box acquired Del Taco as a part of the Company’s goal to gain greater scale and accelerate growth.

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 to the recipients’ continued service and thus were excluded from 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 2022 Class A-2 Notes and 2022 Variable Funding Notes. The Company recognized transaction costs of $9.9 million and $11.2 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 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.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Purchase consideration— The following summarizes 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.

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):


	Amount
Total preliminary aggregate purchase consideration, net of $12,068 cash acquired	$	581,241
Assets:
Accounts and other receivables	3,809
Inventories	3,233
Prepaid expenses	2,950
Other current assets	105
Property and equipment	150,826
Operating lease right-of-use assets	349,489
Intangible assets	12,371
Trademarks	283,500
Other assets	5,128
Liabilities:
Current maturities of long-term debt	22
Current operating lease liabilities	21,991
Accounts payable	18,808
Accrued liabilities	66,739
Long-term debt, net of current maturities	349
Long-term operating lease liabilities, net of current portion	302,688
Deferred tax liabilities	88,203
Other long-term liabilities	13,080
Net assets acquired, excluding goodwill	$	299,531
Goodwill	$	281,710

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 $281.7 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 identifiable intangible assets acquired consist of trade name, 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 trade name was 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 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)
Trade name	$	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.

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 the beginning of fiscal year 2021.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The unaudited pro forma financial information for all periods presented includes the business combination accounting effects resulting from this 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 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.

The unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP (in thousands):


	Quarter				Year-to-date
	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Total revenue	$	382,051	$	377,864	$	885,082	$	869,778
Net earnings	$	23,563	$	33,758	$	51,854	$	59,814

For the periods subsequent to the acquisition that are included in the quarter and year-to-date of 2022, Del Taco had total revenues of $63.0 million and net earnings of $2.5 million.

4.SUMMARY OF REFRANCHISINGS AND FRANCHISE ACQUISITIONS

Refranchisings — In 2022 and 2021, ~~and 2020, 0~~no company-operated restaurants were sold to franchisees. Amounts included in “Gains on the sale of company-operated restaurants” in both periods related to resolutions of certain contingencies from the sale of Jack in the Box restaurants in prior years.

Franchise acquisitions — In 2022, we acquired 13 Jack in the Box restaurants in two markets, and during 2021 we acquired 4 Jack in the Box franchise restaurants in ~~connection with exercising our right of first refusal.~~one market. 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). ~~The acquisition was~~These acquisitions were not material to our condensed consolidated financial ~~statements.~~statements in either year.

4.5.GOODWILL AND INTANGIBLE ASSETS, NET

The changes in the carrying amount of goodwill during fiscal 2022 and 2021 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.	281,710
Acquisition of Jack in the Box franchise-operated restaurants	274
Balance at April 17, 2022	$	329,758

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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


	April 17, 2022						October 3, 2021
	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Sublease assets	$	2,671	$	(39)	$	2,632	$	—	$	—	$	—
Franchise contracts	9,700		(62)		9,638		—		—		—
Reacquired franchise rights	557		(101)		456		542		(72)		470
Total	$	12,928	$	(202)	$	12,726	$	542	$	(72)	$	470

The following table summarizes, as of April 17, 2022, the estimated amortization expense for each of the next five fiscal years (in thousands):


Remainder of 2022	$	423
2023	$	814
2024	$	814
2025	$	814
2026	$	811

6.LEASES

Nature of leases — We own restaurant sites and we also lease 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 ~~subsequent to~~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):


	Quarter				Year-to-date
	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Operating lease income - franchise	$	52,988	$	54,142	$	124,345	$	126,384
Variable lease income - franchise	23,540		23,759		55,282		55,266
Amortization of favorable and unfavorable lease contracts, net	28		—		28		—
Franchise rental revenues	$	76,556	$	77,901	$	179,655	$	181,650
Operating lease income - closed restaurants and other (1)	$	1,407	$	1,360	$	3,065	$	3,225

____________________________

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

813

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents ~~rental income~~as of April 17, 2022, the annual maturities of our lease liabilities (in thousands):

Quarter Year-to-date
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Operating lease income - franchise $ 53,762 $ 54,381 $ 180,146 $ 181,740
Variable lease income - franchise 26,836 21,640 82,102 60,250
Franchise rental revenues $ 80,598 $ 76,021 $ 262,248 $ 241,990
Operating lease income - closed restaurants and other (1) $ 1,377 $ 1,442 $ 4,602 $ 4,969


	Finance Leases		Operating Leases
Fiscal year:
Remainder of 2022	$	491	$	113,985
2023	979		221,635
2024	400		185,228
2025	38		178,781
2026	26		161,832
Thereafter	26		845,684
Total future lease payments (1)	$	1,960	$	1,707,145
Less imputed interest	(96)		(360,372)
Present value of lease liabilities	$	1,864	$	1,346,773
Less current portion	(930)		(174,065)
Long-term lease obligations	$	934	$	1,172,708

____________________________

(1)~~Primarily relates to closed restaurant properties included in “Impairment~~Total future lease payments include non-cancellable commitments of $2.0 million for finance leases and ~~other charges (gains), net” in our condensed consolidated statements of earnings.~~$1,479.2 million for operating leases.

5.7.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 4, 2021:
Fair value measurements as of April 17, 2022:										Fair value measurements as of April 17, 2022:
Non-qualified deferred compensation plan (1)	Non-qualified deferred compensation plan (1)	$	18,524	$	18,524	$	0	$	0	Non-qualified deferred compensation plan (1)	$	15,728	$	15,728	$	—	$	—
Total liabilities at fair value	Total liabilities at fair value	$	18,524	$	18,524	$	0	$	0	Total liabilities at fair value	$	15,728	$	15,728	$	—	$	—
Fair value measurements as of September 27, 2020:
Fair value measurements as of October 3, 2021:										Fair value measurements as of October 3, 2021:
Non-qualified deferred compensation plan (1)	Non-qualified deferred compensation plan (1)	$	25,071	$	25,071	$	0	$	0	Non-qualified deferred compensation plan (1)	$	18,555	$	18,555	$	—	$	—
Total liabilities at fair value	Total liabilities at fair value	$	25,071	$	25,071	$	0	$	0	Total liabilities at fair value	$	18,555	$	18,555	$	—	$	—

____________________________

(1)We maintain 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)We 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 4,~~April 17, 2022 and October 3, 2021 ~~and September 27, 2020~~ (in thousands):

July 4,
2021 September 27,
2020
Carrying Amount Fair Value Carrying Amount Fair Value
Class A-2 Notes $ 1,290,251 $ 1,361,691 $ 1,290,251 $ 1,354,241


	April 17, 2022				October 3, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Series 2019 Class A-2 Notes	$	717,750	$	711,912	$	1,290,251	$	1,351,056
Series 2022 Class A-2 Notes	$	1,100,000	$	1,028,555	$	—	$	—

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 April 17, 2022, we had $50.0 million of outstanding borrowings under our Variable Funding Notes and $4.0 million under our revolving credit facility. The fair value of these loans approximates their carrying value due to the variable rate nature of these borrowings.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Non-financial assets and liabilities — Our 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 ~~2021,~~2022, no material fair value adjustments were required.

8.INDEBTEDNESS


	April 17, 2022		October 3, 2021
Series 2019-1 Class A-2-I Notes	$	—	$	570,688
Series 2019-1 Class A-2-II Notes	272,250		272,938
Series 2019-1 Class A-2-III Notes	445,500		446,625
Series 2022-1 Class A-2-I Notes	550,000		—
Series 2022-1 Class A-2-II Notes	550,000		—
Series 2022-1 Class A-2-I Variable Funding Notes	50,000		—
Revolving Credit Facility	4,000		—
Finance lease obligations and other debt	2,233		2,275
Total debt	1,873,983		1,292,526
Less current maturities of long-term debt	(34,202)		(894)
Less unamortized debt issuance costs	(27,196)		(18,212)
Long-term debt	$	1,812,585	$	1,273,420

Securitization 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” 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 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 April 17, 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.

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 of Del Taco Restaurants, Inc. As a result, the Company recorded a loss on early extinguishment of debt of $5.6 million during the quarter ended April 17, 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” in 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.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 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 in the second quarter of 2022.

6.Revolving credit facility — ~~IMPAIRMENT AND~~ 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 April 17, 2022, we had outstanding borrowings of $4.0 million and available borrowing capacity of $58.2 million of under the facility, net of letters of credit of $12.8 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.

Maturities of long-term debt — Assuming repayment by the Anticipated Repayment Dates and based on the leverage ratio as of April 17, 2022, principal payments on our long-term debt outstanding at April 17, 2022 for each of the next five fiscal years and thereafter are as follows (in thousands):


Remainder of 2022	$	15,564
2023	34,095
2024	29,403
2025	29,338
2026	289,208
Thereafter	1,476,375
	$	1,873,983

9.OTHER ~~CHARGES (GAINS),~~OPERATING EXPENSE, NET

~~Impairment and other charges (gains),~~Other operating expenses, net in the accompanying condensed consolidated statements of earnings is comprised of the following (in thousands):

Quarter Year-to-date
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Costs of closed restaurants and other (1) $ 622 $ 890 $ 2,086 $ 1,322
Restructuring costs 0 2 4 1,165
Losses (gains) on disposition of property and equipment, net (2) 177 (216) (1,754) (10,386)
Accelerated depreciation 123 62 1,362 62
$ 922 $ 738 $ 1,698 $ (7,837)


	Quarter				Year-to-date
	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Acquisition, integration, and restructuring costs (1)	$	13,098	$	(2)	$	16,111	$	4
Costs of closed restaurants and other (2)	650		441		1,722		1,464
Accelerated depreciation	288		560		663		1,239
Losses (gains) on disposition of property and equipment, net	331		229		(286)		(1,931)
	$	14,367	$	1,228	$	18,210	$	776

____________________________

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

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

~~(2)~~

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

10.~~Year-to-date 2021, includes~~SEGMENT REPORTING

Our principal business consists of developing, operating and franchising our Jack in the Box and Del Taco restaurant brands, each of which we consider 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 and evaluate 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, gains on the sale of ~~real estate properties. Year-to-date 2020, includes a $10.8 million gain~~company-operated restaurants, and amortization of favorable and unfavorable leases and subleases, net. The following table provides information related to ~~the sale~~our operating segments in each period (in thousands):


	Quarter				Year-to-date
	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Revenues by segment:
Jack in the Box	$	259,337	$	257,217	$	604,048	$	595,758
Del Taco	62,957		—		62,957		—
Consolidated revenues	$	322,294	$	257,217	$	667,005	$	595,758
Segment operating profit:
Jack in the Box	$	61,321	$	74,111	$	151,984	$	172,766
Del Taco	6,056		—		6,056		—
Total segment operating profit	$	67,377	$	74,111	$	158,040	$	172,766
Depreciation and amortization	11,545		10,696		24,041		25,267
Acquisition, integration, and restructuring costs	13,098		(2)		16,111		4
Share-based compensation	2,916		1,605		3,934		2,836
Cash surrender value of COLI policies, net	2,136		(1,544)		2,580		(6,340)
Gains on the sale of company-operated restaurants	(810)		(1,532)		(858)		(2,815)
Amortization of favorable and unfavorable leases and subleases, net	248		—		248		—
Earnings from operations	$	38,244	$	64,888	$	111,984	$	153,814
Total capital expenditures by segment:
Jack in the Box	$	7,929	$	15,852	$	17,330	$	22,928
Del Taco	3,451		—		3,451		—
Total capital expenditures	$	11,380	$	15,852	$	20,781	$	22,928
Total depreciation and amortization by segment:
Jack in the Box	$	9,340	$	10,696	$	21,836	$	25,267
Del Taco	2,205		—		2,205		—
Total depreciation and amortization	$	11,545	$	10,696	$	24,041	$	25,267

We do not evaluate, manage or measure performance of ~~one of our corporate office buildings.~~segments using asset, interest income and expense, or income tax information; accordingly, this information by segment is not prepared or disclosed.

7.11.INCOME TAXES

The ~~effective~~income tax ~~rate was 23.1%~~provisions reflect tax rates of 33.3% in the ~~third~~second quarter and ~~25.1%~~27.8% year-to-date, ~~fiscal year 2021,~~ compared with ~~27.9%~~27.3% and ~~29.0%~~26.1%, respectively, in fiscal year ~~2020.~~2021. The major components of the year-over-year ~~decrease~~increase in tax rates were ~~a decrease~~non-deductible losses in the ~~impact of non-deductible compensation for certain officers, an increase~~current year versus non-taxable gains in ~~non-taxable gains~~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 ~~a California Private Attorney General Act lawsuit settled in~~ the ~~prior year, and the release of reserves on state tax credits and losses,~~Del Taco acquisition, partially offset by an adjustment related to state taxes recorded in the second quarter of fiscal year 2021.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8.12.RETIREMENT PLANS

Defined benefit pension plans — We sponsor 2 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.

In the fourth quarter of 2019, the Company amended its Qualified Plan to add a limited lump sum payment window whereby certain terminated participants with a vested pension benefit could elect to receive either an immediate lump sum or a monthly annuity payment of their accrued benefit. The offering period began September 16, 2019 and ended October 31, 2019. The participants that elected a lump sum benefit under the program were paid in December 2019, which triggered settlement accounting. As a result of the offering, the Company’s Qualified Plan paid $122.3 million from its plan assets to those who accepted the offer, thereby reducing the plan’s pension benefit obligation. The transaction had no cash impact to the Company but did result in a non-cash settlement charge of $38.6 million in the first quarter of fiscal 2020. Routine lump sum payments made in the second and third quarters of fiscal 2020 resulted in non-cash settlement charges of $0.3 million and $0.1 million, respectively.

Post-retirement healthcare plans — We also sponsor 2 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 — The components of net periodic benefit cost in each period were as follows (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020			April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Defined benefit pension plans:	Defined benefit pension plans:									Defined benefit pension plans:
Interest cost	Interest cost	$	3,398	$	3,581	$	11,328	$	12,326	Interest cost	$	3,389	$	3,398	$	7,904	$	7,930
Expected return on plan assets	Expected return on plan assets	(4,463)		(3,779)		(14,877)		(15,141)		Expected return on plan assets	(4,178)		(4,463)		(9,747)		(10,414)
Pension settlements (1)		0		103		0		39,030
Actuarial losses (1)	Actuarial losses (1)	1,212		1,367		4,041		4,058		Actuarial losses (1)	890		1,213		2,078		2,829
Amortization of unrecognized prior service costs (1)	Amortization of unrecognized prior service costs (1)	5		20		15		65		Amortization of unrecognized prior service costs (1)	4		4		10		10
Net periodic benefit cost	Net periodic benefit cost	$	152	$	1,292	$	507	$	40,338	Net periodic benefit cost	$	105	$	152	$	245	$	355
Post-retirement healthcare plans:	Post-retirement healthcare plans:									Post-retirement healthcare plans:
Interest cost	Interest cost	$	130	$	186	$	433	$	621	Interest cost	$	113	$	130	$	263	$	303
Actuarial (gains) losses (1)		(78)		4		(262)		13
Actuarial gains (1)										Actuarial gains (1)	(148)		(79)		(345)		(184)
Net periodic benefit cost	Net periodic benefit cost	$	52	$	190	$	171	$	634	Net periodic benefit cost	$	(35)	$	51	$	(82)	$	119

~~___________________________~~____________________________

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

Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of January 1, ~~2020,~~2021, the date of our last actuarial funding valuation, there was 0no minimum contribution funding requirement for the Qualified Plan. Details regarding ~~2021~~2022 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	$	4,371	$	590	Net year-to-date contributions	$	3,057	$	636
Remaining estimated net contributions during fiscal 2021		$	852	$	350
Remaining estimated net contributions during fiscal 2022						Remaining estimated net contributions during fiscal 2022	$	2,159	$	496

We continue 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 not anticipate making any contributions to our Qualified Plan in fiscal ~~2021.~~2022.

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9.13.STOCKHOLDERS’ DEFICIT

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

Quarter Year-to-date
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Balance at beginning of period $ (780,557) $ (876,926) $ (793,361) $ (737,584)
Shares issued under stock plans, including tax benefit 2,306 0 6,646 3,559
Share-based compensation expense 502 1,747 3,338 7,612
Dividends declared (9,756) 0 (27,886) (18,492)
Purchases of treasury stock (64,967) 0 (129,967) (153,550)
Net earnings 40,028 32,555 126,821 51,915
Other comprehensive income, net of taxes 842 15,667 2,807 22,453
Cumulative-effect from a change in accounting principle 0 0 0 (2,870)
Balance at end of period $ (811,602) $ (826,957) $ (811,602) $ (826,957)


	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)
Shares issued under stock plans, including tax benefit	28	1		48		—		—		—		49
Share-based compensation	—	—		1,018		—		—		—		1,018
Dividends declared	—	—		63		(9,320)		—		—		(9,257)
Net earnings	—	—		—		39,270		—		—		39,270
Other comprehensive income	—	—		—		—		738		—		738
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	5	—		2		—		—		—		2
Share-based compensation	—	—		2,916		—		—		—		2,916
Dividends declared	—	—		65		(9,334)		—		—		(9,269)
Fair value of assumed Del Taco RSAs attributable to pre-combination service	—	—		449		—		—		—		449
Net earnings	—	—		—		7,796		—		—		7,796
Other comprehensive income	—	—		—		—		553		—		553
Balance at April 17, 2022	82,569	$	826	$	505,002	$	1,792,824	$	(72,963)	$	(3,009,306)	$	(783,617)


	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)
Shares issued under stock plans, including tax benefit	24	—		114		—		—		—		114
Share-based compensation	—	—		1,231		—		—		—		1,231
Dividends declared	—	—		53		(9,142)		—		—		(9,089)
Net earnings	—	—		—		50,859		—		—		50,859
Other comprehensive income	—	—		—		—		1,123		—		1,123
Balance at January 17, 2021	82,394	$	824	$	490,913	$	1,677,928	$	(109,482)	$	(2,809,306)	$	(749,123)
Shares issued under stock plans, including tax benefit	116	1		4,225		—		—		—		4,226
Share-based compensation	—	—		1,605		—		—		—		1,605
Dividends declared	—	—		55		(9,096)		—		—		(9,041)
Purchases of treasury stock	—	—		—		—		—		(65,000)		(65,000)
Net earnings	—	—		—		35,934		—		—		35,934
Other comprehensive income	—	—		—		—		842		—		842
Balance at April 11, 2021	82,510	$	825	$	496,798	$	1,704,766	$	(108,640)	$	(2,874,306)	$	(780,557)

Repurchases of common stock — ~~The Company repurchased 1.2 million shares~~There were no repurchases of ~~its~~ common stock in ~~2021 for an aggregate cost of $130.0 million.~~fiscal 2022. As of ~~July 4, 2021, this leaves $70.0~~April 17, 2022, there was $200.0 million remaining under share repurchase programs authorized by the Board of Directors ~~that expire~~which expires in November ~~2022.~~2023.

Dividends— During 2022, the Board of Directors declared two cash dividends of $0.44 per common totaling $18.6 million. Future dividends are subject to approval by our Board of Directors.

1119

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Repurchases of common stock in our condensed consolidated statement of cash flows for 2021 excludes $5.6 million traded in the quarter that settled in the fourth quarter.~~

~~Dividends~~— During the first, second, and third quarter of 2021, the Board of Directors declared cash dividends of $0.40, $0.40, and $0.44, respectively, totaling $28.1 million. Future dividends are subject to approval by our Board of Directors.

~~10.~~14.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 4, 2021	July 5, 2020	July 4, 2021	July 5, 2020		April 17, 2022	April 11, 2021	April 17, 2022	April 11, 2021
Weighted-average shares outstanding – basic	Weighted-average shares outstanding – basic	22,263	22,847	22,683	23,192	Weighted-average shares outstanding – basic	21,227	22,723	21,215	22,863
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	52	62	66	123	Nonvested stock awards and units	34	50	39	72
Stock options	Stock options	9	0	10	0	Stock options	1	9	1	8
Performance share awards	Performance share awards	2	7	2	7	Performance share awards	—	2	—	2
Weighted-average shares outstanding – diluted	Weighted-average shares outstanding – diluted	22,326	22,916	22,761	23,322	Weighted-average shares outstanding – diluted	21,262	22,784	21,255	22,945
Excluded from diluted weighted-average shares outstanding:	Excluded from diluted weighted-average shares outstanding:					Excluded from diluted weighted-average shares outstanding:
Antidilutive	Antidilutive	0	344	33	334	Antidilutive	23	32	15	39
Performance conditions not satisfied at the end of the period	Performance conditions not satisfied at the end of the period	30	77	30	77	Performance conditions not satisfied at the end of the period	63	36	63	36

~~11.~~15.COMMITMENTS AND CONTINGENCIES

Legal matters — We assess 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. We regularly review contingencies to determine the adequacy of the accruals and related disclosures. The ultimate amount of loss may differ from these estimates. As of ~~July 4,~~April 17, 2022 and October 3, 2021, ~~and September 27, 2020,~~ the Company had recorded aggregate liabilities of ~~$7.4~~$12.2 million and ~~$3.8~~$7.5 million, respectively, within “Accrued liabilities” on our condensed consolidated balance sheets, for all matters including those described below, that were probable and reasonably estimable.~~We believe that~~ As of April 17, 2022, we estimate the ~~ultimate determination~~aggregate range of ~~liability in connection with legal claims pending against us, if any,~~reasonably possible losses, in excess of amounts ~~already provided~~accrued for these matters as of such ~~matters~~date, to be up to approximately $14 million. 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 ~~consolidated financial statements, will not have a material adverse effect on our business, our annual results of operations, liquidity or financial position.~~near term.

~~Gessele v. Jack in the Box Inc.~~— In August 2010, 5 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 ~~Company~~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. ~~In November 2019, the court issued a ruling on various dispositive motions, disallowing a portion of plaintiffs’ claimed damages.~~ The parties participated in a voluntary mediation on March 16, 2020, but the matter did not settle. The plaintiffs recently filed a motion for reconsideration of the court’s prior denial of class certification regarding meal and rest break claims which was denied by the court. The plaintiffs requested permission to seek appellate review of that decision, but that request was rejected by the Ninth Circuit. The trial of this matter was recently reassigned to a new judge and is scheduled for December 2021. The Company continues to dispute liability and the plaintiffs’ ~~damage~~damages calculations and will continue to vigorously defend against the lawsuit.

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,

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

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

2021, the court granted, in part, the plaintiff's motion for class certification. The parties participated in a voluntary mediation on May 24, 2022, but the matter did not settle. The Company continues to dispute liability, the standing of a majority of the class members and plaintiff’s damages calculations.

Other legal matters — In addition to the matter 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 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. We record 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 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 4, 2021,~~April 17, 2022, the maximum potential liability of future undiscounted payments under these leases is approximately ~~$27.4~~$25.4 million. The lease terms extend for a maximum of approximately 1716 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.

~~12.DISCONTINUED OPERATIONS~~

~~The following table presents results of operations in periods which have been included in discontinued operations related to our former Qdoba business (in thousands~~):

Quarter Year-to-date
July 5,
2020 July 5,
2020
Total revenues $ 0 $ 0
Total costs and expenses (income) (1) (527) (527)
Earnings before income taxes 527 527
Income tax expense 148 148
Earnings from discontinued operations, net of income taxes $ 379 $ 379

~~___________________________~~

~~(1)Activity primarily consists of resolutions on certain liabilities related to our discontinued operations, including self-insurance reserves and asset retirement obligations.~~

~~13.~~16.SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION ((in ~~thousands~~thousands))
Year-to-date
July 4,
2021 July 5,
2020
Non-cash investing and financing transactions:
Increase (decrease) in obligations for treasury stock repurchases $ 5,568 $ (2,025)
Increase (decrease) in obligations for purchases of property and equipment $ 258 $ (2,534)
Increase in dividends accrued or converted to common stock equivalents $ 170 $ 65
Consideration for franchise acquisitions $ 0 $ 859
Right-of-use assets obtained in exchange for operating lease obligations $ 138,163 $ 143,604
Right-of-use assets obtained in exchange for finance lease obligations $ 103 $ 132


	Year-to-date
	April 17, 2022		April 11, 2021
Non-cash investing and financing transactions:

Decrease in obligations for purchases of property and equipment	$	1,009	$	338
Increase in dividends accrued or converted to common stock equivalents	$	128	$	108
Right-of use assets obtained in exchange for operating lease obligations	$	141,143	$	92,723
Right-of use assets obtained in exchange for finance lease obligations	$	45	$	65

1321

JACK IN THE BOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~14.~~17.SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION (in thousands)
July 4,
2021 September 27,
2020
Accounts and other receivables, net:
Trade $ 69,304 $ 77,082
Income tax receivable 1,375 1,591
Notes receivable 1,219 1,193
Other 2,404 4,092
Allowance for doubtful accounts (6,024) (5,541)
$ 68,278 $ 78,417
Other assets, net:
Company-owned life insurance policies $ 123,374 $ 113,767
Deferred rent receivable 46,785 48,604
Franchise tenant improvement allowance 34,721 29,437
Other 17,891 18,815
$ 222,771 $ 210,623
Accrued liabilities:
Payroll and related taxes $ 29,396 $ 34,475
Insurance 22,411 25,310
Deferred rent income 17,777 1,687
Sales and property taxes 15,253 22,038
Advertising 12,972 9,861
Deferred franchise fees 4,945 4,934
Other 34,264 31,126
$ 137,018 $ 129,431
Other long-term liabilities:
Defined benefit pension plans $ 112,893 $ 120,811
Deferred franchise fees 35,899 38,607
Other 54,425 47,076
$ 203,217 $ 206,494


	April 17, 2022		October 3, 2021
Accounts and other receivables, net:
Trade	$	49,972	$	75,273
Notes receivable, current portion	1,363		1,467
Income tax receivable	907		1,157
Other	5,963		2,730
Allowance for doubtful accounts	(5,744)		(6,292)
	$	52,461	$	74,335
Prepaid expenses:
Prepaid income taxes	$	8,942	$	651
Other	11,544		12,031
	$	20,486	$	12,682
Property and equipment, net
Land	$	103,222	$	105,393
Buildings	998,155		907,792
Restaurant and other equipment	164,953		112,959
Construction in progress	15,831		6,894
	1,282,161		1,133,038
Less accumulated depreciation and amortization	(819,037)		(810,124)
	$	463,124	$	322,914
Other assets, net:
Company-owned life insurance policies	$	120,403	$	123,566
Deferred rent receivable	45,016		46,234
Franchise tenant improvement allowance	32,832		34,124
Notes receivable, less current portion	4,483		4,544
Other	22,013		15,970
	$	224,747	$	224,438
Accrued liabilities:
Payroll and related taxes	$	40,561	$	34,649
Insurance	32,918		21,218
Sales and property taxes	16,715		23,174
Deferred rent income	8,826		17,892
Advertising	4,004		13,097
Deferred franchise and development fees	5,304		4,949
Other	53,569		33,438
	$	161,897	$	148,417
Other long-term liabilities:
Defined benefit pension plans	$	68,123	$	70,354
Deferred franchise and development fees	41,793		36,571
Other	50,039		49,417
	$	159,955	$	156,342

~~15.~~18.SUBSEQUENT EVENTS

Dividends — On ~~July 30, 2021,~~May 13, 2022, the Board of Directors declared a cash dividend of $0.44 per common share, to be paid on ~~September 3, 2021,~~June 22, 2022, to shareholders of record as of the close of business on ~~August 18, 2021.~~

Subsequent to the end of the third quarter, we took possession of 16 franchise restaurants in a non-cash transaction. We are currently determining the fair value of the non-cash purchase price allocation using the acquisition method of accounting for business combinations.

June 7, 2022.

1422

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

GENERAL

All comparisons between ~~2021~~2022 and ~~2020~~2021 refer to the ~~12-weeks~~12 weeks (“quarter”) and ~~40-weeks~~28 weeks (“year-to-date”) ended ~~July 4,~~April 17, 2022 and April 11, 2021, ~~and July 5, 2020,~~ respectively, unless otherwise indicated.

For an understanding of the significant factors that influenced our performance during ~~2021~~2022 and ~~2020,~~2021, 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 ~~September 27, 2020.~~October 3, 2021.

Our MD&A consists of the following sections:

•Overview — a general description of our ~~business and 2021 highlights.~~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 ~~systemwide~~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 ~~restaurant sales~~ and ~~systemwide~~system restaurant sales, and ~~franchised restaurant sales~~ 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, ~~impairment and~~ other ~~charges (gains),~~operating expenses, net, depreciation and amortization, amortization of favorable and unfavorable leases and subleases, net, and amortization of tenant improvement allowances and ~~incentives, and pension settlement charges.~~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.

1523

~~IMPACT OF~~OVERVIEW

Our Business

Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® quick-service restaurants. As of April 17, 2022, we operated and franchised 2,207 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 Del Taco Restaurants, Inc. (“Del Taco”), the nation’s second largest Mexican quick service restaurant chain by number of restaurants and has approximately 599 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. Throughout the pandemic substantially all of our restaurants have remained open, with the majority of our dining rooms closed and locations operating in an off-premise capacity, leveraging our drive-thru, carryout and delivery ~~capability.~~capabilities. We have continued to follow the guidance of expert health authorities to ensure precautionary steps are taken to protect the health and safety of our employees and guests.

~~In fiscal 2020~~Our business has continued to be challenged by availability and cost of labor resulting in a number of our restaurants across regions to reduce operating hours during the ~~last five weeks of the second quarter, upon the rise~~quarter. We have continued to have limited shortages in ~~“shelter-in-place” mandates and “social distancing” requirements across the country, system same-store sales decreased by 17.0%;~~our supply chain; however, ~~starting in the third quarter and carrying into fiscal 2021, we~~inflationary pressures have ~~seen~~continued to have a significant acceleration of system same-store sales. The acceleration of sales has been largely driven by average check growth which has more than offset a decline in traffic. Although we continued to see positive movement in customer traffic compared to last year, it remains uncertain whether we will return to levels achieved prior to the pandemic.

~~While we do not know the future~~ impact ~~COVID-19 will have~~ on our ~~business, or when our business will fully return~~business.

We expect these operating margin pressures due to ~~normal operations, we expect to see continued~~ labor and supply chain ~~shortages resulting in higher costs in our results in 2021 and~~challenges to continue for the ~~foreseeable future.~~remainder of fiscal 2022.

~~OTHER RECENT DEVELOPMENTS~~Other Developments

As previously announced, a franchisee that operated 68 restaurants in ~~the Midwest~~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. Through the bankruptcy proceedings, the franchisee may reject the franchise agreements and leases for a number of these locations, resulting in potential impairment costs related to future lease obligations.

~~On May 5, 2021~~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 ~~motion~~result of these locations being rejected near the expiration of our master lease agreements. We currently do not anticipate any additional locations being rejected.

During the second quarter of 2022, we agreed to the franchisee’s reorganization plan, which has been submitted to the bankruptcy court and is scheduled for a confirmation hearing in mid-July. The reorganization plan includes a waiver of a portion of damages associated with the ~~court rejecting three~~rejected locations, reduced royalties following plan confirmation, and the settlement of the ~~locations, two of which were permanently closed~~remaining cure costs via a secured note upon emergence from bankruptcy, in ~~fiscal 2020. We have also reached agreement with the debtor regarding the timing for their intended rejection of~~addition to deferring all amounts owed under the franchise agreements ~~and leases~~starting in February through the bankruptcy resolution date. The secured note provides for ~~two additional restaurants, which rejection will coincide with~~repayment based on a calculation of net free cash flows generated from the ~~expiration~~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 ~~master leases for such sites. The franchisee’s remaining 65 restaurants continue to operate with the franchisee remaining current with their obligations to us. The Company does not expect to acquire~~deferrals starting in February were doubtful and ~~operate any restaurants as part of the sale of these restaurants and~~therefore no revenue has been recognized. Furthermore, we increased our ~~current expectation is the remaining restaurants will be transferred to one or more other franchise partners.~~

~~STRATEGY~~

In June 2021, we held a virtual Investor Day during which we provided an overview of our growth strategy, including additional details regarding its plans for unit growth, focus on unit economics, and future investments in digital and new store prototype.

~~Our strategies are rooted in two foundational principles which include:~~

•~~Shape a High-Performance Culture~~ ~~- The first foundational principle is shaping a caring high-performance culture focused on serving our people and franchisees well. If we do this, we are confident they will take care of our guests.~~

•~~Leverage Innovation and Technology Platforms -~~ ~~The second foundational principle is accentuating Jack's history of innovation and leveraging technology.~~

~~On top of these foundation principles are the following strategic pillars:~~

•~~Build Brand Loyalty~~ ~~by transforming our restaurant of the future design, reimaging existing restaurants, and enhancing the digital guest experience.~~

•~~Drive Operations Excellence~~ ~~by focusing on training in our restaurants, execution of brand standards and systems, and improving speed consistency.~~

•~~Grow Restaurant Profits~~ ~~by developing and implementing financial fundamentals, influencing pricing with a dynamic model, and building our data advantage.~~

•~~Expand Jack’s Reach~~ by creating modular, diversified restaurant designs, building company-operated stores and seeding growth, fostering franchise financing and growth capital, and increasing franchise candidate and restaurant site lead generations.

The strategy builds on our historical strengths as a differentiated, challenger brand with a broad menu and operational capabilities, passionate and loyal guests, and committed team members and franchisees, and provides for investments in development and innovation that will deliver long term growth.

~~OVERVIEW~~

~~As of July 4, 2021, we operated and franchised 2,219 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including one in Guam.~~

~~The following is a summary of our third quarter financial results compared to a year ago:~~

•~~System same-store sales~~ — System same-store sales increased by 10.2% in the quarter and 14.0% year-to-date. Company restaurant same-store sales increased 9.0% in the quarter, reflecting average check growth of 4.8% and a 4.2% increase in transactions. Franchise same-store sales increased 10.3% in the quarter.

•~~Company restaurant operations~~ — Company restaurant costs, including food and packaging, payroll and employee benefits, and occupancy and other operating costs, as a percentage of sales were flat in the quarter, primarily due to sales leverage offsetting an increase in commodities, labor and third-party delivery fees.

•~~Franchise operations~~ — ~~Franchised restaurant sales increased by 10.5% in the quarter, driving higher royalty and rent revenues of $5.3 million and $4.6 million, respectively.~~

•~~Selling, general and administrative (“SG&A”) expenses~~ — ~~SG&A increased by $8.1 million in the quarter, primarily due to higher costs~~bad debt reserve related to ~~litigation matters, unfavorable mark-to-market adjustments on investments supporting~~this matter to fully reserve the ~~Company’s non-qualified retirement plans, and higher insurance costs versus~~$3.5 million owed to the ~~prior year quarter.~~Company.

•~~Adjusted EBITDA~~ — ~~Adjusted EBITDA increased in 2021 to $257.1 million from $195.7 million in the prior year.~~

1724

RESULTS OF OPERATIONS

~~The~~following table presents certain income and expense items included in our condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

~~CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA~~
Quarter Year-to-date
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Revenues:
Company restaurant sales 34.1 % 34.0 % 33.8 % 34.2 %
Franchise rental revenues 29.9 % 31.4 % 30.3 % 31.6 %
Franchise royalties and other 18.0 % 17.8 % 18.0 % 17.4 %
Franchise contributions for advertising and other services 18.0 % 16.7 % 18.0 % 16.8 %
100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses, net:
Food and packaging (1) 29.4 % 29.2 % 28.5 % 29.6 %
Payroll and employee benefits (1) 29.8 % 30.4 % 30.4 % 31.0 %
Occupancy and other (1) 15.3 % 15.0 % 15.5 % 15.6 %
Franchise occupancy expenses (2) 60.6 % 63.9 % 62.1 % 66.7 %
Franchise support and other costs (3) 5.6 % 6.2 % 6.0 % 7.7 %
Franchise advertising and other services expenses (4) 101.6 % 104.0 % 102.3 % 103.6 %
Selling, general and administrative expenses 8.1 % 5.6 % 7.1 % 8.6 %
Depreciation and amortization 3.9 % 5.0 % 4.1 % 5.4 %
Impairment and other charges (gains), net 0.3 % 0.3 % 0.2 % (1.0) %
Gains on the sale of company-operated restaurants (0.1) % (0.4) % (0.4) % (0.3) %
Earnings from operations 25.0 % 25.5 % 25.6 % 21.5 %
Income tax rate (5) 23.1 % 27.9 % 25.1 % 29.0 %

~~____________________________~~

~~(1)As a percentage of company restaurant sales.~~

~~(2)As a percentage of franchise rental revenues.~~

~~(3)As a percentage of franchise royalties and other.~~

~~(4)As a percentage of franchise contributions for advertising and other services.~~

~~(5)As a percentage of earnings from continuing operations and before income taxes.~~

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


		Quarter				Year-to-date					Quarter	Year-to-Date
		July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020
Jack in the Box:										Jack in the Box:		April 17, 2022 (1)		April 11, 2021		April 17, 2022 (1)		April 11, 2021
Company	Company	9.0	%	4.1	%	10.0	%	1.2	%	Company		1.7	%	14.5	%	0.6	%	10.4	%
Franchise	Franchise	10.3	%	6.9	%	14.5	%	1.5	%	Franchise		(1.1)	%	21.3	%	0.3	%	16.5	%
System	System	10.2	%	6.6	%	14.0	%	1.5	%	System		(0.8)	%	20.6	%	0.3	%	15.9	%

____________________________

(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 same store sales uses comparable calendar periods to balance with one week shift and to provide a clearer year over year comparison.

The following table summarizes changes in the number and mix of Jack in the Box company and franchise restaurants:


		2021						2020							2022						2021
		Company		Franchise		Total		Company		Franchise		Total
Jack in the Box:														Jack in the Box:	Company		Franchise		Total		Company		Franchise		Total
Beginning of year	Beginning of year	144		2,097		2,241		137		2,106		2,243		Beginning of year	163		2,055		2,218		144		2,097		2,241
New	New	—		10		10		—		20		20		New	—		7		7		—		6		6
Acquired from franchisees	Acquired from franchisees	4		(4)		—		8		(8)		—		Acquired from franchisees	13		(13)		—		4		(4)		—
Closed	Closed	—		(32)		(32)		(1)		(18)		(19)		Closed	(4)		(14)		(18)		—		(19)		(19)
End of period	End of period	148		2,071		2,219		144		2,100		2,244		End of period	172		2,035		2,207		148		2,080		2,228
% of system	% of system	7	%	93	%	100	%	6	%	94	%	100	%	% of system	8	%	92	%	100	%	7	%	93	%	100	%

The following table summarizes restaurant sales for Jack in the Box company-operated, franchised, and systemwide sales (in thousands):


		Quarter				Year-to-date					Quarter				Year-to-date
		July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020
Jack in the Box:										Jack in the Box:	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Company-operated restaurant sales	Company-operated restaurant sales	$	91,892	$	82,444	$	292,132	$	262,188	Company-operated restaurant sales	$	94,250	$	85,962	$	214,306	$	200,240
Franchised restaurant sales (1)	Franchised restaurant sales (1)	889,558		804,791		2,852,746		2,480,062		Franchised restaurant sales (1)	840,468		847,363		1,958,144		1,963,189
Systemwide sales (1)	Systemwide sales (1)	$	981,450	$	887,235	$	3,144,878	$	2,742,250	Systemwide sales (1)	$	934,718	$	933,325	$	2,172,450	$	2,163,429

____________________________

(1)Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. ~~Systemwide~~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 ~~systemwide~~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 (in thousands):

Quarter Year-to-date
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Net earnings - GAAP $ 40,028 $ 32,555 $ 126,821 $ 51,915
Earnings from discontinued operations, net of taxes — (379) — (379)
Income tax expense 11,991 12,432 42,576 21,023
Interest expense, net 15,158 15,700 51,120 51,051
Pension settlement charges — 103 — 39,030
Gains on the sale of company-operated restaurants (264) (1,050) (3,079) (2,625)
Impairment and other charges (gains), net 922 738 1,698 (7,837)
Depreciation and amortization 10,389 12,141 35,656 41,151
Amortization of franchise tenant improvement allowances and incentives 796 618 2,330 2,383
Adjusted EBITDA - Non-GAAP $ 79,020 $ 72,858 $ 257,122 $ 195,712


	Quarter				Year-to-date
Consolidated:	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Net earnings - GAAP	$	7,796	$	35,934	$	47,066	$	86,793
Income tax expense	3,897		13,524		18,087		30,585
Interest expense, net	26,481		15,227		46,668		35,962
Gains on the sale of company-operated restaurants	(810)		(1,532)		(858)		(2,815)
Other operating expenses, net	14,367		1,228		18,210		776
Depreciation and amortization	11,545		10,696		24,041		25,267
Amortization of favorable and unfavorable leases and subleases, net	248		—		248		—
Amortization of franchise tenant improvement allowances and incentives	893		673		2,127		1,534
Adjusted EBITDA - Non-GAAP	$	64,417	$	75,750	$	155,589	$	178,102

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 4, 2021				July 5, 2020				July 4, 2021				July 5, 2020					April 17, 2022				April 11, 2021				April 17, 2022				April 11, 2021
Company restaurant sales	Company restaurant sales	$	91,892			$	82,444			$	292,132			$	262,188			Company restaurant sales	$	94,250			$	85,962			$	214,306			$	200,240
Company restaurant costs:	Company restaurant costs:																	Company restaurant costs:
Food and packaging	Food and packaging	$	27,061	29.4	%	$	24,077	29.2	%	$	83,376	28.5	%	$	77,662	29.6	%	Food and packaging	$	30,687	32.6	%	$	23,938	27.8	%	$	68,224	31.8	%	$	56,315	28.1	%
Payroll and employee benefits	Payroll and employee benefits	$	27,356	29.8	%	$	25,085	30.4	%	$	88,727	30.4	%	$	81,236	31.0	%	Payroll and employee benefits	$	32,007	34.0	%	$	26,440	30.8	%	$	71,732	33.5	%	$	61,371	30.6	%
Occupancy and other	Occupancy and other	$	14,103	15.3	%	$	12,334	15.0	%	$	45,287	15.5	%	$	40,862	15.6	%	Occupancy and other	$	17,384	18.4	%	$	13,349	15.5	%	$	38,261	17.9	%	$	31,184	15.6	%

Company restaurant sales increased ~~$9.4~~$8.3 million or ~~11.5%~~9.6% in the quarter and ~~$29.9~~$14.1 million or ~~11.4%~~7.0% year-to-date ~~versus a~~compared to the prior year, ~~ago~~ primarily due to ~~average check growth, menu price increases, and~~ an increase in the number of company-operated ~~restaurants. Year-to-date, the increase was~~restaurants, average check growth and partially offset by a ~~decrease~~decline in traffic. The following table presents the approximate impact of these items on company restaurant sales ~~in 2021~~ (in millions):


		Quarter		Year-to-date			Quarter	Year-to-Date
Increase in the average number of restaurants						Increase in the average number of restaurants		$	3.5	$	7.2
AUV increase	AUV increase	$	8.4	$	25.5	AUV increase		4.8		6.9
Increase in the average number of restaurants		1.0		4.4
Total change in company restaurant sales	Total change in company restaurant sales	$	9.4	$	29.9	Total change in company restaurant sales		$	8.3	14.1

Same-store sales at company-operated restaurants increased ~~9.0%~~1.7% in the quarter and ~~10.0%~~0.6% year-to-date compared to a year ago. The following table summarizes the change ~~in company-operated same store-sales~~ versus a year ago:


		Quarter				Year-to-date					Quarter			Year-to-Date
		July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020				April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Average check (1)	Average check (1)	4.8	%	20.2	%	16.4	%	9.1	%	Average check (1)		3.7	%	19.9	%	3.6	%	20.8	%
Transactions	Transactions	4.2	%	(16.1)	%	(6.4)	%	(7.9)	%	Transactions		(2.0)	%	(5.4)	%	(3.0)	%	(10.4)	%
Change in same-store sales	Change in same-store sales	9.0	%	4.1	%	10.0	%	1.2	%	Change in same-store sales		1.7	%	14.5	%	0.6	%	10.4	%

____________________________

(1)~~Amounts in 2021 include~~Includes price increases of approximately ~~3.7%~~8.2% in the quarter and ~~3.4% year-to-date. Amounts in 2020 include price increase of approximately 3.0% in the quarter and 2.7%~~6.7% year-to-date.

Food and packaging costs as a percentage of company restaurant sales increased ~~to 29.4%~~4.8% in the quarter, including 4.0% of higher commodity costs, and ~~decreased to 28.5% year-to-date in 2021 compared to 29.2% in the quarter~~3.5% of unfavorable menu item mix and ~~29.6% year-to-date in 2020. In the quarter, the 0.2% increase is due to a 1.4% increase in costs for commodities,~~other, partially offset by 2.7% of increased menu ~~price increases~~pricing. Food and packaging costs as a percentage of ~~0.9%~~company restaurant sales increased 3.7% year-to-date, including 3.2% of higher commodity costs, and ~~favorable sales~~2.4% of unfavorable menu item mix ~~of 0.3%. Year-to-date, the 1.1% decrease is driven by favorable sales mix of 1.1%~~ and ~~menu price increases of 0.8%,~~other, partially offset by ~~a 0.8% increase in commodities.~~ 1.9% of increased menu pricing.

Commodity costs increased in the quarter and year-to-date by approximately ~~5.7%~~16.4% and ~~2.9%~~13.1%, respectively, primarily due to ~~increases in~~higher beef, pork, sauces and ~~beverages, partially offset by a decrease in beef.~~oil costs, due to supply chain and inflationary pressures. For fiscal ~~2021,~~2022, we expect annual commodity cost inflation to be up 4%12% to 5%14% compared with fiscal ~~2020.~~2021.

Payroll and employee benefit costs as a percentage of company restaurant sales ~~decreased to 29.8%~~increased 3.2% in the quarter and ~~30.4%~~2.9% year-to-date, primarily due to labor inflation, a change in ~~2021 compared~~the mix of restaurants due to ~~30.4%~~franchisee acquisitions, partially offset by lower incentive compensation. Labor inflation was approximately 14.2% in the quarter and ~~31.0%~~12.5% year-to-date ~~in 2020, primarily due to sales leverage, which more than offset labor inflation and higher incentive compensation costs. Labor inflation was approximately 8% in~~for the ~~quarter and 6% year-to-date.~~current fiscal year. For fiscal ~~2021,~~2022, we expect annual wage inflation to be up 7%12% to 8%13% compared with fiscal ~~2020.~~2021.

Occupancy and other costs, as a percentage of company restaurant sales, increased ~~to 15.3%~~2.9% in the quarter and ~~decreased to 15.5%~~2.3% year-to-date, ~~in 2021 compared to 15.0% in the quarter and 15.6% year-to-date in 2020. In the quarter, the increase is~~ primarily due to ~~higher costs for delivery fees as we continue to grow our delivery~~the acquisition of 29 restaurants since a year ago with lower than average sales ~~mix,~~volumes, and higher ~~maintenance and repair costs, partially offset by leverage from higher same-store sales. Year-to-date, the decrease is driven by leverage from higher same-store-sales and lower~~ costs for maintenance and ~~repairs, partially offset by higher costs for delivery fees.~~repair and utilities.

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 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020			April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Franchise rental revenues	Franchise rental revenues	$	80,598	$	76,021	$	262,248	$	241,990	Franchise rental revenues	$	75,692	$	77,901	$	178,791	$	181,650

Royalties	Royalties	45,950		41,537		146,913		127,829		Royalties	42,932		43,620		100,580		100,963
Franchise fees and other	Franchise fees and other	2,632		1,702		8,548		5,640		Franchise fees and other	1,497		3,611		4,604		5,916
Franchise royalties and other	Franchise royalties and other	48,582		43,239		155,461		133,469		Franchise royalties and other	44,429		47,231		105,184		106,879
Franchise contributions for advertising and other services	Franchise contributions for advertising and other services	48,386		40,571		155,375		128,458		Franchise contributions for advertising and other services	44,965		46,123		105,766		106,989
Total franchise revenues	Total franchise revenues	$	177,566	$	159,831	$	573,084	$	503,917	Total franchise revenues	$	165,086	$	171,255	$	389,741	$	395,518

Franchise occupancy expenses	Franchise occupancy expenses	$	48,824	$	48,612	$	162,897	$	161,470	Franchise occupancy expenses	$	48,403	$	48,904	$	112,386	$	114,073
Franchise support and other costs	Franchise support and other costs	2,722		2,692		9,336		10,339		Franchise support and other costs	4,828		3,341		8,739		6,614
Franchise advertising and other services expenses	Franchise advertising and other services expenses	49,168		42,176		158,967		133,134		Franchise advertising and other services expenses	46,849		47,104		110,157		109,799
Total franchise costs	Total franchise costs	$	100,714	$	93,480	$	331,200	$	304,943	Total franchise costs	$	100,080	$	99,349	$	231,282	$	230,486
Franchise costs as a percentage of total franchise revenues	Franchise costs as a percentage of total franchise revenues	56.7%		58.5%		57.8%		60.5%		Franchise costs as a percentage of total franchise revenues	60.6%		58.0%		59.3%		58.3%

Average number of franchise restaurants	Average number of franchise restaurants	2,063		2,079		2,072		2,084		Average number of franchise restaurants	2,027		2,071		2,034		2,075
% decrease										% decrease	(2.1)%				(2.0)%
Franchised restaurant sales	Franchised restaurant sales	$	889,558	$	804,791	$	2,852,746	$	2,480,062	Franchised restaurant sales	$	840,468	$	847,363	$	1,958,144	$	1,963,189
Franchised restaurant AUVs	Franchised restaurant AUVs	$	431	$	387	$	1,377	$	1,190	Franchised restaurant AUVs	$	415	$	409	$	963	$	946
Royalties as a percentage of total franchised restaurant sales	Royalties as a percentage of total franchised restaurant sales	5.2%		5.2%		5.1%		5.2%		Royalties as a percentage of total franchised restaurant sales	5.1%		5.1%		5.1%		5.1%

Franchise rental revenues ~~increased $4.6~~decreased $2.2 million, or ~~6.0%~~2.8% in the quarter and ~~$20.3~~$2.9 million, or ~~8.4%~~1.6% year-to-date, driven by a reduction in the number of franchise subleases compared to ~~the~~ prior year, ~~primarily due~~in addition to ~~higher percentage rent driven by higher franchised restaurant sales.~~the impact of deferring $1.2 million in connection with a franchisee currently in bankruptcy proceedings for which revenue will be recognized upon payment.

Franchise royalties and other ~~increased $5.3~~decreased $2.8 million, or ~~12.4%~~5.9% in the quarter and ~~$22.0~~$1.7 million, or ~~16.5%~~1.6% year-to-date, ~~compared~~primarily due to ~~the prior year, due primarily to an increase in franchised restaurant sales driving royalty fees higher by $4.4 million and $19.1 million, respectively. Additionally,~~lower fees received in connection with the early termination of franchise agreements ~~increased by $0.7~~of $2.1 million and $1.3 million, respectively, the deferral of $0.8 million in connection with the ~~quarter~~franchisee bankruptcy matter and ~~$2.8 million year-to-date.~~to a lesser extent a reduction in the number of franchise restaurants.

Franchise contributions for advertising and other services revenues ~~increased $7.8~~decreased $1.2 million, or ~~19.3%~~2.5% in the quarter and ~~$26.9~~$1.2 million, or ~~21.0%~~1.1% year-to-date compared to the prior year, ~~mainly as a result of higher marketing contributions. In the quarter and year-to-date,~~primarily due to lower marketing contributions ~~increased~~of $0.9 million driven by ~~$7.5 million and $26.9 million due to higher franchise sales and~~ a ~~reduction in contribution percentages~~decrease in the ~~prior year for March 2020~~number of franchise restaurants and ~~April 2020 marketing fees~~deferrals in ~~response to~~connection with the ~~pandemic. The decrease in marketing fee contribution percentages in the prior year resulted in lower fees of $2.9 million and $7.9 million in the quarter and year-to-date.~~franchisee bankruptcy matter.

Franchise occupancy expenses, primarily rent, ~~increased $0.2~~decreased $0.5 million, or 1.0% in the quarter and ~~$1.4~~$1.7 million, or 1.5% year-to-date compared to the prior year, ~~mainly~~primarily due to ~~annual base rent increases and higher costs for percentage rent expense.~~a reduction in the number of franchise subleases compared to prior year.

Franchise support and other costs were flat in the quarter and decreased $1.0 million year-to-date, primarily due to a decrease in franchisee bad debt expense from specific franchise situations that occurred in the first quarter of 2020.

~~Franchise advertising and other service expenses~~ increased ~~$7.0~~$1.5 million in the quarter and ~~$25.8~~$2.1 million year-to-date compared to the prior year, primarily due to an increase in ~~marketing contributions~~franchisee bad debt expense as a result of developments in a franchisee’s ongoing bankruptcy proceedings.

Franchise advertising and other service expenses decreased $0.3 million, or 0.5% in the quarter and increased $0.4 million, or 0.3% year-to-date compared to the prior year. In the quarter, the decrease is primarily due to a reduction in the number of franchise restaurants. Year-to-date, the increase is due to higher technology costs in the current year and partially offset by a reduction in the number of franchise restaurants.

Del Taco Brand

As of April 17, 2022, there were 293 company-operated and 306 franchise-operated Del Taco restaurants. System same-store sales increased 1.3% for the period from ~~our franchisees.~~

March 8, 2022 through April 17, 2022 and total revenues and segment operating profit were $63.0 million and $6.1 million, respectively.

Depreciation and Amortization

Depreciation and amortization ~~decreased~~increased by ~~$1.8~~$0.8 million in the quarter and ~~$5.5~~decreased $1.2 million year-to-date. The acquisition of Del Taco in the quarter resulted in an increase of $2.2 million, which was partially offset in the quarter and more than offset year-to-date ~~compared to~~by a decrease in Jack in the ~~prior year,~~Box depreciation and amortization primarily due to certain franchise building assets becoming fully depreciated.

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	$	752	$	1,995	Advertising	$	2,729	$	3,023
Incentive compensation (including share-based compensation and related payroll taxes)	Incentive compensation (including share-based compensation and related payroll taxes)	(1,357)		1,478		Incentive compensation (including share-based compensation and related payroll taxes)	(1,378)		(4,185)
Cash surrender value of COLI policies, net	Cash surrender value of COLI policies, net	1,242		(7,336)		Cash surrender value of COLI policies, net	3,680		8,919
Litigation matters		3,359		(2,464)
Insurance	Insurance	1,276		(1,080)		Insurance	1,049		1,199
Other	Other	2,844		2,432		Other	3,538		5,502
		$	8,116	$	(4,975)		$	9,618	$	14,458

Advertising costs represent company contributions to our marketing ~~fund~~funds and are generally determined as a percentage of company-operated restaurant sales. Advertising costs increased ~~$0.8~~$2.7 million in the quarter and ~~$2.0~~$3.0 million year-to-date compared to the prior year primarily due to the acquisition of Del Taco which resulted in higher ~~company-operated restaurant sales, and a decrease~~advertising costs of $2.3 million as well as an increase in the ~~contribution percentage~~number of Jack in the ~~prior year.~~Box company-operated restaurants.

Incentive compensation decreased by $1.4 million in the quarter and ~~increased by $1.5~~$4.2 million year-to-date compared to the prior year. In the quarter, the decrease is ~~primarily~~ due to a ~~$1.2~~$2.7 million decrease in ~~stock-based compensation~~the annual incentives mainly as a result of ~~turnover at the executive level. Year-to-date, the increase is primarily due to higher~~lower achievement levels compared to the prior year, ~~for the Company’s annual incentive plan,~~ partially offset by a ~~decrease of $4.3~~$1.3 million increase in stock-based compensation asmainly from timing of annual grants compared to the prior year. Year-to-date, the decrease is due to a ~~result~~$5.3 million decrease in the annual incentives, partially offset by a $1.1 million increase in stock-based compensation mainly from timing of ~~turnover at~~annual grants compared to the ~~executive level.~~prior year.

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. ~~In the quarter, the~~The changes in market values had a negative impact of $1.2 million as a result of $2.6 million of gains recognized in the quarter compared to $3.8 million of gains in the prior year quarter. Year-to-date, the changes in market values had a positive impact of $7.3 million as a result of $9.0 million of gains recognized in the year compared to $1.7 million of gains in the prior year.

~~Litigation matters increased by $3.4~~$3.7 million in the quarter and ~~decreased by $2.5~~$8.9 million ~~year-to-date. In the quarter, the increase is related to ongoing litigation in the normal course of business.Year-to-date, the decrease is primarily due to a California Private Attorney General Act lawsuit settled in~~year-to-date versus the prior year. ~~Refer to Note 11,~~ ~~Commitments and Contingencies, of the notes to the condensed consolidated financial statements for additional information.~~

Insurance costs increased by ~~$1.3~~$1.0 million in the quarter and ~~decreased by $1.1~~$1.2 million ~~year-to-date. In~~year-to-date compared to the ~~quarter, insurance costs increased primarily~~prior year due to a more favorable change in the loss development factors related to our ~~workers’~~worker’s compensation liabilities a year ago. ~~Year-to-date,~~

The acquisition of Del Taco resulted in an increase of additional general and administrative costs of $4.3 million in both the ~~decrease is primarily due~~quarter and year-to-date compared to ~~more favorable trends in~~ the ~~current year related to expected losses associated with workers’ compensation claims.~~prior year.

~~Impairment and~~

Other ~~Charges (Gains),~~Operating Expenses, Net

~~Impairment and other charges (gains),~~Other operating expenses, net is comprised of the following (in thousands):
Quarter Year-to-date
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Costs of closed restaurants and other $ 622 $ 890 $ 2,086 $ 1,322
Restructuring costs — 2 4 1,165
Losses (gains) on disposition of property and equipment, net 177 (216) (1,754) (10,386)
Accelerated depreciation 123 62 1,362 62
$ 922 $ 738 $ 1,698 $ (7,837)

~~Impairment and other charges,~~


	Quarter				Year-to-date
	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Acquisition, integration, and restructuring costs	$	13,098	$	(2)	$	16,111	$	4
Costs of closed restaurants and other	650		441		1,722		1,464
Accelerated depreciation	288		560		663		1,239
Losses (gains) on disposition of property and equipment, net	331		229		(286)		(1,931)
	$	14,367	$	1,228	$	18,210	$	776

Other operating expenses, net increased by ~~$0.2~~$13.1 million in the quarter and ~~$9.5~~$17.4 million ~~year-to-date. Year-to-date,~~year-to-date compared to the ~~increase is~~prior year, primarily due to ~~a $10.8~~$13.1 million, ~~gain related~~and $16.1 million of costs incurred in the quarter and year-to-date, respectively relating to the ~~sale of one of our corporate office buildings in 2020.~~

Del Taco acquisition.

Gains on the Sale of Company-Operated Restaurants

In ~~2021~~2022 and ~~2020,~~2021, no company-operated restaurants were sold to franchisees. Amounts included in “Gains on the sale of company-operated restaurants” in ~~all~~both periods related to resolutions of certain contingencies from the sale of Jack in the Box restaurants in prior years.

~~Other Pension and Post-Retirement Expenses, Net~~

~~Other pension and post-retirement expenses, net decreased $40.3 million year-to-date versus the prior year, primarily due to non-cash settlement charges of $39.0 million in 2020. Refer to Note 8,~~ ~~Retirement Plans, of the notes to the condensed consolidated financial statements for additional information.~~

Interest Expense, Net

Interest expense, net is comprised of the following (in thousands):
Quarter Year-to-date
July 4,
2021 July 5,
2020 July 4,
2021 July 5,
2020
Interest expense $ 15,206 $ 15,703 $ 51,186 $ 51,580
Interest income (48) (3) (66) (529)
Interest expense, net $ 15,158 $ 15,700 $ 51,120 $ 51,051


	Quarter				Year-to-date
	April 17, 2022		April 11, 2021		April 17, 2022		April 11, 2021
Interest expense	$	26,562	$	15,241	$	46,835	$	35,980
Interest income	(81)		(14)		(167)		(18)
Interest expense, net	$	26,481	$	15,227	$	46,668	$	35,962

Interest expense, net ~~decreased~~increased by ~~$0.5~~$11.3 million in the quarter and ~~increased $0.1~~$10.7 million year-to-date compared ~~with~~to the prior year, primarily due to a ~~year ago. In~~loss on early extinguishment of debt of $7.7 million during the quarter as well as higher average borrowings in the ~~decrease is due to lower average debt balances as a result~~current quarter and year-to-date resulting in higher interest expense of ~~paying down borrowings under our Variable Funding Notes during the second quarter of 2021. Year-to-date, the increase is mainly due to lower interest income versus the prior year.~~$3.5 million and $2.8 million, respectively.

Income Tax Expense

The ~~effective~~income tax ~~rate was 23.1%~~provisions reflect tax rates of 33.3% in the ~~third~~second quarter and ~~25.1%~~27.8% year-to-date, ~~fiscal year 2021,~~ compared with ~~27.9%~~27.3% and ~~29.0%~~26.1%, respectively, in fiscal year ~~2020.~~2021. The major components of the year-over-year ~~decrease~~increase in tax rates were ~~a decrease~~non-deductibles losses in the ~~impact of non-deductible compensation for certain officers, an increase~~current year versus non-taxable gains in ~~non-taxable gains~~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 ~~a California Private Attorney General Act lawsuit settled in~~ the ~~prior year, and the release of reserves on state tax credits and losses,~~Del Taco acquisition, partially offset by an adjustment related to state taxes recorded in the second quarter of fiscal year 2021.

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 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 ~~Variable Funding Notes.~~credit facilities. As of ~~July 4, 2021,~~April 17, 2022, the Company had ~~$102.4~~$84.6 million of cash and restricted cash on its consolidated balance sheet. 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 ~~$110.5 million of borrowing availability under its Variable Funding Notes.~~pursue opportunities for capital sources, including leasebacks for 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, ~~including our Variable Funding Notes,~~ 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 4, 2021		July 5, 2020			April 17, 2022		April 11, 2021
Total cash provided by (used in):	Total cash provided by (used in):					Total cash provided by (used in):
Operating activities	Operating activities	$	149,881	$	90,168	Operating activities	$	67,828	$	78,544
Investing activities	Investing activities	(26,040)		29,543		Investing activities	(598,182)		(15,718)
Financing activities	Financing activities	(258,320)		(74,359)		Financing activities	541,419		(190,972)
Net cash flows	Net cash flows	$	(134,479)	$	45,352	Net cash flows	$	11,065	$	(128,146)

Operating Activities. Operating cash flows ~~increased $59.7~~decreased $10.7 million compared with a year ago, primarily due to lower net income adjusted for non-cash items of $8.4 million and an ~~increase~~unfavorable change in working capital of $61.4 million in Adjusted EBITDA, favorable collections of $36.9 million from the repayment of franchise marketing and rent payment deferrals provided in the prior year, and lower interest payments of $7.7$2.3 million. These increases were partially offset by higher rent payments of $20.0 million due to repayment of deferrals we received from our landlords in the prior year, and higher income tax payments of $21.6 million compared to prior year.

Pension and ~~Post-Retirement Contributions~~post-retirement contributions — Our policy is to fund our pension plans at or above the minimum required by law. As of January 1, ~~2020,~~2021, the date of our last actuarial funding valuation, there was no minimum contribution funding requirement for our qualified pension plan. In ~~2021,~~2022, we contributed ~~$5.0~~$3.7 million to our non-qualified pension plan and post-retirement plans.

Investing Activities. Cash used in investing activities increased by ~~$55.6~~$582.5 million compared with a year ago, primarily due to ~~$19.8~~$580.8 million paid for the acquisition of ~~proceeds received in the prior year as a result~~Del Taco, net of a sale and partial leaseback of a multi-tenant property,$18.4 million higher capital expenditures, and $17.5 million lower proceeds received on the sale of property and equipment, primarily due to proceeds received on the sale of a corporate office building in the prior year.cash acquired.

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

Year-to-date
July 4,
2021 July 5,
2020
Restaurants:
Remodel / refresh programs $ 7,877 $ 4,256
Restaurant facility expenditures 4,984 4,129
Purchases of assets intended for sale and leaseback 15,528 417
Restaurant information technology 2,482 3,775
30,871 12,577
Corporate Services:
Information technology 1,250 3,370
Corporate facilities 3,036 789
4,286 4,159
Total capital expenditures $ 35,157 $ 16,736

In 2021, capital expenditures increased by $18.4 million compared to a year ago primarily due to a $15.1 million increase in purchases of assets intended for sale and leaseback. During 2021, we exercised our right of first refusal related to four leased restaurant properties which we intend to sell and leaseback within the next 12 months.


	Year-to-date
	April 17, 2022		April 11, 2021
Restaurants:
Remodel / refresh programs	$	4,935	$	5,582
Restaurant facility expenditures	8,689		2,860
Purchases of assets intended for sale and leaseback	1,877		10,343
Restaurant information technology	3,262		1,639
	18,763		20,424
Corporate Services:
Information technology	855		658
Corporate facilities	1,163		1,846
	2,018		2,504

Total capital expenditures	$	20,781	$	22,928

Financing Activities. Cash flows ~~used in~~from financing activities increased by ~~$184.0~~$732.4 million compared with a year ago, primarily ~~due~~as a result of an increase in net borrowings of $669.1 million, driven by the issuance of the 2022 Notes, and an increase of $65.0 million from lower share repurchases compared to ~~our repayment during the second quarter of $107.9 million of 2020 borrowings on our Variable Funding Notes, partially offset by a $31.2 million decrease in cash used for share repurchases.~~prior year.

Repurchases of ~~Common Stock~~common stock — The Company ~~repurchased 1.2 million~~did not repurchase any shares ~~of its common stock~~ in 2021 for an aggregate cost of $130.0 million. Repurchases of common stock in our condensed consolidated statement of cash flows for 2021 excludes $5.6 million traded in the quarter that settled in the fourth quarter. As of July 4, 2021, this leaves $70.0 million remaining under share repurchase programs authorized by the Board of Directors that expire in2022. On November ~~2022.~~

~~Dividends— During the first, second, and third quarter of~~19, 2021, the Board of Directors authorized a $200.0 million stock buy-back program that expires on November 20, 2023.

Dividends — During 2022, the Board of Directors declared two cash dividends of ~~$0.40, $0.40, and~~ $0.44 ~~respectively,~~per common share totaling ~~$28.1~~$18.6 million. On ~~July 30, 2021,~~May 13, 2022, the Board of Directors declared a cash dividend of ~~$0.44~~0.44 per common share, to be paid on ~~September 3, 2021,~~June 22, 2022, to shareholders of record as of the close of business on ~~August 18, 2021. Future dividends are subject to approval by our Board of Directors.~~June 7, 2022.

~~Long-Term Debt~~Securitized Refinancing Transaction — — As of July 4, 2021, we had $1.3 billion of outstanding borrowings under our securitized financing facility, comprised of total principal outstanding on the Class A-2 Notes (as defined below). During the second quarter of 2021, the Company fully paid down its outstanding borrowings on its Variable Funding Notes. As of July 4, 2021, borrowing availability under the Variable Funding Notes was $110.5 million.

On ~~July 8, 2019, Jack in the Box Funding, LLC (the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly owned indirect subsidiary of~~February 11, 2022, the Company completed ~~its securitization transaction and issued $575.0~~the sale of $550.0 million of its Series ~~2019-1 3.982%~~2022-1 3.445% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”)~~, $275.0~~ and $550.0 million of its Series ~~2019-1 4.476%~~2022-1 4.136% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class ~~A-2-II Notes”) and $450.0 million of its Series 2019-1 4.970% Fixed Rate Senior Secured Notes, Class A-2-III (the “Class A-2-III Notes”)~~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 ~~(the “Class A-2 Notes”), in an offering exempt from registration~~will be February 2027 and February 2032, respectively, unless earlier prepaid to the extent permitted under the ~~Securities Act of 1933, as amended. In connection with~~indenture that will govern the ~~issuance of the Class A-2 Notes, the Master Issuer~~2022 Notes.

The Company also entered into a revolving financing facility of Series ~~2019-1~~2022-1 Variable Funding Senior Secured Notes ~~Class A-1~~ (the “Variable Funding Notes”), which ~~allows for the drawing of~~permits borrowings up to a maximum of $150.0 million, ~~under the Variable Funding Notes and the issuance~~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-2~~A-1 Notes was terminated in connection with the transaction. As of April 17, 2022, we had outstanding borrowings of $50.0 million and ~~the~~available borrowing capacity of $58.0 million under our 2022 Variable Funding Notes, net of letters of credits issued of $42.0 million.

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 ~~referred~~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 ~~collectively~~certain limitations, to secure the Notes. The 2022 Notes are subject to the same covenants and restrictions as the ~~“Notes.”~~Series 2019-1 Notes.

~~Interest and principal payments on the Class A-2 Notes are payable on a quarterly basis.~~ The quarterly principal payment ~~of $3.25 million~~ 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. AsSubsequent to closing the issuance of ~~September 27, 2020, January 17, 2021, April 11, 2021, and July 4, 2021,~~ the ~~Company’s actual~~2022 Notes, the Company has a leverage ratio ~~was under~~of greater than 5.0x and, ~~as a result, quarterly principal~~accordingly, the Company resumed making the scheduled amortization payments ~~were not required.~~

The legal final maturity date of the Class A-2 Notes is in August 2049, but it is expected that, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment dates of the Class A-2-I Notes, the Class A-2-IIon its 2022 Notes and Series 2019-1 Notes in the Class A-2-III Notes will be August 2023, August 2026 and August 2029, respectively (the “Anticipated Repayment Dates”). If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to the respective anticipated repayment date, additional interest will accrue pursuant to the Indenture.second quarter of 2022.

Restricted ~~Cash~~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 4, 2021,~~April 17, 2022, the ~~Master Issuer~~Company had restricted cash of ~~$18.2~~$28.9 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~~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 4, 2021,~~April 17, 2022, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.

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~~Off-Balance Sheet Arrangements~~

~~We have~~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 ~~certain off-balance sheet contractual obligations~~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 April 17, 2022, we had outstanding borrowings of $4.0 million and available borrowing capacity of $58.2 million of under the facility, net of letters of credit of $12.8 million.

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 ~~ordinary course~~Bridge Facility, which was terminated as a result of ~~business, which are recognized in~~ our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles. There has been no material change in these arrangements as disclosed in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended September 27, 2020. We are not a party to any other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.securitization refinancing transaction.

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. ~~There have been no material changes~~In addition to the critical accounting policies and estimates previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~September 27, 2020.~~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, 2022. As of April 17, 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.

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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 ~~is expected to~~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 in the food service industry and our inability to compete may 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 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.

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

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

•~~Our business~~Changes in the availability of and the cost of labor could be adversely ~~affected by increased labor costs.~~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.

•We may not achieve our development goals.

•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.

•~~Our tax provision may fluctuate due to changes in expected earnings.~~

•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.

•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.

•We may not be able to adequately protect our intellectual property, which could harm the value of our ~~brands~~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.

•~~Changes in accounting standards may negatively impact our results of operations.~~

•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.

•~~Failure to obtain and maintain required licenses and permits or to comply with food control regulations could lead to the loss of our food service licenses and, thereby, harm our business.~~

•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.

•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.

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 ~~September 27, 2020~~October 3, 2021 (“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

~~There have been no material changes~~We are exposed to interest rate risk on borrowings under our $150.0 million Variable Funding Notes and our $75.0 million revolving credit facility. As of April 17, 2022, we had outstanding variable rate borrowings of $54.0 million. A 100 basis point increase in 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 ~~quantitative~~control. In order to minimize the impact of fluctuations in price and ~~qualitative~~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 ~~risks set forth~~conditions outside our control. Our ability to recover increased costs for commodities and utilities through higher prices is limited by the competitive environment in ~~Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2020.~~which we operate.

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 4, 2021,~~April 17, 2022, 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~~On March 8, 2022, we completed our acquisition of Del Taco and have implemented new processes and internal controls to assist us in the preparation and disclosure of financial information. Given the significance of the Del Taco acquisition and the complexity of systems and business processes, we intend to exclude the acquired Del Taco business from our assessment and report on internal control over financial reporting for the year ended October 2, 2022. Other than discussed above, there have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended ~~July 4, 2021~~April 17, 2022 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 ~~11,~~15, 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

~~When evaluating our business and our prospects, you should consider~~The risk factors set forth below contain material changes to the ~~risks and uncertainties described under Item 1A of Part I of~~risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended ~~September 27, 2020,~~October 3, 2021, which we filed with the SEC on November ~~18, 2020,~~23, 2021, 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 ~~September 27, 2020,~~October 3, 2021, 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, 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 April 17, 2022, the Company has debt outstanding of $1.87 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 — ~~In the third quarter of 2021 we repurchased 0.6 million~~We did not repurchase any shares of our common stock ~~for an aggregate cost~~in the second quarter of ~~$65.0 million.~~2022. As of ~~July 4, 2021, this leaves $70.0~~April 17, 2022, there was $200.0 million remaining under ~~share repurchase programs authorized by~~ the ~~Board of Directors that expire~~Board-authorized stock buyback program which expires in November ~~2022.~~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
$ 135,000,010
April 12, 2021 - May 9, 2021 — $ — — $ 135,000,010
May 10, 2021 - June 6, 2021 191,765 $ 114.31 191,765 $ 113,080,042
June 7, 2021 - July 4, 2021 367,100 $ 117.26 367,100 $ 70,032,499
Total 558,865 558,865

ITEM 3. DEFAULTS OF SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Item 5.03. None.

3038

ITEM 6. EXHIBITS


Number	Description	Form	Filed with SEC
10.2.26*3.1	~~Offer Letter by~~Amended and ~~between Tony Darden and Jack in the Box Inc.,~~Restated Bylaws, dated May ~~11, 2021~~12, 2022	8-K	~~May 17, 2021~~5/18/2022
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 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 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

3139

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
						Tim Mullany
						Executive Vice President and Chief Financial Officer (principal financial officer) (Duly Authorized Signatory)

Date: ~~August 4, 2021~~May 27, 2022

3240


	July 4, 2021	July 5, 2020
Company-operated	148	144
Franchise	2,071	2,100
System	2,219	2,244


	(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
					$	135,000,010
April 12, 2021 - May 9, 2021	—	$	—	—	$	135,000,010
May 10, 2021 - June 6, 2021	191,765	$	114.31	191,765	$	113,080,042
June 7, 2021 - July 4, 2021	367,100	$	117.26	367,100	$	70,032,499
Total	558,865			558,865