10-Q 1 jack-20220417.htm 10-Q jack-20220417
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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 April 17, 2022
or
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-20220417_g1.jpg jack-20220417_g2.jpg
____________________________________________________
JACK IN THE BOX INC.
(Exact name of registrant as specified in its charter)
 _______________________________________________________________________________________
Delaware95-2698708
(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 (858571-2121
_______________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockJACKNASDAQ 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 filerþSmaller reporting company
Accelerated filerEmerging 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 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 Statements of Earnings
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

1


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)
April 17,
2022
October 3,
2021
ASSETS
Current assets:
Cash$55,719 $55,346 
Restricted cash28,914 18,222 
Accounts and other receivables, net52,461 74,335 
Inventories5,845 2,335 
Prepaid expenses20,486 12,682 
Current assets held for sale3,695 1,692 
Other current assets4,828 4,346 
Total current assets171,948 168,958 
Property and equipment:
Property and equipment, at cost1,282,161 1,133,038 
Less accumulated depreciation and amortization(819,037)(810,124)
Property and equipment, net463,124 322,914 
Other assets:
Operating lease right-of-use assets1,337,950 934,066 
Intangible assets, net12,726 470 
Trademarks283,500  
Goodwill329,758 47,774 
Deferred tax assets 51,517 
Other assets, net224,747 224,438 
Total other assets2,188,681 1,258,265 
$2,823,753 $1,750,137 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt$34,202 $894 
Current operating lease liabilities174,065 150,636 
Accounts payable48,559 29,119 
Accrued liabilities161,897 148,417 
Total current liabilities418,723 329,066 
Long-term liabilities:
Long-term debt, net of current maturities1,812,585 1,273,420 
Long-term operating lease liabilities, net of current portion1,172,708 809,191 
Deferred tax liabilities43,399  
Other long-term liabilities159,955 156,342 
Total long-term liabilities3,188,647 2,238,953 
Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued
  
Common stock $0.01 par value, 175,000,000 shares authorized, 82,568,575 and 82,536,059 issued, respectively
826 825 
Capital in excess of par value505,002 500,441 
Retained earnings1,792,824 1,764,412 
Accumulated other comprehensive loss(72,963)(74,254)
Treasury stock, at cost, 61,523,475 shares
(3,009,306)(3,009,306)
Total stockholders’ deficit(783,617)(817,882)
$2,823,753 $1,750,137 

See accompanying notes to condensed consolidated financial statements.
2


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
QuarterYear-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 revenues76,556 77,901 179,655 181,650 
Franchise royalties and other47,101 47,231 107,856 106,879 
Franchise contributions for advertising and other services47,328 46,123 108,129 106,989 
322,294 257,217 667,005 595,758 
Operating costs and expenses, net:
Food and packaging46,871 23,938 84,408 56,315 
Payroll and employee benefits50,910 26,440 90,635 61,371 
Occupancy and other29,171 13,349 50,048 31,184 
Franchise occupancy expenses49,244 48,904 113,227 114,073 
Franchise support and other costs5,015 3,341 8,926 6,614 
Franchise advertising and other services expenses49,258 47,104 112,566 109,799 
Selling, general and administrative expenses 28,479 18,861 53,818 39,360 
Depreciation and amortization11,545 10,696 24,041 25,267 
Other operating expenses, net14,367 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 operations38,244 64,888 111,984 153,814 
Other pension and post-retirement expenses, net70 203 163 474 
Interest expense, net26,481 15,227 46,668 35,962 
Earnings before income taxes11,693 49,458 65,153 117,378 
Income taxes3,897 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 

See accompanying notes to condensed consolidated financial statements.
3


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
QuarterYear-to-date
April 17,
2022
April 11,
2021
April 17,
2022
April 11,
2021
Net earnings$7,796 $35,934 $47,066 $86,793 
Other comprehensive income:
Actuarial losses and prior service costs reclassified to earnings746 1,138 1,743 2,655 
746 1,138 1,743 2,655 
Tax effect(193)(296)(452)(690)
Other comprehensive income, net of taxes553 842 1,291 1,965 
Comprehensive income $8,349 $36,776 $48,357 $88,758 

See accompanying notes to condensed consolidated financial statements.

4


JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year-to-date
April 17,
2022
April 11,
2021
Cash flows from operating activities:
Net earnings$47,066 $86,793 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization24,041 25,267 
Amortization of franchise tenant improvement allowances and incentives2,127 1,534 
Deferred finance cost amortization3,060 3,013 
Loss on extinguishment of debt7,700  
Tax deficiency (excess tax benefit) from share-based compensation arrangements49 (1,112)
Deferred income taxes5,529 (882)
Share-based compensation expense3,934 2,836 
Pension and post-retirement expense163 474 
Losses (gains) on cash surrender value of company-owned life insurance3,163 (9,352)
Gains on the sale of company-operated restaurants(858)(2,815)
Gains on the disposition of property and equipment, net(286)(1,931)
Impairment charges and other1,109 1,340 
Changes in assets and liabilities, excluding acquisitions:
Accounts and other receivables26,257 (4,490)
Inventories(277)(288)
Prepaid expenses and other current assets(6,716)3,461 
Operating lease right-of-use assets and lease liabilities 9,155 (19,075)
Accounts payable1,297 (7,409)
Accrued liabilities(52,286)6,499 
Pension and post-retirement contributions(3,693)(3,577)
Franchise tenant improvement allowance and incentive disbursements(1,629)(567)
Other(1,077)(1,175)
Cash flows provided by operating activities67,828 78,544 
Cash flows from investing activities:
Purchases of property and equipment(20,781)(22,928)
Acquisition of Del Taco, net of cash acquired(580,792) 
Proceeds from the sale of property and equipment2,245 3,629 
Proceeds from the sale and leaseback of assets1,861  
Proceeds from the sale of company-operated restaurants600 965 
Other(1,315)2,616 
Cash flows used in investing activities(598,182)(15,718)
Cash flows from financing activities:
Borrowings on revolving credit facilities63,000  
Repayments of borrowings on revolving credit facilities(9,000)(107,875)
Proceeds from the issuance of debt1,100,000  
Principal repayments on debt(572,958)(415)
Payment of debt issuance and extinguishment costs(20,274) 
Dividends paid on common stock(18,526)(18,130)
Proceeds from issuance of common stock51 4,340 
Repurchases of common stock (65,000)
Payroll tax payments for equity award issuances(874)(3,892)
Cash flows provided by (used in) financing activities541,419 (190,972)
Net increase (decrease) in cash and restricted cash 11,065 (128,146)
Cash and restricted cash at beginning of period73,568 236,920 
Cash and restricted cash at end of period$84,633 $108,774 

See accompanying notes to condensed consolidated financial statements.
5

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.BASIS OF PRESENTATION
Nature of operations — Jack in the Box Inc. (the “Company”), together with its consolidated subsidiaries, develops, operates, and franchises quick-service restaurants under the Jack in the Box® and Del Taco® restaurant brands.
On March 8, 2022, the Company acquired Del Taco Restaurants, Inc. (“Del Taco”) for cash according to the terms and conditions of the Agreement and Plan of Merger, dated as of December 5, 2021. Del Taco is a nationwide operator and franchisor of restaurants featuring fresh and fast Mexican and American inspired cuisines. Refer to Note 3, Business Combination, for further details.
As of April 17, 2022, there were 172 company-operated and 2,035 franchise-operated Jack in the 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 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 October 3, 2021 (“2021 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our 2021 Form 10-K, with the exception of the significant accounting policies below that were adopted 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.
Fiscal year — The Company’s fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. Our Del Taco subsidiary operates on a fiscal year ending the Tuesday closest to September 30. Fiscal years 2022 and 2021 include 52 and 53 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 2022 and 2021 refer to the 12 weeks (“quarter”) and 28 weeks (“year-to-date”) ended April 17, 2022 and April 11, 2021, 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 marketing funds at each of our restaurant brands that include contractual contributions. In 2022 and 2021, marketing fund contributions from Jack in the Box franchise and company-operated restaurants were approximately 5.0% of sales. In 2022, marketing fund contributions from Del Taco franchise and company-operated restaurants were approximately 4.0% of 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 $7.1 million and $13.1 million, respectively, in 2022 and $4.3 million and $10.1 million, respectively, in 2021.
Allowance for credit losses — 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.
6

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):
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 allowance3,993 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 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 per restaurant for a 20-year term, and generally require that franchisees pay royalty and marketing fees based upon a percentage of gross sales. The agreements also require franchisees to pay technology fees, as well as sourcing fees for Jack in the Box franchise agreements.
Disaggregation of revenue — The following table disaggregates revenue by segment and primary source (in thousands):
12 Weeks Ended April 17, 2022
Jack in the BoxDel TacoTotal
Sources of revenue:
Company restaurant sales$94,250 $57,059 $151,309 
Franchise rental revenues75,692 864 76,556 
Franchise royalties42,933 2,645 45,578 
Marketing fees41,390 2,158 43,548 
Technology and sourcing fees3,575 205 3,780 
Franchise fees and other services1,497 26 1,523 
Total revenue$259,337 $62,957 $322,294 
7

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12 Weeks Ended April 11, 2021
Jack in the BoxDel TacoTotal
Sources of revenue:
Company restaurant sales$85,962 $ $85,962 
Franchise rental revenues77,901  77,901 
Franchise royalties43,620  43,620 
Marketing fees42,317  42,317 
Technology and sourcing fees3,806  3,806 
Franchise fees and other services3,611  3,611 
Total revenue$257,217 $ $257,217 
28 Weeks Ended April 17, 2022
Jack in the BoxDel TacoTotal
Sources of revenue:
Company restaurant sales$214,306 $57,059 $271,365 
Franchise rental revenues178,791 864 179,655 
Franchise royalties100,581 2,645 103,226 
Marketing fees97,191 2,158 99,349 
Technology and sourcing fees8,575 205 8,780 
Franchise fees and other services4,604 26 4,630 
Total revenue$604,048 $62,957 $667,005 
28 Weeks Ended April 11, 2021
Jack in the BoxDel TacoTotal
Sources of revenue:
Company restaurant sales$200,240 $ $200,240 
Franchise rental revenues181,650  181,650 
Franchise royalties100,963  100,963 
Marketing fees98,093  98,093 
Technology and sourcing fees8,896  8,896 
Franchise fees and other services5,916  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
April 17,
2022
April 11,
2021
Deferred franchise and development fees at beginning of period$41,520 $43,541 
Changes due to business combinations6,193  
Revenue recognized (2,995)(3,075)
Additions 2,379 1,118 
Deferred franchise and development fees at end of period$47,097 $41,584 
8

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 April 17, 2022 (in thousands):
Remainder of 2022$2,361 
20234,977 
20244,778 
20254,543 
20264,214 
Thereafter21,312 
$42,185 
We have applied the optional exemption, as provided for under ASC Topic 606, Revenue from Contracts with Customers, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.

3.BUSINESS COMBINATION
On March 8, 2022 (the “Closing Date”), the Company acquired 100% of the outstanding equity interest of Del Taco Restaurants, Inc. (“Del Taco”) for cash according to the terms and conditions of the Agreement and Plan of Merger, dated as of December 5, 2021 (the “Merger Agreement”). Del Taco is a nationwide operator and franchisor of restaurants featuring fresh and fast Mexican and American inspired cuisines. 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.
9

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, 202236,442
Del Taco RSAs subject to accelerated vesting805
Del Taco RSUs subject to accelerated vesting70
Del Taco options subject to accelerated vesting292
Total Del Taco shares outstanding37,610
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 receivables3,809 
Inventories3,233 
Prepaid expenses2,950 
Other current assets105 
Property and equipment150,826 
Operating lease right-of-use assets349,489 
Intangible assets12,371 
Trademarks283,500 
Other assets5,128 
Liabilities:
Current maturities of long-term debt22 
Current operating lease liabilities21,991 
Accounts payable18,808 
Accrued liabilities66,739 
Long-term debt, net of current maturities349 
Long-term operating lease liabilities, net of current portion302,688 
Deferred tax liabilities88,203 
Other long-term liabilities13,080 
Net assets acquired, excluding goodwill$299,531 
Goodwill$281,710 
10

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):
AmountUseful life (Years)
Trade name$283,500 Indefinite
Franchise contracts9,700 18
Sublease assets2,671 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.
11

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):
QuarterYear-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, 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 thirteen Jack in the Box restaurants in two markets, and during 2021 we acquired four Jack in the Box franchise restaurants in 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). These acquisitions were not material to our condensed consolidated financial statements in either year.

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 restaurants613 
Balance at October 3, 202147,774 
Acquisition of Del Taco Restaurants, Inc. 281,710 
Acquisition of Jack in the Box franchise-operated restaurants274 
Balance at April 17, 2022$329,758 
12

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 AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Sublease assets$2,671 $(39)$2,632 $ $ $ 
Franchise contracts9,700 (62)9,638    
Reacquired franchise rights557 (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 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):
QuarterYear-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 - franchise23,540 23,759 55,282 55,266 
Amortization of favorable and unfavorable lease contracts, net28  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.
13

JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents as of April 17, 2022, the annual maturities of our lease liabilities (in thousands):
Finance LeasesOperating Leases
Fiscal year:
Remainder of 2022$491 $113,985 
2023979 221,635 
2024400 185,228 
202538 178,781 
202626 161,832 
Thereafter26 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)Total future lease payments include non-cancellable commitments of $2.0 million for finance leases and $1,479.2 million for operating leases.

7.FAIR VALUE MEASUREMENTS
Financial assets and liabilitiesThe following table presents our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
TotalQuoted 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 April 17, 2022:
Non-qualified deferred compensation plan (1)$15,728 $15,728 $ $ 
Total liabilities at fair value$15,728 $15,728 $ $ 
Fair value measurements as of October 3, 2021:
Non-qualified deferred compensation plan (1)$18,555 $18,555 $ $ 
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 April 17, 2022 and October 3, 2021 (in thousands):
April 17,
2022
October 3,
2021
Carrying AmountFair ValueCarrying AmountFair 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.
14

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 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 Notes272,250 272,938 
Series 2019-1 Class A-2-III Notes445,500 446,625 
Series 2022-1 Class A-2-I Notes550,000  
Series 2022-1 Class A-2-II Notes550,000  
Series 2022-1 Class A-2-I Variable Funding Notes50,000  
Revolving Credit Facility4,000  
Finance lease obligations and other debt2,233 2,275 
Total debt1,873,983 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