What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-11-22 compared with 2021-11-23 · 507 added, 311 removed, 1086 unchanged (43% of the section changed)

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Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

In accordance with guidance issued by the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their first assessment of internal control over financial reporting following the date of acquisition.

Based on those guidelines, management’s assessment of the effectiveness of the Company’s internal control over financial reporting excluded Del Taco Restaurants, Inc.

(“Del Taco”), which the Company acquired in the second quarter of 2022.

See Note 3, Business Combination , to the consolidated financial statements for additional information on the Company’s acquisition of Del Taco.

We have included the financial results of this acquisition in the consolidated financial statements from the date of acquisition.

Del Taco represented approximately 39% of consolidated total assets as of October 2, 2022, and 22% of consolidated total revenues for the fiscal year ended October 2, 2022.

Management, under the oversight of our principal executive officer, principal financial officer, and Audit Committee, assessed the effectiveness of the Company’s internal control over financial reporting as of October 2, 2022.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 2, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 3, 2021 and September 27, 2020, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for the fifty-three week period ended October 3, 2021, and for each of the fifty-two week periods ended September 27, 2020, and September 29, 2019, and the related notes (collectively, the consolidated financial statements), and our report dated November 23, 2021 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 2, 2022 and October 3, 2021, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for the fifty-two week period ended October 2, 2022, for the fifty-three week period ended October 3, 2021, and for the fifty-two week period ended September 27, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated November 22, 2022 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Del Taco Restaurants, Inc.

during 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of October 2, 2022, Del Taco Restaurants Inc.’s internal control over financial reporting associated with 39% of total assets and 22% of total revenues included in the consolidated financial statements of the Company as of and for the year ended October 2, 2022.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Del Taco Restaurants, Inc.

Basis for Opinion

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Number Description Form Filed with SEC

2.1 Agreement and Plan of Merger, dated as of December 5, 2021, by and among Jack in the Box Inc, Epic Merger Sub Inc., and Del Taco Restaurants, Inc.

8-K 12/6/2021

3.1 Certificate of Amendment of Restated Certificate of Incorporation dated September 21, 2007

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4.2 Series 2019-1 Supplement to Base Indenture, dated as of July 8, 2019, by and between Jack in the Box Funding, LLC, as Master Issuer of the Series 2019-1 fixed rate senior secured notes, Class A-2, and Series 2019-1 variable funding senior notes, Class A-1, and Citibank, N.A., as Trustee and Series 2019-1 Securities Intermediary.

4.3 Series 2022-1 Supplement to Base Indenture, dated as of February 11, 2022, by and between Jack in the Box Funding, LLC, as Master Issuer of the Series 2022-1 fixed rate senior secured notes, Class A-2, and Series 2022-1 variable funding senior notes, Class A-1, and Citibank, N.A., as Trustee and Series 2022-1 Securities Intermediary.

8-K 2/15/2022

4.4 First Supplement to the Base Indenture, dated as of February 11, 2022, by and between Jack in the Box Funding, LLC, as Master Issuer, and Citibank, N.A., as Trustee and Securities Intermediary.

8-K 2/15/2022

10.1.20 Class A-1 Note Purchase Agreement, dated as of July 8, 2019, by and among Jack in the Box Funding, LLC, as Master Issuer, each of Different Rules, LLC, Jack in the Box Properties, LLC and Jack in the Box SPV Guarantor, LLC, as Guarantors, Jack in the Box Inc.

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10.1.22 Management Agreement, dated as of July 8, 2019, by and among Jack in the Box Funding, LLC, as Master Issuer, certain subsidiaries of Jack in the Box Funding, LLC party thereto, Jack in the Box Inc., as Manager, and Citibank, N.A., as Trustee.

10.1.23 Voting Agreement, dated as of December 5, 2021, by and among Jack in the Box Inc., Belfer Investment Partners LP and Lime Partners LLC

8-K 12/6/2021

Number Description Form Filed with SEC

10.1.24 Voting Agreement, dated as of December 5, 2021, by and among Jack in the Box Inc., Levy Family Partners LLC, Lawrence F.

Levy, Ari Levy and certain other Del Taco stockholders party thereto

8-K 12/6/2021

10.1.25 2022-1 Class A-2 Note Purchase Agreement, dated as of February 2, 2022, by and among Jack in the Box Inc., the subsidiaries of Jack in the Box Inc.

party thereto and Guggenheim Securities, LLC acting on behalf of itself and as the representative of the initial purchasers.

10.1.26 Class A-1 Note Purchase Agreement, dated as of February 11, 2022, by and among Jack in the Box Funding, LLC, as Master Issuer, each of Different Rules, LLC, Jack in the Box Properties, LLC and Jack in the Box SPV Guarantor, LLC, as Guarantors, Jack in the Box Inc.

as Manager, the conduit investors party thereto, the financial institutions party thereto, certain funding agents, and Coöperatieve Rabobank U.A., New York Branch, as L/C Provider, Swingline Lender and Administrative Agent.

8-K 2/15/2022

10.1.27 First Amendment to the Management Agreement, dated as of February 11, 2022, by and among Jack in the Box Funding, LLC, as Master Issuer, certain subsidiaries of Jack in the Box Funding, LLC party thereto, Jack in the Box Inc., as Manager, and Citibank, N.A., as Trustee.

8-K 2/15/2022

10.2* Form of Compensation and Benefits Assurance Agreement for Executives

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10-K 11/18/2020

10.2.19* Jennifer Kennedy Separation and Release Agreement, dated November 13, 2020

10-K 11/18/2020

10.2.20* Offer Letter by and between Tim Mullany and Jack in the Box Inc., dated December 11, 2020

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10-Q 2/17/2021

Number Description Form Filed with SEC

10.2.22* Offer Letter by and between Steven Piano and Jack in the Box Inc., dated March 23, 2021

10-Q 5/12/2021

10.2.23* Offer Letter by and between Carlson Choi and Jack in the Box Inc., dated March 30, 2021

10-Q 5/12/2021

10.2.24* Melissa Corrigan Separation and Release Agreement, dated May 7, 2021

10-Q 5/12/2021

10.2.25* Andrew Martin Separation and Release Agreement, dated May 10, 2021

10-Q 5/12/2021

10.2.26* Offer Letter by and between Tony Darden and Jack in the Box Inc., dated May 11, 2021

8-K 5/17/2021

10.2.27* Adrienne Ingoldt Separation and Release Agreement, dated September 24, 2021

10-K Filed herewith

10.3* Amended and Restated Supplemental Executive Retirement Plan

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10.8.3* Form of Restricted Stock Unit Award Agreement for Non-Employee Director under the 2004 Stock Incentive Plan

10-K 11/20/2009

_____ Filed herewith

10.8.4* Form of Restricted Stock Unit Grant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan

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10-Q 2/19/2015

Number Description Form Filed with SEC

10.8.9* Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan

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Performance Share Award Agreement under the 2004 Stock Incentive Plan

10-K Filed herewith

10-K 11/23/2021

10.8.15* Jack in the Box Inc.

Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan

10-K Filed herewith

10-K 11/23/2021

10.10.2* Jack in the Box Inc.

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_____ Filed herewith

Number Description Form Filed with SEC

31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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* Management contract or compensatory plan

1 Certain of the exhibits and schedules in this Exhibit have been omitted pursuant to Item 601(a)(5) and 601(b)(2) of Regulation S-K.

The Company agrees to furnish supplementally a copy of any omitted exhibits and schedules to the Securities and Exchange Commission upon its request.

ITEM 15(b) All required exhibits are filed herein or incorporated by reference as described in Item 15(a)(3).

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GOEBEL Director and Chairman of the Board November 22, 2022

/s/ GUILLERMO DIAZ, JR.

Director November 22, 2022

Guillermo Diaz, Jr.

/s/ SHARON P.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm ( KPMG LLP , San Diego, CA , Auditor Firm ID:

Consolidated Balance Sheets

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We have audited the accompanying consolidated balance sheets of Jack in the Box Inc.

and subsidiaries (the Company) as of October 3, 2021 and September 27, 2020, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for the fifty-three week period ended October 3, 2021, and for each of the fifty-two week periods ended September 27, 2020, and September 29, 2019 and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 3, 2021 and September 27, 2020, and the results of its operations and its cash flows for the fifty-three week period ended October 3, 2021, and for each of the fifty-two week periods ended September 27, 2020, and September 29, 2019, in conformity with U.S.

and subsidiaries (the Company) as of October 2, 2022 and October 3, 2021, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for the fifty-two week period ended October 2, 2022, the fifty-three week period ended October 3, 2021, and the fifty-two week period ended September 27, 2020 and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 2, 2022 and October 3, 2021, and the results of its operations and its cash flows for the fifty-two week period ended October 2, 2022, for the fifty-three week period ended October 3, 2021, and for the fifty-two week period ended September 27, 2020, in conformity with U.S.

generally accepted accounting principles.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of self-insurance liabilities related to workers’ compensation and general liability

As discussed in Note 1 to the consolidated financial statements, the Company establishes its undiscounted insurance liability and reserves using independent actuarial estimates of expected losses based on a statistical analysis of historical claims data.

As of October 3, 2021, the Company has recorded an estimated self-insurance liability of $20.8 million.

We identified the assessment of self-insurance liabilities related to workers’ compensation and general liability as a critical audit matter.

Evaluating the Company’s judgments regarding the use of actuarial estimates and assumptions related to the loss development factors and the expected loss rates involved a high degree of complex and subjective auditor judgment.

Changes in the loss development factors and expected loss rates could have a significant impact on the liability recognized.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Fair Value of the Del Taco Trademarks

As discussed in Note 3 to the consolidated financial statements, on March 8, 2022, the Company acquired Del Taco Restaurants, Inc.

(Del Taco) in a business combination.

The purchase price was allocated to the fair value of the tangible and intangible assets acquired and liabilities assumed, with the excess recorded as goodwill.

For the trademarks specifically, the Company used the relief from royalty method of the income approach, which involved the use of key inputs and assumptions such as estimates of projected systemwide sales.

As a result of the transaction, the Company recorded trademarks with an acquisition-date fair value of $283.5 million.

We identified the evaluation of the acquisition-date fair value of the Del Taco trademarks as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate the revenue growth rates used to value the trademarks.

Changes in this assumption could have a significant impact on the acquisition-date fair value of the trademarks.

The following are the primary audit procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the revenue growth rates.

We evaluated the Company’s revenue growth rates by comparing forecasted growth assumptions to those of Del Taco’s peers and industry reports, as well as historical results of Del Taco.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the terminal growth rate.

In addition, we performed sensitivity analyses over the Company’s revenue growth rates to assess the impact of the changes in those assumptions on the Company’s determination of fair value of the trademarks.

Identification of Potential Impairment Events of the Del Taco Long-Lived Assets

As discussed in Note 1 to the consolidated financial statements, the Company evaluates long-lived assets, such as property and equipment and operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable.

As of October 2, 2022, the Company had consolidated property and equipment, net and operating lease right of use assets of $418.2 million and $1,332.1 million, respectively, inclusive of the Del Taco long-lived assets.

We identified the identification of potential impairment events associated with the Del Taco brand restaurants long-lived assets as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate management’s identification of indicators of potential impairment including restaurant level operating results as well as other events or changes in circumstances of the restaurant.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to develop the estimate of self-insurance liabilities, with the involvement of actuarial professionals when appropriate.

This included a control related to the review of the loss development factors and expected loss rates applied in the actuarial report and controls related to the completeness and accuracy of claims data.

We agreed the claims paid and claims reported (not paid) data used in the actuarial models with the actual claims paid and claims reported (not paid) records of the Company, which is used in the development of the loss development factors and expected loss rates.

We involved actuarial professionals with specialized skills and knowledge, who assisted in evaluating the Company’s actuarial estimates and assumptions related to the loss development factors and expected loss rates, by comparing them to generally accepted actuarial methodologies and the Company’s historical data.

We evaluated the design of an internal control related to the Company’s identification of impairment events of the Del Taco brand long-lived assets.

We assessed the Company’s identification of impairment indicators by:

• Inspecting operating results by restaurant to identify operating losses

• Testing the underlying restaurant-level operating results used in the impairment indicator assessment for a selection of restaurants

• Considering market conditions and economic trends

• Reading the board of directors meeting minutes for changes to the Company’s current operations and future operating plans.

We have served as the Company’s auditor since 1986.

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(In thousands, except share and per share data)

2021 September 27,

2022 October 3,

Current assets:

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Intangible assets, net 12,324 470

Trademarks 283,500 —

Goodwill 366,821 47,774

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Long-term operating lease liabilities, net of current portion 1,165,097 809,191

Deferred tax liabilities 37,684 —

Other long-term liabilities 134,694 156,342

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Depreciation and amortization 56,100 46,500 52,798

Impairment and other (gains) charges, net ( 3,382 ) ( 6,493 ) 12,455

Pre-opening costs 1,110 775 166

Other operating expense (income), net 889 ( 3,382 ) ( 6,493 )

Gains on the sale of company-operated restaurants ( 3,878 ) ( 4,203 ) ( 3,261 )

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Net earnings $ 115,781 $ 165,755 $ 89,764

Unrecognized periodic benefit costs:

Other comprehensive income:

Actuarial gains (losses) arising during the period 24,249 44,134 ( 4,875 )

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Tax effect ( 7,215 ) ( 12,714 ) ( 10,340 )

36,351 29,401 ( 43,284 )

Cash flow hedges:

Net change in fair value of derivatives — — ( 23,625 )

Net loss reclassified to earnings — — 24,328

Tax effect — — ( 3,165 )

— — ( 2,462 )

Other comprehensive income (loss), net of taxes 36,351 29,401 ( 45,746 )

Other comprehensive income, net of taxes 20,272 36,351 29,401

Comprehensive income $ 136,053 $ 202,106 $ 119,165

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Loss on extinguishment of debt 7,700 — —

Loss on interest rate swap termination — — 23,551

Excess tax benefits from share-based compensation arrangements ( 1,160 ) ( 449 ) ( 113 )

Tax deficiency (excess tax benefits) from share-based compensation arrangements 123 ( 1,160 ) ( 449 )

Deferred income taxes 7,857 8,008 5,162

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Pension and postretirement expense 303 881 41,720

Gains on cash surrender value of company-owned life insurance

Losses (gains) on cash surrender value of company-owned life insurance

12,668 ( 12,753 ) ( 4,262 )

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Proceeds from the sale and leaseback of assets 10,768 3,884 19,828

Acquisition of Del Taco, net of cash acquired ( 580,793 ) — —

Proceeds from the sale of company-operated restaurants 6,391 1,827 3,395

Collections on notes receivable — — 16,759

Proceeds from the sale of property and equipment 31,161 11,742 22,774

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Debt issuance costs ( 20,599 ) — ( 216 )

Payments related to termination of interest rate swaps — — ( 23,551 )

Dividends paid on common stock ( 36,987 ) ( 37,322 ) ( 27,538 )

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Payroll tax payments for equity award issuances ( 1,223 ) ( 4,166 ) ( 5,946 )

Cash flows used in financing activities ( 343,545 ) ( 87,289 ) ( 5,730 )

Net (decrease) increase in cash and restricted cash ( 163,352 ) 85,359 148,856

Cash flows provided by (used in) financing activities 478,178 ( 343,545 ) ( 87,289 )

Net increase (decrease) in cash and restricted cash 62,472 ( 163,352 ) 85,359

Cash and restricted cash at beginning of year 73,568 236,920 151,561

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Net earnings — — — 89,764 — — 89,764

Other comprehensive loss — — — — ( 45,746 ) — ( 45,746 )

Other comprehensive income — — — — 29,401 — 29,401

Cumulative-effect from a change in accounting principle — — — ( 2,870 ) — — ( 2,870 )

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Other comprehensive income — — — — 36,351 — 36,351

Cumulative-effect from a change in accounting principle — — — ( 2,870 ) — — ( 2,870 )

Balance at September 27, 2020 82,369,714 824 489,515 1,636,211 ( 110,605 ) ( 2,809,306 ) ( 793,361 )

Balance at October 3, 2021 82,536,059 825 500,441 1,764,412 ( 74,254 ) ( 3,009,306 ) ( 817,882 )

Shares issued under stock plans, including tax benefit 44,540 1 50 — — — 51

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Purchases of treasury stock — — — — — ( 25,000 ) ( 25,000 )

Fair value of assumed Del Taco RSAs attributable to pre-combination service — — 449 — — — 449

Net earnings — — — 115,781 — — 115,781

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations — Founded in 1951, Jack in the Box Inc.

(the “Company”) operates and franchises Jack in the Box ® quick-service restaurants.

The Company operates as a single segment for reporting purposes.

The following table summarizes the number of restaurants as of the end of each fiscal year:

2021 2020 2019

Company-operated 163 144 137

Franchise 2,055 2,097 2,106

Total system 2,218 2,241 2,243

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 October 2, 2022, there were 146 company-operated and 2,035 franchise-operated Jack in the Box restaurants and 290 company-operated and 301 franchise-operated Del Taco restaurants.

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

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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.

Fiscal year — Our fiscal year is 52 or 53 weeks ending the Sunday closest to September 30.

Comparisons throughout these notes to the consolidated financial statements refer to the 53 -week period ended October 3, 2021 for the fiscal year 2021 and 52 -week periods ended September 27, 2020 and September 29, 2019 for fiscal years 2020 and 2019, respectively .

Certain prior period information on the consolidated statement of earnings has been reclassified to conform to the current year presentation.

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.

Comparisons throughout these notes to the consolidated financial statements refer to the 52-week period ended October 2, 2022 for the fiscal year 2022, and the 53-week and 52-week periods ended October 3, 2021 and September 27, 2020 for fiscal years 2021 and 2020, respectively .

Principles of consolidation — The accompanying consolidated financial statements include the accounts of Jack in the Box Inc.

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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 used 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 October 3, 2021 and September 27, 2020, restricted cash balances were $ 18.2 million and $ 37.3 million, respectively.

As of October 2, 2022 and October 3, 2021, restricted cash balances were $ 27.2 million and $ 18.2 million, respectively.

Accounts and other receivables, net — Our accounts and other receivables, net is primarily comprised of receivables from franchisees, tenants, credit card processors, and insurance receivables.

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We accrue interest on notes receivable based on the contractual terms.

The allowance for doubtful accounts is based on historical experience and a review of existing receivables.

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 doubtful accounts has not historically been material.

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

Balance as of beginning of period $ ( 6,292 ) $ ( 5,541 )

Provision for expected credit losses ( 4,744 ) ( 770 )

Write-offs charged against the allowance 5,061 19

Balance as of end of period $ ( 5,975 ) $ ( 6,292 )

Inventories — Our inventories consist principally of food, packaging, and supplies, and are valued at the lower of cost or market on a first-in, first-out basis.

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Maintenance and repairs are expensed as incurred.

When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the dispositions are included in “Impairment and other (gains) charges, net” in the accompanying consolidated statements of earnings.

When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the dispositions are included in “Other operating expense (income), net” in the accompanying consolidated statements of earnings.

Buildings, equipment, and leasehold improvements are generally depreciated using the straight-line method based on the estimated useful lives of the assets, over the initial lease term for certain assets acquired in conjunction with the lease commencement for leased properties, or the remaining lease term for certain assets acquired after the commencement of the lease for leased properties.

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If the carrying amount of a long-lived asset group exceeds the sum of related undiscounted future cash flows, we recognize an impairment loss by the amount that the carrying value of the assets exceeds fair value.

Refer to Note 9, Impairment and Other (Gains) Charges, Net , for additional information.

Goodwill and intangible assets — Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired, if any.

We generally record goodwill in connection with the acquisition of restaurants from franchisees.

Refer to Note 9, Other Operating Expense (Income), Net , for additional information.

Goodwill and trademarks — Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired, if any.

We generally record goodwill in connection with the acquisition of restaurants from franchisees or the acquisition of another business.

Likewise, upon the sale of restaurants to franchisees, goodwill is decremented.

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If the business disposed of was never fully integrated into the reporting unit after its acquisition, and thus the benefits of the acquired goodwill were never realized, the current carrying amount of the acquired goodwill is written off.

Goodwill is not amortized and has been assigned to reporting units for purposes of impairment testing.

Our two restaurant brands, Jack in the Box and Del Taco, are both operating segments and reporting units.

Goodwill is evaluated for impairment annually during the fourth quarter, or more frequently if indicators of impairment are present.

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If the carrying value exceeds the fair value, an impairment loss is recognized equal to the excess.

Refer to Note 4, Goodwill , for additional information.

Reacquired franchise rights are recorded in connection with our acquisition of franchised restaurants and are amortized over the remaining contractual period of the franchise contract in which the right was granted.

As of October 3, 2021 and September 27, 2020, the carrying value of our intangible assets was $ 0.5 million and $ 0.3 million, respectively, and are included in “Intangible assets, net” in the accompanying consolidated balance sheets.

We evaluate our indefinite-lived intangible assets for impairment on an annual basis or more often if an event occurs or circumstances change that indicate impairments might exist.

We perform our annual test for impairment of our indefinite-lived intangible assets during the fourth quarter.

We may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is greater than its carrying value.

If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value of an indefinite-lived intangible asset exceeds its carrying value, then the asset's fair value is compared to its carrying value.

Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is estimated by discounting the expected future after-tax cash flows associated with the intangible asset.

Intangible assets, net — Intangible assets primarily include franchise contracts, reacquired franchise rights and sublease assets.

Franchise contracts, which represent the fair value of franchise agreements based on the projected royalty revenue stream as of the acquisition date, are amortized on a straight-line basis to “Depreciation and amortization expense” in the consolidated statements of earnings over the remaining term of the franchise agreements.

Reacquired franchise rights are recorded in connection with our acquisition of franchised restaurants and are amortized on a straight-line basis to “Depreciation and amortization expense” in the consolidated statements of earnings over the term of the former franchise agreement.

Sublease assets, which represent subleases with stated rent above comparable market rents, are amortized on a straight-line basis to “Franchise rental revenues” in the consolidated statements of earnings over the term of the related sublease.

Company-owned life insurance — We have purchased company-owned life insurance (“COLI”) policies to support our non-qualified benefit plans.

The cash surrender values of these policies were $ 123.6 million and $ 113.8 million as of October 3, 2021 and September 27, 2020, respectively, and are included in “Other assets, net”, in the accompanying consolidated balance sheets.

The cash surrender values of these policies were $ 108.9 million and $ 123.6 million as of October 2, 2022 and October 3, 2021, respectively, and are included in “Other assets, net”, in the accompanying consolidated balance sheets.

Changes in cash surrender values are included in “Selling, general and administrative expenses” in the accompanying consolidated statements of earnings.

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The lease term and incremental borrowing rate for each lease requires judgement by management and can impact the classification of our leases as well as the value of our lease assets and liabilities.

When determining the lease term, we consider option periods available, and include option periods in the measurement of the lease right-of-use (“ROU”) asset and lease

liability where the exercise is reasonably certain to occur.

When determining the lease term, we consider option periods available, and include option periods in the measurement of the lease right-of-use (“ROU”) asset and lease liability where the exercise is reasonably certain to occur.

As our leases do not provide an implicit discount rate, we have determined it is appropriate to use our estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, in calculating our lease liabilities.

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Gift cards, upon customer purchase, are recorded as deferred income and are recognized in revenue as they are redeemed.

The Company operates loyalty programs in which members earn points primarily for food purchases.

Points can then be redeemed for special reward offers.

The Company allocates the consideration received on loyalty orders between the food purchased and the loyalty points earned, taking into consideration the expected redemption rate of loyalty points.

The consideration allocated to the food is recognized as revenue at the time of sale.

The consideration allocated to the loyalty points earned is deferred until the loyalty points are redeemed or expire.

“Franchise rental revenues” received from franchised restaurants based on fixed rental payments are recognized as revenue over the term of the lease.

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Royalties are based upon a percentage of sales of the franchised restaurant and are recognized as earned.

Franchise royalties are billed on a monthly basis.

Franchise royalties are billed on a monthly or weekly basis.

Franchise fees when a new restaurant opens or at the start of a new franchise term are recorded as deferred revenue when received and recognized as revenue over the term of the franchise agreement.

“Franchise contributions for advertising and other services” includes franchisee contributions to our marketing fund billed on a monthly basis and sourcing and technology fees, as required under the franchise agreements.

Contributions to our marketing fund are based on a percentage of sales and recognized as earned.

“Franchise contributions for advertising and other services” includes franchisee contributions to our marketing funds billed on a monthly or weekly basis and sourcing and technology fees, as required under the franchise agreements.

Contributions to our marketing funds are based on a percentage of sales and recognized as earned.

Sourcing and technology services are recognized when the goods or services are transferred to the franchisee.

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We recognize income from gift cards when redeemed by the customer.

Deferred gift card income totaled $ 4.1 million and $ 2.2 million as of October 2, 2022 and October 3, 2021, respectively, and are included in “Accrued liabilities”, in the accompanying consolidated balance sheets.

While we will continue to honor all gift cards presented for payment, we may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity.

In these circumstances, to the extent we determine there is no requirement for remitting balances to government agencies under unclaimed property laws, card balances may be recognized as income in our statement of earnings.

Amounts recognized on unredeemed gift card balances were $ 0.7 million, $ 0.6 million, and $ 0.5 million in fiscal 2022, 2021, and 2020, respectively.

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Pre-opening costs associated with the opening of a restaurant that was closed upon acquisition consist of labor costs, maintenance and repair costs, and property rent.

Pre-opening costs are included in “Selling, general and administrative expenses” in the accompanying consolidated statements of earnings.

Self-insurance — We are self-insured for a portion of our workers’ compensation, general liability, employee medical and dental, and automotive claims.

We utilize a paid-loss plan for our workers’ compensation, general liability, and automotive programs, which have predetermined loss limits per occurrence and in the aggregate.

We establish our insurance liability (undiscounted) and reserves using independent actuarial estimates of expected losses for determining reported claims and as the basis for estimating claims incurred, but not reported.

As of October 3, 2021 and September 27, 2020, our estimated liability for general liability and workers’ compensation claims exceeded our self-insurance retention limits by $ 1.8 million and $ 1.9 million, respectively, which we expect our insurance providers to pay on our behalf in accordance with the contractual terms of our insurance policies.

Advertising costs — We administer a marketing fund that includes contractual contributions.

In 2021, 2020 and 2019, marketing fund contributions from franchise and company-operated restaurants were approximately 5.0 % of gross revenues with the exception of our March 2020 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 will be collected over three months beginning October 2020.

As of October 3, 2021, postponed marketing fees which remain uncollected were $ 4.3 million which is included within “Accounts and other receivables, net” in our consolidated balance sheet.

We establish our undiscounted insurance liability and reserves using independent actuarial estimates of expected losses based on a statistical analysis of historical claims data.

As of October 2, 2022, our estimated self-insurance liability was $ 31.9 million, and is included in “Accrued liabilities” in the accompanying consolidated balance sheet.

Advertising costs — We administer marketing funds at each of our restaurant brands that include contractual contributions.

In 2022, 2021 and 2020, marketing fund contributions from Jack in the Box franchise and company-operated restaurants were approximately 5.0 % of sales with the exception of our March 2020 and April 2020 marketing fees, which were temporarily reduced to 2 % to 4 %, respectively, in response to the economic burden associated with the COVID-19 pandemic.

In 2022, marketing fund contributions from Del Taco franchise and company-operated restaurants were approximately 4.0 % of sales.

Production costs of commercials, programming, and other marketing activities are charged to the marketing funds when the advertising is first used for its intended purpose, and the costs of advertising are charged to operations as incurred.

When contributions to the marketing fund exceed the related advertising expenses, advertising costs are accrued up to the amount of revenues on an annual basis since we are contractually obligated to spend these funds.

As of October 3, 2021 and September 27, 2020, additional amounts accrued were $ 9.5 million and $ 8.3 million, respectively, for this requirement.

There have been no incremental contributions to the marketing fund made in 2021 or 2020.

In 2019, incremental contributions to the marketing fund were $ 2.0 million.

Total contributions made by the Company, including incremental contributions, are included in “Selling, general, and administrative expenses” in the accompanying consolidated statements of earnings.

As of October 2, 2022 and October 3, 2021, additional amounts accrued were $ 3.5 million and $ 9.5 million, respectively, for this requirement.

Total contributions made by the Company are included in “Selling, general, and administrative expenses” in the accompanying consolidated statements of earnings.

In fiscal 2022, 2021, and 2020 advertising costs were $ 32.6 million, $ 19.6 million, and $ 17.1 million, respectively.

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Refer to Note 11, Income Taxes , for additional information.

Derivative instruments — We have historically used interest rate swaps to hedge interest rate volatility under our senior credit facility.

On July 2, 2019, we terminated all interest rate swap agreements in anticipation of the securitization transaction.

Prior to terminating the agreements, a ll derivatives were recognized on the consolidated balance sheets at fair value based upon quoted market prices.

Changes in the fair values of derivatives were recorded in earnings or other comprehensive income (“OCI”), based on whether or not the instrument is designated as a hedge transaction.

Gains or losses on derivative instruments that qualify for hedge designation were reported in OCI and reclassified to earnings in the period the hedged item affected earnings.

When the underlying hedge transaction ceased to exist, the associated amount reported in OCI was reclassified to earnings at that time.

Refer to Note 6, Derivative Instruments, for additional information .

Contingencies — We recognize liabilities for contingencies when we have an exposure that indicates it is probable that an asset has been impaired or that a liability has been incurred and the amount of impairment or loss can be reasonably estimated.

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Refer to Note 16, Commitments and Contingencies , for additional information.

Effect of new accounting pronouncements adopted in fiscal 2021 — In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , that requires measurement and recognition of expected versus incurred credit losses for financial assets held, including trade receivables.

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.

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

Balance as of September 27, 2020 $ ( 5,541 )

Provision for expected credit losses ( 770 )

Write-offs charged against the allowance 19

Balance as of October 3, 2021 $ ( 6,292 )

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , 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.

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.

Effect of new accounting pronouncements adopted in fiscal 2022 — In October 2021 the 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 consolidated financial statements.

Effect of new accounting pronouncements to be adopted in future periods — We 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 consolidated financial statements.

Nature of products and services — We derive revenue from retail sales at Jack in the Box 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 and generally require that franchisees pay royalty and marketing fees at 5 % of gross sales.

The agreement also requires franchisees to pay sourcing, technology support and other miscellaneous fees.

Disaggregation of revenue — The following table disaggregates revenue by primary source for the fiscal years ended October 3, 2021, September 27, 2020, and September 29, 2019 (in thousands) :

2021 2020 2019

Sources of 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 for the fiscal year ended October 2, 2022 (in thousands) :

Jack in the Box Del Taco Total

Company restaurant sales $ 414,225 $ 286,845 $ 701,070

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Franchise royalties 188,902 13,414 202,316

Marketing fees 188,184 158,258 157,969

Franchise advertising contributions 183,076 10,907 193,983

Technology and sourcing fees 14,740 1,078 15,818

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Total revenue $ 1,151,188 $ 316,895 $ 1,468,083

The following table disaggregates revenue by segment and primary source for the fiscal year ended October 3, 2021 (in thousands) :

Jack in the Box Del Taco Total

Company restaurant sales $ 387,766 $ — $ 387,766

Franchise rental revenues 346,634 — 346,634

Franchise royalties 193,908 — 193,908

Franchise advertising contributions 188,184 — 188,184

Technology and sourcing fees 16,361 — 16,361

Franchise fees and other services 10,817 — 10,817

Total revenue $ 1,143,670 $ — $ 1,143,670

The following table disaggregates revenue by segment and primary source for the fiscal ended September 27, 2020 (in thousands) :

Jack in the Box Del Taco Total

Company restaurant sales $ 348,987 $ — $ 348,987

Franchise rental revenues 320,647 — 320,647

Franchise royalties 171,407 — 171,407

Franchise advertising contributions 158,258 — 158,258

Technology and sourcing fees 15,295 — 15,295

Franchise fees and other services 6,912 — 6,912

Total revenue $ 1,021,506 $ — $ 1,021,506

Contract liabilities — Our contract liabilities consist of deferred revenue resulting from initial fees received from franchisees for new restaurant openings or new franchise terms, which are generally recognized over the franchise term.

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

2021 2020 2019

Deferred franchise fees at beginning of period $ 43,541 $ 46,273 $ 50,018

Deferred franchise and development fees at beginning of period $ 41,520 $ 43,816

Changes due to business combinations 6,193 —

Revenue recognized during the period ( 5,891 ) ( 6,014 )

Additions during the period 4,627 3,718

Deferred franchise fees at end of period $ 40,432 $ 43,541 $ 46,273

Deferred franchise and development fees at end of period $ 46,449 $ 41,520

As of October 2, 2022, approximately $ 5.5 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 at the end of the period (in thousands) :

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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.

BUSINESS COMBINATION

On March 8, 2022 (the “Closing Date”), the Company acquired 100 % of the outstanding equity interest of Del Taco for cash according to the terms and conditions of the Agreement and Plan of Merger, dated as of December 5, 2021 (the “Merger Agreement”).

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 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 $ 12.3 million in fiscal 2022.

These costs were associated with advisory, legal, and consulting services and are presented in “Other operating expense (income), net” in the consolidated statement of earnings.

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

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

Total 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 — During the fourth quarter, we completed the accounting for the acquisition and recorded measurement period adjustments of $ 0.3 million attributable to new information obtained surrounding tax-related matters, certain tangible assets, and the settlement of a litigation matter that existed as of the acquisition date.

The final allocation of the purchase consideration, which includes measurement-period adjustments recorded in our third and fourth quarters of fiscal 2022, is as follows (in thousands) :

Initial Allocation of Consideration Measurement Period Adjustments October 2,

Total aggregate purchase consideration, net of $ 12,068 cash acquired

$ 581,241 $ — $ 581,241

Accounts and other receivables 3,809 774 4,583

Inventories 3,233 — 3,233

Prepaid expenses 2,950 — 2,950

Other current assets 105 — 105

Property and equipment 150,826 ( 5,794 ) 145,032

Operating lease right-of-use assets 349,489 800 350,289

Intangible assets 12,371 — 12,371

Trademarks 283,500 — 283,500

Other assets 5,128 — 5,128

Current maturities of long-term debt 22 — 22

Current operating lease liabilities 21,991 — 21,991

Accounts payable 18,808 — 18,808

Accrued liabilities 66,739 45,840 112,579

Long-term debt, net of current maturities 349 — 349

Long-term operating lease liabilities, net of current portion 302,688 800 303,488

Deferred tax liabilities 88,203 ( 12,848 ) 75,355

Other long-term liabilities 13,080 — 13,080

Net assets acquired, excluding goodwill $ 299,531 $ ( 38,012 ) $ 261,519

Goodwill $ 281,710 $ 38,012 $ 319,722

The excess of the total consideration over the tangible assets, identifiable intangible assets, and assumed liabilities is recorded as goodwill.

The goodwill of $ 319.7 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.

The goodwill arising from the Del Taco acquisition has been allocated to the Company’s reporting units as follows (in thousands ):

Del Taco brand $ 230,722

Jack in the Box brand 89,000

Total acquisition date goodwill $ 319,722

Identifiable intangible assets — The identifiable intangible assets acquired consist of trademarks, franchise and development agreements, and favorable subleases.

The Company amortizes the fair value of the franchise and development agreements and favorable and unfavorable sublease assets and liabilities on a straight-line basis over their respective useful lives.

The trademarks were valued using the relief from royalty method of the income approach, which was applied by discounting the after-tax royalties avoided by owning the trademark 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 trademark.

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

Amount Weighted Average Useful Life (Years)

Trademarks $ 283,500 Indefinite

Franchise contracts 9,700 18

Sublease assets 2,671 13

Estimated fair value of acquired intangible assets $ 295,871

The estimated values of sublease liabilities totaled approximately $ 6.0 million.

These liabilities have an estimated weighted-average useful life of approximately 15 years and are included in “Other long-term liabilities” in the accompanying consolidated balance sheets.

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 (in thousands) :

Total revenue

$ 1,686,160 $ 1,665,660

$ 118,000 $ 133,485

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 valuation of related lease intangibles and remaining payments, as well as the fair value adjustments made to leasehold improvements, certain material non-recurring adjustments and the tax-related effects as though Del Taco was combined as of the beginning of fiscal 2021.

The unaudited pro forma financial information as presented above is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2021, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the two brands.

For the periods subsequent to the acquisition that are included in 2022, Del Taco had total revenues of $ 316.9 million and net earnings of $ 6.5 million.

SUMMARY OF REFRANCHISINGS AND FRANCHISE ACQUISITIONS

Refranchisings — In 2021, 2020, and 2019, no company-operated restaurants were sold to franchisees.

Amounts included in “Gains on the sale of company-operated restaurants” in all periods related to resolutions of certain contingencies from the sale of restaurants in prior years.

Franchise acquisitions — In 2021 and 2020, we acquired 20 and 8 franchise restaurants, respectively.

In 2019 we did no t acquire any franchise restaurants.

Of the 20 restaurants acquired in 2021, we took over 16 restaurants as a result of an agreement with an underperforming franchisee who was in violation of franchise and lease agreements with the Company.

Under this agreement, the franchisee voluntarily agreed to turn over the restaurants.

The acquisition of the additional 4 restaurants in 2021 was the result of exercising our right of first refusal.

Refranchisings — The following table summarizes the number of restaurants sold to franchisees and gains recognized in each fiscal year ( dollars in thousands ):

2022 2021 2020

Restaurants sold to Jack in the Box franchisees 15 — —

Proceeds from the sale of company-operated restaurants (1) $ 6,391 $ 1,827 $ 3,395

Net assets sold (primarily property and equipment) ( 1,565 ) — —

Goodwill related to the sale of company-operated restaurants ( 948 ) — —

Other (2) — 2,376 ( 134 )

Gains on the sale of company-operated restaurants $ 3,878 $ 4,203 $ 3,261

________________________

(1) Amounts in 2022, 2021, and 2020 include additional proceeds of $ 1.4 million, $ 1.8 million, and $ 3.4 million, respectively, related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years.

(2) Amounts in 2021 and 2020 relate to adjustments to contingencies that were included in underlying franchise and lease agreements from the sale of restaurants in prior years.

Franchise acquisitions — In 2022, 2021, and 2020, we acquired thirteen , twenty , and eight franchise restaurants, respectively.

We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations.

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The following table provides detail of the combined acquisitions in 2022, 2021, and 2020 ( dollars in thousands ):

2022 2021 2020

Restaurants acquired from franchisees 13 20 8

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Total consideration $ 297 $ 1,645 $ 859

Of the 2021 total consideration, $ 1.3 million is non-cash consideration and is comprised of $ 0.3 million receivables that were eliminated in acquisition accounting and $ 1.0 million of accounts payable that was recorded in acquisition accounting.

The accounts payable recorded is primarily related to estimated settlements with third parties to waive their liens and security interests on certain assets acquired and are subject to change based on final settlement amounts.

The total consideration of $ 0.3 million for the restaurants acquired in 2022 was comprised of franchise receivables owed to the Company as of the acquisition date.

During the first quarter of 2022, we finalized certain estimates impacting total purchase consideration for the 2021 restaurant acquisitions and recorded the resulting measurement period adjustments which increased goodwill by $ 0.3 million.

Assets held for sale — Assets classified as held for sale consisted of the following at each fiscal year-end ( in thousands ):

2022 October 3,

Jack in the Box restaurant properties held for sale (1) $ 14,151 $ —

Other property and equipment held for sale (2) 2,868 1,692

Assets held for sale $ 17,019 $ 1,692

________________________

(1) Consists of properties that are currently leased to franchisees which we intend to sell the underlying real estate directly to the franchisee and/or sell and leaseback with a third party within the next twelve months.

(2) Consists primarily of owned properties of closed restaurants which we are actively marketing for sale.

Discontinued operations — There were no discontinued operations during 2022 and 2021.

The results of discontinued operations in 2020 pertain to the resolution of certain contingencies relating to our former Qdoba business which we sold in 2018.

GOODWILL AND INTANGIBLE ASSETS

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

Balance at September 29, 2019 $ 46,747

Acquisition of franchise-operated restaurants 414

Jack in the Box Del Taco Total

Balance at September 27, 2020 $ 47,161 $ — $ 47,161

Acquisition of franchise-operated restaurants 613

Acquisition of Jack in the Box franchise-operated restaurants 613 — 613

Balance at October 3, 2021 47,774 — 47,774

Acquisition of Del Taco Restaurants, Inc.

89,000 230,722 319,722

Acquisition of Jack in the Box franchise-operated restaurants 273 — 273

Sale of Jack in the Box company-operated restaurants to franchisees ( 948 ) — ( 948 )

Balance at October 2, 2022 $ 136,099 $ 230,722 $ 366,821

The net carrying amounts of intangible assets are as follows ( in thousands ):

2022 October 3,

Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount

Definite-lived intangible assets:

Sublease assets $ 2,671 $ ( 139 ) $ 2,532 $ — $ — $ —

Franchise contracts 9,700 ( 311 ) 9,389 — — —

Reacquired franchise rights 530 ( 127 ) 403 542 ( 72 ) 470

$ 12,901 $ ( 577 ) $ 12,324 $ 542 $ ( 72 ) $ 470

Indefinite-lived intangible assets:

Del Taco trademark $ 283,500 $ — $ 283,500 $ — $ — $ —

$ 283,500 $ — $ 283,500 $ — $ — $ —

The following table summarizes, as of October 2, 2022, the estimated amortization expense for each of the next five fiscal years ( in thousands ):

FAIR VALUE MEASUREMENTS

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Total liabilities at fair value $ 13,820 $ 13,820 $ — $ —

Fair value measurements as of September 27, 2020:

Fair value measurements as of October 3, 2021:

Non-qualified deferred compensation plan (1) $ 18,555 $ 18,555 $ — $ —

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(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 October 3, 2021 and September 27, 2020 ( in thousands ):

2021 September 27,

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

2022 October 3,

Carrying Amount Fair Value Carrying Amount Fair Value

Class A-2 Notes $ 1,290,251 $ 1,351,057 $ 1,290,251 $ 1,354,241

Series 2019 Class A-2 Notes $ 714,125 $ 641,851 $ 1,290,251 $ 1,351,057

Series 2022 Class A-2 Notes $ 1,089,000 $ 917,428 $ — $ —

The fair value of the Class A-2 Notes was estimated using Level 2 inputs based on quoted market prices in markets that are not considered active markets.

As of October 2, 2022, we had $ 50.0 million of outstanding borrowings under our Variable Funding Notes.

The fair value of these loans approximates their carrying value due to the variable rate nature of these borrowings.

Non-financial assets and liabilities — Our 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.

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If applicable, the carrying values are written down to fair value.

In connection with our impairment reviews performed during 2021, no material fair value adjustments were required.

DERIVATIVE INSTRUMENTS

Interest rate swaps — We have used interest rate swaps to mitigate interest rate volatility with regard to variable rate borrowings under our senior credit facility.

In June 2015, we entered into forward-starting interest rate swap agreements that effectively converted $ 500.0 million of our variable rate borrowings to a fixed rate from October 2018 through October 2022.

These agreements were designated as cash flow hedges under the terms of the FASB authoritative guidance for derivatives and hedging.

Since they were effective in offsetting the variability of the hedged cash flows, changes in the fair values of the derivatives are not included in earnings but were included in OCI.

These changes in fair value were subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments were made on our variable rate debt.

Effective July 2, 2019, the Company terminated all interest rate swap agreements in anticipation of the securitization transaction and related retirement of our senior credit facility.

The fair value of the interest rate swaps at the termination date was $ 23.6 million, which was required to be paid in full on July 8, 2019.

As a result of the decision to extinguish the senior credit facility, forecasted cash flows associated with the variable-rate debt interest payments were no longer considered to be probable.

Consequently, unrealized losses in other comprehensive income at the termination date were immediately reclassified to “Interest expense, net” in the accompanying consolidated statement of earnings.

Financial performance — The following table summarizes the OCI activity related to our interest rate swap derivative instruments and the amounts reclassified from accumulated OCI ( in thousands ):

Location in Income 2019

Loss recognized in OCI N/A $ ( 23,625 )

Loss reclassified from accumulated OCI into net earnings Interest expense, net $ 24,328

Amounts reclassified from accumulated OCI into interest expense represent payments made to the counterparty for the effective portions of the interest rate swaps.

During the fiscal year presented, our interest rate swaps had no hedge ineffectiveness.

Refer to Note 9, Other Operating Expenses (Income), Net, for details on impairment charges recognized in 2022.

The detail of our long-term debt at the end of each fiscal year is as follows ( in thousands ):

Class A-2-I Notes $ 570,688 $ 570,688

Class A-2-II Notes 272,938 272,938

Class A-2-III Notes 446,625 446,625

Class A-1 Variable Funding Notes — 107,876

Finance lease obligations 2,275 2,934

2022 October 3,

Series 2019-1 3.982% Fixed Rate Class A-2-I Notes

$ — $ 570,688

Series 2019-1 4.476% Fixed Rate Class A-2-II Notes

270,875 272,938

Series 2019-1 4.970% Fixed Rate Class A-2-III Notes

443,250 446,625

Series 2022-1 3.445 % Fixed Rate Class A-2-I Notes

Series 2022-1 4.136 % Fixed Rate Class A-2-II Notes

Series 2022-1 Variable Funding Notes, variable interest rate of 5.341% at October 2, 2022

Finance lease obligations and other debt 1,690 2,275

Total debt 1,854,815 1,292,526

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Long-term debt $ 1,799,540 $ 1,273,420

Securitized financing transaction — On July 8, 2019, Jack in the Box Funding, LLC (the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly owned indirect subsidiary of the Company, completed its securitization transaction and issued $ 575.0 million of its Series 2019-1 3.982 % Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”), $ 275.0 million of its Series 2019-1 4.476 % 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”) and together with the Class A-2-I Notes and the Class A-2-II Notes, (the “Class A-2 Notes”), in an offering exempt from registration under the Securities Act of 1933, as amended.

In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into a revolving financing facility of Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “Variable Funding Notes”), which allows for the drawing of up to $ 150.0 million under the Variable Funding Notes and the issuance of letters of credit.

The Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “Notes.”

The 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 (as defined below) of the Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Notes.

The proceeds from the issuance of the Class A-2 Notes, were used to repay the remaining principal outstanding on the term loans and revolving credit facility.

As a result, a loss on early extinguishment of debt of $ 2.8 million was recorded in fiscal 2019, primarily consisting of the write-off of unamortized deferred financing costs related to the Credit Agreement, and is reflected in “Interest expense, net” in the consolidated statement of earnings.

Class A-2 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 5.0 x.

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 2022 Class A-2-I Notes and the Class A-2-II Notes are 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 anticipated repayment dates of the existing 2019-1 Class A-2-II Notes and the Class A-2-III Notes are August 2026 and August 2029, respectively.

The Company also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Secured Notes (the “Variable Funding Notes”), which permits borrowings up to a maximum of $ 150.0 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit.

The Company’s existing revolving financing facility of Series 2019-1 Class A-1 Notes was terminated in connection with the transaction.

As of October 2, 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 second quarter of 2022, which was comprised of the write-off of certain deferred financing costs and a specified make-whole premium payment, and is presented in “Interest expense, net” in the 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.

As of October 2, 2022, the effective interest rates, including the amortization of debt issuance costs, were 4.851 %, 5.258 %, 2.430 %, and 2.783 % for the Series 2019-1 Class A-2-II Notes, Series 2019-1 Class A-2-III Notes, Series 2022-1 Class A-2-I Notes, and Series 2022-1 Class A-2-II Notes, respectively.

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

The quarterly principal payment on the Class A-2 Notes may be suspended when the specified leverage ratio, which is a measure of outstanding debt to earnings before interest, taxes, depreciation, and amortization, adjusted for certain items (as defined in the Indenture), is less than or equal to 5.0 x.

Exceeding the leverage ratio of 5.0 x does not violate any covenant related to the Class A-2 Notes.

As of October 3, 2021, the Company’s actual leverage ratio was under 5.0 x, and as a result, quarterly principal payments are not required.

Accordingly, the entire outstanding balance of the Class A-2 Notes has been classified as long-term debt.

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-II Notes and 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.

The Class A-2 Notes are secured by the collateral described below under “Guarantees and Collateral.”

Variable Funding Notes — The Variable Funding Notes were issued under the Indenture and allow for drawings on a revolving basis and the issuance of letters of credit.

Depending on the type of borrowing under the Variable Funding Notes, interest on the Variable Funding Notes will be based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S.

Subsequent to closing the issuance of the 2022 Notes, the Company has had a leverage ratio of greater than 5.0 x and, accordingly, the Company resumed making the scheduled principal payments on its 2022 Notes and Series 2019-1 Notes beginning in the second quarter of 2022.

Variable Funding Notes — Depending on the type of borrowing under the Variable Funding Notes, interest on the Variable Funding Notes will be based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S.

Dollars or (iv) the lenders’ commercial paper funding rate plus any applicable margin, as set forth in the Variable Funding Note Purchase Agreement.

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Following the anticipated repayment date (and any extensions thereof), additional interest will accrue equal to 5.00 % per annum.

As of October 3, 2021 and September 27, 2020, $ 39.5 million of letters of credit were outstanding against the Variable Funding Notes, which relate primarily to interest reserves required under the Indenture.

During the second quarter of 2020, to secure our liquidity position and provide financial flexibility given the uncertain market conditions, we borrowed $ 107.9 million under the Variable Funding Notes.

During the second quarter of 2021, the Company fully paid down its outstanding borrowings on its Variable Funding Notes.

As of October 3, 2021, unused borrowing capacity under our Variable Funding Notes was $ 110.5 million.

Guarantees and collateral — Pursuant to the Guarantee and Collateral Agreement, dated July 8, 2019 (the “Guarantee and Collateral Agreement”), among the Guarantors, in favor of the trustee, the Guarantors guarantee the obligations of the Master Issuer under the Indenture and related documents and secure the guarantee by granting a security interest in substantially all of their assets.

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Upon certain trigger events, mortgages will be required to be prepared and recorded on the real estate assets.

Covenants and restrictions — The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters.

The Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes in full by the applicable anticipated repayment 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.

Deferred financing costs — In 2019, the Company incurred costs of approximately $ 33.0 million in connection with the securitization transaction.

The costs related to our Class A-2 Notes are presented as a reduction in “Long-term debt, net of current maturities” and are being amortized 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 August 2026 using the straight-line method.

As of October 3, 2021, the effective interest rates, including the amortization of debt issuance costs, were 4.545 %, 4.800 %, and 5.198 % for the Class A-2-I Notes, Class A-2-II Notes and Class A-2-III Notes, respectively.

Revolving credit facility — In connection with the Del Taco acquisition, Del Taco’s existing debt of $ 115.2 million related to a Syndicated Credit Facility dated August 5, 2015, was repaid and extinguished on the Closing Date.

On the Closing Date, Del Taco entered into a new syndicated credit facility with an aggregate principal amount of up to $ 75.0 million, maturing on March 7, 2023.

The revolving credit facility, as amended, includes a limit of $ 20.0 million for letters of credit.

As of October 2, 2022, we had no outstanding borrowings and available borrowing capacity of $ 59.9 million under the facility, net of letters of credit of $ 15.1 million.

The Company capitalized $ 0.3 million of debt issuance costs, which are being amortized into interest expense over the expected term of the credit facility.

Bridge commitment letter — In connection with the Merger Agreement, the Company secured commitments for a bridge financing facility in an amount of up to $ 600.0 million (the “Bridge Facility”).

No amounts were drawn under the Bridge Facility, which was terminated as a result of our securitization refinancing transaction.

The Company expensed approximately $ 2.1 million for the unamortized issuance costs associated with this commitment which is presented in “Interest expense, net” in the consolidated statement of earnings.

Maturities of long-term debt — Assuming repayment by the Anticipated Repayment Dates and based on the leverage ratio as of October 2, 2022, principal payments on our long-term debt outstanding at October 2, 2022 for each of the next five fiscal years and thereafter are as follows ( in thousands ):

2023 $ 30,169

Thereafter 960,480

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Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the accompanying consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”

Company as lessee — Leased assets and liabilities consisted of the following as of October 3, 2021 and September 27, 2020 (in thousands) :

2021 September 27,

Company as lessee — Leased assets and liabilities consisted of the following as of October 2, 2022 and October 3, 2021 (in thousands) :

2022 October 3,

Operating lease ROU assets $ 1,332,135 $ 934,066

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The following table presents the components of our lease costs in fiscal 2022, 2021, and 2020 ( in thousands ):

2022 2021 2020

Finance lease cost:

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____________________________

(1) Included in “Depreciation and amortization” in our consolidated statement of earnings.

(2) Included in “Interest expense, net” in our consolidated statement of earnings.

(3) Operating lease, short-term and variable lease costs associated with franchisees and company-operated restaurants are included in “Franchise occupancy expenses” and “Occupancy and other,” respectively, in our consolidated statement of earnings.

For our closed restaurants, these costs are included in “Impairment and other (gains) charges, net” and all other costs are included in “Selling, general and administrative expenses.”

(4) Includes $ 38.0 million and $ 37.4 million in 2021 and 2020, respectively, of property taxes and common area maintenance costs which are reimbursed by sub-lessees.

The following table summarizes the components of rent expense in fiscal 2019, as accounted for under previous guidance ( in thousands ):

Minimum rentals 184,587

Contingent rentals 2,255

Total rent expense 186,842

(1) Included in “Depreciation and amortization” in our consolidated statements of earnings.

(2) Included in “Interest expense, net” in our consolidated statements of earnings.

For our closed restaurants, these costs are included in “Other operating expense (income), net” and all other costs are included in “Selling, general and administrative expenses.”

(4) Includes $ 38.2 million, $ 38.0 million, and $ 37.4 million in 2022, 2021, and 2020, respectively, of property taxes and common area maintenance costs which are reimbursed by sub-lessees.

The following table presents supplemental information related to leases:

2021 September 27,

2022 October 3,

Weighted-average remaining lease term (in years):

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Less accumulated amortization ( 6,047 ) ( 5,513 )

$ 854 $ 1,698

The following table includes supplemental cash flow and non-cash information related to our lessee leases ( in thousands ):

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Right-of-use assets obtained in exchange for new financing lease obligations $ 45 $ 184

Sale and leaseback transactions — In fiscal 2021, we sold two restaurant properties in sale and leaseback transactions for net proceeds of $ 3.9 million and recorded total gains of less than $ 0.1 million.

Sale and leaseback transactions — In fiscal 2022, we sold four restaurant properties in sale and leaseback transactions for net proceeds of $ 10.8 million and recorded total losses of $ 0.2 million.

The leases have been accounted for as operating leases and contain initial terms of 16 years and 20 years.

In fiscal 2021, we sold two restaurant properties in sale and leaseback transactions for net proceeds of $ 3.9 million and recorded total gains of less than $ 0.1 million.

The leases have been accounted for as operating leases and contain an initial term of 20 years.

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The net proceeds received on the sale were $ 20.6 million and the lease has been accounted for as an operating lease.

A gain on the sale of $ 10.8 million was recognized and is presented within “Impairment and other (gains) charges, net” in our consolidated statement of earnings.

A gain on the sale of $ 10.8 million was recognized and is presented within “Other operating expenses (income), net” in our consolidated statement of earnings.

Company as lessor — The following table presents rental income ( in thousands ):

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Variable lease income - franchise 12,418 96,002 108,420 12,363 96,111 108,474

Amortization of favorable and unfavorable lease contracts, net — 198 198 — — —

Franchise rental revenues $ 31,639 $ 308,752 $ 340,391 $ 32,495 $ 314,139 $ 346,634

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(1) Primarily relates to closed restaurant properties included in “Impairment and other (gains) charges, net” in our consolidated statement of earnings.

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

The following table presents as of October 2, 2022, future minimum rental receipts for non-cancellable leases and subleases ( in thousands ):

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Assets held for lease and included in property and equipment consisted of the following at each fiscal year-end ( in thousands ):

2021 September 27,

2022 October 3,

Land $ 75,967 $ 89,791

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$ 187,175 $ 215,434

IMPAIRMENT AND OTHER (GAINS) CHARGES, NET

Impairment and other (gains) charges, net, in the accompanying consolidated statements of earnings is comprised of the following in each fiscal year ( in thousands ):

OTHER OPERATING EXPENSE (INCOME), NET

Other operating expense (income), net, in the accompanying consolidated statements of earnings is comprised of the following in each fiscal year ( in thousands ):

2022 2021 2020

Gains on disposition of property and equipment, net (1) ( 6,888 ) ( 9,768 ) ( 6,244 )

Acquisition, integration, and restructuring costs $ 20,081 $ 7 $ 1,168

Costs of closed restaurants and other 4,290 1,907 1,872

Restaurant impairment charges 5,927 — —

Accelerated depreciation 1,124 1,592 235

Restructuring costs (4) 7 1,168 8,455

$ ( 3,382 ) $ ( 6,493 ) $ 12,455

Gains on disposition of property and equipment, net ( 30,533 ) ( 6,888 ) ( 9,768 )

$ 889 $ ( 3,382 ) $ ( 6,493 )

(1) In 2021, 2020 and 2019 gains on disposition of property and equipment primarily related to the sales of restaurant properties, in addition to the sale of one of our corporate office buildings in 2020.

(2) In 2021, 2020 and 2019 costs of closed restaurants primarily include lease termination and impairment charges on future lease commitments and expected ancillary cost, net of anticipated sublease rentals, as a result of our decision to close restaurants, ongoing costs associated with closed restaurants, and canceled project costs.

Acquisition, integration, and restructuring costs — In 2022, costs incurred are related to the acquisition and integration of Del Taco, primarily associated with advisory, legal, and consulting services.

In 2020, costs incurred relate to a restructuring plan that management initiated to reduce our general and administrative costs, which was completed in 2020.

Restaurant closing costs — Cost of closed restaurants primarily include ongoing costs associated with closed restaurants and cancelled project costs.

Restaurant impairment charges — In 2022, impairment charges included $ 3.2 million related to nine Jack in the Box company-operated restaurants that were closed in connection with the sale of the related markets and $ 2.7 million related to Jack in the Box restaurants leased or subleased to franchisees for which the lease and franchise agreements were early terminated during the year.

Accelerated depreciation — When a long-lived asset will be replaced or otherwise disposed of prior to the end of its estimated useful life, the useful life of the asset is adjusted based on the estimated disposal date and accelerated depreciation is recognized.

In 2022, 2021, and 2020 accelerated depreciation primarily related to facility improvements, restaurant remodels, and information technology assets.

(4) In 2020 and 2019 restructuring costs include charges resulting from a plan that management initiated to reduce our general and administrative costs, which was completed in the third quarter of 2020.

In fiscal 2019, charges also include costs resulting from the exploration of strategic alternatives, which was concluded in the third quarter of 2019.

DISCONTINUED OPERATIONS

Qdoba — In December 2017, we entered into a stock purchase agreement (the “Qdoba Purchase Agreement”) with the Buyer to sell all issued and outstanding shares of Qdoba.

The Buyer completed the acquisition of Qdoba on March 21, 2018 (the “Qdoba Sale”).

We also entered into a Transition Services Agreement with the Buyer pursuant to which the Buyer received certain services (the “Services”) to enable it to operate the Qdoba business after the closing of the Qdoba Sale.

The Services included information technology, finance and accounting, human resources, supply chain and other corporate support services.

Under the Agreement, the Services were provided at cost for a period of up to 12 months, with two 3-month extensions available for certain services.

As of September 21, 2019, we are no longer providing transition services to Qdoba.

In 2019, we recorded $ 7.0 million in income related to the Services as a reduction of “Selling, general, and administrative expenses” in the consolidated statements of earnings.

The following table presents results of operations in periods which have been included in discontinued operations (in thousands):

Total revenues $ — $ —

Total cost and (income) expense (1) ( 514 ) 173

Earnings (losses) before income taxes 514 ( 173 )

Income tax expense (benefit) (2) 144 ( 2,863 )

Earnings from discontinued operations, net of income taxes $ 370 $ 2,690

Gains on disposition of property and equipment, net — In 2022, gains primarily relate to the sale of Jack in the Box restaurant properties to franchisees who were leasing the properties from us prior to the sale.

In 2021, gains primarily relate to the sale of closed restaurant properties.

In 2020, gains primarily relate to the sale of one of our corporate buildings.

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 company-operated restaurants, and amortization of favorable and unfavorable leases and subleases, net.

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

2022 2021 2020

(1) Amounts in 2020 and 2019 include resolutions of certain contingencies that existed at the date of sale which were insignificant in nature.

(2) In fiscal 2019, the Company entered into a bilateral California election with Quidditch Acquisition, Inc.

to retroactively treat the divestment of Qdoba Restaurant Corporation on March 21, 2018 as a sale of assets instead of a stock sale for income tax purposes.

This election reduced the Company’s fiscal year 2018 California tax liability on the divestment by $ 2.8 million.

Revenues by segment:

Jack in the Box $ 1,151,188 $ 1,143,670 $ 1,021,506

Del Taco 316,895 — —

Consolidated revenues $ 1,468,083 $ 1,143,670 $ 1,021,506

Segment operating profit:

Jack in the Box $ 310,745 $ 327,157 $ 282,748

Del Taco 27,981 — —

Total segment operating profit $ 338,726 $ 327,157 $ 282,748

Depreciation and amortization 56,100 46,500 52,798

Acquisition, integration, and restructuring costs 20,081 7 1,168

Share-based compensation 7,122 4,048 4,394

Net COLI losses (gains) 9,911 ( 9,141 ) ( 2,935 )

Gains on the sale of company-operated restaurants ( 3,878 ) ( 4,203 ) ( 3,261 )

Amortization of favorable and unfavorable leases and subleases, net 1,120 — —

Earnings from operations $ 248,270 $ 289,946 $ 230,584

Total capital expenditures by segment:

Jack in the Box $ 31,601 $ 41,008 $ 19,528

Del Taco 14,874 — —

Total capital expenditures $ 46,475 $ 41,008 $ 19,528

Total depreciation and amortization by segment:

Jack in the Box $ 39,895 $ 46,500 $ 52,798

Del Taco 16,205 — —

Total depreciation and amortization $ 56,100 $ 46,500 $ 52,798

We do not evaluate, manage or measure performance of segments using asset, interest income and expense, or income tax information;

accordingly, this information by segment is not prepared or disclosed.

Income taxes consist of the following in each fiscal year ( in thousands ):

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Income tax expense from continuing operations $ 46,111 $ 55,852 $ 32,727

Income tax expense (benefit) from discontinued operations $ — $ 144 $ ( 2,863 )

Income tax expense from discontinued operations $ — $ — $ 144

A reconciliation of the federal statutory income tax rate to our effective tax rate for continuing operations is as follows:

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State income taxes, net of federal tax benefit 5.2 % 5.1 % 5.3 %

Stock compensation excess tax benefit ( 0.5 ) % ( 0.4 ) % ( 0.1 ) %

Stock compensation tax deficiency (excess tax benefit) 0.1 % ( 0.5 ) % ( 0.4 ) %

Benefit of jobs tax credits, net of valuation allowance ( 0.6 ) % ( 0.1 ) % ( 0.5 ) %

Release of federal tax liability — % — % ( 0.6 ) %

Adjustment to state tax provision — % 0.7 % — %

Benefit related to COLIs ( 1.5 ) % ( 0.9 ) % ( 1.0 ) %

Termination of interest rate swaps — % — % ( 2.6 ) %

Nondeductible transaction costs 0.6 % — % — %

Expense (benefit) related to COLIs 2.1 % ( 1.5 ) % ( 0.9 ) %

Officers’ compensation limitation 0.4 % 0.5 % 2.2 %

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Accrued defined benefit pension and postretirement benefits 19,090 28,837

Accrued legal settlements 15,158 2,378

Deferred income 13,524 12,083

Impairment 6,957 8,895

Accrued insurance 8,339 5,389

Other reserves and allowances 4,050 2,440

Share-based compensation 5,094 4,039

Accrued incentive compensation 3,455 2,585

Tax loss and tax credit carryforwards 4,399 3,129

Accrued incentive compensation 2,402 3,455

Other reserves and allowances 1,627 1,672

Accrued compensation expense 1,329 710

Property and equipment, net of impairment — 5,922

Other, net 2,319 3,424

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Property and equipment, principally due to differences in depreciation ( 5,656 ) —

Investment basis limitation ( 6,010 ) —

Other ( 1,408 ) ( 2,294 )

Total gross deferred tax liabilities ( 450,142 ) ( 255,681 )

Net deferred tax assets $ 51,517 $ 72,322

Deferred tax assets as of October 3, 2021 include state net operating loss carryforwards of approximately $ 16.6 million, of which $ 12.1 million has an indefinite carryforward.

Net deferred tax (liabilities) assets $ ( 37,684 ) $ 51,517

Deferred tax assets as of October 2, 2022 include federal and state gross net operating loss carryforwards of approximately $ 24.6 million, of which $ 19.2 million has an indefinite carryforward.

The remainder will expire at various times between 2023 and 2042.

At October 3, 2021, we recorded a valuation allowance of $ 1.3 million related to state tax credits, which decreased from the $ 2.1 million at September 27, 2020 due to the release of the valuation allowance on California Enterprise Zone Credits and state net operating loss carryforwards.

At October 2, 2022, we recorded a valuation allowance of $ 1.1 million related to state tax credits, which decreased from the $ 1.3 million at October 3, 2021 due to the release of the valuation allowance on California Enterprise Zone Credits.

We believe it is more likely than not that these credit carryforwards will not be realized and that all other deferred tax assets will be realized through future taxable income or alternative tax strategies.

The major jurisdictions in which the Company files income tax returns include the United States and states in which we operate that impose an income tax.

The federal statutes of limitations have not expired for fiscal years 2018 and forward.

The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for fiscal years 2017 and forward.

The major jurisdictions in which the Company files income tax returns includes the United States and states in which we operate that impose an income tax.

The federal statutes of limitations have not expired for fiscal year 2019 and forward.

The statutes of limitations for California and Texas, which constitutes the Company's major state tax jurisdictions, have not expired for fiscal years 2018 and forward.

RETIREMENT PLANS

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These programs include defined contribution plans, defined benefit pension plans, and postretirement healthcare plans.

Defined contribution plans — We maintain a qualified savings plan pursuant to Section 401(k) of the Internal Revenue Code (“IRC”).

The plan allows all employees who have satisfied the service requirements and reached age 21 to defer a percentage of their pay on a pre-tax basis.

Beginning January 1, 2016, we match 100 % of the first 4 % of compensation deferred by the participant.

A participant’s right to Company contributions vest immediately.

Our contributions under this plan were $ 1.6 million in fiscal 2021, and $ 1.6 million and $ 1.7 million in fiscal 2020 and 2019, respectively.

Defined contribution plans — We maintain two qualified savings plans pursuant to Section 401(k) of the Internal Revenue Code (“IRC”).

The plans allows all employees who meet certain age and minimum service requirements to defer a percentage of their pay on a pre-tax basis.

Our contributions under these plans were $ 2.1 million in fiscal 2022, and $ 1.6 million in fiscal years 2021 and 2020, respectively.

We also maintain an unfunded, non-qualified deferred compensation plan for key executives and other members of management whose compensation deferrals or company matching contributions to the qualified savings plan are limited due to IRC rules.

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This plan allows participants to defer up to 50 % of their salary and 85 % of their bonus, on a pre-tax basis.

Our contributions under the non-qualified deferred compensation plan were less than $ 0.1 million in fiscal 2021, $ 0.3 million and $ 0.2 million in fiscal 2020 and 2019, respectively.

Our contributions under the non-qualified deferred compensation plan were less than $ 0.1 million in fiscal years 2022, and 2021, respectively and $ 0.3 million in 2020.

Defined benefit pension plans — We sponsor two defined benefit pension plans, a “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.

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Benefits under both plans are based on the employees’ years of service and compensation over defined periods of employment.

In the fiscal 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.

In the fourth quarter of fiscal 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.

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 (“PBO”).

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Benefits paid ( 14,218 ) ( 14,293 ) ( 5,677 ) ( 5,243 ) ( 1,204 ) ( 1,044 )

Settlements — ( 124,253 ) — — — —

Other — — — — 100 91

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Fair value at beginning of year $ 409,708 $ 365,510 $ — $ — $ — $ —

Actual return on plan assets 58,491 26,549 — — — —

Actual (loss) return on plan assets ( 91,539 ) 58,491 — — — —

Participant contributions — — — — 92 112

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Benefits paid ( 14,218 ) ( 14,293 ) ( 5,677 ) ( 5,243 ) ( 1,204 ) ( 1,044 )

Settlements — ( 124,253 ) — — — —

Other — — — — 100 91

Fair value at end of year $ 303,951 $ 409,708 $ — $ — $ — $ —

Unfunded status at end of year $ ( 345 ) $ ( 47,063 ) $ ( 75,225 ) $ ( 78,971 ) $ ( 17,162 ) $ ( 20,965 )

Funded (unfunded) status at end of year $ 10,609 $ ( 345 ) $ ( 56,891 ) $ ( 75,225 ) $ ( 12,577 ) $ ( 17,162 )

Amounts recognized on the balance sheet:

Noncurrent assets $ 10,609 $ — $ — $ — $ — $ —

Current liabilities — — ( 5,213 ) ( 5,216 ) ( 1,081 ) ( 1,115 )

Noncurrent liabilities — ( 345 ) ( 51,678 ) ( 70,009 ) ( 11,496 ) ( 16,047 )

Total liability recognized $ ( 345 ) $ ( 47,063 ) $ ( 75,225 ) $ ( 78,971 ) $ ( 17,162 ) $ ( 20,965 )

Total asset (liability) recognized $ 10,609 $ ( 345 ) $ ( 56,891 ) $ ( 75,225 ) $ ( 12,577 ) $ ( 17,162 )

Amounts in AOCI not yet reflected in net periodic benefit cost:

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Other changes in plan assets and benefit obligations recognized in OCI:

Net actuarial (gain) loss $ ( 39,936 ) $ 7,527 $ ( 672 ) $ 1,739 $ ( 3,526 ) $ ( 4,391 )

Pension settlement costs — ( 39,218 ) — — — —

Net actuarial gain $ ( 5,357 ) $ ( 39,936 ) $ ( 14,830 ) $ ( 672 ) $ ( 4,062 ) $ ( 3,526 )

Amortization of actuarial (loss) gain ( 2,193 ) ( 3,510 ) ( 1,666 ) ( 1,743 ) 640 341

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Total recognized in OCI ( 7,550 ) ( 43,446 ) ( 16,515 ) ( 2,434 ) ( 3,422 ) ( 3,185 )

Net periodic benefit (credit) cost and other losses ( 3,272 ) 36,661 3,931 4,236 222 825

Net periodic benefit (credit) cost ( 3,404 ) ( 3,272 ) 3,858 3,931 ( 151 ) 222

Total recognized in comprehensive income $ ( 10,954 ) $ ( 46,718 ) $ ( 12,657 ) $ 1,497 $ ( 3,573 ) $ ( 2,963 )

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The funded status is measured as the difference between the fair value of a plan’s assets and its PBO.

As of October 3, 2021 and September 27, 2020, the Qualified Plan’s ABO exceeded the fair value of its plan assets.

The SERP is an unfunded plan and, as such, had no plan assets as of October 3, 2021 and September 27, 2020.

As of October 2, 2022 the Qualified Plan’s ABO was less than the fair value of its plan assets whereas as of October 3, 2021, the Qualified Plan’s ABO exceeded the fair value of its plan assets.

The SERP is an unfunded plan and, as such, had no plan assets as of October 2, 2022 and October 3, 2021.

The following sets forth the PBO, ABO, and fair value of plan assets of our pension plans as of the measurement date in each fiscal year ( in thousands ):

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Actuarial (gain) loss ( 640 ) ( 341 ) 18

Net periodic benefit cost $ 222 $ 825 $ 838

Net periodic benefit (credit) cost $ ( 151 ) $ 222 $ 825

Prior service costs are amortized on a straight-line basis from date of participation to full eligibility.

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Assumptions — We determine our actuarial assumptions on an annual basis.

In determining the present values of our benefit obligations and net periodic benefit costs as of and for the fiscal years ended October 3, 2021, September 27, 2020, and September 29, 2019, we used the following weighted-average assumptions:

In determining the present values of our benefit obligations and net periodic benefit costs as of and for the fiscal years ended October 2, 2022, October 3, 2021, and September 27, 2020, we used the following weighted-average assumptions:

2022 2021 2020

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Discount rate 5.80 % 2.99 % 2.84 %

Rate of future pay increases (2) N/A N/A 3.50 %

Rate of future pay increases (2) N/A N/A N/A

Postretirement health plans:

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Discount rate 2.99 % 2.84 % 3.24 %

Rate of future pay increases (2) N/A 3.50 % 3.50 %

Rate of future pay increases (2) N/A N/A 3.50 %

Postretirement health plans:

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The assumed discount rate and expected long-term rate of return on assets have a significant effect on amounts reported for our pension and postretirement plans.

If the discount rate and long-term rate of return used were decreased by a quarter percentage point, fiscal 2021 earnings before income taxes would have decreased by less than $ 0.1 million and increased by $ 0.9 million, respectively.

The assumed average rate of compensation increase is the average annual compensation increase expected over the remaining employment periods for the participating employees.

For our Qualified Plan, no future pay increases were included in our benefit obligation assumptions as, effective December 31, 2015, our plan participants no longer accrue benefits.

If the discount rate and long-term rate of return used were decreased by a quarter percentage point, fiscal 2022 earnings before income taxes would have decreased by $ 0.1 million and decreased by $ 1.0 million, respectively.

For measurement purposes, the weighted-average assumed health care cost trend rates for our postretirement health plans were as follows for each fiscal year:

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The healthcare cost trend rate assumption has a significant effect on the amounts reported.

For example, a 1.0% change in the assumed healthcare cost trend rate would have the following effect on the fiscal 2021 net periodic benefit cost and end of year PBO ( in thousands ):

Increase 1% Point

Total interest and service cost $ 53 $ ( 46 )

Postretirement benefit obligation $ 1,604 $ ( 1,405 )

Plan assets — Our investment philosophy is to (1) protect the corpus of the fund;

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There were 1,479,033 shares of common stock available for future issuance under this plan as of October 2, 2022.

In connection with the Merger Agreement, on the Closing Date, the Company assumed the Del Taco Restaurants, Inc.

2015 Omnibus Incentive Plan which authorized the issuance of common shares in connection with the granting of stock options, stock appreciation rights, restricted stock and restricted stock units, or performance awards to their employees, directors, and consultants.

There were 174,553 shares of common stock available for future issuance under this plan as of October 2, 2022.

We also maintain a deferred compensation plan for non-management directors under which those who are eligible to receive fees or retainers may choose to defer receipt of their compensation.

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There were 142,918 shares of common stock available for future issuance under this plan as of October 2, 2022.

Compensation expense — The components of share-based compensation expense, included within “Selling, general, and administrative expenses” in our consolidated statement of earnings, in each fiscal year are as follows ( in thousands ):

Compensation expense — The components of share-based compensation expense, included within “Selling, general, and administrative expenses” in our consolidated statements of earnings, in each fiscal year are as follows ( in thousands ):

2022 2021 2020

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Performance share awards 1,835 830 254

Nonvested restricted stock awards 434 — —

Non-management directors’ deferred compensation 290 224 263

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Nonvested restricted stock units — Nonvested restricted stock units (“RSUs”) are generally issued to employees and non-employee directors.

Grants to executive officers of time-vesting RSUs vest ratably over four years and are subject to a stock holding requirement of 50 % of after-tax net shares resulting from the vesting of RSUs and must be held until termination of service.

There were 75,791 of such RSUs outstanding as of October 2, 2022.

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Average Grant

RSUs outstanding at September 27, 2020 175,141 $ 59.65

RSUs outstanding at October 3, 2021 141,197 $ 76.84

Granted 130,862 $ 78.28

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In fiscal years 2022, 2021, and 2020, the total fair value of RSUs that vested and were released was $ 2.5 million, $ 4.3 million, and $ 8.7 million, respectively.

Modification of RSU awards — On April 16, 2020, we entered into a Retention, Transition and Separation Agreement with our former Chairman and Chief Executive Officer, which sets forth the terms of his transition and certain benefits he is eligible to receive, pro-rated through the duration of the transition period, which included vesting of his final tranche of unvested restricted stock units remaining under his November 2015 restricted stock unit award scheduled to vest in November 2020.

Modification of RSU awards — In fiscal 2020, we entered into a Retention, Transition and Separation Agreement with our former Chairman and Chief Executive Officer, which sets forth the terms of his transition and certain benefits he is eligible to receive, pro-rated through the duration of the transition period, which included vesting of his final tranche of unvested restricted stock units remaining under his November 2015 restricted stock unit award scheduled to vest in November 2020.

Consequently, 23,128 shares vested on his last day of employment on July 31, 2020.

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(in thousands)

Options outstanding at September 27, 2020 207,463 $ 91.85

Options outstanding at October 3, 2021 33,117 $ 92.44

Granted — N/A

Exercised ( 667 ) $ 75.23

Forfeited ( 15,100 ) $ 76.29

Expired ( 84,218 ) $ 97.31

Forfeited — N/A

Expired — N/A

Options outstanding at October 2, 2022 32,450 $ 92.80 2.33 $ —

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As of October 2, 2022, there was less than $ 0.1 million of total unrecognized compensation cost related to stock options grants that is expected to be recognized over a weighted-average period of 0.2 years.

The total intrinsic value of stock options exercised was $ 1.6 million, $ 0.7 million, and $ 0.5 million in fiscal years 2021, 2020, and 2019, respectively.

The total intrinsic value of stock options exercised was less than $ 0.1 million, $ 1.6 million, and $ 0.7 million in fiscal years 2022, 2021, and 2020, respectively.

Performance share awards — Performance share awards, granted in the form of stock units, represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period.

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Average Grant

Performance share awards outstanding at September 27, 2020 25,042 $ 63.59

Performance share awards outstanding at October 3, 2021 35,097 $ 79.92

Granted 37,822 $ 78.95

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The total fair value of awards that became fully vested during fiscal years 2022, 2021, and 2020 was $ 0.1 million, $ 0.6 million, and $ 0.5 million, respectively.

Nonvested restricted stock awards — As part of the Merger Agreement, on the Closing Date, the Company assumed Del Taco’s historical equity compensation plans.

The following is a summary of nonvested restricted stock awards for fiscal 2022:

Shares Weighted-

Average Grant

Restricted stock awards outstanding at October 3, 2021 — $ —

Granted 21,152 $ 82.33

Issued ( 8,368 ) $ 82.33

Forfeited ( 8,114 ) $ 82.33

Restricted stock awards outstanding at October 2, 2022 4,670 $ 82.33

As of October 2, 2022, there was approximately $ 0.2 million of total unrecognized compensation cost related to nonvested stock awards, which is expected to be recognized over a weighted-average period of 0.4 years.

The weighted-average grant date fair value of awards granted was $ 82.33 in fiscal 2022.

The total fair value of awards that vested and were released during fiscal 2022 was $ 0.7 million.

Non-management directors’ deferred compensation — All awards outstanding under our directors’ deferred compensation plan are accounted for as equity-based awards and deferred amounts are converted into stock equivalents based on a per share price equal to the average of the closing price of our common stock for the 10 trading days immediately preceding the date the deferred compensation is credited to the director’s account.

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Average Grant

Stock equivalents outstanding at September 27, 2020 105,876 $ 40.96

Stock equivalents outstanding at October 3, 2021 109,463 $ 43.06

Deferred directors’ compensation 3,438 $ 84.35

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Repurchases of common stock — In fiscal 2022, the Company purchased 0.3 million shares of its common stock for an aggregate cost of $ 25.0 million.

As of October 3, 2021, there was no remaining amount under share repurchase programs authorized by the Board of Directors.

Dividends — In fiscal 2021, the Board of Directors declared four cash dividends of $ 0.40 , $ 0.40 , $ 0.44 , and $ 0.44 , respectively, totaling $ 37.6 million.

As of October 2, 2022, there was $ 175.0 million remaining amount under share repurchase programs authorized by the Board of Directors which expires in November 2023.

Dividends — In fiscal 2022, the Board of Directors declared four cash dividends of $ 0.44 , respectively, totaling $ 37.2 million.

Future dividends are subject to approval by our Board of Directors.

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COMMITMENTS AND CONTINGENCIES

Purchase commitments — We have entered into long-term beverage agreements with The Coca-Cola Company and Dr.

Pepper / Seven Up, Inc., which provide fountain products and certain marketing support funding to the Company and its franchisees.

Purchase commitments — Jack in the Box and Del Taco have long-term beverage supply agreements with certain major beverage vendors, which provide fountain products and marketing support funding to the Company and its franchisees.

These agreements require minimum purchases of fountain beverage syrup by the Company and its franchisees at agreed upon prices until the total volume commitments have been reached.

The volume commitments are not subject to any time limit.

As of October 3, 2021, we estimate that it will take approximately four years to complete the Coca-Cola purchase commitment and approximately five years to complete the Dr.

Pepper purchase commitment.

The Company estimates future annual purchases under these agreements to be approximately $ 51.3 million as of October 3, 2021 based on the expected ratio of usage at company-operated to franchise restaurants.

Based on current pricing and ratio of usage at company-operated to franchised restaurants as of October 2, 2022, total beverage purchase requirements under these agreements is estimated to be approximately $ 75.2 million over the next seven years .

We also have entered into various arrangements with vendors providing information technology services with no early termination fees.

The Company’s unconditional purchase obligations on these contracts total approximately $ 7.3 million over the next two years .

The Company’s unconditional purchase obligations on these contracts total approximately $ 6.7 million over the next four years .

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.

As of October 2, 2022, the Company had accruals of $ 59.2 million for all of its legal matters in aggregate, presented within “Accrued liabilities” on our consolidated balance sheet.

Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events.

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The ultimate amount of loss may differ from these estimates.

As of October 3, 2021 and September 27, 2020, the Company had recorded aggregate liabilities of $ 7.5 million and $ 3.8 million, respectively, within “Accrued liabilities” on our consolidated balance sheets for all matters including those described below, that were probable and reasonably estimable.

We believe that the ultimate determination of liability in connection with legal claims pending against us, if any, in excess of amounts already provided for such matters in the consolidated financial statements, will not have a material adverse effect on our business, our annual results of operations, liquidity or financial position.

As of October 2, 2022, we estimate the aggregate range of reasonably possible losses, in excess of amounts accrued for these matters as of such date, to be up to approximately $ 6.5 million, excluding interest and attorney fees.

Any estimate is not an indication of expected loss, if any, or of the Company’s maximum possible loss exposure and the ultimate amount of loss may differ materially from these estimates in the near term.

Jack in the Box Inc.

— In August 2010, five former 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 the Company 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 August 2010, five former Jack in the Box employees instituted litigation in federal court in Oregon alleging claims under the federal Fair Labor Standards Act and Oregon wage and hour laws.

The plaintiffs alleged that Jack in the Box failed to pay non-exempt employees for certain meal breaks and improperly made payroll deductions for shoe purchases and for workers’ compensation expenses, and later added additional claims relating to timing of final pay and related wage and hour claims involving employees of a franchisee.

In 2016, the court dismissed the federal claims and those relating to franchise employees.

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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 remains pending before the court.

The Company continues to dispute liability and the plaintiffs’ damages calculations and will continue to vigorously defend against the lawsuit.

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.

On October 24, 2022, a jury awarded plaintiffs approximately $ 6.4 million in damages and penalties, in addition to interest and attorney fees to be determined by the court at a later date.

The Company continues to dispute liability and the damage award and will defend against both through post-trial motions and all other available appellate remedies.

Torrez — In March 2014, a former Del Taco employee filed a purported Private Attorneys General Act claim and class action alleging various causes of action under California’s labor, wage, and hour laws.

The plaintiff generally alleges Del Taco did not appropriately provide meal and rest breaks and failed to pay wages and reimburse business expenses to its California non-exempt employees.

On November 12, 2021, the court granted, in part, the plaintiff's motion for class certification.

The parties participated in a voluntary mediation on May 24, 2022 and June 3, 2022.

On June 4, 2022, we entered into a Settlement Memorandum of Understanding (the “Agreement”) which obligates the Company to pay a gross settlement amount of $ 50.0 million, for which in exchange we will be released from all claims by the parties.

The Agreement contains no admission of wrongdoing and is contingent upon various conditions, including, but not limited to, court approvals.

There can be no assurance that the Agreement will be approved by the court nor upheld if challenged on appeal.

As of October 2, 2022, the Company has accrued the settlement amount, included within “Accrued liabilities” on our consolidated balance sheet.

J&D Restaurant Group — On April 17, 2019, the trustee for a bankrupt former franchisee filed a complaint seeking to recover assets in the form of actual and exemplary damages for the bankruptcy trust and generally alleging the Company wrongfully terminated the franchise agreements and unreasonably denied two perspective purchasers that the former franchisee presented.

The parties participated in a mediation in April 2021, but the matter did not settle.

Trial in this matter is currently set for January 2023, with the parties scheduled to participate in another court ordered mediation in December 2022.

Other legal matters — In addition to the matters described above, we are subject to normal and routine litigation brought by former or current employees, customers, franchisees, vendors, landlords, shareholders, or others.

We intend to defend ourselves in any such matters.

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Non-cash investing and financing transactions:

Increase in notes and accounts receivable from the sale of restaurant properties $ 10,001 $ — $ —

Increase in dividends accrued or converted to common stock equivalents $ 275 $ 232 $ 117

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SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION (in thousands)

2021 September 27,

2022 October 3,

Accounts and other receivables, net:

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Accrued liabilities:

Legal accruals $ 59,165 $ 7,540

Payroll and related taxes 43,837 34,649

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Advertising 11,028 13,097

Deferred franchise fees 4,824 4,934

Deferred franchise fees and development fees 5,647 4,949

Other 52,511 25,898

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Defined benefit pension plans $ 51,679 $ 70,354

Deferred franchise fees 35,608 38,607

Deferred franchise and development fees 40,802 36,571

Other 42,213 49,417

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Future dividends will be subject to approval by our Board of Directors.

On November 19, 2021, the Board of Directors authorized an additional $ 200.0 million stock buy-back program that expires on November 20, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures