JACK IN THE BOX INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES a. Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the Company’s fiscal year ended October 1, 2023, the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) have concluded that the Company’s disclosure controls and procedures were effective. b. Changes in Internal Control Over Financial Reporting As previously announced, the Company acquired Del Taco Restaurants, Inc. (“Del Taco”) in the second quarter of 2022, and was permitted to exclude the Del Taco segment from the 2022 assessment of internal control over financial reporting as that was the first year following the date of acquisition. The Company has included the Del Taco’s internal controls within management’s assessment of the effectiveness of the Company’s internal control over financial reporting for fiscal year ended October 1, 2023. There were no other changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended October 1, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. c. Management’s Report on Internal Control Over Financial Reporting Management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 39 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 1, 2023. In making this assessment, management used the criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Management has concluded that, as of October 1, 2023, the Company’s internal control over financial reporting was effective, at a reasonable assurance level, based on these criteria. The Company’s independent registered public accounting firm, KPMG LLP, has issued an audit report on the effectiveness of our internal control over financial reporting, which follows. 40 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Jack in the Box Inc.: Opinion on Internal Control Over Financial Reporting We have audited Jack in the Box Inc. and subsidiaries’ (the Company) internal control over financial reporting as of October 1, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 1, 2023, 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 1, 2023 and October 2, 2022, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for each of the fifty-two week periods ended October 1, 2023 and October 2, 2022, and for the fifty-three week period ended October 3, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated November 21, 2023 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP San Diego, California November 21, 2023 41 ITEM 9B. OTHER INFORMATION During the last fiscal quarter, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. On August 15, 2023, the Company adopted a Rule 10b5-1 trading arrangement to repurchase shares of the Company’s common stock up to an aggregate purchase price of $30.0 million. This Rule10b5-1 trading arrangement subsequently terminated on September 29, 2023. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE That portion of our definitive Proxy Statement appearing under the captions “Election of Directors,” “Director Qualifications and Biographical Information,” and “Committees of the Board” to be filed with the Commission pursuant to Regulation 14A within 120 days after October 1, 2023 and to be used in connection with our 2024 Annual Meeting of Stockholders is hereby incorporated by reference. Information regarding our executive officers is set forth in Part I of this Report under the caption “Information about our Executive Officers.” That portion of our definitive Proxy Statement appearing under the caption “Committees of the Board - Audit Committee,” relating to the members of the Company’s Audit Committee and the members of the Audit Committee who qualify as financial experts, is also incorporated herein by reference. That portion of our definitive Proxy Statement appearing under the caption “Stockholder Recommendations and Board Nominations,” relating to the procedures by which stockholders may recommend candidates for director to the Nominating and Governance Committee of the Board of Directors, is also incorporated herein by reference. We have adopted a Code of Ethics, which applies to all Jack in the Box Inc. directors, officers, and employees, including the Chief Executive Officer, Chief Financial Officer, Controller, and all of the financial team. The Code of Ethics is posted on the Company’s corporate website, www.jackintheboxinc.com (under the “Investors — Governance — Governance Documents — Code of Conduct” caption) and is available in print free of charge to any stockholder upon request. We intend to satisfy the disclosure requirement regarding any amendment to, or waiver of, a provision of the Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and Controller or persons performing similar functions, by posting such information on our corporate website. No such waivers have been issued during fiscal 2023. We have also adopted a set of Corporate Governance Principles and Practices for our Board of Directors and charters for all of our Board Committees, including the Audit, Compensation, and Nominating and Governance Committees. The Corporate Governance Principles and Practices and committee charters are available on our corporate website at www.jackintheboxinc.com and in print free of charge to any shareholder who requests them. Written requests for our Code of Business Conduct and Ethics, Corporate Governance Principles and Practices and committee charters should be addressed to Jack in the Box Inc., 9357 Spectrum Center Blvd., San Diego, California 92123, Attention: Corporate Secretary. ITEM 11. EXECUTIVE COMPENSATION That portion of our definitive Proxy Statement appearing under the caption “Executive Compensation,” “Director Compensation and Stock Ownership Requirements,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” to be filed with the Commission pursuant to Regulation 14A within 120 days after October 1, 2023 and to be used in connection with our 2024 Annual Meeting of Stockholders is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS That portion of our definitive Proxy Statement appearing under the caption “Security Ownership of Certain Beneficial Owners and Management” to be filed with the Commission pursuant to Regulation 14A within 120 days after October 1, 2023 and to be used in connection with our 2024 Annual Meeting of Stockholders is hereby incorporated by reference. Information regarding equity compensation plans under which Company common stock may be issued as of October 1, 2023 is set forth in Item 5 of this Report. 42 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE That portion of our definitive Proxy Statement appearing under the caption “Certain Relationships and Related Transactions” and “Directors’ Independence,” if any, to be filed with the Commission pursuant to Regulation 14A within 120 days after October 1, 2023 and to be used in connection with our 2024 Annual Meeting of Stockholders is hereby incorporated by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES That portion of our definitive Proxy Statement appearing under the caption “Independent Registered Public Accountants Fees and Services” to be filed with the Commission pursuant to Regulation 14A within 120 days after October 1, 2023 and to be used in connection with our 2024 Annual Meeting of Stockholders is hereby incorporated by reference. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ITEM 15(a) (1) Financial Statements. See Index to Consolidated Financial Statements on page F-1 of this Report. ITEM 15(a) (2) Financial Statement Schedules. None. ITEM 15(a) (3) Exhibits . 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. 1 8-K 12/6/2021 3.1 Certificate of Amendment of Restated Certificate of Incorporation dated September 21, 2007 8-K 9/24/2007 3.1.1 Restated Certificate of Incorporation, dated March 6, 1992 10-Q 5/14/2020 3.2 Amended and Restated Bylaws of Jack in the Box Inc., effective as of August 3, 2023 8-K 8/8/2023 4.1 Base Indenture, dated as of July 8, 2019, by and between Jack in the Box Funding, LLC, as Master Issuer, and Citibank, N.A., as Trustee and Securities Intermediary. 8-K 7/8/2019 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. 8-K 7/8/2019 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. 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 7/8/2019 10.1.21 The Guarantee and Collateral Agreement, dated July 8, 2019, by and among Jack in the Box SPV Guarantor, LLC, Different Rules, LLC, and Jack in the Box Properties, LLC, each as a Guarantor and Citibank, N.A., as Trustee. 8-K 7/8/2019 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. 8-K 7/8/2019 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 43 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. 8-K 2/3/2022 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 10-Q 2/20/2008 10.2.1* Form of Revised Compensation and Benefits Assurance Agreement for certain officers 10-Q 5/17/2012 10.2.2* Form of Revised Compensation and Benefits Assurance Agreement for certain officers, dated May 8, 2014 10-K 11/21/2014 10.2.3* Form of Revised Compensation and Benefits Assurance Agreement for certain officers, dated June 15, 2020 10-K 11/18/2020 10.2.20* Offer Letter by and between Ryan Ostrom and Jack in the Box Inc., dated December 30, 2020 10-Q 2/17/2021 10.2.21* Offer Letter by and between Steven Piano and Jack in the Box Inc., dated March 23, 2021 10-Q 5/12/2021 10.2.22* Offer Letter by and between Tony Darden and Jack in the Box Inc., dated May 11, 2021 8-K 5/17/2021 10.2.23* Tim Mullany Separation and Release Agreement, dated February 2, 2023 10-Q 3/1/2023 10.2.24* Offer Letter by and between Brian Scott and Jack in the Box Inc., dated August 8, 2023 8-K 8/9/2023 10.3* Amended and Restated Supplemental Executive Retirement Plan 10-Q 2/18/2009 10.3.1 * First Amendment to Jack in the Box Inc. Supplemental Executive Retirement Plan, As Amended and Restated Effective January 1, 2009 8-K 9/22/2015 10.4* Amended and Restated Executive Deferred Compensation Plan 10-Q 2/18/2009 10.4.1 * Jack in the Box Inc. Executive Deferred Compensation Plan, As Amended and Restated Effective January 1, 2016 8-K 9/22/2015 10.5* Amended and Restated Deferred Compensation Plan for Non-Management Directors 10-K 11/22/2006 10.8* Jack in the Box Inc. 2004 Stock Incentive Plan, Amended and Restated Effective February 17, 2012 DEF 14A 1/25/2017 10.8.1* Form of Restricted Stock Award for officers and certain members of management under the 2004 Stock Incentive Plan 10-Q 8/5/2009 10.8.2* Jack in the Box Inc. Non-Employee Director Stock Option Award Agreement under the 2004 Stock Incentive Plan 8-K 11/15/2005 10.8.3* Form of Restricted Stock Unit Award Agreement for Non-Employee Director under the 2004 Stock Incentive Plan 10-K 11/22/2022 10.8.4* Form of Restricted Stock Unit Grant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan 10-Q 5/14/2015 10.8.5* Form of Stock Option and Performance Share Awards Agreement under the 2004 Stock Incentive Plan 10-K 11/22/2013 10.8.6* Form of Time-Vested Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan 10-K 11/22/2013 10.8.7* Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan 10-Q 2/19/2015 44 Number Description Form Filed with SEC 10.8.8* Form of Stock Option and Performance Share Award Agreement under the 2004 Stock Incentive Plan 10-Q 2/19/2015 10.8.9* Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan 10-Q 2/18/2016 10.8.10* Form of Stock Option and Performance Share Award Agreement under the 2004 Stock Incentive Plan 10-Q 2/18/2016 10.8.11* Form of Restricted Stock Unit Grant Agreement for Non-Employee Directors under the 2004 Stock Incentive Plan 10-Q 5/12/2016 10.8.12* Form of Time-Vesting Restricted Stock Unit Award Agreement under the 2004 Stock Incentive Plan 10-Q 2/21/2019 10.8.13* Jack in the Box Inc. Special Time-Vesting Restricted Stock Unit Award Agreement Under the 2004 Stock Incentive Plan 10-Q 2/20/2020 10.8.14* Jack in the Box Inc. Performance Share Award Agreement under the 2004 Stock Incentive Plan 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 11/23/2021 10.8.16* Jack in the Box, Inc Omnibus Incentive Plan, dated March 3, 2023 10-Q 5/17/2023 10.8.17* Restricted Stock Unit Award Grant Notice - Officer 10-Q 5/17/2023 10.8.18* Restricted Stock Unit Award Grant Notice - Non-Officer 10-Q 5/17/2023 10.8.19* Restricted Stock Unit Award Grant Notice - Director 10-Q 5/17/2023 10.8.20* Performance Stock Unit Award Grant Notice - Officer 10-Q 5/17/2023 10.8.21* Jack in the Box, Inc. 2023 Omnibus Incentive Plan - Option Grant Notice 10-Q 8/9/2023 10.10.2* Jack in the Box Inc. Performance Incentive Plan, Effective February 13, 2016 DEF 14A 1/11/2016 10.11* Form of Amended and Restated Indemnification Agreement between the registrant and individual directors, officers and key employees 10-Q 8/10/2012 21.1 Subsidiaries of the Registrant _____ Filed herewith 23.1 Consent of Independent Registered Public Accounting Firm _____ Filed herewith 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 _____ Filed herewith 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 _____ Filed herewith 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 _____ Filed herewith 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 _____ Filed herewith 97.1 Jack in the Box Inc. Incentive Compensation Recoupment Policy _____ Filed herewith 101.INS iXBRL Instance Document 101.SCH iXBRL Taxonomy Extension Schema Document 101.CAL iXBRL Taxonomy Extension Calculation Linkbase Document 101.DEF iXBRL Taxonomy Extension Definition Linkbase Document 101.LAB iXBRL Taxonomy Extension Label Linkbase Document 101.PRE iXBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File formatted in iXBRL * Management contract or compensatory plan 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). ITEM 15(c) All schedules have been omitted as the required information is inapplicable, immaterial or the information is presented in the consolidated financial statements or related notes. ITEM 16. FORM 10-K SUMMARY Not applicable. 45 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JACK IN THE BOX INC. By: /s/ BRIAN SCOTT Brian Scott Executive Vice President and Chief Financial Officer (principal financial officer) November 21, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each person whose signature appears below constitutes and appoints Darin Harris and Brian Scott, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof. Signature Title Date /s/ DARIN HARRIS Chief Executive Officer and Director (principal executive officer) November 21, 2023 Darin Harris /s/ BRIAN SCOTT Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer) November 21, 2023 Brian Scott /s/ DAVID L. GOEBEL Director and Chairman of the Board November 21, 2023 David L. Goebel /s/ GUILLERMO DIAZ, JR. Director November 21, 2023 Guillermo Diaz, Jr. /s/ SHARON P. JOHN Director November 21, 2023 Sharon P. John /s/ MADELEINE A. KLEINER Director November 21, 2023 Madeleine A. Kleiner /s/ MICHAEL W. MURPHY Director November 21, 2023 Michael W. Murphy /s/ JAMES M. MYERS Director November 21, 2023 James M. Myers /s/ DAVID M. TEHLE Director November 21, 2023 David M. Tehle /s/ VIVIEN M. YEUNG Director November 21, 2023 Vivien M. Yeung 46 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ( KPMG LLP , San Diego, CA , Auditor Firm ID: 185 ) F- 2 Consolidated Balance Sheets F- 4 Consolidated Statements of Earnings F- 5 Consolidated Statements of Comprehensive Income F- 6 Consolidated Statements of Cash Flows F- 7 Consolidated Statements of Stockholders’ Deficit F- 8 Notes to Consolidated Financial Statements F- 9 Schedules not filed: All schedules have been omitted as the required information is inapplicable, immaterial, or the information is presented in the consolidated financial statements or related notes. F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Jack in the Box Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Jack in the Box Inc. and subsidiaries (the Company) as of October 1, 2023 and October 2, 2022, the related consolidated statements of earnings, comprehensive income, stockholders’ deficit, and cash flows for each of the fifty-two week periods ended October 1, 2023 and October 2, 2022, and the fifty-three week period ended October 3, 2021, 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 1, 2023 and October 2, 2022, and the results of its operations and its cash flows for each of the fifty-two week periods ended October 1, 2023 and October 2, 2022, and for the fifty-three week period ended October 3, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 1, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 21, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters 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) 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 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 they relate. Valuation of goodwill related to the Del Taco brand As discussed in Notes 1 and 5 to the consolidated financial statements, the goodwill balance as of October 1, 2023 was $194.0 million related to the Del Taco brand. Goodwill is evaluated for impairment annually during the third quarter of each year, or more frequently if indicators of impairment are present. Goodwill is evaluated for impairment by determining whether the fair value of the Company’s reporting units exceed their carrying values. The Company’s reporting units are their two restaurant brands, Jack in the Box and Del Taco. We identified the evaluation of the goodwill impairment analysis for the Del Taco brand reporting unit as a critical audit matter. Evaluating the estimated fair value of the reporting unit involved a high degree of subjective auditor judgment. Specifically, the revenue growth rate assumptions used in estimating the fair value of the Del Taco brand reporting unit were challenging to evaluate as changes in these assumptions could have had a significant effect on the Company’s assessment of the impairment of the goodwill of that reporting unit. F-2 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 related to the Company’s goodwill impairment assessment process, which included a control related to the review of the revenue growth rate assumptions used in the projected financial information. We evaluated the reasonableness of the revenue growth rate assumptions for the Del Taco brand reporting unit by comparing the revenue growth rate assumptions to industry reports. We also compared the Company’s revenue growth rate assumptions to historical revenue growth rate trends to assess the Company’s ability to accurately forecast. In addition, we performed sensitivity analyses over the Company’s revenue growth rate assumptions to assess the impact any changes to those assumptions could have had on the Company’s fair value estimate. /s/ KPMG LLP We have served as the Company’s auditor since 1986. San Diego, California November 21, 2023 F-3 JACK IN THE BOX INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) October 1, 2023 October 2, 2022 ASSETS Current assets: Cash $ 157,653 $ 108,890 Restricted cash 28,254 27,150 Accounts and other receivables, net 99,678 103,803 Inventories 3,896 5,264 Prepaid expenses 16,911 16,095 Current assets held for sale 13,925 17,019 Other current assets 5,667 4,772 Total current assets 325,984 282,993 Property and equipment, at cost: Land 92,007 86,134 Buildings 968,221 960,984 Restaurant and other equipment 166,714 163,527 Construction in progress 31,647 18,271 1,258,589 1,228,916 Less accumulated depreciation and amortization ( 846,559 ) ( 810,752 ) Property and equipment, net 412,030 418,164 Other assets: Operating lease right-of-use assets 1,397,555 1,332,135 Intangible assets, net 11,330 12,324 Trademarks 283,500 283,500 Goodwill 329,986 366,821 Other assets, net 240,707 226,569 Total other assets 2,263,078 2,221,349 $ 3,001,092 $ 2,922,506 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Current maturities of long-term debt $ 29,964 $ 30,169 Current operating lease liabilities 142,518 171,311 Accounts payable 84,960 66,271 Accrued liabilities 302,178 253,932 Total current liabilities 559,620 521,683 Long-term liabilities: Long-term debt, net of current maturities 1,724,933 1,799,540 Long-term operating lease liabilities, net of current portion 1,265,514 1,165,097 Deferred tax liabilities 26,229 37,684 Other long-term liabilities 143,123 134,694 Total long-term liabilities 3,159,799 3,137,015 Stockholders’ deficit: Preferred stock $ 0.01 par value, 15,000,000 shares authorized, none issued — — Common stock $ 0.01 par value, 175,000,000 shares authorized, 82,645,814 and 82,580,599 issued, respectively 826 826 Capital in excess of par value 520,076 508,323 Retained earnings 1,937,598 1,842,947 Accumulated other comprehensive loss ( 51,790 ) ( 53,982 ) Treasury stock, at cost, 62,910,964 and 61,799,221 shares, respectively ( 3,125,037 ) ( 3,034,306 ) Total stockholders’ deficit ( 718,327 ) ( 736,192 ) $ 3,001,092 $ 2,922,506 See accompanying notes to consolidated financial statements. F-4 JACK IN THE BOX INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) Fiscal Year 2023 2022 2021 Revenues: Company restaurant sales $ 846,278 $ 701,070 $ 387,766 Franchise rental revenues 364,591 340,391 346,634 Franchise royalties and other 240,515 216,821 204,725 Franchise contributions for advertising and other services 240,922 209,801 204,545 1,692,306 1,468,083 1,143,670 Operating costs and expenses, net: Food and packaging 250,836 216,345 113,006 Payroll and employee benefits 274,598 232,250 119,033 Occupancy and other 163,273 135,803 61,743 Franchise occupancy expenses 229,602 215,609 214,913 Franchise support and other costs 12,328 16,490 13,052 Franchise advertising and other services expenses 253,533 218,272 210,328 Selling, general, and administrative expenses 172,872 130,823 81,959 Depreciation and amortization 62,287 56,100 46,500 Pre-opening costs 1,385 1,110 775 Other operating expense (income), net 10,837 889 ( 3,382 ) Gains on the sale of company-operated restaurants ( 17,998 ) ( 3,878 ) ( 4,203 ) 1,413,553 1,219,813 853,724 Earnings from operations 278,753 248,270 289,946 Other pension and post-retirement expenses, net 6,967 303 881 Interest expense, net 82,446 86,075 67,458 Earnings from continuing operations and before income taxes 189,340 161,892 221,607 Income taxes 58,514 46,111 55,852 Net earnings $ 130,826 $ 115,781 $ 165,755 Net earnings per share — basic $ 6.35 $ 5.46 $ 7.40 Net earnings per share — diluted $ 6.30 $ 5.45 $ 7.37 Cash dividends declared per common share $ 1.76 $ 1.76 $ 1.68 See accompanying notes to consolidated financial statements. F-5 JACK IN THE BOX INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Fiscal Year 2023 2022 2021 Net earnings $ 130,826 $ 115,781 $ 165,755 Other comprehensive income: Actuarial gains arising during the period 823 24,249 44,134 Amortization of actuarial losses and prior service cost reclassified to earnings 2,154 3,238 4,931 2,977 27,487 49,065 Tax effect ( 785 ) ( 7,215 ) ( 12,714 ) Other comprehensive income, net of taxes 2,192 20,272 36,351 Comprehensive income $ 133,018 $ 136,053 $ 202,106 See accompanying notes to consolidated financial statements. F-6 JACK IN THE BOX INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Fiscal Year 2023 2022 2021 Cash flows from operating activities: Net earnings $ 130,826 $ 115,781 $ 165,755 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 62,287 56,100 46,500 Amortization of franchise tenant improvement allowances and incentives 4,647 4,446 3,450 Amortization of debt issuance costs 5,040 5,496 5,595 Loss on extinguishment of debt — 7,700 — Tax deficiency (excess tax benefits) from share-based compensation arrangements 71 123 ( 1,160 ) Deferred income taxes ( 11,989 ) 7,857 8,008 Share-based compensation expense 11,205 7,122 4,048 Pension and postretirement expense 6,967 303 881 (Gains) losses on cash surrender value of company-owned life insurance ( 7,346 ) 12,668 ( 12,753 ) Gains on the sale of company-operated restaurants ( 17,998 ) ( 3,878 ) ( 4,203 ) Gains on the disposition of property and equipment ( 8,171 ) ( 30,533 ) ( 6,888 ) Impairment charges and other 6,217 8,219 2,889 Changes in assets and liabilities, excluding acquisitions and dispositions: Accounts and other receivables ( 4,048 ) ( 18,143 ) 5,072 Inventories 1,367 304 ( 269 ) Prepaid expenses and other current assets ( 1,422 ) ( 3,275 ) ( 2,766 ) Operating lease right-of-use assets and lease liabilities 2,364 2,593 ( 24,784 ) Accounts payable ( 1,692 ) 16,243 ( 3,091 ) Accrued liabilities 47,459 ( 9,081 ) 28,990 Pension and postretirement contributions ( 6,241 ) ( 6,690 ) ( 6,084 ) Franchise tenant improvement allowance and incentive disbursements ( 3,265 ) ( 2,989 ) ( 8,568 ) Other ( 1,272 ) ( 7,484 ) 500 Cash flows provided by operating activities 215,006 162,882 201,122 Cash flows from investing activities: Purchases of property and equipment ( 74,954 ) ( 46,475 ) ( 41,008 ) Proceeds from the sale and leaseback of assets 3,673 10,768 3,884 Acquisition of Del Taco, net of cash acquired — ( 580,793 ) — Proceeds from the sale of company-operated restaurants 85,221 6,391 1,827 Proceeds from the sale of property and equipment 25,214 31,161 11,742 Other 3,065 360 2,626 Cash flows provided by (used in) investing activities 42,219 ( 578,588 ) ( 20,929 ) Cash flows from financing activities: Borrowings on revolving credit facilities — 68,000 — Repayments of borrowings on revolving credit facilities ( 50,000 ) ( 18,000 ) ( 107,875 ) Proceeds from issuance of debt — 1,100,000 — Principal repayments on debt ( 30,109 ) ( 588,064 ) ( 829 ) Debt issuance costs — ( 20,599 ) — Dividends paid on common stock ( 35,890 ) ( 36,987 ) ( 37,322 ) Proceeds from issuance of common stock 263 51 6,647 Repurchases of common stock ( 90,029 ) ( 25,000 ) ( 200,000 ) Payroll tax payments for equity award issuances ( 1,593 ) ( 1,223 ) ( 4,166 ) Cash flows (used in) provided by financing activities ( 207,358 ) 478,178 ( 343,545 ) Net increase (decrease) in cash and restricted cash 49,867 62,472 ( 163,352 ) Cash and restricted cash at beginning of year 136,040 73,568 236,920 Cash and restricted cash at end of year $ 185,907 $ 136,040 $ 73,568 See accompanying notes to consolidated financial statements. F-7 JACK IN THE BOX INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (Dollars in thousands) Number of Shares Amount Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Balance at September 27, 2020 82,369,714 $ 824 $ 489,515 $ 1,636,211 $ ( 110,605 ) $ ( 2,809,306 ) $ ( 793,361 ) Shares issued under stock plans, including tax benefit 166,345 1 6,646 — — — 6,647 Share-based compensation — — 4,048 — — — 4,048 Dividends declared — — 232 ( 37,554 ) — — ( 37,322 ) Purchases of treasury stock — — — — — ( 200,000 ) ( 200,000 ) Net earnings — — — 165,755 — — 165,755 Other comprehensive income — — — — 36,351 — 36,351 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 Share-based compensation — — 7,122 — — — 7,122 Dividends declared — — 261 ( 37,246 ) — — ( 36,985 ) 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 Other comprehensive income — — — — 20,272 — 20,272 Balance at October 2, 2022 82,580,599 826 508,323 1,842,947 ( 53,982 ) ( 3,034,306 ) ( 736,192 ) Shares issued under stock plans, including tax benefit 65,215 — 263 — — — 263 Share-based compensation — — 11,205 — — — 11,205 Dividends declared — — 285 ( 36,175 ) — — ( 35,890 ) Purchases of treasury stock — — — — — ( 90,731 ) ( 90,731 ) Net earnings — — — 130,826 — — 130,826 Other comprehensive income — — — — 2,192 — 2,192 Balance at October 1, 2023 82,645,814 $ 826 $ 520,076 $ 1,937,598 $ ( 51,790 ) $ ( 3,125,037 ) $ ( 718,327 ) See accompanying notes to consolidated financial statements. F-8 JACK IN THE BOX INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 1, 2023, there were 142 company-operated and 2,044 franchise-operated Jack in the Box restaurants and 171 company-operated and 421 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.” Basis of presentation — The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain prior period information on the consolidated statement of earnings has been reclassified to conform to the current year presentation. Fiscal year — The Company’s fiscal year is the 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 periods ended October 1, 2023 and October 2, 2022, for fiscal years 2023 and 2022, and the 53-week period ended October 3, 2021, for fiscal year 2021. Principles of consolidation — The accompanying consolidated financial statements include the accounts of Jack in the Box Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Use of estimates — In preparing the consolidated financial statements in conformity with U.S. GAAP, management is required to make certain assumptions and estimates that affect reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingencies. In making these assumptions and estimates, management may from time to time seek advice and consider information provided by actuaries and other experts in a particular area. Actual amounts could differ materially from these estimates. 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-2 Notes and Variable Funding Notes. As of October 1, 2023 and October 2, 2022, restricted cash balances were $ 28.3 million and $ 27.2 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. Franchisee receivables primarily include rents, property taxes, royalties, marketing, sourcing and technology support fees associated with lease and franchise agreements, and notes from certain of our franchisees. Tenant receivables relate to subleased properties where we are on the master lease agreement. We accrue interest on notes receivable based on the contractual terms. 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 ): 2023 2022 Balance as of beginning of period $ ( 5,975 ) $ ( 6,292 ) Reversal (provision) for expected credit losses, net 1,788 ( 4,744 ) Write-offs charged against the allowance 41 5,061 Balance as of end of period $ ( 4,146 ) $ ( 5,975 ) F-9 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. Internal-use Software Costs — The Company capitalizes costs incurred to implement software solely for its internal use, including (i) hosted applications used to deliver the Company's support services, and (ii) certain implementation costs incurred in a hosting arrangement that is a service contract when the preliminary project stage is complete, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable the project will be completed and used to perform the intended function. Software implementation costs are capitalized to either other current assets or other long-term assets on the Company's consolidated balance sheet and amortized over the estimated useful life of the developed software. Software implementation costs capitalized were $ 7.9 million and $ 10.7 million as of the end of fiscal year 2023 and 2022, respectively. Related amortization expense for software implementation costs was $ 5.0 million, $ 5.1 million and $ 2.5 million during fiscal years 2023, 2022 and 2021, respectively. Assets held for sale — Our assets held for sale typically includes property we plan to sell within the next year. If the determination is made that we no longer expect to sell an asset within the next year, the asset is reclassified out of assets held for sale. Long-lived assets that meet the held for sale criteria are reported at the lower of their carrying value or fair value, less estimated costs to sell. Property and equipment, net — Expenditures for new facilities and equipment, and those that substantially increase the useful lives of the property, are capitalized. Facilities leased under finance leases are stated at the present value of minimum lease payments at the beginning of the lease term, not to exceed fair value. 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 “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. In certain situations, one or more option periods may be used in determining the depreciable life of assets related to leased properties if we deem that an economic penalty would be incurred otherwise. In either circumstance, our policy requires lease term consistency when calculating the depreciation period, in classifying the lease and in computing straight-line rent expense. Building, leasehold improvement assets and equipment are assigned lives that range from 1 to 35 years. Depreciation expense related to property and equipment was $ 61.7 million, $ 55.8 million, and $ 46.5 million in fiscal year 2023, 2022, and 2021, respectively. Impairment of long-lived assets — We evaluate 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 value may not be recoverable. Long-lived assets are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. The impairment test for long-lived assets requires us to assess the recoverability of long-lived assets by comparing their net carrying value to the sum of undiscounted estimated future cash flows directly associated with and arising from our use and eventual disposition of the assets. 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, 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. The amount of goodwill written-off is determined as the fair value of the business disposed of as a percentage of the fair value of the reporting unit retained. 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 third quarter of each year, or more frequently if indicators of impairment are present. We first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit or indefinite-lived asset is less than its carrying amount. If the qualitative factors indicate that it is more likely than not that the fair value is less than the carrying amount, we perform a single-step impairment test. To perform our impairment analysis, we estimate the fair value of the reporting unit and compare it to the carrying value. If the carrying value exceeds the fair value, an impairment loss is recognized equal to the excess. F-10 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 third 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. During the fourth quarter of 2023, we performed a qualitative test for the fair value of the Jack in the Box reporting unit, noting that the fair value was substantially in excess of its respective carrying value. During the fourth quarter of 2023, we also performed a qualitative tests over the Del Taco reporting unit and of the Del Taco indefinite-lived trademarks, noting that it was not more likely than not that the carrying value was greater than its fair value. Recently, during the third quarter of 2023, we had performed quantitative tests over the Del Taco reporting unit and of the Del Taco indefinite-lived trademarks, and their fair values were in excess of their carrying values by approximately 9 % and 13 %, respectively, as of the testing date. 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 $ 113.2 million and $ 108.9 million as of October 1, 2023 and October 2, 2022, 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. These policies reside in an umbrella trust for use only to pay plan benefits to participants or to pay creditors if the Company becomes insolvent. Leases — We evaluate the contracts entered into by the Company to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property, plant, and equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee, or as an operating, sales-type, or direct financing lease where the Company is a lessor, based on their terms. 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. 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. Revenue recognition — “Company restaurant sales” include revenue recognized upon delivery of food and beverages to the customer at company-operated restaurants, which is when our obligation to perform is satisfied. Company restaurant sales exclude taxes collected from the Company’s customers. 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. Rental revenue from properties owned and leased by the Company and leased or subleased to franchisees is recognized on a straight-line basis over the respective term of the lease. Certain franchise rents, which are contingent upon sales levels, are recognized in the period in which the contingency is met. F-11 “Franchise royalties and other” primarily includes royalties and franchise fees received from our franchisees. Royalties are based upon a percentage of sales of the franchised restaurant and are recognized as earned. 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 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. Gift cards — We sell gift cards to our customers in our restaurants and through selected third parties. The gift cards sold to our customers have no stated expiration dates and are subject to actual or potential escheatment rights in several of the jurisdictions in which we operate. We recognize income from gift cards when redeemed by the customer. Deferred gift card income totaled $ 2.9 million and $ 4.1 million as of October 1, 2023 and October 2, 2022, 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 consolidated statements of earnings. Amounts recognized on unredeemed gift card balances were $ 1.6 million, $ 0.7 million, and $ 0.6 million in fiscal 2023, 2022, and 2021, respectively. Pre-opening costs — Pre-opening costs associated with the opening of a new restaurant or the remodeling of an existing restaurant consist primarily of property rent and employee training costs. 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. 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 undiscounted insurance liability and reserves using independent actuarial estimates of expected losses based on a statistical analysis of historical claims data. As of October 1, 2023, our estimated self-insurance liability was $ 31.3 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 2023, 2022 and 2021, marketing fund contributions from Jack in the Box franchise and company-operated restaurants were approximately 5.0 % of sales. In 2023 and 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 1, 2023 and October 2, 2022, additional amounts accrued were $ 10.3 million and $ 3.5 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 2023, 2022, and 2021 advertising costs were $ 38.9 million, $ 32.6 million, and $ 19.6 million, respectively. Share-based compensation — We account for our share-based compensation under the Financial Accounting Standards Board (“FASB”) authoritative guidance on stock compensation , which generally requires, among other things, that all employee share-based compensation be measured using a fair value method and that the resulting compensation cost be recognized in the financial statements. Compensation expense for our share-based compensation awards is generally recognized on a straight-line basis over the shorter of the vesting period or the period from the date of grant to the date the employee becomes eligible to retire. Refer to Note 13, Share-based Employee Compensation , for additional information. Income taxes — Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize interest and, when applicable, penalties related to unrecognized tax benefits as a component of our income tax provision. F-12 Authoritative guidance issued by the FASB prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Refer to Note 11, Income Taxes , 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. Our ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best estimate within the range. We record legal settlement costs when those costs are probable and reasonably estimable. Refer to Note 16, Commitments and Contingencies , for additional information. 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 accounting pronouncements adopted in 2023 and those to be adopted in future periods — We reviewed the accounting pronouncements adopted in 2023, as well as 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. 2. REVENUE Nature of products and services — We derive revenue from retail sales at Jack in the Box and Del Taco company-operated restaurants and rental revenue, royalties, advertising, and franchise and other fees from franchise-operated restaurants. Our franchise arrangements generally provide for an initial franchise fee per restaurant for a 20-year term, and generally require that franchisees pay royalty and marketing fees based upon a percentage of gross sales. The agreements also require franchisees to pay technology fees, as well as sourcing fees for Jack in the Box franchise agreements. Disaggregation of revenue — The following table disaggregates revenue by segment and primary source for the fiscal year ended October 1, 2023 (in thousands) : Jack in the Box Del Taco Total Company restaurant sales $ 413,748 $ 432,530 $ 846,278 Franchise rental revenues 351,283 13,308 364,591 Franchise royalties 207,064 25,669 232,733 Franchise advertising contributions 199,917 21,025 220,942 Technology and sourcing fees 16,073 3,907 19,980 Franchise fees and other services 7,226 556 7,782 Total revenue $ 1,195,311 $ 496,995 $ 1,692,306 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 Franchise rental revenues 335,936 4,455 340,391 Franchise royalties 188,902 13,414 202,316 Franchise advertising contributions 183,076 10,907 193,983 Technology and sourcing fees 14,740 1,078 15,818 Franchise fees and other services 14,309 196 14,505 Total revenue $ 1,151,188 $ 316,895 $ 1,468,083 F-13 The following table disaggregates revenue by segment and primary source for the fiscal 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 In October 2022, a Jack in the Box franchise operator paid the Company $ 7.3 million in order to sell his restaurants to a new franchisee at the current standard royalty rate, which is lower than the royalty rate in the existing franchise agreements. The payment represented the difference between the existing royalty rate and the new royalty rate based on projected future sales for the remaining term of the existing agreements. The payment is non-refundable and not subject to any adjustments based on actual future sales. The Company determined the transaction represented the termination of the existing agreement rather than the transfer of an agreement between franchisees. As such, the $ 7.3 million was recognized in franchise royalty revenue during the first quarter of 2023. Contract liabilities — Our contract 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. We classify these contract liabilities within “Accrued liabilities” and “Other long-term liabilities” in our consolidated balance sheets. A summary of significant changes in our contract liabilities is presented below (in thousands) : 2023 2022 Deferred franchise and development fees at beginning of period $ 46,449 $ 41,520 Changes due to business combinations — 6,193 Revenue recognized during the period ( 5,469 ) ( 5,891 ) Additions during the period 9,494 4,627 Deferred franchise and development fees at end of period $ 50,474 $ 46,449 As of October 1, 2023, approximately $ 8.1 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) : 2024 $ 5,191 2025 $ 4,966 2026 $ 4,638 2027 $ 4,290 2028 $ 3,657 Thereafter $ 19,660 $ 42,402 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. F-14 3. 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) : Amount Del Taco shares outstanding as of March 8, 2022 36,442 Del Taco RSAs subject to accelerated vesting 805 Del Taco RSUs subject to accelerated vesting 70 Del Taco options subject to accelerated vesting 292 Total Del Taco shares outstanding 37,610 Merger Consideration (per Del Taco share) $ 12.51 Total cash consideration paid to selling shareholders $ 470,500 Del Taco transaction costs paid by Jack in the Box (1) 7,141 Del Taco closing indebtedness settled by Jack in the Box (2) 115,219 Replacement share-based payment awards pre-combination vesting expense 449 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. F-15 Purchase price allocation — The final allocation of the purchase consideration was as follows (in thousands) : Total aggregate purchase consideration, net of $ 12,068 cash acquired $ 581,241 Assets: Accounts and other receivables 4,583 Inventories 3,233 Prepaid expenses 2,950 Other current assets 105 Property and equipment 145,032 Operating lease right-of-use assets 350,289 Intangible assets 12,371 Trademarks 283,500 Other assets 5,128 Liabilities: Current maturities of long-term debt 22 Current operating lease liabilities 21,991 Accounts payable 18,808 Accrued liabilities 112,579 Long-term debt, net of current maturities 349 Long-term operating lease liabilities, net of current portion 303,488 Deferred tax liabilities 75,355 Other long-term liabilities 13,080 Net assets acquired, excluding goodwill $ 261,519 Goodwill $ 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. F-16 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) : 2022 2021 Total revenue $ 1,686,160 $ 1,665,660 Net earnings $ 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. F-17 4. SUMMARY OF REFRANCHISINGS AND FRANCHISE ACQUISITIONS Refranchisings — The following table summarizes the number of restaurants sold to franchisees and gains recognized in each fiscal year ( dollars in thousands ): 2023 2022 2021 Restaurants sold to Jack in the Box franchisees 5 15 — Restaurants sold to Del Taco franchisees 111 — — Proceeds from the sale of company-operated restaurants (1) $ 85,221 $ 6,391 $ 1,827 Broker commissions ( 1,614 ) — — Net assets sold (primarily property and equipment) ( 17,101 ) ( 1,565 ) — Goodwill related to the sale of company-operated restaurants ( 35,544 ) ( 948 ) — Franchise fees ( 3,086 ) — — Sublease liabilities, net ( 8,559 ) — — Lease termination ( 393 ) — — Other (2) ( 926 ) — 2,376 Gains on the sale of company-operated restaurants $ 17,998 $ 3,878 $ 4,203 ________________________ (1) Amounts in 2023, 2022, and 2021 include additional proceeds of $ 0.9 million, $ 1.4 million, and $ 1.8 million, respectively, related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years. (2) Amount in 2023 is primarily related to charges for a restaurant that was closed due to refranchising the related market. Amount in 2021 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 and 2021, we acquired 13 and 20 franchise restaurants, respectively. There were no such acquisitions in 2023. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3). The goodwill recorded primarily relates to the sales growth potential of the market acquired and is expected to be deductible for income tax purposes. The following table provides detail of the combined acquisitions in 2022, and 2021 ( dollars in thousands ): 2022 2021 Restaurants acquired from Jack in the Box franchisees 13 20 Inventory $ — $ 258 Property and equipment 540 1,136 Intangible assets 66 245 Other assets — 10 Goodwill — 613 Gains on the acquisition of franchise-operated restaurants ( 309 ) ( 340 ) Liabilities assumed — ( 277 ) Total consideration $ 297 $ 1,645 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. F-18 Assets held for sale — Assets classified as held for sale consisted of the following at each fiscal year-end ( in thousands ): 2023 2022 Jack in the Box restaurant properties (1) $ 11,097 $ 14,151 Other property and equipment (2) 766 2,868 Del Taco restaurants to be refranchised: Property and equipment 771 — Goodwill 1,291 — Assets held for sale $ 13,925 $ 17,019 ________________________ (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. 5. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill during fiscal 2023 and 2022 were as follows ( in thousands ): Jack in the Box Del Taco Total 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 Sale of Del Taco company-operated restaurants to franchisees — ( 35,472 ) ( 35,472 ) Sale of Jack in the Box company-operated restaurants to franchisees ( 72 ) — ( 72 ) Reclassified to assets held for sale — ( 1,291 ) ( 1,291 ) Balance at October 1, 2023 $ 136,027 $ 193,959 $ 329,986 The net carrying amounts of intangible assets are as follows ( in thousands ): October 1, 2023 October 2, 2022 Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Definite-lived intangible assets: Sublease assets $ 2,671 $ ( 381 ) $ 2,290 $ 2,671 $ ( 139 ) $ 2,532 Franchise contracts 9,700 ( 850 ) 8,850 9,700 ( 311 ) 9,389 Reacquired franchise rights 297 ( 107 ) 190 530 ( 127 ) 403 $ 12,668 $ ( 1,338 ) $ 11,330 $ 12,901 $ ( 577 ) $ 12,324 Indefinite-lived intangible assets: Del Taco trademark $ 283,500 $ — $ 283,500 $ 283,500 $ — $ 283,500 $ 283,500 $ — $ 283,500 $ 283,500 $ — $ 283,500 The following table summarizes, as of October 1, 2023, the estimated amortization expense for each of the next five fiscal years ( in thousands ): 2024 $ 801 2025 $ 801 2026 $ 801 2027 $ 815 2028 and thereafter $ 8,112 Total $ 11,330 F-19 6. FAIR VALUE MEASUREMENTS Financial assets and liabilities — The following table presents the financial assets and liabilities measured at fair value on a recurring basis ( in thousands ): Total Quoted Prices in Active Markets for Identical Assets (2) (Level 1) Significant Other Observable Inputs (2) (Level 2) Significant Unobservable Inputs (2) (Level 3) Fair value measurements as of October 1, 2023: Non-qualified deferred compensation plan (1) $ 15,051 $ 15,051 $ — $ — Total liabilities at fair value $ 15,051 $ 15,051 $ — $ — Fair value measurements as of October 2, 2022: Non-qualified deferred compensation plan (1) $ 13,820 $ 13,820 $ — $ — Total liabilities at fair value $ 13,820 $ 13,820 $ — $ — ________________________ (1) We maintain an unfunded defined contribution plan for key executives and other members of management. The fair value of this obligation is based on the closing market prices of the participants’ elected investments. The obligation is included in “Accrued liabilities” and “Other long-term liabilities” on our consolidated balance sheets. (2) We did not have any transfers in or out of Level 1, 2, or 3. The following table presents the carrying value and estimated fair value of our Class A-2 Notes as of October 1, 2023 and October 2, 2022 ( in thousands ): October 1, 2023 October 2, 2022 Carrying Amount Fair Value Carrying Amount Fair Value Series 2019 Class A-2 Notes $ 706,875 $ 640,046 $ 714,125 $ 641,851 Series 2022 Class A-2 Notes $ 1,067,000 $ 903,056 $ 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 1, 2023, we did not have any 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. However, on an annual basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, non-financial instruments are assessed for impairment. If applicable, the carrying values are written down to fair value. Refer to Note 9, Other Operating Expenses (Income), Net, for details on impairment charges recognized in 2023. 7. INDEBTEDNESS The detail of our long-term debt at the end of each fiscal year is as follows ( in thousands ): October 1, 2023 October 2, 2022 Series 2019-1 4.476 % Fixed Rate Class A-2-II Notes $ 268,125 $ 270,875 Series 2019-1 4.970 % Fixed Rate Class A-2-III Notes 438,750 443,250 Series 2022-1 3.445 % Fixed Rate Class A-2-I Notes 533,500 544,500 Series 2022-1 4.136 % Fixed Rate Class A-2-II Notes 533,500 544,500 Series 2022-1 Variable Funding Notes, variable interest rate of 6.322 % at October 1, 2023 — 50,000 Finance lease obligations and other debt 1,626 1,690 Total debt 1,775,501 1,854,815 Less current maturities of long-term debt ( 29,964 ) ( 30,169 ) Less unamortized debt issuance costs ( 20,604 ) ( 25,106 ) Long-term debt $ 1,724,933 $ 1,799,540 F-20 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. 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. As of October 1, 2023, we did not have any outstanding borrowings and had available borrowing capacity of $ 100.5 million, net of letters of credits issued of $ 49.5 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. 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 1, 2023, the effective interest rates, including the amortization of debt issuance costs, were 4.851 %, 5.258 %, 3.796 %, and 4.347 % 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. 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 is making the scheduled principal payments on its 2022 Notes and Series 2019-1 Notes. 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. There is a scaled commitment fee on the unused portion of the Variable Funding Notes facility of between 50 and 100 basis points. It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to August 2027, subject to two one-year extensions at the option of the Company. Following the anticipated repayment date (and any extensions thereof), additional interest will accrue equal to 5.00 % per annum. 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. The Notes are secured by a security interest in substantially all of the assets of the Master Issuer and the Guarantors (collectively, the “Securitization Entities”). The assets of the Securitization Entities include most of the revenue-generating assets of the Company and its subsidiaries, which principally consist of franchise-related agreements, certain company-operated restaurants, intellectual property and license agreements for the use of intellectual property. Upon certain trigger events, mortgages will be required to be prepared and recorded on the real estate assets. F-21 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, which now matures on March 1, 2024. 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. The revolving credit facility, as amended, included a limit of $ 20.0 million for letters of credit, all of which were cancelled as of October 1, 2023. As of October 1, 2023, we had no outstanding borrowings and available borrowing capacity of $ 75.0 million under the 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 1, 2023, principal payments on our long-term debt outstanding at October 1, 2023 for each of the next five fiscal years and thereafter are as follows ( in thousands ): 2024 $ 29,964 2025 29,905 2026 289,156 2027 516,034 2028 15,538 Thereafter 894,904 $ 1,775,501 8. LEASES Nature of leases — We own restaurant sites and we also lease restaurant sites from third parties. Some of these owned or leased sites are leased and/or subleased to franchisees. Initial terms of our real estate leases are generally 20 years, exclusive of options to renew, which are generally exercisable at our sole discretion for 1 to 20 years. In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurants also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs. Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance, and common area maintenance, which are excluded from the measurement of the lease liability. We also lease certain restaurant and office equipment with initial terms generally ranging from 3 to 8 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees subsequent to refranchising transactions. The lease descriptions, terms, variable lease payments and renewal options are generally the same as the lessee leases described above. 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.” F-22 Company as lessee — Leased assets and liabilities consisted of the following as of October 1, 2023 and October 2, 2022 (in thousands) : October 1, 2023 October 2, 2022 Assets: Operating lease ROU assets $ 1,397,555 $ 1,332,135 Finance lease ROU assets (1) 971 854 Total ROU assets $ 1,398,526 $ 1,332,989 Liabilities: Current operating lease liabilities $ 142,518 $ 171,311 Current finance lease liabilities (2) 689 896 Long-term operating lease liabilities 1,265,514 1,165,097 Long-term finance lease liabilities (2) 627 435 Total lease liabilities $ 1,409,348 $ 1,337,739 ________________________ (1) Included in “Property and equipment, net” on our consolidated balance sheets. (2) Included in “Current maturities of long-term debt” and “Long-term debt, net of current maturities” on our consolidated balance sheets. The following table presents the components of our lease costs in fiscal 2023, 2022, and 2021 ( in thousands ): 2023 2022 2021 Lease costs: Finance lease cost: Amortization of ROU assets (1) $ 691 $ 827 $ 807 Interest on lease liabilities (2) 55 67 89 Operating lease cost (3) 240,153 218,837 194,149 Short-term lease cost (3) 730 824 427 Variable lease cost (3)(4) 50,448 48,872 43,498 $ 292,077 $ 269,427 $ 238,970 ________________________ (1) Included in “Depreciation and amortization” in our consolidated statements of earnings. (2) Included in “Interest expense, net” in our consolidated statements 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 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 $ 39.9 million, $ 38.2 million, and $ 38.0 million in 2023, 2022, and 2021, respectively, of property taxes and common area maintenance costs which are reimbursed by sub-lessees. The following table presents supplemental information related to leases: October 1, 2023 October 2, 2022 Weighted-average remaining lease term (in years): Finance leases 1.7 1.5 Operating leases 11.1 10.0 Weighted-average discount rate: Finance leases 7.1 % 3.8 % Operating leases 5.5 % 4.6 % F-23 The following table presents as of October 1, 2023, the annual maturities of our lease liabilities ( in thousands ): Finance Leases Operating Leases Fiscal year: 2024 $ 757 $ 217,591 2025 651 217,931 2026 18 202,189 2027 — 192,088 2028 — 154,422 Thereafter — 971,239 Total future lease payments (1) $ 1,426 $ 1,955,460 Less: imputed interest ( 110 ) ( 547,428 ) Present value of lease liabilities $ 1,316 $ 1,408,032 Less current portion ( 689 ) ( 142,518 ) Long-term lease obligations $ 627 $ 1,265,514 ________________________ (1) Total future lease payments include non-cancellable commitments of $ 1.4 million for finance leases and $ 1,350.1 million for operating leases. Assets recorded under finance leases are included in property and equipment, and consisted of the following at each fiscal year-end ( in thousands ): 2023 2022 Buildings $ 1,342 $ 1,342 Equipment 6,140 5,559 Less accumulated amortization ( 6,511 ) ( 6,047 ) $ 971 $ 854 The following table includes supplemental cash flow and non-cash information related to our lessee leases ( in thousands ): 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 236,356 $ 218,605 Operating cash flows from financing leases $ 55 $ 67 Financing cash flows from financing leases $ 836 $ 907 Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets: Right-of-use assets obtained in exchange for new operating lease obligations $ 250,862 $ 221,466 Right-of-use assets obtained in exchange for new financing lease obligations $ 5 $ 45 Sale and leaseback transactions — In fiscal 2023, we sold one restaurant property in a sale and leaseback transaction for net proceeds of $ 3.7 million, and recorded total losses of less than $ 0.1 million. The lease has been accounted for as an operating lease and contains an initial term of 20 years. 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. F-24 Company as lessor — The following table presents rental income ( in thousands ): 2023 2022 Owned Properties Leased Properties Total Owned Properties Leased Properties Total Operating lease income - franchise $ 17,805 $ 225,392 $ 243,197 $ 19,221 $ 212,552 $ 231,773 Variable lease income - franchise 12,700 108,010 120,710 12,418 96,002 108,420 Amortization of sublease assets and liabilities, net — 684 684 — 198 198 Franchise rental revenues $ 30,505 $ 334,086 $ 364,591 $ 31,639 $ 308,752 $ 340,391 Operating lease income - closed restaurants and other (1) $ 76 $ 7,387 $ 7,463 $ 60 $ 6,347 $ 6,407 ________________________ (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 1, 2023, future minimum rental receipts for non-cancellable leases and subleases ( in thousands ): October 1, 2023 Fiscal year: 2024 $ 240,756 2025 251,366 2026 237,214 2027 231,827 2028 188,554 Thereafter 1,120,748 Total minimum rental receipts $ 2,270,465 Assets held for lease and included in property and equipment consisted of the following at each fiscal year-end ( in thousands ): October 1, 2023 October 2, 2022 Land $ 78,665 $ 75,967 Buildings 792,177 771,567 Equipment 63 2,750 870,905 850,284 Less accumulated depreciation ( 672,137 ) ( 663,109 ) $ 198,768 $ 187,175 9. 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 ): 2023 2022 2021 Acquisition, integration and strategic initiatives $ 9,112 $ 20,081 $ 7 Costs of closed restaurants and other 4,786 4,290 1,907 Operating restaurant impairment charges 4,569 5,927 — Accelerated depreciation 541 1,124 1,592 Gains on disposition of property and equipment, net ( 8,171 ) ( 30,533 ) ( 6,888 ) $ 10,837 $ 889 $ ( 3,382 ) F-25 Acquisition, integration and strategic initiatives — In 2023, costs incurred primarily related to severance, retention bonuses, strategic consulting fees and technology integration related to the acquisition of Del Taco. In 2022, costs incurred primarily related to advisory, legal, and consulting services relating to the acquisition and integration of Del Taco. Cost of closed restaurant — Cost of closed restaurants primarily include ongoing costs associated with closed restaurants and cancelled project costs. Operating restaurant impairment charges — In 2023, impairment charges included $ 4.4 million relating to under-performing Del Taco restaurants currently held for use. 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 2023, 2022 and 2021, accelerated depreciation primarily related to facility improvements, restaurant remodels, and information technology assets. Gains on disposition of property and equipment, net — In 2023 and 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. 10. 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 strategic initiatives, gains on the sale of company-operated restaurants, and amortization of favorable and unfavorable leases and subleases, net. F-26 The following table provides information related to our operating segments in each period ( in thousands ): 2023 2022 2021 Revenues by segment: Jack in the Box $ 1,195,311 $ 1,151,188 $ 1,143,670 Del Taco 496,995 316,895 — Consolidated revenues $ 1,692,306 $ 1,468,083 $ 1,143,670 Segment operating profit: Jack in the Box $ 308,548 $ 310,745 $ 327,157 Del Taco 30,491 27,981 — Total segment operating profit $ 339,039 $ 338,726 $ 327,157 Depreciation and amortization 62,287 56,100 46,500 Acquisition, integration and strategic initiatives 9,112 20,081 7 Share-based compensation 11,205 7,122 4,048 Net COLI losses (gains) ( 5,953 ) 9,911 ( 9,141 ) Gains on the sale of company-operated restaurants ( 17,998 ) ( 3,878 ) ( 4,203 ) Amortization of favorable and unfavorable leases and subleases, net 1,633 1,120 — Earnings from operations $ 278,753 $ 248,270 $ 289,946 Total capital expenditures by segment: Jack in the Box $ 53,692 $ 31,601 $ 41,008 Del Taco 21,262 14,874 — Total capital expenditures $ 74,954 $ 46,475 $ 41,008 Total depreciation and amortization by segment: Jack in the Box $ 35,973 $ 39,895 $ 46,500 Del Taco 26,314 16,205 — Total depreciation and amortization $ 62,287 $ 56,100 $ 46,500 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. 11. INCOME TAXES Income taxes consist of the following in each fiscal year ( in thousands ): 2023 2022 2021 Current: Federal $ 53,229 $ 28,934 $ 36,051 State 17,274 9,320 11,793 70,503 38,254 47,844 Deferred: Federal ( 10,642 ) 5,344 4,440 State ( 1,347 ) 2,513 3,568 ( 11,989 ) 7,857 8,008 Income tax expense from continuing operations $ 58,514 $ 46,111 $ 55,852 F-27 A reconciliation of the federal statutory income tax rate to our effective tax rate for continuing operations is as follows: 2023 2022 2021 Income tax expense at federal statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit 5.6 % 5.2 % 5.1 % Stock compensation tax deficiency (excess tax benefit) — % 0.1 % ( 0.5 ) % Benefit of tax credits, net of valuation allowance ( 0.4 ) % ( 0.6 ) % ( 0.1 ) % Adjustment to state tax provision — % — % 0.7 % Nondeductible goodwill related to the sale of company-operated restaurants 4.9 % — % — % Nondeductible transaction costs — % 0.6 % — % Expense (benefit) related to COLIs ( 1.0 ) % 2.1 % ( 1.5 ) % Officers’ compensation limitation 0.6 % 0.4 % 0.5 % Other, net 0.2 % ( 0.3 ) % — % 30.9 % 28.5 % 25.2 % The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at each fiscal year-end are presented below ( in thousands ): 2023 2022 Deferred tax assets: Operating and finance lease liabilities $ 372,095 $ 351,746 Accrued defined benefit pension and postretirement benefits 18,896 19,090 Deferred income 15,137 13,524 Accrued legal settlements 11,099 15,158 Accrued insurance 8,086 8,339 Share-based compensation 6,139 5,094 Accrued incentive compensation 5,928 2,402 Tax loss and tax credit carryforwards 1,956 4,399 Capitalized research costs 1,943 — Other reserves and allowances 1,144 1,627 Accrued compensation expense 1,259 1,329 Property and equipment, net of impairment 181 — Other, net 3,852 2,319 Total gross deferred tax assets 447,715 425,027 Valuation allowance ( 1,043 ) ( 1,140 ) Total net deferred tax assets 446,672 423,887 Deferred tax liabilities: Operating and finance lease ROU assets ( 380,040 ) ( 361,332 ) Intangible assets ( 84,969 ) ( 87,165 ) Investment basis limitation ( 6,191 ) ( 6,010 ) Property and equipment, principally due to differences in depreciation — ( 5,656 ) Other ( 1,701 ) ( 1,408 ) Total gross deferred tax liabilities ( 472,901 ) ( 461,571 ) Net deferred tax (liabilities) assets $ ( 26,229 ) $ ( 37,684 ) Deferred tax assets as of October 1, 2023 include state gross net operating loss carryforwards of approximately $ 12.4 million, of which $ 9.6 million has an indefinite carryforward. The remainder will expire at various times between 2024 and 2042. At October 1, 2023, we recorded a valuation allowance of $ 1.0 million related to state tax credits, which decreased from the $ 1.1 million at October 2, 2022 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. F-28 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 2020 and forward. The statutes of limitations for California, which constitutes the Company's major state tax jurisdiction, have not expired for fiscal years 2018 and forward. 12. RETIREMENT PLANS We sponsor programs that provide retirement benefits to our employees. These programs include defined contribution plans, defined benefit pension plans, and postretirement healthcare plans. Defined contribution plans — We maintain two qualified savings plans pursuant to Section 401(k) of the Internal Revenue Code (“IRC”). The plans allow 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 $ 2.3 million, $ 2.1 million, and $ 1.6 million in each fiscal years 2023, 2022 and 2021, 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. Effective January 1, 2016, this non-qualified plan was amended to replace the company matching contribution with an annual restoration match that is intended to “restore” up to the full match for participants whose elective deferrals (and related company matching contributions) to the qualified savings plan were limited due to IRC rules. A participant’s right to the Company restoration match vests immediately. 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 $ 0.1 million in fiscal year 2023, and were less than $ 0.1 million in each fiscal years 2022 and 2021, respectively. 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. In fiscal 2011, the Board of Directors approved changes to our Qualified Plan whereby participants no longer accrue benefits effective December 31, 2015. Benefits under both plans are based on the employees’ years of service and compensation over defined periods of employment. In the fourth quarter of fiscal 2023, the Company amended its Qualified Plan to purchase certain annuity contracts from a third-party company, relieving the Company of its related obligation for future payment (the “Annuity Purchase Agreement”). As a result of the Annuity Purchase Agreement, the Company’s Qualified Plan paid $ 14.4 million from its plan assets to the third-party, thereby reducing the plan’s pension benefit obligation (“PBO”). Postretirement healthcare plans — We also sponsor two healthcare plans, closed to new participants, that provide postretirement medical benefits to certain employees who have met minimum age and service requirements. The plans are contributory, with retiree contributions adjusted annually, and contain other cost-sharing features such as deductibles and coinsurance. F-29 Obligations and funded status — The following table provides a reconciliation of the changes in benefit obligations, plan assets, and funded status of our retirement plans for each fiscal year ( in thousands ): Qualified Plan SERP Postretirement Health Plans 2023 2022 2023 2022 2023 2022 Change in benefit obligation: Obligation at beginning of year $ 293,342 $ 410,053 $ 56,891 $ 75,225 $ 12,577 $ 17,162 Interest cost 16,068 12,506 3,149 2,173 700 489 Participant contributions — — — — 101 92 Actuarial gain ( 13,792 ) ( 114,999 ) ( 1,287 ) ( 14,830 ) ( 383 ) ( 4,062 ) Benefits paid ( 14,884 ) ( 14,218 ) ( 5,240 ) ( 5,677 ) ( 1,145 ) ( 1,204 ) Settlements and other ( 14,389 ) — — — 41 100 Obligation at end of year $ 266,345 $ 293,342 $ 53,513 $ 56,891 $ 11,891 $ 12,577 Change in plan assets: Fair value at beginning of year $ 303,951 $ 409,708 $ — $ — $ — $ — Actual return (loss) on plan assets 465 ( 91,539 ) — — — — Participant contributions — — — — 101 92 Employer contributions — — 5,240 5,677 1,002 1,012 Benefits paid ( 14,884 ) ( 14,218 ) ( 5,240 ) ( 5,677 ) ( 1,145 ) ( 1,204 ) Settlements and other ( 14,389 ) — — — 42 100 Fair value at end of year $ 275,143 $ 303,951 $ — $ — $ — $ — Funded (unfunded) status at end of year $ 8,798 $ 10,609 $ ( 53,513 ) $ ( 56,891 ) $ ( 11,891 ) $ ( 12,577 ) Amounts recognized on the balance sheet: Noncurrent assets $ 8,798 $ 10,609 $ — $ — $ — $ — Current liabilities — — ( 5,138 ) ( 5,213 ) ( 1,072 ) ( 1,081 ) Noncurrent liabilities — — ( 48,375 ) ( 51,678 ) ( 10,819 ) ( 11,496 ) Total asset (liability) recognized $ 8,798 $ 10,609 $ ( 53,513 ) $ ( 56,891 ) $ ( 11,891 ) $ ( 12,577 ) Amounts in AOCI not yet reflected in net periodic benefit cost: Unamortized actuarial loss (gain), net $ 99,871 $ 101,372 $ 13,974 $ 15,979 $ ( 10,232 ) $ ( 10,781 ) Unamortized prior service cost — — 15 34 — — Total $ 99,871 $ 101,372 $ 13,989 $ 16,013 $ ( 10,232 ) $ ( 10,781 ) Other changes in plan assets and benefit obligations recognized in OCI: Net actuarial loss (gain) $ 848 $ ( 5,357 ) $ ( 1,287 ) $ ( 14,830 ) $ ( 383 ) $ ( 4,062 ) Amortization of actuarial (loss) gain ( 2,349 ) ( 2,193 ) ( 718 ) ( 1,666 ) 932 640 Amortization of prior service cost — — ( 19 ) ( 19 ) — — Total recognized in OCI ( 1,501 ) ( 7,550 ) ( 2,024 ) ( 16,515 ) 549 ( 3,422 ) Net periodic benefit (credit) cost 3,312 ( 3,404 ) 3,886 3,858 ( 232 ) ( 151 ) Total recognized in comprehensive income $ 1,811 $ ( 10,954 ) $ 1,862 $ ( 12,657 ) $ 317 $ ( 3,573 ) Amounts in AOCI expected to be amortized in next fiscal net periodic benefit cost: Net actuarial loss (gain) $ 2,403 $ 632 $ ( 914 ) Prior service cost — 14 — Total $ 2,403 $ 646 $ ( 914 ) F-30 Additional year-end pension plan information — The PBO represents the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future pay increases. The accumulated benefit obligation (“ABO”) also reflects the actuarial present value of benefits attributable to employee service rendered to date but does not include the effects of estimated future pay increases. Therefore, the ABO as compared to plan assets is an indication of the assets currently available to fund vested and nonvested benefits accrued through the end of the fiscal year. The funded status is measured as the difference between the fair value of a plan’s assets and its PBO. Since the Qualified Plan is frozen and the SERP has no active participants, the PBO and ABO are equal. As of October 1, 2023 and October 2, 2022, respectively, the Qualified Plan’s ABO was less than the fair value of its plan assets. The SERP is an unfunded plan and, as such, had no plan assets as of October 1, 2023 and October 2, 2022. 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 ): 2023 2022 Qualified Plan: Projected benefit obligation $ 266,345 $ 293,342 Accumulated benefit obligation $ 266,345 $ 293,342 Fair value of plan assets $ 275,143 $ 303,951 SERP: Projected benefit obligation $ 53,513 $ 56,891 Accumulated benefit obligation $ 53,513 $ 56,891 Fair value of plan assets $ — $ — Net periodic benefit cost — The components of the fiscal year net periodic benefit cost were as follows ( in thousands ): 2023 2022 2021 Qualified Plan: Interest cost $ 16,068 $ 12,506 $ 12,558 Expected return on plan assets ( 15,105 ) ( 18,103 ) ( 19,340 ) Actuarial loss 2,349 2,193 3,510 Net periodic benefit (credit) cost $ 3,312 $ ( 3,404 ) $ ( 3,272 ) SERP: Interest cost $ 3,149 $ 2,173 $ 2,169 Actuarial loss 718 1,666 1,743 Amortization of unrecognized prior service cost 19 19 19 Net periodic benefit cost $ 3,886 $ 3,858 $ 3,931 Postretirement health plans: Interest cost $ 700 $ 489 $ 563 Actuarial (gain) loss ( 932 ) ( 640 ) ( 341 ) Net periodic benefit (credit) cost $ ( 232 ) $ ( 151 ) $ 222 Prior service costs are amortized on a straight-line basis from date of participation to full eligibility. Unrecognized gains or losses are amortized using the “corridor approach” under which the net gain or loss in excess of 10% of the greater of the PBO or the market-related value of the assets, if applicable, is amortized. For our Qualified Plan, actuarial losses are amortized over the average future expected lifetime of all participants expected to receive benefits. For our SERP, actuarial losses are amortized over the expected remaining future lifetime for inactive participants, and for our postretirement health plans, actuarial losses are amortized over the expected remaining future lifetime of inactive participants expected to receive benefits. F-31 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 1, 2023, October 2, 2022, and October 3, 2021, we used the following weighted-average assumptions: 2023 2022 2021 Assumptions used to determine benefit obligations (1): Qualified Plan: Discount rate 6.10 % 5.63 % 3.11 % SERP: Discount rate 6.26 % 5.80 % 2.99 % Rate of future pay increases (2) N/A N/A N/A Postretirement health plans: Discount rate 6.27 % 5.82 % 2.95 % Assumptions used to determine net periodic benefit cost (3): Qualified Plan: Discount rate 5.63 % 3.11 % 3.10 % Long-term rate of return on assets 5.10 % 4.50 % 5.40 % SERP: Discount rate 5.80 % 2.99 % 2.84 % Rate of future pay increases (2) N/A N/A N/A Postretirement health plans: Discount rate 5.82 % 2.95 % 2.77 % ________________________ (1) Determined as of end of year. (2) Rate is not applicable as there are no active employees as of fiscal year end 2023, 2022 or 2021. (3) Determined as of beginning of year . The assumed discount rates were determined by considering the average of pension yield curves constructed of a population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better whose cash flow from coupons and maturities match the year-by-year projected benefit payments from the plans. As benefit payments typically extend beyond the date of the longest maturing bond, cash flows beyond 30 years were discounted back to the 30th year and then matched like any other payment. The assumed expected long-term rate of return on assets is the weighted-average rate of earnings expected on the funds invested or to be invested to provide for the pension obligations. The long-term rate of return on assets was determined taking into consideration our projected asset allocation and economic forecasts prepared with the assistance of our actuarial consultants. 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 expected rate of return on assets used were to decrease by 0.25 %, fiscal 2023 earnings before income taxes would have decreased by less than $ 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: 2023 2022 2021 Healthcare cost trend rate for next year: Participants under age 65 6.25 % 6.25 % 6.50 % Participants age 65 or older 6.25 % 5.75 % 6.00 % Rate to which the cost trend rate is assumed to decline: Participants under age 65 4.50 % 4.50 % 4.50 % Participants age 65 or older 4.50 % 4.50 % 4.50 % Year the rate reaches the ultimate trend rate: Participants under age 65 2031 2030 2030 Participants age 65 or older 2031 2028 2028 F-32 The assumed healthcare cost trend rate represents our estimate of the annual rates of change in the costs of the healthcare benefits currently provided by our postretirement plans. The healthcare cost trend rate implicitly considers estimates of healthcare inflation, changes in healthcare utilization and delivery patterns, technological advances and changes in the health status of the plan participants. The healthcare cost trend rate assumption has a significant effect on the amounts reported. Plan assets — Our investment philosophy is to invest assets in a prudent manner to meet the obligation of providing benefits to Plan participants and their beneficiaries in accordance with the time horizon appropriate for the Plan while employing asset diversification to minimize the risk of large losses. Our asset allocation strategy utilizes multiple investment managers in order to maximize the plan’s return while minimizing risk. We regularly monitor our asset allocation, and senior financial management and the Finance Committee of the Board of Directors review performance results quarterly. We continually review our target asset allocation for our Qualified Plan and when changes are made, we reallocate our plan assets over a period of time, as deemed appropriate by senior financial management, to achieve our target asset allocation. Our plan asset allocation at the end of each fiscal 2023 and 2022 and respective target allocations were as follows: 2023 Target Minimum Maximum Cash & cash equivalents 1 % — % — % — % Global equity 11 % 12 % 7 % 17 % Alternative credit 10 % 9 % 4 % 14 % Real assets 10 % 9 % 4 % 14 % Liability-hedging assets 68 % 70 % 60 % 80 % 100 % 100 % 2022 Target Minimum Maximum Cash & cash equivalents 1 % 1 % — % — % Domestic equities 11 % 11 % 5 % 17 % International equities 11 % 11 % 5 % 17 % Core fixed funds 57 % 64 % 57 % 71 % High yield 2 % 2 % — % 5 % Alternative investments 4 % 4 % — % 8 % Real estate 7 % — % — % 5 % Real return bonds 7 % 7 % — % 14 % 100 % 100 % F-33 The Company measures its defined benefit plan assets and obligations as of the month-end date closest to its fiscal year end, which is a practical expedient under FASB authoritative guidance. The fair values of the Qualified Plan’s assets by asset category are as follows ( in thousands ): Total Other (i.e. NAV Assets) (3) Quoted Prices in Active Markets for Identical (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value at September 30, 2023: Cash and cash equivalents (1) $ 3,266 $ — $ — $ 3,266 $ — Equity: Global equity (2) 30,879 30,879 — — — Fixed income: Liability-hedging assets (4) 184,085 77,653 — 106,432 — Alternative credit (5) 28,378 28,378 — — — Real assets (6) 28,535 28,535 — — — $ 275,143 $ 165,445 $ — $ 109,698 $ — Fair Value at September 30, 2022: Cash and cash equivalents (1) $ 2,267 $ — $ — $ 2,267 $ — Equity: U.S. equity (7) 33,659 — 33,659 — — International equity (8) 32,807 16,250 16,557 — — Fixed income: Investment grade (9) 193,426 — 20,138 173,288 — High yield (10) 6,970 — 6,970 — — Alternative investments (11) 12,061 12,061 — — — Real estate (12) 22,761 22,761 — — — $ 303,951 $ 51,072 $ 77,324 $ 175,555 $ — ________________________ (1) Cash and cash equivalents are comprised of commercial paper, short-term bills and notes, and short-term investment funds, which are valued at quoted prices in active markets for similar securities. (2) Global equity is comprised of investments in publicly traded common stocks and other equity-type securities issued by companies throughout the world, including convertible securities, preferred stock, rights and warrants. (3) Certain investments that are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient are not categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. (4) Liability-hedging assets are comprised of investments in fixed income securities or derivatives thereof that are intended to mitigate interest rate risk or reduce the interest rate duration mismatch between the assets and liabilities of the Plan. (5) Alternative credit includes investments in a range of public and private credit securities, including below investment grade rated bonds and loans, securitized credit, and emerging market debt. (6) Real assets are investments in public and private debt and equity investments, including but not limited to real estate, infrastructure, timberland and agriculture/farmland. (7) U.S. equity securities are comprised of investments in common stock of U.S. companies for total return purposes. These investments are valued by the trustee at closing prices from national exchanges on the valuation date. (8) International equity securities are comprised of investments in common stock of companies located outside of the U.S. for total return purposes. These investments are valued by the trustee at closing prices from national exchanges on the valuation date, or the values are adjusted as a result of market movements following the close of local trading using inputs to models that are observable either directly or indirectly. The portion of these investments that are measured at fair value using the net asset value (“NAV”) per share practical expedient can be redeemed on a monthly basis. (9) Investment grade fixed income consists of debt obligations either issued by the U.S. government or have a rating of BBB- / Baa or higher assigned by a major credit rating agency. These investments are valued based on unadjusted quoted market prices (Level 1), or based on quoted prices in inactive markets, or whose values are based on models, but the inputs to those models are observable either directly or indirectly (Level 2). (10) High yield fixed income consists primarily of debt obligations that have a rating of below BBB- / Baa or lower assigned by a major credit rating agency. These investments are valued based on unadjusted quoted market prices. (11) Alternative investments consist primarily of an investment in asset classes other than stocks, bonds, and cash. Alternative investments can include commodities, hedge funds, private equity, managed futures, and derivatives. These investments are valued based on unadjusted quoted market prices and can be redeemed on a bi-monthly basis. (12) Real estate includes investments in a real estate collective trust for purposes of total return. These investments are valued based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These investments can be redeemed on a quarterly basis. F-34 Future cash flows — Our policy is to fund our plans at or above the minimum required by law. As of the date of our last actuarial funding valuation, there was no minimum requirement. We do not anticipate making any contributions to our Qualified Plan in fiscal 2024. Contributions expected to be paid in the next fiscal year, the projected benefit payments for each of the next five fiscal years, and the total aggregate amount for the subsequent five fiscal years are as follows ( in thousands ): Defined Benefit Plans Postretirement Health Plans Estimated net contributions during fiscal 2024 $ 5,138 $ 1,105 Estimated future year benefit payments during fiscal years: 2024 $ 20,353 $ 1,105 2025 $ 20,536 $ 1,122 2026 $ 20,888 $ 1,133 2027 $ 21,304 $ 1,138 2028 $ 21,708 $ 1,133 2029-2033 $ 113,833 $ 5,346 We will continue to evaluate contributions to our Qualified Plan based on changes in pension assets as a result of asset performance in the current market and economic environment. Expected benefit payments are based on the same assumptions used to measure our benefit obligations at October 1, 2023 and include estimated future employee service, if applicable. 13. SHARE-BASED EMPLOYEE COMPENSATION Stock incentive plans — We offer share-based compensation plans to attract, retain, and motivate key officers, employees, and non-employee directors to work toward the financial success of the Company. Our stock incentive plans are administered by the Compensation Committee of the Board of Directors and have been approved by the stockholders of the Company. The terms and conditions of our share-based awards are determined by the Compensation Committee for each award date and may include provisions for the exercise price, expirations, vesting, restriction on sales, and forfeitures, as applicable. We issue new shares to satisfy stock issuances under our stock incentive plans. Our Amended and Restated 2004 Stock Incentive Plan (“Prior Plan”) authorized the issuance of up to 11,600,000 common shares in connection with the granting of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, or performance units to our employees and directors. As of January 1, 2023, no additional awards were granted under the Prior Plan. Our Jack in the Box Inc. 2023 Omnibus Incentive Plan (“Plan”) authorizes the issuance of up to 2,500,000 common shares plus Prior Plan returning shares in connection with outstanding awards as of January 6, 2023 that on or following such date are not issued, settled in cash, or fail to vest. The Plan is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company, and provide a means by which such persons may benefit from increases in value of the common stock. The Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, or performance stock awards, to our employees and directors. There were 2,454,425 shares of common stock available for future issuance under this plan as of October 1, 2023. 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. The deferred amounts are converted to stock equivalents. The plan requires settlement in shares of our common stock based on the number of stock equivalents and dividend equivalents at the time of a participant’s separation from the Board of Directors. This plan provides for the issuance of up to 350,000 shares of common stock in connection with the crediting of stock equivalents. There were 142,918 shares of common stock available for future issuance under this plan as of October 1, 2023. F-35 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 ): 2023 2022 2021 Nonvested restricted stock units $ 7,598 $ 4,544 $ 2,969 Stock options 4 19 25 Performance share awards 3,195 1,835 830 Nonvested restricted stock awards 166 434 — Non-management directors’ deferred compensation 242 290 224 Total share-based compensation expense $ 11,205 $ 7,122 $ 4,048 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 or three years , 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 the multiple of base salary stock ownership is met. There were 38,772 RSU’s vesting over four years , and 54,561 RSU’s vesting over three years outstanding as of October 1, 2023. RSUs issued to non-management directors vest 12 months from the date of grant, or upon termination of board service, including RSUs for which the director elected to defer receipt until termination of board service, and totaled 83,251 units outstanding as of October 1, 2023. RSUs issued to certain other employees either cliff vest or vest ratably over three years and totaled 151,952 units outstanding as of October 1, 2023. These awards are amortized to compensation expense over the estimated vesting period based upon the fair value of our common stock on the award date discounted by the present value of the expected dividend stream over the vesting period. The following is a summary of RSU activity for fiscal 2023: Shares Weighted- Average Grant Date Fair Value RSUs outstanding at October 2, 2022 236,606 $ 75.98 Granted 186,938 $ 68.56 Released ( 55,919 ) $ 81.97 Forfeited ( 39,089 ) $ 74.01 RSUs outstanding at October 1, 2023 328,536 $ 70.97 As of October 1, 2023, there was approximately $ 11.8 million of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 1.9 years. The weighted-average grant date fair value of awards granted was $ 68.56 , $ 78.28 , and $ 95.44 in fiscal years 2023, 2022, and 2021, respectively. In fiscal years 2023, 2022, and 2021, the total fair value of RSUs that vested and were released was $ 4.6 million, $ 2.5 million, and $ 4.3 million, respectively. Stock options — Option grants have contractual terms of seven years and employee options vest over a three-year period. Options may vest sooner upon retirement from the Company for employees meeting certain age and years of service thresholds. All option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant. The following is a summary of stock option activity for fiscal 2023: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands) Options outstanding at October 2, 2022 32,450 $ 92.80 Exercised ( 3,500 ) $ 75.23 Options outstanding at October 1, 2023 28,950 $ 94.92 1.11 $ — Options exercisable at October 1, 2023 28,950 $ 94.92 1.11 $ — The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on October 1, 2023 exceeds the weighted-average exercise price. F-36 We use a valuation model to determine the fair value of options granted that requires the input of highly subjective assumptions, including the expected volatility of the stock price. No stock option awards were granted in fiscal 2023, 2022, or 2021. As of October 1, 2023, there was no unrecognized compensation cost related to stock options grants. The total intrinsic value of stock options exercised was less than $ 0.1 million in fiscal years 2023 and 2022, respectively, and was $ 1.6 million in fiscal year 2021. 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. Performance share awards issued to executives vest at the end of a three-year period and vested amounts may range from 0 % to a maximum of 150 % of targeted amounts depending on the achievement of performance measures at the end of a three-year period. If the awardee ceases to be employed by the Company prior to the last day of the performance period due to retirement, disability, or death, the performance share awards become vested pro-rata based on the number of full accounting periods the awardee was continuously employed by the Company during the performance period. The expected cost of the shares is based on the fair value of our stock on the date of grant and is reflected over the vesting period with a reduction for estimated forfeitures. These awards may be settled in cash or shares of common stock at the election of the Company on the date of grant. It is our intent to settle these awards with shares of common stock. The following is a summary of performance share award activity for fiscal 2023: Shares Weighted- Average Grant Date Fair Value Performance share awards outstanding at October 2, 2022 65,382 $ 79.14 Granted 56,466 $ 65.74 Issued ( 1,126 ) $ 70.56 Forfeited ( 13,548 ) $ 77.54 Performance share awards outstanding at October 1, 2023 107,174 $ 72.51 As of October 1, 2023, there was approximately $ 3.2 million of total unrecognized compensation cost related to performance share awards, which is expected to be recognized over a weighted-average period of 1.8 years. The weighted-average grant date fair value of awards granted was $ 65.74 , $ 78.95 , and $ 88.88 in fiscal years 2023, 2022, and 2021, respectively. The total fair value of awards that became fully vested during fiscal years 2023, 2022, and 2021 was $ 1.8 million, $ 0.1 million, and $ 0.6 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 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. 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 following is a summary of nonvested restricted stock awards for fiscal 2023: Shares Weighted- Average Grant Date Fair Value Restricted stock awards outstanding at October 2, 2022 4,670 $ 82.33 Issued ( 4,670 ) $ 82.33 Restricted stock awards outstanding at October 1, 2023 — $ — As of October 1, 2023, there was no unrecognized compensation cost related to nonvested stock awards. The total fair value of awards that vested and were released during fiscal years 2023 and 2022, was $ 0.4 million and $ 0.7 million, respectively. F-37 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. During fiscal 2023, 2022, and 2021, no shares of common stock were issued in connection with director retirements. The following is a summary of the stock equivalent activity for fiscal 2023: Stock Equivalents Weighted- Average Grant Date Fair Value Stock equivalents outstanding at October 2, 2022 116,274 $ 45.28 Deferred directors’ compensation 3,072 $ 81.38 Dividend equivalents 3,635 $ 78.51 Stock equivalents outstanding at October 1, 2023 122,981 $ 47.16 14. STOCKHOLDERS’ DEFICIT Repurchases of common stock — In fiscal 2023, the Company purchased 1.1 million shares of its common stock for an aggregate cost of $ 90.7 million, including applicable excise tax. As of October 1, 2023, there was $ 85.0 million remaining amount under share repurchase programs authorized by the Board of Directors which expired on November 20, 2023. Dividends — In fiscal 2023, the Board of Directors declared four cash dividends of $ 0.44 , respectively, totaling $ 36.2 million. Future dividends are subject to approval by our Board of Directors. 15. AVERAGE SHARES OUTSTANDING Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive common shares include nonvested stock awards and units, stock options, and non-management director stock equivalents. Performance share awards are included in the average diluted shares outstanding each period if the performance criteria have been met at the end of the respective periods. The following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding in each fiscal year ( in thousands ): 2023 2022 2021 Weighted-average shares outstanding — basic 20,603 21,195 22,402 Effect of potentially dilutive securities: Nonvested stock awards and units 134 47 62 Stock options 1 1 9 Performance share awards 26 2 5 Weighted-average shares outstanding — diluted 20,764 21,245 22,478 Excluded from diluted weighted-average shares outstanding: Antidilutive 25 23 29 Performance conditions not satisfied at the end of the period 81 61 25 16. COMMITMENTS AND CONTINGENCIES Purchase commitments — Jack in the Box and Del Taco have long-term food and beverage supply agreements with certain major vendors, which provide food and fountain drink products and marketing support funding to the Company and its franchisees. These agreements require minimum purchases by the Company and its franchisees at agreed upon prices until the total volume commitments have been reached. Based on current pricing and ratio of usage at company-operated to franchised restaurants as of October 1, 2023, total food and beverage purchase requirements under these agreements is estimated to be approximately $ 131.9 million over the next five 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 $ 16.3 million over the next five years . F-38 Legal matters — The Company assesses contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of October 1, 2023, the Company had accruals of $ 40.9 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. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures. The ultimate amount of loss may differ from these estimates. Any estimate is not an indication of expected loss, if any, or of the Company’s maximum possible loss exposure and the ultimate amount of loss may differ materially from these estimates in the near term. Gessele v. Jack in the Box Inc. — In August 2010, five former Jack in the Box employees instituted litigation in federal court in Oregon alleging claims under the federal Fair Labor Standards Act and Oregon wage and hour laws. The plaintiffs alleged that Jack in the Box failed to pay non-exempt employees for certain meal breaks and improperly made payroll deductions for shoe purchases and for workers’ compensation expenses, and later added additional claims relating to timing of final pay and related wage and hour claims involving employees of a franchisee. In 2016, the court dismissed the federal claims and those relating to franchise employees. In June 2017, the court granted class certification with respect to state law claims of improper deductions and late payment of final wages. The parties participated in a voluntary mediation on March 16, 2020, but the matter did not settle. On October 24, 2022, a jury awarded plaintiffs approximately $ 6.4 million in damages and penalties. The Company continues to dispute liability and the damage award and will defend against both through post-trial motions and all other available appellate remedies. As of October 1, 2023, the Company has accrued the verdict amount above, as well as pre-judgment and post-judgement interest and an estimated fee award, for an additional $ 8.3 million. These amounts are included within “Accrued liabilities” on our consolidated balance sheet as of October 1, 2023. The Company will continue to accrue for post-judgment interest until the matter is resolved. 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. On August 8, 2023, the court issued its final approval of the settlement and on August 9, 2023 final judgement was entered. The Company made its first payment of half of the settlement amount on August 28, 2023. Payment of the second half is due on November 27, 2023. As of October 1, 2023, the Company has accrued the remaining settlement amount of $ 25.5 million, which included within “Accrued liabilities” on its consolidated balance sheet. J&D Restaurant Group — On April 17, 2019, the trustee for a bankrupt former franchisee filed a complaint generally alleging the Company wrongfully terminated the franchise agreements and unreasonably denied two perspective purchasers the former franchisee presented. The parties participated in a mediation in April 2021, and again in December 2022, but the matter did not settle. Trial commenced on January 9, 2023. On February 8, 2023, the jury returned a verdict finding the Company had not breached any contracts in terminating the franchise agreements or denying the proposed buyers. However, while the jury also found the Company had not violated the California Unfair Practices Act, it found for the plaintiff on the claim for breach of implied covenant of good faith and fair dealing, and awarded $ 8.0 million in damages. On May 9, 2023, the court granted the Company’s post-trial motion, overturning the jury verdict and ordering the plaintiff take nothing on its claims. As a result, the Company reversed the prior $ 8.0 million accrual, and as of October 1, 2023, the Company has no amounts accrued for this case on its consolidated balance sheet. The Plaintiff has appealed the trial court’s post-trial rulings. 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. Some of these matters may be covered, at least in part, by insurance or other third-party indemnity obligation. We record receivables from third party insurers when recovery has been determined to be probable. F-39 Lease guarantees — We remain contingently liable for certain leases relating to our former Qdoba business which we sold in fiscal 2018. Under the Qdoba Purchase Agreement, the buyer has indemnified the Company of all claims related to these guarantees. As of October 1, 2023, the maximum potential liability of future undiscounted payments under these leases is approximately $ 21.7 million. The lease terms extend for a maximum of approximately 14 more years and we would remain a guarantor of the leases in the event the leases are extended for any established renewal periods. In the event of default, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer. The Company has not recorded a liability for these guarantees as we believe the likelihood of making any future payments is remote. 17. SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION (in thousands) 2023 2022 2021 Cash paid during the year for: Income tax payments $ 17,811 $ 33,819 $ 48,200 Interest payments $ 78,958 $ 70,475 $ 60,413 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 $ 285 $ 275 $ 232 Consideration for franchise acquisitions $ — $ 297 $ 1,305 Increase in obligations for purchases of property and equipment $ 3,731 $ 1,637 $ 1,755 F-40 18. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION (in thousands) October 1, 2023 October 2, 2022 Accounts and other receivables, net: Trade $ 93,660 $ 90,105 Notes receivable, current portion 2,262 8,643 Income tax receivable 949 878 Other 6,953 10,152 Allowance for doubtful accounts ( 4,146 ) ( 5,975 ) $ 99,678 $ 103,803 Other assets, net: Company-owned life insurance policies $ 113,205 $ 108,924 Franchise tenant improvement allowances 43,590 32,429 Deferred rent receivable 41,947 43,891 Notes receivable, less current portion 11,927 11,624 Other 30,038 29,701 $ 240,707 $ 226,569 Accrued liabilities: Income tax liabilities $ 58,155 $ 6,338 Payroll and related taxes 49,521 43,837 Legal accruals 40,877 59,165 Insurance 31,349 32,272 Sales and property taxes 30,508 30,947 Deferred rent income 19,397 18,525 Advertising 15,597 11,028 Deferred franchise fees and development fees 5,952 5,647 Other 50,822 46,173 $ 302,178 $ 253,932 Other long-term liabilities: Defined benefit pension plans $ 48,375 $ 51,679 Deferred franchise and development fees 44,522 40,802 Other 50,226 42,213 $ 143,123 $ 134,694 19. SUBSEQUENT EVENTS On November 16, 2023, the Board of Directors declared a cash dividend of $ 0.44 per share, to be paid on December 28, 2023 to shareholders of record as of the close of business on December 14, 2023. Future dividends will be subject to approval by our Board of Directors. On November 16, 2023, the Board of Directors authorized a share repurchase program for up to $ 250.0 million of the Company’s common stock. The size and timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors. The share repurchase program has no expiration date and may be modified, suspended or discontinued at any time. F-41