What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-11-21 compared with 2023-11-21 · 104 added, 101 removed, 248 unchanged (45% of the section changed)

1 unchanged sentence

For an understanding of the significant factors that influenced our performance during the fiscal year, we believe our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related notes included in this annual report as indexed on page F-1.

Comparisons under this heading refer to the 52-week periods ended October 1, 2023 and October 2, 2022, respectively.

A comparison of our results of operations and cash flows for fiscal 2022 compared to fiscal 2021 can be found under Part II, “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended October 2, 2022.

Comparisons under this heading refer to the 52-week periods ended September 29, 2024 and October 1, 2023, respectively.

Our MD&A consists of the following sections:

14 unchanged sentences

Same-store sales, system restaurant sales, franchised restaurant sales and AUVs are not measurements determined in accordance with GAAP and should not be considered in isolation, or as an alternative to earnings from operations, or other similarly titled measures of other companies.

A comparison of our results of operations and cash flows for fiscal 2023 compared to fiscal 2022 can be found under Part II, “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended October 1, 2023.

Founded in 1951, Jack in the Box Inc.

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

As of October 1, 2023, we operated and franchised 2,186 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Guam.

As of September 29, 2024, we operated and franchised 2,191 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Mexico and two in Guam.

On March 8, 2022, we completed the acquisition of Del Taco Restaurants, Inc.

(“Del Taco”), the nation’s second largest Mexican quick service restaurant chain by number of restaurants and as of October 1, 2023 has 592 restaurants across 16 states.

(“Del Taco”).

Founded in 1964, Del Taco offers a unique variety of both Mexican and American favorites such as burritos and fries.

Del Taco is the nation’s second largest Mexican quick service restaurant chain by number of restaurants and as of September 29, 2024 has 594 restaurants across 17 states.

We derive revenue from retail sales at company-operated restaurants and rental revenue, royalties (based upon a percent of sales), franchise fees and contributions for advertising and other services from franchisees.

Refranchising of Del Taco

In fiscal year 2023, we embarked on our refranchising strategy with three main intentions.

In fiscal year 2024, we continued on our refranchising strategy with three main intentions.

First, to create a company-wide asset-light model that will benefit from mitigating exposure to macroeconomic pressures;

9 unchanged sentences

System (1.3) % 7.3 %

2023 2022 (1)

Company (1.3) % 2.0 %

1 unchanged sentence

System (1.5) % 1.7 %

________________________

(1) Fiscal 2022 full year same store sales figures are shown for information purposes only.

The following tables summarize changes in the number and mix of company and franchise restaurants for our two brands:

2 unchanged sentences

Beginning of year 142 2,044 2,186 146 2,035 2,181

New 2 18 20 — 17 17

Acquired from franchisees — — — 13 (13) —

8 22 30 2 18 20

Refranchised — — — (5) 5 —

2 unchanged sentences

% of system 7 % 93 % 100 % 6 % 94 % 100 %

2023 2022 (1)

Company Franchise Total Company Franchise Total

1 unchanged sentence

New 3 11 14 — 14 14

Acquired from franchisees 10 (10) — — — —

Refranchised (47) 47 — (111) 111 —

3 unchanged sentences

________________________

(1) Fiscal 2022 full year restaurant activity figures are shown for information purposes only.

(1) The restaurant count includes 6 cloud kitchens as of the end of fiscal year 2024.

The following tables summarize restaurant sales for company-operated, franchised, and systemwide sales for our two brands ( in thousands ):

2 unchanged sentences

Franchised restaurant sales (1)

3,969,200 4,005,985

Systemwide sales (1)

2 unchanged sentences

Franchised restaurant sales (1)

674,804 541,913

Systemwide sales (1)

$ 956,782 $ 974,443

________________________

(1) Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees.

3 unchanged sentences

We believe franchised and systemwide sales information is useful to investors as they have a direct effect on the Company's profitability.

(2) Fiscal 2022 full year systemwide sales figures are shown for information purposes only.

Jack in the Box Brand

6 unchanged sentences

Occupancy and other $ 73,735 17.3 % $ 69,215 16.7 %

Company restaurant sales decreased $0.5 million, or 0.1%, in 2023 as compared with the prior year due to a decrease in the average number of restaurants, partially offset by an increase in traffic and average check.

Company restaurant sales increased $13.3 million, or 3.2%, in 2024 as compared with the prior year due to an increase in the average number of restaurants, as well as an increase in average check.

The following table presents the approximate impact of these items on company restaurant sales in 2024 ( in millions ):

AUV increase $ 0.9

Decrease in the average number of restaurants (32.9)

Increase in the average number of restaurants 12.3

Total change in company restaurant sales $ 13.3

Same-store sales at company-operated restaurants increased 8.8% in 2023 compared to a year ago.

Same-store sales at company-operated restaurants remained the same in 2024 compared to a year ago.

The following table summarizes the changes in company-operated same-store sales:

4 unchanged sentences

(1) Includes price increases of 7.4% in 2024.

Food and packaging costs, as a percentage of company restaurant sales, decreased to 31.6% in 2023 from 32.3% a year ago, primarily due to a 2.4% impact from pricing leverage and 0.6% from favorable menu item mix, partially offset by 2.3% from commodity inflation.

Commodity costs increased in the current fiscal year by approximately 8.4%.

The inflation we have experienced is across all categories with the greatest impact seen in potatoes, produce, sauces, and beverages.

Payroll and employee benefit costs, as a percentage of company restaurant sales, decreased to 30.8% in 2023 compared with 33.3% a year ago primarily due to a change in the mix of restaurants and sales leverage, partially offset by labor inflation of approximately 5.8% in the current fiscal year.

For fiscal 2024, we expect annual wage inflation to be approximately 10% to 12% compared with fiscal 2023.

New regulations, such as AB 1228, which goes into effect April 2024, are expected to increase labor costs, especially considering our concentration of restaurants in California.

Occupancy and other costs, as a percentage of company restaurant sales, decreased to 16.7% in 2023 from 17.9% a year ago primarily due to sales leverage and a change in the mix of restaurants, partially offset by higher other operating costs including utilities, delivery fees and security.

Food and packaging costs, as a percentage of company restaurant sales, decreased to 29.5% in 2024 from 31.6% a year ago, primarily due to a 2.0% impact from pricing leverage and 0.2% from commodity deflation, partially offset by 0.2% unfavorable menu item mix.

Commodity costs decreased in the current fiscal year by approximately 0.7%.

The greatest impacts were seen in produce, beef, and poultry.

Payroll and employee benefit costs, as a percentage of company restaurant sales, increased to 31.5% in 2024 compared with 30.8% a year ago primarily due to a 0.7% impact from wage inflation of approximately 6.9%, and an increase in group insurance, which were partially offset by a decrease in incentive compensation.

New regulations, such as AB 1228, which went into effect April 2024, have raised labor costs, particularly given our high concentration of restaurants in California.

Occupancy and other costs, as a percentage of company restaurant sales, increased to 17.3% in 2024 from 16.7% a year ago primarily due to higher security costs, credit card fees and other operating costs, partially offset by lower maintenance and repair.

Jack in the Box Franchise Operations

16 unchanged sentences

________________________

(1) Excluding the impact of the $7.3 million termination fee in the first quarter of the current year, royalties as a percentage of total franchised restaurant sales would be 5.0% year-to-date for the period ended October 1, 2023.

Franchise rental revenues increased $15.3 million, or 4.6%, in 2023 compared to the prior year, primarily due to an increase in percentage rent of $10.6 million, driven by higher sales, and higher minimum rent of $4.8 million.

Franchise royalties and other increased $11.1 million, or 5.5%, mainly in connection with higher franchise restaurant sales driving royalties higher by approximately $10.7 million.

Additionally, a $7.3 million termination fee paid by a franchise operator who sold his restaurants to a new franchisee in the current year also contributed to the increase.

These increases were partially offset by a decrease in early termination fees of $6.5 million as compared to the prior year.

Franchise contributions for advertising and other services increased $18.2 million, or 9.2%, primarily due to higher marketing contributions of $16.8 million in connection with higher franchise same store sales of 7.1%.

Franchise occupancy expenses, primarily rent, increased $5.2 million, or 2.5% in 2023, primarily due to higher operating lease costs.

Franchise support and other costs decreased $5.6 million, or 35.5% in 2023, mainly in connection with lower bad debt expense of $6.6 million as a result of rolling over bad debt expense associated with two specific franchise matters last year.

Franchise advertising and other service expenses increased $21.7 million, or 10.5% in 2023 primarily due to higher marketing contributions resulting from an increase in franchise sales.

(1) Excluding the impact of the $7.3 million termination fee in the first quarter of the prior year, royalties as a percentage of total franchised restaurant sales would be 5.0% for the fiscal year ended October 1, 2023.

Franchise rental revenues decreased $4.1 million, or 1.2%, in 2024 compared to the prior year, primarily due to a decrease in percentage rent of $8.5 million, driven by lower sales, partially offset by increases in minimum rent of $3.3 million and an increase of $2.5 million related to franchise lease terminations.

Franchise royalties and other decreased $8.9 million, or 4.2%, mainly in connection with a $7.3 million termination fee paid by a franchise operator who sold his restaurants to a new franchisee in the prior year, as well as lower royalty income driven by lower sales.

Franchise contributions for advertising and other services increased $1.8 million, or 0.8%, primarily due to increases in digital and technology fees of $3.5 million, partially offset by lower marketing contributions of $2.0 million in connection with lower franchise same store sales of 1.5%.

Franchise occupancy expenses, mainly rent, increased $1.0 million, or 0.5% in 2024, primarily due to higher operating lease costs.

Franchise support and other costs increased $2.7 million, or 26.4% in 2024, mainly related to a $2.0 million increase in bad debt expense due to a rollover of a bad debt reversal in the prior year, as well as higher operating costs in connection with digital fees and brand standard audits.

Franchise advertising and other service expenses decreased $2.4 million, or 1.1% in 2024 primarily due to lower marketing contributions resulting from a decrease in franchise sales.

Del Taco Brand

Jack in the Box Inc.

acquired Del Taco on March 8, 2022.

Fiscal 2022 results include approximately 30 weeks of operating results compared with 52 weeks in fiscal 2023.

Company Restaurant Operations

5 unchanged sentences

Occupancy and other $ 65,569 23.3 % $ 94,057 21.7 %

Company restaurant sales increased $145.7 million or 50.8%, in 2023 as compared with the prior year primarily due to 52 weeks of operating results in 2023 versus 30 weeks last year and an increase in average check, partially offset by a decrease in sales in connection with current year refranchising activity and a decline in transactions.

Company restaurant sales decreased $150.6 million or 34.8%, in 2024 as compared with the prior year primarily due to the refranchising of 47 company-operated restaurants and the closing of 4 company-operated restaurants in fiscal 2024, as well as a decrease in same store sales compared to the prior year.

The following table presents the approximate impact of these items on company restaurant sales ( in millions ):

Increase in number of operating weeks $ 158.9

AUV increase 0.4

AUV decrease $ (6.1)

Decrease in the average number of restaurants (144.1)

Total change in company restaurant sales $ (150.6)

Same-store sales at company-operated restaurants increased 2.0% in 2023 compared to a year ago.

Same-store sales at company-operated restaurants decreased 1.3% in 2024 compared to a year ago.

The following table summarizes the increases (decreases) in company-operated same-store sales:

4 unchanged sentences

(1) Includes price increases of approximately 7.3% in 2024.

Food and packaging costs, as a percentage of company restaurant sales, decreased to 27.7% in 2023 from 28.8% a year ago primarily due to a 2.5% benefit from pricing leverage, partially offset by 1.6% from commodity inflation.

Food and packaging costs, as a percentage of company restaurant sales, decreased to 26.0% in 2024 from 27.7% a year ago primarily due to a 1.9% benefit from pricing leverage.

Commodity costs inflation was 0.2% in 2024.

The largest sources of inflation in the current year were due to tortillas, shells and potatoes, and was partially offset by favorability in chicken, cheese and produce.

Payroll and employee benefit costs, as a percentage of company restaurant sales, increased to 34.0% in 2023 compared with 32.8% a year ago primarily due to labor inflation.

The largest sources of inflation in the current year were due to dairy and beverages, and was partially offset by favorability in pork, oil, eggs and cheese.

Payroll and employee benefit costs, as a percentage of company restaurant sales, increased to 36.7% in 2024 compared with 34.0% a year ago primarily due to a 2.2% impact from labor inflation.

Labor inflation was 9.7% in the current year.

For fiscal 2024, we expect annual wage inflation to be approximately 10% to 12% compared with fiscal 2023.

Additional regulations, such as AB 1228, which will go into effect April 2024, are expected to increase labor costs for employees, especially considering our concentration of restaurants in California.

Occupancy and other costs, as a percentage of company restaurant sales, increased to 21.7% in 2023 from 21.4% a year ago primarily due to higher operating expenses including utilities, rent, insurance, and delivery fees, partially offset by pricing leverage.

Additional regulations, such as AB 1228, which went into effect April 2024, have raised labor costs, particularly given our high concentration of restaurants in California.

Occupancy and other costs, as a percentage of company restaurant sales, increased to 23.3% in 2024 from 21.7% a year ago primarily due to higher rent and operating expenses including utilities and information technology costs, partially offset by a change in the mix of restaurants due to refranchising.

Del Taco Franchise Operations

11 unchanged sentences

Franchise costs as a percentage of total franchise revenues 72.0 % 63.7 %

Number of franchise restaurants at end of period 421 301

Average number of franchise restaurants 429 344

Franchised restaurant sales $ 674,804 $ 541,913

1 unchanged sentence

Royalties as a percentage of total franchised restaurant sales 4.7 % 4.7 %

Franchise rental revenues increased $8.9 million, or 198.7% in 2023 compared to the prior year, primarily due to higher rental income of $5.1 million resulting from new subleases in connection with the 111 restaurants refranchised in 2023, as well as prior year only including 30 weeks of operating results versus 52 weeks in 2023.

Franchise royalties and other increased $12.6 million, or 92.7% in 2023 compared to the prior year, primarily due to the increase in operating weeks, as well as $2.9 million related to the increase in the number of franchise restaurants due to our refranchising strategy.

Franchise contributions for advertising and other services revenues increased $12.9 million, or 108.0% in 2023 compared to the prior year, primarily due to the increase in operating weeks, as well as $2.6 million related to the increase in the number of franchise restaurants due to our refranchising strategy.

Franchise occupancy expenses, primarily rent, increased $8.8 million, or 202.4% in 2023 compared to the prior year, primarily due higher franchise rent expense of $5.1 million related to the restaurants refranchised in 2023, as well as the increase in operating weeks.

Franchise support and other costs increased $1.4 million, or 160.3% in 2023 compared to the prior year, primarily due to the increase in operating weeks.

Franchise advertising and other service expenses increased $13.6 million, or 112.4% in 2023 compared to the prior year, primarily due to the increase in operating weeks, as well as higher marketing contributions of $2.4 million related to the increase in the number of franchise restaurants due to our refranchising strategy.

Franchise rental revenues increased $14.9 million, or 111.9% in 2024 compared to the prior year, primarily due to higher rental income of $11.0 million resulting from new subleases related to the 142 restaurants refranchised since the second quarter of 2023 and the 11 franchise-operated restaurants opened in fiscal 2024.

Franchise royalties and other increased $6.6 million, or 25.0% in 2024 compared to the prior year, primarily due to higher franchise restaurant sales resulting from the 142 restaurants refranchised since the second quarter of 2023 and the 11 franchise-operated restaurants opened in fiscal 2024.

Franchise contributions for advertising and other services revenues increased $6.0 million, or 24.0% in 2024 compared to the prior year, primarily due to higher marketing contributions related to higher franchise restaurant sales resulting from the 142 restaurants refranchised since the second quarter of 2023 and the 11 franchise-operated restaurants opened in fiscal 2024.

Franchise occupancy expenses, primarily rent, increased $14.8 million, or 112.5% in 2024 compared to the prior year, primarily due to higher rent related to franchise subleases for the 142 restaurants refranchised since the second quarter of 2023 and the 11 franchise-operated restaurants opened in fiscal 2024.

Franchise support and other costs increased $2.3 million, or 101.5% in 2024 compared to the prior year, primarily due to higher franchise development support costs, as well as additional overhead costs.

Franchise advertising and other service expenses increased $8.0 million, or 31.2% in 2024 compared to the prior year, primarily due to higher franchise restaurant sales resulting from the 142 restaurants refranchised since the second quarter of 2023 and the 11 franchise-operated restaurants opened in fiscal 2024.

Company-Wide Results

Depreciation and Amortization

Depreciation and amortization increased $6.2 million in 2023 as compared with the prior year, primarily due to the timing of the acquisition of Del Taco in the second quarter of 2022 resulting in an increase of $10.1 million, partially offset by a decrease in Jack in the Box franchise assets depreciation of $3.9 million as these assets become fully depreciated.

Depreciation and amortization decreased $2.5 million in 2024 as compared with the prior year.

The decreases in depreciation are primarily due to the refranchising of Del Taco restaurants since the prior year, as well as certain Jack in the Box franchise assets becoming fully depreciated.

These decreases were partially offset by increases for new technology assets and new company restaurant openings.

Selling, General and Administrative (“SG&A”) Expenses

The following table presents the amounts for each fiscal period as well as the increase (decrease) in SG&A expenses in 2023 compared with the prior year ( in thousands ):

The following table presents the amounts for SG&A expenses in each fiscal year ( in thousands ):

Advertising $ 34,992 $ 38,753

Incentive compensation (including share-based compensation and related payroll taxes) 31,756 14,014

Share-based compensation 13,471 11,205

Incentive compensation 9,911 20,283

Cash surrender value of COLI policies, net (14,390) (5,953)

4 unchanged sentences

Advertising costs represent company contributions to our marketing funds and are generally determined as a percentage of company-operated restaurant sales.

Advertising costs increased $6.2 million compared to the prior year primarily due to the increase in Del Taco operating weeks from 30 to 52 in the current year.

Incentive compensation increased by $17.7 million in 2023 primarily due to a $13.7 million increase from higher achievement levels compared to the prior year for the Company’s annual incentive plan, as well as an increase in stock-based compensation of $4.1 million due to a higher number of executive stock awards outstanding compared to the prior year.

Advertising costs decreased $3.8 million compared to the prior year primarily due to a decrease in company-operated restaurant sales in the current year which was primarily driven by Del Taco refranchising.

Share-based compensation in 2024 increased by $2.3 million compared to the prior year primarily due to a higher number of executive stock awards outstanding compared to the prior year.

Incentive compensation in 2024 decreased by $10.4 million compared to the prior year primarily due to lower achievement levels compared to the prior year for the Company’s annual incentive plan.

The cash surrender value of our Company-owned life insurance (“COLI”) policies, net of changes in our non-qualified deferred compensation obligation supported by these policies, are subject to market fluctuations.

The changes in market values had a negative impact of $15.9 million versus the prior year.

Litigation matters increased by $8.0 million in 2023 primarily due to litigation developments mainly in connection with one litigation matter in the current year, and rolling over a $2.6 million favorable settlement received in the prior year.

The changes in market values had a favorable impact of $8.4 million as compared to the prior year.

Litigation matters in 2024 decreased by $5.2 million as compared to the prior year due to the timing of litigation developments in each fiscal year.

In fiscal 2023, we recorded litigation charges of $8.3 million for Gessele vs.

1 unchanged sentence

Refer to Note 16, Commitments and Contingencies , of the notes to the consolidated financial statements for additional information.

Insurance costs increased $3.9 million in 2023 versus the prior year primarily due to more favorable trends in the prior year related to expected losses associated with workers’ compensation claims.

The increase in other is primarily due to the timing of the Del Taco acquisition in the second quarter of 2022 and therefore prior year only included 30 weeks of operating results versus 52 weeks in 2023.

Other Operating Expense (Income), Net

Other operating expense (income), net is comprised of the following ( in thousands ):

Acquisition, integration and strategic initiatives 9,112 20,081

Insurance costs in 2024 decreased $2.8 million as compared to the prior year primarily due to positive development factors related to workers compensation and general liability claims.

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.

Goodwill Impairment

During the third quarter of 2024, the Company identified triggering events that indicated the goodwill allocated to the Del Taco reporting unit might be impaired.

The triggering events related to i) a recent negative trend in Del Taco same store sales, ii) lower margins due in part to lower sales and wage increases required in California effective April 1, 2024 under AB 1228 and iii) unfavorable changes in the economic environment specifically impacting our industry, including inflation and interest rates.

As a result, the Company performed a quantitative test over the Del Taco reporting unit, noting that the fair value of the reporting unit was less than the carrying value, which resulted in an impairment of goodwill of $162.6 million.

Other Operating Expense, Net

Other operating expense, net is comprised of the following ( in thousands ):

Integration and strategic initiatives $ 15,631 $ 9,112

Costs of closed restaurants and other 2,975 4,786

1 unchanged sentence

Accelerated depreciation 699 541

Gains on disposition of property and equipment, net $ (8,171) $ (30,533)

Other operating expense (income), net

Gains on acquisition of restaurants (2,702) —

Losses (gains) on disposition of property and equipment, net 185 (8,171)

Other operating expense, net

$ 24,796 $ 10,837

Other operating expense (income), net increased $9.9 million in 2023 versus the prior year primarily due to the lower gains on disposition of property and equipment of $22.4 million in connection with the sale of restaurant properties to franchisees, partially offset by a decrease in Del Taco acquisition and integration costs.

Refer to Note 9, Other Operating Expense (Income), Net, of the notes to the consolidated financial statements for additional information.

Other operating expense, net increased $14.0 million in 2024 versus the prior year primarily due to the decrease in gains on disposition of property and equipment of $8.4 million due to gains recognized in the prior year from a sale of Jack in the Box restaurant properties to franchisees who were leasing the properties from us prior to the sale.

The change was also impacted by the increase in integration and strategic initiatives of $6.5 million in the current year, as well as an increase in restaurant impairment charges of $3.4 million relating to under-performing Jack in the Box and Del Taco restaurants.

Refer also to Note 9, Other Operating Expense, Net, of the notes to the consolidated financial statements for additional information.

Gains on the Sale of Company-Operated Restaurants

In 2023, gains on the sale of company-operated restaurants totaled $18.0 million and were related to the refranchising of 111 Del Taco restaurants and five Jack in the Box restaurants.

In the prior year, gains on the sale of company-operated restaurants totaled $3.9 million and were related to the refranchising of 15 Jack in the Box restaurants.

In 2024, gains on the sale of company-operated restaurants totaled $3.3 million and were related to the refranchising of 47 Del Taco restaurants.

In the prior year, gains on the sale of company-operated restaurants totaled $18.0 million and were related to the refranchising of 111 Del Taco restaurants and five Jack in the Box restaurants.

Refer to Note 4, Summary of Refranchisings and Franchise Acquisitions, of the notes to the consolidated financial statements for additional information.

Other Pension and Post-Retirement Expenses, Net

Our policy is to fund our pension 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 2025.

For additional information, refer to Note 12, Retirement Plans , of the notes to the consolidated financial statements.

Interest Expense, Net

4 unchanged sentences

Interest expense, net, decreased $2.4 million in 2024.

Interest expense decreased $1.9 million due in part to the prior year $7.7 million loss on early extinguishment of debt not recurring in the current year, partially offset by increased expense of $6.2 million due to higher average debt levels year-over-year.

Additionally, interest income increased in the current year primarily due to the higher cash balances throughout the year.

The income tax provisions reflect effective tax rates of 30.9% and 28.5%, in fiscal years 2023 and 2022, respectively.

The major components of the year-over-year increase in tax rates were the impact of non-deductible goodwill related to the sale of company-operated restaurants, partially offset by non-taxable gains in the current year as opposed to non-deductible losses in the prior year from the market performance of insurance products used to fund certain non-qualified retirement plans.

The interest expense portion decreased by $2.5 million primarily due to lower average borrowings, as well as lower average interest rates.

For fiscal year 2024, the Company recorded income tax provisions of $32.4 million resulting in effective tax rate of negative 748.9%.

The effective tax rate for such period differed from the U.S.

statutory tax rate primarily due to the impairment of non-deductible goodwill partially offset by the reversal of state deferred tax liabilities on basis difference of investments in subsidiaries and non-taxable gains from the market performance of insurance products used to fund certain non-qualified retirement plans.

For fiscal year 2023, the Company recorded income tax provisions of $58.5 million resulting in an effective tax rate of 30.9%.

The effective tax rate for such period differed from the U.S.

statutory tax rate primarily due to the impact of non-deductible goodwill related to the sale of company-operated restaurants partially offset by non-taxable gains from the market performance of insurance products used to fund certain non-qualified retirement plans.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings available under our securitized financing facility.

Our primary sources of short-term and long-term liquidity and capital resources are cash flows from operations and borrowings available under our credit facilities.

Our cash requirements consist principally of working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements, franchise tenant improvement allowance and incentive distributions, dividend payments, and obligations related to our benefit plans.

We generally reinvest available cash flows from operations to invest in our business, service our debt obligations, pay dividends and repurchase shares of our common stock.

Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our credit facilities.

As of October 1, 2023, the Company had $185.9 million of cash and restricted cash on its consolidated balance sheet and available borrowings of $175.5 million under both the $150.0 million Variable Funding Notes and our $75.0 million revolving credit facility.

We generally use available cash flows from operations to invest in our business, service our debt obligations, pay dividends and repurchase shares of our common stock.

As of September 29, 2024, the Company had $54.2 million of cash and restricted cash on its consolidated balance sheet and available borrowings of $169.5 million under our $150.0 million Variable Funding Notes and our $75.0 million revolving credit facility.

The Company continually assesses the optimal sources and uses of cash for our business.

Since the Del Taco acquisition, we have undertaken a process to review our balance sheet for any undervalued assets, and to pursue opportunities for capital sources, including sales of Jack in the Box real estate assets identified in its portfolio, and refranchising, primarily for Del Taco in the near term.

The Company intends to use the net proceeds from these transactions to pay down debt, provide additional liquidity and for other corporate purposes including investments in growth initiatives and potential share repurchases.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, borrowings available under our Variable Funding Notes and revolving credit facility, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

We review our balance sheet for any undervalued assets and pursue opportunities for capital sources, including the sale of our owned Jack in the Box properties and refranchising, primarily for Del Taco in the near term.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility and revolving credit facility, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

The table below summarizes our cash flows for each of the last two fiscal years ( in thousands ):

5 unchanged sentences

Operating Activities .

Cash flows provided by operating activities increased $52.1 million compared with a year ago, primarily due to favorable change in working capital of $61.8 million.

The favorable change in working capital primarily relates to the deferral of 2023 income taxes in connection with the southern California winter storm disaster area declaration of $50.3 million, lower payments for incentive compensation of $17.1 million, timing of collections of $14.0 million primarily due to the Jack segment rent billings for October, and lower marketing payments of $11.4 million.

These benefits were partially offset by a $25.5 million payment made in the fourth quarter connection with our Torrez litigation as well as $17.8 million due to the timing of accounts payable, including the Jack segment October rent payments.

Cash flows provided by operating activities was also impacted by a lower net income, after adjusting for non-cash items, of $9.6 million.

In addition to continuing operations, other known uses of cash flow in the first quarter of fiscal year 2024 include the $50.3 million for fiscal 2023 deferred income tax payments, as well as $25.5 million for Torrez, a previously announced litigation settlement.

For additional information related to Torrez, refer to Note 16, Commitments and Contingencies , of the notes to the consolidated financial statements.

Operating cash flows decreased $146.2 million compared with a year ago.

This decrease is primarily due to an unfavorable change in working capital of $156.1 million, partially offset by higher net income, when adjusted for non-cash items, of $9.9 million.

The change in working capital is primarily a result of the payment of income taxes liabilities of $111.9 million (of which $50.3 million was a payment deferred from 2023 in connection with the Southern California winter storm disaster area declaration), an increase in bonus payout, an increase in deferred rent accrual and an increase in the advertising accruals.

Pension and Postretirement Contributions — Our policy is to fund our pension plans at or above the minimum required by law.

4 unchanged sentences

Investing Activities .

Cash flows provided by investing activities increased $620.8 million from 2023 compared to 2022.

This increase was primarily due to $580.8 million of cash that was used in the prior year for the acquisition of Del Taco, coupled with $78.8 million of additional cash received in 2023 from the sale of Del Taco company-owned restaurants to franchisees.

These increases in cash were partially offset by an increase of $28.5 million for amounts used for the purchase of property and equipment as well as a $7.1 million decrease in proceeds from the sale and leaseback of assets.

Cash flows used in investing activities increased $111.6 million from 2024 compared to 2023.

This increase was primarily due to $65.8 million of additional cash received in 2023 from the sale of Del Taco company-owned restaurants to franchisees, and an increase of $40.5 million for amounts used for the purchase of property and equipment.

Capital Expenditures — The composition of capital expenditures in each fiscal year is summarized in the table below ( in thousands ):

9 unchanged sentences

Total capital expenditures $ 115,474 $ 74,954

In 2023, capital expenditures increased by $28.5 million compared to a year ago, primarily due to an increase in the purchases of Jack in the Box restaurant properties intended for sale and leaseback of $13.0 million, an increase in information technology for both restaurant and corporate of $9.9 million, as well as new restaurant openings of $5.3 million.

In 2024, capital expenditures increased by $40.5 million compared to a year ago, primarily due to an increase in information technology for both restaurant and corporate of $16.2 million, new restaurant openings of $14.4 million, and an increase in the purchases of Jack in the Box restaurant properties intended for sale and leaseback of $11.5 million.

Sale and Sale-leaseback Transactions — To optimize our balance sheet and capital structure, we use sales and leaseback financing and provide our franchisees the opportunity to purchase the property that we currently lease to them.

1 unchanged sentence

Financing Activities .

Cash flows used in financing activities increased by $685.5 million compared with a year ago, primarily as a result of a decrease in net borrowings of $621.4 million and a $65.0 million increase in share repurchases compared with a year ago.

Repurchases of Common Stock — In fiscal 2023, the Company repurchased 1.1 million shares of its common stock for an aggregate cost of $90.7 million, including the applicable excise tax.

As of October 1, 2023, there was $85.0 million remaining under share repurchase programs authorized by the Board of Directors which expired on November 20, 2023.

Cash flows used in financing activities decreased by $76.2 million compared with a year ago, primarily as a result of a decrease in net borrowings of $56.2 million and a $20.0 million decrease in share repurchases compared with a year ago.

Repurchases of Common Stock — In fiscal 2024, the Company repurchased 1.1 million shares of its common stock for an aggregate cost of $70.6 million, including applicable excise tax.

As of September 29, 2024, there was $180.0 million remaining under share repurchase programs authorized by the Board of Directors which do not expire.

Dividends — In fiscal 2024, the Board of Directors declared four quarterly cash dividends of $0.44 per share, totaling $34.2 million.

4 unchanged sentences

In 2022, 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 under our 2022 Variable Funding Notes, net of letters of credits issued of $49.5 million.

As of September 29, 2024, we had $6.0 million of outstanding borrowings and had available borrowing capacity of $94.5 million under our 2022 Variable Funding Notes, net of letters of credits issued of $49.5 million.

The net proceeds from the sale of the 2022 Notes were used to repay in full $570.7 million in aggregate outstanding principal amount of the Company’s Series 2019-1 Class A-2-I Notes, together with the applicable make-whole premium and unpaid interest, and was used to fund a portion of the Company’s acquisition of Del Taco Restaurants, Inc.

4 unchanged sentences

Restricted Cash — In accordance with the terms of the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the note holders and are restricted in their use.

As of October 1, 2023, the Master Issuer had restricted cash of $28.3 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees required for the Class A-2 Notes and Variable Funding Notes.

As of September 29, 2024, the Master Issuer had restricted cash of $29.4 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees required for the Class A-2 Notes and Variable Funding Notes.

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

1 unchanged sentence

The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.

As of October 1, 2023, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.

As of September 29, 2024, we were in compliance with all of our debt covenant requirements and were not subject to any rapid amortization events.

Contractual Obligations

26 unchanged sentences

Significant assumptions used to determine fair value under the relief from royalty method include future trends in sales, a royalty rate, an estimated income tax rate, and a discount rate to be applied to the forecast revenue stream.

In the third quarter of 2023, we performed quantitative tests using the approaches described above.

The fair value of our Jack in the Box reporting unit was substantially in excess of its respective carrying value as of the testing date.

The fair value of our Del Taco reporting unit and indefinite-lived trademarks were in excess of their carrying values by approximately 9% and 13%, respectively, as of the testing date.

Self-Insurance — We are self-insured for a portion of our losses related to workers’ compensation, general liability and other legal claims, and health benefits.

10 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis