JACK IN THE BOX INC

Previous wording

The Company’s fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. In fiscal 2023, Del Taco operated on a fiscal year ending the Tuesday closest to September 30. Beginning fiscal 2024, Del Taco’s fiscal year shifted to align with Jack in the Box. As a result, Del Taco’s fiscal 2024 results include two fewer days. Fiscal years 2024 and 2023 include 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks. All comparisons between 2024 and 2023 refer to the 16 weeks (“quarter”) and 16 weeks (“year-to-date”) ended January 21, 2024 and January 22, 2023, respectively, unless otherwise indicated.

Current wording

The Company’s fiscal year is 52 or 53 weeks ending the Sunday closest to September 30. In fiscal 2023, Del Taco operated on a fiscal year ending the Tuesday closest to September 30. Beginning fiscal 2024, Del Taco’s fiscal year shifted to align with Jack in the Box. As a result, Del Taco’s fiscal 2024 results include two fewer days. Fiscal years 2024 and 2023 include 52 weeks. Our first quarter includes 16 weeks and all other quarters include 12 weeks. All comparisons between 2024 and 2023 refer to the 12 weeks (“quarter”) and 28 weeks (“year-to-date”) ended April 14, 2024 and April 16, 2023, respectively, unless otherwise indicated.

Previous wording

Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® and Del Taco® quick-service restaurants. As of January 21, 2024, we operated and franchised 2,192 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Guam, and 592 Del Taco quick-service restaurants across 16 states.

Current wording

Founded in 1951, Jack in the Box Inc. (the “Company”) operates and franchises Jack in the Box® and Del Taco® quick-service restaurants. As of April 14, 2024, we operated and franchised 2,195 Jack in the Box quick-service restaurants, primarily in the western and southern United States, including two in Guam, and 595 Del Taco quick-service restaurants across 16 states.

Previous wording

Company restaurant sales decreased $52.1 million, or 36.1%, compared to the prior year, primarily due to the refranchising of 95 company operated restaurants since the first quarter of 2023. The following table presents the approximate impact of certain items on company restaurant sales (in millions):

Current wording

Company restaurant sales increased $3.4 million, or 3.6% in the quarter and $9.4 million, million or 4.2% year-to-date compared to the prior year. The following table presents the approximate impact of changes in AUVs and the number of restaurants on company restaurant sales for each respective period (in millions):

Previous wording

Same-store sales at company-operated restaurants increased 2.0% compared to a year ago. The following table summarizes the change versus a year ago:

Current wording

Same-store sales at company-operated restaurants decreased 0.6% in the quarter and increased 0.9% year-to-date compared to a year ago. The following table summarizes the change versus a year ago:

Previous wording

(1)Includes price increases of approximately 7.1% in the quarter.

Current wording

(1)Includes price increases of approximately 7.4% in the quarter and 7.3% year-to-date.

Previous wording

Food and packaging costs as a percentage of company restaurant sales decreased 3.1% compared to the prior year primarily due to commodity deflation and menu price increases, partially offset by unfavorable menu item mix.

Current wording

Food and packaging costs as a percentage of company restaurant sales decreased 2.5% in the quarter and 2.8% year-to-date compared to the prior year primarily due to commodity deflation and menu price increases, partially offset by unfavorable menu item mix.

Previous wording

Payroll and employee benefit costs as a percentage of company restaurant sales decreased 0.5% compared to the prior year primarily due to sales leverage, partially offset by wage inflation and higher group insurance costs. Labor inflation in the quarter was approximately 2.8%.

Current wording

Payroll and employee benefit costs as a percentage of company restaurant sales was flat in the quarter and decreased 0.3% year-to-date compared to the prior year. During the quarter, increases in wage inflation and group insurance were offset by decreases in incentive compensation. The decrease on a year-to-date basis is primarily due to sales leverage and lower incentive compensation, partially offset by wage inflation and higher group insurance costs. Labor inflation was approximately 4.6% in the quarter and 3.6% year-to-date for the current year.

Previous wording

Occupancy and other costs, as a percentage of company restaurant sales, increased 0.2% compared to the prior year primarily due to higher other operating costs including security, credit card fees, rent and delivery fees, partially offset by sales leverage in the current year.

Current wording

Occupancy and other costs, as a percentage of company restaurant sales, increased 0.2% in the quarter and 0.3% year-to-date compared to the prior year. These increases were primarily due to higher other operating costs including security, credit card fees, rent and delivery fees, partially offset by sales leverage year-to-date and lower maintenance and repair costs in both the quarter and year-to-date.

Previous wording

Franchise royalties and other decreased $6.0 million, or 8.7%, compared to the prior year primarily due to a $7.3 million termination fee paid by a franchise operator who sold his restaurants to a new franchisee in the prior year, partially offset by an increase in franchise early termination fees in the current year. Refer to Note 2, Revenue, in the notes to the condensed consolidated financial statements for additional information related to the $7.3 million termination fee.

Current wording

Franchise royalties and other decreased $0.5 million, or 1.1% in the quarter and $6.6 million, or 5.6% year-to-date. In the quarter, the decrease was primarily due to lower royalty income of $1.0 million, partially offset by an increase in franchise termination fees. The year-to-date decrease was primarily due to a $7.3 million termination fee paid in the prior year by a franchise operator to sell his restaurants to a new franchisee, partially offset by an increase in franchise early termination fees in the current year. Refer also to Note 2, Revenue, in the notes to the condensed consolidated financial statements for additional information.

Previous wording

Franchise occupancy expenses, primarily rent, increased $0.6 million, or 1.0%, compared to the prior year primarily due to an increase in operating lease costs in the current year.

Current wording

Franchise occupancy expenses, primarily rent, increased $0.8 million, or 1.7% in the quarter and $1.5 million, or 1.3% year-to-date compared to the prior year primarily due to an increase in operating lease costs in the current year.

Previous wording

Franchise support and other costs increased $2.3 million compared to the prior year primarily due to the rollover of a bad debt reversal in the prior year and higher costs for brand standard audits in the current year.

Current wording

Franchise support and other costs was flat in the quarter and increased $2.4 million, or 56.7% year-to-date compared to the prior year. Year-to-date, the increase is primarily due to the rollover of a bad debt reversal in the prior year.

Previous wording

Same-store sales at company-operated restaurants increased 1.8% compared to a year ago. The following table summarizes the change versus a year ago:

Current wording

Same-store sales at company-operated restaurants decreased 1.8% in the quarter and increased 0.2% year-to-date compared to a year ago. The following table summarizes the change versus a year ago:

Previous wording

(1)Includes price increases of approximately 6.3% compared to the prior year.

Current wording

(1)Includes price increases of approximately 7.0% in the quarter and 6.6% year-to-date.

Previous wording

Food and packaging costs as a percentage of company restaurant sales decreased 1.2% compared to the prior year primarily due to menu price increases and commodity deflation.

Current wording

Food and packaging costs as a percentage of company restaurant sales decreased 1.9% in the quarter and 1.5% year-to-date, compared to the prior year primarily due to menu price increases and commodity deflation, partially offset by the change in mix of restaurants resulting from franchise acquisitions.

Previous wording

Commodity costs deflation was 0.5% in the first quarter of 2024 with the greatest impact in produce, poultry, pork and cheese.

Current wording

Commodity costs deflation was 1.6% in the quarter and 0.8% year-to-date, with the greatest impact in produce, dairy and beverages for the quarter and cheese, pork and poultry for the year-to-date.

Previous wording

Payroll and employee benefit costs as a percentage of company restaurant sales increased 1.0% compared to the prior year primarily due to labor inflation, which was 3.2% in the first quarter of 2024.

Current wording

Payroll and employee benefit costs as a percentage of company restaurant sales increased 1.4% in the quarter and 1.1% year-to-date, compared to the prior year primarily due to labor inflation, which was 4.7% in the quarter and 3.8% year-to-date, and the change in mix of restaurants resulting from franchise acquisitions.

Previous wording

Occupancy and other costs as a percentage of company restaurant sales increased 0.7% compared to the prior year primarily due to utility inflation and impact from a change in the mix of restaurants.

Current wording

Occupancy and other costs as a percentage of company restaurant sales increased 1.1% in the quarter and 0.8% year-to-date, compared to the prior year primarily due to utility inflation, an increase in information technology costs and the change in mix of restaurants resulting from franchise acquisitions.

Previous wording

Franchise rental revenues increased $4.9 million, or 178.6%, compared to the prior year primarily due to higher rental income resulting from new subleases related to the 95 restaurants refranchised since the first quarter of 2023.

Current wording

Franchise rental revenues increased $3.6 million, or 137.9%, in the quarter and $8.5 million, or 158.7% year-to-date, compared to the prior year. The increase is primarily due to higher rental income resulting from new subleases related to the 108 restaurants refranchised since the second quarter of 2023.

Previous wording

Franchise royalties and other increased $3.0 million, or 42.2%, compared to the prior year primarily due to higher franchise restaurant sales resulting from the 95 restaurants refranchised refranchised since the first quarter of 2023.

Current wording

Franchise royalties and other increased $1.6 million, or 27.7%, in the quarter and $4.6 million, or 35.6% year-to-date, compared to the prior year primarily due to higher franchise restaurant sales resulting from the 108 restaurants refranchised and the 15 franchise-operated restaurants opened since the second quarter of 2023.

Previous wording

Franchise contributions for advertising and other services revenues increased $3.2 million, or 50.2%, compared to the prior year primarily due to higher marketing contributions related to higher franchise restaurant sales resulting from the 95 restaurants refranchised since the first quarter of 2023.

Current wording

Franchise contributions for advertising and other services revenues increased $1.9 million, or 35.7%, in the quarter and $5.1 million, or 43.6% year-to-date, compared to the prior year primarily due to higher marketing contributions related to higher franchise restaurant sales resulting from the 108 restaurants refranchised and the 15 franchise-operated restaurants opened since the second quarter of 2023.

Previous wording

Franchise occupancy expenses, primarily rent, increased $4.8 million, or 178.7%, compared to the prior year primarily due to higher rent related to franchise subleases for the 95 restaurants refranchised since the first quarter of 2023.

Current wording

Franchise occupancy expenses, primarily rent, increased $3.6 million, or 136.3%, in the quarter and $8.4 million, or 157.6% year-to-date, compared to the prior year primarily due to higher rent related to franchise subleases for the 108 restaurants refranchised since the second quarter of 2023.

Previous wording

Franchise support and other costs increased $1.0 million, or 213.0%, compared to the prior year primarily due to higher franchise development support costs.

Current wording

Franchise support and other costs increased $0.6 million, or 110.1%, in the quarter and $1.6 million, or 158.3% year-to-date, compared to the prior year primarily due to higher franchise development support costs.

Previous wording

Franchise advertising and other service expenses increased $3.7 million, or 56.4%, compared to the prior year primarily due to higher franchise restaurant sales resulting from the 95 restaurants refranchised since the first quarter of 2023.

Current wording

Franchise advertising and other service expenses increased $2.0 million, or 37.2%, in the quarter and $5.8 million, or 47.7% year-to-date, compared to the prior year primarily due to higher franchise restaurant sales resulting from the 108 restaurants refranchised and the 15 franchise-operated restaurants opened since the second quarter of 2023.

Previous wording

Advertising costs represent company contributions to our marketing funds and are generally determined as a percentage of company-operated restaurant sales. Advertising costs decreased $1.8 million compared to the prior year primarily due to a decrease in company-operated restaurant sales in the current year due to refranchising.

Current wording

Advertising costs represent company contributions to our marketing funds and are generally determined as a percentage of company-operated restaurant sales. Advertising costs decreased $1.4 million in the quarter and $3.1 million on a year-to-date basis as compared to the prior year, primarily due to a decrease in company-operated restaurant sales in the current year which was driven by refranchising.

Previous wording

Share-based compensation increased $1.3 million compared to the prior year primarily due higher achievement levels for performance-based equity awards.

Current wording

Share-based compensation increased by $1.4 million in the quarter and $2.7 million on a year-to-date basis as compared to the prior year primarily due to higher achievement relating to performance-based equity awards.

Previous wording

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 slightly less favorable impact of $0.9 million versus the prior year.

Current wording

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 slightly favorable impact of $0.4 million in the quarter, but an unfavorable impact of $0.5 million on a year-to-date basis, compared to the prior year.

Previous wording

Litigation matters decreased $5.9 million versus the prior year primarily due to the timing of litigation developments in the prior year. Refer to Note 14, Commitments and Contingencies, in the condensed consolidated financial statements for additional information related to the legal matters.

Current wording

Litigation matters increased $1.6 million in the quarter and decreased $4.2 million on a year-to-date basis as compared to the prior year primarily due to the timing of litigation developments in each period, respectively. Refer to Note 14, Commitments and Contingencies, in the condensed consolidated financial statements for additional information related to the legal matters.

Previous wording

Other operating expenses (income), net increased $10.7 million compared to the prior year primarily due to the $9.5 million of gains recognized in the prior year from the sale of Jack in the Box restaurant properties to franchisees who were leasing the properties from us prior to the sale, partially offset by $3.7 million of additional consulting fees for strategic initiatives in the current year, as well as the $2.4 million purchase gains related to the acquisition of 9 Del Taco restaurants in the current year.

Current wording

Other operating expenses (income), net increased $2.3 million in the quarter and $13.0 million on a year-to-date basis, as compared to the prior year. For the quarter the increase was primarily due to $2.0 million of consulting fees for strategic initiatives in the current year. For the year-to-date period, the increase was due to $9.5 million of 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 as well as an increase of $7.0 million of consulting fees for strategic initiatives in the current year, partially offset by $2.4 million purchase gains related to the acquisition of 9 Del Taco restaurants, as well as a $1.1 million decrease in costs of closed restaurants in the in the current year.

Previous wording

For the first quarter of 2023, the Company sold five Jack in the Box company-operated restaurants and 16 Del Taco company-operated restaurants to franchisees, for which the Company recognized a net gain on the sale of company-operated restaurants of $3.8 million.

Current wording

For the fiscal 2023 year-to-date period, the Company sold five Jack in the Box company-operated restaurants and 16 Del Taco company-operated restaurants to franchisees, for which the Company recognized a net gain on the sale of company-operated restaurants of $4.5 million.

Previous wording

Interest expense, net, decreased $1.7 million primarily due to lower average borrowings resulting in a decrease of $1.2 million in interest expense compared to the prior year. Additionally, there was an increase in interest income of $0.5 million in the current year due to higher investment balances compared to fiscal year 2023.

Current wording

Interest expense, net, decreased $0.8 million in the quarter and $2.4 million year-to-date primarily due to lower average borrowings as well as lower average interest rates resulting in a decrease of $0.7 million and $1.9 million, respectively, in interest expense compared to the prior year. Additionally, there was an increase in interest income of $0.5 million year-to-date due to higher investment balances compared to fiscal year 2023.

Previous wording

The income tax provisions reflect a year-to-date effective tax rate of 26.9% in 2024, as compared to 26.7% in fiscal year 2023. The major component of the year-over-year increase in tax rates was an increase in the impact of non-deductible officers’ compensation.

Current wording

The income tax provisions reflect an effective tax rate of 26.5% in the second quarter of 2024, as compared to 34.8% in the second quarter of the prior year, as well as 26.7% for the year-to-date period in 2024, as compared to 29.6% in the same period in 2023. The major component of the year-over-year decrease in tax rates was a decrease in the impact of estimated disposals of non-deductible goodwill attributable to refranchising transactions.

Previous wording

As of January 21, 2024, the Company had $82.5 million of cash and restricted cash on its consolidated balance sheet and available borrowings of $175.5 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. 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.

Current wording

As of April 14, 2024, the Company had $49.0 million of cash and restricted cash on its consolidated balance sheet and available borrowings of $175.5 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. 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.

Previous wording

Operating Activities. Operating cash flows decreased $85.1 million compared with a year ago. This is primarily due to an unfavorable change in working capital of $79.5 million, as well as lower net income, when adjusted for non-cash items, of $5.7 million. The change in working capital is primarily a result of the payment of $50.3 million of fiscal 2023 income tax payments deferred in connection with the Southern California winter storm disaster area declaration, the final payment of the Torrez litigation of $25.5 million, and an increase bonus payments of $15.3 million. These decreases in cash were partially offset by an increase in the advertising accruals of $17.5 million.

Current wording

Operating Activities. Operating cash flows decreased $100.1 million compared with a year ago. This is primarily due to an unfavorable change in working capital of $95.5 million, as well as lower net income, when adjusted for non-cash items, of $4.6 million. The change in working capital is primarily a result of the decrease of $60.8 million of income tax liabilities (of which $50.3 million was a payment deferred from 2023 in connection with the Southern California winter storm disaster area declaration), a decrease in accrued legal for the final payment of the Torrez litigation of $25.5 million, and a decrease in the advertising accruals of $11.3 million due to timing.

Previous wording

Investing Activities. Cash flows from investing activities decreased by $52.3 million compared with a year ago due to higher purchases of property and equipment of $14.8 million, lower proceeds in the current year from the sale of Jack in the Box restaurant properties to franchisees of $21.6 million, and lower proceeds from the sale of company-operated restaurants of $15.9 million.

Current wording

Investing Activities. Cash flows from investing activities decreased by $65.6 million compared with a year ago primarily due to higher purchases of property and equipment of $23.9 million in the current year, lower proceeds from the sale of Jack in the Box restaurant properties to franchisees of $21.9 million in the current year, and lower proceeds from the sale of company-operated restaurants of $16.4 million.

Previous wording

Financing Activities. Cash flows from financing activities decreased by $11.5 million compared with a year ago. The change is primarily due to a $10.0 million increase in stock repurchases in the current year versus the prior year.

Current wording

Financing Activities. Cash flows from financing activities decreased by $42.0 million compared with a year ago. The change is primarily due to the $50.0 million repayment in the prior year on the Variable Funding Notes, partially offset by the $7.4 million increase in stock repurchases in the current year versus the prior year.

Previous wording

Repurchases of common stock — The Company repurchased 0.3 million shares of its common stock in fiscal 2024 for an aggregate cost of $25.2 million. As of January 21, 2024, there was $225.0 million remaining under share repurchase programs authorized by the Board of Directors which do not expire.

Current wording

Repurchases of common stock — The Company repurchased 0.5 million shares of its common stock in fiscal 2024 for an aggregate cost of $40.3 million. As of April 14, 2024, there was $210.0 million remaining under share repurchase programs authorized by the Board of Directors which do not expire.

Previous wording

Dividends — Up through January 21, 2024, the Board of Directors declared a cash dividend of $0.44 per common share totaling $8.7 million.

Current wording

Dividends — Up through April 14, 2024, the Board of Directors declared two cash dividends of $0.44 per common share totaling $17.3 million.

Previous wording

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 January 21, 2024, the Company had restricted cash of $28.6 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees required for the Class A-1 and A-2 Notes.

Current wording

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 April 14, 2024, the Company had restricted cash of $28.8 million, which primarily represented cash collections and cash reserves held by the trustee to be used for payments of interest and commitment fees required for the Class A-1 and A-2 Notes.

Previous wording

Revolving credit facility —In connection with the Del Taco acquisition, Del Taco’s existing debt 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 matures on March 1, 2024. The revolving credit facility, as amended, includes a limit of $20.0 million for letters of credit, all of which were cancelled as of October 1, 2023. As of January 21, 2024, we had no outstanding borrowings and available borrowing capacity of $75.0 million under the facility.

Current wording

Revolving credit facility —In connection with the Del Taco acquisition, Del Taco’s existing debt 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 was extended and now matures on February 28, 2025. The revolving credit facility, as amended, includes a limit of $20.0 million for letters of credit, all of which were cancelled as of October 1, 2023. As of April 14, 2024, we had no outstanding borrowings and available borrowing capacity of $75.0 million under the facility.