Jack in the Box(JACK) - 2025 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and accompanying explanatory notes Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets and an increase in the total stockholders' deficit Condensed Consolidated Balance Sheets (July 6, 2025 vs. September 29, 2024) | Item | July 6, 2025 (in thousands) | September 29, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Cash | $38,014 | $24,745 | +$13,269 | | Total current assets | $200,381 | $181,277 | +$19,104 | | Property and equipment, net | $456,550 | $430,039 | +$26,511 | | Operating lease right-of-use assets | $1,389,944 | $1,410,083 | -$20,139 | | Intangible assets, net | $10,068 | $10,515 | -$447 | | Trademarks | $105,600 | $283,500 | -$177,900 | | Goodwill | $136,026 | $161,209 | -$25,183 | | Total assets | $2,596,091 | $2,735,629 | -$139,538 | | Total current liabilities | $432,893 | $434,259 | -$1,366 | | Total long-term liabilities | $3,114,819 | $3,153,168 | -$38,349 | | Total stockholders' deficit | $(951,621) | $(851,798) | -$99,823 | Condensed Consolidated Statements of Earnings (Loss) The company shifted from a significant net loss to net earnings for the quarter, despite a year-to-date net loss Condensed Consolidated Statements of Earnings (Loss) (Quarter Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Revenues | $332,987 | $369,171 | -$36,184 | | Operating costs and expenses, net | $292,199 | $471,407 | -$179,208 | | Earnings (loss) from operations | $40,788 | $(102,236) | +$143,024 | | Net earnings (loss) | $22,027 | $(122,300) | +$144,327 | | Basic Earnings (loss) per share | $1.16 | $(6.29) | +$7.45 | | Diluted Earnings (loss) per share | $1.15 | $(6.26) | +$7.41 | | Cash dividends declared per common share | $— | $0.44 | -$0.44 | Condensed Consolidated Statements of Earnings (Loss) (Year-to-date Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,139,121 | $1,222,016 | -$82,895 | | Operating costs and expenses, net | $1,181,200 | $1,190,582 | -$9,382 | | Earnings (loss) from operations | $(42,079) | $31,434 | -$73,513 | | Net earnings (loss) | $(86,515) | $(58,637) | -$27,878 | | Basic Earnings (loss) per share | $(4.54) | $(2.98) | -$1.56 | | Diluted Earnings (loss) per share | $(4.54) | $(2.96) | -$1.58 | | Cash dividends declared per common share | $0.88 | $1.32 | -$0.44 | Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive income improved significantly for the quarter but worsened year-to-date, mirroring net earnings trends Condensed Consolidated Statements of Comprehensive Income (Loss) (Quarter Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net earnings (loss) | $22,027 | $(122,300) | +$144,327 | | Other comprehensive income, net of taxes | $446 | $363 | +$83 | | Comprehensive income (loss) | $22,473 | $(121,937) | +$144,410 | Condensed Consolidated Statements of Comprehensive Income (Loss) (Year-to-date Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net earnings (loss) | $(86,515) | $(58,637) | -$27,878 | | Other comprehensive income, net of taxes | $1,488 | $1,209 | +$279 | | Comprehensive income (loss) | $(85,027) | $(57,428) | -$27,599 | Condensed Consolidated Statements of Cash Flows Cash flows from operations increased substantially, driving a significant positive swing in net cash flow Condensed Consolidated Statements of Cash Flows (Year-to-date Ended July 6, 2025 vs. July 7, 2024) | Cash Flow Activity | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net loss | $(86,515) | $(58,637) | -$27,878 | | Cash flows provided by operating activities | $128,626 | $39,263 | +$89,363 | | Cash flows used in investing activities | $(62,190) | $(68,288) | +$6,098 | | Cash flows used in financing activities | $(52,492) | $(106,124) | +$53,632 | | Net increase (decrease) in cash and restricted cash | $13,944 | $(135,149) | +$149,093 | | Cash and restricted cash at end of period | $68,111 | $50,758 | +$17,353 | Condensed Consolidated Statements of Stockholders' Deficit The stockholders' deficit widened due to the net loss and dividend declarations, despite share-based compensation Changes in Stockholders' Deficit (September 29, 2024 to July 6, 2025) | Item | Amount (in thousands) | | :--- | :--- | | Balance at September 29, 2024 | $(851,798) | | Shares issued under stock plans, including tax benefit | $2 | | Share-based compensation | $6,812 | | Dividends declared | $(16,735) | | Purchases of treasury stock | $(4,996) | | Net loss | $(86,515) | | Other comprehensive income | $1,488 | | Balance at July 6, 2025 | $(951,621) | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's accounting policies and financial statement components 1. BASIS OF PRESENTATION This note details the company's operations, fiscal year structure, and key accounting policies - The Company develops, operates, and franchises quick-service restaurants under the Jack in the Box and Del Taco brands[25] - As of July 6, 2025, there were 142 company-operated and 2,026 franchise-operated Jack in the Box restaurants, and 132 company-operated and 453 franchise-operated Del Taco restaurants[25] - Fiscal years 2025 and 2024 each include 52 weeks, with the first quarter being 16 weeks and other quarters 12 weeks[30] - Marketing fund contributions are approximately 5.0% of sales for Jack in the Box and 4.0% of sales for Del Taco[32] - The Company is evaluating the impact of ASU 2024-03, 'Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures', effective for annual periods beginning after December 15, 2026[42] Allowance for Doubtful Accounts Activity (Year-to-date) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | | :--- | :--- | :--- | | Balance as of beginning of period | $(4,512) | $(4,146) | | Provision for expected credit losses | $(2,361) | $(233) | | Write-offs charged against the allowance | $1,234 | $6 | | Balance as of end of period | $(5,639) | $(4,373) | 2. REVENUE Revenue is disaggregated by segment, showing declines for both Jack in the Box and Del Taco brands - Revenue sources include retail sales from company-operated restaurants and rental revenue, royalties, advertising, franchise, and other fees from franchise-operated restaurants[43] Total Revenue by Segment (Quarter Ended July 6, 2025 vs. July 7, 2024) | Segment | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Jack in the Box | $262,401 | $281,749 | -$19,348 | | Del Taco | $70,586 | $87,422 | -$16,836 | | Total Revenue | $332,987 | $369,171 | -$36,184 | Total Revenue by Segment (Year-to-date Ended July 6, 2025 vs. July 7, 2024) | Segment | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Jack in the Box | $899,196 | $926,351 | -$27,155 | | Del Taco | $239,925 | $295,665 | -$55,740 | | Total Revenue | $1,139,121 | $1,222,016 | -$82,895 | Contract Liabilities (Deferred Franchise and Development Fees - Year-to-date) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | | :--- | :--- | :--- | | Deferred franchise and development fees at beginning of period | $51,990 | $50,471 | | Revenue recognized | $(4,656) | $(4,490) | | Additions | $2,001 | $4,243 | | Deferred franchise and development fees at end of period | $49,335 | $50,224 | 3. SUMMARY OF REFRANCHISINGS AND ASSETS HELD FOR SALE The company generated a net gain from refranchising Del Taco restaurants, while assets held for sale decreased - Assets classified as held for sale decreased from $16.5 million as of September 29, 2024, to $12.0 million as of July 6, 2025, relating to restaurants to be refranchised, sold, or leasebacked, and closed properties[50] Refranchising Activity (Year-to-date) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | | :--- | :--- | :--- | | Restaurants sold to Del Taco franchisees | 13 | 13 | | Proceeds from the sale of company-operated restaurants | $5,712 | $2,168 | | Gain (loss) on the sale of company-operated restaurants | $2,630 | $(1,384) | 4. FRANCHISE ACQUISITIONS The company acquired 18 Del Taco franchise restaurants in Q3 2025, recognizing significant goodwill - During the third quarter of 2025, the Company acquired 18 Del Taco franchise restaurants for $7.2 million, recognizing $6.3 million in goodwill[51][53] - In the first quarter of 2024, 9 Del Taco franchise restaurants were acquired for $86 thousand, resulting in a $2.4 million gain recorded in 'Other operating expenses, net'[51][53] 5. GOODWILL AND INTANGIBLE ASSETS, NET The Del Taco reporting unit incurred significant goodwill and trademark impairment charges during the fiscal year - Goodwill allocated to the Del Taco reporting unit was impaired by $25.3 million in the second quarter of 2025 due to continued negative same-store sales trends, unfavorable economic conditions, potential divestment, and a sustained lower share price[56] - The Del Taco indefinite-lived trademark asset was impaired by $177.9 million in the second quarter of 2025, reducing its carrying amount to $105.6 million[58][59] - Goodwill of $6.3 million recognized from a franchisee acquisition in Q3 2025 was fully impaired based on the Q2 2025 quantitative impairment analysis[57] Goodwill Carrying Amount (September 29, 2024 to July 6, 2025) | Item | Jack in the Box (in thousands) | Del Taco (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | Balance at September 29, 2024 | $135,827 | $25,382 | $161,209 | | Impairment of goodwill | — | $(31,656) | $(31,656) | | Acquisition of Del Taco company-operated restaurants | — | $6,326 | $6,326 | | Reclassified from (to) assets held for sale | $199 | $(52) | $147 | | Balance at July 6, 2025 | $136,026 | $— | $136,026 | 6. LEASES Franchise rental revenues decreased for the quarter, primarily due to lower variable lease income - Initial terms of real estate leases are generally 20 years, with renewal options[60] Franchise Rental Revenues (Quarter Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Operating lease income - franchise | $60,645 | $59,767 | +$878 | | Variable lease income - franchise | $24,008 | $28,618 | -$4,610 | | Amortization of sublease assets and liabilities, net | $474 | $740 | -$266 | | Franchise rental revenues | $85,127 | $89,125 | -$3,998 | Franchise Rental Revenues (Year-to-date Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Operating lease income - franchise | $201,799 | $197,461 | +$4,338 | | Variable lease income - franchise | $85,157 | $89,339 | -$4,182 | | Amortization of sublease assets and liabilities, net | $1,024 | $1,347 | -$323 | | Franchise rental revenues | $287,980 | $288,147 | -$167 | 7. FAIR VALUE MEASUREMENTS The company's Class A-2 Notes are valued using Level 2 inputs, with fair value below carrying value - The non-qualified deferred compensation plan, a financial liability, is measured at fair value using Level 1 inputs (quoted prices in active markets)[63] - Non-financial instruments, including property and equipment, operating lease right-of-use assets, goodwill, and intangible assets, are reported at carrying value and assessed for impairment annually or when events indicate carrying value may not be recoverable[65] Class A-2 Notes Carrying Value vs. Fair Value (in thousands) | Item | July 6, 2025 Carrying Amount | July 6, 2025 Fair Value | September 29, 2024 Carrying Amount | September 29, 2024 Fair Value | | :--- | :--- | :--- | :--- | :--- | | Series 2019 Class A-2 Notes | $694,188 | $673,719 | $699,625 | $684,875 | | Series 2022 Class A-2 Notes | $1,028,500 | $951,671 | $1,045,000 | $975,507 | 8. OTHER OPERATING EXPENSES, NET Other operating expenses decreased year-to-date, driven by a significant reduction in strategic initiative costs Other Operating Expenses, Net (Quarter Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Integration and strategic initiatives | $2,057 | $4,723 | -$2,666 | | Costs of closed restaurants and other | $1,917 | $160 | +$1,757 | | Operating restaurant impairment charges | $1,058 | $136 | +$922 | | Losses on disposition of property and equipment, net | $597 | $527 | +$70 | | Total Other operating expenses, net | $5,683 | $5,641 | +$42 | Other Operating Expenses, Net (Year-to-date Ended July 6, 2025 vs. July 7, 2024) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Integration and strategic initiatives | $3,748 | $14,612 | -$10,864 | | Costs of closed restaurants and other | $4,684 | $1,792 | +$2,892 | | Operating restaurant impairment charges | $2,935 | $136 | +$2,799 | | Gains on acquisition of restaurants | $(6) | $(2,357) | +$2,351 | | Losses on disposition of property and equipment, net | $1,983 | $1,675 | +$308 | | Total Other operating expenses, net | $13,418 | $16,343 | -$2,925 | 9. SEGMENT REPORTING Both the Jack in the Box and Del Taco segments experienced declines in revenues and segment profit - The Company's reportable operating segments are Jack in the Box and Del Taco restaurant brands[70] - Beginning in 2025, the measure of segment profit was updated to exclude depreciation and amortization, net other operating expenses, net company-owned life insurance (COLI) gains, gains/losses on sale of company-operated restaurants, net amortization of favorable/unfavorable leases and subleases, amortization of franchise tenant improvement allowances, and amortization of cloud-computing costs[71] Revenues by Segment (Quarter Ended July 6, 2025 vs. July 7, 2024) | Segment | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Jack in the Box restaurant operations | $262,401 | $281,749 | -$19,348 | | Del Taco restaurant operations | $70,586 | $87,422 | -$16,836 | | Consolidated revenues | $332,987 | $369,171 | -$36,184 | Segment Profit (Quarter Ended July 6, 2025 vs. July 7, 2024) | Segment | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Jack in the Box segment profit | $73,734 | $88,561 | -$14,827 | | Del Taco segment profit | $6,063 | $9,641 | -$3,578 | | Shared services and unallocated costs | $(18,169) | $(19,096) | +$927 | | Total segment profit | $61,628 | $79,106 | -$17,478 | 10. INCOME TAXES The company recorded income tax benefits in fiscal 2025, a reversal from expenses in 2024 - The effective tax rates differed from the U.S. statutory tax rate primarily due to non-deductible goodwill impairment, partially offset by non-taxable gains from market performance of insurance products[73][74] - The Company is evaluating the potential implications of the 'One Big Beautiful Bill Act' enacted on July 4, 2025, but did not identify any material impacts to its provision for income taxes in the period of enactment[76] Income Tax (Benefit) Expense and Effective Tax Rates | Period | Income Tax (Benefit) Expense (in thousands) | Effective Tax Rate | | :--- | :--- | :--- | | Q3 Fiscal Year 2025 | $(506) | (2.4%) | | Year-to-date Fiscal Year 2025 | $(20,754) | 19.3% | | Q3 Fiscal Year 2024 | $83 | (0.1%) | | Year-to-date Fiscal Year 2024 | $23,316 | (66.0%) | 11. RETIREMENT PLANS The company sponsors several frozen defined benefit and post-retirement plans, with no required contributions to its Qualified Plan in 2025 - The Company sponsors a frozen 'Qualified Plan' for full-time employees hired before January 1, 2011, and an unfunded supplemental executive retirement plan (SERP) closed to new participants effective January 1, 2007[77] - Two post-retirement healthcare plans, closed to new participants, provide medical benefits to certain eligible employees[78] - The Company does not anticipate making any contributions to its Qualified Plan in fiscal 2025[79] Estimated Net Contributions for Fiscal 2025 (in thousands) | Plan | Net Year-to-date Contributions | Remaining Estimated Net Contributions | | :--- | :--- | :--- | | SERP | $4,361 | $764 | | Healthcare Plans | $1,009 | $130 | | Total | $5,370 | $894 | 12. STOCKHOLDERS EQUITY AND REPURCHASES OF COMMON STOCK The company repurchased shares, declared dividends before discontinuing them, and adopted a stockholder rights plan - The Company repurchased 0.1 million shares of common stock for an aggregate cost of $5.0 million year-to-date ended July 6, 2025[80] - As of July 6, 2025, $175.0 million remained under authorized share repurchase programs[80] - Two cash dividends of $0.44 per common share were declared, totaling $16.7 million, but future dividends have been discontinued to direct funds toward debt reduction[81] - A limited-duration stockholder rights plan was adopted on July 1, 2025, expiring July 1, 2026, to allow existing shareholders to purchase shares at a 50% discount if a person or group acquires 12.5% or more of outstanding common stock[82] 13. WEIGHTED AVERAGE SHARES OUTSTANDING Basic and diluted weighted-average shares outstanding decreased year-over-year Weighted-Average Shares Outstanding (in thousands) | Item | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Weighted-average shares outstanding – basic | 19,061 | 19,454 | 19,051 | 19,690 | | Weighted-average shares outstanding – diluted | 19,152 | 19,541 | 19,051 | 19,836 | | Excluded from diluted weighted-average shares outstanding: Antidilutive | 559 | 257 | 469 | 22 | | Excluded from diluted weighted-average shares outstanding: Performance conditions not satisfied | 184 | 136 | 233 | 136 | 14. COMMITMENTS AND CONTINGENCIES The company has accrued for several legal matters and maintains a contingent liability for Qdoba lease guarantees - As of July 6, 2025, the Company had accruals of $18.8 million for all legal matters, included in 'Accrued liabilities'[84] - In Gessele v. Jack in the Box Inc., a jury awarded approximately $6.4 million in damages and penalties, with an additional $9.9 million accrued for estimated interest and fees, totaling $16.3 million[85] - In J&D Restaurant Group, an $8.0 million jury verdict against the Company was overturned by the court; the plaintiff has appealed, and an amount commensurate with resolution attempts has been accrued[86] - The maximum potential liability for Qdoba lease guarantees is approximately $18.7 million, extending for up to 13 more years, but no liability has been recorded as the likelihood of future payments is remote[88] 15. SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION This note details non-cash investing and financing activities, including operating lease obligations Non-Cash Investing and Financing Transactions (Year-to-date) | Item | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | | :--- | :--- | :--- | | Increase (decrease) in obligations for purchases of property and equipment | $2,648 | $(3,825) | | Increase in dividends accrued or converted to common stock equivalents | $121 | $210 | | Right-of use assets obtained in exchange for operating lease obligations | $120,202 | $165,200 | 16. SUPPLEMENTAL CONSOLIDATED BALANCE SHEET INFORMATION This section provides a detailed breakdown of specific balance sheet accounts Accounts and Other Receivables, Net (in thousands) | Item | July 6, 2025 | September 29, 2024 | | :--- | :--- | :--- | | Trade | $86,051 | $71,306 | | Allowance for doubtful accounts | $(5,639) | $(4,512) | | Total | $88,472 | $83,567 | Property and Equipment, Net (in thousands) | Item | July 6, 2025 | September 29, 2024 | | :--- | :--- | :--- | | Land | $93,255 | $93,950 | | Buildings | $963,903 | $963,699 | | Restaurant and other equipment | $202,325 | $171,436 | | Construction in progress | $63,179 | $49,445 | | Less accumulated depreciation and amortization | $(866,112) | $(848,491) | | Total | $456,550 | $430,039 | Accrued Liabilities (in thousands) | Item | July 6, 2025 | September 29, 2024 | | :--- | :--- | :--- | | Legal accruals | $18,750 | $16,220 | | Payroll and related taxes | $35,136 | $38,112 | | Deferred rent income | $17,949 | $— | | Total | $186,414 | $166,868 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, condition, and outlook, including brand-specific results GENERAL This section defines the company's fiscal year and key non-GAAP performance metrics used by management - The Company's fiscal year is 52 or 53 weeks, ending the Sunday closest to September 30; fiscal years 2025 and 2024 each include 52 weeks[92] - Key performance metrics include changes in same-store sales, systemwide sales, franchised restaurant sales, and average unit volumes (AUVs), which are not GAAP measurements but are useful for investors[94] OVERVIEW The company announced a strategic plan involving the Del Taco brand, real estate sales, and restaurant closures - As of July 6, 2025, the Company operated and franchised 2,168 Jack in the Box restaurants and 585 Del Taco restaurants[95] - On April 23, 2025, the Company announced a strategic plan to explore alternatives for the Del Taco brand, sell owned real estate, discontinue dividends to reduce debt, and close approximately 150-200 underperforming Jack in the Box restaurants[96] RESULTS OF OPERATIONS This section analyzes financial performance, including sales declines and significant impairment charges for Del Taco Jack in the Box Brand The Jack in the Box brand saw declines in company and franchise sales, with rising labor and occupancy costs Company Restaurant Operations - Food and packaging costs as a percentage of sales decreased by 0.6% in the quarter and 2.0% year-to-date, primarily due to a new beverage contract and menu price increases, partially offset by commodity inflation (4.0% in Q3, 3.3% YTD)[102] - Payroll and employee benefit costs as a percentage of sales increased by 2.2% in the quarter and 2.6% year-to-date, driven by additional FUTA taxes in California and wage inflation (1.5% in Q3, 9.5% YTD, mainly due to AB 1228)[103] - Occupancy and other costs as a percentage of sales increased by 1.6% in the quarter and 1.4% year-to-date, mainly due to sales deleverage, higher rent, utilities, and delivery fees[104] Jack in the Box Company Restaurant Sales (in thousands) | Period | July 6, 2025 | July 7, 2024 | Change | | :--- | :--- | :--- | :--- | | Quarter | $94,112 | $100,355 | -$6,243 (-6.2%) | | Year-to-date | $322,962 | $331,339 | -$8,377 (-2.5%) | Jack in the Box Company Same-Store Sales Change | Period | July 6, 2025 | July 7, 2024 | | :--- | :--- | :--- | | Quarter | (6.4%) | 0.1% | | Year-to-date | (3.3%) | 0.6% | Franchise Operations - Franchise rental revenues decreased by $5.6 million (6.8%) in the quarter and $7.1 million (2.7%) year-to-date, primarily due to lower percentage rent, partially offset by lease termination fees[106] - Franchise royalties and other decreased by $3.2 million (6.7%) in the quarter and $4.7 million (3.0%) year-to-date, driven by lower sales[107] - Franchise contributions for advertising and other services revenues decreased by $4.3 million (8.3%) in the quarter and $7.0 million (4.1%) year-to-date, mainly due to lower sales impacting marketing contributions[107] Jack in the Box Franchise Revenues (in thousands) | Revenue Type | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Franchise rental revenues | $76,538 | $82,154 | $260,254 | $267,350 | | Royalties | $43,078 | $46,490 | $148,208 | $153,227 | | Franchise contributions for advertising and other services | $47,147 | $51,419 | $162,007 | $168,960 | Del Taco Brand The Del Taco brand saw significant sales decreases due to refranchising, though franchise revenues increased Company Restaurant Operations - Sales decrease primarily due to the refranchising of 47 company-operated restaurants since Q3 2024 and decreases in same-store sales[110] - Food and packaging costs as a percentage of sales increased by 1.0% in the quarter due to unfavorable menu mix and commodity inflation (4.7% in Q3), but decreased 0.8% year-to-date due to menu price increases and favorable beverage funding[111] - Payroll and employee benefit costs as a percentage of sales increased by 1.0% in the quarter and 2.4% year-to-date, mainly due to higher insurance and CA unemployment payroll tax adjustments, despite labor deflation of 0.5% in Q3[112] Del Taco Company Restaurant Sales (in thousands) | Period | July 6, 2025 | July 7, 2024 | Change | | :--- | :--- | :--- | :--- | | Quarter | $46,819 | $66,125 | -$19,306 (-29.2%) | | Year-to-date | $161,867 | $226,279 | -$64,412 (-28.5%) | Del Taco Company Same-Store Sales Change | Period | July 6, 2025 | July 7, 2024 | | :--- | :--- | :--- | | Quarter | (2.2%) | (3.5%) | | Year-to-date | (2.2%) | (0.9%) | Franchise Operations - Franchise rental revenues increased by $1.6 million (23.2%) in the quarter and $6.9 million (33.3%) year-to-date, primarily due to higher rental income and property tax revenue from new subleases related to refranchised restaurants[115] - Franchise royalties and other increased by $0.7 million (9.3%) in the quarter and $1.8 million (7.1%) year-to-date, mainly due to higher franchise restaurant sales resulting from refranchising[116] - Franchise support and other costs increased by $0.5 million (56.5%) in the quarter and $1.6 million (45.5%) year-to-date, primarily due to higher bad debt expense[118] Del Taco Franchise Revenues (in thousands) | Revenue Type | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Franchise rental revenues | $8,589 | $6,971 | $27,726 | $20,797 | | Royalties | $7,469 | $7,287 | $25,054 | $24,055 | | Franchise contributions for advertising and other services | $7,013 | $6,854 | $23,563 | $23,583 | Company-Wide Results Company-wide results were impacted by lower SG&A, significant Del Taco impairment charges, and income tax benefits Depreciation and Amortization - Depreciation and amortization decreased by $1.0 million in the quarter and $2.9 million year-to-date, primarily due to the refranchising of 47 Del Taco restaurants and certain Jack in the Box franchise assets becoming fully depreciated, partially offset by new technology assets and company-operated restaurants[120] Selling, General and Administrative ("SG&A") Expenses - Incentive compensation decreased by $2.0 million in the quarter and $3.1 million year-to-date due to lower achievement levels[122] - Share-based compensation decreased by $0.2 million in the quarter and $4.2 million year-to-date due to current year forfeitures and lower achievement levels for performance-based awards[122] - Insurance costs increased by $3.3 million in the quarter and $3.1 million year-to-date, primarily due to rolling over favorable adjustments from prior year workers' compensation and general liability claims[125] SG&A Expenses (in thousands) | Item | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Advertising | $7,398 | $8,267 | $25,839 | $26,438 | | Incentive compensation | $(797) | $1,237 | $4,659 | $7,719 | | Share-based compensation | $2,127 | $2,357 | $6,812 | $11,018 | | Cash surrender value of COLI policies, net | $(6,062) | $(3,223) | $(3,264) | $(9,289) | | Litigation matters | $530 | $518 | $1,704 | $1,236 | | Insurance | $2,426 | $(906) | $6,351 | $3,279 | | Total SG&A expenses | $26,835 | $29,580 | $112,999 | $113,200 | Impairment of Goodwill and Intangible Assets - Goodwill allocated to the Del Taco reporting unit was impaired by $25.3 million in Q2 2025 due to negative same-store sales trends, unfavorable economic conditions, potential divestment, and a sustained lower share price[126] - An additional $6.3 million in goodwill from a Q3 2025 franchisee acquisition was fully impaired based on the Q2 2025 analysis[127] - The Del Taco trademark asset incurred an impairment of $177.9 million in Q2 2025[128] Other Operating Expenses, Net - Other operating expenses, net, decreased by $2.9 million year-to-date, primarily due to a $10.9 million decrease in integration and strategic initiatives, partially offset by increases in costs of closed restaurants and operating restaurant impairment charges[129] Gains and Losses on the Sale of Company-Operated Restaurants - For the year-to-date period in 2025, the Company recognized a net gain of $2.6 million on the sale of 13 Del Taco company-operated restaurants[130] - In the prior year (YTD 2024), a net loss of $1.4 million was recorded, including a $2.2 million impairment of assets held for sale[130] Interest Expense, Net - Interest expense, net, decreased by $0.5 million in the quarter and $0.8 million year-to-date, primarily due to lower average borrowings[132] Income Taxes - For Q3 and year-to-date fiscal year 2025, the Company recorded income tax benefits of $0.5 million and $20.8 million, respectively, with effective tax rates of (2.4%) and 19.3%[133] - For Q3 and year-to-date fiscal year 2024, the Company recorded income tax expenses of $0.1 million and $23.3 million, respectively, with effective tax rates of (0.1%) and (66.0%)[134] - Differences in effective tax rates were primarily due to non-deductible goodwill impairment and non-taxable gains from insurance products[133][134] LIQUIDITY AND CAPITAL RESOURCES Operating cash flow increased significantly, while investing and financing cash usage decreased General - Primary sources of liquidity are cash flows from operations and borrowings available under the credit facility[136] - As of July 6, 2025, the Company had $68.1 million in cash and restricted cash, and $96.5 million in available borrowings under its $150.0 million Variable Funding Notes[137] - The Company expects cash flows from operations and its securitized financing facility to be sufficient to meet capital expenditure, working capital, and debt service requirements for the foreseeable future[138] Cash Flows - Operating cash flows increased by $89.4 million, primarily due to a $114.7 million favorable change in working capital, partially offset by lower net income (adjusted for non-cash items)[139] - Cash flows used in investing activities decreased by $6.1 million, driven by lower spending for assets intended for sale/leaseback and higher proceeds from asset sales, partially offset by franchise acquisitions and higher property/equipment purchases[140] Summary of Cash Flows (Year-to-date) | Activity | July 6, 2025 (in thousands) | July 7, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Operating activities | $128,626 | $39,263 | +$89,363 | | Investing activities | $(62,190) | $(68,288) | +$6,098 | | Financing activities | $(52,492) | $(106,124) | +$53,632 | | Net cash flows | $13,944 | $(135,149) | +$149,093 | Capital Expenditures - Capital expenditures increased by $3.1 million, primarily due to increased restaurant information technology spending for a new POS system and digital enhancements, partially offset by decreased corporate technology spending[141] Capital Expenditures (Year-to-date, in thousands) | Category | July 6, 2025 | July 7, 2024 | | :--- | :--- | :--- | | Restaurants | $68,332 | $60,462 | | Corporate Services | $1,961 | $6,731 | | Total capital expenditures | $70,293 | $67,193 | Sale of Company-Operated Restaurants - The Company sold 13 Del Taco company-operated restaurants year-to-date 2025, generating total proceeds of $5.7 million[142] Financing Activities - Cash flows used in financing activities decreased by $53.6 million year-over-year, primarily due to a $50.0 million decrease in stock repurchases and a $9.0 million decrease in dividends, partially offset by a $6.0 million repayment on Variable Funding Notes[143] Repurchases of common stock - The Company repurchased 0.1 million shares of common stock for $5.0 million in fiscal 2025, with $175.0 million remaining under authorized repurchase programs[144] Dividends - The Board of Directors declared two cash dividends of $0.44 per common share, totaling $16.7 million, through July 6, 2025[145] - Dividends have been discontinued effective April 23, 2025, with funds directed towards debt reduction[145] Securitized Refinancing Transaction - In February 2022, the Company completed the sale of $550.0 million each of Series 2022-1 Class A-2-I and Class A-2-II Fixed Rate Senior Secured Notes[146] - A revolving financing facility of Variable Funding Notes permits borrowings up to $150.0 million; as of July 6, 2025, $96.5 million was available[147] - The Company resumed scheduled amortization payments on its 2022 Notes and Series 2019-1 Notes beginning in Q2 2022, as its leverage ratio exceeded 5.0x[149] Restricted cash - As of July 6, 2025, the Company had $30.1 million in restricted cash, held by the Indenture trustee for payments of interest and commitment fees for the Class A-1 and A-2 Notes[150] Covenants and restrictions - As of July 6, 2025, the Company was in compliance with all debt covenant requirements and was not subject to any rapid amortization events[151] Revolving credit facility - Del Taco's syndicated revolving credit facility, with an aggregate principal amount of up to $75.0 million, matured on February 28, 2025, and was not renewed[152] DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES No material changes have occurred in critical accounting policies and estimates since the last annual report - There have been no material changes to the critical accounting policies and estimates previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 2024[153] NEW ACCOUNTING PRONOUNCEMENTS This section refers to Note 1 for information regarding new accounting pronouncements - Refer to Note 1, Basis of Presentation, of the notes to condensed consolidated financial statements for information on new accounting pronouncements[154] CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This section discloses risks and uncertainties that could cause actual results to differ from projections - Forward-looking statements are based on management's current expectations and involve known and unknown risks and uncertainties[155] - Key risk factors include changes in labor costs, declines in economic conditions, increases in food and commodity costs, intense competition, inability to attract/retain personnel, negative publicity, regulatory and legal complexities, cybersecurity risks, and restrictive terms of securitized debt instruments[155][157] - Investors are cautioned not to place undue reliance on forward-looking statements, which are made only as of the date issued, and the Company does not undertake any obligation to update them[156] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes have occurred in the company's market risks since the last annual report - There have been no material changes in the Company's quantitative and qualitative market risks since the Annual Report on Form 10-K for the fiscal year ended September 29, 2024[158] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal control - The Company's CEO and CFO concluded that disclosure controls and procedures were effective as of July 6, 2025[159] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended July 6, 2025[160] PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 14 for details on the company's legal matters and related contingencies - Refer to Note 14, Commitments and Contingencies, of the notes to the condensed consolidated financial statements for a discussion of legal matters[163] Item 1A. Risk Factors This section directs readers to previously filed comprehensive risk factor disclosures - Readers should consider the risks and uncertainties described in Item 1A of the Annual Report on Form 10-K for the fiscal year ended September 29, 2024, and the 'Cautionary Statements Regarding Forward-Looking Statements' in Item 2 of this Quarterly Report[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased in the third quarter, with $175.0 million remaining under authorized programs - No shares of common stock were repurchased in the third quarter of 2025[165][166] - As of July 6, 2025, $175.0 million remained under share repurchase programs authorized by the Board of Directors[165][166] Item 3. Defaults of Senior Securities This section states that there were no defaults of senior securities to report - No defaults of senior securities[167] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[168] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended July 6, 2025[169] Item 6. Exhibits This section lists the exhibits filed with the report, including officer certifications and iXBRL documents - Exhibits include certifications of the Chief Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[170] - iXBRL Instance Document and Taxonomy Extension documents (Schema, Calculation, Definition, Label, Presentation) are filed[170] Signature The report was duly signed by the Chief Financial Officer on behalf of the company - The report was signed by Dawn Hooper, Chief Financial Officer, on August 6, 2025[173]