Jack in the Box(JACK) - 2026 Q1 - Quarterly Report

Sales Performance - Company-operated restaurant sales decreased by $1.8 million, or 1.4%, compared to the prior year, with same-store sales down 4.7%[97] - Franchise rental revenues decreased by $8.4 million, or 7.9%, primarily due to lower sales and a decrease in the number of franchise restaurants[102] - Total franchise revenues declined to $217.6 million, down from $237.3 million, representing an 8.3% decrease[100] - Systemwide sales for the sixteen weeks ended January 18, 2026, were $1.366 billion, compared to $1.268 billion for the same period in 2025, reflecting a 7.7% increase[94] Cost and Expense Management - Food and packaging costs as a percentage of company restaurant sales increased to 29.7%, up from 25.9% in the prior year, driven by commodity inflation of 7.1%[95][98] - Payroll and employee benefit costs increased to 35.3% of company restaurant sales, up from 33.3% in the prior year, primarily due to a change in the mix of restaurants[99] - Other operating expenses increased by $5.5 million, primarily due to restructuring and integration costs[110] - Depreciation and amortization increased by $1.2 million due to new technology assets and new company-operated restaurants[106] Financial Position - As of January 18, 2026, the company had $99.4 million in cash and restricted cash, with available borrowings of $95.3 million under its $150.0 million Variable Funding Notes[116] - Operating cash flows decreased by $71.0 million compared to the previous year, primarily due to a decrease in working capital of $59.2 million[118] - Total capital expenditures for the first quarter of 2026 were $23.218 million, compared to $21.300 million in the prior year[119] - The company prepaid $105.0 million of its existing Series 2019-1 Class A-2-II Notes on January 9, 2026, as part of its debt reduction strategy[122] - The company did not declare any dividends during the current quarter, redirecting funds toward leverage reduction[127] - As of January 18, 2026, there was $175.0 million remaining under share repurchase programs authorized by the Board of Directors[128] - The company expects cash flows from operations and its financing facility to be sufficient to meet capital expenditure, working capital, and debt service requirements for at least the next twelve months[117] Tax and Income - For the first quarter of fiscal year 2026, the company recorded an income tax expense of $6.9 million, resulting in an effective tax rate of 32.4%[112] - Changes in tax laws and interpretations may adversely affect the company's income tax expenses and payments[133] Risks and Challenges - The company faces risks related to maintaining effective internal controls, which could impact financial results and shareholder confidence[133] - The company is exposed to risks from disagreements with key stakeholders, including franchisees[133] - Activist stockholder actions could lead to significant costs and divert management's focus[133] - Cybersecurity breaches and data security incidents pose risks to the company's operations[133] - Increasing dependence on digital commerce platforms may unpredictably affect consumer behavior and financial results[133] - The company has a significant amount of outstanding debt, which could negatively impact financial condition and operational results[133] - Securitized debt instruments have restrictive terms, and non-compliance could result in default, harming brand value[133] - The company has not reported any material changes in market risks as per the latest annual report[134] Operational Changes - The average number of franchise restaurants decreased by 2.9% to 1,974 from 2,032 in the prior year[100] - The company closed 14 restaurants during the period, resulting in a total of 2,128 restaurants as of January 18, 2026[94] - Losses from discontinued operations amounted to $16.8 million for the first quarter of 2026, compared to earnings of $2.7 million in the prior year quarter[114] - Interest expense, net decreased by $0.7 million to $23.682 million compared to the prior year, primarily due to lower average borrowings[111]