What items are included in the Del Taco financial statements?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
---|---|--------------|-----------------| | Total revenue | | $ 1,686,160 | $ 1,665,660 | | Net earnings | | $ 118,000 | $ 133,485 |
The unaudited pro forma financial information for all periods presented includes the business combination accounting effects resulting from this acquisition, mainly including adjustments to reflect additional amortization expense from acquired intangibles, incremental depreciation expense from the fair value property and equipment, elimination of historical interest expense associated with both Del Taco's and the Company's historical indebtedness, additional interest expense associated with the new Del Taco revolving credit facility and the Company's new borrowings as part of the refinancing to fund the acquisition, adjusted rent expense reflecting the acquired right-of-use assets and liabilities to their estimated acquisition-date values based upon valuation of related lease intangibles and remaining payments, as well as the fair value adjustments made to leasehold improvements, certain material non-recurring adjustments and the tax-related effects as though Del Taco was combined as of the beginning of fiscal 2021. The unaudited pro forma financial information as presented above is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2021, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the two brands.
For the periods subsequent to the acquisition that are included in 2022, Del Taco had total revenues of $316.9 million and net earnings of $6.5 million.
4. SUMMARY OF REFRANCHISINGS AND FRANCHISE ACQUISITIONS
Refranchisings — The following table summarizes the number of restaurants sold to franchisees and gains recognized in each fiscal year (dollars in thousands):
| 202 | 4 | 2023 | 2022 | |
|---|---|---|---|---|
| Restaurants sold to Jack in the Box franchisees | _ | 5 | 15 | |
| Restaurants sold to Del Taco franchisees | 47 | 111 | ||
| Proceeds from the sale of company-operated restaurants (1) | $ 19 | 9,400 | $ 85,221 | $ 6,391 |
| Broker commissions | _ | (1,614) | _ | |
| Net assets sold (primarily property and equipment) | (: | 5,310) | (17,101) | (1,565) |
| Goodwill related to the sale of company-operated restaurants | (6 | 5,835) | (35,544) | (948) |
| Franchise fees | ( | 1,266) | (3,086) | |
| Sublease liabilities, net | (140) | (8,559) | ||
| Lease termination | (225) | (393) | _ | |
| Other (2) | (2 | 2,369) | (926) | _ |
| Gains on the sale of company-operated restaurants | $ 3 | 3,255 | $ 17,998 | $ 3,878 |
(1) Amounts in 2024, 2023, and 2022 include additional proceeds of $1.5 million, $0.9 million, and $1.4 million, respectively, related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years.
Franchise acquisitions — In 2024, Del Taco purchased 10 franchise-operated restaurants for $86 thousand as part of three separate transactions, and recognized related gains of $2.7 million. In 2022, Jack in the Box acquired 13 franchise restaurants for total consideration of $0.3 million, comprised of franchise receivables owed to the Company as of the acquisition date. There were no such acquisitions in 2023. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3).
(2) Amount in 2024 is primarily comprised of a $2.2 million loss on sale of assets related to a Del Taco refranchising transaction that closed in the second quarter of 2024. Amount in 2023 is primarily related to charges for a restaurant that was closed due to refranchising the related market.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to the 2025 Del Taco Franchise Disclosure Document, the financial statements include several key components. The unaudited pro forma financial information incorporates business combination accounting effects from the acquisition, such as adjustments for amortization expense from acquired intangibles, depreciation expense from fair value property and equipment, and the elimination of historical interest expense. It also includes interest expense related to the new Del Taco revolving credit facility, adjustments to rent expense, and fair value adjustments to leasehold improvements. For periods after the acquisition in 2022, Del Taco had total revenues of $316.9 million and net earnings of $6.5 million. These pro forma statements are for informational purposes and may not indicate future results due to factors like cost savings, synergies, and integration costs.
Segment reporting is also a significant part of Del Taco's financial statements. The company assesses the results of operations for the Jack in the Box and Del Taco brands separately, without including costs related to certain corporate functions that support both brands. This structure reflects the company's management and internal reporting methods. Additionally, the financial statements include details about the revolving credit facility Del Taco entered into in connection with the acquisition, with an aggregate principal amount of up to $75.0 million maturing on February 28, 2025.
The financial statements also adhere to U.S. Generally Accepted Accounting Principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC). They include estimates and assumptions made by management, which may affect the reported amounts of assets, liabilities, revenues, and expenses. Advertising costs are also detailed, with marketing fund contributions from Del Taco franchise and company-operated restaurants being approximately 4.0% of sales in 2025 and 2024. Consolidated advertising costs were $10.5 million and $10.4 million for 2025 and 2024, respectively. The financial statements also include an allowance for credit losses, which is estimated based on the lifetime expected loss on receivables from franchisees.