8-K
JACK IN THE BOX INC (JACK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
| Date of Report (Date of earliest event reported): | May 13, 2020 | |
|---|---|---|
| JACK IN THE BOX INC. | ||
| --- | ||
| (Exact name of registrant as specified in its charter) | ||
| Delaware | 001-09390 | 95-2698708 |
| --- | --- | --- |
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission File<br><br> <br>Number) | (I.R.S. Employer Identification<br><br> <br>Number) |
| 9330 Balboa Avenue, San Diego, California | 92123 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
(858) 571-2121
\(Registrant’s telephone number, including area code\)
Not Applicable
\(Former Name or Former Address, if Changed Since Last Report\)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | JACK | The NASDAQ Stock Market LLC<br><br> <br>(NASDAQ Global Select Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
|---|
On May 13, 2020, Jack in the Box Inc. issued a press release announcing its second quarter fiscal 2020 financial results and disclosing other information.
A copy of the press release is attached as Exhibit 99.1.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
|---|
(d) Exhibits.
| Exhibit | |
|---|---|
| No. | Description |
| 99.1 | Press Release of Jack in the Box Inc. dated May 13, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| JACK IN THE BOX INC. | |
|---|---|
| Date: May 13, 2020 | /s/ Lance Tucker |
| Lance Tucker | |
| Executive Vice President, Chief Financial Officer | |
| Exhibit 99.1 | |
| --- |
Jack in the Box Inc. Reports Second Quarter FY 2020 Earnings
Withdraws Long-Term Guidance; Temporarily Suspends Quarterly Cash Dividend for the Quarter
SAN DIEGO--(BUSINESS WIRE)--May 13, 2020--Jack in the Box Inc. (NASDAQ: JACK) today reported financial results for the second quarter ended April 12, 2020.
| Increase/(Decrease) in same-store sales: | ||||
|---|---|---|---|---|
| 12 Weeks Ended | 28 Weeks Ended | |||
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | |
| Company | (4.1)% | 0.6% | (0.1)% | 0.5% |
| Franchise | (4.2)% | 0.1% | (0.9)% | 0.0% |
| System | (4.2)% | 0.2% | (0.8)% | 0.0% |
Jack in the Box^®^ system same-store sales decreased 4.2 percent for the quarter. Company same-store sales decreased 4.1 percent in the second quarter driven by average check growth of 6.4 percent while transactions decreased 10.5 percent. As previously disclosed, system same-store sales increased 5.2 percent in the seven weeks ended March 8, 2020, prior to any impacts from the COVID-19 pandemic.
Lenny Comma, chairman and chief executive officer, said, "Our same-store sales growth during the first seven weeks of the quarter exemplified our strategy of combining compelling bundles at competitive price points with innovation, including the menu addition of Tiny Tacos. Tiny Tacos helped to re-establish our equity in Tacos while delivering a craveable product at a great price.
"As we navigate the COVID-19 pandemic, I am proud of the way our teams in the restaurant, our employees, our franchisees and partners have responded nimbly to the changing occasions of our consumers. We remain committed to operating our restaurants with integrity, providing great guest service, and most importantly, protecting the health and safety of our employees and guests. We are dedicated to remaining open to serve guests during this time of uncertainty.
"Given this uncertainty, we are prioritizing actions to bolster liquidity in the event we encounter greater volatility to our business. Because of this, we have temporarily suspended both share repurchases and the quarterly dividend typically paid next month with the intent to re-evaluate these decisions each quarter as we gain greater clarity on any further negative impact to our business trends."
Results for the second quarter reflect the significant and unprecedented impacts of the COVID-19 pandemic, which primarily impacted the five weeks ended April 12, 2020.
Earnings from continuing operations were $11.5 million, or $0.50 per diluted share, for the second quarter of fiscal 2020 compared with $25.1 million, or $0.96 per diluted share, for the second quarter of fiscal 2019.
Operating Earnings Per Share ^(1)^, a non-GAAP measure, were $0.50 in the second quarter of fiscal 2020 compared with $0.99 in the prior year quarter. A reconciliation of non-GAAP Operating Earnings Per Share to GAAP results is provided below, with additional information included in the attachment to this release.
| 12 Weeks Ended | 28 Weeks Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | ||||||||
| Diluted earnings per share from continuing operations – GAAP | $ | 0.50 | $ | 0.96 | $ | 0.82 | $ | 2.15 | |||
| Restructuring charges | — | 0.03 | 0.03 | 0.20 | |||||||
| Gains on the sale of company-operated restaurants | — | — | (0.05 | ) | (0.01 | ) | |||||
| Gain on sale of corporate office building | — | — | (0.32 | ) | — | ||||||
| Pension settlement charges | 0.01 | — | 1.14 | — | |||||||
| Excess tax benefits from share-based compensation arrangements | (0.01 | ) | — | — | — | ||||||
| Operating Earnings Per Share – non-GAAP | $ | 0.50 | $ | 0.99 | $ | 1.62 | $ | 2.34 |
Adjusted EBITDA^(2)^, a non-GAAP measure, was $46.3 million in the second quarter of fiscal 2020 compared with $61.2 million for the prior year quarter.
Restaurant-Level Margin^(3)^, a non-GAAP measure, decreased by 700 basis points to 20.6 percent of company restaurant sales in the second quarter of fiscal 2020 from 27.6 percent a year ago. The decrease was due primarily to sales deleverage during COVID-19 impacted weeks and wage and commodity inflation. Food and packaging costs, as a percentage of company restaurant sales, increased 160 basis points in the quarter driven by higher ingredient costs, which were partially offset by menu price increases. Commodity costs increased 4.4 percent in the quarter as compared with the prior year.
Franchise-Level Margin^(3)^, a non-GAAP measure, decreased by $2.7 million in the second quarter, primarily driven by lower royalties and rental revenues as a result of the decline in franchise same-store sales. As previously disclosed, the company provided relief to franchisees within the quarter by postponing collection of April rent payments and reducing and postponing March marketing fees, which are typically collected in April. In addition to previously announced relief, the company also reduced April marketing fees, to a range of 2 to 4 percent of gross restaurant sales based on sales volume, and postponed these fees, which are typically collected in May, to be collected over three months beginning October 2020. This relief did not have any impact on Franchise-Level Margin^(3)^.
Franchise-Level Margin^(3)^, as a percentage of total franchise revenues, was 38.6 percent in the second quarter of fiscal 2020. The company adopted the new lease accounting standard, ASC 842, in fiscal 2020, which resulted in grossing up both franchise rental revenues and franchise occupancy expenses by approximately $9.5 million in the second quarter. Without these adjustments, Franchise-Level Margin^(3)^ would have been 41.4 percent of total franchise revenues. This compares with 41.3 percent in the prior year.
As a percentage of system-wide sales, G&A was 2.7 percent in the second quarter of fiscal 2020 compared with 1.7 percent in the prior year quarter. The $7.0 million increase in G&A, which excludes advertising, was primarily driven by:
- mark-to-market adjustments on investments supporting the company's non-qualified retirement plans resulting in a $7.2 million year-over-year increase in G&A; and
- an increase of $1.9 million related to litigation settlements.
- These increases were partially offset by a $2.4 million reduction in incentive compensation.
Advertising costs, which are included in SG&A, decreased $0.4 million in the second quarter due primarily to the reduction in marketing fees for March and April. In the second quarter of fiscal 2020, SG&A expenses increased by $6.6 million and were 11.2 percent of revenues compared with 8.2 percent in the prior year quarter.
Impairment and other charges, net, decreased $0.4 million in the second quarter. Restructuring charges, which are included in Impairment and other charges, net, in the accompanying condensed consolidated statements of earnings, decreased $0.8 million in the quarter.
Interest expense, net, increased by $2.1 million in the second quarter driven by higher debt balances.
The effective tax rate for the second quarter of fiscal 2020 was 32.3 percent and was elevated primarily due to the decrease in operating earnings before income tax and an increase in losses from the mark-to-market adjustments associated with investments supporting the company's non-qualified retirement plans. Excluding non-recurring impacts of share-based compensation, pension settlements, and restructuring, the effective tax rate in the second quarter was 33.9 percent.
Capital Allocation and Liquidity Position
The company did not repurchase any shares in the second quarter of fiscal 2020, and as announced on April 15, 2020, temporarily suspended its share repurchase program. This leaves approximately $122 million remaining under share repurchase programs authorized by its Board of Directors, consisting of $22 million remaining that expire in November 2020 and approximately $100 million remaining that expire in November 2021.
In the context of an unprecedented global pandemic, the company believes it is prudent to maintain maximum financial flexibility by preserving its capital and maintaining its healthy liquidity position. In addition to temporarily suspending its share repurchase program, the company announced today that on May 8, 2020, its Board of Directors approved the company’s voluntary election to temporarily suspend quarterly dividend payments. The company will continue to monitor and revisit its capital allocation policies throughout the third quarter with the goal of reinstating dividends and share repurchases once it has more clarity around the scope and duration of the disruption caused by COVID-19.
As of the end of the second quarter, the company had approximately $169 million in cash, of which $132 million was unrestricted cash.
Withdrawing Long-Term Guidance
Due to the unprecedented adverse impact of the COVID-19 pandemic on business results, the company is withdrawing its long-term guidance. The company will provide an update when it can reasonably estimate the impacts of the COVID-19 pandemic on business results. As previously announced, the company also withdrew its guidance for the fiscal year ending September 27, 2020.
Conference Call
The company will host a conference call for financial analysts and investors on Thursday, May 14, 2020, beginning at 8:30 a.m. PT (11:30 a.m. ET). The conference call will be broadcast live over the Internet via the Jack in the Box Inc. corporate website. To access the live call through the Internet, log onto the Investors section of the Jack in the Box Inc. website at http://investors.jackinthebox.com at least 15 minutes prior to the event in order to download and install any necessary audio software. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days, beginning at approximately 11:30 a.m. PT on May 14, 2020.
About Jack in the Box Inc.
Jack in the Box Inc. (NASDAQ: JACK), based in San Diego, is a restaurant company that operates and franchises Jack in the Box^®^restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. For more information on Jack in the Box, including franchising opportunities, visit www.jackinthebox.com.
_____________________________
(1) Operating Earnings Per Share represents diluted earnings per share from continuing operations on a GAAP basis excluding gains or losses on the sale of company-operated restaurants, restructuring charges, gain on sale of corporate office building, pension settlement charges, and the excess tax benefits from share-based compensation arrangements. See "Reconciliation of Non-GAAP Measurements to GAAP Results."
(2) Adjusted EBITDA represents net earnings on a GAAP basis excluding earnings or losses from discontinued operations, income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, impairment and other charges, net, depreciation and amortization, the amortization of franchise tenant improvement allowances and pension settlement charges. See "Reconciliation of Non-GAAP Measurements to GAAP Results."
(3) Restaurant-Level Margin and Franchise-Level Margin are non-GAAP measures. These non-GAAP measures are reconciled to earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to: the potential impacts to our business and operations resulting from the coronavirus COVID-19 pandemic, the success of new products, marketing initiatives and restaurant remodels and drive-thru enhancements; the impact of competition, unemployment, trends in consumer spending patterns and commodity costs; the company's ability to reduce G&A and operate efficiently; the company’s ability to achieve and manage its planned growth, which is affected by the availability of a sufficient number of suitable new restaurant sites, the performance of new restaurants, risks relating to expansion into new markets and successful franchise development; the ability to attract, train and retain top-performing personnel, litigation risks; risks associated with disagreements with franchisees; supply chain disruption; food-safety incidents or negative publicity impacting the reputation of the company's brand; increased regulatory and legal complexities, including federal, state and local policies regarding mitigation strategies for controlling the coronavirus COVID-19 pandemic, risks associated with the amount and terms of the securitized debt issued by certain of our wholly owned subsidiaries; adverse investor response to the company's temporary suspension of dividends and its stock repurchase program; and stock market volatility. These and other factors are discussed in the company’s annual report on Form 10-K and its periodic reports on Form 10-Q filed with the Securities and Exchange Commission, which are available online at http://investors.jackinthebox.com or in hard copy upon request. The company undertakes no obligation to update or revise any forward-looking statement, whether as the result of new information or otherwise.
| JACK IN THE BOX INC. AND SUBSIDIARIES<br> <br>CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS<br><br> <br>(In thousands, except per share data)<br><br> <br>(Unaudited) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 12 Weeks Ended | 28 Weeks Ended | ||||||||||
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | ||||||||
| Revenues: | |||||||||||
| Company restaurant sales | $ | 74,380 | $ | 76,682 | $ | 179,744 | $ | 179,514 | |||
| Franchise rental revenues | 69,885 | 61,646 | 165,969 | 145,536 | |||||||
| Franchise royalties and other | 37,764 | 38,410 | 90,230 | 90,660 | |||||||
| Franchise contributions for advertising and other services | 34,128 | 38,989 | 87,887 | 90,803 | |||||||
| 216,157 | 215,727 | 523,830 | 506,513 | ||||||||
| Operating costs and expenses, net: | |||||||||||
| Company restaurant costs (excluding depreciation and amortization): | |||||||||||
| Food and packaging | 22,237 | 21,676 | 53,585 | 51,292 | |||||||
| Payroll and employee benefits | 24,261 | 22,768 | 56,151 | 53,042 | |||||||
| Occupancy and other | 12,570 | 11,100 | 28,528 | 27,113 | |||||||
| Total company restaurant costs | 59,068 | 55,544 | 138,264 | 131,447 | |||||||
| Franchise occupancy expenses | 48,341 | 38,618 | 112,858 | 89,331 | |||||||
| Franchise support and other costs | 2,971 | 2,797 | 7,647 | 5,642 | |||||||
| Franchise advertising and other services expenses | 35,734 | 40,245 | 90,958 | 94,515 | |||||||
| Selling, general and administrative expenses | 24,203 | 17,585 | 52,451 | 41,668 | |||||||
| Depreciation and amortization | 12,282 | 12,690 | 29,010 | 29,859 | |||||||
| Impairment and other charges, net | 716 | 1,125 | (8,575 | ) | 8,823 | ||||||
| Gains on the sale of company-operated restaurants | — | — | (1,575 | ) | (219 | ) | |||||
| 183,315 | 168,604 | 421,038 | 401,066 | ||||||||
| Earnings from operations | 32,842 | 47,123 | 102,792 | 105,447 | |||||||
| Other pension and post-retirement expenses, net | 512 | 343 | 39,490 | 799 | |||||||
| Interest expense, net | 15,409 | 13,276 | 35,351 | 30,650 | |||||||
| Earnings from continuing operations and before income taxes | 16,921 | 33,504 | 27,951 | 73,998 | |||||||
| Income taxes | 5,458 | 8,374 | 8,591 | 17,747 | |||||||
| Earnings from continuing operations | 11,463 | 25,130 | 19,360 | 56,251 | |||||||
| Earnings (losses) from discontinued operations, net of taxes | — | (41 | ) | — | 2,936 | ||||||
| Net earnings | $ | 11,463 | $ | 25,089 | $ | 19,360 | $ | 59,187 | |||
| Net earnings per share - basic: | |||||||||||
| Earnings from continuing operations | $ | 0.50 | $ | 0.97 | $ | 0.83 | $ | 2.17 | |||
| Earnings from discontinued operations | — | — | — | 0.11 | |||||||
| Net earnings per share (1) | $ | 0.50 | $ | 0.97 | $ | 0.83 | $ | 2.28 | |||
| Net earnings per share - diluted: | |||||||||||
| Earnings from continuing operations | $ | 0.50 | $ | 0.96 | $ | 0.82 | $ | 2.15 | |||
| Earnings from discontinued operations | — | — | — | 0.11 | |||||||
| Net earnings per share (1) | $ | 0.50 | $ | 0.96 | $ | 0.82 | $ | 2.26 | |||
| Weighted-average shares outstanding: | |||||||||||
| Basic | 22,803 | 25,943 | 23,339 | 25,922 | |||||||
| Diluted | 22,895 | 26,145 | 23,490 | 26,137 | |||||||
| Dividends declared per common share | $ | 0.40 | $ | 0.40 | $ | 0.80 | $ | 0.80 | |||
| (1) | Earnings per share may not add due to rounding. | ||||||||||
| --- | --- |
| JACK IN THE BOX INC. AND SUBSIDIARIES<br> <br>CONDENSED CONSOLIDATED BALANCE SHEETS<br><br> <br>(In thousands, except share and per share data)<br><br> <br>(Unaudited) | ||||||
|---|---|---|---|---|---|---|
| April 12, 2020 | September 29, 2019 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 132,161 | $ | 125,536 | ||
| Restricted cash | 37,023 | 26,025 | ||||
| Accounts and other receivables, net | 66,331 | 45,235 | ||||
| Inventories | 1,821 | 1,776 | ||||
| Prepaid expenses | 18,460 | 9,015 | ||||
| Current assets held for sale | 6,186 | 16,823 | ||||
| Other current assets | 3,970 | 2,718 | ||||
| Total current assets | 265,952 | 227,128 | ||||
| Property and equipment: | ||||||
| Property and equipment, at cost | 1,149,656 | 1,176,241 | ||||
| Less accumulated depreciation and amortization | (793,435 | ) | (784,307 | ) | ||
| Property and equipment, net | 356,221 | 391,934 | ||||
| Other assets: | ||||||
| Operating lease right-of-use asset | 903,010 | — | ||||
| Intangible assets, net | 294 | 425 | ||||
| Goodwill | 47,161 | 46,747 | ||||
| Deferred tax assets | 77,410 | 85,564 | ||||
| Other assets, net | 211,205 | 206,685 | ||||
| Total other assets | 1,239,080 | 339,421 | ||||
| $ | 1,861,253 | $ | 958,483 | |||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||
| Current liabilities: | ||||||
| Current maturities of long-term debt | $ | 13,819 | $ | 774 | ||
| Current operating lease liabilities | 163,077 | — | ||||
| Accounts payable | 47,867 | 37,066 | ||||
| Accrued liabilities | 120,949 | 120,083 | ||||
| Total current liabilities | 345,712 | 157,923 | ||||
| Long-term liabilities: | ||||||
| Long-term debt, net of current maturities | 1,368,446 | 1,274,374 | ||||
| Long-term operating lease liabilities, net of current portion | 781,653 | — | ||||
| Other long-term liabilities | 242,368 | 263,770 | ||||
| Total long-term liabilities | 2,392,467 | 1,538,144 | ||||
| Stockholders’ deficit: | ||||||
| Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued | — | — | ||||
| Common stock $0.01 par value, 175,000,000 shares authorized, 82,318,622 and 82,159,002 issued, respectively | 823 | 822 | ||||
| Capital in excess of par value | 489,847 | 480,322 | ||||
| Retained earnings | 1,574,930 | 1,577,034 | ||||
| Accumulated other comprehensive loss | (133,220 | ) | (140,006 | ) | ||
| Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively | (2,809,306 | ) | (2,655,756 | ) | ||
| Total stockholders’ deficit | (876,926 | ) | (737,584 | ) | ||
| $ | 1,861,253 | $ | 958,483 |
| JACK IN THE BOX INC. AND SUBSIDIARIES<br> <br>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<br><br> <br>(In thousands) (Unaudited) | ||||||
|---|---|---|---|---|---|---|
| 28 Weeks Ended | ||||||
| April 12, 2020 | April 14, 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net earnings | $ | 19,360 | $ | 59,187 | ||
| Earnings from discontinued operations | — | 2,936 | ||||
| Earnings from continuing operations | 19,360 | 56,251 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 29,010 | 29,859 | ||||
| Amortization of franchise tenant improvement allowances and other | 1,765 | 1,137 | ||||
| Deferred finance cost amortization | 3,046 | 1,224 | ||||
| Excess tax benefits from share-based compensation arrangements | (77 | ) | (47 | ) | ||
| Deferred income taxes | 6,783 | 3,955 | ||||
| Share-based compensation expense | 5,865 | 4,708 | ||||
| Pension and postretirement expense | 39,490 | 799 | ||||
| Losses (gains) on cash surrender value of company-owned life insurance | 3,150 | (1,336 | ) | |||
| Gains on the sale of company-operated restaurants | (1,575 | ) | (219 | ) | ||
| Gains on the disposition of property and equipment, net | (10,170 | ) | (138 | ) | ||
| Non-cash operating lease costs | (13,118 | ) | — | |||
| Impairment charges and other | 133 | 896 | ||||
| Changes in assets and liabilities, excluding acquisitions: | ||||||
| Accounts and other receivables | (22,858 | ) | (11,658 | ) | ||
| Inventories | 28 | (91 | ) | |||
| Prepaid expenses and other current assets | (10,350 | ) | 3,701 | |||
| Accounts payable | 20,660 | (3,904 | ) | |||
| Accrued liabilities | 1,400 | (6,532 | ) | |||
| Pension and postretirement contributions | (3,582 | ) | (3,671 | ) | ||
| Franchise tenant improvement allowance distributions | (5,811 | ) | (6,697 | ) | ||
| Other | (4,222 | ) | (7,421 | ) | ||
| Cash flows provided by operating activities | 58,927 | 60,816 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment | (12,777 | ) | (18,191 | ) | ||
| Proceeds from the sale of property and equipment | 22,394 | 1,479 | ||||
| Proceeds from the sale and leaseback of assets | 17,373 | 1,944 | ||||
| Proceeds from the sale of company-operated restaurants | 1,575 | 133 | ||||
| Collections on notes receivable | — | 6,491 | ||||
| Other | 1,036 | — | ||||
| Cash flows provided by (used in) investing activities | 29,601 | (8,144 | ) | |||
| Cash flows from financing activities: | ||||||
| Borrowings on revolving credit facilities | 111,376 | 189,736 | ||||
| Repayments of borrowings on revolving credit facilities | (3,500 | ) | (180,800 | ) | ||
| Principal repayments on debt | (3,640 | ) | (21,757 | ) | ||
| Debt issuance costs | (216 | ) | (3,615 | ) | ||
| Dividends paid on common stock | (18,466 | ) | (20,615 | ) | ||
| Proceeds from issuance of common stock | 3,559 | 243 | ||||
| Repurchases of common stock | (155,576 | ) | (14,362 | ) | ||
| Payroll tax payments for equity award issuances | (4,442 | ) | (2,617 | ) | ||
| Cash flows used in financing activities | (70,905 | ) | (53,787 | ) | ||
| Net increase (decrease) in cash and restricted cash | 17,623 | (1,115 | ) | |||
| Cash and restricted cash at beginning of period | 151,561 | 2,705 | ||||
| Cash and restricted cash at end of period | $ | 169,184 | $ | 1,590 |
JACK IN THE BOX INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION
The following table presents certain income and expense items included in our condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.
| CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA<br> <br>(Unaudited) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 12 Weeks Ended | 28 Weeks Ended | |||||||
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | |||||
| Revenues: | ||||||||
| Company restaurant sales | 34.4 | % | 35.5 | % | 34.3 | % | 35.4 | % |
| Franchise rental revenues | 32.3 | % | 28.6 | % | 31.7 | % | 28.7 | % |
| Franchise royalties and other | 17.5 | % | 17.8 | % | 17.2 | % | 17.9 | % |
| Franchise contributions for advertising and other services | 15.8 | % | 18.1 | % | 16.8 | % | 17.9 | % |
| Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
| Operating costs and expenses, net: | ||||||||
| Company restaurant costs: | ||||||||
| Food and packaging (1) | 29.9 | % | 28.3 | % | 29.8 | % | 28.6 | % |
| Payroll and employee benefits (1) | 32.6 | % | 29.7 | % | 31.2 | % | 29.5 | % |
| Occupancy and other (1) | 16.9 | % | 14.5 | % | 15.9 | % | 15.1 | % |
| Total company restaurant costs (1) | 79.4 | % | 72.4 | % | 76.9 | % | 73.2 | % |
| Franchise occupancy expenses (2) | 69.2 | % | 62.6 | % | 68.0 | % | 61.4 | % |
| Franchise support and other costs (3) | 7.9 | % | 7.3 | % | 8.5 | % | 6.2 | % |
| Franchise advertising and other services expenses (4) | 104.7 | % | 103.2 | % | 103.5 | % | 104.1 | % |
| Selling, general and administrative expenses | 11.2 | % | 8.2 | % | 10.0 | % | 8.2 | % |
| Depreciation and amortization | 5.7 | % | 5.9 | % | 5.5 | % | 5.9 | % |
| Impairment and other charges, net | 0.3 | % | 0.5 | % | (1.6) | % | 1.7 | % |
| Gains on the sale of company-operated restaurants | — | % | — | % | (0.3) | % | — | % |
| Earnings from operations | 15.2 | % | 21.8 | % | 19.6 | % | 20.8 | % |
| Income tax rate (5) | 32.3 | % | 25.0 | % | 30.7 | % | 24.0 | % |
| (1) | As a percentage of company restaurant sales. | |||||||
| --- | --- | |||||||
| (2) | As a percentage of franchise rental revenues. | |||||||
| (3) | As a percentage of franchise royalties and other. | |||||||
| (4) | As a percentage of franchise contributions for advertising and other services. | |||||||
| (5) | As a percentage of earnings from continuing operations and before income taxes. |
| Jack in the Box system sales (dollars in thousands): | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12 Weeks Ended | 28 Weeks Ended | ||||||||
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | ||||||
| Company-owned restaurant sales | $ | 74,380 | $ | 76,682 | $ | 179,744 | $ | 179,514 | |
| Franchised restaurant sales (1) | 695,926 | 721,350 | 1,675,271 | 1,681,310 | |||||
| System sales (1) | $ | 770,306 | $ | 798,032 | $ | 1,855,015 | $ | 1,860,824 | |
| (1) | Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. System sales include company and franchised restaurant sales. We do not<br> record franchised sales as revenues; however, our royalty revenues, marketing fees and percentage rent revenues are calculated based on a percentage of franchised sales. We believe franchised and system restaurant sales<br> information is useful to investors as they have a direct effect on the company's profitability. | ||||||||
| --- | --- |
The following table summarizes the year-to-date changes in the number and mix of Jack in the Box company and franchise restaurants:
| SUPPLEMENTAL RESTAURANT ACTIVITY INFORMATION<br> <br>(Unaudited) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||||
| Company | Franchise | Total | Company | Franchise | Total | |||||||
| Beginning of year | 137 | 2,106 | 2,243 | 137 | 2,100 | 2,237 | ||||||
| New | — | 16 | 16 | — | 11 | 11 | ||||||
| Acquired from franchisees | 8 | (8 | ) | — | — | — | — | |||||
| Closed | (1 | ) | (12 | ) | (13 | ) | — | (8 | ) | (8 | ) | |
| End of period | 144 | 2,102 | 2,246 | 137 | 2,103 | 2,240 | ||||||
| % of system | 6 | % | 94 | % | 100 | % | 6 | % | 94 | % | 100 | % |
JACK IN THE BOX INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASUREMENTS TO GAAP RESULTS (Unaudited)
To supplement the consolidated financial statements, which are presented in accordance with GAAP, the company uses the following non-GAAP measures: Operating Earnings Per Share, Adjusted EBITDA, Restaurant-Level Margin and Franchise-Level Margin. Management believes that these measurements, when viewed with the company's results of operations in accordance with GAAP and the accompanying reconciliations in the tables below, provide useful information about operating performance and period-over-period changes, and provide additional information that is useful for evaluating the operating performance of the company's core business without regard to potential distortions.
Operating Earnings Per Share
Operating Earnings Per Share represents diluted earnings per share from continuing operations on a GAAP basis excluding gains or losses on the sale of company-operated restaurants, restructuring charges, the gain on sale of corporate office building, pension settlement charges, and the excess tax benefits from share-based compensation arrangements which are now recorded as a component of income tax expense versus equity prior to fiscal year 2019. Operating Earnings Per Share should be considered as a supplement to, not as a substitute for, analysis of results as reported under U.S. GAAP or other similarly titled measures of other companies. Management believes Operating Earnings Per Share provides investors with a meaningful supplement of the company’s operating performance and period-over-period changes without regard to potential distortions.
Below is a reconciliation of non-GAAP Operating Earnings Per Share to the most directly comparable GAAP measure, diluted earnings per share from continuing operations. Figures may not add due to rounding.
| 12 Weeks Ended | 28 Weeks Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | ||||||||
| Diluted earnings per share from continuing operations – GAAP | $ | 0.50 | $ | 0.96 | $ | 0.82 | $ | 2.15 | |||
| Restructuring charges | — | 0.03 | 0.03 | 0.20 | |||||||
| Gains on the sale of company-operated restaurants | — | — | (0.05 | ) | (0.01 | ) | |||||
| Gain on sale of corporate office building | — | — | (0.32 | ) | — | ||||||
| Pension settlement charges | 0.01 | — | 1.14 | — | |||||||
| Excess tax benefits from share-based compensation arrangements | (0.01 | ) | — | — | — | ||||||
| Operating earnings per share - non-GAAP | $ | 0.50 | $ | 0.99 | $ | 1.62 | $ | 2.34 |
Adjusted EBITDA
Adjusted EBITDA represents net earnings on a GAAP basis excluding earnings or losses from discontinued operations, income taxes, interest expense, net, pension settlement charges, gains or losses on the sale of company-operated restaurants, impairment and other charges, net, depreciation and amortization, and the amortization of franchise tenant improvement allowances and other. Adjusted EBITDA should be considered as a supplement to, not as a substitute for, analysis of results as reported under U.S. GAAP or other similarly titled measures of other companies. Management believes Adjusted EBITDA is useful to investors to gain an understanding of the factors and trends affecting the company's ongoing cash earnings, from which capital investments are made and debt is serviced.
Below is a reconciliation of non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net earnings (in thousands).
| 12 Weeks Ended | 28 Weeks Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | |||||||
| Net earnings - GAAP | $ | 11,463 | $ | 25,089 | $ | 19,360 | $ | 59,187 | ||
| Losses (earnings) from discontinued operations, net of taxes | — | 41 | — | (2,936 | ) | |||||
| Income taxes | 5,458 | 8,374 | 8,591 | 17,747 | ||||||
| Interest expense, net | 15,409 | 13,276 | 35,351 | 30,650 | ||||||
| Pension settlement charges | 321 | — | 38,927 | — | ||||||
| Gains on the sale of company-operated restaurants | — | — | (1,575 | ) | (219 | ) | ||||
| Impairment and other charges, net | 716 | 1,125 | (8,575 | ) | 8,823 | |||||
| Depreciation and amortization | 12,282 | 12,690 | 29,010 | 29,859 | ||||||
| Amortization of franchise tenant improvement allowances and other | 614 | 607 | 1,765 | 1,137 | ||||||
| Adjusted EBITDA – non-GAAP | $ | 46,263 | $ | 61,202 | $ | 122,854 | $ | 144,248 |
Restaurant-Level Margin
Restaurant-Level Margin is defined as company restaurant sales less restaurant operating costs (food and packaging, labor, and occupancy costs) and is neither required by, nor presented in accordance with GAAP. Restaurant-Level Margin excludes revenues and expenses of our franchise operations and certain costs, such as selling, general, and administrative expenses, depreciation and amortization, impairment and other charges, net, gains or losses on the sale of company-operated restaurants, and other costs that are considered normal operating costs. As such, Restaurant-Level Margin is not indicative of the overall results of the company and does not accrue directly to the benefit of shareholders because of the exclusion of corporate-level expenses. Restaurant-Level Margin should be considered as a supplement to, not as a substitute for, analysis of results as reported under GAAP or other similarly titled measures of other companies. The company is presenting Restaurant-Level Margin because it believes that it provides a meaningful supplement to net earnings of the company's core business operating results, as well as a comparison to those of other similar companies. Management utilizes Restaurant-Level Margin as a key performance indicator to evaluate the profitability of company-owned restaurants.
Below is a reconciliation of non-GAAP Restaurant-Level Margin to the most directly comparable GAAP measure, earnings from operations (in thousands):
| 12 Weeks Ended | 28 Weeks Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April 12, 2020 | April 14, 2019 | April 12, 2020 | April 14, 2019 | |||||||||||||
| Earnings from operations - GAAP | $ | 32,842 | $ | 47,123 | $ | 102,792 | $ | 105,447 | ||||||||
| Franchise rental revenues | (69,885 | ) | (61,646 | ) | (165,969 | ) | (145,536 | ) | ||||||||
| Franchise royalties and other | (37,764 | ) | (38,410 | ) | (90,230 | ) | (90,660 | ) | ||||||||
| Franchise contributions for advertising and other services | (34,128 | ) | (38,989 | ) | (87,887 | ) | (90,803 | ) | ||||||||
| Franchise occupancy expenses | 48,341 | 38,618 | 112,858 | 89,331 | ||||||||||||
| Franchise support and other costs | 2,971 | 2,797 | 7,647 | 5,642 | ||||||||||||
| Franchise advertising and other services expenses | 35,734 | 40,245 | 90,958 | 94,515 | ||||||||||||
| Selling, general and administrative expenses | 24,203 | 17,585 | 52,451 | 41,668 | ||||||||||||
| Impairment and other charges, net | 716 | 1,125 | (8,575 | ) | 8,823 | |||||||||||
| Gains on the sale of company-operated restaurants | — | — | (1,575 | ) | (219 | ) | ||||||||||
| Depreciation and amortization | 12,282 | 12,690 | 29,010 | 29,859 | ||||||||||||
| Restaurant-Level Margin- Non-GAAP | $ | 15,312 | $ | 21,138 | $ | 41,480 | $ | 48,067 | ||||||||
| Company restaurant sales | $ | 74,380 | $ | 76,682 | $ | 179,744 | $ | 179,514 | ||||||||
| Restaurant-Level Margin % - Non-GAAP | 20.6 | % | 27.6 | % | 23.1 | % | 26.8 | % |
Franchise-Level Margin
Franchise-Level Margin is defined as franchise revenues less franchise operating costs (occupancy expenses, advertising contributions, and franchise support and other costs) and is neither required by, nor presented in accordance with GAAP. Franchise-Level Margin excludes revenue and expenses of our company-operated restaurants and certain costs, such as selling, general, and administrative expenses, depreciation and amortization, impairment and other charges, net, and other costs that are considered normal operating costs. As such, Franchise-Level Margin is not indicative of the overall results of the company and does not accrue directly to the benefit of shareholders because of the exclusion of corporate-level expenses. Franchise-Level Margin should be considered as a supplement to, not as a substitute for, analysis of results as reported under GAAP or other similarly titled measures of other companies. The company is presenting Franchise-Level Margin because it believes that it provides a meaningful supplement to net earnings of the company's core business operating results, as well as a comparison to those of other similar companies. Management utilizes Franchise-Level Margin as a key performance indicator to evaluate the profitability of our franchise operations.
Below is a reconciliation of non-GAAP Franchise-Level Margin to the most directly comparable GAAP measure, earnings from operations (in thousands):
| 12 Weeks Ended | 28 Weeks Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April 12, 2020 | April 14, 2019 (1) | April 12, 2020 | April 14, 2019 (1) | |||||||||||||
| Earnings from operations - GAAP | $ | 32,842 | $ | 47,123 | $ | 102,792 | $ | 105,447 | ||||||||
| Company restaurant sales | (74,380 | ) | (76,682 | ) | (179,744 | ) | (179,514 | ) | ||||||||
| Food and packaging | 22,237 | 21,676 | 53,585 | 51,292 | ||||||||||||
| Payroll and employee benefits | 24,261 | 22,768 | 56,151 | 53,042 | ||||||||||||
| Occupancy and other | 12,570 | 11,100 | 28,528 | 27,113 | ||||||||||||
| Selling, general and administrative expenses | 24,203 | 17,585 | 52,451 | 41,668 | ||||||||||||
| Impairment and other charges, net | 716 | 1,125 | (8,575 | ) | 8,823 | |||||||||||
| Gains on the sale of company-operated restaurants | — | — | (1,575 | ) | (219 | ) | ||||||||||
| Depreciation and amortization | 12,282 | 12,690 | 29,010 | 29,859 | ||||||||||||
| Franchise-Level Margin - Non-GAAP | $ | 54,731 | $ | 57,385 | $ | 132,623 | $ | 137,511 | ||||||||
| Franchise rental revenues | $ | 69,885 | $ | 61,646 | $ | 165,969 | $ | 145,536 | ||||||||
| Franchise royalties and other | 37,764 | 38,410 | 90,230 | 90,660 | ||||||||||||
| Franchise contributions for advertising and other services | 34,128 | 38,989 | 87,887 | 90,803 | ||||||||||||
| Total franchise revenues | $ | 141,777 | $ | 139,045 | $ | 344,086 | $ | 326,999 | ||||||||
| Franchise-Level Margin % - Non-GAAP | 38.6 | % | 41.3 | % | 38.5 | % | 42.1 | % | ||||||||
| (1) | During the first quarter of 2020, the Company changed its presentation of Non-GAAP Franchise-Level Margin to include "amortization of franchise tenant improvement allowances and<br> other" in its definition thereof. The prior period has been recast to conform to current year presentation. | |||||||||||||||
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Contacts
Investor Contact:
Rachel Webb, \(858\) 571-2683