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): August 4, 2021
| JACK IN THE BOX INC. |
|---|
| (Exact name of registrant as specified in its charter) |
| Delaware | 1-9390 | 95-2698708 |
|---|---|---|
| (State or Other Jurisdiction<br><br> <br>of Incorporation) | (Commission<br><br> <br>File Number) | (I.R.S. Employer<br><br> <br>Identification Number) |
| 9357 Spectrum Center Blvd,<br> San Diego, CA 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 filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ 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 12, 2021, Jack in the Box Inc. issued a press release announcing its third quarter fiscal 2021 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 August 4, 2021
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: August 4, 2021 | /s/ Tim Mullany |
| Tim Mullany | |
| Executive Vice President, Chief Financial Officer |
Exhibit 99.1
Jack in the Box Inc. Reports Third Quarter 2021 Earnings
Systemwide sales growth of +10.6%
Same store sales growth +10.2%
Net units down -1.1%
Diluted EPS up +26.1% to $1.79
Company provides updates to 2021 guidance measures
Company provides CapEx & Other Investments guidance range for 2022
SAN DIEGO--(BUSINESS WIRE)--August 4, 2021--Jack in the Box Inc. (NASDAQ: JACK) announced financial results for the third quarter ended July 4, 2021, comprised of growth in systemwide sales, system same store sales and earnings per share.
"I am very pleased with our third quarter results, and proud of the continued momentum and execution from our franchisees and operators,” said Darin Harris, Jack in the Box Chief Executive Officer. “Comps on a two-year basis of +16.8%, coupled with solid earnings performance, are all part of creating the store-level profitability that will help us maximize our growth and expansion opportunities going forward.”
Systemwide sales increased 10.6% in the third quarter, comprised of positive results in same store sales and a slight decline in net unit growth. The company had a third quarter net store decline of 9 stores, comprised of 4 store openings and 13 closures – with 7 closings that include future offsetting locations, and the remainder related to agreement expirations. In the third quarter, there were development agreements signed for 60 future restaurants, bringing the year-to-date total to 64 future restaurants.
Company-operated same-store sales grew 9.0% in the third quarter, with evenly-balanced contribution from both transactions and average check. Franchise same-store sales grew 10.3%, with similar trends in both average check and transactions.
Same-store sales:
| 12 Weeks Ended | 40 Weeks Ended | |||
|---|---|---|---|---|
| July 4, 2021 | July 5, 2020 | July 4, 2021 | July 5, 2020 | |
| Company | 9.0% | 4.1% | 10.0% | 1.2% |
| Franchise | 10.3% | 6.9% | 14.5% | 1.5% |
| System SSS | 10.2% | 6.6% | 14.0% | 1.5% |
Restaurant Counts:
| 2021 | 2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Company | Franchise | Total | Company | Franchise | Total | |||||||
| Store count at beginning of Q3 | 148 | 2,080 | 2,228 | 144 | 2,102 | 2,246 | ||||||
| New | — | 4 | 4 | — | 4 | 4 | ||||||
| Closed | — | (13 | ) | (13 | ) | — | (6 | ) | (6 | ) | ||
| Store count at end of Q3 | 148 | 2,071 | 2,219 | 144 | 2,100 | 2,244 | ||||||
| Q3 Net Unit Increase/(Decrease) | — | (9 | ) | (9 | ) | — | (2 | ) | (2 | ) | ||
| Q3 2021 vs. Q3 2020 Unit % Increase/(Decrease) | 2.8 | % | (1.4 | )% | (1.1 | )% | 5.1 | % | (0.2 | )% | 0.1 | % |
Third quarter diluted earnings per share was $1.79, up 26.1% over the prior year quarter. Total revenues increased 11.2% to $269.5 million, compared to $242.3 million in the comparable period ended July 5, 2020, driven by 10.2% growth in system same-store sales. Net earnings increased to $40.0 million for the third quarter of fiscal 2021, compared with $32.6 million for the third quarter of fiscal 2020. Adjusted EBITDA^(1)^, a non-GAAP measure, was $79.0 million in the third quarter of fiscal 2021 compared with $72.9 million for the prior year quarter.
Restaurant-Level Margin^(2)^, a non-GAAP measure, remained flat at 25.4% of company restaurant sales in the third quarter of fiscal 2021 from a year ago. Sales leverage was offset by an increase in food and packaging costs, wage inflation of 8%, higher incentive compensation as well as an increase in delivery fees and maintenance and repair costs. The increase in food and packaging costs were primarily driven by higher costs for ingredients, partially offset by favorable sales mix and menu price increases. Commodity costs increased in the quarter by approximately 5.7%, primarily due to increases in pork and beverages, partially offset by a decrease in beef.
Franchise-Level Margin^(2)^, a non-GAAP measure, increased by $10.5 million in the third quarter, primarily driven by higher royalties and rental revenues as a result of higher franchise same-store sales.
(1) Adjusted EBITDA represents net earnings on a GAAP basis excluding 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 other, and pension settlement charges. See "Reconciliation of Non-GAAP Measurements to GAAP Results."
(2) 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."
Capital Allocation
The company repurchased 0.6 million shares of our common stock for an aggregate cost of $65.0 million. As of July 4, 2021, there was $70.0 million remaining under the Board-authorized stock buyback program which expire in November 2022.
On July 30, 2021, the Board of Directors declared a cash dividend of $0.44 per share on the company's common stock. The dividend is payable on September 3, 2021, to shareholders of record at the close of business on August 18, 2021.
Updates to 2021 Guidance Measures
The following guidance and underlying assumptions reflect the company’s current expectations for the current fiscal year ending October 3, 2021 (which, this year, includes 53 weeks):
- 2021 CapEx of $40-45 million
- Previously stated at Investor Day on June 29, 2021 — and does not include the Other Investments stated below which commence with our 2022 guidance
- 2021 G&A of $71-76 million
- Replaces previous % of system sales guidance, and excludes net COLI gains/losses
- 2021 Commodity outlook up 4-5% compared to 2020
- Previous guidance was up 1-3%
- 2021 Labor Cost outlook up 7-8% compared to 2020
- Previous guidance was up 5-6%
The Company will provide similar guidance measures for FY 2022 on its Q4 2021 earnings call.
CapEx & Other Investments Guidance for 2022
The following guidance range and underlying assumptions reflect the company’s current expectations for the fiscal year ending October 2, 2022:
- 2022 CapEx & Other Investments: $65-75 million
- Note: Beginning in 2022, CapEx & Other Investments guidance factors in two main items:
- Capital expenditures (located within cash flows from investing activities)
- Franchise tenant improvement allowances and incentives (located within cash flows from operating activities)
Conference Call
The company will host a conference call for analysts and investors on Wednesday, August 4, 2021, beginning at 2:00 p.m. PT (5:00 p.m. ET). The call will be webcast live via the Investors section of the Jack in the Box company website at http://investors.jackinthebox.com. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days. The call can be accessed via phone by dialing (833) 513-0565 and using ID 2691153.
About Jack in the Box Inc.
Jack in the Box Inc. (NASDAQ: JACK), founded and headquartered in San Diego, California, 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
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; 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> <br>CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS<br><br> <br>(In thousands, except per share data)<br><br> <br>(Unaudited) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12 Weeks Ended | 40 Weeks Ended | |||||||||||
| July 4, <br><br> 2021 | July 5, <br><br> 2020 | July 4, <br><br> 2021 | July 5, <br><br> 2020 | |||||||||
| Revenues: | ||||||||||||
| Company restaurant sales | $ | 91,892 | $ | 82,444 | $ | 292,132 | $ | 262,188 | ||||
| Franchise rental revenues | 80,598 | 76,021 | 262,248 | 241,990 | ||||||||
| Franchise royalties and other | 48,582 | 43,239 | 155,461 | 133,469 | ||||||||
| Franchise contributions for advertising and other services | 48,386 | 40,571 | 155,375 | 128,458 | ||||||||
| 269,458 | 242,275 | 865,216 | 766,105 | |||||||||
| Operating costs and expenses, net: | ||||||||||||
| Food and packaging | 27,061 | 24,077 | 83,376 | 77,662 | ||||||||
| Payroll and employee benefits | 27,356 | 25,085 | 88,727 | 81,236 | ||||||||
| Occupancy and other | 14,103 | 12,334 | 45,287 | 40,862 | ||||||||
| Franchise occupancy expenses | 48,824 | 48,612 | 162,897 | 161,470 | ||||||||
| Franchise support and other costs | 2,722 | 2,692 | 9,336 | 10,339 | ||||||||
| Franchise advertising and other services expenses | 49,168 | 42,176 | 158,967 | 133,134 | ||||||||
| Selling, general and administrative expenses | 21,796 | 13,680 | 61,156 | 66,131 | ||||||||
| Depreciation and amortization | 10,389 | 12,141 | 35,656 | 41,151 | ||||||||
| Impairment and other charges (gains), net | 922 | 738 | 1,698 | (7,837 | ) | |||||||
| Gains on the sale of company-operated restaurants | (264 | ) | (1,050 | ) | (3,079 | ) | (2,625 | ) | ||||
| 202,077 | 180,485 | 644,021 | 601,523 | |||||||||
| Earnings from operations | 67,381 | 61,790 | 221,195 | 164,582 | ||||||||
| Other pension and post-retirement expenses, net | 204 | 1,482 | 678 | 40,972 | ||||||||
| Interest expense, net | 15,158 | 15,700 | 51,120 | 51,051 | ||||||||
| Earnings before income taxes | 52,019 | 44,608 | 169,397 | 72,559 | ||||||||
| Income taxes | 11,991 | 12,432 | 42,576 | 21,023 | ||||||||
| Earnings from continuing operations | 40,028 | 32,176 | 126,821 | 51,536 | ||||||||
| Earnings from discontinued operations, net of income taxes | — | 379 | — | 379 | ||||||||
| Net earnings | $ | 40,028 | $ | 32,555 | $ | 126,821 | $ | 51,915 | ||||
| Net earnings per share - basic: | ||||||||||||
| Earnings from continuing operations | $ | 1.80 | $ | 1.41 | $ | 5.59 | $ | 2.22 | ||||
| Earnings from discontinued operations | — | 0.02 | — | 0.02 | ||||||||
| Net earnings per share (1) | $ | 1.80 | $ | 1.42 | $ | 5.59 | $ | 2.24 | ||||
| Net earnings per share - diluted: | ||||||||||||
| Earnings from continuing operations | $ | 1.79 | $ | 1.40 | $ | 5.57 | $ | 2.21 | ||||
| Earnings from discontinued operations | — | 0.02 | — | 0.02 | ||||||||
| Net earnings per share (1) | $ | 1.79 | $ | 1.42 | $ | 5.57 | $ | 2.23 | ||||
| Weighted-average shares outstanding: | ||||||||||||
| Basic | 22,263 | 22,847 | 22,683 | 23,192 | ||||||||
| Diluted | 22,326 | 22,916 | 22,761 | 23,322 | ||||||||
| Dividends declared per common share | $ | 0.44 | $ | — | $ | 1.24 | $ | 0.80 | ||||
| ____________________________ | ||||||||||||
| --- | --- | |||||||||||
| (1) | Earnings per share may not add due to rounding. |
| JACK IN THE BOX INC. AND SUBSIDIARIES<br><br> <br>CONDENSED CONSOLIDATED BALANCE SHEETS<br><br> <br>(In thousands, except share and per share data)<br><br> <br>(Unaudited) | ||||||
|---|---|---|---|---|---|---|
| July 4, <br><br> 2021 | September 27, <br><br> 2020 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 84,220 | $ | 199,662 | ||
| Restricted cash | 18,221 | 37,258 | ||||
| Accounts and other receivables, net | 68,278 | 78,417 | ||||
| Inventories | 2,120 | 1,808 | ||||
| Prepaid expenses | 8,990 | 10,114 | ||||
| Current assets held for sale | 3,255 | 4,598 | ||||
| Other current assets | 4,123 | 3,724 | ||||
| Total current assets | 189,207 | 335,581 | ||||
| Property and equipment: | ||||||
| Property and equipment, at cost | 1,140,824 | 1,132,430 | ||||
| Less accumulated depreciation and amortization | (809,375 | ) | (796,448 | ) | ||
| Property and equipment, net | 331,449 | 335,982 | ||||
| Other assets: | ||||||
| Operating lease right-of-use assets | 924,210 | 904,548 | ||||
| Intangible assets, net | 256 | 277 | ||||
| Goodwill | 47,161 | 47,161 | ||||
| Deferred tax assets | 72,419 | 72,322 | ||||
| Other assets, net | 222,771 | 210,623 | ||||
| Total other assets | 1,266,817 | 1,234,931 | ||||
| $ | 1,787,473 | $ | 1,906,494 | |||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||
| Current liabilities: | ||||||
| Current maturities of long-term debt | $ | 858 | $ | 818 | ||
| Current operating lease liabilities | 153,217 | 179,000 | ||||
| Accounts payable | 34,557 | 31,105 | ||||
| Accrued liabilities | 137,018 | 129,431 | ||||
| Total current liabilities | 325,650 | 340,354 | ||||
| Long-term liabilities: | ||||||
| Long-term debt, net of current maturities | 1,272,405 | 1,376,913 | ||||
| Long-term operating lease liabilities, net of current portion | 797,803 | 776,094 | ||||
| Other long-term liabilities | 203,217 | 206,494 | ||||
| Total long-term liabilities | 2,273,425 | 2,359,501 | ||||
| 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, 82,536,059 and 82,369,714 issued, respectively | 825 | 824 | ||||
| Capital in excess of par value | 499,668 | 489,515 | ||||
| Retained earnings | 1,734,976 | 1,636,211 | ||||
| Accumulated other comprehensive loss | (107,798 | ) | (110,605 | ) | ||
| Treasury stock, at cost, 60,846,347 and 59,646,773 shares, respectively | (2,939,273 | ) | (2,809,306 | ) | ||
| Total stockholders’ deficit | (811,602 | ) | (793,361 | ) | ||
| $ | 1,787,473 | $ | 1,906,494 |
| JACK IN THE BOX INC. AND SUBSIDIARIES<br><br> <br>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<br><br> <br>(In thousands) (Unaudited) | ||||||
|---|---|---|---|---|---|---|
| 40 Weeks Ended | ||||||
| July 4, <br><br> 2021 | July 5, <br><br> 2020 | |||||
| Cash flows from operating activities: | ||||||
| Net earnings | $ | 126,821 | $ | 51,915 | ||
| Earnings from discontinued operations | — | 379 | ||||
| Earnings from continuing operations | $ | 126,821 | $ | 51,536 | ||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 35,656 | 41,151 | ||||
| Amortization of franchise tenant improvement allowances and incentives | 2,330 | 2,383 | ||||
| Deferred finance cost amortization | 4,304 | 4,337 | ||||
| Excess tax benefit from share-based compensation arrangements | (1,164 | ) | (71 | ) | ||
| Deferred income taxes | (2,599 | ) | 12,567 | |||
| Share-based compensation expense | 3,338 | 7,612 | ||||
| Pension and post-retirement expense | 678 | 40,972 | ||||
| Gains on cash surrender value of company-owned life insurance | (12,561 | ) | (1,861 | ) | ||
| Gains on the sale of company-operated restaurants | (3,079 | ) | (2,625 | ) | ||
| Gains on the disposition of property and equipment, net | (1,754 | ) | (10,386 | ) | ||
| Non-cash operating lease costs | (16,511 | ) | (5,689 | ) | ||
| Impairment charges and other | 1,951 | 195 | ||||
| Changes in assets and liabilities, excluding acquisitions: | ||||||
| Accounts and other receivables | 14,485 | (38,783 | ) | |||
| Inventories | (250 | ) | 14 | |||
| Prepaid expenses and other current assets | 1,194 | (5,034 | ) | |||
| Accounts payable | (9,821 | ) | (2,756 | ) | ||
| Accrued liabilities | 20,611 | 15,755 | ||||
| Pension and post-retirement contributions | (4,961 | ) | (4,921 | ) | ||
| Franchise tenant improvement allowance and incentive disbursements | (8,009 | ) | (9,384 | ) | ||
| Other | (778 | ) | (4,844 | ) | ||
| Cash flows provided by operating activities | 149,881 | 90,168 | ||||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (35,157 | ) | (16,736 | ) | ||
| Proceeds from the sale of property and equipment | 5,272 | 22,790 | ||||
| Proceeds from the sale and leaseback of assets | — | 19,828 | ||||
| Proceeds from the sale of company-operated restaurants | 1,229 | 2,625 | ||||
| Other | 2,616 | 1,036 | ||||
| Cash flows (used in) provided by investing activities | (26,040 | ) | 29,543 | |||
| Cash flows from financing activities: | ||||||
| Borrowings on revolving credit facilities | — | 111,376 | ||||
| Repayments of borrowings on revolving credit facilities | (107,875 | ) | (3,500 | ) | ||
| Principal repayments on debt | (640 | ) | (7,094 | ) | ||
| Debt issuance costs | — | (216 | ) | |||
| Dividends paid on common stock | (27,886 | ) | (18,466 | ) | ||
| Proceeds from issuance of common stock | 6,646 | 3,559 | ||||
| Repurchases of common stock | (124,399 | ) | (155,576 | ) | ||
| Payroll tax payments for equity award issuances | (4,166 | ) | (4,442 | ) | ||
| Cash flows used in financing activities | (258,320 | ) | (74,359 | ) | ||
| Net (decrease) increase in cash and restricted cash | (134,479 | ) | 45,352 | |||
| Cash and restricted cash at beginning of period | 236,920 | 151,561 | ||||
| Cash and restricted cash at end of period | $ | 102,441 | $ | 196,913 |
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> <br>(Unaudited) | ||||||||
|---|---|---|---|---|---|---|---|---|
| 12 Weeks Ended | 40 Weeks Ended | |||||||
| July 4, <br><br> 2021 | July 5, <br><br> 2020 | July 4, <br><br> 2021 | July 5, <br><br> 2020 | |||||
| Revenues: | ||||||||
| Company restaurant sales | 34.1 | % | 34.0 | % | 33.8 | % | 34.2 | % |
| Franchise rental revenues | 29.9 | % | 31.4 | % | 30.3 | % | 31.6 | % |
| Franchise royalties and other | 18.0 | % | 17.8 | % | 18.0 | % | 17.4 | % |
| Franchise contributions for advertising and other services | 18.0 | % | 16.7 | % | 18.0 | % | 16.8 | % |
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |
| Operating costs and expenses, net: | ||||||||
| Food and packaging (1) | 29.4 | % | 29.2 | % | 28.5 | % | 29.6 | % |
| Payroll and employee benefits (1) | 29.8 | % | 30.4 | % | 30.4 | % | 31.0 | % |
| Occupancy and other (1) | 15.3 | % | 15.0 | % | 15.5 | % | 15.6 | % |
| Franchise occupancy expenses (2) | 60.6 | % | 63.9 | % | 62.1 | % | 66.7 | % |
| Franchise support and other costs (3) | 5.6 | % | 6.2 | % | 6.0 | % | 7.7 | % |
| Franchise advertising and other services expenses (4) | 101.6 | % | 104.0 | % | 102.3 | % | 103.6 | % |
| Selling, general and administrative expenses | 8.1 | % | 5.6 | % | 7.1 | % | 8.6 | % |
| Depreciation and amortization | 3.9 | % | 5.0 | % | 4.1 | % | 5.4 | % |
| Impairment and other charges (gains), net | 0.3 | % | 0.3 | % | 0.2 | % | (1.0) | % |
| Gains on the sale of company-operated restaurants | (0.1) | % | (0.4) | % | (0.4) | % | (0.3) | % |
| Earnings from operations | 25.0 | % | 25.5 | % | 25.6 | % | 21.5 | % |
| Income tax rate (5) | 23.1 | % | 27.9 | % | 25.1 | % | 29.0 | % |
| ____________________________ | ||||||||
| --- | --- | |||||||
| (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 before income taxes. | |||||||
| Jack in the Box system sales (in thousands): | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 12 Weeks Ended | 40 Weeks Ended | |||||||
| July 4, <br><br> 2021 | July 5, <br><br> 2020 | July 4, <br><br> 2021 | July 5, <br><br> 2020 | |||||
| Company-operated restaurant sales | $ | 91,892 | $ | 82,444 | $ | 292,132 | $ | 262,188 |
| Franchised restaurant sales (1) | 889,558 | 804,791 | 2,852,746 | 2,480,062 | ||||
| Systemwide sales (1) | $ | 981,450 | $ | 887,235 | $ | 3,144,878 | $ | 2,742,250 |
| ____________________________ | ||||||||
| --- | --- | |||||||
| (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 record<br> 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 sales information is useful to investors<br> 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> <br>(Unaudited) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||||||||
| Company | Franchise | Total | Company | Franchise | Total | |||||||
| Beginning of year | 144 | 2,097 | 2,241 | 137 | 2,106 | 2,243 | ||||||
| New | — | 10 | 10 | — | 20 | 20 | ||||||
| Acquired from franchisees | 4 | (4 | ) | — | 8 | (8 | ) | — | ||||
| Closed | — | (32 | ) | (32 | ) | (1 | ) | (18 | ) | (19 | ) | |
| End of period | 148 | 2,071 | 2,219 | 144 | 2,100 | 2,244 | ||||||
| % of system | 7 | % | 93 | % | 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: 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.
Adjusted EBITDA
Adjusted EBITDA represents net earnings on a GAAP basis excluding earnings from discontinued operations, income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, impairment and other charges (gains), net, depreciation and amortization, the amortization of franchise tenant improvement allowances and incentives, and pension settlement charges. 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 | 40 Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| July 4, <br><br> 2021 | July 5, <br><br> 2020 | July 4, <br><br> 2021 | July 5, <br><br> 2020 | |||||||||
| Net earnings - GAAP | $ | 40,028 | $ | 32,555 | $ | 126,821 | $ | 51,915 | ||||
| Earnings from discontinued operations, net of taxes | — | (379 | ) | — | (379 | ) | ||||||
| Income tax expense | 11,991 | 12,432 | 42,576 | 21,023 | ||||||||
| Interest expense, net | 15,158 | 15,700 | 51,120 | 51,051 | ||||||||
| Pension settlement charges | — | 103 | — | 39,030 | ||||||||
| Gains on the sale of company-operated restaurants | (264 | ) | (1,050 | ) | (3,079 | ) | (2,625 | ) | ||||
| Impairment and other charges (gains), net | 922 | 738 | 1,698 | (7,837 | ) | |||||||
| Depreciation and amortization | 10,389 | 12,141 | 35,656 | 41,151 | ||||||||
| Amortization of franchise tenant improvement allowances and incentives | 796 | 618 | 2,330 | 2,383 | ||||||||
| Adjusted EBITDA - Non-GAAP | $ | 79,020 | $ | 72,858 | $ | 257,122 | $ | 195,712 |
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 (gains), 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 | 40 Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| July 4, <br><br> 2021 | July 5, <br><br> 2020 | July 4, <br><br> 2021 | July 5, <br><br> 2020 | |||||||||
| Earnings from operations - GAAP | $ | 67,381 | $ | 61,790 | $ | 221,195 | $ | 164,582 | ||||
| Franchise rental revenues | (80,598 | ) | (76,021 | ) | (262,248 | ) | (241,990 | ) | ||||
| Franchise royalties and other | (48,582 | ) | (43,239 | ) | (155,461 | ) | (133,469 | ) | ||||
| Franchise contributions for advertising and other services | (48,386 | ) | (40,571 | ) | (155,375 | ) | (128,458 | ) | ||||
| Franchise occupancy expenses | 48,824 | 48,612 | 162,897 | 161,470 | ||||||||
| Franchise support and other costs | 2,722 | 2,692 | 9,336 | 10,339 | ||||||||
| Franchise advertising and other services expenses | 49,168 | 42,176 | 158,967 | 133,134 | ||||||||
| Selling, general and administrative expenses | 21,796 | 13,680 | 61,156 | 66,131 | ||||||||
| Impairment and other charges (gains), net | 922 | 738 | 1,698 | (7,837 | ) | |||||||
| Gains on the sale of company-operated restaurants | (264 | ) | (1,050 | ) | (3,079 | ) | (2,625 | ) | ||||
| Depreciation and amortization | 10,389 | 12,141 | 35,656 | 41,151 | ||||||||
| Restaurant-Level Margin- Non-GAAP | $ | 23,372 | $ | 20,948 | $ | 74,742 | $ | 62,428 | ||||
| Company restaurant sales | $ | 91,892 | $ | 82,444 | $ | 292,132 | $ | 262,188 | ||||
| Restaurant-Level Margin % - Non-GAAP | 25.4 | % | 25.4 | % | 25.6 | % | 23.8 | % |
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 (gains), 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 | 40 Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| July 4, <br><br> 2021 | July 5, <br><br> 2020 | July 4, <br><br> 2021 | July 5, <br><br> 2020 | |||||||||
| Earnings from operations - GAAP | $ | 67,381 | $ | 61,790 | $ | 221,195 | $ | 164,582 | ||||
| Company restaurant sales | (91,892 | ) | (82,444 | ) | (292,132 | ) | (262,188 | ) | ||||
| Food and packaging | 27,061 | 24,077 | 83,376 | 77,662 | ||||||||
| Payroll and employee benefits | 27,356 | 25,085 | 88,727 | 81,236 | ||||||||
| Occupancy and other | 14,103 | 12,334 | 45,287 | 40,862 | ||||||||
| Selling, general and administrative expenses | 21,796 | 13,680 | 61,156 | 66,131 | ||||||||
| Impairment and other charges (gains), net | 922 | 738 | 1,698 | (7,837 | ) | |||||||
| Gains on the sale of company-operated restaurants | (264 | ) | (1,050 | ) | (3,079 | ) | (2,625 | ) | ||||
| Depreciation and amortization | 10,389 | 12,141 | 35,656 | 41,151 | ||||||||
| Franchise-Level Margin - Non-GAAP | $ | 76,852 | $ | 66,351 | $ | 241,884 | $ | 198,974 | ||||
| Franchise rental revenues | $ | 80,598 | $ | 76,021 | $ | 262,248 | $ | 241,990 | ||||
| Franchise royalties and other | 48,582 | 43,239 | 155,461 | 133,469 | ||||||||
| Franchise contributions for advertising and other services | 48,386 | 40,571 | 155,375 | 128,458 | ||||||||
| Total franchise revenues | $ | 177,566 | $ | 159,831 | $ | 573,084 | $ | 503,917 | ||||
| Franchise-Level Margin % - Non-GAAP | 43.3 | % | 41.5 | % | 42.2 | % | 39.5 | % |
Contacts
Chris Brandon
Vice President, Investor Relations
chris.brandon@jackinthebox.com
619.902.0269