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): November 18, 2020
| 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 November 18, 2020, Jack in the Box Inc. issued a press release announcing its fourth 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 November 18, 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: November 18, 2020 | /s/ Darin Harris |
| Darin Harris | |
| Chief Executive Officer |
Exhibit 99.1
Jack in the Box Inc. Reports Fourth Quarter FY 2020 Earnings; Declares Quarterly Cash Dividend
SAN DIEGO--(BUSINESS WIRE)--November 18, 2020--Jack in the Box Inc. (NASDAQ: JACK) today reported financial results for the fourth quarter and fiscal year ended September 27, 2020.
| Increase in same-store sales: | |||||
|---|---|---|---|---|---|
| 12 Weeks Ended | 52 Weeks Ended | ||||
| September 27, <br><br> 2020 | September 29, <br><br> 2019 | September 27, <br><br> 2020 | September 29, <br><br> 2019 | ||
| Company | 9.6% | 3.5% | 3.1% | 1.7% | |
| Franchise | 12.4% | 3.0% | 4.0% | 1.3% | |
| System | 12.2% | 3.0% | 4.0% | 1.3% |
Jack in the Box^®^ system same-store sales increased 12.2 percent for the quarter. Company same-store sales increased 9.6 percent in the fourth quarter driven by average check growth of 21.9 percent while transactions decreased 12.3 percent. Improvement in company same-store sales as compared with the third quarter was primarily driven by a sequential improvement in transactions.
Darin Harris, chief executive officer, said, "Our ongoing strategy of offering guests value combined with indulgent and flavorful products continues to drive overall performance for the brand. I am proud of the way our franchisees, the teams in our restaurants, our employees, and our partners have remained focused amidst this pandemic, and are delivering outstanding results. This momentum has continued into the first quarter of 2021, and I look forward to building on these learnings to enhance long-term performance of the company."
Earnings from continuing operations were $37.9 million, or $1.65 per diluted share, for the fourth quarter of fiscal 2020 compared with $22.0 million, or $0.86 per diluted share, for the fourth quarter of fiscal 2019.
Operating Earnings Per Share^(1)^, a non-GAAP measure, were $1.61 in the fourth quarter of fiscal 2020 compared with $0.95 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 | 52 Weeks Ended | |||
|---|---|---|---|---|
| September 27, <br> 2020 | September 29, <br> 2019 | September 27, <br> 2020 | September 29, <br> 2019 | |
| Diluted earnings per share from continuing operations – GAAP | 1.65 | 0.86 | 3.84 | 3.52 |
| Loss on early termination of interest rate swaps and debt extinguishment | — | 0.08 | — | 0.64 |
| Restructuring charges | — | 0.05 | 0.04 | 0.24 |
| Gains on the sale of company-operated restaurants | (0.02 | (0.03 | (0.10 | (0.04 |
| Gain on sale of corporate office building | — | — | (0.34 | — |
| Pension settlement charges | 0.01 | — | 1.23 | — |
| Excess tax benefits from share-based compensation agreements | (0.02 | — | (0.02 | — |
| Operating earnings per share – Non-GAAP (1) | 1.61 | 0.95 | 4.65 | 4.35 |
All values are in US Dollars.
Adjusted EBITDA^(2)^, a non-GAAP measure, was $78.4 million in the fourth quarter of fiscal 2020 compared with $66.9 million for the prior year quarter. For fiscal year 2020, Adjusted EBITDA was $274.2 million, compared with $269.0 million in fiscal year 2019.
Results for the fourth quarter reflect the business and financial impacts of the COVID-19 pandemic, which include the following:
- Restaurant traffic declined substantially, although did improve versus the third quarter. Check growth continued to drive overall same-store sales growth.
- Higher costs for delivery fees and supplies related to COVID-19 negatively impacted Occupancy and other costs as a percentage of company restaurant sales by approximately 90 basis points.
- The company continued its short-term cash preservation strategy, and as such, did not buy back any shares in the fourth quarter. The company also significantly reduced capital spending.
Restaurant-Level Margin^(3)^, a non-GAAP measure, increased 280 basis points to 27.0 percent of company restaurant sales in the fourth quarter of fiscal 2020 from 24.2 percent a year ago. Labor costs improved by 120 basis points, due to sales leverage, which was partially offset by approximately 6 percent wage inflation. Food and packaging costs, as a percentage of company restaurant sales, decreased 100 basis points driven by menu price increases and positive mix shift, which more than offset higher ingredient costs. Commodity costs increased 0.4 percent in the quarter as compared with the prior year. Lower maintenance and repairs expenses, partially offset by higher delivery fees, drove the 50 basis point decrease in Occupancy and other versus the prior year quarter.
Franchise-Level Margin^(3)^, a non-GAAP measure, increased by $11.6 million in the fourth quarter, primarily driven by higher royalties and rental revenues as franchise same-store sales increased. The company did not provide any relief to franchisees through postponements or reductions of rent or marketing in the fourth quarter.
Franchise-Level Margin^(3)^, as a percentage of total franchise revenues, was 41.3 percent in the fourth 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 fourth quarter. Without these adjustments, Franchise-Level Margin^(3)^ would have been 43.7 percent of total franchise revenues. This compares with 40.8 percent in the prior year.
In the fourth quarter of fiscal 2020, SG&A expenses increased by $4.4 million and were 5.8 percent of revenues compared with 4.7 percent in the prior year quarter. Advertising costs, which are included in SG&A, increased $0.4 million in the fourth quarter.
As a percentage of system-wide sales, G&A was 1.1 percent in the fourth quarter of fiscal 2020 compared with 0.8 percent in the prior year quarter. The $4.0 million increase in G&A, which excludes advertising, was primarily driven by:
- an increase in costs related to litigation matters of approximately $3 million, which was largely driven by a reduction in an unfavorable jury verdict in the prior year quarter, partially offset by a favorable settlement in the current year quarter;
- an increase in incentive compensation of approximately $0.3 million as a result of higher achievement levels, partially offset by a decrease in share-based compensation; and
- a $0.8 million increase in insurance.
- These increases were partially offset by mark-to-market adjustments on investments supporting the company's non-qualified retirement plans resulting in a $0.7 million year-over-year decrease in G&A.
Impairment and other charges, net, decreased $5.5 million in the fourth quarter, driven by a charge in the prior year quarter associated with a write-off of development costs associated with a discontinued technology project and a decrease in restructuring costs.
Interest expense, net, decreased by $2.1 million in the fourth quarter driven by the $2.8 million write-off of unamortized deferred financing fees related to the refinancing of the company's senior credit facility in the prior year quarter, partially offset by higher borrowings in the quarter.
The effective tax rate for the fourth quarter of fiscal year 2020 was 23.6 percent, which was lower than the 27.4 percent in the fourth quarter of the prior year primarily due to the release of valuation reserves on state tax credits and the tax benefit from anticipated audit conclusions and amended returns, partially offset by an increase in deduction limitation on officers’ compensation and non-deductible legal settlements. The full year effective tax rate was 26.8 percent.
Capital Allocation and Liquidity Position
The company did not repurchase any shares in the fourth quarter of fiscal 2020, and as announced on April 15, 2020, temporarily suspended its share repurchase program. On November 13, 2020, the Board of Directors authorized an additional $100 million share repurchase program to more than offset the $22 million authorization that was set to expire at the end of November 2020. This brings the total remaining under share repurchase programs to $200 million, consisting of $100 million which expires in November 2021 and $100 million which expires in November 2022.
The company also announced today that on November 13, 2020, its Board of Directors declared a cash dividend of $0.40 per share on the company's common stock. The dividend is payable on December 18, 2020, to shareholders of record at the close of business on December 2, 2020.
As of the end of the fourth quarter, the company had $236.9 million in cash, of which $199.7 million was unrestricted cash.
Guidance
Given the uncertainty associated with the COVID-19 pandemic, the company has not provided any guidance for Fiscal 2021 at this time, but will evaluate on a quarterly basis, with the intent to return to providing guidance once the visibility into sustained trends becomes more clear.
Fiscal 2021 ends on October 3, 2021. Fiscal 2020 contained 52 weeks, while Fiscal 2021 contains 53 weeks. Fiscal 2020 contained 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters. Fiscal 2021 contains 16 weeks in the first quarter, 12 weeks in the second and third quarter, and 13 weeks in the fourth quarter.
Conference Call
The company will host a conference call for financial analysts and investors on Thursday, November 19, 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 November 19, 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, loss on early termination of interest rate swaps, loss on early extinguishment of debt and the excess tax benefits from share-based compensation arrangements. See "Reconciliation of Non-GAAP Measurements to GAAP Results." Operating Earnings Per Share may not add due to rounding.
(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 other, 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 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>CONSOLIDATED STATEMENTS OF EARNINGS<br><br> <br>(In thousands, except per share data) (Unaudited) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12 Weeks Ended | 52 Weeks Ended | |||||||||||
| September 27, <br><br> 2020 | September 29, <br><br> 2019 | September 27, <br><br> 2020 | September 29, <br><br> 2019 | |||||||||
| Revenues: | ||||||||||||
| Company restaurant sales | $ | 86,799 | $ | 78,859 | $ | 348,987 | $ | 336,807 | ||||
| Franchise rental revenues | 78,657 | 63,920 | 320,647 | 272,815 | ||||||||
| Franchise royalties and other | 44,850 | 38,971 | 178,319 | 169,811 | ||||||||
| Franchise contributions for advertising and other services | 45,095 | 39,485 | 173,553 | 170,674 | ||||||||
| 255,401 | 221,235 | 1,021,506 | 950,107 | |||||||||
| Operating costs and expenses, net: | ||||||||||||
| Food and packaging | 24,787 | 23,349 | 102,449 | 97,699 | ||||||||
| Payroll and employee benefits | 25,304 | 23,995 | 106,540 | 100,158 | ||||||||
| Occupancy and other | 13,295 | 12,448 | 54,157 | 50,613 | ||||||||
| Franchise occupancy expenses | 48,568 | 38,882 | 210,038 | 166,584 | ||||||||
| Franchise support and other costs | 2,720 | 3,773 | 13,059 | 12,110 | ||||||||
| Franchise advertising and other services expenses | 47,660 | 41,696 | 180,794 | 178,093 | ||||||||
| Selling, general and administrative expenses | 14,710 | 10,300 | 80,841 | 76,357 | ||||||||
| Depreciation and amortization | 11,647 | 12,536 | 52,798 | 55,181 | ||||||||
| Impairment and other charges, net | 1,344 | 6,888 | (6,493 | ) | 12,455 | |||||||
| Gains on the sale of company-operated restaurants | (636 | ) | (1,147 | ) | (3,261 | ) | (1,366 | ) | ||||
| 189,399 | 172,720 | 790,922 | 747,884 | |||||||||
| Earnings from operations | 66,002 | 48,515 | 230,584 | 202,223 | ||||||||
| Other pension and post-retirement expenses, net | 748 | 343 | 41,720 | 1,484 | ||||||||
| Interest expense, net | 15,692 | 17,823 | 66,743 | 84,967 | ||||||||
| Earnings from continuing operations and before income taxes | 49,562 | 30,349 | 122,121 | 115,772 | ||||||||
| Income taxes | 11,704 | 8,326 | 32,727 | 24,025 | ||||||||
| Earnings from continuing operations | 37,858 | 22,023 | 89,394 | 91,747 | ||||||||
| (Losses) earnings from discontinued operations, net of income taxes | (9 | ) | 38 | 370 | 2,690 | |||||||
| Net earnings | $ | 37,849 | $ | 22,061 | $ | 89,764 | $ | 94,437 | ||||
| Net earnings per share - basic: | ||||||||||||
| Earnings from continuing operations | $ | 1.65 | $ | 0.86 | $ | 3.87 | $ | 3.55 | ||||
| Earnings (losses) from discontinued operations | — | — | 0.02 | 0.10 | ||||||||
| Net earnings per share ^(1)^ | $ | 1.65 | $ | 0.86 | $ | 3.88 | $ | 3.66 | ||||
| Net earnings per share - diluted: | ||||||||||||
| Earnings from continuing operations | $ | 1.65 | $ | 0.86 | $ | 3.84 | $ | 3.52 | ||||
| Earnings (losses) from discontinued operations | — | — | 0.02 | 0.10 | ||||||||
| Net earnings per share ^(1)^ | $ | 1.64 | $ | 0.86 | $ | 3.86 | $ | 3.62 | ||||
| Weighted-average shares outstanding: | ||||||||||||
| Basic | 22,903 | 25,456 | 23,125 | 25,823 | ||||||||
| Diluted | 23,012 | 25,721 | 23,269 | 26,068 | ||||||||
| Cash dividends declared per common share | $ | 0.40 | $ | 0.40 | $ | 1.20 | $ | 1.60 | ||||
| ___________________________ | ||||||||||||
| --- | --- | |||||||||||
| (1) | Earnings per share may not add due to rounding. |
| JACK IN THE BOX INC. AND SUBSIDIARIES <br> <br>CONSOLIDATED BALANCE SHEETS<br><br> <br>(In thousands, except share and per share data) (Unaudited) | ||||||
|---|---|---|---|---|---|---|
| September 27, <br><br> 2020 | September 29, <br><br> 2019 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 199,662 | $ | 125,536 | ||
| Restricted cash | 37,258 | 26,025 | ||||
| Accounts and other receivables, net | 78,417 | 45,235 | ||||
| Inventories | 1,808 | 1,776 | ||||
| Prepaid expenses | 10,114 | 9,015 | ||||
| Current assets held for sale | 4,598 | 16,823 | ||||
| Other current assets | 3,724 | 2,718 | ||||
| Total current assets | 335,581 | 227,128 | ||||
| Property and equipment, at cost: | ||||||
| Land | 100,460 | 116,070 | ||||
| Buildings | 914,311 | 927,337 | ||||
| Restaurant and other equipment | 112,675 | 125,176 | ||||
| Construction in progress | 4,984 | 7,658 | ||||
| 1,132,430 | 1,176,241 | |||||
| Less accumulated depreciation and amortization | (796,448 | ) | (784,307 | ) | ||
| Property and equipment, net | 335,982 | 391,934 | ||||
| Other assets: | ||||||
| Operating lease right-of-use assets | 904,548 | — | ||||
| Intangible assets, net | 277 | 425 | ||||
| Goodwill | 47,161 | 46,747 | ||||
| Deferred tax assets | 72,322 | 85,564 | ||||
| Other assets, net | 210,623 | 206,685 | ||||
| Total other assets | 1,234,931 | 339,421 | ||||
| $ | 1,906,494 | $ | 958,483 | |||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||
| Current liabilities: | ||||||
| Current maturities of long-term debt | $ | 818 | $ | 774 | ||
| Current operating lease liabilities | 179,000 | — | ||||
| Accounts payable | 31,105 | 37,066 | ||||
| Accrued liabilities | 129,431 | 120,083 | ||||
| Total current liabilities | 340,354 | 157,923 | ||||
| Long-term liabilities: | ||||||
| Long-term debt, net of current maturities | 1,376,913 | 1,274,374 | ||||
| Long-term operating lease liabilities, net of current portion | 776,094 | — | ||||
| Other long-term liabilities | 206,494 | 263,770 | ||||
| Total long-term liabilities | 2,359,501 | 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, 82,369,714 and 82,159,002 issued, respectively | 824 | 822 | ||||
| Capital in excess of par value | 489,515 | 480,322 | ||||
| Retained earnings | 1,636,211 | 1,577,034 | ||||
| Accumulated other comprehensive loss | (110,605 | ) | (140,006 | ) | ||
| Treasury stock, at cost, 59,646,773 and 57,760,573 shares, respectively | (2,809,306 | ) | (2,655,756 | ) | ||
| Total stockholders’ deficit | (793,361 | ) | (737,584 | ) | ||
| $ | 1,906,494 | $ | 958,483 |
| JACK IN THE BOX INC. AND SUBSIDIARIES <br> <br>CONSOLIDATED STATEMENTS OF CASH FLOWS<br><br> <br>(In thousands) (Unaudited) | ||||||
|---|---|---|---|---|---|---|
| 52 Weeks Ended | ||||||
| September 27, 2020 | September 29, 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net earnings | $ | 89,764 | $ | 94,437 | ||
| Earnings from discontinued operations | 370 | 2,690 | ||||
| Earnings from continuing operations | 89,394 | 91,747 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 52,798 | 55,181 | ||||
| Franchise tenant improvement allowance amortization and other | 3,028 | 1,983 | ||||
| Amortization of debt issuance costs | 5,628 | 3,121 | ||||
| Loss on extinguishment of debt | — | 2,757 | ||||
| Loss on interest rate swap termination | — | 23,551 | ||||
| Excess tax benefits from share-based compensation arrangements | (449 | ) | (113 | ) | ||
| Deferred income taxes | 5,162 | 4,100 | ||||
| Share-based compensation expense | 4,394 | 8,074 | ||||
| Pension and postretirement expense | 41,720 | 1,484 | ||||
| Gains on cash surrender value of company-owned life insurance | (4,262 | ) | (4,475 | ) | ||
| Gains on the sale of company-operated restaurants | (3,261 | ) | (1,366 | ) | ||
| Gains on the disposition of property and equipment | (9,768 | ) | (6,244 | ) | ||
| Non-cash operating lease costs | 490 | — | ||||
| Impairment charges and other | 322 | 5,414 | ||||
| Changes in assets and liabilities, excluding acquisitions and dispositions: | ||||||
| Accounts and other receivables | (28,724 | ) | 3,504 | |||
| Inventories | 41 | 82 | ||||
| Prepaid expenses and other current assets | (2,780 | ) | 8,728 | |||
| Accounts payable | 154 | 4,524 | ||||
| Accrued liabilities | 4,222 | (7,505 | ) | |||
| Pension and postretirement contributions | (6,243 | ) | (6,194 | ) | ||
| Franchise tenant improvement allowance disbursements | (7,516 | ) | (10,593 | ) | ||
| Other | (825 | ) | (9,355 | ) | ||
| Cash flows provided by operating activities | 143,525 | 168,405 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment | (19,528 | ) | (47,649 | ) | ||
| Proceeds from the sale and leaseback of assets | 19,828 | 4,447 | ||||
| Proceeds from the sale of company-operated restaurants | 3,395 | 1,280 | ||||
| Collections on notes receivable | — | 16,759 | ||||
| Proceeds from the sale of property and equipment | 22,774 | 9,714 | ||||
| Other | 2,654 | 1,630 | ||||
| Cash flows provided by (used in) investing activities | 29,123 | (13,819 | ) | |||
| Cash flows from financing activities: | ||||||
| Borrowings on revolving credit facilities | 114,376 | 229,798 | ||||
| Repayments of borrowings on revolving credit facilities | (6,500 | ) | (960,220 | ) | ||
| Proceeds from issuance of debt | — | 1,300,000 | ||||
| Principal repayments on debt | (10,536 | ) | (337,150 | ) | ||
| Debt issuance costs | (216 | ) | (34,122 | ) | ||
| Payments related to termination of interest rate swaps | — | (23,551 | ) | |||
| Dividends paid on common stock | (27,538 | ) | (41,179 | ) | ||
| Proceeds from issuance of common stock | 4,647 | 1,231 | ||||
| Repurchases of common stock | (155,576 | ) | (137,654 | ) | ||
| Payroll tax payments for equity award issuances | (5,946 | ) | (2,883 | ) | ||
| Cash flows used in financing activities | (87,289 | ) | (5,730 | ) | ||
| Net increase in cash and restricted cash | 85,359 | 148,856 | ||||
| Cash and restricted cash at beginning of year | 151,561 | 2,705 | ||||
| Cash and restricted cash at end of year | $ | 236,920 | $ | 151,561 |
| JACK IN THE BOX INC. AND SUBSIDIARIES <br><br> SUPPLEMENTAL INFORMATION | ||||||||
|---|---|---|---|---|---|---|---|---|
| The following table presents certain income and expense items included in our consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated.<br> Percentages may not add due to rounding. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA<br> <br>(Unaudited) | ||||||||
| 12 Weeks Ended | 52 Weeks Ended | |||||||
| September 27, <br><br> 2020 | September 29, <br><br> 2019 | September 27, <br><br> 2020 | September 29, <br><br> 2019 | |||||
| Revenues: | ||||||||
| Company restaurant sales | 34.0 | % | 35.6 | % | 34.2 | % | 35.4 | % |
| Franchise rental revenues | 30.8 | % | 28.9 | % | 31.4 | % | 28.7 | % |
| Franchise royalties and other | 17.6 | % | 17.6 | % | 17.5 | % | 17.9 | % |
| Franchise contributions for advertising and other services | 17.7 | % | 17.8 | % | 17.0 | % | 18.0 | % |
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |
| Operating costs and expenses, net: | ||||||||
| Food and packaging (1) | 28.6 | % | 29.6 | % | 29.4 | % | 29.0 | % |
| Payroll and employee benefits (1) | 29.2 | % | 30.4 | % | 30.5 | % | 29.7 | % |
| Occupancy and other (1) | 15.3 | % | 15.8 | % | 15.5 | % | 15.0 | % |
| Franchise occupancy expenses (2) | 61.7 | % | 60.8 | % | 65.5 | % | 61.1 | % |
| Franchise support and other costs (3) | 6.1 | % | 9.7 | % | 7.3 | % | 7.1 | % |
| Franchise advertising and other services expenses (4) | 105.7 | % | 105.6 | % | 104.2 | % | 104.3 | % |
| Selling, general and administrative expenses | 5.8 | % | 4.7 | % | 7.9 | % | 8.0 | % |
| Depreciation and amortization | 4.6 | % | 5.7 | % | 5.2 | % | 5.8 | % |
| Impairment and other charges, net | 0.5 | % | 3.1 | % | (0.6 | )% | 1.3 | % |
| Gains on the sale of company-operated restaurants | (0.2 | )% | (0.5 | )% | (0.3 | )% | (0.1 | )% |
| Earnings from operations | 25.8 | % | 21.9 | % | 22.6 | % | 21.3 | % |
| Income tax rate (5) | 23.6 | % | 27.4 | % | 26.8 | % | 20.8 | % |
| ____________________________ | ||||||||
| --- | --- | |||||||
| (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 (in thousands): | ||||||||
|---|---|---|---|---|---|---|---|---|
| 12 Weeks Ended | 52 Weeks Ended | |||||||
| September 27, <br><br> 2020 | September 29, <br><br> 2019 | September 27, <br><br> 2020 | September 29, <br><br> 2019 | |||||
| Company-owned restaurant sales | $ | 86,799 | $ | 78,859 | $ | 348,987 | $ | 336,807 |
| Franchised restaurant sales (1) | 843,683 | 739,212 | 3,323,745 | 3,167,920 | ||||
| System sales (1) | $ | 930,482 | $ | 818,071 | $ | 3,672,732 | $ | 3,504,727 |
| ____________________________ | ||||||||
| --- | --- | |||||||
| (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 restaurant sales information is useful<br> 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 | — | 27 | 27 | — | 19 | 19 | ||||||
| Acquired from franchisees | 8 | (8) | 0 | — | — | — | ||||||
| Closed | (1) | (28) | (29) | — | (13) | (13) | ||||||
| End of period | 144 | 2,097 | 2,241 | 137 | 2,106 | 2,243 | ||||||
| % 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, loss on early termination of interest rate swaps, loss on early extinguishment of debt, and the excess tax benefits from share-based compensation arrangements. 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.
| 12 Weeks Ended | 52 Weeks Ended | |||
|---|---|---|---|---|
| September 27, <br> 2020 | September 29, <br> 2019 | September 27, <br> 2020 | September 29, <br> 2019 | |
| Diluted earnings per share from continuing operations – GAAP | 1.65 | 0.86 | 3.84 | 3.52 |
| Loss on early termination of interest rate swaps and debt extinguishment | — | 0.08 | — | 0.64 |
| Restructuring charges | — | 0.05 | 0.04 | 0.24 |
| Gains on the sale of company-operated restaurants | (0.02 | (0.03 | (0.10 | (0.04 |
| Gain on sale of corporate office building | — | — | (0.34 | — |
| Pension settlement charges | 0.01 | — | 1.23 | — |
| Excess tax benefits from share-based compensation agreements | (0.02 | — | (0.02 | — |
| Operating earnings per share – Non-GAAP (1) | 1.61 | 0.95 | 4.65 | 4.35 |
All values are in US Dollars.
| ___________________________ | |
|---|---|
| (1) | Operating Earnings Per Share may not add due to rounding. |
Adjusted EBITDA
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, 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 | 52 Weeks Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 27, 2020 | September 29, 2019 | September 27, 2020 | September 29, 2019 | |||||
| Net earnings - GAAP | $ | 37,849 | $ | 22,061 | $ | 89,764 | $ | 94,437 |
| Losses (earnings) from discontinued <br><br> operations, net of taxes | 9 | (38) | (370) | (2,690) | ||||
| Income taxes | 11,704 | 8,326 | 32,727 | 24,025 | ||||
| Interest expense, net | 15,692 | 17,823 | 66,743 | 84,967 | ||||
| Pension settlement charges | 188 | — | 39,218 | — | ||||
| Gains on the sale of company-operated <br><br> restaurants | (636) | (1,147) | (3,261) | (1,366) | ||||
| Impairment and other charges, net | 1,344 | 6,888 | (6,493) | 12,455 | ||||
| Depreciation and amortization | 11,647 | 12,536 | 52,798 | 55,181 | ||||
| Amortization of franchise tenant improvement allowances and other | 645 | 459 | 3,028 | 1,983 | ||||
| Adjusted EBITDA – non-GAAP | $ | 78,442 | $ | 66,908 | $ | 274,154 | $ | 268,992 |
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 | 52 Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27,<br><br> <br>2020 | September 29,<br><br> <br>2019 | September 27,<br><br> <br>2020 | September 29,<br><br> <br>2019 | |||||||||
| Earnings from operations - GAAP | $ | 66,002 | $ | 48,515 | $ | 230,584 | $ | 202,223 | ||||
| Franchise rental revenues | (78,657) | (63,920) | (320,647) | (272,815) | ||||||||
| Franchise royalties and other | (44,850) | (38,971) | (178,319) | (169,811) | ||||||||
| Franchise contributions for advertising and other services | (45,095) | (39,485) | (173,553) | (170,674) | ||||||||
| Franchise occupancy expenses | 48,568 | 38,882 | 210,038 | 166,584 | ||||||||
| Franchise support and other costs | 2,720 | 3,773 | 13,059 | 12,110 | ||||||||
| Franchise advertising and other services expenses | 47,660 | 41,696 | 180,794 | 178,093 | ||||||||
| Selling, general and administrative expenses | 14,710 | 10,300 | 80,841 | 76,357 | ||||||||
| Impairment and other charges, net | 1,344 | 6,888 | (6,493) | 12,455 | ||||||||
| Gains on the sale of company-operated restaurants | (636) | (1,147) | (3,261) | (1,366) | ||||||||
| Depreciation and amortization | 11,647 | 12,536 | 52,798 | 55,181 | ||||||||
| Restaurant-Level Margin- Non-GAAP | $ | 23,413 | $ | 19,067 | $ | 85,841 | $ | 88,337 | ||||
| Company restaurant sales | $ | 86,799 | $ | 78,859 | $ | 348,987 | $ | 336,807 | ||||
| Restaurant-Level Margin % - Non-GAAP | 27.0 | % | 24.2 | % | 24.6 | % | 26.2 | % |
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 | 52 Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2020 | September 29, 2019 | September 27, 2020 | September 29, 2019 | |||||||||
| Earnings from operations - GAAP | $ | 66,002 | $ | 48,515 | $ | 230,584 | $ | 202,223 | ||||
| Company restaurant sales | (86,799) | (78,859) | (348,987) | (336,807) | ||||||||
| Food and packaging | 24,787 | 23,349 | 102,449 | 97,699 | ||||||||
| Payroll and employee benefits | 25,304 | 23,995 | 106,540 | 100,158 | ||||||||
| Occupancy and other | 13,295 | 12,448 | 54,157 | 50,613 | ||||||||
| Selling, general and administrative expenses | 14,710 | 10,300 | 80,841 | 76,357 | ||||||||
| Impairment and other charges, net | 1,344 | 6,888 | (6,493) | 12,455 | ||||||||
| Gains on the sale of company-operated restaurants | (636) | (1,147) | (3,261) | (1,366) | ||||||||
| Depreciation and amortization | 11,647 | 12,536 | 52,798 | 55,181 | ||||||||
| Franchise-Level Margin - Non-GAAP (1) | $ | 69,654 | $ | 58,025 | $ | 268,628 | $ | 256,513 | ||||
| Franchise rental revenues | $ | 78,657 | $ | 63,920 | $ | 320,647 | $ | 272,815 | ||||
| Franchise royalties and other | 44,850 | 38,971 | 178,319 | 169,811 | ||||||||
| Franchise contributions for <br><br> advertising and other services | 45,095 | 39,485 | 173,553 | 170,674 | ||||||||
| Total franchise revenues | $ | 168,602 | $ | 142,376 | $ | 672,519 | $ | 613,300 | ||||
| Franchise-Level Margin % - Non-GAAP (1) | 41.3 | % | 40.8 | % | 39.9 | % | 41.8 | % | ||||
| ____________________________ | ||||||||||||
| --- | --- | |||||||||||
| (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 other" in<br> its definition thereof. The prior period has been recast to conform to current year presentation. |
Contacts
Investor Contact:
Carol DiRaimo
Investor.Relations@jackinthebox.com