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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

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(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

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(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

(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 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 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

(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 other" in its definition thereof. The prior period has been recast to conform to current year presentation.

 

Investor Contact:
Rachel Webb, (858) 571-2683

Source: Jack in the Box Inc.