UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 Date of Report (Date of earliest event reported):
    May 13, 2020
 


 
JACK IN THE BOX INC.
 
 
(Exact name of registrant as specified in its charter)
 

Delaware
001-09390
95-2698708
(State or other jurisdiction
of incorporation)
(Commission File
Number)
(I.R.S. Employer Identification
Number)

 
9330 Balboa Avenue, San Diego, California
92123
(Address of principal executive offices)
(Zip Code)


(858) 571-2121
(Registrants telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
JACK
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



 ITEM 2.02
 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On May 13, 2020, Jack in the Box Inc. issued a press release announcing its second quarter fiscal 2020 financial results and disclosing other information.

A copy of the press release is attached as Exhibit 99.1.

 ITEM 9.01
 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

 Exhibit
 
 No.
 Description
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

       
    JACK IN THE BOX INC.  
       
Date: May 13, 2020
 
/s/ Lance Tucker 
 
   
Lance Tucker
 
   
Executive Vice President, Chief Financial Officer
 
 
 Exhibit 99.1

Jack in the Box Inc. Reports Second Quarter FY 2020 Earnings

Withdraws Long-Term Guidance;
Temporarily Suspends Quarterly Cash Dividend for the Quarter

SAN DIEGO--(BUSINESS WIRE)--May 13, 2020--Jack in the Box Inc. (NASDAQ: JACK) today reported financial results for the second quarter ended April 12, 2020.

Increase/(Decrease) in same-store sales:


 



 

 


12 Weeks Ended



28 Weeks Ended

 


April 12, 2020


April 14, 2019



April 12, 2020


April 14, 2019

Company


(4.1)%

 

0.6%

 


(0.1)%

 

0.5%

Franchise


(4.2)%

 

0.1%

 


(0.9)%

 

0.0%

System


(4.2)%

 

0.2%

 


(0.8)%

 

0.0%

Jack in the Box® system same-store sales decreased 4.2 percent for the quarter. Company same-store sales decreased 4.1 percent in the second quarter driven by average check growth of 6.4 percent while transactions decreased 10.5 percent. As previously disclosed, system same-store sales increased 5.2 percent in the seven weeks ended March 8, 2020, prior to any impacts from the COVID-19 pandemic.

Lenny Comma, chairman and chief executive officer, said, "Our same-store sales growth during the first seven weeks of the quarter exemplified our strategy of combining compelling bundles at competitive price points with innovation, including the menu addition of Tiny Tacos. Tiny Tacos helped to re-establish our equity in Tacos while delivering a craveable product at a great price.

"As we navigate the COVID-19 pandemic, I am proud of the way our teams in the restaurant, our employees, our franchisees and partners have responded nimbly to the changing occasions of our consumers. We remain committed to operating our restaurants with integrity, providing great guest service, and most importantly, protecting the health and safety of our employees and guests. We are dedicated to remaining open to serve guests during this time of uncertainty.


"Given this uncertainty, we are prioritizing actions to bolster liquidity in the event we encounter greater volatility to our business. Because of this, we have temporarily suspended both share repurchases and the quarterly dividend typically paid next month with the intent to re-evaluate these decisions each quarter as we gain greater clarity on any further negative impact to our business trends."

Results for the second quarter reflect the significant and unprecedented impacts of the COVID-19 pandemic, which primarily impacted the five weeks ended April 12, 2020.

Earnings from continuing operations were $11.5 million, or $0.50 per diluted share, for the second quarter of fiscal 2020 compared with $25.1 million, or $0.96 per diluted share, for the second quarter of fiscal 2019.

Operating Earnings Per Share (1), a non-GAAP measure, were $0.50 in the second quarter of fiscal 2020 compared with $0.99 in the prior year quarter. A reconciliation of non-GAAP Operating Earnings Per Share to GAAP results is provided below, with additional information included in the attachment to this release.



12 Weeks Ended


28 Weeks Ended

 


April 12, 2020


April 14, 2019


April 12, 2020


April 14, 2019

Diluted earnings per share from continuing operations – GAAP


$

0.50

 


$

0.96


$

0.82

 


$

2.15

 

Restructuring charges




0.03


0.03

 


0.20

 

Gains on the sale of company-operated restaurants





(0.05

)


(0.01

)

Gain on sale of corporate office building





(0.32

)



Pension settlement charges


0.01

 



1.14

 



Excess tax benefits from share-based compensation arrangements


(0.01

)






Operating Earnings Per Share – non-GAAP


$

0.50

 


$

0.99


$

1.62

 


$

2.34

 

Adjusted EBITDA(2), a non-GAAP measure, was $46.3 million in the second quarter of fiscal 2020 compared with $61.2 million for the prior year quarter.


Restaurant-Level Margin(3), a non-GAAP measure, decreased by 700 basis points to 20.6 percent of company restaurant sales in the second quarter of fiscal 2020 from 27.6 percent a year ago. The decrease was due primarily to sales deleverage during COVID-19 impacted weeks and wage and commodity inflation. Food and packaging costs, as a percentage of company restaurant sales, increased 160 basis points in the quarter driven by higher ingredient costs, which were partially offset by menu price increases. Commodity costs increased 4.4 percent in the quarter as compared with the prior year.

Franchise-Level Margin(3), a non-GAAP measure, decreased by $2.7 million in the second quarter, primarily driven by lower royalties and rental revenues as a result of the decline in franchise same-store sales. As previously disclosed, the company provided relief to franchisees within the quarter by postponing collection of April rent payments and reducing and postponing March marketing fees, which are typically collected in April. In addition to previously announced relief, the company also reduced April marketing fees, to a range of 2 to 4 percent of gross restaurant sales based on sales volume, and postponed these fees, which are typically collected in May, to be collected over three months beginning October 2020. This relief did not have any impact on Franchise-Level Margin(3).

Franchise-Level Margin(3), as a percentage of total franchise revenues, was 38.6 percent in the second quarter of fiscal 2020. The company adopted the new lease accounting standard, ASC 842, in fiscal 2020, which resulted in grossing up both franchise rental revenues and franchise occupancy expenses by approximately $9.5 million in the second quarter. Without these adjustments, Franchise-Level Margin(3) would have been 41.4 percent of total franchise revenues. This compares with 41.3 percent in the prior year.

As a percentage of system-wide sales, G&A was 2.7 percent in the second quarter of fiscal 2020 compared with 1.7 percent in the prior year quarter. The $7.0 million increase in G&A, which excludes advertising, was primarily driven by:

  • mark-to-market adjustments on investments supporting the company's non-qualified retirement plans resulting in a $7.2 million year-over-year increase in G&A; and
  • an increase of $1.9 million related to litigation settlements.
  • These increases were partially offset by a $2.4 million reduction in incentive compensation.

Advertising costs, which are included in SG&A, decreased $0.4 million in the second quarter due primarily to the reduction in marketing fees for March and April. In the second quarter of fiscal 2020, SG&A expenses increased by $6.6 million and were 11.2 percent of revenues compared with 8.2 percent in the prior year quarter.

Impairment and other charges, net, decreased $0.4 million in the second quarter. Restructuring charges, which are included in Impairment and other charges, net, in the accompanying condensed consolidated statements of earnings, decreased $0.8 million in the quarter.

Interest expense, net, increased by $2.1 million in the second quarter driven by higher debt balances.

The effective tax rate for the second quarter of fiscal 2020 was 32.3 percent and was elevated primarily due to the decrease in operating earnings before income tax and an increase in losses from the mark-to-market adjustments associated with investments supporting the company's non-qualified retirement plans. Excluding non-recurring impacts of share-based compensation, pension settlements, and restructuring, the effective tax rate in the second quarter was 33.9 percent.

Capital Allocation and Liquidity Position

The company did not repurchase any shares in the second quarter of fiscal 2020, and as announced on April 15, 2020, temporarily suspended its share repurchase program. This leaves approximately $122 million remaining under share repurchase programs authorized by its Board of Directors, consisting of $22 million remaining that expire in November 2020 and approximately $100 million remaining that expire in November 2021.

In the context of an unprecedented global pandemic, the company believes it is prudent to maintain maximum financial flexibility by preserving its capital and maintaining its healthy liquidity position. In addition to temporarily suspending its share repurchase program, the company announced today that on May 8, 2020, its Board of Directors approved the company’s voluntary election to temporarily suspend quarterly dividend payments. The company will continue to monitor and revisit its capital allocation policies throughout the third quarter with the goal of reinstating dividends and share repurchases once it has more clarity around the scope and duration of the disruption caused by COVID-19.

As of the end of the second quarter, the company had approximately $169 million in cash, of which $132 million was unrestricted cash.


Withdrawing Long-Term Guidance

Due to the unprecedented adverse impact of the COVID-19 pandemic on business results, the company is withdrawing its long-term guidance. The company will provide an update when it can reasonably estimate the impacts of the COVID-19 pandemic on business results. As previously announced, the company also withdrew its guidance for the fiscal year ending September 27, 2020.

Conference Call

The company will host a conference call for financial analysts and investors on Thursday, May 14, 2020, beginning at 8:30 a.m. PT (11:30 a.m. ET). The conference call will be broadcast live over the Internet via the Jack in the Box Inc. corporate website. To access the live call through the Internet, log onto the Investors section of the Jack in the Box Inc. website at http://investors.jackinthebox.com at least 15 minutes prior to the event in order to download and install any necessary audio software. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days, beginning at approximately 11:30 a.m. PT on May 14, 2020.

About Jack in the Box Inc.

Jack in the Box Inc. (NASDAQ: JACK), based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. For more information on Jack in the Box, including franchising opportunities, visit www.jackinthebox.com.

_____________________________

(1) Operating Earnings Per Share represents diluted earnings per share from continuing operations on a GAAP basis excluding gains or losses on the sale of company-operated restaurants, restructuring charges, gain on sale of corporate office building, pension settlement charges, and the excess tax benefits from share-based compensation arrangements. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

(2) Adjusted EBITDA represents net earnings on a GAAP basis excluding earnings or losses from discontinued operations, income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, impairment and other charges, net, depreciation and amortization, the amortization of franchise tenant improvement allowances and pension settlement charges. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

(3) Restaurant-Level Margin and Franchise-Level Margin are non-GAAP measures. These non-GAAP measures are reconciled to earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."


Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to: the potential impacts to our business and operations resulting from the coronavirus COVID-19 pandemic, the success of new products, marketing initiatives and restaurant remodels and drive-thru enhancements; the impact of competition, unemployment, trends in consumer spending patterns and commodity costs; the company's ability to reduce G&A and operate efficiently; the company’s ability to achieve and manage its planned growth, which is affected by the availability of a sufficient number of suitable new restaurant sites, the performance of new restaurants, risks relating to expansion into new markets and successful franchise development; the ability to attract, train and retain top-performing personnel, litigation risks; risks associated with disagreements with franchisees; supply chain disruption; food-safety incidents or negative publicity impacting the reputation of the company's brand; increased regulatory and legal complexities, including federal, state and local policies regarding mitigation strategies for controlling the coronavirus COVID-19 pandemic, risks associated with the amount and terms of the securitized debt issued by certain of our wholly owned subsidiaries; adverse investor response to the company's temporary suspension of dividends and its stock repurchase program; and stock market volatility. These and other factors are discussed in the company’s annual report on Form 10-K and its periodic reports on Form 10-Q filed with the Securities and Exchange Commission, which are available online at http://investors.jackinthebox.com or in hard copy upon request. The company undertakes no obligation to update or revise any forward-looking statement, whether as the result of new information or otherwise.


JACK IN THE BOX INC. AND SUBSIDIARIES

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.

 

Contacts

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