JACK
$99.55
Jack IN The Box
$2.41
2.48%
Earnings Details
Quarter September 2020
Wednesday, November 18, 2020 4:05:00 PM
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Summary

Jack IN The Box Beats

Jack IN The Box (JACK) reported Quarter September 2020 earnings of $1.61 per share on revenue of $255.4 million. The consensus earnings estimate was $1.14 per share on revenue of $249.0 million. The Earnings Whisper number was $1.21 per share.

Jack In The Box Inc owns, operates and franchises quick-service restaurants and Qdoba Mexican Grill fast-casual restaurants.

Results
Reported Earnings
$1.61
Earnings Whisper
$1.21
Consensus Estimate
$1.14
Reported Revenue
$255.4 Mil
Revenue Estimate
$249.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Jack in the Box Inc. Reports Fourth Quarter FY 2020 Earnings; Declares Quarterly Cash Dividend

SAN DIEGO--(BUSINESS WIRE)--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,
2020

 

September 29,
2019

 

September 27,
2020

 

September 29,
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,
2020

 

September 29,
2019

 

September 27,
2020

 

September 29,
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

 

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

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data) (Unaudited)

 

12 Weeks Ended

 

52 Weeks Ended

 

September 27,
2020

 

September 29,
2019

 

September 27,
2020

 

September 29,
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

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data) (Unaudited)

 

September 27,
2020

 

September 29,
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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(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
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. Percentages may not add due to rounding.

 
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA

(Unaudited)

 

12 Weeks Ended

 

52 Weeks Ended

 

September 27,
2020

 

September 29,
2019

 

September 27,
2020

 

September 29,
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,
2020

 

September 29,
2019

 

September 27,
2020

 

September 29,
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 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

 

 

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,
2020

 

September 29,
2019

 

September 27,
2020

 

September 29,
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

 

___________________________
(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
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
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,

2020

 

September 29,

2019

 

September 27,

2020

 

September 29,

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
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 its definition thereof. The prior period has been recast to conform to current year presentation.

 

Investor Contact:
Carol DiRaimo
Investor.Relations@jackinthebox.com

Source: Jack in the Box Inc.