Jack in the Box Inc. (NASDAQ: JACK) today reported financial
results for the third quarter ended July 5, 2020.
Increase in same-store sales:
12 Weeks Ended
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Company
4.1%
2.8%
1.2%
1.2%
Franchise
6.9%
2.7%
1.5%
0.8%
System
6.6%
2.7%
1.5%
0.8%
Jack in the Box® system same-store sales increased 6.6 percent
for the quarter. Company same-store sales increased 4.1 percent in
the third quarter driven by average check growth of 20.2 percent
while transactions decreased 16.1 percent.
Darin Harris, chief executive officer, said, "In my first six
weeks as CEO, I have witnessed the nimbleness and passion within
this brand. I am proud of the way our franchisees, the teams in our
restaurants, our employees, and our partners have responded swiftly
to the changing occasions of our consumers amidst the pandemic. Our
strong performance in the third quarter is a testament to this
agile approach. Our focus on value combined with indulgent and
flavorful products continues to drive overall performance for the
brand.
This strong performance accelerated throughout the third
quarter, and has continued thus far into the fourth quarter. I am
excited about taking the learnings from this uncertain time and
using them to fuel the remaining part of 2020 as well as our
strategy into 2021."
Earnings from continuing operations were $32.2 million, or $1.40
per diluted share, for the third quarter of fiscal 2020 compared
with $13.5 million, or $0.51 per diluted share, for the third
quarter of fiscal 2019.
Operating Earnings Per Share(1), a non-GAAP measure, were $1.37
in the third quarter of fiscal 2020 compared with $1.07 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
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Diluted earnings per share from continuing
operations – GAAP
$1.40
$0.51
$2.21
$2.67
Loss on early termination of interest rate
swaps
—
0.56
—
0.56
Restructuring charges
—
—
0.04
0.19
Gains on the sale of company-operated
restaurants
(0.03)
—
(0.08)
(0.01)
Gain on sale of corporate office
building
—
—
(0.33)
—
Pension settlement charges
—
—
1.20
—
Operating Earnings Per Share – non-GAAP
(1)
$1.37
$1.07
$3.03
$3.41
(1) Operating Earnings per share may not
add due to rounding.
Adjusted EBITDA(2), a non-GAAP measure, was $72.9 million in the
third quarter of fiscal 2020 compared with $57.8 million for the
prior year quarter.
Results for the third 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 last five weeks of the second quarter. Check growth
continued to drive overall same-store sales growth.
- Higher costs for delivery fees and supplies related to COVID-19
increased Occupancy and Other as a percentage of company restaurant
sales by 90 basis points.
- Higher costs for a new emergency paid sick leave program
increased Labor as a percentage of company restaurant sales by 30
basis points.
- The company did not provide any additional relief to
franchisees in the form of marketing fee reduction or postponement
or rent postponement in the third quarter. The marketing fee
reduction in April, however, did impact slightly over two weeks of
the third quarter, resulting in lower Advertising costs by $0.1
million, and reduced Franchise Contributions for Advertising by
approximately $2.9 million.
- The company implemented a short-term cash preservation
strategy, and as such, did not buy back any shares in the third
quarter. The company also significantly reduced capital
spending.
Restaurant-Level Margin(3), a non-GAAP measure, decreased by 160
basis points to 25.4 percent of company restaurant sales in the
third quarter of fiscal 2020 from 27.0 percent a year ago. The
decrease was due primarily to wage inflation as well as higher
delivery fees and supply costs related to COVID-19. Food and
packaging costs, as a percentage of company restaurant sales,
decreased 20 basis points in the quarter driven by menu price
increases and favorable mix shift, partially offset by increases in
ingredient costs. Commodity costs increased 3.6 percent in the
quarter as compared with the prior year, due primarily to increases
in beef.
Franchise-Level Margin(3), a non-GAAP measure, increased by $5.4
million in the third quarter, primarily driven by higher royalties
and rental revenues as franchise same-store sales increased. The
company did not provide any additional relief to franchisees
through postponements or reductions of rent or marketing in the
third quarter.
Franchise-Level Margin(3), as a percentage of total franchise
revenues, was 41.5 percent in the third 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 $9.7
million and $9.9 million respectively in the third quarter. Without
these adjustments, Franchise-Level Margin(3) would have been 44.4
percent of total franchise revenues. This compares with 42.4
percent in the prior year.
As a percentage of system-wide sales, G&A was 1.1 percent in
the third quarter of fiscal 2020 compared with 2.5 percent in the
prior year quarter. The $10.6 million decrease in G&A, which
excludes advertising, was primarily driven by:
- a decrease of $7.0 million in costs related to litigation
matters versus prior year;
- mark-to-market adjustments on investments supporting the
company's non-qualified retirement plans resulting in a $2.6
million year-over-year decrease in G&A; and
- a $2.5 million decrease in incentive compensation.
- These increases were partially offset by a $2.6 million
increase in insurance.
Advertising costs, which are included in SG&A, decreased
$0.1 million in the third quarter due to the reduction in marketing
fees for April. In the third quarter of fiscal 2020, SG&A
expenses decreased by $10.7 million and were 5.6 percent of
revenues compared with 11.0 percent in the prior year quarter.
Impairment and other charges, net, increased $4.0 million in the
third quarter, driven by a $5.7 million gain on sale of a
restaurant property in the prior year quarter.
Interest expense, net, decreased by $20.8 million in the third
quarter driven by the termination of our interest rate swaps in the
prior year quarter.
The effective tax rate for the third quarter of fiscal 2020 was
27.9 percent, an improvement versus the second quarter, primarily
driven by the improvement in operating earnings before income tax
and nontaxable gains from mark-to-market adjustments associated
with investments supporting the company's non-qualified retirement
plans.
Capital Allocation and Liquidity Position
The company did not repurchase any shares in the third 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.
The company also announced today that on July 31, 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 September 3,
2020, to shareholders of record at the close of business on August
18, 2020. The reinstatement of the dividend reflects the strong
financial health of the company and continued commitment to
shareholders.
As of the end of the third quarter, the company had
approximately $196.9 million in cash, of which $159.5 million was
unrestricted cash.
Conference Call
The company will host a conference call for financial analysts
and investors on Thursday, August 6, 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 August 6, 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, 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 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
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Revenues:
Company restaurant sales
$
82,444
$
78,434
$
262,188
$
257,948
Franchise rental revenues
76,021
63,359
241,990
208,895
Franchise royalties and other
43,239
40,180
133,469
130,840
Franchise contributions for advertising
and other services
40,571
40,386
128,458
131,189
242,275
222,359
766,105
728,872
Operating costs and expenses, net:
Company restaurant costs (excluding
depreciation and amortization):
Food and packaging
24,077
23,058
77,662
74,350
Payroll and employee benefits
25,085
23,121
81,236
76,163
Occupancy and other
12,334
11,052
40,862
38,165
Total company restaurant costs
61,496
57,231
199,760
188,678
Franchise occupancy expenses
48,612
38,371
161,470
127,702
Franchise support and other costs
2,692
2,695
10,339
8,337
Franchise advertising and other services
expenses
42,176
41,882
133,134
136,397
Selling, general and administrative
expenses
13,680
24,389
66,131
66,057
Depreciation and amortization
12,141
12,786
41,151
42,645
Impairment and other charges, net
738
(3,256)
(7,837)
5,567
Gains on the sale of company-operated
restaurants
(1,050)
—
(2,625)
(219)
180,485
174,098
601,523
575,164
Earnings from operations
61,790
48,261
164,582
153,708
Other pension and post-retirement
expenses, net
1,482
342
40,972
1,141
Interest expense, net
15,700
36,494
51,051
67,144
Earnings from continuing operations and
before income taxes
44,608
11,425
72,559
85,423
Income taxes
12,432
(2,048)
21,023
15,699
Earnings from continuing operations
32,176
13,473
51,536
69,724
Earnings (losses) from discontinued
operations, net of taxes
379
(284)
379
2,652
Net earnings
$
32,555
$
13,189
$
51,915
$
72,376
Net earnings per share - basic:
Earnings from continuing operations
$
1.41
$
0.52
$
2.22
$
2.69
Earnings from discontinued operations
0.02
(0.01)
0.02
0.10
Net earnings per share (1)
$
1.42
$
0.51
$
2.24
$
2.79
Net earnings per share - diluted:
Earnings from continuing operations
$
1.40
$
0.51
$
2.21
$
2.67
Earnings from discontinued operations
0.02
(0.01)
0.02
0.10
Net earnings per share (1)
$
1.42
$
0.50
$
2.23
$
2.77
Weighted-average shares outstanding:
Basic
22,847
25,958
23,192
25,933
Diluted
22,916
26,176
23,322
26,150
Dividends declared per common share
$
—
$
0.40
$
0.80
$
1.20
(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)
July 5, 2020
September 29,
2019
ASSETS
Current assets:
Cash
$
159,540
$
125,536
Restricted cash
37,373
26,025
Accounts and other receivables, net
88,242
45,235
Inventories
1,835
1,776
Prepaid expenses
13,447
9,015
Current assets held for sale
6,191
16,823
Other current assets
3,504
2,718
Total current assets
310,132
227,128
Property and equipment:
Property and equipment, at cost
1,140,285
1,176,241
Less accumulated depreciation and
amortization
(796,159)
(784,307)
Property and equipment, net
344,126
391,934
Other assets:
Operating lease right-of-use asset
902,858
—
Intangible assets, net
283
425
Goodwill
47,161
46,747
Deferred tax assets
66,132
85,564
Other assets, net
216,008
206,685
Total other assets
1,232,442
339,421
$
1,886,700
$
958,483
LIABILITIES AND STOCKHOLDERS’
DEFICIT
Current liabilities:
Current maturities of long-term debt
$
13,821
$
774
Current operating lease liabilities
169,347
—
Accounts payable
26,339
37,066
Accrued liabilities
143,344
120,083
Total current liabilities
352,851
157,923
Long-term liabilities:
Long-term debt, net of current
maturities
1,366,171
1,274,374
Long-term operating lease liabilities, net
of current portion
777,883
—
Other long-term liabilities
216,752
263,770
Total long-term liabilities
2,360,806
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, 82,320,270 and 82,159,002 issued,
respectively
823
822
Capital in excess of par value
491,594
480,322
Retained earnings
1,607,485
1,577,034
Accumulated other comprehensive loss
(117,553)
(140,006)
Treasury stock, at cost, 59,646,773 and
57,760,573 shares, respectively
(2,809,306)
(2,655,756)
Total stockholders’ deficit
(826,957)
(737,584)
$
1,886,700
$
958,483
JACK IN THE BOX INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
40 Weeks Ended
July 5, 2020
July 7, 2019
Cash flows from operating activities:
Net earnings
$
51,915
$
72,376
Earnings from discontinued operations
379
2,652
Earnings from continuing operations
51,536
69,724
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
41,151
42,645
Amortization of franchise tenant
improvement allowances and other
2,383
1,524
Deferred finance cost amortization
4,337
1,903
Excess tax benefits from share-based
compensation arrangements
(71)
(66)
Deferred income taxes
12,567
(1,745)
Share-based compensation expense
7,612
6,589
Pension and postretirement expense
40,972
1,141
Gains on cash surrender value of
company-owned life insurance
(1,861)
(3,117)
Gains on the sale of company-operated
restaurants
(2,625)
(219)
Gains on the disposition of property and
equipment, net
(10,386)
(5,756)
Non-cash operating lease costs
(5,689)
—
Impairment charges and other
195
1,624
Changes in assets and liabilities,
excluding acquisitions:
Accounts and other receivables
(39,198)
(3,555)
Inventories
14
(79)
Prepaid expenses and other current
assets
(5,034)
1,509
Accounts payable
(4,620)
24,321
Accrued liabilities
15,755
9,363
Pension and postretirement
contributions
(4,921)
(5,126)
Franchise tenant improvement allowance
distributions
(7,105)
(7,875)
Other
(4,844)
(16,012)
Cash flows provided by operating
activities
90,168
116,793
Cash flows from investing activities:
Purchases of property and equipment
(16,736)
(25,041)
Proceeds from the sale of property and
equipment
22,790
7,563
Proceeds from the sale and leaseback of
assets
19,828
3,056
Proceeds from the sale of company-operated
restaurants
2,625
133
Collections on notes receivable
—
15,239
Other
1,036
—
Cash flows provided by investing
activities
29,543
950
Cash flows from financing activities:
Borrowings on revolving credit
facilities
111,376
229,798
Repayments of borrowings on revolving
credit facilities
(3,500)
(252,800)
Principal repayments on debt
(7,094)
(32,611)
Debt issuance costs
(216)
(5,088)
Dividends paid on common stock
(18,466)
(30,929)
Proceeds from issuance of common stock
3,559
696
Repurchases of common stock
(155,576)
(14,362)
Payroll tax payments for equity award
issuances
(4,442)
(2,705)
Cash flows used in financing
activities
(74,359)
(108,001)
Net increase in cash and restricted
cash
45,352
9,742
Cash and restricted cash at beginning of
period
151,561
2,705
Cash and restricted cash at end of
period
$
196,913
$
12,447
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
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Revenues:
Company restaurant sales
34.0
%
35.3
%
34.2
%
35.4
%
Franchise rental revenues
31.4
%
28.5
%
31.6
%
28.7
%
Franchise royalties and other
17.8
%
18.1
%
17.4
%
18.0
%
Franchise contributions for advertising
and other services
16.7
%
18.2
%
16.8
%
18.0
%
Total revenues
100.0
%
100.0
%
100.0
%
100.0
%
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging (1)
29.2
%
29.4
%
29.6
%
28.8
%
Payroll and employee benefits (1)
30.4
%
29.5
%
31.0
%
29.5
%
Occupancy and other (1)
15.0
%
14.1
%
15.6
%
14.8
%
Total company restaurant costs (1)
74.6
%
73.0
%
76.2
%
73.1
%
Franchise occupancy expenses (2)
63.9
%
60.6
%
66.7
%
61.1
%
Franchise support and other costs (3)
6.2
%
6.7
%
7.7
%
6.4
%
Franchise advertising and other services
expenses (4)
104.0
%
103.7
%
103.6
%
104.0
%
Selling, general and administrative
expenses
5.6
%
11.0
%
8.6
%
9.1
%
Depreciation and amortization
5.0
%
5.8
%
5.4
%
5.9
%
Impairment and other charges, net
0.3
%
(1.5)
%
(1.0)
%
0.8
%
Gains on the sale of company-operated
restaurants
(0.4)
%
—
%
(0.3)
%
—
%
Earnings from operations
25.5
%
21.7
%
21.5
%
21.1
%
Income tax rate (5)
27.9
%
(17.9)
%
29.0
%
18.4
%
(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
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Company-owned restaurant sales
$
82,444
$
78,434
$
262,188
$
257,948
Franchised restaurant sales (1)
804,791
747,398
2,480,062
2,428,708
System sales (1)
$
887,235
$
825,832
$
2,742,250
$
2,686,656
(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
—
20
20
—
16
16
Acquired from franchisees
8
(8)
—
—
—
—
Closed
(1)
(18)
(19)
—
(11)
(11)
End of period
144
2,100
2,244
137
2,105
2,242
% 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, 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
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Diluted earnings per share from continuing
operations – GAAP
$1.40
$0.51
$2.21
$2.67
Loss on early termination of interest rate
swaps
—
0.56
—
0.56
Restructuring charges
—
—
0.04
0.19
Gains on the sale of company-operated
restaurants
(0.03)
—
(0.08)
(0.01)
Gain on sale of corporate office
building
—
—
(0.33)
—
Pension settlement charges
—
—
1.20
—
Operating Earnings Per Share – non-GAAP
(1)
$1.37
$1.07
$3.03
$3.41
(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, 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
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Net earnings - GAAP
$
32,555
$
13,189
$
51,915
$
72,376
(Earnings) losses from discontinued
operations, net of taxes
(379)
284
(379)
(2,652)
Income taxes
12,432
(2,048)
21,023
15,699
Interest expense, net
15,700
36,494
51,051
67,144
Pension settlement charges
103
—
39,030
—
Gains on the sale of company-operated
restaurants
(1,050)
—
(2,625)
(219)
Impairment and other charges, net
738
(3,256)
(7,837)
5,567
Depreciation and amortization
12,141
12,786
41,151
42,645
Amortization of franchise tenant
improvement allowances and other
618
387
2,383
1,524
Adjusted EBITDA – non-GAAP
$
72,858
$
57,836
$
195,712
$
202,084
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
40 Weeks Ended
July 5, 2020
July 7, 2019
July 5, 2020
July 7, 2019
Earnings from operations - GAAP
$
61,790
$
48,261
$
164,582
$
153,708
Franchise rental revenues
(76,021)
(63,359)
(241,990)
(208,895)
Franchise royalties and other
(43,239)
(40,180)
(133,469)
(130,840)
Franchise contributions for advertising
and other services
(40,571)
(40,386)
(128,458)
(131,189)
Franchise occupancy expenses
48,612
38,371
161,470
127,702
Franchise support and other costs
2,692
2,695
10,339
8,337
Franchise advertising and other services
expenses
42,176
41,882
133,134
136,397
Selling, general and administrative
expenses
13,680
24,389
66,131
66,057
Impairment and other charges, net
738
(3,256)
(7,837)
5,567
Gains on the sale of company-operated
restaurants
(1,050)
—
(2,625)
(219)
Depreciation and amortization
12,141
12,786
41,151
42,645
Restaurant-Level Margin- Non-GAAP
$
20,948
$
21,203
$
62,428
$
69,270
Company restaurant sales
$
82,444
$
78,434
$
262,188
$
257,948
Restaurant-Level Margin % - Non-GAAP
25.4
%
27.0
%
23.8
%
26.9
%
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
40 Weeks Ended
July 5, 2020
July 7, 2019 (1)
July 5, 2020
July 7, 2019 (1)
Earnings from operations - GAAP
$
61,790
$
48,261
$
164,582
$
153,708
Company restaurant sales
(82,444)
(78,434)
(262,188)
(257,948)
Food and packaging
24,077
23,058
77,662
74,350
Payroll and employee benefits
25,085
23,121
81,236
76,163
Occupancy and other
12,334
11,052
40,862
38,165
Selling, general and administrative
expenses
13,680
24,389
66,131
66,057
Impairment and other charges, net
738
(3,256)
(7,837)
5,567
Gains on the sale of company-operated
restaurants
(1,050)
—
(2,625)
(219)
Depreciation and amortization
12,141
12,786
41,151
42,645
Franchise-Level Margin - Non-GAAP
$
66,351
$
60,977
$
198,974
$
198,488
Franchise rental revenues
$
76,021
$
63,359
$
241,990
$
208,895
Franchise royalties and other
43,239
40,180
133,469
130,840
Franchise contributions for advertising
and other services
40,571
40,386
128,458
131,189
Total franchise revenues
$
159,831
$
143,925
$
503,917
$
470,924
Franchise-Level Margin % - Non-GAAP
41.5
%
42.4
%
39.5
%
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805006009/en/
Investor Contact: Rachel Webb, (858) 571-2683
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