Jack in the Box Inc. Reports Third Quarter 2021 Earnings

Systemwide sales growth of +10.6% – Same store sales growth +10.2%

Jack in the Box Inc. (NASDAQ: JACK) announced financial results for the third quarter ended July 4, 2021, comprised of growth in systemwide sales, system same store sales and earnings per share.

“I am very pleased with our third quarter results, and proud of the continued momentum and execution from our franchisees and operators,” said Darin Harris, Jack in the Box Chief Executive Officer. “Comps on a two-year basis of +16.8%, coupled with solid earnings performance, are all part of creating the store-level profitability that will help us maximize our growth and expansion opportunities going forward.”

Systemwide sales increased 10.6% in the third quarter, comprised of positive results in same store sales and a slight decline in net unit growth. The company had a third quarter net store decline of 9 stores, comprised of 4 store openings and 13 closures – with 7 closings that include future offsetting locations, and the remainder related to agreement expirations. In the third quarter, there were development agreements signed for 60 future restaurants, bringing the year-to-date total to 64 future restaurants.

Company-operated same-store sales grew 9.0% in the third quarter, with evenly-balanced contribution from both transactions and average check. Franchise same-store sales grew 10.3%, with similar trends in both average check and transactions.

Same-store sales:

12 Weeks Ended

40 Weeks Ended

July 4, 2021

July 5, 2020

July 4, 2021

July 5, 2020

Company

9.0%

4.1%

10.0%

1.2%

Franchise

10.3%

6.9%

14.5%

1.5%

System SSS

10.2%

6.6%

14.0%

1.5%

Restaurant Counts:

2021

2020

Company

Franchise

Total

Company

Franchise

Total

Store count at beginning of Q3

148

2,080

2,228

144

2,102

2,246

New

4

4

4

4

Closed

(13

)

(13

)

(6

)

(6

)

Store count at end of Q3

148

2,071

2,219

144

2,100

2,244

Q3 Net Unit Increase/(Decrease)

(9

)

(9

)

(2

)

(2

)

Q3 2021 vs. Q3 2020 Unit % Increase/(Decrease)

2.8

%

(1.4

)%

(1.1

)%

5.1

%

(0.2

)%

0.1

%

Third quarter diluted earnings per share was $1.79, up 26.1% over the prior year quarter. Total revenues increased 11.2% to $269.5 million, compared to $242.3 million in the comparable period ended July 5, 2020, driven by 10.2% growth in system same-store sales. Net earnings increased to $40.0 million for the third quarter of fiscal 2021, compared with $32.6 million for the third quarter of fiscal 2020. Adjusted EBITDA(1), a non-GAAP measure, was $79.0 million in the third quarter of fiscal 2021 compared with $72.9 million for the prior year quarter.

Restaurant-Level Margin(2), a non-GAAP measure, remained flat at 25.4% of company restaurant sales in the third quarter of fiscal 2021 from a year ago. Sales leverage was offset by an increase in food and packaging costs, wage inflation of 8%, higher incentive compensation as well as an increase in delivery fees and maintenance and repair costs. The increase in food and packaging costs were primarily driven by higher costs for ingredients, partially offset by favorable sales mix and menu price increases. Commodity costs increased in the quarter by approximately 5.7%, primarily due to increases in pork and beverages, partially offset by a decrease in beef.

Franchise-Level Margin(2), a non-GAAP measure, increased by $10.5 million in the third quarter, primarily driven by higher royalties and rental revenues as a result of higher franchise same-store sales.

(1) Adjusted EBITDA represents net earnings on a GAAP basis excluding 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.”

(2) 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.”

Capital Allocation

The company repurchased 0.6 million shares of our common stock for an aggregate cost of $65.0 million. As of July 4, 2021, there was $70.0 million remaining under the Board-authorized stock buyback program which expire in November 2022.

On July 30, 2021, the Board of Directors declared a cash dividend of $0.44 per share on the company’s common stock. The dividend is payable on September 3, 2021, to shareholders of record at the close of business on August 18, 2021.

Updates to 2021 Guidance Measures

The following guidance and underlying assumptions reflect the company’s current expectations for the current fiscal year ending October 3, 2021 (which, this year, includes 53 weeks):

  • 2021 CapEx of $40-45 million
    • Previously stated at Investor Day on June 29, 2021 — and does not include the Other Investments stated below which commence with our 2022 guidance
  • 2021 G&A of $71-76 million
    • Replaces previous % of system sales guidance, and excludes net COLI gains/losses
  • 2021 Commodity outlook up 4-5% compared to 2020
    • Previous guidance was up 1-3%
  • 2021 Labor Cost outlook up 7-8% compared to 2020
    • Previous guidance was up 5-6%

The Company will provide similar guidance measures for FY 2022 on its Q4 2021 earnings call.

CapEx & Other Investments Guidance for 2022

The following guidance range and underlying assumptions reflect the company’s current expectations for the fiscal year ending October 2, 2022:

  • 2022 CapEx & Other Investments: $65-75 million
  • Note: Beginning in 2022, CapEx & Other Investments guidance factors in two main items:
    • Capital expenditures (located within cash flows from investing activities)
    • Franchise tenant improvement allowances and incentives (located within cash flows from operating activities)

About Jack in the Box Inc.

Jack in the Box Inc. (NASDAQ: JACK), founded and headquartered in San Diego, California, 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.

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 4,
2021

July 5,
2020

July 4,
2021

July 5,
2020

Revenues:

Company restaurant sales

$

91,892

$

82,444

$

292,132

$

262,188

Franchise rental revenues

80,598

76,021

262,248

241,990

Franchise royalties and other

48,582

43,239

155,461

133,469

Franchise contributions for advertising and other services

48,386

40,571

155,375

128,458

269,458

242,275

865,216

766,105

Operating costs and expenses, net:

Food and packaging

27,061

24,077

83,376

77,662

Payroll and employee benefits

27,356

25,085

88,727

81,236

Occupancy and other

14,103

12,334

45,287

40,862

Franchise occupancy expenses

48,824

48,612

162,897

161,470

Franchise support and other costs

2,722

2,692

9,336

10,339

Franchise advertising and other services expenses

49,168

42,176

158,967

133,134

Selling, general and administrative expenses

21,796

13,680

61,156

66,131

Depreciation and amortization

10,389

12,141

35,656

41,151

Impairment and other charges (gains), net

922

738

1,698

(7,837

)

Gains on the sale of company-operated restaurants

(264

)

(1,050

)

(3,079

)

(2,625

)

202,077

180,485

644,021

601,523

Earnings from operations

67,381

61,790

221,195

164,582

Other pension and post-retirement expenses, net

204

1,482

678

40,972

Interest expense, net

15,158

15,700

51,120

51,051

Earnings before income taxes

52,019

44,608

169,397

72,559

Income taxes

11,991

12,432

42,576

21,023

Earnings from continuing operations

40,028

32,176

126,821

51,536

Earnings from discontinued operations, net of income taxes

379

379

Net earnings

$

40,028

$

32,555

$

126,821

$

51,915

Net earnings per share – basic:

Earnings from continuing operations

$

1.80

$

1.41

$

5.59

$

2.22

Earnings from discontinued operations

0.02

0.02

Net earnings per share (1)

$

1.80

$

1.42

$

5.59

$

2.24

Net earnings per share – diluted:

Earnings from continuing operations

$

1.79

$

1.40

$

5.57

$

2.21

Earnings from discontinued operations

0.02

0.02

Net earnings per share (1)

$

1.79

$

1.42

$

5.57

$

2.23

Weighted-average shares outstanding:

Basic

22,263

22,847

22,683

23,192

Diluted

22,326

22,916

22,761

23,322

Dividends declared per common share

$

0.44

$

$

1.24

$

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)

       

July 4,
2021

September 27,
2020

ASSETS

Current assets:

Cash

$

84,220

$

199,662

Restricted cash

18,221

37,258

Accounts and other receivables, net

68,278

78,417

Inventories

2,120

1,808

Prepaid expenses

8,990

10,114

Current assets held for sale

3,255

4,598

Other current assets

4,123

3,724

Total current assets

189,207

335,581

Property and equipment:

Property and equipment, at cost

1,140,824

1,132,430

Less accumulated depreciation and amortization

(809,375

)

(796,448

)

Property and equipment, net

331,449

335,982

Other assets:

Operating lease right-of-use assets

924,210

904,548

Intangible assets, net

256

277

Goodwill

47,161

47,161

Deferred tax assets

72,419

72,322

Other assets, net

222,771

210,623

Total other assets

1,266,817

1,234,931

$

1,787,473

$

1,906,494

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Current maturities of long-term debt

$

858

$

818

Current operating lease liabilities

153,217

179,000

Accounts payable

34,557

31,105

Accrued liabilities

137,018

129,431

Total current liabilities

325,650

340,354

Long-term liabilities:

Long-term debt, net of current maturities

1,272,405

1,376,913

Long-term operating lease liabilities, net of current portion

797,803

776,094

Other long-term liabilities

203,217

206,494

Total long-term liabilities

2,273,425

2,359,501

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, 82,536,059 and 82,369,714 issued, respectively

825

824

Capital in excess of par value

499,668

489,515

Retained earnings

1,734,976

1,636,211

Accumulated other comprehensive loss

(107,798

)

(110,605

)

Treasury stock, at cost, 60,846,347 and 59,646,773 shares, respectively

(2,939,273

)

(2,809,306

)

Total stockholders’ deficit

(811,602

)

(793,361

)

$

1,787,473

$

1,906,494

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

   

40 Weeks Ended

July 4,
2021

July 5,
2020

Cash flows from operating activities:

Net earnings

$

126,821

$

51,915

Earnings from discontinued operations

379

Earnings from continuing operations

$

126,821

$

51,536

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

35,656

41,151

Amortization of franchise tenant improvement allowances and incentives

2,330

2,383

Deferred finance cost amortization

4,304

4,337

Excess tax benefit from share-based compensation arrangements

(1,164

)

(71

)

Deferred income taxes

(2,599

)

12,567

Share-based compensation expense

3,338

7,612

Pension and post-retirement expense

678

40,972

Gains on cash surrender value of company-owned life insurance

(12,561

)

(1,861

)

Gains on the sale of company-operated restaurants

(3,079

)

(2,625

)

Gains on the disposition of property and equipment, net

(1,754

)

(10,386

)

Non-cash operating lease costs

(16,511

)

(5,689

)

Impairment charges and other

1,951

195

Changes in assets and liabilities, excluding acquisitions:

Accounts and other receivables

14,485

(38,783

)

Inventories

(250

)

14

Prepaid expenses and other current assets

1,194

(5,034

)

Accounts payable

(9,821

)

(2,756

)

Accrued liabilities

20,611

15,755

Pension and post-retirement contributions

(4,961

)

(4,921

)

Franchise tenant improvement allowance and incentive disbursements

(8,009

)

(9,384

)

Other

(778

)

(4,844

)

Cash flows provided by operating activities

149,881

90,168

Cash flows from investing activities:

Capital expenditures

(35,157

)

(16,736

)

Proceeds from the sale of property and equipment

5,272

22,790

Proceeds from the sale and leaseback of assets

19,828

Proceeds from the sale of company-operated restaurants

1,229

2,625

Other

2,616

1,036

Cash flows (used in) provided by investing activities

(26,040

)

29,543

Cash flows from financing activities:

Borrowings on revolving credit facilities

111,376

Repayments of borrowings on revolving credit facilities

(107,875

)

(3,500

)

Principal repayments on debt

(640

)

(7,094

)

Debt issuance costs

(216

)

Dividends paid on common stock

(27,886

)

(18,466

)

Proceeds from issuance of common stock

6,646

3,559

Repurchases of common stock

(124,399

)

(155,576

)

Payroll tax payments for equity award issuances

(4,166

)

(4,442

)

Cash flows used in financing activities

(258,320

)

(74,359

)

Net (decrease) increase in cash and restricted cash

(134,479

)

45,352

Cash and restricted cash at beginning of period

236,920

151,561

Cash and restricted cash at end of period

$

102,441

$

196,913

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 4,
2021

July 5,
2020

July 4,
2021

July 5,
2020

Revenues:

Company restaurant sales

34.1

%

34.0

%

33.8

%

34.2

%

Franchise rental revenues

29.9

%

31.4

%

30.3

%

31.6

%

Franchise royalties and other

18.0

%

17.8

%

18.0

%

17.4

%

Franchise contributions for advertising and other services

18.0

%

16.7

%

18.0

%

16.8

%

100.0

%

100.0

%

100.0

%

100.0

%

Operating costs and expenses, net:

Food and packaging (1)

29.4

%

29.2

%

28.5

%

29.6

%

Payroll and employee benefits (1)

29.8

%

30.4

%

30.4

%

31.0

%

Occupancy and other (1)

15.3

%

15.0

%

15.5

%

15.6

%

Franchise occupancy expenses (2)

60.6

%

63.9

%

62.1

%

66.7

%

Franchise support and other costs (3)

5.6

%

6.2

%

6.0

%

7.7

%

Franchise advertising and other services expenses (4)

101.6

%

104.0

%

102.3

%

103.6

%

Selling, general and administrative expenses

8.1

%

5.6

%

7.1

%

8.6

%

Depreciation and amortization

3.9

%

5.0

%

4.1

%

5.4

%

Impairment and other charges (gains), net

0.3

%

0.3

%

0.2

%

(1.0)

%

Gains on the sale of company-operated restaurants

(0.1)

%

(0.4)

%

(0.4)

%

(0.3)

%

Earnings from operations

25.0

%

25.5

%

25.6

%

21.5

%

Income tax rate (5)

23.1

%

27.9

%

25.1

%

29.0

%

____________________________

(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 before income taxes.

Jack in the Box system sales (in thousands):

       

12 Weeks Ended

40 Weeks Ended

July 4,
2021

July 5,
2020

July 4,
2021

July 5,
2020

Company-operated restaurant sales

$

91,892

$

82,444

$

292,132

$

262,188

Franchised restaurant sales (1)

889,558

804,791

2,852,746

2,480,062

Systemwide sales (1)

$

981,450

$

887,235

$

3,144,878

$

2,742,250

____________________________

(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 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)

       

2021

2020

Company

Franchise

Total

Company

Franchise

Total

Beginning of year

144

2,097

2,241

137

2,106

2,243

New

10

10

20

20

Acquired from franchisees

4

(4

)

8

(8

)

Closed

(32

)

(32

)

(1

)

(18

)

(19

)

End of period

148

2,071

2,219

144

2,100

2,244

% of system

7

%

93

%

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: 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.

Adjusted EBITDA

Adjusted EBITDA represents net earnings on a GAAP basis excluding earnings from discontinued operations, income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, impairment and other charges (gains), net, depreciation and amortization, the amortization of franchise tenant improvement allowances and incentives, and pension settlement charges. 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 4,
2021

July 5,
2020

July 4,
2021

July 5,
2020

Net earnings – GAAP

$

40,028

$

32,555

$

126,821

$

51,915

Earnings from discontinued operations, net of taxes

(379

)

(379

)

Income tax expense

11,991

12,432

42,576

21,023

Interest expense, net

15,158

15,700

51,120

51,051

Pension settlement charges

103

39,030

Gains on the sale of company-operated restaurants

(264

)

(1,050

)

(3,079

)

(2,625

)

Impairment and other charges (gains), net

922

738

1,698

(7,837

)

Depreciation and amortization

10,389

12,141

35,656

41,151

Amortization of franchise tenant improvement allowances and incentives

796

618

2,330

2,383

Adjusted EBITDA – Non-GAAP

$

79,020

$

72,858

$

257,122

$

195,712

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 (gains), 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 4,
2021

July 5,
2020

July 4,
2021

July 5,
2020

Earnings from operations – GAAP

$

67,381

$

61,790

$

221,195

$

164,582

Franchise rental revenues

(80,598

)

(76,021

)

(262,248

)

(241,990

)

Franchise royalties and other

(48,582

)

(43,239

)

(155,461

)

(133,469

)

Franchise contributions for advertising and other services

(48,386

)

(40,571

)

(155,375

)

(128,458

)

Franchise occupancy expenses

48,824

48,612

162,897

161,470

Franchise support and other costs

2,722

2,692

9,336

10,339

Franchise advertising and other services expenses

49,168

42,176

158,967

133,134

Selling, general and administrative expenses

21,796

13,680

61,156

66,131

Impairment and other charges (gains), net

922

738

1,698

(7,837

)

Gains on the sale of company-operated restaurants

(264

)

(1,050

)

(3,079

)

(2,625

)

Depreciation and amortization

10,389

12,141

35,656

41,151

Restaurant-Level Margin- Non-GAAP

$

23,372

$

20,948

$

74,742

$

62,428

Company restaurant sales

$

91,892

$

82,444

$

292,132

$

262,188

Restaurant-Level Margin % – Non-GAAP

25.4

%

25.4

%

25.6

%

23.8

%

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 (gains), 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 4,
2021

July 5,
2020

July 4,
2021

July 5,
2020

Earnings from operations – GAAP

$

67,381

$

61,790

$

221,195

$

164,582

Company restaurant sales

(91,892

)

(82,444

)

(292,132

)

(262,188

)

Food and packaging

27,061

24,077

83,376

77,662

Payroll and employee benefits

27,356

25,085

88,727

81,236

Occupancy and other

14,103

12,334

45,287

40,862

Selling, general and administrative expenses

21,796

13,680

61,156

66,131

Impairment and other charges (gains), net

922

738

1,698

(7,837

)

Gains on the sale of company-operated restaurants

(264

)

(1,050

)

(3,079

)

(2,625

)

Depreciation and amortization

10,389

12,141

35,656

41,151

Franchise-Level Margin – Non-GAAP

$

76,852

$

66,351

$

241,884

$

198,974

Franchise rental revenues

$

80,598

$

76,021

$

262,248

$

241,990

Franchise royalties and other

48,582

43,239

155,461

133,469

Franchise contributions for advertising and other services

48,386

40,571

155,375

128,458

Total franchise revenues

$

177,566

$

159,831

$

573,084

$

503,917

Franchise-Level Margin % – Non-GAAP

43.3

%

41.5

%

42.2

%

39.5

%