Jack in the Box Inc. Reports Third Quarter 2022 Earnings

Aug 10th, 2022 8:31 EST

SAN DIEGO--(BUSINESS WIRE)--Jack in the Box Inc. (NASDAQ: JACK) announced financial results for the Jack in the Box and Del Taco segments in the third quarter, ended July 10, 2022.

“I am very encouraged by the commitment shown by our franchisees, operators and corporate team members as we navigate this challenging and complex operating environment. We have remained steadfast in executing our four strategic pillars by focusing on what we can control,” said Darin Harris, Jack in the Box Chief Executive Officer. “Both Jack and Del Taco demonstrated top-line strength, delivering excellent same-store sales performances on a two-year basis, and sequentially higher sales on a three-year basis. As we navigate through the near-term, we are committed to utilizing the remainder of the year to return cash to shareholders via share buybacks in the fourth quarter, as well as strengthen our foundation to demonstrate unit growth progress beginning in fiscal 2023.”

Jack in the Box Performance

Systemwide sales for the third quarter decreased 1.4%. Same-store sales decreased 0.6% in the third quarter, comprised of a decline in franchise same-store sales of 1.0% and an increase in Company-operated same-store sales of 3.5%. Higher average check, driven mostly by pricing, was more than offset by traffic declines for franchise, and only partially offset by traffic declines for company-operated. The chicken and sides categories performed well, as did the snack and dinner day parts. During the quarter, systemwide sales declined relative to same-store sales due to a one-week shift affecting the calculation of same-store sales related to the 53rd week in 2021. This one-week shift had a more positive impact on same-store sales due to lapping less of the stimulus benefit in its calculation when compared to the fiscal quarter comparison.

As of the third quarter, and since the launch of the development program in mid-2021, the Company currently has 62 signed agreements for a total of 233 restaurants. Under these agreements, 13 restaurants have opened, leaving 220 remaining for future development. Net restaurant count was flat in the third quarter, as the Company both opened and closed three locations. The three restaurant closures included one Company-operated restaurant within an Evolving Market, one franchise location with an early termination and one franchise location with an agreement expiration.

Restaurant-Level Margin(2), a non-GAAP measure, was 15.8%, a decline from a year ago driven by increases in food and packaging costs; wage inflation of 13.2%; and increases in utilities and maintenance and repair costs, partially offset by menu price increases. Commodity costs increased in the quarter by approximately 16.8%, primarily due to increases in proteins, sauces, oil and beverages. When removing the temporary Evolving Markets (Oregon, Kansas City, Oklahoma City and Nashville), Restaurant-Level Margin was 19.3% for the quarter. Subsequent to the third quarter, the Company completed a Letter of Intent to refranchise seven restaurants within the Oregon market, with plans to close the remaining company-owned Oregon restaurants thereafter. This would remove all Oregon locations from the Evolving Markets portfolio beginning in Q1 2023. The agreement would also include six Southern California-based company-owned restaurants, which would be refranchised to the same operator, and a commitment to build additional future restaurants.

Franchise-Level Margin(2), a non-GAAP measure, was 41.4%, a decline from a year ago, driven by reduced operating hours, lower early termination penalties, and deferrals in connection with a franchisee currently in bankruptcy proceedings. Excluding the impact of this St. Louis-area franchisee's pre-pandemic challenges and 2021 chapter 11 bankruptcy event, Franchise-Level Margin for the third quarter of 2022 would have been would have been 42.2%, compared to 43.3% in the third quarter of 2021.

Jack in the Box Same-Store Sales:

 

 

12 Weeks Ended

 

40 Weeks Ended

 

 

July 10, 2022

 

July 4, 2021

 

July 10, 2022

 

July 4, 2021

Company

 

3.5%

 

9.0%

 

1.5%

 

10.0%

Franchise

 

(1.0)%

 

10.3%

 

(0.1)%

 

14.5%

System

 

(0.6)%

 

10.2%

 

0.0%

 

14.0%

Jack in the Box Restaurant Counts:

 

 

2022

 

2021

 

 

Company

 

Franchise

 

Total

 

Company

 

Franchise

 

Total

Restaurant count at beginning of Q3

 

172

 

 

2,035

 

 

2,207

 

 

148

 

2,080

 

 

2,228

 

New

 

 

 

3

 

 

3

 

 

 

4

 

 

4

 

Acquired from franchisees

 

 

 

 

 

 

 

 

 

 

 

Closed

 

(1

)

 

(2

)

 

(3

)

 

 

(13

)

 

(13

)

Restaurant count at end of Q3

 

171

 

 

2,036

 

 

2,207

 

 

148

 

2,071

 

 

2,219

 

Q3 Net Restaurant Increase/(Decrease)

 

(1

)

 

1

 

 

 

 

 

 

 

 

 

Q3 2022 vs. Q3 2021 Restaurant % Increase/(Decrease)

 

15.5

%

 

(1.7

)%

 

(0.5

)%

 

 

 

 

 

 

Del Taco Performance(1)

Systemwide sales for the fiscal third quarter increased 3.3% driven by positive results in both franchise and company-operated same-store sales. Same-store sales increased 3.5% in the third quarter, comprised of franchise same-store sales growth of 4.8% and Company-operated same-store sales growth of 2.3%. Sales performance was boosted by the 20 Under $2 value platform, higher average ticket and menu price, partially offset by menu mix and transaction declines. Del Taco had a third quarter net restaurant decrease of five restaurants, comprised of five closures and no openings.

Restaurant-Level Margin, a non-GAAP measure, was 17.6% while Franchise-Level Margin, a non-GAAP measure, was 42.7%.

Del Taco Same-Store Sales(1):

 

 

12 Weeks Ended

 

 

July 10, 2022

 

July 4, 2021

Company

 

2.3%

 

8.2%

Franchise

 

4.8%

 

5.9%

System

 

3.5%

 

7.1%

Del Taco Restaurant Counts(1):

 

 

2022

 

2021

 

 

Company

 

Franchise

 

Total

 

Company

 

Franchise

 

Total

Restaurant count at beginning of Q3

 

293

 

 

306

 

 

599

 

 

297

 

303

 

 

600

 

New

 

 

 

 

 

 

 

1

 

3

 

 

4

 

Closed

 

(2

)

 

(3

)

 

(5

)

 

 

(1

)

 

(1

)

Restaurant count at end of Q3

 

291

 

 

303

 

 

594

 

 

298

 

305

 

 

603

 

Q3 Net Restaurant Increase/(Decrease)

 

(2

)

 

(3

)

 

(5

)

 

 

 

 

 

 

Q3 2022 vs. Q3 2021 Restaurant % Increase/(Decrease)

 

(2.3

)%

 

(0.7

)%

 

(1.5

)%

 

 

 

 

 

 

Company-Wide Performance

Third quarter diluted earnings per share was $1.08. Operating Earnings Per Share (3), a non-GAAP measure, was $1.38 in the third quarter of fiscal 2022 compared with $1.64 in the prior year quarter. Total revenues increased 47.8% to $398.3 million, compared to $269.5 million in the prior year quarter.

Net earnings decreased to $22.9 million for the third quarter of fiscal 2022, compared with $40.0 million for the third quarter of fiscal 2021.

Adjusted EBITDA(4), a non-GAAP measure, was $73.2 million in the third quarter of fiscal 2022 compared with $79.0 million for the prior year quarter.

SG&A expense for the third quarter, which now includes Del Taco, was $40.1 million, an increase of $18.3 million compared to the prior year quarter, driven primarily by; mark-to-market changes in the cash surrender value of company owned life insurance ("COLI") policies, net of changes in our deferred compensation obligation supported by these policies, resulting in a year-over-year increase of $7.2 million, an increase in advertising expense of $5.1 million and an increase of $8.5 million in other G&A from the acquisition of Del Taco; partially offset by a decrease in litigation matters of $2.1 million.

The effective tax rate for the third quarter of fiscal year 2022 was 28.8% compared to 23.1% in fiscal year 2021. The major components of the year-over-year increase in tax rate, the impacts of which were exacerbated by a decrease in earnings before income taxes, were non-deductible COLI losses in the current year as opposed to non-taxable gains in the prior year, a favorable release of reserve on state tax credits and losses in the prior year, and an increase in non-deductible expenses in the current year.

(1) Del Taco same-store sales on a two-year basis and all prior year comparisons are pro forma and based on the time period of Jack in the Box’s full two-year fiscal calendar. We believe Del Taco's information on this time period is useful to investors as they have a direct effect on the company's profitability

(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."

(3) Operating Earnings Per Share represents diluted earnings per share on a GAAP basis of $1.08 excluding acquisition, integration, and restructuring costs of $0.10; COLI losses (gains), net of $0.22; and refranchising gains of ($0.03). See "Reconciliation of Non-GAAP Measurements to GAAP Results." Operating earnings per share may not add due to rounding.

(4) 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, other operating expenses (income), net, depreciation and amortization, the amortization of favorable and unfavorable leases and subleases, net and the amortization of franchise tenant improvement allowances and incentives. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

Capital Allocation

On November 19, 2021, the Board of Directors authorized a $200.0 million stock buy-back program that expires on November 20, 2023. The Company did not repurchase any shares in the third quarter of 2022, but plans to execute $25 million in share repurchases during the fourth quarter of 2022. On August 5, 2022, the Board of Directors declared a cash dividend of 0.44 per common share, to be paid on September 9, 2022, to shareholders of record as of the close of business on August 24, 2022.

Guidance Updates

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

Jack Restaurant Level Margin Guidance for FY 2022

  • Overall Jack in the Box Restaurant Level Margin is now expected to be ~16% (previously ~17%), which includes high single-digit price increases
  • Jack in the Box Restaurant Level Margin when removing Evolving Markets (Oregon, Kansas City, Oklahoma City and Nashville) is expected to be ~19% (previously ~20%)

Company-wide CapEx & Other Investments Guidance for FY 2022

  • Company-wide CapEx & Other Investments Guidance now $50-55 million (previously $75-80 million), due primarily to lower franchise incentive capital deployment toward restaurant reimages

Del Taco Guidance

All guidance and outlook measures related specifically to Del Taco will debut in 2023, and will be disclosed at our Q4/Full-Year 2022 earnings in November.

Conference Call

The Company will host a conference call for analysts and investors on Wednesday, August 10, 2022, beginning at 10:00 a.m. PT (1:00 p.m. ET). The call will be webcast live via the Investors section of the Jack in the Box company website at http://investors.jackinthebox.com. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days. The call can be accessed via phone by dialing (888) 330-2455 and using ID 6311841.

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®, one of the nation's largest hamburger chains with more than 2,200 restaurants across 21 states, and Del Taco®, the second largest Mexican-American QSR chain by units in the U.S. with approximately 600 restaurants across 16 states. For more information on both brands, including franchising opportunities, visit www.jackinthebox.com and www.deltaco.com. Category: Earnings

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 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 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, risks associated with the amount and terms of the securitized debt issued by certain of our wholly owned subsidiaries; 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.

 

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 

 

12 Weeks Ended

 

40 Weeks Ended

 

 

July 10, 2022

 

July 4, 2021

 

July 10, 2022

 

July 4, 2021

Revenues:

 

 

 

 

 

 

 

 

Company restaurant sales

 

$

215,231

 

 

$

91,892

 

 

$

486,596

 

 

$

292,132

 

Franchise rental revenues

 

 

80,068

 

 

 

80,598

 

 

 

259,723

 

 

 

262,248

 

Franchise royalties and other

 

 

52,059

 

 

 

48,582

 

 

 

159,915

 

 

 

155,461

 

Franchise contributions for advertising and other services

 

 

50,947

 

 

 

48,386

 

 

 

159,076

 

 

 

155,375

 

 

 

 

398,305

 

 

 

269,458

 

 

 

1,065,310

 

 

 

865,216

 

Operating costs and expenses, net:

 

 

 

 

 

 

 

 

Food and packaging

 

 

65,755

 

 

 

27,061

 

 

 

150,163

 

 

 

83,376

 

Payroll and employee benefits

 

 

71,366

 

 

 

27,356

 

 

 

162,001

 

 

 

88,727

 

Occupancy and other

 

 

42,054

 

 

 

14,103

 

 

 

92,102

 

 

 

45,287

 

Franchise occupancy expenses

 

 

50,971

 

 

 

48,824

 

 

 

164,198

 

 

 

162,897

 

Franchise support and other costs

 

 

3,768

 

 

 

2,722

 

 

 

12,694

 

 

 

9,336

 

Franchise advertising and other services expenses

 

 

52,398

 

 

 

49,168

 

 

 

164,964

 

 

 

158,967

 

Selling, general and administrative expenses

 

 

40,086

 

 

 

21,796

 

 

 

93,904

 

 

 

61,156

 

Depreciation and amortization

 

 

16,713

 

 

 

10,389

 

 

 

40,754

 

 

 

35,656

 

Other operating expenses, net

 

 

4,129

 

 

 

922

 

 

 

22,339

 

 

 

1,698

 

Gains on the sale of company-operated restaurants

 

 

(802

)

 

 

(264

)

 

 

(1,660

)

 

 

(3,079

)

 

 

 

346,438

 

 

 

202,077

 

 

 

901,459

 

 

 

644,021

 

Earnings from operations

 

 

51,867

 

 

 

67,381

 

 

 

163,851

 

 

 

221,195

 

Other pension and post-retirement expenses, net

 

 

70

 

 

 

204

 

 

 

233

 

 

 

678

 

Interest expense, net

 

 

19,703

 

 

 

15,158

 

 

 

66,371

 

 

 

51,120

 

Earnings before income taxes

 

 

32,094

 

 

 

52,019

 

 

 

97,247

 

 

 

169,397

 

Income taxes

 

 

9,237

 

 

 

11,991

 

 

 

27,324

 

 

 

42,576

 

Net earnings

 

$

22,857

 

 

$

40,028

 

 

$

69,923

 

 

$

126,821

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

1.08

 

 

$

1.80

 

 

$

3.29

 

 

$

5.59

 

Diluted

 

$

1.08

 

 

$

1.79

 

 

$

3.29

 

 

$

5.57

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

21,236

 

 

 

22,263

 

 

 

21,221

 

 

 

22,683

 

Diluted

 

 

21,260

 

 

 

22,326

 

 

 

21,264

 

 

 

22,761

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.44

 

 

$

0.44

 

 

$

1.32

 

 

$

1.24

 

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

July 10, 2022

 

October 3, 2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

65,857

 

 

$

55,346

 

Restricted cash

 

 

27,058

 

 

 

18,222

 

Accounts and other receivables, net

 

 

78,490

 

 

 

74,335

 

Inventories

 

 

5,704

 

 

 

2,335

 

Prepaid expenses

 

 

15,529

 

 

 

12,682

 

Current assets held for sale

 

 

7,519

 

 

 

1,692

 

Other current assets

 

 

4,775

 

 

 

4,346

 

Total current assets

 

 

204,932

 

 

 

168,958

 

Property and equipment:

 

 

 

 

Property and equipment, at cost

 

 

1,270,362

 

 

 

1,133,038

 

Less accumulated depreciation and amortization

 

 

(828,723

)

 

 

(810,124

)

Property and equipment, net

 

 

441,639

 

 

 

322,914

 

Other assets:

 

 

 

 

Operating lease right-of-use assets

 

 

1,334,300

 

 

 

934,066

 

Intangible assets, net

 

 

12,544

 

 

 

470

 

Trademarks

 

 

283,500

 

 

 

 

Goodwill

 

 

367,507

 

 

 

47,774

 

Deferred tax assets

 

 

 

 

 

51,517

 

Other assets, net

 

 

219,350

 

 

 

224,438

 

Total other assets

 

 

2,217,201

 

 

 

1,258,265

 

 

 

$

2,863,772

 

 

$

1,750,137

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt

 

$

30,201

 

 

$

894

 

Current operating lease liabilities

 

 

173,057

 

 

 

150,636

 

Accounts payable

 

 

49,286

 

 

 

29,119

 

Accrued liabilities

 

 

215,286

 

 

 

148,417

 

Total current liabilities

 

 

467,830

 

 

 

329,066

 

Long-term liabilities:

 

 

 

 

Long-term debt, net of current maturities

 

 

1,806,074

 

 

 

1,273,420

 

Long-term operating lease liabilities, net of current portion

 

 

1,166,977

 

 

 

809,191

 

Deferred tax liabilities

 

 

33,704

 

 

 

 

Other long-term liabilities

 

 

157,051

 

 

 

156,342

 

Total long-term liabilities

 

 

3,163,806

 

 

 

2,238,953

 

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, 82,580,296 and 82,536,059 issued, respectively

 

 

826

 

 

 

825

 

Capital in excess of par value

 

 

506,674

 

 

 

500,441

 

Retained earnings

 

 

1,806,352

 

 

 

1,764,412

 

Accumulated other comprehensive loss

 

 

(72,410

)

 

 

(74,254

)

Treasury stock, at cost, 61,523,475 shares

 

 

(3,009,306

)

 

 

(3,009,306

)

Total stockholders’ deficit

 

 

(767,864

)

 

 

(817,882

)

 

 

$

2,863,772

 

 

$

1,750,137

 

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

 

Year-to-date

 

 

July 10, 2022

 

July 4, 2021

Cash flows from operating activities:

 

 

 

 

Net earnings

 

$

69,923

 

 

$

126,821

 

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

 

 

 

 

Depreciation and amortization

 

 

40,754

 

 

 

35,656

 

Amortization of franchise tenant improvement allowances and incentives

 

 

3,046

 

 

 

2,330

 

Deferred finance cost amortization

 

 

4,280

 

 

 

4,304

 

Loss on extinguishment of debt

 

 

7,700

 

 

 

 

Tax deficiency (excess tax benefit) from share-based compensation arrangements

 

 

123

 

 

 

(1,164

)

Deferred income taxes

 

 

8,058

 

 

 

(2,599

)

Share-based compensation expense

 

 

5,541

 

 

 

3,338

 

Pension and post-retirement expense

 

 

233

 

 

 

678

 

Losses (gains) on cash surrender value of company-owned life insurance

 

 

9,024

 

 

 

(12,561

)

Gains on the sale of company-operated restaurants

 

 

(1,660

)

 

 

(3,079

)

Gains on the disposition of property and equipment, net

 

 

(1,746

)

 

 

(1,754

)

Impairment charges and other

 

 

3,863

 

 

 

1,951

 

Changes in assets and liabilities, excluding acquisitions:

 

 

 

 

Accounts and other receivables

 

 

571

 

 

 

14,485

 

Inventories

 

 

(137

)

 

 

(250

)

Prepaid expenses and other current assets

 

 

(3,261

)

 

 

1,194

 

Operating lease right-of-use assets and lease liabilities

 

 

6,074

 

 

 

(23,735

)

Accounts payable

 

 

2,627

 

 

 

(2,597

)

Accrued liabilities

 

 

(42,701

)

 

 

20,611

 

Pension and post-retirement contributions

 

 

(5,109

)

 

 

(4,961

)

Franchise tenant improvement allowance and incentive disbursements

 

 

(2,206

)

 

 

(8,009

)

Other

 

 

(1,185

)

 

 

(778

)

Cash flows provided by operating activities

 

 

103,812

 

 

 

149,881

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(34,349

)

 

 

(35,157

)

Acquisition of Del Taco, net of cash acquired

 

 

(580,792

)

 

 

 

Proceeds from the sale of property and equipment

 

 

4,691

 

 

 

5,272

 

Proceeds from the sale and leaseback of assets

 

 

5,968

 

 

 

 

Proceeds from the sale of company-operated restaurants

 

 

1,402

 

 

 

1,229

 

Other

 

 

(1,315

)

 

 

2,616

 

Cash flows used in investing activities

 

 

(604,395

)

 

 

(26,040

)

Cash flows from financing activities:

 

 

 

 

Borrowings on revolving credit facilities

 

 

68,000

 

 

 

 

Repayments of borrowings on revolving credit facilities

 

 

(18,000

)

 

 

(107,875

)

Proceeds from the issuance of debt

 

 

1,100,000

 

 

 

 

Principal repayments on debt

 

 

(580,518

)

 

 

(640

)

Payment of debt issuance and extinguishment costs

 

 

(20,599

)

 

 

 

Dividends paid on common stock

 

 

(27,789

)

 

 

(27,886

)

Proceeds from issuance of common stock

 

 

51

 

 

 

6,646

 

Repurchases of common stock

 

 

 

 

 

(124,399

)

Payroll tax payments for equity award issuances

 

 

(1,215

)

 

 

(4,166

)

Cash flows provided by (used in) financing activities

 

 

519,930

 

 

 

(258,320

)

Net increase (decrease) in cash and restricted cash

 

 

19,347

 

 

 

(134,479

)

Cash and restricted cash at beginning of period

 

 

73,568

 

 

 

236,920

 

Cash and restricted cash at end of period

 

$

92,915

 

 

$

102,441

 

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 10, 2022

 

July 4, 2021

 

July 10, 2022

 

July 4, 2021

Revenues:

 

 

 

 

 

 

 

Company restaurant sales

54.0

%

 

34.1

%

 

45.7

%

 

33.8

%

Franchise rental revenues

20.1

%

 

29.9

%

 

24.4

%

 

30.3

%

Franchise royalties and other

13.1

%

 

18.0

%

 

15.0

%

 

18.0

%

Franchise contributions for advertising and other services

12.8

%

 

18.0

%

 

14.9

%

 

18.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

Operating costs and expenses, net:

 

 

 

 

 

 

 

Food and packaging (1)

30.6

%

 

29.4

%

 

30.9

%

 

28.5

%

Payroll and employee benefits (1)

33.2

%

 

29.8

%

 

33.3

%

 

30.4

%

Occupancy and other (1)

19.5

%

 

15.3

%

 

18.9

%

 

15.5

%

Franchise occupancy expenses (excluding depreciation and amortization) (2)

63.7

%

 

60.6

%

 

63.2

%

 

62.1

%

Franchise support and other costs (3)

7.2

%

 

5.6

%

 

7.9

%

 

6.0

%

Franchise advertising and other services expenses (4)

102.8

%

 

101.6

%

 

103.7

%

 

102.3

%

Selling, general and administrative expenses

10.1

%

 

8.1

%

 

8.8

%

 

7.1

%

Depreciation and amortization

4.2

%

 

3.9

%

 

3.8

%

 

4.1

%

Other operating expenses, net

1.0

%

 

0.3

%

 

2.1

%

 

0.2

%

Gains on the sale of company-operated restaurants

(0.2

) %

 

(0.1

) %

 

(0.2

) %

 

(0.4

) %

Earnings from operations

13.0

%

 

25.0

%

 

15.4

%

 

25.6

%

Income tax rate (5)

28.8

%

 

23.1

%

 

28.1

%

 

25.1

%

(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 operations and before income taxes

Jack in the Box systemwide sales (in thousands):

 

12 Weeks Ended

 

40 Weeks Ended

 

July 10, 2022

 

July 4, 2021

 

July 10, 2022

 

July 4, 2021

Company-operated restaurant sales

$

100,899

 

$

91,892

 

$

315,205

 

$

292,132

Franchised restaurant sales (1)

 

867,210

 

 

889,558

 

 

2,825,353

 

 

2,852,746

Systemwide sales (1)

$

968,109

 

$

981,450

 

$

3,140,558

 

$

3,144,878

(1)

Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. Systemwide 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 systemwide restaurant sales information is useful to investors as they have a direct effect on the company's profitability.

Del Taco systemwide sales (in thousands):

12 Weeks Ended

 

40 Weeks Ended

 

July 10, 2022

 

July 4, 2021 (1)

 

July 10, 2022 (1)

 

July 4, 2021 (1)

Company-operated restaurant sales

$

114,333

 

$

112,196

 

$

368,893

 

$

359,395

Franchised restaurant sales (2)

112,774

 

107,741

 

359,243

 

341,691

Systemwide sales (2)

$

227,107

 

$

219,937

 

$

728,136

 

$

701,086

(1)

Del Taco has been presented on a pro forma basis has been derived from unaudited financial information to conform to our fiscal year and is for informational purposes only.

(2)

Franchised restaurant sales represent sales at franchised restaurants and are revenues of our franchisees. Systemwide 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 systemwide restaurant sales information is useful to investors as they have a direct effect on the company's profitability.

JACK IN THE BOX INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASUREMENTS TO GAAP RESULTS (Unaudited)

To supplement the condensed 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 on a GAAP basis excluding acquisition, integration, and restructuring costs; COLI losses (gains), net and gains on the sale of company-operated restaurants. 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. Figures may not add due to rounding.

 

 

12 Weeks Ended

 

 

July 10, 2022

 

July 4, 2021

Diluted earnings per share – GAAP

 

$

1.08

 

 

$

1.79

 

Acquisition, integration, and restructuring costs

 

 

0.10

 

 

 

 

Net COLI losses (gains)

 

 

0.22

 

 

 

(0.14

)

Refranchising gains

 

 

(0.03

)

 

 

(0.01

)

Operating Earnings Per Share – non-GAAP (1)

 

$

1.38

 

 

$

1.64

 

(1)

 

Operating Earnings Per Share may not add due to rounding.

(2)

 

Beginning in the first quarter of 2022, we exclude gains and losses driven by mark-to-market changes in the cash surrender value of COLI policies, net of a deferred compensation obligation supported by these policies. The prior period has been recast to conform to the current year presentation.

Adjusted EBITDA

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, other operating expenses (income), net, depreciation and amortization, amortization of favorable and unfavorable leases and subleases, net 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

 

July 10, 2022

 

July 4, 2021

Net earnings - GAAP

$

22,857

 

 

$

40,028

 

Income taxes

 

9,237

 

 

 

11,991

 

Interest expense, net

 

19,703

 

 

 

15,158

 

Gains on the sale of company-operated restaurants

 

(802

)

 

 

(264

)

Other operating expenses, net

 

4,129

 

 

 

922

 

Depreciation and amortization

 

16,713

 

 

 

10,389

 

Amortization of favorable and unfavorable leases and subleases, net

 

437

 

 

 

 

Amortization of franchise tenant improvement allowances and other

 

919

 

 

 

796

 

Adjusted EBITDA – non-GAAP

$

73,193

 

 

$

79,020

 

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, other operating expenses (income), 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-operated restaurants.

Below is a reconciliation of non-GAAP Restaurant-Level Margin to the most directly comparable GAAP measure, earnings from operations (in thousands):

 

 

Jack in the Box

 

Del Taco

 

 

July 10, 2022

 

July 4, 2021

 

July 10, 2022

 

July 4, 2021

Earnings from operations - GAAP

 

$

47,963

 

 

$

67,381

 

 

$

3,904

 

 

$

 

Franchise rental revenues

 

 

(78,278

)

 

 

(80,598

)

 

 

(1,791

)

 

 

 

Franchise royalties and other

 

 

(46,632

)

 

 

(48,582

)

 

 

(5,426

)

 

 

 

Franchise contributions for advertising and other services

 

 

(46,168

)

 

 

(48,386

)

 

 

(4,780

)

 

 

 

Franchise occupancy expenses

 

 

49,216

 

 

 

48,824

 

 

 

1,755

 

 

 

 

Franchise support and other costs

 

 

3,422

 

 

 

2,722

 

 

 

346

 

 

 

 

Franchise advertising and other services expenses

 

 

47,622

 

 

 

49,168

 

 

 

4,776

 

 

 

 

Selling, general and administrative expenses

 

 

26,913

 

 

 

21,796

 

 

 

13,173

 

 

 

 

Other operating expenses, net

 

 

3,461

 

 

 

922

 

 

 

668

 

 

 

 

Gains on the sale of company-operated restaurants

 

 

(802

)

 

 

(264

)

 

 

 

 

 

 

Depreciation and amortization

 

 

9,202

 

 

 

10,389

 

 

 

7,511

 

 

 

 

Restaurant-Level Margin- Non-GAAP

 

$

15,919

 

 

$

23,372

 

 

$

20,136

 

 

$

 

 

 

 

 

 

 

 

 

 

Company restaurant sales

 

$

100,899

 

 

$

91,892

 

 

$

114,333

 

 

$

 

 

 

 

 

 

 

 

 

 

Restaurant-Level Margin % - Non-GAAP

 

 

15.8

%

 

 

25.4

%

 

 

17.6

%

 

 

%

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, other operating expenses (income), 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):

 

 

 

Jack in the Box

 

Del Taco

 

 

 

July 10, 2022

 

July 4, 2021

 

July 10, 2022

 

July 4, 2021

Earnings from operations - GAAP

 

 

$

47,963

 

 

$

67,381

 

 

$

3,904

 

 

$

 

Company restaurant sales

 

 

 

(100,899

)

 

 

(91,892

)

 

 

(114,333

)

 

 

 

Food and packaging

 

 

 

33,319

 

 

 

27,061

 

 

 

32,435

 

 

 

 

Payroll and employee benefits

 

 

 

33,699

 

 

 

27,356

 

 

 

37,667

 

 

 

 

Occupancy and other

 

 

 

17,960

 

 

 

14,103

 

 

 

24,095

 

 

 

 

Selling, general and administrative expenses

 

 

 

26,913

 

 

 

21,796

 

 

 

13,173

 

 

 

 

Other operating expenses, net

 

 

 

3,461

 

 

 

922

 

 

 

668

 

 

 

 

Gains on the sale of company-operated restaurants

 

 

 

(802

)

 

 

(264

)

 

 

 

 

 

 

Depreciation and amortization

 

 

 

9,202

 

 

 

10,389

 

 

 

7,511

 

 

 

 

Franchise-Level Margin - Non-GAAP

 

 

$

70,816

 

 

$

76,852

 

 

$

5,120

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Franchise rental revenues

 

 

$

78,278

 

 

$

80,598

 

 

$

1,791

 

 

$

 

Franchise royalties and other

 

 

 

46,632

 

 

 

48,582

 

 

 

5,426

 

 

 

 

Franchise contributions for advertising and other services

 

 

 

46,168

 

 

 

48,386

 

 

 

4,780

 

 

 

 

Total franchise revenues

 

 

$

171,078

 

 

$

177,566

 

 

$

11,997

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Franchise-Level Margin % - Non-GAAP

 

 

 

41.4

%

 

 

43.3

%

 

 

42.7

%

 

 

%

 

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