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Jack in the Box Inc. Reports Fourth Quarter and Full-Year 2021 Earnings

By: Jack in the Box |  0 Shares     178 Reads

SAN DIEGO - (BUSINESS WIRE) - November 23, 2021 - Jack in the Box Inc. (NASDAQ: JACK) announced financial results for the fourth quarter ended October 3, 2021, comprised of growth in systemwide sales, same store sales and earnings per share.

"I am very proud of the execution and determination shown by our outstanding franchisees and corporate team members, continuing to deliver for our guests during a challenging operating environment,” said Darin Harris, Jack in the Box Chief Executive Officer. “We closed the year with strong comps on a two-year basis of +12.3% in Q4, leading us to another record-setting year of store-level profitability — a key element in driving results against our growth strategy in the near future. We continue to focus heavily on making significant progress on our strategic pillars, growth objectives, and unlocking substantial value for JACK shareholders."

Systemwide sales for the fourth quarter increased 8.6%, or 0.2% when excluding the 53rd week for the purpose of comparison to the prior year, driven by positive results in same store sales and partially offset by a slight decline in net unit growth. Systemwide sales for full year 2021 increased 13.1%, or 11.0% when excluding the 53rd week.

The company had a fourth quarter net store decline of one store, comprised of four store openings and five closures. The five store closures included one company-owned location and four related to early terminations and an agreement expiration. In the fourth quarter, there were development agreements signed for 47 future restaurants, bringing the year-to-date total to 111 future restaurant commitments.

Company-operated same-store sales declined 4.4% in the fourth quarter, with decreases in traffic partially offset by increases in average check. Franchise same-store sales grew 0.6%, with increases in average check; partially offset by a decrease in traffic.

(1) Fiscal year 2020 Diluted EPS included non-recurring items, notably a pension settlement charge and the sale of a corporate office building, that affect the comparability to fiscal year 2021 Diluted EPS.

Fourth quarter diluted earnings per share was $1.80, up 9.8% over the prior year quarter or 2.4% excluding the benefit of the 53rd week. Total revenues increased 9.0% to $278.5 million, compared to $255.4 million in the comparable period ended September 27, 2020, driven by the 53rd week in 2021 and growth in same store sales. Net earnings increased to $38.9 million for the fourth quarter of fiscal 2021, compared with $37.8 million for the fourth quarter of fiscal 2020. Adjusted EBITDA(1), a non-GAAP measure, was $74.3 million in the fourth quarter of fiscal 2021 compared with $78.4 million for the prior year quarter.

Restaurant-Level Margin⁽²⁾, a non-GAAP measure, was 20.1%, a decrease of 6.9% from the fourth quarter a year ago, primarily driven by the take back of lower-volume franchise restaurants; increases in food and packaging costs; wage inflation of 9.8%; and increases in utilities, and maintenance and repair costs, partially offset by lower incentive compensation and menu price increases. Commodity costs increased in the quarter by approximately 11.8%, primarily due to increases in pork, beef and beverages.

Franchise-Level Margin⁽²⁾, a non-GAAP measure, increased by $6.1 million, or 8.7% from the fourth quarter a year ago, driven by the benefit of the 53rd week in 2021.

G&A expense for the fourth quarter was $16.7 million, an increase of $6.4 million compared to the prior year quarter, driven primarily by a $3.8 million favorable litigation settlement in the prior year quarter; mark-to-market changes in the cash surrender value of company owned life insurance ("COLI") policies, net of a deferred compensation obligation supported by these policies, resulting in a year-over-year increase of $1.1 million; a $1.1 million increase in incentive compensation; and $1.5 million related to the 53rd week in fiscal 2021. G&A for the full-year was $63.1 million. When including selling and advertising expense, SG&A was $82.7 million for fiscal 2021.

(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 0.7 million shares of our common stock for an aggregate cost of $70.0 million. As of October 3, 2021, there was no remaining amount under the Board-authorized stock buyback program. On November 19, 2021, the Board of Directors authorized an additional $200.0 million stock buy-back program that expires on November 20, 2023.

On November 19, 2021, the Board of Directors declared a cash dividend of $0.44 per share, to be paid on December 23, 2021 to shareholders of record as of the close of business on December 9, 2021. Future dividends will be subject to approval by our Board of Directors.

2022 Guidance & Outlook

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

• 2022 CapEx & Other Investments Guidance of $65-75 million
  • Previously stated at Q3 2021 earnings on August 4, 2021
  • Includes:
    • Capital expenditures (located within cash flows from investing activities)
    • Franchise tenant improvement allowances and incentives (located within cash flows from operating activities)
• 2022 SG&A Guidance of $92-97 million
  • Excludes net COLI gains/losses, and now includes selling/advertising expense
• 2022 Commodity Guidance up 6-7% compared to 2021
• 2022 Company-owned Wage Rate Guidance up 8-10% compared to 2021
• No change to 3-5 Year Outlook as provided at Investor Day on June 29, 2021
  • Same store sales up 2 to 3%
  • Unit growth up 1 to 3%
  • Systemwide sales up 3 to 5%

2022 Restaurant Level Margin Outlook

• Due to an anticipated unique cost environment, we are providing one-time Company-owned restaurant level margin annual guidance for 2022
  
  • Restaurant Level Margin is expected to be 20-21%, which includes mid-to-high single digit price increases

Company-owned Restaurant Funding Outlook

• 2022: Planning to fund up to 5 company-owned restaurants
• 2023: Planning to fund between 7 and 15 company-owned restaurants

Conference Call

The company will host a conference call for analysts and investors on Tuesday, November 23, 2021, beginning at 7:30 a.m. PT (10:30 a.m. ET).

JACK IN THE BOX INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

The following table presents certain income and expense items included in our consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

The following table summarizes the changes in the number and mix of Jack in the Box company and franchise restaurants:

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).

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 (gains) 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):

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 (gains) 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):

SOURCE Jack in the Box Inc.

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