SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 1, 2000SEPTEMBER 30, 2001
COMMISSION FILE NUMBER 1-9390
Jack in the Box Inc.
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(Exact name of registrant as specified in its charter)
Delaware 95-2698708
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(State of Incorporation) (I.R.S. Employer Identification No.)
9330 Balboa Avenue, San Diego, CA 92123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (858) 571-2121
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.01 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of November 30, 2000,2001, computed by reference to the closing
price reported in the New York Stock Exchange - Composite Transactions, was
approximately $986 million.
Number of shares of common stock, $.01 par value, outstanding as of the
close of business November 30, 20002001 - 38,453,734.39,280,393.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the 20012002 Annual Meeting of Stockholders
are incorporated by reference into Part III hereof.
1
ITEM 1. BUSINESS
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The Company
Overview. Jack in the Box Inc. (the "Company"), formerly Foodmaker, Inc.,
owns, operates and franchises JACK IN THE BOX(R)quick-service hamburger
restaurants. In fiscal 2000,2001, we generated revenues of $1.6$1.8 billion. As of
October 1, 2000,September 30, 2001, the JACK IN THEJack in the BOX system included 1,6341,762 restaurants, of
which 1,3111,431 were Company-operated and 323331 were franchised. JACK IN THE BOX
restaurants are located primarily in the western and southern United States.
Based on the number of units, JACK IN THE BOX is the second or third largest
quick-service hamburger chain in most of its major markets.
JACK IN THE BOX restaurants offer a broad selection of distinctive,
innovative products targeted at the adult fast-food consumer. The
JACK IN THE BOX menu features a variety of hamburgers, specialty sandwiches,
Mexican foods, finger foods and side items. The core of the JACK IN THE BOX menu
is hamburgers, including the signature Jumbo Jack(R), Sourdough Jack(R) and
Ultimate Cheeseburger. In addition, we offer products unique to the hamburger
segment, such as the Teriyaki Chicken Bowl and Chicken Fajita Pita.
JACK IN THE BOX restaurants also offer value-priced product alternatives, known
as "Jack's Value Menu," to compete against price-oriented competitors. We
believe that our distinctive menu has been instrumental in developing brand
loyalty and is appealing to customers with a broader range of food preferences.
JACK IN THE BOX restaurants focus on guest service in providingstrive to provide a restaurant experience whichthat
exceeds the guests' expectations.
The JACK IN THE BOX restaurant chain was the first to develop and expand
the concept of drive-thru only restaurants. In addition to drive-thru windows,
most of our restaurants have seating capacities ranging from 20 to 100 persons
and are open 18-24 hours a day. Drive-thru sales currently account for
approximately 64%65% of sales at Company-operated restaurants.
History. The first JACK IN THE BOX restaurant, which offered only
drive-thru service, opened in 1951, and the1951. The JACK IN THE BOX chain had expanded its
operations to approximately 300 restaurants inby 1968. After the Company was
purchased in 1968 by Ralston Purina Company, we initiated a major expansion program was
initiated in an effort to penetrate the eastern and midwestern markets, and by
1979 our business grewhad grown to over 1,000 units. In 1979, wethe Company decided to
divest of 232 restaurants in the east and midwest andto concentrate ourits efforts and
resources in the western and southwestern markets, which wewere believed offeredto offer
the greatest growth and profit potential at that time. In 1985, we were acquired by a group of
private investors acquired the Company and, in 1987, completed a public offering of common
stock.stock was completed. In 1988, the outstanding publicly-held shares were acquired
by private investors through a tender offer. In 1992, we completed a recapitalization was
completed that included a public offering of common stock and indebtedness.
Since that time, we have continued to add new restaurants and have entered new
markets.
Operating Strategy. Our operating strategy includes: (i) offering quality
products with high perceived value,at competitive prices, (ii) providing fast and friendly customer
service, (iii) maintaining a strong brand image, and (iv) targeting an
attractive demographic segment. Beginning in 1994, we began a series of
operating initiatives to improve food quality and guest service. These
initiatives include improvements in food preparation and service methods,
product reformulations and innovations, and training and retention of employees.
In 1995, we launched our award-winning, irreverent advertising campaign featuring our
fictional founder "Jack" which has been instrumental in delivering the message
of product quality, innovation and value to our customers. We believe our menu
and marketing campaign appeal to a broad segment of the population, particularly
our primary target market of men aged 18-34, the demographic group with the
highest incidence of fast-food consumption. The Company operates 80%We operate 81% of the
JACK IN THE BOX restaurants, one of the highest percentages in the quick-service
restaurant industry, which we believe enables us to implement our operating
strategy and introduce product innovations consistently across the entire system
bettermore effectively and efficiently than other quick-service restaurant chains.
Menu Strategy. The menu strategy for JACK IN THE BOX restaurants is to
provide high quality products that represent good value and appeal to the
preferences of our customers. The menu features traditional hamburgers and side
items in addition to specialty sandwiches, Mexican foods, finger foods,
breakfast foods, unique side items and desserts.
2
We recognize the advantages of improving existing products through
ingredient specifications and changes in preparation and cooking procedures.
Such majorWhen appropriate, improvements such as our Assemble-to-Order ("ATO") program are
communicated to the public through point-of-purchase and television media, with
messages such as "We won't make it - `til you order it." During fiscal 1999,2001,
with an emphasis on speed of service, we implementedimproved our Assemble-to-Order ("ATO") program.
This program,average transaction time
by about 40 seconds. We believe these initiatives, along with the addition of
new menu boards and order confirmation screens have had a favorable impact on
sales.
JACK IN THE BOX restaurants operate in the hamburger segment which is the
largest segment of the quick-service industry. Hamburgers, including the Jumbo
Jack, Sourdough Jack and the Ultimate Cheeseburger, accounted for approximately
one-quarter of our restaurant sales in fiscal 2000.2001. However, we believe that, as
a result of our diverse menu, our restaurants are less dependent on the
commercial success of one or a few products than other quick-service chains, and
the menu appeals to guests with a broad range of food preferences.
Growth Strategy. Our business strategyplan is to (i) increase same store sales and
profitability through the continued implementation of our successful operating
strategy and (ii) capitalize on our strong brand name and proven operating
strategy by developing new restaurants.
We believe that our strategy of focusing on food quality and guest service
will allow us to differentiate ourselves from competitors and maintaincompetitors. We intend to continue
our restaurant level margins among the highest in the industry. Management intends
to continueefforts to increase same store sales and profitability through improvements
in food quality and guest service, product innovations and creative marketing.
For example, in 1999, we implemented the ATO program by remodeling our
restaurant kitchens to improve food quality and to allow for more efficient
operations. Also, we installed new drive-thru menu boards which feature an
electronic order confirmation system that allows customers to read their orderorders
on an electronic screen, which we believe will reducereduces errors and increaseincreases customer
satisfaction. In response to consumer demand, we installed self-serve drink
stations in the vast majority of restaurants, improving guest satisfaction and
reducing labor.
We intend to capitalize on our strong brand name and proven operating
strategy to achieve attractive returns on investment by developing new
Company-operated restaurants and, to a lesser extent, franchised restaurants. We
opened 120126 new Company-operated restaurants in fiscal 20002001 and intend to open
and operate slightly increased levels ofadditional new restaurants in each ofover the next several years. Newly-opened restaurants typically have sales levels similar to
existing restaurants. We believe
that our brand is still underpenetrated in many of our existing markets and
intend to leverage media and food delivery costs by increasing our market
penetration. In addition, we believe that we can further leverage the
JACK IN THE BOX brand name by expanding to contiguous and selected high growth new markets.
We have also begun opening a limited number of restaurants on nontraditional
sites, such as sites adjacent to convenience stores and gas stations, and intend
to continue to add nontraditional sites to increase our penetration of existing
markets. We intend to remain flexible in our strategies to grow the business in
our pursuit of long-term increases in shareholder value.
Site selections for all new JACK IN THE BOX restaurants are made after an
extensive review of demographic data and other information relating to
population density, restaurant visibility and access, available parking,
surrounding businesses and opportunities for market penetration. JACK IN THE BOX
restaurants developed by franchisees are built to our specifications on sites
which have been approved by us.
New JACK IN THE BOX restaurants are built using several configurations,
with the largest restaurantsconfiguration seating approximately 100 customers and the
smallest, 40 customers. Management believes that the flexibility provided by the
alternative configurations enables us to match the restaurant configuration with
specific economic, demographic and geographic characteristics of the site. The
typical development costs for new restaurants range from approximately $1.4
million to $1.7$1.8 million. We use lease financing and other means to lower our
cash investment in a typical leased restaurant to approximately $300,000 to
$400,000.
3
The following table summarizes the growth in Company-operated and
franchised JACK IN THE BOX restaurants since the beginning of fiscal 1996:1997:
Fiscal Year
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1996------------------------------------------
1997 1998 1999 2000 2001
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Company-operated restaurants:
Opened ....................... 26Opened........................ 75 102 115 120 126
Sold to franchisees .......... -franchisees........... (8) (2) - (13) Closed ....................... (15)(13)
Closed........................ (6) (8) (6) (4) (2)
Acquired from franchisees .... 5franchisees..... 23 14 13 17 9
End of period total .......... 879total........... 963 1,069 1,191 1,311 1,431
Franchised restaurants:
Opened ....................... 10Opened........................ 5 2 2 1 4
Acquired from Company ........ -Company......... 8 2 - 13 Closed ....................... (3)13
Closed........................ (21) (5) (8) - -
Sold to Company .............. (5)Company............... (23) (14) (13) (17) (9)
End of period total .......... 391total........... 360 345 326 323 331
System end of period total ...... 1,270total........ 1,323 1,414 1,517 1,634 1,762
The following table summarizes, by state, the geographical locations of
JACK IN THE BOX restaurants at October 1, 2000:September 30, 2001:
Company-
operated Franchised Total
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Arizona ........................... 86 44 130
California ........................ 515 234 749
Hawaii ............................-----
Arizona........................ 89 45 134
California..................... 544 244 788
Hawaii......................... 28 1 29
Idaho ............................. 20Idaho.......................... 22 - 20
Illinois ..........................22
Illinois....................... 13 - 13
Louisiana ......................... 6Louisiana...................... 14 - 6
Missouri .......................... 4514
Missouri....................... 47 - 45
Nevada ............................ 36 10 4647
Nevada......................... 40 11 51
New Mexico ........................Mexico..................... - 2 2
North Carolina .................... 8Carolina................. 16 - 8
Oregon ............................ 3016
Oregon......................... 35 2 3237
South Carolina ....................Carolina................. 6 - 6
Tennessee...................... 19 - 19
Texas.......................... 451 26 477
Utah........................... 1 - 1
Tennessee ......................... 9Washington..................... 106 - 9
Texas ............................. 414 30 444
Washington ........................ 100 - 100106
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Total ........................... 1,311 323 1,634------
Total...................... 1,431 331 1,762
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Restaurant Operations. We devote significant resources toward ensuring that
all JACK IN THE BOX restaurants offer the highesthigh quality food and service. Emphasis is
placed on ensuring that quality ingredients are delivered to the restaurants,
restaurant food production systems are continuously developed and improved, and
we train all our employees to be dedicated to delivering consistently high quality
food and service. Through our network of corporate quality assurance, facilities
services and restaurant management personnel, including regional vice
presidents, area managers and restaurant managers, we standardize specifications
for food preparation and service, employee conduct and appearance, and the
maintenance and repair of our premises. Operating specifications and procedures
are documented in a series of manuals and video presentations. Most restaurants,
including franchised units, receive approximately four quality, food safety and
imagecleanliness inspections and 26 mystery guest reviews each year.
4
Each JACK IN THE BOX restaurant is operated by a Company-employed manager
or a franchisee who normally attends an extensive range of management training
classes. Our management training program involves a combination of classroom
instruction and on-the-job training in specially designated training
restaurants. Restaurant managers and supervisory personnel train other
restaurant employees in accordance with detailed procedures and guidelines using
training aids and video equipment available at each location. The restaurant
managers are directly responsible for the operation of the restaurants,
including product quality, food handling safety, cleanliness, service,
inventory, cash control and the conduct and appearance of employees.
4
Restaurant managers are supervised by area managers, each of whom is
responsible for approximately 15-20an average of 15 restaurants. The area managers are supervised
by ten12 regional vice presidents. Under our performance system, regional vice
presidents, and area and restaurant managers are eligible for quarterly bonuses
based on a percentage of location operating profit and profit improvement over
the prior year.year and certain other criteria.
Our "farm-to-fork" food safety and quality assurance program is designed to
maintain high standards for the food products and food preparation procedures
used by Company-operated and franchised restaurants. We maintain product
specifications and approve sources for obtaining such products.product sources. We have a comprehensive,
restaurant-based Hazard Analysis & Critical Control Points ("HACCP") system for
managing food safety and quality. HACCP combines employee training, testing by
suppliers, and detailed attention to product quality at every stage of the food
preparation cycle. Our HACCP program has been recognized as a leader in the
industry by the USDA, FDA and the Center for Science in the Public Interest.
We provide purchasing, warehouse and distribution services for bothall
Company-operated and some franchisedapproximately one-third of franchise-operated restaurants.
The remaining franchisees participate in a purchasing cooperative they formed in
1996 and contract with another supplier for distribution services. Some
products, primarily dairy and bakery items, are delivered directly by approved
suppliers to both Company-operated and franchised restaurants. Prior to 1996, most JACK IN THE BOX
franchisees used our distribution services to the full extent available even
though they were permitted to purchase products directly from any approved
source. In 1996, JACK IN THE BOX franchisees formed a purchasing cooperative and
contracted with another supplier for distribution services. This transition by
most franchisees resulted in a substantial decline in distribution sales, but
had only a minor impact on profitability since distribution is a low margin
business.
The primary commodities purchased by JACK IN THE BOX restaurants are beef,
poultry, pork, cheese and produce. We monitor the primary commodities we
purchase in order to minimize the impact of fluctuations in price and
availability, and make advance purchases of commodities when considered to be
advantageous. However, certain commodities remain subject to price fluctuations.
All essential food and beverage products are available, or upon short notice can
be made available, from alternative qualified suppliers.
We have centralized financial and accounting controls for Company-operated
JACK IN THE BOX restaurants which we believe are important in analyzing and
improving profit margins. JACK IN THE BOX restaurants use a specially designed
computerized reporting and cash register system.system which is being converted to a
new touch screen point-of-sale system designed to increase speed of service, and
decrease employee training and transaction times. The system provides
point-of-sale transaction data and accumulates marketing information. Our management collects
and analyzes sales data on a weekly basis.information for
analysis.
Franchising Program. The growth of the JACK IN THE BOX concept occurs
primarily through the building of new Company-operated restaurants. Although we
do not actively recruit new franchisees, our franchising strategy allows
selected franchisee restaurant development in existing franchised markets. We
offer development agreements for construction of one or more new restaurants
over a defined period of time and in a defined geographic area. Developers are
required to prepay one-halfpay a development fee, a portion of thewhich may be credited against
franchise fees due for restaurants to be opened in the future andfuture. Developers may
forfeit such fees and lose their rights to future developments if they do not
maintain the required schedule of openings.
Our current franchise agreement provides for an initial franchise fee of
$50,000 per restaurant, royalties of 5% of gross sales, marketing fees of 5% of
gross sales and, in most instances, a 20-year term. Some existing agreements
provide for royalties and marketing fees at rates as low as 4%. In connection
with the conversion of a Company-operated restaurant, the restaurant equipment
and the right to do business at that location, known as "Trading Area Rights,"
are sold to the franchisee, in most cases for cash. The aggregate price is equal
to the negotiated fair market value of the restaurant as a going concern, which
depends on various factors including the history of the restaurant, its location
and cash flow potential. In addition, the land and building are leased or
subleased to the franchisee at a negotiated rent, generally equal to the greater
of a minimum base rent or a percentage of gross sales (typically 8 1/2%).sales. The franchisee is
required to pay property taxes, insurance and maintenance costs. Our franchise
agreement also provides us a right of first refusal on each proposed sale of a
franchised restaurant, which we exercise from time to time when the proposed
sale price and terms are acceptable to us.
5
We view our non-franchised JACK IN THE BOX units as a potential resource
which, on a selected basis, can be sold to a franchisee to generate additional
immediategenerating current cash
flow and revenues while still maintaining future cash flows and earnings through
franchise rents and royalties. Franchised units totaled 323331 of the 1,6341,762
JACK IN THE BOX restaurants at October 1, 2000.September 30, 2001. The ratio of franchised to
Company-operated restaurants is low relative to our major competitors.
Advertising and Promotion. JACK IN THE BOX restaurants participate in
substantial marketing programs and activities. Advertising costs are paid from a
fund comprised of (i) an amount contributed each year by us equal to
at leastapproximately 5% of the gross sales of our Company-operated restaurants and (ii)
the marketing fees paid by franchisees. Our use of advertising is limited to
regional and local campaigns on television and radio and in print media. We
spent approximately $94.9$104.5 million on advertising and promotions in fiscal 2000,2001,
including franchisee contributions of $18.0$19.1 million. Our current advertising
campaign relies on a series of television and radio spot advertisements to
promote individual products and to develop the JACK IN THE BOX brand. We also
spent $.9$1.1 million in fiscal 20002001 for local marketing purposes. Franchisees are
also encouraged to, and generally do, spend additional funds for local marketing
programs.
Employees. At October 1, 2000,September 30, 2001, we had approximately 40,20043,600 employees, of
whom approximately 37,70041,100 were restaurant employees, 570620 were corporate
personnel, 370400 were distribution employees and 1,5601,480 were field management and
administrative personnel. Employees are paid on an hourly basis, except
restaurant managers, corporate and field management, and administrative
personnel. A majority of our restaurant employees are employed on a part-time,
hourly basis to provide services necessary during peak periods of restaurant
operations. We have not experienced any significant work stoppages and believe
our labor relations are good. We compete in the job market for qualified
employees and believe our wage rates are comparable to those of our competitors.
Trademarks and Service Marks
The JACK IN THE BOX name is of material importance to us and is a
registered trademark and service mark in the United States and in certain
foreign countries. In addition, we have registered numerous service marks and
trade names for use in our business, including the JACK IN THE BOX logo and
various product names and designs.
Competition and Markets
The restaurant business is highly competitive and is affected by
competitive changes in a geographic area, changes in the public's eating habits
and preferences, local and national economic conditions affecting consumer
spending habits, population trends and traffic patterns. Key elements of
competition in the industry are the quality and value of the food products
offered, quality and speed of service, advertising, name identification,
restaurant location and attractiveness of facilities.
Each JACK IN THE BOX restaurant competes directly and indirectly with a
large number of national and regional restaurant chains, as well as with
locally-owned quick-service restaurants and coffee shops. In selling franchises,
we compete with many other restaurant franchisers, some of whom have
substantially greater financial resources and higher total sales volume.
Regulation
Each JACK IN THE BOX restaurant is subject to regulation by federal
agencies and to licensing and regulation by state and local health, sanitation,
safety, fire and other departments. Difficulties or failures in obtaining any
required licensing or approval could result in delays or cancellations in the
opening of new restaurants.
We are also subject to federal and a substantial number of state laws
regulating the offer and sale of franchises. Such laws impose registration and
disclosure requirements on franchisers in the offer and sale of franchises and
may also apply substantive standards to the relationship between franchiser and
franchisee, including limitations on the ability of franchisers to terminate
franchisees and alter franchise arrangements. We believe we are operating in
substantial compliance with applicable laws and regulations governing our
operations.
6
We are subject to the Fair Labor Standards Act and various state laws
governing such matters as minimum wages, overtime and other working conditions.
A significant number of our food service personnel are paid at rates related to
the federal and state minimum wage, and, accordingly, increases in the minimum
wage increase our labor costs.
In addition, various proposals which would require employers to provide
health insurance for all of their employees are being considered from time to
time in Congress and various states. The imposition of any requirement that we
provide health insurance to all employees would have a material adverse impact
on the consolidated operations and financial condition of the Company and the
restaurant industry.industry, in general.
We are subject to certain guidelines under the Americans with Disabilities
Act of 1990 ("ADA") and various state codes and regulations which require
restaurants to provide full and equal access to persons with physical
disabilities. To comply with such laws and regulations, the cost of remodeling
and developing restaurants has increased, principally due to the need to provide
certain older restaurants with ramps, wider doors, larger restrooms and other
conveniences.
We are also subject to various federal, state and local laws regulating the
discharge of materials into the environment. The cost of developing restaurants
has increased to comply with these laws. Additional costs relate primarily to
the necessity of obtaining more land, landscaping and below surface storm
drainage and the cost of more expensive equipment necessary to decrease the
amount of effluent emitted into the air and ground.
Forward-Looking Statements and Risk Factors
This Form 10-K contains "forward-looking statements" within the meaning of
the securities laws. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, and have based these expectations on
our beliefs as well as assumptions we have made, such expectations may prove to
be materially incorrect due to known and unknown risks and uncertainties.
These forward-looking statements are principally contained in the sections
captioned "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Statements regarding our future financial
performance, including growth in net sales, earnings, cash flows from operations
and sources of liquidity; expectations regarding effective tax rates; the number
and location of new restaurants to be opened in the future and continuing
investment in new restaurants and refurbishment of existing facilitiesfacilities; the
appeal of our menu and marketing campaigns; our operational efficiencies and
labor relations are forward-looking statements. In those and other portions of
this Form 10-K, the words "anticipates," "believes," "estimates," "seeks,"
"expects," "plans," "intends" and similar expressions as they relate to the
Company or its management are intended to identify forward-looking statements.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the following cautionary statements identify
important factors that could cause actual results to differ materially from
those expressed in any forward-looking statements. In addition to the factors
discussed in this Form 10-K, other factors that could cause results to differ
materially are:include, but are not limited to: the effectiveness and cost of our
advertising and promotional efforts; the degree of success of our product
offerings; our ability to expand successfully into new markets; weather
conditions;conditions that adversely affect the level of customer traffic or timely
delivery of our food supplies; difficulties in obtaining ingredients and
variations in ingredient costs; theour ability to control operating, general and
administrative costs and to raise prices sufficiently to offset cost increases;
theour ability to recognize value from any current or future co-branding efforts;
erosion of our sales caused by competitive products, and pricing and promotions; the
impact of any wide-spread negative publicity; the impact on consumer eating
habits of new scientific information regarding diet, nutrition and health;
competition for labor; power shortages and increases in utility costs due to
deregulation; general economic conditions; changes in consumer tastes and in
travel and dining-out habits; the impact on operations and the costs to comply
with laws and regulations and other activities of governing entities; the costs
and other effects of legal claims by franchisees, customers, vendors and others,
including settlement of those claims; and the effectiveness of management
strategies and decisions.
7
Risks Related to the Food Service Industry. Food service businesses are
often affected by changes in consumer tastes, national, regional and local
economic conditions and demographic trends. The performance of individual
restaurants may be adversely affected by factors such as traffic patterns,
demographics and the type, number and location of competing restaurants.
7
Multi-unit food service businesses such as ours can also be materially and
adversely affected by publicity resulting from poor food quality, illness,
injury or other health concerns with respect to the nutritional value of certain
food.
In early 1993, our business was severely disrupted as a result of an
outbreak of food-borne illness bacteria attributed to hamburgers served in
JACK IN THE BOX restaurants, principally in the state of Washington. To minimize the risk of any such occurrence in the future,food-borne illness, we have implemented a HACCP
system for managing food safety and quality. Nevertheless, the risk of
food-borne illness cannot be completely eliminated. Any outbreak of such illness
attributed to JACK IN THE BOX restaurants or within the food service industry
could have a material adverse effect on our financial condition and results of
operations.
Dependence on frequent deliveries of fresh produce and groceries subjects
food service businesses, such as ours, to the risk that shortages or
interruptions in supply, caused by adverse weather or other conditions, could
adversely affect the availability, quality and cost of ingredients. In addition,
unfavorable trends or developments concerning factors such as inflation,
increased food, labor and employee benefit costs (including increases in hourly
wage and unemployment tax rates), increases in the number and locations of
competing restaurants, regional weather conditions and the availability of
experienced management and hourly employees may also adversely affect the food
service industry in general and our financial condition and results of
operations in particular. Changes in economic conditions affecting our customers
could reduce traffic in some or all of our restaurants or impose practical
limits on pricing, either of which could have a material adverse effect on our
financial condition and results of operations. Our continued success will depend
in part on our ability to anticipate, identify and respond to changing
conditions.
Risks Associated with Development. We intend to grow primarily by
developing additional Company-owned restaurants. Development involves
substantial risks, including the risk of (i) development costs exceeding
budgeted or contracted amounts, (ii) delays in completion of construction, (iii)
failing to obtain all necessary zoning and construction permits, (iv) the
inability to identify or the unavailability of suitable sites, both traditional
and nontraditional, on acceptable leasing or purchase terms, (v) developed
properties not achieving desired revenue or cash flow levels once opened, (vi)
competition for suitable development sites from competitors (some of which have
greater financial resources than us)we do), (vii) incurring substantial
unrecoverable costs in the event a development project is abandoned prior to
completion, (viii) changes in governmental rules, regulations, and
interpretations (including interpretations of the requirements of the ADA) and
(ix) general economic and business conditions.
Although we intend to manage our development to reduce such risks, we
cannot assure you that present or future developments will perform in accordance
with our expectations. We cannot assure you that we will complete the
development and construction of the facilities, or that any such developments
will be completed in a timely manner or within budget, or that such restaurants
will generate our expected returns on investment. Our inability to expand in
accordance with our plans or to manage our growth could have a material adverse
effect on our results of operations and financial condition.
Risks Associated with Growth. Our development plans will require the
implementation of enhanced operational and financial systems and will require
additional management, operational, and financial resources. For example, we
will be required to recruit and train managers and other personnel for each new
Company-owned restaurant, as well as additional development and accounting
personnel. We cannot assure you that we will be able to manage our expanding
operations effectively. The failure to implement such systems and add such
resources on a cost-effective basis could have a material adverse effect on our
results of operations and financial condition.
Reliance on Certain Markets. Because our business is regional, with
approximately three-fourths of JACK IN THE BOX restaurants located in the states
of California and Texas, the economic conditions, state and local government
regulations and weather conditions affecting those states may have a material
impact upon our results.
8
Risks Related to Entering New Markets. During fiscal 20012002 we expect to open
additional restaurants in the new markets.markets we entered since fiscal 2000. We
cannot assure you that we will be able to successfully enter into these or
additional new geographical markets, as we may encounter well-established
competitors with substantially greater financial resources. We may be unable to
find attractive locations, successfully market our products and attract new
customers. Competitive circumstances and consumer characteristics in new markets
may differ substantially from those in the markets in which we have substantial
experience. We cannot assure you that we will be able to successfully integrate
or profitably operate new Company-operated or franchised restaurants located in
our new markets.
8
Competition. The restaurant industry is highly competitive with respect to
price, service, location and food quality, and there are many well-established
competitors. Certain of our competitors have engaged in substantial price
discounting in recent years and may continue to do so in the future. In
addition, factors such as increased food, labor and benefits costs and the
availability of experienced management and hourly employees may adversely affect
the restaurant industry in general and our restaurants in particular. Each
JACK IN THE BOX restaurant competes directly and indirectly with a large number
of national and regional restaurant chains, as well as with locally-owned
quick-service restaurants and coffee shops. Some of our competitors have
substantially greater financial resources and higher total sales volume. Any
changes in these factors could adversely affect our profitability.
Exposure to Commodity Pricing. Although we may take hedging positions in
certain commodities from time to time and opportunistically contract for some of
these items in advance of a specific need, we cannot assure you that we will not
be subject to the risk of substantial and sudden price increases, shortages or
interruptions in supply of such items, which could have a material adverse
effect on us.
Risks Related to Increased Labor Costs. We have a substantial number of
employees who are paid wage rates at or slightly above the minimum wage. As
federal and state minimum wage rates increase, we may need to increase not only
the wages of our minimum wage employees but also the wages paid to the employees
at wage rates which are above minimum wage. If competitive pressures or other
factors prevent us from offsetting the increased costs by increases in prices,
our profitability may decline. In addition, various proposals which would
require employers to provide health insurance for all of their employees are
being considered from time to time in Congress and various states. The
imposition of any requirement that we provide health insurance to all employees
would have a material adverse impact on the operations and financial condition
of the Company and the restaurant industry.
Taxes. Because of losses incurred in past years, we have been requiredRisks Related to establish valuation allowancesAdvertising. We compete against deferred tax assets recorded for certainboth regional and national
quick service restaurants, grocery and speciality stores as well as similar
types of loss carryforwards. Our effective tax rates would be impacted if
sufficient evidence becomes available that indicates thatbusinesses which offer sandwiches and similar items. Some of our
competors have greater financial resources which enable them to purchase
significantly more television and radio advertising than we will beare able to
realize such deferred tax assets through offsetting taxable gains. In addition,
frompurchase. Should our competitors increase spending on advertising and promotion,
should the cost of television or radio advertising increase, or our advertising
funds decrease for any reason, including implementation of reduced spending
strategies, there could be a material adverse effect on our results of operation
and financial condition.
Taxes. From time to time, we may take positions forin filing our tax returns
whichthat differ from the treatment of the same itemtreatments for financial reporting purposes. If we
prevail in our tax return filingThe ultimate
outcome of such positions could have an adverse impact on our effective tax
rate will be
affected.rate.
Leverage. We are highly leveraged. Our substantial indebtedness may limit
our ability to respond to changing business and economic conditions. The
contracts under which we acquired our debt impose significant operating and
financial restrictions which limit our ability to borrow money, sell assets or
make capital expenditures or investments without the approval of certain
lenders. In addition to cash flows generated by operations, other financing
alternatives may be required in order to repay our substantial debt as it comes due. We
cannot assure you that we will be able to refinance our debt or obtain
additional financing, or that any such financing will be on terms favorable to
us.
9
Risks Related to Franchise Operations. At October 1, 2000,September 30, 2001, we had 323331
franchised JACK IN THE BOX restaurants. The opening and success of franchised
restaurants depends on various factors, including the availability of suitable
sites, the negotiation of acceptable lease or purchase terms for new locations,
permitting and regulatory compliance, the ability to meet construction schedules
and the financial and other capabilities of our franchisees and developers. We
cannot assure you that developers planning the opening of franchised restaurants
will have the business abilities or sufficient access to financial resources
necessary to open the restaurants required by their agreements. We cannot assure
you that franchisees will successfully operate their restaurants in a manner
consistent with our concept and standards. In addition, certain federal and
state laws govern our relationships with our franchisees. See "Risks Related to
Government Regulations" below.
Dependence on Key Personnel. We believe that our success will depend in
part on the continuing services of our key executives, including Robert J.
Nugent, Chief Executive Officer, Kenneth R. Williams, President and Chief
ExecutiveOperating Officer, Charles W. Duddles,and John F. Hoffner, Executive Vice President and Chief
Financial Officer, and Chief Administrative Officer and
Kenneth R. Williams, Executive Vice President, Marketing and Operations, none of whom are employed pursuant to an employment
agreement. The loss of the services of any of such executives could have a
material adverse effect on our business, and we cannot assure you that qualified
replacements would be available. Our continued growth will also depend in part
on our ability to attract and retain additional skilled management personnel.
9
Risks Related to Government Regulations. The restaurant industry is subject
to extensive federal, state and local governmental regulations, including those
relating to the preparation and sale of food and those relating to building and
zoning requirements. We and our franchisees are also subject to laws governing
our relationships with employees, including minimum wage requirements, overtime,
working and safety conditions and citizenship requirements. See "Risks Related
to Increased Labor Costs" above. We are also subject to federal regulation and
certain state laws which govern the offer and sale of franchises. Many state
franchise laws impose substantive requirements on franchise agreements,
including limitations on noncompetition provisions and on provisions concerning
the termination or nonrenewal of a franchise. Some states require that certain
materials be registered before franchises can be offered or sold in that state.
The failure to obtain or retain licenses or approvals to sell franchises could
adversely affect us and our franchisees. Changes in government regulations could
have a material adverse effect on us.our operations.
Environmental Risks and Regulations. As is the case with any owner or
operator of real property, we are subject to a variety of federal, state and
local governmental regulations relating to the use, storage, discharge, emission
and disposal of hazardous materials. Failure to comply with environmental laws
could result in the imposition of severe penalties or restrictions on operations
by governmental agencies or courts of law which could adversely affect
operations. We do not have environmental liability insurance,insurance; nor do we maintain
a reserve to cover such events. We have engaged and may engage in real estate
development projects and own or lease several parcels of real estate on which
our restaurants are located. We are unaware of any significant environmental
hazards on properties we own or have owned, or operate or have operated. In the
event of the determination of contamination on such properties, the Company, as
owner or operator, cancould be held liable for severe penalties and costs of
remediation. We also operate motor vehicles and warehouses and handle various
petroleum substances and hazardous substances, but are not aware of any current
material liability related thereto.
10
ITEM 2. PROPERTIES
----------
At October 1, 2000,September 30, 2001, we owned 637690 JACK IN THE BOX restaurant buildings,
including 419466 located on leased land. In addition, we leased 914990 restaurants
where both the land and building are leased, including 141148 restaurants operated
by franchisees. At October 1, 2000,September 30, 2001, franchisees directly owned or leased 8382
restaurants.
Number of restaurants
------------------------------------------------------------
Company- FranchiseFranchise-
operated -operatedoperated Total
--------- ------------ -------- ---------- -------
Company-owned restaurant buildings:
On Company-owned land.................... 165land...................... 171 53 218224
On leased land........................... 373 46 419land............................. 418 48 466
----- --- -----
Subtotal................................. 538 99 637Subtotal................................... 589 101 690
Company-leased restaurant buildings
on leased land........................... 773 141 914land............................. 842 148 990
Franchise directly-owned or directly-
leased restaurant buildings..............buildings................ - 83 8382 82
----- --- -----
Total restaurant buildings.................. 1,311 323 1,634buildings.................... 1,431 331 1,762
===== === =====
Our leases generally provide for fixed rental payments (with cost-of-living
index adjustments) plus real estate taxes, insurance and other expenses; inexpenses. In
addition, many of the leases provide for contingent rental payments of between
2% and 10% of the restaurant's gross sales.sales once certain thresholds are met. We
have generally been able to renew our restaurant leases as they expire at
then currentthen-current market rates. The remaining
lease terms of ground leases range from
approximately one year to 5453 years, including optional renewal periods. The
remaining lease terms of our other leases range from approximately one year to
4043 years, including optional renewal periods. At October 1, 2000,September 30, 2001, the leases
had initial terms expiring as follows:
Number of restaurants
------------------------------------------------------
Land and
Ground building
leases leases
-------------- --------------
2001---------- ------------
2002 - 2005................................... 161 228
20062006................................... 179 256
2007 - 2010................................... 102 254
20112011................................... 98 251
2012 - 2015................................... 56 154
20162016................................... 45 212
2017 and later................................ 100 278144 271
We own our principal executive offices in San Diego, California, consisting
of approximately 150,000 square feet.feet and have opportunistically acquired land
for the potential expansion of our San Diego office space. We own one warehouse
and lease an additional six with remaining terms ranging from one to 1918 years,
including optional renewal periods.
Certain of our real and personal property are pledged as collateral for
various components of our long-term debt.
11
ITEM 3. LEGAL PROCEEDINGS
-----------------
On February 2, 1995,As previously reported, we have reached a settlement in an action by Concetta Jorgensen was filed against us
in
the U.S. District Court in San Francisco, California alleging that restrooms
at a JACK IN THE BOX restaurant failed to comply with laws1995 regarding disabled
persons and seeking damages in unspecified amounts, punitive damages, injunctive
relief, attorneys' fees and prejudgment interest. In an amended complaint,
damages were also sought on behalf of all physically disabled persons who were
allegedly denied access to restrooms at the restaurant. In February 1997, the
Court ordered that the action for injunctive relief proceed as a nationwide
class action on behalf of all persons in the United States with mobility
disabilities. We have reached agreement on settlement terms both as to the
individual plaintiff Concetta Jorgensen and the claims for injunctive relief,
and the settlement agreement has been approved by the U.S. District Court. The
settlement requires us to make access improvements at Company-operated
restaurantsalleged failure to comply with the standards set forth in the ADA Access Guidelines.Americans with Disabilities
Act ("ADA"). The settlement requires compliance with ADA Access Guidelines at
Company-operated restaurants by October 2005. We have begun to makeare in the process of making
modifications to our restaurants to improve accessibility and anticipate investing an estimated $24at our restaurants. We currently expect
to spend approximately $10 million in capital
improvementsover the next four years in connection with
these modifications including approximately
$11 million spent through October 1, 2000. Similar claims have been made against
JACK IN THE BOX franchiseesin addition to amounts previously invested.
On April 18, 2001, an action was filed by Robert Bellmore and us relatingJeffrey
Fairbairn, individually and on behalf of all others similarly situated, in the
Superior Court of the State of California, San Diego County, seeking class
action status and alleging violations of California wage and hour laws. The
complaint alleges that salaried restaurant management personnel in California
were improperly classified as exempt from California overtime laws, thereby
depriving them of overtime pay. The complaint seeks damages in an unspecified
amount, penalties, injunctive relief, prejudgment interest, costs and attorneys'
fees. We believe our employee classifications are appropriate and plan to
franchised locations which may
notvigorously defend this action. A motion for class certification is scheduled to
be in compliance with the ADA. A settlement agreementheard on May 3, 2002 and a trial date has been reached which
providesset for injunctive relief requiring franchisees to bring their franchised
restaurants into compliance with the ADA, and requiring payment by us of
monitoring expenses to ensure compliance and attorney's fees.January 17, 2003.
We are also subject to normal and routine litigation.litigation in the ordinary course
of business. The amount of liability from the claims and actions against us
cannot be determined with certainty, but in our opinion the ultimate liability
from all pending legal proceedings, asserted legal claims and known potential
legal claims which are probable of assertion should not materially affect our
results of operations and liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
fiscal quarter ended October 1, 2000.September 30, 2001.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
The following table sets forth the high and low closing sales prices for
our common stock during the fiscal quarters indicated, as reported on the New
York Stock Exchange-CompositeExchange - Composite Transactions:
12 weeks ended
16 weeks ended ------------------------------ 13 weeks ended
Jan. 17, 1999 Apr. 11, 1999 July 4, 1999 Oct. 3, 1999
-------------- ------------- ------------ --------------
High...... $23.06 $26.63 $28.56 $29.31
Low....... 13.06 22.00 22.38 22.44
12 weeks ended
16 weeks ended -----------------------------------------------------------------------------------------------
Jan. 23, 2000 Apr. 16, 2000 July 9, 2000 Oct. 1, 2000
-------------- ------------- ------------ -------------
High......------------
High..... $27.00 $26.00 $26.88 $26.88
Low.......Low...... 18.50 18.81 22.94 20.00
12 weeks ended
16 weeks ended -------------------------------------------------
Jan. 21, 2001 Apr. 15, 2001 July 8, 2001 Sept. 30, 2001
-------------- ------------- ------------ --------------
High..... $30.56 $31.75 $26.47 $34.00
Low...... 20.06 24.46 23.91 25.55
We have not paid any cash or other dividends (other than the issuance of
the Rights, as described in Note 8 to the Consolidated Financial Statements) during
ourthe last two fiscal years and do not anticipate paying dividends in the
foreseeable future. Our credit agreements prohibit, and our public debt
instruments restrict, our right to declare or pay dividends or make other
distributions with respect to shares of our capital stock.
As of October 1, 2000,September 30, 2001, there were approximately 500 stockholders of
record.
12
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Our fiscal year is 52 or 53 weeks, ending the Sunday closest to
September 30. Fiscal year 1999 includesincluded 53 weeks and all other years include
52 weeks. The following selected financial data of Jack in the Box Inc. for each
fiscal year is extracted or derived from financial statements which have been
audited by KPMG LLP, our independent auditors.
Fiscal Year
-------------------------------------------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
1996
----------- ----------- ----------- ----------- ---------------------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
Statement of Operations Data:
Revenues:
Restaurant sales.......................sales...................... $1,714,126 $1,529,328 $1,372,899 $1,112,005 $ 1,529,328 $ 1,372,899 $ 1,112,005 $ 986,583 $ 892,029
Distribution and other sales...........sales.......... 66,565 59,091 41,828 26,407 45,233
132,421
Franchise rents and royalties..........royalties......... 43,825 41,432 39,863 35,904 35,426
34,048
Other revenues (1)......................................... 9,060 3,461 2,309 49,740 4,500
4,324
----------- --------------------- ---------- ----------- ----------- ----------
Total revenues....................... 1,833,576 1,633,312 1,456,899 1,224,056 1,071,742 1,062,822
----------- ----------- ----------- ----------- ----------
Costs of revenues (2).................... 1,301,9241,477,048 1,301,757 1,142,995 951,619 869,721
882,270---------- ---------- ----------- ----------- ----------
Gross profit............................. 356,528 331,555 313,904 272,437 202,021
Selling, general and
administrative expenses................ 182,794expenses............... 201,715 182,961 164,297 134,926 116,459
109,075---------- ---------- ----------- ----------- ----------
Earnings from operations................. 154,813 148,594 149,607 137,511 85,562
Interest expense......................... 24,453 25,830 28,249 33,058 40,359
46,126
----------- --------------------- ---------- ----------- ----------- ----------
Earnings before income taxes,
extraordinary item and extraordinary item...........cumulative
effect of accounting change........... 130,360 122,764 121,358 104,453 45,203
25,351
Income taxes (3)......................... 46,300 22,500 44,900 33,400 9,900
5,300
----------- --------------------- ---------- ----------- ----------- ----------
Earnings before extraordinary item.....................item and
cumulative effect of accounting
change................................ $ 84,060 $ 100,264 $ 76,458 $ 71,053 $ 35,303
$ 20,051
=========== ===================== ========== =========== =========== ==========
Earnings per share before extraordinary item:extra-
ordinary item and cumulative
effect of accounting change:
Basic................................ $ 2.17 $ 2.62 $ 2.00 $ 1.82 $ .91
$ .52
Diluted.............................. 2.11 2.55 1.95 1.77 .89 .51
Balance Sheet Data (at end of period):
Total assets............................. $1,029,822 $ 906,828 $ 833,644 $ 743,588 $ 681,758
$ 653,638
Long-term debt........................... 279,719 282,568 303,456 320,050 346,191
396,340
Stockholders' equity..................... 413,530 316,352 217,837 136,980 87,879
51,384
- -------------------
(1) Includes the recognition of a $45.8 million Litigation Settlementlitigation settlement received
from various meat suppliers in 1998 as described in Item 7 - Revenues.1998.
(2) Reflects an $18.0 million reduction of restaurant operating costs in 1999 as
described in Item 7 - Costs and Expenses.
(3) Includes the recognition of $22.9 million in tax benefits in 2000 primarily
resulting from the settlement of a tax case as described in Item 7 - Costs
and Expenses.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------------------------------------------------------------------------------
OF OPERATIONS
-------------
Results of Operations
All comparisons under this heading between 2001, 2000 1999 and 19981999 refer to the
52-week periodperiods ended September 30, 2001 and October 1, 2000, and the 53-week
period ended October 3, 1999,
and the 52-week period ended September 27, 1998, respectively, unless otherwise indicated.
Revenues
Company-operated restaurant sales were $1,714.1 million, $1,529.3 million
and $1,372.9 million in 2001, 2000 and $1,112.01999, respectively. In 1999, restaurant
sales included approximately $28 million in 2000, 1999 and 1998, respectively.from an additional 53rd week.
Restaurant sales improved from the prior year by $184.8 million, or 12.1%, in
2001 and $156.4 million, or 11.4%, in 2000, and $260.9
million, or 23.5%, in 1999, reflecting increases in the average number
of Company-operated restaurants and in per store average ("PSA") sales. The
increase
in 1999 also included restaurant sales of approximately $28 million for the
additional week. The average number of Company-operated restaurants at the end of the fiscal year grew to
1,2421,431 in 2001 from 1,311 in 2000 from 1,120and 1,191 in 1999 and 998 in 1998 with new restaurant openings
of 126, 120 115 and 102,115, respectively. PSA weekly sales for comparable Company
restaurants increased 4.1% in 2001, 3.3% in 2000 and 8.7% in 1999 and 2.8% in 1998 compared to
the respective prior year, due to increases in both the number of transactions
and the average transaction amounts. We believe restaurant sales improvements
resulthave resulted from our two-tier marketing strategy featuring both premium
sandwiches and value-priced alternatives, as well as to a popular brand-building
advertising campaign that features our fictional founder, "Jack". Also
contributing to sales growth were price increases and our strategic initiatives,
including an Assemble-to-Order ("ATO") program in
which sandwiches are made when customers order them, menu boards that showcase
combo mealsour ongoing focus on food quality and an order confirmation system at the drive-thru.guest service.
Distribution and other sales were $66.6 million, $59.1 million and $41.8
million in 2001, 2000 and $26.41999, respectively. The $7.5 million increase in 2001
compared to 2000 1999 and 1998, respectively. Distribution sales of food and
suppliesis primarily due to franchisees and others were $31.2 million in 2000, $30.9 million in
1999 and $24.3 million in 1998, reflecting increases in the number of restaurants
serviced by our distribution division and PSA sales growth at franchisefranchised
restaurants. Other sales fromThe $17.3 million increase in 2000 compared to 1999 is due
principally to an increase in the number of fuel and convenience store operations
increased to $27.9 million in 2000 from $10.9 million in 1999 and $2.1 million
in 1998 as the number of locationsstores we
operate was seven during 2000 having grown
to that level principally during 1999.operate.
Franchise rents and royalties were $43.8 million, $41.4 million and $39.9
million in 2001, 2000 and $35.9
million in 2000, 1999, and 1998, respectively, or 10.8%, 10.6% and 10.4%,
respectively of sales at franchise-operated restaurants in 2000 and 10.4% in 1999 and 1998.restaurants. Franchise restaurant
sales were $391.9$406.9 million in 2001, $391.1 million in 2000 and $384.7 million in
1999 and $345.9
million in 1998.1999. The percentage of sales in 2001 and 2000 grew primarily due to increases
in percentage rents at certain franchised restaurants.
In 2000, otherOther revenues, typicallyrepresenting franchise gains and fees and interest income
from investments and notes receivable, also included $1.9increased to $9.1 million received for refranchising 13
restaurants and fees that franchisees paid to extend the term of their
franchises for three years. In 1998, other revenues also included a litigation
settlement receivedin 2001 from
various meat suppliers of $58.5 million, of which $45.8
million (the "Litigation Settlement") was realized after litigation costs.
Excluding the unusual items, other revenues were $1.6 million, $2.3 million and
$4.0$3.5 million in 2000 and $2.3 million in 1999, and 1998, respectively, reflecting lower investments
as cash has been utilized in refinancingprimarily due to increased
franchising activities.
Costs and Expenses
Restaurant costs of sales and operating costs increased with sales growth
and the addition of Company-operated restaurants. Restaurant costs of sales,
which include food and packaging costs, increased with sales growth and the addition of Company-operated restaurants to $528.1 million in 2001 from
$473.4 million in 2000 fromand $432.2 million in 1999 and $353.5 million in 1998.1999. As a percent of restaurant
sales, costs of sales were 30.8% in 2001, 31.0% in 2000 and 31.5% in 1999 and 31.8% in 1998.1999. The
restaurant costs of sales percentages decreasedpercentage improved in 20002001 and 19992000 compared to 1998prior
years primarily due to favorable overall ingredient costs principally dairy, shortening and bakery in 2000 and beef, pork and beverages
costs in 1999.selling price
increases.
14
Restaurant operating costs were $750.6$864.1 million, $750.7 million and $646.8
million in 2001, 2000 and $549.2
million in 2000, 1999, and 1998, respectively. In 1999, we reduced accrued
liabilities and restaurant operating costs by $18.0 million, primarily due to a
change in estimates resulting from improvements to our loss preventionasset protection and risk
management programs, which have beenwere more successful than anticipated. This change in
estimates was supported by an independent actuarial study conducted to evaluate
the self-insured portion of our workers' compensation, general liability and
other insurance programs. Restaurant operating costs were 49.1%50.4% of restaurant
sales in 2001, 49.1% in 2000 and 48.4% in 1999, excluding the change in
estimates,estimates. The restaurant operating costs percentage increased in 2001 compared
to 2000, reflecting an increase in occupancy costs, principally utilities and 49.4% in 1998.to
a lesser extent higher labor-related expenses. The percentage in 2000 increased
compared to 1999, primarily reflecting costs related to initiatives designed to
improve the overall guest experience and slightly higher labor-related costs.
The restaurant operating
costs percentage declined in 1999 compared to 1998, reflecting improved rates of
labor-related costs and occupancy expenses, which increased at lesser rates than
PSA sales growth.
Costs of distribution and other sales were $57.8$64.5 million in 2001, $57.5
million in 2000 and $41.2 million in 1999, and $25.8 million in 1998, reflecting an increase in the related
sales. CostsAs a percent of distribution and other sales, were 97.8% of related salesthese costs improved to
96.9% in 2001, from 97.4% in 2000 and 98.5% in 1999, and 97.8% in 1998. The higher percentage in 1999 was
primarily due to start-up costs related toimproved
margins from our fuel and convenience store operations.operations resulting from our
revised fuel pricing strategy and a decrease in start up costs.
Franchised restaurant costs, which consist principally of rents and
depreciation on properties leased to franchisees and other miscellaneous costs,
were $20.4 million, $20.1 million and $22.7 million in 2001, 2000 and $23.0 million in 2000, 1999, and 1998,
respectively. The declines in 20002001 and 19992000 compared to 19981999 principally reflect
decreases in franchise-related legal expenses.
Selling, general and administrative expenses were $182.8$201.7 million, $183.0
million and $164.3 million in 2001, 2000 and $134.9 million in 2000, 1999, and 1998, respectively. Advertising and
promotion costs were $86.5 million in 2001, $77.8 million in 2000 and $70.3
million in 1999, and $58.3
million in 1998, representing approximately 5.1%just over 5% of restaurant sales in 2000 and
1999 and 5.2% in 1998.all years. General,
administrative and other costs were approximately 6.4%6.3% of revenues in 2001, 6.4%
in 2000 and 6.5% in 19991999. The percentage improvement in 2001 compared to 2000 is
primarily due to lower bonus and 6.3% in 1998.pension expenses. The higher percentage in 1999
reflects costs associated with the implementation of the ATO program and other guest initiatives,
accelerated restaurant growth and higher incentive compensation attributable to our earnings improvement and
increased pension
expense. In 1998, such costs included a non-cash charge of
approximately $8 million, primarily related to facilities and customer service
improvement projects.
Interest expense declined to $24.5 million in 2001 from $25.8 million in
2000 fromand $28.2 million in 1999. The reduction in 2001 compared to 2000 is
principally due to lower average interest rates. The reduction in 2000 compared
to 1999 and $33.1 million in 1998,is principally due to a reduction in total debt outstanding and lower interest rates. Over this three-year period, total
long-term debt has been reduced by $63.6 million and certain debt has been
refinanced at lower rates.outstanding.
The tax provisions reflect effective annual tax rates of 18%35.5%, 37%18.3% and
32%37.0% of pre-tax earnings in 2001, 2000 1999 and 1998,1999, respectively. The favorable
income tax rates in each year resulthave resulted from our ability to realize as our profitability
has improved,
previously unrecognized tax benefits such as business tax credit, tax loss and
minimum tax credit carryforwards. Also contributing to the effective rate
decline in 2000 was our settlement with the U.S. Internal Revenue Service of a
tax case related to the disposition in November 1995 of our interest in
Family Restaurants, Inc. We recognized tax benefits of $22.9 million, primarily
as a result of this settlement.
In 1998,2001, we incurred an extraordinary lossadopted Staff Accounting Bulletin ("SAB") 101 which requires
that franchise percentage rents, which are coningent upon certain annual sales
levels, be recognized in the period in which the contingency is met instead of
$7.0being accrued for ratably. As a result of adopting SAB 101, we recorded a
one-time after-tax cumulative effect of this accounting change of $1.9 million
less income tax
benefitsrelated to the deferral of $2.6 million, onfranchise percentage rents not yet earned as of the
early extinguishmentbeginning of $125 million each of
9 1/4% senior notes and 9 3/4% senior subordinated notes.fiscal year 2001.
Net earnings were $82.2 million, or $2.06 per diluted share, in 2001,
$100.3 million, or $2.55 per diluted share, in 2000 and $76.5 million, or $1.95
per diluted share, in 1999 and $66.7 million, or $1.66 per
diluted share, in 1998.1999. Each year includes unusual items, which increased ouritems. In 2001, net
earnings.earnings included the aforementioned $1.9 million charge for the cumulative
effect of accounting change, or $.05 per diluted share. In 2000, we reached a
final agreement with the U.S. Internal Revenue Service to settle a tax case as
described above. This settlement increased 2000 net earnings by $22.9 million,
or $.58 per diluted share. In 1999, restaurant operating costs were reduced by
$18.0 million due to a change in estimates as described above. This change in
estimates increased 1999 net earnings by $11.4 million, or $.29 per diluted
share, net of income taxes. In addition, 1999 included a 53rd week that
contributed an extra $1.4 million in net earnings, or $.04 per diluted share.
In 1998, net earnings included
approximately $25.7 million, or $.64 per diluted share, net of income taxes,
from the Litigation Settlement income offset by the aforementioned non-cash
charge, and the extraordinary loss of $4.4 million, or $.11 per share. Excluding these unusual items, net earnings increased 22%8.7% to $84.1 million, or
$2.11 per diluted share, in 2001 from $77.4 million, or $1.97 per diluted share,
in 2000, which had increased 21.5% from $63.7 million, or $1.62 per diluted
share, in 1999,
which had increased 40% from $45.4 million, or $1.13 per diluted share in 1998.1999.
15
Liquidity and Capital Resources
Cash and cash equivalents decreased $4.1$.5 million to approximately $6.8$6.3
million at October 1, 2000September 30, 2001 from approximately $10.9$6.8 million at the beginning
of the fiscal year. We expect to maintain low levels of cash and cash
equivalents, reinvesting available cash flows from operations to develop new or
enhance existing restaurants and to reduce borrowings under the revolving credit
agreement.
Our working capital deficit decreased $22.7$6.9 million to $102.2 million at
September 30, 2001 from $109.1 million at October 1, 2000, from $131.8 million at October 3, 1999, principally due to a
declinean
increase in income taxaccounts receivable and assets held for sale and leaseback, offset
in part by an increase in total current liabilities. The Company and the
restaurant industry in general, maintain relatively low levels of accounts
receivable and inventories, and vendors grant trade credit for purchases such as
food and supplies. We also continually invest in our business through the
addition of new units and refurbishment of existing units, which are reflected
as long-term assets and not as part of working capital.
Our revolving bank credit agreement provides for a credit facility expiring
in 2003 of up to $175 million, including letters of credit of up to $25 million.
At October 1, 2000,September 30, 2001, we had borrowings of $66.0$65.0 million and approximately
$98.7$95.9 million of availability under the agreement. Total debt outstanding
has
decreased $20.6$2.6 million to $284.6$282.0 million at October 1, 2000September 30, 2001 from $305.2$284.6
million at the beginning of fiscal year 2000.2001.
We are subject to a number of customary covenants under our various debt
instruments, including limitations on additional borrowings, capital
expenditures, lease commitments and dividend payments, and requirements to
maintain certain financial ratios, cash flows and net worth. In September 1999,
the collateral securing the bank credit facility was released. However, realReal and personal
property previously held as collateral for the bank credit facility cannot be
used to secure other indebtedness of the Company. In addition, certain of our
real and personal property secure other indebtedness.
We require capital principally to grow the business through new restaurant
construction, as well as to maintain, improve and refurbish existing
restaurants, and for general operating purposes. Our primary sources of
liquidity are expected to be cash flows from operations, the revolving bank
credit facility, and the sale and leaseback of restaurant properties. Additional
potential sources of liquidity include financing opportunities and the
conversion of Company-operated restaurants to franchised restaurants.
Based upon current levels of operations and anticipated growth, we expect
that sufficient cash flows will be generated from operations so that, combined
with available financing alternatives, we will be able to meet our debt service,
capital expenditure and working capital requirements.
Although we cannot determine with certainty the amount of liability from
claims and actions described in Note 10 of the Consolidated Financial
Statements, cannot be determined with certainty,
management believeswe believe the ultimate liability offor such claims and actions should
not materially affect our results of operations and liquidity.
On December 3, 1999, our Board of Directors authorized the purchase of our
outstanding common stock in the open market for an aggregate amount not to
exceed $10 million. At October 1, 2000,Through September 30, 2001, we had acquired 305,800341,600 shares
underin connection with this authorization for an aggregate cost of $5.8$6.6 million.
Seasonality
Our restaurant sales and profitability are subject to seasonal fluctuations
and are traditionally higher during the spring and summer months because of
factors such as increased travel and improved weather conditions which affect
the public's dining habits.
16
Future Accounting Changes
In June 1998,July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133,141, Business Combinations,
and 142, Goodwill and Other Intangible Assets, which supersede Accounting
Principles Board Opinion 17, Intangible Assets. SFAS 141 requires that all
business combinations be accounted for under the purchase method. The statement
further requires separate recognition of intangible assets that meet one of the
two criteria, as defined in the statement. This statement applies to all
business combinations initiated after June 30, 2001. Under SFAS 142, goodwill
and intangible assets with indefinite lives are no longer amortized but are to
be tested at least annually for impairment. Separable intangible assets with
defined lives will continue to be amortized over their useful lives. The
provisions of SFAS 142 will apply to goodwill and intangible assets acquired
before and after the statement's effective date. This new standard is required
to be adopted by the first quarter of fiscal year 2003, although we may elect to
adopt it in the first quarter of fiscal year 2002. We are currently evaluating
the effect that such adoption will have on our results of operations and
financial position.
In June 2001, the FASB issued SFAS 143, Accounting for Derivative
InstrumentsAsset Retirement
Obligations. This new standard requires entities to recognize the fair value of
a liability for an asset retirement obligation in the period in which it is
incurred if a reasonable estimate of fair value can be made. When the liability
is initially incurred, the cost is capitalized as part of the carrying amount of
the long-lived asset. Over time, the liability is accreted to its present value
each period through charges to operating expense and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS 133 requires
thatthe capitalized cost is
depreciated over the life of the asset. Upon settlement of the liability, an
entity recognize all derivatives as either assetssettles the obligation for its recorded amount or liabilities in the
statementincurs a gain or
loss upon settlement. The provisions of financial position and measure those instruments at fair value.
This Statement was amended by SFAS 137 which deferred the143 are effective date to all
fiscal quarters offor fiscal years
beginning after June 15, 2000.2002. We have not yet determined the impact, if any, of
adoption of SFAS 133, as
amended143.
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This new standard supersedes SFAS 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of. The primary objectives of this statement were to develop one accounting
model, based on the framework established in SFAS 121, for long-lived assets to
be disposed of by sale and to address significant implementation issues related
to SFAS 137 and121. Statement 144 requires that all long-lived assets, including
discontinued operations, be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. The provisions of SFAS 138, is144 are effective for our first quarter infiscal
years beginning after December 15, 2001. We have not yet determined the
fiscal year ending September 30, 2001 and is not expected to have a material
effect on our financial position or resultsimpact, if any, of operations.
16
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101 (SAB101), Revenue Recognition in Financial Statements,
summarizing their views for applying generally accepted accounting principles to
revenue recognition in financial statements. Although we have determined that
the adoption of SAB101 should not have a material effect on our annual results
of operations, it will impact the reporting of our franchise percentage rent
between quarters within the year. As permitted by SAB101, we plan to adopt the
new standard in the fourth quarter of fiscal year 2001 at which time we will
restate the earlier quarters of the year.SFAS 144.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Our primary exposure relating to financial instruments is to changes in
interest rates. We use interest rate swap agreements to reduce exposure to
interest rate fluctuations. At October 1, 2000, we had a $25 million notional
amount interest rate swap agreement expiring in June 2001. This agreement
effectively converts a portion of our variable rate bank debt to fixed rate debt
and has a pay rate of 6.38%. Our $175 million credit facility bears interest at an annual
rate equal to the prime rate or the London Interbank Offered Rate ("LIBOR") plus
an applicable margin based on a financial leverage ratio. As of
October 1, 2000,September 30, 2001, our applicable margin was set at .625%. In fiscal year 2000,2001, the
average interest rate paid on the credit facility was approximately 6.9%.6.3%,
including the impact of an interest rate swap which expired in June 2001. At
October 1, 2000,September 30, 2001, a hypothetical one percentage point increase in short-term
interest rates would result in a reduction of $.4$.7 million in annual pre-tax
earnings. The estimated reduction is based on holding the unhedged
portion ofour bank debt at its
October 1, 2000September 30, 2001 level.
We are also exposed to the impact of commodity price fluctuations related
to unpredictable factors such as weather and various other market conditions
outside our control. From time-to-time we enter into commodity futures and
option contracts to manage these fluctuations. Open commodity futures and option
contracts were not significant as of September 30, 2001.
At October 1, 2000,September 30, 2001, we had no other material financial instruments
subject to significant market exposure.
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Consolidated Financial Statements and related financial information
required to be filed are indexed on page F-1 and are incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
17
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The following table sets forth the name, age (as of January 1, 2001)2002) and
position of each person who is a director or executive officer of
Jack in the Box Inc.:
Name Age Positions
---------------------------------------------------------- --- --------------------------------------------------------------------------
Robert J. Nugent(3).................... 60 Chairman of the Board and Chief
Executive Officer
Kenneth R. Williams........... 59 President, Chief ExecutiveOperating Officer
and Director
Charles W. Duddles.......... 60John F. Hoffner............... 54 Executive Vice President and Chief
Financial Officer
Chief
Administrative Officer and Director
Kenneth R. Williams......... 58 Executive Vice President, Marketing
and Operations
Lawrence E. Schauf.......... 55Schauf............ 56 Executive Vice President and Secretary
Linda A. Lang................. 43 Senior Vice President, Marketing
Paul L. Schultz............. 46Schultz............... 47 Senior Vice President, Operations
and Franchising
David M. Theno, Ph.D.......... 51 Senior Vice President, Quality
and Logistics
Karen C. Bachmann........... 49Bachmann............. 50 Vice President, Corporate
Communications
Pamela S. Boyd................ 46 Vice President, Financial Planning
and Analysis
Carlo E. Cetti.............. 56Cetti................ 57 Vice President, Human Resources and
Strategic Planning
Stephanie Cline............. 55E. Cline............ 56 Vice President, Chief Information
Officer
Gladys H. DeClouet............ 44 Vice President, Operations-Division II
Karen Gentry................ 40G. Gentry............... 41 Vice President, Franchising
Linda A. Lang............... 42David T. Kaufhold............. 44 Vice President, and Regional Vice
President, Southern CaliforniaOperations-Division I
William F. Motts............ 57Motts.............. 58 Vice President, Restaurant Development
Harold L. Sachs............. 55Sachs............... 56 Vice President, Treasurer
David M. Theno, Ph.D........ 50 Vice President, Technical Services
Charles E. Watson........... 45Watson............. 46 Vice President, Real Estate and
Construction
Darwin J. Weeks............. 54Weeks............... 55 Vice President, Controller and Chief
Accounting Officer
Jack W. Goodall(3).......... 62 Chairman of the Board
Michael E. Alpert(4)(5)..... 58....... 59 Director
Jay W. Brown(3)(5).......... 55............ 56 Director
Paul T. Carter(1)(2)(5)..... 78.......... 79 Director
Edward W. Gibbons(4)Gibbons(3)(4)(5)..... 64.... 65 Director
Alice B. Hayes, Ph.D.(2)(5). 63... 64 Director
Murray H. Hutchison(1)(2)... 62..... 63 Director
L. Robert Payne(1)(4)....... 67......... 68 Director
----------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Executive Committee.
(4) Member of the Finance Committee.
(5) Member of the Nominating and Governance Committee.
18
Mr. Nugent has been PresidentChairman of the Board since February 2001 and Chief
Executive Officer since April 1996. The Company has announced that Mr. Nugent will become Chairman of the Board and
Chief Executive Officer effective February 23, 2001, upon his re-election to the
Board of Directors. He was President from April 1996 to February
2001 and Executive Vice President from February 1985 to April 1996. He has been
a director since February 1988. Mr. Nugent has 2122 years of experience with the
Company in various executive and operations positions.
Mr. DuddlesWilliams has been Executive Vice President and Chief AdministrativeOperating Officer since May 1988.February
2001. He has been Chief Financial Officer since October 1985.
He has been a director since February 1988. Mr. Duddles has 21 years of
experience with the Company in various finance positions.
Mr. Williams has beenwas Executive Vice President, Marketing and Operations sincefrom May 1996. The Company has announced that Mr. Williams will become
President1996 to
February 2001 and Chief Operating Officer effective February 23, 2001, upon
Mr. Nugent's vacation of the office of President. He was Senior Vice President from January 1993 to May 1996. He has
been a director since February 2001. Mr. Williams has 3536 years of experience
with the Company in various operations positions.
Mr. Hoffner has been Executive Vice President and Chief Financial Officer
since August 2001. Prior to joining the Company he was Executive Vice President
of Administration and Chief Financial Officer of Cost Plus, Inc. from June 1998
to August 2001 and Senior Vice President and Chief Financial Officer of Sweet
Factory, Inc. from April 1993 to June 1998.
Mr. Schauf has been Executive Vice President and Secretary since August
1996. Prior to joining the Company he was Senior Vice President, General Counsel
and Secretary of Wendy's International, Inc. from February 1991 to August 1996.
Ms. Lang has been Senior Vice President, Marketing since May 2001. She was
Vice President and Regional Vice President, Southern California Region from
April 2000 to May 2001, Vice President, Marketing from March 1999 to April 2000
and Vice President, Products, Promotions and Consumer Research from February
1996 until March 1999. Ms. Lang has 14 years of experience with the Company in
various marketing, finance and operations positions.
Mr. Schultz has been Senior Vice President, Operations and Franchising
since August 1999, and was Vice President from May 1988 to August 1999. Mr.
Schultz has 2728 years of experience with the Company in various operations
positions.
Dr. Theno has been Senior Vice President, Quality and Logistics since May
2001. He was Vice President, Technical Services (formerly Quality Assurance,
Research and Development and Product Safety) from April 1994 to May 2001.
Dr. Theno has nine years of experience with the Company in various quality
assurance and product safety positions.
Ms. Bachmann has been Vice President, Corporate Communications since
November 1999. She was Division Vice President, Corporate Communications from
December 1994 until November 1999.
Ms. Boyd has been Vice President, Financial Planning and Analysis since
November 2001. She was Division Vice President, Planning and Analysis from
October 1997 to November 2001 and Director, Planning and Analysis from November
1992 to October 1997. Ms. Boyd has 14 years of experience with the Company in
various finance positions.
Mr. Cetti has been Vice President, Human Resources and Strategic Planning
since March 1994. Mr. Cetti has 2021 years of experience with the Company in
various human resources and training positions.
Ms. Cline has been a Vice President of the Company since August 2000 and
Chief Information Officer since May 2000. She was Division Vice President of
Systems Development from August 1993 to May 2000. Ms. Cline has 2324 years of
experience with the Company in various management information systems positions.
Ms. DeClouet has been Vice President, Operations-Division II since February
2001. She was Division Vice President, Operations from July 1999 to February
2001 and Regional Vice President, Los Angeles from February 1998 to July 1999.
Prior to joining the Company, she was Division Manager, Marketing of BP Oil
Company from February 1995 to January 1998.
19
Ms. Gentry has been Vice President, Franchising since August 2000. From
November 1994 to August 2000 she was Division Vice President, Franchising.
Ms. Gentry has 2122 years of experience with the Company in various operations and
franchise positions.
Ms. Lang (formerly Vaughan)Mr. Kaufhold has been Vice President, Operations-Division I since February
2001. He was Division Vice President, Operations from July 1999 to February 2001
and Regional Vice President, Southern California Region since April 2000. She was Vice President,
MarketingDallas from March 1999December 1995 to April 2000 and Vice President, Products, Promotions
and Consumer Research from February 1996 until MarchJuly 1999. She was Division Vice
President, New Products and Promotions from November 1994 until February 1996.
Ms. Lang has 13 years of experience with the Company in various marketing,
finance and operations positions.
Mr. Motts has been Vice President, Restaurant Development since September
1988. Mr. Motts has 1819 years of experience with the Company in various
restaurant development positions.
Mr. Sachs has been Vice President, Treasurer since November 1999. He was
Treasurer from January 1986 to November 1999. Mr. Sachs has 2223 years of
experience with the Company in various finance positions.
Dr. Theno has been Vice President, Technical Services (formerly Quality
Assurance, Research and Development and Product Safety) since April 1994. He was
Vice President, Quality Assurance and Product Safety from March 1993 to April
1994.
Mr. Watson has been Vice President, Real Estate and Construction since
April 1997. From July 1995 to March 1997, he was Vice President, Real Estate and
Construction of Boston Chicken, Inc. He was Division Vice President, Real Estate
and Construction of the Company from November 1991 through June 1995. Mr. Watson
has 1516 years of experience with the Company in various real estate and
construction positions.
19
Mr. Weeks has been Vice President, Controller and Chief Accounting Officer
since August 1995 and was previously Division Vice President and Assistant
Controller from April 1982 through July 1995. Mr. Weeks has 2425 years of
experience with the Company in various finance positions.
Mr. Goodall has been Chairman of the Board since October 1985. He has
announced his retirement from the Board of Directors effective February 23,
2001. For more than five years prior to his retirement in April 1996, he was
President and Chief Executive Officer of the Company. Mr. Goodall is a director
of Ralcorp Holdings, Inc.
Mr. Alpert has been a director of the Company since August 1992. Mr. Alpert
was a partner in the San Diego office of the law firm of Gibson, Dunn & Crutcher
LLP for more than 5five years prior to his retirement in August 1992. He is
currently Advisory Counsel to Gibson, Dunn & Crutcher LLP. Gibson, Dunn &
Crutcher LLP provides legal services to us from time to time.
Mr. Brown has been a director of the Company since February 1997. He is
currently a principal with Westgate Group, LLC. From April 1995 to September
1998, Mr. Brown was President and CEO of Protein Technologies International,
Inc., the world's leading supplier of soy-based proteins to the food and paper
processing industries. He was Chairman and CEO of Continental Baking Company
from October 1984 to July 1995 and President of Van Camp Seafood Company from
August 1983 to October 1984. From July 1981 through July 1983, he served as Vice
President of Marketing for us. Mr. Brown is a director of Agribrands
International, Inc. and Cardinal Brands, Inc.
Mr. Carter has been a director of the Company since June 1991. Mr. Carter
has been an insurance consultant for the Government Division of Corroon & Black
Corporation since February 1987. He retired in February 1987 as Chairman and
Chief Executive Officer of Corroon & Black Corporation, Southwestern Region and
as Director and Senior Vice President of Corroon & Black Corporation. Mr. Carter
is a director of Borrego Springs National Bank.
Mr. Gibbons has been a director of the Company since October 1985 and has
been a general partner of Gibbons, Goodwin, van Amerongen, an investment banking
firm, for more than five years. Mr. Gibbons is also a director of Robert Half
International, Inc. and Summer Winds Garden Centers, Inc.
Dr. Hayes has been a director of the Company since September 1999. She has
been the President of the University of San Diego since 1995. From 1989 to 1995,
Dr. Hayes served as Executive Vice President and Provost of Saint Louis
University. Previously, she spent 27 years at Loyola University of Chicago,
where she served in various executive positions. Dr. Hayes is also a director of
the Pulitzer Publishing Company, the Old Globe Theatre, Independent Colleges of
Southern California, The San Diego Foundation, Loyola University of Chicago and
Catholic Charities, Diocese of San Diego.
20
Mr. Hutchison has been a director of the Company since May 1998. He served
18 years as Chief Executive Officer and Chairman of International Technology
Corp., one of the largesta large publicly traded environmental engineering firms in the
U.S.,firm, until his
retirement in 1996. Mr. Hutchison is the Chairman of the Board of Sunrise
Medical, Inc. and the Huntington Hotel Corp. and serves as a director of
Cadiz Inc., Senior Resource Corp. and the Olson Company.
Mr. Payne has been a director of the Company since August 1986. He has been
President and Chief Executive Officer of Multi-Ventures, Inc. since February
1976 and was Chairman of the Board of Grossmont Bank, a wholly-owned subsidiary
of Bancomer, S.A., from February 1974 until October 1995.1976. Multi-Ventures, Inc. is a real estate development and investment company
that is also the managing partner of the San Diego Mission Valley Hilton and the
Red Lion Hanalei Hotel. He was a principal in the Company prior to its
acquisition by its former parent, Ralston Purina Company, in 1968.
That portion of our definitive Proxy Statement appearing under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" to be filed with the
Commission pursuant to Regulation 14A within 120 days after October 1, 2000September 30, 2001
and to be used in connection with our 20012002 Annual Meeting of ShareholdersStockholders is
hereby incorporated by reference.
20
ITEM 11. EXECUTIVE COMPENSATION
----------------------
That portion of our definitive Proxy Statement appearing under the caption
"Executive Compensation" to be filed with the Commission pursuant to Regulation
14A within 120 days after October 1, 2000September 30, 2001 and to be used in connection with
our 20012002 Annual Meeting of Stockholders is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
That portion of our definitive Proxy Statement appearing under the caption
"Security Ownership of Certain Beneficial Owners and Management" to be filed
with the Commission pursuant to Regulation 14A within 120 days after
October 1,
2000September 30, 2001 and to be used in connection with our 20012002 Annual Meeting of
Stockholders is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
That portion of our definitive Proxy Statement appearing under the caption
"Certain Transactions" to be filed with the Commission pursuant to Regulation
14A within 120 days after October 1, 2000September 30, 2001 and to be used in connection with
our 20012002 Annual Meeting of Stockholders is hereby incorporated by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
ITEM 14(a)(1) Financial Statements. See Index to Consolidated Financial
--------------------
Statements on page F-1 of this report.
ITEM 14(a)(2) Financial Statement Schedules. Not applicable.
-----------------------------
21
ITEM 14(a)(3) Exhibits.
--------
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation, as amended(9)amended(8)
3.2 Restated Bylaws(9)Bylaws(8)
4.1 Indenture for the 8 3/8% Senior Subordinated Notes due 2008(6)2008(5)
(Instruments with respect to the registrant's long-term debt
not in excess of 10% of the total assets of the registrant and
its subsidiaries on a consolidated basis have been omitted. The
registrant agrees to furnish supplementally a copy of any such
instrument to the Commission upon request.)
10.1.1 Revolving Credit Agreement dated as of April 1, 1998 by and between
Foodmaker, Inc. and the Banks named therein(6)therein(5)
10.1.2 First Amendment dated as of August 24, 1998 to the Revolving Credit
Agreement dated as of April 1, 1998 by and between Foodmaker, Inc. and
the Banks named therein(7)therein(6)
10.1.3 Second Amendment dated as of February 27, 1999 to the Revolving Credit
Agreement dated as of April 1, 1998 by and between Foodmaker, Inc. and
the Banks named therein(8)therein(7)
10.1.4 Third Amendment dated as of September 17, 1999 to the Revolving Credit
Agreement dated as of April 1, 1998 by and between Foodmaker, Inc. and
the Banks named therein(9)therein(8)
10.1.5 Fourth Amendment dated as of December 6, 1999 to the Revolving Credit
Agreement dated as of April 1, 1998 by and between Foodmaker, Inc. and
the Banks named therein(10)therein(9)
10.1.6 Fifth Amendment dated as of May 3, 2000 to the Revolving Credit
Agreement dated as of April 1, 1998 by and between
Jack in the Box Inc. and the Banks named therein(10)
10.1.7 Sixth Amendment dated as of November 17, 2000 to the Revolving Credit
Agreement dated as of April 1, 1998 by and between
Jack in the Box Inc. and the Banks named therein(11)
10.2 Purchase Agreements dated as of January 22, 1987 between
Foodmaker, Inc. and FFCA/IIP 1985 Property Company and FFCA/IIP 1986
Property Company(1)
10.3 Land Purchase Agreements dated as of February 18, 1987 by and between
Foodmaker, Inc. and FFCA/IPI 1984 Property Company and FFCA/IPI 1985
Property Company and Letter Agreement relating thereto(1)
10.4 Amended and Restated 1992 Employee Stock Incentive Plan(4)Plan(3)
10.5 Capital Accumulation Plan for Executives(2)Executives
10.6 Supplemental Executive Retirement Plan(2)Plan
10.7 Performance Bonus Plan(7)Plan(12)
10.8 Deferred Compensation Plan for Non-Management Directors(3)Directors(2)
10.9 Amended and Restated Non-Employee Director Stock Option Plan(9)Plan(8)
10.10 Form of Compensation and Benefits Assurance Agreement for Executives(5)Executives(4)
23.1 Consent of KPMG LLP
27 Financial Data Schedule (included only with electronic filing)
- ----------
(1) Previously filed and incorporated herein by reference from registrant's
Registration Statement on Form S-1 (No. 33-10763) filed February 24, 1987.
(2) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended September 30, 1990.
(3) Previously filed and incorporated herein by reference from registrant's
Definitive Proxy Statement dated January 17, 1995 for the Annual Meeting
of Stockholders on February 17, 1995.
(4)(3) Previously filed and incorporated herein by reference from registrant's
Registration Statement on Form S-8 (No. 333-26781)filed May 9, 1997.
(5)(4) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended September 28, 1997.
(6)(5) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 12, 1998.
(7)(6) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended September 27, 1998.
(8)(7) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 11, 1999.
22
(9)(8) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended October 3, 1999.
(10)(9) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended January 23, 2000.
(11)(10) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended July 9, 2000.
(11) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended January 21, 2001.
(12) Previously filed and incorporated herein by reference from registrant's
Definitive Proxy Statement dated January 19, 2001 for the Annual Meeting
of Stockholders on February 23, 2001.
ITEM 14(b) We did not file any reports on Form 8-K with the Securities and
Exchange Commission during the fourth quarter ended
October 1,
2000.September 30, 2001.
ITEM 14(c) All required exhibits are filed herein or incorporated by reference
as described in Item 14(a)(3).
ITEM 14(d) All supplemental schedules are omitted as inapplicable or because
the required information is included in the Consolidated Financial
Statements or notes thereto.
23
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JACK IN THE BOX INC.
By: CHARLES W. DUDDLES
------------------
Charles W. DuddlesJOHN F. HOFFNER
---------------
John F. Hoffner
Executive Vice President and
Chief Financial Officer
Chief
Administrative Officer and Director
Date: December 13, 200010, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------------------- ------------------------------------------------------- ---------------------- -----------------
JACK GOODALLROBERT J. NUGENT Chairman of the Board December 13, 2000
---------------------
Jack Goodall
ROBERT J. NUGENT President,10, 2001
----------------------- and Chief Executive Officer December 13, 2000
--------------------- and Director (Principal Executive
Robert J. Nugent Officer (Principal
Executive Officer)
CHARLES W. DUDDLESKENNETH R. WILLIAMS President, Chief December 10, 2001
----------------------- Operating Officer and
Kenneth R. Williams Director
JOHN F. HOFFNER Executive Vice President December 10, 2001
----------------------- and Chief December 13, 2000
--------------------- Financial
John F. Hoffner Officer Chief
Charles W. Duddles Administrative Officer and Director (Principal
Financial Officer)
DARWIN J. WEEKS Vice President, December 10, 2001
----------------------- Controller and December 13, 2000
--------------------- Chief
Darwin J. Weeks Accounting Officer
(Principal
Darwin J. Weeks Accounting
Officer)
MICHAEL E. ALPERT Director December 13, 2000
---------------------10, 2001
-----------------------
Michael E. Alpert
JAY W. BROWN Director December 13, 2000
---------------------10, 2001
-----------------------
Jay W. Brown
PAUL T. CARTER Director December 13, 2000
---------------------10, 2001
-----------------------
Paul T. Carter
EDWARD W. GIBBONS Director December 13, 2000
---------------------10, 2001
-----------------------
Edward W. Gibbons
ALICE B. HAYES Director December 13, 2000
---------------------10, 2001
-----------------------
Alice B. Hayes
MURRAY H. HUTCHISON Director December 13, 2000
---------------------10, 2001
-----------------------
Murray H. Hutchison
L. ROBERT PAYNE Director December 13, 2000
---------------------10, 2001
-----------------------
L. Robert Payne
24
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report................................Report........................... F-2
Consolidated Balance Sheets.................................Sheets............................ F-3
Consolidated Statements of Earnings.........................Earnings.................... F-4
Consolidated Statements of Cash Flows.......................Flows.................. F-5
Consolidated Statements of Stockholders' Equity.............Equity........ F-6
Notes to Consolidated Financial Statements..................Statements............. F-7
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jack in the Box Inc.:
We have audited the accompanying consolidated balance sheets of
Jack in the Box Inc. and subsidiaries as of September 30, 2001 and
October 1, 2000, and October 3, 1999, and the related consolidated statements of earnings, cash flows
and stockholders' equity for the fifty-two weeks ended September 30, 2001 and
October 1, 2000, and the fifty-three weeks ended October 3, 1999, and the fifty-two weeks ended
September 27, 1998.1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Jack in the Box Inc. and subsidiaries as of September 30, 2001 and
October 1, 2000, and October 3, 1999, and the results of their operations and their cash flows for
the fifty-two weeks ended September 30, 2001 and October 1, 2000, and the
fifty-three weeks ended October 3, 1999, and the
fifty-two weeks ended September 27, 1998, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
San Diego, California
November 6, 20005, 2001
F-2
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
September 30, October 1,
October 3,2001 2000
1999------------- ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents...........................equivalents...................... $ 6,328 $ 6,836
$ 10,925
Accounts receivable, net............................net....................... 21,816 13,667
11,991
Inventories.........................................Inventories.................................... 28,993 25,722
19,889
Prepaid expenses....................................expenses............................... 19,268 19,329 15,657
Assets held for sale and leaseback..................leaseback............. 48,329 33,855
38,772
---------- --------------------- ---------
Total current assets.............................assets......................... 124,734 99,409
97,234
---------- --------------------- ---------
Property and equipment:
Land................................................Land........................................... 95,435 88,617
89,352
Buildings...........................................Buildings...................................... 499,681 429,845 379,595
Restaurant and other equipment......................equipment................. 453,376 393,885 334,577
Construction in progress............................progress....................... 63,345 55,485
55,161
---------- --------------------- ---------
1,111,837 967,832 858,685
Less accumulated depreciation
and amortization......amortization............................. 332,369 288,474
251,401
---------- --------------------- ---------
779,468 679,358
607,284
---------- --------------------- ---------
Other assets, net.....................................net................................. 125,620 128,061
129,126
---------- --------------------- ---------
$ 1,029,822 $ 906,828
$ 833,644
========== ===================== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................debt........... $ 2,255 $ 2,034
$ 1,695
Accounts payable....................................payable............................... 55,036 53,082
44,180
Accrued liabilities.................................liabilities............................ 169,628 153,356
183,151
---------- --------------------- ---------
Total current liabilities........................liabilities.................... 226,919 208,472
229,026
---------- --------------------- ---------
Long-term debt, net of current maturities.............maturities......... 279,719 282,568 303,456
Other long-term liabilities...........................liabilities....................... 91,439 86,968 75,270
Deferred income taxes.................................taxes............................. 18,215 12,468 8,055
Stockholders' equity:
Preferred stock.....................................stock................................ - -
Common stock $.01 par value, 75,000,000
authorized, 42,418,742 and 41,483,369
and 41,105,434 issued, respectively...respectively......................... 424 415 411
Capital in excess of par value......................value................. 310,107 294,380
290,336
Retained earnings (accumulated deficit).............earnings.............................. 144,018 61,817 (38,447)
Treasury stock, at cost, 3,170,574 and
3,134,774 and 2,828,974
shares, respectively..............................respectively............... (41,019) (40,260)
(34,463)
---------- --------------------- ---------
Total stockholders' equity.......................equity................... 413,530 316,352
217,837
---------- --------------------- ---------
$ 1,029,822 $ 906,828
$ 833,644
========== ===================== =========
See accompanying notes to consolidated financial statements.
F-3
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Fiscal year
-----------------------------------
2000 1999 1998
---------- ---------- -----------
Revenues:
Restaurant sales.......................... $1,529,328 $1,372,899 $1,112,005
Distribution and other sales.............. 59,091 41,828 26,407
Franchise rents and royalties............. 41,432 39,863 35,904
Other..................................... 3,461 2,309 49,740
---------- ---------- ----------
1,633,312 1,456,899 1,224,056
---------- ---------- ----------
Costs and expenses:
Costs of revenues:
Restaurant costs of sales............... 473,373 432,231 353,534
Restaurant operating costs.............. 750,620 646,815 549,221
Costs of distribution and other sales... 57,812 41,217 25,821
Franchised restaurant costs............. 20,119 22,732 23,043
Selling, general and administrative...... 182,794 164,297 134,926
Interest expense......................... 25,830 28,249 33,058
--------- ---------- -----------
1,510,548 1,335,541 1,119,603
--------- ----------- ----------
Earnings before income taxes
and extraordinary item................... 122,764 121,358 104,453
Income taxes............................... 22,500 44,900 33,400
--------- ---------- -----------
Earnings before extraordinary item......... 100,264 76,458 71,053
Extraordinary item - loss on early
extinguishment of debt, net of taxes..... - - (4,378)
--------- ---------- -----------
Net earnings............................... $ 100,264 $ 76,458 $ 66,675
========= ========== ===========
Earnings per share - basic:
Earnings before extraordinary item....... $ 2.62 $ 2.00 $ 1.82
Extraordinary item....................... - - (.11)
---------- ---------- -----------
Net earnings per share................... $ 2.62 $ 2.00 $ 1.71
========= ========== ===========
Earnings per share - diluted:
Earnings before extraordinary item....... $ 2.55 $ 1.95 $ 1.77
Extraordinary item....................... - - (.11)
--------- ---------- --- -------
Net earnings per share................... $ 2.55 $ 1.95 $ 1.66
========= ========== ===========
Weighted average shares outstanding:
Basic.................................... 38,267 38,144 39,092
Diluted..................................
Fiscal year
------------------------------------
2001 2000 1999
---------- ---------- ----------
Revenues:
Restaurant sales............................ $1,714,126 $1,529,328 $1,372,899
Distribution and other sales................ 66,565 59,091 41,828
Franchise rents and royalties............... 43,825 41,432 39,863
Other....................................... 9,060 3,461 2,309
---------- ---------- ----------
1,833,576 1,633,312 1,456,899
---------- ---------- ----------
Costs of revenues:
Restaurant costs of sales................... 528,070 473,373 432,231
Restaurant operating costs.................. 864,135 750,736 646,815
Costs of distribution and other sales....... 64,490 57,543 41,217
Franchised restaurant costs................. 20,353 20,105 22,732
---------- ---------- ----------
1,477,048 1,301,757 1,142,995
---------- ---------- ----------
Gross profit................................... 356,528 331,555 313,904
Selling, general and administrative............ 201,715 182,961 164,297
---------- ---------- ----------
Earnings from operations....................... 154,813 148,594 149,607
Interest expense............................... 24,453 25,830 28,249
---------- ---------- ----------
Earnings before income taxes and
cumulative effect of accounting change...... 130,360 122,764 121,358
Income taxes................................... 46,300 22,500 44,900
---------- ---------- ----------
Earnings before cumulative effect of
accounting change........................... 84,060 100,264 76,458
Cumulative effect of adopting SAB 101.......... (1,859) - -
---------- ---------- ----------
Net earnings................................... $ 82,201 $ 100,264 $ 76,458
========== ========== ==========
Net earnings per share - basic:
Earnings before cumulative effect of
accounting change......................... $ 2.17 $ 2.62 $ 2.00
Cumulative effect of adopting SAB 101....... (.05) - -
--------- ---------- ----------
Net earnings per share...................... $ 2.12 $ 2.62 $ 2.00
========= ========== ==========
Net earnings per share - diluted:
Earnings before cumulative effect of
accounting change......................... $ 2.11 $ 2.55 $ 1.95
Cumulative effect of adopting SAB 101....... (.05) - -
--------- ---------- ----------
Net earnings per share...................... $ 2.06 $ 2.55 $ 1.95
========= ========== ==========
Weighted-average shares outstanding:
Basic....................................... 38,791 38,267 38,144
Diluted..................................... 39,780 39,334 39,281
40,113
See accompanying notes to consolidated financial statements.
F-4
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Fiscal year
-------------------------------------------------------------------------
2001 2000 1999
1998
--------------------- ---------- ----------
Cash flows from operating activities:
Net earnings before extraordinary item................earnings........................................ $ 82,201 $ 100,264 $ 76,458 $ 71,053
Non-cash items included in operations:
Depreciation and amortization.......................amortization..................... 64,195 56,766 45,857 40,201
Deferred finance cost amortization..................amortization................ 2,075 1,664 1,794
1,913
Deferred income taxes...............................taxes............................. 5,747 4,413 5,708
585Cumulative effect of accounting change............ 1,859 - -
Tax benefit associated with exercise of
stock options..................................... 7,531 2,589 1,663
Decrease (increase) in receivables....................receivables.................. (8,149) (1,676) 3,125
(2,183)Increase in inventories............................. (3,271) (5,833) (1,950)
Decrease (increase) in inventories.................... (5,833) (1,950) 361
Increase in prepaid expenses..........................expenses............. 61 (3,672) (3,319) (1,184)
Increase (decrease) in accounts payable...............payable............. 1,954 8,902 (7,906) 12,511
Increase (decrease) in other accrued liabilities......liabilities............ 19,144 (18,768) 35,537
25,925
---------- ---------- ------------------- --------- ---------
Cash flows provided by operating activities....... 142,060 155,304 149,182
---------- ---------- ----------173,347 144,649 156,967
--------- --------- ---------
Cash flows from investing activities:
Additions to property and equipment...................equipment................. (166,522) (127,361) (134,333) (111,098)
Dispositions of property and equipment................equipment.............. 8,642 5,938 12,172 5,431
Increase in trading area rights.......................rights..................... (1,486) (2,656) (3,864) (6,763)
Decrease (increase) in assets held for sale
and leaseback.......................................leaseback..................................... (14,474) 4,917 (11,695)
1,297
Other.................................................Other............................................... (4,427) (4,286) (4,024)
(8,358)
---------- ---------- ------------------- --------- ---------
Cash flows used in investing activities........... (178,267) (123,448) (141,744)
(119,491)
---------- ---------- ------------------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving bank loans............... 503,500 386,000 334,000
Principal repayments under revolving bank loans..... (504,500) (406,000) (345,500)
Proceeds from issuance of long-term debt............ - 825 4,347
Principal payments on long-term debt,
including current maturities..................................maturities...................... (2,034) (1,777) (9,833) (251,504)
Proceeds from issuance of long-term debt.............. 825 4,347 127,690
Borrowings under revolving bank loans................. 386,000 334,000 224,500
Principal repayments under revolving bank loans....... (406,000) (345,500) (127,000)
Extraordinary loss on retirement of debt,
net of taxes........................................ - - (4,378)
Repurchase of common stock............................stock.......................... (759) (5,797) - (20,000)
Proceeds from issuance of common stock................ 4,048 4,399 2,426
---------- ---------- ----------stock.............. 8,205 1,459 2,736
--------- --------- ---------
Cash flows used inprovided by (used in)
financing activities........... (22,701) (12,587) (48,266)
---------- ---------- ----------activities............................. 4,412 (25,290) (14,250)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents....equivalents... $ (508) $ (4,089) $ 973
$ (18,575)
========== ========== =================== ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized................capitalized.............. $ 22,635 $ 24,392 $ 26,873
$ 30,551
Income tax payments.................................payments............................... $ 30,174 $ 41,110 $ 26,451 28,519
See accompanying notes to consolidated financial statements.
F-5
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)thousands)
Common stock Retained
-------------------------------------------- Capital in earnings
Number of excess of (accumulated Treasury
shares Amount par value deficit) stock Total
------------------------------------ ------------ --------- ----------- ------------ ---------- ------ ---------- ------------- --------- ---------
Balance at September 28, 1997....... 40,509,46927, 1998...... 40,756,899 $ 405408 $ 283,517285,940 $(114,905) $(34,463) $ (181,580) $(14,463) $ 87,879
Exercise of stock options and
warrants.......................... 247,430 3 1,701 - - 1,704
Tax benefit associated with
exercise of stock options......... - - 722 - - 722
Purchases of treasury stock......... - - - - (20,000) (20,000)
Net earnings........................ - - - 66,675 - 66,675
---------- ----- --------- ---------- -------- ---------
Balance at September 27, 1998....... 40,756,899 408 285,940 (114,905) (34,463) 136,980
Exercise of stock options and
warrants..........................warrants........................ 348,535 3 2,733 - - 2,736
Tax benefit associated with
exercise of stock options.........options....... - - 1,663 - - 1,663
Net earnings........................earnings....................... - - - 76,458 - 76,458
--------------------- ----- --------- ------------------- -------- ---------
Balance at October 3, 1999..........1999......... 41,105,434 411 290,336 (38,447) (34,463) 217,837
Exercise of stock options ................... 377,935 4 1,455 - - 1,459
Tax benefit associated with
exercise of stock options.........options....... - - 2,589 - - 2,589
Purchases of treasury stock.........stock........ - - - - (5,797) (5,797)
Net earnings........................earnings....................... - - - 100,264 - 100,264
--------------------- ----- --------- ------------------- -------- ---------
Balance at October 1, 2000..........2000......... 41,483,369 415 294,380 61,817 (40,260) 316,352
Exercise of stock options.......... 935,373 9 8,196 - - 8,205
Tax benefit associated with
exercise of stock options....... - - 7,531 - - 7,531
Purchase of treasury stock......... - - - - (759) (759)
Net earnings....................... - - - 82,201 - 82,201
----------- ----- --------- --------- -------- ---------
Balance at September 30, 2001...... 42,418,742 $ 415424 $ 294,380310,107 $ 61,817 $(40,260)144,018 $(41,019) $ 316,352413,530
========== ===== ========= =================== ======== =========
See accompanying notes to consolidated financial statements.
F-6
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations - On October 4, 1999, Foodmaker, Inc. changed its name
to Jack in the Box Inc. (the "Company"). We operate operates and
franchisefranchises JACK IN THE BOX quick-serve restaurants, principally in the
western and southern United States.
Basis of presentation and fiscal year - The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions are eliminated.
Certain prior year amounts in the consolidated financial statements have
been reclassified to conform with the 20002001 presentation. Our fiscal year is
52 or 53 weeks ending the Sunday closest to September 30. Fiscal years 2001
and 2000 include 52 weeks and fiscal year 1999 includes 53 weeks and
all other years include 52 weeks.
Financial instruments - The fair valuevalues of cash and cash equivalents,
accounts receivable and accounts payable approximate the carrying amounts
due to their short maturities. The fair values of each of our long-term
debt instruments are based on quoted market values, where available, or on
the amount of future cash flows associated with each instrument, discounted
using our current borrowing rate for similar debt instruments of comparable
maturity. The estimated fair values of our long-term debt at
September 30, 2001 and October 1, 2000 and
October 3, 1999 approximate their carrying values.
WeFrom time-to-time, we use commodities hedginginterest rate derivative instruments to manage
our exposure to variability in interest rates related to our bank credit
facility and commodity derivatives to reduce the risk of price fluctuations
related to future raw materialsmaterial requirements for commodities such as beef and pork.
The terms of such instruments generallyWe do not exceed
twelve months,speculate using derivative instruments and dependpurchase derivative
instruments only for the purpose of risk management.
Effective October 2, 2000, we adopted Statement of Financial Accounting
Standards ("SFAS") 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS 137 and 138, which establishes accounting
and reporting standards for derivative instruments and hedging activities.
SFAS 133 requires that entities recognize all derivatives as either assets
or liabilities in the balance sheet and measure those instruments at fair
value. Accounting for changes in the fair value of a derivative depends on
the commodityintended use and other market factors. Gains
and losses are deferred and subsequently recordedresulting designation of the derivative. For
derivatives designated as cost of products soldhedges, changes in the fair value are either
offset against the change in fair value of the assets or liabilities
through earnings or recognized in accumulated other comprehensive income in
the balance sheet until the hedged item is recognized in earnings.
Upon the adoption of SFAS 133, we did not designate our derivative
instruments as hedge transactions. The transition adjustment recorded upon
the adoption of SFAS 133 was not material to our consolidated statement of
earnings. The changes in the fair value of our commodity derivatives are
included in restaurant costs of sales and changes in the fair value of our
interest rate swap, which expired in June 2001, are included in interest
expense in the accompanying consolidated statement of earnings infor the
same period as the hedged transactions.
We use interest rate swap agreements in the management of interest rate
exposure. The interest rate differential to be paid or received is normally
accrued as interest rates change, and is recognized as a component of
interest expense over the life of the agreements.fiscal year ended September 30, 2001.
At October 1, 2000, we had
a $25 million notional amount interest rate swap agreement expiring in
June 2001. This agreement effectively converts a portion of our variable rate
bank debt to fixed rate debt and has a pay rate of 6.38%.
At October 1, 2000,September 30, 2001, we had no other material financial instruments
subject to significant market exposure.
Cash and cash equivalents - We invest cash in excess of operating
requirements in short term, highly liquid investments with original
maturities of three months or less, which are considered cash equivalents.
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
Assets held for sale and leaseback primarily represent the costs for new
sites that will be sold and leased back when construction is completed.
Gains and losses realized on the sale leaseback transactions are deferred
and credited to income over the lease terms. The leases are classified in
accordance with Statement of Financial Accounting Standards ("SFAS")SFAS 13, Accounting for Leases.
Preopening costs are those typically associated with the opening of a new
restaurant and consist primarily of employee training costs. Preopening costs
are expensed as incurred.
F-7
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Preopening costs are those typically associated with the opening of a new
restaurant and consist primarily of employee training costs. Preopening
costs are expensed as incurred.
Property and equipment at cost - Expenditures for new facilities and
equipment and those that substantially increase the useful lives of the
property are capitalized. Facilities leased under capital leases are stated
at the present value of minimum lease payments at the beginning of the
lease term, not to exceed fair value. Maintenance repairs, and minor
renewals are expensed as incurred. When properties are retired or otherwise
disposed of, the related cost and accumulated depreciation are removed from
the accounts, and gains or losses on the dispositions are reflected in
results of operations.
Buildings, equipment and leasehold improvements are depreciated using the
straight-line method based on the estimated useful lives of the assets or
over the lease term for certain capital leases (buildings 15 to 33 years
and equipment 3 to 30 years).
Other assets primarily include trading area rights, lease acquisition
costs, deferred franchise contract costs, deferred finance costs and
goodwill. Trading area rights represent the amount allocated under purchase
accounting to reflect the value of operating existing restaurants within
their specific trading area. These rights are amortized on a straight-line
basis over the period of control of the property, not exceeding 40 years,
and are retired when a restaurant is franchised or sold.
Lease acquisition costs represent the acquired values of existing lease
contracts having lower contractual rents lower than fair market rents and are
amortized over the remaining lease term. Also included in other assets are deferredDeferred franchise contract costs
which represent the acquired value of franchise contracts in existence at
the time the Company was acquired in 1988 and are amortized over the term of
the franchise agreement, usually 20 years; deferredyears. Deferred finance costs which are
amortized using the interest method over the terms of the respective loan
agreements, from 4 to 10 years;years, and goodwill which represents the excess of
purchase price over the fair value of net assets acquired and is amortized on a
straight-line basis over 40 years.
Impairment of Long-Lived Assetslong-lived assets - We evaluate impairment losses to be
recorded on long-lived
assets used in operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. We also account for long-lived assets that are held for
disposal at the lower of cost or fair value.
Franchise operations - Franchise arrangements generally provide for initial
license fees of $50 (formerly $25) per restaurant and continuing payments to us based on a
percentage of sales. Among other things, the franchisee may be provided the
use of land and building, generally for a period of 20 years, and is
required to pay negotiated rent, property taxes, insurance and maintenance.
Franchise fees are recorded as revenue when we have substantially performed
all of our contractual obligations. Expenses associated with the issuance
of the franchise are expensed as incurred. Franchise rents and royalties are recorded
asin income on an accrual basis. Gains on salesthe sale of restaurant businesses
to franchisees which have not been
material, are recorded as other revenuesrevenue when the sales are consummated
and certain other criteria are met.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, Revenue Recognition in Financial
Statements. SAB 101 requires a change in the recognition of franchise
percentage rents, which are contingent upon certain annual sales levels,
from an accrual basis to recognition in the period in which the contingency
is met. We adopted SAB 101 in the fourth quarter of fiscal year 2001 and
have reported the cumulative effect of this change in our 2001 consolidated
statement of earnings. Other than the recording of this one-time cumulative
effect, the adoption of SAB 101 did not have a material effect on our
annual results of operations.
F-8
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases as well as tax loss and credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled.
F-8
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net earnings per share - Basic earnings per share is computed using the
weighted averageweighted-average number of shares outstanding during the period. Diluted
earnings per share is computed using the additional dilutive effect of all
potential common stock and includes the dilutive impact of
stock options and warrants.
Stock options - Stock options are accounted for under the intrinsic value
based method, whereby compensation expense is recognized for the excess, if
any, of the quoted market price of the Company stock at the date of grant
over the option price. Our policy is to grant stock options at fair value
at the date of grant. We have included pro forma information in Note 7, as
required by SFAS 123, Accounting for Stock-Based Compensation.
Advertising costs - The Company maintains a marketing fund consisting of
funds contributed by us equal to at leastapproximately 5% of gross sales of all
Company-operated JACK IN THE BOX restaurants and contractual marketing fees
paid monthly by franchisees. Production costs of commercials, programming
and other marketing activities are expensed to the marketing fund when the
advertising is first used, and the costs of advertising are charged to
operations as incurred. Our contributions to the marketing fund and other
marketing expenses, which are included in selling, general and
administrative expenses in the accompanying consolidated statements of
earnings, were $77,788,$86,539, $77,799 and $70,297 in 2001, 2000 and $58,256 in 2000, 1999, and 1998,
respectively.
Segment reporting - An operating segment is defined as a component of an
enterprise that engages in business activities from which it may earn
revenues and incur expenses, and about which separate financial information
is regularly evaluated by the chief operating decision maker in deciding
how to allocate resources. Similar operating segments can be aggregated
into a single operating segment if the businesses are similar.
We believe we operateJack in the Box Inc. operates its business in a single segment.
Estimations - In preparing the consolidated financial statements in
conformity with accounting principles generally accepted accounting principles,in the United
States of America, management is required to make certain assumptions and
estimates that affect reported amounts of assets, liabilities, revenues,
expenses and the disclosure of contingencies. In making these assumptions
and estimates, management may from time to time seek advice from and
consider information provided by actuaries and other experts in a
particular area. Actual amounts could differ from these estimates.
In 1999, we reduced accrued liabilities and restaurant operating costs by
$18.0 million, primarily due to a change in estimates resulting from
improvements to our loss prevention and risk management programs, which
have
beenwere more successful than anticipated. This change in estimates was
supported by an independent actuarial study conducted to evaluate the
self-insured portion of our workers' compensation, general liability and
other insurance programs.
F-9
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
2. LONG-TERM DEBT
2001 2000 1999
---------- ----------
The detail of long-term debt at each year end follows:
Bank loans, variable interest rate based on established market
indicators which approximate the prime rate or less, 7.5%4.7% at
October 1, 2000.............................................................September 30, 2001...................................................... $ 66,00065,000 $ 86,00066,000
Senior subordinated notes, 8 3/8% interest, net of discount of $158$137
and $179,$158, respectively, reflecting an 8.4% effective interest rate
due April 15, 2008, redeemable beginning April 15, 2003....................2003................. 124,863 124,842 124,821
Financing lease obligations, net of discounts of $646 and
$1,031, and $1,413respectively, reflecting a 10.3% effective interest rate,
semi-annual payments of $3,413 and $747 to cover interest and
sinking fund requirements, respectively, due in equal
installments on January 1, 2003 and November 1, 2003...........2003.................... 69,354 68,969 68,587
Secured notes, 11 1/2% interest, due in monthly
installments through May 1, 2005............................................2005........................................ 5,077 6,139 7,011
Capitalized lease obligations, 11% average interest rate.......................rate.................. 15,565 16,229 16,842
Other notes, principally unsecured, 10% average interest rate ............................. 2,115 2,423 1,890
---------- ----------
281,974 284,602 305,151
Less current portion...........................................................portion...................................................... 2,255 2,034 1,695
---------- ----------
$ 282,568279,719 $ 303,456282,568
========== ==========
On April 1, 1998, we entered into a revolving bank credit agreement, which
expires March 31, 2003 and provides for a credit facility of up to $175
million, including letters of credit of up to $25 million. The credit
agreement requires the payment of an annual commitment fee of approximately
.2% ofbased on the
unused credit line. At October 1, 2000,September 30, 2001, we had borrowings of $66.0$65 million
and approximately $98.7$95.9 million of availability under the agreement.
In 1998, we repaid $125 million of our 9 1/4% senior notes and $125 million
of our 9 3/4% senior subordinated notes due 2002, and incurred an
extraordinary loss of $6,978, less income tax benefits of $2,600, relating to
the early extinguishment of the debt.
We are subject to a number of customary covenants under our various credit
agreements, including limitations on additional borrowings, capital
expenditures, lease commitments and dividend payments, and requirements to
maintain certain financial ratios, cash flows and net worth. In
September 1999, the collateral securing the bank loans was released. However, realReal
and personal property previously held as collateral for the bank loans
cannot be used to secure other indebtedness of the Company. In addition,
certain of our real and personal property secure other indebtedness.
In January 1994, we entered into financing lease arrangements with two
limited partnerships (the "Partnerships"), in which interests in 76
restaurants for a specified period of time were sold. The acquisition of
the properties, including costs and expenses, was funded through the
issuance of $70 million in senior secured notes by a special purpose
corporation acting as agent for the Partnerships of $70
million of senior secured notes.Partnerships. On January 1, 2003 and
November 1, 2003, we must make offers to reacquire 50% of the properties at each date at
a price which is sufficient, in conjunction with previous sinking fund
deposits, to retire the notes. If the Partnerships reject the offers, we
may purchase the properties at less than fair market value or cause the
Partnerships to fund the remaining principal payments on the notes and, at
our option, cause the Partnerships to acquire our residual interest in the
properties. If the Partnerships are allowed to retain their interests, we
have available options to extend the leases for total terms of up to 35
years, at which time the ownership of the property will revert to us. The
transactions are reflected as financings with the properties remaining in
our consolidated financial statements.
F-10
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
2. LONG-TERM DEBT (continued)
Aggregate maturities and sinking fund requirements on all long-term debt
are $3,529, $3,750, $90,773,$89,025, $37,680, $2,336 and $2,336$1,377 for the years 20012002 through
2005,2006, respectively. The 2003 amount is net of $12,706 of accumulated sinking fund
payments.payments of $13,453.
Interest capitalized during the construction period of restaurants was
$2,441, $2,259 and $1,469 in 2001, 2000 and $1,203 in 2000, 1999, and 1998, respectively.
3. LEASES
As Lessee - We lease restaurant and other facilities under leases having
terms expiring at various dates through 2054. The leases generally have
renewal clauses of 5 to 20 years exercisable at our option and, in some
instances, have provisions for contingent rentals based upon a percentage
of defined revenues. Total rent expense for all operating leases was
$142,351, $123,465 $108,700 and $94,275,$108,700, including contingent rentals of $7,200,
$6,551 and $6,066, in 2001, 2000 and $4,561 in 2000, 1999, and 1998, respectively.
Future minimum lease payments under capital and operating leases are as
follows:
Fiscal Capital Operating
year leases leases
-------------------------------------------------- -------- -----------
2001..........................................----------------------------------------------- ------- ----------
2002............................................ $ 2,376 $ 107,422
2002..........................................120,992
2003............................................ 2,376 105,608
2003..........................................118,852
2004............................................ 2,376 103,279
2004.......................................... 2,376 100,644
2005..........................................116,216
2005............................................ 2,359 90,436
Thereafter.................................... 20,160 652,461
-------- -----------106,058
2006............................................ 2,335 96,061
Thereafter...................................... 17,830 747,208
------- ----------
Total minimum lease payments...................... 32,023 $ 1,159,850
===========payments........................ 29,652 $1,305,387
==========
Less amount representing interest................. 15,794
--------interest................... 14,087
-------
Present value of obligations under capital leases. 16,229leases... 15,565
Less current portion.............................. 664
--------portion................................ 738
-------
Long-term capital lease obligations............... $ 15,565
========obligations................. $14,827
=======
Building assets recorded under capital leases were $14,651$13,843 and $15,466,$14,651, net
of accumulated amortization of $6,284$7,089 and $5,470,$6,284, as of September 30, 2001
and October 1, 2000, and
October 3, 1999, respectively.
As Lessor - We lease or sublease restaurants to certain franchisees and
others under agreements which generally provide for the payment of
percentage rentals in excess of stipulated minimum rentals, usually for a
period of 20 years. Total rental revenue was $27,213, $25,900 $25,134 and $22,747,$25,134,
including contingent rentals of $11,091, $10,642 and $9,655, in 2001, 2000
and $6,976 in 2000, 1999, and 1998, respectively.
F-11
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
3. LEASES (continued)
The minimum rents receivable under these non-cancelable leases are as
follows:
Fiscal Sales-type Operating
year leases leases
------------------------------------------------------------------------
2001.............................................----------------------------------------- ---------- ----------
2002..................................... $ 4498 $ 16,769
2002............................................. 44 16,172
2003............................................. 44 15,224
2004............................................. 44 14,353
2005............................................. 45 13,186
Thereafter....................................... 34 62,24717,960
2003..................................... 98 16,839
2004..................................... 98 15,921
2005..................................... 99 14,728
2006..................................... 88 13,004
Thereafter............................... 781 74,857
------- ----------
Total minimum future rentals......................... 255rentals................. 1,262 $ 137,951153,309
==========
Less amount representing interest.................... 67interest............ 630
-------
Net investment (included in other assets)................ $ 188632
=======
Land and building assets held for lease were $42,531$45,133 and $44,962,$42,531, net of
accumulated amortization of $21,697$22,787 and $20,814,$21,697, as of September 30, 2001
and October 1, 2000, and
October 3, 1999, respectively.
4. INCOME TAXES
The fiscal year income taxes consist of the following:
2001 2000 1999
1998
-------- -------- --------------- ------- -------
Federal - current.......................... $ 14,036 $ 31,227 $ 24,618$34,658 $14,036 $31,227
- deferred......................... 5,419 3,535 6,709 3,707
State - current.......................... 4,695 4,051 7,965
5,597
- deferred......................... 328 878 (1,001)
(3,122)
-------- -------- --------
Subtotal ..................................------- ------- -------
Subtotal................................... 45,100 22,500 44,900 30,800
Income tax benefit related to
cumulative effect of extraordinary item...accounting change... 1,200 - -
2,600
-------- -------- --------------- ------- -------
Income taxes............................... $ 22,500 $ 44,900 $ 33,400
======== ======== ========
Fiscal year$46,300 $22,500 $44,900
======= ======= =======
A reconciliation of the federal statutory income taxes reconcile with the amounts computed at the statutory
federaltax rate of 35%to our effective
tax rate is as follows:
2001 2000 1999
1998
-------- -------- ------------- ---- ----
Computed at federal statutory rate......... $ 42,968 $ 42,475 $ 36,559rate............. 35.0% 35.0% 35.0%
State income taxes, net of federal effect.. 3,204 4,526 1,609
Jobs tax credit wages...................... (1,271) (1,281) (861)benefit. 2.5 2.6 3.7
Benefit of jobs tax credits.................... (1.2) (1.0) (1.1)
Adjustment of tax loss, contribution and
tax credit carryforwards..............carryforwards..................... 1.7 - 425 584.4
Reduction to valuation allowance........... (23,579) (1,842) (4,581)allowance............... (2.6) (19.3) (1.5)
Other, net................................. 1,178 597 90
-------- -------- --------
$ 22,500 $ 44,900 $ 33,400
======== ======== ========net..................................... .1 1.0 .5
----- ----- -----
35.5% 18.3% 37.0%
===== ===== =====
F-12
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
4. INCOME TAXES (continued)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at each year
end are presented below:
2001 2000
1999
-------- -----------------
Deferred tax assets:
Accrued pension and postretirement benefits.... $ 17,039 $ 18,247
Accrued insurance.............................. 10,086 10,513
Accrued vacation pay expense................... 9,558 8,542
Deferred income................................ 13,449 11,279
Other reserves and allowances.................. 4,212 5,471
Tax loss and tax credit carryforwards........... $carryforwards.......... - 3,386
$ 25,123
Accrued insurance............................... 10,513 15,377
Accrued pension and postretirement benefits..... 18,247 13,296
Accrued vacation pay expense.................... 8,542 7,686
Other, reserves and allowances................... 5,471 7,422
Deferred income................................. 11,279 9,819
Other, net......................................net..................................... 7,824 8,599 8,515
-------- --------
Total gross deferred tax assets.................assets................ 62,168 66,037 87,238
Less valuation allowance........................allowance....................... - 3,386 26,965
-------- --------
Net deferred tax assets.........................assets........................ 62,168 62,651 60,273
-------- --------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation...................depreciation.................. 71,773 65,941
57,776
Intangible assets...............................assets.............................. 8,610 9,178 10,552
-------- --------
Total gross deferred tax liabilities............liabilities........... 80,383 75,119 68,328
-------- --------
Net deferred tax liabilities....................liabilities................... $ 12,46818,215 $ 8,05512,468
======== ========
During fiscal year 2000, we reached a final agreement with the U.S.
Internal Revenue Service ("IRS") to settle a tax case related to the
disposition in November 1995 of our interest in Family Restaurants, Inc. We
recognized tax benefits of $22,900, primarily as a result of this
settlement which reduced our fiscal year 2000 provision for income taxes.
At October 1, 2000, we hadThe valuation allowance decreased $3,386 in fiscal year 2001 due to the
resolution of tax loss carryforwards that expire in 2001. The
valuation allowance of $3,386 as of October 1, 2000 and $26,965 as of
October 3, 1999 represents deferred tax assets that may not be realized by
the reversal of future taxable differences. The valuation allowance decreased $23,579 in fiscal year 2000 primarily due to
the IRS settlement and $2,850 in
fiscal year 1999. Other decreases in each year related to the expected future use of deferred tax assets. WeAs of
September 30, 2001, we have not recorded a valuation allowance because we
believe it is more likely than not that the net deferred tax assets will be
realized through future taxable income or alternative tax strategies.
From time to time, we may take positions for filing our tax returns which
may differ from the treatment of the same item for financial reporting
purposes. The ultimate outcome of these items will not be known until such
time as the IRS has completed its examination or until the statute of
limitations has expired. As of October 1, 2000, the IRS had completed its examinations of our
federal income tax returns through fiscal year 1996.
F-13
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
5. RETIREMENT, SAVINGS AND BONUS PLANS
We have non-contributory defined benefit pension plans covering
substantially all salaried and hourly employees meeting certain eligibility
requirements. These plans are subject to modification at any time. The
plans provide retirement benefits based on years of service and
compensation. It is our practice to fund retirement costs as necessary.
Qualified plans Non-qualified plan
----------------------- ----------------------------------------------- ----------------------
2001 2000 19992001 2000 1999
--------- --------- --------- ----------------- --------
Change in benefit obligation:
Benefit obligation at beginning of year......... $ 66,839 $ 68,942 $ 65,36917,877 $ 17,391
$ 16,294
Service cost.................................... 3,917 4,706 4,744255 245 408
Interest cost................................... 5,442 4,991 4,5411,432 1,305
1,153
Actuarial gain..................................(gain) loss........................... 5,729 (10,097) (4,192)2,151 (774) (24)
Benefits paid................................... (2,424) (1,703) (1,520)(543) (438) (440)
Plan amendment.................................. - - 1,500 148
-
--------- --------- --------- ----------------- -------- -------- --------
Benefit obligation at end of year............... $ 79,503 $ 66,839 $ 68,94222,672 $ 17,877
$ 17,391
========= ========= ========= ================= ======== ======== ========
Change in plan assets:
Fair value of plan assets at beginning of year.. $ 60,85268,550 $ 55,45460,852 $ - $ -
Actual return on plan assets.................... (1,223) 8,419 2,214 - -
Employer contributions.......................... 5,500 982 4,704543 438 440
Benefits paid................................... (2,424) (1,703) (1,520)(543) (438)
(440)
--------- --------- --------- ----------------- -------- -------- --------
Fair value of plan assets at end of year........ $ 68,55070,403 $ 60,85268,550 $ - $ -
========= ========= ========= ================= ======== ======== ========
Reconciliation of funded status:
Funded status................................... $ (9,100) $ 1,712 $ (8,090) $ (17,877) $ (17,391)$(22,672) $(17,877)
Unrecognized net (gain) loss.................... 7,247 (5,596) 8,0263,949 1,798 2,664
Unrecognized prior service cost................. (67) (103) (138)5,132 4,111 4,431
Unrecognized net transition asset............... - 9 193 31
58
--------- --------- --------- ----------------- -------- -------- --------
Net liability recognized........................liabilities recognized...................... $ (1,920) $ (3,978) $ (183) $ (11,937) $ (10,238)
========= ========= ========= =========$(13,588) $(11,937)
======== ======== ======== ========
Amounts recognized in the statement of
financial position consist of:
Accrued benefit liability......................liability....................... $ (1,920) $ (3,978) $ (183) $ (15,565) $ (13,599)$(18,723) $(15,565)
Intangible asset...............................asset................................ - - 5,135 3,628
3,361
--------- --------- --------- ----------------- -------- -------- --------
Net liability recognized.......................liabilities recognized...................... $ (1,920) $ (3,978) $ (183) $ (11,937) $ (10,238)
========= ========= ========= =========$(13,588) $(11,937)
======== ======== ======== ========
In determining the present values of benefit obligations, our actuaries
assumed discount rates of 8.0%7.75% and 7.5%8.00% at the measurement dates of
June 30, 20002001 and 1999,2000, respectively. The assumed rate of increase in
compensation levels was 4% for the qualified plans and 5% for the
non-qualified plan in 20002001 and 1999.2000. The long-term rate of return on assets
was 8.5% in both years. Assets of the qualified plans consist primarily of
listed stocks and bonds.
F-14
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
5. RETIREMENT, SAVINGS AND BONUS PLANS (continued)
The components of the fiscal year net defined benefit pension cost are as
follows:
Qualified plans Non-qualified plan
--------------------------------- -------------------------------------------------------------
2001 2000 1999 19982001 2000 1999
1998
-------- -------- -------- -------- -------- ----------------- --------- --------- ------- ------- -------
Service cost..................... $ 3,917 $ 4,706 $ 4,744 $ 3,116255 $ 245 $ 408
$ 342
Interest cost.................... 5,442 4,991 4,541 4,0471,432 1,305 1,153 1,006
Expected return on plan assets... (5,889) (5,082) (5,257) (4,458) - - -
Net amortization................. (28) 162 426 (26)508 587 601 495
-------- -------- -------- -------- -------- --------------- ------- -------
Net periodic pension cost........ $ 3,442 $ 4,777 $ 4,454 $ 2,6792,195 $ 2,137 $ 2,162
$ 1,843
======== ======== ======== ======== ======== =============== ======= =======
We maintain a savings plan pursuant to Section 401(k) of the Internal
Revenue Code, which allows administrative and clerical employees who have
satisfied the service requirements and reached age 21, to defer from 2% to
12% of their pay on a pre-tax basis. We contribute an amount equal to 50%
of the first 4% of compensation that is deferred by the participant. Our
contributions under this plan were $1,651, $1,426 and $1,328 in 2001, 2000
and $1,141 in 2000, 1999, and 1998, respectively. We also maintain an unfunded, non-qualified
deferred compensation plan, which was created in 1990 for key executives
and other members of management who were then excluded from participation
in the qualified savings plan. This plan allows participants to defer up to
15% of their salary on a pre-tax basis. We contribute an amount equal to
100% of the first 3% contributed by the employee. Our contributions under
the non-qualified deferred compensation plan were $680, $609 and $481 in
2001, 2000 and $372 in 2000,
1999, and 1998, respectively. In each plan, a participant's right to
Company contributions vests at a rate of 25% per year of service.
We maintain a bonus plan that allows certain officers and management of the
Company to earn annual bonuses based upon achievement of certain financial
and performance goals approved by the compensation committeeCompensation Committee of our Board
of Directors. Under this plan, $1,297, $4,654 $6,390 and $3,834$6,390 was expensed in
2001, 2000 1999 and 1998,1999, respectively.
We maintain a deferred compensation plan for non-management directors.
Under the plan's equity option, those who are eligible to receive
directors' fees or retainers may choose to defer receipt of their
compensation. The amounts deferred are converted into stock equivalents at
the then currentthen-current market price of our common stock. We provide a deferment
credit equal to 25% of the compensation initially deferred. Under this
plan, a total of $234, $0 $562 and $262$562 was expensed in 2001, 2000 1999 and 1998,1999,
respectively, for both the deferment credit and the stock appreciation on
the deferred compensation.
F-15
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
6. POSTRETIREMENT BENEFIT PLAN
We sponsor a health care plan that provides postretirement medical benefits
for employees who meet minimum age and service requirements. The plan is
contributory, with retiree contributions adjusted annually, and contains
other cost-sharing features such as deductibles and coinsurance. Our policy
is to fund the cost of medical benefits in amounts determined at the
discretion of management.
2001 2000 1999
-------- --------
Change in benefit obligation:
Benefit obligation at beginning of year.........year.......... $ 16,769 $ 16,465
$ 16,270
Service cost..................................... 247 586
Interest cost.................................... 586 638
Interest cost...................................537 1,233
1,137
Actuarial gain..................................gain................................... (9,741) (1,420)
(1,403)
Benefits paid...................................paid.................................... (83) (95) (177)
-------- --------
Benefit obligation at end of year...............year................ $ 16,7697,729 $ 16,46516,769
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year..year... $ - $ -
Employer contributions..........................contributions........................... 83 95
177
Benefits paid...................................paid.................................... (83) (95) (177)
-------- --------
Fair value of plan assets at end of year........year......... $ - $ -
======== ========
Reconciliation of funded status:
Funded status...................................status.................................... $ (7,729) $(16,769) $(16,465)
Unrecognized net gain...........................gain............................ (11,792) (3,351) (1,965)
-------- --------
Net liability recognized........................recognized......................... $(19,521) $(20,120) $(18,430)
======== ========
All of the net liability recognized in the reconciliation of funded status
is included as an accrued benefit liability in the statements of financial
position.
In determining the above information, our actuaries assumed a discount rate
of 8.0%7.75% and 7.5%8.00% at the measurement dates of June 30, 20002001 and 1999,2000,
respectively.
The components of the fiscal year net periodic postretirement benefit cost
are as follows:
2001 2000 1999
1998
------- -------- --------------- -------
Service cost..........................cost........................... $ 247 $ 586 $ 638
$ 517
Interest cost.........................cost.......................... 537 1,233 1,137
1,021
Net amortization......................amortization....................... (1,282) (34) -
(88)
------- -------- --------------- -------
Net periodic pension cost.............(income) cost..... $ (498) $ 1,785 $ 1,775
$ 1,450
======= ======== =============== =======
For measurement purposes, an 8.0%a 9.0% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was assumed
for 2000 for2002. For plan participants under age 65, the rate was assumed to
decrease .5% per year to 5.0%6.0% by the year 20062008 and remain at that level
thereafter. For plan participants age 65 years or older, a 6.0%9.0% annual
health care cost trend rate was assumed for 2000, the2002. The rate was assumed to
decrease .5% per year to 4.0%6.0% by the year 20042008 and remain at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed health
care cost trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation as of October 1, 2000September 30, 2001
by $3,553,$1,638, or 21%, and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 20002001 by $483$208, or
27%.
F-16
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
7. STOCK OPTIONS
We offer stock option plans to attract, retain and motivate key officers,
non-employee directors and employees by providing for or increasing the
proprietary interests of such persons to work toward the future financial
success of the Company.
In January 1992, we adopted the 1992 Employee Stock Incentive Plan (the
"1992 Plan") and, as part of a merger, assumed outstanding options to
employees under our predecessor's 1990 Stock Option Plan and assumed
contractually the options to purchase 42,750 shares of common stock granted
to two non-employee directors of the Company. Under the 1992 Plan,
employees are eligible to receive stock options, restricted stock and other
various stock-based awards. Subject to certain adjustments, up to a maximum
of 3,775,000 shares of common stock may be sold or issued under the 1992
Plan. No awards shall be granted after January 16, 2002, although stock may
be issued thereafter pursuant to awards granted prior to such date.
In August 1993, we adopted the 1993 Stock Option Plan (the "1993 Plan").
Under the 1993 Plan, employees who do not receive stock options under the
1992 Plan are eligible to receive annually stock options with an aggregate
exercise price equivalent to a percentage of their eligible earnings.
Subject to certain adjustments, up to a maximum of 3,000,000 shares of
common stock may be sold or issued under the 1993 Plan. No awards shall be
granted after December 11, 2003, although common stock may be issued
thereafter pursuant to awards granted prior to such date.
In February 1995, we adopted the Non-Employee Director Stock Option Plan
(the "Director Plan"). Under the Director Plan, any eligible director of
Jack in the Box Inc. who is not an employee of the Company or its
subsidiaries is granted annually an option to purchase shares of common
stock at fair market value. The actual number of shares that may be
purchased under the option is based on the relationship of a portion of
each director's compensation to the fair market value of the common stock,
but is limited to fewer than 10,000 shares.shares annually. Subject to certain
adjustments, up to a maximum of 650,000 shares of common stock may be sold
or issued under the Director Plan. Unless sooner terminated, no awards
shall be granted after February 17, 2005, although common stock may be
issued thereafter pursuant to awards granted prior to such date.
The terms and conditions of the stock-based awards under the plans are
determined by a committeethe Compensation Committee of the Board of Directors on each
award date and may include provisions for the exercise price, expirations,
vesting, restriction on sales and forfeiture, as applicable. Options
granted under the plans have terms not exceeding 11 years and provide for
an option exercise price of not less than 100% of the quoted market value
of the common stock at the date of grant.
F-17
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
7. STOCK OPTIONS (continued)
The following is a summary of stock option activity for the three fiscal
years ended October 1, 2000:September 30, 2001:
Option exercise price per share
-------------------------------
WeightedWeighted-
Shares Range average
--------- ------------- ----------
Balance at September 28, 1997..... 3,157,034 $ .96-12.63 $ 7.90
Granted....................... 761,046 17.44-19.06 18.93
Exercised..................... (198,200) 1.13-12.63 8.27
Canceled...................... (108,759) 5.75-19.06 11.37-------------- ---------
Balance at September 27, 1998.....1998... 3,611,121 .96-19.06$ .96 - 19.06 $ 10.10
Granted....................... 655,541 13.56-26.6313.56 - 26.63 26.24
Exercised..................... (297,148) .96-19.06.96 - 19.06 9.00
Canceled...................... (105,801) 5.75-26.635.75 - 26.63 15.27
---------
Balance at October 3, 1999........1999...... 3,863,713 .96-26.63.96 - 26.63 12.78
Granted....................... 699,574 23.25-23.8823.25 - 23.88 23.25
Exercised..................... (377,935) .96-19.06.96 - 19.06 3.92
Canceled...................... (128,922) 5.75-26.635.75 - 26.63 20.39
---------
Balance at October 1, 2000........2000...... 4,056,430 1.13-26.631.13 - 26.63 15.16
Granted....................... 996,699 26.00 - 32.77 26.27
Exercised..................... (935,373) 1.13 - 26.63 8.51
Canceled...................... (119,655) 5.75 - 26.63 23.20
---------
Balance at September 30, 2001... 3,998,101 4.19 - 32.77 19.24
=========
The following is a summary of stock options outstanding at
October 1, 2000:September 30, 2001:
Options outstanding Options exercisable
-------------------------------------------- ------------------------
Weighted average Weighted Weighted
remaining----------------------------------------------- -----------------------
Weighted-average Weighted- Weighted-
contractual average average
Range of Number contractualremaining exercise Number exercise
exercise prices outstanding life in years price exercisable price
--------------- ----------- ---------------- ------------------- ----------- ---------
$ 1.134.19 - 6.38 627,661 3.1912.13 1,082,043 3.86 $ 3.87 626,8388.76 1,082,043 $ 3.87
6.508.76
12.25 - 11.00 894,764 3.83 8.78 857,022 8.83
12.1323.25 1,405,656 7.60 19.74 711,376 18.29
23.88 - 19.06 1,272,288 7.48 15.73 808,786 14.64
23.25 - 26.63 1,261,717 9.47 24.72 222,127 24.9832.77 1,510,402 9.17 26.29 364,732 25.99
--------- ---------
1.134.19 - 26.63 4,056,430 6.63 15.16 2,514,773 10.9032.77 3,998,101 7.18 19.24 2,158,151 14.81
========= =========
At September 30, 2001, October 1, 2000 and October 3, 1999, and September 27, 1998, the number of
options exercisable were 2,158,151, 2,514,773 2,503,009 and 2,239,930,2,503,009, respectively,
and the weighted averageweighted-average exercise priceprices of those options were $14.81,
$10.90 $8.62
and $7.32,$8.62, respectively.
For purposes of the following pro forma disclosures required by SFAS 123,
the fair value of each option granted after fiscal year 1995 has been
estimated on the date of grant using the Black-Scholes option-pricing
model. Valuation models require the input of highly subjective assumptions,
including the expected volatility of the stock price. Therefore, in
management's opinion, the existing models do not provide a reliable single
measure of the value of employee stock options. The following assumptions
were used for grants: risk-free interest rates of 5.9%5.8%, 5.9% and 5.5% in
2001, 2000 and 5.7% in 2000, 1999, and 1998, respectively; expected volatility of 40%, in 2001 and
2000 and 35% and 34%, respectively;in 1999; and an expected life of six years in each year. We
have not paid any cash or other
dividends and do not anticipate paying dividends in the
foreseeable future,future; therefore, the expected dividend yield is zero.
F-18
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
7. STOCK OPTIONS (continued)
The weighted averageweighted-average fair value of options granted was $12.70 in 2001,
$11.26 in 2000 and $11.58 in 1999 and $8.32 in 1998.1999. Had compensation expense been recognized
for stock-based compensation plans in accordance with provisions of SFAS
123, the Company would have recorded net earnings of $77,739, or $2.00 per
basic share and $1.95 per diluted share, in 2001; $97,620, or $2.55 per
basic share and $2.48 per diluted share, in 2000;2000 and $74,391, or $1.95 per
basic share and $1.89 per diluted share, in 1999 and $65,011, or $1.66 per basic share
and $1.62 per diluted share, in 1998.1999.
For the pro forma disclosures, the options' estimated fair values of the options
were amortized over their vesting periods of up to five years. The pro
forma disclosures do not include a full five years of grants since SFAS 123
does not apply to grants before 1995.1996. Therefore, these pro forma amounts
are not indicative of anticipated future disclosures.
8. STOCKHOLDERS' EQUITY
We have 15,000,000 shares of preferred stock authorized for issuance at a
par value of $.01 per share. No preferred shares have been issued.
On July 26, 1996, the Board of Directors declared a dividend of one
preferred stock purchase right (a "Right") for each outstanding share of
our common stock, which Rights expire on July 26, 2006. Each Right entitles
a stockholder to purchase for an exercise price of $40, subject to
adjustment, one one-hundredth of a share of the Company's Series A Junior
Participating Cumulative Preferred Stock, or, under certain circumstances,
shares of common stock of Jack in the Box Inc. or a successor company with
a market value equal to two times the exercise price. The Rights would only
become exercisable for all other persons when any person has acquired or
commences to acquire a beneficial interest of at least 20% of the Company's
outstanding common stock. The Rights have no voting privileges and may be
redeemed by the Board of Directors at a price of $.001 per Right at any
time prior to or shortly after the acquisition of a beneficial ownership of
20% of the outstanding common shares. There are 383,486 shares of Series A
Junior Participating Cumulative Preferred Stock reserved for issuance upon
exercise of the Rights.
At October 1, 2000,September 30, 2001, we had 6,068,7245,133,351 shares of common stock reserved for
issuance upon the exercise of stock options.
F-19
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
9. AVERAGE SHARES OUTSTANDING
Fiscal year netNet earnings per share for each fiscal year is based on the
weighted averageweighted-average number of common shares outstanding during the year,
determined as follows:
2001 2000 1999 1998
---------- ---------- ----------
Shares outstanding, beginning of fiscal year....year...... 38,348,595 38,276,460 37,927,925 39,096,815
Effect of common stock issued...................issued..................... 470,040 200,074 215,635 144,739
Effect of common stock reacquired...............reacquired................. (27,212) (209,048) - (150,047)
---------- ---------- ----------
Weighted averageWeighted-average shares outstanding - basic.....basic....... 38,791,423 38,267,486 38,143,560 39,091,507
Assumed additional shares issued upon exercise
of stock options and warrants, net of shares
reacquired at the average market price........price.......... 988,644 1,066,579 1,136,949 1,021,378
---------- ---------- ----------
Weighted averageWeighted-average shares outstanding - diluted...diluted..... 39,780,067 39,334,065 39,280,509 40,112,885
========== ========== ==========
The diluted weighted averageweighted-average shares outstanding computation excludes
496,125, 1,047,684 345,040 and 290,042345,040 antidilutive stock options in 2001, 2000 1999 and
1998,1999, respectively.
10. CONTINGENCIES AND LEGAL MATTERS
In 1998,As previously reported, we settled litigation filed against various meat suppliers seeking
reimbursement for all damages, costs and expenses incurredhave reached a settlement in connection
with food-borne illness attributed to hamburgers served at JACK IN THE BOX
restaurants in 1993. In the settlement we received approximately $58.5
million, of which a net of approximately $45.8 million was realized after
litigation costs and before income taxes (the "Litigation Settlement"). The
net Litigation Settlement is reflected in other revenues in 1998.
On February 2, 1995, an action by Concetta Jorgensen was filed against us in
the U.S. District Court in San Francisco, California alleging that restrooms
at a JACK IN THE BOX restaurant failed to comply with laws1995 regarding disabled persons and seeking damages in unspecified amounts, punitive
damages, injunctive relief, attorneys' fees and prejudgment interest. In an
amended complaint, damages were also sought on behalf of all physically
disabled persons who were allegedly denied access to restrooms at the
restaurant. In February 1997, the Court ordered that the action for
injunctive relief proceed as a nationwide class action on behalf of all
persons in the United States with mobility disabilities. We have reached
agreement on settlement terms both as to the individual plaintiff Concetta
Jorgensen and the claims for injunctive relief, and the settlement agreement
has been approved by the U.S. District Court. The settlement requires us to
make access improvements at Company-operated restaurantsalleged failure to comply with the standards set forth in the ADA Access Guidelines.Americans with
Disabilities Act ("ADA"). The settlement requires compliance with ADA
Access Guidelines at Company-operated restaurants by October 2005. We have begun to
makeare
in the process of making modifications to our restaurants to improve accessibility and
anticipate investing an estimated $24at our
restaurants. We currently expect to spend approximately $10 million in capital improvementsover
the next four years in connection with these modifications including approximately $11 million
spent through October 1, 2000. Similar claims have been made against
JACK IN THE BOX franchiseesin addition to
amounts previously invested.
On April 18, 2001, an action was filed by Robert Bellmore and us relatingJeffrey
Fairbairn, individually and on behalf of all others similarly situated, in
the Superior Court of the State of California, San Diego County, seeking
class action status and alleging violations of California wage and hour
laws. The complaint alleges that salaried restaurant management personnel
in California were improperly classified as exempt from California overtime
laws, thereby depriving them of overtime pay. The complaint seeks damages
in an unspecified amount, penalties, injunctive relief, prejudgment
interest, costs and attorneys' fees. We believe our employee
classifications are appropriate and plan to franchised locations which
may notvigorously defend this action.
A motion for class certification is scheduled to be in compliance with the ADA. A settlement agreementheard on May 3, 2002
and a trial date has been reached which providesset for injunctive relief requiring franchisees to bring
their franchised restaurants into compliance with the ADA, and requiring
payment by us of monitoring expenses to ensure compliance and attorney's
fees.January 17, 2003.
We are also subject to normal and routine litigation.litigation in the ordinary course
of business. The amount of liability from the claims and actions against us
cannot be determined with certainty, but in theour opinion of management, the ultimate
liability from all pending legal proceedings, asserted legal claims and
known potential legal claims which are probable of assertion should not
materially affect our results of operations and liquidity.
F-20
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
10. CONTINGENCIES AND LEGAL MATTERS (continued)
We have sixthree wholly-owned subsidiaries, consisting of CP Distribution Co., CP
Wholesale Co., Jack in the Box, Inc. (an inactive New Jersey corporation),
Foodmaker
International Franchising Inc. (collectively, the(the "Subsidiary Guarantors"Guarantor") and two other
non-guarantor subsidiaries (collectively, the "Non-Guarantor
Subsidiaries"). The Subsidiary Guarantors comprise all of the
direct and indirect subsidiaries of the Company (other than the
Non-Guarantor Subsidiaries which conduct no material
operations, have no significant assets on a consolidated basis and account
for only an insignificant share of our consolidated revenues). Each of therevenues. The
Subsidiary Guarantors' guaranteesGuarantor's guaranty of our $125 million senior subordinated
notes is full unconditional and joint and several.unconditional. The Subsidiary Guarantors haveGuarantor has no
significant operations or any significant assets or liabilities on a
consolidated basis, other than
guaranteesthe guaranty of indebtedness of the Company, and therefore, no separate
financial statements of the Subsidiary GuarantorsGuarantor are presented because management has determined that they
are not material to investors.
F-21F-20
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
11. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
September 30, October 1,
October 3,2001 2000
1999
---------------------- ----------
Accounts receivable:
Trade........................................Trade...................................... $ 7,163 $ 5,871
$ 7,989
Construction advances........................ 4,857 2,835
Notes........................................ 455 67
Other........................................ 3,579 2,929advances...................... 8,426 5,857
Other...................................... 6,808 3,034
Allowances for doubtful accounts.............accounts........... (581) (1,095) (1,829)
---------- ----------
$ 13,66721,816 $ 11,99113,667
========== ==========
Other Assets:assets:
Trading area rights, net of amortization
of $37,330 and $33,183, and $29,057, respectively.......respectively.... $ 68,825 $ 71,565 $ 73,033
Lease acquisition costs, net of amortization
of $26,088 and $24,625, respectively....... 13,746 15,352
Other, net of amortization
of $16,071$46,058 and $14,681, respectively....... 42,750 40,741$42,159, respectively.... 56,795 56,496
---------- ----------
$ 128,061125,620 $ 129,126128,061
========== ==========
Accrued liabilities:
Payroll and related taxes....................taxes.................. $ 47,84246,058 $ 43,06647,842
Sales and property taxes.....................taxes................... 17,970 15,364
17,978
Insurance....................................Insurance.................................. 27,771 27,696
28,548
Advertising..................................Advertising................................ 13,228 11,419
15,517
Capital improvements.........................improvements....................... 15,898 13,142 14,753
Interest..................................... 6,864 7,092
Income tax liabilities.......................liabilities..................... 13,181 5,887
30,767
Other........................................ 25,142 25,430Other...................................... 35,522 32,006
---------- ----------
$ 153,356169,628 $ 183,151153,356
========== ==========
F-22F-21
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(continued)
12. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
16 weeks 12 weeks ended 13 weeks
ended --------------------- ended
Jan. 17, Apr. 11, July 4, Oct. 3,
Fiscal Year 1999 1999 1999 1999 1999
--------------------------- -------- -------- -------- --------
Revenues................... $407,134 $321,973 $342,448 $385,344
Gross profit............... 78,873 81,047 71,495 82,489
Net earnings............... 15,751 24,987 17,377 18,343The following fiscal year 2001 quarterly results of operations reflect the
adoption of SAB 101 as described in Note 1:
16 weeks 12 weeks ended
ended ----------------------------------
Jan. 21, Apr. 15, July 8, Sept. 30,
Fiscal Year 2001 2001 2001 2001 2001
------------------------------------------ --------- --------- -------- ---------
Revenues.................................. $543,223 $413,219 $434,633 $442,501
Gross profit.............................. 109,998 77,394 84,750 84,386
Net earnings before cumulative
effect of accounting change............. 25,580 16,771 21,034 20,675
Net earnings.............................. 23,721 16,771 21,034 20,675
Net earnings per share before cumulative
effect of accounting change:
Basic................................. .67 .43 .54 .53
Diluted............................... .65 .42 .53 .52
Net earnings per share:
Basic................................. .62 .43 .54 .53
Diluted............................... .60 .42 .53 .52
Although the impact of adopting SAB 101 on full fiscal year operating
results was not significant, the results for each of the respective
quarters presented above reflect the following SAB 101 adjustments.
Revenues and gross profit increased (decreased) $2,481, $(2,353), $(1,440)
and $1,259. Net earnings per share:
Basic.................. .41 .66 .45 .48
Diluted................ .40 .64 .44 .47
16 weeks 12 weeks ended
ended ----------------------------------
Jan. 23, Apr. 16, July 9, Oct. 1,
Fiscal Year 2000 2000 2000 2000 2000
--------------------------- -------- -------- -------- --------
Revenues................... $476,806 $370,495 $390,311 $395,700
Gross profit............... 94,110 74,243 82,150 80,885
Net earnings............... 20,392 16,085 20,808 42,979before cumulative effect of accounting change
increased (decreased) $1,541, $(1,460), $(927) and $812. Net earnings
increased (decreased) $622, $(2,353), $(1,440) and $1,259. Basic and
diluted net earnings per share:
Basic.................. .53 .42 .54 1.12
Diluted................share before cumulative effect of accounting
change increased (decreased) $.04, $(.04), $(.02) and $.02. Basic and
diluted net earnings per share increased (decreased) $(.01), $(.04), $(.02)
and $.02.
Since SAB 101 was adopted as of the beginning of fiscal year 2001, the
following fiscal year 2000 quarterly results of operations have not been
adjusted:
16 weeks 12 weeks ended
ended ---------------------------------
Jan. 23, Apr. 16, July 9, Oct. 1,
Fiscal Year 2000 2000 2000 2000 2000
------------------------------------------ --------- --------- -------- --------
Revenues.................................. $476,806 $370,495 $390,311 $395,700
Gross profit.............................. 94,133 74,280 82,170 80,972
Net earnings.............................. 20,392 16,085 20,808 42,979
Net earnings per share:
Basic................................... .53 .42 .54 1.12
Diluted................................. .52 .41 .53 1.09
F-23
EX-23.1
2
0002.txt
INDEPENDENT AUDITOR'S CONSENT
Independent Auditors' Consent
The Board of Directors
Jack in the Box Inc.:
We consent to incorporation by reference in the registration statement Nos.
33-67450, 33-54602, 33-51490, 333-85669 and 333-26781 on Form S-8 of
Jack in the Box Inc. of our report dated November 6, 2000, relating to the
consolidated balance sheets of Jack in the Box Inc. and subsidiaries as of
October 1, 2000 and October 3, 1999, and the related consolidated statements of
earnings, cash flows and stockholders' equity for the fifty-two weeks ended
October 1, 2000, the fifty-three weeks ended October 3, 1999 and the fifty-two
weeks ended September 27, 1998, which report appears in the October 1, 2000
annual report on Form 10-K of Jack in the Box Inc. and subsidiaries, and to the
reference to our firm under the heading "Selected Financial Data" in Item 6 of
the referenced Form 10-K.
San Diego, California
December 13, 2000
F-22