SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 9, 2000
------------January 21, 2001
----------------
Commission file no. 1-9390
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JACK IN THE BOX INC.
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 5-269870895-2698708
- ----------------------------------------------------------------------------------------------------------------------- --------------------------------------
(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
-----------------------------
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
--- ---
Number of shares of common stock, $.01 par value, outstanding as of the close of
business August 15, 2000February 26, 2001 - 38,324,861.38,652,684.
1
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
July 9,January 21, October 3,1,
2001 2000 1999
- --------------------------------------------------- --------------- ------------ -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents......................equivalents....................... $ 7,2685,277 $ 10,9256,836
Accounts receivable, net....................... 10,665 9,156
Inventories.................................... 25,303 20,159net........................ 13,373 13,667
Inventories..................................... 28,012 25,722
Prepaid expenses............................... 15,121 15,387expenses................................ 14,782 19,329
Assets held for sale........................... 52,326 41,607
----------sale and leaseback.............. 32,948 33,855
----------- ----------
Total current assets......................... 110,683 97,234
---------- ----------
Trading area rights............................... 72,413 73,033
---------- ----------
Lease acquisition costs........................... 14,038 15,352
---------- ----------
Other assets...................................... 42,713 40,741
----------assets.......................... 94,392 99,409
----------- ----------
Property and equipment, at cost................... 923,950 858,685cost.................... 1,000,576 967,832
Accumulated depreciation and amortization...... (280,502) (251,401)amortization....... (302,274) (288,474)
----------- ----------
Property and equipment, net................... 698,302 679,358
----------- ----------
643,448 607,284Trading area rights, net........................... 70,731 71,565
Lease acquisition costs, net....................... 13,273 13,746
Other assets, net.................................. 43,448 42,750
----------- ----------
----------
TOTAL........................................TOTAL......................................... $ 883,295920,146 $ 833,644
==========906,828
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...........debt............ $ 1,9832,097 $ 1,6952,034
Accounts payable............................... 33,530 44,180payable................................ 43,952 53,082
Accrued expenses................................ 184,390 183,151
----------150,330 153,356
----------- ----------
Total current liabilities.................... 219,903 229,026
----------liabilities..................... 196,379 208,472
----------- ----------
Deferred income taxes............................. 8,955 8,055
---------- ----------taxes.............................. 12,922 12,468
Long-term debt, net of current maturities......... 299,918 303,456
---------- ----------maturities.......... 279,048 282,568
Other long-term liabilities....................... 84,078 75,270
---------- ----------liabilities........................ 89,700 86,968
Stockholders' equity:
Common stock................................... 414 411stock.................................... 417 415
Capital in excess of par value................. 291,449 290,336value.................. 296,583 294,380
Retained earnings (deficit).................... 18,838 (38,447)earnings............................... 85,856 61,817
Treasury stock.................................stock.................................. (40,759) (40,260)
(34,463)
--------------------- ----------
Total stockholders' equity................... 270,441 217,837equity.................... 342,097 316,352
----------- ----------
----------
TOTAL........................................TOTAL......................................... $ 883,295920,146 $ 833,644
==========906,828
=========== ==========
See accompanying notes to consolidated financial statements.
2
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Twelve Weeks Ended Forty Weeks Ended
-------------------------------- ---------------------------
July 9, July 4, July 9, July 4,
2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------
Revenues:
Restaurant sales.............................. $ 364,314 $ 323,727 $ 1,159,989 $ 1,011,833
Distribution and other sales.................. 14,599 9,175 43,508 28,365
Franchise rents and royalties................. 9,740 9,086 31,684 29,686
Other......................................... 1,658 460 2,431 1,671
--------- --------- ----------- -----------
390,311 342,448 1,237,612 1,071,555
--------- --------- ----------- -----------
Costs and expenses:
Costs of revenues:
Restaurant costs of sales.................. 111,638 100,133 359,702 320,906
Restaurant operating costs................. 177,599 156,779 569,221 473,372
Costs of distribution and other sales...... 14,318 9,038 42,738 27,919
Franchised restaurant costs................ 4,606 5,003 15,448 17,943
Selling, general and administrative........... 43,009 37,574 139,094 117,385
Interest expense.............................. 6,133 6,344 20,424 21,815
--------- --------- ----------- -----------
357,303 314,871 1,146,627 979,340
--------- --------- ----------- -----------
Earnings before income taxes..................... 33,008 27,577 90,985 92,215
Income taxes..................................... 12,200 10,200 33,700 34,100
--------- --------- ----------- -----------
Net earnings..................................... $ 20,808 $ 17,377 $ 57,285 $ 58,115
========= ========= =========== ===========
Net earnings per share:
Basic......................................... $ .54 $ .45 $ 1.50 $ 1.53
Diluted....................................... $ .53 $ .44 $ 1.46 $ 1.48
Weighted average shares outstanding:
Basic......................................... 38,269 38,209 38,249 38,104
Diluted....................................... 39,371 39,446 39,336 39,229
Sixteen Weeks Ended
---------------------------
January 21, January 23,
2001 2000
- -------------------------------------------------- ------------ -----------
Revenues:
Restaurant sales................................ $ 506,537 $ 448,226
Distribution and other sales.................... 19,292 15,528
Franchise rents and royalties................... 13,362 12,640
Other........................................... 1,551 412
----------- ----------
540,742 476,806
----------- ----------
Costs and expenses:
Costs of revenues:
Restaurant costs of sales.................... 156,167 139,988
Restaurant operating costs................... 252,053 221,234
Costs of distribution and other sales........ 18,800 15,332
Franchised restaurant costs.................. 6,205 6,142
Selling, general and administrative............. 60,770 53,533
Interest expense................................ 8,008 8,285
----------- ----------
502,003 444,514
----------- ----------
Earnings before income taxes....................... 38,739 32,292
Income taxes....................................... 14,700 11,900
----------- ----------
Net earnings....................................... $ 24,039 $ 20,392
=========== ==========
Net earnings per share:
Basic........................................... $ .63 $ .53
Diluted......................................... $ .61 $ .52
Weighted-average shares outstanding:
Basic........................................... 38,429 38,256
Diluted......................................... 39,506 39,395
See accompanying notes to consolidated financial statements.
3
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
FortySixteen Weeks Ended
------------------------
July 9, July 4,---------------------------
January 21, January 23,
2001 2000
1999
- ----------------------------------------------------------------------------------------------------------------------------------------------- -----------
Cash flows from operations:
Net earnings........................................earnings................................... $ 57,28524,039 $ 58,11520,392
Non-cash items included above:
Depreciation and amortization.................... 44,427 35,491amortization............... 19,098 16,615
Deferred finance cost amortization.......... 639 637
Deferred income taxes............................ 900 1,800taxes....................... 454 300
Decrease (increase) in receivables.................. (1,509) 3,369receivables........................ 294 3,334
Increase in inventories............................. (5,144) (2,563)inventories........................ (2,290) (2,621)
Decrease (increase) in prepaid expenses............. 266 (4,737)expenses................... 4,547 4,033
Decrease in accounts payable........................ (10,650) (17,384)payable................... (9,130) (16,441)
Increase (decrease) in other liabilities....................... 9,807 12,728
-------- --------liabilities....... 828 (20,347)
----------- ----------
Cash flows provided by operations................ 95,382 86,819
-------- --------operations........... 38,479 5,902
----------- ----------
Cash flows from investing activities:
Additions to property and equipment................. (77,156) (81,939)equipment............ (38,882) (24,492)
Dispositions of property and equipment.............. 3,286 4,776equipment......... 1,773 1,096
Increase in trading area rights..................... (2,541) (1,910)rights................ (453) (1,060)
Increase in other assets............................ (3,665) (2,665)
Increaseassets....................... (1,507) (1,738)
Decrease (increase) in assets held
for sale.................... (10,719) (2,777)
--------- --------sale and leaseback........................ 907 (5,231)
----------- ----------
Cash flows used in investing activities.......... (90,795) (84,515)
--------- --------activities..... (38,162) (31,425)
----------- ----------
Cash flows from financing activities:
Borrowings under revolving bank loans............... 338,000 256,500loans.......... 106,500 158,000
Principal repayments under revolving
bank loans..... (341,000) (267,000)loans................................... (109,500) (134,000)
Proceeds from issuance of long-term debt............debt....... - 825 3,375
Principal payments on long-term debt,
including current maturities............................... (1,385) (2,308)maturities................ (582) (508)
Repurchase of common stock.......................... (5,797) -stock..................... (499) (2,436)
Proceeds from issuance of common stock.............. 1,116 2,407
--------- --------stock......... 2,205 197
----------- ----------
Cash flows used inprovided by (used in)
financing activities.......... (8,241) (7,026)
--------- --------activities...................... (1,876) 22,078
----------- ----------
Net decrease in cash and cash equivalents...............equivalents.......... $ (3,654)(1,559) $ (4,722)
========= ========(3,445)
=========== ==========
See accompanying notes to consolidated financial statements.
4
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements of
Jack in the Box Inc. (the "Company") and its subsidiaries do not include
all of the information and footnotes required by accounting principles
generally accepted accounting principlesin the United States of America for complete financial
statements. In theour opinion, of
management, all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation of
financial condition and results of operations for the interim periods have
been included. Operating results for any interim period are not necessarily
indicative of the results for any other interim period or for the full
year. The Company reportsWe report results quarterly with the first quarter having 16 weeks
and each remaining quarter having 12 weeks. Certain financial statement
reclassifications have been made in the prior year to conform to the
current year presentation. These financial statements should be read in
conjunction with the 1999fiscal year 2000 financial statements.
2. We use interest rate derivative instruments to manage our exposure to
variability in interest rates related to our bank credit facility, foreign
currency exchange derivatives to manage our exposure to rising beef prices
and commodity derivatives to manage our exposure to commodity price
fluctuations. We do not speculate using derivative instruments and purchase
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 intended use and resulting designation of the derivative. For
derivatives designated as hedges, changes in the fair value are either
offset against the change in fair value of the assets or liabilities
through earnings or recognized in 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 interest rate swap,
foreign currency exchange and commodity derivatives 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 foreign currency exchange and commodity derivatives are
included in costs of goods sold and the fair value of our interest rate
swap is included in interest expense in the accompanying unaudited
consolidated statement of earnings for the quarter ended January 21, 2001.
5
3. The 2001 income tax provisions reflectprovision reflects the projected annual tax rate of 38%
of earnings before income taxes. The income tax provision for the 16 weeks
ended January 23, 2000 was 37% of earnings before income taxes and was
subsequently adjusted in 2000 and the actual taxfourth quarter of last year to the effective
annual rate of 37%18% of pretax earnings, primarily due to a $22.9 million
income tax benefit recognized as a result of the favorable settlement with
the U.S. Internal Revenue Service of a tax case related to the disposition
in 1999.November 1995 of our interest in Family Restaurants, Inc. The favorable
income tax rates result from the
Company'sour ability to realize previously unrecognized
tax benefits. The Company cannot determine with certainty the 2000actual 2001 annual tax rate cannot be determined until
the end of the fiscal year; thus the rate could differ from our current
expectations.
3. Contingent Liabilities
On February 2, 1995, an action by Concetta Jorgensen was filed against the
Company in the U.S. District Court in San Francisco, California alleging
that restrooms at a Jack in the Box restaurant failed to comply with laws
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. The Company
has 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 the Company to make access improvements at
Company-operated restaurants to comply with the standards set forth in the
Americans with Disabilities Act ("ADA") Access Guidelines. The settlement
requires compliance at Company-operated restaurants by October 2005. The
Company has begun to make modifications to its restaurants to improve
accessibility and anticipates investing an estimated $24 million in capital
improvements in connection with these modifications, including
approximately $11 million spent through July 9, 2000. Similar claims have
been made against Jack in the Box franchisees and the Company relating to
franchised locations which may not be in compliance with the ADA. A
settlement agreement has been reached which provides for injunctive relief
requiring franchisees to bring their franchised restaurants into compliance
with the ADA and requiring payment by the Company of monitoring expenses to
ensure compliance and attorney's fees.
The Company is also4. We are subject to normal and routine litigation. The amount of liability
from the claims and actions against the Companyus cannot be determined with certainty,
but in the 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 theour results of
operations and liquidity of the Company.
5liquidity.
6
JACK IN THE BOX INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All comparisons under this heading between fiscal years2001 and 2000 and 1999 refer to the
12-week and 40-week16-week periods ended July 9,January 21, 2001 and January 23, 2000, and July 4, 1999, respectively,
unless otherwise indicated.
RestaurantCompany-operated restaurant sales increased $40.6$58.3 million, and $148.2 million, respectively,or 13.0%, to
$364.3 million and $1,160.0$506.5 million in 20002001 from $323.7 million and $1,011.8$448.2 million in 1999,2000, reflecting increases in both
the number of Company-operated restaurants and in per store average ("PSA")
sales. The average number of Company-operated restaurants for the 40-week period increased 11.0%10.1% to
1,2281,325 in 20002001 from 1,1061,203 restaurants in 1999.2000. PSA sales for comparable
Company-operated restaurants, those open more than one year, grew 2.6% and 3.9%, respectively,4.3% in the 12-week and 40-week periods of 20002001
compared with the same periodsperiod in 1999.
Sales2000. PSA sales growth, compared to a year ago,
resulted from increases in the average transaction amounts of 2.3%3.4% and 2.0% in the respective 2000 periods and the remainder from higher average
number of transactions. Management believestransactions of .9%. We believe that the sales growth is attributabledue to
effective advertising and strategic initiatives, including the
Assemble-To-Order program in which sandwiches are made when customers order
them, new menu boards that showcase combo mealsour ongoing guest
focus on food quality, service and an order confirmation system
at drive-thru windows.promotions.
Distribution and other sales increased $5.4$3.8 million to $19.3 million in
2001 from $15.5 million in 2000. Distribution sales of food and $15.1supplies to
franchisees increased $3.0 million respectively, to $14.6$11.5 million and $43.5in 2001 from $8.5 million in
2000, from $9.2 million and
$28.4 million in 1999, primarily due to an increaseincreases in otherthe number of restaurants serviced by our
distribution division and PSA sales growth at fuel and
convenience stores to $7.0 million and $20.8 million in 2000franchise restaurants. Other sales
from $2.0 million
and $5.6 million in 1999. At July 9, 2000, the Company had seven fuel and convenience store operations increased $.8 million to $7.8 million
in 2001 from $7.0 million in 2000 as the number of locations we operate grew to
eight at the end of the quarter compared with twoseven a year ago.
Franchise rents and royalties increased $.6$.8 million and $2.0to $13.4 million respectively, to $9.7 million and $31.7in
2001 from $12.6 million in 2000, from $9.1 million and
$29.7 million in 1999, which represent slightly over 10.5%or 10.8% of franchise restaurant sales in 20002001
and a slightly lower percentage10.5% in 1999.2000. Franchise restaurant sales grew to $91.1$124.3 million and $301.1in 2001
from $120.6 million respectively, in 2000, from $88.3 million and $286.2 million in 1999, benefiting from the Company'sour strategic initiatives described above.initiatives.
Franchise rents and royalties grew as a percentage of sales in 2001 primarily
due to increases in rents at certain franchised restaurants.
Other revenues, primarily franchise fees andtypically interest income from investments and notes
receivable, increased to $1.7 million and $2.4 million,
respectively, in 2000 from $.5 million and $1.7$1.6 million in 1999. The increase is
principally due to $1.22001 from $.4 million received in 2000. In 2001,
other revenues also included franchising gains of $1.0 million which result from
the quarter for additional franchise
fees from refranchising 13 restaurants and fees that franchisees paid to extend
the term of their franchises for three years.
Restaurant costs of sales and operating costs increased with sales growth
and the additionconversion of Company-operated restaurants.restaurants to franchises.
Restaurant costs of sales, which include food and packaging costs,
increased with sales growth and the addition of Company-operated restaurants to
$111.6 million and $359.7$156.2 million in 20002001 from $100.1 million and $320.9$140.0 million in 1999.2000. As a percent of restaurant
sales, costs of sales declined to 30.6% and 31.0%, respectively,30.8% in 20002001 from 30.9% and 31.7%31.2% in 1999,2000, primarily
due to lower ingredient costs, especially dairy, shorteningbeef, cheese and bakery, partially offset by higher beef and
pork costs.poultry.
Restaurant operating costs also increased with sales growth and additional
restaurants to $177.6$252.1 million, and $569.2or 49.8% of sales, in 2001 from $221.2 million,
respectively,or 49.4% of sales, in 2000 from $156.8 million and $491.4 million2000. The higher percentage of costs in 1999, excluding
an unusual adjustment. In the second quarter of 1999, the Company reduced
accrued expenses and restaurant operating costs by $18.0 million, primarily due
to a change in estimates resulting from improvements to its loss prevention and
risk management programs, which have been more successful than anticipated. As a
percent of restaurant sales, operating costs increased to 48.7% and 49.1%,
respectively, in 2000 from 48.4% and 48.6% in 1999 excluding the unusual
adjustment, reflecting cost increases related to initiatives described above
which are designed to improve the overall guest experience and slightly2001 reflects
higher percentages of utilities, occupancy and labor-related expenses.
7
Costs of distribution and other sales increased to $14.3 million and $42.7
million, respectively, in 2000 from $9.0 million and $27.9$18.8 million in 1999,2001
from $15.3 million in 2000, reflecting an increase in the related sales. As a
percent of distribution and other sales, these costs were 98.1% and 98.2%, respectively,declined to 97.4% in 20002001
compared to 98.5% and 98.4%98.7% a year ago.
6
Franchisedago, reflecting a slightly improved margin from our
fuel and convenience store operations.
Franchise restaurant costs, which consist principally of rents and
depreciation on properties leased to franchisees and other miscellaneous costs,
declinedincreased slightly to $4.6 million and $15.4 million, respectively, in 2000 from $5.0
million and $17.9$6.2 million in 1999, primarily due to lower franchise-related
legal expenses.2001 from $6.1 million in 2000.
Selling, general and administrative costs increased to $43.0 million and
$139.1 million, respectively, in 2000 from $37.6 million and $117.4$60.8 million in
1999.2001 from $53.5 million in 2000. Advertising and promotion costs increased $3.0
million to $18.6$25.8 million and $59.1in 2001 from $22.8 million respectively, in 2000, from $16.6 million and $52.0 million in 1999,
slightly over 5%approximately 5.1%
of restaurant sales in all periods.both quarters. General, administrative and other costs
were 6.3% andapproximately 6.5% of revenues, respectively, in 2000 compared to
6.1% of revenues in both periods of 1999, primarily due to a decision to
increase staffing levels in the field to accommodate the growth program and
other costs to support restaurant and revenue growth.quarters.
Interest expense declined $.2 million and $1.4 million, respectively, to $6.1 million and $20.4$8.0 million in 20002001 from $6.3 million and $21.8$8.3 million in 1999,2000
reflecting a reduction in total average debt compared to a year ago.outstanding.
The 2001 income tax provisions reflectprovision reflects the projected annual tax rate of 38%
of earnings before income taxes. The income tax provision for the 16 weeks ended
January 23, 2000 was 37% of earnings before income taxes and was subsequently
adjusted in 2000 and the actual taxfourth quarter of last year to the effective annual rate of 37%18%
of pretax earnings, primarily due to a $22.9 million income tax benefit
recognized as a result of the favorable settlement with the U.S. Internal
Revenue Service of a tax case related to the disposition in 1999.November 1995 of our
interest in Family Restaurants, Inc. The favorable income tax rates result from
the Company'sour ability to realize previously unrecognized tax benefits. The Company cannot
determine with certainty the 2000actual 2001
annual tax rate cannot be determined until the end of the fiscal year; thus the
rate could differ from our current expectations.
In 2000, netNet earnings were $20.8increased $3.6 million, or $.53$.09 per diluted share, to $24.0
million, or $.61 per diluted share, in the
12-week period and $57.32001 from $20.4 million, or $1.46$.52 per
diluted share, in the 40-week
period. In 1999, net earnings were $17.4 million, or $.44 per diluted share, in
the 12-week period and $58.1 million, or $1.48 per diluted share, in the 40-week
period. Excluding the unusual adjustment2000. Earnings improved nearly 18%, principally due to restaurant operating costs and
related tax effects, net earnings in 1999 were $46.8 million, or $1.19 per
diluted share, in the 40-week period. Net earnings increased 19.7% and 22.5%,
respectively, in 2000 compared to the same periods in 1999, excluding this
unusual item, reflecting the
impact of sales growth and improved margins.growth.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased slightly$1.5 million to $7.3$5.3 million at
July 9,
2000January 21, 2001 from $10.9$6.8 million at the beginning of the fiscal year. The Company expectsWe
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.
The Company'sOur working capital deficit decreased $22.6$7.1 million to $109.2$102.0 million at
July 9, 2000January 21, 2001 from $131.8$109.1 million at October 3, 1999,1, 2000, primarily due to
an increase in assets held for sale and a
decline in 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. The CompanyWe also
continually investsinvest in itsour 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.
In 1998, the Company entered into aOur revolving bank credit agreement which provides for a credit facility expiring
in 2003 of up to $175 million, including letters of credit of up to $25 million.
At July 9, 2000, the CompanyJanuary 21, 2001, we had borrowings of $83.0$63 million and approximately $83.0$100.7
million of availability under the agreement. Total debt outstanding decreased
slightly to $301.9$281.1 million at July 9, 2000January 1, 2001 from $305.2$284.6 million at the
beginning of the fiscal year.
The Company is8
We are subject to a number of covenants under itsour 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. TheIn September 1999, the collateral
securing the bank credit facility is secured by a first priority security interest in certain assetswas released. However, the real and propertiespersonal
property previously held as collateral for the bank credit facility cannot be
used to secure other indebtedness of the Company. In addition, certain of the Company'sour
real estate and equipmentpersonal property secure other indebtedness.
7
The Company requiresWe 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. The Company'sOur 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, the Company expectswe expect that cash flows
from operations, combined with other financing alternatives available, will be
sufficient to meet debt service, capital expenditure and working capital
requirements.
The Company is subject to normal and routine litigation. Although the amount of liability from claims and actions against the Companyus cannot
be determined with certainty, management believeswe believe the ultimate liability of such claims
and actions should not materially affect theour results of operations and
liquidity of the Company.liquidity.
On December 3, 1999, the Company'sour Board of Directors authorized the purchase of the Company'sour
outstanding common stock in the open market for an aggregate amount not to
exceed $10 million. At July 9, 2000, the CompanyThrough January 21, 2001, we had acquired 305,800330,800 shares underin
connection with this authorization for an aggregate cost of $5.8$6.3 million.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company'sOur primary exposure relating to financial instruments is to changes in
interest rates. The Company usesWe use interest rate swap agreements to reduce exposure to
interest rate fluctuations. At July 9, 2000, the CompanyJanuary 21, 2001, we had a $25 million notional
amount interest rate swap agreement expiring in June 2001. This agreement
effectively converts a portion of the Company'sour variable rate bank debt to fixed rate debt
and has a pay rate of 6.38%6.4%.
The Company'sOur 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 July 9, 2000, the Company'sJanuary 21, 2001, our applicable
margin was set at .625%. During the thirdfirst quarter of fiscal year 2000,2001, the
average interest rate on the credit facility was 7.0%.7.2%, including the impact of
the interest rate swap.
At July 9, 2000,January 21, 2001, a hypothetical one percentage point increase in
short-term interest rates would result in a reduction of $.6$.4 million in annual
pre-tax earnings. The estimated reduction is based on holding the unhedged
portion of bank debt at its July 9, 2000January 21, 2001 level.
At July 9, 2000, the CompanyJanuary 21, 2001, we had no other material financial instruments subject
to significant market exposure. 8However, from time to time we enter into
commodity and foreign currency contracts which could expose us to market risk.
9
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
including, but not limited to, the Company'sour expectations regarding itsour effective tax
rate, itsour continuing investment in new restaurants and refurbishment of existing
facilities and sources of liquidity. Forward-looking statements are generally
identifiable by the use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" and similar expressions. Forward-looking
statements are subject to known and unknown risks and uncertainties which may
cause actual results to differ materially from expectations. The following is a
discussion of some of those factors. The
Company'sOur tax provision is highly sensitive to
expected earnings and as expectations change the Company'sour income tax provision may vary
more significantly from quarter to quarter and year to year than companies which
have been continuously profitable. However, the Company'sour effective tax rates are expected
to increase in the future. There can be no assurances that growth objectives in
the regional domestic markets in which the Company operateswe operate will be met or that capital
will be available for refurbishment of existing facilities. Multi-unit food
service businessesbusiness such as JACK IN THE BOX restaurants can be materially and
adversely affected by publicity about allegations of poor food quality, foreign
objects in food, illness, injury or other health concerns with respect to the
nutritional value of certain foods. We have experienced an increase in utility
costs due to deregulations. We have also experienced power outages in certain
areas and are uncertain if they will continue or spread to other areas. The
deregulation of utilities and the continuation of power shortages or
interruptions may adversely affect the profitability of businesses, including the Company'sour business in the
areas in which they occur. Additional risk factors associated with the Company'sour business
are detailed in the Company'sour most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
NEW ACCOUNTING STANDARDS
In June 1998,December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101 ("SAB101"), Revenue Recognition in Financial Accounting Standards Board issued StatementStatements,
summarizing their views for applying generally accepted accounting principles to
revenue recognition in financial statements. Although we have determined that
the adoption of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting andSAB101 should not have a material effect on our annual results
of operations, it will impact the reporting standards for derivative instruments and hedging activities. SFAS 133 requires
that an entity recognize all derivatives as either assets or liabilitiesof our franchise percentage rent
between quarters within the year. As permitted by SAB101, we plan to adopt the
new standard in the statement of financial position and measure those instruments at fair value.
This Statement was amended by SFAS 137 which defers the effective date to all
fiscal quartersfourth quarter of fiscal years beginning after June 15, 2000. SFAS 133, as
amended, is effective foryear 2001 at which time we will
restate the Company's first quarter inearlier quarters within the fiscal year ending
September 30, 2001. Management has not yet addressed the effect of this standard
on the Company's current reporting and disclosures.
9year.
10
PART II - OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of stockholders in the first quarter
ended January 21, 2001. Our annual meeting was held February 23, 2001 at which
the following matters were voted as indicated:
For Withheld
--- --------
1. Legal ProceedingsElection of the following directors to serve
until the next annual meeting of stockholders
and until their successors are elected and
qualified.
Michael E. Alpert.......................... 33,787,304 433,433
Jay W. Brown............................... 33,857,944 362,793
Paul T. Carter............................. 33,989,907 230,830
Charles W. Duddles......................... 34,005,621 215,116
Edward W. Gibbons.......................... 34,004,925 215,812
Alice B. Hayes, Ph.D....................... 34,002,728 218,009
Murray H. Hutchison........................ 34,004,150 216,587
Robert J. Nugent........................... 33,858,662 362,075
L. Robert Payne............................ 33,994,067 226,670
Kenneth R. Williams........................ 34,003,978 216,759
For Against Abstain Not Voted
--- ------- ------- ---------
2. Approval of the Performance
Bonus Plan...................... 32,751,539 657,379 704,583 107,236
3. Ratification of the appointment
of KPMG LLP as independent
accountants..................... 34,063,365 33,982 123,390 - See Note 3 to the Unaudited Consolidated Financial
Statements.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description
------ -----------
10.1 FifthSixth Amendment dated as of May 3,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.
27 Financial Data Schedule (included only with
electronic filing)
(b) Reports on Form 8-K - NoneNone.
11
SIGNATURE
Pursuant to the requirements 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 and in the capacities indicated.
JACK IN THE BOX INC.
By: DARWIN J. WEEKS
-------------------------------------------
Darwin J. Weeks
Vice President, Controller
and Chief Accounting Officer
(Duly Authorized Signatory)
Date: August 21, 2000March 7, 2001