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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 6, 2003
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Commission file no. 1-9390
JACK IN THE BOX INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2698708
- --------------------------------------------------------------------------------
(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
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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
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
----- -----
Number of shares of common stock, $.01 par value, outstanding as of the close of
business August 15, 2003 - 36,025,518.
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1
JACK IN THE BOX INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets...................................... 3
Unaudited Consolidated Statements of Earnings.................... 4
Unaudited Consolidated Statements of Cash Flows.................. 5
Notes to Unaudited Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 17
Item 4. Controls and Procedures .................................... 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 18
Item 6. Exhibits and Reports on Form 8-K............................ 19
Signature........................................................... 21
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
July 6, September 29,
2003 2002
- --------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents..................... $ 10,328 $ 5,620
Accounts receivable, net...................... 31,827 26,176
Inventories................................... 32,404 29,975
Prepaid expenses and other current assets..... 18,985 38,108
Assets held for sale and leaseback............ 26,661 12,626
----------- -----------
Total current assets........................ 120,205 112,505
----------- -----------
Property and equipment, at cost.................. 1,269,476 1,219,487
Accumulated depreciation and amortization..... (412,019) (372,556)
----------- -----------
Property and equipment, net................. 857,457 846,931
----------- -----------
Trading area rights, net......................... - 64,628
Goodwill......................................... 90,218 1,988
Other assets, net................................ 68,598 37,392
----------- -----------
TOTAL....................................... $ 1,136,478 $ 1,063,444
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.......... $ 2,604 $ 106,265
Accounts payable.............................. 42,328 59,212
Accrued expenses.............................. 171,265 167,900
----------- -----------
Total current liabilities................... 216,197 333,377
----------- -----------
Deferred income taxes............................ 41,602 25,861
Long-term debt, net of current maturities........ 300,835 143,364
Other long-term liabilities...................... 106,051 96,727
Stockholders' equity:
Common stock.................................. 432 429
Capital in excess of par value................ 324,968 319,810
Retained earnings............................. 284,315 227,064
Accumulated other comprehensive loss, net..... (8,882) (8,882)
Unearned compensation......................... (4,577) -
Treasury stock................................ (124,463) (74,306)
----------- -----------
Total stockholders' equity.................. 471,793 464,115
----------- -----------
TOTAL....................................... $ 1,136,478 $ 1,063,444
=========== ===========
See accompanying notes to consolidated financial statements.
3
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 6, July 7, July 6, July 7,
2003 2002 2003 2002
- ------------------------------------------------- ----------- ----------- ----------- -----------
Revenues:
Restaurant sales............................... $ 443,990 $ 428,150 $ 1,421,695 $ 1,398,816
Distribution and other sales................... 25,927 19,051 78,351 57,153
Franchise rents and royalties.................. 11,803 9,271 39,799 34,157
Other.......................................... 6,854 4,747 25,411 12,903
----------- ----------- ----------- -----------
488,574 461,219 1,565,256 1,503,029
----------- ----------- ----------- -----------
Costs of revenues:
Restaurant costs of sales...................... 140,129 128,395 436,950 426,093
Restaurant operating costs..................... 230,557 216,756 748,804 713,144
Costs of distribution and other sales.......... 25,277 18,491 76,556 55,630
Franchised restaurant costs.................... 6,157 5,215 19,402 16,979
----------- ----------- ----------- -----------
402,120 368,857 1,281,712 1,211,846
----------- ----------- ----------- -----------
Gross profit..................................... 86,454 92,362 283,544 291,183
Selling, general and administrative.............. 51,629 51,341 174,210 167,020
----------- ----------- ----------- -----------
Earnings from operations......................... 34,825 41,021 109,334 124,163
Interest expense................................. 5,538 5,086 19,598 17,582
----------- ----------- ----------- -----------
Earnings before income taxes..................... 29,287 35,935 89,736 106,581
Income taxes..................................... 9,515 11,733 32,485 37,519
----------- ----------- ----------- -----------
Net earnings..................................... $ 19,772 $ 24,202 $ 57,251 $ 69,062
=========== =========== =========== ===========
Net earnings per share:
Basic.......................................... $ .55 $ .61 $ 1.56 $ 1.75
Diluted........................................ $ .54 $ .60 $ 1.54 $ 1.72
Weighted-average shares outstanding:
Basic.......................................... 36,007 39,513 36,608 39,393
Diluted........................................ 36,559 40,482 37,082 40,232
See accompanying notes to consolidated financial statements.
4
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Forty Weeks Ended
----------------------------
July 6, July 7,
2003 2002
- -------------------------------------------------------------------------------- ----------- -----------
Cash flows from operating activities:
Net earnings.................................................................. $ 57,251 $ 69,062
Non-cash items included in operations:
Depreciation and amortization.............................................. 53,526 53,564
Amortization of unearned compensation ..................................... 367 -
Deferred finance cost amortization......................................... 2,231 1,286
Deferred income taxes, excluding the effect of the Qdoba acquisition....... 12,025 7,567
Tax benefit associated with exercise of stock options......................... - 3,500
Gains on the conversion of Company-operated restaurants....................... (22,149) (10,834)
Changes in assets and liabilities, excluding the effect of the Qdoba
acquisition:
(Increase) decrease in receivables......................................... 1,481 4,892
(Increase) decrease in inventories......................................... (2,278) (1,062)
(Increase) decrease in prepaid expenses and other current assets........... 2,984 (2,064)
Increase (decrease) in accounts payable.................................... (17,054) (8,859)
Increase (decrease) in other liabilities................................... 11,425 (2,077)
----------- -----------
Cash flows provided by operating activities................................ 99,809 114,975
----------- -----------
Cash flows from investing activities:
Additions to property and equipment........................................... (77,109) (90,741)
Purchase of Qdoba, net of cash acquired of $2,856............................. (42,606) -
Dispositions of property and equipment........................................ 19,453 4,392
Proceeds from the conversion of Company-operated restaurants.................. 3,072 6,070
(Increase) decrease in assets held for sale and leaseback..................... (14,035) 10,822
Collections on notes receivable............................................... 12,563 1,737
Other......................................................................... (4,566) (2,068)
----------- -----------
Cash flows used in investing activities.................................... (103,228) (69,788)
----------- -----------
Cash flows from financing activities:
Borrowings under revolving bank loans......................................... 510,500 314,640
Principal repayments under revolving bank loans............................... (538,000) (344,640)
Proceeds from issuance of long-term debt...................................... 150,000 -
Principal payments on long-term debt, including current maturities............ (56,601) (1,782)
Debt issuance and debt repayment costs........................................ (7,832) -
Repurchase of common stock.................................................... (50,157) (19,080)
Proceeds from issuance of common stock........................................ 217 6,042
----------- -----------
Cash flows provided by (used in) financing activities...................... 8,127 (44,820)
----------- -----------
Net increase in cash and cash equivalents....................................... $ 4,708 $ 367
=========== ===========
See accompanying notes to consolidated financial statements.
5
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited consolidated financial statements of Jack in the Box
Inc. (the "Company") and its subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States of America and the
rules and regulations of the Securities and Exchange Commission ("SEC"). In
management's opinion, all 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. We report results quarterly, with the first quarter having 16 weeks,
and each remaining quarter having 12 weeks.
Certain financial statement reclassifications have been made to the prior year
to conform to the current year presentation. These financial statements should
be read in conjunction with the notes to the fiscal year 2002 consolidated
financial statements contained in our Annual Report on Form 10-K filed with the
SEC.
2. STOCK-BASED EMPLOYEE COMPENSATION
Stock awards are accounted for under Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees, using the intrinsic method, whereby
compensation expense is recognized for the excess, if any, of the quoted market
price of the Company's stock at the date of grant over the exercise price.
Our policy is to grant stock options at fair value at the date of grant. Had
compensation expense been recognized for our stock-based compensation plans by
applying the fair value recognition provisions of Statement of Financial
Accounting Standards ("SFAS") 123, Accounting for Stock-Based Compensation, we
would have recorded net earnings as follows (dollars in thousands, except per
share amounts):
Twelve Weeks Ended Forty Weeks Ended
---------------------------- ----------------------------
July 6, July 7, July 6, July 7,
2003 2002 2003 2002
--------------------------------------------- ----------- ----------- ----------- -----------
Net earnings, as reported.................... $ 19,772 $ 24,202 $ 57,251 $ 69,062
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
taxes...................................... 1,031 1,037 3,855 3,779
----------- ------------ ----------- -----------
Pro forma net earnings....................... $ 18,741 $ 23,165 $ 53,396 $ 65,283
=========== ============ =========== ===========
Net earnings per share:
Basic-as reported.......................... $ .55 $ .61 $ 1.56 $ 1.75
Basic-pro forma............................ $ .52 $ .59 $ 1.46 $ 1.66
Diluted-as reported........................ $ .54 $ .60 $ 1.54 $ 1.72
Diluted-pro forma.......................... $ .51 $ .57 $ 1.44 $ 1.62
3. QDOBA ACQUISITION
On January 21, 2003 we acquired Qdoba Restaurant Corporation ("Qdoba"), operator
and franchiser of Qdoba Mexican Grill(R), for approximately $45 million in cash.
The purchase was financed by borrowings under our credit facility. Qdoba
operates in the fast-casual segment of the restaurant industry and, as of the
acquisition date, operated or franchised 85 restaurants in 16 states. This
acquisition is consistent with the Company's long-term strategy to transition
from a regional quick-service restaurant chain to a national restaurant company.
6
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3. QDOBA ACQUISITION (continued)
The following table summarizes the fair values of the assets acquired and
liabilities assumed at the acquisition date. We utilized a third party valuation
expert to assist us in valuing the intangible assets acquired. The amounts
summarized in the table below are in thousands.
Current assets.............................................. $ 3,326
Property and equipment and other............................ 8,186
Intangible assets........................................... 18,000
Goodwill.................................................... 23,617
----------
Total assets acquired..................................... 53,129
Liabilities assumed......................................... 7,667
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Net assets acquired....................................... $ 45,462
==========
Intangible assets include amortizable franchise contracts, which will be
amortized over a period of 26 years. None of the goodwill acquired is deductible
for tax purposes.
The results of Qdoba's operations have been included in the consolidated
financial statements since January 21, 2003. Had the acquisition been completed
as of the beginning of the periods indicated in the table below, the Company
would have reported pro forma revenues, net earnings and basic and diluted net
earnings per share amounts as follows (dollars in thousands, except per share
amounts):
Twelve Weeks
Ended Forty Weeks Ended
----------- ----------------------------
July 7, July 6, July 7,
2002 2003 2002
----------------------------------------------- ----------- ----------------------------
Total revenues.............................. $ 466,773 $ 1,573,062 $ 1,519,554
Net earnings................................ 24,227 57,148 68,237
Net earnings per share - Basic.............. $ .61 $ 1.56 $ 1.73
Net earnings per share - Diluted............ $ .60 $ 1.54 $ 1.70
The pro forma results include interest expense on the Company's credit facility,
which was used to finance the acquisition. The pro forma amounts are not
necessarily indicative of anticipated future results.
4. INTANGIBLE ASSETS
SFAS 141, Business Combinations, requires that all business combinations be
accounted for using the purchase method of accounting and specifies the criteria
to use in determining whether intangible assets identified in purchase
accounting must be recorded separately from goodwill. We determined that our
trading area rights ("TAR"), which represent the amounts allocated under
purchase accounting to reflect the value of operating existing restaurants
within each specific trading area, do not meet the separability criteria of SFAS
141. Therefore, effective September 30, 2002, our trading area rights have been
reclassified to goodwill.
Under SFAS 142, Goodwill and Other Intangible Assets, goodwill and intangible
assets with indefinite lives are no longer amortized but are tested at least
annually for impairment. Separable intangible assets with definite lives will
continue to be amortized over their estimated useful lives. In accordance with
the provisions of SFAS 142, we ceased amortizing goodwill effective September
30, 2002. We also performed the transitional impairment test for goodwill in the
first quarter, which indicated there was no impairment upon our adoption of SFAS
142.
7
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4. INTANGIBLE ASSETS (continued)
Intangible assets consist of the following as of July 6, 2003 (in thousands):
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
------------------------------------------------------------------------------
Amortized intangible assets....... $ 61,069 $ 39,755 $ 21,314
========
Unamortized intangible assets:
Goodwill................................................... $ 90,218
Trademark.................................................. 8,800
--------
$ 99,018
========
The change in the carrying amount of total goodwill during the forty weeks ended
July 6, 2003 was as follows (in thousands):
Balance at September 29, 2002.............................. $ 1,988
Reclassification of trading area rights and other.......... 64,613
Goodwill acquired.......................................... 23,617
--------
Balance at July 6, 2003.................................... $ 90,218
========
Had the provisions of SFAS 142 been adopted prior to September 30, 2002, net
earnings for the twelve weeks ended July 7, 2002 would have increased $632, or
$.02 per basic share and $.01 per diluted share, to $24,834, or $.63 per basic
share and $.61 per diluted share. We reported net earnings for the quarter of
$24,202, or $.61 per basic share and $.60 per diluted share. Net earnings for
the forty weeks ended July 7, 2002 would have increased $2,109, or $.06 per
basic share and $.05 per diluted share, to $71,171, or $1.81 per basic share and
$1.77 per diluted share. We reported net earnings year-to-date of $69,062, or
$1.75 per basic share and $1.72 per diluted share. Adjusted net earnings exclude
goodwill and trading area rights amortization expense, net of taxes.
Total amortization expense related to intangible assets was $.5 million and $1.7
million, respectively, for the quarter and year-to-date periods ended July 6,
2003. The estimated intangibles amortization expense for each fiscal year
through 2007 is $2.3 million.
5. DEBT
Debt Extinguishment. In January 1994, we entered into financing lease
arrangements with two limited partnerships (the "Partnerships"), in which we
sold interests in 76 restaurants for a specified period of time. The acquisition
of the properties, including costs and expenses, was funded through the issuance
of $70 million in 10.3% senior secured notes by a special purpose corporation
acting as agent for the Partnerships. On August 29, 2002, we entered into an
agreement to repurchase the interests in the restaurant properties that had been
encumbered by the financing lease obligations for a consent fee of $1.3 million.
On January 2, 2003, we used borrowings under our credit facility and previous
sinking fund payments to reacquire the interests in the restaurant properties
and retire the high interest rate bearing financing lease obligations.
New Financing. On January 22, 2003, we secured a new senior credit facility
which provides borrowings in the aggregate amount of $350 million and is
comprised of: (i) a $200 million revolving credit facility maturing on January
22, 2006 and (ii) a $150 million term loan maturing on July 22, 2007. This new
credit facility replaces our prior $175 million credit facility, which was due
to expire March 31, 2003.
8
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. INCOME TAXES
The income tax provisions in 2003 and 2002 project annual tax rates of 36.2% and
35.2% of pretax earnings, respectively. The fiscal 2002 income tax provision was
subsequently adjusted to the effective annual rate of 33.9% of pretax earnings.
The lower income tax rates result from the favorable resolutions of
long-standing tax matters in both years. The final 2003 annual tax rate cannot
be determined until the end of the fiscal year; therefore, the actual rate could
differ from our current estimates.
7. STOCKHOLDERS' EQUITY
As part of the Company's long term incentive program, the Company awarded
242,600 shares of restricted stock to certain executives during the year-to-date
period ended July 6, 2003. These restricted stock awards have been recognized as
unearned compensation in stockholders' equity based upon the fair value of the
Company's common stock on the award date. Unearned compensation is amortized to
compensation expense over the estimated vesting period.
Pursuant to our stock repurchase program, as authorized by our Board of
Directors, the Company repurchased 2,566,053 shares of our common stock for
approximately $50.2 million during the year-to-date period ended July 6, 2003.
At the end of the second quarter we had no repurchase availability remaining.
8. AVERAGE SHARES OUTSTANDING
Net earnings per share for each period is based on the weighted-average number
of shares outstanding during the period, determined as follows (in thousands):
Twelve Weeks Ended Forty Weeks Ended
---------------------------- ----------------------------
July 6, July 7, July 6, July 7,
2003 2002 2003 2002
---------------------------------------------------- ----------- ----------- ----------- -----------
Shares outstanding, beginning of fiscal year........ 38,558 39,248 38,558 39,248
Effect of common stock issued....................... 15 455 9 202
Effect of common stock reacquired................... (2,566) (190) (1,959) (57)
----------- ----------- ----------- -----------
Weighted-average shares outstanding - basic......... 36,007 39,513 36,608 39,393
Assumed additional shares issued upon exercise of
stock options, net of shares reacquired at the
average market price.............................. 309 884 280 751
Effect of restricted stock issued................... 243 85 194 88
----------- ----------- ----------- -----------
Weighted-average shares outstanding - diluted....... 36,559 40,482 37,082 40,232
=========== =========== =========== ===========
Diluted weighted-average shares outstanding exclude options to purchase
3,498,064 and 3,571,234 shares, respectively, of common stock during the quarter
and year-to-date periods ended July 6, 2003 and 40,000 and 594,964 shares,
respectively, of common stock during the quarter and year-to-date periods ended
July 7, 2002, because their exercise prices exceeded the average market price of
common stock for the period.
9. COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS
During the quarter ended July 6, 2003, the Company entered into a purchase
agreement to sell 25 company-operated restaurants to an existing franchisee,
subject to certain conditions. Through July 6, 2003 four of the restaurants have
been converted, and the remaining 21 restaurants are expected to be converted
during the fourth quarter of fiscal year 2003 and the first quarter of fiscal
year 2004.
The Company is subject to normal and routine litigation. In the opinion of
management, based in part on the advice of legal counsel, the ultimate liability
from all pending legal proceedings, asserted legal claims and known potential
legal claims should not materially affect our operating results and liquidity.
9
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. SEGMENT REPORTING
Prior to the acquisition of Qdoba, the Company operated its business in a single
segment. Subsequent to the Qdoba acquisition the Company has two operating
segments, Qdoba and JACK IN THE BOX. Based upon certain quantitative thresholds,
only JACK IN THE BOX is considered a reportable segment. Summarized financial
information concerning our reportable segment is shown in the following table
(in thousands):
Twelve Weeks Ended Forty Weeks Ended
---------------------------- ----------------------------
July 6, July 7, July 6, July 7,
2003 2002 2003 2002
----------------------------------------------- ----------- ----------- ----------- -----------
Revenues .................................... $ 481,921 $ 461,219 $ 1,552,513 $ 1,503,029
Earnings from operations..................... 34,515 41,021 108,797 124,163
Interest expense and income taxes are not reported on an operating segment basis
in accordance with the Company's method of internal reporting. A reconciliation
of reportable segment earnings from operations to consolidated earnings from
operations follows (in thousands):
Twelve Weeks Ended Forty Weeks Ended
---------------------------- ----------------------------
July 6, July 7, July 6, July 7,
2003 2002 2003 2002
----------------------------------------------- ----------- ----------- ----------- -----------
Earnings from operations..................... $ 34,515 $ 41,021 $ 108,797 $ 124,163
Qdoba earnings from operations............... 310 - 537 -
----------- ----------- ----------- -----------
Consolidated earnings from operations........ $ 34,825 $ 41,021 $ 109,334 $ 124,163
=========== =========== =========== ===========
11. NON-CASH INVESTING AND FINANCING ACTIVITIES
The statements of cash flows exclude the following non-cash transactions: (i)
the use of sinking fund payments, which were recorded as other current assets as
of September 29, 2002 to retire financing lease obligations during 2003; (ii)
non-cash proceeds from the Company's financing of a portion of the sale of
company-operated restaurants to certain qualified franchisees in both years,
included in accounts receivable; and (iii) equipment capital lease obligations
of $3.5 million incurred in 2003.
12. NEW ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 149 is
generally effective for derivative instruments, including derivative instruments
embedded in certain contracts, entered into or modified after June 30, 2003 and
for hedging relationships designated after June 30, 2003. The adoption of SFAS
149 did not have a material impact on our operating results or financial
condition.
10
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
12. NEW ACCOUNTING PRONOUNCEMENTS (continued)
In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how to classify and measure certain financial
instruments with characteristics of both liabilities and equity. The Statement
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS 150 has not had, and is not
expected to have, a material impact on our operating results or financial
condition.
In May 2003, the Emerging Issues Task Force released Issue 01-8, Determining
Whether an Arrangement Contains a Lease. This Issue requires the reporting of
revenue as rental or leasing income that was previously reported as part of
product sales or services revenue and applies to new or modified arrangements
beginning after May 28, 2003. The adoption of Issue 01-8 did not have a material
impact on our operating results or financial condition.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 2003 and 2002 refer to the
12-week ("quarter") and the 40-week ("year-to-date") periods ended July 6, 2003
and July 7, 2002, respectively, unless otherwise indicated.
The Company completed its acquisition of Qdoba Restaurant Corporation
("Qdoba"), operator and franchiser of Qdoba Mexican Grill(R), on January 21,
2003. Qdoba's operations have been included since the date of acquisition
representing 24 weeks of operations.
Consolidated company-operated restaurant sales were $444.0 million and
$1.42 billion, respectively, in 2003 compared with $428.2 million and $1.40
billion in 2002. The number of JACK IN THE BOX company-operated restaurants
increased 2.7% to 1,534 at the end of the quarter from 1,493 restaurants a year
ago. Sales at JACK IN THE BOX company-operated restaurants open more than one
fiscal year ("same store sales") declined 0.2% and 2.4%, respectively, in 2003
compared with 2002. The upward trend in same store sales in the quarter is
primarily attributable to the introduction of a new line of premium salads
called Jack's Ultimate SaladsTM. Year-to-date sales were negatively impacted by
continued economic weakness in certain key markets, discounting by competitors,
poor weather, and soft sales in markets near military installations and border
crossings, offset in part by modest selling price increases and the success of
new product introductions, as previously mentioned.
Distribution and other sales, representing distribution sales to certain
JACK IN THE BOX and Qdoba franchisees and sales from our fuel and convenience
stores ("QUICK STUFF(R)"), increased $6.9 million and $21.2 million,
respectively, to $25.9 million and $78.4 million in 2003. Distribution and other
sales increased principally as a result of sales increases at our QUICK STUFF
locations, primarily due to fuel selling price increases consistent with overall
industry trends, and to a lesser extent an increase in the number of QUICK STUFF
locations to 13 at the end of the quarter from 12 a year ago. Distribution sales
also contributed to the increase in distribution and other sales, increasing
slightly primarily due to an increase in the number of JACK IN THE BOX
franchised restaurants using our distribution services, as well as to an
increase in average sales to those restaurants.
Franchise rents and royalties increased $2.5 million and $5.6 million,
respectively, to $11.8 million and $39.8 million in 2003, primarily reflecting
an increase in the number of JACK IN THE BOX franchised restaurants to 386 at
the end of the quarter from 347 a year ago. As a percentage of franchise
restaurant sales, franchise rents and royalties remained constant at 9.5% in the
quarter and 10.7% year-to-date in 2003 and 2002. In 2003, the benefit from
increases in minimum rents and royalties due from certain JACK IN THE BOX
franchised restaurants was offset by the impact of Qdoba royalties of 5.0% of
franchise restaurant sales compared with JACK IN THE BOX combined average rents
and royalties of 10.0% and 11.1% of franchise restaurant sales, respectively, in
2003. Qdoba has no leasing arrangements with its franchises, and as such, does
not generate any franchise rent revenue. In accordance with Staff Accounting
Bulletin 101, franchise percentage rents, which are contingent upon attaining
certain annual calendar year sales levels, are not recognized until the period
in which the contingency is met. Accordingly, most of our franchise percentage
rents are recognized in our first and fourth fiscal quarters.
Other revenues, principally gains and fees from the conversion of JACK IN
THE BOX company-operated restaurants to franchisees, as well as interest income
from notes receivable and investments, increased to $6.9 million and $25.4
million, respectively, in 2003 from $4.7 million and $12.9 million in 2002,
primarily due to our continued strategy of selectively converting JACK IN THE
BOX company-operated restaurants to franchises. Franchise gains increased to
$5.6 million and $22.1 million, respectively, in 2003 from $4.0 million and
$10.8 million in 2002, due to an increase in the number of restaurants converted
to 14 and 28, respectively, in 2003 from 5 and 14 in 2002.
12
Restaurant costs of sales, which include food and packaging costs,
increased to $140.1 million and $437.0 million, respectively, in 2003 from
$128.4 million and $426.1 million in 2002. Restaurant costs of sales increased
to 31.6% and 30.7% of restaurant sales, respectively, in 2003 from 30.0% and
30.5% in 2002, primarily due to higher beef and produce commodity costs, and the
initial rollout of Jack's Ultimate SaladsTM in the quarter, which were offset in
part by certain margin improvement initiatives and modest selling price
increases.
Restaurant operating costs grew with the addition of company-operated
restaurants to $230.6 million and $748.8 million, respectively, in 2003 from
$216.8 million and $713.1 million in 2002. As a percentage of restaurant sales,
operating costs increased to 51.9% and 52.7%, respectively, in 2003 from 50.6%
and 51.0% in 2002. The percentage increases in 2003 are primarily due to higher
workers' compensation insurance expenses, increases in occupancy costs on newer
restaurants whose sales have not yet matured, increased costs related to our new
point of sale system and reduced leverage on fixed costs due to a decline in per
store average sales at company-operated restaurants. These cost increases were
offset in part by decreases in incentive compensation and intangibles
amortization expense. The reduction in intangibles amortization expense in 2003
is attributable to the reclassification of our trading area rights to goodwill,
which is no longer amortizable per the provisions of SFAS 142, Goodwill and
Other Intangible Assets, which was adopted at the beginning of fiscal year 2003.
The previously mentioned increases in workers' compensation insurance costs and
costs associated with the new point of sale system are expected to continue to
increase in the next fiscal year.
Costs of distribution and other sales increased to $25.3 million and $76.6
million, respectively, in 2003 from $18.5 million and $55.6 million in 2002,
primarily reflecting an increase in the related sales. As a percentage of
distribution and other sales, these costs increased to 97.5% and 97.7%,
respectively, in 2003 from 97.1% and 97.3% in 2002, primarily due to a change in
our fuel pricing strategy designed to achieve higher sales volumes at certain
QUICK STUFF locations. Continuing reductions in QUICK STUFF labor costs and
other profit improvement initiatives partially offset the impact of lower fuel
margins. Distribution margins also decreased, although slightly, primarily due
to additional costs incurred in connection with the initial rollout of Jack's
Ultimate SaladsTM.
Franchise restaurant costs, which consist principally of rents and
depreciation on properties leased to franchisees and other administrative costs,
increased to $6.2 million and $19.4 million, respectively, in 2003 from $5.2
million and $17.0 million in 2002, primarily reflecting an increase in the
number of franchised restaurants. As a percentage of franchise restaurant sales,
these costs declined to 4.9% and 5.2%, respectively, in 2003 from 5.4% and 5.3%
a year ago. The inclusion of Qdoba franchise operations resulted in the
favorable percentage decline in the quarter and year-to-date. The year-to-date
percentage improvement was moderated by slight increases in fixed costs,
primarily rents, as a percentage of lower average sales at JACK IN THE BOX
franchise-operated restaurants.
Selling, general and administrative ("SG&A") expenses increased to $51.6
million and $174.2 million, respectively, in 2003 from $51.3 million and $167.0
million in 2002. As a percentage of revenues, SG&A expenses improved to 10.6% in
the quarter from 11.1% a year ago, and year-to-date remained constant at 11.1%.
The favorable percentage decline in the quarter is primarily due to a decrease
in bonus expense, cost reductions from profit improvement initiatives and higher
other revenues which more than offset higher pension costs and the reduced
leverage from softer sales. Year-to-date, higher pension costs and the reduced
leverage from softer JACK IN THE Box sales were mitigated by the benefit
provided from higher other revenues and cost reductions from profit improvement
initiatives. Pension costs have increased due to declines in discount rates and
in the return on plan assets and are expected to continue to increase in the
next fiscal year.
Interest expense increased to $5.5 million and $19.6 million, respectively,
in 2003 from $5.1 million and $17.6 million in 2002. Increased borrowings from
the acquisition of Qdoba and common stock repurchases in 2003 contributed to the
increase in both periods in 2003. Costs associated with the early retirement of
our high interest rate financing lease obligations also contributed to the
year-to-date increase in interest expense.
The income tax provisions for 2003 and 2002 reflect projected annual tax
rates of 36.2% and 35.2% of pretax earnings, respectively. The fiscal 2002
income tax provision was subsequently adjusted to the effective annual rate of
33.9% of pretax earnings. The lower income tax rates result from the favorable
resolutions of long-standing tax matters in both years. The final 2003 annual
tax rate cannot be determined until the end of the fiscal year; therefore, the
actual rate could differ from our current estimates.
13
Net earnings were $19.8 million in the quarter, or $.54 per diluted share,
in 2003 compared to $24.2 million, or $.60 per diluted share, in 2002.
Year-to-date net earnings were $57.3 million, or $1.54 per diluted share, in
2003 compared to $69.1 million, or $1.72 per diluted share, in 2002.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
General. Cash and cash equivalents increased $4.7 million to $10.3 million
at July 6, 2003 from $5.6 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
reducing borrowings under the revolving credit facility.
Financial Condition. Our working capital deficit decreased $124.9 million
to $96.0 million at July 6, 2003 from $220.9 million at September 29, 2002,
primarily due to the reclassification of our revolving credit facility to
long-term debt and the repayment of our financing lease obligations in January
2003. 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. At
the end of the quarter, our current ratio (current assets divided by current
liabilities) increased to .6 to 1 compared with .3 to 1 at the beginning of the
year, primarily due to the credit facility reclassification and financing lease
obligations repayment discussed above.
On January 22, 2003, we replaced our existing revolving credit facility,
due to expire March 31, 2003, with borrowings under a new senior credit
facility. Our new credit facility provides borrowings in the aggregate amount of
$350 million and is comprised of: (i) a $200 million revolving credit facility
maturing on January 22, 2006 with an initial rate of London Interbank Offered
Rate ("LIBOR") plus 2.25% and (ii) a $150 million term loan maturing on July 22,
2007 with an initial rate of LIBOR plus 3.25%. This new credit facility requires
the payment of an annual commitment fee based on the unused portion of the
credit facility. The annual commitment rate and the credit facility's interest
rates are based on a financial leverage ratio, as defined in the credit
agreement. To secure our respective obligations under the new credit facility,
the Company and certain of its subsidiaries granted liens on substantially all
personal property assets. Under certain circumstances, the Company and each of
its certain subsidiaries will be required to grant liens in certain real
property assets to secure their respective obligations under the new credit
facility. Additionally, certain of our real and personal property secure other
indebtedness of the Company. At July 6, 2003, we had borrowings of $6.5 million
and letters of credit outstanding of $27.3 million under our revolving credit
facility.
We are subject to a number of customary covenants under our various debt
instruments, including limitations on additional borrowings, acquisitions, loans
to franchisees, capital expenditures, lease commitments and dividend payments,
as well as requirements to maintain certain financial ratios, cash flows and net
worth. As of July 6, 2003, we were in compliance with all covenants.
Total debt outstanding increased to $303.4 million at July 6, 2003 from
$249.6 million at the beginning of the fiscal year, primarily reflecting our
acquisition of Qdoba which was funded by borrowings under our new credit
facility.
Other Transactions. In January 1994, we entered into financing lease
arrangements with two limited partnerships (the "Partnerships"), in which we
sold interests in 76 restaurants for a specified period of time. The acquisition
of the properties, including costs and expenses, was funded through the issuance
of $70 million in 10.3% senior secured notes by a special purpose corporation
acting as agent for the Partnerships. On August 29, 2002, we entered into an
agreement to repurchase the interests in the restaurant properties that had been
encumbered by the financing lease obligations for a consent fee of $1.3 million.
On January 2, 2003, we used borrowings under our credit facility and previous
sinking fund payments to reacquire the interests in the restaurant properties
and retire the high interest rate bearing financing lease obligations.
In December 1999 and fiscal 2002, our Board of Directors authorized the
repurchase of our outstanding common stock in the open market for an aggregate
amount not to exceed $90 million. The Company did not repurchase any Jack in the
Box common stock during the third quarter of 2003. From the initiation of the
share repurchase program in 1999 through July 6, 2003, we acquired 4,115,853
shares at an aggregate cost of $90 million, and have no repurchase availability
remaining. The stock repurchase program was intended to increase shareholder
value and offset the dilutive effect of stock option exercises.
14
On January 21, 2003, we acquired Qdoba, operator and franchiser of Qdoba
Mexican Grill(R), for approximately $45 million in cash. The primary assets
acquired include $8.2 million in net property and equipment and other long-term
assets, $18.0 million in intangible assets and $23.6 million in goodwill. Qdoba
operates in the fast-casual segment of the restaurant industry and, as of the
July 6, 2003, operated or franchised 98 restaurants in 19 states. This
acquisition is consistent with the Company's long-term strategy to transition
from a regional quick-service restaurant chain to a national restaurant company.
Capital Expenditures. Year-to-date capital expenditures were $77.1 million
in 2003, down from $90.7 million in 2002 primarily due to a decrease in new
restaurant expenditures, reflecting a reduction in the number of new restaurant
openings to 63 in 2003 from 78 a year ago. Also contributing to the decrease in
capital expenditures was an increase in the portion of new restaurant properties
being leased rather than purchased due to changes in financing market terms.
We plan to spend approximately $125 million on capital expenditures and
incur capital lease obligations of approximately $10 million during fiscal year
2003 compared with the $182 million total amount originally estimated in our
2002 Annual Report on Form 10-K filed with the SEC. The projected estimate
decrease reflects our current plan to lease a greater portion of our new
company-operated restaurants rather than purchase such locations.
Pension Funding. Due to the downturn in the equity markets over the past
year, the market value of our pension plan assets have declined, and lower
interest rates have caused our accumulated benefit plan obligation to increase
during 2003. A minimum pension liability adjustment is required when the
accumulated benefit obligation exceeds the fair value of plan assets at the
measurement date. Based upon current plan asset values and anticipated
contributions through the measurement date, as well as reductions in our
discount rate and long-term return on asset assumptions to reflect current
market conditions, we anticipate we will be required to recognize an additional
minimum pension liability at September 28, 2003, resulting in an additional
charge to other comprehensive income. Final determination of the minimum pension
liability adjustment is in process based on pension plan data as of the
measurement date, which was June 30, 2003.
Future Liquidity. 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
short-term and long-term sources of liquidity are expected to be cash flows from
operations, the revolving bank credit facility, and the sale and leaseback of
certain 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 cash flows from operations, combined with other financing
alternatives available, will be sufficient to meet debt service, capital
expenditure and working capital requirements.
We do not have material related party transactions or off-balance sheet
arrangements, other than our operating leases. We do not enter into commodity
contracts for which market price quotations are not available. Furthermore, we
are not aware of any other factors, which are reasonably likely to affect our
liquidity, other than those disclosed as risk factors in our Form 10-K filed
with the SEC. While we expect certain operating expenses, including pension,
workers' compensation insurance, medical benefits and occupancy costs, to rise,
we believe that there are sufficient funds available from operations, our
existing credit facility and the sale and leaseback of restaurant properties to
accommodate the Company's future growth.
DISCUSSION OF CRITICAL ACCOUNTING POLICIES
- ------------------------------------------
The Company's critical accounting policies, which are those that are most
important to the portrayal of the Company's financial condition and results and
require management's most subjective and complex judgements, are detailed in our
most recent Annual Report on Form 10-K filed with the SEC.
15
FUTURE APPLICATION OF ACCOUNTING STANDARDS
- ------------------------------------------
In November 2002, the FASB's Emerging Issues Task Force ("EITF") discussed
Issue 02-16, Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor. Issue 02-16 provides guidance on how a
customer should account for cash consideration received from a vendor. The
requirements of this Issue for volume based rebates apply to new arrangements,
including modifications of existing arrangements, entered into after November
21, 2002. The adoption of the new accounting for other supplier payments is
effective for arrangements entered into or modified after December 31, 2002. We
are currently evaluating the effect that the adoption of this Issue will have on
our beverage contracts entered into subsequent to the above noted dates, which
will become effective in the first quarter of fiscal year 2004. We do not expect
the adoption of this Issue to have a material impact on our operating results or
financial condition.
In January 2003, the FASB issued Interpretation 46, Consolidation of
Variable Interest Entities - an interpretation of Accounting Research Bulletin
No. 51 which requires companies that control another entity through interests
other than voting interests to consolidate the controlled entity. This
Interpretation applies immediately to variable interest entities created after
January 31, 2003. For variable interest entities that existed prior to February
1, 2003, the requirements of this Interpretation are effective for the first
fiscal year or interim period beginning after June 15, 2003. The Company is
currently assessing the impact, if any, that Interpretation 46 will have on its
consolidated financial statements, including an evaluation of the Company's
marketing funds. If it is determined that the consolidation of these funds is
required under this Interpretation, such consolidation is not expected to have a
material impact on our annual operating results.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
- ----------------------------------------------------------
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the federal securities law. These forward-looking
statements are principally contained in the sections captioned, Notes to
Unaudited Consolidated Financial Statements, Results of Operations and Liquidity
and Capital Resources. Statements regarding our continuing investment in new
restaurants and refurbishment of existing facilities, expectations regarding our
effective tax rate, future pension costs, anticipated capital expenditures and
capital lease obligations, future estimated intangibles amortization expense,
expectations regarding any liability that may result from claims and actions
filed against us, our future financial performance, our sources of liquidity,
uses of cash and sufficiency of our cash flows are forward-looking statements.
Forward-looking statements are generally identifiable by the use of the words
"anticipate," "assume," "believe," "estimate," "seek," "expect," "intend,"
"plan," "project," "may," "will," "would," and similar expressions.
Forward-looking statements are based on management's current plans and
assumptions and 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.
There is intense competition in the quick service restaurant industry with
respect to market share, restaurant locations, labor, and menu and product
development. The quick service restaurant segment itself faces competitive
pressures from the emerging "quick-casual" and sandwich chains. The Company
competes primarily on the basis of quality, variety and innovation of menu
items, service, brand, convenience and price against several larger national and
international chains with potentially significantly greater financial resources.
The Company's results depend upon the effectiveness of its strategies as
compared to its competitors, and can be adversely affected by aggressive
competition from numerous and varied competitors in all areas of business,
including new product introductions, advertising, promotions and discounting. In
addition, restaurant sales can be affected by factors, including but not limited
to, demographic changes, consumer preferences, tastes and spending patterns,
perceptions about the health and safety of food products and severe weather
conditions. With approximately 40% of its restaurants in California, JACK IN THE
BOX restaurant sales can be significantly affected by demographic changes,
adverse weather, economic and political conditions and other significant events
in California. The downturn in the national economy was a significant
contributor to soft sales trends experienced by the Company and several of its
competitors; there can be no assurance as to whether the downturn in the economy
will recur or that earnings will not be materially affected. Because a large
majority of its restaurants are company-operated, the Company's earnings are
more sensitive to declining unit sales and increasing costs than majority
franchised chains. The quick service restaurant industry is mature, with
significant chain penetration. There can be no assurances that the Company's
growth objectives in the regional domestic markets in which it operates
restaurants and convenience stores will be
16
met or that the new facilities will be profitable. Anticipated and unanticipated
delays in development, sales softness and restaurant closures may have a
material adverse effect on the Company's results of operations. The development
and profitability of restaurants can be adversely affected by many factors
including the ability of the Company and its franchisees to select and secure
suitable sites on satisfactory terms, the availability of financing and general
business and economic conditions. The realization of gains from our program of
selective sales of company-operated restaurants to existing and new franchisees
depends upon various factors including failure of the market for our franchises
to develop as expected, sales trends at franchised restaurants and the financing
market and national and regional economic conditions referred to above. The
Company has provided financing, for a portion of the purchase price, to certain
franchisees who purchased existing restaurants from the Company. There can be no
assurance that all such borrowers will make timely payments or ultimately
perform on the terms contemplated, or at all. The ongoing success of our
selective sale and leaseback of restaurant properties is subject to changes in
the economy, credit market, real estate market and the ability of the Company to
obtain acceptable prices and terms. Our results of operations can also be
adversely affected by changes in commodity prices or supply shortages, higher
costs associated with a new POS system and other new technologies, the high cost
of energy and potential power outages, increasing occupancy and insurance costs,
including the possibility of increased workers compensation costs resulting from
changes in the rate and amount of estimated claims, interest rates, inflation,
recession and other factors over which the Company has no control, including the
possibility of increased pension expense and contributions resulting from
continued declines in interest rates and stock market returns. In January 2003,
the Company completed its acquisition of Qdoba Restaurant Corporation, a
fast-casual restaurant chain. The Company may not successfully integrate or
fully realize the potential benefits or synergies of this or other acquisition
transactions. Other factors that can cause actual results to differ materially
from expectations include the unpredictable nature of litigation, including
strategies and settlement costs; changes in accounting standards, policies and
practices; new legislation and governmental regulation; potential variances
between estimated and actual liabilities; and the possibility of unforeseen
events affecting the industry in general.
Our income tax provision is sensitive to expected earnings and, as
expectations change, our income tax provision may vary from quarter-to-quarter
and year-to-year. In addition, from time-to-time, we may take positions for
filing our tax returns which differ from the treatment for financial reporting
purposes. Our effective tax rate for fiscal 2003 is expected to be higher than
our fiscal 2002 rate.
This discussion of uncertainties is not exhaustive. Additional risk factors
associated with our business are detailed in our most recent Annual Report on
Form 10-K filed with the SEC. Jack in the Box Inc. assumes no obligation and
does not intend to update these forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Our primary exposure relating to financial instruments is to changes in
interest rates. Our credit facility, which is comprised of a revolving credit
facility and a term loan, bears interest at an annual rate equal to the prime
rate or the LIBOR plus an applicable margin based on a financial leverage ratio.
The majority of the credit facility borrowings are LIBOR based. As of July 6,
2003, our applicable margin for the LIBOR based revolving loans and term loan
was set at 2.25% and 3.25%, respectively. A hypothetical 100 basis point
increase in short-term interest rates, based on the outstanding balance of our
revolving credit facility and term loan at July 6, 2003, would result in a
reduction of $1.6 million in annual pretax earnings.
Changes in interest rates also impact our pension expense. An assumed
discount rate is used in determining the present value of future cash outflows
currently expected to be required to satisfy the pension benefit obligations
when due. A hypothetical 30 basis point reduction in the assumed discount rate
would result in an estimated increase of $1.2 million in our fiscal 2003 pension
expense.
We are also exposed to the impact of commodity and utility price
fluctuations related to unpredictable factors such as weather and various other
market conditions outside our control. Our ability to recover increased costs
through higher prices is limited by the competitive environment in which we
operate. From time-to-time we enter into futures and option contracts to manage
these fluctuations. We had no significant open futures and option contracts at
July 6, 2003.
At July 6, 2003, we had no other material financial instruments subject to
significant market risk exposure.
17
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
evaluated the effectiveness of our disclosure controls and procedures, as such
term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the
Securities Exchange Act of 1934, as amended. Based on this evaluation, our
principal executive officer and principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period
covered by this quarterly report.
PART II. OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to normal and routine litigation. In the opinion of
management, based in part on the advice of legal counsel, the ultimate liability
from all pending legal proceedings, asserted legal claims and known potential
legal claims should not materially affect our operating results and liquidity.
18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM 6 (a). Exhibits
--------
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation, as amended(7)
3.2 Amended and Restated Bylaws(13)
4.1 Indenture for the 8 3/8% Senior Subordinated Notes due 2008(6)
(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.)
4.2 Shareholder Rights Agreement(3)
10.1 Credit Agreement dated as of January 22, 2003 by and among Jack in
the Box Inc. and the lenders named therein(12)
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)
10.4.1 Amended and Restated 1992 Employee Stock Incentive Plan(4)
10.4.2 Jack in the Box Inc. 2002 Stock Incentive Plan(10)
10.5 Capital Accumulation Plan for Executives(9)
10.5.1 First Amendment dated as of August 2, 2002 to the Capital
Accumulation Plan for Executives(11)
10.6 Supplemental Executive Retirement Plan(9)
10.6.1 First Amendment dated as of August 2, 2002 to the Supplemental
Executive Retirement Plan(11)
10.7 Performance Bonus Plan(8)
10.8 Deferred Compensation Plan for Non-Management Directors(2)
10.9 Amended and Restated Non-Employee Director Stock Option Plan(7)
10.10 Form of Compensation and Benefits Assurance Agreement for Executives
(5)
10.11 Form of Indemnification Agreement between Jack in the Box Inc. and
certain officers and directors(11)
10.12 Consent Agreement(11)
10.13 Executive Deferred Compensation Plan(13)
10.14 Form of Restricted Stock Award for certain executives(13)
10.14(a) Schedule of Restricted Stock Awards
10.15 Executive Agreement between Jack in the Box Inc. and Gary J.
Beisler, President and Chief Executive Officer of Qdoba
Restaurant Corporation (14)
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- ----------
(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
Definitive Proxy Statement dated January 17, 1995 for the Annual Meeting of
Stockholders on February 17, 1995.
(3) Previously filed and incorporated by reference from registrant's current
report on Form 8-K dated July 26, 1996.
(4) Previously filed and incorporated herein by reference from registrant's
Registration Statement on Form S-8 (No. 333-26781) filed May 9, 1997.
(5) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended September 28, 1997.
19
(6) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 12, 1998.
(7) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended October 3, 1999.
(8) 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.
(9) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended September 30, 2001.
(10) Previously filed and incorporated herein by reference from the registrant's
Definitive Proxy Statement dated January 18, 2002 for the Annual Meeting of
Stockholders' on February 22, 2002.
(11) Previously filed and incorporated herein by reference from registrant's
Annual Report on Form 10-K for the fiscal year ended September 29, 2002.
(12) Previously filed and incorporated by reference from registrant's current
report on Form 8-K dated January 22, 2003.
(13) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended January 19, 2003.
(14) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 13, 2003.
ITEM 6(b). Form 8-K.
---------
We filed the following reports on Form 8-K with the Securities and Exchange
Commission during the third quarter ended July 6, 2003: On May 14, 2003, we
filed a report on Form 8-K containing an earnings release that reported results
of operations for the quarter ended April 13, 2003.
20
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: /s/JOHN F. HOFFNER
------------------------------
John F. Hoffner
Executive Vice President,
and Chief Financial Officer
(Principal Financial Officer)
(Duly Authorized Signatory)
Date: August 20, 2003
21