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 April 13, 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
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(State of Incorporation) (I.R.S. Employer Identification No.)
9330 BALBOA AVENUE, SAN DIEGO, CA 92123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (858) 571-2121
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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 May 23, 2003 - 36,005,907.
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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 4. Submission of Matters to a Vote of Security Holders......... 18
Item 6. Exhibits and Reports on Form 8-K............................ 19
Signature........................................................... 21
Certifications...................................................... 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
April 13, September 29,
2003 2002
- --------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 8,242 $ 5,620
Accounts receivable, net ...................... 30,748 26,176
Inventories ................................... 32,030 29,975
Prepaid expenses and other current assets ..... 15,847 38,108
Assets held for sale and leaseback ............ 21,691 12,626
---------- ----------
Total current assets ........................ 108,558 112,505
---------- ----------
Property and equipment, at cost .................. 1,247,170 1,219,487
Accumulated depreciation and amortization ..... (401,129) (372,556)
---------- ----------
Property and equipment, net ................. 846,041 846,931
---------- ----------
Trading area rights, net ......................... - 64,628
Goodwill ......................................... 90,218 1,988
Other assets, net ................................ 67,849 37,392
---------- ----------
TOTAL ....................................... $1,112,666 $1,063,444
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt .......... $ 2,519 $ 106,265
Accounts payable .............................. 40,736 59,212
Accrued expenses .............................. 174,392 167,900
---------- ----------
Total current liabilities ................... 217,647 333,377
---------- ----------
Deferred income taxes ............................ 37,193 25,861
Long-term debt, net of current maturities ........ 298,989 143,364
Other long-term liabilities ...................... 107,046 96,727
Stockholders' equity:
Common stock ................................... 432 429
Capital in excess of par value ................. 324,486 319,810
Retained earnings .............................. 264,543 227,064
Accumulated other comprehensive loss, net ...... (8,882) (8,882)
Unearned compensation .......................... (4,325) -
Treasury stock ................................. (124,463) (74,306)
---------- ----------
Total stockholders' equity .................. 451,791 464,115
---------- ----------
TOTAL ....................................... $1,112,666 $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 Twenty-Eight Weeks Ended
----------------------------- ------------------------------
April 13, April 14, April 13, April 14,
2003 2002 2003 2002
- ------------------------------------------- ----------------------------- ------------------------------
Revenues:
Restaurant sales........................ $ 418,272 $ 418,118 $ 977,703 $ 970,666
Distribution and other sales............ 24,282 16,950 52,424 38,102
Franchise rents and royalties........... 10,496 8,247 27,997 24,886
Other................................... 10,298 4,315 18,559 8,156
---------- ---------- ----------- -----------
463,348 447,630 1,076,683 1,041,810
---------- ---------- ----------- -----------
Costs of revenues:
Restaurant costs of sales............... 125,551 127,579 296,821 297,697
Restaurant operating costs.............. 224,228 214,840 518,245 496,389
Costs of distribution and other sales... 23,789 16,454 51,281 37,139
Franchised restaurant costs............. 5,774 5,123 13,214 11,764
---------- ---------- ----------- -----------
379,342 363,996 879,561 842,989
---------- ---------- ----------- -----------
Gross profit............................... 84,006 83,634 197,122 198,821
Selling, general and administrative........ 51,884 49,804 122,612 115,680
---------- ---------- ----------- -----------
Earnings from operations................... 32,122 33,830 74,510 83,141
Interest expense........................... 5,802 5,190 14,061 12,495
---------- ---------- ----------- -----------
Earnings before income taxes............... 26,320 28,640 60,449 70,646
Income taxes............................... 10,001 10,454 22,970 25,786
---------- ---------- ----------- -----------
Net earnings............................... $ 16,319 $ 18,186 $ 37,479 $ 44,860
========== ========== =========== ===========
Net earnings per share:
Basic................................... $ .45 $ .46 $ 1.02 $ 1.14
Diluted................................. $ .44 $ .45 $ 1.00 $ 1.12
Weighted-average shares outstanding:
Basic................................... 36,399 39,436 36,866 39,342
Diluted................................. 36,846 40,299 37,306 40,125
See accompanying notes to consolidated financial statements.
4
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Twenty-Eight Weeks Ended
-----------------------------
April 13, April 14,
2003 2002
- -------------------------------------------------------------------------------- -----------------------------
Cash flows from operating activities:
Net earnings.................................................................. $ 37,479 $ 44,860
Non-cash items included in operations:
Depreciation and amortization.............................................. 37,217 37,253
Amortization of unearned compensation ..................................... 234 -
Deferred finance cost amortization......................................... 1,595 900
Deferred income taxes...................................................... 7,616 5,016
Tax benefit associated with exercise of stock options......................... - 2,700
Gains on the conversion of Company-operated restaurants....................... (16,595) (6,860)
Changes in assets and liabilities, net of the effect of the Qdoba acquisition:
(Increase) decrease in receivables......................................... (5,100) 3,972
(Increase) decrease in inventories......................................... (1,904) 885
Decrease in prepaid expenses and other current assets...................... 6,069 2,661
Decrease in accounts payable............................................... (18,617) (17,473)
Increase in other liabilities.............................................. 15,287 3,416
--------- ---------
Cash flows provided by operating activities................................ 63,281 77,330
--------- ---------
Cash flows from investing activities:
Additions to property and equipment........................................... (49,223) (53,539)
Purchase of Qdoba, net of cash acquired of $2,856............................. (42,606) -
Dispositions of property and equipment........................................ 18,543 3,031
Proceeds from the conversion of Company-operated restaurants.................. 2,228 5,739
Increase in assets held for sale and leaseback................................ (9,065) (8,336)
Collections on notes receivable............................................... 12,251 1,706
Other......................................................................... (2,643) (2,754)
--------- ---------
Cash flows used in investing activities.................................... (70,515) (54,153)
--------- ---------
Cash flows from financing activities:
Borrowings under revolving bank loans......................................... 479,500 235,140
Principal repayments under revolving bank loans............................... (506,500) (261,140)
Proceeds from issuance of long-term debt...................................... 150,000 -
Principal payments on long-term debt, including current maturities............ (55,521) (1,208)
Debt issuance and debt repayment costs........................................ (7,586) -
Repurchase of common stock.................................................... (50,157) -
Proceeds from issuance of common stock........................................ 120 3,841
--------- ---------
Cash flows provided by (used in) financing activities...................... 9,856 (23,367)
--------- ---------
Net increase (decrease) in cash and cash equivalents............................ $ 2,622 $ (190)
========= =========
See accompanying notes to consolidated financial statements.
5
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
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 our
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 in 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 APB 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 SFAS 123, we would have recorded net earnings as
follows:
Twelve Weeks Ended Twenty-Eight Weeks Ended
--------------------------- ---------------------------
April 13, April 14, April 13, April 14,
2003 2002 2003 2002
---------------------------------------------- --------------------------- ---------------------------
Net earnings, as reported.................. $ 16,319 $ 18,186 $ 37,479 $ 44,860
Deduct: Total stock based employee
compensation expense determined under
fair value based method for all awards,
net of taxes............................. 1,223 1,184 2,824 2,742
-------- -------- -------- --------
Pro forma net earnings..................... $ 15,096 $ 17,002 $ 34,655 $ 42,118
======== ======== ======== ========
Net earnings per share:
Basic-as reported........................ $ .45 $ .46 $ 1.02 $ 1.14
Basic-pro forma.......................... $ .41 $ .43 $ .94 $ 1.07
Diluted-as reported...................... $ .44 $ .45 $ 1.00 $ 1.12
Diluted-pro forma........................ $ .41 $ .42 $ .93 $ 1.05
3. QDOBA ACQUISITION
On January 21, 2003 we acquired Qdoba Restaurant Corporation ("Qdoba"), operator
and franchiser of Qdoba Mexican Grill(R), for $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
(Dollars in thousands, except share and per share data)
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.
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
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:
Twelve Weeks
Ended Twenty-Eight Weeks Ended
------------ --------------------------
April 14, April 13, April 14,
2002 2003 2002
-------------------------------------- -------------------------------------------
Total revenues...................... $ 454,176 $1,084,251 $1,052,781
Net earnings........................ 17,931 37,377 44,009
Net earnings per share - Basic...... $ .45 $ 1.01 $ 1.12
Net earnings per share - Diluted.... $ .44 $ 1.00 $ 1.10
The pro forma results include interest expense on the Company's term loan, which
was used to finance the acquisition. The pro forma amounts are not 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
(Dollars in thousands, except share and per share data)
4. INTANGIBLE ASSETS (continued)
Intangible assets consist of the following as of April 13, 2003:
Gross Net
Carrying Accumulated Carrying
Amount Amortization Amount
-----------------------------------------------------------------------------
Amortized intangible assets....... $ 61,255 $ 39,414 $ 21,841
========
Unamortized intangible assets:
Goodwill.................................................... $ 90,218
Trademark................................................... 8,800
--------
$ 99,018
========
The change in the carrying amount of total goodwill during the twenty-eight
weeks ended April 13, 2003 was as follows:
Balance at September 29, 2002................................ $ 1,988
Reclassification of trading area rights and other............ 64,613
Goodwill acquired............................................ 23,617
--------
Balance at April 13, 2003.................................... $ 90,218
========
Had the provisions of SFAS 142 been adopted prior to September 30, 2002, net
earnings for the twelve weeks ended April 14, 2002 would have increased $632, or
$.01 per basic and diluted share, to $18,818, or $.47 per basic share and $.46
per diluted share. We reported net earnings for the quarter of $18,186, or $.46
per basic share and $.45 per diluted share. Net earnings for the twenty-eight
weeks ended April 14, 2002 would have increased $1,476, or $.04 per basic and
diluted share, to $46,336, or $1.18 per basic share and $1.16 per diluted share.
We reported net earnings year-to-date of $44,860, or $1.14 per basic share and
$1.12 per diluted share. Adjusted net earnings exclude goodwill and trading area
rights amortization expense, net of taxes.
Total intangibles amortization expense was $0.5 million and $1.2 million,
respectively, for the quarter and year-to-date periods ended April 13, 2003. The
estimated intangibles amortization expense for each fiscal year through 2007 is
$2.3 million.
8
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
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.
6. INCOME TAXES
The income tax provisions in 2003 and 2002 project annual tax rates of 38.0% and
36.5% 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 favorable income tax rate in 2002 resulted from our ability to realize
previously unrecognized tax benefits. 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
217,600 shares of restricted stock to certain executives during the quarter
ended January 19, 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 865,653 and 2,566,053 shares, respectively,
of our common stock for approximately $13.9 million and $50.1 million during the
quarter and year-to-date periods ended April 13, 2003. At the end of the quarter
we had no repurchase availability remaining.
9
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
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:
Twelve Weeks Ended Twenty-Eight Weeks Ended
------------------------------------------------------------
April 13, April 14, April 13, April 14,
2003 2002 2003 2002
--------------------------------------------------------------------------------------------------------------------
Shares outstanding, beginning of fiscal year ...... 38,558,036 39,248,168 38,558,036 39,248,168
Effect of common stock issued...................... 11,009 188,160 7,169 93,928
Effect of common stock reacquired.................. (2,170,007) - (1,699,516) -
---------- ---------- ---------- ----------
Weighted-average shares outstanding - basic........ 36,399,038 39,436,328 36,865,689 39,342,096
Assumed additional shares issued upon exercise
of stock options, net of shares reacquired at
the average market price......................... 229,440 862,506 266,898 783,191
Effect of restricted stock issued.................. 217,600 - 173,192 -
---------- ---------- ---------- ----------
Weighted-average shares outstanding - diluted...... 36,846,078 40,298,834 37,305,779 40,125,287
========== ========== ========== ==========
Diluted weighted-average shares outstanding exclude options to purchase
4,043,951 and 3,602,593 shares, respectively, of common stock during the quarter
and year-to-date periods ended April 13, 2003 and 40,000 and 832,806 shares,
respectively, of common stock during the quarter and year-to-date periods ended
April 14, 2002, because their exercise prices exceeded the average market price
of common stock for the period.
9. CONTINGENCIES AND LEGAL MATTERS
On April 18, 2001, an action was filed by Robert Bellmore and Jeffrey Fairbairn,
individually and on behalf of all others similarly situated, in the Superior
Court of the State of California, San Diego County, seeking class action status
in alleging violations of California wage and hour laws. The Company settled the
action in fiscal year 2002 for approximately $9.3 million without admission of
liability and the Court approved the settlement on February 10, 2003. Through
April 13, 2003 the Company has paid out approximately $7.9 million in connection
with this settlement.
The Company is also 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 other pending legal proceedings, asserted legal claims and known
potential legal claims should not materially affect our operating results and
liquidity.
10
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
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:
Twelve Weeks Ended Twenty-Eight Weeks Ended
----------------------- ------------------------
April 13, April 14, April 13, April 14,
2003 2002 2003 2002
-------------------------------------------------------------------------------------------------------
Revenues ................................ $ 457,258 $ 447,630 $1,070,593 $1,041,810
Earnings from operations................. 31,895 33,830 74,283 83,141
Interest expense and income taxes are not reported on an operating segment basis
based on the Company's method of internal reporting. A reconciliation of
reportable segment earnings from operations to consolidated earnings from
operations follows:
Twelve Weeks Ended Twenty-Eight Weeks Ended
----------------------- ------------------------
April 13, April 14, April 13, April 14,
2003 2002 2003 2002
-------------------------------------------------------------------------------------------------------
Earnings from operations................. $ 31,895 $ 33,830 $ 74,283 $ 83,141
Qdoba earnings from operations........... 227 - 227 -
--------- --------- ---------- ----------
Consolidated earnings from operations.... $ 32,122 $ 33,830 $ 74,510 $ 83,141
========= ========= ========== ==========
11. ACCOUNTING CHANGES
The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards ("SFAS") 148, Accounting for Stock-Based Compensation -
Transition and Disclosure - an amendment of FASB Statement No. 123. This
Statement amends the disclosure requirements of SFAS 123, Accounting for
Stock-Based Compensation, to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
Additionally, this Statement provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee consideration. We account for our stock-based employee compensation
under APB Opinion 25, Accounting for Stock Used to Employees.
In January 2003, the FASB issued Interpretation 46, Consolidation of Variable
Interest Entities - an interpretation of Accounting Research Bulletin No. 51,
which requires that companies that control another entity through interests
other than voting interests should consolidate the controlled entity. If it is
reasonably possible that a company will have a significant variable interest
entity at the date the Interpretation becomes effective, the company must
disclose the nature, purpose, size and activities of the variable interest
entity and the consolidated enterprise's maximum exposure loss resulting from
its involvement with the variable interest entity in all financial statements
issued after January 31, 2003. 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. We are not involved with any variable interest
entities created after January 31, 2003. The Company is assessing the impact, if
any, that Interpretation 46 will have on its consolidated financial statements.
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 28-week ("year-to-date") periods ended April 13, 2003
and April 14, 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 12 weeks of operations.
Consolidated Company-operated restaurant sales were $418.3 million and
$977.7 million, respectively, in 2003 compared with $418.1 million and $970.7
million in 2002. JACK IN THE BOX Company-operated restaurant sales decreased
slightly in the quarter and increased year-to-date. The number of JACK IN THE
BOX Company-operated restaurants increased 3.5% to 1,527 at the end of the
quarter from 1,476 restaurants a year ago. Sales at JACK IN THE BOX
Company-operated restaurants open more than one fiscal year declined 4.3% and
3.3%, respectively, in 2003 compared with 2002, primarily due to continued
economic weakness in certain key markets, continued discounting by competitors,
poor weather and soft sales in markets near military installations and border
crossings, offset in part by modest selling price increases.
Distribution and other sales, representing distribution sales to JACK IN
THE BOX franchisees and sales from our fuel and convenience stores ("Quick
Stuff(R)"), increased $7.3 million and $14.3 million, respectively, to $24.3
million and $52.4 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 twelve at the end of the quarter from eleven a year ago. An
increase in distribution sales, which resulted from an increase in the number of
franchised restaurants using our distribution services, also contributed to the
growth in distribution and other sales.
Franchise rents and royalties increased $2.2 million and $3.1 million,
respectively, to $10.5 million and $28.0 million in 2003, primarily reflecting
an increase in the number of JACK IN THE BOX franchised restaurants to 370 at
the end of the quarter from 341 a year ago. As a percentage of franchise
restaurant sales, franchise rents and royalties grew to 9.3% and 11.3%,
respectively, in 2003 from 8.7% and 11.2% in 2002. The percentage increases in
2003 are attributable to increases in minimum rent from JACK IN THE BOX
franchisees which offset decreases in percentage rent related to per store
average ("PSA") sales declines at franchise-operated restaurants.
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 $10.3 million and $18.6
million, respectively, in 2003 from $4.3 million and $8.2 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
$9.3 million and $16.6 million, respectively, in 2003 from $3.8 million and $6.9
million in 2002, due to an increase in the average selling price per restaurant
and an increase in the number of restaurants converted to 14 year-to-date from 9
a year ago.
Restaurant costs of sales, which include food and packaging costs,
decreased to $125.6 million and $296.8 million, respectively, in 2003 from
$127.6 million and $297.7 million in 2002. Restaurant costs of sales improved to
30.0% and 30.4 %, respectively, of restaurant sales in 2003 from 30.5% and 30.7%
in 2002, primarily due to decreased food cost percentages at JACK IN THE BOX
restaurants, which were favorably impacted by lower ingredient costs, certain
margin improvement initiatives and modest selling price increases in 2003.
12
Restaurant operating costs grew with the addition of Company-operated
restaurants to $224.2 million and $518.2 million, respectively, in 2003 from
$214.8 million and $496.4 million in 2002. As a percentage of restaurant sales,
operating costs increased to 53.6% and 53.0%, respectively, in 2003 from 51.4%
and 51.1% in 2002. The percentage increases in 2003 are primarily due to higher
insurance expenses and occupancy costs on newer stores 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 PSA sales at Company-operated
restaurants. These cost increases were offset in part by decreases in utilities,
restaurant managed and intangibles amortization expense.
Costs of distribution and other sales increased to $23.8 million and $51.3
million, respectively, in 2003 from $16.5 million and $37.1 million in 2002,
primarily reflecting an increase in the related sales. As a percentage of
distribution and other sales, these costs increased to 98.0% in the quarter from
97.8% compared with a year ago primarily due to a change in our fuel pricing
strategy designed to achieve higher sales volumes at certain QUICK STUFF
locations. Year-to-date theses costs improved to 97.1% of the related sales in
2003 from 97.5% compared with a year ago, primarily due to reductions in QUICK
STUFF labor costs and other profit improvement initiatives.
Franchise restaurant costs, which consist principally of rents and
depreciation on properties leased to franchisees and other miscellaneous costs,
increased to $5.8 million and $13.2 million, respectively, in 2003 from $5.1
million and $11.8 million in 2002, primarily reflecting an increase in the
number of franchised restaurants. As a percentage of franchise restaurant sales,
franchise restaurant costs declined to 55.0% and 47.2%, respectively, in 2003
from 62.1% and 47.3% a year ago. The inclusion of Qdoba franchise operations
contributed to the favorable percentage decline in the quarter and resulted in
the percentage decline year-to-date. Year-to-date increases in fixed costs,
primarily rents, exceeded the overall sales growth at JACK IN THE BOX
franchise-operated restaurants.
Selling, general and administrative expenses increased to $51.9 million and
$122.6 million, respectively, or 11.2% and 11.4% of revenues, in 2003 from $49.8
million and $115.7 million, or 11.1% of revenues, for both periods in 2002,
primarily due to higher pension costs and the reduced leverage from softer JACK
IN THE BOX sales, which were offset in part by higher other revenues. Pension
costs have increased due to declines in discount rates and in the return on plan
assets.
Interest expense increased to $5.8 million and $14.1 million, respectively,
in 2003 from $5.2 million and $12.5 million in 2002, primarily due to costs
associated with the early retirement of our high interest rate financing lease
obligations and the amortization of debt issuance costs incurred in connection
with our new credit facility. Increased borrowings from the acquisition of Qdoba
and common stock repurchases in 2003 also contributed to the increase in
interest expense compared to a year ago.
The income tax provisions for 2003 and 2002 reflect projected annual tax
rates of 38.0% and 36.5% 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 favorable income tax rate in 2002 resulted from
our ability to realize previously unrecognized tax benefits. 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.
Net earnings decreased in the quarter to $16.3 million, or $.44 per diluted
share, in 2003 from $18.2 million, or $.45 per diluted share, in 2002.
Year-to-date net earnings declined to $37.5 million, or $1.00 per diluted share,
in 2003 from $44.9 million, or $1.12 per diluted share, in 2002.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
General. Cash and cash equivalents increased $2.6 million to $8.2 million
at April 13, 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 to reduce borrowings under the revolving credit facility.
Financial Condition. Our working capital deficit decreased $111.8 million
to $109.1 million at April 13, 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
13
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 increased to .5 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 April 13, 2003, we had borrowings of $7.0
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 April 13, 2003, we were in compliance with all covenants.
Total debt outstanding increased to $301.5 million at April 13, 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. Through April 13, 2003, we had acquired
4,115,853 shares in connection with this authorization at an aggregate cost of
$90 million, and had no repurchase availability remaining. The stock repurchase
program was intended to increase shareholder value and offset the dilutive
effect of stock option exercises.
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
April 13, 2003, operated or franchised 92 restaurants in 18 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 decreased $4.3
million to $49.2 million in 2003 from $53.5 million in 2002, primarily due to a
decrease in new restaurant expenditures, reflecting a reduction in the number of
new restaurant openings to 42 in 2003 from 46 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. Capital expenditures in 2003 included $31.1 million for
new restaurant expenditures, $15.1 million for existing restaurant improvements
and $3.0 million for other additions.
14
We plan to spend approximately $155 million during fiscal year 2003 on
capital expenditures compared with the $182 million originally disclosed 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.
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 have noted that certain operating expenses, including
pension, insurance and occupancy costs, are rising and the economy has slowed
down, 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.
OTHER SIGNIFICANT KNOWN EVENTS, TRENDS OR UNCERTAINTIES EXPECTED TO IMPACT
- --------------------------------------------------------------------------------
FUTURE OPERATIONS
- ------------------
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.
15
In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which and 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. We do not expect the
adoption of SFAS 149 to have a material impact on our operating results or
financial condition.
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. We do not expect the adoption of SFAS 150 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 that companies that control another entity through
interests other than voting interests should 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. We are not
involved with any variable interest entities created after January 31, 2003. The
Company is assessing the impact, if any, that Interpretation 46 will have on its
consolidated financial statements.
Pension Funding.
Due to the continued downturn in the equity markets, the market value of
our pension plan assets have continued to decline, 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 and accrued benefit liabilities
at the measurement date. Based upon current plan asset values and anticipated
contributions through the measurement date, 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 will only be known at
the measurement date, which is June 30, 2003. As required by SFAS 87, Employers'
Accounting for Pensions, the minimum pension liability adjustment necessary will
not be reflected in the consolidated financial statements until the end of the
fiscal year, September 28, 2003.
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 and Liquidity and Capital Resources.
Statements regarding our continuing investment in new restaurants and
refurbishment of existing facilities, expectations regarding our effective tax
rate, 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, menu and product
development. 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
16
aggressive competition from numerous and varied competitors in all areas of
business, including new product introductions, 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 national economy continues in a downturn and is a significant
contributor to soft sales trends experienced by the Company and several of its
competitors; there can be no assurance as to when the trends can be reversed or
that earnings will not be materially affected. 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 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 sales trends at JACK IN THE BOX restaurants and
the financing market and economic conditions referred to above. 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, increasing
utility, occupancy and insurance costs, 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 DISCLOSURE 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 April
13, 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 April 13, 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.
17
We are also exposed to the impact of commodity price fluctuations related
to unpredictable factors such as weather and various other market conditions
outside our control. From time-to-time we enter into commodity futures and
option contracts to manage these fluctuations. We had no open commodity futures
and option contracts at April 13, 2003.
At April 13, 2003, we had no other material financial instruments subject
to significant market risk exposure.
ITEM 4. CONTROLS AND PROCEDURES
(a) Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures, as such term is defined under Rule 13a-14(c)
promulgated under the Securities Exchange Act of 1934, as amended, within the 90
days prior to the filing date of this report. Based on their evaluation, our
principal executive officer and principal financial officer concluded that our
disclosure controls and procedures were effective as of the date of the
evaluation.
(b) There have been no significant changes, including corrective actions
with regard to significant deficiencies or material weaknesses, in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a) above.
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
On April 18, 2001, an action was filed by Robert Bellmore and Jeffrey
Fairbairn, individually and on behalf of all others similarly situated, in the
Superior Court of the State of California, San Diego County, seeking class
action status in alleging violations of California wage and hour laws. The
Company settled the action in fiscal year 2002 for approximately $9.3 million
without admission of liability and the Court approved the settlement on February
10, 2003. Through April 13, 2003 the Company has paid out approximately $7.9
million in connection with this settlement.
The Company is also 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 other pending legal proceedings, asserted legal
claims and known potential legal claims should not materially affect our
operating results and liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information on matters submitted to a vote of our stockholders at our
annual meeting can be found in our Quarterly Report on Form 10-Q for the quarter
ended January 19, 2003 previously filed with the SEC.
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 (17)
10.2 Purchase Agreements dated as of January 22, 1987 between Foodmaker,
Inc. and FFCA/IIP 1985 Property Company and F FCA/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(13)
10.15 Executive Agreement between Jack in the Box Inc. and Gary J. Beisler
President and Chief Executive Officer of Qdoba Restaurant
Corporation
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
__________
(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.
(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.
19
(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.
ITEM 6(b) FORM 8-K.
We did not file any reports on Form 8-K with the Securities and Exchange
Commission during the second quarter ended April 13, 2003, except as follows. On
February 6, 2003, we filed a report on Form 8-K announcing that Jack in the Box
Inc. entered into a new $350 million senior credit facility arranged by Wachovia
Securities, replacing a $175 million revolving credit facility which was due to
expire March 31, 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: May 28, 2003
21
CERTIFICATION
-------------
I, Robert J. Nugent, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Jack in the Box
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and p rocedures (as
defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and
we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and repor t financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
By: /S/ ROBERT J. NUGENT
----------------------------
Robert J. Nugent
Chief Executive Officer and
Chairman of the Board
Date: May 28, 2003
22
CERTIFICATION
-------------
I, John F. Hoffner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Jack in the Box
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and p rocedures (as
defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and
we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and repor t financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
By: /S/ JOHN F. HOFFNER
----------------------------
John F. Hoffner
Executive Vice President and
Chief Financial Officer
Date: May 28, 2003
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