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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 January 18, 2004
----------------
Commission file no. 1-9390
JACK IN THE BOX INC.
------------------------------------------------------
(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
--------------
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 February 27, 2004 - 36,355,725.
1
JACK IN THE BOX INC. AND SUBSIDIARIES
INDEX
Page
----
PART I
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheets........................... 3
Unaudited Consolidated Statements of Earnings................... 4
Unaudited Consolidated Statements of Cash Flow.................. 5
Notes to Unaudited Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 17
Item 4. Controls and Procedures........................................... 17
PART II
Item 4. Submission of Matters to a Vote of Security Holders............... 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
January 18, September 28,
2004 2003
- --------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................... $ 30,558 $ 22,362
Accounts and notes receivable, net.......... 26,804 31,582
Inventories................................. 34,801 31,699
Prepaid expenses and other current assets... 17,378 21,056
Assets held for sale and leaseback.......... 54,784 41,916
----------- -----------
Total current assets...................... 164,325 148,615
----------- -----------
Property and equipment, net.................... 865,137 866,960
Goodwill....................................... 90,218 90,218
Intangible assets, net......................... 28,967 29,640
Other assets, net.............................. 41,418 40,517
----------- -----------
TOTAL..................................... $ 1,190,065 $ 1,175,950
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........ $ 9,536 $ 12,334
Accounts payable............................ 43,103 49,491
Accrued expenses............................ 182,563 175,909
----------- -----------
Total current liabilities................. 235,202 237,734
----------- -----------
Deferred income taxes.......................... 35,445 33,910
Long-term debt, net of current maturities...... 300,701 290,746
Other long-term liabilities.................... 132,339 143,238
Stockholders' equity:
Common stock................................ 433 432
Capital in excess of par value.............. 325,789 325,510
Retained earnings........................... 316,289 300,682
Accumulated other comprehensive loss, net... (27,184) (27,184)
Unearned compensation....................... (4,486) (4,655)
Treasury stock.............................. (124,463) (124,463)
----------- -----------
Total stockholders' equity................ 486,378 470,322
----------- -----------
TOTAL..................................... $ 1,190,065 $ 1,175,950
=========== ===========
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)
Sixteen Weeks Ended
--------------------------------
January 18, January 19,
2004 2003
- --------------------------------------------------------------------------------
Revenues:
Restaurant sales............................ $ 597,712 $ 559,431
Distribution and other sales................ 43,670 28,142
Franchise rents and royalties............... 21,217 17,500
Other....................................... 7,321 8,261
----------- -----------
669,920 613,334
----------- -----------
Costs of revenues:
Restaurant costs of sales................... 188,449 171,227
Restaurant operating costs.................. 313,139 294,059
Costs of distribution and other sales....... 42,907 27,492
Franchised restaurant costs................. 8,941 7,440
----------- -----------
553,436 500,218
----------- -----------
Selling, general and administrative............ 75,412 70,729
----------- -----------
Earnings from operations....................... 41,072 42,387
Interest expense............................... 15,899 8,258
----------- -----------
Earnings before income taxes................... 25,173 34,129
Income taxes................................... 9,566 12,969
----------- -----------
Net earnings................................... $ 15,607 $ 21,160
=========== ===========
Earnings per share:
Basic....................................... $ .43 $ .57
Diluted..................................... $ .43 $ .56
Weighted-average shares outstanding:
Basic....................................... 36,050 37,216
Diluted..................................... 36,607 37,651
See accompanying notes to consolidated financial statements.
4
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Sixteen Weeks Ended
--------------------------
January 18, January 19,
2004 2003
- -----------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings......................................................... $ 15,607 $ 21,160
Non-cash items included in operations:
Depreciation and amortization...................................... 23,175 21,182
Amortization of unearned compensation ............................. 169 117
Deferred finance cost amortization................................. 728 915
Deferred income taxes.............................................. 1,535 2,422
Loss on early retirement of debt................................... 9,177 -
Gains on the conversion of company-operated restaurants.............. (5,112) (7,270)
Decrease (increase) in receivables................................... (114) 4,488
Increase in inventories.............................................. (3,102) (2,132)
Decrease in prepaid expenses and other current assets................ 3,678 10,003
Decrease in accounts payable......................................... (6,388) (15,671)
Increase in other liabilities........................................ 14,573 7,853
-------- --------
Cash flows provided by operating activities........................ 53,926 43,067
-------- --------
Cash flows from investing activities:
Additions to property and equipment.................................. (23,501) (22,371)
Dispositions of property and equipment............................... 1,993 15,300
Proceeds from the conversion of company-operated restaurants......... 3,111 849
Increase in assets held for sale and leaseback....................... (9,865) (4,676)
Collections on notes receivable...................................... 10,020 4,302
Pension contributions................................................ (17,000) (4,400)
Other................................................................ (3,902) (1,584)
-------- --------
Cash flows used in investing activities............................ (39,144) (12,580)
-------- --------
Cash flows from financing activities:
Borrowings under revolving bank loans................................ - 361,500
Principal repayments under revolving bank loans...................... - (288,500)
Proceeds from term loan.............................................. 275,000 -
Principal payments on long-term debt, including current maturities... (275,230) (54,905)
Debt issuance and debt repayment costs............................... (6,636) (1,203)
Repurchase of common stock........................................... - (36,225)
Proceeds from issuance of common stock............................... 280 110
-------- --------
Cash flows used in financing activities............................ (6,586) (19,223)
-------- --------
Net increase in cash and cash equivalents.............................. $ 8,196 $ 11,264
======== ========
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 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. Our fiscal year is 52 or 53
weeks ending the Sunday closest to September 30. Fiscal year 2004 includes
53 weeks and fiscal year 2003 includes 52 weeks. We report results
quarterly with the first quarter having 16 weeks and each remaining quarter
having 12 weeks with the exception of the fourth quarter of fiscal year
2004 which will include 13 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
2003 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:
Sixteen Weeks Ended
--------------------------
January 18, January 19,
2004 2003
----------------------------------------------------------------------------------------------
Net earnings, as reported............................................ $ 15,607 $ 21,160
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of taxes.......... 1,659 1,619
-------- --------
Pro forma net earnings............................................... $ 13,948 $ 19,541
======== ========
Net earnings per share:
Basic-as reported................................................... $ .43 $ .57
Basic-pro forma..................................................... $ .39 $ .53
Diluted-as reported................................................. $ .43 $ .56
Diluted-pro forma................................................... $ .38 $ .52
3. ACCOUNTING CHANGES
In December 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation 46 Revised, Consolidation of Variable Interest Entities - an
interpretation of Accounting Research Bulletin No. 51, which provides among
other things, the immediate deferral of the application of Interpretation
46 for entities which did not originally qualify as special purpose
entities, and provided additional scope exceptions for joint ventures with
business operations and franchises. The adoption of this Interpretation did
not have a material impact on our results of operations or financial
position.
6
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
4. INTANGIBLE ASSETS
Intangible assets consisted of the following as of January 18, 2004 and
September 28, 2003:
2004 2003
----------------------------------------------------------------------------
Amortized intangible assets:
Gross carrying amount................. $ 60,676 $ 61,069
Less accumulated amortization......... 40,509 40,229
----------- -----------
Net carrying amount................... $ 20,167 $ 20,840
=========== ===========
Unamortized intangible assets:
Goodwill.............................. $ 90,218 $ 90,218
Qdoba trademark....................... 8,800 8,800
----------- -----------
$ 99,018 $ 99,018
=========== ===========
Amortized intangible assets include lease acquisition costs and acquired
franchise contracts. Lease acquisition costs represent the fair values of
acquired lease contracts having contractual rents lower than fair market
rents and are amortized on a straight-line basis over the remaining lease
term. Acquired franchise contracts are amortized over the term of the
franchise agreements based on the projected royalty revenue stream. The
weighted-average life of the amortized intangible assets is approximately
28 years. Total amortization expense related to intangible assets was $613
and $639 for the quarters ended January 18, 2004 and January 19, 2003,
respectively. The estimated amortization expense for each fiscal year
through 2008 ranges from approximately $1,400 to $1,800.
5. INDEBTEDNESS
New Financing. On January 8, 2004, we secured a new senior term loan and
amended our revolving credit facility, each with extended maturities. Our
new financing is intended to provide a more flexible capital structure,
facilitate the execution of our strategic plan, and decrease borrowing
costs by approximately $3,000 per year on average over the term of our new
term loan.
Our credit facility provides borrowings in the aggregate amount of $475,000
and is comprised of: (i) a $200,000 revolving credit facility maturing on
January 8, 2008 with a rate of London Interbank Offered Rate ("LIBOR") plus
2.25% and (ii) a $275,000 term loan maturing on January 8, 2011 with a rate
of LIBOR plus 2.75%. The 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 credit facility, the Company
and certain of its subsidiaries granted liens in 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 January 18, 2004, we had no
borrowings under our revolving credit facility and had letters of credit
outstanding of approximately $32,600.
We are subject to a number of 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 January 18, 2004, we were in compliance with all the
debt covenants.
Debt Extinguishment. We used the proceeds from the new term loan to
refinance our existing $150,000 term loan and redeem $125,000 of 8 3/8%
senior subordinated notes due April 15, 2008, which resulted in a pre-tax
charge to interest expense of $9,177, or $5,690 after tax.
7
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
6. INCOME TAXES
The income tax provisions in the quarter reflect the projected annual tax
rates for 2004 and 2003 of 38.0%. The fiscal 2003 income tax provision was
subsequently adjusted to the effective annual rate of 36.2% of pretax
earnings. The favorable income tax rate in 2003 resulted from the favorable
resolution of a long-standing tax matter. The final 2004 annual tax rate
cannot be determined until the end of the fiscal year; therefore, the
actual rate could differ from our current estimates.
7. AVERAGE SHARES OUTSTANDING
Net earnings per share for each quarter is based on the weighted-average
number of shares outstanding during the quarter, determined as follows (in
thousands):
Sixteen Weeks Ended
-------------------------
January 18, January 19,
2004 2003
-----------------------------------------------------------------------------------------------
Shares outstanding, beginning of period ............................... 36,034 38,558
Effect of common stock issued.......................................... 16 4
Effect of common stock reacquired...................................... - (1,346)
------ ------
Weighted-average shares outstanding - basic............................ 36,050 37,216
Assumed additional shares issued upon exercise of stock
options, net of shares reacquired at the average market price......... 305 295
Effect of restricted stock issued...................................... 252 140
------ ------
Weighted-average shares outstanding - diluted.......................... 36,607 37,651
====== ======
Diluted weighted-average shares outstanding exclude options to purchase
3,480,676 and 3,271,253 shares of common stock in 2004 and 2003,
respectively, because their exercise prices exceeded the average market
price of common stock for the period.
8. CONTINGENCIES AND LEGAL MATTERS
The Company is principally liable for lease obligations on various
properties sub-leased to third parties. We are also obligated under a lease
guarantee agreement associated with one Chi Chi's restaurant property. Due
to the bankruptcy of the Chi-Chi's restaurant chain, previously owned by
the Company, we are obligated to perform in accordance with the terms of
the guarantee agreement, as well as four other lease agreements which
expire at various dates in 2010 and 2011. During fiscal year 2003, we
established an accrual for these lease obligations and do not anticipate
incurring any additional charges related to the Chi Chi's bankruptcy in
future years.
Legal Proceedings - 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 pending legal proceedings,
asserted legal claims and known potential legal claims should not
materially affect our operating results, financial position or liquidity.
9. 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, JACK IN THE BOX and Qdoba, based on the Company's
management structure and internal method of reporting. Based upon certain
quantitative thresholds, only JACK IN THE BOX is considered a reportable
segment.
8
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
9. SEGMENT REPORTING (continued)
Summarized financial information concerning our reportable segment is shown
in the following table:
Sixteen Weeks Ended
--------------------------------
January 18, January 19,
2004 2003
---------------------------------------------------------------------------
Revenues ................................. $ 660,240 $ 613,334
Earnings from operations.................. 41,410 42,387
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 revenues to consolidated revenue
follows:
Sixteen Weeks Ended
--------------------------------
January 18, January 19,
2004 2003
---------------------------------------------------------------------------
Revenues................................. $ 660,240 $ 613,334
Other.................................... 9,680 -
----------- -----------
Consolidated revenues.................... $ 669,920 $ 613,334
=========== ===========
A reconciliation of reportable segment earnings from operations to
consolidated earnings from operations follows:
Sixteen Weeks Ended
--------------------------------
January 18, January 19,
2004 2003
---------------------------------------------------------------------------
Earnings from operations................. $ 41,410 $ 42,387
Other.................................... (338) -
----------- -----------
Consolidated earnings from operations.... $ 41,072 $ 42,387
=========== ===========
10. SUPPLEMENTAL CASH FLOW INFORMATION
The consolidated statements of cash flows exclude the following non-cash
transactions: (i) equipment capital lease obligations of $7,290 incurred in
2004; (ii) non-cash proceeds from the Company's financing of a portion of
the sale of company-operated restaurants to certain qualified franchisees
of $5,265 and $8,218 in 2004 and 2003, respectively, included in accounts
receivable; and (iii) the use of sinking fund payments to retire financing
lease obligations during 2003.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
All comparisons under this heading between 2004 and 2003 refer to the
16-week periods ended January 18, 2004 and January 19, 2003, respectively,
unless otherwise indicated.
The Company acquired Qdoba Restaurant Corporation ("Qdoba"), operator and
franchiser of Qdoba Mexican Grill(R), on January 21, 2003. Qdoba's results of
operations are not included in periods ending prior to the acquisition date, and
as such are not reflected in the results of operations for the first quarter of
fiscal year 2003.
Overview
Jack in the Box Inc. (the "Company") owns, operates and franchises JACK IN
THE BOX(R) quick-service hamburger restaurants and Qdoba Mexican Grill ("Qdoba")
fast-casual restaurants. As of January 18, 2004, the JACK IN THE BOX system
included 1,959 restaurants, of which 1,545 were company-operated and 414 were
franchise-operated. JACK IN THE BOX restaurants are located primarily in the
western and southern United States. As of January 18, 2004, the Qdoba Mexican
Grill system included 131 fast-casual restaurants.
The Company's primary source of revenue is from company-operated
restaurants. The Company also derives revenue from distribution sales to JACK IN
THE BOX and Qdoba franchises, retail sales from fuel and convenience stores
("QUICK STUFF(R)"), royalties from franchised restaurants, rents from real
estate leased to certain franchisees, initial franchise fees and development
fees, and the sale of company-operated restaurants to franchisees.
The quick-serve restaurant industry has become more complex and challenging
in recent years. Challenges presently facing the sector include changes in
consumer expectations, intense competition with respect to market share,
restaurant locations, labor, and menu and product development, the emergence of
a new fast-casual restaurant segment, changes in the economy and industry price
wars.
To address these challenges and others, and support our goal of
transitioning to a national restaurant company, management has undertaken a
brand re-invention operating strategy and developed a multifaceted growth
strategy. Brand re-invention initiatives include product innovation with a focus
on high-quality products, enhancements to the quality of service and renovation
to the restaurant facility. Our multifaceted growth strategy includes growing
our restaurant base, increasing our franchising activities, expanding our
proprietary QUICK STUFF convenience store concept and continuing to grow Qdoba.
We believe that brand re-invention will clearly differentiate us from our
competition and that our growth strategy will support us in our objective to
become a national restaurant company.
The following summarizes the most significant events occurring in the first
quarter of fiscal year 2004:
o Increase in Company-operated Restaurant Sales. New product
introductions and quality improvements to existing products have
resulted in increased sales trends in the quarter. This trend is
expected to continue, and we project a 4.0% to 4.5% increase in sales
at JACK IN THE BOX restaurants open more than one fiscal year
("same-store") in the second quarter and a 2.5% to 3.0% growth in
same-store sales for the full year.
o Increase in Restaurant Costs of Sales. In the quarter, restaurant
costs of sales were unfavorably impacted by higher commodity costs,
primarily beef. Beef costs were approximately 20% higher than a year
ago and are expected to continue to be higher than last year in our
second quarter and then moderate for the remainder of the year. For
the full fiscal year, we estimate beef costs will be approximately 5%
to 7% higher than last year.
o Refinancing Transaction. We secured new financing intended to provide
a more flexible capital structure, facilitate the execution of our
strategic plan, and decrease borrowing costs. In connection with the
refinancing, we recorded a charge to interest expense for the early
retirement of debt of $9.2 million, $5.7 million after tax or $.15 per
diluted share.
o Brand Re-Invention Progress. We are currently converting two
restaurants in San Diego that will serve as learning labs for our
brand re-invention initiative. These restaurants are expected to
reopen within the next 60 days and will feature an upgraded menu,
totally redesigned facility - inside and out - and a higher level of
guest service. The results of these two concept stores will be
evaluated and applied in two test markets before fiscal-year end. As
we have stated previously, brand reinvention is anticipated to be a
three- to five-year program which will roll out only after evaluation
of our market testing. We are also on course with our new Innovation
Center, which will unite research and development with product
marketing and other key support functions. The Innovation Center,
expected to open this spring, will help us research evolving consumer
preferences, develop new products and design new restaurant processes
and equipment.
10
The following table sets forth, unless otherwise indicated, the percentage
relationship to total revenues of certain items included in the Company's
statements of earnings.
STATEMENTS OF EARNINGS DATA
2004 2003
- -------------------------------------------------------------------------------
Revenues:
Restaurant sales............................. 89.2% 91.2%
Distribution and other sales................. 6.5 4.6
Franchise rents and royalties................ 3.2 2.9
Other........................................ 1.1 1.3
----- -----
Total revenues............................. 100.0% 100.0%
----- -----
Costs of revenues:
Restaurant costs of sales (1)................ 31.5% 30.6%
Restaurant operating costs (1)............... 52.4 52.6
Costs of distribution and other sales (1).... 98.3 97.7
Franchise restaurant costs (1)............... 42.1 42.5
Total costs of revenues.................... 82.6 81.6
Selling, general and administrative............ 11.3 11.5
Earnings from operations................... 6.1 6.9
(1) As a percentage of the related sales and/or revenues.
The following table summarizes the number of JACK IN THE BOX restaurants as
of January 18, 2004 and January 19, 2003:
2004 2003
- -------------------------------------------------------------------------------
JACK IN THE BOX:
Company-operated............................. 1,545 1,515
Franchised................................... 414 365
----- -----
End of period total.......................... 1,959 1,880
===== =====
Revenues
Restaurant sales increased $38.3 million, or 6.8%, to $597.7 million in
2004 from $559.4 million in 2003. This growth primarily reflects an increase in
sales at JACK IN THE BOX company-operated restaurants, growth in the number of
company-operated restaurants and additional sales from Qdoba company-operated
restaurants, which were acquired in the second quarter of 2003. Sales at JACK IN
THE BOX restaurants open more than one fiscal year ("same-store") increased 3.1%
in 2004 compared with 2003, primarily due to the continued success of our
premium salad line, positive response to our new high-quality products,
including Classics on a Roll and our improved Chicken Breast Strips and improved
economic conditions compared with a year ago. The number of JACK IN THE BOX
company-operated restaurants increased 2.0% to 1,545 in 2004 from 1,515 a year
ago.
Distribution and other sales, representing distribution sales to
franchisees and QUICK STUFF sales, increased $15.6 million to $43.7 million in
2004 from $28.1 million in 2003. Sales from our QUICK STUFF locations increased
primarily due to an increase in the number of QUICK STUFF locations to eighteen
at the end of the quarter from twelve a year ago. Distribution sales also grew
in 2004 compared with 2003, primarily due to an increase in the number of JACK
IN THE BOX and Qdoba franchised restaurants serviced by our distribution
centers.
11
Franchise rents and royalties increased $3.7 million to $21.2 million in
2004 from $17.5 million in 2003, primarily reflecting an increase in the number
of JACK IN THE BOX franchised restaurants to 414 at the end of the quarter from
365 a year ago. As a percentage of franchise restaurant sales, franchise rents
and royalties decreased slightly to 12.3% in 2004 from 13.0% in 2003, primarily
due to the acquisition of Qdoba in the second quarter of fiscal year 2003, whose
royalties are lower than JACK IN THE BOX average rents and royalties.
Other revenues include principally gains and fees from the conversion of
company-operated restaurants, as well as interest income from notes receivable
and investments. Other revenues decreased $1.0 million to $7.3 million in 2004
from $8.3 million in 2003, primarily due to a decrease in gains and fees from
the conversion of 19 lower average sales volume restaurants in 2004 compared
with 9 restaurants a year ago. Gains related to these conversions were $5.1
million and $7.3 million, respectively. In the second quarter, we expect to
convert seven restaurants to franchises and generate approximately $4 million in
other revenues, and for the full year other revenues are expected to be
approximately $23 million, primarily from the conversion of 35 to 40
restaurants.
Costs and Expenses
Restaurant costs of sales, which include food and packaging costs,
increased to $188.4 million in 2004 from $171.2 million in 2003, primarily due
to sales growth and higher ingredient costs. As a percentage of restaurant
sales, costs of sales increased to 31.5% in 2004 from 30.6% in 2003, due to
higher ingredient costs, primarily beef which was approximately 20% higher than
a year ago.
Restaurant operating costs were $313.1 million, or 52.4% of restaurant
sales, in 2004 and $294.1 million, or 52.6% in 2003. The percentage improvement
in 2004 is primarily due to increased leverage on payroll and fixed costs
provided by higher sales in the quarter compared with a year ago, partially
offset by increases in insurance costs. Insurance expenses, primarily workers'
compensation, are expected to continue at higher levels throughout fiscal year
2004.
Costs of distribution and other sales increased to $42.9 million in 2004
from $27.5 million in 2003, primarily reflecting an increase in the related
sales. As a percentage of distribution and other sales, these costs increased to
98.3% in 2004 from 97.7% a year ago due to declines in distribution and fuel
margins. Lower fuel margins resulted from a change in our fuel pricing strategy
designed to achieve higher sales volumes at certain QUICK STUFF locations.
Distribution margins were impacted by growth in the percentage of our
distribution business serviced from our lower margin distribution centers.
Franchise restaurant costs, which consist principally of rents and
depreciation on properties leased to franchisees and other miscellaneous costs,
increased to $8.9 million in 2004 from $7.4 million in 2003, primarily
reflecting an increase in the number of franchised restaurants.
Selling, general and administrative expenses ("SG&A") increased to $75.4
million in 2004 from $70.7 million in 2003. SG&A improved to 11.3% of revenues
in 2004 compared with 11.5% in 2003 due to continued cost reduction initiatives
from our Profit Improvement Program and the increased leverage from higher
revenues, offset in part by higher pension costs. Pension costs have increased
due to declines in discount rates and in the assumed long-term rate of return on
plan assets, and are expected to continue at higher levels throughout fiscal
year 2004.
Interest expense was $15.9 million in 2004 compared with $8.3 million in
2003. This increase primarily relates to the refinancing of the Company's term
loan and the early redemption of the senior subordinated notes, which resulted
in a charge of $9.2 million for the payment of a call premium and the write-off
of deferred finance fees. In addition to providing us with a more flexible
capital structure, this refinancing transaction is expected to lower our
borrowing costs by approximately $3 million per year on average over the term of
our new term loan. The impact of these costs was partially offset by lower
average interest rates compared with a year ago.
The income tax provisions in both quarters reflect projected annual tax
rates of 38.0% of pre-tax earnings. The fiscal 2003 income tax provision was
subsequently adjusted to the effective annual rate of 36.2% of pretax earnings.
The lower income tax rate in 2003 resulted from the favorable resolution of a
long-standing tax matter. The final 2004 annual tax rate cannot be determined
until the end of the fiscal year; therefore, the actual rate could differ from
our current estimates.
12
Net Earnings
Net earnings were $15.6 million, or $.43 per diluted share, in 2004
compared to $21.2 million, or $.56 per diluted share, in 2003. In 2004, net
earnings includes a loss on early retirement of debt, which was $5.7 million,
net of income taxes, or $.15 per diluted share.
Liquidity and Capital Resources
General. Cash and cash equivalents increased $8.2 million to $30.6 million
at January 18, 2004 from $22.4 million at the beginning of the fiscal year,
reflecting a temporary increase in cash balances. We generally 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. At January 18, 2004, we
had no borrowings under our revolving credit facility.
Financial Condition. Our working capital deficit decreased $18.2 million to
$70.9 million at January 18, 2004 from $89.1 million at September 28, 2003,
primarily due to the temporary increase in our cash and a $12.9 million increase
in assets held for sale and leaseback at the end of the quarter. The increase in
assets held for sale and leaseback is due principally to an increase in costs
associated with the Company's Innovation Center expected to open this spring.
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 increased to .7 to 1 compared with .6
to 1 at the beginning of the year, improving for the same reasons discussed
above.
New Financing. On January 8, 2004, we secured a new senior term loan and
amended our revolving credit facility, each with extended maturities. Our new
financing is intended to provide a more flexible capital structure, facilitate
the execution of our strategic plan, and decrease borrowing costs by
approximately $3 million per year on average over the term of our new term loan.
Our credit facility provides borrowings in the aggregate amount of $475
million and is comprised of: (i) a $200 million revolving credit facility
maturing on January 8, 2008 with a rate of London Interbank Offered Rate
("LIBOR") plus 2.25% and (ii) a $275 million term loan maturing on January 8,
2011 with a rate of LIBOR plus 2.75%. The 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 credit facility, the Company and certain of its
subsidiaries granted liens in 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
January 18, 2004, we had no borrowings under our revolving credit facility and
had letters of credit outstanding of $32.6 million.
We used the proceeds from the new term loan to refinance our existing $150
million term loan and redeem $125 million of 8 3/8% senior subordinated notes
due April 15, 2008, which resulted in a charge to interest expense of $9.2
million. The amended revolving credit facility is intended to support general
corporate purposes.
We are subject to a number of 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 January 18, 2004, we were in compliance with all the debt
covenants.
Total debt outstanding increased to $310.2 million at January 18, 2004 from
$303.1 million at the beginning of the fiscal year due to an increase in capital
lease obligations associated with new restaurant equipment leases.
Franchise Conversions. We have continued our strategy of selectively
converting company-operated restaurants to franchises, converting 19 restaurants
in the quarter compared with nine a year ago. In the first quarter of 2004 and
2003, proceeds from the conversion of company-operated restaurants and
collections on notes receivable, primarily related to conversions, were $13.1
million and $5.2 million, respectively.
13
In the second quarter, we expect to convert seven restaurants to franchises
and generate approximately $4 million in other revenues, and for the full year
other revenues are expected to be approximately $23 million, primarily from the
conversion of 35 to 40 restaurants.
Other Transactions. In January 1994, we entered into financing lease
arrangements with two limited partnerships (the "Partnerships") related to 76
restaurants. At the inception of the financing lease arrangements, we recorded
cash and cash held in trust, and established financing lease obligations of
approximately $70 million requiring semi-annual payments to cover interest and
sinking fund obligations due in equal installments on January 1, 2003 and
November 1, 2003. In January 2003, we paid a $1.3 million fee to retire the debt
early. The fee was charged to interest expense in the first quarter of fiscal
year 2003 when the obligations were retired. 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 fiscal years 2000 and 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. Under these authorizations, we acquired
4,115,853 shares at an aggregate cost of $90 million prior to the beginning of
fiscal year 2004 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.
Contractual Obligations and Commitments. The following is a summary of the
Company's contractual obligations and commercial commitments as of January 18,
2004:
Payments Due by Period (in thousands)
-----------------------------------------------------------------------------
Less than After
Total 1 year 1-3 years 3-5 years 5 years
----------------------------------------------------------------------------------------------------------------------------
Contractual Obligations:
Credit facility term loan................. $ 275,000 $ 2,063 $ 5,500 $ 5,500 $ 261,937
Revolving credit facility................. - - - - -
Capital lease obligations................. 30,407 4,189 8,450 8,423 9,345
Other long-term debt obligations.......... 4,830 3,284 1,152 394 -
Operating lease obligations (1)........... 1,506,547 159,737 281,326 237,487 827,997
Guarantee (2)............................. 1,106 210 323 316 257
----------- ----------- ----------- ----------- -----------
Total contractual obligations............ $ 1,817,890 $ 169,483 $ 296,751 $ 252,120 $ 1,099,536
=========== =========== =========== =========== ===========
Other Commercial Commitments:
Stand-by letters of credit (3)............ $ 32,602 $ 32,602 $ - $ - $ -
=========== =========== =========== =========== ===========
(1) We exercised our purchase option rights under certain lease agreements
and on February 27, 2004, purchased JACK IN THE BOX restaurant
properties for approximately $46 million, which will be converted to
sale and leaseback transactions over the balance of the fiscal year.
(2) Consists of a guarantee associated with one Chi-Chi's property. Due to
the bankruptcy of the Chi-Chi's restaurant chain, previously owned by
the Company, we are obligated to perform in accordance with the terms
of the guarantee agreement.
(3) Consists primarily of letters of credit for workers' compensation and
general liability insurance.
Capital Expenditures. Capital expenditures, including capital lease
obligations, were $30.8 million and $22.4 million in 2004 and 2003,
respectively. Cash flows from additions to property and equipment, increased
$1.1 million to $23.5 million in 2004 from $22.4 million in 2003, due to an
increase in spending related to JACK IN THE BOX restaurant improvements and the
inclusion of Qdoba capital expenditures, primarily related to new
company-operated restaurants. These increases were partially offset by a decline
in expenditures for new JACK IN THE BOX restaurants, reflecting a reduction in
the number of new restaurant openings to 12 in the first quarter of fiscal year
2004 from 22 a year ago. During the quarter, we also incurred capital lease
obligations for certain restaurant equipment of $7.3 million.
In the second quarter of fiscal year 2004 and for the full year, we expect
capital expenditures and lease commitments to be approximately $29 million and
$150 million, respectively. Our capital projections include spending related to
approximately 14 and 65 new restaurants, respectively, brand re-invention
initiatives and our new Innovation Center, as well as additional capital lease
commitments for certain restaurant equipment.
14
Pension Funding. Lower discount rates and a reduction in our assumed
long-term rate of return on plan assets have contributed to an increase in our
accumulated benefit plan obligations. Taking advantage of our current cash
position and the upward trend in the equity markets, we contributed $17.0
million to our pension plans in December 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
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 in place or
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 are rising,
including pension and insurance costs, 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
We have identified the following as the Company's most 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 judgments. Information regarding the Company's other
significant accounting policies are disclosed in Note 1 of our most recent
Annual Report on Form 10-K filed with the SEC.
Pension Benefits - The Company sponsors pension and other retirement plans
in various forms covering those employees who meet certain eligibility
requirements. Several statistical and other factors which attempt to anticipate
future events are used in calculating the expense and liability related to the
plans, including assumptions about the discount rate, expected return on plan
assets and the rate of increase in compensation levels, as determined by the
Company using specified guidelines. In addition, our outside actuarial
consultants also use certain statistical factors such as turnover, retirement
and mortality rates to estimate the Company's future benefit obligations. The
actuarial assumptions used may differ materially from actual results due to
changing market and economic conditions, higher or lower turnover and retirement
rates or longer or shorter life spans of participants. These differences may
impact the amount of pension expense recorded by the Company. Due principally to
decreases in discount rates and declines in the return on assets in the plans,
the pension expense in fiscal year 2004 is expected to be approximately $7.2
million higher than fiscal year 2003.
Self Insurance - The Company is self-insured for a portion of its current
and prior years' losses related to its workers' compensation, general liability,
automotive, medical and dental programs. In estimating the Company's
self-insurance reserves, we utilize independent actuarial estimates of expected
losses, which are based on statistical analyses of historical data. These
assumptions are closely monitored and adjusted when warranted by changing
circumstances. Should a greater amount of claims occur compared to what was
estimated, or medical costs increase beyond what was expected, reserves might
not be sufficient, and additional expense may be recorded.
Long-lived Assets - Property, equipment and certain other assets, including
amortized intangible assets, are reviewed for impairment when indicators of
impairment are present. This review includes a market-level analysis and
evaluations of restaurant operating performance from operations and marketing
management. When indicators of impairment are present, we perform an impairment
analysis on a restaurant-by-restaurant basis. If the sum of undiscounted future
cash flows is less than the carrying value of the asset, we recognize an
impairment loss by the amount which the carrying value exceeds the fair value of
the asset. Our estimates of future cash flows may differ from actual cash flows
due to, among other things, economic conditions or changes in operating
performance. During the first quarter of fiscal year 2004, we noted no
indication of impairment of these long-lived assets.
15
Goodwill and Other Intangibles - We also evaluate goodwill and intangible
assets not subject to amortization annually, or more frequently if indicators of
impairment are present. If the estimated fair values of these assets are less
than the related carrying amounts, an impairment loss is recognized. The methods
we use to estimate fair value include future cash flow assumptions, which may
differ from actual cash flows due to, among other things, economic conditions or
changes in operating performance. During the fourth quarter of 2003, we reviewed
the carrying value of our goodwill and indefinite life intangible assets and
determined that no impairment existed as of September 28, 2003.
Allowances for Doubtful Accounts - Our trade receivables consist primarily
of amounts due from franchisees for rents on subleased sites, royalties and
distribution sales. We also have notes receivable related to short-term
financing provided on the sale of company-operated restaurants to certain
qualified franchisees. We continually monitor amounts due from franchisees and
maintain an allowance for doubtful accounts for estimated losses resulting from
the potential inability of our franchisees to make required payments. This
estimate is based on our assessment of the collectibility of specific franchisee
accounts, as well as a general allowance based on historical trends, the
financial condition of our franchisees, consideration of the general economy and
the aging of such receivables. The Company has good relationships with its
franchisees and achieves high collection rates; however, if the future financial
condition of our franchisees were to deteriorate, resulting in their inability
to make specific required payments, additions to the allowance for doubtful
accounts may be required.
Legal Accruals - The Company is subject to claims and lawsuits in the
ordinary course of its business. A determination of the amount accrued, if any,
for these contingencies is made after analysis of each matter. We continually
evaluate such accruals and may increase or decrease accrued amounts as we deem
appropriate.
Future Application of Accounting Principles
In December 2003, the FASB issued SFAS 132 Revised, Employers' Disclosures
about Pensions and Other Post Retirement Benefits. This Statement requires
revisions to employers' disclosures about pension plans and other post
retirement plans. The interim period disclosure requirements will be effective
beginning in the second quarter of fiscal year 2004 and the annual disclosure
requirements will be effective for fiscal year 2004.
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 refinancing and
effective tax rate, expectations regarding any liability that may result from
claims and actions filed against us, our estimated and future expenses, our
brand reinvention, growth and QUICK STUFF strategies, our same store sales
trends, our cost of sales, the opening of our learning labs and Innovation
Center, the number and impact of our anticipated restaurant conversions, our
future financial performance, 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
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, demographic
changes, adverse weather, economic and political conditions and other
significant events in California can significantly affect Jack in the Box
restaurant sales. 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
16
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 discount 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 2004 is expected to be higher than
our fiscal 2003 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 January
18, 2004, our applicable margins for the LIBOR based revolving loans and term
loan were set at 2.25% and 2.75%, respectively. A hypothetical one percent
increase in short-term interest rates, based on the outstanding balance of our
revolving credit facility and term loan at January 18, 2004, would result in an
estimated increase of $2.8 million in annual interest expense.
Changes in interest rates also impact our pension expense, as do changes in
the expected long-term rate of return on our pension plan assets. 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 obligation when
due. Additionally, an assumed long-term rate of return on plan assets is used in
determining the average rate of earnings expected on the funds invested or to be
invested to provide the benefits to meet our projected benefit obligation. A
hypothetical 25 basis point reduction in the assumed discount rate and expected
long-term rate of return on plan assets would result in an estimated increase of
$1.4 million and $0.2 million, respectively, in our future annual 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. Open commodity futures and option contracts were not
significant at January 18, 2004.
At January 18, 2004, we had no other material financial instruments subject
to significant market 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 our disclosure controls and procedures, as such
17
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.
(b) There have been no significant changes in our internal control over
financial reporting during the quarter ended January 18, 2004 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION
There is no information required to be reported for any items under Part II,
except as follows:
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders in the first quarter
ended January 18, 2004. Our annual meeting of stockholders was held February 13,
2004, at which the following matters were voted as indicated:
1. Election of the following directors to serve until the next
annual meeting of stockholders and until their successors
are elected and qualified.
For Withheld Abstain
--- -------- -------
Michael E. Alpert..................... 32,823,932 1,668,770 -
Edward W. Gibbons..................... 33,908,169 584,533 -
Anne B. Gust.......................... 32,723,132 1,769,570 -
Alice B. Hayes, Ph.D.................. 32,503,188 1,989,514 -
Murray H. Hutchison................... 32,123,171 2,369,531 -
Michael W. Murphy..................... 32,124,528 2,368,174 -
Linda A. Lang......................... 33,906,359 586,343 -
Robert J. Nugent...................... 33,529,084 963,618 -
L. Robert Payne....................... 33,522,934 969,768 -
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
2. Approve the 2004 Stock Incentive Plan.... 22,923,040 5,754,266 281,030 5,534,366
For Against Abstain
--- ------- -------
3. Ratification of appointment of KPMG LLP
as independent auditors................. 33,355,559 1,121,774 15,369
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
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 Amended and Restated Credit Agreement dated as of January 8, 2004
by and among Jack in the Box Inc. and the lenders named therein
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(12)
10.14* Form of Restricted Stock Award for certain executives(12)
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 (13)
10.16* 2004 Stock Incentive Plan (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
-----------
* Management contract or compensatory plan.
19
(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.
(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 herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended January 19, 2003.
(13) Previously filed and incorporated herein by reference from registrant's
Quarterly Report on Form 10-Q for the quarter ended April 13, 2003.
(14) Previously filed and incorporated herein by reference from the registrant's
Definitive Proxy Statement dated January 9, 2004 for the Annual Meeting of
Stockholders' on February 13, 2004.
ITEM 6(b). FORM 8-K
--------
We filed the following reports on Form 8-K with the Securities and Exchange
Commission during the first quarter ended January 18, 2004: On November 12,
2003, we filed a report on Form 8-K containing an earnings release that reported
results of operations for the fourth quarter and fiscal year periods ended
September 28, 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: March 2, 2004