EX-99.2 3 a51776578ex99_2.htm EXHIBIT 99.2
 
Exhibit 99.2

JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
On March 21, 2018, Jack in the Box Inc. (the “Company”) completed the previously announced sale (the “Qdoba Sale”) of Qdoba Restaurant Corporation (“Qdoba”), a wholly owned subsidiary of the Company which operates and franchises more than 700 Qdoba Mexican Eats® fast-casual restaurants, to certain funds managed by affiliates of Apollo Global Management, LLC (the “Buyer”). On March 21, 2018, the Company also amended its credit agreement to extend the terms of its revolving credit facility and the term loan facility, each from a maturity date of March 19, 2019 to March 19, 2020 (the “Amendment”). As required under the Amendment, the Company will repay $260.0 million of the term loan facility upon closing of the Qdoba Sale. The Amendment also increases the Company's leverage ratio from 4.0x to 4.5x, and amends certain covenants contained in the credit agreement.
 
The following unaudited pro forma condensed consolidated balance sheet as of January 21, 2018 is presented as if the Qdoba Sale and Amendment had each occurred on January 21, 2018. The following unaudited pro forma condensed consolidated statement of earnings for the 16-week period ended January 21, 2018, and unaudited pro forma condensed consolidated statements of earnings for each of the fiscal years ended October 1, 2017, October 2, 2016 and September 27, 2015 are presented as if the Qdoba Sale had occurred on September 29, 2014, the first day of fiscal year 2015.
 
The unaudited pro forma condensed consolidated financial statements have been derived from historical financial statements prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and are presented based on information currently available. They are intended for informational purposes only and are not intended to represent the Company’s financial position or results of operations had the Qdoba Sale and Amendment occurred on the dates indicated, or to project the Company’s financial performance for any future period. Beginning in the first quarter of fiscal 2018, Qdoba’s historical financial information was reflected in the Company’s condensed consolidated balance sheets and statements of earnings as discontinued operations.
 
The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the following: (i) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-K for the year ended October 1, 2017 and (ii) the unaudited condensed consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-Q for the 16-week period ended January 21, 2018.
1
 
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of January 21, 2018
(In thousands, except share and per share data)
 
 
   
Historical (a)
    
Pro Forma
Adjustments
  
Pro Forma
  
ASSETS
                    
Current assets:
                    
Cash
  
$
3,789
    
$
36,737
  
(b)
  
$
40,526
  
Accounts and other receivables, net
    
36,303
                
36,303
  
Inventories
    
3,335
                
3,335
  
Prepaid expenses
    
16,423
      
(4,190
)
(c)
    
12,233
  
Current assets held for sale
    
332,308
      
(314,314
)
(d)
    
17,994
  
Other current assets
    
5,950
      
(2,199
)
(e)
    
3,751
  
Total current assets
    
398,108
      
(283,966
)
      
114,142
  
Property and equipment:
                          
Property and equipment, at cost
    
1,250,596
                
1,250,596
  
Less accumulated depreciation and amortization
    
(787,427
)
              
(787,427
)
Property and equipment, net
    
463,169
                
463,169
  
Other Assets:
                          
Intangible assets, net
    
1,348
                
1,348
  
Goodwill
    
51,050
                
51,050
  
Other assets, net
    
243,894
      
(539
)
(f)
    
243,355
  
Total other assets
    
296,292
      
(539
)
      
295,753
  
   
$
1,157,569
    
$
(284,505
)
    
$
873,064
  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                          
Current liabilities:
                          
Current maturities of long-term debt
  
$
68,564
    
$
(27,903
)
(g)
  
$
40,661
  
Accounts payable
    
27,142
                
27,142
  
Accrued liabilities
    
102,866
      
7,778
  
(c)
    
110,644
  
Current liabilities held for sale
    
61,521
      
(61,521
)
(d)
    
—
  
Total current liabilities
    
260,093
      
(81,646
)
      
178,447
  
Long-term liabilities:
                          
Long-term debt, net of current maturities
    
1,036,642
      
(232,097
)
(g)
    
804,545
  
Other long-term liabilities
    
235,394
                
235,394
  
Total long-term liabilities
    
1,272,036
      
(232,097
)
      
1,039,939
  
Stockholders’ deficit:
                          
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued
    
—
                
—
  
Common stock $0.01 par value, 175,000,000 shares authorized, 81,943,562 issued
    
819
                
819
  
Capital in excess of par value
    
457,772
                
457,772
  
Retained earnings
    
1,485,130
      
29,238
  
(h)
    
1,514,368
  
Accumulated other comprehensive loss
    
(127,842
)
              
(127,842
)
Treasury stock, at cost, 52,411,407 shares
    
(2,190,439
)
              
(2,190,439
)
Total stockholders’ deficit
    
(374,560
)
    
29,238
        
(345,322
)
   
$
1,157,569
    
$
(284,505
)
    
$
873,064
  
 
 
 
See accompanying notes to unaudited pro forma condensed consolidated financial statements.

2
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the 16-weeks Ended January 21, 2018 - First Quarter of Fiscal Year 2018
(In thousands, except per share data)
 
 
 
  
Historical (a)
    
Pro Forma
Adjustments
  
Pro Forma
  
Revenues:
                    
Company restaurant sales
  
$
169,637
    
$
—
      
$
169,637
  
Franchise rental revenues
    
77,217
                
77,217
  
Franchise royalties and other
    
47,609
                
47,609
  
     
294,463
                
294,463
  
Operating costs and expenses, net:
                          
Company restaurant costs (excluding depreciation and amortization):
                    
Food and packaging
    
48,864
                
48,864
  
Payroll and employee benefits
    
48,940
                
48,940
  
Occupancy and other
    
27,750
                
27,750
  
Total company restaurant costs (excluding depreciation and amortization)
    
125,554
                
125,554
  
Franchise occupancy expenses (excluding depreciation and amortization)
    
46,521
                
46,521
  
Franchise support and other costs
    
2,482
                
2,482
  
Selling, general and administrative expenses
    
34,625
                
34,625
  
Depreciation and amortization
    
19,157
                
19,157
  
Impairment and other charges, net
    
2,257
                
2,257
  
Gains on the sale of company-operated restaurants
    
(8,940
)
              
(8,940
)
     
221,656
                
221,656
  
Earnings from operations
    
72,807
                
72,807
  
Interest expense, net
    
12,780
                
12,780
  
Earnings from continuing operations and before income taxes
    
60,027
                
60,027
  
Income taxes
    
47,138
      
2,327
  
(i)
    
49,465
  
Earnings from continuing operations
  
$
12,889
    
$
(2,327
)
    
$
10,562
  
                           
Earnings per share from continuing operations:
                          
Basic
  
$
0.44
                     
$
0.36
  
Diluted
  
$
0.43
                     
$
0.35
  
                           
Weighted-average shares outstanding:
                          
Basic
    
29,551
                
29,551
  
Diluted
    
29,853
                
29,853
  
 
See accompanying notes to unaudited pro forma condensed consolidated financial statements.

3
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the 52-weeks Ended October 1, 2017 - Fiscal Year 2017
(In thousands, except per share data)
 
 
 
  
Historical (a)
    
Pro Forma
Adjustments
  
Pro Forma
  
Revenues:
                    
Company restaurant sales
  
$
1,152,479
    
$
(436,558
)
(j)
  
$
715,921
  
Franchise rental revenues
    
231,687
      
(109
)
(j)
    
231,578
  
Franchise royalties and other
    
169,748
      
(19,956
)
(j)
    
149,792
  
     
1,553,914
      
(456,623
)
      
1,097,291
  
Operating costs and expenses, net:
                          
Company restaurant costs (excluding depreciation and amortization):
                    
Food and packaging
    
346,944
      
(140,291
)
(j)
    
206,653
  
Payroll and employee benefits
    
333,611
      
(122,000
)
(j)
    
211,611
  
Occupancy and other
    
219,446
      
(95,079
)
(j)
    
124,367
  
Total company restaurant costs (excluding depreciation and amortization)
    
900,001
      
(357,370
)
(j)
    
542,631
  
Franchise occupancy expenses (excluding depreciation and amortization)
    
140,729
      
(106
)
(j)
    
140,623
  
Franchise support and other costs
    
13,700
      
(4,889
)
(j)
    
8,811
  
Selling, general and administrative expenses
    
157,348
      
(36,749
)
(j)(k)
    
120,599
  
Depreciation and amortization
    
88,939
      
(21,500
)
(j)
    
67,439
  
Impairment and other charges, net
    
25,090
      
(11,921
)
(j)
    
13,169
  
Gains on the sale of company-operated restaurants
    
(38,034
)
    
—
        
(38,034
)
     
1,287,773
      
(432,535
)
      
855,238
  
Earnings from operations
    
266,141
      
(24,088
)
      
242,053
  
Interest expense, net
    
46,518
      
(8,370
)
(j)(l)
    
38,148
  
Earnings from continuing operations and before income taxes
    
219,623
      
(15,718
)
      
203,905
  
Income taxes
    
81,315
      
(5,983
)
(m)
    
75,332
  
Earnings from continuing operations
  
$
138,308
    
$
(9,735
)
    
$
128,573
  
                           
Earnings per share from continuing operations:
                          
Basic
  
$
4.52
                 
$
4.20
  
Diluted
  
$
4.47
                 
$
4.16
  
                           
Weighted-average shares outstanding:
                          
Basic
    
30,630
                
30,630
  
Diluted
    
30,914
                
30,914
  
 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 
4
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the 53-weeks Ended October 2, 2016 - Fiscal Year 2016
(In thousands, except per share data)
 
 
  
Historical (a)
    
Pro Forma
Adjustments
  
Pro Forma
  
Revenues:
                    
Company restaurant sales
  
$
1,204,535
    
$
(415,495
)
(j)
  
$
789,040
  
Franchise rental revenues
    
232,907
      
(113
)
(j)
    
232,794
  
Franchise royalties and other
    
161,889
      
(21,465
)
(j)
    
140,424
  
     
1,599,331
      
(437,073
)
      
1,162,258
  
Operating costs and expenses, net:
                          
Company restaurant costs (excluding depreciation and amortization):
                    
Food and packaging
    
363,002
      
(127,464
)
(j)
    
235,538
  
Payroll and employee benefits
    
334,470
      
(111,451
)
(j)
    
223,019
  
Occupancy and other
    
212,844
      
(83,081
)
(j)
    
129,763
  
Total company restaurant costs (excluding depreciation and amortization)
    
910,316
      
(321,996
)
(j)
    
588,320
  
Franchise occupancy expenses (excluding depreciation and amortization)
    
137,808
      
(102
)
(j)
    
137,706
  
Franchise support and other costs
    
15,485
      
(4,378
)
(j)
    
11,107
  
Selling, general and administrative expenses
    
195,150
      
(43,003
)
(j)(k)
    
152,147
  
Depreciation and amortization
    
92,844
      
(20,058
)
(j)
    
72,786
  
Impairment and other charges, net
    
19,043
      
(9,114
)
(j)
    
9,929
  
Gains on the sale of company-operated restaurants
    
(1,230
)
    
—
        
(1,230
)
     
1,369,416
      
(398,651
)
      
970,765
  
Earnings from operations
    
229,915
      
(38,422
)
      
191,493
  
Interest expense, net
    
31,081
      
(6,801
)
(j)(l)
    
24,280
  
Earnings from continuing operations and before income taxes
    
198,834
      
(31,621
)
      
167,213
  
Income taxes
    
72,564
      
(11,824
)
(m)
    
60,740
  
Earnings from continuing operations
  
$
126,270
    
$
(19,797
)
    
$
106,473
  
                           
Earnings per share from continuing operations:
                          
Basic
  
$
3.74
                 
$
3.16
  
Diluted
  
$
3.70
                 
$
3.12
  
                           
Weighted-average shares outstanding:
                          
Basic
    
33,735
                
33,735
  
Diluted
    
34,146
                
34,146
  

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

5
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the 52-weeks Ended September 27, 2015 - Fiscal Year 2015
(In thousands, except per share data)
 
 
  
Historical (a)
    
Pro Forma
Adjustments
  
Pro Forma
  
Revenues:
                    
Company restaurant sales
  
$
1,156,863
    
$
(374,338
)
(j)
  
$
782,525
  
Franchise rental revenues
    
226,702
      
(208
)
(j)
    
226,494
  
Franchise royalties and other
    
156,752
      
(20,595
)
(j)
    
136,157
  
     
1,540,317
      
(395,141
)
      
1,145,176
  
Operating costs and expenses, net:
                          
Company restaurant costs (excluding depreciation and amortization):
                    
Food and packaging
    
361,988
      
(114,057
)
(j)
    
247,931
  
Payroll and employee benefits
    
313,302
      
(97,704
)
(j)
    
215,598
  
Occupancy and other
    
199,658
      
(72,930
)
(j)
    
126,728
  
Total company restaurant costs (excluding depreciation and amortization)
    
874,948
      
(284,691
)
(j)
    
590,257
  
Franchise occupancy expenses (excluding depreciation and amortization)
    
136,974
      
(192
)
(j)
    
136,782
  
Franchise support and other costs
    
15,197
      
(3,471
)
(j)
    
11,726
  
Selling, general and administrative expenses
    
211,651
      
(42,702
)
(j)(k)
    
168,949
  
Depreciation and amortization
    
89,468
      
(17,775
)
(j)
    
71,693
  
Impairment and other charges, net
    
11,767
      
(996
)
(j)
    
10,771
  
Losses on the sale of company-operated restaurants
    
3,139
      
—
        
3,139
  
     
1,343,144
      
(349,827
)
      
993,317
  
Earnings from operations
    
197,173
      
(45,314
)
      
151,859
  
Interest expense, net
    
18,803
      
(5,694
)
(j)(l)
    
13,109
  
Earnings from continuing operations and before income taxes
    
178,370
      
(39,620
)
      
138,750
  
Income taxes
    
65,769
      
(15,020
)
(m)
    
50,749
  
Earnings from continuing operations
  
$
112,601
    
$
(24,600
)
    
$
88,001
  
                           
Earnings per share from continuing operations:
                          
Basic
  
$
3.00
                 
$
2.34
  
Diluted
  
$
2.95
                 
$
2.30
  
                           
Weighted-average shares outstanding:
                          
Basic
    
37,587
                
37,587
  
Diluted
    
38,215
                
38,215
  
 
See accompanying notes to unaudited pro forma condensed consolidated financial statements.

6
JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial statements:
 
(a)           Reflects the Company's historical US GAAP consolidated financial statements, as reported, before pro forma adjustments related to the Qdoba Sale or the Amendment. As of and for the 16-weeks ended January 21, 2018, Qdoba was reported as discontinued operations in the Company's Form 10-Q. For each of the fiscal years ended October 1, 2017, October 2, 2016 and September 27, 2015, Qdoba results of operations were included in the consolidated results of operations in the Company's respective Form 10-K.
 
In fiscal 2018, the Company began presenting depreciation and amortization as a separate line item on the condensed consolidated statements of earnings to better align with similar presentations made by many of its peers and to provide additional disclosure that is meaningful to its investors. The historical condensed consolidated statements of earnings were adjusted to conform to this new presentation. Depreciation and amortization were previously presented within company restaurant costs, franchise occupancy expenses, selling, general and administrative expenses, and impairment and other charges, net on the consolidated statements of earnings.
 
(b)           Reflects estimated net cash proceeds from the Qdoba Sale of $294.5 million, representing the gross sales price of $305.0 million less certain estimated purchase price adjustments and estimated transaction costs, plus the transaction costs incurred and capitalized as of January 21, 2018 as discussed in note (e). The net cash proceeds ultimately recognized may change based on adjustments to transaction costs and the working capital adjustment as defined in the stock purchase agreement dated December 19, 2017. The pro forma adjustment to cash was also impacted by the mandatory repayment of debt outstanding under the term loan as discussed in note (g).

The pro forma adjustment to cash was calculated as follows (in thousands):
 
Estimated proceeds, net of transaction costs
  
$
294,538
  
Transaction costs capitalized, see note (e)    
2,199
  
Payment on term loan, see note (g)    
(260,000
)
   
$
36,737
  
 
(c)           Represents adjustments for the estimated taxes payable on the gain associated with the Qdoba Sale. Taxes on the gain were calculated using a blended statutory tax rate of 28.67% as shown in note (h). Taxes payable on the gain were included in the pro forma adjustment for accrued liabilities and were reduced by the Company's prepaid income taxes as of January 21, 2018, which resulted in a pro forma adjustment to prepaid expenses.
 
(d)           Represents the net assets sold and liabilities conveyed to the Buyer in the Qdoba Sale.
 
(e)           Represents transaction costs that were incurred as of the January 21, 2018 balance sheet to be applied against the gain on sale of Qdoba when it closes.
 
(f)           Represents the reduction of deferred tax benefit on the excess of the tax basis over the financial reporting basis in the Company's investment in Qdoba.
 
(g)          Represents the mandatory repayment of $260.0 million of the Company's term loan upon closing of the Qdoba Sale in accordance with the Amendment. The repayment was applied to current and long-term debt based on a pro-rata allocation of the remaining scheduled debt payments under the Amendment.
7
 
(h)           Represents the estimated after-tax gain on the sale of Qdoba of $29.8 million, and the realization of the Qdoba deferred tax benefit as discussed in note (f), which was calculated as follows (in thousands):
 
Estimated proceeds, net of transaction costs, see note (b)
  
$
294,538
  
Qdoba assets held for sale, see note (d)
    
(314,314
)
Qdoba liabilities held for sale, see note (d)
    
61,521
  
Pre-tax gain on sale of Qdoba
    
41,745
  
Taxes on the sale of Qdoba at blended statutory rate of 28.67%
    
(11,968
)
After-tax gain on sale of Qdoba
    
29,777
  
Deferred tax benefit, see note (f)
    
(539
)
   
$
29,238
  
 
The after-tax gain on sale of Qdoba ultimately recognized may change based on adjustments to transaction costs and the working capital adjustment as defined in the stock purchase agreement dated December 19, 2017.
 
(i)            Represents a Qdoba tax benefit that was recognized as a component of income taxes from continuing operations. This tax benefit resulted from the re-measurement of Qdoba's deferred tax liabilities due to the enactment of the Tax Cuts and Jobs Act on December 22, 2017.
 
(j)            Reflects the elimination of revenues and expenses representing the historical operating results of Qdoba.
 
(k)           In addition to the adjustment discussed in note (j), the pro forma adjustment to selling, general and administrative expenses in fiscal years 2017, 2016 and 2015 was impacted by an elimination of share-based compensation expenses, employee relocation expenses and gains/losses from the Company's executive deferred compensation plan totaling $1.4 million, $0.7 million and $0.3 million, respectively. These expenses were eliminated as they were corporate costs directly in support of Qdoba operations. All other corporate costs remain classified in the results of continuing operations.
 
(l)            In addition to the adjustment discussed in note (j), the pro forma adjustment to interest expense, net in fiscal years 2017, 2016 and 2015 was impacted by the allocation of additional interest expense of $4.5 million, $4.1 million, and $3.7 million, respectively, to Qdoba based on the mandatory term loan repayment upon closing of the Qdoba Sale, as discussed in note (g).
 
(m)          The pro forma adjustment for income taxes in fiscal years 2017, 2016 and 2015 represents Qdoba’s historical income tax expense net of the tax effect of the pro forma adjustments discussed in notes (k) and (l) of $5.9 million, $4.8 million, and $4.0 million, respectively.

Transition Services Agreement and Employee Agreement
 
Pursuant to a transition services agreement entered into and effective on the closing of the Qdoba Sale, the Company will supply certain services to Qdoba, including information technology, finance and accounting, human resources, supply chain and other corporate support services (the “Services”). The Services will be provided at cost for a period of up to 12 months, with two 3-month extensions available for certain services. No pro forma adjustments have been made related to these Services as the Company is unable to currently estimate the duration that each of the Services will be provided.
 
Further, pursuant to an employee agreement entered into and effective on the closing date of the Qdoba Sale, the Company will continue to employ all Qdoba employees who will transfer employment to the Buyer (the “Qdoba Employees”) through the earlier of: (a) following 30 days written notice from the Buyer of termination of the employee agreement, or (b) nine months following the closing of the Qdoba Sale. Upon termination of the employee agreement, the Qdoba Employees will become employees of the Buyer. During the term of the employee agreement, the Company (as the employer of record) will pay all wages and benefits of the Qdoba Employees and will receive reimbursement of these costs from the Buyer, who has all control over the employees. As the costs of the employee agreement will be passed through to the Buyer, no pro forma adjustments have been made related to the employment agreement.
 
8
Additional Financial Information
 
The following is a summary of the unaudited quarterly pro forma results of operations for fiscal year 2017 (in thousands, except per share data):
 
   
16-weeks Ended
    
12-weeks Ended
  
   
January 22,
2017
    
April 16,
2017
    
July 9,
2017
    
October 1,
2017
  
Company restaurant sales
  
$
238,571
    
$
180,275
    
$
157,772
    
$
139,303
  
Franchise revenues
    
114,610
      
85,609
      
88,329
      
92,822
  
Company restaurant costs (excluding depreciation and amortization)
    
(177,113
)
    
(137,275
)
    
(121,094
)
    
(107,149
)
Franchise costs (excluding depreciation and amortization)
    
(44,727
)
    
(33,276
)
    
(34,500
)
    
(36,931
)
Selling, general and administrative expenses
    
(40,772
)
    
(25,862
)
    
(28,110
)
    
(25,855
)
Depreciation and amortization
    
(21,263
)
    
(16,123
)
    
(15,336
)
    
(14,717
)
Impairment and other charges, net
    
(2,654
)
    
(1,367
)
    
(4,873
)
    
(4,275
)
Gains on the sale of company-operated restaurants
    
137
      
7,779
      
13,250
      
16,868
  
Interest expense, net
    
(10,409
)
    
(9,037
)
    
(9,382
)
    
(9,320
)
Earnings from continuing operations and before income taxes
    
56,380
      
50,723
      
46,056
      
50,746
  
Income taxes
    
(21,831
)
    
(19,333
)
    
(14,764
)
    
(19,404
)
Earnings from continuing operations
  
$
34,549
    
$
31,390
    
$
31,292
    
$
31,342
  
                                 
Earnings per share from continuing operations:
                                
Basic
  
$
1.07
    
$
1.02
    
$
1.06
    
$
1.06
  
Diluted
  
$
1.06
    
$
1.01
    
$
1.05
    
$
1.05
  
                                 
Weighted-average shares outstanding:
                                
Basic
    
32,168
      
30,895
      
29,474
      
29,478
  
Diluted
    
32,442
      
31,126
      
29,718
      
29,753
  

 

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