Jack in the Box Inc. Provides Business Update and Response to COVID-19

Jack in the Box Inc. (NASDAQ: JACK) today reported an update on the impact of the COVID-19 pandemic to its operations and financial performance and the company’s response.

Business Update

Same-store Sales

Jack in the Box system same-store sales for the second quarter ended April 12, 2020 are projected to decrease 4.2 percent. Prior to the weeks impacted by the COVID-19 pandemic, system same-store sales quarter-to-date through March 8, 2020 increased 5.2 percent.

Increase/(Decrease) in same-store sales (Unaudited):

Closures

Throughout the second quarter, the company had minimal temporary closures, with over 99 percent of restaurants open on each day during the COVID-19 pandemic. As previously disclosed, all locations are operating in an off-premise capacity.

Response to COVID-19

“While we navigate through this time of uncertainty, Jack in the Box remains committed to operating our restaurants with integrity, providing great guest service, and most importantly, protecting the health and safety of our employees and guests.

“We thank our franchisees for their partnership in upholding a variety of rigorous safety procedures, including implementing heightened sanitation requirements, practicing employee social distancing, and adhering to glove and mask protocol for all patrons and workers. We are cognizant of the economic burden on our franchisees as a result of this pandemic and want to ensure their financial health during these difficult times.

“We thank our employees, franchisees and partners for their tireless efforts to keep our drive-thrus open so that we may continue to serve our communities. We entered into this crisis in a position of strength, and we intend to emerge out of it even stronger,” said Lenny Comma, chairman and chief executive officer.

Restaurant Support

To support restaurant-level employees, the company has taken the following actions:

• Implemented a new Emergency Paid Sick Leave program at company-owned restaurants, which extends coverage in the event employees are quarantining, to care of themselves or a family member.
• Provided protective masks and thermometers to each of the restaurants across the system, both company-owned and franchised.

Community Support

To aid communities in which Jack in the Box operates, the company and its franchisees have provided the following assistance:

• Franchisees have supported local neighborhoods by donating gloves, providing free meals to first responders, and offering major discounts to public transportation workers.
• The company has donated 10,000 discontinued uniform shirts to a renowned designer to convert into masks for first responders.

Franchise Support

In response to the economic burden associated with the COVID-19 pandemic, the company has taken the following actions to ensure financial health of its valued franchise operators during these difficult times:

• Marketing fee reduction and collection postponement: Reduced April marketing fees from 5 percent to 4 percent of gross restaurant sales and postponed collection of these marketing fees. Marketing fees will be collected over the course of 24 months to commence at a future date that will be determined by the company.
• Rental payment collection postponement: Postponed the collection of approximately 40% of April franchisee rental payments to the company, to be collected by the company over three months beginning in July. In addition, the company is actively negotiating the underlying payment terms on land and buildings in which the company is the primary lessee, and any benefit the company is able to procure will be passed through to the respective franchisees.
• Delayed all fiscal 2020 franchise development agreements by at least six months and suspended other required capital investments.

These relief efforts will not have a material impact on the company’s income statement but will be reflected on the balance sheet and cash flow statements. The company will continue to monitor the situation closely and may consider additional assistance to franchisees if the situation warrants.

Capital Allocation and Liquidity Position

The company has temporarily paused its share repurchase program and did not buy back any shares in the second quarter.

The company drew down $100 million on its credit facility as previously disclosed, and subsequently drew down the remaining $8 million available under the credit facility. The company expects to report over $165 million in cash on the balance sheet as of the end of the second quarter.

Withdrawing 2020 Guidance

Due to the unprecedented adverse impact of the COVID-19 pandemic on business results, the company is withdrawing its guidance for the fiscal year ending September 27, 2020 and suspending all forward-looking guidance for 2020. The company will provide an update when it can reasonably estimate the impacts of the COVID-19 pandemic on business results.