 | April 3, 2017 United States Securities and Exchange Commission Division of Corporation Finance 100 F. Street, N.E. Washington, D.C. 20549 Attn: Melissa Raminpour, Branch Chief Re: Jack in the Box Inc. Form 10-K for the fiscal year ended October 2, 2016 Filed November 22, 2016 File No. 001-09390 Ladies and Gentlemen: This letter is being submitted in response to the comment letter dated March 24, 2017 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Form 10-K for the fiscal year ended October 2, 2016 of Jack in the Box Inc. (the “Company”). For the Staff's convenience, the Staff's comment has been stated below in its entirety, with the Company's responses to the comment set out immediately underneath it. The heading and numbered paragraph in this letter corresponds to the heading and numbered paragraph in the comment letter from the Staff. Capitalized terms used but not defined in this letter are intended to have the meanings ascribed to such terms in the above-referenced filings. Form 10-K for the Year Ended October 2, 2016 Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations General, page 21 1. We note your response to previous comment one. To the extent you continue to include company restaurant margins and franchise margins, please revise your proposed presentation to begin with GAAP earnings from operations. Refer to Question 102.10 of the updated Non-GAAP Compliance and Disclosure Interpretations issued on May 17, 2016. Please provide us with your proposed reconciliation. |
In response to the Staff’s comment, we have reviewed Question 102.10 of the updated Non-GAAP Compliance Checklist and Disclosure Interpretations issued on May 17, 2016, and have accordingly updated our example of the proposed non-GAAP reconciliation to begin with GAAP earnings from operations, as follows: | |
| 53 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | ||||||||||||||||||||||||||||||||||
| October 2, 2016 | September 27, 2015 | September 28, 2014 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Jack in the Box | Qdoba | Consolidated | Jack in the Box | Qdoba | Consolidated | Jack in the Box | Qdoba | Consolidated | |||||||||||||||||||||||||||
| Earnings from operations - GAAP (1) | $ | 229,915 | $ | 197,173 | $ | 162,308 | ||||||||||||||||||||||||||||||
| Other operating expenses: (2) | ||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | (203,816 | ) | (221,145 | ) | (206,788 | ) | ||||||||||||||||||||||||||||||
| Impairment and other charges, net | (19,057 | ) | (11,757 | ) | (14,908 | ) | ||||||||||||||||||||||||||||||
| Gains (losses) on the sale of company-operated restaurants | 1,230 | (3,139 | ) | (3,548 | ) | |||||||||||||||||||||||||||||||
| Total other operating expenses | $ | (221,643 | ) | $ | (236,041 | ) | $ | (225,244 | ) | |||||||||||||||||||||||||||
| Company restaurant operations: (2) | ||||||||||||||||||||||||||||||||||||
| Company restaurant sales | $ | 789,040 | $ | 415,495 | $ | 1,204,535 | $ | 782,525 | $ | 374,338 | $ | 1,156,863 | $ | 782,461 | $ | 338,451 | $ | 1,120,912 | ||||||||||||||||||
| Food and packaging | (235,538 | ) | (127,464 | ) | (363,002 | ) | (247,931 | ) | (114,057 | ) | (361,988 | ) | (254,891 | ) | (102,447 | ) | (357,338 | ) | ||||||||||||||||||
| Payroll and employee benefits | (223,019 | ) | (111,451 | ) | (334,470 | ) | (215,598 | ) | (97,704 | ) | (313,302 | ) | (218,000 | ) | (90,494 | ) | (308,494 | ) | ||||||||||||||||||
| Occupancy and other | (162,869 | ) | (101,289 | ) | (264,158 | ) | (157,281 | ) | (88,742 | ) | (246,023 | ) | (164,433 | ) | (83,428 | ) | (247,861 | ) | ||||||||||||||||||
| Restaurant operating margin - Non-GAAP | $ | 167,614 | $ | 75,291 | $ | 242,905 | $ | 161,715 | $ | 73,835 | $ | 235,550 | $ | 145,137 | $ | 62,082 | $ | 207,219 | ||||||||||||||||||
| Franchise operations: (2) | ||||||||||||||||||||||||||||||||||||
| Franchise rental revenues | $ | 232,794 | $ | 113 | $ | 232,907 | $ | 226,494 | $ | 208 | $ | 226,702 | $ | 216,944 | $ | 238 | $ | 217,182 | ||||||||||||||||||
| Franchise royalties and other | 140,424 | 21,465 | 161,889 | 136,157 | 20,595 | 156,752 | 127,839 | 18,198 | 146,037 | |||||||||||||||||||||||||||
| Franchise occupancy expenses | (170,050 | ) | (102 | ) | (170,152 | ) | (169,910 | ) | (192 | ) | (170,102 | ) | (168,819 | ) | (215 | ) | (169,034 | ) | ||||||||||||||||||
| Franchise support and other costs | (11,107 | ) | (4,884 | ) | (15,991 | ) | (11,726 | ) | (3,962 | ) | (15,688 | ) | (10,052 | ) | (3,800 | ) | (13,852 | ) | ||||||||||||||||||
| Franchise margin - Non-GAAP | $ | 192,061 | $ | 16,592 | $ | 208,653 | $ | 181,015 | $ | 16,649 | $ | 197,664 | $ | 165,912 | $ | 14,421 | $ | 180,333 | ||||||||||||||||||
| Restaurant operating margin as a % of company restaurant sales | 21.2 | % | 18.1 | % | 20.2 | % | 20.7 | % | 19.7 | % | 20.4 | % | 18.5 | % | 18.3 | % | 18.5 | % | ||||||||||||||||||
| Franchise margin as a % of total franchise revenues | 51.5 | % | 76.9 | % | 52.9 | % | 49.9 | % | 80.0 | % | 51.5 | % | 48.1 | % | 78.2 | % | 49.6 | % | ||||||||||||||||||
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(1) Earnings from operations is the sum of total other operating expenses, restaurant operating margin and franchise margin.
(2) Restaurant operating margin and franchise margin do not include an allocation of other operating expenses, such as selling, general and administrative expenses which include the costs of shared service functions such as accounting/finance and human resources, and other unallocated costs such as pension expense and share-based compensation. As such, restaurant operating margins and franchise margins are not indicative of the overall results of the Company and are considered non-GAAP financial measures. Restaurant operating margin and franchise margin should be considered as a supplement to, not as a substitute for, earnings from operations, net earnings or other financial measures prepared in accordance with U.S. GAAP, or other similarly titled measures of other companies. Management believes these non-GAAP financial measures provide important supplemental information to assist investors in understanding and analyzing the performance of the Company's core business and operating results.
In future filings, to the extent we continue to disclose company restaurant margins and franchise margins, we will include the non-GAAP reconciliation shown above. | |
The Company hereby acknowledges that: l The Company is responsible for the adequacy and accuracy of the disclosure in its filings. l Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the Company's filings. l The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. If you have any questions or comments regarding these responses, please do not hesitate to contact me by telephone at (858) 571-2485 or by facsimile at (858) 571-2225. Very truly yours, /S/ JERRY P. REBEL Jerry P. Rebel Executive Vice President and Chief Financial Officer cc: Leonard A. Comma, Chairman of the Board and Chief Executive Officer Phillip H. Rudolph, Executive Vice President, Chief Legal and Risk Officer and Corporate Secretary KPMG LLP | |