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Jack in the Box Inc. Reports Second Quarter FY 2017 Earnings; Updates Guidance for FY 2017; Declares Quarterly Cash Dividend

SAN DIEGO--(BUSINESS WIRE)--May 16, 2017-- Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $33.8 million, or $1.09 per diluted share, for the second quarter ended April 16, 2017, compared with $29.0 million, or $0.85 per diluted share, for the second quarter of fiscal 2016.

Operating earnings per share, a non-GAAP measure which the company defines as diluted earnings per share from continuing operations on a GAAP basis excluding restructuring charges and gains or losses from refranchising, were $0.98 in the second quarter of fiscal 2017 compared with $0.85 in the prior year quarter.

A reconciliation of non-GAAP measurements to GAAP results is provided below, with additional information included in the attachment to this release. Figures may not add due to rounding.

      12 Weeks Ended     28 Weeks Ended

April 16,
2017

   

April 10,
2016

April 16,
2017

   

April 10,
2016

Diluted earnings per share from continuing operations – GAAP

$ 1.09 $ 0.85 $ 2.22 $ 1.78
Restructuring charges 0.04 0.08
Gains from refranchising   (0.15 )     (0.15 )   (0.01 )
Operating earnings per share – Non-GAAP $ 0.98   $ 0.85 $ 2.15   $ 1.77  

During fiscal 2016, the company announced plans to reduce general and administrative costs. A comprehensive review of its organizational structure identified cost savings from workforce reductions, relocation and consolidation of the Qdoba corporate support center, refranchising initiatives, and information technology synergies across both brands. As a result, restructuring charges of $2.2 million, or approximately $0.04 per diluted share, were recorded during the second quarter of fiscal 2017. Charges consist primarily of facility closing and employee relocation costs. These charges are included in “Impairment and other charges, net” in the accompanying condensed consolidated statements of earnings.

Lenny Comma, chairman and chief executive officer, said, “While operating earnings per share increased 15 percent versus last year, driven primarily by lower G&A, our second quarter performance was below our expectations. After a sluggish start to the quarter, which we believe was attributable to delayed tax refunds and record rainfall in California, Jack in the Box® system same-store sales improved to positive territory as these transitory issues passed and we pivoted our advertising towards value messages. However, same-store sales at Qdoba® company restaurants worsened in the latter two months of the quarter, as we lapped more aggressive discounting in last year's second quarter. While margins at Qdoba were still disappointing, they improved to over 16 percent in the final month of the quarter as we were able to manage labor and food costs more effectively than in the first quarter, despite the larger decline in same-store sales. We are also encouraged that Qdoba company same-store sales have improved thus far in the third quarter.

“At our investor meeting last May, we said one of the factors that would cause us to reconsider our strategy with respect to Qdoba was valuation. It has become more apparent since then that the overall valuation of the company is being impacted by having two different business models. As a result, we've retained Morgan Stanley & Co. LLC to assist the Board in its evaluation of potential alternatives with respect to Qdoba, as well as other ways to enhance shareholder value.

“Lastly, we continue to make good progress on our Jack in the Box refranchising initiative, with the sale of 60 restaurants in the second quarter. In addition, as of today, we have signed non-binding letters of intent with franchisees to sell approximately 70 additional restaurants.”

Increase/(decrease) in same-store sales*:

 
      12 Weeks Ended     28 Weeks Ended

April 16,
2017 *

   

April 10,
2016

April 16,
2017 *

   

April 10,
2016

Jack in the Box:
Company (2.4)% (1.0)% (0.7)% (0.2)%
Franchise (0.4)% 0.3% 2.0% 1.1%
System (0.8)% 0.0% 1.4% 0.8%
Qdoba:
Company (5.9)% 3.1% (3.4)% 2.2%
Franchise (0.3)% 1.2% (0.3)% 1.8%
System (3.2)% 2.1% (1.9)% 2.0%

*Note: Due to the transition from a 53-week to a 52-week fiscal year, year-over-year fiscal period comparisons are offset by one week. The change in same-store sales presented in the 2017 column uses comparable calendar periods to balance the one-week shift and to provide a clearer year-over-year comparison.

Jack in the Box system same-store sales decreased 0.8 percent for the quarter and lagged the QSR sandwich segment by 1.5 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended April 16, 2017. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales decreased 2.4 percent in the second quarter driven by a 7.1 percent decrease in transactions, partially offset by average check growth of 4.7 percent.

Qdoba same-store sales decreased 3.2 percent system-wide and 5.9 percent for company restaurants in the second quarter. Company same-store sales reflected an 8.2 percent decrease in transactions, partially offset by growth in average check and catering sales.

Consolidated restaurant operating margin, a non-GAAP measure1,decreased by 240 basis points to 17.5 percent of sales in the second quarter of 2017, compared with 19.9 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box company restaurants, a non-GAAP measure1, decreased 100 basis points to 19.7 percent of sales. The decrease was due primarily to higher labor costs related to wage inflation, higher repairs and maintenance costs, and sales deleverage, which were partially offset by a decrease in food and packaging costs. The decrease in food and packaging costs as a percentage of sales resulted from the benefit of menu price increases, favorable product mix and commodity deflation of approximately 0.3 percent in the quarter. Restaurant operating margin for Qdoba company restaurants, a non-GAAP measure1,decreased 480 basis points to 13.5 percent of sales. The decrease was due primarily to sales deleverage, the impact of new restaurant openings over the last 12 months, an increase in food and packaging costs and the impact of wage inflation. The increase in food and packaging costs as a percentage of sales was impacted by unfavorable product mix, which was partially offset by a decrease in discounting. Commodity costs at Qdoba were flat in the quarter compared to the prior year.

Franchise margin, a non-GAAP measure1,as a percentage of total franchise revenues improved to 54.4 percent in the second quarter from 53.8 percent in the prior year quarter. The improvement was due primarily to higher franchise fees related to the sale of 60 company-operated Jack in the Box restaurants to franchisees in the second quarter, lower depreciation and a decrease in franchise support and other costs. These increases were partially offset by decreases in rental revenues and royalties resulting from the acquisition of 19 franchise-operated Jack in the Box restaurants at the beginning of the quarter which the company intends to refranchise, and an increase in occupancy expenses due primarily to a decrease in favorable lease commitment adjustments related to previously refranchised markets.

____________________________
(1) Restaurant operating margin and franchise margin are non-GAAP measures. These non-GAAP measures are reconciled to consolidated earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

SG&A expense for the second quarter decreased by $11.1 million and was 9.7 percent of revenues as compared to 13.0 percent in the prior year quarter. Key items contributing to the decrease were the impact of the company's restructuring activities, a $3.3 million decrease in incentive compensation, a $2.6 million decrease in advertising, a $2.1 million decrease in pension and postretirement benefits, as well as a $2.0 million decrease in insurance costs. These decreases were partially offset by mark-to-market adjustments on investments supporting the company's non-qualified retirement plans, which resulted in a $1.5 million year-over-year increase in SG&A.

Interest expense, net, increased by $4.0 million in the second quarter due to increased leverage and a higher effective interest rate for 2017.

The tax rate for the second quarter of 2017 was 38.2 percent versus 36.7 percent for the second quarter of 2016. The higher tax rate was due primarily to a decrease in work opportunity tax credits in the second quarter of 2017, and favorable mark-to-market adjustments on investments supporting the company's non-qualified retirement plans in the second quarter of 2016.

Capital Allocation

The company repurchased approximately 2,229,000 shares of its common stock in the second quarter of 2017 at an average price of $98.27 per share for an aggregate cost of $219.0 million.

On May 11, 2017, the Board of Directors authorized an additional $100.0 million stock buyback program. This leaves approximately $181.0 million remaining under stock buyback programs authorized by the company's Board of Directors that expire in November 2018.

The company also announced today that on May 11, 2017, its Board of Directors declared a quarterly cash dividend of $0.40 per share on the company’s common stock. The dividend is payable on June 12, 2017, to shareholders of record at the close of business on May 30, 2017.

Guidance

The following guidance and underlying assumptions reflect the company’s current expectations for the third quarter ending July 9, 2017, and fiscal year ending October 1, 2017. Fiscal 2017 is a 52-week year, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters. Fiscal 2016 was a 53-week year, with the additional week occurring in the fourth quarter.

Third quarter fiscal year 2017 guidance

  • Same-store sales of up 1.0 to down 1.0 percent at Jack in the Box system restaurants versus a 1.1 percent increase in same-store sales in the year-ago quarter.
  • Same-store sales of up 1.0 to down 1.0 percent at Qdoba company restaurants versus a 1.0 percent increase in the year-ago quarter.

Fiscal year 2017 guidance

  • Same-store sales increase of approximately 1.0 percent at Jack in the Box system restaurants.
  • Same-store sales decrease of approximately 1.0 to 2.0 percent at Qdoba company restaurants.
  • Commodity costs of approximately flat for both Jack in the Box and Qdoba.
  • Consolidated restaurant operating margin of approximately 19.0 percent, depending on the timing of refranchising transactions and the margins associated with the restaurants sold.
  • SG&A as a percentage of revenues of approximately 11.0 percent as compared to 12.7 percent in fiscal 2016.
  • Impairment and other charges as a percentage of revenues of approximately 70 basis points, excluding restructuring charges.
  • Approximately 20 to 25 new Jack in the Box restaurants opening system-wide, the majority of which will be franchise locations.
  • Approximately 50 to 60 new Qdoba restaurants, of which approximately 30 are expected to be company locations.
  • Capital expenditures of approximately $100 million.
  • Tax rate of approximately 38.0 to 39.0 percent.
  • Operating earnings per share, which the company defines as diluted earnings per share from continuing operations on a GAAP basis excluding restructuring charges and gains or losses from refranchising, ranging from $4.10 to $4.30.

Conference call

The company will host a conference call for financial analysts and investors on Wednesday, May 17, 2017, beginning at 8:30 a.m. PT (11:30 a.m. ET). The conference call will be broadcast live over the Internet via the Jack in the Box Inc. corporate website. To access the live call through the Internet, log onto the Investors section of the Jack in the Box Inc. website at http://investors.jackinthebox.com at least 15 minutes prior to the event in order to download and install any necessary audio software. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days, beginning at approximately 11:30 a.m. PT on May 17, 2017.

About Jack in the Box Inc.

Jack in the Box Inc. (NASDAQ: JACK), based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Eats®, a leader in fast-casual dining, with more than 700 restaurants in 47 states, the District of Columbia and Canada. For more information on Jack in the Box and Qdoba, including franchising opportunities, visit www.jackinthebox.com or www.qdoba.com.

Safe harbor statement

This press release contains forward-looking statements within the meaning of the federal securities laws. Such statements are subject to substantial risks and uncertainties. A variety of factors could cause the company’s actual results to differ materially from those expressed in the forward-looking statements, including the following: the success of new products and marketing initiatives; the impact of competition, unemployment, trends in consumer spending patterns and commodity costs; the company's ability to reduce G&A; the company's ability to execute its refranchising strategy; the company’s ability to achieve and manage its planned growth, which is affected by the availability of a sufficient number of suitable new restaurant sites, the performance of new restaurants, and risks relating to expansion into new markets; litigation risks; food safety incidents or negative publicity impacting the reputations of the company's brands; and stock market volatility. These and other factors are discussed in the company’s annual report on Form 10-K and its periodic reports on Form 10-Q filed with the Securities and Exchange Commission, which are available online at http://investors.jackinthebox.com or in hard copy upon request. The company undertakes no obligation to update or revise any forward-looking statement, whether as the result of new information or otherwise.

JACK IN THE BOX INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASUREMENTS TO GAAP RESULTS
(Unaudited)

Operating earnings per share, a non-GAAP measure, is defined by the company as diluted earnings per share from continuing operations on a GAAP basis excluding restructuring charges and gains or losses from refranchising. Management believes this non-GAAP financial measure provides important supplemental information to assist investors in analyzing the performance of the company’s core business. In addition, the company uses operating earnings per share in establishing performance goals for purposes of executive compensation. The company encourages investors to rely upon its GAAP numbers but includes this non-GAAP financial measure as a supplemental metric to assist investors. This non-GAAP financial measure should not be considered as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, this non-GAAP financial measure used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

Below is a reconciliation of non-GAAP operating earnings per share to the most directly comparable GAAP measure, diluted earnings per share from continuing operations. Figures may not add due to rounding.

      12 Weeks Ended     28 Weeks Ended

April 16,
2017

   

April 10,
2016

April 16,
2017

   

April 10,
2016

Diluted earnings per share from continuing operations – GAAP

$ 1.09 $ 0.85 $ 2.22 $ 1.78
Restructuring charges 0.04 0.08
Gains from refranchising   (0.15 )     (0.15 )   (0.01 )
Operating earnings per share – Non-GAAP $ 0.98   $ 0.85 $ 2.15   $ 1.77  

Restaurant operating margin and franchise margin are non-GAAP measures presented in the reconciliations below. These non-GAAP measures 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, share-based compensation and restructuring expense. As such, restaurant operating margin and franchise margin are not indicative of the overall results of the company and are considered non-GAAP financial measures. 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. The company encourages investors to rely upon its GAAP numbers, but includes these non-GAAP financial measures as a supplement to, not as a substitute for, earnings from operations, net earnings or other financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

Below are the reconciliations of non-GAAP restaurant operating margin and franchise margin to the most directly comparable GAAP measure, consolidated earnings from operations.

      12 Weeks Ended     12 Weeks Ended
April 16, 2017 April 10, 2016
($ in thousands) Jack in the Box     Qdoba     Consolidated Jack in the Box     Qdoba     Consolidated
Earnings from operations - GAAP (1) $ 65,650   $ 52,786  

Other operating expenses:

Selling, general and administrative expenses (35,788 ) (46,895 )
Impairment and other charges, net (4,331 ) (2,422 )
Gains (losses) on the sale of company-operated restaurants 7,779   (3 )
Total other operating expenses $ (32,340 ) $ (49,320 )
 

Company restaurant operations:

Company restaurant sales $ 180,275 $ 98,792 $ 279,067 $ 179,664 $ 92,128 $ 271,792
Food and packaging (52,042 ) (30,870 ) (82,912 ) (54,116 ) (27,950 ) (82,066 )
Payroll and employee benefits (54,529 ) (28,230 ) (82,759 ) (51,401 ) (24,736 ) (76,137 )
Occupancy and other (38,229 ) (26,341 ) (64,570 ) (36,905 ) (22,622 ) (59,527 )

Restaurant operating margin (2) - Non-GAAP

$ 35,475   $ 13,351   $ 48,826   $ 37,242   $ 16,820   $ 54,062  
 

Franchise operations:

Franchise rental revenues $ 51,295 $ 26 $ 51,321 $ 52,577 $ 25 $ 52,602
Franchise royalties and other 34,314 4,687 39,001 31,821 4,936 36,757
Franchise occupancy expenses (38,393 ) (24 ) (38,417 ) (37,385 ) (23 ) (37,408 )
Franchise support and other costs (1,734 ) (1,007 ) (2,741 ) (2,761 ) (1,146 ) (3,907 )

Franchise margin (2) - Non-GAAP

$ 45,482   $ 3,682   $ 49,164   $ 44,252   $ 3,792   $ 48,044  
 

Restaurant operating margin (2) as a % of company restaurant sales

19.7 % 13.5 % 17.5 % 20.7 % 18.3 % 19.9 %

Franchise margin (2) as a % of total franchise revenues

54.4 % 53.8 %
 

(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 are non-GAAP measures. Refer to discussion regarding these non-GAAP measures above.

      28 Weeks Ended     28 Weeks Ended
April 16, 2017 April 10, 2016
($ in thousands) Jack in the Box     Qdoba     Consolidated Jack in the Box     Qdoba     Consolidated
Earnings from operations - GAAP (1) $ 138,767   $ 115,300  

Other operating expenses:

Selling, general and administrative expenses (91,496 ) (112,767 )
Impairment and other charges, net (9,388 ) (4,079 )
Gains (losses) on the sale of company-operated restaurants 7,916   815  
Total other operating expenses $ (92,968 ) $ (116,031 )
 

Company restaurant operations:

Company restaurant sales $ 418,846 $ 227,491 $ 646,337 $ 415,943 $ 209,070 $ 625,013
Food and packaging (120,031 ) (71,817 ) (191,848 ) (127,249 ) (63,728 ) (190,977 )
Payroll and employee benefits (124,712 ) (64,968 ) (189,680 ) (117,090 ) (56,954 ) (174,044 )
Occupancy and other (87,079 ) (60,535 ) (147,614 ) (85,076 ) (52,150 ) (137,226 )

Restaurant operating margin (2) - Non-GAAP

$ 87,024   $ 30,171   $ 117,195   $ 86,528   $ 36,238   $ 122,766  
 

Franchise operations:

Franchise rental revenues $ 122,731 $ 59 $ 122,790 $ 122,277 $ 63 $ 122,340
Franchise royalties and other 77,488 10,707 88,195 73,425 11,196 84,621
Franchise occupancy expenses (89,809 ) (57 ) (89,866 ) (89,576 ) (51 ) (89,627 )
Franchise support and other costs (4,271 ) (2,308 ) (6,579 ) (6,099 ) (2,670 ) (8,769 )

Franchise margin (2) - Non-GAAP

$ 106,139   $ 8,401   $ 114,540   $ 100,027   $ 8,538   $ 108,565  
 

Restaurant operating margin (2) as a % of company restaurant sales

20.8 % 13.3 % 18.1 % 20.8 % 17.3 % 19.6 %

Franchise margin (2) as a % of total franchise revenues

54.3 % 52.5 %
 

(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 are non-GAAP measures. Refer to discussion regarding these non-GAAP measures above.

           

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 
12 Weeks Ended 28 Weeks Ended

April 16,
2017

     

April 10,
2016

April 16,
2017

     

April 10,
2016

Revenues:
Company restaurant sales $ 279,067 $ 271,792 $ 646,337 $ 625,013
Franchise rental revenues 51,321 52,602 122,790 122,340
Franchise royalties and other 39,001   36,757   88,195   84,621  
369,389   361,151   857,322   831,974  
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging 82,912 82,066 191,848 190,977
Payroll and employee benefits 82,759 76,137 189,680 174,044
Occupancy and other 64,570   59,527   147,614   137,226  
Total company restaurant costs 230,241 217,730 529,142 502,247
Franchise occupancy expenses 38,417 37,408 89,866 89,627
Franchise support and other costs 2,741 3,907 6,579 8,769
Selling, general and administrative expenses 35,788 46,895 91,496 112,767
Impairment and other charges, net 4,331 2,422 9,388 4,079
(Gains) losses on the sale of company-operated restaurants (7,779 ) 3   (7,916 ) (815 )
303,739   308,365   718,555   716,674  
Earnings from operations 65,650 52,786 138,767 115,300
Interest expense, net 10,941   6,911   23,658   15,086  
Earnings from continuing operations and before income taxes 54,709 45,875 115,109 100,214
Income taxes 20,889   16,847   44,255   37,289  
Earnings from continuing operations 33,820 29,028 70,854 62,925
Losses from discontinued operations, net of income tax benefit (726 ) (346 ) (1,831 ) (1,022 )
Net earnings $ 33,094   $ 28,682   $ 69,023   $ 61,903  
 
Net earnings per share - basic:
Earnings from continuing operations $ 1.09 $ 0.86 $ 2.24 $ 1.81
Losses from discontinued operations (0.02 ) (0.01 ) (0.06 ) (0.03 )
Net earnings per share (1) $ 1.07   $ 0.85   $ 2.18   $ 1.78  
Net earnings per share - diluted:
Earnings from continuing operations $ 1.09 $ 0.85 $ 2.22 $ 1.78
Losses from discontinued operations (0.02 ) (0.01 ) (0.06 ) (0.03 )
Net earnings per share (1) $ 1.06   $ 0.84   $ 2.16   $ 1.76  
 
Weighted-average shares outstanding:
Basic 30,895 33,656 31,622 34,686
Diluted 31,126 34,177 31,883 35,256
 
Cash dividends declared per common share $ 0.40 $ 0.30 $ 0.80 $ 0.60
 

(1) Earnings per share may not add due to rounding.

                       

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

April 16,
2017

October 2,
2016

ASSETS
Current assets:
Cash $ 6,358 $ 17,030
Accounts and other receivables, net 39,657 73,360
Inventories 7,769 8,229
Prepaid expenses 20,782 40,398
Assets held for sale 35,224 14,259
Other current assets 2,350   2,129  
Total current assets 112,140   155,405  
Property and equipment, at cost 1,537,344 1,605,576
Less accumulated depreciation and amortization (883,109 ) (886,526 )
Property and equipment, net 654,235   719,050  
Intangible assets, net 14,161 14,042
Goodwill 175,525 166,046
Other assets, net 274,838   290,469  
$ 1,230,899   $ 1,345,012  
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt $ 55,762 $ 55,935
Accounts payable 42,232 40,736
Accrued liabilities 140,579   181,250  
Total current liabilities 238,573   277,921  
Long-term debt, net of current maturities 1,135,287 935,372
Other long-term liabilities 326,455 348,925
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, 81,828,835 and 81,598,524 issued, respectively 818 816
Capital in excess of par value 448,246 432,564
Retained earnings 1,443,131 1,399,721
Accumulated other comprehensive loss (171,172 ) (187,021 )
Treasury stock, at cost, 52,411,407 and 49,190,992 shares, respectively (2,190,439 ) (1,863,286 )
Total stockholders’ deficit (469,416 ) (217,206 )
$ 1,230,899   $ 1,345,012  
 
 

             

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
28 Weeks Ended

April 16,
2017

         

April 10,
2016

Cash flows from operating activities:
Net earnings $ 69,023 $ 61,903
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 49,166 49,331
Deferred finance cost amortization 1,919 1,437
Excess tax benefits from share-based compensation arrangements (4,034 ) (2,451 )
Deferred income taxes 2,385 (1,303 )
Share-based compensation expense 6,735 7,901
Pension and postretirement expense 2,269 7,261
Gains on cash surrender value of company-owned life insurance (73 ) (2,446 )
Gains on the sale of company-operated restaurants (7,916 ) (815 )
Losses on the disposition of property and equipment 1,234 1,646
Impairment charges and other 2,702 858
Changes in assets and liabilities:
Accounts and other receivables 24,915 (25,875 )
Inventories 460 (497 )
Prepaid expenses and other current assets 23,428 (2,149 )
Accounts payable (1,371 ) (1,847 )
Accrued liabilities (37,870 ) (3,464 )
Pension and postretirement contributions (2,773 ) (8,255 )
Other (4,045 ) (782 )
Cash flows provided by operating activities 126,154   80,453  
Cash flows from investing activities:
Purchases of property and equipment (33,415 ) (51,298 )
Purchases of assets intended for sale and leaseback (1,805 ) (5,581 )
Proceeds from the sale and leaseback of assets 2,466 7,748
Proceeds from the sale of company-operated restaurants 31,389 1,021
Collections on notes receivable 1,204 2,614
Acquisition of franchise-operated restaurants 324
Proceeds from the sale of property and equipment 2,082
Other (172 ) 14  
Cash flows provided by (used in) investing activities 1,749   (45,158 )
Cash flows from financing activities:
Borrowings on revolving credit facilities 534,500 497,000
Repayments of borrowings on revolving credit facilities (305,000 ) (264,000 )
Principal repayments on debt (28,800 ) (13,065 )
Dividends paid on common stock (25,462 ) (20,765 )
Proceeds from issuance of common stock 4,840 1,432
Repurchases of common stock (322,687 ) (250,000 )
Excess tax benefits from share-based compensation arrangements 4,034 2,451
Change in book overdraft   2,695  
Cash flows used in financing activities (138,575 ) (44,252 )
Effect of exchange rate changes on cash   13  
Net decrease in cash (10,672 ) (8,944 )
Cash at beginning of period 17,030   17,743  
Cash at end of period $ 6,358   $ 8,799  
 
 

JACK IN THE BOX INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION

The following table presents certain income and expense items included in our condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA

(Unaudited)

           
12 Weeks Ended 28 Weeks Ended

April 16,
2017

     

April 10,
2016

April 16,
2017

     

April 10,
2016

Revenues:
Company restaurant sales 75.5 % 75.3 % 75.4 % 75.1 %
Franchise rental revenues 13.9 % 14.6 % 14.3 % 14.7 %
Franchise royalties and other 10.6 % 10.2 % 10.3 % 10.2 %
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging (1) 29.7 % 30.2 % 29.7 % 30.6 %
Payroll and employee benefits (1) 29.7 % 28.0 % 29.3 % 27.8 %
Occupancy and other (1) 23.1 % 21.9 % 22.8 % 22.0 %
Total company restaurant costs (1) 82.5 % 80.1 % 81.9 % 80.4 %
Franchise occupancy expenses (2) 74.9 % 71.1 % 73.2 % 73.3 %
Franchise support and other costs (3) 7.0 % 10.6 % 7.5 % 10.4 %
Selling, general and administrative expenses 9.7 % 13.0 % 10.7 % 13.6 %
Impairment and other charges, net 1.2 % 0.7 % 1.1 % 0.5 %
Gains on the sale of company-operated restaurants (2.1 )% % (0.9 )% (0.1 )%
Earnings from operations 17.8 % 14.6 % 16.2 % 13.9 %
Income tax rate (4) 38.2 % 36.7 % 38.4 % 37.2 %
 

(1) As a percentage of company restaurant sales.
(2) As a percentage of franchise rental revenues.
(3) As a percentage of franchise royalties and other.
(4) As a percentage of earnings from continuing operations and before income taxes.

The following table presents Jack in the Box and Qdoba company restaurant sales, costs and margin, and restaurant costs and margin as a percentage of the related sales. Percentages may not add due to rounding.

SUPPLEMENTAL COMPANY RESTAURANT OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

         
12 Weeks Ended 28 Weeks Ended
April 16, 2017     April 10, 2016 April 16, 2017     April 10, 2016
Jack in the Box:                        
Company restaurant sales $ 180,275 $ 179,664 $ 418,846 $ 415,943
Company restaurant costs:
Food and packaging 52,042 28.9 % 54,116 30.1 % 120,031 28.7 % 127,249 30.6 %
Payroll and employee benefits 54,529 30.2 % 51,401 28.6 % 124,712 29.8 % 117,090 28.2 %
Occupancy and other 38,229   21.2 % 36,905   20.5 % 87,079   20.8 % 85,076   20.5 %
Total company restaurant costs 144,800   80.3 % 142,422   79.3 % 331,822   79.2 % 329,415   79.2 %

Restaurant operating margin (1)

$ 35,475   19.7 % $ 37,242   20.7 % $ 87,024   20.8 % $ 86,528   20.8 %
Qdoba:
Company restaurant sales $ 98,792 $ 92,128 $ 227,491 $ 209,070
Company restaurant costs:
Food and packaging 30,870 31.2 % 27,950 30.3 % 71,817 31.6 % 63,728 30.5 %
Payroll and employee benefits 28,230 28.6 % 24,736 26.8 % 64,968 28.6 % 56,954 27.2 %
Occupancy and other 26,341   26.7 % 22,622   24.6 % 60,535   26.6 % 52,150   24.9 %
Total company restaurant costs 85,441   86.5 % 75,308   81.7 % 197,320   86.7 % 172,832   82.7 %

Restaurant operating margin (1)

$ 13,351   13.5 % $ 16,820   18.3 % $ 30,171   13.3 % $ 36,238   17.3 %
 

(1) Restaurant operating margin is a non-GAAP measure. This non-GAAP measure is reconciled to consolidated earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

The following table presents franchise revenues, costs and margin in each period:

SUPPLEMENTAL FRANCHISE OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

           
12 Weeks Ended 28 Weeks Ended

April 16,
2017

     

April 10,
2016

April 16,
2017

     

April 10,
2016

Franchise rental revenues $ 51,321 $ 52,602 $ 122,790 $ 122,340
 
Royalties 36,110 36,122 84,129 82,784
Franchise fees and other 2,891   635   4,066   1,837  
Franchise royalties and other 39,001   36,757   88,195   84,621  
Total franchise revenues 90,322   89,359   210,985   206,961  
 
Rental expense 31,567 30,016 73,790 72,188
Depreciation and amortization 6,850   7,392   16,076   17,439  
Franchise occupancy expenses 38,417 37,408 89,866 89,627
Franchise support and other costs 2,741   3,907   6,579   8,769  
Total franchise costs 41,158   41,315   96,445   98,396  

Franchise margin (1)

$ 49,164   $ 48,044   $ 114,540   $ 108,565  

Franchise margin (1) as a % of franchise revenues

54.4 % 53.8 % 54.3 % 52.5 %
 

(1) Franchise margin is a non-GAAP measure. This non-GAAP measure is reconciled to consolidated earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

The following table provides information related to our operating segments in each period:

SUPPLEMENTAL SEGMENT REPORTING INFORMATION

(In thousands)

(Unaudited)

           
12 Weeks Ended 28 Weeks Ended

April 16,
2017

     

April 10,
2016

April 16,
2017

     

April 10,
2016

Revenues by segment:
Jack in the Box restaurant operations $ 265,884 $ 264,062 $ 619,065 $ 611,645
Qdoba restaurant operations 103,505   97,089   238,257   220,329  

Consolidated revenues

$ 369,389   $ 361,151   $ 857,322   $ 831,974  
Earnings from operations by segment:
Jack in the Box restaurant operations $ 68,658 $ 63,146 $ 161,062 $ 148,836
Qdoba restaurant operations 8,489 10,623 17,221 19,360
Shared services and unallocated costs (19,276 ) (20,980 ) (47,432 ) (53,711 )

Gains (losses) on the sale of company-operated restaurants

7,779   (3 ) 7,916   815  
Consolidated earnings from operations 65,650 52,786 138,767 115,300
Interest expense, net 10,941   6,911   23,658   15,086  
Consolidated earnings from continuing operations and before income taxes $ 54,709   $ 45,875   $ 115,109   $ 100,214  
Total depreciation expense by segment:
Jack in the Box restaurant operations $ 14,483 $ 15,059 $ 33,772 $ 35,532
Qdoba restaurant operations 4,907 4,279 11,399 9,867
Shared services and unallocated costs 1,640   1,310   3,614   3,535  
Consolidated depreciation expense $ 21,030   $ 20,648   $ 48,785   $ 48,934  
 
 

The following table summarizes the year-to-date changes in the number and mix of Jack in the Box ("JIB") and Qdoba company and franchise restaurants:

SUPPLEMENTAL RESTAURANT ACTIVITY INFORMATION

(Unaudited)

           
2017 2016
Company       Franchise       Total Company       Franchise       Total
Jack in the Box:
Beginning of year 417 1,838 2,255 413 1,836 2,249
New 2 13 15 5 5
Refranchised (60 ) 60 (1 ) 1
Acquired from franchisees 19 (19 ) 1 (1 )
Closed (7 ) (3 ) (10 )   (3 ) (3 )
End of period 371   1,889   2,260   413   1,838   2,251  
% of JIB system 16 % 84 % 100 % 18 % 82 % 100 %
Qdoba:
Beginning of year 367 332 699 322 339 661
New 13 12 25 19 10 29
Closed (3 ) (4 ) (7 ) (3 ) (4 ) (7 )
End of period 377   340   717   338   345   683  
% of Qdoba system 53 % 47 % 100 % 49 % 51 % 100 %
Consolidated:            
Total system end of period 748   2,229   2,977   751   2,183   2,934  
% of consolidated system 25 % 75 % 100 % 26 % 74 % 100 %
 

Source: Jack in the Box Inc.

Jack in the Box Inc.
Investor Contact:
Carol DiRaimo, (858) 571-2407
or
Media Contact:
Brian Luscomb, (858) 571-2291