Press Release

<< Back
Jack in the Box Inc. Reports Third Quarter FY 2009 Earnings and Updates FY 2009 Guidance

SAN DIEGO--(BUSINESS WIRE)--Aug. 4, 2009-- Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $32.9 million, or 57 cents per diluted share, for the third quarter ended July 5, 2009, compared with earnings from continuing operations of $29.5 million, or 50 cents per diluted share, for the third quarter of fiscal 2008. Third quarter 2009 results include a pre-tax loss of approximately $2.4 million, or approximately 3 cents per diluted share, related to the expected sale of a lower-performing Jack in the Box® company-operated market that is anticipated to close by the end of the calendar year. This loss is included in “Gains on sale of company-operated restaurants, net” in the accompanying consolidated statements of earnings.

As previously announced, the company expects to complete the sale of its 61 Quick Stuff® convenience stores by the end of fiscal 2009 in multiple all-cash transactions. As a result, the company recorded an after-tax charge of $14.1 million in the third quarter, which reduced diluted earnings per share by approximately 24 cents. This charge and the results of operations for Quick Stuff are included in discontinued operations in the accompanying consolidated statements of earnings for all periods presented.

Third quarter FY 2009 results

Same-store sales at Jack in the Box company restaurants decreased 1.0 percent in the third quarter compared with a year-ago decrease of 0.4 percent. Sales during the quarter started off strong but deteriorated significantly near the end of the quarter.

System same-store sales at Qdoba Mexican Grill® decreased 2.8 percent in the third quarter versus a year-ago increase of 0.5 percent, in line with the company’s guidance.

Consolidated restaurant operating margin improved to 18.4 percent of sales in the third quarter of 2009, compared with 16.7 percent of sales in the year-ago quarter and 16.5 percent of sales in the second quarter of 2009. Food and packaging costs were 180 basis points better than prior year as a result of the benefit of effective price increases at Jack in the Box of approximately 3.3 percent, favorable product mix, and the company’s margin-improvement initiatives. Commodity costs were approximately 0.8 percent lower in the quarter versus prior year, better than anticipated, as most commodities trended favorable to the company’s expectations, including beef and cheese, which were down 4 percent and more than 25 percent, respectively, from last year’s third quarter. Restaurant operating costs were 50.1 percent of restaurant sales, equal to the year-ago quarter, with improvements in labor and utilities expense offsetting higher depreciation resulting from the kitchen enhancement program completed in fiscal 2008 and the ongoing re-image program at Jack in the Box, as well as higher rent and depreciation related to new restaurant development and sales deleverage at Jack in the Box and Qdoba.

“We’re pleased with the improvement in restaurant operating margin and earnings despite the deceleration in sales during the quarter,” said Linda A. Lang, chairman and chief executive officer. “The ongoing recession, which was exacerbated by higher unemployment and rising gas prices during the quarter, has consumers cutting back on their discretionary spending. In addition, we have seen aggressive discounting by not only quick-service competitors but other segments of the restaurant industry as well.”

SG&A expense improved to 10.9 percent of revenues in the third quarter compared with 11.0 percent last year with positive mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans substantially offsetting impairment charges and higher pre-opening costs.

Gains on the sale of 23 company-operated Jack in the Box restaurants to franchisees totaled $11.1 million in the third quarter compared with $15.2 million in the year-ago quarter from the sale of 17 restaurants. Partially offsetting these gains was a loss of $2.4 million related to the expected sale of a lower-performing Jack in the Box company-operated market that is expected to be completed by the end of the calendar year. Excluding this loss, average gains were $482,000 in the quarter. Through the first three quarters of fiscal 2009, the company refranchised 98 Jack in the Box restaurants, with gains totaling $44.3 million, including the $2.4 million loss.

The company provided $5.3 million in bridge financing during the quarter for one of the three refranchising transactions. As of the end of the third quarter, notes receivable from franchisees related to refranchising activities totaled $12.3 million.

The Jack in the Box system is now 42 percent franchised versus 36 percent a year ago. The company remains on track to achieve its long-term goal to increase the percentage of franchise ownership in the Jack in the Box system to 70 to 80 percent by the end of fiscal year 2013.

The tax rate for the third quarter was 37.7 percent compared with 38.9 percent in the prior year, with the decrease due to higher work opportunity tax credits as well as the market performance of insurance investment products used to fund certain non-qualified retirement plans. Changes in the cash value of the insurance products are not deductible or taxable.

Restaurant openings

Fifteen new Jack in the Box restaurants opened in the third quarter, including 9 company locations, compared with 7 new restaurants opened systemwide during the same quarter last year. Late in the quarter, a franchisee opened two restaurants in a new contiguous market, Albuquerque, N.M. Opening week sales at each of the locations exceeded $115,000. Through the first three quarters of 2009, 49 new Jack in the Box restaurants opened, compared to 23 in the first three quarters of 2008. In the third quarter, 9 Qdoba restaurants opened, including 4 franchised locations, versus 18 new restaurants in the year-ago quarter, 16 of which were franchised.

At July 5, 2009, the company’s system total comprised 2,199 Jack in the Box restaurants, including 921 franchised locations, and 491 Qdoba restaurants, including 344 franchised locations.

Third quarter FY 2009 initiatives

During the quarter, the company continued to execute its strategic initiative to reinvent the Jack in the Box brand. This initiative is expected to drive sales by offering guests a better restaurant experience than typically found in the quick-serve restaurant segment through menu innovation, enhanced restaurant facilities and improvements in guest service.

In April, Jack in the Box enhanced its line of Real Fruit Smoothies with a new Tropical flavor, which is made from a blend of banana and mango Minute Maid® fruit juices and purees blended with nonfat frozen yogurt.

In early June, Jack in the Box expanded its product platform of mini burgers and sandwiches by adding Mini Buffalo Ranch Chicken Sandwiches, which feature a trio of mini homestyle chicken fillets topped with Frank’s RedHot sauce, ranch sauce and shredded lettuce on toasted mini buns.

Also in June, Jack in the Box added Flavored Iced Teas to its lineup of premium beverages and debuted three refreshing flavors – Mango, Peach and Raspberry.

A major element of the company’s strategic initiative to reinvent the Jack in the Box brand is a comprehensive restaurant re-imaging program. Approximately 45 percent of the Jack in the Box system, including new construction, now features all interior and exterior elements of the program. Exterior enhancements, including new paint schemes, lighting and landscaping, are now completed at 69 percent of the Jack in the Box system.

Guidance (from continuing operations)

The following guidance and underlying assumptions reflect the company’s current expectations for the fourth quarter and fiscal year ending Sept. 27, 2009, in approximate amounts:

Q4 FY 2009 guidance

  • 2.5 to 4.5 percent same-store sales decrease at Jack in the Box company restaurants versus a 0.8 percent decrease in the year-ago quarter.
  • 2 to 4 percent same-store sales decrease at Qdoba system restaurants versus a 1.0 percent decrease in the year-ago quarter.
  • Same-store sales guidance reflects trends experienced during the first four weeks of the fourth quarter.

Fiscal year 2009 guidance update

  • Flat to 1 percent decrease in same-store sales at Jack in the Box company restaurants.
  • 1 to 3 percent decrease in same-store sales at Qdoba system restaurants.
  • Overall commodity costs are expected to increase by approximately 2 percent.
  • Restaurant operating margin for the full year is expected to be in the low 16-percent range.
  • Approximately 60 new Jack in the Box restaurants, including approximately 40 company locations.
  • 55 to 65 new Qdoba restaurants, including approximately 25 company locations.
  • $65 to $70 million in gains on the sale of approximately 150 Jack in the Box restaurants to franchisees, with $90 to $95 million in total proceeds resulting from the sales.
  • Capital expenditures of approximately $175 million.
  • SG&A expense related to continuing operations in the mid-11 percent range, assuming no further mark-to-market adjustments of significance.
  • Tax rate of approximately 39 percent.
  • Diluted earnings per share from continuing operations of $2.11 to $2.18, including franchise gains, with the range reflecting uncertainty in the timing of anticipated refranchising transactions as well as same-store sales volatility. EPS guidance from continuing operations excludes the results for Quick Stuff, which contributed 2 cents per diluted share in fiscal 2008, as well as any potential insurance recoveries related to Hurricane Ike.

Conference call

The company will host a conference call for financial analysts and investors on Wednesday, Aug. 5, 2009, beginning at 8:30 a.m. PDT (11:30 a.m. EDT). The conference call will be broadcast live over the Internet via the Jack in the Box 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 conference-call link on the Jack in the Box Inc. home page for 21 days, beginning at approximately 11:00 a.m. PDT on Aug. 5.

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 approximately 2,200 restaurants in 18 states. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Grill®, a leader in fast-casual dining, with approximately 500 restaurants in 42 states and the District of Columbia. For more information, visit www.jackinthebox.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. These 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 www.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
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
       
  Twelve Weeks Ended   Forty Weeks Ended
July 5,   July 6, July 5,   July 6,
    2009     2008     2009     2008  
 
Revenues:
Restaurant sales $ 457,586 $ 489,223 $ 1,554,561 $ 1,627,748
Distribution sales 72,534 65,380 231,517 207,417
Franchised restaurant revenues   45,602     37,260     144,728     121,729  
  575,722     591,863     1,930,806     1,956,894  
Operating costs and expenses:
Restaurant costs of sales 143,952 162,658 508,578 537,392
Restaurant operating costs 229,427 245,039 793,001 817,341
Distribution costs of sales 72,456 64,904 230,070 206,253
Franchised restaurant costs 18,961 15,310 58,651 49,150
Selling, general and administrative expenses 62,532 64,967 220,221 220,399
Gains on the sale of company-operated restaurants, net   (8,725 )   (15,247 )   (44,320 )   (43,225 )
  518,603     537,631     1,766,201     1,787,310  
 
Earnings from operations 57,119 54,232 164,605 169,584
 
Interest expense 4,622 6,041 17,802 21,895
Interest income   (250 )   (77 )   (1,130 )   (370 )
Interest expense, net 4,372 5,964 16,672 21,525
 
Earnings from continuing operations and before income taxes 52,747 48,268 147,933 148,059
 
Income taxes   19,871     18,770     57,504     55,924  
 
Earnings from continuing operations 32,876 29,498 90,429 92,135
 
Earnings (losses) from discontinued operations, net   (13,318 )   418     (12,613 )   270  
Net earnings $ 19,558   $ 29,916   $ 77,816   $ 92,405  
 
Net earnings per share - basic:
Earnings from continuing operations $ 0.58 $ 0.51 $ 1.59 $ 1.57
Earnings (losses) from discontinued operations, net   (0.24 )   0.01     (0.22 )   0.00  
Net earnings per share $ 0.34   $ 0.52   $ 1.37   $ 1.57  
 
Net earnings per share - diluted:
Earnings from continuing operations $ 0.57 $ 0.50 $ 1.57 $ 1.54
Earnings (losses) from discontinued operations, net   (0.23 )   0.01     (0.22 )   0.00  
Net earnings per share $ 0.34   $ 0.51   $ 1.35   $ 1.54  
 
Weighted-average shares outstanding:
Basic 56,921 57,746 56,728 58,785
Diluted 57,975 58,767 57,697 59,963
 
 

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
       
July 5, September 28,
          2009       2008  
 
ASSETS
Current assets:
Cash and cash equivalents $ 12,153 $ 47,884
Accounts and other receivables, net 62,723 70,290
Inventories 39,543 45,206
Prepaid expenses 37,596 20,061
Deferred income taxes 46,166 46,166
Assets held for sale 122,673 112,994
Other current assets   6,904     7,480  
Total current assets   327,758     350,081  
 
Property and equipment, at cost 1,617,289 1,605,497
Less accumulated depreciation and amortization   (676,263 )   (662,435 )
Property and equipment, net 941,026 943,062
Other assets, net   216,982     205,275  
$ 1,485,766   $ 1,498,418  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Current maturities of long-term debt $ 36,336 $ 2,331
Accounts payable 81,455 99,708
Accrued liabilities   197,519     213,631  
Total current liabilities   315,310     315,670  
 
Long-term debt, net of current maturities 419,150 516,250
 
Other long-term liabilities 158,414 161,277
 
Deferred income taxes 46,453 48,110
 
Stockholders’ equity:
Preferred stock $.01 par value, 15,000,000 authorized, none issued - -

Common stock $.01 par value, 175,000,000 authorized, 73,950,008 and 73,506,049 issued, respectively

740 735
Capital in excess of par value 167,132 155,023
Retained earnings 873,473 795,657
Accumulated other comprehensive loss, net (20,447 ) (19,845 )
Treasury stock, at cost, 16,726,032 shares   (474,459 )   (474,459 )
Total stockholders' equity   546,439     457,111  
$ 1,485,766   $ 1,498,418  
 
 

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
     
Forty Weeks Ended
July 5,   July 6,
          2009       2008  
 
Cash flows from operating activities:
Net earnings $ 77,816 $ 92,405
Losses (earnings) from discontinued operations, net   12,613     (270 )
Net earnings from continuing operations 90,429 92,135
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 77,389 74,417
Deferred finance cost amortization 1,195 1,103
Deferred income taxes (1,283 ) (2,219 )
Share-based compensation expense awards 6,926 6,581
Pension and postretirement expense 9,419 11,139
Losses on cash surrender value of company-owned life insurance 7,690 5,658
Gains on the sale of company-operated restaurants, net (44,320 ) (43,225 )
Gains on the acquisition of franchise-operated restaurants (958 ) -
Losses on the disposition of property and equipment, net 9,269 12,978
Impairment charges 6,243 1,811
Changes in assets and liabilities, excluding acquisitions and dispositions:
Increase in receivables (5,489 ) (14,948 )
Decrease (increase) in inventories 5,663 (3,706 )
Decrease (increase) in prepaid expenses and other current assets (15,864 ) 114
Increase (decrease) in accounts payable 2,127 (11,095 )
Pension and postretirement contributions (19,040 ) (24,133 )
Decrease in other liabilities   (17,293 )   (1,051 )
Cash flows provided by operating activities from continuing operations   112,103     105,559  
Cash flows provided by operating activities from discontinued operations   2,953     3,762  
Cash flows provided by operating activities   115,056     109,321  
 
Cash flows from investing activities:
Purchases of property and equipment (118,760 ) (109,229 )
Proceeds from the sale of company-operated restaurants 49,447 53,941
Purchases of assets held for sale and leaseback, net (27,981 ) (9,345 )
Collections on notes receivable 23,659 36
Acquisition of franchise-operated restaurants (6,760 ) -
Other   (2,076 )   (3,949 )
Cash flows used in investing activities from continuing operations   (82,471 )   (68,546 )
Cash flows used in investing activities from discontinued operations   (1,765 )   (3,817 )
Cash flows used in investing activities   (84,236 )   (72,363 )
 
Cash flows from financing activities:
Borrowings on revolving credit facility 381,000 392,000
Repayments of borrowings on revolving credit facility (442,000 ) (322,000 )
Principal payments on debt (2,095 ) (4,855 )
Proceeds from issuance of common stock 4,117 8,078
Repurchase of common stock - (100,000 )
Excess tax benefits from share-based compensation arrangements 1,228 4,446
Change in book overdraft   (8,801 )   (15,859 )
Cash flows used in financing activities   (66,551 )   (38,190 )
 
Net decrease in cash and cash equivalents (35,731 ) (1,232 )
Cash and cash equivalents at beginning of period   47,884     15,702  
Cash and cash equivalents at end of period $ 12,153   $ 14,470  
 
 

JACK IN THE BOX INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

(Unaudited)

       

The following table sets forth, unless otherwise indicated, the percentage relationship to total revenues of certain items included in our condensed consolidated statements of earnings:

 
Twelve Weeks Ended   Forty Weeks Ended
July 5,   July 6, July 5,   July 6,
        2009   2008   2009   2008
Statement of Earnings Data:
Revenues:
Restaurant sales

79.5

% 82.7 % 80.5 % 83.2 %
Distribution sales 12.6 % 11.0 % 12.0 % 10.6 %
Franchised restaurant revenues 7.9 % 6.3 % 7.5 % 6.2 %
Total revenues

100.0

% 100.0 % 100.0 % 100.0 %
 
Operating costs and expenses:
Restaurant costs of sales (1) 31.5 % 33.2 % 32.7 % 33.0 %
Restaurant operating costs (1) 50.1 % 50.1 % 51.0 % 50.2 %
Distribution costs of sales (1) 99.9 % 99.3 % 99.4 % 99.4 %
Franchised restaurant costs (1) 41.6 % 41.1 % 40.5 % 40.4 %
Selling, general and administrative expenses 10.9 % 11.0 % 11.4 % 11.3 %
Gains on sale of company-operated restaurants, net (1.5 %) (2.6 %) (2.3 %) (2.2 %)
Earnings from operations 9.9 % 9.2 % 8.5 % 8.7 %
 
Income tax rate (2) 37.7 % 38.9 % 38.9 % 37.8 %
 
(1) As a percentage of the related sales and/or revenues
(2) As a percentage of earnings from continuing operations and before income taxes.
 
 

The following table summarizes the changes in the number of Jack in the Box and Qdoba company-operated and franchised restaurants:

        Forty Weeks Ended July 5, 2009     Forty Weeks Ended July 6, 2008
          Company     Franchised     Total Company     Franchised     Total
Jack in the Box:                
Beginning of period 1,346 812 2,158 1,436 696 2,132
New 35 14 49 13 10 23
Franchised (98 ) 98 - (68 ) 68 -
Closed (5 ) (3 ) (8 ) (3 ) (4 ) (7 )
End of period 1,278   921   2,199   1,378   770   2,148  
% of system 58 % 42 % 100 % 64 % 36 % 100 %
Qdoba:
Beginning of period 111 343 454 90 305 395
New 14 27 41 9 43 52
Acquired 22 (22 ) - - - -
Closed -   (4 ) (4 ) -   (9 ) (9 )
End of period 147   344   491   99   339   438  
% of system 30 % 70 % 100 % 23 % 77 % 100 %
 
Consolidated:            
Total system 1,425   1,265   2,690   1,477   1,109   2,586  
% of system 53 % 47 % 100 % 57 % 43 % 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