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Jack in the Box Inc. Reports First Quarter FY 2013 Earnings; Updates Guidance for FY 2013

SAN DIEGO--(BUSINESS WIRE)--Feb. 20, 2013-- Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $23.9 million, or $0.54 per diluted share, for the first quarter ended January 20, 2013, compared with earnings from continuing operations of $12.0 million, or $0.27 per diluted share, for the first quarter of fiscal 2012.

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 from refranchising, were $0.54 per share in the first quarter of fiscal 2013 compared with $0.25 per share in the prior year quarter. Gains from refranchising contributed approximately $0.01 per diluted share for the quarter as compared with approximately $0.02 per diluted share 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.

    16 Weeks Ended
January 20,
2013
  January 22,
2012
Diluted earnings per share from
continuing operations – GAAP
$ 0.54   $ 0.27
Plus: Restructuring charges 0.01
Less: Gains from refranchising   (0.01 )     (0.02 )
Operating earnings per share – Non-GAAP $ 0.54     $ 0.25  

During the first quarter of 2013, the company continued to review and refine its organization to create a structure that more efficiently supports its business model. As a result, restructuring charges of $0.8 million, or approximately $0.01 per diluted share, were recorded during the first quarter of 2013. These charges are included in “impairment and other charges, net” in the accompanying consolidated statements of earnings.

As previously announced, during the fourth quarter of 2012, the company began outsourcing its distribution business, and the transition was completed in the first quarter of fiscal 2013. As a result of the outsourcing, the company recorded an after-tax charge totaling $3.3 million in the first quarter of fiscal 2013, which reduced diluted net earnings per share by approximately $0.07. This charge and the results of operations for the distribution business are included in discontinued operations in the accompanying consolidated statements of earnings for all periods presented.

Increase in same-store sales:

    16 Weeks Ended

January 20, 2013

    16 Weeks Ended

January 22, 2012

Jack in the Box®:
Company 2.1 % 5.3 %
Franchise 1.8 % 2.8 %
System 1.9 % 3.6 %
Qdoba®:
Company 1.5 % 3.5 %
Franchise 0.5 % 4.0 %
System 1.0 % 3.8 %

Linda A. Lang, chairman and chief executive officer, said, “Jack in the Box company same-store sales increased 2.1 percent and system same-store sales increased 1.9 percent in the first quarter. Jack in the Box system same-store sales growth for the quarter exceeded that of the QSR sandwich segment for the comparable period, according to The NPD Group’s SalesTrack Weekly for the 16-week time period ended January 20, 2013. Included in this segment are the top 15 sandwich and QSR burger chain competitors.

“Qdoba same-store sales in the first quarter increased 1.5 percent for company restaurants, driven by transaction and catering growth. One of our key priorities for 2013 is to drive traffic at Qdoba, and we believe our promotional efforts aimed at differentiating the brand resulted in the improvement in traffic and sales trends.

“Numerous companies in both the restaurant and retail space have reported some weakening in sales in the last part of January and first half of February which has been attributed to higher payroll taxes, delayed tax refunds and the rapid increase in gas prices over the last month. Our sales guidance for the second quarter reflects the softness we’ve seen thus far in the quarter and the uncertainty surrounding consumer spending,” Lang said.

Consolidated restaurant operating margin improved by 220 basis points to 15.7 percent of sales in the first quarter of 2013, compared with 13.5 percent of sales in the year-ago quarter. Restaurant operating margin increased 320 basis points to 17.1% of sales for Jack in the Box and decreased 40 basis points to 11.6% of sales for Qdoba.

Food and packaging costs in the quarter were 130 basis points lower than prior year. The decrease resulted from the benefit of price increases, favorable product mix at Jack in the Box, and a greater proportion of Qdoba company restaurants which combined to more than offset slight commodity inflation and the impact of promotional activity at Qdoba. Overall commodity costs were up less than 1 percent in the quarter.

Payroll and employee benefits costs were 40 basis points lower than the year-ago quarter, reflecting leverage from same-store sales increases, the favorable impact of recent acquisitions of Qdoba franchised restaurants, and a modest benefit from refranchising Jack in the Box restaurants.

Occupancy and other costs decreased 50 basis points in the first quarter due primarily to leverage from same-store sales increases and the favorable impact of recent acquisitions of Qdoba franchised restaurants.

SG&A expense for the first quarter increased by $1.6 million and was 14.5 percent of revenues as compared to 14.4 percent in the prior year quarter. Mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans positively impacted SG&A by $1.3 million in the first quarter as compared to a positive impact of $3.2 million in last year’s first quarter, resulting in a year-over-year increase in SG&A of $1.9 million. The increase in SG&A was also due to higher incentive compensation, increased G&A related to Qdoba growth, and higher pension costs which were partially offset by the benefit of the company’s restructuring activities as well as lower advertising and overhead costs resulting from the Jack in the Box refranchising strategy.

Impairment and other charges decreased $1.1 million in the quarter compared to a year ago primarily due to income of $2.1 million recognized in 2013 in connection with the resolution of two eminent domain matters involving Jack in the Box restaurants.

Gains on the sale of company-operated Jack in the Box restaurants were $0.7 million in the 2013 quarter, or approximately $0.01 per diluted share, which primarily represented additional proceeds received as a result of the extension of underlying franchise and lease agreements for previously sold restaurants. This compares to gains of $1.1 million, or approximately $0.02 per diluted share, in the year-ago quarter.

The tax rate for the first quarter of 2013 was 30.2 percent versus 34.3 percent for the first quarter of 2012. The lower tax rate in the first quarter of fiscal 2013 was due primarily to legislation that retroactively reinstated 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. The company now expects its full year tax rate to be approximately 35 to 36 percent as a result of the reinstated tax credits.

The company repurchased approximately 985,000 shares of its common stock in the first quarter at an average price of $27.26 per share for an aggregate cost of $26.9 million, leaving $50 million remaining under a $100 million stock-buyback program authorized by the company’s board of directors that expires in November 2013, and $100 million remaining under an authorization that expires in November 2014.

Restaurant openings

Nine new Jack in the Box restaurants opened in the first quarter of fiscal 2013, including six franchised locations, compared with 16 new restaurants opened system-wide during the same quarter last year, of which 11 were franchised.

In the first quarter, 17 Qdoba restaurants opened, including 14 franchised locations, versus 15 new restaurants in the year-ago quarter, of which 9 were franchised. The company also acquired 6 Qdoba restaurants from franchisees in the quarter.

At January 20, 2013, the company’s system total comprised 2,255 Jack in the Box restaurants, including 1,704 franchised locations, and 636 Qdoba restaurants, including 311 franchised locations.

Guidance

The following guidance and underlying assumptions reflect the company’s current expectations for the second quarter ending April 14, 2013, and the fiscal year ending September 29, 2013. Fiscal 2013 is a 52-week year, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters.

Second quarter fiscal year 2013 guidance

  • Same-store sales are expected to be approximately flat at Jack in the Box company restaurants versus a 5.6 percent increase in the year-ago quarter.
  • Same-store sales are expected to be flat to down 2 percent at Qdoba company restaurants versus a 3.8 percent increase in the year-ago quarter.

Fiscal year 2013 guidance

  • Same-store sales are expected to increase approximately 1.5 to 2.5 percent at Jack in the Box company restaurants.
  • Same-store sales are expected to increase approximately 1.0 to 2.0 percent at Qdoba company restaurants.
  • Overall commodity costs are expected to increase by approximately 2 to 3 percent for the full year.
  • Restaurant operating margin for the full year is expected to range from approximately 15.5 to 16.0 percent, depending on same-store sales and commodity inflation.
  • SG&A as a percentage of revenue is expected to be in the mid-14 percent range as compared to 14.7% in fiscal 2012. G&A as a percentage of system-wide sales is expected to decline to approximately 4.3% in fiscal 2013 from 4.6% in fiscal 2012.
  • Impairment and other charges as a percentage of revenue are expected to be approximately 50 to 70 basis points, excluding restructuring charges.
  • The company no longer provides guidance with respect to refranchising gains or proceeds.
  • 20 to 25 new Jack in the Box restaurants are expected to open, including approximately 10 company locations.
  • 70 to 85 new Qdoba restaurants are expected to open, of which approximately 40 to 45 are expected to be company locations.
  • Capital expenditures are expected to be $95 to $105 million.
  • The tax rate is expected to be approximately 35 to 36 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 from refranchising, are now expected to range from $1.48 to $1.63 in fiscal 2013 as compared to operating earnings per share of $1.20 in fiscal 2012.
  • Diluted earnings per share includes approximately $0.04 of incentive payments to Jack in the Box franchisees in fiscal 2013 to complete the installation of new signage as compared to $0.11 in fiscal 2012 to complete the re-image program.

Conference call

The company will host a conference call for financial analysts and investors on Thursday, February 21, 2013, 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 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 February 21.

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. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Grill®, a leader in fast-casual dining, with more than 600 restaurants in 44 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 achieve and manage its planned expansion, such as the availability of a sufficient number of suitable new restaurant sites, the performance of new restaurants, and risks relating to expansion into new markets; 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 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.

    16 Weeks Ended
January 20,
2013
  January 22,
2012
Diluted earnings per share from
continuing operations – GAAP
$ 0.54   $ 0.27
Plus: Restructuring charges 0.01
Less: Gains from refranchising   (0.01 )     (0.02 )
Operating earnings per share – Non-GAAP $ 0.54     $ 0.25  

                     
JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
 
Sixteen Weeks Ended
January 20,

2013

January 22,

2012

Revenues:
Company restaurant sales $ 360,094 $ 364,102
Franchise revenues   105,429     93,819  
  465,523     457,921  
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging 116,101 122,107
Payroll and employee benefits 104,064 106,811
Occupancy and other   83,354     85,943  
Total company restaurant costs 303,519 314,861
Franchise costs 52,488 49,859
Selling, general and administrative expenses 67,336 65,717
Impairment and other charges, net 3,263 4,351
Gains on the sale of company-operated restaurants   (748 )   (1,122 )
  425,858     433,666  
Earnings from operations 39,665 24,255
Interest expense, net   5,365     6,057  
Earnings from continuing operations and before income taxes 34,300 18,198
Income taxes   10,356     6,248  
Earnings from continuing operations 23,944 11,950
Losses from discontinued operations, net of income tax benefit

 

(3,255 )

 

 
Net earnings $ 20,689   $ 11,950  
 
Net earnings per share - basic:
Earnings from continuing operations $ 0.56 $ 0.27
Losses from discontinued operations   (0.08 )    
Net earnings per share $ 0.48   $ 0.27  
Net earnings per share - diluted:
Earnings from continuing operations $ 0.54 $ 0.27
Losses from discontinued operations   (0.07 )    
Net earnings per share $ 0.47   $ 0.27  
 
Weighted-average shares outstanding:
Basic 42,997 43,863
Diluted 44,356 44,659
 

                     
JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
 
January 20,

2013

September 30,

2012

ASSETS
Current assets:
Cash and cash equivalents $ 9,542 $ 8,469
Accounts and other receivables, net 40,489 78,798
Inventories 8,235 7,752
Prepaid expenses 20,543 32,821
Deferred income taxes 26,931 26,932
Assets held for sale and leaseback 44,847 45,443
Assets of discontinued operations held for sale 30,591
Other current assets   671     375  
Total current assets   151,258     231,181  
Property and equipment, at cost 1,528,889 1,529,650
Less accumulated depreciation and amortization   (729,755 )   (708,858 )
Property and equipment, net   799,134     820,792  
Goodwill 147,283 140,622
Other assets, net   279,614     271,130  
$ 1,377,289   $ 1,463,725  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt $ 20,976 $ 15,952
Accounts payable 38,231 94,713
Accrued liabilities   150,579     164,637  
Total current liabilities   209,786     275,302  
Long-term debt, net of current maturities 374,947 405,276
Other long-term liabilities 367,387 371,202
Stockholders’ equity:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued

Common stock $0.01 par value, 175,000,000 shares authorized, 76,427,051 and 75,827,894 issued, respectively

764 758
Capital in excess of par value 236,672 221,100
Retained earnings 1,141,360 1,120,671
Accumulated other comprehensive loss (132,168 ) (136,013 )
Treasury stock, at cost, 32,941,042 and 31,955,606 shares, respectively   (821,459 )   (794,571 )
Total stockholders’ equity   425,169     411,945  
$ 1,377,289   $ 1,463,725  
 

                     
JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
Sixteen Weeks Ended
January 20,

2013

January 22,

2012

Cash flows from operating activities:
Net earnings $ 20,689 $ 11,950
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 30,016 29,534
Deferred finance cost amortization 729 788
Deferred income taxes (1,370 ) (1,203 )
Share-based compensation expense 4,062 2,022
Pension and postretirement expense 9,584 8,212
Gains on cash surrender value of company-owned life insurance (2,836 ) (6,742 )
Gains on the sale of company-operated restaurants (748 ) (1,122 )
(Gains) losses on the disposition of property and equipment (832 ) 1,083
Impairment charges and other 4,458 1,199
Loss on early retirement of debt 939
Changes in assets and liabilities, excluding acquisitions and dispositions:
Accounts and other receivables 38,766 8,630
Inventories 26,361 (6,462 )
Prepaid expenses and other current assets 11,980 (1,412 )
Accounts payable (33,966 ) 2,222
Accrued liabilities (9,141 ) (21,849 )
Pension and postretirement contributions (5,525 ) (996 )
Other   (3,201 )   1,938  
Cash flows provided by operating activities   89,965     27,792  
Cash flows from investing activities:
Purchases of property and equipment (21,394 ) (26,945 )
Purchases of assets intended for sale and leaseback (13,357 ) (11,046 )
Proceeds from sale and leaseback of assets 13,513 3,143
Proceeds from the sale of company-operated restaurants 833 1,249
Collections on notes receivable 1,848 3,539
Disbursements for loans to franchisees (2,604 )
Acquisitions of franchise-operated restaurants (7,800 ) (6,195 )
Other   2,042     14  
Cash flows used in investing activities   (24,315 )   (38,845 )
Cash flows from financing activities:
Borrowings on revolving credit facilities 385,148 222,020
Repayments of borrowings on revolving credit facilities (445,148 ) (191,295 )
Proceeds from issuance of debt 200,000
Principal repayments on debt (165,305 ) (5,380 )
Debt issuance costs (4,386 )
Proceeds from issuance of common stock 10,733 785
Repurchases of common stock (26,888 ) (6,901 )
Excess tax benefits from share-based compensation arrangements 675 191
Change in book overdraft   (19,406 )   (6,147 )
Cash flows provided by (used in) financing activities   (64,577 )   13,273  
Net increase in cash and cash equivalents 1,073 2,220
Cash and cash equivalents at beginning of period   8,469     11,424  
Cash and cash equivalents at end of period $ 9,542   $ 13,644  
 

 
JACK IN THE BOX INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION

(Unaudited)

 
 

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

                     
CONSOLIDATED STATEMENTS OF EARNINGS DATA
 
Sixteen Weeks Ended
January 20,

2013

January 22,

2012

Revenues:
Company restaurant sales

77.4

%

79.5

%

Franchise revenues

22.6

%

20.5

%

Total revenues

100.0

%

100.0

%

Operating costs and expenses, net:
Company restaurant costs:

Food and packaging(1)

32.2

%

33.5

%

Payroll and employee benefits(1)

28.9

%

29.3

%

Occupancy and other(1)

23.1

%

23.6

%

Total company restaurant costs(1)

84.3

%

86.5

%

Franchise costs(1)

49.8

%

53.1

%

Selling, general and administrative expenses

14.5

%

14.4

%

Impairment and other charges, net

0.7

%

1.0

%

Gains on the sale of company-operated restaurants (0.2 )% (0.2 )%
Earnings from operations

8.5

%

5.3

%

Income tax rate(2)

30.2

%

34.3

%

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

               
SUPPLEMENTAL COMPANY-OPERATED RESTAURANTS STATEMENTS OF EARNINGS DATA
(Dollars in thousands)
 
      Sixteen Weeks Ended
January 20, 2013 January 22, 2012
Jack in the Box:      
Company restaurant sales $ 267,176 $ 294,353
Company restaurant costs:
Food and packaging 87,798

32.9

%

101,591

34.5

%

Payroll and employee benefits 77,002

28.8

%

86,569

29.4

%

Occupancy and other   56,588

21.2

%

 

65,291

22.2

%

Total company restaurant costs $ 221,388

82.9

%

$

253,451

86.1

%

Qdoba:
Company restaurant sales $ 92,918 $ 69,749
Company restaurant costs:
Food and packaging 28,303

30.5

%

20,516

29.4

%

Payroll and employee benefits 27,062

29.1

%

20,242

29.0

%

Occupancy and other   26,766

28.8

%

 

20,652

29.6

%

Total company restaurant costs $ 82,131

88.4

%

$

61,410

88.0

%

 

 

JACK IN THE BOX INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

(Unaudited)

 

The following table summarizes the changes in the number and mix of Jack in the Box and Qdoba company and franchise restaurants in each fiscal year:

                                   
January 20, 2013 January 22, 2012
Company Franchise Total Company Franchise Total
Jack in the Box:
Beginning of year 547 1,703 2,250 629 1,592 2,221
New 3 6 9 5 11 16
Acquired from franchisees 1 (1 )
Closed   (4 ) (4 )   (1 ) (1 )
End of period 551   1,704   2,255   634   1,602   2,236  
% of Jack in the Box system 24 % 76 % 100 % 28 % 72 % 100 %
% of consolidated system 63 % 85 % 78 % 71 % 83 % 79 %
Qdoba:
Beginning of year 316 311 627 245 338 583
New 3 14 17 6 9 15
Acquired from franchisees 6 (6 ) 11 (11 )
Closed   (8 ) (8 )   (1 ) (1 )
End of period 325   311   636   262   335   597  
% of Qdoba system 51 % 49 % 100 % 44 % 56 % 100 %
% of consolidated system 37 % 15 % 22 % 29 % 17 % 21 %
Consolidated:            
Total system 876   2,015   2,891   896   1,937   2,833  
% of consolidated system 30 % 70 % 100 % 32 % 68 % 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