News Details

SAN DIEGO--(BUSINESS WIRE)--May 14, 2014-- Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $18.3 million, or $0.43 per diluted share, for the second quarter ended April 13, 2014, compared with earnings from continuing operations of $15.1 million, or $0.33 per diluted share, for the second quarter of fiscal 2013.

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 $0.51 in the second quarter of fiscal 2014 compared with $0.37 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.

In connection with the refinancing of the company’s credit facility in March 2014, the company wrote off $0.8 million in deferred financing costs during the second quarter. This charge is included in interest expense and negatively impacted diluted earnings per share by approximately one cent in the second quarter.

Lenny Comma, chairman and chief executive officer, said, “Overall, our second quarter results were solid, with a 38 percent increase in operating earnings per share resulting from better than expected same-store sales growth at Qdoba Mexican Grill^®, margin expansion and lower overhead, which overcame a shortfall in sales at Jack in the Box^®.”

Increase (decrease) in same-store sales:

“Jack in the Box company same-store sales increased 0.9 percent for the quarter, as sales trends softened in the last half of the quarter, when we saw an increase in messaging around value promotions from our competitors,” Comma said. “Importantly, both late-night and breakfast dayparts remained strong, and sales have rebounded through the first four weeks of our third quarter. While our same-store sales performance at Jack in the Box was lower than our expectations, system same-store sales growth for the quarter of 0.7 percent exceeded that of the QSR sandwich segment by 1.2 percentage points for the comparable period, according to The NPD Group’s SalesTrack^® Weekly for the 12-week time period ended April 13, 2014. Included in this segment are 14 of the top QSR sandwich and burger chains in the country.

“Qdoba same-store sales in the second quarter increased 7.2 percent for company restaurants and 7.0 percent system-wide. Our results exceeded our expectations following the mid-February introduction of our Queso Bliss promotion featuring two new Queso flavors, Diablo and Verde. Guests clearly responded to the new product news surrounding this limited-time offer. In addition, our company performance reflected less discounting, as well as double-digit growth in catering sales.”

Consolidated restaurant operating margin increased by 140 basis points to 18.5 percent of sales in the second quarter of 2014, compared with 17.1 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box restaurants increased 150 basis points to 18.6 percent of sales. The improvement was due primarily to lower food and packaging costs and the benefit of refranchising, which were partially offset by higher utility costs. The decrease in food and packaging costs as a percentage of sales resulted from the benefit of price increases and favorable product mix changes, combined with essentially no commodity inflation in the quarter. Restaurant operating margin for Qdoba restaurants increased 110 basis points to 18.3 percent of sales, due primarily to sales leverage, the benefit of less discounting, and commodity deflation of approximately 0.9 percent, which were partially offset by higher incentive compensation for restaurant managers, utilities, maintenance and repairs, credit card fees and beverage equipment rental costs.

SG&A expense for the second quarter decreased by $3.8 million and was 14.3 percent of revenues as compared to 15.1 percent in the prior year quarter. The decrease reflects a $4.0 million reduction in pension expense, a $1.9 million decrease in incentive and share-based compensation, and a $1.1 million decrease in advertising costs resulting from the Jack in the Box refranchising strategy. These decreases were partially offset by a $1.4 million increase in advertising costs at Qdoba due to the timing of advertising activities, and by a legal settlement of $1.0 million. Mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans positively impacted SG&A by $0.5 million in the second quarter of 2014 as compared to $1.4 million in the second quarter of 2013, resulting in a year-over-year increase in SG&A of $0.9 million.

The company is continuing its efforts to improve its cost structure and identify opportunities to reduce G&A as well as improve restaurant profitability across both brands. During the second quarter of 2014, the company recorded a $6.4 million charge to write-off restaurant technology software as it plans to integrate certain systems across both brands to create efficiencies while lowering costs. Including this amount, total restructuring charges recorded during the second quarter of 2014 were $7.5 million, or approximately $0.11 per diluted share, as compared to $0.3 million during the second quarter of 2013. These charges are included in “Impairment and other charges, net” in the accompanying consolidated statements of earnings.

Gains from refranchising were $1.8 million in the second quarter of 2014, or approximately $0.03 per diluted share, compared with a loss of $2.4 million, or approximately $0.03 per diluted share, in the prior year quarter. During the second quarter of fiscal 2014, the company refranchised 14 Jack in the Box restaurants in one market and recognized a gain of $4.2 million. The company also recognized a loss of $3.1 million related to the expected sale of two Jack in the Box markets in the Southeast for which it has received signed letters of intent. Amounts in both years also include additional proceeds received as a result of the extension of underlying franchise and lease agreements for previously refranchised Jack in the Box restaurants.

In the third quarter of 2013, following the completion of the company’s previously disclosed review of market performance for its Qdoba brand, 62 company-operated Qdoba restaurants were closed, and the results of operations, impairment charges, lease obligations and other exit costs for these restaurants are included in discontinued operations in the accompanying consolidated statements of earnings for all periods presented. Discontinued operations for the second quarter of fiscal 2014 include after-tax charges related to the Qdoba restaurant closures of approximately $0.06 per diluted share, as compared to $0.04 for the second quarter of fiscal 2013.

Capital Allocation

The company repurchased approximately 2,100,000 shares of its common stock in the second quarter of 2014 at an average price of $59.54 per share for an aggregate cost of $125.0 million. Year-to-date through the second quarter, the company repurchased approximately 3,678,000 shares at an average price of $54.93 per share, for an aggregate cost of $202.0 million. This leaves $134.7 million remaining under a $200 million stock-buyback program authorized by the company’s Board of Directors in February 2014 that expires in November 2015. The company also separately announced today that its Board of Directors has approved the initiation of a regular quarterly cash dividend of $0.20 per share.

Guidance

The following guidance and underlying assumptions reflect the company’s current expectations for the third quarter ending July 6, 2014, and the fiscal year ending September 28, 2014. Fiscal 2014 is a 52-week year, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters.

Third quarter fiscal year 2014 guidance

• Same-store sales are expected to increase approximately 2.0 to 3.0 percent at Jack in the Box company restaurants versus a 1.2 percent increase in the year-ago quarter.

• Same-store sales are expected to increase approximately 3.0 to 4.0 percent at Qdoba company restaurants versus a 0.5 percent increase in the year-ago quarter.

Fiscal year 2014 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 now expected to increase approximately 3.0 to 4.0 percent at Qdoba company restaurants.
• Overall commodity costs are now expected to increase by approximately 1 to 2 percent for the full year.
• Restaurant operating margin for the full year, which reflects an approximate 20 basis points impact from the July 2014 minimum wage increase in California, is expected to be approximately 18.0 to 18.5 percent, depending on same-store sales and commodity inflation.
• SG&A as a percentage of revenue is expected to be approximately 13.5 to 14.0 percent as compared to 14.8 percent in fiscal 2013. G&A as a percentage of system-wide sales is expected to decline to approximately 3.8 percent in fiscal 2014 from 4.3 percent in fiscal 2013.
• Impairment and other charges as a percentage of revenue are expected to be approximately 70 basis points, excluding restructuring charges.
• Approximately 10 new Jack in the Box restaurants are expected to open, including approximately 3 company locations.
• Approximately 50 new Qdoba restaurants are expected to open, of which approximately 20 are expected to be company locations.
• Capital expenditures are expected to be $75 to $85 million.

• The tax rate is expected to be approximately 37 to 38 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, are now expected to range from $2.25 to $2.35 in fiscal 2014 as compared to operating earnings per share of $1.82 in fiscal 2013.

Conference call

The company will host a conference call for financial analysts and investors on Thursday, May 15, 2014, 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 15.

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 2,250 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 46 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 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; 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.

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