News Details

SAN DIEGO--(BUSINESS WIRE)--Aug. 3, 2016-- Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $30.8 million, or $0.93 per diluted share, for the third quarter ended July 3, 2016, compared with $28.4 million, or $0.75 per diluted share, for the third quarter of fiscal 2015.

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 $1.07 in the third quarter of fiscal 2016 compared with $0.76 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.

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 $7.7 million, or approximately $0.15 per diluted share, were recorded during the third quarter. Charges consist primarily of employee severance pay and facility closing costs. These charges are included in “impairment and other charges, net” in the accompanying consolidated statements of earnings, which increased in the third quarter to $10.5 million from $3.8 million a year ago.

Lenny Comma, chairman and chief executive officer, said, “Operating earnings per share for the third quarter exceeded our expectations, and resulted primarily from healthy margins combined with proceeds from a legal settlement, mark-to-market adjustments and a lower tax rate. We were particularly pleased that Jack in the Box^® system same-store sales closed the gap as compared to the industry, with results steadily improving throughout the quarter. We also began implementing our G&A cost reduction plans, and are happy with the progress that has been made thus far.”

Increase (decrease) in same-store sales:

Jack in the Box system same-store sales increased 1.1 percent for the quarter and lagged the QSR sandwich segment by 0.1 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended July 3, 2016. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales decreased 0.2 percent, with average check up 3.5 percent.

Qdoba same-store sales increased 0.6 percent system-wide and 1.0 percent for company restaurants in the third quarter. Company same-store sales reflected a 0.4 percent increase in transactions as well as growth in catering sales.

Consolidated restaurant operating margin increased by 10 basis points to 21.9 percent of sales in the third quarter of 2016, compared with 21.8 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box company restaurants increased 50 basis points to 22.5 percent of sales. The increase was due primarily to favorable food and packaging costs, which were partially offset by higher costs related to equipment and exterior upgrades and minimum wage increases in California that went into effect in January 2016. The decrease in food and packaging costs as a percentage of sales resulted from the benefit of commodity deflation of approximately 2.7 percent in the quarter, favorable product mix changes and menu price increases. Restaurant operating margin for Qdoba company restaurants decreased 80 basis points to 20.6 percent of sales. The decrease was due primarily to costs associated with a greater number of new restaurant openings, increased promotional activity, and higher costs related to equipment upgrades which more than offset the sales growth and benefits from commodity deflation of approximately 3.8 percent in the quarter.

Franchise margin as a percentage of total franchise revenues improved to 52.8 percent in the third quarter from 52.1 percent in the prior year quarter. The improvement was due primarily to higher royalty revenue for both brands and higher rental income from Jack in the Box franchised restaurants resulting from increases in franchise average unit volumes.

SG&A expense for the third quarter decreased by $8.2 million and was 11.6 percent of revenues as compared to 14.2 percent in the prior year quarter. Key items contributing to the decrease were a $2.5 million legal settlement related to an oil spill in the Gulf of Mexico in 2010, a $1.3 million reduction in incentive compensation, and a $1.2 million decrease in pension and postretirement benefits related to the sunsetting of the company's qualified pension plan on December 31, 2015. In addition, mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans positively impacted SG&A by $1.3 million in the third quarter of 2016 as compared to a negative impact of $1.0 million in the third quarter of 2015, resulting in a year-over-year decrease in SG&A of $2.3 million. These decreases were partially offset by a $1.3 million increase in insurance costs due to unfavorable workers' compensation and general liability claim developments in the year.

Interest expense, net, increased by $3.1 million in the third quarter due to increased leverage and a higher effective interest rate for 2016.

The tax rate for the third quarter of 2016 was 36.0 percent versus 38.2 percent for the third quarter of 2015. The lower tax rate in the third quarter of 2016 was due primarily to favorable adjustments on investments supporting the company's non-qualified retirement plans and the conclusion of a state audit during the prior year quarter.

Capital Allocation

Due to the significant announcements made at the company's investor meeting in late May which was more than halfway through the quarter, the company did not repurchase any shares of its common stock in the third quarter of 2016. Year-to-date through the third quarter, the company has repurchased approximately 3,451,000 shares at an average price of $72.44, for an aggregate cost of $250.0 million. The company currently has $150.0 million remaining under stock-buyback programs authorized by its Board of Directors in February and May 2016 that expire in November 2017.

The company also announced today that on July 28, 2016, its Board of Directors declared a quarterly cash dividend of $0.30 per share on the company’s common stock. The dividend is payable on August 29, 2016, to shareholders of record at the close of business on August 16, 2016.

Guidance

The following guidance and underlying assumptions reflect the company’s current expectations for the fourth quarter and fiscal year ending October 2, 2016. Fiscal 2016 is a 53-week year, with 16 weeks in the first quarter, 12 weeks in each of the second and third quarters, and 13 weeks in the fourth quarter.

Fourth quarter fiscal year 2016 guidance

• Same-store sales increase of approximately 1.0 to 2.0 percent at Jack in the Box company restaurants versus a 4.1 percent increase in the year-ago quarter.
• Same-store sales increase of approximately 1.0 to 2.0 percent at Qdoba company restaurants versus a 6.1 percent increase in the year-ago quarter.

Fiscal year 2016 guidance

• Same-store sales of approximately flat to up 0.5 percent at Jack in the Box company restaurants.
• Same-store sales increase of approximately 1.5 to 2.0 percent at Qdoba company restaurants.
• Commodity deflation of approximately 2 to 3 percent for Jack in the Box and approximately 5 percent for Qdoba.
• Consolidated restaurant operating margin of approximately 20.0 to 20.5 percent.
• SG&A as a percentage of revenue of approximately 13.0 to 13.5 percent as compared to 14.4 percent in fiscal 2015.
• Impairment and other charges as a percentage of revenue of approximately 80 basis points, excluding restructuring charges.
• Approximately 20 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 35 are expected to be company locations.
• Capital expenditures of $100 million to $110 million.
• Tax rate of approximately 37 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 $3.65 to $3.75 in fiscal 2016 as compared to operating earnings per share of $3.00 in fiscal 2015. The estimated benefit of the 53^rd week in fiscal 2016 is approximately $0.08 per diluted share.

Conference call

The company will host a conference call for financial analysts and investors on Thursday, August 4, 2016, 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 August 4.

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 600 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.

___________________________

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

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(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 franchise revenues, costs and margin in each period:

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

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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