Jack in the Box Inc. Reports First Quarter FY 2013 Earnings; Updates Guidance for FY 2013
Jack in the Box Inc. Reports First Quarter FY 2013 Earnings; Updates
Guidance for FY 2013
Business Wire
SAN DIEGO -- February 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, January 22,
2013 2012
Diluted earnings per share from $ 0.54 $ 0.27
continuing operations – GAAP
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 16 Weeks Ended
January 20, 2013 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, January 22,
2013 2012
Diluted earnings per share from $ 0.54 $ 0.27
continuing operations – GAAP
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, January 22,
2013 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 67,336 65,717
administrative expenses
Impairment and other charges, 3,263 4,351
net
Gains on the sale of (748 ) (1,122 )
company-operated restaurants
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 34,300 18,198
taxes
Income taxes 10,356 6,248
Earnings from continuing 23,944 11,950
operations
Losses from discontinued
operations, net of income tax (3,255 ) —
benefit
Net earnings $ 20,689 $ 11,950
Net earnings per share - basic:
Earnings from continuing $ 0.56 $ 0.27
operations
Losses from discontinued (0.08 ) —
operations
Net earnings per share $ 0.48 $ 0.27
Net earnings per share -
diluted:
Earnings from continuing $ 0.54 $ 0.27
operations
Losses from discontinued (0.07 ) —
operations
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, September 30,
2013 2012
ASSETS
Current assets:
Cash and cash equivalents $ 9,542 $ 8,469
Accounts and other 40,489 78,798
receivables, net
Inventories 8,235 7,752
Prepaid expenses 20,543 32,821
Deferred income taxes 26,931 26,932
Assets held for sale and 44,847 45,443
leaseback
Assets of discontinued — 30,591
operations held for sale
Other current assets 671 375
Total current assets 151,258 231,181
Property and equipment, at 1,528,889 1,529,650
cost
Less accumulated
depreciation and (729,755 ) (708,858 )
amortization
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 $ 20,976 $ 15,952
long-term debt
Accounts payable 38,231 94,713
Accrued liabilities 150,579 164,637
Total current liabilities 209,786 275,302
Long-term debt, net of 374,947 405,276
current maturities
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 764 758
75,827,894 issued,
respectively
Capital in excess of par 236,672 221,100
value
Retained earnings 1,141,360 1,120,671
Accumulated other (132,168 ) (136,013 )
comprehensive loss
Treasury stock, at cost,
32,941,042 and 31,955,606 (821,459 ) (794,571 )
shares, respectively
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, January 22,
2013 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 729 788
amortization
Deferred income taxes (1,370 ) (1,203 )
Share-based compensation 4,062 2,022
expense
Pension and postretirement 9,584 8,212
expense
Gains on cash surrender value
of company-owned life (2,836 ) (6,742 )
insurance
Gains on the sale of (748 ) (1,122 )
company-operated restaurants
(Gains) losses on the
disposition of property and (832 ) 1,083
equipment
Impairment charges and other 4,458 1,199
Loss on early retirement of 939 —
debt
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 11,980 (1,412 )
current assets
Accounts payable (33,966 ) 2,222
Accrued liabilities (9,141 ) (21,849 )
Pension and postretirement (5,525 ) (996 )
contributions
Other (3,201 ) 1,938
Cash flows provided by 89,965 27,792
operating activities
Cash flows from investing
activities:
Purchases of property and (21,394 ) (26,945 )
equipment
Purchases of assets intended (13,357 ) (11,046 )
for sale and leaseback
Proceeds from sale and 13,513 3,143
leaseback of assets
Proceeds from the sale of 833 1,249
company-operated restaurants
Collections on notes 1,848 3,539
receivable
Disbursements for loans to — (2,604 )
franchisees
Acquisitions of (7,800 ) (6,195 )
franchise-operated restaurants
Other 2,042 14
Cash flows used in investing (24,315 ) (38,845 )
activities
Cash flows from financing
activities:
Borrowings on revolving credit 385,148 222,020
facilities
Repayments of borrowings on (445,148 ) (191,295 )
revolving credit facilities
Proceeds from issuance of debt 200,000 —
Principal repayments on debt (165,305 ) (5,380 )
Debt issuance costs (4,386 ) —
Proceeds from issuance of 10,733 785
common stock
Repurchases of common stock (26,888 ) (6,901 )
Excess tax benefits from
share-based compensation 675 191
arrangements
Change in book overdraft (19,406 ) (6,147 )
Cash flows provided by (used (64,577 ) 13,273
in) financing activities
Net increase in cash and cash 1,073 2,220
equivalents
Cash and cash equivalents at 8,469 11,424
beginning of period
Cash and cash equivalents at $ 9,542 $ 13,644
end of period
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 January
20, 22,
2013 2012
Revenues:
Company restaurant 77.4 % 79.5 %
sales
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 28.9 % 29.3 %
benefits(1)
Occupancy and other(1) 23.1 % 23.6 %
Total company 84.3 % 86.5 %
restaurant costs(1)
Franchise costs(1) 49.8 % 53.1 %
Selling, general and
administrative 14.5 % 14.4 %
expenses
Impairment and other 0.7 % 1.0 %
charges, net
Gains on the sale of
company-operated (0.2 )% (0.2 )%
restaurants
Earnings from 8.5 % 5.3 %
operations
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 $ 267,176 $ 294,353
restaurant sales
Company
restaurant
costs:
Food and 87,798 32.9 % 101,591 34.5 %
packaging
Payroll and
employee 77,002 28.8 % 86,569 29.4 %
benefits
Occupancy and 56,588 21.2 % 65,291 22.2 %
other
Total company $ 221,388 82.9 % $ 253,451 86.1 %
restaurant costs
Qdoba:
Company $ 92,918 $ 69,749
restaurant sales
Company
restaurant
costs:
Food and 28,303 30.5 % 20,516 29.4 %
packaging
Payroll and
employee 27,062 29.1 % 20,242 29.0 %
benefits
Occupancy and 26,766 28.8 % 20,652 29.6 %
other
Total company $ 82,131 88.4 % $ 61,410 88.0 %
restaurant costs
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 547 1,703 2,250 629 1,592 2,221
year
New 3 6 9 5 11 16
Acquired from 1 (1 ) — — — —
franchisees
Closed — (4 ) (4 ) — (1 ) (1 )
End of period 551 1,704 2,255 634 1,602 2,236
% of Jack in
the Box 24 % 76 % 100 % 28 % 72 % 100 %
system
% of
consolidated 63 % 85 % 78 % 71 % 83 % 79 %
system
Qdoba:
Beginning of 316 311 627 245 338 583
year
New 3 14 17 6 9 15
Acquired from 6 (6 ) — 11 (11 ) —
franchisees
Closed — (8 ) (8 ) — (1 ) (1 )
End of period 325 311 636 262 335 597
% of Qdoba 51 % 49 % 100 % 44 % 56 % 100 %
system
% of
consolidated 37 % 15 % 22 % 29 % 17 % 21 %
system
Consolidated:
Total system 876 2,015 2,891 896 1,937 2,833
% of
consolidated 30 % 70 % 100 % 32 % 68 % 100 %
system
Contact:
Jack in the Box Inc.
Investor Contact:
Carol DiRaimo, (858) 571-2407
or
Media Contact:
Brian Luscomb, (858) 571-2291
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