Jack in the Box Inc. Reports Second Quarter FY 2013 Earnings; Updates Guidance for FY 2013
By: Jack in the Box | 0 Shares 197 Reads
SAN DIEGO - May 16, 2013 - (BUSINESS WIRE) - Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $13.4 million, or $0.30 per diluted share, for the second quarter ended April 14, 2013, compared with earnings from continuing operations of $21.6 million, or $0.48 per diluted share, for the second 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 or losses from refranchising, were $0.33 per share in the second quarter of fiscal 2013 compared with $0.30 per share in the prior year quarter.
During the second quarter of fiscal 2013, the company recognized a pre-tax loss of $2.7 million, or approximately 4 cents per diluted share, related to the expected sale of 16 restaurants in one market that is anticipated to be completed by the end of the fiscal year. The company also refranchised four Jack in the Box® restaurants, which generated a gain of approximately $0.01 per diluted share. The resulting loss from refranchising of approximately $0.03 per diluted share for the quarter compares with a gain from refranchising of approximately $0.21 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.
12 Weeks Ended
28 Weeks Ended
April 14, 2013
April 15, 2012
April 14, 2013
April 15, 2012
Diluted earnings per share from continuing operations – GAAP
$
0.30
$
0.48
$
0.84
$
0.75
Plus: Restructuring charges
-
0.02
0.02
0.02
Less: (Gains)/losses from refranchising
0.03
(0.21
)
0.03
(0.22
)
Operating earnings per share – Non-GAAP
$
0.33
$
0.30
$
0.88
$
0.55
The company is continuing its efforts to lower its cost structure and identify opportunities to reduce G&A as well as improve restaurant profitability across both brands. As a result, restructuring charges of $0.3 million were recorded during the second quarter of 2013 as compared to $1.5 million, or approximately $0.02 per diluted share in the prior year quarter. These charges are included in “impairment and other charges, net” in the accompanying condensed consolidated statements of earnings. The company expects to incur additional restructuring charges in fiscal 2013 relating to this review.
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 of $0.1 million in the second quarter and $3.3 million in the first quarter of fiscal 2013, which reduced year-to-date diluted net earnings per share by approximately $0.08. This charge and the results of operations for the distribution business are included in discontinued operations in the accompanying condensed consolidated statements of earnings for all periods presented.
Increase (decrease) in same-store sales:
12 Weeks Ended April 14, 2013
12 Weeks Ended April 15, 2012
28 Weeks Ended April 14, 2013
28 Weeks Ended April 15, 2012
Jack in the Box®:
Company
0.9
%
5.6
%
1.6
%
5.5
%
Franchise
(0.2
%)
3.6
%
0.9
%
3.1
%
System
0.1
%
4.2
%
1.1
%
3.8
%
Qdoba®:
Company
(2.0
%)
3.8
%
(0.1
%)
3.7
%
Franchise
(0.9
%)
2.2
%
(0.1
%)
3.2
%
System
(1.5
%)
3.0
%
(0.1
%)
3.4
%
Linda A. Lang, chairman and chief executive officer, said, “Jack in the Box company same-store sales increased 0.9 percent during the quarter, accelerating in the last two months of the quarter after a slow start which we attributed to pressures on consumer spending due to higher payroll taxes, delayed tax refunds and the rapid increase in gas prices in the last part of January and first half of February. Jack in the Box system same-store sales growth for the quarter exceeded that of the QSR sandwich segment by 1.9 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended April 14, 2013. Included in this segment are 15 of the top QSR sandwich and burger chains in the US. And on a weekly basis, the brand outperformed the segment for 11 out of the 12 weeks.
“Qdoba same-store sales in the second quarter decreased 2.0 percent for company restaurants, and were adversely affected by more severe winter weather in the quarter than last year, which we believe resulted in approximately 150 basis points of unfavorable impact,” Lang said.
Consolidated restaurant operating margin improved by 30 basis points to 15.8 percent of sales in the second quarter of 2013, compared with 15.5 percent of sales in the year-ago quarter.
Restaurant operating margin increased 160 basis points to 17.1% of sales for Jack in the Box. The improvement was due primarily to leverage from same-store sales increases and the benefit of refranchising, as well as slightly lower food and packaging costs. The decrease in food and packaging costs as a percentage of sales was due primarily to the benefit of price increases and favorable product mix which were partially offset by commodity inflation of approximately 2.6 percent.
Restaurant operating margin decreased 340 basis points to 12.2% of sales for Qdoba, due primarily to sales deleverage and greater promotional activity, as well as commodity inflation of approximately 1.8 percent.
SG&A expense for the second quarter decreased by $1.5 million and was 14.9 percent of revenues, the same percentage as the prior year quarter. The decrease in SG&A costs was due, in part, to the benefit of the company’s restructuring activities, lower advertising and overhead costs resulting from the Jack in the Box refranchising strategy, and a decrease in pre-opening costs. These decreases were partially offset by higher incentive and share-based compensation, increased advertising and G&A related to Qdoba growth, and higher pension costs. Mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans positively impacted SG&A by $1.4 million in the second quarter as compared to a positive impact of $1.1 million in last year’s second quarter, resulting in a year-over-year decrease in SG&A of $0.3 million.
Impairment and other charges decreased $2.7 million in the quarter compared to a year ago, including a $1.2 million decrease in restructuring charges.
The tax rate for the second quarter of 2013 was 37.1 percent versus 34.1 percent for the second quarter of 2012. The tax rate in the second quarter of fiscal 2013 was affected by the timing of Work Opportunity Tax Credits.
The company repurchased approximately 421,000 shares of its common stock in the second quarter at an average price of $34.28 per share for an aggregate cost of $14.4 million. This leaves $35.6 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 a subsequent authorization that expires in November 2014.
Restaurant openings
Three new franchised Jack in the Box restaurants opened in the second quarter of fiscal 2013, compared with 7 new restaurants opened system-wide during the same quarter last year, of which 3 were franchised.
In the second quarter, 15 Qdoba restaurants opened, including 6 franchised locations, versus 8 new restaurants in the year-ago quarter, of which 6 were franchised. The company also acquired 6 Qdoba restaurants from franchisees in the quarter, compared with 25 in the prior year quarter.
At April 14, 2013, the company’s system total comprised 2,256 Jack in the Box restaurants, including 1,710 franchised locations, and 647 Qdoba restaurants, including 307 franchised locations.
Guidance
The following guidance and underlying assumptions reflect the company’s current expectations for the third quarter ending July 7, 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.
Third quarter fiscal year 2013 guidance
Same-store sales are expected to increase approximately 1 to 3 percent at Jack in the Box company restaurants versus a 3.4 percent increase in the year-ago quarter.
Same-store sales are expected to be approximately flat at Qdoba company restaurants versus a 3.3 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 be approximately flat to up 1.0 percent at Qdoba company restaurants.
Overall commodity costs are expected to increase by approximately 2 to 2.5 percent for the full year.
Restaurant operating margin for the full year is expected to be approximately 16.0 percent, depending on same-store sales and commodity inflation.
SG&A as a percentage of revenue is expected to be in the high-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 4.4% in fiscal 2013 from 4.6% in fiscal 2012. The increase in expected SG&A costs as compared to the company’s previous guidance is due primarily to higher anticipated incentive compensation.
Impairment and other charges as a percentage of revenue are expected to be approximately 70 basis points, excluding restructuring charges.
The company no longer provides guidance with respect to refranchising gains or proceeds.
Approximately 20 new Jack in the Box restaurants are expected to open, including approximately 6 company locations.
70 to 75 new Qdoba restaurants are expected to open, of which approximately 40 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 $1.55 to $1.65 in fiscal 2013 as compared to operating earnings per share of $1.20 in fiscal 2012.
Diluted earnings per share includes approximately $0.03 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.
Diluted weighted-average shares outstanding for the full year are expected to be approximately the same as last year.
Conference call
The company will host a conference call for financial analysts and investors on Thursday, May 16, 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 May 16.
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 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.
12 Weeks Ended
28 Weeks Ended
April 14, 2013
April 15, 2012
April 14, 2013
April 15, 2012
Diluted earnings per share from continuing operations – GAAP
$
0.30
$
0.48
$
0.84
$
0.75
Plus: Restructuring charges
-
0.02
0.02
0.02
Less: (Gains)/losses from refranchising
0.03
(0.21
)
0.03
(0.22
)
Operating earnings per share – Non-GAAP
$
0.33
$
0.30
$
0.88
$
0.55
JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
Quarter
Year-to-Date
April 14,
2013
April 15,
2012
April 14,
2013
April 15,
2012
Revenues:
Company restaurant sales
$
277,197
$
290,803
$
637,291
$
654,905
Franchise revenues
78,426
75,681
183,855
169,500
355,623
366,484
821,146
824,405
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging
90,688
94,910
206,789
217,017
Payroll and employee benefits
79,620
84,566
183,684
191,377
Occupancy and other
63,152
66,184
146,506
152,127
Total company restaurant costs
233,460
245,660
536,979
560,521
Franchise costs
39,661
37,996
92,149
87,855
Selling, general and administrative expenses
52,972
54,497
120,308
120,214
Impairment and other charges, net
2,382
5,074
5,645
9,425
Losses (gains) on the sale of company-operated restaurants
2,418
(14,078
)
1,670
(15,200
)
330,893
329,149
756,751
762,815
Earnings from operations
24,730
37,335
64,395
61,590
Interest expense, net
3,426
4,534
8,791
10,591
Earnings from continuing operations and before income taxes
21,304
32,801
55,604
50,999
Income taxes
7,894
11,169
18,250
17,417
Earnings from continuing operations
13,410
21,632
37,354
33,582
Losses from discontinued operations, net of income tax benefit
(120
)
-
(3,375
)
-
Net earnings
$
13,290
$
21,632
$
33,979
$
33,582
Net earnings per share - basic:
Earnings from continuing operations
$
0.31
$
0.49
$
0.86
$
0.77
Losses from discontinued operations
—
—
(0.08
)
—
Net earnings per share (1)
$
0.30
$
0.49
$
0.78
$
0.77
Net earnings per share - diluted:
Earnings from continuing operations
$
0.30
$
0.48
$
0.84
$
0.75
Losses from discontinued operations
—
—
(0.08
)
—
Net earnings per share (1)
$
0.29
$
0.48
$
0.76
$
0.75
Weighted-average shares outstanding:
Basic
43,747
43,937
43,319
43,896
Diluted
45,274
44,911
44,736
44,775
(1) Earnings per share may not add due to rounding
JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
April 14,
2013
September 30,
2012
ASSETS
Current assets:
Cash and cash equivalents
$
10,202
$
8,469
Accounts and other receivables, net
52,185
78,798
Inventories
8,713
7,752
Prepaid expenses
31,992
32,821
Deferred income taxes
26,931
26,932
Assets held for sale and leaseback
39,569
45,443
Assets of discontinued operations held for sale
—
30,591
Other current assets
452
375
Total current assets
170,044
231,181
Property and equipment, at cost
1,543,068
1,529,650
Less accumulated depreciation and amortization
(736,854
)
(708,858
)
Property and equipment, net
806,214
820,792
Goodwill
148,935
140,622
Other assets, net
276,544
271,130
$
1,401,737
$
1,463,725
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt
$
20,960
$
15,952
Accounts payable
24,123
94,713
Accrued liabilities
160,581
164,637
Total current liabilities
205,664
275,302
Long-term debt, net of current maturities
369,728
405,276
Other long-term liabilities
369,667
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, 77,559,191 and 75,827,894
issued, respectively
776
758
Capital in excess of par value
266,500
221,100
Retained earnings
1,154,650
1,120,671
Accumulated other comprehensive loss
(129,344
)
(136,013
)
Treasury stock, at cost, 33,362,162 and 31,955,606 shares, respectively
(835,904
)
(794,571
)
Total stockholders’ equity
456,678
411,945
$
1,401,737
$
1,463,725
JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Year-to-Date
April 14,
2013
April 15,
2012
Cash flows from operating activities:
Net earnings
$
33,979
$
33,582
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
52,590
51,874
Deferred finance cost amortization
1,249
1,431
Deferred income taxes
2,536
(2,560
)
Share-based compensation expense
7,599
3,562
Pension and postretirement expense
16,772
14,372
Gains on cash surrender value of company-owned life insurance
(5,669
)
(8,427
)
Losses (gains) on the sale of company-operated restaurants
1,670
(15,200
)
Losses on the disposition of property and equipment
416
2,858
Impairment charges and other
4,828
2,109
Loss on early retirement of debt
939
—
Changes in assets and liabilities, excluding acquisitions and dispositions:
Accounts and other receivables
25,227
(8,680
)
Inventories
25,883
5,213
Prepaid expenses and other current assets
751
(4,627
)
Accounts payable
(32,036
)
(6,178
)
Accrued liabilities
(4,256
)
6,237
Pension and postretirement contributions
(7,052
)
(6,573
)
Other
(3,821
)
595
Cash flows provided by operating activities
121,605
69,588
Cash flows from investing activities:
Purchases of property and equipment
(41,754
)
(40,609
)
Purchases of assets intended for sale and leaseback
(25,165
)
(22,000
)
Proceeds from sale and leaseback of assets
22,892
9,312
Proceeds from the sale of company-operated restaurants
2,866
21,964
Collections on notes receivable
2,987
9,669
Disbursements for loans to franchisees
—
(3,977
)
Acquisitions of franchise-operated restaurants
(11,014
)
(39,195
)
Other
3,694
244
Cash flows used in investing activities
(45,494
)
(64,592
)
Cash flows from financing activities:
Borrowings on revolving credit facilities
479,000
333,020
Repayments of borrowings on revolving credit facilities
(539,000
)
(308,324
)
Proceeds from issuance of debt
200,000
—
Principal repayments on debt
(170,540
)
(10,662
)
Debt issuance costs
(4,392
)
(741
)
Proceeds from issuance of common stock
37,113
2,015
Repurchases of common stock
(40,465
)
(6,901
)
Excess tax benefits from share-based compensation arrangements
599
287
Change in book overdraft
(36,693
)
(13,806
)
Cash flows used in financing activities
(74,378
)
(5,112
)
Net increase (decrease) in cash and cash equivalents
1,733
(116
)
Cash and cash equivalents at beginning of period
8,469
11,424
Cash and cash equivalents at end of period
$
10,202
$
11,308
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
Quarter
Year-to-Date
April 14,
2013
April 15,
2012
April 14,
2013
April 15,
2012
Revenues:
Company restaurant sales
77.9
%
79.3
%
77.6
%
79.4
%
Franchise revenues
22.1
%
20.7
%
22.4
%
20.6
%
Total revenues
100.0
%
100.0
%
100.0
%
100.0
%
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging (1)
32.7
%
32.6
%
32.4
%
33.1
%
Payroll and employee benefits (1)
28.7
%
29.1
%
28.8
%
29.2
%
Occupancy and other (1)
22.8
%
22.8
%
23.0
%
23.2
%
Total company restaurant costs (1)
84.2
%
84.5
%
84.3
%
85.6
%
Franchise costs (1)
50.6
%
50.2
%
50.1
%
51.8
%
Selling, general and administrative expenses
14.9
%
14.9
%
14.7
%
14.6
%
Impairment and other charges, net
0.7
%
1.4
%
0.7
%
1.1
%
Gains on the sale of company-operated restaurants
0.7
%
(3.8
)%
0.2
%
(1.8
)%
Earnings from operations
7.0
%
10.2
%
7.8
%
7.5
%
Income tax rate (2)
37.1
%
34.1
%
32.8
%
34.2
%
(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)
Quarter
Year-to-Date
April 14, 2013
April 15, 2012
April 14, 2013
April 15, 2012
Jack in the Box:
Company restaurant sales
$
203,439
$
227,828
$
470,615
$
522,181
Company restaurant costs:
Food and packaging
68,195
33.5
%
76,508
33.6
%
155,993
33.1
%
178,098
34.1
%
Payroll and employee benefits
58,108
28.6
%
67,128
29.5
%
135,110
28.7
%
153,697
29.4
%
Occupancy and other
42,421
20.9
%
48,900
21.5
%
99,009
21.0
%
114,191
21.9
%
Total company restaurant costs
$
168,724
82.9
%
$
192,536
84.5
%
$
390,112
82.9
%
$
445,986
85.4
%
Qdoba:
Company restaurant sales
$
73,758
$
62,975
$
166,676
$
132,724
Company restaurant costs:
Food and packaging
22,493
30.5
%
18,402
29.2
%
50,796
30.5
%
38,919
29.3
%
Payroll and employee benefits
21,512
29.2
%
17,438
27.7
%
48,574
29.1
%
37,680
28.4
%
Occupancy and other
20,731
28.1
%
17,284
27.4
%
47,497
28.5
%
37,936
28.6
%
Total company restaurant costs
$
64,736
87.8
%
$
53,124
84.4
%
$
146,867
88.1
%
$
114,535
86.3
%
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:
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