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Jack In The Box Inc. Reports Third Quarter FY 2013 Earnings; Updates Guidance For FY 2013

Restaurant openings

Three new Jack in the Box restaurants opened in the third quarter of fiscal 2013, including 2 franchised locations, compared with 7 new restaurants opened system-wide during the same quarter last year, of which 2 were franchised.

In the third quarter, 11 Qdoba restaurants opened, including 4 franchised locations, versus 11 new restaurants in the year-ago quarter, of which 5 were franchised.

At July 7, 2013, the company’s system total comprised 2,255 Jack in the Box restaurants, including 1,729 franchised locations, and 592 Qdoba restaurants, including 308 franchised locations.

Guidance

The following guidance and underlying assumptions reflect the company’s current expectations for the fourth quarter and 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.

Fourth quarter fiscal year 2013 guidance

  • Same-store sales are expected to be slightly positive at Jack in the Box company restaurants versus a 3.1 percent increase in the year-ago quarter.
  • Same-store sales are expected to increase approximately 1 percent at Qdoba company restaurants versus a 1.1 percent increase in the year-ago quarter.

Fiscal year 2013 guidance

  • Same-store sales are expected to increase approximately 1 percent at Jack in the Box company restaurants.
  • Same-store sales are expected to be approximately flat to up 1 percent at Qdoba company restaurants.
  • Overall commodity costs are expected to increase by approximately 2 percent for the full year.
  • Restaurant operating margin for the full year is expected to be approximately 17.0 to 17.5 percent, depending on same-store sales and commodity inflation .
  • SG&A as a percentage of revenue is expected to be approximately 15 percent as compared to 14.9% in fiscal 2012. G&A as a percentage of system-wide sales is expected to decline to approximately 4.3% in fiscal 2013 from 4.5% in fiscal 2012.
  • 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.
  • 65 to 70 new Qdoba restaurants are expected to open, of which approximately 35 are expected to be company locations.
  • Capital expenditures are expected to be $90 to $95 million.
  • The tax rate is expected to be approximately 35 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 $1.72 to $1.78 in fiscal 2013 as compared to operating earnings per share of $1.31 in fiscal 2012. The increase in the company’s guidance for operating earnings per share is due primarily to the Qdoba closures.
  • 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, August 8, 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 August 8.

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 approximately 600 restaurants in 45 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   40 Weeks Ended
July 7,   July 8, July 7,   July 8,
2013     2012   2013     2012  

Diluted earnings per share from continuing operations – GAAP

$

0.38

$

0.28

$

1.30

$

1.09

Restructuring charges - 0.16 0.02 0.19
(Gains)/losses from refranchising   0.02     (0.05 )   0.05     (0.28 )
Operating earnings per share – Non-GAAP $ 0.41   $ 0.39   $ 1.37   $ 1.00  
 
 

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
  Quarter   Year-to-Date
July 7,

2013

  July 8,

2012

July 7,

2013

  July 8,

2012

Revenues:
Company restaurant sales $ 270,863 $ 276,447 $ 888,565 $ 913,292
Franchise revenues   79,466     77,605     263,321     247,105  
  350,329     354,052     1,151,886     1,160,397  
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging 88,712 89,456 289,259 301,067
Payroll and employee benefits 74,242 78,055 250,006 262,670
Occupancy and other   59,360     60,691     195,372     203,679  
Total company restaurant costs 222,314 228,202 734,637 767,416
Franchise costs 40,116 38,604 132,265 126,459
Selling, general and administrative expenses 52,078 52,090 171,246 171,195
Impairment and other charges, net 3,428 15,161 9,053 24,556
Losses (gains) on the sale of company-operated restaurants   1,509     (3,733 )   3,179     (18,933 )
  319,445     330,324     1,050,380     1,070,693  
Earnings from operations 30,884 23,728 101,506 89,704
Interest expense, net   3,270     4,371     12,061     14,962  
Earnings from continuing operations and before income taxes 27,614 19,357 89,445 74,742
Income taxes   10,318     6,753     30,954     25,854  
Earnings from continuing operations 17,296 12,604 58,491 48,888
Losses from discontinued operations, net of income tax benefit   (22,952 )   (1,012 )   (30,167 )   (3,714 )
Net earnings (losses) $ (5,656 ) $ 11,592   $ 28,324   $ 45,174  
 
Net earnings (losses) per share - basic:
Earnings from continuing operations $ 0.40 $ 0.29 $ 1.35 $ 1.11
Losses from discontinued operations   (0.52 )   (0.02 )   (0.69 )   (0.08 )
Net earnings (losses) per share (1) $ (0.13 ) $ 0.26   $ 0.65   $ 1.03  
Net earnings (losses) per share - diluted:
Earnings from continuing operations $ 0.38 $ 0.28 $ 1.30 $ 1.09
Losses from discontinued operations   (0.51 )   (0.02 )   (0.67 )   (0.08 )
Net earnings (losses) per share (1) $ (0.12 ) $ 0.26   $ 0.63   $ 1.01  
 
Weighted-average shares outstanding:
Basic 43,772 44,156 43,435 43,975
Diluted 45,247 45,153 44,978 44,892
 
(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)
 
  July 7,

2013

  September 30,

2012

ASSETS
Current assets:
Cash and cash equivalents $ 9,783 $ 8,469
Accounts and other receivables, net 41,972 78,798
Inventories 8,203 7,752
Prepaid expenses 56,816 32,821
Deferred income taxes 26,931 26,932
Assets held for sale 31,253 45,443
Assets of discontinued operations held for sale 30,591
Other current assets   471     375  
Total current assets   175,429     231,181  
Property and equipment, at cost 1,489,407 1,529,650
Less accumulated depreciation and amortization   (726,552 )   (708,858 )
Property and equipment, net   762,855     820,792  
Goodwill 148,632 140,622
Other assets, net   273,502     271,130  
$ 1,360,418   $ 1,463,725  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt $ 20,931 $ 15,952
Accounts payable 26,594 94,713
Accrued liabilities   169,792     164,637  
Total current liabilities   217,317     275,302  
Long-term debt, net of current maturities 359,514 405,276
Other long-term liabilities 366,356 371,202
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, 77,991,876 and 75,827,894 issued, respectively

780 758
Capital in excess of par value 280,600 221,100
Retained earnings 1,148,995 1,120,671
Accumulated other comprehensive loss (126,421 ) (136,013 )
Treasury stock, at cost, 34,728,194 and 31,955,606 shares, respectively   (886,723 )   (794,571 )

Total stockholders’ equity

  417,231     411,945  
$ 1,360,418   $ 1,463,725  
 
 

JACK IN THE BOX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
Year-to-Date
July 7,

2013

July 8,

2012

Cash flows from operating activities:
Net earnings $ 28,324 $ 45,174
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 74,870 74,210
Deferred finance cost amortization 1,764 2,068
Deferred income taxes 2,523 (2,314 )
Share-based compensation expense 10,049 5,001
Pension and postretirement expense 23,959 26,853
Gains on cash surrender value of company-owned life insurance (5,209 ) (8,781 )
Losses (gains) on the sale of company-operated restaurants 3,179 (18,933 )
Losses on the disposition of property and equipment 2,525 3,762
Impairment charges and other 28,237 2,765
Loss on early retirement of debt 939
Changes in assets and liabilities, excluding acquisitions and dispositions:
Accounts and other receivables 33,776 (2,891 )
Inventories 26,393 1,934
Prepaid expenses and other current assets (24,091 ) (12,346 )
Accounts payable (27,857 ) (5,395 )
Accrued liabilities 7,196 13,210
Pension and postretirement contributions (13,168 ) (9,998 )
Other   (6,121 )   (2,737 )
Cash flows provided by operating activities   167,288     111,582  
Cash flows from investing activities:
Purchases of property and equipment (57,971 ) (56,205 )
Purchases of assets intended for sale and leaseback (25,198 ) (31,565 )
Proceeds from sale and leaseback of assets 36,553 18,457
Proceeds from the sale of company-operated restaurants 8,415 29,253
Collections on notes receivable 5,837 10,198
Disbursements for loans to franchisees (3,976 )
Acquisitions of franchise-operated restaurants (11,014 ) (48,262 )
Other   4,054     315  
Cash flows used in investing activities   (39,324 )   (81,785 )
Cash flows from financing activities:
Borrowings on revolving credit facilities 554,000 444,380
Repayments of borrowings on revolving credit facilities (619,000 ) (445,104 )
Proceeds from issuance of debt 200,000
Principal repayments on debt (175,783 ) (15,933 )
Debt issuance costs (4,392 ) (741 )
Proceeds from issuance of common stock 48,000 7,096
Repurchases of common stock (92,152 ) (6,901 )
Excess tax benefits from share-based compensation arrangements 1,261 525
Change in book overdraft   (38,584 )   (13,728 )
Cash flows used in financing activities   (126,650 )   (30,406 )
Net increase (decrease) in cash and cash equivalents 1,314 (609 )
Cash and cash equivalents at beginning of period   8,469     11,424  
Cash and cash equivalents at end of period $ 9,783   $ 10,815  
 
 

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 OPERATIONS DATA
 
Quarter Year-to-Date
July 7,

2013

July 8,

2012

July 7,

2013

July 8,

2012

Revenues:
Company restaurant sales 77.3 % 78.1 % 77.1 % 78.7 %
Franchise revenues 22.7 % 21.9 % 22.9 % 21.3 %
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging (1) 32.8 % 32.4 % 32.6 % 33.0 %
Payroll and employee benefits (1) 27.4 % 28.2 % 28.1 % 28.8 %
Occupancy and other (1) 21.9 % 22.0 % 22.0 % 22.3 %
Total company restaurant costs (1) 82.1 % 82.5 % 82.7 % 84.0 %
Franchise costs (1) 50.5 % 49.7 % 50.2 % 51.2 %
Selling, general and administrative expenses 14.9 % 14.7 % 14.9 % 14.8 %
Impairment and other charges, net 1.0 % 4.3 % 0.8 % 2.1 %

Losses (gains) on the sale of company-operated restaurants

0.4 % (1.1 )% 0.3 % (1.6 )%
Earnings from operations 8.8 % 6.7 % 8.8 % 7.7 %
Income tax rate (2) 37.4 % 34.9 % 34.6 % 34.6 %
 
(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 OPERATIONS DATA
(Dollars in thousands)
 
Quarter Year-to-Date
July 7, 2013 July 8, 2012 July 7, 2013 July 8, 2012
Jack in the Box:
Company restaurant sales $ 197,239 $ 214,679 $ 667,854 $ 736,860
Company restaurant costs:
Food and packaging 66,552 33.7 % 71,582 33.3 % 222,545 33.3 % 249,681 33.9 %
Payroll and employee benefits 55,019 27.9 % 62,772 29.2 % 190,129 28.5 % 216,470 29.4 %
Occupancy and other   42,258 21.4 %   46,442 21.6 %   141,267 21.2 %   160,632 21.8 %
Total company restaurant costs $ 163,829 83.1 % $ 180,796 84.2 % $ 553,941 82.9 % $ 626,783 85.1 %
Qdoba:
Company restaurant sales $ 73,624 $ 61,768 $ 220,711 $ 176,432
Company restaurant costs:
Food and packaging 22,160 30.1 % 17,874 28.9 % 66,714 30.2 % 51,386 29.1 %
Payroll and employee benefits 19,223 26.1 % 15,283 24.7 % 59,877 27.1 % 46,200 26.2 %
Occupancy and other   17,102 23.2 %   14,249 23.1 %   54,105 24.5 %   43,047 24.4 %
Total company restaurant costs $ 58,485 79.4 % $ 47,406 76.7 % $ 180,696 81.9 % $ 140,633 79.7 %
 
 

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:
 
July 7, 2013 July 8, 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 4 11 15 14 16 30
Refranchised (22 ) 22 (55 ) 55
Acquired from franchisees 1 (1 )
Closed (4 ) (6 ) (10 ) (2 ) (2 ) (4 )
End of period 526   1,729   2,255   586   1,661   2,247  
% of Jack in the Box system 23 % 77 % 100 % 26 % 74 % 100 %
% of consolidated system 65 % 85 % 79 % 66 % 84 % 79 %
Qdoba:
Beginning of year 316 311 627 245 338 583
New 19 24 43 14 20 34
Acquired from franchisees 12 (12 ) 45 (45 )
Closed (63 ) (15 ) (78 )   (3 ) (3 )
End of period 284   308   592   304   310   614  
% of Qdoba system 48 % 52 % 100 % 50 % 50 % 100 %
% of consolidated system 35 % 15 % 21 % 34 % 16 % 21 %
Consolidated:            
Total system 810   2,037   2,847   890   1,971   2,861  
% of consolidated system 28 % 72 % 100 % 31 % 69 % 100 %




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