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SAN DIEGO - August 7, 2013 - (BUSINESS WIRE) - Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $17.3 million, or $0.38 per diluted share, for the third quarter ended July 7, 2013, compared with earnings from continuing operations of $12.6 million, or $0.28 per diluted share, for the third 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 $0.41 per share in the third quarter of fiscal 2013 compared with $0.39 per 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.
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In June 2013, following the completion of its previously disclosed review of market performance for its Qdoba Mexican Grill® brand, the company announced plans to close 67 of its company-operated Qdoba restaurants. In the third quarter of 2013, 62 of these 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 condensed consolidated statements of operations for all periods presented. Three of the restaurants were sold to an existing franchisee in the fourth quarter, and the remaining two restaurants are expected to close when their leases expire prior to the end of the calendar year. The results of operations and impairment charges related to these five restaurants have been included in continuing operations.
Discontinued operations for the third quarter of fiscal 2013 include pre-tax charges related to the Qdoba restaurant closures of approximately $36.7 million, including approximately $22.7 million in non-cash impairment charges and approximately $11.4 million in charges related to future lease obligations, net of reversals for deferred rent and tenant improvement allowances, and other exit costs including employee severance. In addition, the pre-tax loss from operations relating to these restaurants was approximately $2.6 million in the third quarter of fiscal 2013 and $8.8 million in the year-to-date 2013 period, or approximately $0.04 and $0.12 per diluted share, respectively.
Discontinued operations also include charges related to the previously announced outsourcing of the company’s distribution business which was completed in the first quarter of fiscal 2013. As a result of the outsourcing, the company recorded a pre-tax charge of $0.6 million in the third quarter and $6.0 million in the year-to-date 2013 period, which reduced year-to-date diluted net earnings per share by approximately $0.08.
Losses on the sale of company-operated restaurants in the third quarter of fiscal 2013 totaled $1.5 million, or approximately $0.02 per diluted share, compared with a gain from refranchising of $3.7 million, or approximately $0.05 per diluted share, in the prior year quarter. The 2013 amount includes a pre-tax loss of $1.1 million related to the sale of three Qdoba restaurants that was completed in the fourth quarter, as well as a loss relating to 18 Jack in the Box® restaurants that were refranchised during the third quarter.
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 $0.1 million were recorded during the third quarter of 2013 as compared to $11.3 million, or approximately $0.16 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 operations. The company expects to incur additional restructuring charges relating to this review.
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Linda A. Lang, chairman and chief executive officer, said, “Jack in the Box company same-store sales increased 1.2 percent for the quarter exceeding that of the QSR sandwich segment by 1.0 percentage point for the comparable period, with system-wide same-store sales growth just slightly below the segment, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended July 7th, 2013. Included in this segment are 15 of the top QSR sandwich and burger chain competitors.
“Qdoba same-store sales in the third quarter increased 0.5 percent for company restaurants and 1.3 percent system-wide, showing sequential improvement from our second quarter weather-impacted results,” Lang said.
Consolidated restaurant operating margin improved by 40 basis points to 17.9 percent of sales in the third quarter of 2013, compared with 17.5 percent of sales in the year-ago quarter.
Restaurant operating margin increased 110 basis points to 16.9 percent of sales for Jack in the Box. The improvement was due primarily to leverage from same-store sales increases and the benefit of refranchising, which was partially offset by higher food and packaging costs. The increase in food and packaging costs as a percentage of sales resulted from commodity inflation of approximately 3.0 percent which was partially offset by the benefit of price increases.
Restaurant operating margin decreased 270 basis points to 20.6% of sales for Qdoba, due primarily to sales deleverage as compared to last year, product mix changes, commodity inflation of approximately 1.9 percent and increased staffing levels.
SG&A expense for the third quarter was essentially flat as compared to the prior year quarter. The benefit of the company’s restructuring activities, lower advertising and overhead costs resulting from the Jack in the Box refranchising strategy, and decreases in pre-opening costs and incentive compensation were partially offset by higher share-based compensation and pension costs, and increased advertising at Qdoba.
The tax rate for the third quarter of 2013 was 37.4 percent versus 34.9 percent for the third quarter of 2012. The tax rate in the third quarter of fiscal 2013 was affected by discontinued operations relating to the Qdoba closures.
The company repurchased approximately 1,366,000 shares of its common stock in the third quarter at an average price of $37.20 per share for an aggregate cost of $50.8 million. Year-to-date through the third quarter, the company has repurchased approximately 2,773,000 shares at an average price of $33.24 per share for an aggregate cost of $92.2 million. This leaves $84.7 million remaining under a $100 million stock-buyback program authorized by the company’s board of directors that expires in November 2014. In August 2013, the company’s board of directors authorized an additional $100 million stock-buyback program that expires in November 2015.
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.
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.
Fiscal year 2013 guidance
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.
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.
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.
Investor
Carol DiRaimo
858-571-2407
Media
Brian Luscomb
858-571-2291
Jack in the Box Inc. (NASDAQ: JACK), based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants.