SAN DIEGO - November 21, 2016 - (BUSINESS WIRE) - Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $32.6 million, or $0.98 per diluted share, for the fourth quarter ended October 2, 2016, compared with $23.8 million, or $0.65 per diluted share, for the fourth quarter of fiscal 2015. Fiscal 2016 earnings from continuing operations totaled $126.3 million, or $3.70 per diluted share, compared with $112.6 million, or $2.95 per diluted share in 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 $1.03 in the fourth quarter of fiscal 2016 compared with $0.62 in the prior year quarter. For fiscal year 2016, operating earnings per share were $3.86 compared with $3.00 last year.
The fourth quarter and fiscal year ended October 2, 2016, included 13 weeks and 53 weeks, respectively, as compared to 12 weeks and 52 weeks in the fourth quarter and fiscal year ended September 27, 2015, respectively. The company estimates that the extra week benefited diluted earnings per share by approximately 9 cents in both the fourth quarter and fiscal 2016.
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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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 $2.3 million, or approximately $0.05 per diluted share, were recorded during the fourth quarter. Restructuring charges for fiscal year 2016 totaled $10.1 million, or approximately $0.19 per diluted share. 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.
Lenny Comma, chairman and chief executive officer, said, “Operating earnings per share for the fourth quarter exceeded our expectations, due primarily to a reduction in G&A costs resulting from our restructuring initiatives, as well as lower impairment charges and a lower tax rate. We were pleased that Jack in the Box® system same-store sales outperformed sluggish industry trends, and although sales and traffic growth at Qdoba were solid, margins were hampered by the impact of new restaurant openings.
“Operating earnings per share for the year (excluding the benefit of the 53rd week) grew more than 25 percent, the fifth consecutive year of growth in excess of 20 percent.
“We are happy with the progress we made on our key strategic initiatives during the year, as we made significant headway on reducing our G&A, increased our borrowing capacity to support our capital structure goals, and began implementing plans to increase the franchise mix at Jack in the Box to over 90 percent of the system.”
Increase in same-store sales:
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Jack in the Box system same-store sales increased 2.0 percent for the quarter and exceeded the QSR sandwich segment by 1.3 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 13-week time period ended October 2, 2016. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales increased 0.5 percent in the fourth quarter, with average check up 3.5 percent.
Qdoba same-store sales increased 0.8 percent system-wide and 1.2 percent for company restaurants in the fourth quarter. Company same-store sales reflected a 0.7 percent increase in transactions as well as growth in catering sales.
Consolidated restaurant operating margin decreased by 30 basis points to 19.7 percent of sales in the fourth quarter of 2016, compared with 20.0 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box company restaurants increased 70 basis points to 21.0 percent of sales. The increase was due primarily to favorable food and packaging costs, which were partially offset by higher costs related to equipment upgrades, maintenance and repair expenses, 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 4.0 percent in the quarter, favorable product mix changes and menu price increases. Restaurant operating margin for Qdoba company restaurants decreased 220 basis points to 17.3 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 technology upgrades which more than offset the sales growth and benefits from commodity deflation of approximately 3.4 percent in the quarter.
Franchise margin as a percentage of total franchise revenues improved to 53.7 percent in the fourth quarter from 51.4 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 fourth quarter decreased by $6.3 million and was 12.1 percent of revenues as compared to 15.4 percent in the prior year quarter. Key items contributing to the decrease were lower advertising costs at Qdoba due to the timing of promotional activities 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 $0.2 million in the fourth quarter of 2016 as compared to a negative impact of $1.1 million in the fourth quarter of 2015, resulting in a year-over-year decrease in SG&A of $1.3 million. These decreases were partially offset by the impact of the 53rd week.
Interest expense, net, increased by $3.5 million in the fourth quarter due to increased leverage and a higher effective interest rate for 2016.
The company repurchased approximately 425,000 shares of its common stock in the fourth quarter of 2016 at an average price of $98.42 per share for an aggregate cost of $41.9 million. During fiscal year 2016, the company repurchased approximately 3,876,000 shares at an average price of $75.29 per share, for an aggregate cost of $291.9 million. As of the end of fiscal year 2016, the company had $408.2 million remaining under stock-buyback programs authorized by its Board of Directors, of which $108.2 million expires in November 2017 and $300.0 million expires in November 2018.
As previously disclosed, the company made an accelerated pension contribution of $80 million during the fourth quarter of 2016. This tax-deductible contribution will decrease the company's future G&A costs, as well as reduce, if not fully eliminate, pension contributions over the next several years.
In addition, the company acquired 14 franchised Qdoba restaurants in one market during the fourth quarter of 2016 for approximately $20 million.
The company also announced today that on November 17, 2016, its Board of Directors declared a quarterly cash dividend of $0.40 per share on the company’s common stock, representing a 33 percent increase from the previous quarterly dividend of $0.30 per share. The dividend is payable on December 16, 2016, to shareholders of record at the close of business on December 5, 2016.
The following guidance and underlying assumptions reflect the company’s current expectations for the first quarter and fiscal year ending October 1, 2017. Fiscal 2017 is a 52-week year, with 16 weeks in the first quarter, 12 weeks in each of the second, third and fourth quarters. Fiscal 2016 was a 53-week year, with the additional week occurring in the fourth quarter.
Tax rate of approximately 38 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 $4.55 to $4.75. This guidance assumes share repurchases of approximately $408 million during the year, representing the amount remaining under current Board authorizations.
The company will host a conference call for financial analysts and investors on Tuesday, November 22, 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 November 22.
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 approximately 700 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.
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.
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JACK IN THE BOX INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
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.
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The following table presents Jack in the Box and Qdoba company restaurant sales, costs and margin, and restaurant costs and margin as a percentage of the related sales. Percentages may not add due to rounding.
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The following table presents franchise revenues, costs and margin in each period:
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The following table provides information related to our operating segments in each period:
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The following table summarizes the changes in the number and mix of Jack in the Box ("JIB") and Qdoba company and franchise restaurants in each fiscal year:
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SOURCE Jack in the Box Inc.
Carol DiRaimo
Jack in the Box Inc.
Investor Relations
(858) 571-2407
Brian Luscomb
Jack in the Box Inc
Media Relations
(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.