SAN DIEGO - February 22, 2017- (BUSINESS WIRE) - Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $37.0 million, or $1.14 per diluted share, for the first quarter ended January 22, 2017, compared with $33.9 million, or $0.94 per diluted share, for the first quarter of fiscal 2016.
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 $1.18 in the first quarter of fiscal 2017 compared with $0.93 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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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 $2.0 million, or approximately $0.04 per diluted share, were recorded during the first quarter of fiscal 2017. Charges consist primarily of facility closing costs and employee severance pay. These charges are included in “impairment and other charges, net” in the accompanying condensed consolidated statements of earnings.
Lenny Comma, chairman and chief executive officer, said, “Our first quarter results were mixed, with solid results at the Jack in the Box® brand offset by lower than expected sales and disappointing margins at Qdoba®. We are intent on improving the performance of the Qdoba brand with priorities focused on driving sales growth and managing labor and food costs more effectively.
“We were pleased that Jack in the Box system same-store sales outperformed sluggish industry trends during the quarter. And despite the weaker Qdoba results, our commitments to reduce G&A and to return cash to shareholders contributed to a 27 percent increase in operating earnings per share for the quarter.
“Consistent with restaurant and retail industry data, we've seen an abrupt downturn in February sales trends for both brands. We believe some of this slowdown may be attributable to delayed tax refunds, as well as record rainfall and flooding in California over the past few weeks which have impacted our Jack in the Box results.
“We've made good progress on our refranchising initiative, and as of today, have signed non-binding letters of intent with franchisees to sell approximately 75 restaurants in several different markets.”
Increase/(decrease) in same-store sales:
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Jack in the Box system same-store sales increased 3.1 percent for the quarter and exceeded the QSR sandwich segment by 1.6 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 16-week time period ended January 22, 2017. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales increased 0.6 percent in the first quarter, with average check up 4.9 percent.
Qdoba same-store sales decreased 1.0 percent system-wide and 1.4 percent for company restaurants in the first quarter. Company same-store sales reflected a 2.5 percent decrease in transactions, partially offset by growth in average check and catering sales.
Consolidated restaurant operating margin decreased by 90 basis points to 18.6 percent of sales in the first quarter of 2017, compared with 19.5 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box company restaurants increased 70 basis points to 21.6 percent of sales. The increase was due primarily to lower costs for food and packaging, partially offset by minimum wage increases in California that went into effect in January 2016 and January 2017. The decrease in food and packaging costs as a percentage of sales resulted from the benefit of commodity deflation of approximately 5.6 percent in the quarter, favorable product mix changes and menu price increases. Restaurant operating margin for Qdoba company restaurants decreased 350 basis points to 13.1 percent of sales. The decrease was due primarily to the impact of new restaurant openings over the last 12 months, sales deleverage, labor staffing inefficiencies and wage inflation, and higher costs for food and packaging. The increase in food and packaging costs as a percentage of sales was impacted by increased promotional activity, partially offset by the benefits from commodity deflation of approximately 3.0 percent in the quarter.
Franchise margin as a percentage of total franchise revenues improved to 54.2 percent in the first quarter from 51.5 percent in the prior year quarter. The improvement was due primarily to higher royalty revenue and rental income from Jack in the Box franchised restaurants resulting from increases in franchise average unit volumes, and a decrease in franchise costs.
SG&A expense for the first quarter decreased by $10.2 million and was 11.4 percent of revenues as compared to 14.0 percent in the prior year quarter. Key items contributing to the decrease were the impact of the company's restructuring activities, including a $2.9 million decrease in pension and postretirement benefits, as well as a $1.7 million decrease in incentive compensation.
Interest expense, net, increased by $4.5 million in the first quarter due to increased leverage and a higher effective interest rate for 2017.
The tax rate for the first quarter of 2017 was 38.7 percent versus 37.6 percent for the first quarter of 2016. The higher tax rate in the first quarter of 2017 was due primarily to a decrease in work opportunity tax credits.
The company repurchased approximately 992,000 shares of its common stock in the first quarter of 2017 at an average price of $109.04 per share for an aggregate cost of $108.1 million. This leaves approximately $300 million remaining under stock buyback programs authorized by the company's Board of Directors.
The company also announced today that on February 21, 2017, its Board of Directors declared a quarterly cash dividend of $0.40 per share on the company’s common stock. The dividend is payable on March 20, 2017, to shareholders of record at the close of business on March 7, 2017.
The following guidance and underlying assumptions reflect the company’s current expectations for the second quarter ending April 16, 2017, and fiscal year ending October 1, 2017. Fiscal 2017 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 2016 was a 53-week year, with the additional week occurring in the fourth quarter.
The company will host a conference call for financial analysts and investors on Thursday, February 23, 2017, 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 February 23, 2017.
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 more than 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 condensed 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 year-to-date changes in the number and mix of Jack in the Box ("JIB") and Qdoba company and franchise restaurants:
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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.