Jack in the Box Inc. Reports Fourth Quarter FY 2011 Earnings; Issues Guidance for FY 2012

SAN DIEGO--(BUSINESS WIRE)--Jack in the Box Inc. (NASDAQ: JACK) today reported net earnings of $22.7 million, or $0.49 per diluted share, for the fourth quarter ended October 2, 2011, compared with net earnings of $4.0 million, or $0.07 per diluted share, for the fourth quarter of fiscal 2010. Fiscal 2011 net earnings totaled $80.6 million, or $1.61 per diluted share, compared with net earnings of $70.2 million, or $1.26 per diluted share, in fiscal 2010. In last year's fourth quarter, 40 Jack in the Box® company restaurants were closed, and the company recorded pre-tax charges totaling $28.0 million (included in "impairment and other charges, net" in the accompanying consolidated statements of earnings), which reduced diluted earnings per share by approximately $0.33 in both the fourth quarter and fiscal 2010.

Gains from refranchising contributed approximately $0.30 per diluted share for the fourth quarter of 2011 and approximately $0.78 for fiscal year 2011 as compared with approximately $0.65 per diluted share in fiscal year 2010.

The fourth quarter and fiscal year ended October 2, 2011, included 12 weeks and 52 weeks, respectively, as compared to 13 weeks and 53 weeks in the fourth quarter and fiscal year ended October 3, 2010, respectively. The company estimates that the extra week benefited diluted earnings per share by approximately $0.03 in both the fourth quarter and fiscal 2010.

 
    12 Weeks Ended   13 Weeks Ended   52 Weeks Ended   53 Weeks Ended
    October 2, 2011   October 3, 2010   October 2, 2011   October 3, 2010
Jack in the Box®:                
Company   5.8 %   (4.0 %)   3.1 %   (8.6 %)
Franchise   2.0 %   (2.8 %)   1.3 %   (7.8 %)
System   3.1 %   (3.3 %)   1.8 %   (8.2 %)
Qdoba®:                
Company   4.3 %   3.0 %   5.1 %   0.8 %
Franchise   3.3 %   6.8 %   5.4 %   3.6 %
System   3.7 %   5.6 %   5.3 %   2.8 %
 

Linda A. Lang, chairman, chief executive officer and president, said, "Jack in the Box company same-store sales increased 5.8 percent in the fourth quarter, ahead of our expectations, as sales and traffic accelerated in the last two months of the quarter. On a two-year cumulative basis, this represented our fifth consecutive quarter of sequentially improving company same-store sales trends. We believe these results have been largely driven by the investments we have made to enhance the entire guest experience at the Jack in the Box brand.

"Qdoba's same-store sales in the fourth quarter increased 3.7 percent system-wide, representing the third consecutive quarter that two-year cumulative same-store sales have been greater than 9 percent," Lang said.

Consolidated restaurant operating margin was 13.5 percent of sales in the fourth quarter of 2011, compared with 12.5 percent of sales in the year-ago quarter.

Food and packaging costs in the quarter were 190 basis points higher than prior year. Overall commodity costs were approximately 7 percent higher in the quarter, driven by higher costs for most commodities other than poultry and largely consistent with the company's expectations.

Payroll and employee benefits costs were 110 basis points lower than the year-ago quarter, reflecting lower insurance costs and the benefit of refranchising. These decreases were partially offset by higher unemployment taxes resulting from rate increases in several states.

Occupancy and other costs decreased 180 basis points in the fourth quarter due primarily to lower repairs and maintenance costs and utilities expenses, and the benefit of refranchising. These decreases were partially offset by higher rent expense as a percentage of sales due to the greater proportion of company-operated Qdoba restaurants versus the prior year.

SG&A expense for the fourth quarter decreased by $7.3 million and was 10.6 percent of revenues compared with 10.8 percent last year. SG&A expense for fiscal 2011 decreased by $18.9 million and was 10.2 percent of revenues compared with 10.6 percent last year. The variances in SG&A were attributable primarily to the following:

  • The 53rd week added approximately $3.6 million to SG&A in last year's fourth quarter and fiscal year.
  • Advertising costs were $5.2 million lower in the fourth quarter and $17.9 million lower in fiscal 2011, due primarily to the impact of refranchising Jack in the Box restaurants and a decrease in incremental spending compared to the fourth quarter and fiscal 2010. These decreases were partially offset by higher advertising expense for Qdoba due to the increase in the number of company-owned restaurants and same-store sales growth.
  • Incentive compensation accruals decreased by $2.3 million in the fourth quarter of 2011.
  • Pension expense, which is non-cash in nature, decreased by $1.3 million in the fourth quarter and by $5.3 million for fiscal 2011.
  • The company's refranchising strategy and planned overhead reductions resulted in lower general and administrative costs of approximately $0.4 million for the fourth quarter and $5.9 million for the full year.

These decreases were partially offset by the following:

  • Mark-to-market adjustments on investments supporting the company's non-qualified retirement plans negatively impacted SG&A by $4.6 million in the fourth quarter as compared to a positive impact of $2.1 million in last year's fourth quarter, resulting in a year-over-year increase in SG&A of $6.7 million. For fiscal 2011, mark-to-market adjustments negatively impacted SG&A by $0.1 million as compared to a positive impact of $2.7 million last year, resulting in a year-over-year increase in SG&A of $2.8 million.
  • Insurance recoveries related to Hurricane Ike resulted in a $1.2 million benefit in the fourth quarter of 2010 and a $4.2 million benefit in fiscal 2010.
  • Incentive compensation accruals increased by $2.2 million in fiscal 2011.
  • Qdoba G&A increased by $0.9 million in the fourth quarter and $4.4 million in fiscal 2011 due primarily to higher overhead to support recently acquired franchise markets and new unit growth.

Gains on the sale of 106 company-operated Jack in the Box restaurants to franchisees totaled $22.2 million in the fourth quarter, or approximately $0.30 per diluted share. For fiscal 2011, gains on the sale of 332 company-operated restaurants to franchisees totaled $61.1 million, or approximately $0.78 per diluted share, compared with $55.0 million, or approximately $0.65 per diluted share in fiscal 2010 from the sale of 219 company-operated restaurants. Total proceeds related to refranchising, including cash and notes receivable, for the fourth quarter and fiscal 2011 were $43.4 million and $120.3 million, respectively.

"With the sale of 332 restaurants in fiscal 2011, the Jack in the Box system was 72 percent franchised as of the end of the year, and we've achieved our original goal of increasing the percentage of franchise ownership to 70 to 80 percent two years ahead of plan," Lang said. "Over the last six years, we have refranchised more than 1,000 restaurants and expect to refranchise 150 to 200 restaurants over the next couple of years, which will bring our Jack in the Box franchise ownership to approximately 80 percent of the system."

The company repurchased approximately 2,637,000 shares of its common stock in the fourth quarter of 2011 at an average price of $20.42 per share. In fiscal 2011, the company returned over $193 million to shareholders through the repurchase of approximately 9,106,000 shares of its common stock at an average price of $21.27 per share. In October 2011, the company completed the repurchase of the remaining $6.4 million authorized by its board of directors in May 2011. In November 2011, the company's board of directors authorized an additional $100 million stock-buyback program that expires in November 2013.

Restaurant openings

Ten new Jack in the Box restaurants opened in the fourth quarter, including 6 franchised locations, compared with 14 new restaurants opened system-wide during the same quarter last year, of which 2 were franchised. For the full year, 31 new Jack in the Box restaurants opened, including 16 franchised locations, compared with 46 new restaurants in fiscal 2010, 16 of which were franchised.

In the fourth quarter, 20 Qdoba restaurants opened, including 12 franchised locations, versus 13 new restaurants in the year-ago quarter, of which 6 were franchised. For the full year, 67 Qdoba restaurants opened, including 42 franchised locations, compared with 36 new restaurants in fiscal 2010, 21 of which were franchised.

At October 2, 2011, the company's system total comprised 2,221 Jack in the Box restaurants, including 1,592 franchised locations, and 583 Qdoba restaurants, including 338 franchised locations.

Guidance

The following guidance and underlying assumptions reflect the company's current expectations for the first quarter ending January 22, 2012, and the fiscal year ending September 30, 2012. Fiscal 2012 is a 52-week year, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters.

First quarter fiscal year 2012 guidance

  • Same-store sales are expected to increase approximately 4 to 5 percent at Jack in the Box company restaurants versus a 1.5 percent increase in the year-ago quarter.
  • Same-store sales are expected to increase approximately 2 to 3 percent at Qdoba system restaurants versus a 6.4 percent increase in the year-ago quarter.

Fiscal year 2012 guidance

  • Same-store sales are expected to increase approximately 2 to 4 percent at Jack in the Box company restaurants.
  • Same-store sales are expected to increase approximately 3 to 5 percent at Qdoba system restaurants.
  • Overall commodity costs are expected to increase by approximately 5 percent for the full year, with higher inflation in the first half of the fiscal year.
  • Restaurant operating margin for the full year is expected to be in the mid-13 percent range, depending on same-store sales and commodity inflation.
  • 25 to 30 new Jack in the Box restaurants are expected to open, including approximately 15 company locations.
  • 70 to 90 new Qdoba restaurants are expected to open, of which approximately half are expected to be company locations.
  • $15 to $25 million in gains on the sale of 80 to 120 Jack in the Box restaurants to franchisees, with $35 to $50 million in total proceeds resulting from the sales.
  • Capital expenditures of $90 to $100 million.
  • SG&A expense in the mid-10 percent range, including higher pension expense, restaurant technology investments and costs related to Qdoba growth.
  • Impairment and other charges of 30 to 40 basis points.
  • Tax rate of approximately 37 to 38 percent.
  • Diluted earnings per share of $1.10 to $1.43, with the range reflecting uncertainty in the timing of anticipated refranchising transactions as well as same-store sales results and commodity inflation. Operating earnings per share, which the company defines as diluted earnings per share on a GAAP basis less gains from refranchising, are expected to range from $0.90 to $1.10 per diluted share. Diluted earnings per share includes approximately $0.07 to $0.09 of re-image incentive payments to franchisees in fiscal 2012 to complete the re-image program as compared to $0.11 in fiscal 2011. Gains from refranchising are expected to contribute $0.20 to $0.33 to diluted earnings per share, as compared to approximately $0.79 in fiscal 2011.

Conference call

The company will host a conference call for financial analysts and investors on Tuesday, November 22, 2011, 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 November 22.

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 19 states. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Grill®, a leader in fast-casual dining, with more than 580 restaurants in 42 states and the District of Columbia. For more information, visit www.jackinthebox.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 success of new products and marketing initiatives, the impact of competition, stock market volatility, unemployment, trends in consumer spending patterns, commodity costs, and timing of sales of Jack in the Box restaurants to franchisees. These 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 www.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

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 
    Twelve   Thirteen   Fifty-Two   Fifty-Three
    Weeks Ended   Weeks Ended   Weeks Ended   Weeks Ended
    October 2,   October 3,   October 2,   October 3,
    2011   2010   2011   2010
                 
Revenues:                
Company restaurant sales   $ 296,088     $ 391,989     $ 1,380,273     $ 1,668,527  
Distribution sales     137,206       108,558       530,959       397,977  
Franchise revenues     70,872       62,666       282,066       231,027  
      504,166       563,213       2,193,298       2,297,531  
Operating costs and expenses, net:                
Company restaurant costs:                
Food and packaging     101,064       126,328       460,790       530,613  
Payroll and employee benefits     85,226       117,127       414,463       505,138  
Occupancy and other     69,864       99,644       329,766       398,066  
Total company restaurant costs     256,154       343,099       1,205,019       1,433,817  
Distribution costs     138,255       108,776       533,496       399,707  
Franchise costs     34,879       28,535       136,148       104,845  
Selling, general and administrative expenses     53,607       60,902       224,455       243,353  
Impairment and other charges, net     2,481       35,653       12,672       48,887  
Gains on the sale of company-operated restaurants, net     (22,185 )     (18,934 )     (61,125 )     (54,988 )
      463,191       558,031       2,050,665       2,175,621  
                 
Earnings from operations     40,975       5,182       142,633       121,910  
                 
Interest expense, net     4,283       4,165       16,855       15,894  
                 
Earnings before income taxes     36,692       1,017       125,778       106,016  
                 
Income taxes     14,040       (3,024 )     45,178       35,806  
                 
Net earnings   $ 22,652     $ 4,041     $ 80,600     $ 70,210  
                 
Net earnings per share:                
Basic   $ 0.50     $ 0.08     $ 1.63     $ 1.27  
Diluted   $ 0.49     $ 0.07     $ 1.61     $ 1.26  
                 
Weighted-average shares outstanding:                
Basic     45,524       53,836       49,302       55,070  
Diluted     46,262       54,579       50,085       55,843  
 

 

 
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
         
    October 2,   October 3,
    2011   2010
         
ASSETS
Current assets:        
Cash and cash equivalents   $ 11,424     $ 10,607  
Accounts and other receivables, net     86,213       81,150  
Inventories     38,931       37,391  
Prepaid expenses     18,737       36,100  
Deferred income taxes     45,520       46,185  
Assets held for sale and leaseback     51,793       59,897  
Other current assets     1,793       3,592  
Total current assets     254,411       274,922  
         
Property and equipment, at cost:        
Land     105,314       101,206  
Buildings     1,025,107       965,312  
Restaurant and other equipment     343,718       437,547  
Construction in progress     44,660       58,664  
      1,518,799       1,562,729  
Less accumulated depreciation and amortization     (663,373 )     (684,690 )
Property and equipment, net     855,426       878,039  
         
Intangible assets, net     17,495       17,986  
Goodwill     105,872       85,041  
Other assets, net     199,118       151,104  
    $ 1,432,322     $ 1,407,092  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
         
Current liabilities:        
Current maturities of long-term debt   $ 21,148     $ 13,781  
Accounts payable     94,348       101,216  
Accrued liabilities     167,487       168,186  
Total current liabilities     282,983       283,183  
         
Long-term debt, net of current maturities     447,350       352,630  
         
Other long-term liabilities     290,723       250,440  
         
Deferred income taxes     5,310       376  
         
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, 74,992,487 and 74,461,632 issued, respectively

    750       745  
Capital in excess of par value     202,684       187,544  
Retained earnings     1,063,020       982,420  
Accumulated other comprehensive loss, net     (95,940 )     (78,787 )
Treasury stock, at cost, 30,746,099 and 21,640,400 shares, respectively     (764,558 )     (571,459 )
Total stockholders' equity     405,956       520,463  
    $ 1,432,322     $ 1,407,092  
 

 

 
JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
    Fiscal Year
    2011   2010
         
Cash flows from operating activities:        
Net earnings   $ 80,600     $ 70,210  
Adjustments to reconcile net earnings to net cash provided by operating activities:        
Depreciation and amortization     96,147       101,514  
Deferred finance cost amortization     2,554       1,658  
Deferred income taxes     (12,832 )     (27,554 )
Share-based compensation expense     8,062       10,605  
Pension and postretirement expense     23,845       29,140  
Losses (gains) on cash surrender value of company-owned life insurance     1,094       (6,199 )
Gains on the sale of company-operated restaurants, net     (61,125 )     (54,988 )
Gains on the acquisition of franchise-operated restaurants     (426 )     -  
Losses on the disposition of property and equipment, net     7,650       10,757  
Impairment charges and other     1,367       12,970  
Loss on early retirement of debt     -       513  
Changes in assets and liabilities, excluding acquisitions and dispositions:        
Accounts and other receivables     (26,116 )     (8,174 )
Inventories     (1,540 )     284  
Prepaid expenses and other current assets     19,163       (22,967 )
Accounts payable     1,498       (2,219 )
Pension and postretirement contributions     (4,790 )     (24,072 )
Other     (10,891 )     (27,440 )
Cash flows provided by operating activities from continuing operations     124,260       64,038  
Cash flows used in operating activities from discontinued operations     -       (2,172 )
Cash flows provided by operating activities     124,260       61,866  
         
Cash flows from investing activities:        
Purchases of property and equipment     (129,312 )     (95,610 )
Proceeds from the sale of company-operated restaurants     119,275       66,152  
Proceeds from (purchases of) assets held for sale and leaseback, net     (3,262 )     45,348  
Collections on notes receivable     20,848       8,322  
Acquisition of franchise-operated restaurants     (31,077 )     (8,115 )
FFE loans to franchisees     (14,473 )     -  
Other     2,199       3,076  
Cash flows provided by (used in) investing activities     (35,802 )     19,173  
         
Cash flows from financing activities:        
Borrowings on revolving credit facilities     721,160       881,000  
Repayments of borrowings on revolving credit facilities     (605,000 )     (721,000 )
Proceeds from issuance of debt     -       200,000  
Principal repayments on debt     (13,760 )     (418,836 )
Debt issuance costs     (989 )     (9,548 )
Proceeds from issuance of common stock     5,530       5,186  
Repurchase of common stock     (193,099 )     (97,000 )
Excess tax benefits from share-based compensation arrangements     1,290       2,037  
Change in book overdraft     (2,773 )     34,727  
Cash flows used in financing activities     (87,641 )     (123,434 )
         
Net increase (decrease) in cash and cash equivalents     817       (42,395 )
Cash and cash equivalents at beginning of period     10,607       53,002  
Cash and cash equivalents at end of period   $ 11,424     $ 10,607  
 

 

 
JACK IN THE BOX INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(Unaudited)
 

The following table presents certain income and expense items included in the company's condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding:

 
    Quarter   Fiscal Year
    October 2,   October 3,   October 2,   October 3,
    2011   2010   2011   2010
Statement of Earnings Data:                
Revenues:                
Company restaurant sales   58.7 %   69.6 %   62.9 %   72.6 %
Distribution sales   27.2 %   19.3 %   24.2 %   17.3 %
Franchise revenues   14.1 %   11.1 %   12.9 %   10.1 %
    100.0 %   100.0 %   100.0 %   100.0 %
                 
Operating costs and expenses, net:                
Company restaurant costs:                
Food and packaging (1)   34.1 %   32.2 %   33.4 %   31.8 %
Payroll and employee benefits (1)   28.8 %   29.9 %   30.0 %   30.3 %
Occupancy and other (1)   23.6 %   25.4 %   23.9 %   23.9 %
Total company restaurant costs (1)   86.5 %   87.5 %   87.3 %   85.9 %
Distribution costs (1)   100.8 %   100.2 %   100.5 %   100.4 %
Franchise costs (1)   49.2 %   45.5 %   48.3 %   45.4 %
Selling, general and administrative expenses   10.6 %   10.8 %   10.2 %   10.6 %
Impairment and other charges, net   0.5 %   6.3 %   0.6 %   2.1 %
Gains on the sale of company-operated restaurants, net   (4.4 )%   (3.4 )%   (2.8 )%   (2.4 )%
Earnings from operations   8.1 %   0.9 %   6.5 %   5.3 %
                 
Income tax rate (2)   38.3 %   (297.3 )%   35.9 %   33.8 %
 
(1) As a percentage of the related sales and/or revenues.
(2) As a percentage of earnings before income taxes.
 
 

The following table summarizes the year-to-date changes in the number of Jack in the Box and Qdoba company and franchise restaurants:

 
    October 2, 2011     October 3, 2010
    Company   Franchise Total     Company   Franchise Total
Jack in the Box:                          
Beginning of period   956     1,250     2,206       1,190     1,022     2,212  
New   15     16     31       30     16     46  
Refranchised   (332 )   332     -       (219 )   219     -  
Closed   (10 )   (6 )   (16 )     (46 )   (6 )   (52 )
Acquired from franchisees   -     -     -       1     (1 )   -  
End of period   629     1,592     2,221       956     1,250     2,206  
% of system   28 %   72 %   100 %     43 %   57 %   100 %
Qdoba:                          
Beginning of period   188     337     525       157     353     510  
New   25     42     67       15     21     36  
Closed   -     (9 )   (9 )     -     (21 )   (21 )
Acquired from franchisees   32     (32 )   -       16     (16 )   -  
End of period   245     338     583       188     337     525  
% of system   42 %   58 %   100 %     36 %   64 %   100 %
                           
Consolidated:                          
Total system   874     1,930     2,804       1,144     1,587     2,731  
% of system   31 %   69 %   100 %     42 %   58 %   100 %
 

###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Featured Opportunities

SpeedPro Imaging
SpeedPro Imaging is the ONLY franchise available exclusively focusing on wide format printing, the highest margin and fastest growing niche in the...
The Simple Greek
The Simple Greek is redefining the traditional Greek restaurant with an interactive concept that combines premium ingredients, open kitchens and...
Red Mango
Based in Dallas and with more than 300 locations across the U.S., Mexico, El Salvador and Uruguay, Red Mango is a rapidly-expanding retailer of...
Speaking Roses
Speaking Roses gives you the opportunity to produce, sell, and distribute our patented product in your area using our very own flower printer....
American Family Care
The demand for health care services increases every year. People want and need access to health care on their terms - which usually means immediately!

Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)