Jack in the Box Inc. Reports Third Quarter FY 2017 Earnings

Updates Guidance for FY 2017; Declares Quarterly Cash Dividend

SAN DIEGO - August 09, 2017 - (BUSINESS WIRE) - Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $37.1 million, or $1.25 per diluted share, for the third quarter ended July 9, 2017, compared with $30.8 million, or $0.93 per diluted share, for the third 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 $0.99 in the third quarter of fiscal 2017 compared with $1.07 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.

    12 Weeks Ended   40 Weeks Ended
    July 9, 2017   July 3, 2016   July 9, 2017   July 3, 2016

Diluted earnings per share from continuing operations – GAAP

  $ 1.25     $ 0.93     $ 3.46     $ 2.72  
Restructuring charges   0.04     0.15     0.12     0.14  
Gains from refranchising   (0.30 )   (0.01 )   (0.43 )   (0.02 )
Operating earnings per share – Non-GAAP   $ 0.99     $ 1.07     $ 3.15     $ 2.84  

Restructuring charges of $1.8 million, or approximately $0.04 per diluted share, were recorded during the third quarter of fiscal 2017, including $1.7 million related to the evaluation of potential alternatives with respect to the Qdoba® brand. These charges are included in “Impairment and other charges, net” in the accompanying condensed consolidated statements of earnings.

During the third quarter of fiscal 2017, the company took over 31 franchised Jack in the Box restaurants from an underperforming franchisee and incurred costs of $4.4 million, or approximately $0.10 per diluted share, related to these restaurants, which negatively impacted operating earnings per share. These costs are reflected in franchise revenue ($1.0 million), G&A ($2.4 million) and impairment ($1.0 million).

Lenny Comma, chairman and chief executive officer, said, “While same-store sales for both brands improved sequentially, our third quarter performance was below our expectations. Jack in the Box®same-store sales and transactions improved as we focused more of our advertising on value messages, but company restaurant margins were negatively impacted by higher labor and repairs and maintenance costs, and the return of commodity inflation. System same-store sales at Qdoba restaurants turned positive in the quarter, as guests responded favorably to menu innovation, including the launch of Fire-Roasted Shrimp. Company restaurant margins at Qdoba improved sequentially to over 16 percent in the quarter as we were able to manage labor costs more effectively.

"We continue to make significant progress on our Jack in the Box refranchising initiative, with the sale of 58 restaurants in the third quarter and 118 year-to-date. At the end of the quarter, we had signed non-binding letters of intent with franchisees to sell 63 additional restaurants."

Morgan Stanley & Co. LLC continues to assist the company's Board of Directors in its evaluation of potential alternatives with respect to Qdoba, as well as other ways to enhance shareholder value. There can be no assurance that the evaluation process will result in any transaction. The company has not set a timetable for completion of the evaluation process, and it does not intend to comment further unless a specific transaction is approved by the Board, the evaluation process is concluded, or it is otherwise determined that further disclosure is appropriate or required by law.

Increase/(decrease) in same-store sales*:

      12 Weeks Ended   40 Weeks Ended
      July 9, 2017 *   July 3, 2016   July 9, 2017 *   July 3, 2016
Jack in the Box:                
  Company   (1.6 )%   (0.2 )%   (0.9 )%   (0.2 )%
  Franchise   0.1 %   1.5 %   1.5 %   1.3 %
  System   (0.2 )%   1.1 %   0.9 %   0.9 %
Qdoba:                
  Company   (1.1 )%   1.0 %   (2.7 )%   1.8 %
  Franchise   2.3 %   0.1 %   0.5 %   1.3 %
  System   0.5 %   0.6 %   (1.2 )%   1.6 %

*Note: Due to the transition from a 53-week to a 52-week fiscal year, year-over-year fiscal period comparisons are offset by one week. The change in same-store sales presented in the 2017 columns uses comparable calendar periods to balance the one-week shift and to provide a clearer year-over-year comparison.

Jack in the Box system same-store sales decreased 0.2 percent for the quarter and lagged the QSR sandwich segment by 1.9 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended July 9, 2017. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales decreased 1.6 percent in the third quarter driven by a 4.4 percent decrease in transactions, partially offset by average check growth of 2.8 percent.

Qdoba same-store sales increased 0.5 percent system-wide and decreased 1.1 percent for company restaurants in the third quarter. Company same-store sales reflected a 2.8 percent decrease in transactions, partially offset by growth in catering sales and average check.

Consolidated restaurant operating margin, a non-GAAP measure1, decreased by 380 basis points to 18.1 percent of sales in the third quarter of 2017, compared with 21.9 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box company restaurants, a non-GAAP measure1, decreased 320 basis points to 19.3 percent of sales. The decrease was due primarily to higher labor costs including wage inflation, as well as higher repairs and maintenance costs, an increase in food and packaging costs as a percentage of sales, and sales deleverage, which were partially offset by the benefit of refranchising activities in 2017. The increase in food and packaging costs as a percentage of sales resulted from commodity inflation of approximately 4.9 percent in the quarter, partially offset by favorable product mix changes and menu price increases. Restaurant operating margin for Qdoba company restaurants, a non-GAAP measure1, decreased 420 basis points to 16.4 percent of sales. The decrease was due primarily to sales deleverage, the impact of new restaurant openings, an increase in food and packaging costs, and the impact of wage inflation, which were partially offset by lower workers’ compensation costs. The increase in food and packaging costs as a percentage of sales was impacted by unfavorable product mix and commodity inflation of approximately 2.5 percent in the quarter, partially offset by a decrease in discounting.

Franchise margin, a non-GAAP measure1, as a percentage of total franchise revenues improved to 54.0 percent in the third quarter from 52.8 percent in the prior year quarter. The improvement was due primarily to higher franchise fees related to the sale of 58 company-operated Jack in the Box restaurants to franchisees in the third quarter, higher rental revenues and royalties related to the refranchising of 118 Jack in the Box restaurants in the second and third quarters of fiscal 2017, and to a decrease in franchise support and other costs. These increases were partially offset by decreases in rental revenues and royalties resulting from the acquisition of 50 franchise-operated Jack in the Box restaurants in the second and third quarters of fiscal 2017.

SG&A expense for the third quarter decreased by $4.4 million and was 10.7 percent of revenues as compared to 11.6 percent in the prior year quarter. Key items contributing to the decrease were the impact of the company's restructuring activities, a $3.5 million decrease in incentive compensation, a $2.1 million decrease in pension and postretirement benefits, and a $2.0 million decrease in insurance costs. These decreases were partially offset by a $2.5 million legal settlement benefit recognized in the prior year related to an oil spill in the Gulf of Mexico in 2010, and $2.4 million of costs incurred while the 31 franchised Jack in the Box restaurants taken back during the third quarter of 2017 were closed.

Interest expense, net, increased by $3.8 million in the third quarter due to increased leverage and a higher effective interest rate for 2017.

The tax rate for the third quarter of 2017 was 33.2 percent versus 36.0 percent for the third quarter of 2016. The lower tax rate was due primarily to state tax credits becoming usable as a result of overall increases in taxable income, including the impact of refranchising gains.

____________________________

(1) Restaurant operating margin and franchise margin are non-GAAP measures. These non-GAAP measures are reconciled to consolidated earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

Capital Allocation

The company did not repurchase any shares of its common stock in the third quarter of 2017 due to the evaluation of potential alternatives with respect to Qdoba. Year-to-date through the third quarter, the company has repurchased approximately 3,220,000 shares at an average price of $101.59 per share for an aggregate cost of $327.2 million. The company currently has approximately $181.0 million remaining under stock buyback programs authorized by the company's Board of Directors that expire in November 2018.

The company also announced today that on August 3, 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 September 5, 2017, to shareholders of record at the close of business on August 22, 2017.

Guidance

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

Fourth quarter fiscal year 2017 guidance

  • Same-store sales of flat to down 2.0 percent at Jack in the Box system restaurants versus a 2.0 percent increase in same-store sales in the year-ago quarter.
  • Same-store sales of flat to down 2.0 percent at Qdoba company restaurants versus a 1.2 percent increase in the year-ago quarter.

Fiscal year 2017 guidance

  • Same-store sales increase of approximately 0.5 percent at Jack in the Box system restaurants.
  • Same-store sales decrease of approximately 2.0 to 2.5 percent at Qdoba company restaurants.
  • Commodity costs of approximately flat for both Jack in the Box and Qdoba.
  • Consolidated restaurant operating margin of approximately 18.0 to 18.5 percent, depending on the timing of refranchising transactions and the margins associated with the restaurants sold.
  • SG&A as a percentage of revenues of approximately 11.0 percent as compared to 12.7 percent in fiscal 2016.
  • Impairment and other charges as a percentage of revenues of approximately 70 basis points, excluding restructuring charges.
  • Approximately 20 to 25 new Jack in the Box restaurants opening system-wide, the majority of which will be franchise locations.
  • Approximately 45 new Qdoba restaurants opening system-wide, of which approximately 25 are expected to be company locations.
  • Capital expenditures of approximately $80 to $90 million.
  • Tax rate of approximately 37.0 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 $4.00 to $4.15 (which includes approximately $0.10 of costs related to the 31 franchised Jack in the Box restaurants taken back in the third quarter).

Conference call

The company will host a conference call for financial analysts and investors on Thursday, August 10, 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 August 10, 2017.

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 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.

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 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; the company's ability to enhance shareholder value, including through potential alternatives with respect to Qdoba; 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.

    12 Weeks Ended   40 Weeks Ended
    July 9, 2017   July 3, 2016   July 9, 2017   July 3, 2016

Diluted earnings per share from continuing operations – GAAP

  $ 1.25     $ 0.93     $ 3.46     $ 2.72  
Restructuring charges   0.04     0.15     0.12     0.14  
Gains from refranchising   (0.30 )   (0.01 )   (0.43 )   (0.02 )
Operating earnings per share – Non-GAAP   $ 0.99     $ 1.07     $ 3.15     $ 2.84  

 

Restaurant operating margin and franchise margin are non-GAAP measures presented in the reconciliations below. These non-GAAP measures do not include an allocation of other operating expenses, such as selling, general and administrative expenses which include the costs of shared service functions such as accounting, finance and human resources, and other unallocated costs such as pension expense, share-based compensation and restructuring expense. As such, restaurant operating margin and franchise margin are not indicative of the overall results of the company and are considered non-GAAP financial measures. Management believes these non-GAAP financial measures provide important supplemental information to assist investors in understanding and analyzing the performance of the company's core business and operating results. The company encourages investors to rely upon its GAAP numbers, but includes these non-GAAP financial measures as a supplement to, not as a substitute for, earnings from operations, net earnings or other financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

Below are the reconciliations of non-GAAP restaurant operating margin and franchise margin to the most directly comparable GAAP measure, consolidated earnings from operations.

 
      12 Weeks Ended     12 Weeks Ended
      July 9, 2017     July 3, 2016
($ in thousands)     Jack in the Box   Qdoba   Consolidated     Jack in the Box   Qdoba   Consolidated
Earnings from operations - GAAP (1)             $ 66,981               $ 55,705  
Other operating expenses:                            
Selling, general and administrative expenses             (38,365 )             (42,768 )
Impairment and other charges, net             (6,212 )             (10,519 )
Gains on the sale of company-operated restaurants             13,250               409  
Total other operating expenses             $ (31,327 )             $ (52,878 )
                             
Company restaurant operations:                            
Company restaurant sales     $ 157,772     $ 107,067     $ 264,839       $ 179,458     $ 99,371     $ 278,829  
Food and packaging     (46,182 )   (33,977 )   (80,159 )     (51,893 )   (29,932 )   (81,825 )
Payroll and employee benefits     (46,486 )   (28,412 )   (74,898 )     (50,654 )   (26,256 )   (76,910 )
Occupancy and other     (34,644 )   (27,072 )   (61,716 )     (36,446 )   (22,672 )   (59,118 )
Restaurant operating margin (2) - Non-GAAP     $ 30,460     $ 17,606     $ 48,066       $ 40,465     $ 20,511     $ 60,976  
                             
Franchise operations:                            
Franchise rental revenues     $ 52,824     $ 25     $ 52,849       $ 52,849     $ 29     $ 52,878  
Franchise royalties and other     35,505     4,653     40,158       32,186     5,045     37,231  
Franchise occupancy expenses     (39,813 )   (24 )   (39,837 )     (38,824 )   (24 )   (38,848 )
Franchise support and other costs     (1,952 )   (976 )   (2,928 )     (2,515 )   (1,139 )   (3,654 )
Franchise margin (2) - Non-GAAP     $ 46,564     $ 3,678     $ 50,242       $ 43,696     $ 3,911     $ 47,607  
                             
Restaurant operating margin (2) as a % of company restaurant sales     19.3 %   16.4 %   18.1 %     22.5 %   20.6 %   21.9 %
Franchise margin (2) as a % of total franchise revenues             54.0 %             52.8 %
 
____________________________
(1)     Earnings from operations is the sum of total other operating expenses, restaurant operating margin and franchise margin.
       
(2)     Restaurant operating margin and franchise margin are non-GAAP measures. Refer to discussion regarding these non-GAAP measures above.
       

 

 
      40 Weeks Ended     40 Weeks Ended
      July 9, 2017     July 3, 2016
($ in thousands)     Jack in the Box   Qdoba   Consolidated     Jack in the Box   Qdoba   Consolidated
Earnings from operations - GAAP (1)             $ 205,748               $ 171,005  
Other operating expenses:                            
Selling, general and administrative expenses             (129,861 )             (155,535 )
Impairment and other charges, net             (15,600 )             (14,598 )
Gains on the sale of company-operated restaurants             21,166               1,224  
Total other operating expenses             $ (124,295 )             $ (168,909 )
                             
Company restaurant operations:                            
Company restaurant sales     $ 576,618     $ 334,558     $ 911,176       $ 595,401     $ 308,441     $ 903,842  
Food and packaging     (166,213 )   (105,794 )   (272,007 )     (179,142 )   (93,660 )   (272,802 )
Payroll and employee benefits     (171,198 )   (93,380 )   (264,578 )     (167,744 )   (83,210 )   (250,954 )
Occupancy and other     (121,723 )   (87,607 )   (209,330 )     (121,522 )   (74,822 )   (196,344 )
Restaurant operating margin (2) - Non-GAAP     $ 117,484     $ 47,777     $ 165,261       $ 126,993     $ 56,749     $ 183,742  
                             
Franchise operations:                            
Franchise rental revenues     $ 175,555     $ 84     $ 175,639       $ 175,126     $ 92     $ 175,218  
Franchise royalties and other     112,993     15,360     128,353       105,611     16,241     121,852  
Franchise occupancy expenses     (129,622 )   (81 )   (129,703 )     (128,400 )   (75 )   (128,475 )
Franchise support and other costs     (6,223 )   (3,284 )   (9,507 )     (8,614 )   (3,809 )   (12,423 )
Franchise margin (2) - Non-GAAP     $ 152,703     $ 12,079     $ 164,782       $ 143,723     $ 12,449     $ 156,172  
                             
Restaurant operating margin (2) as a % of company restaurant sales     20.4 %   14.3 %   18.1 %     21.3 %   18.4 %   20.3 %
Franchise margin (2) as a % of total franchise revenues             54.2 %             52.6 %
 
____________________________
(1)     Earnings from operations is the sum of total other operating expenses, restaurant operating margin and franchise margin.
       
(2)     Restaurant operating margin and franchise margin are non-GAAP measures. Refer to discussion regarding these non-GAAP measures above.
       

 

 

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 
      12 Weeks Ended     40 Weeks Ended
      July 9,
2017
  July 3,
2016
    July 9,
2017
  July 3,
2016
Revenues:                    
Company restaurant sales     $ 264,839     $ 278,829       $ 911,176     $ 903,842  
Franchise rental income     52,849     52,878       175,639     175,218  
Franchise royalties and other     40,158     37,231       128,353     121,852  
      357,846     368,938       1,215,168     1,200,912  
Operating costs and expenses, net:                    
Company restaurant costs:                    
Food and packaging     80,159     81,825       272,007     272,802  
Payroll and employee benefits     74,898     76,910       264,578     250,954  
Occupancy and other     61,716     59,118       209,330     196,344  
Total company restaurant costs     216,773     217,853       745,915     720,100  
Franchise occupancy expense     39,837     38,848       129,703     128,475  
Franchise support and other costs     2,928     3,654       9,507     12,423  
Selling, general and administrative expenses     38,365     42,768       129,861     155,535  
Impairment and other charges, net     6,212     10,519       15,600     14,598  

Gains on the sale of company-operated restaurants

    (13,250 )   (409 )     (21,166 )   (1,224 )
      290,865     313,233       1,009,420     1,029,907  
Earnings from operations     66,981     55,705       205,748     171,005  
Interest expense, net     11,433     7,613       35,091     22,699  
Earnings from continuing operations and before income taxes     55,548     48,092       170,657     148,306  
Income taxes     18,427     17,308       62,682     54,597  
Earnings from continuing operations     37,121     30,784       107,975     93,709  
Losses from discontinued operations, net     (770 )   (595 )     (2,601 )   (1,617 )
Net earnings     $ 36,351     $ 30,189       $ 105,374     $ 92,092  
                     
Net earnings per share — basic:                    
Earnings from continuing operations     $ 1.26     $ 0.94       $ 3.49     $ 2.75  
Losses from discontinued operations, net     (0.03 )   (0.02 )     (0.08 )   (0.05 )
Net earnings per share (1)     $ 1.23     $ 0.92       $ 3.40     $ 2.70  
Net earnings per share — diluted:                    
Earnings from continuing operations     $ 1.25     $ 0.93       $ 3.46     $ 2.72  
Losses from discontinued operations, net     (0.03 )   (0.02 )     (0.08 )   (0.05 )
Net earnings per share (1)     $ 1.22     $ 0.91       $ 3.37     $ 2.67  
Weighted-average shares outstanding:                    
Basic     29,474     32,642       30,976     34,073  
Diluted     29,718     33,016       31,234     34,469  
                     
Dividends declared per common share     $ 0.40     $ 0.30       $ 1.20     $ 0.90  
 
____________________________
(1)     Earnings per share may not add due to rounding.
       

 

 

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

      July 9,
2017
    October 2,
2016
ASSETS            
Current assets:            
Cash     $ 7,560       $ 17,030  
Accounts and other receivables, net     56,245       73,360  
Inventories     7,418       8,229  
Prepaid expenses     52,071       40,398  
Assets held for sale     36,755       14,259  
Other current assets     2,656       2,129  
Total current assets     162,705       155,405  
Property and equipment, at cost:     1,516,247       1,605,576  
Less accumulated depreciation and amortization     (881,240 )     (886,526 )
Property and equipment, net     635,007       719,050  
Intangible assets, net     14,776       14,042  
Goodwill     172,963       166,046  
Other assets, net     269,768       290,469  
      $ 1,255,219       $ 1,345,012  
LIABILITIES AND STOCKHOLDERS’ DEFICIT            
Current liabilities:            
Current maturities of long-term debt     $ 60,115       $ 55,935  
Accounts payable     34,857       40,736  
Accrued liabilities     151,580       181,250  
Total current liabilities     246,552       277,921  
Long-term debt, net of current maturities     1,124,798       935,372  
Other long-term liabilities     322,865       348,925  
Stockholders’ deficit:            
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued            
Common stock $0.01 par value, 175,000,000 shares authorized, 81,835,883 and 81,598,524 issued, respectively     818       816  
Capital in excess of par value     450,830       432,564  
Retained earnings     1,467,671       1,399,721  
Accumulated other comprehensive loss     (167,876 )     (187,021 )
Treasury stock, at cost, 52,411,407 and 49,190,992 shares, respectively     (2,190,439 )     (1,863,286 )
Total stockholders’ deficit     (438,996 )     (217,206 )
      $ 1,255,219       $ 1,345,012  
 

 

 

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
      40 Weeks Ended
      July 9,
2017
    July 3,
2016
Cash flows from operating activities:            
Net earnings     $ 105,374       $ 92,092  
Adjustments to reconcile net earnings to net cash provided by operating activities:            
Depreciation and amortization     69,527       70,314  
Deferred finance cost amortization     2,707       2,049  
Excess tax benefits from share-based compensation arrangements     (4,133 )     (3,822 )
Deferred income taxes     5,824       15,672  
Share-based compensation expense     8,855       9,220  
Pension and postretirement expense     3,242       10,374  
Gains on cash surrender value of company-owned life insurance     (364 )     (5,008 )
Gains on the sale of company-operated restaurants     (21,166 )     (1,224 )
Losses on the disposition of property and equipment     2,186       2,295  
Impairment charges and other     4,320       2,928  
Changes in assets and liabilities, excluding acquisitions and dispositions:            
Accounts and other receivables     6,026       (16,333 )
Inventories     1,000       (557 )
Prepaid expenses and other current assets     (8,057 )     (7,677 )
Accounts payable     2,238       (7,466 )
Accrued liabilities     (27,485 )     1,534  
Pension and postretirement contributions     (4,110 )     (14,700 )
Other     (6,077 )     (2,992 )
Cash flows provided by operating activities     139,907       146,699  
Cash flows from investing activities:            
Purchases of property and equipment     (47,210 )     (74,971 )
Purchases of assets intended for sale and leaseback     (3,248 )     (5,593 )
Proceeds from the sale and leaseback of assets     2,466       7,748  
Proceeds from the sale of company-operated restaurants     62,923       1,434  
Collections on notes receivable     1,426       3,237  
Acquisition of franchise-operated restaurants           324  
Proceeds from the sale of property and equipment     2,898       140  
Other     (1,713 )     (89 )
Cash flows provided by (used in) investing activities     17,542       (67,770 )
Cash flows from financing activities:            
Borrowings on revolving credit facilities     638,500       576,000  
Repayments of borrowings on revolving credit facilities     (400,000 )     (376,000 )
Principal repayments on debt     (43,162 )     (19,651 )
Dividends paid on common stock     (37,194 )     (30,513 )
Proceeds from issuance of common stock     5,166       5,093  
Repurchases of common stock     (334,361 )     (250,000 )
Excess tax benefits from share-based compensation arrangements     4,133       3,822  
Change in book overdraft           1,213  
Cash flows used in financing activities     (166,918 )     (90,036 )
Effect of exchange rate changes on cash     (1 )     11  
Net decrease in cash     (9,470 )     (11,096 )
Cash at beginning of period     17,030       17,743  
Cash at end of period     $ 7,560       $ 6,647  
 

 

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.

 

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS DATA

(Unaudited)

 
      12 Weeks Ended     40 Weeks Ended
      July 9,
2017
  July 3,
2016
    July 9,
2017
  July 3,
2016
Revenues:                    
Company restaurant sales     74.0 %   75.6 %     75.0 %   75.3 %
Franchise rental revenues     14.8 %   14.3 %     14.5 %   14.6 %
Franchise royalties and other     11.2 %   10.1 %     10.6 %   10.1 %
Total revenues     100.0 %   100.0 %     100.0 %   100.0 %
Operating costs and expenses, net:                    
Company restaurant costs:                    
Food and packaging (1)     30.3 %   29.3 %     29.9 %   30.2 %
Payroll and employee benefits (1)     28.3 %   27.6 %     29.0 %   27.8 %
Occupancy and other (1)     23.3 %   21.2 %     23.0 %   21.7 %
Total company restaurant costs (1)     81.9 %   78.1 %     81.9 %   79.7 %
Franchise occupancy expenses (2)     75.4 %   73.5 %     73.8 %   73.3 %
Franchise support and other costs (3)     7.3 %   9.8 %     7.4 %   10.2 %
Selling, general and administrative expenses     10.7 %   11.6 %     10.7 %   13.0 %
Impairment and other charges, net     1.7 %   2.9 %     1.3 %   1.2 %
Gains on the sale of company-operated restaurants     (3.7 )%   (0.1 )%     (1.7 )%   (0.1 )%
Earnings from operations     18.7 %   15.1 %     16.9 %   14.2 %
Income tax rate (4)     33.2 %   36.0 %     36.7 %   36.8 %
 
____________________________
(1)     As a percentage of company restaurant sales.
(2)     As a percentage of franchise rental revenues.
(3)     As a percentage of franchise royalties and other.
(4)     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 margin, and restaurant costs and margin as a percentage of the related sales. Percentages may not add due to rounding.

 

SUPPLEMENTAL COMPANY RESTAURANT OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

 
      12 Weeks Ended     40 Weeks Ended
      July 9, 2017   July 3, 2016     July 9, 2017   July 3, 2016
Jack in the Box:                                    
Company restaurant sales     $ 157,772         $ 179,458           $ 576,618         $ 595,401      
Company restaurant costs:                                    
Food and packaging     46,182     29.3 %   51,893     28.9 %     166,213     28.8 %   179,142     30.1 %
Payroll and employee benefits     46,486     29.5 %   50,654     28.2 %     171,198     29.7 %   167,744     28.2 %
Occupancy and other     34,644     22.0 %   36,446     20.3 %     121,723     21.1 %   121,522     20.4 %
Total company restaurant costs     127,312     80.7 %   138,993     77.5 %     459,134     79.6 %   468,408     78.7 %
Restaurant operating margin (1)     $ 30,460     19.3 %   $ 40,465     22.5 %     $ 117,484     20.4 %   $ 126,993     21.3 %
Qdoba:                                    
Company restaurant sales     $ 107,067         $ 99,371           $ 334,558         $ 308,441      
Company restaurant costs:                                    
Food and packaging     33,977     31.7 %   29,932     30.1 %     105,794     31.6 %   93,660     30.4 %
Payroll and employee benefits     28,412     26.5 %   26,256     26.4 %     93,380     27.9 %   83,210     27.0 %
Occupancy and other     27,072     25.3 %   22,672     22.8 %     87,607     26.2 %   74,822     24.3 %
Total company restaurant costs     89,461     83.6 %   78,860     79.4 %     286,781     85.7 %   251,692     81.6 %
Restaurant operating margin (1)     $ 17,606     16.4 %   $ 20,511     20.6 %     $ 47,777     14.3 %   $ 56,749     18.4 %
 
____________________________
(1)     Restaurant operating margin is a non-GAAP measure. This non-GAAP measure is reconciled to consolidated earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."
       

 

The following table presents franchise revenues, costs and margin in each period:

 

SUPPLEMENTAL FRANCHISE OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

 
      12 Weeks Ended     40 Weeks Ended
      July 9,
2017
  July 3,
2016
    July 9,
2017
  July 3,
2016
Franchise rental revenues     $ 52,849     $ 52,878       $ 175,639     $ 175,218  
                     
Royalties     37,509     36,554       121,638     119,338  
Franchise fees and other     2,649     677       6,715     2,514  
Franchise royalties and other     40,158     37,231       128,353     121,852  
Total franchise revenues     93,007     90,109       303,992     297,070  
                     
Rental expense     32,571     31,595       106,361     103,783  
Depreciation and amortization     7,266     7,253       23,342     24,692  
Franchise occupancy expenses     39,837     38,848       129,703     128,475  
Franchise support and other costs     2,928     3,654       9,507     12,423  
Total franchise costs     42,765     42,502       139,210     140,898  
Franchise margin (1)     $ 50,242     $ 47,607       $ 164,782     $ 156,172  
Franchise margin (1) as a % of franchise revenues     54.0 %   52.8 %     54.2 %   52.6 %
 
____________________________
(1)     Franchise margin is a non-GAAP measure. This non-GAAP measure is reconciled to consolidated earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."
 

 

The following table provides information related to our operating segments in each period:

 

SUPPLEMENTAL SEGMENT REPORTING INFORMATION

(In thousands)

(Unaudited)

 
      12 Weeks Ended     40 Weeks Ended
      July 9,
2017
  July 3,
2016
    July 9,
2017
  July 3,
2016
Revenues by segment:                    
Jack in the Box restaurant operations     $ 246,101     $ 264,493       $ 865,166     $ 876,138  
Qdoba restaurant operations     111,745     104,445       350,002     324,774  
Consolidated revenues     $ 357,846     $ 368,938       $ 1,215,168     $ 1,200,912  
Earnings from operations by segment:                    
Jack in the Box restaurant operations     $ 59,423     $ 69,528       $ 220,485     $ 218,364  
Qdoba restaurant operations     11,905     14,172       29,126     33,532  
Shared services and unallocated costs     (17,597 )   (28,404 )     (65,029 )   (82,115 )
Gains on the sale of company-operated restaurants     13,250     409       21,166     1,224  
Consolidated earnings from operations     66,981     55,705       205,748     171,005  
Interest expense, net     11,433     7,613       35,091     22,699  
Consolidated earnings from continuing operations and before income taxes     $ 55,548     $ 48,092       $ 170,657     $ 148,306  
Total depreciation expense by segment:                    
Jack in the Box restaurant operations     $ 13,731     $ 14,877       $ 47,503     $ 50,409  
Qdoba restaurant operations     4,875     4,536       16,274     14,403  
Shared services and unallocated costs     1,608     1,401       5,222     4,936  
Consolidated depreciation expense     $ 20,214     $ 20,814       $ 68,999     $ 69,748  
 

 

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:

 

SUPPLEMENTAL RESTAURANT ACTIVITY INFORMATION

(Unaudited)

 
      2017     2016
      Company   Franchise   Total     Company   Franchise   Total
Jack in the Box:                            
Beginning of year     417     1,838     2,255       413     1,836     2,249  
New     2     15     17       2     9     11  
Refranchised     (118 )   118           (1 )   1      
Acquired from franchisees     50     (50 )         1     (1 )    
Closed     (11 )   (6 )   (17 )         (6 )   (6 )
End of period     340     1,915     2,255       415     1,839     2,254  
% of JIB system     15 %   85 %   100 %     18 %   82 %   100 %
Qdoba:                            
Beginning of year     367     332     699       322     339     661  
New     18     13     31       26     11     37  
Closed     (4 )   (6 )   (10 )     (4 )   (6 )   (10 )
End of period     381     339     720       344     344     688  
% of Qdoba system     53 %   47 %   100 %     50 %   50 %   100 %
Consolidated:                            
Total system end of period     721     2,254     2,975       759     2,183     2,942  
% of consolidated system     24 %   76 %   100 %     26 %   74 %   100 %
 

Contacts:

Carol DiRaimo
Jack in the Box Inc.
Investor Relations
(858) 571-2407

Brian Luscomb
Jack in the Box Inc.
Media Relations
(858) 571-2291

SOURCE Jack in the Box

###

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