Jack in the Box Inc. Reports Second Quarter FY 2011 Earnings

May 18, 2011 · 0 Comments

SAN DIEGO– May 18, 2011(www.hospitalitybusinessnews.com)–Jack in the Box Inc. today reported net earnings of $6.8 million, or $0.13 per diluted share, for the second quarter ended April 17, 2011, compared with net earnings of $17.7 million, or $0.32 per diluted share, for the second quarter of fiscal 2010.

Gains from refranchising contributed approximately $0.01 per diluted share for the quarter as compared with approximately $0.04 per diluted share in the prior year quarter. Operating earnings per share, a non-GAAP measure which the company defines as diluted earnings per share on a GAAP basis less gains from refranchising, were $0.12 per diluted share compared with $0.28 per diluted share in the prior year quarter.

Increase (decrease) in same-store sales:

		12 Weeks Ended April 17, 2011		12 Weeks Ended April 11, 2010		28 Weeks Ended April 17, 2011		28 Weeks Ended April 11, 2010
Jack in the Box^®:
	Company	0.8	%	(8.6	%)	1.2	%	(10.1	%)
	Franchise	(0.3	%)	(7.3	%)	0.4	%	(9.4	%)
	System	0.1	%	(8.1	%)	0.7	%	(9.9	%)
Qdoba^® System		6.0	%	3.1	%	6.2	%	0.4	%

Linda A. Lang, chairman, chief executive officer and president, said, “Jack in the Box company same-store sales increased 0.8 percent in the second quarter, ahead of our expectations, as sales and traffic rebounded after severe weather impacted many of our major markets in the first four weeks of the quarter. On a two-year basis, we’re continuing to see sequential improvement in same-store sales with three consecutive quarters of improving trends. We believe the investments we have made in the business to enhance the entire guest experience, along with employment growth, will drive improved sales results at the Jack in the Box brand.

“Qdoba’s same-store sales momentum continued in the second quarter with an increase of 6.0 percent system-wide, driven largely by transaction growth as well as higher catering sales,” Lang said.

Consolidated restaurant operating margin was 12.3 percent of sales in the second quarter of 2011, compared with 15.2 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 5.0 percent higher in the quarter, driven by higher costs for beef, produce, cheese, pork, dairy and shortening. These increases were partially offset by lower costs for bakery and poultry and the benefit of higher prices.

Payroll and employee benefits costs were 30.5 percent of restaurant sales versus 30.2 percent in the year-ago quarter, reflecting higher levels of staffing designed to improve the guest experience. In addition, higher unemployment taxes resulting from rate increases in several states negatively impacted payroll and employee benefit costs.

Occupancy and other costs increased 70 basis points in the second quarter due to additional costs relating to guest service initiatives and higher rent expense as a percentage of sales resulting from a greater proportion of company-operated Qdoba restaurants versus the prior year. These costs were partially offset by lower utilities expense.

SG&A expense for the second quarter decreased by $2.1 million and was 10.4 percent of revenues compared with 10.3 percent last year. The decrease in SG&A was attributable primarily to the following:

The company’s refranchising strategy and planned overhead reductions resulted in lower general and administrative costs of approximately $0.7 million.
Advertising costs were $4.2 million lower, as the impact of refranchising of Jack in the Box restaurants was partially offset by higher advertising expense due to more Qdoba company restaurants.
Pension expense decreased by approximately $1.2 million due primarily to the company’s previously announced decision to sunset its pension plan, whereby participants will no longer accrue benefits after December 31, 2015.
Mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans positively impacted SG&A by $1.3 million in the second quarter as compared to a positive impact of $0.7 million in last year’s second quarter, resulting in a year-over-year decrease in SG&A of $0.6 million.

These decreases were partially offset by the following:

Incentive compensation accruals were $1.7 million higher in the quarter
.
Qdoba G&A increased by $1.6 million due primarily to higher pre-opening costs, overhead to support the recently acquired Boston and Indianapolis markets, and new unit growth.

Gains on the sale of 26 company-operated Jack in the Box restaurants to franchisees totaled $0.9 million in the second quarter, or approximately $0.01 per diluted share, compared with $3.0 million, or approximately $0.04 cents per diluted share, in the year-ago quarter from the sale of 30 restaurants. For the second quarter of 2011, average gains were $34,000 per restaurant, and total proceeds related to refranchising were $5.5 million, or an average of $212,000 per restaurant. The restaurants sold in the second quarter included 22 restaurants in one market that had lower-than-average sales volumes and cash flows; however, the company expects the sale of these restaurants to be accretive to future operating earnings. The company did not provide any additional financing during the quarter related to refranchising. As of the end of the second quarter, notes receivable from franchisees related to refranchising activities totaled $10.9 million.

The tax rate for the second quarter was 32.8 percent compared with 35.2 percent in the prior year. The tax rate for the second quarter was lower than prior year and the company’s most recent guidance due primarily to the market performance of insurance investment products used to fund certain non-qualified retirement plans. Changes in the cash value of the insurance products are not deductible or taxable.

The company repurchased approximately 1,125,000 shares of its common stock in the second quarter of 2011 at an average price of $22.23 per share. Through the first two quarters of fiscal 2011, the company repurchased approximately 3,476,000 shares of its common stock at an average price of $21.58 per share. In November 2010, the company’s board of directors authorized a $100 million stock-buyback program that expires in November 2011, of which $25 million remained available as of the end of the second quarter. In May 2011, the company’s board of directors authorized an additional $100 million stock-buyback program that expires in November 2012.

Restaurant openings

Eight new Jack in the Box restaurants opened in the second quarter, including 6 franchised locations, compared with 11 new restaurants opened system-wide during the same quarter last year, of which 4 were franchised. In the second quarter, 10 Qdoba restaurants opened, including 5 franchised locations, versus 4 new restaurants in the year-ago quarter, of which 3 were franchised. At April 17, 2011, the company’s system total comprised 2,220 Jack in the Box restaurants, including 1,372 franchised locations, and 549 Qdoba restaurants, including 328 franchised locations.

Guidance

The following guidance and underlying assumptions reflect the company’s current expectations for the third quarter ending July 10, 2011, and the fiscal year ending Oct. 2, 2011. Fiscal 2011 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 2010 was a 53-week year, with the additional week occurring in the fourth quarter.

Third quarter fiscal year 2011 guidance

Same-store sales are expected to increase approximately 2 to 4 percent at Jack in the Box company restaurants versus a 9.4 percent decrease in the year-ago quarter.
Same-store sales are expected to increase approximately 4 to 6 percent at Qdoba system restaurants versus a 4.6 percent increase in the year-ago quarter.
Same-store sales guidance reflects trends experienced during the first four weeks of the third quarter.
Commodity costs for the quarter are currently expected to increase by 6 to 7 percent, driven by higher costs for most commodities other than poultry and potatoes.
Refranchising gains are expected to be lower than the third quarter of 2010.

Fiscal year 2011 guidance

Same-store sales are expected to increase approximately 1 to 3 percent at Jack in the Box company restaurants.
Same-store sales are expected to increase approximately 4 to 6 percent at Qdoba system restaurants.
Overall commodity costs are now expected to increase by 4.5 to 5.5 percent for the full year.
Restaurant operating margin for the full year is expected to range from 12.5 to 13.5 percent, depending on same-store sales and commodity inflation.
30 to 35 new Jack in the Box restaurants, including approximately 18 company locations.
60 to 70 new Qdoba restaurants, including approximately 25 company locations.
$55 to $65 million in gains on the sale of 175 to 225 Jack in the Box restaurants to franchisees, with $85 to $95 million in total proceeds resulting from the sales.
Capital expenditures of $125 to $135 million.
SG&A expense in the mid-10 percent range, excluding impairment and other charges of 70 to 80 basis points.
Tax rate of approximately 35 percent.
Diluted earnings per share of $1.40 to $1.65, with the range reflecting uncertainty in the timing of anticipated refranchising transactions as well as same-store sales volatility and commodity inflation. Gains from refranchising are expected to contribute from $0.70 to $0.83 to diluted earnings per share, as compared to $0.65 in fiscal 2010. 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 $0.70 to $0.82 per diluted share. Diluted earnings per share includes approximately $0.10 to $0.12 of incremental re-image incentive payments to franchisees in fiscal 2011 as compared to fiscal 2010.

<
td>


JACK IN THE BOX INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) (Unaudited)

				Quarter								Year-to-Date
				April 17,				April 11,			April 17,				April 11,
				2011				2010				2011				2010

Revenues:
	Company restaurant sales			$	321,242			$	388,301			$	758,152			$	900,395
	Distribution sales				121,362				90,762				268,049				195,380
	Franchise revenues				62,531				50,643				143,652				115,249
					505,135				529,706				1,169,853				1,211,024
Operating costs and expenses, net:
	Company restaurant costs:
		Food and packaging			107,275				122,316				249,130				284,643
		Payroll and employee benefits			97,998				117,133				232,514				273,485
		Occupancy and other			76,393				89,888				181,802				210,041
		Total company restaurant costs			281,666				329,337				663,446				768,169
	Distribution costs				121,837				90,910				269,178				196,279
	Franchise costs				31,328				23,102				69,680				52,512
	Selling, general and administrative expenses				52,619				54,742				119,504				125,419
	Impairment and other charges, net				4,494				3,452				8,090				6,131
	Gains on the sale of company-operated restaurants				(878	)			(2,987	)			(28,750	)			(12,367	)
					491,066				498,556				1,101,148				1,136,143

Earnings from operations					14,069				31,150				68,705				74,881
			&nb sp;
Interest expense, net					3,945				3,873				8,556				9,308

Earnings before income taxes					10,124				27,277				60,149				65,573

Income taxes					3,322				9,597				20,946				23,645

Net earnings				$	6,802			$	17,680			$	39,203			$	41,928

Net earnings per share:
	Basic			$	0.14			$	0.32			$	0.76			$	0.75
	Diluted			$	0.13			$	0.32			$	0.75			$	0.74
							d>
Weighted-average shares outstanding:
	Basic				50,183				54,972				51,265				55,711
	Diluted				50,984				55,797				52,069				56,499


JACK IN THE BOX INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) (Unaudited)

			April 17,			October 3,
			2011			2010

ASSETS
Current assets:
	Cash and cash equivalents		$	14,712		$	10,607
	Accounts and other receivables, net			60,061			81,150
	Inventories			36,830			37,391
	Prepaid expenses			30,223			36,100
	Deferred income taxes			46,328		46,185
	Assets held for sale			51,349			59,897
	Other current assets			3,882			3,592
		Total current assets		243,385			274,922

Property and equipment, at cost				1,551,432			1,562,729
Less accumulated depreciation and amortization				(685,614	)		(684,690	)
	Property and equipment, net			865,818			878,039
Other assets, net				293,992			254,131
			$	1,403,195		$	1,407,092

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
	Current maturities of long-term debt		$	18,695		$	13,781
	Accounts payable			68,900			101,216
	n="2">Accrued liabilities		173,471			168,186
		Total current liabilities		261,066			283,183

Long-term debt, net of current maturities				388,672			352,630

Other long-term liabilities				255,377			250,440

Deferred income taxes				41			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, 74,812,157 and 74,461,632 issued, respectively			748			745
	Capital in excess of par value			196,668			187,544
	Retained earnings			1,021,623			982,420
	Accumulated other comprehensive loss, net			(74,541	)		(78,787	)
	Treasury stock, at cost, 25,116,010 and 21,640,400 shares, respectively			(646,459	)		(571,459	)
		Total stockholders’ equity		498,039			520,463
			$	1,403,195		$	1,407,092


JACK IN THE BOX INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)

			Year-to-Date
			April 17,			April 11,
			2011			2010

Cash flows from operating activities:
	Net earnings		$	39,203		$	41,928
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization		51,817			54,152
		Deferred finance cost amortization		1,350			724
		Deferred income taxes		(4,965	)		(3,267	)
		Share-based compensation expense		4,972			5,500
		Pension and postretirement expense		12,840			15,661
		Gains on cash surrender value of company-owned life insurance		(7,841	)		(6,026	)
		Gains on the sale of company-operated restaurants		(28,750	)		(12,367	)
		Losses on the disposition of property and equipment, net		5,424			2,360
		Impairment charges		1,167			1,503
	Changes in assets and liabilities, excluding acquisitions and dispositions:
		Accounts and other receivables		(2,359	)		(11,811	)
		Inventories		561			(93	)
		Prepaid expenses and other current assets		6,848			(19,833	)
		Accounts payable		(2,851	)		(3,309	)
		Pension and postretirement contributions		(2,472	)		(11,824	)
		Other		6,900			(26,652	)
		Cash flows provided by operating activities from continuing operations		81,844			26,646
	Cash flows used in operating activities from discontinued operations		-			(2,172	)
		Cash flows provided by operating activities		81,844			24,474

Cash flows from investing activities:
	Purchases of property and equipment			(74,129	)		(42,632	)
	Proceeds from the sale of company-operated restaurants			49,588			19,093
	Proceeds from assets held for sale and leaseback, net			6,669			8,889
	Collections on notes receivable			19,062			7,675
	Acquisition of franchise-operated restaurants			(21,477	)		-
	Other			(6,618	)		1,031
		Cash flows used in investing activities		(26,905	)		(5,944	)

Cash flows from financing activities:
	Borrowings on revolving credit facility			396,000			313,000
	Repayments of borrowings on revolving credit facility			(349,000	)		(293,000	)
	Principal repayments on debt			(5,731	)		(46,031	)
	Debt issuance costs			(989	)		-
	Proceeds from issuance of common stock			3,376			2,445
	Repurchases of common stock			(75,000	)		(50,000	)
	Excess tax benefits from share-based compensation arrangements			640			690
	Change in book overdraft			(20,130	)		13,825
		Cash flows used in financing activities		(50,834	)		(59,071	)

Net increase (decrease) in cash and cash equivalents				4,105			(40,541	)
Cash and cash equivalents at beginning of period				10,607			53,002
Cash and cash equivalents at end of period			$	14,712		$	12,461

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					Year-to-Date
			April 17,			April 11,		April 17,		April 11,
			2011			2010		2011		2010
Statement of Earnings Data:
Revenues:
	Company restaurant sales		63.6	%		73.3	%	64.8	%	74.4	%
	Distribution sales		24.0	%		17.1	%	22.9	%	16.1	%
	Franchise revenues		12.4	%		9.6	%	12.3	%	9.5	%
			100.0	%		100.0	%	100.0	%	100.0	%

Operating costs and expenses, net:
	Company restaurant costs:
		Food and pac kaging (1)	33.4	%		31.5	%	32.9	%	31.6	%
		Payroll and employee benefits (1)	30.5	%		30.2	%	30.7	%	30.4	%
		Occupancy and other (1)	23.8	%		23.1	%	24.0	%	23.3	%
		Total company restaurant costs (1)	87.7	%		84.8	%	87.5	%	85.3	%
	Distribution costs (1)		100.4	%		100.2	%	100.4	%	100.5	%
	Franchise costs (1)		50.1	%		45.6	%	48.5	%	45.6	%
	Selling, general and administrative expenses		10.4	%		10.3	%	10.2	%	10.4	%
	Impairment and other charges, net		0.9	%		0.7	%	0.7	%	0.5	%
	Gains on the sale of company-operated restaurants		(0.2	%)		(0.6	%)	(2.5	%)	(1.0	%)
Earnings from operations			2.8	%	&nbsp ;	5.9	%	5.9	%	6.2	%

Income tax rate (2)			32.8	%		35.2	%	34.8	%	36.1	%

_____________________________________________
(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-operated and franchise restaurants:


			April 17, 2011						April 11, 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	7		9		16		16		12		28
		Refranchised	(114	)	114		-		(53	)	53		-
		Acquired from franchisees	-		-		-		1		(1	)	-
		Closed	(1	)	(1	)	(2	)	(1	)	(6	)	(7	)
	End of period		848		1,372		2,220		1,153		1,080		2,233
		% of system	38	%	62	%	100	%	52	%	48	%	100	%
Qdoba:
	Beginning of period		188		337		525		157		353		510
		New	11		19		30		3		7		10
		Acquired from franchisees	22		(22	)	-		-		-		-
		Closed	-		(6	)	(6	)	-		(15	)	(15	)
	End of period		221		328		549		160		345		505
		% of system	40	%	60	%	100	%	32	%	68	%	100	%

Consolidated:
	Total system		1,069		1,700		2,769		1,313		1,425		2,738
		% of system	39	%	61	%	100	%	48	%	52	%	100	%

By erichertha

You must be logged in to post a comment.

Hospitality Business News

Earnings

Jack in the Box Inc. Reports Second Quarter FY 2011 Earnings

Readers Comments (0)

Popular Posts

Recent Posts

Tags