Exhibit 99.1
Jack in the Box Inc. Reports Third Quarter Results;
Raises FY06 Earnings Forecast;
Announces Agreement to Franchise Hawaii Market
SAN DIEGO--(BUSINESS WIRE)--Aug. 8, 2006--Jack in the Box Inc.
(NYSE:JBX) today reported that net earnings increased to $27.8
million, or 77 cents per diluted share, in the third quarter ended
July 9, 2006, compared with $23.9 million, or 66 cents per diluted
share, in the same quarter a year ago. Results exceeded the company's
guidance of 65-67 cents per diluted share and analysts' First Call
consensus estimate of 66 cents. Year to date, net earnings totaled
$74.9 million, or $2.09 per diluted share, compared with $70.0
million, or $1.89 per diluted share, for the first three quarters of
fiscal 2005.
"We're continuing to make progress in reinventing the Jack in the
Box(R) brand," said Linda A. Lang, chairman and chief executive
officer. "Those efforts are reflected in the company's strong third
quarter results and our optimism for continued growth in sales and
earnings. The pending sale of our company restaurants in Hawaii
underscores the progress we're making in our strategic initiative to
increase franchising. Franchising will help expand the Jack in the Box
brand in new and existing markets, and can generate higher returns and
margins for the company."
As required by Statement of Financial Accounting Standards (SFAS)
No. 123R, fiscal 2006 results include the effect of expensing stock
options. Fiscal 2005 results did not include the effect of expensing
of stock options. The following table shows a 22 percent increase in
comparable third-quarter diluted EPS, adjusting for the pro forma
effect of stock option expense in fiscal 2005:
Third Quarter Third Quarter
Fiscal 2006 Fiscal 2005
------------- -------------
Diluted EPS $ 0.77 $ 0.66
Comparable adjustments:
Pro forma effect of stock options
as if expensed in FY 2005(1) - (0.03)
------------- -------------
Comparable diluted EPS $ 0.77 $ 0.63
============= =============
(1) Included in SG&A expense in the company's unaudited consolidated
statements of earnings commencing with the adoption of SFAS 123R
in the first quarter of fiscal 2006.
Third quarter financial highlights
Earnings per diluted share exceeded by 11 cents the midpoint of
the range previously forecast by the company. Approximately 8 cents of
this improvement versus guidance was due primarily to higher
restaurant operating margin resulting from lower costs related to
commodities and workers' compensation insurance, along with profit
improvement program initiatives and lower SG&A expense. The remaining
3 cents of the improvement was due to a lower tax rate resulting from
tax planning initiatives and tax credits.
Same-store sales at Jack in the Box company restaurants increased
2.9 percent in the third quarter, on top of a 2.8 percent increase in
the third quarter of 2005. The improvement was slightly lower than the
range previously forecast, with an increase in average check partially
offset by slightly lower transactions. Year to date, Jack in the Box
same-store sales increased 4.3 percent on top of a 2.7 percent
increase for the same period in 2005, with an increase in both average
check and transactions. For the third quarter, system same-store sales
at Qdoba Mexican Grill(R) increased 6.0 percent on top of a 10.3
percent increase in the third quarter of 2005. Year to date, system
same-store sales at Qdoba increased 6.5 percent on top of a 12.3
percent increase for the same period last year. Qdoba continued to be
accretive to earnings for the quarter.
"Qdoba continues to perform well and now has 28 consecutive
quarters -- or seven years -- of comparable sales growth," Lang said.
"I'd like to congratulate Qdoba's CEO and President Gary Beisler and
his team on two major accomplishments: In July, Qdoba celebrated the
opening of its 300th location, in Bloomington, Ind., and Nation's
Restaurant News selected Gary as one of only six 2006 Golden Chain
award winners."
Restaurant operating margin increased to 18.7 percent of sales in
the third quarter compared with 18.0-18.2 percent forecast and 17.2
percent a year ago, with the improvement versus 2005 due primarily to
lower commodity costs -- principally beef, cheese and pork -- and
profit improvement program initiatives, partially offset by higher
utility costs. Beef costs were down approximately 11 percent versus
last year.
SG&A expense rate, including an approximate 20-basis-point
increase from the expensing of stock options, was 10.5 percent of
revenues in the third quarter compared with 10.6 percent in 2005,
which did not include stock option expense.
Ten company and franchised Jack in the Box restaurants opened in
the third quarter, along with 3 new Quick Stuff(R) convenience stores,
as forecast, compared with 10 new restaurants, including 4 Quick Stuff
sites, opened in the same quarter a year ago. Qdoba opened 14 company
and franchised restaurants during the third quarter, as forecast,
compared with 15 locations opened in the same quarter a year ago. At
July 9, the company's system total included 2,065 company and
franchised Jack in the Box restaurants, including 50 with Quick Stuff
convenience stores, and 298 company and franchised Qdoba restaurants.
Gains on the sale of company-operated restaurants and other
revenues totaled $7.6 million in the third quarter, as forecast,
primarily from the sale of 17 Jack in the Box company restaurants to
franchisees, compared with approximately $6.4 million a year ago,
primarily from the sale of 20 such restaurants to franchisees. The
increase in average gains this year related to the specific sales and
cash flows of restaurants sold.
The effective tax rate for the quarter was 34.1 percent, versus
37.0-37.5 percent forecast and 31.0 percent a year ago, with the
decrease versus forecast due to tax-planning initiatives and tax
credits. The tax rate in 2005 was lower due to the resolution of a
prior year's tax matter and tax-planning initiatives.
Capital expenditures, including capital lease obligations, were
$42.2 million for the third quarter compared with $35-40 million
forecast and $26.8 million in fiscal 2005, with the increase due
primarily to investments associated with the company's restaurant
re-imaging program.
Third quarter initiatives
Several new products were introduced during the third quarter as
Jack in the Box continues to focus on menu innovation, upgraded
service execution and enhanced restaurant facilities, which are the
three major components of this holistic approach to reinvent the Jack
in the Box brand:
-- Diner Melts, featuring either a single or double jumbo beef
patty, grilled onions, two kinds of melted cheese, mayo-onion
sauce and sweet mustard.
-- Acapulco Chicken Salad, offering a blend of fresh romaine and
spring mix lettuce topped with savory grilled chicken,
shredded pepper jack cheese, grape tomatoes, cucumber slices
and red onions served with a side of blue corn tortilla
strips, a flavorful cilantro-lime dressing and lime wedges.
-- Vanilla Malted Crunch Shake, made with real ice cream blended
with malted crunch pieces.
-- Jack's Fresh Fruit Cup, made by Del Monte(R), offering a
7-ounce serving of cantaloupe, honeydew, pineapple and red
grapes.
-- Bottled spring water by Dannon(R).
In the third quarter, the company began re-imaging Jack in the Box
restaurants in Seattle with a comprehensive program that includes a
complete redesign of the dining room and common areas. Interior
finishes include ceramic tile floors; a mix of seating styles, such as
booths, bars and high-top round tables; decorative pendant lighting;
and graphics and wall collages. Other elements of the program include
music, uniforms, menu boards and packaging, along with new paint
schemes, landscaping and other exterior enhancements. The entire
market is expected to be re-imaged by fiscal year end.
Agreement to franchise Hawaii market
Jack in the Box Inc. also announced today that it has signed an
agreement to sell its company-operated Jack in the Box restaurants in
Hawaii to a new franchise operator, who has extensive experience
operating multiple quick-serve concepts in Hawaii. The sale of the 25
restaurants to Chris Scanlan, president of Scanlan Management, LLC, is
scheduled for completion late in the fourth quarter. Following
completion of the sale, which is expected to positively impact
earnings by approximately 20-24 cents per diluted share, the company's
Hawaii market will be entirely franchise operated. A development
agreement for new restaurants will be part of this transaction, which
is expected to be neutral to earnings in subsequent years.
More than 27 percent of the Jack in the Box system is currently
franchised. Including the projected sale of the restaurants in Hawaii,
along with additional restaurants that the company expects to
franchise in the fourth quarter, nearly 29 percent of the Jack in the
Box system will be franchised at fiscal year end.
Fiscal year 2006 guidance update
Jack in the Box Inc. today increased its earnings guidance for
fiscal 2006. The company now expects to earn approximately $2.72 --
$2.74 per diluted share for the full year, which is up from its
previous forecast of approximately $2.60 -- $2.63 per diluted share
and compares with $2.48 per diluted share earned in fiscal 2005. The
new forecast for fiscal 2006 does not include the anticipated benefit
of 20-24 cents per diluted share from the expected sale of
company-operated restaurants in Hawaii, but it does include the effect
of expensing stock options, as required by SFAS 123R. Fiscal 2005
results did not include the expensing of stock options. The following
table compares guidance for fiscal year 2006 with 2005 comparable
results, assuming the pro forma effect of expensing stock options of
approximately 15 cents per diluted share (excluding the effect of
accelerated vesting of retiree's stock options) and a charge related
to canceling the test of JBX Grill(R) in the fourth quarter of fiscal
2005:
Forecast
Fiscal 2006 Fiscal 2005
------------- -------------
Diluted EPS $ 2.72 - 2.74 $ 2.48
Comparable adjustments:
Pro forma effect of stock options
as if expensed in FY 2005(1) - (0.15)
Charge related to JBX Grill in
Q4 of FY 2005(2) - 0.05
------------- -------------
Comparable diluted EPS $ 2.72 - 2.74 $ 2.38
============= =============
(1) Included in SG&A expense in the company's unaudited consolidated
statements of earnings commencing with the adoption of SFAS 123R
in the first quarter of fiscal 2006.
(2) Included in SG&A expense in the company's unaudited consolidated
statements of earnings.
Fiscal 2006 earnings guidance represents a 14-15 percent
improvement over comparable 2005 results. The primary assumptions on
which earnings guidance is based are as follows, in approximate
amounts:
-- The opening of 40 company and franchised Jack in the Box
restaurants, including 12 with new Quick Stuff convenience
stores, as well as the opening of 75 company and franchised
Qdoba restaurants.
-- A 4.0-4.5 percent increase in same-store sales at Jack in the
Box company restaurants, and a 6.0-7.0 percent system
same-store sales increase at Qdoba.
-- Restaurant operating margin at 17.4-17.6 percent of sales
versus 16.9 percent in 2005, with the increase due primarily
to lower commodity costs, profit improvement program
initiatives, and fixed-cost leverage on same-store sales
growth, partially offset by higher utility costs.
-- Gains on the sale of company-operated restaurants and other
revenues of $34-35 million, primarily related to the sale of
57 Jack in the Box restaurants to franchisees, excluding the
pending Hawaii transaction.
-- An effective tax rate of 36-36.5 percent.
-- Capital expenditures, including capital lease obligations, of
$150 million compared with $124 million in 2005, with the
increase due primarily to investments associated with the
planned re-imaging of approximately 150 Jack in the Box
restaurants in 2006.
Fourth quarter 2006 guidance
The company also today provided earnings guidance for the fourth
quarter ending Oct. 1, 2006, of approximately 64-66 cents per diluted
share versus 59 cents per diluted share in the prior year. The
quarter's guidance does not include the anticipated benefit of 20-24
cents per diluted share from the expected sale of company-operated
restaurants in Hawaii, but it does include the effect of expensing
stock options, as required by SFAS 123R. Fourth-quarter fiscal 2005
results did not include the pro forma effect of expensing stock
options of approximately 4 cents per diluted share. The following
table compares 2006 guidance with 2005 comparable results after
adjusting for the pro forma effect of stock option expense in fiscal
2005 and a charge related to canceling the test of JBX Grill in the
fourth quarter of fiscal 2005:
Forecast
Fourth Quarter Fourth Quarter
Fiscal 2006 Fiscal 2005
--------------- ---------------
Diluted EPS $ 0.64 - 0.66 $ 0.59
Comparable adjustments:
Pro forma effect of stock
options as if expensed in
FY 2005(1) - (0.04)
Charge related to JBX Grill
in Q4 of FY 2005(2) - 0.05
--------------- ---------------
Comparable diluted EPS $ 0.64 - 0.66 $ 0.60
=============== ===============
(1) Included in SG&A expense in the company's unaudited consolidated
statements of earnings commencing with the adoption of SFAS 123R
in the first quarter of fiscal 2006.
(2) Included in SG&A expense in the company's unaudited consolidated
statements of earnings.
Estimated fourth-quarter fiscal 2006 earnings guidance represents
a 7-10 percent improvement over comparable prior-year results after
adjusting for the noncomparable items noted in the table above. The
primary assumptions on which fourth-quarter earnings guidance is based
are as follows, in approximate amounts:
-- A 3.5-4.5 percent increase in same-store sales at Jack in the
Box company restaurants.
-- Restaurant operating margin at 17.8-18.0 percent of sales
versus 17.3 percent in 2005, due primarily to lower food
costs, fixed-cost leverage on increased sales, and profit
improvement program initiatives.
-- Gains on the sale of company-operated restaurants and other
revenues of $8.0-9.0 million, primarily related to the sale of
10 Jack in the Box restaurants to franchisees, compared with
$7.5 million in 2005, primarily related to the sale of 12
company restaurants to franchisees. The fourth-quarter
forecast excludes the pending Hawaii transaction.
-- An effective tax rate of 36-36.5 percent compared with 32.2
percent in 2005.
-- Capital expenditures of $60 million compared with $47 million
in 2005, with the increase due in part to investments
associated with the planned re-imaging of Jack in the Box
restaurants in 2006.
Fourth quarter initiatives
-- In July, Jack in the Box enhanced its dessert menu by adding a
Chocolate Chip Cookie Cheesecake made with Nestle Toll
House(R) semisweet chocolate morsels and by re-imaging its
line of real ice cream shakes. Jack's shakes now feature
creamy whipped topping and a cherry and are served in a clear
plastic cup with a dome-shaped lid.
-- Also in July, Jack in the Box launched a value-friendly combo
meal called The Big Deal, featuring a chicken sandwich, two
beef tacos and a 20-ounce beverage for just $2.59.
-- Additionally, Jack in the Box enhanced its beverage offerings
by introducing a new brand of orange juice, from Minute
Maid(R).
-- Next week, Jack in the Box will add buttermilk biscuits to its
breakfast menu and introduce two new products: Bacon, Egg &
Cheese Biscuit and Sausage, Egg & Cheese Biscuit.
-- Also next week, Jack in the Box will introduce an Outlaw(TM)
Burger and Outlaw(TM) Spicy Chicken Sandwich, featuring either
a jumbo beef patty or spicy crispy chicken fillet with two
fried onion rings, slices of bacon, two slices of American
cheese, lettuce and tomatoes all topped with KC Masterpiece(R)
Original Barbecue Sauce and served on a toasted sesame bun.
About Jack in the Box Inc.
Jack in the Box Inc. (NYSE:JBX), based in San Diego, is a
restaurant company that operates and franchises Jack in the Box(R)
restaurants, one of the nation's largest hamburger chains, with more
than 2,000 restaurants in 17 states. The company also operates a
proprietary chain of convenience stores called Quick Stuff(R), with
approximately 50 locations, each built adjacent to a full-size Jack in
the Box restaurant and including a major-brand fuel station.
Additionally, through a wholly owned subsidiary, the company operates
and franchises Qdoba Mexican Grill(R), an emerging leader in
fast-casual dining, with more than 300 restaurants in 40 states. For
more information, visit www.jackinthebox.com.
Safe harbor statement
Except for the historical information contained herein, the
matters discussed in this press release are forward-looking statements
that are subject to substantial risks and uncertainties. These
statements, which include the company's guidance and related
assumptions, may be identified by the use of words such as
"assumption," "believes," "estimates," "expects," "guidance," "plans,"
"will," and other words of similar meaning.
The following are some of the factors that could cause the
company's actual results to differ materially from those expressed in
the forward-looking statements: delays in closings or failure to close
sales of franchises; delays in the opening of new or remodeled
restaurants; the uncertainty whether test results for products or
facility enhancements are predictive of successful results on a larger
scale; loss of sales due to restaurant closures related to blackouts
or adverse weather conditions or other events in the regions in which
the company's restaurants are located; changes in laws, regulations
and accounting rules and interpretations; and adverse economic and
other local, national and international conditions or events that
affect consumer confidence and spending. Costs may exceed projections,
including the cost of food, labor, pending or future legal claims, new
restaurant construction and remodels, and utilities. Increases in the
cost of fuel may increase the cost of food and packaging as well as
impact consumer spending patterns. Additional factors that may
adversely affect results include the effect of any widespread negative
publicity regarding the company, the foodservice industry in general
or particular foods. Further information about factors that could
affect the company's financial and other results is included 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. The
information in this press release is as of Aug. 8, 2006. The company
undertakes no obligation to update or revise any forward-looking
statement, whether as the result of new information or otherwise.
Use of non-GAAP financial information
In this press release, the company provides (i) earnings per
diluted share (EPS) determined in accordance with generally accepted
accounting principles (GAAP) and (ii) EPS adjusted for certain items
as follows:
-- For the third quarter of fiscal 2005, comparable diluted EPS
as shown in a table earlier in this press release includes the
pro forma effect of expensing stock options in accordance with
SFAS 123.
-- For fiscal year 2005, comparable diluted EPS as shown in a
table earlier in this press release includes the pro forma
effect of expensing stock options in accordance with SFAS 123
and excludes a charge related to canceling the test of JBX
Grill in the fourth quarter of fiscal 2005.
-- For the fourth quarter of fiscal 2005, comparable diluted EPS
as shown in a table earlier in this press release includes the
pro forma effect of expensing stock options in accordance with
SFAS 123 and excludes a charge related to canceling the test
of JBX Grill in the fourth quarter of fiscal 2005.
These non-GAAP financial measures are used by the company's
management to evaluate financial operating performance. Use of these
non-GAAP measures also facilitates comparisons between current and
prior period financial results, estimates of future results, and to
the results of the company's competitors. These financial measures are
also comparable to forecasts made by securities analysts and others,
which generally exclude special items as they are difficult to predict
in advance. Non-GAAP measures are not intended to be a substitute for
net earnings determined in accordance with GAAP.
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Twelve Weeks Ended Twenty-Eight Weeks
Ended
------------------ ----------------------
July 9, July 10, July 9, July 10,
2006 2005 2006 2005
-------- -------- ---------- ----------
Revenues:
Restaurant sales $488,054 $483,392 $1,615,756 $1,573,500
Distribution and other
sales 130,076 81,318 378,159 248,244
Franchise rents and
royalties 23,259 18,236 75,402 59,503
Gains on sale of company-
operated restaurants and
other 7,599 6,357 25,624 21,764
-------- -------- ---------- ----------
648,988 589,303 2,094,941 1,903,011
-------- -------- ---------- ----------
Costs of revenues:
Restaurant costs of sales 149,399 156,136 504,913 499,489
Restaurant operating costs 247,598 244,155 829,164 809,132
Costs of distribution and
other sales 128,218 79,869 373,510 244,937
Franchised restaurant
costs 10,679 8,711 33,530 27,142
-------- -------- ---------- ----------
535,894 488,871 1,741,117 1,580,700
-------- -------- ---------- ----------
Selling, general and
administrative costs 68,193 62,273 226,874 205,871
-------- -------- ---------- ----------
Earnings from operations 44,901 38,159 126,950 116,440
Interest expense, net 2,685 3,560 10,115 10,011
-------- -------- ---------- ----------
Earnings before income
taxes 42,216 34,599 116,835 106,429
Income taxes 14,375 10,713 41,984 36,436
-------- -------- ---------- ----------
Net earnings $ 27,841 $ 23,886 $ 74,851 $ 69,993
======== ======== ========== ==========
Net earnings per share:
Basic $ .79 $ .68 $ 2.15 $ 1.96
Diluted $ .77 $ .66 $ 2.09 $ 1.89
Weighted-average shares
outstanding:
Basic 35,073 35,080 34,858 35,733
Diluted 36,018 36,403 35,850 37,067
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
July 9, July 10,
2006 2005
- ----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 191,523 $ 98,636
Accounts and notes receivable, net 28,608 26,030
Inventories 40,964 39,503
Other current assets 98,595 102,974
---------- ----------
Total current assets 359,690 267,143
---------- ----------
Property and equipment, net 883,424 855,349
Other assets, net 178,920 203,119
---------- ----------
$1,422,034 $1,325,611
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 7,916 $ 7,629
Other current liabilities 278,863 256,039
---------- ----------
Total current liabilities 286,779 263,668
---------- ----------
Long-term debt, net of current maturities 284,105 291,973
Other long-term liabilities 214,428 201,021
Stockholders' equity 636,722 568,949
---------- ----------
$1,422,034 $1,325,611
========== ==========
CONTACT: Jack in the Box Inc.
Brian Luscomb, 858-571-2229
brian.luscomb@jackinthebox.com
www.jackinthebox.com