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Jack in the Box Inc. Reports Second Quarter 2022 Earnings

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Jack in the Box systemwide sales growth of +0.1%, Del Taco systemwide sales growth of +2.9%(1)

Jack in the Box same-store sales of -0.8%, +19.8% on a two-year basis

Del Taco same-store sales of +2.5%, +22.3% on a two-year basis(1)

Finalizing sale leasebacks and refranchising to accelerate return of cash to shareholders

Provides updates to previous guidance, as well as new one-time annual guidance items for FY 2022

SAN DIEGO, May 26, 2022--(BUSINESS WIRE)--Jack in the Box Inc. (NASDAQ: JACK) announced financial results for the Jack in the Box segment in the second quarter, ended April 17, 2022, as well as the Del Taco segment on both a pro-forma fiscal quarter, and partial quarter basis following the acquisition which was completed on March 8, 2022.

"While challenged by continued inflationary pressure facing our industry, we are pleased to have delivered strong same-store sales on a two-year basis. This performance has allowed our franchisees, operators and corporate team members to provide our guests with innovative and craveable food they have come to expect from JACK," said Darin Harris, Jack in the Box Chief Executive Officer. "I am also very excited to welcome Del Taco to the Jack in the Box family, and to show how the combination of these two challenger brands will enable faster and more efficient growth in the years to come."

Jack in the Box Performance

Systemwide sales for the second quarter increased 0.1% driven by growth in average restaurant volumes, offset by a slight decline in the number of restaurants.

System same-store sales decreased 0.8% in the second quarter, comprised of Company-operated same-store sales growth of 1.7%, with increases in average check partially offset by decreases in traffic, and a decline in franchise same-store sales of 1.1%, with decreases in traffic partially offset by increases in average check. The burger and sides categories performed well, assisting sales performance in the quarter against challenging prior year overlaps fueled by stimulus, and headwinds created by the final weeks of the Omicron surge. During the quarter, system same-store sales declined versus systemwide sales due to a one-week shift affecting the calculation of same-store sales related to the 53rd week in 2021. This one-week shift resulted in a negative impact on same-store sales, due to lapping more of the stimulus benefit in its calculation as compared to the fiscal quarter comparison.

As of the second quarter, and since the launch of the development program in mid-2021, the Company currently has 54 signed agreements for a total of 218 restaurants. Under these agreements, 12 restaurants have opened, leaving 206 remaining for future development. Jack in the Box had a second quarter net restaurant decline of one restaurant, as the Company opened five locations and closed six. The six restaurant closures included two Company-operated restaurants, two franchise locations with early terminations and two franchise locations with agreement expirations, bringing the total Jack in the Box restaurant count to 2,207 at the end of the second quarter.

Restaurant-Level Margin(3), a non-GAAP measure, was 15.0%, a decline from a year ago driven by increases in food and packaging costs; wage inflation of 14.2%; and increases in utilities and maintenance and repair costs, partially offset by lower incentive-based compensation and menu price increases. Commodity costs increased in the quarter by approximately 16.4%, primarily due to increases in beef, pork, sauces and oil. When removing our temporary Evolving Markets (Oregon, Kansas City, Oklahoma City and Nashville), Restaurant-Level Margin was 18.3% for the quarter.

Franchise-Level Margin(3), a non-GAAP measure, was 39.4%, driven by reduced operating hours, lower early termination penalties, and deferrals in connection with a franchisee currently in bankruptcy proceedings. Franchise-Level Margin for the second quarter of 2021 was 42.0%, and when removing the $4.1 million unfavorable impact as a result of this St. Louis-area franchisee's pre-pandemic challenges and 2021 chapter 11 bankruptcy event, franchise-level margin for the second quarter 2022 would have been 41.9%.

Jack in the Box Same-Store Sales:

12 Weeks Ended

28 Weeks Ended

April 17, 2022

April 11, 2021

April 17, 2022

April 11, 2021

Company

1.7%

14.5%

0.6%

10.4%

Franchise

(1.1)%

21.3%

0.3%

16.5%

System

(0.8)%

20.6%

0.3%

15.9%

Jack in the Box Restaurant Counts:

2022

2021

Company

Franchise

Total

Company

Franchise

Total

Restaurant count at beginning of Q2

165

2,043

2,208

148

2,089

2,237

New

5

5

3

3

Acquired from franchisees

9

(9

)

Closed

(2

)

(4

)

(6

)

(12

)

(12

)

Restaurant count at end of Q2

172

2,035

2,207

148

2,080

2,228

Q2 Net Restaurant Increase/(Decrease)

7

(8

)

(1

)

Q2 2022 vs. Q2 2021 Restaurant % Increase/(Decrease)

16.2

%

(2.2

) %

(0.9

) %

Del Taco Performance

Systemwide sales for the pro-forma fiscal second quarter(1) increased 2.9% driven by positive results in both franchise and company-operated same-store sales. Same-store sales increased 2.5% in the pro-forma fiscal second quarter(1), comprised of franchise same-store sales growth of 3.4% and Company-operated same-store sales growth of 1.6%. Sales performance was boosted by the 20 Under $2 value platform and strong LTO performance, higher average ticket and menu price, and offset by menu mix and transaction trends. Del Taco had a second quarter net restaurant decrease of one restaurant, comprised of one opening and two closures.

Restaurant-Level Margin(2), a non-GAAP measure, was 17.8% while Franchise-Level Margin(2), a non-GAAP measure, was 41.7%.

Del Taco Same-Store Sales(1):

12 Weeks Ended

April 17, 2022

April 11, 2021

Company

1.6%

16.1%

Franchise

3.4%

24.0%

System

2.5%

19.8%

Del Taco Restaurant Counts(1):

2022

2021

Company

Franchise

Total

Company

Franchise

Total

Restaurant count at beginning of Q2

294

306

600

295

301

596

New

1

1

2

3

5

Closed

(1

)

(1

)

(2

)

(1

)

(1

)

Restaurant count at end of Q2

293

306

599

297

303

600

Q2 Net Restaurant Increase/(Decrease)

(1

)

(1

)

Q2 2022 vs. Q2 2021 Restaurant % Increase/(Decrease)

(1.3

) %

1.0

%

(0.2

) %

Company-Wide Performance

Second quarter diluted earnings per share was $0.37. Operating Earnings Per Share (4), a non-GAAP measure, was $1.16 in the second quarter of fiscal 2022 compared with $1.40 in the prior year quarter. Total revenues increased 25.3% to $322.3 million, compared to $257.2 million in the prior year quarter.

Net earnings decreased to $7.8 million for the second quarter of fiscal 2022, compared with $35.9 million for the second quarter of fiscal 2021.

Adjusted EBITDA(5), a non-GAAP measure, was $64.4 million in the second quarter of fiscal 2022 compared with $75.8 million for the prior year quarter.

SG&A expense for the second quarter, which now includes Del Taco, was $28.5 million, an increase of $9.6 million compared to the prior year quarter, driven primarily by; mark-to-market changes in the cash surrender value of company owned life insurance ("COLI") policies, net of changes in our deferred compensation obligation supported by these policies, resulting in a year-over-year increase of $3.7 million, an increase in advertising expense of $2.7 million, an increase of $4.3 million in other G&A from the acquisition of Del Taco and an increase in insurance of $1.0 million; partially offset by a decrease in incentive compensation.

The effective tax rate for the second quarter of fiscal year 2022 was 33.3% compared to 27.3% in fiscal year 2021. The major components of the year-over-year increase in tax rate, the impacts of which were exacerbated by a decrease in earnings before income taxes, were an absence of excess tax benefit on share-based compensation in the current year, non-deductible COLI losses in the current year as opposed to non-taxable gains in the prior year, and an increase in non-deductible expenses, partially offset by a favorable adjustment to state taxes in the current year as opposed to an unfavorable adjustment in the prior year.

(1) Del Taco systemwide sales, same-store sales, unit growth performance and guidance are based on the time period of Jack in the Box's full fiscal Q2 2022 calendar, January 24 through April 17. We believe Del Taco's information on this time period is useful to investors as they have a direct effect on the company's profitability.

(2) All other disclosed Del Taco results, aside from same-store sales and unit growth, are based on a partial quarter time period, March 8 through April 17.

(3) Restaurant-Level Margin and Franchise-Level Margin are non-GAAP measures. These non-GAAP measures are reconciled to earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

(4) Operating Earnings Per Share represents diluted earnings per share on a GAAP basis of $0.37 excluding acquisition, integration, and restructuring costs of $0.45; COLI losses (gains), net of $0.11; debt write-off costs of $0.26; refranchising gains of ($0.03); and the excess tax benefit or tax deficiency from share-based compensation arrangements. See "Reconciliation of Non-GAAP Measurements to GAAP Results." Operating earnings per share may not add due to rounding.

(5) Adjusted EBITDA represents net earnings on a GAAP basis excluding income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, other operating expenses (income), net, depreciation and amortization, the amortization of favorable and unfavorable leases and subleases, net and the amortization of franchise tenant improvement allowances and incentives. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

Capital Allocation

On November 19, 2021, the Board of Directors authorized a $200.0 million stock buy-back program that expires on November 20, 2023. The Company did not repurchase any shares in the second quarter of 2022, but plans to resume share buybacks during the second half of 2022. On May 13, 2022, the Board of Directors declared a cash dividend of $0.44 per common share, to be paid on June 22, 2022, to shareholders of record as of the close of business on June 7, 2022.

The Company is assessing optimal capital sources, finalizing sale leasebacks and refranchising plans, and continually reviewing its balance sheet for any undervalued assets, all in an effort to accelerate the return of cash to shareholders. However, note that not all proceeds from sale leasebacks become unrestricted cash, due to the Company's securitization structure. Jack in the Box remains committed to its primary goal of investing in growth, while being disciplined in our commitment to return capital to shareholders.

Guidance & Outlook Updates

The following guidance and underlying assumptions reflect the Company’s current expectations for the current fiscal year ending October 2, 2022:

New One-Time Guidance Updates for FY 2022

  • FY 2022 Company-wide Operating EPS Guidance of $5.80 to $6.10

  • FY 2022 Same-Store Sales Guidance

    • Jack in the Box: Flat to +1.0% (two year stack of +10.3% to +11.3%)

    • Del Taco +3.0% to +4.0% (two year stack of +10.5% to +11.5%)(1)

Company-Wide Guidance Updates

  • FY 2022 Company-wide CapEx & Other Investments Guidance, including Del Taco, now $75-80 million (previously $70-75 million, Jack in the Box only)

  • FY 2022 Company-wide SG&A Guidance, including Del Taco, now $120-130 million (Excludes net COLI gains/losses; previously $92-97 million, Jack in the Box only)

Jack in the Box Guidance

  • FY 2022 Jack in the Box Commodity Guidance now up 12-14% vs. 2021 (previously 6-7%)

  • FY 2022 Jack in the Box Company-owned Wage Rate Guidance now up 12-13% vs. 2021 (previously 8-10%)

  • FY 2022 Jack in the Box Restaurant Level Margin Outlook

    • We are updating the one-time Company-owned restaurant level margin annual guidance for 2022 provided on November 23, 2021

    • Overall Restaurant Level Margin is now expected to be ~17% (previously 20-21%), which includes high single-digit price increases (previously mid-to-high single digit)

    • Restaurant Level Margin when removing our 'Evolving Markets' (including Oregon, Kansas City, Oklahoma City and Nashville) is expected to be ~20%

  • No change to Jack in the Box Company-owned Restaurant Funding Outlook for FY 2022 and FY 2023, provided on November 23, 2021

  • No change to Jack in the Box 3-5 Year Outlook as provided at Investor Day on June 29, 2021

    • Same-store sales up 2 to 3%

    • Net unit growth up 1 to 3% (reaching 4% by 2025)

    • Systemwide sales up 3 to 5%

Del Taco Guidance

All guidance and outlook measures related specifically to Del Taco will debut in 2023, and will be disclosed at our Q4/Full-Year 2022 earnings in November.

Conference Call

The Company will host a conference call for analysts and investors on Wednesday, May 26, 2022, beginning at 7:30 a.m. PT (10:30 a.m. ET). The call will be webcast live via the Investors section of the Jack in the Box company website at http://investors.jackinthebox.com. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days. The call can be accessed via phone by dialing (833) 513-0565 and using ID 9357793.

About Jack in the Box Inc.

Jack in the Box Inc. (NASDAQ: JACK), founded and headquartered in San Diego, California, is a restaurant company that operates and franchises Jack in the Box®, one of the nation's largest hamburger chains with more than 2,200 restaurants across 21 states, and Del Taco®, the second largest Mexican-American QSR chain by units in the U.S. with approximately 600 restaurants across 16 states. For more information on both brands, including franchising opportunities, visit www.jackinthebox.com and www.deltaco.com.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words such as "anticipate," "believe," "estimate," "expect," "forecast," "goals," "guidance," "intend," "plan," "project," "may," "will," "would" and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to: the success of new products, marketing initiatives and restaurant remodels and drive-thru enhancements; the impact of competition, unemployment, trends in consumer spending patterns and commodity costs; 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, risks relating to expansion into new markets and successful franchise development; the ability to attract, train and retain top-performing personnel, litigation risks; risks associated with disagreements with franchisees; supply chain disruption; food-safety incidents or negative publicity impacting the reputation of the company's brand; increased regulatory and legal complexities, risks associated with the amount and terms of the securitized debt issued by certain of our wholly owned subsidiaries; 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
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)

12 Weeks Ended

28 Weeks Ended

April 17, 2022

April 11, 2021

April 17, 2022

April 11, 2021

Revenues:

Company restaurant sales

$

151,309

$

85,962

$

271,365

$

200,240

Franchise rental revenues

76,556

77,901

179,655

181,650

Franchise royalties and other

47,101

47,231

107,856

106,879

Franchise contributions for advertising and other services

47,328

46,123

108,129

106,989

322,294

257,217

667,005

595,758

Operating costs and expenses, net:

Food and packaging

46,871

23,938

84,408

56,315

Payroll and employee benefits

50,910

26,440

90,635

61,371

Occupancy and other

29,171

13,349

50,048

31,184

Franchise occupancy expenses

49,244

48,904

113,227

114,073

Franchise support and other costs

5,015

3,341

8,926

6,614

Franchise advertising and other services expenses

49,258

47,104

112,566

109,799

Selling, general and administrative expenses

28,479

18,861

53,818

39,360

Depreciation and amortization

11,545

10,696

24,041

25,267

Other operating expenses, net

14,367

1,228

18,210

776

Gains on the sale of company-operated restaurants

(810

)

(1,532

)

(858

)

(2,815

)

284,050

192,329

555,021

441,944

Earnings from operations

38,244

64,888

111,984

153,814

Other pension and post-retirement expenses, net

70

203

163

474

Interest expense, net

26,481

15,227

46,668

35,962

Earnings before income taxes

11,693

49,458

65,153

117,378

Income taxes

3,897

13,524

18,087

30,585

Net earnings

$

7,796

$

35,934

$

47,066

$

86,793

Net earnings per share:

Basic

$

0.37

$

1.58

$

2.22

$

3.80

Diluted

$

0.37

$

1.58

$

2.21

$

3.78

Weighted-average shares outstanding:

Basic

21,227

22,723

21,215

22,863

Diluted

21,262

22,784

21,255

22,945

Dividends declared per common share

$

0.44

$

0.40

$

0.88

$

0.80

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

April 17,
2022

October 3,
2021

ASSETS

Current assets:

Cash

$

55,719

$

55,346

Restricted cash

28,914

18,222

Accounts and other receivables, net

52,461

74,335

Inventories

5,845

2,335

Prepaid expenses

20,486

12,682

Current assets held for sale

3,695

1,692

Other current assets

4,828

4,346

Total current assets

171,948

168,958

Property and equipment:

Property and equipment, at cost

1,282,161

1,133,038

Less accumulated depreciation and amortization

(819,037

)

(810,124

)

Property and equipment, net

463,124

322,914

Other assets:

Operating lease right-of-use assets

1,337,950

934,066

Intangible assets, net

12,726

470

Trademarks

283,500

Goodwill

329,758

47,774

Deferred tax assets

51,517

Other assets, net

224,747

224,438

Total other assets

2,188,681

1,258,265

$

2,823,753

$

1,750,137

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Current maturities of long-term debt

$

34,202

$

894

Current operating lease liabilities

174,065

150,636

Accounts payable

48,559

29,119

Accrued liabilities

161,897

148,417

Total current liabilities

418,723

329,066

Long-term liabilities:

Long-term debt, net of current maturities

1,812,585

1,273,420

Long-term operating lease liabilities, net of current portion

1,172,708

809,191

Deferred tax liabilities

43,399

Other long-term liabilities

159,955

156,342

Total long-term liabilities

3,188,647

2,238,953

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, 82,568,575 and 82,536,059 issued, respectively

826

825

Capital in excess of par value

505,002

500,441

Retained earnings

1,792,824

1,764,412

Accumulated other comprehensive loss

(72,963

)

(74,254

)

Treasury stock, at cost, 61,523,475 shares

(3,009,306

)

(3,009,306

)

Total stockholders’ deficit

(783,617

)

(817,882

)

$

2,823,753

$

1,750,137

JACK IN THE BOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

Year-to-date

April 17, 2022

April 11, 2021

Cash flows from operating activities:

Net earnings

$

47,066

$

86,793

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

24,041

25,267

Amortization of franchise tenant improvement allowances and incentives

2,127

1,534

Deferred finance cost amortization

3,060

3,013

Loss on extinguishment of debt

7,700

Tax deficiency (excess tax benefit) from share-based compensation arrangements

49

(1,112

)

Deferred income taxes

5,529

(882

)

Share-based compensation expense

3,934

2,836

Pension and post-retirement expense

163