Jack In The Box Results

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

Jack in the Box

Jack in the Box Inc. (NASDAQ: JACK) today reported earnings from continuing operations of $30.3 million, or $1.02 per diluted share, for the fourth quarter ended October 1, 2017, compared with $32.6 million, or $0.98 per diluted share, for the fourth quarter of fiscal 2016. Fiscal 2017 earnings from continuing operations totaled $138.3 million, or $4.47 per diluted share, compared with $126.3 million, or $3.70 per diluted share in 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 $0.73 in the fourth quarter of fiscal 2017 compared with $1.03 in the prior year quarter. For fiscal year 2017, operating earnings per share were $3.88 compared with $3.86 last year.

The fourth quarter and fiscal year ended October 1, 2017, included 12 weeks and 52 weeks, respectively, as compared to 13 weeks and 53 weeks in the fourth quarter and fiscal year ended October 2, 2016, respectively. The company estimates that the extra week benefited diluted earnings per share by approximately $0.09 in both the fourth quarter and fiscal 2016.

                       

12 Weeks

Ended

13 Weeks

Ended

52 Weeks

Ended

53 Weeks

Ended

October 1,

2017

October 2,

2016

October 1,

2017

October 2,

2016

Diluted earnings per share from continuing operations – GAAP

$ 1.02 $ 0.98 $ 4.47 $ 3.70
Restructuring charges 0.06 0.05 0.18 0.19
Gains from refranchising   (0.35 )     (0.77 )   (0.02 )
Operating earnings per share – Non-GAAP $ 0.73   $ 1.03 $ 3.88   $ 3.86  
 

Restructuring charges of $2.8 million, or approximately $0.06 per diluted share, were recorded during the fourth quarter of fiscal 2017, as compared with $2.3 million, or approximately $0.05 per diluted share, in the prior year quarter. Total restructuring charges in the fourth quarter of fiscal 2017 included $3.6 million related to the evaluation of potential alternatives with respect to Qdoba®, and also reflected a $0.9 million reduction in future lease commitment costs resulting from the early termination of the lease for the Qdoba corporate support center. Restructuring charges are included in "Impairment and other charges, net" in the accompanying consolidated statements of earnings, which increased in the fourth quarter to $9.5 million from $4.5 million in the year ago quarter. Excluding restructuring charges, the increase was due primarily to charges related to the impairment of three underperforming Qdoba locations, as well as impairment and accelerated depreciation of furniture and equipment resulting from Qdoba design changes and remodels, totaling $3.3 million, or approximately $0.07 per diluted share.

Lenny Comma, chairman and chief executive officer, said, "Our fourth quarter operating results concluded a challenging year for both brands. Our key initiatives in 2018 will be focused on regaining momentum in a highly competitive environment.

"We continue to make significant progress on our Jack in the Box refranchising initiative, with the sale of 60 restaurants in the fourth quarter and 178 during the fiscal year. We currently have signed non-binding letters of intent with franchisees to sell 32 additional restaurants, and now anticipate the Jack in the Box franchise mix to approach the high end of our previous expected range.

"The company returned over $376 million to shareholders in fiscal 2017, including over $327 million in share repurchases and $49 million in dividends. We remain committed to returning cash to shareholders in the future as we adjust our capital structure to reflect a less capital-intensive business model."

The company's Board of Directors, with the assistance of Morgan Stanley & Co. LLC, has made substantial progress 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 or other specific course of action. The company does not intend to comment further until the evaluation process is concluded. The company will provide guidance for fiscal 2018 following the completion of the Qdoba evaluation process.

 

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

 
     

12 Weeks

Ended

     

13 Weeks

Ended

     

52 Weeks

Ended

     

53 Weeks

Ended

October 1,

2017*

October 2,

2016

October 1,

2017*

October 2,

2016

Jack in the Box:
Company (2.0)% 0.5% (1.1)% 0.0%
Franchise (0.7)% 2.4% 0.9% 1.6%
System (1.0)% 2.0% 0.5% 1.2%
Qdoba:
Company (4.0)% 1.2% (3.0)% 1.7%
Franchise 0.0% 0.4% 0.4% 1.1%
System (2.1)% 0.8% (1.4)% 1.4%

*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 1.0 percent for the quarter and lagged the QSR sandwich segment by 2.9 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended October 1, 2017. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales decreased 2.0 percent in the fourth quarter driven by a 5.4 percent decrease in transactions, partially offset by average check growth of 3.4 percent. The company estimates that Hurricane Harvey negatively impacted company, franchise and system same-store sales by 40, 20 and 30 basis points, respectively, in the fourth quarter.

Qdoba same-store sales decreased 2.1 percent system-wide and decreased 4.0 percent for company restaurants in the fourth quarter. Company same-store sales reflected a 6.4 percent decrease in transactions, partially offset by growth in average check and catering sales.

Consolidated restaurant operating margin, a non-GAAP measure1, decreased by 390 basis points to 15.8 percent of sales in the fourth quarter of 2017, compared with 19.7 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box company restaurants, a non-GAAP measure1, decreased 180 basis points to 19.2 percent of sales. The decrease was due primarily to sales deleverage, higher repairs and maintenance costs and higher labor costs including wage inflation, which were partially offset by a decrease in food and packaging costs as a percentage of sales and the benefit of refranchising activities in 2017. The decrease in food and packaging costs as a percentage of sales resulted from favorable product mix changes and menu price increases, partially offset by commodity inflation of approximately 3.3 percent in the quarter. Restaurant operating margin for Qdoba company restaurants, a non-GAAP measure1, decreased 610 basis points to 11.2 percent of sales. The decrease was due primarily to the impact of new restaurant openings, an increase in food and packaging costs, sales deleverage, and the impact of wage inflation. The increase in food and packaging costs as a percentage of sales was impacted by unfavorable product mix, operating inefficiencies and commodity inflation of approximately 3.6 percent in the quarter, including a more than 50 percent spike in avocado prices, partially offset by a decrease in discounting.

Franchise margin, a non-GAAP measure1, as a percentage of total franchise revenues decreased to 52.2 percent in the fourth quarter from 53.7 percent in the prior year quarter. The decrease was due primarily to a decrease in rental revenues and royalties related to the 50 franchise-operated Jack in the Box restaurants the company took over in the second and third quarters of fiscal 2017, and an increase in franchise support and other costs. These decreases were partially offset by higher franchise fees related to the sale of 60 company-operated Jack in the Box restaurants to franchisees in the fourth quarter, as well as higher rental revenues and royalties related to the refranchising of 178 Jack in the Box restaurants in the second, third and fourth quarters of fiscal 2017.

SG&A expense for the fourth quarter decreased by $12.4 million and was 10.6 percent of revenues as compared to 12.1 percent in the prior year quarter. Key items contributing to the decrease were the impact of the company's restructuring activities, a $6.4 million decrease in incentive compensation, a $3.0 million decrease related to the 53rd week in the prior year, a $2.1 million decrease in pension and postretirement benefits, and mark-to-market adjustments on investments supporting the company's non-qualified retirement plans resulting in a $0.7 million year-over-year decrease in SG&A.

____________________________

(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."

 

Interest expense, net, increased by $3.0 million in the fourth quarter due to increased leverage and a higher effective interest rate for 2017.

The tax rate for the fourth quarter of 2017 was 38.1 percent versus 35.6 percent for the fourth quarter of 2016. The higher tax rate was due primarily to an increase in state taxes and an overall decrease in tax credits.

Capital Allocation

The company did not repurchase any shares of its common stock in the fourth quarter of 2017 due to the evaluation of potential alternatives with respect to Qdoba. During fiscal year 2017, the company 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.

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.

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

13 Weeks

Ended

52 Weeks

Ended

53 Weeks

Ended

October 1,

2017

October 2,

2016

October 1,

2017

October 2,

2016

Diluted earnings per share from continuing operations – GAAP

$ 1.02 $ 0.98 $ 4.47 $ 3.70
Restructuring charges 0.06 0.05 0.18 0.19
Gains from refranchising   (0.35 )     (0.77 )   (0.02 )
Operating earnings per share – Non-GAAP $ 0.73   $ 1.03 $ 3.88   $ 3.86  
 

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 13 Weeks Ended
October 1, 2017 October 2, 2016
($ in thousands) Jack in the Box       Qdoba       Consolidated Jack in the Box       Qdoba       Consolidated
Earnings from operations - GAAP (1) $ 60,393   $ 58,910  
Other operating expenses:
Selling, general and administrative expenses (35,891 ) (48,281 )
Impairment and other charges, net (9,541 ) (4,459 )
Gains on the sale of company-operated restaurants 16,868   6  
Total other operating expenses $ (28,564 ) $ (52,734 )
 
Company restaurant operations:
Company restaurant sales $ 139,303 $ 102,000 $ 241,303 $ 193,639 $ 107,054 $ 300,693
Food and packaging (40,440 ) (34,497 ) (74,937 ) (56,396 ) (33,804 ) (90,200 )
Payroll and employee benefits (40,413 ) (28,620 ) (69,033 ) (55,275 ) (28,241 ) (83,516 )
Occupancy and other (31,728 ) (27,488 ) (59,216 ) (41,347 ) (26,467 ) (67,814 )
Restaurant operating margin (2) - Non-GAAP $ 26,722   $ 11,395   $ 38,117   $ 40,621   $ 18,542   $ 59,163  
 
Franchise operations:
Franchise rental revenues $ 56,023 $ 25 $ 56,048 $ 57,668 $ 21 $ 57,689
Franchise royalties and other 36,798 4,597 41,395 34,813 5,224 40,037
Franchise occupancy expenses (41,861 ) (27 ) (41,888 ) (41,650 ) (27 ) (41,677 )
Franchise support and other costs (2,588 ) (2,127 ) (4,715 ) (2,493 ) (1,075 ) (3,568 )
Franchise margin (2) - Non-GAAP $ 48,372   $ 2,468   $ 50,840   $ 48,338   $ 4,143   $ 52,481  
 
Restaurant operating margin (2) as a % of company restaurant sales 19.2 % 11.2 % 15.8 % 21.0 % 17.3 % 19.7 %
Franchise margin (2) as a % of total franchise revenues 52.2 % 53.7 %
 

 

           
52 Weeks Ended 53 Weeks Ended
October 1, 2017 October 2, 2016
($ in thousands) Jack in the Box       Qdoba       Consolidated Jack in the Box       Qdoba       Consolidated
Earnings from operations - GAAP (1) $ 266,141   $ 229,915  
Other operating expenses:
Selling, general and administrative expenses (165,752 ) (203,816 )
Impairment and other charges, net (25,141 ) (19,057 )
Gains on the sale of company-operated restaurants 38,034   1,230  
Total other operating expenses $ (152,859 ) $ (221,643 )
 
Company restaurant operations:
Company restaurant sales $ 715,921 $ 436,558 $ 1,152,479 $ 789,040 $ 415,495 $ 1,204,535
Food and packaging (206,653 ) (140,291 ) (346,944 ) (235,538 ) (127,464 ) (363,002 )
Payroll and employee benefits (211,611 ) (122,000 ) (333,611 ) (223,019 ) (111,451 ) (334,470 )
Occupancy and other (153,451 ) (115,095 ) (268,546 ) (162,869 ) (101,289 ) (264,158 )
Restaurant operating margin (2) - Non-GAAP $ 144,206   $ 59,172   $ 203,378   $ 167,614   $ 75,291   $ 242,905  
 
Franchise operations:
Franchise rental revenues $ 231,578 $ 109 $ 231,687 $ 232,794 $ 113 $ 232,907
Franchise royalties and other 149,791 19,957 169,748 140,424 21,465 161,889
Franchise occupancy expenses (171,483 ) (108 ) (171,591 ) (170,050 ) (102 ) (170,152 )
Franchise support and other costs (8,811 ) (5,411 ) (14,222 ) (11,107 ) (4,884 ) (15,991 )
Franchise margin (2) - Non-GAAP $ 201,075   $ 14,547   $ 215,622   $ 192,061   $ 16,592   $ 208,653  
 
Restaurant operating margin (2) as a % of company restaurant sales 20.1 % 13.6 % 17.6 % 21.2 % 18.1 % 20.2 %
Franchise margin (2) as a % of total franchise revenues 53.7 % 52.9 %
 

 

                       

JACK IN THE BOX INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 

12 Weeks

Ended

13 Weeks

Ended

52 Weeks

Ended

53 Weeks

Ended

October 1,

2017

October 2,

2016

October 1,

2017

October 2,

2016

Revenues:
Company restaurant sales $ 241,303 $ 300,693 $ 1,152,479 $ 1,204,535
Franchise rental revenues 56,048 57,689 231,687 232,907
Franchise royalties and other 41,395   40,037   169,748   161,889  
338,746   398,419   1,553,914   1,599,331  
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging 74,937 90,200 346,944 363,002
Payroll and employee benefits 69,033 83,516 333,611 334,470
Occupancy and other 59,216   67,814   268,546   264,158  
Total company restaurant costs 203,186 241,530 949,101 961,630
Franchise occupancy expenses 41,888 41,677 171,591 170,152
Franchise support and other costs 4,715 3,568 14,222 15,991
Selling, general and administrative expenses 35,891 48,281 165,752 203,816
Impairment and other charges, net 9,541 4,459 25,141 19,057
Gains on the sale of company-operated restaurants (16,868 ) (6 ) (38,034 ) (1,230 )
278,353   339,509   1,287,773   1,369,416  
Earnings from operations 60,393 58,910 266,141 229,915
Interest expense, net 11,427   8,382   46,518   31,081  
Earnings from continuing operations and before income taxes 48,966 50,528 219,623 198,834
Income taxes 18,633   17,967   81,315   72,564  
Earnings from continuing operations 30,333 32,561 138,308 126,270
Losses from discontinued operations, net of income tax benefit (375 ) (580 ) (2,976 ) (2,197 )
Net earnings $ 29,958   $ 31,981   $ 135,332   $ 124,073  
 
Net earnings per share — basic:
Earnings from continuing operations $ 1.03 $ 1.00 $ 4.52 $ 3.74
Losses from discontinued operations, net (0.01 ) (0.02 ) (0.10 ) (0.07 )
Net earnings per share (1) $ 1.02   $ 0.98   $ 4.42   $ 3.68  
Net earnings per share — diluted:
Earnings from continuing operations $ 1.02 $ 0.98 $ 4.47 $ 3.70
Losses from discontinued operations, net (0.01 ) (0.02 ) (0.10 ) (0.06 )
Net earnings per share (1) $ 1.01   $ 0.97   $ 4.38   $ 3.63  
Weighted-average shares outstanding:
Basic 29,478 32,694 30,630 33,735
Diluted 29,753 33,085 30,914 34,146
 
Dividends declared per common share $ 0.40 $ 0.30 $ 1.60 $ 1.20
 

 

                       

JACK IN THE BOX INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 
October 1,

2017

October 2,

2016

ASSETS
Current assets:
Cash $ 7,642 $ 17,030
Accounts and other receivables, net 68,694 73,360
Inventories 6,647 8,229
Prepaid expenses 29,148 40,398
Assets held for sale 24,107 14,259
Other current assets 3,039   2,129  
Total current assets 139,277   155,405  
Property and equipment, at cost:
Land 112,509 117,166
Buildings 1,112,763 1,116,244
Restaurant and other equipment 265,791 331,644
Construction in progress 31,558   40,522  
1,522,621 1,605,576
Less accumulated depreciation and amortization (889,630 ) (886,526 )
Property and equipment, net 632,991   719,050  
Intangible assets, net 14,072 14,042
Goodwill 169,049 166,046
Other assets, net 273,032   290,469  
$ 1,228,421   $ 1,345,012  
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt $ 64,383 $ 55,935
Accounts payable 37,302 40,736
Accrued liabilities 160,305   181,250  
Total current liabilities 261,990   277,921  
Long-term debt, net of current maturities 1,080,932 935,372
Other long-term liabilities 273,531 348,925
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, 81,843,483 and 81,598,524 issued, respectively 818 816
Capital in excess of par value 453,530 432,564
Retained earnings 1,485,820 1,399,721
Accumulated other comprehensive loss (137,761 ) (187,021 )
Treasury stock, at cost, 52,411,407 and 49,190,992 shares, respectively (2,190,439 ) (1,863,286 )
Total stockholders’ deficit (388,032 ) (217,206 )
$ 1,228,421   $ 1,345,012  
 
 

 

                     

JACK IN THE BOX INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

52 Weeks

Ended

53 Weeks

Ended

October 1,

2017

October 2,

2016

Cash flows from operating activities:
Net earnings $ 135,332 $ 124,073
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 88,939 92,844
Deferred finance cost amortization 3,487 2,736
Excess tax benefits from share-based compensation arrangements (4,232 ) (7,461 )
Deferred income taxes (12,208 ) 34,973
Share-based compensation expense 11,416 11,455
Pension and postretirement expense 4,215 13,484
Gains on cash surrender value of company-owned life insurance (2,424 ) (5,365 )
Gains on the sale of company-operated restaurants (38,034 ) (1,230 )
Losses on the disposition of property and equipment 3,635 2,654
Impairment charges and other 7,940 4,759
Changes in assets and liabilities, excluding acquisitions and dispositions:
Accounts and other receivables (5,774 ) (28,181 )
Inventories 1,771 (713 )
Prepaid expenses and other current assets 14,831 (15,367 )
Accounts payable 480 2,225
Accrued liabilities (20,704 ) 8,662
Pension and postretirement contributions (5,363 ) (101,052 )
Other (11,470 ) (4,314 )
Cash flows provided by operating activities 171,837   134,182  
Cash flows from investing activities:
Purchases of property and equipment (67,453 ) (96,615 )
Purchases of assets intended for sale and leaseback (5,769 ) (9,785 )
Proceeds from the sale and leaseback of assets 6,057 17,123
Proceeds from the sale of company-operated restaurants 99,591 1,439
Collections on notes receivable 1,715 3,555
Acquisition of franchise-operated restaurants (2,053 ) (19,816 )
Other 1,251   (299 )
Cash flows provided by (used in) investing activities 33,339   (104,398 )
Cash flows from financing activities:
Borrowings on revolving credit facilities 747,900 705,000
Repayments of borrowings on revolving credit facilities (533,300 ) (817,578 )
Proceeds from issuance of debt 417,578
Principal repayments on debt (57,404 ) (26,154 )
Debt issuance costs (2,385 )
Dividends paid on common stock (48,925 ) (40,295 )
Proceeds from issuance of common stock 5,165 10,564
Repurchases of common stock (334,361 ) (284,645 )
Excess tax benefits from share-based compensation arrangements 4,232 7,461
Change in book overdraft 2,151    
Cash flows used in financing activities (214,542 ) (30,454 )
Effect of exchange rate changes on cash (22 ) (43 )
Net decrease in cash (9,388 ) (713 )
Cash at beginning of period 17,030   17,743  
Cash at end of period $ 7,642   $ 17,030  
 
 

 

                       

JACK IN THE BOX INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

 

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

 

CONSOLIDATED STATEMENTS OF EARNINGS DATA

(Unaudited)

 

12 Weeks

Ended

13 Weeks

Ended

52 Weeks

Ended

53 Weeks

Ended

October 1,

2017

October 2,

2016

October 1,

2017

October 2,

2016

Revenues:
Company restaurant sales 71.2 % 75.5 % 74.2 % 75.3 %
Franchise rental revenues 16.5 % 14.5 % 14.9 % 14.6 %
Franchise royalties and other 12.2 % 10.0 % 10.9 % 10.1 %
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses, net:
Company restaurant costs:
Food and packaging (1) 31.1 % 30.0 % 30.1 % 30.1 %
Payroll and employee benefits (1) 28.6 % 27.8 % 28.9 % 27.8 %
Occupancy and other (1) 24.5 % 22.6 % 23.3 % 21.9 %
Total company restaurant costs (1) 84.2 % 80.3 % 82.4 % 79.8 %
Franchise occupancy expenses (2) 74.7 % 72.2 % 74.1 % 73.1 %
Franchise support and other costs (3) 11.4 % 8.9 % 8.4 % 9.9 %
Selling, general and administrative expenses 10.6 % 12.1 % 10.7 % 12.7 %
Impairment and other charges, net 2.8 % 1.1 % 1.6 % 1.2 %
Gains on the sale of company-operated restaurants (5.0 )% % (2.4 )% (0.1 )%
Earnings from operations 17.8 % 14.8 % 17.1 % 14.4 %
Income tax rate (4) 38.1 % 35.6 % 37.0 % 36.5 %
 

 

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 13 Weeks Ended 52 Weeks Ended 53 Weeks Ended
October 1, 2017 October 2, 2016 October 1, 2017 October 2, 2016
Jack in the Box:                                
Company restaurant sales $ 139,303 $ 193,639 $ 715,921 $ 789,040
Company restaurant costs:
Food and packaging 40,440 29.0 % 56,396 29.1 % 206,653 28.9 % 235,538 29.9 %
Payroll and employee benefits 40,413 29.0 % 55,275 28.5 % 211,611 29.6 % 223,019 28.3 %
Occupancy and other 31,728   22.8 % 41,347   21.4 % 153,451   21.4 % 162,869   20.6 %
Total company restaurant costs 112,581   80.8 % 153,018   79.0 % 571,715   79.9 % 621,426   78.8 %
Restaurant operating margin (1) $ 26,722   19.2 % $ 40,621   21.0 % $ 144,206   20.1 % $ 167,614   21.2 %
Qdoba:
Company restaurant sales $ 102,000 $ 107,054 $ 436,558 $ 415,495
Company restaurant costs:
Food and packaging 34,497 33.8 % 33,804 31.6 % 140,291 32.1 % 127,464 30.7 %
Payroll and employee benefits 28,620 28.1 % 28,241 26.4 % 122,000 27.9 % 111,451 26.8 %
Occupancy and other 27,488   26.9 % 26,467   24.7 % 115,095   26.4 % 101,289   24.4 %
Total company restaurant costs 90,605   88.8 % 88,512   82.7 % 377,386   86.4 % 340,204   81.9 %
Restaurant operating margin (1) $ 11,395   11.2 % $ 18,542   17.3 % $ 59,172   13.6 % $ 75,291   18.1 %
 

 

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

                       

SUPPLEMENTAL FRANCHISE OPERATIONS DATA

(Dollars in thousands)

(Unaudited)

 

12 Weeks

Ended

13 Weeks

Ended

52 Weeks

Ended

53 Weeks

Ended

October 1,

2017

October 2,

2016

October 1,

2017

October 2,

2016

Franchise rental revenues $ 56,048 $ 57,689 $ 231,687 $ 232,907
 
Royalties 38,364 39,176 160,002 158,514
Franchise fees and other 3,031   861   9,746   3,375  
Franchise royalties and other 41,395   40,037   169,748   161,889  
Total franchise revenues 97,443   97,726   401,435   394,796  
 
Rental expense 34,370 34,025 140,731 137,808
Depreciation and amortization 7,518   7,652   30,860   32,344  
Franchise occupancy expenses 41,888 41,677 171,591 170,152
Franchise support and other costs 4,715   3,568   14,222   15,991  
Total franchise costs 46,603   45,245   185,813   186,143  
Franchise margin (1) $ 50,840   $ 52,481   $ 215,622   $ 208,653  
Franchise margin (1) as a % of franchise revenues 52.2 % 53.7 % 53.7 % 52.9 %
 

 

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

                       

SUPPLEMENTAL SEGMENT REPORTING INFORMATION

(In thousands)

(Unaudited)

 

12 Weeks

Ended

13 Weeks

Ended

52 Weeks

Ended

53 Weeks

Ended

October 1,

2017

October 2,

2016

October 1,

2017

October 2,

2016

Revenues by segment:
Jack in the Box restaurant operations $ 232,125 $ 286,120 $ 1,097,291 $ 1,162,258
Qdoba restaurant operations 106,621   112,299   456,623   437,073  
Consolidated revenues $ 338,746   $ 398,419   $ 1,553,914   $ 1,599,331  
Earnings from operations by segment:
Jack in the Box restaurant operations $ 59,612 $ 71,982 $ 280,097 $ 290,346
Qdoba restaurant operations 1,905 13,718 31,031 47,250
Shared services and unallocated costs (17,992 ) (26,796 ) (83,021 ) (108,911 )
Gains on the sale of company-operated restaurants 16,868   6   38,034   1,230  

Consolidated earnings from operations

60,393 58,910 266,141 229,915
Interest expense, net 11,427   8,382   46,518   31,081  
Consolidated earnings from continuing operations and before income taxes $ 48,966   $ 50,528   $ 219,623   $ 198,834  
Total depreciation expense by segment:
Jack in the Box restaurant operations $ 13,092 $ 15,878 $ 60,595 $ 66,287
Qdoba restaurant operations 4,580 4,903 20,854 19,306
Shared services and unallocated costs 1,539   1,553   6,761   6,489  
Consolidated depreciation expense $ 19,211   $ 22,334   $ 88,210   $ 92,082  
 
 

 

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 18 20 4 12 16
Refranchised (178 ) 178 (1 ) 1
Acquired from franchisees 50 (50 ) 1 (1 )
Closed (15 ) (9 ) (24 )   (10 ) (10 )
End of period 276   1,975   2,251   417   1,838   2,255  
% of JIB system 12 % 88 % 100 % 18 % 82 % 100 %
Qdoba:
Beginning of year 367 332 699 322 339 661
New 23 19 42 35 18 53
Acquired from franchisees 14 (14 )
Closed (5 ) (10 ) (15 ) (4 ) (11 ) (15 )
End of period 385   341   726   367   332   699  
% of Qdoba system 53 % 47 % 100 % 53 % 47 % 100 %
Consolidated:            
Total system end of period 661   2,316   2,977   784   2,170   2,954  
% of consolidated system 22 % 78 % 100 % 27 % 73 % 100 %
 



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