Jack in the Box reported earnings from continuing operations of $23.4 million, or $0.61 per diluted share, for the second quarter ended April 12, 2015.
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This compares with earnings from continuing operations of $18.3 million, or $0.43 per diluted share, for the second quarter of fiscal 2014.
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 $0.69 in the second quarter of fiscal 2015 compared with $0.51 in the prior year quarter.
Lenny Comma, chairman and chief executive officer, said, "We're pleased with our second quarter performance, which culminated in a 35 percent increase in operating earnings per share resulting from strong same-store sales growth and margin expansion at both Jack in the Box and Qdoba Mexican Grill.
"We continued to use our growing free cash flow to return cash to shareholders, and today we announced a 50 percent increase in our quarterly dividend, demonstrating the confidence we have in our business model. We also essentially completed our refranchising strategy, with the sale of 20 companyoperated restaurants in the Southeast.
"Jack in the Box system same-store sales increased 8.9 percent for the quarter, our best performance since 1999, and company same-store sales increased 7.4 percent. Transactions drove approximately one-third of the company growth, and sales were strong across all dayparts, with breakfast and dinner the best performing," Comma said.
Jack in the Box system same-store sales growth for the quarter of 8.9 percent exceeded that of the QSR sandwich segment by 7.6 percentage points for the comparable period, according to The NPD Group's SalesTrack Weekly for the 12-week time period ended April 12, 2015. Included in this segment are 16 of the top QSR sandwich and burger chains in the country.
Consolidated restaurant operating margin increased by 210 basis points to 20.6 percent of sales in the second quarter of 2015, compared with 18.5 percent of sales in the year-ago quarter. Restaurant operating margin for Jack in the Box company restaurants increased 280 basis points to 21.4 percent of sales.
The improvement was due primarily to sales leverage and the benefit of refranchising, which were partially offset by the impact of the increase in the California minimum wage in July 2014.
Food and packaging costs as a percentage of sales decreased due to the benefit of price increases and favorable product mix changes, which were partially offset by commodity inflation of approximately 2.6 percent in the quarter.
Restaurant operating margin for Qdoba company restaurants increased 50 basis points to 18.8 percent of sales, due primarily to sales leverage, including the benefit of the new menu pricing structure, which was partially offset by commodity inflation of approximately 2.0 percent, an increase in labor staffing and higher credit card fees.
Franchise costs for the second quarter decreased to 48.3 percent of franchise revenues from 50.5 percent in the prior year quarter. The decrease was due primarily to higher royalty revenue for both brands and higher rental income from Jack in the Box franchise restaurants resulting from increases in franchise average unit volumes and an increase in the number of franchise restaurants.
SG&A expense for the second quarter increased by $3.8 million and was 14.7 percent of revenues as compared to 14.3 percent in the prior year quarter. The increase reflects a $1.2 million increase in pension expense and a $3.4 million increase in incentive compensation relating to the company's performance.
Mark-to-market adjustments on investments supporting the company's nonqualified retirement plans positively impacted SG&A by $1.6 million in the second quarter of 2015 as compared to $0.5 million in the second quarter of 2014, resulting in a year-over-year decrease in SG&A of $1.1 million.
Losses from refranchising were $5 million in the second quarter of 2015, or approximately $0.08 per diluted share, relating to the refranchising of 20 Jack in the Box restaurants in one market. This compares to gains of $1.8 million, or approximately $0.03 per diluted share, in the prior year quarter. ■