Jack In The Box Inc. (JACK)

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Jack in the Box (JACK)

Q4 2012 Earnings Call

November 20, 2012 11:30 am ET


Carol A. DiRaimo - Vice President of Investor Relations & Corporate Communications

Linda A. Lang - Chairman, Chief Executive Officer and Chairman of Executive Committee

Jerry P. Rebel - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Leonard A. Comma - President and Chief Operating Officer


Joseph T. Buckley - BofA Merrill Lynch, Research Division

John S. Glass - Morgan Stanley, Research Division

Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division

Jeffrey Andrew Bernstein - Barclays Capital, Research Division

David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division

Christopher T. O'Cull - KeyBanc Capital Markets Inc., Research Division

Michael Tamas - Oppenheimer & Co. Inc., Research Division

Alexander Slagle - Jefferies & Company, Inc., Research Division

Robert M. Derrington - Northcoast Research

Conrad Lyon - B. Riley & Co., LLC, Research Division

Nick Setyan - Wedbush Securities Inc., Research Division



Good day, everyone, and welcome to the Jack in the Box Inc. Fourth Quarter Fiscal 2012 Earnings Conference Call. Today's call is being broadcast live over the Internet. A replay of the call will be available on the Jack in the Box corporate website starting today. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Vice President of Investor Relations and Corporate Communications for Jack in the Box. Please go ahead.

Carol A. DiRaimo

Thank you, Stacy, and good morning, everyone. Joining me on the call today are Chairman and CEO, Linda Lang; Executive Vice President and CFO, Jerry Rebel; and President and Chief Operating Officer, Lenny Comma.

During this morning's session, we'll review the company's operating results for the fourth quarter of fiscal 2012 as well as some of the guidance we issued yesterday for the first quarter and fiscal 2013. And we'll also touch upon some of our key expectations for the next 3 years. Following today's presentation, we'll take questions from the financial community.

Please be advised that during the course of our presentation and our question-and-answer session today, we may make forward-looking statements that reflect management's expectations for the future, which are based on current information. Actual results may differ materially from these expectations based on risks to the business. The Safe Harbor statement in yesterday's news release and the cautionary statement in the company's most recent Form 10-K are considered a part of this conference call. Material risk factors, as well as information relating to company operations, are detailed in our most recent 10-K, 10-Q and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com.

A few calendar items to note. Jack in the Box management will be participating at the ICR XChange in Miami on January 16, and our first quarter ends on January 20. We tentatively plan to announce our earnings results on February 20 after market close and our conference call is tentatively scheduled to be held at 8:30 a.m. Pacific Time on February 21.

Before I turn the call over to Linda, I have one housekeeping item. As many of you know, trying to determine what consensus EPS estimates include or exclude can be very difficult, if not impossible. As an example, First Call consensus for fiscal 2013 prior to our earnings release yesterday was $1.58, which included $0.07 of gains. But that $0.07 ranged from 0 to $0.28. This was not apples-to-apples as some analysts completely exclude gains, as we are doing in our EPS guidance for 2013. In order to have a meaningful consensus number and try to eliminate some of the confusion, we would ask that the models you submit to First Call or other services exclude gains to promote comparability.

And with that, I'll turn the call over to Linda.

Linda A. Lang

Thank you, Carol, and good morning, everyone. Quarter 4 capped off a year of substantial accomplishments despite the challenging macroeconomic environment. Let me recap some highlights on the progress we made during 2012.

Operating EPS for the full year increased 41% to $1.20 per share. Consolidated restaurant operating margin improved 240 basis points to 15.1% of sales. Same-store sales at Jack in the Box company restaurants improved 4.6% for the year and importantly, traffic growth drove half of the increase. The investments we've made over the past few years to enhance our food, service and restaurant facilities continued to drive sales and traffic at Jack in the Box. This was our best year of sales performance since 2007, and we believe we have strategies in place to continue to drive sustainable sales and market share growth at the Jack in the Box brand.

One of the areas of opportunity we've been intently focused on is speed of service at Jack in the Box. We've now seen 7 quarters of sequential improvement in speed of service. We believe this improvement is building trust with our guests and driving additional visits. As a reminder, it only takes 6 guests per day to drive 1% same-store sales growth at a typical Jack in the Box restaurant.

Our Jack in the Box franchisees completed the systemwide reimaging of their restaurants during the year. We achieved significantly higher guest satisfaction scores at Jack in the Box, which is tangible evidence that our guests are noticing the holistic approach we've taken to enhancing the overall experience. With the refranchising of 97 Jack in the Box restaurants, we are now 76% franchised. We opened a total of 95 restaurants systemwide, including 37 Jack in the Box and 58 Qdoba restaurants. We also acquired 46 Qdoba restaurants and are now more than 50% company owned. Qdoba now represents 37% of our company-owned restaurants as compared to only 6% 5 years ago.

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