Jack in the Box Inc. I 2008 Annual Report

Jack in the Box Inc. I 2008 Annual Report

BSD50573_10K_Cvr_10:BSD50573_10K_Cvr_10 12/22/08 12:00 PM Page 1 JACK IN THE BOX INC. IN THE BOX JACK I 2008 ANNUAL REPORT Jack in the Box and Qdoba states Jack in the Box (only) states Qdoba (only) states States that wish they had Jack in the Box and Qdoba JACK IN THE BOX INC. I 2008 ANNUAL REPORT JACK IN THE BOX INC. I 9330 BALBOA AVENUE, SAN DIEGO, CA 92123 I WWW.JACKINTHEBOX.COM BSD50573_10K_Cvr_10:BSD50573_10K_Cvr_10 12/22/08 12:01 PM Page 2 COMPANY OVERVIEW CORPORATE OFFICES Jack in the Box Inc. Jack in the Box Inc. (NASDAQ: JACK), based in San Diego, is a restaurant company that 9330 Balboa Avenue operates and franchises Jack in the Box® restaurants, one of the nation’s largest hamburger San Diego, CA 92123-1516 chains, with more than 2,100 restaurants in 18 states. Additionally, through a wholly owned (858) 571-2121 subsidiary, the company operates and franchises Qdoba Mexican Grill®, a leader in fast-casual dining, with more than 450 restaurants in 41 states and the District of Columbia. INVESTOR REQUESTS The company also operates a proprietary chain of 61 convenience stores called Quick Stuff®, For financial information, visit the Jack in the Box Inc. website at www.jackinthebox.com or write: each built adjacent to a full-size Jack in the Box restaurant and including a major-brand Investor Relations fuel station. The company has announced plans to sell its Quick Stuff brand. Jack in the Box Inc. 9330 Balboa Avenue San Diego, CA 92123-1516 SELECTED FINANCIAL DATA The company’s fiscal year is 52 or 53 weeks, ending the Sunday closest to September 30. INVESTOR INQUIRIES Carol DiRaimo, Vice President, Investor Relations and Corporate Communications Fiscal year 2004 includes 53 weeks; all other years include 52 weeks. The selected (858) 571-2407 financial data reflects Quick Stuff as a discontinued operation for all years presented. A copy of the company’s 2008 Form 10-K is available free of charge. The following selected financial data of Jack in the Box Inc. for each fiscal year was extracted or derived from our audited financial statements. LEGAL COUNSEL DLA Piper US LLP Fiscal Year 2008 2007 2006 2005 2004(1) INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (In thousands, except per share data) KPMG LLP 750 B Street Statement of Earnings Data: San Diego, CA 92101 Total revenues $2,539,561 $2,513,431 $2,381,244 $2,269,477 $2,192,612 Costs of revenues 2,102,467 2,042,781 1,945,947 1,871,128 1,805,537 TRANSFER AGENT AND REGISTRAR BNY Mellon Shareowner Services Selling, general and Newport Office Center VII administrative expenses 287,555 291,745 298,436 272,087 262,809 480 Washington Blvd. Gains on sale of company- Jersey City, NJ 07310 operated restaurants (66,349) (38,091) (40,464) (22,093) (16,146) Total operating costs STOCK EXCHANGE LISTING and expenses 2,323,673 2,296,435 2,203,919 2,121,122 2,052,200 Jack in the Box Inc. common stock traded on the New York Stock Exchange (NYSE) through the market's close on Dec. 12, 2008, under the ticker symbol Earnings from operations 215,888 216,996 177,325 148,355 140,412 JBX. The company subsequently transferred its listing to the Nasdaq Global (2) Interest expense, net 27,428 23,335 12,056 13,389 25,391 Select Market (NASDAQ) where its common stock began trading on Dec. 15, Income taxes 70,251 68,982 58,845 45,405 41,850 2008, under the new ticker symbol JACK. Earnings from continuing operations $ 118,209 $ 124,679 $ 106,424 $ 89,561 $ 73,171 DIVIDEND POLICY Jack in the Box Inc. did not pay any cash or other dividends during the last two Diluted earnings per share fiscal years. Effective October 15, 2007, a stock split was effected in the form from continuing operations $ 1.99 $ 1.85 $ 1.48 $ 1.21 $ 0.99 of a stock dividend, with shareholders receiving an additional share of stock for each share held. The company does not anticipate paying dividends in the Balance Sheet Data (at end of period): foreseeable future. Its credit agreement provides for a remaining aggregate amount of $97.4 million for the repurchase of the company’s common stock and Total assets $ 1,498,418 $ 1,374,690 $ 1,513,499 $ 1,332,606 $ 1,320,527 $50.0 million for the potential payment of cash dividends. Long-term debt(2) 516,250 427,516 254,231 290,213 297,092 Stockholders’ equity(3) 457,111 409,585 706,633 562,085 550,870 ANNUAL MEETING February 13, 2009, 2 p.m. Marriott Courtyard (1) Fiscal 2004 includes 53 weeks. All other periods presented include 52 weeks. The additional week in fiscal 2004 added 8651 Spectrum Center Blvd. approximately $0.01 per diluted share to net earnings. San Diego, CA 92123 (2) Fiscal 2008 and 2007 reflect higher bank borrowings associated with our revolver and credit facility. (3) Fiscal year 2007 includes a reduction in stockholders’ equity of $363.4 million related to shares repurchased and retired For general information about Jack in the Box Inc., visit the company’s website during the year. at www.jackinthebox.com. DEAR FELLOW SHAREHOLDERS, as well those whose discretionary spending has been especially We’re pleased to report that Jack in the Box Inc. delivered hard hit by the country’s economic problems. We provide variety earnings per share growth of more than 7% in fiscal 2008 on our menu, including innovative products that are not typically despite challenges on several fronts — from the slowing offered in the QSR segment, such as the Real Fruit Smoothies economy and food cost inflation to tightening credit markets that we launched in the second quarter and our Breakfast Bowls and a damaging hurricane. Our performance under such diverse and Pita Snacks, which we introduced in the fourth quarter. business and operating conditions is a testament to the strength and flexibility of our long-term strategic plan, which As with our Jack in the Box restaurants, Qdoba Mexican Grill® continues to focus on brand reinvention, expanding franchising, is also feeling the impact of a difficult economy. Still, system improving the business model and growth. same-store sales at Qdoba were up 1.6% on top of a fiscal 2007 increase of 4.6%. 2008 Financial Performance — Net earnings for fiscal 2008 totaled $119.3 million, or $2.01 per diluted share, compared with Our business continued to be impacted by pressures from $125.6 million, or $1.87 per diluted share in fiscal 2007. Fiscal increased commodity costs. In 2008, food and packaging costs year 2008 results include a negative impact of approximately were 150 basis points higher than last year. Beef costs, which 4 to 5 cents for losses and costs related to Hurricane Ike. represent our largest single commodity expense, increased by more than 5%, and higher costs for cheese, shortening and With the nation’s recessionary economy impacting consumer potato items contributed to a 5.5% increase in overall commodity spending, same-store sales at Jack in the Box® company costs for the year. For the year, utilities were also approximately restaurants increased 0.2% in fiscal 2008 on top of a very 30 basis points higher than in fiscal 2007. These factors strong 6.1% increase in fiscal 2007. The effective price increase contributed to a 180 basis points decrease in restaurant at company restaurants was approximately 2.2% for the year, operating margin in fiscal 2008 versus fiscal 2007. less than many in our industry as we believe we should remain cautious about how aggressively we raise prices due to the Strategic Initiatives — In September, our board of directors economic pressures that our guests are facing. Our approach approved the continuation of the company’s strategic plan and was to focus primarily on improving the cost structure of our the following four key initiatives comprising that updated plan. restaurant operations by managing labor and introducing higher-margin new products while also controlling G&A expenses. Our first strategic initiative, and certainly the one most apparent to our guests, is reinventing the Jack in the Box brand to Our focus continues to be on premium products versus deep differentiate Jack in the Box from the competition and deliver value or discounting messages. We have a tiered menu strategy a restaurant experience superior to that typically found in the that is keeping our brand relevant to a wide range of consumers, QSR segment. Brand reinvention focuses on major improvements including those trading down from other restaurant categories, in the following areas: • Menu innovation. We will continue to differentiate our capital intensive and not as susceptible to cost fluctuations. Jack in the Box menu and broaden the brand’s consumer Our long-term goal is to increase the percentage of franchise appeal by developing new products and platforms that are ownership to the 70% to 80% range by the end of fiscal year unique to the QSR segment. In fiscal 2008, we rolled out 2013 through acceleration of refranchising and franchisee several new product platforms, including Real Fruit Smoothies development of new restaurants. and Breakfast Bowls, and we continued to enhance our menu with products featuring premium ingredients like sirloin steak. In fiscal 2009, we sold 109 company-operated restaurants to • Enhanced restaurant environment. In 2008, we continued franchisees, with gains on sale totaling $66.3 million. Despite re-imaging restaurants with a comprehensive program that the tightening of the credit markets, the number of restaurants includes a complete redesign of the dining room and common sold and the gains on sale exceeded the company’s guidance for areas.

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