Jack In The Box 2009 Annual Report Download - page 22

Table of Contents
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For an understanding of the significant factors that influenced our performance during the past three fiscal years, we believe our
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with
the Consolidated Financial Statements and related Notes included in this Annual Report as indexed on page F-1.
All comparisons under this heading among 2009, 2008 and 2007 refer to the 52-week periods ended September 27, 2009,
September 28, 2008, and September 30, 2007, respectively, unless otherwise indicated.
Our MD&A consists of the following sections:
• Overview — a general description of our business, the quick-service dining segment of the restaurant industry and fiscal 2009
highlights.
• Results of operations — an analysis of our consolidated statements of earnings for the three years presented in our consolidated
financial statements.
• Liquidity and capital resources — an analysis of cash flows including capital expenditures, aggregate contractual obligations,
share repurchase activity, known trends that may impact liquidity, and the impact of inflation.
• Future application of accounting principles — a discussion of new accounting pronouncements, dates of implementation and
impact on our consolidated financial position or results of operations, if any.
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Our primary source of revenue is from retail sales at Jack in the Box and Qdoba company-operated restaurants. We also derive
revenue from Jack in the Box and Qdoba franchised restaurants, including royalties based upon a percent of sales, rents, franchise fees
and distribution sales of food and packaging commodities. In addition, we recognize gains from the sale of company-operated restaurants
to franchisees, which are presented as a reduction of operating costs and expenses in the accompanying consolidated statements of
earnings.
The quick-service restaurant industry is complex and challenging. Challenges currently facing the sector include higher levels of
consumer expectations, intense competition with respect to market share, restaurant locations, labor, menu and product development,
changes in the economy, including the current recessionary environment, significant promotional and discounting activity in the QSR
and casual dining segments of the industry, costs of commodities and trends for healthier eating. In light of these challenges, we were able
to grow earnings in fiscal 2009 due in large part to the successful execution of strategic initiatives, such as refranchising, new unit growth
and improving our cost structure.
The following summarizes the most significant events occurring in fiscal 2009:
• Earnings from Continuing Operations per Diluted Share. Earnings per diluted share of $2.27 in fiscal 2009 represented an
increase of more than 14% over fiscal 2008.
• Restaurant Sales. The recessionary environment negatively impacted discretionary spending and sales throughout the restaurant
industry. Sales at Jack in the Box company-operated restaurants open more than one year (“same-store sales”) decreased 1.2% in
fiscal 2009 versus an increase of 0.2% in 2008. System same-store sales at Qdoba decreased 2.3% versus an increase of 1.6%
last fiscal year.
• Restaurant Operating Margin. Our consolidated restaurant operating margin improved to 16.2%, despite the deleverage in
same-store sales.
• Commodity Costs. Pressures from higher commodity costs have impacted our business. However, as expected, commodity
costs moderated in 2009, increasing approximately 2.0% over last year, as higher costs for bakery, potatoes and beef were
partially offset by lower cheese and dairy. In 2009, food and packaging costs decreased 100 basis points compared with 2008
when such costs increased 150 basis points over the prior year.
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