Jack In The Box 2014 Annual Report Download - page 29

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
The following table presents the change in selling, general and administrative (“SG&A”) expenses in each year compared with the prior year (in
thousands):



Advertising
$ (2,298)
$ (30)
Refranchising strategy
(362)
(2,005)
Incentive compensation
1,181
(1,357)
Cash surrender value of COLI policies, net
1,365
1,647
Pension and postretirement benefits
(17,386)
4,409
Pre-opening costs
(777)
(2,497)
Employee relocation
1,152
37
Other
3,272
(4,415)
$ (13,853)
$ (4,211)
Our refranchising strategy has resulted in a decrease in the number of Jack in the Box company-operated restaurants and the related overhead expenses to
manage and support those restaurants, including advertising costs, which are primarily contributions to our marketing funds determined as a percentage of
restaurant sales. As such, advertising costs decreased at Jack in the Box and were partially offset in 2014 and nearly offset in 2013 by higher advertising
expenses at Qdoba, as well as same-store sales growth at Jack in the Box and Qdoba restaurants.
In 2014, the higher level of incentive compensation reflects improvements in the Company’s results compared with performance goals, partially offset by
decreases in costs related to share-based compensation vesting. In 2013, incentive compensation declined due to a decrease in Qdoba’s results compared with
performance goals, and was partially offset by an increase in share-based compensation due primarily to changes in the attribution period over which certain
share-based compensation awards are recognized.
The cash surrender value of our Company-owned life insurance (“COLI”) policies, net of changes in our non-qualified deferred compensation obligation
supported by these policies, are subject to market fluctuations. The changes in market values had a positive impact of $3.2 million in 2014, $4.6 million in
2013 and $6.2 million in 2012.
In 2014 and 2013, the changes in pension and postretirement benefits principally relate to changes in the discount rates as compared with the respective
prior year.
In 2014 and 2013, pre-opening costs decreased primarily due to a decline in the number of new Jack in the Box company restaurants. Additionally, the
decrease in 2013 was attributable to higher pre-opening costs in 2012 associated with restaurant openings in new markets which did not recur in 2013.
The following table presents the components of impairment and other charges, net in each year (in thousands):



Impairment charges
$ 570
$ 3,874
$ 3,112
Losses on disposition of property and equipment, net
2,876
3,645
5,904
Costs of closed restaurants (primarily lease obligations) and other
2,841
2,469
8,332
Restructuring costs
8,621
3,451
15,461
$ 14,908
$ 13,439
$ 32,809
Impairment and other charges, net increased $1.5 million in 2014 versus 2013 due primarily to an increase in restructuring costs incurred in connection
with the comprehensive review of our organizational structure, partially offset by a decrease in impairment charges associated with closed or underperforming
Jack in the Box restaurants. In 2014, restructuring costs increased $5.2 million due to an impairment charge of $6.5 million related to a restaurant software
asset we no longer plan to place in service as a result of our efforts to integrate certain systems across both of our brands and lower costs. Losses recognized
on the disposition of property and equipment, net decreased slightly due to a decrease in restaurant enhancement activity which was partially offset by
income of $2.8 million from the resolution of four eminent domain matters involving Jack in the Box restaurants in 2013. In 2013, impairment and other
charges decreased $19.4 million versus 2012 due to a decrease in restructuring costs, a decline in lease obligation costs associated with closed restaurants and
the aforementioned eminent domain income in 2013. Restructuring costs in 2012 included charges for pension benefits and severance related to a voluntary
early retirement program offered by the Company.
27