Jack In The Box 2014 Annual Report Download - page 30

Gains (losses) on the sale of company-operated restaurants to franchisees, net are detailed in the following table (dollars in thousands):
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Number of restaurants sold to franchisees
37
81
97
Gains (losses) on the sale of company-operated restaurants
$ (1,692)
$ 4,640
$ 29,145
Loss on the anticipated sale of a Jack in the Box market
(1,856)
—
—
Total gains (losses) on the sale of company-operated restaurants
$ (3,548)
$ 4,640
$ 29,145
Gains and losses are impacted by the number of restaurants sold and changes in average gains or losses recognized, which relate to specific sales and cash
flows of those restaurants. In 2014, 2013 and 2012, gains (losses) on the sale of company-operated restaurants include additional gains of $2.1 million, $3.3
million and $2.3 million, respectively, recognized upon the extension of the underlying franchise and lease agreements related to Jack in the Box restaurants
sold in previous years. In 2014, the loss on the anticipated sale of a Jack in the Box market relates to 25 company-operated restaurants of which we expect to
sell 20 and close five in 2015.
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Interest expense, net is comprised of the following (in thousands):
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Interest expense
$ 16,531
$ 16,471
$ 20,953
Interest income
(853)
(1,220)
(2,079)
Interest expense, net
$ 15,678
$ 15,251
$ 18,874
In 2014, interest expense, net increased $0.4 million compared with a year ago due to a decrease in interest income attributable to a decline in notes
receivable related to refranchising transactions. Interest expense remained fairly consistent versus the prior year as higher average borrowings and an increase
in interest costs associated with lease commitments were offset by the impact of lower interest rates. Both 2014 and 2013 include the write-off of deferred
finance fees of $0.8 million and $0.9 million, respectively, recorded in connection with refinancing of our credit facility in each year. The decrease in 2013
versus 2012 primarily relates to lower average borrowings and interest rates, offset in part by the write-off of deferred financing fees in 2013.
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The income tax provisions reflect effective tax rates of 35.3%, 32.8% and 33.2% of pretax earnings from continuing operations in 2014, 2013 and 2012,
respectively. In 2014, the major components of the year-over-year change in tax rates were a decrease in tax credits related to the expiration of the Work
Opportunity Tax Credit offset by the release of a valuation allowance on California tax credits due to a change in state tax law, and a decrease in the market
performance of insurance products used to fund certain non-qualified retirement plans which are excluded from taxable income. The tax rate decrease in 2013
versus 2012 relates to the market performance of our insurance products coupled with the impact of work opportunity tax credits.
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Earnings from continuing operations were $94.8 million, or $2.26 per diluted share, in 2014; $82.6 million, or $1.84 per diluted share, in 2013; and $68.1
million, or $1.52 per diluted share, in 2012.
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As described in Note 2, Discontinued Operations, in the notes to our consolidated financial statements, the losses from our distribution business and the
2013 Qdoba Closures have been reported as discontinued operations for all periods presented.
Losses from discontinued operations net of tax, are as follows for each discontinued operation in each year (in thousands):
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Distribution business
$ (790)
$ (3,974)
$ (5,321)
2013 Qdoba Closures
(5,104)
(27,482)
(5,132)
$ (5,894)
$ (31,456)
$ (10,453)
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