Jack in the Box Inc. (JACK) posted fiscal 2010 second-quarter earnings of 32 cents per share after the closing bell on Wednesday. The company’s earnings came in behind both the Zacks Consensus Estimate of 40 cents per share as well as the year-ago result of 52 cents. The worse-than-expected result was primarily caused by sluggish sales and higher overheads.
 
San Diego-based Jack in the Box is a restaurant company that operates and franchises more than 2,200 Jack in the Box quick-service restaurants across 18 states. The company, through a wholly owned subsidiary, also operates and franchises Qdoba Mexican Grill fast-casual dining chain, with more than 500 restaurants in 43 states and the District of Columbia.
 
During the quarter, Jack in the Box recorded an 8.4% decline in total revenue to $529.7 million from $578.4 million in the prior year quarter. The decrease was primarily caused by a 17.1% year-over-year decrease in restaurant sales to $388.3 million mainly due to the company’s strategy to sell company-owned restaurants to franchisees. However, overall revenues were partially offset by a 34.5% growth in distribution revenue to $90.8 million and 18.8% increase in franchised restaurant revenues to $50.6 million.
 
Jack in the Box’s gross profit from restaurant sales declined 23.7% to $59.0 million, while gross margin dipped 130 basis points (bps) to 15.2%. The decline was mainly attributable to the deleveraging impact of lower sales on occupancy and payroll expenses. Distribution costs increased 35.6% to $90.9 million, while franchised restaurant costs rose 31.6% to $23.1 million. Accordingly, operating income plunged 41.3% year over year to $31.2 million, while operating margin decreased by 330 bps to 5.9%.
 
 At the end of the quarter, Jack in the Box had cash and cash equivalents of $12.5 million and long-term debt of $348.4 million, compared to $11 million of cash and $451.3 million of long-term debt in the year-ago period. During the first-half of fiscal 2010, the company generated $24.5 million of cash from operations and received $313 million from borrowings and $19.1 million from the sale of company-owned restaurants. The company also deployed $42.6 million towards capital expenditure and $339.0 million towards debt repayments over the same period.
 
Looking ahead, Jack in the Box reiterated earnings guidance of $1.85 to $2.05 per share during fiscal 2010. The company also plans to open 45 to 50 new Jack in the Box restaurants and 30 to 40 new Qdoba outlets stated and incur capital expenditure of $125 million to $135 million in the current fiscal. The Zacks Consensus Estimate for fiscal 2010 is currently pegged at $1.95 per share, which remained constant over the past 2 months. However, the most accurate estimate is more bullish at $2.05 per share, indicating a potential upside of 5.1% over the Zacks Consensus Estimate.
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