San Diego - Marking the 13th consecutive quarter of improved sales at its comparable Jack in the Box restaurants, Foodmaker Inc. reported second quarter earnings of $34.3 million, or 85 cents per share, on a diluted basis.
These results also reflect income from the settlement of litigation and a non-cash charge relating to various write-offs.
Without these unusual items, the company reported second quarter earnings of $8.7 million, or 22 cents per share on a diluted basis, an improvement of nearly 30 percent compared to the $6.7 million, or 17 cents per share, reported in the second quarter a year ago.
“Our marketing strategy focusing on core products continues to build a preference among consumers for our brand,” said Robert J. Nugent, Foodmaker's president and chief executive officer. “In addition, we are striving to maintain a competitive advantage by continually seeking ways to improve the overall restaurant experience with quality menu offerings and excellent service.”
Sales at company-operated restaurants grew 11.5 percent to $250 million in the second quarter compared to a year ago, while systemwide sales improved nearly 8 percent to $328 million. Total revenues, excluding the settlement, grew 7 percent to $264 million.
Per store average sales (PSA) at comparable company restaurants grew 2 percent on top of the 7.8 percent growth achieved in last year's second quarter, reflecting growth in both customer visits and average check amounts.
The company's restaurant operating margin of 18.2 percent of sales was about the same as last year's second quarter.
The company reported that beginning in September last year, it initiated a refinancing plan to reduce and restructure its debt. The recent $58.5 million settlement of the Hamburger Patty Cases, in which Foodmaker realized approximately $30 million after litigation costs and taxes, and excess cash generated by operations, have been used to reduce long-term debt by approximately $95 million from the levels in effect during most of fiscal 1997.
In addition, the company said that a new, five-year revolving bank credit facility of up to $175 million dollars, and the recently completed private offering of $125 million of 8-3/8 percent senior subordinated notes due in 2008, have been and will be used to repay higher interest rate debt. Utilizing these sources of funds, the company will have redeemed at various dates in the third quarter, $125 million of 9-1/4 percent senior notes, and another $125 million of 9-3/4 percent senior subordinated notes.
Foodmaker also reported that an extraordinary pre-tax charge of approximately $7 million relating to the prepayment of this debt will be incurred during the third quarter; however, these refinancing efforts will reduce interest expense by more than $10 million annually from 1997 levels.
During the quarter, Foodmaker announced the write-off of approximately $8 million as a pre-tax, non- cash charge to earnings principally resulting from the write-down of underperforming restaurants and asset write-offs associated with customer service enhancements.
Also during the quarter, Foodmaker continued its long-term strategy to improve the restaurant experience. For example, the company recently introduced a juicier burger patty, developed new menu boards that make product selection easier and faster, and is installing self-serve drink fountains.
The company proceeded with growth plans calling for 100 new company-operated Jack in the Box units by the end of the fiscal year. At the end of the second quarter, there were 1,002 company-operated restaurants, an increase of 107 from a year ago.
The company's plans are subject to risks and uncertainties that could cause actual results to differ materially. Risk factors relating to Foodmaker's business are described in the company's 10-K report.
Foodmaker operates and franchises 1,345 Jack in the Box restaurants, primarily in the West. With more than $1 billion in annual revenues, the company has 29,000 employees and is headquartered in San Diego.
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