020519 Jack in the Box Reports an 8.4% Increase Q2May 10, 2002San Diego, CA - Jack in the Box Inc., operator and franchiser of Jack in the Box restaurants, announced that net earnings for its second quarter ended April 14 increased 8.4 percent to $18.2 million compared with $16.8 million in the second quarter of fiscal 2001. Earnings per share were 45 cents, which was one cent higher than analysts' consensus estimates, and three cents higher than last year. Year-to-date, earnings per share were $1.12 versus $1.07 last year. Earnings results include adjustments for the adoption of SAB 101, which occurred in the fourth quarter of fiscal 2001. On a full-year basis, SAB 101 adjustments are expected to have an immaterial impact on operating results. Company restaurant sales grew 7.4 percent to $418.1 million compared with last year's second quarter. Total revenues grew 8.3 percent to $447.6 million. Year-to-date, sales increased 8.4 percent compared with fiscal 2001, and revenues improved 8.9 percent to $1.04 billion. Second quarter same-store sales at company restaurants declined .3 percent from last year, compared to a 4.1 percent increase last year. Same-store sales for period seven increased .4 percent on top of a 3.4 percent increase last year. Year-to-date, same-store sales have improved .3 percent on top of a 4.2 percent increase in the prior year. "I am pleased with our earnings because they continue to reflect management's ability to operate the business prudently through a difficult period without losing focus on current initiatives, while also developing new, long-term strategies," said Chairman and CEO Robert J. Nugent. "The company's new Profit Improvement Program has helped produce a second quarter gross profit rate of 18.7 percent and an SG&A expense rate of 11.1 percent, each .1 percent better than forecast. Additionally, I have confidence in our ability to renew our momentum with investments in strategic initiatives currently underway in quality, new product development and technology." During the second quarter, Jack in the Box introduced three new products, including Jack's Spicy Chicken Club sandwich, Spicy Cheddar Wedges and the Chocolate Banana Shake, all of which contributed to sales systemwide. In addition, the introduction of a new antenna ball promotion featuring the San Francisco Giants and Oakland A's baseball teams helped stimulate sales of premium Sourdough JackŪ combo meals in the Bay Area. During the third quarter, the company plans to roll out the antenna ball promotion with seven additional major league baseball teams from California to St. Louis. Also in the third quarter, Jack in the Box will re-emphasize its value menu and introduce its new Ultimate Berry Shake. A major new product quality improvement program scheduled for the fourth quarter is designed to enhance the company's sandwich products and will be supported by special advertising, Nugent noted. He added, "Jack in the Box continues to aggressively examine consumer trends to ensure that we remain competitive in our segment." The company reported that by fiscal year-end it would complete the rollout of a satellite system that improves information gathering and communications, while also providing a platform for future innovation. It is also rolling out a new, point-of-sale (POS) system that will help improve speed of service and guest interaction, as well as provide the technology to implement future loyalty programs and the use of credit/debit cards. Jack in the Box opened 20 new company restaurants in the second quarter, two more units than forecast. Also, as previously forecasted, the company converted six of its company restaurants to franchised stores compared with three a year ago, as part of its initial effort to selectively increase the use of franchising in its business model as it grows. At the end of the second quarter, there were 1,476 company restaurants and 341 franchised restaurants for a systemwide total of 1,817 restaurants, compared with 1,693 total units a year ago. The company estimates that its third-quarter earnings per share will be 57 cents compared with 53 cents in the third quarter last year. Guidance for fiscal 2002 earnings per share is now $2.27, versus $2.24 announced previously. The major assumptions upon which the third-quarter earnings estimates and comparisons are based include the following: * The opening of 22 new company restaurants, compared with 28 in the third quarter last year, after accelerating two units into quarter two, and ending the third quarter with 1,839 restaurants systemwide versus 1,721 a year ago. * Company restaurant sales of approximately $437 million, 7 percent higher than the third quarter of fiscal 2001. * Same-store sales improvement of approximately .4 percent on top of the 4.3 percent increase reported last year. * Other revenues of approximately $3.4 million vs. $2.3 million reported in the third quarter a year ago, primarily reflecting the conversion of four company restaurants to franchises, two more than last year and two more than planned as a result of opportunistic acceleration of two conversions from the fourth quarter. * For the balance of the year, the company currently expects to complete three conversions in the fourth quarter, reflecting the opportunistic acceleration of two conversions from the first quarter of fiscal 2003. For fiscal 2002, the company expects to complete approximately 16 conversions, about 1 percent of its total restaurant base, compared with a total of 13 last year. These conversions represent a majority of the approximately $15 million in other revenues estimated for the year, compared with $9.1 million last year. * Total revenues of approximately $470 million, 8 percent higher than last year's third quarter. * Gross profit rate of approximately 19.6 percent of revenues compared with 19.5 percent last year. * SG&A expense rate of approximately 10.8 percent of revenues versus 11.1 percent in the prior year, due primarily to the company's new Profit Improvement Program. * Earnings before interest and taxes (EBIT) of approximately $41.7 million compared with $36.7 million in last year's third quarter, up 13.6 percent. * Interest expense as a percent of revenues of approximately 1.1 percent versus 1.3 percent last year, due to lower levels of debt. * Earnings before taxes of approximately $36 million compared with $31 million in fiscal 2001. * Estimated income tax rate of approximately 36.5 percent versus 32.2 percent last year, due to one-time receipts of enterprise zone and franchise tax credits in fiscal 2001. * Net earnings of approximately $23 million compared with $21 million in the third quarter of fiscal 2001. * Weighted-average shares outstanding of approximately 40.5 million, up 1.9 percent from last year. * EBITDA of approximately $58 million versus $51.6 million last year. * Capital expenditures of approximately $40 million compared with $40.9 million in the third quarter a year ago. For the fourth quarter, the company currently expects its earnings per share to be approximately 58 cents compared with 52 cents in the prior year, primarily due to estimated improvements in revenues and gross profit margin.
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