020805 Jack in the Box Third Quarter Earnings Increase

San Diego, CA - Jack in the Box Inc., operator and franchiser of Jack in the Box restaurants, announced that net earnings for its third quarter ended July 7 increased 15% to $24.2 million, or 60 cents per share, compared with $21 million, or 53 cents per share, in the third quarter of fiscal 2001.

Year-to-date, net earnings have increased 8.9% to $69.1 million from $63.4 million last year, with earnings per share at $1.72 versus $1.60 a year ago.

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 5.2% to $428 million in the third quarter compared with last year. Year- to-date, company restaurant sales have increased 7.4% to $1.4 billion compared with fiscal 2001.

Total revenues for the quarter increased 6.1% to $461 million, and systemwide sales were $525 million, a 4.8% increase. Year-to-date revenues have increased 8% to $1.5 billion, with year-to-date systemwide sales increasing 6.4% to $1.7 billion.

Sales at company restaurants open more than a year decreased 1.5% compared with a 4.3% increase in last year's third quarter. Year-to-date, same-store sales have decreased 0.3% compared with a 4.2% increase in fiscal 2001.

"We experienced continued softness in our sales during the quarter due to significant competitive activity and to certain markets in the West where economic difficulties persist," said Chairman and CEO Robert J. Nugent. "We are disappointed in our sales results; however, we are pleased to report increased growth in earnings," he added. "Our efforts to selectively increase the use of franchising, as well as benefits from our new Profit Improvement Program, continue to help position Jack in the Box for improved, long-term operating results."

Jack in the Box opened 23 new company restaurants during the third quarter, one more than forecast, for a total of 1,493 Jack in the Box company restaurants versus 1,395 at the end of the third quarter last year. Total system restaurants at quarter end were 1,840 compared with 1,721 last year.

The company converted five restaurants to franchises in the third quarter. These conversions contributed a majority of the $4.7 million in other revenues as forecast, compared with $2.3 million in last year's third quarter. Year-to-date, the company has converted 14 company restaurants compared with six last year, which represents only 1% of its total current restaurant base. Other revenues have increased by $7.6 million year-to-date versus last year, primarily as a result of these conversions. While this increase accounts for all of the company's gains in operating income, the company's new Profit Improvement Program has also offset significant cost increases and has leveraged SG&A expense against soft sales throughout the year.

The company's gross profit rate in the third quarter was 20% of revenues compared with a 19.9% forecast, due to continued profit-improvement initiatives in restaurant operations. Restaurant operating margin was 19.4% of sales versus 19.1% in last year's third quarter.

Also during the quarter, SG&A expense rate was 11.1% of revenues versus 11% forecast, primarily due to reduced leverage from softer sales and to increases in insurance and legal costs.

In the last two periods of the fourth quarter, the company will introduce "Our Best Burgers Ever," an extensive quality-improvement program featuring significant changes to the primary sandwich line, including the use of distinctive new packaging. Said Nugent, "Our strategy is to distinguish ourselves among consumers by offering a standard of quality that differentiates Jack in the Box from other QSR competitors. We believe 'Our Best Burgers Ever' will increase our product quality and value perception in this fiercely competitive industry." Creative new advertising for "Our Best Burgers Ever" will begin the week of August 5.

Also during the fourth quarter,

* For the first time, Jack in the Box will offer three combo sizes. Larger drinks will now come in a branded, car-friendly collectible cup. "Our new combo strategy is intended to offer more choices to our customers and deliver additional value to them," Nugent said.

* The company will also introduce a new product, taquitos with real guacamole and sour cream. "Given the long-term success of our tacos and the increasing demand for Mexican-style food, we are confident that this new product will have great appeal with our guests," he added.

* Finally, the company is investing additional product marketing, consumer research and R&D resources to increase its focus on new products and further enhancements to existing products. "The quick-serve segment is rapidly evolving, and we intend to capitalize on our experience in offering a broad and varied menu to address the changing wants and needs of our customers," Nugent added.

Regarding guidance for the fourth quarter, the company continues to expect it will earn approximately 67 cents per diluted share versus 52 cents per diluted share last year, and $2.39 per share for the full year, compared with $2.11 per share in fiscal 2001. This earnings guidance is based on the following major assumptions and estimates:

* The opening of 22 new company restaurants compared with 40 in the fourth quarter last year. The company expects to end the year with 1,862 restaurants systemwide versus 1,762 last year.

* Company restaurant sales of approximately $435 million compared with $411 million in last year's fourth quarter.

* Though recent trends have been softer, the company currently expects its same-store sales to be approximately flat compared with a 3.8% increase last year. The company believes its major new initiatives, which will be implemented in the last two periods of the fourth quarter, will have a positive effect on sales.

* Other revenues of approximately $6.9 million versus $3.7 million in the fourth quarter of 2001, resulting from eight restaurant conversions to franchises versus seven last year, and three more than previously forecast, due to a large packaged sale to one franchisee. For the full year, the company expects to convert 22 restaurants compared with 13 in fiscal 2001.

* Total revenues of approximately $475 million, 7.4% higher than last year's fourth quarter.

* Gross profit rate of approximately 20.6% of revenues compared with 19.1% of revenues in 2001, as the result of additional conversions and lower food, packaging, labor and utility costs from Profit Improvement Program initiatives.

* SG&A expense rate of approximately 11.1% of revenues, slightly higher than prior forecast, due to higher pension and insurance costs, and to reduced leverage from softer sales.

* Earnings before interest and taxes of approximately $45 million compared with $37.1 million in the fourth quarter of 2001.

* Interest expense as a percent of revenues of approximately 1.1%, the same as last year.

* Earnings before taxes of approximately $40 million compared with $32.1 million in 2001.

* Estimated income tax rate of approximately 32.6% versus 35.7% in the fourth quarter of last year, due to the favorable resolution of a long-standing tax matter. For the full year, the company expects that its income tax rate will be approximately 34.5% versus 35.5% last year.

* Net earnings of approximately $27 million compared with $20.7 million in the fourth quarter of fiscal 2001.

* Weighted-average shares outstanding of approximately 40.1 million, the same as last year.

* EBITDA of approximately $61.8 million versus $52.3 million in 2001.

* Capital expenditures of approximately $76.8 million compared with $53.1 million in the fourth quarter a year ago, resulting from the company's decision to purchase some of its new restaurant properties instead of leasing them.

Effective in the fourth quarter, Jack in the Box will begin reporting its same-store sales quarterly instead of monthly. As the 2002 Investor Relations Magazine Best Corporate Governance Award winner, the company plans to be among the first to adopt regulations being proposed by the SEC and NYSE that call for additional depth, quality and certification of all public disclosures. These regulations, while deemed appropriate by the company and beneficial in general, require additional administrative time and resources to provide the expected levels of information. In addition, the company intends to meet the accelerated deadline for quarterly filings being proposed by the SEC. As a result, Jack in the Box now believes that all of its operating results are best communicated in the context of its quarterly earnings releases, financial guidance and related conference calls.

During this transition, Jack in the Box will provide a mid-quarter update of its performance for the fourth quarter only on September 10, 2002.

Following approval by the Board of Directors at its mid-September meeting, the company will announce the major components and direction of its new strategic plan. This announcement will include both a press release and conference call with senior management.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com