030304 Jack in the Box Earns $21.2M Quarter

San Diego, CA - Jack in the Box Inc., operator and franchiser of Jack in the Box restaurants and Qdoba Mexican Grill, announced net earnings of $21.2 million, or 56 cents per diluted share in the first quarter ended January 19, compared with 55 cents forecast and 67 cents in last year's first quarter.

Chairman and CEO Robert J. Nugent said, "While other chains are discounting aggressively to drive customer traffic, Jack in the Box remains committed to improving quality, value and service. During the quarter, we significantly increased the size of our regular hamburger patty and added four new products, including two with the new patty. Each of these products performed well despite the competitive environment."

New product introductions included the Chipotle Chicken Sandwich and Philly Cheesesteak Sandwich, as well as the value-priced Chili Cheeseburger and Jr. Bacon Cheeseburger.

"As we continue developing new products and marketing plans aimed at increasing sales, we're pleased with the progress we've made toward achieving our long-term goal of becoming a national restaurant company," Nugent said. "In January, Jack in the Box entered the fast-casual restaurant category by purchasing Qdoba Restaurant Corporation, operator and franchiser of Qdoba Mexican Grill. And we remain on pace to build eight new proprietary Quick Stuff® convenience stores adjacent to Jack in the Box restaurants in 2003. Experienced management teams are in place to guide these operations, both of which were profitable last year, so that we can focus our attention on improving our core business. Additionally, we're continuing with our plans to increase franchising on a disciplined, value-added basis."

First-quarter company restaurant sales were $559.4 million, compared with $552.5 million a year ago. Same-store sales decreased 2.6% from last year's first quarter due to continued aggressive price discounting by competitors and soft economic conditions, especially in the West where the majority of company restaurants are located.

Other revenues increased to $8.3 million versus $7.6 million forecast and $3.8 million in last year's first quarter, primarily related to the sale of nine company restaurants to franchisees compared with three last year. Total revenues increased to $613.3 million compared with $594.2 million last year.

Gross profit rate was 18.4% of revenues, slightly higher than forecast but down from 19.4% in 2002, primarily as a result of higher occupancy, insurance and POS-system upgrade costs, as well as to reduced leverage on fixed costs from lower same-store sales. Restaurant operating margin was 16.8% versus 18.3% in last year's first quarter.

SG&A expense rate was 11.5% of revenues, slightly higher than forecast and up from 11.1% last year, due to higher pension costs and to reduced leverage from lower same- store sales.

Jack in the Box opened 22 new company restaurants during the quarter, for a total of 1,515 units. Total systemwide units at January 19 were 1,880 compared with 1,797 units at quarter-end last year.

Guidance Update

The same factors cited for the decrease in first-quarter same-store sales are expected to contribute to a decrease of approximately 1.0 to 1.5% in same-store sales for fiscal 2003, compared with the company's previous forecast of flat sales. The company said that it expects savings realized from its Profit Improvement Program will offset the anticipated reduction in operating income resulting from the lower sales. However, interest expense for the year is now estimated to be approximately $3.1 million higher than previously forecast due to costs associated with the recent refinancing of the company's credit facility as well as its recent acquisition of Qdoba. Consequently, diluted earnings per share for fiscal 2003 are now estimated in the range of $1.97 to $2.01, compared with the company's previous estimate of $2.01 to $2.04. The company expects its 2003 capital expenditures to be approximately $155 million versus $181 million originally budgeted, as the company plans to lease a greater portion of its new stores rather than purchase them.

For the second quarter, the company estimates net earnings will total approximately $16 million, or 44 cents per diluted share, compared with $18.4 million, or 46 cents per diluted share last year. The major assumptions on which second-quarter estimates are based are as follows, after adjusting for adoption of FAS 142 -- which eliminates the amortization of indefinite life intangible assets -- and equalizing tax rates:

The opening of approximately 20 new company Jack in the Box restaurants, the same as last year's second quarter.

Same-store sales decline of approximately 2.3% to 2.7% versus the prior year, due to continued competitive discounting and soft economic conditions in certain key markets.

Other revenues of approximately $9 million versus $4.3 million last year, primarily resulting from the sale of five high-performing restaurants to franchisees.

Total revenues of approximately $468 million versus $447.6 million in the prior year.

Gross profit rate of approximately 18.1% of revenues compared to 18.9% in 2002, resulting from higher costs for insurance and occupancy, as well as reduced leverage on fixed costs from lower sales, partially offset by lower food costs and additional profit improvement initiatives.

SG&A expense rate of approximately 11.2% of revenues compared to 11.1% last year, due to higher pension costs as well as reduced leverage from lower sales, partially offset by continued profit improvement initiatives.

Interest expense as a percent of revenues of approximately 1.2%, the same as the prior year, including additional costs associated with the recent refinancing of the company's debt and the acquisition of Qdoba.

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