EXHIBIT 99.1
Jack in the Box Inc. Reports 20 Percent Increase in Second-Quarter
Earnings; Raises Guidance for Third Quarter and FY 2004
Business Editors
SAN DIEGO--(BUSINESS WIRE)--May 12, 2004--Jack in the Box Inc.
(NYSE: JBX), operator and franchisor of Jack in the Box(R) and Qdoba
Mexican Grill(R) restaurants, today reported earnings of $19.6
million, or 53 cents per diluted share, in the second quarter ended
April 11, 2004, compared with approximately 43 cents forecast and with
$16.3 million, or 44 cents per diluted share, in the same quarter a
year ago. For the first half of the 53-week fiscal 2004, earnings were
$35.2 million, or 96 cents per diluted share, including a pretax
charge to interest expense of $9.2 million -- $5.7 million after tax,
or 15 cents per diluted share -- for costs related to refinancing the
company's credit facility in January. Excluding the first-quarter
charge, year-to-date earnings were $40.9 million, or $1.11 per diluted
share, versus $37.5 million, or $1.00 per diluted share, in the first
half of 2003.
The 10-cent increase over second-quarter EPS guidance can be
summarized as follows: 4 cents from improved operating income related
to higher sales at company-operated and franchised restaurants; 5
cents from cost leverage on increased sales and Profit Improvement
Program initiatives, which contributed to savings in both restaurant
operating costs and SG&A expenses; and 1 cent from lower-than-expected
commodity costs, primarily beef. Beef prices have moderated, but were
approximately 6 percent higher than last year's second quarter and
about 13 percent higher year to date.
Same-store sales at Jack in the Box restaurants increased 8.2
percent in the quarter compared with a 4.3 percent decrease in last
year's second quarter. Year to date, same-stores sales increased 5.2
percent compared with a decrease of 3.3 percent in fiscal 2003.
"Sales of new products, including the three Pannido(TM) sandwiches
we introduced in February, have been especially strong and contributed
to our highest increase in same-store sales in 18 quarters," said
Robert J. Nugent, chairman and chief executive officer. "Additionally,
we experienced exceptionally strong profit flow-through on our
increased sales, due to factors which include lower-than-expected food
costs resulting from a favorable shift in menu mix and reduced
reliance on discounting, excellent control of labor costs, and
improved leverage on fixed operating and G&A costs from higher sales."
The company also announced today its earnings guidance for the
third quarter ending July 4, in which it expects to earn approximately
53 cents per diluted share compared with 54 cents in fiscal 2003.
Earnings per share are expected to be lower in the quarter due to
higher SG&A, as originally forecast, as well as lower gains on
restaurant conversions, and a lower income tax rate in the third
quarter of 2003. Additionally, the company increased its earnings
guidance for fiscal 2004 to approximately $1.99 per diluted share
versus $1.68 originally forecast, primarily due to the results
achieved in the first half of fiscal 2004, plus ongoing interest
expense savings from the company's January 2004 refinancing. Excluding
the first-quarter charge of 15 cents per share related to the
refinancing, Jack in the Box estimates 2004 fiscal-year earnings per
diluted share to be approximately $2.14 versus $1.99 in 2003.
In addition to the Pannidos, Nugent said Jack in the Box is also
seeing continued demand for its line of entree salads, which now
includes a Greek Salad that was rolled out in most markets earlier
this month. Next week, the company will add a new, low-fat premium
product to its menu, the Southwest Chicken Pita. Additional new menu
items, some scheduled for introduction later this year, are in various
stages of development at the company's new 70,000-square-foot
Innovation Center, which opened in March next to the company's San
Diego headquarters.
During the second quarter, Jack in the Box opened two completely
remodeled restaurants in San Diego where the company is testing its
brand-reinvention initiative. Along with an entirely different
restaurant design and brand name, the new fast-casual concept called
JBX(TM) offers a significantly upgraded menu and higher level of guest
service. These two restaurants are serving as "learning labs" to
determine which elements of brand reinvention are successful and will
be carried forward and which ones won't.
The company will expand the test to selected restaurants in two
additional markets by calendar year end: Bakersfield, Calif., and
Boise, Idaho. This test phase is intended to evaluate the opportunity
to generate incremental sales by attracting new customers to JBX as
well as benefiting from the transfer of sales to non-converted Jack in
the Box restaurants. Expansion into Bakersfield and Boise has been
moved back approximately three months to more fully incorporate and
refine the learnings from the San Diego market. The company is
planning to expand the test in 2005 to a fourth market, which will be
identified later this year.
The company expects that the tests of brand reinvention will not
have a material impact on its operating results for some period of
time. As such, and also for competitive reasons, it does not plan to
publish separate financial performance results of brand reinvention
until it determines such reporting is appropriate. The company may,
from time to time, publish directional comments on brand reinvention,
such as consumer reactions, location of test markets, and
modifications to strategy, if any, that may arise from the company's
learnings.
"The JBX fast-casual concept has attracted a lot of interest, and
the reaction of our guests has been very positive," Nugent said. "We
will carefully evaluate the results of our market tests before
determining how best to expand the positive elements of brand
reinvention in our system."
Jack in the Box opened 14 new company restaurants during the
quarter, as forecast. At quarter end, the company operated 1,552 Jack
in the Box restaurants versus 1,527 a year ago. Total units in
operation, including company-operated and franchised restaurants, were
1,973 versus 1,897 in 2003.
Qdoba opened seven new company and franchised restaurants during
the second quarter, bringing its total units in operation to 138, and
the chain remained on track to produce a strong, single-digit
same-store sales increase for the year.
Total systemwide restaurants in operation, which include company
and franchised restaurants, were 2,111 at the end of the second
quarter compared to 1,989 in 2003. The company operated 1,594
locations at the end of the second quarter and 1,556 a year ago. Sales
from company-operated restaurants were $459.7 million in the quarter
compared to $418.3 million in 2003, an increase of 9.9 percent.
Year-to-date sales from company-operated restaurants were $1.1 billion
versus $977.7 million in 2003.
The company's Quick Stuff(R) convenience-store concept continued
to perform to expectations and, including three new sites opened
during the second quarter, had 21 locations operating at quarter end.
Qdoba and Quick Stuff operations are not material components of the
company's consolidated financial results or projections.
Distribution and other sales were $39.5 million in the second
quarter versus $24.3 million last year, primarily due to an increase
in the number of new Quick Stuff convenience-store sites, higher fuel
sales and additional distribution sales to franchisees. Year to date,
distribution and other sales were $83.2 million compared with $52.4
million last year.
Other revenues in the quarter were $5 million, as forecast,
primarily from the conversion of seven Jack in the Box restaurants to
franchises, compared with $10.3 million from five conversions in last
year's second quarter. Year to date, other revenues totaled $12.3
million, primarily from 26 conversions, compared with $18.6 million,
from 14 conversions, a year ago.
Total revenues in the quarter increased 11.6 percent versus last
year, to $517.3 million, and totaled $1.2 billion year to date versus
$1.1 billion in 2003.
Restaurant operating margin in the second quarter was 17.8 percent
of sales versus 17.1 percent forecast and 16.4 percent last year,
primarily due to continued Profit Improvement Program initiatives, and
labor and fixed-cost leverage from higher sales, partially offset by
higher commodity costs, particularly beef. Beef costs were
approximately 6 percent higher than last year in the quarter and about
13 percent higher year to date. Year-to-date restaurant operating
margin was 16.8 percent of sales compared with 16.6 percent last year.
Costs of revenues were 82.0 percent in the second quarter compared
with 82.7 percent forecast and 81.9 percent a year ago, primarily due
to lower gains from franchise conversions plus additional distribution
and fuel sales at higher costs, which offset improvements in
restaurant operating margin. Year to date, costs of revenues were 82.3
percent versus 81.7 percent in 2003, primarily for the same reasons.
Excluding other revenues, as stated above, which are primarily gains
and fees from sales of restaurants to franchisees, year-to-date costs
of revenues were 83.2 percent versus 83.1 percent in 2003.
SG&A expense rate in the quarter was 11.3 percent of revenues
compared with 11.2 percent in 2003, and year to date was 11.3 percent
compared with 11.4 percent a year ago. The company had forecast an
SG&A expense rate of 11.7 percent for the second quarter due to
expected cost increases for pension, brand reinvention market tests,
incentive accruals and Innovation Center relocation, and attributes
the lower actual rate primarily to leverage from higher sales and
continued efforts from its Profit Improvement Program.
Earnings from operations were $34.8 million and
depreciation/amortization was $18.0 million in the second quarter,
compared with $32.1 million and $16.1 million, respectively, in 2003.
Year to date, earnings from operations were $75.9 million and
depreciation/amortization was $41.2 million, compared with $74.5
million and $37.2 million, respectively, in 2003.
Interest expense in the second quarter was $4.1 million versus
$5.8 million last year, with the decrease primarily due to lower
interest rates associated with the company's recent refinancing.
Year-to-date, interest expense was $20.0 million compared with $14.1
million in 2003. Excluding the first-quarter charge of $9.2 million
related to the refinancing, year to date interest expense was $10.8
million.
Income tax rate was 36.2 percent in the second quarter compared
with 38.0 percent in 2003, reflecting a lower annualized tax rate for
the full year. Income tax rate was 37.0 percent year to date versus
38.0 percent in 2003. The reduction in the estimated tax rate for
fiscal year 2004 is primarily the result of the company's ongoing
tax-planning initiatives.
Capital expenditures in the second quarter were $38.4 million
versus $22 million to $24 million forecast and $27 million a year ago.
The higher expenditures relate primarily to a recent decision to
finance the new Innovation Center out of the company's new credit
facility instead of through a sale/leaseback transaction. Year to
date, capital expenditures were $69.2 million compared with $49.2
million in 2003.
Highlights from the company's second-quarter balance sheet
include:
-- Current ratio was 0.8 versus 0.5 last year, primarily due to
an increase in assets held for sale/leaseback. The company
elected to exercise its option to purchase approximately 80
Jack in the Box leased restaurant properties and plans to
resell and lease back these sites at more favorable rates.
-- Debt:equity ratio was 0.6:1 compared with 0.7:1 last year due
to increases in net earnings.
-- Accounts receivable decreased $2.5 million from a year ago,
primarily due to collections on short-term loans made to
qualified franchisees for temporary refinancing of restaurant
purchases from the company.
-- Other current assets were $111 million higher than last year,
primarily due to the repurchase of properties for
sale/leaseback, as mentioned above.
-- Current liabilities were $54 million higher than last year,
primarily related to increased current maturities of debt,
accruals for workers' compensation insurance, incentive
compensation, and sales taxes.
-- Total debt increased $11.3 million, primarily due to an
increase in capital lease obligations for restaurant POS
equipment. At quarter end, the company had $5 million
outstanding under its $200 million revolving credit facility.
-- Other long-term liabilities increased $35 million compared
with last year, primarily due to increases in pension
obligations, deferred taxes and rent accruals.
-- Stockholders' equity was $56 million higher than last year, as
increases to retained earnings were offset in part by a
pension liability adjustment, primarily related to a decrease
in the discount rate used to present-value these obligations.
Third-quarter and FY 2004 Guidance
The primary assumptions on which third-quarter and fiscal 2004
earnings guidance is based are as follows, in approximate amounts:
-- The opening of 13 new Jack in the Box restaurants compared
with 21 in the third quarter of 2003. For the full year, the
company still expects to open 65 new restaurants.
-- The opening of approximately 78 company and franchised Qdoba
restaurants in fiscal 2004, 30 fewer than originally forecast.
A higher percentage of new units will now be franchised to
improve operating margins and returns on capital, as well as
to sustain manageable growth rates of high-quality sites over
time. Qdoba's increase in same-store sales is estimated to be
in the high single digits for 2004, and the chain is now
expected to be marginally dilutive to Jack in the Box earnings
this year, primarily due to higher commodity costs for beef,
cheese, chicken and avocados, as well as slightly higher
occupancy costs.
-- A 3.0 to 3.5 percent increase in Jack in the Box same-store
sales compared with a 0.2 percent decrease in the third
quarter of fiscal 2003, due to new product introductions and
promotions in 2004. For the full year, same-store sales are
expected to increase 4.0 to 4.5 percent.
-- $44 million in distribution and other sales versus $26 million
in the third quarter of last year, due to increased
distribution to Qdoba and Jack in the Box franchised
restaurants and higher Quick Stuff fuel sales.
-- Approximately $6 million in other revenues compared with
approximately $7 million in 2003, primarily related to 12 Jack
in the Box restaurant conversions to franchises versus 14 in
the third quarter last year. For the full year, other revenues
are expected to be $24 million versus $31 million last year,
from 50 conversions versus 40 originally forecast, due to
increased numbers of packaged sales to franchisees.
-- $532 million in total revenues versus $489 million in the
third quarter of last year.
-- Costs of revenues at 82.0 percent compared with 82.3 percent
in the third quarter of 2003, due primarily to improved food
costs and leverage on payroll and fixed costs from higher
sales, partially offset by higher equipment depreciation,
lower gains on sale, and higher maintenance costs. For the
full year, costs of revenues are expected to be 82.3 percent
versus 82.7 percent originally forecast and 82.1 percent last
year, primarily due to lower gains on sale, partially offset
by higher restaurant operating margin.
-- Restaurant operating margin at 17.4 percent of sales for the
third quarter versus 17.1 percent originally forecast and 16.5
percent in 2003, due to lower costs for food, labor and
occupancy, partially offset by higher restaurant operating
costs. For the full year, restaurant operating margin is
expected to be at 16.9 percent of sales versus 16.4 percent
originally forecast and 16.4 percent in 2003.
-- SG&A expense rate at 11.3 percent of revenues compared with
11.7 percent originally forecast and 10.6 percent in the third
quarter of 2003, due primarily to higher costs related to
pension, brand reinvention market tests, incentive accruals
and Innovation Center relocation, partially offset by leverage
from higher sales. For the full year, SG&A expense rate is
expected to be 11.3 percent of revenues compared with 11.7
percent originally forecast and 11.1 percent in 2003, due to
the reasons noted above.
-- Interest expense is expected to be approximately $20 million
for the full year, excluding the $9.2 million first-quarter
charge related to the company's refinancing, compared with
$24.8 million last year. The decrease is primarily related to
lower interest rates associated with the refinancing.
-- Income tax rate of 37 percent versus 32.5 percent in the third
quarter of fiscal 2003, due to resolution of significantly
favorable tax matters last year. Income tax rate for fiscal
year 2004 is expected to be 37 percent, and is expected to
return to its normal rate of 38 percent in fiscal 2005,
excluding any other significant tax-planning initiatives.
-- Weighted average shares outstanding of 37 million versus 36.6
million in 2003.
-- Capital expenditures of approximately $35 million compared
with $31 million in 2003. For the full year, capital
expenditures are expected to be approximately $155 million, $5
million higher than originally forecast due to the Innovation
Center financing, which is partially offset by savings on Jack
in the Box new store development and the opening of fewer
Qdoba company units.
-- Operating income of $35 million and depreciation/amortization
of approximately $18 million compared with $35 million and $16
million, respectively, in the third quarter of 2003. For the
year, operating income and depreciation/amortization are
expected to be $145 million and $80 million, respectively.
In this earnings release, the company provides both earnings per
diluted share determined in accordance with generally accepted
accounting principles (GAAP) and earnings per diluted share before a
first-quarter charge related to refinancing, which was recorded in
interest expense. This non-GAAP financial measure is used by
management to evaluate financial and operating performance. Management
does not consider the refinancing charge to be directly related to
operating results for the period. Use of this non-GAAP measure also
facilitates comparisons to prior period financial results and to the
results of the company's competitors. This financial measure is also
comparable to forecasts made by securities analysts and others, which
generally exclude special items, as they are difficult to predict in
advance. Non-GAAP measures are not intended to be a substitute for net
earnings determined in accordance with GAAP.
About Jack in the Box Inc.
Jack in the Box Inc. (NYSE: JBX) operates and franchises Jack in
the Box and Qdoba Mexican Grill restaurants in 32 states combined.
Jack in the Box is the nation's first major drive-thru hamburger
chain, with more than 1,970 restaurants. Qdoba Mexican Grill is an
emerging leader in fast-casual dining, with more than 130 restaurants.
Based in San Diego, Jack in the Box Inc. has more than 45,000
employees. For more information, visit www.jackinthebox.com.
Safe Harbor Statement
This news release contains forward-looking statements about, among
other items, the company's projected earnings and related assumptions,
and its projected or potential sales, revenues, accruals, expenses and
costs (including costs for remodels, food, labor, insurance,
incentives, depreciation/amortization, maintenance, occupancy and cost
of capital), margins, new products, brand reinvention testing, growth
plans, gains from and number of conversions of company restaurants to
franchises, capital expenditures, weighted average shares outstanding
and income tax rates. These forward-looking statements rely on a
number of assumptions and estimates that could be inaccurate and that
are subject to risks and uncertainties.
The following are some of the factors that could cause the
company's actual results to differ materially from those expressed in
the forward-looking statements: the company's ability to accurately
assess consumer desires and trends; operational and other initiatives
may not produce anticipated increases in sales, returns on investment
or improvements in service; costs may exceed projections; the impact
of competitive response, including pricing, competitor marketing and
operational initiatives and new products introduced by competitors;
the level of consumer demand for higher-quality and higher-priced
products; the availability and cost of food ingredients, labor and
utilities; increases in expenses related to pension liabilities,
workers' compensation and other insurance; the success of the
company's new products and the effect of product deletions; delays in
the remodeling or opening of restaurants, the availability of
financing on terms satisfactory to franchisees and potential
franchisees; timely payment of franchisee obligations due the company;
the attractiveness of the company's franchise offerings and
continuation of franchise conversions; adverse regional weather
conditions and business, economic and other local or national
conditions or events which affect consumer confidence and spending
patterns; the effects of war and terrorist activities; consumer
concerns about fast food in general or the company's products
specifically; the effect of any widespread negative publicity
regarding the company or the restaurant industry in general; changes
in government regulations; changes in accounting standards, policies
and practices; changes in effective tax rates; potential variances
between estimated and actual liabilities; the effects of legal claims;
and the possibility of unforeseen events affecting the industry in
general. Further information about factors that could affect the
company's financial and other results is included in its annual report
on Form 10-K and periodic reports on Forms 10-Q and 8-K filed with the
Securities and Exchange Commission. Statements about the company's
past performance are not necessarily indicative of its future results.
The information in this press release is as of May 12, 2004. The
company undertakes no obligation to update or revise any
forward-looking statement, whether as the result of new information,
future events or otherwise.
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Twelve Weeks Twenty-Eight Weeks
Ended Ended
---------------------------------------
April 11, April 13, April 11, April 13,
2004 2003 2004 2003
---------------------------------------
Revenues:
Restaurant sales $459,709 $418,272 $1,057,421 $977,703
Distribution and other sales 39,495 24,282 83,165 52,424
Franchise rents and royalties 13,035 10,496 34,252 27,997
Other 5,027 10,298 12,348 18,559
---------------------------------------
517,266 463,348 1,187,186 1,076,683
---------------------------------------
Costs of revenues:
Restaurant costs of sales 139,397 125,515 327,846 296,743
Restaurant operating costs 238,495 224,264 551,634 518,323
Costs of distribution and
other sales 38,848 23,789 81,755 51,281
Franchised restaurant costs 7,243 5,804 16,184 13,244
---------------------------------------
423,983 379,372 977,419 879,591
---------------------------------------
Selling, general and
administrative 58,490 51,854 133,902 122,582
---------------------------------------
Earnings from operations 34,793 32,122 75,865 74,510
Interest expense 4,074 5,802 19,973 14,061
---------------------------------------
Earnings before income taxes 30,719 26,320 55,892 60,449
Income taxes 11,114 10,001 20,680 22,970
---------------------------------------
Net earnings $19,605 $16,319 $35,212 $37,479
=======================================
Earnings per share:
Basic $.54 $.45 $.98 $1.02
Diluted $.53 $.44 $.96 $1.00
Weighted-average shares
outstanding:
Basic 36,115 36,399 36,077 36,866
Diluted 36,811 36,846 36,694 37,306
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 11, April 13,
2004 2003
- ----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $11,116 $8,242
Accounts receivable, net 28,236 30,748
Inventories 33,054 32,030
Other current assets 148,127 37,538
----------------------
Total current assets 220,533 108,558
----------------------
Property and equipment, net 881,257 846,041
Other assets, net 161,941 158,067
----------------------
TOTAL $1,263,731 $1,112,666
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $8,860 $2,519
Other current liabilities 263,008 215,128
----------------------
Total current liabilities 271,868 217,647
----------------------
Long-term debt, net of current maturities 303,928 298,989
Other long-term liabilities 179,709 144,239
----------------------
Total liabilities 755,505 660,875
----------------------
Stockholders' equity 508,226 451,791
----------------------
TOTAL $1,263,731 $1,112,666
======================
CONTACT: Jack in the Box Inc., San Diego
Brian Luscomb, Division Vice President, Corporate
Communications, 858-571-2229
brian.luscomb@jackinthebox.com