Exhibit 99.1
Jack in the Box Inc. Reports Increase in Third-Quarter Earnings;
Raises Guidance for FY2004
SAN DIEGO--(BUSINESS WIRE)--Aug. 4, 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 net earnings of $21.6
million, or 58 cents per diluted share, in the third quarter ended
July 4, 2004, compared with approximately 53 cents forecast and $19.8
million, or 54 cents per diluted share, in the same quarter a year
ago. Through the first three quarters of fiscal 2004, net earnings
were $56.8 million, or $1.55 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 net earnings were $62.5 million, or $1.70 per
diluted share, versus $57.3 million, or $1.54 per diluted share, for
the first three quarters of fiscal 2003.
The 5-cent increase over third-quarter EPS guidance is primarily
attributed to improved earnings from operations related to higher
sales, continued control of restaurant payroll and fixed costs,
slightly higher gains on sale of company restaurants to franchisees
due to a timing difference on such sales in the fourth quarter, and
lower interest expense, partially offset by higher SG&A for additional
pension accruals.
Same-store sales at Jack in the Box restaurants increased 3.9
percent in the quarter compared with a 0.2 percent decrease in last
year's third quarter. Year to date, same-store sales increased 4.8
percent compared with a decrease of 2.4 percent in fiscal 2003.
"Sales of premium products, including Pannidos(TM) and Jack's
Ultimate Salads(TM), remain strong and were primarily responsible for
the higher increases in same-store sales," said Robert J. Nugent,
chairman and chief executive officer.
The company also announced today its earnings guidance for the
13-week fourth quarter ending Oct. 3, in which it expects to earn
approximately 49 cents per diluted share compared with 45 cents in
fiscal 2003. Based on its higher third-quarter earnings, and
reflecting continued increases in average shares outstanding, the
company raised its EPS guidance for the 53-week fiscal 2004 to $2.03.
Excluding the first-quarter charge of 15 cents per share related to
the refinancing, Jack in the Box now estimates 2004 fiscal-year EPS
will be approximately $2.18 versus $1.99 in 2003.
During the third quarter, Jack in the Box added two premium items
to its menu: a Greek Salad and Southwest Chicken Pita. Four additional
menu items are slated for introduction in the fourth quarter: Natural
Cut Fries, which debuted at most restaurants on July 12; two
1950s-style premium sandwiches called Sourdough Melts, one featuring a
jumbo beef patty and the other a chicken fillet, which will roll out
next week; and a new ice cream shake, Chocolate Malted Crunch, which
will be introduced concurrently with the Sourdough Melts.
"The new additions to our menu continue to reflect the first step
of our brand-reinvention strategy -- to improve food quality," Nugent
said. "We are also following through with our other brand-reinvention
initiatives, including improvements to guest service and our
restaurant facilities, as well as the test of our new fast-casual
concept called JBX(TM)."
With respect to JBX, the company continues to test the concept at
two locations in San Diego, and it remains on schedule to expand the
test to selected restaurants in two additional markets by calendar
year end: Bakersfield, Calif. and Boise, Idaho. This phase is intended
to evaluate the opportunity to generate incremental sales by
attracting new customers to JBX, as well as benefit from the transfer
of sales to nearby Jack in the Box restaurants. The test will be
expanded to a fourth market, which will be identified later this year.
Jack in the Box opened 13 new company restaurants during the
quarter, as forecast. At quarter end, the company operated 1,553 Jack
in the Box restaurants versus 1,534 a year ago. Total Jack in the Box
units in operation, including company-operated and franchised
restaurants, were 1,987 versus 1,920 in 2003.
Qdoba opened 12 new company and franchised restaurants during the
third quarter, bringing its total units in operation to 150, and the
chain remained on track to produce a high single-digit same-store
sales increase for the year, on top of a double-digit increase in
2003.
Total systemwide restaurants in operation, which include all
company and franchised restaurants for Jack in the Box and Qdoba, were
2,137 at the end of the third quarter compared with 2,018 in 2003. The
company operated 1,597 of those locations at the end of the third
quarter versus 1,563 a year ago. Sales from company-operated
restaurants were $470.6 million in the quarter compared with $444.0
million in 2003, an increase of 6 percent. Year-to-date sales from
company-operated restaurants were $1.5 billion versus $1.4 billion in
2003.
The company's Quick Stuff(R) convenience-store concept continued
to perform to expectations and, including four new sites opened during
the third quarter, had 25 locations operating at quarter end versus 13
last year. Qdoba, Quick Stuff and JBX operations are not material
components of the company's consolidated financial results or
projections.
Distribution and other sales were $49.6 million in the third
quarter versus $25.9 million last year, primarily due to an increase
in the number of new Quick Stuff sites, higher fuel sales, and
additional distribution sales to franchisees. Year to date,
distribution and other sales were $132.7 million compared with $78.4
million last year, an increase of 69 percent.
Other revenues in the quarter were $6.6 million, slightly higher
than forecast, primarily from the sale of 12 Jack in the Box
restaurants to franchisees, compared with $6.9 million, primarily from
14 restaurant sales in last year's third quarter. Year to date, other
revenues totaled $19.0 million, primarily from 38 restaurant sales,
compared with $25.4 million, from the sale of 28 restaurants, a year
ago. Since September 2002, when Jack in the Box announced its strategy
to expand franchising activities, the company has sold 74 locations to
franchisees, and franchisees have opened 5 new restaurants as well.
Additionally, the company said there continues to be considerable
interest from outside the Jack in the Box system in new franchise
development opportunities.
Total revenues in the quarter increased nearly 11 percent versus
last year, to $541 million, and totaled $1.7 billion year to date
versus $1.6 billion in 2003.
Restaurant operating margin in the third quarter was 18.0 percent
of sales versus 17.4 percent forecast and 16.5 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 poultry, pork and dairy. As a
percentage of sales, total food and packaging costs in the quarter
were lower than last year, however, due to start-up costs associated
with the company's introduction of its entree salad line in 2003.
Year-to-date restaurant operating margin was 17.2 percent of sales
compared with 16.6 percent last year.
Costs of revenues were 81.6 percent in the third quarter compared
with 82.0 percent forecast and 82.3 percent a year ago, primarily due
to improved restaurant operating margin, partially offset by
additional fuel and distribution sales at lower margins. Year to date,
costs of revenues were 82.1 percent versus 81.9 percent in 2003,
primarily due to lower gains on sale of company restaurants. 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 83.0 percent versus 83.2 percent in 2003.
SG&A expense rate in the quarter was 11.3 percent of revenues, as
forecast, compared with 10.6 percent in 2003, and year to date was
11.3 percent compared with 11.1 percent a year ago. SG&A costs were
approximately $1 million higher than forecast in the quarter, which is
primarily attributed to higher pension expense resulting predominantly
from lower-than-anticipated employee turnover, as determined by the
company's annual actuarial review of its qualified pension plans.
Earnings from operations were $38.1 million and
depreciation/amortization was $18.5 million in the third quarter,
compared with $34.8 million and $16.3 million, respectively, in 2003.
Year to date, earnings from operations were $113.9 million and
depreciation/amortization was $59.8 million, compared with $109.3
million and $53.5 million, respectively, in 2003.
Interest expense in the third quarter was $3.8 million versus $5.5
million last year, due to lower interest rates associated with the
company's recent refinancing. Year to date, interest expense was $23.7
million compared with $19.6 million in 2003. Excluding the
first-quarter charge of $9.2 million related to the refinancing, year-
to-date interest expense was $14.5 million.
Income tax rate was 37 percent in the third quarter compared with
32.5 percent in 2003, which resulted from the favorable resolution of
a tax matter last year. Income tax rate was 37 percent year to date
versus 36.2 percent in 2003, for the same reason.
Capital expenditures in the third quarter were $25 million versus
$35 million forecast and approximately $31 million a year ago. The
lower amount versus forecast is primarily related to timing of
expenditures for brand-reinvention test markets and new restaurant
openings. Year to date, capital expenditures were approximately $94
million compared with approximately $81 million in 2003.
Highlights from the company's third-quarter balance sheet:
-- Current ratio was 0.9 versus 0.6 last year, primarily due to
an increase in cash and in assets held for sale/leaseback. In
the second quarter, the company exercised its option to
purchase 80 Jack in the Box leased restaurant properties, and
during the third quarter it sold and leased back 67 of these
locations at more favorable rates.
-- During the third quarter, the company elected to contribute
$13 million to its qualified pension plans from available cash
on hand. The additional funding was determined based on an
annual actuarial review of the plans. The company currently
anticipates that its qualified pension plans' accumulated
benefit obligation will be fully funded at fiscal year end, as
a result of the additional contribution.
-- Debt:equity ratio was 0.6:1, the same as last year. During the
third quarter, the company amended the $275 million term-loan
portion of its credit facility to achieve an approximate
50-basis-point reduction in its borrowing rate over the loan
term. Fees paid in association with the repricing were
customary for such arrangements of this type and were not
material.
-- Accounts receivable decreased $6 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 $21 million higher than last year,
primarily due to the repurchase of properties for
sale/leaseback, as mentioned above.
-- Current liabilities were $37 million higher than last year,
primarily related to increased current maturities of debt and
accruals for workers' compensation insurance, incentive
compensation, and advertising costs.
-- Total debt increased $4 million, primarily due to an increase
in capital lease obligations for restaurant POS equipment. At
quarter end, the company had no borrowings against its $200
million revolving credit facility.
-- Other long-term liabilities increased $28 million compared
with last year, primarily due to increases in pension
obligations, deferred taxes and rent accruals.
-- Stockholders' equity was $63 million higher than last year, as
increases to retained earnings were offset in part by a
pension liability adjustment at the end of fiscal 2003,
primarily related to a decrease in the discount rate used to
present-value these obligations.
Fourth-quarter and FY 2004 Guidance
The primary assumptions on which fourth-quarter and fiscal 2004
earnings guidance is based are as follows, in approximate amounts:
-- The opening of 21 new Jack in the Box restaurants compared
with 27 in the fourth quarter of 2003. For the full year, the
company now expects to open approximately 60 new restaurants
versus 65 originally forecast for 2004, primarily due to
short-term construction delays that will cause these units to
open early in fiscal 2005. These deferred openings include two
Quick Stuff sites, resulting in 13 new locations in fiscal
2004 versus 15 originally forecast.
-- The opening of approximately 67 company and franchised Qdoba
restaurants in fiscal 2004, 11 fewer than prior guidance due
to short-term construction and landlord development delays.
Qdoba is expected to end fiscal 2004 with approximately 178
restaurants compared with 111 in fiscal 2003. Qdoba's increase
in same-store sales is estimated to be in the high single
digits for 2004, and the chain is expected to be marginally
dilutive to Jack in the Box earnings this year, primarily due
to higher commodity costs for beef, dairy, poultry and
avocados, as well as slightly higher occupancy costs.
-- A 2.2 percent to 2.6 percent increase in Jack in the Box
same-store sales compared with a 0.9 percent increase in the
fourth 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.
-- Approximately $55 million in distribution and other sales
versus $30 million in the fourth quarter of last year, due to
increased distribution to Qdoba and Jack in the Box franchised
restaurants, additional Quick Stuff units and higher fuel
sales. Increases in other sales reflect higher retail prices
per gallon of fuel, with accompanying higher costs of sales,
resulting in stable penny profits.
-- Approximately $5 million in other revenues compared with
approximately $6 million in 2003, primarily related to the
sale of 11 Jack in the Box restaurants to franchisees versus 8
in the fourth quarter last year. For the full year, other
revenues are expected to be $24 million, from the sale of
approximately 49 restaurants, versus $31 million, from the
sale of 36 restaurants last year, with the variance in gains
due to differences in the sales and cash flows of the
restaurants being sold.
-- Approximately $575 million in total revenues versus $493
million in the fourth quarter of last year.
-- Costs of revenues at approximately 82.8 percent, the same as
the fourth quarter of 2003. For the full year, costs of
revenues are expected to be 82.3 percent, as previously
forecast, versus 82.7 percent originally forecast for 2004 and
82.1 percent last year, primarily due to lower gains on sale,
which were partially offset by higher restaurant operating
margin.
-- Restaurant operating margin at 16.9 percent of sales for the
fourth quarter versus 16.1 percent originally forecast for
2004 and 15.8 percent in 2003, due to lower costs for food,
labor, insurance and occupancy, partially offset by higher
incentive accruals and other restaurant operating costs. For
the full year, restaurant operating margin is expected to be
at 17.1 percent of sales versus 16.4 percent originally
forecast for 2004 and 16.4 percent in 2003.
-- SG&A expense rate at 11.4 percent of revenues for the fourth
quarter compared with 11.6 percent originally forecast for
2004 and 10.9 percent in the fourth quarter of 2003, due
primarily to higher costs related to pension, JBX market tests
and incentive accruals, partially offset by leverage from
higher sales. For the full year, SG&A expense rate is expected
to be 11.3 percent of revenues, as previously forecast,
compared with 11.7 percent originally forecast for 2004 and
11.1 percent in 2003, due to the reasons noted above.
-- Interest expense is expected to be approximately $28 million
for the full year, or approximately $18.8 million excluding
the $9.2 million first-quarter charge related to the company's
refinancing, compared with $24.8 million last year. The
decrease, after excluding the first-quarter charge, is
primarily related to lower interest rates associated with the
debt refinancing and subsequent repricing.
-- Income tax rate of 37 percent versus 36.2 percent in the
fourth 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 37.9 million for the
fourth quarter versus 36.6 million in 2003. For the full year,
weighted average shares outstanding are estimated at 37
million, the same as last year.
-- Capital expenditures of $41 million to $46 million compared
with $41 million in 2003. For the full year, capital
expenditures are expected to be $135 million to $140 million,
lower than previously forecast due to rescheduling the JBX
market tests from the fourth quarter of fiscal 2004 to the
first quarter of fiscal 2005, as previously disclosed, as well
as savings on new store development.
-- Earnings from operations of $33 million and
depreciation/amortization of approximately $20 million in the
fourth quarter of 2004 versus $31 million and $17 million,
respectively in the fourth quarter of 2003. For the full year,
earnings from operations and depreciation/amortization are
expected to be $147 million and $80 million, respectively,
versus $140 million and $70 million, respectively, in 2003.
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. For the same reasons, the
company also provides non-GAAP measures of interest expense, excluding
the first-quarter charge.
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 33 states combined.
Jack in the Box is the nation's first major drive-thru hamburger
chain, with nearly 2,000 restaurants. Qdoba Mexican Grill is an
emerging leader in fast-casual dining, with approximately 150
restaurants. Based in San Diego, Jack in the Box Inc. has nearly
46,000 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 operating income and earnings and
related assumptions; projected or potential improvements to guest
service and restaurant facilities; sales at Jack in the Box, JBX and
Qdoba restaurants; revenues; pension and other accruals; anticipated
pension funding levels; expenses and costs, including costs for
remodels, food, labor, insurance, interest, incentives,
depreciation/amortization and occupancy; margins; new products;
brand-reinvention testing; computer-based training; potential
reductions in training costs and turnover; growth plans; franchising
strategy; gains from and number of sales of company restaurants to
franchisees; 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, utilities and
labor, including potential increases in the minimum wage; higher
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 sales of Jack in the Box
restaurants to franchisees; adverse regional weather conditions and
business, economic and other local or national conditions or events
that affect consumer confidence and spending patterns, such as
concerns about the safety of beef or other foods, job security,
increases in the unemployment rate or elevated gas prices; 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 August 4, 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 Ended Forty Weeks Ended
------------------ ----------------------
July 4, July 6, July 4, July 6,
2004 2003 2004 2003
------------------ ----------------------
Revenues:
Restaurant sales $470,621 $443,990 $1,528,042 $1,421,695
Distribution and other
sales 49,575 25,927 132,740 78,351
Franchise rents and
royalties 14,402 11,803 48,654 39,799
Other 6,614 6,854 18,962 25,411
--------- --------- --------- ---------
541,212 488,574 1,728,398 1,565,256
--------- --------- --------- ---------
Costs of revenues:
Restaurant costs of sales 145,601 140,088 473,447 436,832
Restaurant operating costs 240,488 230,593 792,122 748,914
Costs of distribution and
other sales 48,532 25,282 130,287 76,562
Franchised restaurant costs 7,265 6,157 23,449 19,402
--------- --------- --------- ---------
441,886 402,120 1,419,305 1,281,710
--------- --------- --------- ---------
Selling, general and
administrative 61,245 51,629 195,147 174,211
--------- --------- --------- ---------
Earnings from operations 38,081 34,825 113,946 109,335
Interest expense 3,757 5,538 23,730 19,599
--------- -------- --------- ---------
Earnings before income taxes 34,324 29,287 90,216 89,736
Income taxes 12,700 9,515 33,380 32,485
--------- --------- ---------- ---------
Net earnings $21,624 $19,772 $56,836 $57,251
========= ========= ========== =========
Earnings per share:
Basic $.60 $.55 $1.57 $1.56
Diluted $.58 $.54 $1.55 $1.54
Weighted-average shares
outstanding:
Basic 36,291 36,007 36,139 36,608
Diluted 37,254 36,559 36,737 37,082
JACK IN THE BOX INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
July 4, July 6,
2004 2003
- ----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $87,486 $10,328
Accounts receivable, net 25,820 31,827
Inventories 36,608 32,404
Other current assets 66,535 45,646
---------- ---------
Total current assets 216,449 120,205
---------- ---------
Property and equipment, net 883,128 857,457
Other assets, net 163,228 158,816
---------- ---------
TOTAL $1,262,805 $1,136,478
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $8,470 $2,604
Other current liabilities 245,134 213,593
---------- ---------
Total current liabilities 253,604 216,197
---------- ---------
Long-term debt, net of current maturities 298,669 300,835
Other long-term liabilities 175,385 147,653
---------- ---------
Total liabilities 727,658 664,685
---------- ---------
Stockholders' equity 535,147 471,793
---------- ----------
TOTAL $1,262,805 $1,136,478
========== ==========
CONTACT: Jack in the Box Inc.
Division Vice President, Corporate Communications
Brian Luscomb, 858-571-2229
brian.luscomb@jackinthebox.com