Jack in the Box Inc. Remains on Course with Strategic Plan; Provides First-Quarter and FY2005 Guidance; Announces $35 Million Common Stock Repurchase Program
SAN DIEGO--(BUSINESS WIRE)--Sept. 15, 2004--Jack in the Box Inc. (NYSE:JBX) today announced that its board of directors affirmed the long-term goal of becoming a national restaurant company during last week's annual budget and strategic plan review. Since updating its two-part strategic plan a year ago, the company has made significant progress on both key aspects: a multifaceted growth strategy and reinvention of the Jack in the Box(R) brand.
"With experienced management teams focused on the operations of each of our brands, we are dedicated to becoming a national restaurant company, and we remain confident in our ability to increase the long-term value of the company," said Robert J. Nugent, chairman and CEO. "Our growth plan gives us the flexibility to expand our business through a variety of channels. Additionally, our commitment to increase franchising activities will help us improve operating margins and returns."
The company also today reaffirmed 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. For the 53-week fiscal 2004, the company expects to earn $2.03 per diluted share, or approximately $2.18 per share excluding a 15-cent first-quarter charge for costs related to refinancing the company's credit facility last January, compared with $1.99 in 2003.
Strategic Plan Update
The company's strategic vision for its portfolio of brands, comprised of Jack in the Box, JBX(TM), Quick Stuff(TM) and Qdoba Mexican Grill(R), is summarized as follows:
Jack in the Box is one of the nation's largest quick-serve hamburger chains, with systemwide total restaurants expected to top 2,000 in the current quarter.
-- Direction is to reinvent the Jack in the Box brand by upgrading its menu, guest service and restaurant facilities. New products, including Pannidos(TM) and Jack's Ultimate Salads(TM), have led to four consecutive quarters of same-store sales growth. Additional premium-quality products, created at the company's new 70,000-square-foot Innovation Center, are in various stages of test and development, as Jack in the Box leverages product quality and innovation to differentiate its menu from other quick-service chains. -- An ongoing strategy to optimize menu productivity and reduce reliance on discounting is expected to continue improving sales, margins, kitchen efficiency and guest service. -- To further enhance guest service, Jack in the Box has several initiatives in various stages of implementation, such as MasterCard, Visa and Discover card acceptance at all restaurants; computer-based training; and a more comprehensive program for evaluating customer service directly from the guests' perspective. -- A new benefits plan for crewmembers is expected to contribute to a higher and more consistent level of guest service while improving retention and reducing training costs. In addition to its longstanding practice of offering health care benefits to restaurant employees at the level of shift leader and above, beginning in fiscal 2005, the company will offer medical, dental and vision benefits to all crew-level employees and will subsidize a portion of the premiums based on tenure. -- Regarding the facility-upgrade component of its brand-reinvention initiative, in the first half of fiscal 2005, the company will begin testing new interior and exterior designs for its Jack in the Box restaurants. The company said it plans to reimage approximately 50 Jack in the Box restaurants in fiscal 2005 and approximately 200 restaurants each year thereafter, at a cost of approximately $100,000 per restaurant. -- Continued growth will result from a moderate increase in the number of new company and franchised restaurants, primarily in existing and contiguous markets, over the next few years. JBX is a new fast-casual concept designed to appeal to a broader customer base that seeks a better dining experience. JBX is still in the early stages of test at two locations in San Diego. -- Based on learnings gained since the JBX restaurants opened in March, along with extensive consumer research, the company plans to expand the test to Boise, Idaho, and Bakersfield, Calif., with approximately seven converted restaurants opening by calendar year end and two new units opening shortly thereafter. The company plans to add a fourth market, Dallas, to the test by the end of fiscal 2005. -- From its learnings, the company currently believes that approximately 10-15 percent of its chain may be converted to the new fast-casual concept over a five-year period. -- The company will continue to carefully evaluate the results of its JBX operations to determine the most prudent course for continued expansion, including the possible addition of end-cap prototypes in addition to traditional drive-thru facilities.
Franchising: The company will continue expanding its franchising activities for Jack in the Box, including the sale of certain company-operated restaurants to franchisees. It will also explore opportunities to franchise the JBX concept. Within five years, the company expects to increase the percentage of franchised Jack in the Box and JBX units to approximately 35 percent of its systemwide total from about 22 percent today.
Quick Stuff is the company's proprietary brand of convenience store and fuel station built adjacent to a full-size Jack in the Box restaurant. With solid unit economics and approximately 30 sites expected to be operating at the end of fiscal 2004, Quick Stuff has nearly doubled in size in the past year. Over the next five years, the company expects to accelerate growth of this unique, co-branded convenience-store concept, in both existing and contiguous markets.
Qdoba Mexican Grill is one of the nation's fastest growing fast-casual Mexican food chains, with 20 consecutive quarters of positive same-store sales and nearly 180 restaurants expected to be operating at the end of fiscal 2004. Qdoba is projected to continue its strong growth, primarily by increasing the number of franchise developers and locations.
JBX, Quick Stuff and Qdoba operations are not material components of the company's consolidated financial results or projections.
$35 Million Share-Repurchase Authorization
The company said today that its board of directors has authorized a $35 million program to repurchase shares of the company's common stock at prevailing market prices, in the open market or in private transactions, from time to time at management's discretion, until Oct. 2, 2005, the end of the company's next fiscal year. As of Aug. 9, 2004, the company had 36.8 million shares of common stock outstanding. Repurchases under the program are subject to bank approval, which the company expects to obtain. Such repurchases will be made using the company's own cash resources and are intended over time to offset the dilutive impact of stock options exercised and stock grants issued.
FY2005 and Q1 Guidance
The company also provided initial earnings guidance for first-quarter and fiscal year 2005. The company expects to earn approximately $2.43 per diluted share in fiscal 2005 compared with $2.03 forecast in fiscal 2004, or $2.17 excluding the first-quarter charge of 15 cents per share related to refinancing and a 1 cent per-share benefit from the 53rd week in fiscal 2004. For the first quarter, diluted earnings per share are expected to be 69 cents versus 43 cents last year, or 58 cents when excluding the 15-cent refinancing charge mentioned above.
The primary assumptions on which 2005 earnings guidance is based are as follows, in approximate amounts, with 2004 comparisons based on the company's latest guidance for the 53-week fiscal year:
-- The opening of 45-50 new Jack in the Box and JBX restaurants, including franchised units; 10-12 new Quick Stuff sites; and approximately 75 new company and franchised Qdoba restaurants. Qdoba is expected to be slightly accretive to earnings in fiscal 2005. -- A 2.5 percent to 3.0 percent increase in Jack in the Box same-store sales compared with a 4.0 to 4.5 percent increase in fiscal 2004. Same-store sales at Qdoba are expected to be in the mid-single-digit range on top of a high single-digit increase in 2004. -- Approximately $340 million in distribution and other sales versus $190 million in fiscal 2004, primarily due to significant increases in c-store unit growth and fuel sales at higher prices, along with growth in Jack in the Box and Qdoba franchisees served by Jack in the Box distribution centers. -- Approximately $27 million in other revenues compared with approximately $24 million in 2004, primarily related to the sale of 50 Jack in the Box restaurants to franchisees versus 49 in the prior year. -- Approximately $2.5 billion in total revenues versus $2.3 billion in the prior year. -- Restaurant operating margin at 17.5 percent of sales versus 17.1 percent in 2004, primarily due to lower food costs from price and mix favorability, as well as lower restaurant managed costs. -- Costs of revenues at approximately 82.7 percent compared with 82.3 percent in 2004, primarily due to the significant increase in distribution and other sales at low margins, which more than offsets the gain in restaurant operating margin. -- SG&A expense rate at 10.7 percent of revenues versus 11.3 percent in 2004, primarily due to additional leverage from increased distribution and other sales, as well as reduced G&A costs on a per-restaurant basis. -- Interest expense of $19 million versus $28 million for 2004, or approximately $19 million excluding the $9.2 million first-quarter charge related to the company's refinancing. -- Income tax rate of 38 percent compared with 37 percent in 2004. -- Weighted average shares outstanding of 37 million, compared with 37 million in the prior year. -- Capital expenditures of $125 million to $135 million versus $128 million to $133 million in 2004. -- Earnings from operations of $165 million and depreciation/amortization of approximately $82 million compared with $147 million and $80 million, respectively, in 2004. The primary assumptions upon which first-quarter guidance is based are as follows, in approximate amounts: -- The opening of 5-10 new Jack in the Box restaurants, including franchised units, compared with 13 in the first quarter of 2004, and 20-25 new Qdoba restaurants versus 20 in the first quarter of 2004. -- A 2.5 to 3.0 percent increase in Jack in the Box same-store sales compared with a 3.1 percent increase in the first quarter of 2004. As a reminder, the company will be rolling over a same-store sales increase of 8.2 percent in the second quarter of 2004. -- $96 million in distribution and other sales versus $44 million in the first quarter of 2004, primarily due to significant growth in the number of new c-store units and fuel sales at higher prices. -- $6 million in other revenues compared with $7 million in the first quarter of 2004, primarily related to the sale of 10-12 Jack in the Box restaurants to franchisees versus 19 in the first quarter of 2004. -- $745 million in total revenues versus $670 million in the first quarter of 2004. -- Restaurant operating margin at 16.9 percent of sales versus 16.1 percent in the first quarter of 2004, primarily due to lower food costs related to high beef prices in the first quarter of 2004, lower restaurant managed costs, and leverage on occupancy costs from higher sales and the sale and leaseback of 80 restaurants at more favorable rates in 2004. -- Costs of revenues at 83.0 percent compared with 82.6 percent in the first quarter of 2004, primarily due to the significant increase in distribution and other sales at low margins, which more than offsets the gain in restaurant operating margin. -- SG&A expense rate of 10.8 percent of revenues compared with 11.3 percent in the first quarter of 2004, primarily due to leverage from increases in distribution and other sales. -- Interest expense of $5.5 million versus $6.7 million in the first quarter of 2004, excluding costs related to the refinancing. -- Income tax rate of 38 percent, the same as in the first quarter of 2004. -- Weighted average shares outstanding of 37 million versus 36.6 million in the first quarter of 2004. -- Capital expenditures of $25 million to $30 million compared with $31 million in the first quarter of 2004. -- Earnings from operations of $46 million and depreciation/amortization of $25 million compared with $41.1 million and $23.2 million, respectively, in the first quarter of 2004.
In this news 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 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 more than 150 restaurants. Based in San Diego, Jack in the Box Inc. has nearly 46,000 employees. For more information, visit www.jackinthebox.com.
This news release contains forward-looking statements about, among other items, the company's strategies and goals, including the strategic plan and goals for each brand and their related impact on sales, expenditures and financial results; the ability to increase shareholder value and the long-term value of the company; projected operating income, earnings and related assumptions; growth plans; franchising strategies; potential improvements in operating margins and returns; the improvements which constitute the company's brand-reinvention strategy; plans for new, higher-quality products; differentiation of the Jack in the Box menu from other quick-serve menus; the effect of reduced levels of discounting; guest-service improvement initiatives; plans to offer medical, dental and vision benefits to crew-level employees and the projected impact on turnover and costs for recruitment and training; the impact of new designs and restaurant facilities on brand image; plans for and cost of re-imaging restaurants; testing of the JBX concept in fiscal year 2005 and potential conversion of certain Jack in the Box restaurants to JBX restaurants; sales at Jack in the Box, JBX and Qdoba restaurants and other sales, revenues, margins, expenses and costs, gains from and number of conversions of company restaurants to franchises; capital expenditures; weighted average shares outstanding and timing and intentions with respect to share repurchases; 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 to effectively differentiate its brands and menus among themselves and the competition; the inherent risk in expanding a new concept such as JBX that has not yet proved its long-term viability; the uncertainty whether test results of products or concepts are predictive of successful results on a larger scale; operational and other initiatives may not produce anticipated increases in sales, returns on investment or improvements in service; 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; costs may exceed projections, including the costs of new construction, brand-reinvention remodels at Jack in the Box restaurants and conversions of Jack in the Box restaurants to JBX; the cost of developing and marketing JBX as a new concept; the 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 potential for the loss of the company's new crew-level medical, dental and vision coverage program and the potential for significant increases in costs to the company and negative impact on the state economy should voters in California fail to repeal a law mandating employers to provide state-specified health insurance to all employees under state-defined terms and conditions; 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 company-operated restaurants to franchisees; the continuation of positive relationships with the company's franchisees, and the franchisees' continuing willingness to participate in company strategies; adverse regional weather conditions and business, economic and other local or national conditions or events which 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 obesity, 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 the company's annual report on Form 10-K and its 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 September 15, 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.
CONTACT: Jack in the Box Inc. Brian Luscomb, 858-571-2229 Division Vice President, Corporate Communications firstname.lastname@example.org SOURCE: Jack in the Box Inc.