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First Profit Since Fatal 1993 E. Coli Outbreak at Jack in the Box

August 2, 1995

SAN DIEGO (AP) _ Foodmaker Inc., the owner of the Jack in the Box fast-food chain, on Wednesday reported its first profit since a 1993 bacterial outbreak linked to its hamburgers killed three children and made at least 500 people sick in Washington state.

For the third quarter of its fiscal year, Foodmaker said it earned $2.6 million, or 7 cents a share, compared with a loss of $3.4 million, or 9 cents a share, in the same period a year ago. Revenue for the quarter ended July 9 rose 8.1 percent to $244.1 million from $225.8 million.

``We had a very good quarter ... primarily due to our new ad campaign,″ said Charles Duddles, chief financial officer of San Diego-based Foodmaker.

Late last year, the nation’s fifth-largest hamburger chain reintroduced ``Jack,″ the clown mascot that was blown up during a 1980 advertising campaign.

``Prior to 1980, we were really marketing to the kids, and we thought the clown was more identified with the kids,″ Duddles said. ``What we found is we adults like our childhood, too, in terms of the clown. They like him as he came back as an adult.″

Despite its new image, the company continues to deal with the aftermath of the January 1993 E. coli bacterial outbreak in Washington state. Authorities attributed the deaths and illnesses to undercooked hamburgers served by the chain.

Following the outbreak, Jack in the Box introduced a Hazard Analysis & Critical Control Points system, which includes a meat testing program and inspections that monitor each restaurant during every shift.

``We’re the only one that the USDA holds up as the model food safety program they’d like (other restaurants) to model after us,″ Duddles said.

The company’s last previous quarterly profit was announced just prior to the first news of the outbreak, said Foodmaster spokeswoman Karen Bachmann.

The company has settled about 70 lawsuits linked to the outbreak. Last year, 12-year-old Brianne Kiner of Seattle won a $15.6 million settlement after the bacterial infection left her with kidney, pancreatic and intestinal damage.

For the first three quarters of the fiscal year, losses widened to $72.8 million, or $1.88 a share, from $33.5 million, or 87 cents a share, in the same period a year earlier. Revenue fell 7.1 percent to $767.4 million from $826.1 million.

Jack in the Box restaurants are primarily located in the western and southwestern United States, as well as Hong Kong, Mexico and the Philippines.

At the end of the third quarter, San Diego-based Foodmaker owned 859 restaurants, compared with 785 a year ago. Franchisees operated 384 restaurants, compared with 411 a year ago.

The company said it expects to open about 25 restaurants this year, in addition to new franchises in Cairo, Jakarta, Manila and Shanghai.

The earnings report came out at the end of the trading day, and Foodmaker stock was down 3.7 percent, or 25 cents at $6.50 a share on the New York Stock Exchange.

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