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Monday, Sep 26, 2022

Jack in the Box Won’t Sell, to Pursue Securitization

Jack in the Box, the San Diego-based fast food chain, announced on May 15 that it has decided not to sell the company to new owners. Instead it will pursue a securitization strategy, refinancing and restructuring its existing loans.

Jack in the Box operates 2,255 quick-service restaurants. Photo courtesy of Jack in the Box Inc.

This concludes the company’s search for strategic and financing alternatives, the business said in a news release.

The company’s board of directors, management team and legal and financial advisers met with potential buyers and explored various financial alternatives. In the end, the company concluded that implementing a new capital structure was the best option for driving shareholder value at this point.

Jack in the Box (Nasdaq: JACK) plans to replace its existing credit facility, which includes a term loan and a revolving credit facility, with the securitization. It plans to use the proceeds to repay its existing credit facility, repay costs associated with the refinancing and return cash to shareholders, among other uses.

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“With this evaluation behind us, we are dedicated to moving the Jack in the Box brand forward,” said David Goebel, lead director of the board, via a statement. “The board of directors unanimously and wholeheartedly supports Chairman and Chief Executive Officer Lenny Comma and the entire management team as we collectively pursue a strategic plan focused on value creation as a standalone company.”

Once the securitization is complete, Jack in the Box intends to resume share repurchases through open market transactions and/or an accelerated share repurchase program, with a target leverage ratio of approximately 5.0 times EBITDA, or earnings before interest, taxes, depreciation and amortization.

The press release also states Jack in the Box expects systemwide sales of approximately $4 billion in fiscal 2022, adjusted EBITDA growing to approximately $300 million in fiscal 2022, and to return more than $1 billion to shareholders beginning in the fourth quarter of fiscal 2018 through fiscal 2022, in the form of share repurchases and dividends.

In a separate release, Jack in the Box reported earnings from continuing operations were $25.1 million, or 96 cents per diluted share, for the second quarter of fiscal 2019. Earnings for Q2 of fiscal 2018 were $25 million and $0.85 per diluted share in 2018. Operating earnings per share were 99 cents in the second quarter of fiscal 2019, compared with 80 cents the same quarter the year prior. Adjusted EBITDA was $61.2 million in Q2 of fiscal 2019, up from $60.3 million from the same quarter last year. Additionally, Jack in the Box same store sales increased two-tenths of a percent for the quarter.

“Our greater emphasis on bundled value in the second quarter resulted in a sequential improvement in traffic and sales without sacrificing restaurant margins,” Comma said in a statement. “Our long-term goals are centered around meeting evolving consumer needs, with emphasis on improving operations consistency and targeted investments designed to maximize our returns. We remain focused on balancing the interests of all our stakeholders, including our franchisees, customers, employees and shareholders.”

Jack in the Box has more than 2,200 restaurants in 21 states and Guam.

Travel & hospitality reporter Mariel Concepcion can be reached at mconcepcion@sdbj.com or 858-634-4625.


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