Jack in the Box holds steady on Q2 results; TransWestern trades as earnings motivate sellers

By Sara Rosenberg

New York, May 14 - Jack in the Box Inc.'s bank debt managed to hold steady at previous levels following the company's announcement of slightly weaker earnings and slightly weaker guidance since the market was pretty well prepared for the news, according to a trader. Meanwhile, some of TranWestern Publishing Co. LLC's bank debt has been trading recently, compared to the previous trend in which investors held on to the paper, after the company reported somewhat disappointing earnings numbers on Monday.

Jack in the Box's bank debt was quoted at par 3/8 bid, par 7/8 offered, unchanged on the day, the trader said.

"Earnings were a little weaker. Guidance was a little weaker. But they prepped the market for this," the trader explained.

For the second quarter, the company reported net earnings of $16.3 million, or 44 cents per diluted share, compared with $18.2 million, or 45 cents per share, for the same quarter last year. Year-to-date, earnings per share totaled $1.00 versus $1.12 in 2002. The company reaffirmed its earnings-per-share estimate for fiscal 2003 of approximately $1.97 to $2.01.

Same store sales decreased by 4.3%, compared with a 0.3% decrease last year, due to weak economic conditions in certain key markets, continued competitive discounting, poor weather and soft sales in markets impacted by the war. Year-to-date, same-store sales were down 3.3% compared with a 0.3% increase for the first half of fiscal 2002.

"We anticipated that competitor discounting and weak economic conditions, particularly in our western markets, would continue to impact sales for the near term, but unusually high fuel costs and the war in Iraq adversely affected sales as well," said Robert J. Nugent, chairman and chief executive officer, in a news release. "Despite these factors, Jack in the Box remains focused on the major elements of its strategic plan, including the development of higher-quality products that are unique to the quick-serve hamburger category."

Jack in the Box is a San Diego quick service restaurant franchise.

TransWestern's paper traded around par on Wednesday, down about ¼ to 3/8 of a point, according to a trader.

"Previous to the call there was a bid without an offering," the trader said. "The only thing the call did was loosen up a little bit of paper."

For the first quarter, revenues were $63 million, a decrease of $6 million over the first quarter of 2002. EBITDA was $14.8 million, a decrease of $5.1 million or 25.4% as compared to the same period in 2002. Net income for the quarter decreased $6.2 million, from income of $1.3 million in the first quarter of 2002 to a loss of $4.9 million in the same period in 2003.

Decreased revenue for the quarter was attributed to 22 directories that did not meet specific sales objectives in order to publish them in the first quarter. They had contributed $24.3 million in revenue in 2002.

TransWestern is a California-based independent telephone directory publisher.

In follow-up news, Affinity Group Inc.'s $175 million credit facility (Ba2/BB-) is now oversubscribed after a few "big tickets" came in on Tuesday night and on Wednesday, according to a syndicate source. The deal is scheduled to allocate on Friday.

The loan consists of a $35 million five-year revolver with an interest rate of Libor plus 350 basis points and a $140 million six-year term loan B with an interest rate of Libor plus 400 basis points.

FleetBoston and CIBC are the lead banks on the Englewood, Colo. direct marketing company's deal that will be used to repay existing bank debt, repurchase a portion of the notes at Affinity Group Holding, Inc. and fund a shareholder distribution.

Medex Inc. downsized its term loan B by $50 million after announcing that it upsized its bond offering b y $50 million to a new size of $200 million. The facility is expected to allocate and break for trading on Thursday.

The $125 million six-year term loan B (downsized from an original size of $175 million) is priced with an interest rate of Libor plus 400 basis points.

Also included in the facility (B1/B+) is a $25 million five-year revolver with an interest rate of Libor plus 350 basis points.

Wachovia and Lehman are the lead banks on the deal.

Proceeds will be used to help fund Medex and One Equity's leveraged buyout by of the Jelco peripheral IV catheter business of Johnson & Johnson.

Medex is a Dublin, Ohio seller of disposable and non-disposable critical care products.

However, Medex is not the only company to take advantage of the hot bond market. Rite Aid Corp. came to market with $150 million 9¼% senior notes due June 1, 2013 on Wednesday, with proceeds labeled for repaying a portion of the term loan under its senior credit facility and for general corporate purposes.

The Camp Hill, Pa. retail drugstore chain reduced the size of its revolver under the recently launched credit facility following this unexpected bond deal, according to market sources.

The $700 million revolver, downsized from $850 million, and the $1.15 billion term loan were also flexed down in price to Libor plus 350 basis points from Libor plus 375 basis points, sources added. Both tranches are due in April 2008.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint lead arrangers on the deal (B1/BB).

Proceeds will be used to repay the company's existing $1.37 billion senior secured credit facility due March 2005 and its $107 million synthetic lease due March 2005 and to replace the existing $500 million revolver, which is undrawn.

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