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(Bloomberg) — Privately owned fast-food chain Whataburger said earnings in the first quarter rose 10% from a year ago, even as concerns mount that higher energy costs will weigh on consumer spending and drag sales lower.
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Texas-based Whataburger, which is looking to raise a $2.72 billion term loan to refinance debt, shared the numbers with investors this week, according to people familiar with the matter.
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Whataburger reported earnings before interest, taxes, depreciation and amortization of $145 million for the first quarter, up from $132 million in the same period last year. It posted revenues of about $930 million, rising from roughly $900 million a year ago, the people said, asking not to be identified as the details are private.
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The company, known for its white and orange restaurants and hefty, 5-inch burgers, reported leverage of about five times earnings.
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S&P Global Ratings said it expects Whataburger’s same-store sales to decline in the near term, “as ongoing consumer budgetary pressures weigh on both its visitation frequency and average order size.” It also flagged elevated beef prices as a drag on margins. However, the ratings firm said a loyal customer base in Texas and a new cheaper menu should help comparable sales to “turn modestly positive” in the next two years.
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Loan Deal
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Whataburger, backed by BDT & MSD Partners, posted more than $60 million of free cash flow in the 12 months ended March 31, the people said. Representatives for Whataburger and BDT & MSD Partners declined to comment.
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BDT & MSD Partners bought a majority stake in the company in 2019 to help expand the fast-food chain, which opened its first location in 1950.
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The burger chain’s latest loan deal is being offered to investors at 2.75-3 percentage points above the Secured Overnight Financing Rate. This could decrease if the company reduces its overall leverage or conducts an initial public offering.
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Currently, Whataburger is paying 2.5 percentage points over the benchmark for its existing loan due in 2028. Lenders have until Thursday to commit to the new deal. S&P assigned a B rating – five notches below investment grade – to the business.
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The company will use the net proceeds of its debt raising to repurchase debt maturing in 2028 and to pay fees and expenses.
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