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El Pollo Loco Holdings, Inc. Announces Second Quarter 2014 Financial Results

By: El Pollo Loco |  2 Shares     120 Reads

COSTA MESA, Calif. - September 04, 2014 - (BUSINESS WIRE) - El Pollo Loco Holdings, Inc. (Nasdaq:LOCO) today announced financial results for its second quarter ended June 25, 2014.

Highlights for the second quarter ended June 25, 2014, compared to the second quarter ended June 26, 2013 were as follows:

• Total revenue increased 6.3% to $86.9 million
• System-wide comparable restaurant sales increased 5.4%, including a 5.0% increase for company-operated restaurants, and a 5.9% increase for franchised restaurants
• Net income was $6.6 million, or $0.21 per diluted share, compared to $410,000, or $0.01 per diluted share
• Pro forma net income(1) increased 10.0% to $6.1 million, or $0.16 per diluted share, compared to $5.5 million, or $0.15 per diluted share
• Adjusted EBITDA(1) increased 7.6% to $16.6 million

(1) Pro forma net income and adjusted EBITDA are non-GAAP measures. A reconciliation of GAAP net income to each of these measures is included in the accompanying financial data. See also "Non-GAAP Financial Measures."

Steve Sather, President and Chief Executive Officer of El Pollo Loco Holdings, Inc., stated, "We’re pleased with the consistent strength of our results, which included a 5.4% increase in system-wide comparable restaurant sales and a 10.0% increase in pro forma net income in the second quarter. Our success continues to be driven by our compelling value proposition and the growing appeal of healthier, better for you offerings found on our menu. Our signature, citrus marinated fire grilled chicken and hand chopped entrees offered at quick service price points reinforce our QSR plus positioning."

Sather continued, "As a result of our successful IPO, we have strengthened our capital structure to provide the financial flexibility to accelerate the growth of our business, augment our competitive position, and further enhance our brand. We believe El Pollo Loco has significant potential to grow its store base, including a substantial opportunity within our existing markets, as well as in new markets. We are particularly excited to open our first restaurant in the Greater Houston market this fall and recently signed a new agreement for the development of 12 franchised restaurants in the Greater Houston market over the next five years. We believe El Pollo loco is well positioned for future growth and are excited to satisfy the needs of consumers who are increasingly seeking real food, real fast at reasonable prices, while simultaneously building value for our shareholders."

Initial Public Offering

On July 30, 2014, following the end of the second quarter of 2014, El Pollo Loco Holdings, Inc. successfully completed its initial public offering ("IPO") at $15.00 per share. The Company sold a total of 8,214,286 shares of common stock, including 1,071,429 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. Total net proceeds to the Company from the offering, after deducting underwriter discounts and commissions and estimated offering expenses, were approximately $112.8 million. The Company used the proceeds primarily to repay in whole its $100 million Second Lien Term Loan.

Second Quarter 2014 Financial Results

Company-operated restaurant revenue increased 6.3% to $81.4 million from $76.5 million in the second quarter of 2013. Comparable company-operated restaurant sales increased 5.0% driven by a 2.8% increase in average check size and a 2.2% increase in traffic.

Franchise revenue increased 6.5% to $5.5 million, from $5.2 million in the second quarter of 2013. Franchised comparable restaurant sales increased 5.9% during the quarter.

Restaurant contribution increased 6.7% to $18.4 million from $17.2 million in the second quarter of 2013. As a percent of company-operated restaurant revenue, restaurant contribution margin improved to 22.6%, compared to 22.5% in the prior year quarter. An improvement in labor costs, driven by leverage of comparable company-operated restaurant sales growth, was largely offset by an increase in cost of sales as a result of higher commodity costs combined with a slight increase in occupancy and other operating expenses.

Net income for the second quarter of 2014 was $6.6 million, or $0.21 per diluted share, compared to $410,000, or $0.01 per diluted share in the second quarter of 2013.

Pro forma net income increased 10.0% to $6.1 million, or $0.16 per diluted share during the second quarter of 2014, compared to $5.5 million, or $0.15 per diluted share during the second quarter of 2013. A reconciliation between GAAP net income and pro forma net income is included in the accompanying financial data.

2014 Outlook

The Company currently anticipates the following for its fiscal year 2014:

• System-wide comparable restaurant sales growth of approximately 5.5% to 6.0% including a 5.0% to 5.5% increase for company-operated restaurants;
• The opening of 9 to 11 new company-owned restaurants and 4 new franchised restaurants; and
• Restaurant contribution margin of 21.4% to 21.6%.

The following definitions apply to these terms as used in this release:

Comparable restaurant sales reflect the change in year-over-year sales for the comparable company, franchised and total system restaurant base. The comparable restaurant base is defined to include those restaurants open for 15 months or longer. At June 25, 2014, there were 163 restaurants, in our comparable company-operated restaurant base. At June 25, 2014, there were 228 restaurants, in our comparable franchised restaurant base.

Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP. Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses, which are food and paper costs, labor and related expenses and occupancy and other operating expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue. See also "Non-GAAP Financial Measures."

EBITDA and adjusted EBITDA are neither required by, nor presented in accordance with, GAAP. EBITDA represents net income before interest expense, provision for income taxes, depreciation, and amortization , and adjusted EBITDA represents EBITDA before items that we do not consider representative of our ongoing operating performance, as identified in the GAAP reconciliation in the accompanying financial data. See also "Non-GAAP Financial Measures."

Pro forma net income is neither required by, nor presented in accordance with, GAAP. Pro forma net income reflects (i) the net decrease in interest expense resulting from our repayment of our second lien term loan facility with the proceeds from our IPO and the reduction in interest resulting from our refinancing of our debt facilities in 2013, as if these events occurred on December 27, 2012 (ii) the elimination of fees payable under the management agreement between us and affiliates of our sponsors (iii) an estimate of recurring incremental legal, accounting, insurance and other compliance costs we expect to incur as a public company and the add-back of one-time costs incurred as a result of the IPO (iv) costs related to loss on disposal of assets and asset impairment and closed store costs and (v) provision for income taxes at a normalized tax rate of 40.5%, which reflects our estimated long-term effective tax rate, including both federal and state income taxes. See the GAAP reconciliation in the accompanying financial data and "Non-GAAP Financial Measures."

Pro forma weighted-average share and per share data reflects the 8,214,286 additional shares of common stock issued in the IPO as if they had been issued on December 27, 2012. See also "Non-GAAP Financial Measures."

Conference Call

The Company will host a conference call to discuss financial results for the second quarter of 2014 today at 5:00 PM Eastern Time. Steve Sather, President and Chief Executive Officer, Larry Roberts, Chief Financial Officer, and Ed Valle, Chief Marketing Officer will host the call.

The conference call can be accessed live over the phone by dialing 877-407-3982 or for international callers by dialing 201-493-6780. A replay will be available after the call and can be accessed by dialing 877-870-5176 or for international callers by dialing 858-384-5517; the passcode is 13589555. The replay will be available until Thursday, September 18, 2014. The conference call will also be webcast live from the Company's corporate website at investor.elpolloloco.com under the "Events & Presentations" page. An archive of the webcast will be available at the same location on the corporate website shortly after the call has concluded.

About El Pollo Loco

El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken in front of its customers. El Pollo Loco opened its first location on Alvarado Street in Los Angeles, California, in 1980 and has grown to more than 400 company-owned and franchised restaurants in Arizona, California, Nevada, Texas and Utah. The Company’s distinctive menu features its signature product – citrus-marinated fire-grilled chicken – and a variety of Mexican-inspired entrees that the Company and its franchisees create from that chicken.

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements because they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "outlook," "potential," "project," "projection," "plan," "intend," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. They appear in a number of places throughout this press release and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected.

While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed in our final prospectus dated July 24, 2014, including the sections thereof captioned "Special Note Regarding Forward-Looking Statements" and "Risk Factors." These filings and future filings are available online at www.sec.gov, www.elpolloloco.com or upon request from El Pollo Loco.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the ways that we expect. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures including those indicated above. These measures are not intended to be considered in isolation or as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. We use non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information about operating results, enhance understanding of past performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP measures used in this press release may be different from the measures used by other companies.

EL POLLO LOCO HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
		Thirteen Weeks Ended												Twenty-Six Weeks Ended
		June 25, 2014						June 26, 2013						June 25, 2014						June 26, 2013
			$		%				$		%				$		%				$		%
Revenue:
Restaurant revenue		$	81,358		93.6	%		$	76,520		93.6	%		$	157,571		93.6	%		$	148,589		93.6	%
Franchise revenue			5,546		6.4	%			5,207		6.4	%			10,760		6.4	%			10,133		6.4	%
Total revenue			86,904		100.0	%			81,727		100.0	%			168,331		100.0	%			158,722		100.0	%
Costs of operations:
Food and paper cost (1)			25,930		31.9	%			24,207		31.6	%			49,953		31.7	%			46,903		31.6	%
Labor and related expenses (1)			20,102		24.7	%			19,218		25.1	%			39,415		25.0	%			38,288		25.8	%
Occupancy and other operating expenses (1)			16,945		20.8	%			15,874		20.7	%			32,989		20.9	%			31,398		21.1	%
Company restaurant expenses (1)			62,977		77.4	%			59,299		77.5	%			122,357		77.7	%			116,589		78.5	%
General and administrative expenses			6,835		7.9	%			6,298		7.7	%			13,465		8.0	%			12,491		7.9	%
Franchise expenses			943		1.1	%			981		1.2	%			1,926		1.1	%			1,950		1.2	%
Depreciation and amortization			2,752		3.2	%			2,541		3.1	%			5,347		3.2	%			4,945		3.1	%
Loss on disposal of assets			215		0.2	%			391		0.5	%			491		0.3	%			581		0.4	%
Asset impairment and closed store reserves			340		0.4	%			36		0.0	%			393		0.2	%			101		0.1	%
Total expenses			74,062		85.2	%			69,546		85.1	%			143,979		85.5	%			136,657		86.1	%
Income from operations			12,842		14.8	%			12,181		14.9	%			24,352		14.5	%			22,065		13.9	%
Interest expense, net			5,703		6.6	%			9,800		12.0	%			11,326		6.7	%			19,580		12.3	%
Income before provision for income taxes			7,139		8.2	%			2,381		2.9	%			13,026		7.7	%			2,485		1.6	%
Provision for income taxes			(570	)	-0.7	%			(1,971	)	-2.4	%			(987	)	-0.6	%			(2,135	)	-1.3	%
Net Income		$	6,569		7.6	%		$	410		0.5	%		$	12,039		7.2	%		$	350		0.2	%
Net income per share:
Basic		$	0.23					$	0.01					$	0.42					$	0.01
Diluted		$	0.21					$	0.01					$	0.39					$	0.01
Wighted average shares used in
computing net income per share:
Basic			28,715,485						28,712,622						28,714,053						28,712,622
Diluted			30,596,998						28,999,093						30,595,565						28,999,093

(1) As a percentage of restaurant revenue.

EL POLLO LOCO HOLDINGS, INC.
UNAUDITED SELECTED BALANCE SHEETS AND SELECTED OPERATING DATA
(dollar amounts in thousands)
		As of
		June 25, 2014				December 25, 2013
Balance Sheet Data:
Cash and cash equivalents		$	27,134			$	17,015
Total assets			433,168				416,942
Total debt			288,346				289,242
Total liabilities			372,283				368,406
Total stockholder's equity			60,885				48,536
		Twenty-Six Weeks Ended
		June 25, 2014				June 26, 2013
Selected Operating Data:
Company-owned restaurants at end of period			168				167
Franchise restaurants at end of period			233				231
Company-owned:
Comparable restaurant sales			5.2	%			6.8	%
Units in the comparable base			164				162

 

EL POLLO LOCO HOLDINGS, INC.
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(dollar amounts in thousands)
		Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 25, 2014			June 26, 2013			June 25, 2014			June 26, 2013
Adjusted EBITDA:
Net income, as reported		$	6,569		$	410		$	12,039		$	350
Provision for income tax			570			1,971			987			2,135
Interest expense, net			5,703			9,800			11,326			19,580
Depreciation and amortization			2,752			2,541			5,347			4,945
EBITDA			15,594			14,722			29,699			27,010
Stock-based compensation expense			169			30			338			115
Management fees			134			169			292			324
Loss on disposal of assets			215			391			491			581
Impairments and closures			340			36			393			101
Pre-opening costs			103			43			211			147
Adjusted EBITDA		$	16,555		$	15,391		$	31,424		$	28,278

 

EL POLLO LOCO HOLDINGS, INC.
UNAUDITED RECONCILIATION OF NET INCOME TO PRO FORMA NET INCOME
(dollar amounts in thousands, except per share data)
		Thirteen Weeks Ended								Twenty-Six Weeks Ended
		June 25, 2014				June 26, 2013				June 25, 2014				June 26, 2013
Pro forma net income:
Net income, as reported		$	6,569			$	410			$	12,039			$	350
Provision for taxes, as reported			570				1,971				987				2,135
Interest expense, as reported			5,703				9,800				11,326				19,580
Pro forma interest expense			(3,108	)			(3,108	)			(6,135	)			(6,135	)
IPO costs			134				-				134				-
Ongoing public company costs			(365	)			(365	)			(816	)			(816	)
Management fees			125				125				250				250
Loss on Disposal of Assets			215				391				491				581
Asset Impairment and Closed Store Costs			340				36				393				101
Provision for income taxes			(4,124	)			(3,750	)			(7,561	)			(6,499	)
Pro forma net income		$	6,059				5,510				11,108				9,547
Pro forma weighted-average share and per share data:
Pro forma net income per share
Basic		$	0.16			$	0.15			$	0.30			$	0.26
Diluted		$	0.16			$	0.15			$	0.29			$	0.26
Wieghted-average shares used in computing pro forma net income per share
Basic			36,929,771				36,926,908				36,928,339				36,926,908
Diluted			38,811,284				37,213,379				38,809,851				37,213,379

Investor Contact:

Fitzhugh Taylor
ICR
714-599-5200
fitzhugh.taylor@icrinc.com

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