EPL Intermediate, Inc. Announces Results for the 13 Weeks and 39 Weeks Ended September 29, 2010

EPL Intermediate, Inc., parent company of El Pollo Loco, Inc., reported results for the 13-week third quarter and 39 weeks ended September 29, 2010.

El Pollo Loco reported total operating revenue for the 13-week third quarter ended September 29, 2010 of $68.2 million, which is a decrease of $0.3 million, or 0.4%, below total operating revenue for the 13-week quarter ended September 30, 2009 of $68.5 million. Total operating revenue includes sales at company-operated stores and franchise revenue.

The decrease in total operating revenue was primarily attributed to a 2.2% decrease in system-wide same-store sales for the 13-week third quarter of 2010 compared to the 13-week third quarter of 2009. Restaurants enter the comparable restaurant base for same-store sales the first full week after that restaurant’s 15-month anniversary.

Commenting on results for the third quarter of 2010, Steve Sather, acting president and CEO of El Pollo Loco, Inc. said, “Traffic frequency in our restaurants continues to be adversely affected by the challenging economy and high level of unemployment in our core markets, and in particular among Hispanics which are a key demographic for our brand. During the quarter, we had a limited time offer for our Queso Crunch Burrito, which we launched with a new twist-- a choice of flame-grilled chicken or steak, and our Double Your Chicken for $5 offer with the purchase of any 8, 10 or 12-piece meal. We believe that the key to driving sales in this challenging environment is to remain keenly focused on striking the right balance between value and check performance while continuing our system-wide focus on operational excellence and exceptional guest service.”

Operating income increased $0.2 million, or 3.3%, to $4.9 million for the 13 weeks ended September 29, 2010 from $4.7 million for the 13 weeks ended September 30, 2009. This increase in operating income was mainly due to lower restaurant asset impairment charges and a decrease in our product cost, which were partially offset by higher payroll and benefit costs.

Interest expense, net of interest income, increased $0.4 million, or 4.8%, to $9.5 million for the 13 weeks ended September 29, 2010 from $9.1 million for the 13 weeks ended September 30, 2009.

Despite having a loss for the 13 weeks ended September 29, 2010 and September 30, 2009, we had an income tax provision of $0.2 million and $0.3 million, respectively, primarily related to the effect of changes in our deferred taxes and the related effect of maintaining a full valuation allowance against certain of our deferred tax assets as of September 29, 2010.

As a result of the factors cited above, there was a net loss for the 13 weeks ended September 29, 2010 of $4.8 million compared to a net loss of $4.6 million for the 13 weeks ended September 30, 2009.

Total operating revenue for the 39 weeks ended September 29, 2010 was $207.4 million, which was a decrease of $4.4 million, or 2.1%, from total operating revenue for the 39 weeks ended September 30, 2009 of $211.8 million. The decrease was primarily due to a decrease in same-store sales of 4.7% for the system for the 39 weeks ended September 29, 2010 compared to the corresponding period of 2009.

Operating income increased $3.6 million, or 27.6%, to $16.5 million for the 39 weeks ended September 29, 2010 from $12.9 million for the same period of 2009. This increase in operating income was due primarily to a decrease in our product cost, lower legal settlements and lower restaurant asset impairment charges, which were partially offset by lower total operating revenue and an increase in our closed store reserve.

Despite having a loss for the 39 weeks ended September 29, 2010, we had an income tax provision of $1.0 million, primarily related to the effect of changes in our deferred taxes and the related effect of maintaining a full valuation allowance against certain of our deferred tax assets as of September 29, 2010. For the 39 weeks ended September 30, 2009, we had an income tax provision of $19.8 million as we recorded a valuation allowance against our deferred tax assets and the effect of changes in our deferred taxes.

As a result of the factors noted above, the company had a net loss for the 39 weeks ended September 29, 2010 of $12.5 million compared to a net loss of $30.4 million for the 39 weeks ended September 30, 2009.

Commenting on the remainder of 2010, Sather said, “With the economy continuing to negatively impact consumer spending, we are taking this time to align our entire team, company members and franchisees, around a sharpened focus on quality, service, and cleanliness as a platform to strengthen our position in the marketplace and set ourselves up for momentum when the economy turns around. We will also continue to strive to provide our guests value, while protecting profits, with new menu items that leverage our flame-grilling expertise; greater menu variety with both chicken and steak; our Loco Value Menu; and compelling family meal offers.”

El Pollo Loco’s restaurant count changes for the 13 weeks ended September 29, 2010 are as follows:

Addressing the Company’s development plans, Sather commented, “As we shared earlier this year, we expect to open fewer restaurants this year than last, due in part to the continued difficulty franchisees have securing financing in this tough environment and the impact that the challenging economy has had on our franchisees, several of whom have delayed or reduced the number of new restaurants they plan to open. During the third quarter of 2010, one new franchise restaurant opened in San Diego, CA and we closed one company restaurant in Sanger, CA. Since the end of the third quarter, one additional franchise restaurant opened in Rohnert Park, CA.

“We plan to open one more restaurant before the end of 2010, a company-operated restaurant in Anaheim, CA, which will reflect a lower investment cost and several new features to further enhance our guests’ experience.”

System-wide Sales

Included above is system-wide same-store sales information. System-wide same-store sales are a financial measure that includes sales at all company-owned stores and franchise-owned stores, as reported by franchisees. Management uses system-wide same-store sales information internally in connection with store development decisions, planning and budgeting analyses. Management believes system-wide same-store sales information is useful in assessing consumer acceptance of the Company’s brand and facilitates an understanding of financial performance as the Company’s franchisees pay royalties and contribute to advertising pools based on a percentage of their sales.

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