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El Pollo Loco Holdings, Inc. Announces Second Quarter 2016 Financial Results

/EIN News/ -- COSTA MESA, Calif., Aug. 04, 2016 (GLOBE NEWSWIRE) -- El Pollo Loco Holdings, Inc. (Nasdaq:LOCO) today announced financial results for the 13-week period ended June 29, 2016.

Highlights for the second quarter ended June 29, 2016, compared to the second quarter ended July 1, 2015 were as follows:

  • Total revenue increased 9.0% to $97.5 million compared to $89.5 million.
  • System-wide comparable restaurant sales grew 2.4%, including a 2.0% increase for company-operated restaurants, and a 2.7% increase for franchised restaurants.
  • Net income increased to $7.3 million, or $0.19 per diluted share, compared to $7.2 million, or $0.18 per diluted share in the prior year.
  • Pro forma net income(1) was $7.6 million, or $0.19 per diluted share, compared to $7.4 million, or $0.19 per diluted share. 
  • Adjusted EBITDA(1) was $17.9 million compared to $17.0 million in the prior year. 

(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, “Throughout the second quarter we continued to make progress executing on  the value, operational and service initiatives implemented during the past year. This is evident by our 20th consecutive quarter of system wide comparable restaurant sales growth, including traffic growth of 2.7% for company-operated restaurants. We are confident that we have the right strategy in place to continue delivering comparable restaurant sales.”

Sather continued, “Looking to the second half of the year, we have an exciting pipeline of growth ahead through both company-operated and franchised restaurants including our entrance into the Dallas market. We continue to expect to open 17-20 company-operated restaurants and 10-15 franchised restaurants in 2016.”

Second Quarter 2016 Financial Results

Company-operated restaurant revenue in the second quarter of 2016 increased 8.7% to $90.9 million, compared to $83.6 million in the same period last year.  The growth in company-operated restaurant revenue was largely driven by the 18 new restaurants opened during and subsequent to the second quarter of 2015.   

Comparable company-operated restaurant sales in the second quarter increased 2.0%, driven by a 2.7% increase in traffic partially offset by a 0.7% decrease in average check.

Franchise revenue in the second quarter of 2016 increased 12.2% to $6.6 million, compared to $5.9 million in the second quarter of 2015. Franchised comparable restaurant sales increased 2.7% during the quarter. The growth in franchise revenue was largely driven by comparable restaurant sales growth, nine new restaurants opened during and subsequent to the second quarter of 2015 and fees associated with our point-of-sale system.  

Restaurant contribution was $20.0 million, compared to $18.0 million in the second quarter of 2015. As a percent of company-operated restaurant revenue, restaurant contribution margin increased 40 basis points to 22.0%. The increase in restaurant contribution margin was primarily the result of an improvement in food and paper costs coupled with an increase in comparable restaurant sales, partially offset by higher labor and occupancy and other operating expenses.

Net income for the second quarter of 2016 was $7.3 million, or $0.19 per diluted share, compared to net income of $7.2 million, or $0.18 per diluted share in the second quarter of 2015. Pro forma net income was $7.6 million, or $0.19 per diluted share during the second quarter of 2016, compared to $7.4 million, or $0.19 per diluted share during the second quarter of 2015.  A reconciliation between GAAP net income and pro forma net income is included in the accompanying financial data.

2016 Outlook

Based on current information, the Company is updating its guidance for the fiscal year 2016.

The company expects 2016 pro forma diluted net income per share ranging from $0.68 to $0.72.  This compares to pro forma diluted net income per share of $0.71 in 2015. Pro forma net income guidance for fiscal year 2016 is based, in part, on the following updated annual assumptions:

  • System-wide comparable restaurant sales growth in the low single digits;
  • The opening of 17-20 new company-owned restaurants and 10-15 new franchised restaurants;
  • Restaurant contribution margin of 20.8% to 21.2%;
  • G&A expenses of between 8.0% and 8.2% of total revenue, excluding legal expenses related to securities class action litigation;
  • Pro forma income tax rate of 40.0%; and
  • Adjusted EBITDA of between $67.0 and $69.0 million.

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 29, 2016, there were 170 restaurants in our comparable company-operated restaurant base and 408 restaurants in our comparable system 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) costs related to loss on disposal of assets and asset impairment and closed store costs, (ii) amortization expense and other estimate adjustments incurred on the Tax Receivable Agreement (“TRA”) completed at the time of our IPO, (iii) legal costs associated with a securities class action lawsuit, (iv) expenses and gains on the recovery of insurance proceeds related to a fire at one of our restaurants in 2015, (v) professional fees incurred as a result of the block trade of 5.96 million common shares in the second quarter of 2015, (vi) gain on the disposition of restaurants, and (vii) provision for income taxes at a normalized tax rate of 40.0%, 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.” 

Conference Call
The Company will host a conference call to discuss financial results for the second quarter of 2016 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 13640249. The replay will be available until Thursday, August 18, 2016.  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 (Nasdaq:LOCO) is the nation's leading fire-grilled chicken restaurant chain renowned for its masterfully citrus-marinated, fire-grilled chicken and handcrafted entrees using fresh ingredients inspired by Mexican recipes. With more than 435 company-owned and franchised restaurants in Arizona, California, Nevada, Texas and Utah, El Pollo Loco is expanding its presence in key markets like Houston and Dallas through a combination of company and franchisee development. Visit us on our website at ElPolloLoco.com.

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 could 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 annual report on Form 10-K for the year ended December 30, 2015, file number 001-36556, including the sections thereof captioned “Forward-Looking Statements” and “Risk Factors,” as those sections may be updated in our quarterly reports on Form 10-Q.  Those and other filings are available online at www.sec.gov, at 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 data)
                         
    Thirteen Weeks Ended   Twenty-Six Weeks Ended
    June 29, 2016   July 1, 2015   June 29, 2016   July 1, 2015
    $ %   $ %   $ %   $ %
Revenue:                        
Restaurant revenue   $   90,877     93.2 %   $   83,575     93.4 %   $   179,246     93.4 %   $   168,308     93.6 %
Franchise  revenue       6,597     6.8 %       5,879     6.6 %       12,582     6.6 %       11,572     6.4 %
Total revenue       97,474     100.0 %       89,454     100.0 %       191,828     100.0 %       179,880     100.0 %
Costs of operations:                        
Food and paper cost (1)       27,032     29.7 %       27,055     32.4 %       53,800     30.0 %       54,178     32.2 %
Labor and related expenses (1)       24,361     26.8 %       21,089     25.2 %       48,868     27.3 %       42,671     25.4 %
Occupancy and other operating expenses (1)     19,496     21.5 %       17,388     20.8 %       38,330     21.4 %       34,524     20.5 %
Company restaurant expenses (1)       70,889     78.0 %       65,532     78.4 %       140,998     78.7 %       131,373     78.1 %
General and administrative expenses       8,287     8.5 %       6,405     7.2 %       17,524     9.1 %       13,890     7.7 %
Franchise expenses       1,239     1.3 %       840     0.9 %       2,163     1.1 %       1,695     0.9 %
Depreciation and amortization       3,964     4.1 %       3,200     3.6 %       7,722     4.0 %       6,346     3.5 %
Loss on disposal of assets       267     0.3 %       85     0.1 %       466     0.2 %       166     0.1 %
Expenses related to fire loss       -        -          -        -          48       -          -        -   
Gain on recovery of insurance proceeds       (600 )   -0.6 %       -        -          (889 )   -0.5 %       -        -   
Asset impairment and closed-store reserves       60     0.1 %       (190 )   -0.2 %       134     0.1 %       (139 )   -0.1 %
Total expenses       84,106     86.3 %       75,872     84.8 %       168,166     87.7 %       153,331     85.2 %
Gain on disposition of restaurants       33       -          -        -          33       -          -        -   
Income from operations       13,401     13.7 %       13,582     15.2 %       23,695     12.4 %       26,549     14.8 %
Interest expense, net       830     0.9 %       1,014     1.1 %       1,656     0.9 %       2,225     1.2 %
Expenses related to selling shareholders       -        -          50     0.1 %       -        -          50       -   
Income tax receivable agreement (income) expense       (35 )     -          226     0.3 %       229     0.1 %       477     0.3 %
Income before provision for income taxes       12,606     12.9 %       12,292     13.7 %       21,810     11.4 %       23,797     13.2 %
Provision for income taxes       5,339     5.5 %       5,062     5.7 %       9,100     4.7 %       9,776     5.4 %
Net Income   $    7,267     7.5 %   $    7,230     8.1 %   $    12,710     6.6 %   $    14,021     7.8 %
                         
Net income per share:                        
Basic   $   0.19       $   0.19       $   0.33       $   0.37    
Diluted   $   0.19       $   0.18       $   0.33       $   0.36    
Weighted average shares used in                        
computing net income per share:                        
Basic       38,294,575           37,812,767           38,289,505           37,618,756    
Diluted       38,962,802           39,085,206           38,981,610           39,002,974    
                         
(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 29, 2016   December 30, 2015  
           
Balance Sheet Data:          
Cash and cash equivalents   $   9,496     $   6,101    
Total assets       467,018         461,028    
Total debt       117,050         123,638    
Total liabilities       208,717         216,395    
Total stockholders' equity       258,301         244,633    
           
           
    Twenty-Six Weeks Ended  
    June 29, 2016   July 1, 2015  
           
Selected Operating Data:          
Company-owned restaurants at end of period       188         174    
Franchise restaurants at end of period       251         244    
Company-owned:          
Comparable restaurant sales     0.7 %     1.5 %  
Units in the comparable base       170         159    

 

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 29, 2016   July 1, 2015   June 29, 2016   July 1, 2015
                 
Adjusted EBITDA:                
Net income, as reported   $   7,267     $   7,230     $   12,710     $   14,021  
Provision for income taxes       5,339         5,062         9,100         9,776  
Interest expense, net       830         1,014         1,656         2,225  
Depreciation and amortization       3,964         3,200         7,722         6,346  
EBITDA       17,400         16,506         31,188         32,368  
Stock-based compensation expense       128         146         139         443  
Loss on disposal of assets       267         85         466         166  
Expenses related to fire loss       -          -          48         -   
Gain on recovery of insurance proceeds       (600 )       -          (889 )       -   
Asset impairment and closed-store reserves       60         (190 )       134         (139 )
Pre-opening costs       376         164         857         219  
Gain on disposition of restaurants       (33 )       -          (33 )       -   
Expenses related to selling shareholders       -          50         -          50  
Income tax receivable agreement (income) expense     (35 )       226         229         477  
Securities class action legal expense       340         -          1,808         -   
                 
Adjusted EBITDA   $    17,903     $    16,987     $    33,947     $    33,584  

 

EL POLLO LOCO HOLDINGS, INC.  
UNAUDITED RECONCILIATION OF NET INCOME TO  PRO FORMA NET INCOME  
(dollar amounts in thousands, except share data)  
                   
    Thirteen Weeks Ended   Twenty-Six Weeks Ended  
    June 29, 2016   July 1, 2015   June 29, 2016   July 1, 2015  
                   
Pro forma net income:                  
Net income, as reported   $   7,267     $   7,230     $   12,710     $   14,021    
Provision for taxes, as reported       5,339         5,062         9,100         9,776    
Gain on disposition of restaurants       (33 )       -          (33 )       -     
Income tax receivable agreement (income) expense     (35 )       226         229         477    
Expenses related to selling shareholders       -          50         -          50    
Loss on disposal of assets       267         85         466         166    
Expenses related to fire loss       -          -          48         -     
Gain on recovery of insurance proceeds       (600 )       -          (889 )       -     
Asset impairment and closed-store reserves       60         (190 )       134         (139 )  
Securities class action legal expense       340         -          1,808         -     
  Provision for income taxes       (5,042 )       (5,110 )       (9,429 )       (9,984 )  
Pro forma net income   $    7,563     $    7,353         14,144         14,367    
Pro forma weighted-average share and per share data:                  
Pro forma net income per share                  
Basic   $   0.20     $   0.19     $   0.37     $   0.38    
Diluted   $   0.19     $   0.19     $   0.36     $   0.37    
Weighted-average shares used in computing pro forma net income per share                  
Basic       38,294,575         37,812,767         38,289,505         37,618,756    
Diluted       38,962,802         39,085,206         38,981,610         39,002,974    

 

Investor Contact:
Fitzhugh Taylor, ICR
fitzhugh.taylor@icrinc.com
714-599-5200

Media Contact:
Christine Beggan, ICR
loco@icrinc.com
203-682-8200

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