El Pollo Loco Inc. reported results for its 13 week third quarter

IRVINE, Calif., Nov 10, 2004 (BUSINESS WIRE) --

For simplicity of presentation, the company has described the 13 week third quarters and 39 week nine month periods ended Sept. 29, 2004, and Sept. 24, 2003, as Sept. 30, 2004, and Sept. 30, 2003, respectively. El Pollo Loco reported operating revenues for the 13 weeks ended Sept. 30, 2004, of $56.5 million, which is an increase of $2.7 million, or 5.0%, over operating revenues for the 13 weeks ended Sept. 30, 2003, of $53.8 million. Operating revenues include both sales at company-operated stores and franchise revenues. Same store sales for the system increased 4.3% in the third quarter of fiscal 2004; with company-operated restaurant same store sales increasing 3.3% and franchise restaurant same store sales increasing 5.2%. Operating income for the third quarter of fiscal 2004 was $5.4 million, a decrease of $0.8 million, or 13.6%, from the third quarter of 2003 operating income of $6.2 million. Contributing to this decrease were higher commodity costs, which as a percentage of sales increased 1.7% to 31.8% for the third quarter of 2004 from 30.1% for the third quarter of 2003. The impact of this increase was partially offset by labor costs, which as a percentage of sales decreased 0.8% to 26.5% for the third quarter of 2004 from 27.3% for the third quarter of 2003. An additional decrease to operating income in the third quarter of 2004 resulted from a $0.6 million non-cash asset impairment charge for one store in San Antonio that the company continues to operate. This impairment resulted from inadequate cash flows from the restaurant to support the existing net book value of the asset. Interest expense increased by $2.1 million from $1.5 million in the third quarter of 2003 to $3.6 million in the third quarter of 2004 due to our December 2003 $110.0 million bond offering. In the third quarter of 2004, we realized an income tax benefit of $0.6 million. This reduction in our overall income tax expense was related to the resolution of uncertainty regarding certain outstanding tax items that had given rise to a reserve. As a result of the above, net income for the third quarter of fiscal 2004 was $1.7 million, which was a decrease of $1.2 million from third quarter 2003 net income of $2.9 million. EBITDA for the third quarter of fiscal 2004 was $8.8 million, a decrease of $0.7 million, or 7.2%, from third quarter 2003 EBITDA of $9.5 million. This decrease is primarily due to the factors described above. EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA and its uses and limitations are discussed further under "Non-GAAP Financial Measures," below. Operating revenues for the 39-week period ended Sept. 30, 2004, were $166.0 million, which was an increase of $16.0 million, or 10.6%, over operating revenues for the 39 weeks ended Sept. 30, 2003, of $150.1 million. Same store sales for the system increased 8.3% for the 39 weeks ended Sept. 30, 2004; with company-operated restaurant same store sales increasing 7.3% and franchise restaurant same store sales increasing 9.1%. Operating income for the 39 weeks ended Sept. 30, 2004, was $15.1 million, which is the same as operating income of $15.1 million for the 39 weeks ended Sept. 30, 2003. Interest expense increased $6.1 million, or 133.7%, to $10.7 million for the 39-week period ended Sept. 30, 2004, from $4.6 million for the 39-week period ended Sept. 30, 2003. This increase is due to $7.6 million in additional interest expense related to our issuance of the Senior Secured Notes in December 2003, partially offset by $1.8 million in reduced interest expense due to lower outstanding balances on our term loan under our senior credit facility. Net income for the 39 weeks ended Sept. 30, 2004, was $3.2 million, a decrease of $3.2 million from net income for the 39 weeks ended Sept. 30, 2003, of $6.4 million. EBITDA for the 39 weeks ended Sept. 30, 2004, was $25.0 million, an increase of $0.4 million, or .7%, over EBITDA of $24.5 million for the 39 weeks ended Sept. 30, 2003. Stephen E. Carley, president and CEO of El Pollo Loco Inc. said: "The third quarter results show the progress we made in sales growth and labor cost controls, but also the challenges we face in rising commodity costs. We believe that short term period comparable sales will be further adversely impacted as we compare against strong numbers in prior year periods. Additionally, we will continue to face pressure from commodity costs into 2005. We plan to address these challenges by a combination of product optimization, menu management, and selective price increases." El Pollo Loco's store count changes for the 39 weeks ended Sept. 30, 2004, are as follows: