El Pollo Loco Holdings, Inc. (Nasdaq:LOCO) today announced
financial results for the 13-week period ended June 28, 2017.
Highlights for the second quarter ended
June 28, 2017, compared to the second quarter ended
June 29, 2016 were as follows:
- Total revenue increased 8.3% to $105.6 million compared to
$97.5 million.
- System-wide comparable restaurant sales increased 2.9%,
including a 2.4% increase for company-operated restaurants, and a
3.2% increase for franchised restaurants.
- Net income increased to $7.8 million, or $0.20 per diluted
share, compared to $7.3 million, or $0.19 per diluted share in
the prior year.
- Pro forma net income(1) was $8.2 million,
or $0.21 per diluted share, compared to $7.6 million,
or $0.19 per diluted share.
- Adjusted EBITDA(1) was $19.7 million, compared to $17.9
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, "During the
second quarter we achieved solid results, including system-wide
comparable store sales growth of 2.9% and a return to positive
transaction growth. Our core business continues to perform
well, driven by our strategy to highlight our authentic brand, our
differentiated offerings, and our QSR+ positioning.
Additionally we made progress against new technology initiatives
focused on driving convenience and loyalty, rolling out delivery
and launching our all-new Loco Rewards loyalty program.”
Sather continued, “While we’re pleased with the
performance of our core business, our sales in Houston and Dallas
remain challenged. We continue to reevaluate our marketing
and operations programs in order to generate sustained momentum in
these very competitive Texas markets.”
Second Quarter 2017 Financial Results
Company-operated restaurant revenue in the
second quarter of 2017 increased 8.8% to $98.9 million, compared to
$90.9 million in the same period last year. The growth in
company-operated restaurant revenue was largely driven by the 24
new restaurants opened during and subsequent to the second quarter
of 2016.
Comparable company-operated restaurant sales in
the second quarter increased 2.4%, driven by a 0.5% increase in
transactions and a 1.9% increase in average check.
Franchise revenue in the second quarter of 2017
increased 1.4% to $6.7 million, compared to $6.6 million in the
second quarter of 2016. The growth in franchise revenue was largely
driven by the contribution from the 17 new restaurants opened
during and subsequent to the second quarter of 2016. Franchised
comparable restaurant sales increased 3.2% during the quarter.
Restaurant contribution was $21.6 million or
21.8% of company-operated restaurant revenue, compared to $20.0
million, or 22.0% of company-operated restaurant revenue in the
second quarter of 2016. The slight decrease in restaurant
contribution margin was primarily the result of higher labor costs,
due to increased minimum wage, and higher occupancy and other
operating expenses associated with new restaurants opened in 2016
and 2017, partially offset by lower workers compensation costs and
an improvement in food costs, related to lower chicken prices.
During the second quarter of 2017, the Company recorded a $0.4
million expense related to the partial impairment of the assets of
one restaurant in Texas.
Net income for the second quarter of 2017
was $7.8 million, or $0.20 per diluted share,
compared to net income of $7.3 million, or $0.19 per
diluted share in the second quarter of 2016. Pro forma net income
was $8.2 million, or $0.21 per diluted share during the
second quarter of 2017, compared to $7.6 million,
or $0.19 per diluted share during the second quarter of
2016. A reconciliation between GAAP net income and pro forma net
income is included in the accompanying financial data.
Subsequent Events
Subsequent to the end of the second quarter, the
Company repaid $4.0 million on its revolving credit facility.
Additionally, the Company decided to close three company-owned
restaurants in the Texas market. The closures are expected to occur
during the third quarter of 2017.
2017 Outlook
Based on current information, the Company is
revising its earnings guidance for the fiscal year 2017.
The Company expects 2017 pro forma diluted net
income per share ranging from $0.64 to $0.67. This compares to pro
forma diluted net income per share of $0.66 in 2016. Pro forma net
income guidance for fiscal year 2017 is based, in part, on the
following updated annual assumptions:
- System-wide comparable restaurant sales growth of 1.0% to
2.0%;
- The opening of 17-19 new company-owned restaurants and 9-11 new
franchised restaurants;
- Restaurant contribution margin of 20.3% to 20.7%;
- G&A expenses of between 8.5% and 8.7% of total revenue
excluding legal fees related to securities class action
litigation;
- Pro forma income tax rate of 39.5%; and
- Adjusted EBITDA of between $66.5 and $68.5 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 28, 2017, there were 178
restaurants in our comparable company-operated restaurant base and
420 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 represents net income adjusted for (i) costs (or gains)
related to loss (or gains) on disposal of assets and asset
impairment and closed store costs, (ii) amortization expense
and other estimate adjustments (whether expense or income) 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 for the reimbursement of property and equipment,
and expenses related to a fire at one of our restaurants in 2015,
(v) insurance proceeds received related to securities class action
legal expenses, (vi) costs associated with the transition of our
CEO and (vi) provision for income taxes at a normalized tax
rate of 39.5% and 40.0% for the thirteen and twenty-six weeks ended
June 28, 2017 and June 29, 2016, respectively, 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 2017 today at
5:00 PM Eastern Time. Steve Sather, President and Chief Executive
Officer and Larry Roberts, Chief Financial 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 844-512-2921 or for international
callers by dialing 412-317-6671; the passcode is 13664840. The
replay will be available until Thursday, August 17, 2017. 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 470 company-owned and franchised restaurants in Arizona,
California, Nevada, Texas and Utah, El Pollo Loco is expanding its
presence 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 28, 2016, 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
INCOME |
(in thousands, except share
data) |
|
|
Thirteen Weeks Ended |
|
Twenty-Six Weeks Ended |
|
June 28, 2017 |
|
June 29, 2016 |
|
June 28, 2017 |
|
June 29, 2016 |
|
$ |
|
% |
|
$ |
|
% |
|
$ |
|
% |
|
$ |
|
% |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated
restaurant revenue |
$ |
98,885 |
|
|
93.7 |
% |
|
$ |
90,877 |
|
|
93.2 |
% |
|
$ |
192,334 |
|
|
93.7 |
% |
|
$ |
179,246 |
|
|
93.4 |
% |
Franchise revenue |
6,688 |
|
|
6.3 |
% |
|
6,597 |
|
|
6.8 |
% |
|
13,010 |
|
|
6.3 |
% |
|
12,582 |
|
|
6.6 |
% |
Total revenue |
105,573 |
|
|
100.0 |
% |
|
97,474 |
|
|
100.0 |
% |
|
205,344 |
|
|
100.0 |
% |
|
191,828 |
|
|
100.0 |
% |
Costs of
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and
paper cost (1) |
29,146 |
|
|
29.5 |
% |
|
27,032 |
|
|
29.7 |
% |
|
56,218 |
|
|
29.2 |
% |
|
53,800 |
|
|
30.0 |
% |
Labor and
related expenses (1) |
26,592 |
|
|
26.9 |
% |
|
24,361 |
|
|
26.8 |
% |
|
53,425 |
|
|
27.8 |
% |
|
48,868 |
|
|
27.3 |
% |
Occupancy and other operating expenses (1) |
21,574 |
|
|
21.8 |
% |
|
19,496 |
|
|
21.5 |
% |
|
42,116 |
|
|
21.9 |
% |
|
38,330 |
|
|
21.4 |
% |
Company restaurant expenses (1) |
77,312 |
|
|
78.2 |
% |
|
70,889 |
|
|
78.0 |
% |
|
151,759 |
|
|
78.9 |
% |
|
140,998 |
|
|
78.7 |
% |
General and
administrative expenses |
9,576 |
|
|
9.1 |
% |
|
8,287 |
|
|
8.5 |
% |
|
19,309 |
|
|
9.4 |
% |
|
17,524 |
|
|
9.1 |
% |
Franchise expenses |
1,006 |
|
|
1.0 |
% |
|
1,239 |
|
|
1.3 |
% |
|
1,823 |
|
|
0.9 |
% |
|
2,163 |
|
|
1.1 |
% |
Depreciation and
amortization |
4,632 |
|
|
4.4 |
% |
|
3,964 |
|
|
4.1 |
% |
|
8,949 |
|
|
4.4 |
% |
|
7,722 |
|
|
4.0 |
% |
Loss on disposal of
assets |
434 |
|
|
0.4 |
% |
|
267 |
|
|
0.3 |
% |
|
659 |
|
|
0.3 |
% |
|
466 |
|
|
0.2 |
% |
Expenses related to
fire loss |
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
48 |
|
|
— |
% |
Gain on recovery of
insurance proceeds, property, equipment and expenses |
— |
|
|
— |
% |
|
(600 |
) |
|
(0.6 |
)% |
|
— |
|
|
— |
% |
|
(889 |
) |
|
(0.5 |
)% |
Recovery of securities
class action legal expense |
(511 |
) |
|
(0.5 |
)% |
|
— |
|
|
— |
% |
|
(511 |
) |
|
(0.2 |
)% |
|
— |
|
|
— |
% |
Asset impairment and
closed-store reserves |
384 |
|
|
0.4 |
% |
|
60 |
|
|
0.1 |
% |
|
1,255 |
|
|
0.6 |
% |
|
134 |
|
|
0.1 |
% |
Total expenses |
92,833 |
|
|
87.9 |
% |
|
84,106 |
|
|
86.3 |
% |
|
183,243 |
|
|
89.2 |
% |
|
168,166 |
|
|
87.7 |
% |
Gain on disposition of
restaurants |
— |
|
|
— |
% |
|
33 |
|
|
— |
% |
|
— |
|
|
— |
% |
|
33 |
|
|
— |
% |
Income from
operations |
12,740 |
|
|
12.1 |
% |
|
13,401 |
|
|
13.7 |
% |
|
22,101 |
|
|
10.8 |
% |
|
23,695 |
|
|
12.4 |
% |
Interest expense-net of
interest income |
778 |
|
|
0.7 |
% |
|
830 |
|
|
0.9 |
% |
|
1,568 |
|
|
0.8 |
% |
|
1,656 |
|
|
0.9 |
% |
Income tax receivable
agreement (income) expense |
(101 |
) |
|
(0.1 |
)% |
|
(35 |
) |
|
— |
% |
|
126 |
|
|
0.1 |
% |
|
229 |
|
|
0.1 |
% |
Income before
provision for income taxes |
12,063 |
|
|
11.4 |
% |
|
12,606 |
|
|
12.9 |
% |
|
20,407 |
|
|
9.9 |
% |
|
21,810 |
|
|
11.4 |
% |
Provision for income
taxes |
4,244 |
|
|
4.0 |
% |
|
5,339 |
|
|
5.5 |
% |
|
7,711 |
|
|
3.8 |
% |
|
9,100 |
|
|
4.7 |
% |
Net
income |
$ |
7,819 |
|
|
7.4 |
% |
|
$ |
7,267 |
|
|
7.5 |
% |
|
$ |
12,696 |
|
|
6.2 |
% |
|
$ |
12,710 |
|
|
6.6 |
% |
Net income per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.20 |
|
|
|
|
$ |
0.19 |
|
|
|
|
$ |
0.33 |
|
|
|
|
$ |
0.33 |
|
|
|
Diluted |
$ |
0.20 |
|
|
|
|
$ |
0.19 |
|
|
|
|
$ |
0.32 |
|
|
|
|
$ |
0.33 |
|
|
|
Weighted
average shares used in computing net income per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
38,449,240 |
|
|
|
|
38,294,575 |
|
|
|
|
38,443,130 |
|
|
|
|
38,289,505 |
|
|
|
Diluted |
39,123,961 |
|
|
|
|
38,962,802 |
|
|
|
|
39,102,501 |
|
|
|
|
38,981,610 |
|
|
|
(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 28, 2017 |
|
December 28, 2016 |
Selected
Balance Sheet Data: |
|
|
|
Cash and cash
equivalents |
$ |
4,371 |
|
|
$ |
2,168 |
|
Total assets |
463,785 |
|
|
471,305 |
|
Total debt |
94,877 |
|
|
104,461 |
|
Total liabilities |
185,400 |
|
|
206,123 |
|
Total stockholders’
equity |
278,385 |
|
|
265,182 |
|
|
Twenty-Six Weeks Ended |
|
June 28, 2017 |
|
June 29, 2016 |
Selected
Operating Data: |
|
|
|
Company-operated
restaurants at end of period |
208 |
|
|
188 |
|
Franchised restaurants
at end of period |
264 |
|
|
251 |
|
Company-operated: |
|
|
|
Comparable restaurant sales growth |
2.4 |
% |
|
0.7 |
% |
Restaurants in the comparable base |
178 |
|
|
170 |
|
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 28, 2017 |
|
June 29, 2016 |
|
June 28, 2017 |
|
June 29, 2016 |
Adjusted
EBITDA: |
|
|
|
|
|
|
|
Net income, as
reported |
$ |
7,819 |
|
|
$ |
7,267 |
|
|
$ |
12,696 |
|
|
$ |
12,710 |
|
Provision
for income taxes |
4,244 |
|
|
5,339 |
|
|
7,711 |
|
|
9,100 |
|
Interest
expense, net |
778 |
|
|
830 |
|
|
1,568 |
|
|
1,656 |
|
Depreciation and amortization |
4,632 |
|
|
3,964 |
|
|
8,949 |
|
|
7,722 |
|
EBITDA |
17,473 |
|
|
17,400 |
|
|
30,924 |
|
|
31,188 |
|
Stock-based compensation expense |
272 |
|
|
128 |
|
|
414 |
|
|
139 |
|
Loss on
disposal of assets |
434 |
|
|
267 |
|
|
659 |
|
|
466 |
|
Expenses
related to fire loss |
— |
|
|
— |
|
|
— |
|
|
48 |
|
Gain on
recovery of insurance proceeds, property, equipment and
expenses |
— |
|
|
(600 |
) |
|
— |
|
|
(889 |
) |
Recovery
of securities class action legal expense |
(511 |
) |
|
— |
|
|
(511 |
) |
|
— |
|
Asset
impairment and closed-store reserves |
384 |
|
|
60 |
|
|
1,255 |
|
|
134 |
|
Pre-opening costs |
470 |
|
|
376 |
|
|
1,097 |
|
|
857 |
|
Gain on
disposition of restaurants |
— |
|
|
(33 |
) |
|
— |
|
|
(33 |
) |
Income
tax receivable agreement (income) expense |
(101 |
) |
|
(35 |
) |
|
126 |
|
|
229 |
|
Securities class action legal expense |
1,057 |
|
|
340 |
|
|
1,408 |
|
|
1,808 |
|
Executive
transition costs |
179 |
|
|
— |
|
|
271 |
|
|
— |
|
Adjusted
EBITDA |
$ |
19,657 |
|
|
$ |
17,903 |
|
|
$ |
35,643 |
|
|
$ |
33,947 |
|
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 28, 2017 |
|
June 29, 2016 |
|
June 28, 2017 |
|
June 29, 2016 |
Pro forma net
income: |
|
|
|
|
|
|
|
Net income, as
reported |
$ |
7,819 |
|
|
$ |
7,267 |
|
|
$ |
12,696 |
|
|
$ |
12,710 |
|
Provision
for taxes, as reported |
4,244 |
|
|
5,339 |
|
|
7,711 |
|
|
9,100 |
|
Gain on
disposition of restaurants |
— |
|
|
(33 |
) |
|
— |
|
|
(33 |
) |
Income
tax receivable agreement (income) expense |
(101 |
) |
|
(35 |
) |
|
126 |
|
|
229 |
|
Loss on
disposal of assets |
434 |
|
|
267 |
|
|
659 |
|
|
466 |
|
Expenses
related to fire loss |
— |
|
|
— |
|
|
— |
|
|
48 |
|
Gain on
recovery of insurance proceeds, property, equipment and
expenses |
— |
|
|
(600 |
) |
|
— |
|
|
(889 |
) |
Recovery
of securities class action legal expense |
(511 |
) |
|
— |
|
|
(511 |
) |
|
— |
|
Asset
impairment and closed-store reserves |
384 |
|
|
60 |
|
|
1,255 |
|
|
134 |
|
Securities class action legal expense |
1,057 |
|
|
340 |
|
|
1,408 |
|
|
1,808 |
|
Executive
transition costs |
179 |
|
|
— |
|
|
271 |
|
|
— |
|
Provision
for income taxes |
(5,334 |
) |
|
(5,042 |
) |
|
(9,328 |
) |
|
(9,429 |
) |
Pro forma net
income |
$ |
8,171 |
|
|
$ |
7,563 |
|
|
$ |
14,287 |
|
|
$ |
14,144 |
|
Pro forma
weighted-average share and per share data: |
|
|
|
|
|
|
|
Pro forma net income
per share |
|
|
|
|
|
|
|
Basic |
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.37 |
|
|
$ |
0.37 |
|
Diluted |
$ |
0.21 |
|
|
$ |
0.19 |
|
|
$ |
0.37 |
|
|
$ |
0.36 |
|
Weighted-average shares
used in computing pro forma net income per share |
|
|
|
|
|
|
|
Basic |
38,449,240 |
|
|
38,294,575 |
|
|
38,443,130 |
|
|
38,289,505 |
|
Diluted |
39,123,961 |
|
|
38,962,802 |
|
|
39,102,501 |
|
|
38,981,610 |
|
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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