El Pollo Loco Earnings 2020-06-24

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 24, 2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36556

EL POLLO LOCO HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-3563182
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3535 Harbor Blvd., Suite 100, Costa Mesa, California		92626
(Address of principal executive offices)		(Zip Code)

(714) 599-5000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	LOCO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☒

Non-accelerated Filer	☐	Smaller Reporting Company	☒

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of July 24, 2020, there were 35,922,099 shares of the issuer’s common stock outstanding.

Table of Contents


Table of Contents		Page

PART I—FINANCIAL INFORMATION		3
Item 1. Financial Statements.		3
Condensed Consolidated Balance Sheets (Unaudited)		3
Condensed Consolidated Statements of Income (Unaudited)		4
Condensed Consolidated Statements of Comprehensive Income (Unaudited)		5
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)		6
Condensed Consolidated Statements of Cash Flows (Unaudited)		8
Notes to Condensed Consolidated Financial Statements (Unaudited)		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		31
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		49
Item 4. Controls and Procedures.		50
PART II—OTHER INFORMATION		51
Item 1. Legal Proceedings.		51
Item 1A. Risk Factors.		51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		51
Item 3. Defaults of Senior Securities.		51
Item 4. Mine Safety Disclosures.		51
Item 5. Other Information.		51
Item 6. Exhibits.		52
Signatures		53

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

EL POLLO LOCO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except share data)


	June 24,		December 25,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	60,342	$	8,070
Accounts and other receivables, net		16,115		8,505
Inventories		1,954		2,009
Prepaid expenses and other current assets		2,696		5,718
Income tax receivable		—		376
Total current assets		81,107		24,678
Property and equipment owned, net		84,262		91,778
Property held under operating leases, net ("ROU asset")		184,308		192,395
Goodwill		248,674		248,674
Trademarks		61,888		61,888
Deferred tax assets		4,185		3,709
Other assets		1,168		1,630
Total assets	$	665,592	$	624,752
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of obligations under finance leases	$	37	$	34
Current portion of obligations under operating leases		17,979		16,406
Accounts payable		9,338		5,627
Accrued salaries and vacation		6,277		8,618
Accrued insurance		10,138		9,440
Accrued income taxes payable		1,693		—
Accrued interest		217		302
Current portion of income tax receivable agreement payable		4,987		4,935
Other accrued expenses and current liabilities		16,376		28,597
Total current liabilities		67,042		73,959
Revolver loan		138,800		97,000
Obligations under finance leases, net of current portion		63		83
Obligations under operating leases, net of current portion		189,060		197,492
Deferred taxes		1,671		1,672
Income tax receivable agreement payable, net of current portion		3,419		3,301
Other noncurrent liabilities		8,978		5,679
Total liabilities		409,033		379,186
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized; none issued or outstanding		—		—
Common stock, $0.01 par value, 200,000,000 shares authorized; 35,854,122 and 35,126,582 shares issued and outstanding		359		351
Additional paid-in-capital		334,088		330,950
Accumulated deficit		(76,889)		(85,988)
Accumulated other comprehensive (loss) income		(999)		253
Total stockholders’ equity		256,559		245,566
Total liabilities and stockholders’ equity	$	665,592	$	624,752

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

EL POLLO LOCO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Amounts in thousands, except share data)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019
Revenue
Company-operated restaurant revenue	$	87,707	$	100,139	$	180,341	$	197,289
Franchise revenue		6,719		7,918		13,781		14,362
Franchise advertising fee revenue		5,178		5,683		10,645		11,066
Total revenue		99,604		113,740		204,767		222,717
Cost of operations
Food and paper cost		22,873		27,886		48,435		55,038
Labor and related expenses		25,759		29,272		54,452		58,848
Occupancy and other operating expenses		21,922		23,032		44,031		46,259
Company restaurant expenses		70,554		80,190		146,918		160,145
General and administrative expenses		10,465		9,348		19,796		20,696
Franchise expenses		6,627		7,542		13,538		13,686
Depreciation and amortization		4,168		4,454		8,537		9,215
Loss on disposal of assets		27		134		127		178
Recovery of securities lawsuits related legal expenses and other insurance claims		(123)		(10,000)		(123)		(10,000)
Impairment and closed-store reserves		437		565		2,839		874
Loss on disposition of restaurants		—		927		—		5,051
Total expenses		92,155		93,160		191,632		199,845
Income from operations		7,449		20,580		13,135		22,872
Interest expense, net		908		922		1,813		1,781
Income tax receivable agreement expense (income)		290		(94)		170		77
Income before provision for income taxes		6,251		19,752		11,152		21,014
Provision for income taxes		752		5,665		2,053		6,014
Net income	$	5,499	$	14,087	$	9,099	$	15,000
Net income per share
Basic	$	0.16	$	0.37	$	0.26	$	0.39
Diluted	$	0.16	$	0.37	$	0.26	$	0.38
Weighted-average shares used in computing net income per share
Basic		34,836,410		37,939,912		34,747,785		38,296,807
Diluted		35,410,198		38,580,722		35,382,607		39,043,477

See notes to condensed consolidated financial statements (unaudited).

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EL POLLO LOCO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in thousands, except share data)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019
Net income	$	5,499	$	14,087	$	9,099	$	15,000
Other comprehensive loss (income)
Changes in derivative instruments
Unrealized net losses arising during the period from interest rate swap		296		—		1,755		—
Reclassifications of losses into net income		(81)		—		(42)		—
Income benefit		(58)		—		(461)		—
Other comprehensive loss, net of taxes		157		—		1,252		—
Comprehensive income	$	5,342	$	14,087	$	7,847	$	15,000

Table of Contents

EL POLLO LOCO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Amounts in thousands, except share data)


	Thirteen Weeks Ended June 24, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income (Loss)		Equity
Balance, March 25, 2020	35,089,983	$	351	$	331,484	$	(82,388)	$	(842)	$	248,605
Stock-based compensation	—		—		727		—		—		727
Issuance of common stock related to restricted stock	436,263		4		(4)		—		—		—
Issuance of common stock upon exercise of stock options	372,556		4		2,161		—		—		2,165
Shares repurchased for employee tax withholdings	(20,193)		—		(280)		—		—		(280)
Forfeiture of common stock related to restricted shares	(24,487)		—		—		—		—		—
Other comprehensive loss, net of tax	—		—		—		—		(157)		(157)
Net income	—		—		—		5,499		—		5,499
Balance, June 24, 2020	35,854,122	$	359	$	334,088	$	(76,889)	$	(999)	$	256,559

	Thirteen Weeks Ended June 26, 2019
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
Balance, March 27, 2019	38,730,204	$	388	$	372,825	$	(109,975)	$	—		263,238
Stock-based compensation	—		—		641		—		—		641
Issuance of common stock related to restricted shares	323,489		3		(3)		—		—		—
Issuance of common stock upon exercise of stock options	6,709		—		80		—		—		80
Shares repurchased for employee tax withholdings	(24,172)		(1)		(278)		—		—		(279)
Repurchase of common stock	(1,303,282)		(13)		(14,930)		—		—		(14,943)
Net income	—		—		—		14,087		—		14,087
Balance, June 26, 2019	37,732,948	$	377	$	358,335	$	(95,888)	$	—	$	262,824

Table of Contents


	Twenty-Six Weeks Ended June 24, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income (Loss)		Equity
Balance, December 25, 2019	35,126,582	$	351	$	330,950	$	(85,988)	$	253	$	245,566
Stock-based compensation	—		—		1,261		—		—		1,261
Issuance of common stock related to restricted stock	436,263		4		(4)		—		—		—
Issuance of common stock upon exercise of stock options	372,556		4		2,161		—		—		2,165
Shares repurchased for employee tax withholdings	(20,193)		—		(280)		—		—		(280)
Forfeiture of common stock related to restricted shares	(61,086)		—		—		—		—		—
Other comprehensive loss, net of tax	—		—		—		—		(1,252)		(1,252)
Net income	—		—		—		9,099		—		9,099
Balance, June 24, 2020	35,854,122	$	359	$	334,088	$	(76,889)	$	(999)	$	256,559

	Twenty-Six Weeks Ended June 26, 2019
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
Balance, December 26, 2018	39,009,451	$	390	$	375,734	$	(110,888)	$	—		265,236
Stock-based compensation	—		—		1,129		—		—		1,129
Issuance of common stock related to restricted shares	301,371		3		(3)		—		—		—
Issuance of common stock upon exercise of stock options	6,709		—		80		—		—		80
Shares repurchased for employee tax withholdings	(25,747)		(1)		(294)		—		—		(295)
Repurchase of common stock	(1,558,836)		(15)		(18,311)		—		—		(18,326)
Net income	—		—		—		15,000		—		15,000
Balance, June 26, 2019	37,732,948	$	377	$	358,335	$	(95,888)	$	—	$	262,824

Table of Contents

EL POLLO LOCO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)


	Twenty-Six Weeks Ended
	June 24, 2020		June 26, 2019
Cash flows from operating activities:
Net income	$	9,099	$	15,000
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization		8,537		9,215
Stock-based compensation expense		1,261		1,129
Income tax receivable agreement expense		170		77
Loss on disposition of restaurants		—		5,051
Loss on disposal of assets		127		178
Impairment of property and equipment		1,972		227
Amortization of deferred financing costs		126		126
Amortization of favorable and unfavorable leases, net		—		(362)
Deferred income taxes, net		(363)		5,799
Changes in operating assets and liabilities:
Accounts and other receivables, net		(7,610)		(2,084)
Inventories		55		277
Prepaid expenses and other current assets		3,021		(450)
Other assets		339		23
Accounts payable		3,610		1,057
Accrued salaries and vacation		(2,342)		(487)
Accrued insurance		698		1,163
Income taxes payable		2,069		(3)
Other accrued expenses and liabilities		(9,687)		(23,077)
Net cash flows provided by operating activities		11,082		12,859
Cash flows from investing activities:
Proceeds from disposition of restaurants		—		4,770
Purchase of property and equipment		(2,479)		(5,898)
Net cash flows used in investing activities		(2,479)		(1,128)
Cash flows from financing activities:
Minimum tax withholdings related to net share settlements		(280)		(295)
Payments on revolver and swingline loan		(10,700)		(15,000)
Borrowings on revolver and swingline loan		52,500		26,000
Proceeds from issuance of common stock upon exercise of stock options, net of expenses		2,165		80
Payment of obligations under finance leases		(16)		(53)
Stock buybacks		—		(18,151)
Net cash flows provided by (used in) financing activities		43,669		(7,419)
Increase in cash and cash equivalents		52,272		4,312
Cash and cash equivalents, beginning of period		8,070		6,969
Cash and cash equivalents, end of period	$	60,342	$	11,281


	Twenty-Six Weeks Ended
	June 24, 2020		June 26, 2019
Supplemental cash flow information
Cash paid during the period for interest	$	1,738	$	1,694
Cash paid during the period for income taxes	$	434	$	218
Unpaid purchases of property and equipment	$	846	$	980
Unpaid stock buybacks	$	—	$	310

See notes to the condensed consolidated financial statements (unaudited).

Price	15.24	EPS	1
Shares	35	P/E	21
MCap	535	P/FCF	15
Net Debt	89	EBIT	38
TEV	624	TEV/EBIT	16
TTM 2019-12-25, in MM, except price, ratios

10-Q	2020-06-24	Filed 2020-07-31
10-Q	2020-03-25	Filed 2020-05-01
10-K	2019-12-25	Filed 2020-03-06
10-Q	2019-09-25	Filed 2019-11-01
10-Q	2019-06-26	Filed 2019-08-02
10-Q	2019-03-27	Filed 2019-05-03
10-K	2018-12-26	Filed 2019-03-08
10-Q	2018-09-26	Filed 2018-11-02
10-Q	2018-06-27	Filed 2018-08-03
10-Q	2018-03-28	Filed 2018-05-07
10-K	2017-12-27	Filed 2018-03-09
10-Q	2017-09-27	Filed 2017-11-03
10-Q	2017-06-28	Filed 2017-08-07
10-Q	2017-03-29	Filed 2017-05-05
10-K	2016-12-28	Filed 2017-03-10
10-Q	2016-09-28	Filed 2016-11-04
10-Q	2016-06-29	Filed 2016-08-05
10-Q	2016-03-30	Filed 2016-05-06
10-K	2015-12-30	Filed 2016-03-11
10-Q	2015-09-30	Filed 2015-11-13
10-Q	2015-07-01	Filed 2015-08-14
10-Q	2015-04-01	Filed 2015-05-15
10-K	2014-12-31	Filed 2015-03-17
S-1	2014-11-10	Public Filing
10-Q	2014-09-24	Filed 2014-11-07
10-Q	2014-06-25	Filed 2014-09-05
S-1	2014-06-24	Public Filing

8-K	2020-07-30	Earnings, Exhibits
8-K	2020-06-02
8-K	2020-04-30
8-K	2020-04-08
8-K	2020-03-18
8-K	2020-03-05
8-K	2019-10-31
8-K	2019-08-01
8-K	2019-06-04
8-K	2019-05-02
8-K	2019-03-29
8-K	2019-03-07
8-K	2019-01-22
8-K	2018-11-01
8-K	2018-08-31
8-K	2018-08-02
8-K	2018-06-28
8-K	2018-06-05
8-K	2018-05-03
8-K	2018-03-08
8-K	2018-02-15
8-K	2018-01-16
8-K	2018-01-03

EX-31.1	loco-20200624ex311c77584.htm
EX-31.2	loco-20200624ex312fafa2e.htm
EX-32.1	loco-20200624ex32101c69b.htm

LOCO 10Q Quarterly Report

El Pollo Loco Earnings 2020-06-24