Industry News | November 10, 1999

El Pollo Loco 3Q 2000

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Advantica Restaurant Group, Inc. (Nasdaq:DINE) reported November 9 EBITDA from continuing operations of $57.1 million for the third quarter ended September 29, 1999, compared with $56.9 million in the prior year quarter. The EBITDA results reflected level performance with the prior year quarter at Denny's, while EBITDA results at FRD Acquisition Co., the parent company of Coco's and Carrows, were down slightly for the quarter. Total EBITDA, including discontinued operations at El Pollo Loco, increased to $63.8 million from $62.0 million in the prior year quarter.

The Company also announced today that it has signed a definitive purchase agreement to sell its El Pollo Loco subsidiary to an affiliate of American Securities Capital Partners, L.P., a New York-based investment firm, for $128 million, which includes the assumption of $14 million of debt. The transaction is expected to be completed by the end of the year.

Systemwide sales from continuing operations for the quarter, which include sales from Company-owned, franchised and licensed restaurants, increased five percent to $782 million, from $745 million in the prior year quarter. Revenue from continuing operations decreased slightly to $412 million versus $423 million in the prior year quarter. El Pollo Loco recorded a 16 percent increase in revenue to $38.5 million as a result of significant same-store sales growth and increased new restaurant development.

Commenting on the Company's results for the third quarter, Advantica Chairman and Chief Executive Officer James B. Adamson said, "Denny's reimaged restaurants are recording year-over-year same-store sales increases of approximately 10 percent, which exceeds the level necessary to meet our minimum return hurdle. The initial reimagingresults are encouraging; however, we continue to strive to lower the cost of the program and to enhance its potential long-term return.

"During the third quarter, we also completed the reimaging of nine Coco's Cafe and Bakery restaurants in Southern California. Coco's and Carrows have recently introduced new product-focused advertising campaigns and have also begun an extensive customer research project. We believe that the results of these studies will provide us critical information to regain market share at Coco's and Carrows.

"We are pleased to have signed a definitive purchase agreement for the sale of El Pollo Loco to an affiliate of American Securities Capital Partners, L.P. Net cash proceeds from the sale, estimated to be in excess of $100 million, are expected to be used for reinvestment in the Company and to further reduce debt. During the most recent quarter, El Pollo Loco recorded strong operating performance, with same-store sales increases of 7.0 percent at Company-owned restaurants. Effective advertising, a marketing strategy successfully embracing the emerging `Fresh Mex' trend and growing home meal replacement opportunities continue to positively impact sales.

The Company reported a loss from continuing operations for the quarter of $45.0 million, or $1.13 per common share, which included approximately $10.7 million of depreciation for retirement of assets replaced in conjunction with recently reimaged restaurants. Additionally, the loss from continuing operations included noncash fresh start reporting charges of approximately $37.7 million, or $0.94 per share, related to the emergence from Chapter 11. Excluding the fresh start items, the Company reported a loss from continuing operations for the quarter of $7.3 million, or $0.19 per share.

Systemwide sales from continuing operations for the three quarters ending September 29, 1999 increased five percent to $2.21 billion, compared with $2.11 billion in the prior year period. Revenue from continuing operations declined slightly to $1.20 billion, versus $1.22 billion in the prior year period. Revenue increases at Denny's, driven by continued same-store sales growth, were offset by lower revenue at Coco's and Carrows resulting from decreases in same-store sales and in the number of Company-owned restaurants.

The Company reported a decrease in EBITDA from continuing operations for the year-to-date period to $142.4 million, compared with $157.5 million in the prior year period. The decrease was principally attributable to declines at Coco's and Carrows. Total EBITDA, including discontinued operations at El Pollo Loco, decreased to $162.4 million, versus $174.1 million in the prior year period.

Denny's same-store sales for Company-owned and franchised restaurants increased 1.4 percent and 1.6 percent, respectively, during the third quarter. Denny's EBITDA of $52.9 million was even with the prior year quarter. The impact of higher same-store sales and gains on refranchising were offset by increased labor costs. The Denny's system opened 23 new restaurants during the quarter and opened or acquired 79 new restaurants during the year-to-date period, increasing the total system to 1,765 restaurants.

Denny's has completed the reimaging of 110 restaurants within the past 12 months. For the 57 restaurants open between three and six months since reimaging, same-store sales are up approximately seven percent.

Coco's third quarter EBITDA declined to $6.4 million from $7.6 million in the prior year quarter. The Coco's system opened five new restaurants during the quarter and 11 restaurants during the year-to-date period. Carrows' third quarter EBITDA increased to $5.6 million from $4.9 million in the prior year quarter.

El Pollo Loco, which has been reflected as a discontinued operation, recorded same-store sales increases of 7.0 percent and 5.5 percent at Company-owned and franchised restaurants, respectively, for the third quarter. EBITDA increased to $6.7 million, compared with $5.1 million in the prior year quarter. The increased profitability resulted primarily from higher same-store sales and improved cost controls. The El Pollo Loco system opened five new restaurants during the quarter and 11 restaurants during the year-to-date period, increasing the total system to 274 restaurants.

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.