What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 246 added, 142 removed, 542 unchanged (42% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except share data)

(Amounts in thousands, except share and per share data)

Current assets:

31 unchanged sentences

Common stock, $ 0.01 par value, 200,000,000 shares authorized;

31,179,519 and 31,353,223 shares issued and outstanding as of March 27, 2024 and December 27, 2023, respectively

29,988,771 and 31,353,223 shares issued and outstanding as of June 26, 2024 and December 27, 2023, respectively

Additional paid-in-capital

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Amounts in thousands, except share data)

(Amounts in thousands, except share and per share data)

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Company-operated restaurant revenue

11 unchanged sentences

Depreciation and amortization

Loss on disposal of assets

Loss (gain) on disposal of assets

Gain on recovery of insurance proceeds, property, equipment and expenses

Gain on disposition of restaurants

Loss (gain) on disposition of restaurants

Impairment and closed-store reserves

2 unchanged sentences

Interest expense, net

Income tax receivable agreement income

Income tax receivable agreement expense (income)

Income before provision for income taxes

7 unchanged sentences

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Other comprehensive (loss) income

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Other comprehensive loss

Changes in derivative instruments

Reclassifications of (loss) gains into net income

Reclassifications of loss into net income

Income tax benefit

Other comprehensive (loss) income, net of taxes

Other comprehensive loss, net of taxes

Comprehensive income

3 unchanged sentences

(Amounts in thousands, except share data)

Thirteen Weeks Ended March 27, 2024

Thirteen Weeks Ended June 26, 2024

Comprehensive

1 unchanged sentence

(Loss) Income

Balance, December 27, 2023

Balance, March 27, 2024

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options, net

Shares repurchased for employee tax withholdings

Repurchase of common stock

( 1,737,786 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Balance, June 26, 2024

Thirteen Weeks Ended June 28, 2023

Comprehensive

Stockholders’

(Loss) Income

Balance, March 29, 2023

Thirteen Weeks Ended March 29, 2023

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options, net

Shares repurchased for employee tax withholdings

Repurchase of common stock

( 1,272,287 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Other comprehensive income, net of tax

Balance, June 28, 2023

Twenty-Six Weeks Ended June 26, 2024

Comprehensive

3 unchanged sentences

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options, net

Shares repurchased for employee tax withholdings

Repurchase of common stock

( 1,874,186 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Balance, June 26, 2024

Twenty-Six Weeks Ended June 28, 2023

Comprehensive

Stockholders’

(Loss) Income

Balance, December 28, 2022

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options, net

Shares repurchased for employee tax withholdings

Repurchase of common stock

( 1,824,636 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Other comprehensive (loss) income, net of tax

Balance, March 29, 2023

Balance, June 28, 2023

See notes to condensed consolidated financial statements (unaudited).

2 unchanged sentences

(Amounts in thousands)

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

Cash flows from operating activities:

4 unchanged sentences

Fire insurance proceeds for expenses paid and lost profit

Gain on disposition of restaurants

Loss on disposal of assets

Loss (gain) on disposition of restaurants

Loss (gain) on disposal of assets

Gain on recovery of insurance proceeds, property, equipment and expenses, net

9 unchanged sentences

Accrued insurance

Payment related to tax receivable agreement

Other accrued expenses and liabilities

6 unchanged sentences

Cash flows from financing activities:

Proceeds from borrowings on revolver and swingline loans

Payments on revolver and swingline loan

Minimum tax withholdings related to net share settlements

Proceeds from issuance of common stock upon exercise of stock options, net of expenses

5 unchanged sentences

Cash and cash equivalents, end of period

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

Supplemental cash flow information

2 unchanged sentences

Unpaid purchases of property and equipment

Unpaid repurchases of common stock

Unpaid repurchases of common stock and excise tax

See notes to condensed consolidated financial statements (unaudited).

6 unchanged sentences

(“EPL”), which develops, franchises, licenses, and operates quick-service restaurants under the name El Pollo Loco® and operates under one operating segment.

At March 27, 2024, the Company operated 172 and franchised 323 El Pollo Loco restaurants.

At June 26, 2024, the Company operated 171 and franchised 324 El Pollo Loco restaurants in the United States.

The Company also licenses 10 restaurants in the Philippines.

Basis of Presentation

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Holdings and Holdings’ direct subsidiary, EPL Intermediate, Inc.

(“Intermediate”), guarantee EPL’s 2022 Revolver (as defined below) on a full and unconditional basis (see Note 4, “Long-Term Debt”), and Intermediate has no subsidiaries other than EPL.

(“Intermediate”), guarantee EPL’s 2022 Revolver (as defined in Note 4 below) on a full and unconditional basis (see Note 4, “Long-Term Debt”), and Intermediate has no subsidiaries other than EPL.

EPL is a separate and distinct legal entity and has no obligation to make funds available to Intermediate.

10 unchanged sentences

The Company’s principal liquidity and capital requirements are new restaurants, existing restaurant capital investments (remodels and maintenance), interest payments on its debt, lease obligations and working capital and general corporate needs.

At March 27, 2024, the Company’s total debt was $ 80.0 million.

At June 26, 2024, the Company’s total debt was $ 87.0 million.

The Company’s ability to make payments on its indebtedness and to fund planned capital expenditures depends on available cash and its ability to generate adequate cash flows in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond the Company’s control.

Based on current operations, the Company believes that its cash flow from operations, available cash of $ 9.1 million at March 27, 2024, and the outstanding borrowing availability under the 2022 Revolver will be adequate to meet the Company’s liquidity needs for the next twelve months from the date of filing of these condensed consolidated financial statements.

Based on current operations, the Company believes that its cash flow from operations, available cash of $ 10.5 million at June 26, 2024, and the outstanding borrowing availability under the 2022 Revolver will be adequate to meet the Company’s liquidity needs for the next twelve months from the date of filing of these condensed consolidated financial statements.

Subsequent Events

Subsequent to the quarter-end, the Company paid down $ 5.0 million on its 2022 Revolver resulting in outstanding borrowings as of May 2, 2024 of $ 75.0 million.

Subsequent to the quarter-end, the Company paid down $ 4.0 million on its 2022 Revolver resulting in outstanding borrowings of $ 83.0 million as of August 1, 2024.

Concentration of Risk

1 unchanged sentence

The Company has never experienced any losses related to these balances.

The Company had no supplier for which amounts due totaled more than 10.0% of the Company’s accounts payable at March 27, 2024.

As of December 27, 2023, the Company had one supplier to whom amounts due totaled 15.1 % of the Company’s accounts payable.

Purchases from the Company’s largest supplier totaled 24.7 % of total expenses for the thirteen weeks ended March 27, 2024, and 26.5 % of total expenses for the thirteen weeks ended March 29, 2023, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.5 % of total revenue for the thirteen weeks ended March 27, 2024, and 70.7 % for the thirteen weeks ended March 29, 2023.

The Company had one supplier to whom amounts due totaled 11.9 % and 15.1 % of the Company’s accounts payable at June 26, 2024 and December 27, 2023, respectively.

Purchases from the Company’s largest supplier totaled 24.2 % and 24.4 % of total expenses for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and 27.8 % and 27.3 % of total expenses for the thirteen and twenty-six weeks ended June 28, 2023, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.8 % and 71.7 % of total revenue for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and 70.9 % and 70.8 % for the thirteen and twenty-six weeks ended June 28, 2023, respectively.

Goodwill and Indefinite Lived Intangible Assets

9 unchanged sentences

As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2023 or the thirteen weeks ended March 27, 2024.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2023 or the twenty-six weeks ended June 26, 2024.

The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

10 unchanged sentences

These assumptions are subject to change as a result of changing economic and competitive conditions.

The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen weeks ended March 27, 2024.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen weeks ended March 27, 2024.

The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen and twenty-six weeks ended June 26, 2024.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen and twenty-six weeks ended June 26, 2024.

Fair Value Measurements

8 unchanged sentences

In other words, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances (e.g., when there is evidence of impairment).

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen weeks ended March 27, 2024.

The following non-financial instruments were measured at fair value on a nonrecurring basis as of and for the thirteen weeks ended March 29, 2023, reflecting certain property and equipment assets and ROU assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Property and Equipment and ROU Assets” (in thousands):

There were no non-financial instruments measured at fair value on a nonrecurring basis as of and for the thirteen and twenty-six weeks ended June 26, 2024.

The following non-financial instruments were measured at fair value on a nonrecurring basis as of and for the thirteen and twenty-six weeks ended June 28, 2023, reflecting certain property and equipment assets and right of use (“ROU”) assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Property and Equipment and ROU Assets” (in thousands):

Thirteen Weeks

Fair Value Measurements at March 29, 2023 Using

Ended March 29, 2023

Twenty-Six Weeks

Fair Value Measurements at June 28, 2023 Using

Ended June 28, 2023

Impairment Losses

Certain ROU assets, net

7 unchanged sentences

If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material.

The Company determined that triggering events occurred for certain restaurants during the thirteen weeks ended March 27, 2024 that required an impairment review of certain of the Company’s property and equipment and ROU assets.

Based on the results of the analysis, the Company did no t record any non-cash impairment charges for the thirteen weeks ended March 27, 2024.

The Company recorded a non-cash impairment charge of less than $ 0.1 million for the thirteen weeks ended March 29, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California.

For this restaurant, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.

The Company determined that triggering events occurred for certain restaurants during the twenty-six weeks ended June 26, 2024 that required an impairment review of certain of the Company’s property and equipment and ROU assets.

Based on the results of the analysis, the Company did no t record any non-cash impairment charges for the thirteen and twenty-six weeks ended June 26, 2024.

The Company recorded a non-cash impairment charge of less than $ 0.1 million for the thirteen and twenty-six weeks ended June 28, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California.

Given the inherent uncertainty in projecting results for newer restaurants in newer markets, the Company monitors the recoverability of the carrying value of the assets of several restaurants on an ongoing basis.

For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.

Closed-Store Reserves

2 unchanged sentences

Additionally, any property tax and common area maintenance (“CAM”) payments relating to closed restaurants are included within closed-store expense.

During both the thirteen weeks ended March 27, 2024 and March 29, 2023, the Company recognized less than $ 0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

During both the thirteen and twenty-six weeks ended June 26, 2024 and June 28, 2023, the Company recognized less than $ 0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

Gain on Recovery of Insurance Proceeds, Lost Profits

1 unchanged sentence

In fiscal 2023, the Company incurred costs directly related to the fire of less than $ 0.1 million.

The Company recognized gains of $ 0.2 million, related to the reimbursement of property and equipment and expenses incurred and $ 0.2 million related to the reimbursement of lost profits.

The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the thirteen weeks ended March 29, 2023, as a reduction of company restaurant expenses.

The Company received from the insurance company cash of $ 0.4 million, net of the insurance deductible, during fiscal 2023.

Gain on Disposition of Restaurants

During the thirteen weeks ended March 29, 2023, the Company completed the sale of one restaurant within California to an existing franchisee.

The Company has determined that this restaurant disposition represents multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on its relative standalone selling price.

The Company received $ 0.4 million in cash, net of the insurance deductible, from the insurance company during fiscal 2023 for which the Company recognized gains of $ 0.2 million, related to the reimbursement of property and equipment and expenses incurred and $ 0.2 million related to the reimbursement of lost profits.

The gain on recovery of insurance proceeds for the reimbursement of property and

equipment and expenses and the reimbursement of lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the twenty-six weeks ended June 28, 2023, as a reduction of company restaurant expenses.

Loss (Gain) on Disposition of Restaurants

During the thirteen and twenty-six weeks ended June 26, 2024, the Company completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024.

During the twenty-six weeks ended June 28, 2023, the Company completed the sale of one restaurant within California to an existing franchisee.

The Company determined that these restaurant dispositions represented multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on its relative standalone selling price.

Cash proceeds included upfront consideration for the sale of the restaurant and franchise fees.

1 unchanged sentence

The Company initially defers and subsequently recognizes the franchise fees over the term of the franchise agreement.

During the thirteen weeks ended March 29, 2023, this sale resulted in cash proceeds of $ 0.2 million and a net gain on sale of restaurant of $ 0.1 million.

Since the date of their sale, this restaurant is now included in the total number of franchised El Pollo Loco restaurants.

During the twenty-six weeks ended June 26, 2024 and June 28, 2023, these sales resulted in cash proceeds of $ 0.1 million and $ 0.2 million, respectively, and a net loss of sale of restaurant of less than $ 0.1 million and a net gain on sale of restaurant of $ 0.1 million, respectively.

Since the date of sale, this restaurant is now included in the total number of franchised El Pollo Loco restaurants.

The provision for income taxes, income taxes payable and deferred income taxes is determined using the asset and liability method.

11 unchanged sentences

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

The Company had no accrual for interest or penalties at March 27, 2024 or at December 27, 2023.

The Company did no t recognize interest or penalties during the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively, since there were no material unrecognized tax benefits.

The Company had no accrual for interest or penalties at June 26, 2024 or at December 27, 2023.

The Company did no t recognize interest or penalties during the thirteen and twenty-six weeks ended June 26, 2024 and June 28, 2023, respectively, since there were no material unrecognized tax benefits.

Management believes no significant changes to the amount of unrecognized tax benefits will occur within the next twelve months.

On July 30, 2014, the Company entered into the income tax receivable agreement (the “TRA”), which calls for the Company to pay to its pre-initial public offering (“IPO”) stockholders 85 % of the savings in cash that the Company realizes in its income taxes as a result of utilizing its net operating losses (“NOLs”) and other tax attributes attributable to preceding periods.

For the thirteen weeks ended March 27, 2024, the Company did not record any income tax receivable agreement income or expense, and for the thirteen weeks ended March 29, 2023, the Company recorded income tax receivable agreement income of $ 0.1 million, in each case, related to the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income.

For the quarter ended March 27, 2024, the Company recorded an income tax provision of $ 2.2 million, reflecting an estimated effective tax rate of 27.1 %.

For the quarter ended March 29, 2023, the Company recorded an income tax provision of $ 2.0 million, reflecting an estimated effective tax rate of approximately 28.4 %.

The difference between the 21.0 % statutory rate and the effective tax rate of 27.1 % for the quarter ended March 27, 2024 is primarily a result of state taxes , a non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit .

For the thirteen and twenty-six weeks ended June 26, 2024, the Company did no t record any income tax receivable agreement income or expense, and for the thirteen and twenty-six weeks ended June 28, 2023, the Company recorded income tax receivable agreement expense of $ 0.1 million and income tax receivable agreement income of less than $ 0.1 million related to the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income.

On May 29, 2024, the Company terminated most of the obligations under the TRA, dated July 30, 2014, with respect to any payments or obligations owed to the FS Equity Partners V, L.P.

and FS Affiliates V, L.P.

(together, the “Sellers”) thereunder in exchange for a payment to the Sellers of $ 398,896 .

As of June 26, 2024, an immaterial amount of obligations owed remained outstanding on the Company’s condensed consolidated balance sheets.

For the quarter ended June 26, 2024, the Company recorded an income tax provision of $ 3.2 million, reflecting an estimated effective tax rate of 29.3 %.

For the quarter ended June 28, 2023, the Company recorded an income tax provision of $ 2.7 million, reflecting an estimated effective tax rate of approximately 27.9 %.

For the year-to-date period ended June 26, 2024, the Company recorded an income tax provision of $ 5.4 million, reflecting an estimated effective tax rate of approximately 28.4 %.

For the year-to-date period ended June 28, 2023, the Company recorded an income tax provision of $ 4.7 million, reflecting an estimated effective tax rate of approximately 28.1 %.

The difference between the 21.0 % statutory rate and the effective tax rate of 28.4 % for the year-to-date period ended June 26, 2024 is primarily a result of state taxes , the impact of non-tax deductible executive compensation, a tax shortfall related to equity compensation deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, partially offset by a Work Opportunity Tax Credit benefit .

Recently Issued Accounting Pronouncements

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2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to

standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied prospectively with the option of retrospective application.

3 unchanged sentences

The costs and related accumulated depreciation and amortization of major classes of property and equipment are as follows (in thousands):

March 27, 2024

June 26, 2024

December 27, 2023

3 unchanged sentences

accumulated depreciation and amortization

Depreciation expense was $ 3.9 million and $ 3.6 million for the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively.

Based on the Company’s review of its property and equipment assets for impairment, the Company did no t record any non-cash impairment charges for the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively.

Depreciation and amortization expense was $ 3.9 million and $ 3.7 million for the thirteen weeks ended June 26, 2024 and June 28, 2023, respectively, and $ 7.7 million and $ 7.3 million for the twenty-six weeks ended June 26, 2024 and June 28, 2023, respectively.

Based on the Company’s review of its property and equipment assets for impairment, the Company did no t record any non-cash impairment charges for the thirteen weeks and twenty-six weeks ended June 26, 2024 and June 28, 2023,

respectively.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Property and Equipment Assets and ROU Assets” for additional information.

1 unchanged sentence

Stock Options

At March 27, 2024, options to purchase 792,165 shares of common stock were outstanding, including 375,412 vested and 416,753 unvested options.

At June 26, 2024, options to purchase 1,121,783 shares of common stock were outstanding, including 335,325 vested and 786,458 unvested options.

Unvested options vest over time;

however, upon a change in control, the Board of Directors may accelerate vesting.

At March 27, 2024, there were no premium options, which are options granted above the stock price at date of grant, that were outstanding.

A summary of stock option activity at March 27, 2024 and changes during the thirteen weeks ended March 27, 2024 is as follows:

A summary of stock option activity at June 26, 2024 and changes during the twenty-six weeks ended June 26, 2024 is as follows:

Weighted-Average

6 unchanged sentences

Forfeited, cancelled or expired

Outstanding – March 27, 2024

Vested and expected to vest at March 27, 2024

Exercisable at March 27, 2024

At March 27, 2024, the Company had total unrecognized compensation expense of $ 1.4 million related to unvested stock options, which it expects to recognize over a weighted-average period of 2.70 years.

Outstanding – June 26, 2024

Vested and expected to vest at June 26, 2024

Exercisable at June 26, 2024

The fair value of each stock option was estimated on the grant date using an exercise price of the closing stock price on the day prior to date of grant and the Black-Scholes option-pricing model with the following weighted average assumptions:

June 26, 2024

June 28, 2023

Expected volatility

Risk-free interest rate

Expected term (years)

Expected dividends

At June 26, 2024, the Company had total unrecognized compensation expense of $ 3.6 million related to unvested stock options, which it expects to recognize over a weighted-average period of 3.56 years.

Restricted Shares

A summary of restricted share activity as of March 27, 2024 and changes during the thirteen weeks ended March 27, 2024 is as follows:

A summary of restricted share activity as of June 26, 2024 and changes during the twenty-six weeks ended June 26, 2024 is as follows:

Weighted-Average

Unvested shares at December 27, 2023

Forfeited, cancelled, or expired

Unvested shares at March 27, 2024

Unvested shares at March 27, 2024, included 458,189 unvested restricted shares and 41,963 unvested restricted units.

At March 27, 2024, the Company had unrecognized compensation expense of $ 2.7 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 2.43 years and unrecognized compensation expense of $ 0.2 million related to unvested restricted units, which it expects to recognize over a weighted-average period of 0.62 years.

Total stock-based compensation expense was $ 0.9 million for the thirteen weeks ended March 27, 2024, and $ 0.8 million for the thirteen weeks ended March 29, 2023.

Forfeited and cancelled

Unvested shares at June 26, 2024

Unvested shares at June 26, 2024, included 669,934 unvested restricted shares, 41,537 unvested performance stock units, and 41,963 unvested restricted units.

At June 26, 2024, the Company had unrecognized compensation expense of $ 6.3 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 3.06 years, unrecognized compensation expense of $ 0.4 million related to unvested performance stock units, which it expects to recognize over a weighted-average period of 2.51 years, and unrecognized compensation expense of $ 0.1 million related to unvested restricted units, which it expects to recognize over a weighted-average period of 0.37 years.

Total stock-based compensation expense was $ 0.9 million and $ 1.8 million for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and $ 0.8 million and $ 1.6 million for the thirteen and twenty-six weeks ended June 28, 2023, respectively.

Share Repurchases

Share Repurchase Program

7 unchanged sentences

Following completion of this repurchase, approximately $ 7.4 million of the Company’s common stock remained available for repurchase under the share repurchase program at December 27, 2023.

For the thirteen weeks ended March 27, 2024, the Company repurchased 136,400 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $ 1.2 million.

Following completion of these repurchases, approximately $ 6.2 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at March 27, 2024.

For the thirteen and twenty-six weeks ended June 26, 2024, the Company repurchased 203,483 and 339,883 shares of common stock, respectively, under the Share Repurchase Program, using open market purchases, for total consideration of approximately $ 2.0 million and $ 3.2 million, respectively.

Following completion of these repurchases, approximately $ 4.2 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at June 26, 2024.

Other Share Repurchases

On May 29, 2024, the Company repurchased 1,534,303 shares for a total purchase price of $ 15.0 million under the Stock Repurchase Agreement with FS Equity Partners V, L.P.

and FS Affiliates V, L.P.

LONG-TERM DEBT

5 unchanged sentences

The obligations under the 2022 Credit Agreement and related loan documents are guaranteed by Holdings and Intermediate.

The obligations of

Holdings, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets subject to certain customary exceptions.

The obligations of Holdings, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets subject to certain customary exceptions.

The special dividend announced by the Company’s Board of Directors on October 11, 2022 was permitted under the terms of 2022 Revolver pursuant to both subclause (iii)(d) and (iii)(e) of the following sentence.

Under the 2022 Revolver, Holdings is restricted from making certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $ 1.0 million per year to repurchase or redeem qualified equity interests of Holdings held by past or present officers, directors, or employees (or their estates) of the Company upon death, disability, or termination of employment, (ii) pay under its TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $ 0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $ 2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $ 5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $ 0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $ 2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $ 5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid.

2 unchanged sentences

Borrowings under the 2022 Revolver may be repaid and reborrowed.

The interest rate range under the 2022 Revolver was 6.92 % to 6.96 % for the thirteen weeks ended March 27, 2024, and 5.69 % to 6.30 % for the thirteen weeks ended March 29, 2023 .

The interest rate range under the 2022 Revolver was 6.67 % to 6.94 % and 6.67 % to 6.96 % for the thirteen and twenty-six weeks ended June 26, 2024, respectively, and 6.22 % to 8.50 % and 5.69 % to 8.50 % for the thirteen and twenty-six weeks ended June 28, 2023 , respectively.

The 2022 Credit Agreement contains certain customary financial covenants, subject to certain exceptions.

The Company was in compliance with the financial covenants as of March 27, 2024.

At March 27, 2024, the Company had $ 80.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $ 9.8 million outstanding, and as a result, the Company had $ 60.2 million in borrowing availability.

The Company was in compliance with the financial covenants as of June 26, 2024.

At June 26, 2024, the Company had $ 87.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $ 9.8 million outstanding, and as a result, the Company had $ 53.2 million in borrowing availability.

Maturities, Borrowings and Paydowns

On July 27, 2022, the Company refinanced and terminated the 2018 Revolver pursuant to the 2022 Credit Agreement.

During the thirteen weeks ended March 27, 2024 and March 29, 2023 the Company paid down $ 4.0 million and $ 8.0 million, respectively, on the 2022 Revolver.

No amounts were borrowed on the 2022 Revolver during both the thirteen weeks ended March 27, 2024 and March 29, 2023.

During the thirteen and twenty-six weeks ended June 26, 2024, the Company paid down $ 7.0 million and $ 11.0 million, respectively, on the 2022 Revolver.

During the twenty-six weeks ended June 28, 2023, the Company paid down $ 8.0 million on the 2022 Revolver.

During the thirteen and twenty-six weeks ended June 26, 2024, the Company borrowed $ 14.0 million on the 2022 Revolver.

During the thirteen and twenty-six weeks ended June 28, 2023, the Company borrowed $ 2.0 million on the 2022 Revolver.

There are no required principal payments prior to maturity for the 2022 Revolver which matures on July 27, 2027.

7 unchanged sentences

The remaining amount in AOCI related to the hedging relationship was reclassified into earnings when the hedged forecasted transaction was reported in earnings.

As of March 27, 2024, there were no estimated net gains to be included in AOCI related to the Company’s cash flow hedge that would be reclassified into earnings, based on current Term SOFR interest rates.

The following table summarizes the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income (in thousands):

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Interest expense on hedged portion of debt

1 unchanged sentence

Interest income on debt and derivatives, net

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen weeks ended March 27, 2024 and March 29, 2023 (in thousands):

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen and twenty-six weeks ended June 26, 2024 and June 28, 2023 (in thousands):

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Gain Reclassified from

Net Gain Recognized in OCI

AOCI into Interest Income

March 27, 2024

March 29, 2023

March 27, 2024

March 29, 2023

Net Gain Recognized in OCI

AOCI into Interest Income

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Interest rate swap

2 unchanged sentences

Other accrued expenses and current liabilities consist of the following (in thousands):

March 27, 2024

June 26, 2024

December 27, 2023

8 unchanged sentences

Other noncurrent liabilities consist of the following (in thousands):

March 27, 2024

June 26, 2024

December 27, 2023

5 unchanged sentences

The outcomes of these actions are not predictable but the Company does not believe that the ultimate resolution of these other actions will have a material adverse effect on its financial position, results of operations, liquidity, or capital resources.

A significant increase in the number of claims, or an increase in amounts owing under

successful claims, could materially and adversely affect its business, condensed consolidated financial condition, results of operations, and cash flows.

A significant increase in the number of claims, or an increase in amounts owing under successful claims, could materially and adversely affect its business, condensed consolidated financial condition, results of operations, and cash flows.

Purchasing Commitments

2 unchanged sentences

These contracts have terms extending through the end of 2024.

At March 27, 2024, the Company’s total estimated commitment to purchase chicken was $ 24.8 million.

At June 26, 2024, the Company’s total estimated commitment to purchase chicken was $ 16.6 million.

Contingent Lease Obligations

1 unchanged sentence

These leases have various terms, the latest of which expires in 2038 .

As of March 27, 2024, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 3.6 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at March 27, 2024 was $ 2.5 million.

As of June 26, 2024, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 3.4 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at June 26, 2024 was $ 2.3 million.

The Company’s franchisees are primarily liable on the leases.

2 unchanged sentences

Employment Agreements

As of March 27, 2024, the Company had employment agreements with three of the officers of the Company.

As of June 26, 2024, the Company had employment agreements with three of the officers of the Company.

These agreements provide for minimum salary levels, possible annual adjustments for cost-of-living changes, and incentive bonuses that are payable under certain business conditions.

4 unchanged sentences

EARNINGS PER SHARE

Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen weeks ended March 27, 2024 and March 29, 2023.

Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and twenty-six weeks ended June 26, 2024 and June 28, 2023.

Diluted EPS is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method.

1 unchanged sentence

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Weighted-average shares outstanding—basic

5 unchanged sentences

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Weighted-average shares outstanding—basic

15 unchanged sentences

A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty points terms.

As of both March 27, 2024 and December 27, 2023, the revenue allocated to loyalty points that have not been redeemed was $ 0.7 million, which is reflected in the Company’s accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

As of June 26, 2024 and December 27, 2023, the revenue allocated to loyalty points that have not been redeemed was $ 0.8 million and $ 0.7 million, respectively, which is reflected in the Company’s accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

The Company expects the loyalty points to be redeemed and recognized over a one-year period.

The Company sells gift cards to its customers in the restaurants and through selected third parties.

The gift cards sold to customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the

jurisdictions in which the Company operates.

The gift cards sold to customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the jurisdictions in which the Company operates.

Furthermore, due to these escheatment rights, the Company does not recognize breakage related to the sale of gift cards due to the immateriality of the amount remaining after escheatment.

19 unchanged sentences

As the Company is considered the principal in this relationship, payment for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the franchisee.

As of March 27, 2024, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied.

As of June 26, 2024, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied.

The following table presents the Company’s revenues disaggregated by geographic market:

March 27, 2024

March 29, 2023

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Greater Los Angeles area market

1 unchanged sentence

Contract balances

The following table provides information about the change in the franchise contract liability balances during the thirteen weeks ended March 27, 2024 and March 29, 2023 (in thousands):

The following table provides information about the change in the franchise contract liability balances during the twenty-six weeks ended June 26, 2024 and June 28, 2023 (in thousands):

December 27, 2023

1 unchanged sentence

Additional contract liability

March 27, 2024

June 26, 2024

December 28, 2022

1 unchanged sentence

Additional contract liability

March 29, 2023

June 28, 2023

The Company’s franchise contract liability includes development fees, initial franchise and license fees, franchise renewal fees, lease subsidies and royalty discounts and is included within other accrued expenses and current liabilities and other noncurrent liabilities within the accompanying condensed consolidated balance sheets.

2 unchanged sentences

Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement.

The following table illustrates the estimated revenue to be recognized in future periods related to performance obligations under the applicable contracts that are unsatisfied as of March 27, 2024 (in thousands):

Franchise revenues:

Changes in the loyalty rewards program liability included in deferred revenue within other accrued expenses and current liabilities on the condensed consolidated balance sheets were as follows (in thousands):

March 27, 2024

June 26, 2024

December 27, 2023

3 unchanged sentences

Loyalty rewards liability, ending balance

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of March 27, 2024 to be recognized within one year .

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of June 26, 2024 to be recognized within one year .

The gift card liability included in other accrued expenses and current liabilities on the condensed consolidated balance sheets was as follows (in thousands):

March 27, 2024

June 26, 2024

December 27, 2023

2 unchanged sentences

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Revenue recognized from gift card liability balance at the beginning of the year

4 unchanged sentences

Additionally, the Company has various contracts with vendors that have been determined to contain an embedded lease in accordance with Topic 842.

As of March 27, 2024, the Company had two leases that it had entered into, but had not yet commenced.

As of June 26, 2024 , the Company had two leases that it had entered into, but had not yet commenced.

The Company does not have control of the property until lease commencement.

9 unchanged sentences

Furthermore, there are no residual value guarantees and no restrictions imposed by the lease.

During the thirteen weeks ended March 27, 2024, the Company reassessed the lease terms on eight restaurants due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

As a result of the reassessment, an additional $ 5.9 million of ROU asset and lease liabilities for the thirteen weeks ended March 27, 2024, respectively, were recognized and will be amortized over the new lease term.

During the thirteen weeks ended March 29, 2023, the Company reassessed the lease terms on 12 restaurants due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

This reassessment resulted in an additional $ 10.1 million of ROU asset and lease liabilities for the thirteen weeks ended March 29, 2023, which were recognized and will be amortized over the new lease term.

During the thirteen and twenty-six weeks ended June 26, 2024, the Company reassessed the lease terms on 4 and 12 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

As a result of the reassessment, an additional $ 1.8 million and $ 8.1 million of ROU asset and lease liabilities for the thirteen and twenty-six weeks ended June 26, 2024, respectively, were recognized and will be amortized over the new lease term.

During the thirteen and twenty-six weeks ended June 28, 2023, the Company reassessed the lease terms on 10 and 22 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

This reassessment resulted in an additional $ 3.5 million and $ 13.6 million of ROU asset and lease liabilities for the thirteen and twenty-six weeks ended June 28, 2023, respectively, which were recognized and will be amortized over the new lease term.

Additionally, as the Company adopted all practical expedients available under Topic 842, no reallocation between lease and non-lease components was necessary.

4 unchanged sentences

The Company does not have any related party leases.

During the thirteen weeks ended March 27, 2024, the Company did not record any non-cash impairment charges.

During the thirteen weeks ended March 29, 2023, the Company recorded a less than $ 0.1 million non-cash impairment charge related to the carrying value of ROU assets of one restaurant in California.

During the twenty-six weeks ended June 26, 2024, the Company did no t record any non-cash impairment charges.

During the twenty-six weeks ended June 28, 2023, the Company recorded a less than $ 0.1 million non-cash impairment charge related to the carrying value of ROU assets of one restaurant in California.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information.

12 unchanged sentences

Thirteen Weeks Ended

March 27, 2024

March 29, 2023

June 26, 2024

June 28, 2023

Finance lease cost:

7 unchanged sentences

Total lease cost

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Operating lease cost:

Fixed rent cost

Short-term lease cost

Variable lease cost

Sublease income

Total lease cost

The following table presents the Company’s total lease cost on the condensed consolidated statements of income (in thousands):

March 27, 2024

March 29, 2023

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 26, 2024

June 28, 2023

June 26, 2024

June 28, 2023

Lease cost – Occupancy and other operating expenses

4 unchanged sentences

Total lease cost

During the thirteen weeks ended March 27, 2024 and March 29, 2023, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):

March 27, 2024

March 29, 2023

During the twenty-six weeks ended June 26, 2024 and June 28, 2023, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):

Twenty-Six Weeks Ended June 26, 2024

Twenty-Six Weeks Ended June 28, 2023

Cash paid for amounts included in the measurement of lease liabilities

12 unchanged sentences

Weighted-average discount rate—operating leases

Information regarding the Company’s minimum future lease obligations as of March 27, 2024 is as follows (in thousands):

Information regarding the Company’s minimum future lease obligations as of June 26, 2024 is as follows (in thousands):

Finance Leases

19 unchanged sentences

Additionally, there are no related party leases.

The Company received $ 0.1 million of lease income from company-owned locations for each of the thirteen weeks ended March 27, 2024 and March 29, 2023.

The Company received $ 0.1 million of lease income from company-owned locations for the thirteen weeks ended June 26, 2024 and June 28, 2023.

The Company received $ 0.2 million and $ 0.1 million of lease income from company-owned locations for the twenty-six weeks ended June 26, 2024 and June 28, 2023, respectively.

SHAREHOLDER RIGHTS AGREEMENT

16 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements