SECURITIES AND
EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 Form
10-Q
 
 x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
quarterly period ended September 30, 2009
 
 or
 
  ̈ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
transition period from __________ to __________
 
 Commission
File No. 333-115644
 
 EPL
Intermediate, Inc.
 (Exact
Name of Registrant as Specified in Its Charter)
  Delaware
              13-4092105(State
      or Other Jurisdiction of
              (I.R.S.
      EmployerIncorporation
      or Organization)
              Identification
      No.)3535
      Harbor Blvd., Suite 100Costa
      Mesa, California
              92626(Address
      of Principal Executive Offices)
              (Zip
      Code)
 
 (714)
599-5000
 (Registrant’s
Telephone Number, Including Area Code)
 
 Not
Applicable
 (Former
Name, Address or Fiscal Year if Changed from Last Report)
 
 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  ̈ Not
applicable.  Registrant is a voluntary filer.
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).     Yes  ̈     No
 ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company, as
defined in Rule 12b-2 of the Exchange Act.
 Large
accelerated filer  ̈Accelerated filer
 ̈Non-accelerated
filer xSmaller reporting
company  ̈
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes  ̈   No
x
 
 As of
November 16, 2009, the registrant had 100 shares of its common stock, $.01 par
value, outstanding.
  
 
 TABLE
OF CONTENTS
  Item
                    
                    
                    PagePART I – FINANCIAL
      INFORMATION1.
                    
                    Condensed
      Consolidated Financial Statements (Unaudited)
                    32.
                    
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                    163.
                    
                    Quantitative
      and Qualitative Disclosures About Market Risk
                    304T.
                    
                    Controls
      and Procedures
                    30PART II – OTHER
      INFORMATION1.
                    
                    Legal
      Proceedings
                    305.
                    
                    Other
      Information
                    306.
                    
                    Exhibits
                    31
  2
  Item
1. Financial Statements
 
 EPL
INTERMEDIATE, INC.
 (A
Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (Amounts in thousands)
 
 
 DECEMBER
      31,
                  
                  
                  SEPTEMBER
      30,2008
                  
                  
                  2009ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                  
                  $
                  1,076
                  
                  
                  $
                  20,051Restricted
      cash
                  
                  
                  -
                  
                  
                  
                  131Accounts
      receivable—net
                  
                  
                  4,472
                  
                  
                  
                  5,071Inventories
                  
                  
                  1,756
                  
                  
                  
                  1,631Prepaid
      expenses and other current assets
                  
                  
                  4,640
                  
                  
                  
                  5,640Income
      taxes receivable
                  
                  
                  43
                  
                  
                  
                  -Deferred
      income taxes
                  
                  
                  1,740
                  
                  
                  
                  -Total
      current assets
                  
                  
                  13,727
                  
                  
                  
                  32,524PROPERTY
      OWNED—Net
                  
                  
                  84,321
                  
                  
                  
                  79,975PROPERTY
      HELD UNDER CAPITALLEASES—Net
                  
                  
                  732
                  
                  
                  
                  568GOODWILL
                  
                  
                  252,418
                  
                  
                  
                  252,418DOMESTIC
      TRADEMARKS
                  
                  
                  103,100
                  
                  
                  
                  103,100OTHER
      INTANGIBLE ASSETS—Net
                  
                  
                  9,157
                  
                  
                  
                  8,287OTHER
      ASSETS
                  
                  
                  6,310
                  
                  
                  
                  12,817TOTAL
      ASSETS
                  
                  $
                  469,765
                  
                  
                  $
                  489,689
 
 See
      notes to condensed consolidated financial statements.
              
              (continued)
  3
 
 EPL
INTERMEDIATE, INC.
 (A
Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (Amounts in thousands, except share
data)
 
  DECEMBER
      31,
                  
                  
                  SEPTEMBER
      30,2008
                  
                  
                  2009LIABILITIES
      AND STOCKHOLDER'S EQUITYCURRENT
      LIABILITIES:Revolving
      credit facility
                  
                  $
                  5,000
                  
                  
                  $
                  -Current
      portion of note payable
                  
                  
                  5,889
                  
                  
                  
                  -Current
      portion of senior secured notes
                  
                  
                  250
                  
                  
                  
                  -Current
      portion of obligations under capital leases
                  
                  
                  601
                  
                  
                  
                  382Accounts
      payable
                  
                  
                  12,441
                  
                  
                  
                  14,581Accrued
      salaries
                  
                  
                  3,410
                  
                  
                  
                  2,836Accrued
      vacation
                  
                  
                  2,075
                  
                  
                  
                  2,054Accrued
      insurance
                  
                  
                  1,723
                  
                  
                  
                  1,556Accrued
      income taxes payable
                  
                  
                  -
                  
                  
                  
                  593Accrued
      interest
                  
                  
                  1,658
                  
                  
                  
                  10,345Accrued
      advertising
                  
                  
                  380
                  
                  
                  
                  -Other
      accrued expenses and current liabilities
                  
                  
                  6,196
                  
                  
                  
                  5,537Total
      current liabilities
                  
                  
                  39,623
                  
                  
                  
                  37,884NONCURRENT
      LIABILITIES:Senior
      secured notes (2012 Notes)
                  
                  
                  -
                  
                  
                  
                  130,193Senior
      unsecured notes payable (2013 Notes)
                  
                  
                  108,163
                  
                  
                  
                  106,305PIK
      Notes (2014 Notes)
                  
                  
                  25,980
                  
                  
                  
                  28,846Note
      payable—less current portion
                  
                  
                  93,464
                  
                  
                  
                  -Obligations
      under capital leases—less current portion
                  
                  
                  2,104
                  
                  
                  
                  1,848Deferred
      income taxes
                  
                  
                  26,136
                  
                  
                  
                  46,685Other
      intangible liabilities—net
                  
                  
                  4,883
                  
                  
                  
                  4,214Other
      noncurrent liabilities
                  
                  
                  12,832
                  
                  
                  
                  11,159Total
      noncurrent liabilities
                  
                  
                  273,562
                  
                  
                  
                  329,250COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDER'S
      EQUITYCommon
      stock, $.01 par value—20,000 shares authorized; 100 shares issued and
      outstanding
                  
                  
                  -
                  
                  
                  
                  -Additional
      paid-in-capital
                  
                  
                  200,046
                  
                  
                  
                  199,555Accumulated
      Deficit
                  
                  
                  (43,466
                  )
                  
                  
                  (77,000
                  )Total
      stockholder's equity
                  
                  
                  156,580
                  
                  
                  
                  122,555TOTAL
                  
                  $
                  469,765
                  
                  
                  $
                  489,689
 
 See
      notes to condensed consolidated financial statements.
              
              (concluded)
  4
 
 EPL
INTERMEDIATE, INC.
 (A
Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)
 
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (Amounts in thousands)
 
 
 13
      Weeks Ended September 30,
                      
                      
                      39
      Weeks Ended September 30,2008
                      
                      
                      2009
                      
                      
                      2008
                      
                      
                      2009OPERATING
      REVENUE:Restaurant
      revenue
                      
                      $
                      69,653
                      
                      
                      $
                      63,740
                      
                      
                      $
                      206,806
                      
                      
                      $
                      197,444Franchise
      revenue
                      
                      
                      5,232
                      
                      
                      
                      4,764
                      
                      
                      
                      15,644
                      
                      
                      
                      14,357Total
      operating revenue
                      
                      
                      74,885
                      
                      
                      
                      68,504
                      
                      
                      
                      222,450
                      
                      
                      
                      211,801OPERATING
      EXPENSES:Product
      cost
                      
                      
                      22,711
                      
                      
                      
                      20,587
                      
                      
                      
                      66,948
                      
                      
                      
                      63,747Payroll
      and benefits
                      
                      
                      18,363
                      
                      
                      
                      16,621
                      
                      
                      
                      54,506
                      
                      
                      
                      52,391Depreciation
      and amortization
                      
                      
                      3,214
                      
                      
                      
                      3,015
                      
                      
                      
                      9,305
                      
                      
                      
                      8,651Other
      operating expenses
                      
                      
                      24,000
                      
                      
                      
                      23,544
                      
                      
                      
                      81,667
                      
                      
                      
                      74,090Total
      operating expenses
                      
                      
                      68,288
                      
                      
                      
                      63,767
                      
                      
                      
                      212,426
                      
                      
                      
                      198,879OPERATING
      INCOME
                      
                      
                      6,597
                      
                      
                      
                      4,737
                      
                      
                      
                      10,024
                      
                      
                      
                      12,922INTEREST
      EXPENSE—Net
                      
                      
                      6,107
                      
                      
                      
                      9,075
                      
                      
                      
                      19,724
                      
                      
                      
                      23,501OTHER
      EXPENSE
                      
                      
                      399
                      
                      
                      
                      -
                      
                      
                      
                      399
                      
                      
                      
                      443OTHER
      INCOME
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (452
                      )INCOME
      (LOSS) BEFORE PROVISION FOR INCOME TAXES
                      
                      
                      91
                      
                      
                      
                      (4,338
                      )
                      
                      
                      (10,099
                      )
                      
                      
                      (10,570
                      )PROVISION
      (BENEFIT) FOR INCOME TAXES
                      
                      
                      43
                      
                      
                      
                      675
                      
                      
                      
                      (4,105
                      )
                      
                      
                      22,964NET
      INCOME (LOSS)
                      
                      $
                      48
                      
                      
                      $
                      (5,013
                      )
                      
                      $
                      (5,994
                      )
                      
                      $
                      (33,534
                      )
 
 See notes
to condensed consolidated financial statements.
  5
 
 EPL
INTERMEDIATE, INC.
 (A
Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts in thousands)
 
 
 39
      Weeks Ended September 30,2008
                  
                  
                  2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (5,994
                  )
                  
                  $
                  (33,534
                  )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
                  
                  
                  9,305
                  
                  
                  
                  8,651Stock-based
      compensation expense
                  
                  
                  574
                  
                  
                  
                  390Interest
      accretion
                  
                  
                  2,813
                  
                  
                  
                  3,336Gain
      on disposal of assets
                  
                  
                  (538
                  )
                  
                  
                  -Gain
      on repurchase of bonds
                  
                  
                  -
                  
                  
                  
                  (452
                  )Asset
      impairment
                  
                  
                  1,230
                  
                  
                  
                  3,200Amortization
      of deferred financing costs
                  
                  
                  1,338
                  
                  
                  
                  2,799Amortization
      of favorable / unfavorable leases
                  
                  
                  (122
                  )
                  
                  
                  (142
                  )Deferred
      income taxes
                  
                  
                  (4,171
                  )
                  
                  
                  22,289Excess
      tax benefits related to exercise / cancellation of stock
      options
                  
                  
                  31
                  
                  
                  
                  -Litigation
      settlement
                  
                  
                  10,924
                  
                  
                  
                  -Change
      in fair value of interest rate swap
                  
                  
                  399
                  
                  
                  
                  231Changes
      in operating assets and liabilities:Notes
      and accounts receivable—net
                  
                  
                  (1,383
                  )
                  
                  
                  (599
                  )Inventories
                  
                  
                  10
                  
                  
                  
                  125Prepaid
      expenses and other current assets
                  
                  
                  (828
                  )
                  
                  
                  (1,000
                  )Income
      taxes receivable / payable
                  
                  
                  (102
                  )
                  
                  
                  636Other
      assets
                  
                  
                  1,357
                  
                  
                  
                  (141
                  )Accounts
      payable
                  
                  
                  3,777
                  
                  
                  
                  2,606Accrued
      salaries and vacation
                  
                  
                  (16
                  )
                  
                  
                  (595
                  )Accrued
      insurance
                  
                  
                  (310
                  )
                  
                  
                  (167
                  )Other
      accrued expenses and current and noncurrent liabilities
                  
                  
                  5,548
                  
                  
                  
                  5,739Net
      cash provided by operating activities
                  
                  
                  23,842
                  
                  
                  
                  13,372CASH
      FLOW FROM INVESTING ACTIVITIES:Proceeds
      from asset disposition
                  
                  
                  1,080
                  
                  
                  
                  -Purchase
      of property
                  
                  
                  (13,157
                  )
                  
                  
                  (7,449
                  )Restricted
      cash
                  
                  
                  -
                  
                  
                  
                  (131
                  )Net
      cash used in investing activities
                  
                  
                  (12,077
                  )
                  
                  
                  (7,580
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of common stock
                  
                  
                  50
                  
                  
                  
                  -Repurchase
      of common stock
                  
                  
                  (47
                  )
                  
                  
                  (881
                  )Excess
      tax benefits related to exercise / cancellation of stock
      options
                  
                  
                  (31
                  )
                  
                  
                  -Capital
      contribution
                  
                  
                  12,000
                  
                  
                  
                  -Proceeds
      from borrowings
                  
                  
                  -
                  
                  
                  
                  133,850Payment
      of obligations under capital leases
                  
                  
                  (848
                  )
                  
                  
                  (475
                  )Payments
      on debt
                  
                  
                  (4,343
                  )
                  
                  
                  (108,603
                  )Repurchase
      of notes
                  
                  
                  (12,812
                  )
                  
                  
                  (1,470
                  )Deferred
      financing costs
                  
                  
                  -
                  
                  
                  
                  (9,238
                  )Net
      cash (used in) provided by financing activities
                  
                  
                  (6,031
                  )
                  
                  
                  13,183
 
 See
      notes to condensed consolidated financial statements.
              
              
              (continued)
  6
 
 EPL
INTERMEDIATE, INC.
 (A
Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts in thousands)
 
 
 39
      Weeks Ended September 30,2008
                  
                  
                  2009INCREASE
      IN CASH AND
                    CASH
      EQUIVALENTS
                  
                  $
                  5,734
                  
                  
                  $
                  18,975CASH
      AND CASH EQUIVALENTS—
                    Beginning
      of period
                  
                  
                  3,841
                  
                  
                  
                  1,076CASH
      AND CASH EQUIVALENTS—
                    End
      of period
                  
                  $
                  9,575
                  
                  
                  $
                  20,051SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW
                    INFORMATION—Cash
      paid during the period for:Interest
      (net of amounts capitalized)
                  
                  $
                  12,696
                  
                  
                  $
                  9,008Income
      taxes
                  
                  $
                  165
                  
                  
                  $
                  38SUPPLEMENTAL
      SCHEDULE OF NON-CASH ACTIVITIES:Unpaid
      purchases of property and equipment
                  
                  $
                  1,257
                  
                  
                  $
                  356Litigation
      settlement paid by Chicken Acquisition Corp. on behalf of the Company,
      treated as a capital contribution
                  
                  $
                  10,924
                  
                  
                  $
                  -
 
 See
      notes to condensed consolidated financial statements.
              
              
              (concluded)
  7
  EPL
INTERMEDIATE, INC.
 (A
Wholly-Owned Subsidiary of El Pollo Loco Holdings, Inc.)
 
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 1.
Basis of Presentation
 
 The
accompanying condensed consolidated financial statements are unaudited. EPL
Intermediate, Inc. (“Intermediate”) and its wholly owned subsidiary El Pollo
Loco, Inc. (“EPL” and jointly with Intermediate, the “Company,”) prepared these
condensed consolidated financial statements in accordance with Article 10 of
Regulation S-X. In compliance with those instructions, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted.
 
 The
accompanying condensed consolidated financial statements include all adjustments
(consisting of normal recurring adjustments and accruals) that management
considers necessary for a fair presentation of its financial position and
results of operations for the interim periods presented. The results of
operations for the interim periods presented are not necessarily indicative of
the results that may be expected for the entire year.
 
 The
accompanying condensed consolidated financial statements should be read in
conjunction with the Company’s audited consolidated financial statements and the
related notes thereto included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008 (File No. 333-115644) as filed with the
Securities and Exchange Commission (the “Commission”) on March 31,
2009.
 
 The
Company uses a 52-53 week fiscal year ending on the last Wednesday of the
calendar year. In a 52-week fiscal year, each quarter includes 13 weeks of
operations; in a 53-week fiscal year, the first, second and third quarters each
include 13 weeks of operations and the fourth quarter includes 14 weeks of
operations. Fiscal year 2008, which ended December 31, 2008, was a 53-week
fiscal year. Fiscal year 2009, which will end December 30, 2009, is a 52-week
year. For simplicity of presentation, the Company has described the periods
ended September 24, 2008 and September 30, 2009 as September 30, 2008 and 2009,
respectively.
 
 The
Company is a wholly-owned subsidiary of El Pollo Loco Holdings, Inc.
(“Holdings”), which is a wholly owned indirect subsidiary of Chicken Acquisition
Corp. (“CAC”) which is 99% owned by Trimaran Pollo Partners, LLC (the “LLC”).
The Company’s activities are performed principally through its wholly-owned
subsidiary, EPL, which develops, franchises, licenses, and operates
quick-service restaurants under the name El Pollo Loco®.
 
 The
Company evaluated subsequent events for recognition or disclosure through
November 16, 2009, which was the date the Company filed this form 10-Q with the
Securities and Exchange Commission.
 
 2.
Cash
 
 Restricted
cash
 
 As of
September 30, 2009 the Company had recorded $0.1 million as restricted cash on
the accompanying condensed consolidated balance sheet.  This amount
serves as collateral to Bank of America for our remaining Bank of America
company credit cards as of September 30, 2009 as the Company transferred the
banking relationship to Wells Fargo.
 
 Concentration
of credit risk
 
 The
Company maintains all of its cash at one commercial bank.  Balances on
deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to
specified limits.  Our balances in excess of the FDIC limits are
uninsured.
  8
 
 3.
Acquisitions of Restaurants
  On
September 24, 2009, EPL purchased four El Pollo Loco restaurants located in the
Atlanta, Georgia area previously owned and operated by an EPL franchisee, Fiesta
Brands, Inc., and related assets, and assumed various operating
contracts, including the leases, relating to the four purchased
restaurants.  EPL will continue to operate the four purchased
restaurants. EPL also purchased furniture, fixtures and equipment of five other
El Pollo Loco restaurants previously operated by Fiesta Brands, Inc. which have
been closed. The purchase price of $1.7 million consisted of cash and was
accounted for using the purchase method of accounting in accordance with
Accounting Standards Codification (“ASC”) 805-10, Business Combinations. The
Company’s allocation of the purchase price to the fair value of the acquired
assets was as follows: equipment, $0.4 million and building and leasehold
improvements, $1.3 million. Results of operations of the Atlanta restaurants are
included in the Company’s financial statements beginning as of the acquisition
date.  Fiesta Brands, Inc. is an affiliate of the Company’s principal
stockholders and certain Company directors.
 
 4.
Other Intangible Assets and Liabilities
 
 Other
intangible assets and liabilities consist of the following (in
thousands):
 
 December 31, 2008
                        
                        September 30, 2009Gross
                        
                        
                        
                        Net
                        
                        Gross
                        
                        
                        
                        NetCarrying
                        
                        Accumulated
                        
                        Carrying
                        
                        Carrying
                        
                        Accumulated
                        
                        CarryingAmount
                        
                        Amortization
                        
                        Amount
                        
                        Amount
                        
                        Amortization
                        
                        AmountFranchise
      network
                        
                        $
                        8,000
                        
                        
                        $
                        (1,425
                        )
                        
                        $
                        6,575
                        
                        
                        $
                        8,000
                        
                        
                        $
                        (1,767
                        )
                        
                        $
                        6,233Favorable
      leasehold interest
                        
                        
                        5,862
                        
                        
                        
                        (3,280
                        )
                        
                        
                        2,582
                        
                        
                        
                        5,862
                        
                        
                        
                        (3,808
                        )
                        
                        
                        2,054Other
      intangible assets
                        
                        $
                        13,862
                        
                        
                        $
                        (4,705
                        )
                        
                        $
                        9,157
                        
                        
                        $
                        13,862
                        
                        
                        $
                        (5,575
                        )
                        
                        $
                        8,287Unfavorable
      leasehold interest liability
                        
                        $
                        (9,156
                        )
                        
                        $
                        4,273
                        
                        
                        $
                        (4,883
                        )
                        
                        $
                        (9,156
                        )
                        
                        $
                        4,942
                        
                        
                        $
                        (4,214
                        )
 
 Favorable
leasehold interest represents the asset in excess of the approximate fair market
value of the leases. The amount is being amortized over the approximate average
life of the leases and is shown as other intangible assets-net on the
accompanying condensed consolidated balance sheet.
 
 Unfavorable
leasehold interest liability represents the liability in excess of the
approximate fair market value of the leases. The amount is being amortized over
the approximate average life of the leases.  This amount is shown as
other intangible liabilities-net on the accompanying condensed consolidated
balance sheet. Amortization for other intangible assets and liabilities was
$221,000 for the 39-week period ended September 30, 2008 and $201,000 for the
39-week period ended September 30, 2009.
  The
estimated amortization for the Company’s amortizable intangible assets and
liabilities for each of the five succeeding fiscal years is as follows (in
thousands):
  Year Ending December 312009
      (October 1st–
      December 31st)
                  
                  $
                  542010
                  
                  
                  1302011
                  
                  
                  1672012
                  
                  
                  1822013
                  
                  
                  2442014
                  
                  
                  230
  9
 
 5.
Asset Impairment
 
 The
Company periodically reviews the performance of company-operated stores on a
restaurant-by-restaurant basis for indicators of asset impairment. If the
Company concludes that the carrying value of certain assets will not be
recovered based on expected undiscounted future cash flows, an impairment
write-down is recorded to reduce the assets to their estimated fair value. As a
result of this review, the Company recorded an impairment charge of
approximately $2.0 million in March 2009 for two under-performing
company-operated stores that will continue to be operated, and $1.2 million in
September 2009 for four under-performing company-operated stores that will
continue to be operated. The Company also recorded an impairment charge of
approximately $1.2 million in September 2008 for two under-performing
company-operated stores that continue to be operated. These impairment charges
are included in other operating expenses in the accompanying condensed
consolidated statements of operations.
 
 6.
Stock-Based Compensation
 
 As of
September 30, 2009, options to purchase 289,216 shares of common stock of CAC
were outstanding, including 65,740 options that are fully vested. The remaining
options partially vest upon the Company’s attaining annual financial or other
goals, with the remaining unvested portion vesting on the seventh anniversary of
the grant date or vesting 100% upon the occurrence of an initial public offering
of at least $50 million or a change in control of CAC. All options were granted
with an exercise price equal to the fair value of the common stock on the date
of grant.
 
 Changes
in stock options for the nine months ended September 30, 2009 are as
follows:
 
 Weighted-AverageRemainingWeighted-
                                  Average
                                
                                
                                Contractual
                                  Life
                                
                                Aggregate
                                  IntrinsicShares
                                
                                
                                Exercise Price
                                
                                
                                (in Years)
                                
                                Value (000’s)Outstanding—December
      31, 2008
                                
                                
                                307,556
                                
                                
                                $
                                69.42Grants
      (weighted-average fair value of $28.29 per share)
                                
                                
                                15,573
                                
                                
                                $
                                68.00Exercised
                                
                                
                                (13,910
                                )
                                
                                $
                                5.97Canceled
                                
                                
                                (20,003
                                )
                                
                                $
                                86.43Outstanding—September
      30, 2009
                                
                                
                                289,216
                                
                                
                                $
                                71.22
                                
                                
                                
                                5.7
                                
                                
                                $
                                -Vested
      and expected to vest – September 30, 2009
                                
                                
                                285,688
                                
                                
                                $
                                71.22
                                
                                
                                
                                5.7
                                
                                
                                $
                                -Exercisable –
      September 30, 2009
                                
                                
                                65,740
                                
                                
                                $
                                9.10
                                
                                
                                
                                2.3
                                
                                
                                $
                                3,872
 
 The
intrinsic value is calculated as the difference between the estimated market
value as of September 30, 2009 and the exercise price of options that are
outstanding and exercisable.
 
 As of
September 30, 2009, there was unrecognized compensation expense of $2.9 million
related to unvested stock options, which the Company expects to recognize over a
weighted-average period of 3.7 years or earlier in the event of an initial
public offering of our common stock or change in
control.
 
 7.
Commitments and Contingencies
 
 Legal
Matters
 
 On or
about April 16, 2004, former managers Haroldo Elias, Marco Ramirez and Javier
Rivera filed a purported class action lawsuit in the Superior Court of the State
of California, County of Los Angeles, against EPL on behalf of all putative
class members (former and current general managers and restaurant managers from
April 2000 to present) alleging certain violations of California labor laws,
including alleged improper classification of general managers and restaurant
managers as exempt employees. Plaintiffs’ requested remedies include
compensatory damages for unpaid wages, interest, certain statutory penalties,
disgorgement of alleged profits, punitive damages and attorneys’ fees and costs
as well as certain injunctive relief.  The hearing on Plaintiffs’
motion for class certification is currently scheduled on December 3,
2009.  While the Company intends to defend against this action
vigorously, the ultimate outcome of this case is presently not determinable as
it is in a preliminary phase. Thus, it is not possible at this time to determine
the likelihood of an adverse judgment or a likely range of damages in the event
of an adverse judgment.
  10
 
 On or
about October 18, 2005, Salvador Amezcua, on behalf of himself and all others
similarly situated, filed a purported class action complaint against EPL in the
Superior Court of the State of California, County of Los Angeles. Carlos Olvera
replaced Mr. Amezcua as the named class representative on August 16, 2006. This
action alleges certain violations of California labor laws and the California
Business and Professions Code, based on, among other things, failure to pay
overtime compensation, failure to provide meal periods, unlawful deductions from
earnings and unfair competition. Plaintiffs’ requested remedies include
compensatory and punitive damages, injunctive relief, disgorgement of profits
and reasonable attorneys’ fees and costs.  The court denied EPL’s
motion to compel arbitration, and the Company appealed that decision. The Court
of Appeal issued its ruling on April 27, 2009 affirming the trial court ruling
on the arbitration issue.  While the Company intends to defend against
this action vigorously, the ultimate outcome of this case is presently not
determinable as it is in a preliminary phase. Thus, it is not possible at this
time to determine the likelihood of an adverse judgment or a likely range of
damages in the event of an adverse judgment.
 
 On June
22, 2006, the Company filed a complaint for declaratory relief, breach of
written contract and bad faith against Arch Specialty Insurance Company
(Arch), seeking damages and equitable relief for Arch’s refusal to carry
out the obligations of its insurance contract to defend and indemnify, among
other things, the Company in the EPL-Mexico v. EPL-USA trademark litigation
settled in June 2008. Following a trial on the merits, the Court issued a final
decision on March 2, 2009 in favor of EPL, which Arch has
appealed.  The opening brief on appeal has been filed by Arch and the
Company’s responsive brief is due November 18, 2009.
 
 In April
2007, Dora Santana filed a purported class action in Superior Court of
California for Los Angeles County on behalf of all “Assistant Shift Managers.”
Plaintiff alleges wage and hour violations including working off the clock,
failure to pay overtime, and meal break violations on behalf of the purported
class, currently defined as all Assistant Managers from April 2003 to present.
The parties have reached an agreement in principle to settle this matter and are
in the process of finalizing that agreement. The classwide settlement requires
Court approval.  In the second quarter of 2009, the Company accrued
the estimated settlement expense of $0.9 million and it is included in other
operating expenses in the accompanying condensed consolidated statement of
operations.  The final amount of the settlement could be materially
different from the $0.9 million that was accrued depending on a variety of
circumstances being met.
 
 On May
30, 2008, Jeannette Delgado, a former Assistant Manager filed a purported class
action on behalf of all hourly (i.e. non-exempt) employees of EPL in Superior
Court of California for Los Angeles County alleging violations of certain
California labor laws and the California Business and Professions Code including
failure to pay overtime, failure to provide meal periods and rest periods and
unfair business practices. By statute, the purported class extends back four
years, to May 30, 2004. Plaintiff’s requested remedies include compensatory and
punitive damages, injunctive relief, disgorgement of profits and reasonable
attorneys’ fees and costs. This lawsuit was served on the Company in early
September 2008.  The parties have reached an agreement in principle to
settle this matter and executed a Memorandum of Understanding in June
2009.  The classwide settlement requires Court approval.  In
the second quarter of 2009, the Company accrued the estimated settlement expense
of $1.5 million and it is included in other operating expenses in the
accompanying condensed consolidated statement of operations. The final amount of
the settlement could be materially different from the $1.5 million that was
accrued depending on a variety of circumstances being met.
 
 On or
about February 2, 2009, Sunset & Westridge, LLC, landlord of a restaurant
site in St. George, Utah, filed suit against EPL in California Superior Court
for the County of Orange seeking declaratory relief for alleged breach of a
commercial lease.  Plaintiff alleges that the Company wrongfully terminated
the lease in question, citing force majeure delays as justification for missing
the delivery date on the property.  The claim settled during a private
mediation in November for an immaterial amount.
  11
 
 On or
about May 26, 2009 in Superior Court in Orange County, California, Martin
Penaloza, a former Assistant Manager, filed a purported class action on behalf
of all non-exempt employees.  The claims, requested remedies, and
potential class in this case overlap those in the Delgado and Santana cases
discussed above.  The settlement of this matter is included in the
settlement of the Delgado and Santana lawsuits.
 
 On or
about September 21, 2009 in Superior Court in Los Angeles County, California,
Oscar Ventura, a former employee filed a purported class action on behalf of all
non-exempt employees.  In addition to the same claims, requested
remedies and potential class as the Delgado and Penaloza actions discussed
above, this lawsuit adds claims for uniform deductions and failure to reimburse
for mileage in violation of California labor statutes.  While the
Company intends to defend against this action vigorously, the ultimate outcome
of this case is presently not determinable as it is in a preliminary phase.
Thus, it is not possible at this time to determine the likelihood of an adverse
judgment or a likely range of damages in the event of an adverse
judgment.
 
 The
Company is also involved in various other claims and legal actions that arise in
the ordinary course of business. The Company does not believe that the ultimate
resolution of these other actions will have a material adverse effect on the
Company’s financial position, results of operations, liquidity and capital
resources. A significant increase in the number of claims or significant cash
payments resulting from successful claims against the Company or settlements
could have a material adverse affect on the Company’s business, financial
condition, results of operation and cash flows. Except for a $2.4 million
accrual for the estimated settlements of the Delgado and Santana cases, the
Company has not recorded any reserves for litigation contingencies.
 
 Purchasing
Commitments
 
 The
Company has entered into long-term beverage supply agreements with certain major
beverage vendors. Pursuant to the terms of these arrangements, marketing rebates
are provided to the Company and its franchisees from the beverage vendors based
upon the dollar volume of purchases for company-operated restaurants and
franchised restaurants, respectively, which will vary according to their demand
for beverage syrup and fluctuations in the market rates for beverage syrup.
These contracts have terms extending into 2011 with an estimated Company
obligation totaling $4.8 million remaining as of September 30,
2009.
 
 In March
2009, EPL executed contracts with two chicken suppliers that are effective
March 2009 and extend for two years.  The agreements provide for prices and
minimum quantities of chicken that EPL must purchase from each supplier. 
The Company’s remaining obligation under the contracts at September 30, 2009 was
approximately $19.7 million.
 
 8.
Senior Secured Notes (2009 Notes)
 
 In
December 2003, EPL issued the 2009 Notes, consisting of $110.0 million of senior
secured notes accruing interest at 9.25% per annum, due December 2009. In May of
2009, the Company repurchased, at par, the remaining outstanding $250,000
balance of these Notes.
 
 9.
Senior Secured Notes (2012 Notes)
 
 On May
22, 2009, EPL issued $132,500,000 aggregate principal amount of 11 3/4%
senior secured notes due December 1, 2012 (the “2012 Notes”) in a private
placement.  EPL sold the 2012 Notes at an issue price equal to 98.0%
of the principal amount, resulting in gross proceeds to EPL of $129,850,000
before expenses and fees.  At September 30, 2009, the Company had
$130.2 million outstanding in aggregate principal amount of the 2012 Notes. The
principal value of the 2012 Notes will increase (representing accretion of
original issue discount) from the date of original issuance so that the accreted
value of the 2012 Notes will be equal to the full principal amount of $132.5
million at maturity. Interest is payable each year in June and December
beginning December 1, 2009. The 2012 Notes are guaranteed by Intermediate and
are secured by a second priority lien on substantially all of the Company’s
assets, which includes all of the outstanding common stock of
EPL.  The 2012 Notes may be redeemed at a premium, at the discretion
of EPL, after March 1, 2011, or sooner in connection with certain equity
offerings. If EPL undergoes certain changes of control, each holder of the notes
may require EPL to repurchase all or a part of its notes at a price of 101% of
the principal amount.  The Indenture governing the 2012 Notes contains
a number of covenants that, among other things, restrict, subject to certain
exceptions, EPL’s ability to incur additional indebtedness; pay dividends or
certain restricted payments; make certain investments; sell assets; create
liens; merge; and enter into certain transactions with its
affiliates.
  12
 
 In
connection with the issuance of the 2012 notes, EPL filed a registration
statement on Form S-4 with the SEC in October 2009 and such registration
statement is required to become effective within 240 days after the issuance of
the 2012 Notes to enable the  holders to exchange the privately placed
2012 Notes for publicly registered notes with, subject to limited exceptions,
identical terms.  If such deadline is not satisfied, or if the
exchange of the 2012 Notes is not completed by 360 days after the issuance of
the 2012 Notes, the interest rate borne by the Notes will be increased by
one-quarter of one percent per annum on a quarterly basis; provided that the
aggregate increase in such annual interest rate may in no event exceed one
percent.
 
 EPL
incurred direct finance costs of approximately $9.1 million in connection with
this offering. Included in these costs are the estimated costs incurred for the
registration statement. These costs have been capitalized and are included in
other assets in the accompanying balance sheets, and the related amortization is
reflected as a component of interest expense in the accompanying condensed
consolidated statement of operations. The Company used the net proceeds from the
2012 Notes to repay the credit facility with Merrill Lynch, Bank of America, et
al (see Note 11) and its 9.25% Senior Secured Notes due 2009 (see Note 8), and
for general corporate purposes.
 
 10.
Senior Unsecured Notes Payable (2013 Notes)
 
 EPL has
outstanding 2013 Notes, consisting of $106.3 million aggregate principal amount
of 11 3/4% senior notes due 2013. Interest is payable in May and November
beginning May 15, 2006. The 2013 Notes are unsecured, are guaranteed by
Intermediate, and may be redeemed, at the discretion of the issuer, after
November 15, 2009. The indenture contains certain provisions which may prohibit
EPL’s ability to incur additional indebtedness, sell assets, engage in
transactions with affiliates, and issue or sell preferred stock, among other
items.
 
 In
October 2006, EPL completed the exchange of the 2013 Notes for registered,
publicly tradable notes that have substantially identical terms as the 2013
Notes. The costs incurred in connection with the offering of the 2013 Notes have
been capitalized and are included in other assets in the accompanying balance
sheets, and the related amortization is reflected as a component of interest
expense in the accompanying condensed consolidated financial statements. The
Company used the proceeds from the 2013 Notes to purchase substantially all of
the outstanding 2009 Notes (see Note 8).
 
 As a
holding company, the stock of EPL constitutes Intermediate’s only material
asset. Consequently, EPL conducts all of the Company’s consolidated operations
and owns substantially all of the consolidated operating assets. The Company’s
principal source of the cash required to pay its obligations is the cash that
EPL generates from its operations. EPL is a separate and distinct legal entity,
has no obligation to make funds available to Intermediate, and the 2013 Notes,
the 2012 Notes and the 2014 Notes (see Notes 9 and 13) have restrictions that
limit distributions or dividends that may be paid by EPL to Intermediate.
Conditions that would allow for distributions or dividends to be made include
compliance with a fixed charge coverage ratio test (as defined in the applicable
indentures) and cash received from the proceeds of new equity contributions. As
of September 30, 2009, we are restricted from incurring additional indebtedness,
as EPL does not currently meet the 2.0 to 1 fixed charge coverage ratio required
under our 2012 and 2013 Notes. This restriction does not apply to the existing
loan availability of $6.2 million under the revolving line of credit. There are
also some allowed distributions, payments and dividends for other specific
events. Distributions, dividends or investments would also be limited to 50% of
consolidated net income under certain circumstances.
 
 The
Company purchased $2.0 million in principal amount of the 2013 Notes at a price
of $1.5 million in March 2009.  The net purchase price was 74% of the
principal amount of such notes and resulted in a net gain of $0.5 million which
is included in other income in the condensed consolidated statement of
operations. The gain of $0.5 million is net of the write-off of prorated
deferred finance costs of $0.1 million.
  13
 
 11.
Notes Payable to Merrill Lynch, Bank of America, et al and Revolving Credit
Facility
 
 On
November 18, 2005, EPL entered into a senior secured credit facility with
Intermediate, as parent guarantor, Merrill Lynch Capital Corporation, as
administrative agent, the other agents identified therein, Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Bank of America,
N.A., as lead arrangers and book managers, and a syndicate of financial
institutions and institutional lenders. The credit facility provided for a
$104.5 million term loan and $25.0 million in revolving availability. The
Company repaid the credit facility in full in May 2009 with the proceeds of the
2012 Notes and replaced the revolving loan with the new credit facility
described in Note 12.
 
 The
credit facility bore interest, payable quarterly, at a Base Rate or LIBOR, at
EPL’s option, plus an applicable margin. The applicable margin was based on
EPL’s financial performance, as defined. The applicable margin rate for the term
loan remained constant at 2.50% with respect to LIBOR and at 1.50% with respect
to Base Rate.  See below for the interest rates on the portion of the
term loan represented by an interest rate swap. The credit facility was secured
by a first-priority pledge by Holdings of all of the outstanding stock of the
Company, a first priority pledge by the Company of all of EPL’s outstanding
stock and a first priority security interest in substantially all of EPL’s
tangible and intangible assets. In addition, the credit facility was guaranteed
by the Company and Holdings.
 
 The
credit facility required the prepayment of the term loan in an amount equal to
50% of Excess Operating Cash Flow if, at the end of the fiscal year, the
Consolidated Leverage Ratio was less than 5.0:1.0.  Excess Operating
Cash Flow was defined as an amount equal to Consolidated EBITDA minus
Consolidated Financial Obligations and other specific payments and
adjustments.  The Excess Operating Cash Flow for 2008 was $9.4
million.  The Company made the required prepayment of $4.7 million in
April 2009.
 
 In the
past, to help mitigate risk, we entered into an interest rate swap
agreement.  The agreement was terminated in the second quarter of
2009.  The interest rate swap agreement was intended to reduce
interest rate risk associated with variable interest rate debt.  The
Company had $0.2 million in expense for the 39 weeks ending September 30, 2009,
respectively, related to the change in the fair value of the interest rate swap
agreement.
 
 12.
Revolving Credit Facility
 
 On May
22, 2009, EPL entered into a credit agreement (the "Credit Facility") with
Intermediate as guarantor, Jefferies Finance LLC, as administrative and
syndication agent and the various lenders. The Credit Facility provides for a
$12.5 million revolving line of credit with borrowings limited at any time to
the lesser of (i) $12.5 million or (ii) the Company’s consolidated cash
flow for the most recently completed trailing twelve consecutive
months.  Utilizing the Credit Facility, $6.3 million of letters of
credit were issued and outstanding as of September 30, 2009.
 
 The
Credit Facility bears interest, payable quarterly, at an Alternate Base Rate or
LIBOR, at EPL's option, plus an applicable margin. The applicable margin rate is
5.50% with respect to LIBOR and 4.50% with respect to Alternate Base Rate
advances.  The Credit Facility is secured by a first priority lien on
substantially all of the Company’s assets and is guaranteed by Intermediate. The
Credit Facility matures on July 22, 2012.
 
 The
Credit Facility contains a number of covenants that, among other things,
restrict, subject to certain exceptions, the Company’s ability to (i) incur
additional indebtedness or issue preferred stock; (ii) create liens on assets;
(iii) engage in mergers or consolidations; (iv) sell assets; (v) make certain
restricted payments; (vi) make investments, loans or advances; (vii) make
certain acquisitions; (viii) engage in certain transactions with affiliates;
(ix) change the Company’s lines of business or fiscal year; and (x) engage in
speculative hedging transactions. In addition, the Credit Agreement requires the
Company to maintain, on a consolidated basis, a minimum level of consolidated
cash flow at all times.  As of September 30, 2009, the Company was in
compliance with all of the financial covenants contained in the Credit Facility
and had $6.2 million available for borrowings under the revolving line of
credit.
 
 13.
PIK Notes (2014 Notes)
 
 At
December 31, 2008 and September 30, 2009, the Company had $26.0 million and
$28.8 million, respectively, outstanding in aggregate principal amount of the
2014 Notes. No cash interest will accrue on the 2014 Notes prior to November 15,
2009. Instead, the principal value of the 2014 Notes will increase (representing
accretion of original issue discount) from the date of original issuance until
but not including November 15, 2009 at a rate of 14 1/2% per annum compounded
annually, so that the accreted value of the 2014 Notes on November 15, 2009 will
be equal to the full principal amount of $29.3 million at
maturity.
  14
 
 Beginning
on November 15, 2009, cash interest will accrue on the 2014 Notes at an annual
rate of 14 1/2% per annum payable semi-annually in arrears on May 15 and
November 15 of each year, beginning May 15, 2010. Principal is due on November
15, 2014. The indenture restricts the ability of Intermediate and its
subsidiaries to incur additional indebtedness, sell assets, engage in
transactions with affiliates, and issue or sell preferred stock, among other
items. The indenture also limits the ability of EPL or other subsidiaries to
make dividend or other payments to Intermediate and for Intermediate to make
payments to Holdings (see Note 10).
 
 The 2014
Notes are effectively subordinated to all existing and future indebtedness and
other liabilities of the Company’s subsidiaries. The 2014 Notes are unsecured
and are not guaranteed. If any of the 2014 Notes are outstanding at May 15,
2011, the Company is required to redeem for cash a portion of each note then
outstanding at 104.5% of the accreted value of such portion of such note, plus
accrued and unpaid interest. Additionally, the Company may, at its discretion,
redeem any or all of the 2014 Notes, subject to certain provisions.
 
 In
October 2006, Intermediate completed the exchange of the 2014 Notes for
registered, publicly tradable notes that have substantially identical terms as
the 2014 Notes. The costs incurred in connection with its registration of the
2014 Notes have been capitalized and are included in other assets in the
accompanying balance sheets and the related amortization is reflected as a
component of interest expense in the accompanying condensed consolidated
financial statements.
 
 On
January 25, 2008, CAC made an $8.0 million capital contribution to the Company.
The Company used $7.9 million of these proceeds to repurchase a portion of the
outstanding 2014 Notes at a price that approximated their accreted
value.  The Company wrote-off the prorated deferred finance costs of
$0.1 million at that time.
 
 14.
Income Taxes
 
 The
Company’s taxable income or loss is included in the consolidated federal and
state income tax returns of CAC. The Company records its provision for income
taxes based on its separate stand-alone operating results using the asset and
liability method.
 
 The
Company has determined that the total amount of unrecognized tax benefits was
$0.7 million as of December 31, 2008 and September 30, 2009. The Company will
continue to classify income tax penalties and interest as part of the provision
for income taxes in its Consolidated Statements of Operations. The Company has
not recorded accrued interest and penalties on uncertain tax positions as of
September 30, 2009. The Company’s liability for uncertain tax positions is
reviewed periodically and is adjusted as events occur that affect the estimated
liability for additional taxes, such as the lapsing of applicable statutes of
limitations, the conclusion of tax audits, the measurement of additional
estimated liabilities based on current calculations, the identification of new
uncertain tax positions, the release of administrative tax guidance affecting
the Company’s estimates of tax liabilities, or the rendering of court decisions
affecting its estimates of tax liabilities.
 
 The
Company recorded a full valuation allowance of $21.3 million in June 2009 to
reduce deferred tax assets to the balance that is more likely than not to be
realized. In evaluating the need for a valuation allowance, the Company made
judgments and estimates related to future taxable income and existing facts and
circumstances.  The Company believes that the valuation allowance recorded
at September 30, 2009 is appropriate for the circumstances. However,
subsequent changes in facts and circumstances that affect the Company’s
judgments or estimates in determining the proper deferred tax assets or
liabilities could materially affect the valuation allowance.
 
 15.
New Accounting Pronouncements
 
 In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” (“SFAS 167”). SFAS 167 amends certain requirements of FASB Interpretation
No. 46(R) to improve financial reporting by companies involved with variable
interest entities and to provide more relevant and reliable information to users
of financial statements. SFAS 167 is effective for fiscal years beginning after
November 15, 2009. The Company is currently evaluating the impact that the
adoption of SFAS 167 will have on its results of operations, financial position,
and cash flows.
  15
 
 In August
2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, Measuring
Liabilities at Fair Value, which amends the guidance in ASC 820, Fair Value
Measurements and Disclosures, to provide guidance on fair value measurement of
liabilities.   If a quoted price in an active market is not available
for an identical liability, ASU 2009-05 requires companies to compute fair value
by using quoted prices for an identical liability when traded as an asset,
quoted prices for similar liabilities when traded as an asset or another
valuation technique that is consistent with the guidance is ASC 820.  ASU
2009-05 will be effective for interim and annual periods beginning after its
issuance and is not expected to have a material impact on the Company’s
financial position or results of operations.
 
 In
October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue
Arrangements a consensus of the FASB Emerging Issues Task Force, which
amends the guidance in ASC 605, Revenue Recognition. 
ASU 2009-13 eliminates the residual method of accounting for revenue on
undelivered products and instead, requires companies to allocate revenue to each
of the deliverable products based on their relative selling price.  In
addition, this ASU expands the disclosure requirements surrounding
multiple-deliverable arrangements.  ASU 2009-13 will be effective for
revenue arrangements entered into for fiscal years beginning on or after June
15, 2010.  This is not expected to have a material impact on the Company’s
financial position or results of operations.
 
 Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
 
 You
should read the following discussion together with our unaudited condensed
consolidated financial statements and related notes thereto included elsewhere
in this filing.
 
 Certain
statements contained within this report constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are those that do not relate solely to historical
fact. They include, but are not limited to, any statement that may predict,
forecast, indicate or imply future results, performance, achievements or events.
They may contain words such as “believe,” “anticipate,” “expect,” “estimate,”
“intend,” “project,” “plan,” “will,” “should,” “may,” “could” or words or
phrases of similar meaning.
 
 These
forward-looking statements reflect our current views with respect to future
events and are based on assumptions and are subject to risks and uncertainties.
Also, these forward-looking statements present our estimates and assumptions
only as of the date of this report. Except for our ongoing obligation to
disclose material information as required by federal securities laws, we do not
intend to update you concerning any future revisions to any forward-looking
statements to reflect events or circumstances occurring after the date of this
report.
 
 Factors
that could cause actual results to differ materially from those expressed or
implied by the forward-looking statements include the adverse impact of economic
conditions on our operating results and financial condition, on our ability to
comply with our debt covenants and on our ability to refinance our existing debt
or to obtain additional financing; our substantial level of indebtedness;
food-borne-illness incidents; negative publicity, whether or not valid;
increases in the cost of chicken;  our dependence upon frequent
deliveries of food and other supplies; our vulnerability to changes in consumer
preferences and economic conditions; our sensitivity to events and conditions in
the greater Los Angeles, California area, our largest market; our ability to
compete successfully with other quick service and fast casual restaurants; our
ability to expand into new markets; our reliance on our franchisees, who have
also been adversely impacted by the economic crisis; matters relating to labor
laws and the adverse impact of related litigation, including wage and hour class
actions; our ability to support our expanding franchise system; our ability to
renew leases at the end of their term; the impact of applicable federal, state
or local government regulations; our ability to protect our name and logo and
other proprietary information; and litigation we face in connection with our
operations. Actual results may differ materially due to these risks and
uncertainties and those described in our Annual Report on Form 10-K (File No.
333-115644) as filed with the Securities and Exchange Commission on March 31,
2009, as updated from time to time in our quarterly reports and current reports
filed with the Commission.
  16
 
 We use a
52-53 week fiscal year ending on the last Wednesday of the calendar year. For
simplicity of presentation, we have described the periods ended September 24,
2008 and September 30, 2009 as September 30, 2008 and 2009, respectively. In a
52-week fiscal year, each quarter includes 13 weeks of operations; in a 53-week
fiscal year, the first, second and third quarters each include 13 weeks of
operations and the fourth quarter includes 14 weeks of operations. Fiscal year
2008, which ended December 31, 2008, was a 53-week fiscal year. Fiscal year 2009
which will end December 30, 2009, is a 52-week fiscal year.
 
 References
to “our restaurant system” or “system-wide” mean both company-operated and
franchised restaurants. Unless otherwise indicated, references to “our
restaurants” or results or statistics attributable to one or more restaurants
without expressly identifying them as company-operated, franchise or the entire
restaurant system mean our company-operated restaurants only.
 
 Overview
 
 EPL
Intermediate, Inc. (“Intermediate”) through its wholly-owned subsidiary El Pollo
Loco, Inc. (“EPL” and jointly with Intermediate, the “Company,” “we,” “us” and
“our”) owns, operates and franchises restaurants specializing in marinated
flame-grilled chicken. Our restaurants are located principally in California,
with additional restaurants in Arizona, Colorado, Connecticut, Georgia,
Illinois, Massachusetts, Missouri, Nevada, New Jersey, Oregon, Texas, Utah, and
Virginia. Our typical restaurant is a freestanding building ranging from
approximately 2,200 to 2,600 square feet with seating for approximately 60
customers and offering drive-thru convenience.
 
 Our store
counts at September 30, 2009 and 2008, and December 31, 2008 are set forth
below:
 
 El Pollo Loco RestaurantsSeptember 30,
                        
                        
                        December 31,2008
                        
                        
                        2009
                        
                        
                        2008Company-owned
                        
                        
                        163
                        
                        
                        
                        171
                        
                        
                        
                        165Franchised
                        
                        
                        248
                        
                        
                        
                        244
                        
                        
                        
                        248System-wide
                        
                        
                        411
                        
                        
                        
                        415
                        
                        
                        
                        413
 
 During
the nine months ended September 30, 2009, the Company opened three new
restaurants, purchased four restaurants from a franchisee and closed one
restaurant. During this same nine-month period, our franchisees opened six new
restaurants, closed six restaurants and sold four restaurants to the
Company.
 
 We plan
to open a total of four company-operated restaurants in fiscal 2009 in an effort
to conserve capital. We believe our franchisees will open a total of eight new
restaurants in fiscal 2009.  We anticipate fewer restaurant openings
for both the Company and our franchisees in 2010 compared to this year, due in
part to the difficulty franchisees continue to have in obtaining financing in
this challenging economy and the overall impact the current economic crisis has
had on our business. The growth in new restaurant openings and the rate of
restaurant closings have been, and are expected to continue to be, negatively
impacted by the economic climate, as discussed below.  In response to
the credit crisis, we are adjusting our growth strategy to focus on a new
generation (Gen3) reduced cost restaurant that we believe will appeal to both
single unit and multi-unit franchisees.  The Gen3 is designed to offer
the same features (with fewer seats and no salsa bar) of a typical 2,600 square
foot free-standing drive-thru restaurant, at about half the cost.  The
Gen3, which will range from 1,800 to 2,200 square feet, will have reduced
construction costs and a shorter build-out period than our existing restaurant
design.
 
 At the
end of the third quarter of 2009, we had 16 restaurants open in new markets east
of the Rockies. The 16 open stores are experiencing a wide range of sales
volumes, and a majority of them have sales volumes that are significantly less
than the chain average due to the lack of brand awareness in the new
markets.
  17
 
 Our
revenue is derived from two primary sources, company-operated restaurant revenue
and franchise revenue, the latter of which is comprised principally of franchise
royalties and to a lesser extent franchise fees and sublease rental income. A
common measure of financial performance in the restaurant industry is
“same-store sales.” A restaurant enters our comparable restaurant base for the
calculation of same-store sales the first full week after the 15-month
anniversary of its opening. For the 13 weeks ended September 30, 2009,
same-store sales for restaurants system-wide decreased 10.1%, and for the 39
weeks ended September 30, 2009, same-store sales for restaurants system-wide
decreased 7.6%, compared to the corresponding periods in 2008. System-wide
same-store sales include same-store sales at all company-owned stores and
franchise-owned stores, as reported by franchisees. We use system-wide sales
information in connection with store development decisions, planning and
budgeting analyses. This information is useful in assessing consumer acceptance
of our brand and facilitates an understanding of financial performance as our
franchisees pay royalties (included in franchise revenues) and contribute to
advertising pools based on a percentage of their sales.  Same-store
sales at company-operated restaurants decreased 9.1% for the 13 weeks ended
September 30, 2009, and same-store sales at company-operated restaurants
decreased 7.2% for the 39 weeks ended September 30, 2009, compared to the
corresponding periods in 2008.
 
 Changes
in company-operated restaurant revenue are due to changes in the number of
company-operated restaurants and to increases or decreases in same-store sales,
which may include price, menu mix and transaction volume changes. We implemented
menu price increases in January, May and October 2008. Beginning in the third
quarter of 2008, the depressed economy and increased unemployment, especially in
California, negatively impacted our transaction volume and average check.
Consumers are eating out less, and when they do eat out, are more sensitive to
price increases and are looking for specials and promotions. This has an impact
on both same-store sales and on restaurant margins. Due to these economic
conditions and intense competition, there is no assurance that we will be able
to increase prices in the future to offset the declines in transaction volume
and average check.  The depressed economic and employment conditions
in the first nine months of 2009 resulted in our first decline in nine-month
same-store sales since 2000.  We expect the remainder of 2009 and 2010
to be just as challenging.   Many other factors can influence
sales at all or specific restaurants, including increased competition, strength
of marketing promotions, the restaurant manager’s operational execution and
changes in local market conditions and demographics. In California, our
largest market, at September 30, 2009, unemployment was 12.2% compared to 9.8%
nationally.
 
 Franchise
revenue consists of royalties, initial franchise fees, help desk revenue and
franchise rental income. Royalties average 4% of the franchisees’ net sales. New
franchise restaurant growth is dependent on our ability to sign development
agreements with experienced franchisees in new and existing
markets.   As of September 30, 2009, we had commitments from
franchisees to open 129 restaurants at various dates through 2015. However, the
current adverse economic and liquidity conditions have caused some franchisees
to delay the opening of new restaurants under existing development
agreements.  As a result of these conditions, we estimate that as few
as 45 of those restaurants could open through 2015. Additionally, some of our
franchisees have incurred significant loss of cash flow due to declining sales
in their El Pollo Loco restaurants or other restaurant concepts they operate,
which could result in restaurant closures in the future.  Due in part
to the adverse economic conditions, one developing franchisee filed for
bankruptcy in 2008 and another developing franchisee filed for bankruptcy in
2009, resulting in the closure of six franchise restaurants in 2009 (excluding
the four restaurants that were purchased by the Company from Fiesta Brands,
Inc.).
 
 As of
October 30, 2009 we were legally authorized to market franchises in 44 states.
We have entered into development agreements that usually result in area
development fees being recognized as the related restaurants open. Due to the
recession and associated liquidity crisis, most of our developing franchisees
are having a difficult time obtaining financing for new restaurants. This has
had the effect of slowing development of new El Pollo Loco restaurants,
especially in new markets.   In addition, the current economic
conditions have had a negative effect on our ability to recruit and financially
qualify new single-unit and developing franchisees. We expect these trends to
continue at least through 2009 and into 2010. We expect that many of the
franchisees who have development agreements will not be able to meet the new
unit opening dates required under their agreements.
 
 We sublease facilities to
certain franchisees and the sublease rent is included in our franchise revenue.
This revenue exceeds rent payments made under the leases that are included in
other operating expenses. Since we do not expect to lease or sublease new
properties to our franchisees as we expand our franchise restaurants, we expect
the portion of franchise revenue attributable to franchise rental income to
decrease over time.
  18
 
 Product
cost, which includes food and paper costs, is our largest single expense.
Chicken accounts for the largest part of product cost, which was approximately
14.1% of revenue from company-owned restaurants in the first nine months of
2009.  These costs are subject to increase or decrease based on
commodity cost changes and depend in part on the success of controls we have in
place to manage product cost in the restaurants. We currently have four
contracts for chicken that were effective as of March 1, 2009, at higher prices
than the expiring contracts.  Two of the contracts have a floor and
ceiling price for chicken and are for a term of two years.  The other
two contracts are one year with fixed pricing for the term of the
agreement.  We implemented price increases in January, May and October
2008 that partially mitigated the impact of higher chicken prices. At present
the overall cost of chicken is projected to be neutral in 2010.   However,
under lying commodity costs for corn and soybean meal, and the export
market for these commodities and chicken are  subject to weather
conditions as well as foreign and domestic government actions.
  Payroll
and benefits make up the next largest single expense. Payroll and benefits have
been and remain subject to inflation, including minimum wage increases and
expenses for health insurance and workers’ compensation insurance. A significant
number of our hourly staff are paid at rates consistent with the applicable
federal or state minimum wage and, accordingly, increases in the minimum wage
will increase our labor cost. The state of California (or largest market)
increased the minimum wage from $7.50 per hour to $8.00 per hour effective
January 1, 2008. The federal minimum wage increased from $5.85 to $6.55 per hour
effective July 24, 2008 and increased to $7.25 per hour effective July 24, 2009.
The Company implemented menu price increases totaling approximately 3.7%
throughout 2008 in order to help mitigate the impact on profits of the minimum
wage increase and commodity increases. There is no assurance that we will be
able to increase menu prices in the future to offset these increased costs.
Workers’ compensation insurance costs are subject to a number of factors,
including the impact of legislation. We have seen an overall reduction in the
number of workers’ compensation claims due to employee safety initiatives that
we implemented which has resulted in a reduction in our workers’ compensation
expense compared to prior years.
 
 Depreciation
and amortization expense consists primarily of depreciation of property and
equipment of our restaurants and amortization of our franchise network
intangible asset.
 
 Other
operating expenses include restaurant other operating expense, franchise
expense, and general and administrative expense.
 
 Restaurant
other operating expense includes occupancy, advertising and other costs such as
utilities, repair and maintenance, janitorial and cleaning and operating
supplies.
 
 Franchise
expense consists primarily of rent expense that we pay to landlords associated
with leases under restaurants we are subleasing to franchisees. Franchise
expense usually fluctuates primarily as subleases expire and is to some degree
based on rents that are tied to a percentage of sales calculation. Because we do
not expect to lease or sublease new properties to our franchisees as we expand
our franchise restaurants, we expect franchise expense as a percentage of
franchise revenue to decrease over time. Expansion of our franchise operations
does not require us to incur material additional capital
expenditures.
 
 General
and administrative expense includes all corporate and administrative functions
that support existing operations and provide the infrastructure to facilitate
our growth. These expenses are impacted by litigation costs, rating agency fees,
directors and officers insurance, compliance with laws relating to corporate
governance and public disclosure, and audit fees. We do expect that litigation
expenses could be high in 2009 due to the ongoing wage and hour class action
lawsuits.
  19
 
 Results
of Operations
 
 Our
operating results for the 13 weeks ended September 30, 2008 and 2009 are
expressed as a percentage of restaurant revenue below:
 
 13 Weeks EndedSeptember 30,2008
                  
                  
                  2009Operating
      Statement Data:Restaurant
      revenue
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Product
      cost
                  
                  
                  32.6
                  
                  
                  
                  32.3Payroll
      and benefits
                  
                  
                  26.4
                  
                  
                  
                  26.1Depreciation
      and amortization
                  
                  
                  4.6
                  
                  
                  
                  4.7Other
      operating expenses
                  
                  
                  34.5
                  
                  
                  
                  36.9Operating
      income
                  
                  
                  9.5
                  
                  
                  
                  7.4Interest
      expense-net
                  
                  
                  8.8
                  
                  
                  
                  14.2Other
      expense
                  
                  
                  0.6
                  
                  
                  
                  0.0Income
      (loss) before provision for income taxes
                  
                  
                  0.1
                  
                  
                  
                  (6.8
                  )Provision
      for income taxes
                  
                  
                  0.1
                  
                  
                  
                  1.1Net
      income (loss)
                  
                  
                  0.1
                  
                  
                  
                  (7.9
                  )Supplementary
      Operating Statement Data:Restaurant
      other operating expense
                  
                  
                  22.9
                  
                  
                  
                  24.7Franchise
      expense
                  
                  
                  1.5
                  
                  
                  
                  1.5General
      and administrative expense
                  
                  
                  10.1
                  
                  
                  
                  10.7Total
      other operating expenses
                  
                  
                  34.5
                  
                  
                  
                  36.9
  20
 
 13
Weeks Ended September 30, 2009 Compared to 13 Weeks Ended September 30,
2008
 
 Restaurant
revenue decreased $6.0 million, or 8.5%, to $63.7 million for the 13 weeks ended
September 30, 2009 from $69.7 million for the 13 weeks ended September 30, 2008.
This decrease was primarily due to a reduction of $6.1 million in restaurant
revenue resulting from a 9.1% decrease in company-operated same-store sales for
the 2009 period from the 2008 period. Restaurants enter the comparable
restaurant base for same-store sales the first full week after that restaurant’s
fifteen-month anniversary. The components of the company-operated comparable
sales decrease were price increases totaling approximately 1.3% from October
2008, a transaction decrease of 6.8%, and a menu mix decrease of 3.6%. The menu
mix decrease is a result of deeper discounting in the current period and
customers switching to lower priced menu items.  The company-operated
same-store sales decrease reflects intense competition and a general sales
softness in the QSR industry due to higher unemployment, the recession and other
adverse economic and consumer confidence factors that escalated in 2009 and are
expected to continue through the remainder of 2009 and into 2010.  The
decrease was also due to lost sales of $0.7 million from the closure of three
company-operated restaurants in 2008 and one company-operated restaurant in
2009.  The decrease was partially offset by an increase in restaurant
revenue of $0.1 million from five restaurants opened in 2008 and also by $0.7
million from three restaurants opened in 2009.
 
 Franchise
revenue decreased $0.4 million, or 9.0%, to $4.8 million for the 13 weeks ended
September 30, 2009 from $5.2 million for the 13 weeks ended September 30, 2008.
This decrease is due primarily to lower royalties and percentage rent income,
which are based on sales, resulting from an 11.0% decrease in franchise-operated
same-store sales for the 2009 period from the 2008
period.  Franchise-operated same-store sales were impacted by the same
adverse factors that affected company-operated same-store sales described above.
The decrease in franchise revenue was partially offset by $0.2 million in
revenue recognized due to the termination of the development agreement with our
Atlanta franchisee.
  21
 
 Product
costs decreased $2.1 million, or 9.4%, to $20.6 million for the 13 weeks ended
September 30, 2009 from $22.7 million for the 13 weeks ended September 30, 2008.
This decrease resulted primarily from lower sales due to the decrease in
company-operated same-store sales for the 2009 period.
 
 Product cost as a
percentage of restaurant revenue was 32.3% for the 13 weeks ended September 30,
2009 compared to 32.6% for the 13 weeks ended September 30, 2008. This 0.3%
decrease resulted primarily from the menu price increases taken in October 2008,
partially offset by increases in commodity costs and higher and more frequent
discounting in the current period. Overall, we expect continued pressure on
commodity costs in 2009.
 
 Payroll
and benefit expenses decreased $1.7 million, or 9.5%, to $16.6 million for the
13 weeks ended September 30, 2009 from $18.4 million for the 13 weeks ended
September 30, 2008.  This decrease resulted primarily from fewer
employees needed to support the lower sales volume for the 2009 period and also
due to lower workers’ compensation expense attributed to lower estimated costs
for our current claims.
 
 As a
percentage of restaurant revenue, these costs decreased 0.3% to 26.1% for the
2009 period from 26.4% for the 2008 period due to an adjustment to our workers’
compensation accrual in the current period due to lower estimated costs for our
current claims partially off set by higher labor costs as a percentage of
revenue due to the deleverage caused by the decreasing sales.
 
 Depreciation
and amortization decreased $0.2 million, or 6.2%, to $3.0 million for the 13
weeks ended September 30, 2009 compared to $3.2 million for the 13 weeks ended
September 30, 2008. This decrease is mainly attributed to a portion of the point
of sale equipment in our restaurants becoming fully depreciated at the end of
2008.
 
 These
costs as a percentage of restaurant revenue increased 0.1% to 4.7% for the 2009
period compared with 4.6% for the 2008 period.
 
 Other
operating expenses include restaurant other operating expense, franchise
expense, and general and administrative expense.
 
 Restaurant
other operating expense, which includes utilities, repair and maintenance,
advertising, property taxes, occupancy and other operating expenses, decreased
$0.2 million, or 1.1%, to $15.7 million for the 13 weeks ended September 30,
2009 from $15.9 million for the 13 weeks ended September 30, 2008. This decrease
is mainly attributed to the reasons noted below.
 
 Restaurant
other operating expense as a percentage of revenue increased to 24.7% for the
2009 period from 22.9% for the 2008 period. The increase in operating costs as a
percentage of revenue was due to a 1.2% increase in occupancy costs as a
percentage of revenue, which was primarily a result of higher rent expense in
the current period mainly due to new stores in the current period, higher
general liability expense in the current period which was attributed to
increased claims litigation in the current period and also to the deleverage
caused by the decreasing sales. The increase was also attributed to higher
repair and maintenance cost in the current period of 0.3% as a percentage of
restaurant revenue.  The expense was higher as the timing of repairs
can fluctuate, and also due to the deleverage caused by the lower sales in the
current period. The increase was also attributed to higher credit card and bank
fees of 0.2% as a percentage of revenue which was due to a higher number of
credit card transactions and increased credit card fees and also due to higher
bank fees attributed to our transition to a new bank.  The increase
was partially offset by lower advertising expense of 0.1% as a percentage of
revenue. Advertising expense each quarter may be above or below our planned
annual rate of approximately 4% of revenue, depending on the timing of marketing
promotions and the relative weights and price of media spending.  The
increase in restaurant other operating expense as a percentage of revenue was
also partially offset by a decrease of 0.2% in utilities as a percentage of
revenue which was mainly due to lower natural gas prices in the current period
..
  Franchise
expense consists primarily of rent expense that we pay to landlords associated
with leases under restaurants we are subleasing to franchisees. This expense
usually fluctuates primarily as subleases expire and to some degree based on
rents that are tied to a percentage of sales calculation. Franchise expense
remained flat at $1.0 million for the 13 weeks ended September 30, 2009 and
2008.
  22
 
 General
and administrative expense decreased $0.2 million, or 3.3%, to $6.8 million for
the 13 weeks ended September 30, 2009 from $7.0 million for the 13 weeks ended
September 30, 2008. The decrease was attributed to lower salaries and wages of
$0.4 million due to lower headcount, lower legal fees of $0.4 million in the
current period, lower meetings expense of $0.3 million due to cost saving
initiatives, and lower travel expense of $0.2 million also due to cost saving
initiatives.  The decrease was partially offset by higher bonus
expense of $1.1 million as in the prior year period we reduced our bonus accrual
by $1.2 million and we accrued $0.3 million for bonuses in the current
period.
 
 General
and administrative expense as a percentage of revenue increased 0.6% to 10.7%
for the 13 weeks ended September 30, 2009 from 10.1% for the 13 weeks ended
September 30, 2008. This increase was mainly due to lower
revenue.  The increase was partially offset by the reasons noted
above.
 
 Interest
expense, net of interest income, increased $3.0 million, or 48.6%, to $9.1
million for the 13 weeks ended September 30, 2009 from $6.1 million for the 13
weeks ended September 30, 2008. Our average debt balances for the 2009 period
increased to $267.0 million compared to $247.7 million for the 2008 period and
our average interest rate increased to 11.97% for the 2009 period compared to
9.41% for the 2008 period.
 
 The
Company had $0.4 million in other expense in the 2008 period primarily related
to the change in the fair value of the interest rate swap
agreement.  The fixed interest rate that the Company agreed to pay was
higher than the floating rate estimated for the life of the
agreement.  The Company terminated the interest rate swap agreement in
the second quarter of 2009.
 
 Our
provision for income taxes consisted of an income tax expense of $0.7 million
and income tax expense of $43,000 for the 13-week periods ended September 30,
2009 and 2008, respectively.
 
 As a
result of the factors above we had a net loss of $5.0 million and net income of
$48,000 for the 13 weeks ended September 30, 2009 and 2008, respectively, or
(7.9)% and 0.1% as a percentage of restaurant revenue,
respectively.
 
 39
Weeks Ended September 30, 2009 Compared to 39 Weeks Ended September 30,
2008
 
 Our
operating results for the 39 weeks ended September 30, 2008 and 2009 are
expressed as a percentage of restaurant revenue below:
 
 39 Weeks EndedSeptember 30,2008
                  
                  
                  2009Operating
      Statement Data:Restaurant
      revenue
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Product
      cost
                  
                  
                  32.4
                  
                  
                  
                  32.3Payroll
      and benefits
                  
                  
                  26.4
                  
                  
                  
                  26.5Depreciation
      and amortization
                  
                  
                  4.5
                  
                  
                  
                  4.4Other
      operating expenses
                  
                  
                  39.5
                  
                  
                  
                  37.5Operating
      income
                  
                  
                  4.8
                  
                  
                  
                  6.5Interest
      expense-net
                  
                  
                  9.5
                  
                  
                  
                  11.9Other
      expense
                  
                  
                  0.2
                  
                  
                  
                  0.2Other
      income
                  
                  
                  0.0
                  
                  
                  
                  (0.2
                  )Loss
      before provision for income taxes
                  
                  
                  (4.9
                  )
                  
                  
                  (5.4
                  )Provision
      (benefit) for income taxes
                  
                  
                  (2.0
                  )
                  
                  
                  11.6Net
      loss
                  
                  
                  (2.9
                  )
                  
                  
                  (17.0
                  )Supplementary
      Operating Statement Data:Restaurant
      other operating expense
                  
                  
                  22.5
                  
                  
                  
                  23.6Franchise
      expense
                  
                  
                  1.5
                  
                  
                  
                  1.5General
      and administrative expense
                  
                  
                  15.5
                  
                  
                  
                  12.4Total
      other operating expenses
                  
                  
                  39.5
                  
                  
                  
                  37.5
  23
 
 Restaurant
revenue decreased $9.4 million, or 4.5%, to $197.4 million for the 39 weeks
ended September 30, 2009 from $206.8 million for the 39 weeks ended September
30, 2008. This decrease was primarily due to a reduction of $14.6 million in
restaurant revenue resulting from a 7.2% decrease in company-operated same-store
sales for the 2009 period compared to the 2008 period. Restaurants enter the
comparable restaurant base for same-store sales the first full week after that
restaurant’s fifteen-month anniversary. The components of the company-operated
comparable sales decrease were price increases totaling approximately 2.2% in
May, October and various other times after March 31, 2008, a transaction
decrease of 2.7%, and a menu mix decrease of 6.7%. The menu mix decrease is a
result of deeper discounting in the current period and customers switching to
lower priced menu items. The company-operated same-store sales decrease reflects
intense competition and a general sales softness in the QSR industry due to
higher unemployment, the recession and other adverse economic and consumer
confidence factors that escalated in 2009 and are expected to continue through
the remainder of 2009 and into 2010.  The decrease was also due to
lost sales of $1.6 million from the closure of three company-operated
restaurants in 2008 and one company-operated restaurant in 2009.  The
decrease was partially offset by an increase in restaurant revenue of $5.2
million from ten restaurants opened in 2007 and 2008 and also by $1.6 million
from three restaurants opened in 2009.
 
 Franchise
revenue decreased $1.2 million, or 8.2%, to $14.4 million for the 39 weeks ended
September 30, 2009 from $15.6 million for the 39 weeks ended September 30, 2008.
This decrease is due primarily to decreased development fees which are
attributed to fewer franchised restaurant openings in the current period and
also due to lower royalties and percentage rent income, which are based on
sales, resulting from an 8.0% decrease in franchise-operated same-store sales
for the 2009 period from the 2008 period.  Franchise-operated
same-store sales were impacted by the same adverse factors that affected
company-operated same-store sales described above.
 
 Product
costs decreased $3.2 million, or 4.8%, to $63.7 million for the 39 weeks ended
September 30, 2009 from $66.9 million for the 39 weeks ended September 30, 2008.
This decrease resulted primarily from lower sales due to the decrease in
company-operated same-store sales for the 2009 period.
 
 Product
cost as a percentage of restaurant revenue was 32.3% for the 39 weeks ended
September 30, 2009 compared to 32.4% for the 39 weeks ended September 30, 2008.
The menu price increases taken in May and October 2008 offset the majority of
increases in commodity costs and the impact of the increased discounting in the
current period. Overall, we expect continued pressure on commodity costs in
2009.
 
 Payroll
and benefit expenses decreased $2.1 million, or 3.9%, to $52.4 million for the
39 weeks ended September 30, 2009 from $54.5 million for the 39 weeks ended
September 30, 2008. This decrease resulted primarily from fewer employees needed
to support the lower sales volume for the 2009 period.
 
 As a
percentage of restaurant revenue, these costs increased 0.1% to 26.5% for the
2009 period from 26.4% for the 2008 period due to the decrease in restaurant
revenue.
 
 Depreciation
and amortization decreased $0.6 million, or 7.0%, to $8.7 million for the 39
weeks ended September 30, 2009 compared to $9.3 million for the 39 weeks ended
September 30, 2008. This decrease is mainly attributed to a portion of the point
of sale equipment in our restaurants becoming fully depreciated at the end of
2008.
 
 These
costs as a percentage of restaurant revenue decreased slightly to 4.4% for the
2009 period compared with 4.5% for the 2008 period.
 
 Other
operating expenses include restaurant other operating expense, franchise
expense, and general and administrative expense.
  24
 
 Restaurant
other operating expense, which includes utilities, repair and maintenance,
advertising, property taxes, occupancy and other operating expenses, increased
$0.1 million, or 0.1%, to $46.7 million for the 39 weeks ended September 30,
2009 from $46.6 million for the 39 weeks ended September 30, 2008. This increase
is mainly attributed to new restaurants and the reasons noted
below.
 
 Restaurant
other operating expense as a percentage of revenue increased to 23.6% for the
2009 period from 22.5% for the 2008 period. The increase in operating costs was
due to a 0.8% increase in occupancy costs as a percentage of revenue, which was
primarily a result of higher rent expense in the current period mainly due to
new stores in the current period and higher general liability expense which was
attributed to increased claims litigation in the current period. The increase
was also attributed to higher advertising expense of 0.2% as a percentage of
revenue. Advertising expense each quarter may be above or below our planned
annual rate of approximately 4% of revenue, depending on the timing of marketing
promotion and the relative weights and price of media spending. The
increase was also attributed to higher credit card and bank fees of 0.2% as a
percentage of revenue which was due to a higher number of credit card
transactions and increased credit card fees. The increase in restaurant other
operating expense was partially offset by a decrease of 0.3% in utilities as a
percentage of revenue which was mainly due to lower natural gas prices in the
current period and also a 0.1% decrease in preopening costs as a percentage of
revenue due to fewer stores opened in the current period.
 
 Franchise
expense consists primarily of rent expense that we pay to landlords associated
with leases under restaurants we are subleasing to franchisees. This expense
usually fluctuates primarily as subleases expire and to some degree based on
rents that are tied to a percentage of sales calculation. Franchise expense
decreased slightly to $2.9 million for the 39 weeks ended September 30, 2009
compared to $3.0 million for the 39 weeks ended September 30, 2008.
 
 General
and administrative expense decreased $7.6 million, or 23.6%, to $24.5 million
for the 39 weeks ended September 30, 2009 from $32.1 million for the 39 weeks
ended September 30, 2008. The decrease was primarily attributed to lower legal
fees due to a $10.7 million expense in the prior period to settle the EPL-Mexico
v. EPL-USA trademark litigation that did not recur in the current
period.  The decrease was also due to lower salaries and wages of $0.7
million due to decreased headcount and also to lower travel and entertainment
expenses of $0.7 million in the current period due to the Company’s focus on
reducing expenses, and decreased meetings expense of $0.3 million which is also
attributed to the cost savings initiatives.  The decrease was
partially offset by increased impairment charges in the current period of $2.0
million, which was due to three under-performing company-operated stores that
will continue to operate, legal settlement accruals in the current period of
$2.4 million, higher bonus expense of $0.6 million in the current period which
was mainly due to the $1.2 million bonus accrual reversed in the prior year
third quarter and a gain on sale of land of $0.3 million in the 2008 period that
did not recur in the 2009 period.
 
 General
and administrative expense as a percentage of revenue decreased 3.1% to 12.4%
for the 39 weeks ended September 30, 2009 from 15.5% for the 39 weeks ended
September 30, 2008. This decrease was attributed to the reasons noted above
and was partially offset due to lower revenue.
 
 Interest
expense, net of interest income, increased $3.8 million, or 19.2%, to $23.5
million for the 39 weeks ended September 30, 2009 from $19.7 million for the 39
weeks ended September 30, 2008. Our average debt balances for the 2009 period
increased to $254.5 million compared to $254.1 million for the 2008 period and
our average interest rate increased to 10.1% for the 2009 period compared to
9.77% for the 2008 period. The increase in interest expense was also attributed
to the write off of deferred finance costs related to our credit facility which
was paid in full in May 2009.
 
 The
Company had $0.4 million in other expense in the 2009 and 2008 period primarily
related to the change in the fair value of the interest rate swap
agreement.  The fixed interest rate that the Company agreed to pay was
higher than the floating rate estimated for the life of the
agreement.  The Company terminated the interest rate swap agreement in
the second quarter of 2009.
 
 The
Company had $0.5 million in other income in the 2009 period attributed to a net
gain on the repurchase of a portion of the 2013 Notes.  This gain is
net of the portion of the deferred finance costs associated with the
notes.
  25
 
 Despite
having a loss for the 39 weeks ended September 30, 2009, our provision for
income taxes consisted of an income tax expense of $23.0 million as we recorded
a full valuation allowance of $21.3 million against our deferred tax assets in
the current period.  We had an income tax benefit of $4.1 million for
the 39-week period ended September 30, 2008.
 
 As a
result of the factors above we had a net loss of $33.5 million and $6.0 million
for the 39 weeks ended September 30, 2009 and 2008, respectively, or (17.0)% and
(2.9)% as a percentage of restaurant revenue, respectively.
 
 Liquidity
and Capital Resources
 
 Our
principal liquidity requirements are to service our debt and meet our capital
expenditure needs. At September 30, 2009, our total debt was $267.6 million,
compared to $241.5 million at December 31, 2008. See “Debt and Other
Obligations” below. Our ability to make payments on our indebtedness, and to
fund planned capital expenditures will depend on our available cash and our
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 our control. Based on our current
level of operations, we believe our cash flow from operations, available cash
(including approximately $17 million available as capital contributions from
CAC) and the approximately $6.2 million that EPL had available at September 30,
2009, under its credit agreement will be adequate to meet our liquidity needs
for at least the next 12 months. The current economic crisis and resulting
severely constrained liquidity conditions, however, could make it more difficult
or costly for us to obtain debt financing or to refinance our existing debt if
it becomes necessary, and could make sources of liquidity unavailable. See “Debt
and Other Obligations” below.
 
 Our
previous credit facility required the prepayment of the related term loan in an
amount equal to 50% of Excess Operating Cash Flow if, at the end of the fiscal
year, the Consolidated Leverage Ratio was less than 5.0:1.0.  Excess
Operating Cash Flow is defined as an amount equal to Consolidated EBITDA minus
Consolidated Financial Obligations and other specific payments and
adjustments.  Excess Operating Cash Flow for 2008 was $9.4
million.  The Company made the required prepayment of $4.7 million in
April 2009.
 
 On
January 25, 2008, CAC made an $8 million capital contribution to the Company.
The Company used $7.9 million of these proceeds to repurchase a portion of
the outstanding 14.5% senior discount notes due 2014 (see Note 13 to our
Condensed Consolidated Financial Statements) at a price that approximated their
accreted value. In May of 2008, CAC made a $4.0 million capital contribution to
the Company that was used for normal operating purposes.  In June 2008
CAC paid a litigation settlement payment of $10,722,860 on behalf of
EPL.  This payment was accounted for as a capital contribution by CAC
to EPL. CAC may make future capital contributions to the Company and EPL
for general corporate purposes.
  In the
nine-month period ended September 30, 2009, our capital expenditures totaled
$7.4 million, consisting of $3.5 million for new restaurants, $1.7 million for
the purchase of the four Atlanta stores and related assets from Fiesta Brands,
Inc., $1.3 million for capitalized repairs of existing sites, $0.6 million
related to other projects and $0.3 million related to remodels. Due to a reduced
number of expected new store openings in 2009 compared to prior years, we expect
our capital expenditures for 2009 to be approximately $10.0
million.
 
 Cash and
cash equivalents, including restricted cash, increased $19.1 million from $1.1
million at December 31, 2008 to $20.2 million at September 30, 2009. See
“Working Capital and Cash Flows” below for information explaining this
increase.  We cannot assure you that our business will generate
sufficient cash flow from operations or that future borrowings will be available
to EPL under EPL’s senior secured credit facilities in an amount sufficient to
enable us to service our indebtedness or to fund our other liquidity
needs.  If we acquire additional restaurants from franchisees, our
debt service requirements could increase.  In addition, we may fund
restaurant openings through credit received by trade suppliers and landlord
contributions.  If our cash flow from operations is inadequate to meet
our obligations under our indebtedness we may need to refinance all or a portion
of our indebtedness, including the notes, on or before maturity.  We
cannot provide assurance that we will be able to refinance any of our
indebtedness, if necessary, on commercially reasonable terms or at
all.
  26
 
 As
discussed in Note 7, Commitments and Contingencies, we are involved in various
lawsuits, including wage and hour class action lawsuits.  In order to
mitigate the adverse effects of these cases, such as on-going legal expense,
diversion of management time, and the risk of a substantial judgment against us
(which could occur even if we believe we have a strong legal basis for our
position), we may seek to settle these cases.  Any substantial
settlement payments or damage awards against us if the cases go to trial could
have a material adverse effect on our liquidity and financial
condition.
 
 As a
holding company, the stock of EPL constitutes our only material asset. EPL
conducts all of our consolidated operations and owns substantially all of our
consolidated operating assets. Our principal source of the cash required to pay
our obligations is the cash that EPL generates from its operations. EPL is a
separate and distinct legal entity, has no obligation to make funds available to
us and currently has restrictions that limit distributions or dividends to be
paid by EPL to us. Furthermore, subject to certain restrictions, EPL is
permitted under the terms of EPL’s senior secured credit facilities and the
indentures governing the 2012 Notes, 2013 Notes and 2014 Notes to incur
additional indebtedness that may severely restrict or prohibit EPL from making
distributions or loans, or paying dividends, to us.
 
 Working
Capital and Cash Flows
 
 We
presently have, in the past have had, and may have in the future, negative
working capital balances. The working capital deficit principally is the result
of our investment to build new restaurants, remodel and replace or improve
equipment in company-operated restaurants, and to acquire new restaurant
information systems. We do not have significant receivables or inventories and
we receive trade credit based upon negotiated terms in purchasing food and
supplies. Funds available from cash sales and franchise revenue not needed
immediately to pay for food and supplies or to finance receivables or
inventories typically have been used for the capital expenditures referenced
above and/or debt service payments under our existing indebtedness. We expect
our negative working capital balances to continue to increase, based on the
continuation of the economic downturn and our plan to continue to open new
restaurants.
 
 During
the 39 weeks ended September 30, 2009, our cash and cash equivalents, including
restricted cash, increased by $19.1 million to $20.2 million from the period
ended December 31, 2008. This increase was due to the $129.9 million of cash
proceeds received from our 2012 Note offering, $4.0 million from short-term
borrowings under our prior revolver facility and $13.4 million from our
operating activities.  These increases were partially offset by the
$108.6 million used to payoff our bank term loan and revolver, $9.2 million in
fees and costs incurred primarily in connection with the 2012 Note offering and
$7.4 million for capital expenditures.  The $5.8 million decline in
purchases of property for the 39 week period 2009 compared to 2008 was mainly
due to decreased spending on new restaurants as we had fewer openings in the
current period.
 
 Debt
and Other Obligations
 
 On May
22, 2009, EPL entered into a credit agreement (the "Credit Facility") with
Intermediate as guarantor, Jefferies Finance LLC, as administrative and
syndication agent, and the various lenders. The Credit Facility provides for a
$12.5 million revolving line of credit with borrowings limited at any time to
the lesser of (i) $12.5 million and (ii) the Company’s consolidated cash flow
for the most recently completed trailing twelve consecutive
months.  EPL has $6.3 million of letters of credit outstanding as of
September 30, 2009 (see Note 12).
 
 The
Credit Facility bears interest, payable quarterly, at an Alternate Base Rate or
LIBOR, at EPL's option, plus an applicable margin. The applicable margin rate is
5.50% with respect to LIBOR and 4.50% with respect to Alternate Base Rate
advances.  The Credit Facility is secured by a first priority lien on
substantially all of the Company’s assets and is guaranteed by Intermediate. The
Credit Facility matures on July 22, 2012.
 
 The
Credit Facility contains a number of covenants that, among other things,
restrict, subject to certain exceptions, the Company’s ability to (i) incur
additional indebtedness or issue preferred stock; (ii) create liens on assets;
(iii) engage in mergers or consolidations; (iv) sell assets; (v) make certain
restricted payments; (vi) make investments, loans or advances; (vii) make
certain acquisitions; (viii) engage in certain transactions with affiliates;
(ix) change the Company’s lines of business or fiscal year; and (x) engage in
speculative hedging transactions. In addition, the Credit Agreement will require
the Company to maintain, on a consolidated basis, a minimum level of
consolidated cash flow at all times.  As of September 30, 2009, the
Company was in compliance with all of the financial covenants contained in the
Credit Facility and had $6.2 million available for borrowings under the
revolving line of credit.
  27
 
 On May
22, 2009, EPL issued $132,500,000 aggregate principal amount of 11 3/4%
senior secured notes due December 1, 2012 (the “2012 Notes”) in a private
placement.  EPL sold the 2012 Notes at an issue price equal to 98.0%
of the principal amount, resulting in gross proceeds to EPL of $129,850,000
before expenses and fees.  Interest is payable each year in June and
December beginning December 1, 2009. The 2012 Notes are guaranteed by
Intermediate and are secured by a second priority lien on substantially all of
the Company’s assets.  The 2012 Notes may be redeemed at a premium, at
the discretion of EPL, after March 1, 2011, or sooner in connection with certain
equity offerings. If EPL undergoes certain changes of control, each holder of
the notes may require EPL to repurchase all or a part of its notes at a price of
101% of the principal amount.  The Indenture governing the 2012 Notes
contains a number of covenants that, among other things, restrict, subject to
certain exceptions, EPL’s ability to incur additional indebtedness; pay
dividends or certain restricted payments; make certain investments; sell assets;
create liens; merge; and enter into certain transactions with its
affiliates.  As of September 30, 2009, we had $130.2 million
outstanding in aggregate principal amount under our 2012 Notes. The principal
value of the 2012 Notes will increase (representing accretion of original issue
discount) from the date of original issuance so that the accreted value of the
2012 Notes will be equal to the full principal amount of $132.5 million at
maturity.
 
 In
connection with the issuance of the 2012 notes, EPL filed a registration
statement on Form S-4 with the SEC in October 2009 and such registration
statement is required to become effective within 240 days after the issuance of
the 2012 Notes to enable the  holders to exchange the privately placed
2012 Notes for publicly registered notes with, subject to limited exceptions,
identical terms.  If such deadline is not satisfied, or if the
exchange of the 2012 Notes is not completed by 360 days after the issuance of
the 2012 Notes, the interest rate borne by the Notes will be increased by
one-quarter of one percent per annum on a quarterly basis; provided that the
aggregate increase in such annual interest rate may in no event exceed one
percent.
 
 EPL
incurred direct finance costs of approximately $9.1 million in connection with
sale of the 2012 Notes. Included in these costs are the estimated costs incurred
to file the registration statement. These costs have been capitalized and are
included in other assets in the Company’s balance sheet, and the related
amortization is reflected as a component of interest expense in the condensed
consolidated statement of operations. The Company used the net proceeds from the
2012 Notes to repay the credit facility with  Merrill Lynch, Bank of
America, et al (which provided for a $104.5 million term loan and a $25.0
million revolving loan) and its 9 1⁄4% Senior Secured Notes due 2009.
 
 As of
September 30, 2009, we calculated our “fixed charge coverage ratio”
(as defined in the indenture governing the 2012 Notes) at 1.38 to 1. The
indenture permits us to incur indebtedness or issue disqualified stock, and the
Company’s restricted subsidiaries may incur indebtedness or issue preferred
stock, if our fixed charge coverage ratio for the most recently ended four full
fiscal quarters would have been at least 2.0 to 1, as determined on a pro forma
basis as if such indebtedness had been incurred or the disqualified stock or the
preferred stock had been issued at the beginning of such four-quarter period.
Since EPL does not currently meet the fixed charge coverage ratio, EPL is not
permitted to incur additional indebtedness under the terms of the 2012
Notes.  A failure to meet the ratios affects only our ability to incur
additional indebtedness and does not constitute a default under these
Notes.
 
 At
September 30, 2009, we had $28.8 million outstanding in aggregate principal
amount of 141⁄2% Senior Discount Notes due 2014. No cash interest will accrue on
the 2014 Notes prior to November 15, 2009. Instead, the principal value of the
2014 Notes will increase (representing accretion of original issue discount)
from the date of original issuance until but not including November 15, 2009 at
a rate of 14 1⁄2 % per
annum compounded annually, so that the accreted value of the 2014 Notes on
November 15, 2009 will be equal to the full principal amount of $29.3 million at
maturity. Beginning on November 15, 2009, interest will accrue on the 2014 Notes
at an annual rate of 14 1⁄2 % per annum payable
semi-annually in arrears on May 15 and November 15 of each year, beginning May
15, 2010. Principal is due on November 15, 2014. On January 25, 2008, CAC made
an $8.0 million capital contribution to the Company. The Company used $7.9
million of these proceeds to repurchase a portion of these notes at a price that
approximated their accreted value. See Note 13 to our Condensed Consolidated
Financial Statements.
  28
 
 As of
September 30, 2009, we had $106.3 million outstanding in aggregate principal
amount under our 2013 Notes. The Company purchased, at par, the $250,000
remaining balance of the 2009 Notes in May of 2009 with the proceeds of the 2012
Notes.  The Company used $13.6 million of proceeds from operations to
repurchase a portion of the 2013 Notes in 2008.  See Notes 8 and 9 to
our Condensed Consolidated Financial Statements.
 
 As of
September 30, 2009, we calculated our “fixed charge coverage ratio” and our
“consolidated leverage ratio” (as defined in the indenture governing the
2014 Notes) at 1.51 to 1 and 6.12 to 1, respectively. Similar ratios exist in
the indenture governing the 2013 Notes. The indenture permits us to incur
indebtedness that (a) is contractually subordinated to the 2014 Notes, (b) has a
maturity date after November 15, 2014, and (c) does not provide for payment of
cash interest prior to November 15, 2014. The indenture also permits us to incur
indebtedness if our fixed charge coverage ratio for the most recently ended four
full fiscal quarters would have been at least 2.0 to 1, and if our consolidated
leverage ratio would have been equal to or less than 7.5 to 1, all as determined
on a pro forma basis as if such indebtedness had been incurred at the beginning
of such four-quarter period. Since EPL does not currently meet the fixed charge
coverage ratio, EPL is not permitted to incur additional indebtedness under the
terms of the 2013 and 2014 Notes.  A failure to meet the ratios
affects only our ability to incur additional indebtedness and does not
constitute a default under these Notes.
 
 At
September 30, 2009, we had outstanding letters of credit totaling $6.3 million,
which served as collateral for our various workers’ compensation insurance
programs (see Note 12 to our Condensed Consolidated Financial
Statements).
 
 We have
certain land and building leases for which the building portion is treated as a
capital lease. These assets are amortized over the shorter of the lease term or
useful life.
 
 Franchisees
pay a monthly advertising fee of 4% of gross sales for the Los Angeles,
California designated market area and 5% of gross sales for other markets.
Pursuant to our Franchise Disclosure Document, we contribute, where we have
company-operated restaurants, to the advertising fund on the same basis as
franchised restaurants. Under our franchise agreements, we are obligated to use
all advertising fees collected from franchisees to purchase, develop and engage
in advertising, public relations and marketing activities to promote the El
Pollo Loco®
brand.
 
 Critical
Accounting Policies and Estimates
 
 The
preparation of our financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an ongoing basis, we evaluate our estimates and judgments,
including those related to recoverability of fixed assets, intangible assets,
closed restaurants, workers’ compensation insurance, the realization of gross
deferred tax assets, tax reserves, and contingent liabilities including the
outcome of litigation. We base our estimates and judgments on historical
experience and on various other factors that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions. A summary of our critical accounting
polices and estimates is included in our Annual Report on Form 10-K (File No.
333-115644) as filed with the Securities and Exchange Commission on March 31,
2009.
  Litigation
Contingency
 
 As
discussed in Note 7 to our Unaudited Consolidated Financial Statements in
Part I of this Report, we are subject to employee claims against us based, among
other things, on discrimination, harassment, wrongful termination, or violation
of wage and labor laws in the ordinary course of business.  These
claims may divert our financial and management resources that would otherwise be
used to benefit our operations. In recent years a number of restaurant companies
have been subject to wage and hour class action lawsuits alleging violations of
federal and state labor laws.  A number of these lawsuits have
resulted in the payment of substantial damages by the defendants.  We
are currently a defendant in several wage and hour class action
lawsuits.  Since our insurance carriers have denied coverage of these
claims, a significant judgment against us could adversely affect our financial
condition and adverse publicity resulting from these allegations could adversely
affect our business. In an effort to mitigate these adverse consequences, we
could seek to settle certain of these lawsuits.  The on-going expense
of these lawsuits, and any substantial settlement payment or judgment against
us, could adversely affect our business, financial condition, operating results
or cash flows. We recorded a reserve of $2.4 million in June of 2009 for
estimated legal settlements of two cases, but we have not recorded reserves for
any other litigation contingencies.
  29
 
 Off-Balance
Sheet and Other Arrangements
 
 As of
September 30, 2009 and 2008, we had approximately $6.2 million and $17.6 million
of borrowing capacity on the revolving portion of our senior credit
facility.
 
 Item
3. Quantitative and Qualitative Disclosures About Market Risk
 
 The
inherent risk in market risk sensitive instruments and positions primarily
relates to potential losses arising from adverse changes in interest
rates.
 
 We are
subject to market risk from exposure to changes in interest rates based on our
financing activities. This exposure relates to borrowings under EPL’s senior
secured credit facility that bears interest at floating rates. As of
September 30, 2009, we had no amounts outstanding under this
facility.
 
 In the
past, to help mitigate risk, we entered into an interest rate swap
agreement.  The agreement was terminated in the second quarter of
2009.  The interest rate swap agreement was intended to reduce
interest rate risk associated with variable interest rate debt.  The
Company had $0.2 million in expense for the 39 weeks ending September 30, 2009,
respectively, related to the change in the fair value of the interest rate swap
agreement.
 
 Item
4T. Controls and Procedures
 
 Our Chief
Executive Officer and Chief Financial Officer have concluded that the design and
operation of our disclosure controls and procedures are effective as of
September 30, 2009. This conclusion is based on an evaluation conducted under
the supervision and with the participation of Company management. Disclosure
controls and procedures are those controls and procedures which are designed to
ensure that information required to be disclosed in our SEC filings and
submissions is accumulated and communicated to management and is recorded,
processed, summarized and reported in a timely manner and in accordance with SEC
rules and regulations.
 
 There
have been no changes in our internal control over financial reporting that
occurred during our 39 weeks ended September 30, 2009 that materially affect, or
are reasonably likely to materially affect, our internal control over financial
reporting.
  PART
II – OTHER INFORMATION
 
 Item
1. Legal Proceedings
 
 The
information set forth in Note 7 to our Unaudited Condensed Consolidated
Financial Statements in Part I of this Report is incorporated herein by this
reference.
 
 Also see
our Annual Report on Form 10-K for the year ended December 31, 2008 as filed
with the SEC on March 31, 2009.
 
 Item
5.  Other Information
 
 On
November 16, 2009, the Company issued a press release reporting results of
operations for the third quarter and nine month periods ended September 30,
2009.  A copy of the press release is being furnished as Exhibit 99.1
hereto and is incorporated herein by this reference. We do not intend for this
exhibit to be incorporated by reference into any other filings we make with the
SEC. This information is provided in this Report in response to Item 2.02,
Results of Operations and Financial Condition, and Item 9.01, Financial
Statements and Exhibits, of Form 8-K in lieu of filing a Form
8-K.
  30
 
 Item
6. Exhibits.
  ExhibitNumber
                  
                  Description of
      Documents10.1
                  
                  Asset
      Purchase Agreement and Termination of Franchise Rights dated September 24,
      2009, between EPL and Fiesta Brands, Inc.31.1
                  
                  Certification
      Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
      Act of 193431.2
                  
                  Certification
      Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
      Act of 193432.1
                  
                  Certification
      Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
      Act of 193432.2
                  
                  Certification
      Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
      Act of 193499.1
                  
                  Press
      Release dated November 16,
2009
  31
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
  EPL INTERMEDIATE,
      INCDate:
      November 16, 2009
              By:
              /s/ Stephen E. CarleyStephen
      E. CarleyPresidentBy:
              /s/ Gary CampanaroGary
      CampanaroChief
      Financial Officer and Treasurer
  32
  EXHIBIT
INDEX
 
 ExhibitNumber
                  
                  Description of
      Documents10.1
                  
                  Asset
      Purchase Agreement and Termination of Franchise Rights dated September 24,
      2009, between EPL and Fiesta Brands, Inc.31.1
                  
                  Certification
      Pursuant to Rule 13-a-14(a) or Rule 15d-14(a) of the Securities Exchange
      Act of 193431.2
                  
                  Certification
      Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
      Act of 193432.1
                  
                  Certification
      Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
      Act of 193432.2
                  
                  Certification
      Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
      Act of 193499.1
                  
                  Press
      Release dated November 16,
2009
  33