SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-Q

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

For the quarterly period ended September 26, 2007or

o  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. 333-115644EPL Intermediate, Inc.(Exact Name of Registrant as Specified in Its Charter)

|Delaware                                 |  | 13-4092105         
|---------------------------------------- |  | -------------------
|(State or Other Jurisdiction of          |  | (I.R.S. Employer   
|Incorporation or Organization)           |  | Identification No.)
|                                        
|3535 Harbor Blvd., Suite 100             |  |                    
|Costa Mesa, California                   |  | 92626              
|(Address of Principal Executive Offices) |  | (Zip Code)         

(714) 599-5000(Registrants Telephone Number, Including Area Code)3333 Michelson Drive, Suite 550Irvine, CA 92612(Former Address 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.   YesoNox

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):

|Large Acceleratedo |  | Filer Accelerated Filero |  | Non-Accelerated Filerx
|------------------ |  | ------------------------ |  | ----------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YesoNox

As of November 9, 2007, 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

153
.

Quantitative and Qualitative Disclosures About Market Risk

244
T.

Controls and Procedures

24PART II  OTHER INFORMATION1
.

Legal Proceedings

241
A.

Risk Factors

256
.

Exhibits

262

PART I  FINANCIAL INFORMATION
Item 1. Financial StatementsEPL INTERMEDIATE, INC.(A Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(Amounts in thousands)
DECEMBER 27,

SEPTEMBER 30,ASSETS
2006

2007CURRENT ASSETS:Cash and cash equivalents
$
2,955

$
6,085Notes and accounts receivable--net

3,564


3,884Inventories

1,560


1,655Prepaid expenses and other current assets

3,835


4,061Income taxes receivable

68


-Deferred income taxes

799


799Total current assets

12,781


16,484PROPERTY OWNED--Net

73,842


80,937PROPERTY HELD UNDER CAPITALLEASES--Net

1,634


1,227GOODWILL

277,514


277,087DOMESTIC TRADEMARKS

120,700


120,700OTHER INTANGIBLE ASSETS--Net

11,982


10,797OTHER ASSETS

10,595


10,001TOTAL ASSETS
$
509,048

$
517,233See 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 27,

SEPTEMBER 30,2006

2007LIABILITIES AND STOCKHOLDER'S EQUITYCURRENT LIABILITIES:Revolving credit facility
$
3,000

$
-Current portion of note payable

1,306


1,035Current portion of obligations undercapital leases

1,313


1,125Accounts payable

9,821


14,482Accrued salaries

3,665


4,788Accrued vacation

1,834


1,860Accrued insurance

3,869


4,263Accrued income taxes payable

-


176Accrued interest

2,709


6,061Accrued advertising

1,358


58Other accrued expenses and current liabilities

4,307


4,446Total current liabilities

33,182


38,294NONCURRENT LIABILITIES:Senior secured notes (2009 Notes)

250


250Senior unsecured notes (2013 Notes)

123,646


123,794PIK Notes (2014 Notes)

26,319


29,232Note payable--less current portion

102,410


100,677Obligations under capital leases--lesscurrent portion

3,943


3,124Deferred income taxes

34,247


37,163Other intangible liabilities--net

7,434


6,385Other noncurrent liabilities

4,903


7,475Total noncurrent liabilities

303,152


308,100COMMITMENTS AND CONTINGENCIESSTOCKHOLDER'S EQUITYCommon stock, $.01 par value--20,000 sharesauthorized; 100 shares issued and outstanding

-


-Additional paid-in-capital

172,665


173,214Retained earnings (accumulated deficit)

49


(2,375
)Total stockholder's equity

172,714


170,839TOTAL
$
509,048

$
517,233See 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 30,2006

2007

2006

2007OPERATING REVENUE:Restaurant revenue

$
61,673

$
67,266


$
182,502

$
194,690Franchise revenue


4,636


5,048



12,833


14,149Total operating revenue


66,309


72,314



195,335


208,839OPERATING EXPENSES:Product cost


19,117


20,786



57,125


60,117Payroll and benefits


15,459


17,476



46,297


50,727Depreciation and amortization


2,608


3,014



7,488


8,707Other operating expenses


20,071


24,864



59,098


66,690Total operating expenses


57,255


66,140



170,008


186,241OPERATING INCOME


9,054


6,174



25,327


22,598INTEREST EXPENSE--Net


7,228


7,423



21,446


21,927INCOME (LOSS) BEFORE PROVISIONFOR INCOME TAXES


1,826


(1,249
)


3,881


671PROVISION FOR INCOME TAXES


1,294


2,763



2,093


3,095NET INCOME (LOSS)

$
532

$
(4,012
)

$
1,788

$
(2,424
)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 30,2006

2007CASH FLOWS FROM OPERATINGACTIVITIES:Net income (loss)

$
1,788


$
(2,424
)Adjustments to reconcile net income (loss) to netcash provided by operating activities:Depreciation and amortization of propertyand intangible assets


7,488



8,707Stock-based compensation expense


330



603Interest accretion


2,697



3,061Loss on disposal of assets


4



2,558Amortization of deferred financing costs


984



1,042Amortization of negative leasehold interest


(286
)


(206
)Deferred income taxes


(59
)


2,916Changes in operating assets and liabilities:Notes and accounts receivable--net


(581
)


(320
)Inventories


76



(95
)Prepaid expenses and other current assets


(205
)


(226
)Income taxes receivable / payable


3,463



244Other assets


69



(275
)Accounts payable


489



2,313Accrued salaries and vacation


(53
)


1,149Accrued insurance


128



394Other accrued expenses and current and noncurrent liabilities


5,489



4,816Net cash provided by operating activities


21,821



24,257CASH FLOW FROM INVESTINGACTIVITIES:Proceeds from asset disposition


2



8,035Purchase of franchise restaurants


-



(8,534
)Purchase of property


(8,994
)


(14,447
)Payment of acquisition costs


(2,949
)


-Net cash used in investing activities


(11,941
)


(14,946
)CASH FLOWS FROM FINANCINGACTIVITIES:Proceeds from issuance of common stock


28



-Repurchase of common stock


-



(54
)Proceeds from borrowings


-



14,500Payment of obligations under capital leases


(899
)


(950
)Payments on debt


(3,559
)


(19,504
)Deferred financing costs


(1,596
)


(173
)Net cash used in financing activities


(6,026
)


(6,181
)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 30,2006

2007INCREASE IN CASH ANDCASH EQUIVALENTS

$
3,854

$
3,130CASH AND CASH EQUIVALENTS--Beginning of period


3,552


2,955CASH AND CASH EQUIVALENTS--End of period

$
7,406

$
6,085SUPPLEMENTAL DISCLOSURE OF CASH FLOWINFORMATION--Cash paid during the period for:Interest (net of amounts capitalized)

$
14,542

$
14,744Income taxes

$
-

$
2SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:Unpaid purchases of property and equipment

$
109

$
2,348Recording of amounts due to predecessor stockholders in connectionwith acquisition

$
2,146

$
-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 collectively 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 27, 2006 (File No. 333-115644) as filed with the Securities and Exchange Commission (the Commission) on March 23, 2007.
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 2006, which ended December 27, 2006, and fiscal year 2007, which will end December 26, 2007, are both
52-week fiscal years. For simplicity of presentation, the Company has described the periods ended September 27, 2006 and September 26, 2007 as September 30, 2006 and 2007, 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 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®.
2. Acquisitions and Dispositions of Restaurants
On June 29, 2007, the Company acquired the assets of three previously franchised restaurants (Las Vegas restaurants). The purchase price of $8.5 million consisted of cash and was accounted
for using the purchase method of accounting in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. The Companys preliminary allocation of the purchase price to the fair value of the
acquired assets is as follows: equipment, $0.1 million, and goodwill, $8.4 million. Results of operations of the Las Vegas restaurants are included in the Companys financial statements beginning as of the acquisition date. The Company
expects to finalize the purchase price allocation by the end of fiscal 2007.
In August and September of 2007, the Company sold eight restaurants to franchisees for a total of $7.5 million. These restaurants had an aggregate net book value of $1.6 million, and
after a write off of goodwill of $8.8 million, in accordance with Statement of Accounting Standards No. 142, and a liability reduction of $0.1 million, the Company realized a $2.8 million loss that is included in other operating expenses
in the accompanying condensed statements of operations.
3. Acquisition of the Company
On September 27, 2005, Holdings entered into a stock purchase agreement (the Stock Purchase Agreement) among Chicken Acquisition Corp. (CAC), Holdings, Intermediate,
EPL, the equity holders of Holdings, and American Securities Capital Partners, L.P. (ASCP). Pursuant to the Stock Purchase Agreement, CAC, an affiliate of Trimaran Fund II, L.L.C., agreed to purchase (the Acquisition) all of
Holdings issued and outstanding common stock (other than certain shares exchanged by existing shareholders, including management, representing approximately 7.3% of Holdings). On November 18, 2005, Holdings, CAC, and the other parties to the
Stock Purchase Agreement completed the Acquisition. As a result of the Acquisition, CAC expects to be the owner of the
8

nations leading restaurant company specializing in flame-grilled chicken. The Acquisition was accounted for as a purchase of Holdings by CAC in accordance with SFAS No. 141.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of Acquisition based on the initial aggregate purchase price of $435.9
million. The purchase price allocation was based on estimates of the fair value of the assets acquired and liabilities assumed as determined by management with the assistance of an independent valuation company. The valuation was finalized in fiscal
2006.
(in thousands)Current assets

$
31,213Property


68,424Other assets


2,282Domestic trademarks


120,700Other intangible assets, net


4,705Goodwill


272,204Total assets acquired


499,528Current liabilities


25,379Other liabilities


38,296Total liabilities assumed


63,675Net assets acquired

$
435,853The goodwill recorded as part of the purchase accounting is not deductible for income tax purposes.
4. Goodwill and Other Intangible Assets and Liabilities
Changes in goodwill consist of the following (in thousands):
Beginning balance December 27, 2006

$
277,514Purchase of franchise restaurants


8,389Sale of company restaurants


(8,816
)Ending balance September 30, 2007


277,087Other intangible assets and liabilities consist of the following (in thousands):December 26, 2007

September 30, 2007Gross Carrying
Accumulated
Net Carrying

Gross Carrying
Accumulated
Net CarryingAmount
Amortization
Amount

Amount
Amortization
AmountFranchise network

$
8,000

$
(510
)
$
7,490


$
8,000

$
(853
)
$
7,147Favorable leasehold interest


5,862


(1,370
)

4,492



5,862


(2,212
)

3,650Other intangible assets

$
13,862

$
(1,880
)
$
11,982


$
13,862

$
(3,065
)
$
10,797Unfavorable leasehold interest liability

$
(9,156
)
$
1,722

$
(7,434
)

$
(9,156
)
$
2,771

$
(6,385
)9

Favorable leasehold interest represents the asset in
excess of the approximate fair market value of the leases assumed as of November
18, 2005, the date of the Acquisition. The amount is being reduced over the approximate
 average life of the leases.

Unfavorable leasehold interest liability represents
the liability in excess of the approximate fair market value of the leases assumed
as of November 18, 2005, the date of the Acquisition. The amount is being reduced
over  the approximate average life of the leases.
Amortization expense for franchise network was $343,000 for both periods ended September 30, 2006 and 2007.
The estimated amortization expense 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 312007 (October 1st December
          31st)


$
462008



2392009



2362010



1112011



1495. Asset Impairment
The Company periodically reviews the performance of company-operated stores 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. The Company has not recognized any impairment charges during the 39 weeks ended September 30, 2006
and 2007.
6. Stock-Based Compensation
As of September 30, 2007, options to purchase 308,737 shares of common stock of CAC were outstanding, including 80,831 options that are fully vested. The remaining options vest 100% on the
seventh anniversary of the grant date, 100% upon a change in control of CAC if certain conditions are met, or 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. 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 39 weeks ended September 30, 2007 are as follows:
Weighted-AverageRemaining

AggregateWeighted-Average

Contractual Life

IntrinsicShares

Exercise Price

(in Years)

Value (000s)OutstandingDecember 27, 2006

302,772


$
66.58Granted

22,246


$
113.39Exercised

(709
)

$
10.39Canceled

(15,572
)

$
89.64OutstandingSeptember 30, 2007

308,737


$
68.91

7.3


$
          13,622Vested and expected to vest in thefutureSeptember 30, 2007

227,906


$
90.25

9.5


$
          5,191ExercisableSeptember 30,2007

80,831


$
8.73

4.1


$
          8,431The intrinsic value is calculated as the difference between the market value as of September 30, 2007 and the exercise price of the options outstanding and options exercisable.
10

For options granted prior to December 29, 2005 that may be cancelled and replaced with restricted stock upon completion of an initial public offering before November 18, 2007, the Company uses
variable accounting to recognize expense based on the change in incremental value of the award at each reporting period. Compensation expense decreased by $46,000 along with a corresponding decrease in the net loss of $29,000 for the 13
weeks ended September 30, 2007 related to these options. Compensation expense of $353,000 and a corresponding increase in the net loss of $238,000 was recognized for the 39 weeks ended September 30, 2007 related to these options.
In accordance with the prospective method of adoption of SFAS 123R, the Company recognized share-based compensation expense before tax of $90,000 and $251,000 and a corresponding
increase to the net loss of $57,000 and $169,000 for the 13 and 39 weeks ended September 30, 2007, respectively, related to vesting of stock options granted after the adoption of SFAS 123R.
As of September 30, 2007, there was unrecognized compensation expense of $3.9 million related to unvested stock options, which the Company expects to recognize over a weighted-average
period of 5.4 years.
7. Commitments and Contingencies
Legal Matters
On or about April 16, 2004, two former employees and one current employee filed a class action suit in the Superior Court of the State of California, County of Los Angeles, against the Company
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 (the Elias Action). 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 complaint was served on the Company on April 19, 2004. The court ordered the class action stayed pending the arbitration of one of the named putative class plaintiffs
claims as a result of his execution of a mandatory arbitration agreement. Given a recent ruling by the California Supreme Court, the Court has requested briefing on the viability of lifting the stay of the class action. On October 26, 2007, the
Court declared the class waiver provision in the arbitration agreements to be unenforceable and lifted the stay on class certification discovery in the Olvera action referenced below. However, the Court allowed the stay of discovery along with the
order to arbitrate to remain in place with respect to the Elias action. This case has been deemed by the Court to be related to the Olvera Action referenced below and assigned to the complex litigation panel. 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, the Company cannot at this time determine the likelihood of an adverse judgment or a likely range of damages in
the event of an adverse judgment. Any settlement of or judgment with a negative outcome arising from such lawsuit could have an adverse material impact on the Companys consolidated financial position, results of operations or cash flows.
On or about October 18, 2005, Salvador Amezcua, filed a purported class action complaint against the Company in the Superior Court of the State of California, County of Los Angeles. Carlos
Olvera replaced Mr. Amezuca as the named class representative on August 16, 2006 (the Olvera Action). 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 Company was served with this complaint on December 16, 2005. The court has deemed the case complex and assigned it to the complex litigation panel. This action has been designated by the
court as related to the Elias Action referenced above. The Company cannot at this time determine the likelihood of an adverse judgment or a likely range of damages in the event of an adverse judgment. Any settlement of or judgment with a negative
outcome arising from such lawsuit could have an adverse material impact on the Companys consolidated financial position, results of operations or cash flows.
The contractual rights to use the name El Pollo Loco® and certain related trademarks and intellectual property in Mexico were assigned to the Company in 1996, pursuant to an agreement with
a company controlled by Juan Francisco Ochoa, the founder of the first El Pollo Loco restaurant in Mexico and the United States. As consideration for the assignment of such rights, the Company agreed, subject to the terms and conditions of the
agreement, to use commercially reasonable efforts to develop a minimum number of restaurants in Mexico by February 2006 and to pay certain fees for each such restaurant. On March 31, 2004, EPL-Mexico filed suit alleging, among other things, that the
Company breached its agreement with EPL-Mexico by failing to exploit the trademarks and develop new restaurants in Mexico. A jury trial was held in July 2007 in federal district court in Laredo, Texas. The jury returned a verdict finding damages for
EPL-Mexico, based on theories under Mexican law, in the approximate amount of $22 million. A post trial hearing was held October 31, 2007, at which time a judgment was not announced. The Company believes there are inconsistencies in the jury
verdict. Further, it is the Companys contention that two key factual findings by the jury support our
11

position. The first is that plaintiff knew of the injuries it alleged in this case as early as 1997 but did not file this lawsuit until 2004, which the Company asserts was after the statute of limitations expired. The
second is that the value of the 1996 agreement was $1,087,500. The Company deposited that same amount into the registry of the Court two years ago, representing the buyout price in the contract. The Company is hopeful that the trial judge will
recognize the significance of these two key jury findings and enter a final judgment in our favor. If the Court upholds the jurys damages findings, the Company will appeal. The failure to prevail in this action could result in the loss of the
Companys ownership in Mexico of the El Pollo Loco trademarks and intellectual property. This could negatively affect our brand in the United States and elsewhere. In addition, a final adverse judgment could result in the imposition of
significant monetary damages, which could have a material adverse impact on the Companys consolidated financial position, results of operations or cash flows. No accrual for the EPL  Mexico litigation has been recorded as of the November
9, 2007.
On November 1, 2006, Fall River Music, Inc. filed a lawsuit in United States District Court, Central District of California, Santa Ana Division, against the Company and its advertising agency,
Krueger Communications, LLC. Fall River Music claims all rights, title and interest to the musical composition Guantanamera, and alleges that the music used by the Company in its advertisements is an infringement of Fall Rivers
copyrights. Fall River Music, Inc. seeks unspecified damages as a result of this alleged infringement. The parties reached an agreement on settlement terms and are finalizing the settlement agreement. While the Company has received a denial of
coverage from its insurance company, Kruegers insurance company accepted coverage, defended the Company, and is funding the settlement in full.
On January 11, 2007, Veronica Blanco filed a purported class action complaint against the Company in the United States District Court, Central District of California, Santa Ana Division.
Veronica Blanco, on behalf of herself and all others similarly situated, alleges violations of the federal Fair Credit Reporting Act and Fair and Accurate Credit Transactions Act, which restrict the credit card information that may be printed on
customer receipts. The Ninth Circuit Court of Appeal is currently reviewing trial court decisions in identical lawsuits denying class certification motions. The trial court has issued a stay pursuant to a stipulation by the parties in order to
monitor the outcome of the Ninth Circuit review. While the Company intends to defend against this action vigorously, the ultimate outcome of this case is not presently determinable as it is in the preliminary phase.
On April 10, 2007, Shawn Monroe filed a purported class action lawsuit in Superior Court of the State of California, County of Los Angeles against the Company on behalf of all individuals in
California with disabilities who use wheelchairs or electric scooters for mobility alleging violations of the Americans with Disabilities Act and the corresponding sections of the California Civil Code. Plaintiffs seek permanent injunctive relief as
well as statutory damages in the amount of $1,000 per violation. The complaint was served on the Company on May 17, 2007. The Court has designated this matter as complex and assigned it to the complex litigation panel. The Court granted the
Companys Motion to Strike the class allegations contained in Plaintiffs complaint. Plaintiffs have elected to litigate only the individual claims. While the Company intends to defend this action vigorously, the ultimate outcome of this
case is not presently determinable as it is in the preliminary phase.
On April 23, 2007, Dora Santana filed a purported class action lawsuit in the Superior Court of the State of California, County of Los Angeles, against the Company on behalf of all putative
class members (Assistant Shift Managers) alleging certain violations of certain California labor laws, including failure to pay overtime, failure to compensate properly for time worked off the clock, and failure to allow meal
periods. 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 complaint was served on the Company on June 5, 2007. While the Company intends to defend against this action vigorously, the ultimate outcome of this case is not presently determinable as it is in the preliminary phase.
The Company is also involved in various other claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of these actions will have a
material adverse effect on our financial position, results of operations, liquidity and capital resources. A significant increase in the number of these claims or an increase in amounts owing under successful claims could materially adversely affect
our business, financial condition, results of operation and cash flows.
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 funds 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 $9,262,000.

12

Office Lease
On May 18, 2007, the Company entered into a new corporate office lease. The lease commenced in October of 2007 and has a term of 10 1⁄2 years at an annual expense for financial statement
purposes of approximately $271,000.
8. Predecessor Debt (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 2009. At December 27, 2006 and September 30,
2007, $250,000 principal amount of the 2009 Notes was outstanding.
9. Senior Unsecured Notes Payable (2013 Notes)
EPL has outstanding 2013 Notes, consisting of $125.0 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.
EPL incurred direct costs in connection with the offering of the 2013 Notes. These costs have been capitalized and are included in other assets in the accompanying balance sheets. The Company
used the proceeds from the 2013 Notes to purchase substantially all of the outstanding 2009 Notes.
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 and the 2014 Notes (see Note 11) have restrictions that limit distributions or dividends to 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 indenture governing the 2013 Notes) and cash received from the proceeds of new equity contributions. As of September 30, 2007, we are restricted from incurring additional
indebtedness, as EPL does not currently meet the fixed charge coverage ratio. This restriction does not apply to the existing loan availability of $17.4 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.
10. Notes Payable to Merrill Lynch, Bank of America, et al and Revolving Credit Facility
On November 18, 2005, EPL entered into senior secured credit facilities (the 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 provides for a $104.5 million term loan and $25.0 million in revolving availability. Of this senior secured revolving credit facility, EPL issued $7.6 million of letters of credit to replace
existing letters of credit as of September 30, 2007. Future principal payments under the term loan at September 30, 2007 are as follows (in thousands).
Year Ending December 312007(October 1st  December 31st)
$
2592008

1,0352009

1,0352010

1,0352011

1,035Thereafter

97,313$
101,71213

The Credit Facility bears interest, payable quarterly, at a Base Rate or LIBOR, at EPLs option, plus an applicable margin. The applicable margin is based on EPLs financial
performance, as defined. The applicable margin rate was 3.00% with respect to LIBOR and 2.00% with respect to Base Rate advances and thereafter ranges from: 2.75% to 2.25% with respect to LIBOR advances and 1.75% to 1.25% with respect to Base Rate
advances. The effective rate at December 27, 2006 and September 30, 2007 was 8.37% and 7.70%, respectively. In March 2007 the Company amended the credit facility to reduce the interest rate by 0.50% and to modify in the Companys favor the
terms of certain restrictive covenants. The Credit Facility is 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 is guaranteed by the Company and Holdings. The Credit Facility matures on November 18, 2011. As of September 30, 2007, EPL
was in compliance with all of the financial covenants contained in its senior credit facility and has $17.4 million available for borrowings under the revolving line of credit.
11. PIK Notes (2014 Notes)
At December 27, 2006 and September 30, 2007, the Company had $26.3 million and $29.2 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 $39.3 million at maturity. 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 9).
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. Intermediate incurred
direct costs in connection with its registration of the 2014 Notes. These costs have been capitalized and are included in other assets in the accompanying balance sheets.
12. 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
recorded a provision for income taxes of $1.3 million and $2.8 million
for the 13-week periods ended September 30, 2006 and 2007, respectively. The
effective tax  rates for the 13 weeks ended September 30, 2006 and September
30, 2007, were 56.7% and 36.5%, respectively. The Company recorded a provision
for income taxes of $2.1 million and $3.1 million for the 39-week periods
ended September 30, 2006  and 2007, respectively. The effective tax rates for
the 39 weeks ended September 30, 2006 and 2007, were 48.7% and 32.6%, respectively.
The 2007 periods effective tax rate was impacted by an adjustment to recognize
an interest deduction  related to the EPL Intermediate Discount Notes in the
amount of $0.5 million that we determined not to be subject to Applicable
High Yield Discount Obligation (AHYDO) rules in Section 163(i) of the Internal
Revenue Code. The effective tax rate  was also impacted by the non-deductible
portion of goodwill written off in the amount of $3.3 million
related to the sale of eight company restaurants.
On January 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48
prescribes a comprehensive model of how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 states that a tax benefit
from an uncertain position may be recognized if it is more likely than not that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater
than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information.
14

At the adoption date, the Company reviewed all uncertain tax positions for all years open to statute. The years open to statute are Calendar years 2002 through 2006. The Company has determined
that there is no cumulative adjustment for uncertain tax positions required as of January 1, 2007. There has been no change in the FIN 48 reserve for uncertain tax positions from January 1, 2007 through September 30, 2007. The Company believes that
any uncertain tax positions are insignificant and therefore have no material impact to the Companys consolidated financial statements. The Company estimates that the unrecognized tax benefit as of September 30, 2007 will not change
significantly within the next twelve months. The Company will continue to classify income tax penalties and interest as part of the provision for income taxes in its Consolidated Statements of Income. The Company has not recorded accrued interest
and penalties on uncertain tax positions as of September 30, 2007. 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.
13. New Accounting Pronouncements
In September 2006, FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). This new standard provides guidance for using fair value to measure assets and
liabilities and information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. This framework is intended to provide
increased consistency in how fair value determinations are made under various existing accounting standards which permit, or in some cases require, estimates of fair market value. SFAS 157 also expands financial statement disclosure requirements
about a companys use of fair value measurements, including the effect of such measures on earnings. The provisions of SFAS 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is
currently evaluating the impact, if any, that SFAS 157 will have on its consolidated financial position, results of operations and cash flows.
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a tax position taken or expected to be taken in the Companys tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods and disclosure requirements for uncertain tax positions. FIN 48 is effective for fiscal years ending after December 15, 2006. The Company determined that the adoption of FIN 48 did not have a significant impact on its financial position or
results of operations (see Note 12).
In February 2007, the FASB issued Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB
Statement No. 115 (SFAS 159). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the Boards long-term measurement objectives for accounting for financial instruments. SFAS 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007.
The Company is currently evaluating the impact, if any, that SFAS 159 will have on its consolidated financial position, results of operations and cash flows.
14. Events Subsequent to the End of the Third Fiscal Quarter
     See Note 7 for recent developments in material litigation.
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.
15

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 concerns about food-borne illnesses; negative publicity,
whether or not valid; adverse public perception due to the occurrence of avian flu; increases in the cost of chicken; an ultimate adverse ruling in litigation involving trademark rights in Mexico, which could result in the imposition of significant
monetary damages and the loss of such rights; our dependence upon frequent deliveries of food and other supplies; our sensitivity to events and conditions in the greater Los Angeles area; our ability to open new restaurants in new and existing
markets; our reliance in part on our franchisees; our vulnerability to changes in consumer preferences and economic conditions; our ability to compete successfully with other quick service and fast casual restaurants; our ability to service our
indebtedness; matters relating to employment and labor laws, labor shortages or increases in labor costs; our ability to renew leases at the end of their terms; the impact of federal, state or local government regulations relating to the preparation
and sale of food, zoning and building codes, and employee, environmental and other matters; and our ability to protect our name and logo and other proprietary information. 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 23, 2007.
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 27, 2006 and September 26,
2007 as September 30, 2006 and 2007, 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 2006, which ended December 27, 2006, and fiscal year 2007, which ends December 26, 2007, are both 52-week fiscal years. References to our restaurant system 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 collectively 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, Nevada,
Texas, Illinois, Colorado, Connecticut and Georgia. 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, 2007 and 2006, and December 26, 2006 are set forth below:
El Pollo Loco Restaurants
September 30,

December 26,

September 30,2007

2006

2006Company-owned

154

151

148Franchised

226

208

200System-wide

380

359

348During the nine months ended September 30, 2007, the Company opened 8 new restaurants, purchased 3 previously franchised restaurants and sold 8 restaurants to franchisees. In that period,
franchisees opened 13 new restaurants, acquired 8 restaurants from us and sold 3 restaurants to us. Our franchisees opened 17 new restaurants in fiscal 2006 and we believe they will open approximately 20 new restaurants in fiscal 2007 and up to 40
new restaurants in fiscal 2008. The Company expects to open approximately 10 new restaurants in fiscal 2007 and 7 to 10 new restaurants annually over the next few years.
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 the 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, 2007 and 39 weeks ended September 30, 2007, same-store sales for restaurants systemwide increased 2.2% and 2.6%
16

over the 13 weeks and 39 weeks ended September 30, 2006, respectively. 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.
Increases in company-operated restaurant revenue are due to growth in the number of company-operated restaurants and to increases in same store sales, which may include price and transaction
volume increases. We implemented a menu price increase in January 2007. Many 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.
Franchise revenue consists of royalties, initial franchise fees and franchise rental income. Royalties average 4% of the franchisees net sales. We believe that new franchise restaurant
growth will increase as we sign development agreements with experienced franchisees in new and existing markets. As of October 25, 2007, we are legally authorized to market franchises in 50 states and we are pursuing opportunities in a number those
states. We have entered into development agreements that have resulted in area development fees being recognized as the related restaurants open. 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 franchise expense. 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.
Product cost, which includes food and paper costs, is our largest single expense. It is subject to increase or decrease based on commodity cost changes and depends in part on the success of
controls we have in place to manage product cost in the restaurants. Effective March 2007, we renewed two chicken contracts with terms ranging from one to two years at higher prices than the expiring contracts. One of these contracts provides a
floor and ceiling price for the chicken we buy from the supplier. We implemented menu price increases of approximately 2% in January 2007 that have partially mitigated the impact of higher chicken prices on our profitability.
Payroll and benefits make up the next largest single expense. Payroll and benefits are subject to inflation, 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. On September 12, 2006, the
state of California passed legislation increasing the minimum wage in the state from $6.75 per hour to $7.50 per hour effective January 1, 2007. Additionally on January 1, 2008, the minimum wage in California will go up to $8.00 per
hour. The Company implemented a menu price increase of approximately 2% at the beginning of fiscal 2007 in order to partially mitigate the impact on profits of the minimum wage increase. Legislation was also passed raising the federal minimum wage
from $5.15 to $5.85 effective July 24, 2007 although the impact to the Company on the increase in the federal wage rate is nominal due to the relatively small number of Company stores outside of California. Workers compensation
insurance costs are subject to a number of factors, and although we have seen a reduction in the number of workers compensation claims due to employee safety initiatives that we began implementing in fiscal 2002, we cannot predict whether this
trend will continue and what the impact to our workers compensation expense will be.
Depreciation and amortization expense changed subsequent to our acquisition by CAC, which we refer to as the Acquisition, a result of fair values assigned to assets acquired and liabilities
assumed at the date of the Acquisition as determined by management with the assistance of an independent valuation company
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. Occupancy expense
increased subsequent to the Acquisition as a result of the revaluation of the fair market value of leases assumed in the Acquisition and the reduction in the annual amortization of the unfavorable leasehold interest liability.
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.
17

General and administrative expense includes all corporate and administrative functions that support existing operations and provide the infrastructure to facilitate our growth. These expenses
have been impacted by rating agency fees, directors and officers insurance, compliance with laws relating to corporate governance and public disclosure, and audit fees. In addition, general and administrative expense includes costs associated with
disclosure controls and procedures and implementing the level of internal controls required for a company with registered securities.
Results of Operations
Our operating results for the 13 weeks ended September 30, 2006 and 2007 are expressed as a percentage of restaurant revenue below:
13 Weeks EndedSeptember
    30,2006

2007Operating Statement Data:Restaurant revenue
100.0
%

100.0
%Product cost
31.0


30.9Payroll and benefits
25.1


26.0Depreciation and amortization
4.2


4.5Other operating expenses
32.5


37.0Operating income
14.7


9.2Interest expense
11.7


11.0Income (loss) before income taxes
3.0


(1.9
)Net income (loss)
0.9


(6.0
)Supplementary Operating Statement Data:Restaurant other operating expense
21.6


22.0Franchise expense
1.4


1.4General and administrative expense
9.5


13.6Total other operating expenses
32.5


37.013 Weeks Ended September 30, 2007 Compared to 13 Weeks Ended September 30, 2006
Restaurant revenue increased $5.6 million, or 9.1%, to $67.3 million for the 13 weeks ended September 30, 2007 from $61.7 million for the 13 weeks ended September 30, 2006. This
increase was partially due to an additional $1.0 million in restaurant revenue resulting from a 1.7% increase in company-operated same-store sales for the 2007 period from the 2006 period. The positive impact from a price increase taken at the
beginning of the year and an increase in average check more than compensated for a transaction decline in the third quarter. Restaurants enter the comparable restaurant base for same-store sales the first full week after that restaurants
15-month anniversary. The increase in restaurant revenue was also due in part to $1.5 million in current year revenue from five restaurants opened in fiscal 2006, $1.9 million from eight restaurants opened in fiscal 2007 and $1.6 million
from three restaurants acquired from a franchisee in fiscal 2007 partially offset by lost sales of $0.4 million due to the sale of eight company restaurants to franchisees in fiscal 2007.
Franchise revenue increased $0.4 million, or 8.9%, to $5.0 million for the 13 weeks ended September 30, 2007 from $4.6 million for the 13 weeks ended September 30, 2006. This
increase is primarily due to an increase in royalties resulting from a 2.5% increase in franchise same-store sales and also due to the increase in royalties from new franchise stores opened in the current period.
Product cost increased $1.7 million, or 8.7%, to $20.8 million for the 13 weeks ended September 30, 2007 from $19.1 million for the 13 weeks ended September 30, 2006 reflecting
increased restaurant revenue and chicken costs. These costs as a percentage of restaurant revenue remained relatively flat at 30.9% for the 2007 period compared to 31.0% for the 2006 period.
18

Payroll and benefit expenses increased $2.0 million, or 13.0%, to $17.5 million for the 13 weeks ended September 30, 2007 from $15.5 million for the 13 weeks ended September 30,
2006. As a percentage of restaurant revenue, these costs increased 0.9% to 26.0% in 2007 from 25.1% for the 2006 period. This increase is primarily attributed to increased spending on manager training and the increase in the minimum wage.
Depreciation and amortization increased $0.4 million, or 15.6%, to $3.0 million for the 13 weeks ended September 30, 2007 compared to $2.6 million for the 13 weeks ended September
30, 2006. These costs as a percentage of restaurant revenue increased 0.3% to 4.5% in 2007 from 4.2% for the 2006 period. The increase in depreciation expense as a percentage of restaurant revenue is due to capital expenditures on existing
restaurants for capitalized maintenance and to comply with the federal Americans With Disabilities Act remodels.
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, increased $1.5 million, or 11.0%,
to $14.8 million for the 13 weeks ended September 30, 2007 from $13.3 million for the 13 weeks ended September 30, 2006. These costs as a percentage of restaurant revenue increased to 22.0% for the 2007 period from 21.6% for the 2006 period.
The increase in operating costs was due to a 0.4% increase in occupancy costs as a percentage of revenue, which was a result of the reduction in the annual amortization of the unfavorable leasehold interest liability and higher rent expense. The
increase in operating costs was also due to a 0.4% increase in repair and maintenance costs as a percentage of revenue due to a higher general run rate of equipment repairs and refrigeration. This is in response to increased heat load during the
period. The increase in restaurant other operating expense was partially offset by a 0.5% decrease in advertising expense 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.
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 $0.9 million the 13-week periods ended September 30, 2007 and September 30, 2006.
General and administrative expense increased $3.3 million, or 56.0%, to $9.2 million for the 13 weeks ended September 30, 2007 from $5.9 million for the 13 weeks ended September 30,
2006. General and administrative expense as a percentage of revenue increased 4.1% to 13.6% for the 13 weeks ended September 30, 2007 from 9.5% for the 13 weeks ended September 30, 2006. The increase was primarily attributed to a $2.8 million
loss recognized in the 2007 period from the sale of eight company restaurants that did not occur in the 2006 period, an increase of $0.6 million in legal fees in the 2007 period, partially offset by a decrease of $0.3 million in corporate
meetings expense due to timing. The eight restaurants that were sold had an aggregate net book value of $1.6 million, and after a write off of goodwill of $8.8 million, in accordance with Statement of Accounting Standards No. 142, and a
liability reduction of $0.1 million, the Company realized a $2.8 million loss.
Interest expense, net of interest income, increased $0.2 million, or 2.7%, to $7.4 million for the 13 weeks ended September 30, 2007 from $7.2 million for the 13 weeks ended
September 30, 2006. Our average debt balances for the 2007 period increased to $265.0 million compared to $258.4 million for the 2006 period and our average interest rate decreased to 10.62% for the 2007 period compared to 10.81% for the
2006 period.
Our provision for income
taxes consisted of income tax expense of $2.8 million and $1.3 million
for the 13-week periods ended September 30, 2007 and 2006, respectively, for
an effective  tax rate of 36.5% for 2007 and 56.7% for 2006. The 2007 periods
effective tax rate was impacted by the non-deductible portion of goodwill written
off, in the amount of $3.3 million related to the sale of eight company
restaurants.
As a result of the factors above, we had a net loss of $4.0 million for the 13 weeks ended September 30, 2007 compared with net income of $0.5 million for the 13 weeks ended September
30, 2006, or (6.0)% and 0.9% as a percentage or restaurant revenue, for the 13 weeks ended September 30, 2007 and 2006, respectively.
39 Weeks Ended September 30, 2007 Compared to 39 Weeks Ended September 30, 2006
Our operating results for the 39 weeks ended September 30, 2006 and 2007 are expressed as a percentage of restaurant revenue below:
19

39 Weeks EndedSeptember 30,2006

2007Operating Statement Data:Restaurant revenue

100.0
%

100.0
%Product cost

31.3


30.9Payroll and benefits

25.4


26.1Depreciation and amortization

4.1


4.5Other operating expenses

32.4


34.3Operating income

13.9


11.6Interest expense

11.8


11.3Income before income taxes

2.1


0.3Net income (loss)

1.0


(1.2
)Supplementary Operating Statement Data:Restaurant other operating expense

20.8


21.6Franchise expense

1.4


1.4General and administrative expense

10.2


11.3Total other operating expenses

32.4


34.3Restaurant revenue increased $12.2 million, or 6.7%, to $194.7 million for the 39 weeks ended September 30, 2007 from $182.5 million for the 39 weeks ended September 30, 2006. This
increase was partially due to an additional $3.0 million in restaurant revenue resulting from a 1.7% increase in company-operated same-store sales for the 2007 period from the 2006 period. The positive impact from a price increase taken at the
beginning of the year and an increase in average check more than compensated for a transaction decline in fiscal 2007. Restaurants enter the comparable restaurant base for same-store sales the first full week after that restaurants 15-month
anniversary. The increase in restaurant revenue was also due in part to $5.9 million in current year revenue from twelve restaurants opened in fiscal 2005 and 2006, $3.1 million from eight restaurants opened in fiscal 2007 and $1.6
million from three restaurants acquired from a franchisee in fiscal 2007 partially offset by lost sales of $1.0 million due to the temporary closure of a restaurant due to a fire in 2007 and $0.4 million due to the sale of eight company
restaurants to franchisees in fiscal 2007.
Franchise revenue increased $1.3 million, or 10.3%, to $14.1 million for the 39 weeks ended September 30, 2007 from $12.8 million for the 39 weeks ended September 30, 2006. This
increase is primarily due to an increase in royalties resulting from a 3.4% increase in franchise same-store sales and also due to the increase in royalties from new franchise stores opened in the current period.
Product cost increased $3.0 million, or 5.2%, to $60.1 million for the 39 weeks ended September 30, 2007 from $57.1 million for the 39 weeks ended September 30, 2006 reflecting
increased restaurant revenue and chicken costs. These costs as a percentage of restaurant revenue were 30.9% for the 2007 period compared to 31.3% for the 2006 period. The 0.4% decrease in product cost as a percentage of restaurant revenue resulted
primarily from the menu price increase taken in January of 2007.
Payroll and benefit expenses increased $4.4 million, or 9.6%, to $50.7 million for the 39 weeks ended September 30, 2007 from $46.3 million for the 39 weeks ended September 30,
2006. As a percentage of restaurant revenue, these costs increased 0.7% to 26.1% in 2007 from 25.4% for the 2006 period. This increase is primarily attributed to increased spending on manager training and the increase in the minimum wage in the
current period.
Depreciation and amortization increased $1.2 million, or 16.3%, to $8.7 million for the 39 weeks ended September 30, 2007 compared to $7.5 million for the 39 weeks ended September
30, 2006. These costs as a percentage of restaurant revenue increased 0.4% to 4.5% in 2007 from 4.1% for the 2006 period. The increase in depreciation expense as a percentage of restaurant revenue is due to capital expenditures on existing
restaurants for capitalized maintenance and to comply with the federal Americans With Disabilities Act remodels.
Other operating expenses include restaurant other operating expense, franchise expense, and general and administrative expense.
20

Restaurant other operating expense, which includes utilities, repair and maintenance, advertising, property taxes, occupancy and other operating expenses, increased $4.1 million, or 10.9%,
to $42.0 million for the 39 weeks ended September 30, 2007 from $37.9 million for the 39 weeks ended September 30, 2006. These costs as a percentage of restaurant revenue increased to 21.5% for the 2007 period compared to 20.8% for the 2006
period. The increase in operating costs was due in part to a 0.2% increase in advertising expense as a percentage of revenue. Advertising expense each quarter may be above or below our planned annual rate of approximately 4%, depending on the timing
of marketing promotion and the relative weights and price of media spending. The increase in operating costs was also due to a 0.4% increase in occupancy costs as a percentage of revenue, which was a result of the reduction in the annual
amortization of the unfavorable leasehold interest liability and higher rent expense. The increase in operating costs was also due to a 0.2% increase in repair and maintenance costs due to a higher general run rate of equipment repairs and
refrigeration.
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 relatively flat at $2.7 million for the 39-week period ended September 30, 2007 and at $2.6
million for the 39-week period ended September 30, 2006.
General and administrative expense increased $3.4 million, or 18.2%, to $22.0 million for the 39 weeks ended September 30, 2007 from $18.6 million for the 39 weeks ended September
30, 2006. General and administrative expense as a percentage of revenue increased 1.1% to 11.3% for the 2007 period from 10.2% for the 2006 period. The increase in general and administrative expenses was due to a $2.6 million loss recognized in
the current period primarily attributed to the sale of eight company restaurants to franchisees, increased legal fess of $0.6 million in the 2007 period and an increase in bonus expense of $0.4 million, partially offset by decreased outside
services expense of $0.3 million.
Interest expense, net of interest income, increased $0.5 million, or 2.2%, to $21.9 million for the 39 weeks ended September 30, 2007 from $21.4 million for the 39 weeks ended
September 30, 2006. Our average debt balances for the 2007 period increased to $260.7 million compared to $259.4 million for the 2006 period and our average interest rate increased to 10.63% for the 2007 period compared to 10.57% for the
2006 period.
Our provision for income
taxes consisted of income tax expense of $3.1 million and $2.1 million
for the 39-week periods ended September 30, 2007 and 2006, respectively, for
an effective  tax rate of 32.6% for 2007 and 48.7% for 2006. The 2007 periods
effective tax rate was impacted by an adjustment to recognize an interest deduction
related to the EPL Intermediate Discount Notes in the amount of $0.5 million
that we  determined not to be subject to Applicable High Yield Discount Obligation
(AHYDO) rules in Section 163(i) of the Internal Revenue Code. The effective tax
rate was also impacted by the non-deductible portion of goodwill written off,
 in the amount of $3.3 million related to the sale of eight company restaurants.
As a result of the factors above, we had a net loss of $2.4 million for the 39 weeks ended September 30, 2007 compared with net income of $1.8 million for the 39 weeks ended September
30, 2006, or (1.2) % and 1.0% as a percentage or restaurant revenue, for the 39 weeks ended September 30, 2007 and 2006, respectively.
Liquidity and Capital Resources
Our principal liquidity requirements are to service our debt and meet our capital expenditure needs. Our indebtedness at September 30, 2007 was $259.2 million. Our ability to make payments
on and to refinance our indebtedness, and to fund planned capital expenditures will depend on our ability to generate cash 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 and available borrowings under the $25.0 million revolving portion of EPLs senior credit facility
will be adequate to meet our future liquidity needs for at least the next twelve months.
In the 2007 nine-month period, our capital expenditures totaled $14.4
million, consisting of $9.9 million for new restaurants, $1.4 million for capitalized repairs of existing
sites, and $2.9 million for constructions costs related to our new corporate office. We also had an $8.5 million expenditure for the purchase of three franchise restaurants and we had cash proceeds of $8.0 million from asset dispositions
in the current period, $7.4 million of which was related to the sale of eight company restaurants to franchisees in the current period. As a result, net cash used in investing activities in the current period was $14.9
million.
Cash and cash equivalents increased $3.1 million from $3.0 million at December 27, 2006 to $6.1 million at September 30, 2007. In the first nine months of fiscal 2007, we made
$2.0 million in principal repayments on EPLs loan, $17.5 million in payments to pay off borrowings under our revolving credit facility and $14.7 million in interest payments. The interest payments related primarily to the term
loan. We also borrowed $14.5 million under our revolving credit facility, $8.5 million of which was used to purchase three
21

restaurants in Las Vegas from a franchisee on June 29, 2007. 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 assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
As a holding company, the stock of EPL constitutes our only material asset. Consequently, 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 indenture governing the 2013 Notes and
2014 Notes to incur additional indebtedness that may severely restrict or prohibit the making of distributions, the payment of dividends or the making of loans by EPL.
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. As discussed above, we spent cash on a number of items directly or indirectly related to our debt financings and the Acquisition of the Company by CAC. We expect our negative
working capital balances to continue to increase, based on the continuing growth of our business.
Operating Activities.We had net cash provided by operating activities of $24.3
million for the 39 weeks ended September 30, 2007 compared with
$21.8 million for the 39 weeks ended September 30, 2006. The increase in cash provided by operating activities was related to increased accounts payable balances, increases in deferred income taxes and changes in loss on disposal of assets
partially offset by changes in the income taxes payable balances and the net loss.
Investing Activities.We
had net cash used in investing activities of $14.9
million for the 39 weeks ended September 30, 2007 compared with $11.9
million for the 39 weeks ended September 30, 2006. The increase in cash used
in investing activities of $3.0 million was related to $3.6 million in
increased expenditures for new store construction, $8.5 million for the purchase
of the  three franchise restaurants and $2.9 million in construction costs
related to the new corporate office, partially offset by $8.0 million in
proceeds received for asset dispositions primarily attributed to the eight restaurants
sold to  franchises in the current period and a decrease in spending of $2.9
million for acquisition costs.
Financing Activities.We had net cash provided by financing activities of $6.2 million for the 39 weeks ended September 30, 2007 compared with net
cash used in financing activities of $6.0 million for the 39 weeks ended September 30, 2006. The decrease of $0.2 million in cash used financing activities in the 2007 period was primarily attributable to the draw down of our revolving
credit facility of $14.5 million and a decrease in deferred financing costs of $1.4 million partially offset by increased payments on debt of $15.9 million due to increased borrowings on our revolver that were paid in the current period
and also due to a 2006 principal payment that was made in the current period.
Debt and Other Obligations
On November 18, 2005, EPL entered into senior secured credit facilities 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 senior
secured credit facilities provide for an $104.5 million term loan and $25.0 million in revolving availability. As of September 30, 2007, EPL was in compliance with all of the financial covenants contained in its senior credit facility. In
March 2007 we amended the credit facility to reduce the interest rate and to modify in our favor the terms of certain restrictive covenants.
We have certain land and building leases for which the building portion is treated as a capital lease. These assets are amortized over the life of the respective lease.
22

At September 30, 2007, we had $29,232,000 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 $39,342,000 at maturity. 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 (see Note 11 to our Consolidated Financial Statements).
At September 30, 2007, we had $250,000 and $123,794,000 outstanding in aggregate principal amount under our 2009 Notes and 2013 Notes, respectively (see Notes 8 and 9 to our
Consolidated Financial Statements).
At September 30, 2007, we had outstanding letters of credit totaling $7.6 million, which served as collateral for our various workers compensation insurance programs.
Franchisees pay a monthly advertising fee of 4% of gross sales for the Los Angeles designated market area or 5% of gross sales for other markets. Pursuant to our Uniform Franchise Offering
Circular, 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.
As of September 30, 2007, EPL was in compliance with all of the financial covenants contained in its senior credit facility. As of such date we calculated all relevant ratios under its senior
credit facility as follows:
EPLs fixed charge coverage ratio (as such term is defined in the senior credit agreement) was 1.11 to 1; and
EPLs leverage ratio (as such term is defined in the senior credit agreement) was 4.98 to 1.These two ratios were permitted to be no less than 1.00 to 1, and no greater than 5.75 to 1, respectively, as of such date.
In addition, as of September 30, 2007, we calculated our fixed charge coverage ratio and our consolidated leverage ratio (as such terms are defined in the indenture
governing the 2014 Notes) at 1.58 to 1 and 5.48 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 our restricted subsidiaries (as such term is defined in the indenture), including EPL, to
incur indebtedness if our fixed charge coverage ratio for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such indebtedness was incurred would have been
at least 2.0 to 1, and, in the case of indebtedness incurred by us, 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 (including a pro forma application of the net proceeds
therefrom), 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. This restriction does not
apply to borrowings available under the revolving line of credit.
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 and contingent liabilities. 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 23, 2007.
As further described in Part II, Item 1, in 2004, EPL-Mexico filed suit alleging, among other things, that the Company breached its agreement with EPL-Mexico by failing to exploit the
trademarks and develop new restaurants in Mexico. A jury trial was held in July 2007 in federal district court in Laredo, Texas. On July 26, 2007, the jury returned a verdict finding damages for EPL-Mexico in the approximate amount of $22
million.
23

A post trial hearing was held October 31, 2007, at which time a judgment was not announced. The Company believes there are inconsistencies in the jury verdict. Further, it is the Companys
contention that two key factual findings by the jury support our position. The first is that plaintiff knew of the injuries it alleged in this case as early as 1997 but did not file this lawsuit until 2004, which we assert was after the statute of
limitations expired. The second is that the value of the 1996 agreement was $1,087,500. The Company deposited that same amount into the registry of the Court two years ago, representing the buyout price in the contract. The Company is hopeful
that the trial judge will recognize the significance of these two key jury findings and enter a final judgment in our favor. If the Courts judgment upholds the jurys damages findings, the Company will appeal. The failure to prevail in
this action could result in the loss of the Companys ownership in Mexico of the El Pollo Loco trademarks and intellectual property. This could negatively affect our brand in the United States and elsewhere. In addition, a final adverse
judgment could result in the imposition of significant monetary damages, which could have a material adverse impact on the Companys consolidated financial position, results of operations or cash flows.
Pursuant to Statement of Accounting Standards No. 5, Accounting for Contingencies (FAS 5) and FASB Interpretation 14 (FIN14), two conditions must be met in order to establish an accrual: (i) it
is probable that a liability has been incurred; and (ii) the amount of loss can be reasonably estimated.
We believe that due to the significant points that we have for appeal in the EPL  Mexico litigation, the likelihood of a loss is not probable even if the Court enters a judgment that
mirrors the jury verdict. Additionally, FAS 5 and FIN14 state that if a loss can be reasonably estimated, it should be recorded. Due to the uncertainties involved in predicting possible outcomes of the judgment, then predicting possible outcomes to
the rulings on appeal that we would file if a material adverse judgment is issued, it is our opinion that, even though we have received an adverse jury verdict, a reasonable estimate of the loss cannot be determined at this time. Therefore, no
accrual for the EPL  Mexico litigation has been recorded as of September 30, 2007. Once a judgment is issued, the number of possible outcomes will be reduced, and we will then re-evaluate whether to establish an accrual for this
contingency.
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 facilities
that are payable at floating rates of interest.
A hypothetical 10% fluctuation in the variable interest rate on our existing debt of $101.7 million as of September 30, 2007 would result in an increase or decrease in interest expense of
approximately $0.1 million in a given year. We do not consider the change in fair value of our long-term fixed rate debt resulting from a hypothetical 10% fluctuation in interest rates as of September 30, 2007 to be material.
Item 4T. Controls and Procedures
Our Chief Executive Officer and Senior Vice President of Finance have concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2007.
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 first 39 weeks ended September 30, 2007, that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II  OTHER INFORMATION
Item 1. Legal Proceedings
The contractual rights to use the name El Pollo Loco® and certain related trademarks and intellectual property in Mexico were assigned to the Company in 1996, pursuant to an agreement with
a company controlled by Juan Francisco Ochoa, the founder of the first El Pollo Loco restaurant in Mexico and the United States. As consideration for the assignment of such rights, the Company
24

agreed, subject to the terms and conditions of the
agreement, to use commercially reasonable efforts to develop a minimum number
of restaurants in Mexico by February 2006 and to pay certain fees for each such
restaurant. On  March 31, 2004, EPL-Mexico filed suit alleging, among other things,
that the Company breached its agreement with EPL-Mexico by failing to exploit
the trademarks and develop new restaurants in Mexico. A jury trial was held in
July 2007 in federal  district court in Laredo, Texas. The jury returned a verdict
finding damages for EPL-Mexico, based on theories under Mexican law, in the approximate
amount of $22
million. A post trial hearing was held October 31, 2007, at which time a judgment
was not announced. The Company believes there are inconsistencies in the jury
verdict. Further, it is the Companys
contention that two key factual findings by the jury support our position. The
first is that plaintiff knew of the injuries it alleged in this case as early
as 1997 but did not file this lawsuit until 2004, which the Company asserts was
after the statute of limitations expired. The second is that the value of the
1996 agreement was
$1,087,500. The Company deposited that same amount into the registry of the
Court two years ago, representing the buyout price in the contract. The Company
is hopeful that the trial judge will recognize the significance of these two
key jury  findings and enter a final judgment in our favor. If the Court upholds
the jurys damages findings, the Company will appeal. The failure to prevail
in this action could result in the loss of the Companys ownership in Mexico
of the El  Pollo Loco trademarks and intellectual property. This could negatively
affect our brand in the United States and elsewhere. In addition, a final adverse
judgment could result in the imposition of significant monetary damages, which
could have a  material adverse impact on the Companys consolidated financial
position, results of operations or cash flows.
On June 22, 2006, the Company filed a complaint for declaratory relief, breach of written contract and bad faith against Arch Specialty Insurance Company, 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 described above. A voluntary mediation was held in New York
City on February 5, 2007, but the parties were unable to reach agreement. The Court has scheduled a hearing on the Summary Judgment motions of both parties on January 25, 2008, and a trial date in March 2008.
Also see our Annual Report on Form 10-K for the year ended December 27, 2006 as filed with the SEC on March 23, 2007.
Item 1A. Risk Factors
An ultimate adverse ruling in litigation involving Mexico trademark rights could result in the imposition of significant monetary damages and loss of rights to the trademarks in Mexico.
We are currently involved in litigation relating to our rights to use certain trademarks and intellectual property in Mexico as discussed in Part II, Item 1 above. An ultimate adverse ruling in
this litigation could result in the imposition of significant monetary damages which could result in an event of default under our credit facility and our long-term notes and materially, adversely affect our liquidity, financial condition and
business. In addition, the loss of the rights to use the trademarks and intellectual property in Mexico could adversely affect our brand in the United States and elsewhere.
Certain factors may have a material adverse effect on our business, financial condition and results of operations and you should carefully consider them. For discussion of our potential risks
our uncertainties, refer to Risk Factors, included in our Annual Report on Form 10-K for the year ended December 27, 2006 as filed with the U.S. Securities Exchange Commission on March 23, 2007.
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Item 6. Exhibits.
ExhibitNumber

Description of Documents31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200226

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 9, 2007

By:
/s/ Stephen E. CarleyStephen E. CarleyPresidentBy:
/s/ Joseph SteinJoseph SteinChief Financial Officer and Treasurer27

EXHIBIT INDEX
ExhibitNumber

Description of Documents31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200228