El Torito’s Net Up 32% as Buy-Out Plans Proceed

El Torito Restaurants Inc. reported net income of $3 million for its fiscal third quarter ended Sept. 30, a 32% gain from net income of $2.3 million for the comparable period a year earlier. The Irvine-based restaurant operator said sales for the period totaled $101 million, up 20% from $84.2 million.

El Torito attributed the increased sales and earnings to reduced administrative expenses and the addition of sales from restaurants acquired in 1985 and 1986.

Net earnings for the first nine months, however, were up only 1.2%, to $8.6 million from $8.5 million. Sales for the nine months totaled $292.6 million, up 25% from $234.5 million.

New York-based W.R. Grace & Co., which owns a 73% stake in El Torito, said a group of its managers is proceeding with plans for a leveraged buy-out of Grace’s restaurant group, which would include El Torito. Completion of the buy-out is subject to certain conditions, including a favorable vote of the Grace and El Torito boards.

If the sale is completed, the minority stake in El Torito would be purchased by the investor group.

A leveraged buy-out is a transaction financed largely by borrowing on the assets of the company to be acquired. The debt then is repaid either from earnings or by selling portions of the acquired company.