El Pollo Loco 2015 Annual Report Download - page 61

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Table of Contents
Asset Impairment and Close
-Store Reserves
Asset impairment and close-store reserve expense decreased $1.6 million to a gain of $0.1 million in fiscal 2013, primarily due to a decrease of
$1.6 million in close-store reserves. The 2012 close-store reserve expense resulted from the establishment of a reserve for four restaurants that
were anticipated to be closed, while the 2013 gain resulted from the partial reversal in 2013 of the 2012 reserve costs, due to our subleasing one
of the reserved restaurants at a lower net cost than originally estimated.
Gain on Disposition of Restaurants
In fiscal 2013, a $0.4 million gain was recognized relating to a restaurant that was closed as a result of an eminent domain purchase by the State
of California.
Interest Expense, Net
Interest expense, net, decreased $2.6 million in fiscal 2013, primarily due to a reduction in the interest rate on our debt, resulting from the 2013
Refinancing.
Early Extinguishment of Debt
We recorded a $21.5 million charge in fiscal 2013 related to the early extinguishment of debt. This charge resulted from call premiums of $7.9
million, a write-
off of deferred financing costs of $8.4 million, and accelerated accretion of $5.2 million resulting from the 2013 Refinancing. As
a result of the 2013 Refinancing, we incurred banking fees, early repayment penalties, and other related costs.
Provision for Income Taxes
Despite having a net loss in both fiscal 2013 and 2012, our provision for income taxes consisted of income tax expense of $1.4 million in fiscal
2013 and $2.0 million in fiscal 2012, primarily related to the effect of changes in our deferred taxes and the related effect of maintaining a full
valuation allowance against certain of our deferred tax assets as of December 25, 2013, and December 26, 2012.
Liquidity and Capital Resources
Our primary sources of liquidity and capital resources have been cash provided from operations, cash and cash equivalents, and our secured
revolving credit facility. Our primary requirements for liquidity and capital are new restaurants, existing restaurant capital investments (remodels
and maintenance), interest payments on our debt, lease obligations, and working capital and general corporate needs. Our working capital
requirements are not significant, since our customers pay for their purchases in cash or by payment card (credit or debit) at the time of sale.
Thus, we are able to sell many of our inventory items before we have to pay our suppliers for them. Our restaurants do not require significant
inventories or receivables. We believe that these sources of liquidity and capital are sufficient to finance our continued operations and expansion
plans for at least the next 12 months.
In October 2013, we refinanced the 2011 Financing Agreements by entering into the 2013 Credit Agreements. These senior secured credit
facilities carried longer maturities and lower interest rates than the indebtedness that they replaced.
On July 30, 2014, we closed our IPO, the majority of the proceeds of which were used to repay our 2013 Second Lien Term Loan.
In December 2014, we refinanced the 2013 First Lien Credit Agreement by entering into the 2014 Revolver, which carried a longer maturity and
a lower interest rate than the indebtedness that it replaced.
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