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EL POLLO LOCO HOLDINGS, INC.
FORM 10-K
(Annual Report)
Filed 03/17/15 for the Period Ending 12/31/14
Address 3535 HARBOR BOULEVARD
SUITE 100
COSTA MESA, CA 92626
Telephone 7145995000
CIK 0001606366
Symbol LOCO
SIC Code 5812 - Eating Places
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2015, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    EL POLLO LOCO HOLDINGS, INC. FORM 10-K (Annual Report) Filed 03/17/15 for the Period Ending 12/31/14 Address Telephone CIK Symbol SIC Code Fiscal Year 3535 HARBOR BOULEVARD SUITE 100 COSTA MESA, CA 92626 7145995000 0001606366 LOCO 5812 - Eating Places 12/31 http://www.edgar-online.com © ...

  • Page 2
    ... EL POLLO LOCO HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware State or other jurisdiction of incorporation or organization 20-3563182 (I.R.S. Employer Identification No.) 3535 Harbor Blvd., Suite 100, Costa Mesa, California (Address of principal executive offices...

  • Page 3
    ... 25, 2014, the last business day of the registrant's most recently completed second fiscal quarter, the registrant's common equity was not publicly traded. The registrant's common equity began trading on the NASDAQ Global Select Market on July 25, 2014. As of February 28, 2015, there were 37,420,450...

  • Page 4
    ...Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services...

  • Page 5
    ... restaurant openings, restaurant closures, due to financial performance or otherwise, increases in chicken and other input costs, negative publicity, whether or not valid, concerns about food safety and quality and about food-borne illness, particularly avian flu, dependence on frequent and timely...

  • Page 6
    ... corporate governance rules primarily related to board independence, and that we intend to use some or all of those exemptions, that El Pollo Loco Holdings, Inc., is a holding company with no operations that relies on its operating subsidiaries to provide it with funds, timing of our emerging growth...

  • Page 7
    ...and cilantro dressings from scratch. The open design of our kitchens reveals our Mexican-inspired cooking process and allows our customers to watch our grill masters and team members fire-grill and hand-cut our signature chicken, as well as make burritos, salads, tostadas, bowls, stuffed quesadillas...

  • Page 8
    ... flavorful bone-in chicken meals and Mexican-inspired entrees. With menu items such as our Chicken Avocado Burrito, Chicken Tostada Salad, Pollo Bowl ® , and Chicken Avocado Stuffed Quesadilla, we believe that we offer our customers a healthier alternative to traditional food on-the-go. Our entrees...

  • Page 9
    ... our company-operated and our franchised restaurant managers to make rapid and objective decisions to maintain our standards for food and service. Developing High Average Unit Volumes ("AUVs") and Strong Unit Economics One Chicken at a Time. We believe that our differentiated QSR+ positioning drives...

  • Page 10
    ...had 415 locations in five states. In fiscal 2014, we opened eleven new companyoperated and five new franchised restaurants, and in 2015 we intend to open sixteen new company-operated and eleven new franchised restaurants. Over the long term, we plan to grow the number of El Pollo Loco restaurants by...

  • Page 11
    ...will be able to open new company-operated or franchised restaurants, or to increase the overall number of our restaurants. We may be unsuccessful in expanding within existing or into new markets for a variety of reasons described in Item 1A, "Risk Factors," including competition for customers, sites...

  • Page 12
    .... Restaurant Management and Operations Service We are extremely focused on customer service. We aim to provide fast, friendly service on a solid foundation of dedicated, driven team members and managers. Our cashiers are trained on the menu items that we offer, and offer customers thoughtful...

  • Page 13
    ... requires increased training periods, culminating in the general manager training process, which is comprised of seven weeks of intensive classroom and hands-on training in a certified training restaurant. Grill Masters Our reputation is built on our signature product-fired-grilled chicken marinated...

  • Page 14
    ... ensure that our franchise owners and their managers are equipped with the knowledge and skills necessary for success. The program consists of hands-on training in the operation and management of an El Pollo Loco restaurant. Training is conducted by a general training manager who has been certified...

  • Page 15
    ... El Pollo Loco ® , Pollo Bowl ® , The Crazy Chicken ® , and certain other names used by our restaurants as trademarks or service marks with the U.S. Patent and Trademark Office (the "PTO"), and El Pollo Loco ® in approximately 42 foreign countries. Our current brand campaign, Crazy You Can Taste...

  • Page 16
    ...fil-A, Church's Chicken, KFC, Popeyes Louisiana Kitchen, and Taco Bell, among others. We believe that competition within the fast casual restaurant segment is based primarily on ambience, price, taste, quality, and freshness of menu items, as well as on the convenience of drive-thru service. We also...

  • Page 17
    ... that we face, see Item 1A, "Risk Factors." Management Information Systems All of our company-operated and franchised restaurants use computerized point-of-sale and back-office systems, which we believe can scale to support our long-term growth plans. Our point-of-sale system provides a touch-screen...

  • Page 18
    Table of Contents Available Information We make available free of charge on our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities ...

  • Page 19
    ... adversely affected, and we and our franchisees might decelerate the number and timing of new restaurant openings. Deterioration in customer traffic or a reduction in average check size would negatively impact our revenues and our profitability and could result in further reductions in staff levels...

  • Page 20
    ...in opening new company-operated or franchised restaurants or in establishing new markets, which could adversely affect our growth. One of the key means to achieving our growth strategy will be through opening new restaurants and operating those restaurants on a profitable basis. We opened eleven new...

  • Page 21
    ... menu price increases in the future to protect our margins, average check size and restaurant traffic could be materially and adversely affected, at both company-operated and franchised restaurants. Negative publicity could reduce sales at some or all of our restaurants. We are, from time to time...

  • Page 22
    ... flu that customers may associate with our food products. We rely on only one company to distribute substantially all of our products to company-operated and franchised restaurants, and on a limited number of companies to supply chicken. Failure to receive timely deliveries of food or other supplies...

  • Page 23
    ... financial condition. Our ability to manage our debt is dependent upon our level of positive cash flow from company-operated and franchised restaurants, net of costs. An economic downturn could negatively impact our cash flow. Credit and capital markets can be volatile, making it difficult for us to...

  • Page 24
    ...fast casual restaurants in new and existing markets, we could lose customers and our revenue could decline. Our company-operated and franchised restaurants compete with national and regional quick-service and fast casual restaurant chains for customers, restaurant locations, and qualified management...

  • Page 25
    .... They are not our employees, and we do not exercise control over the day-to-day operations of their restaurants. We provide training and support to franchisees, and set and monitor operational standards, but the quality of franchised restaurants may be diminished by any number of factors beyond our...

  • Page 26
    ... to offer franchises. To the extent that we have such disputes, the attention, time, and financial resources of our management and our franchisees will be diverted from our restaurants, which could have a material adverse effect on our business, financial condition, results of operations, and...

  • Page 27
    ... awareness. We have registered El Pollo Loco ® , Pollo Bowl ® , The Crazy Chicken ® , and certain other names used by our restaurants as trademarks or service marks with the PTO and in approximately 42 foreign countries. Our current brand campaign, Crazy You Can Taste™, has also been approved...

  • Page 28
    ... of operating our company-operated and franchised restaurants. If we or our franchisees face labor shortages or increased labor costs, because of increased competition for employees, higher employee-turnover rates, unionization of restaurant workers, or increases in the federally-mandated or state...

  • Page 29
    ... the number of employees taking part in our health insurance program, which could impact our results of operations beginning in 2015. We are also subject to regulation by the Federal Trade Commission and subject to state laws that govern the offer, sale, renewal, and termination of franchises and...

  • Page 30
    ... PPACA amended the Federal Food, Drug, and Cosmetic Act to require that chain restaurants with 20 or more locations, operating under the same name and offering substantially the same menus, publish the total number of calories of standard menu items on menus and menu boards, along with a statement...

  • Page 31
    ... of contamination at any of our properties, our operating expenses would likely increase and our results of operations would be materially and adversely affected. See Item 1, "Business-Environmental Matters." We are required to pay our pre-IPO owners for certain tax benefits, which amounts...

  • Page 32
    ... the then-current market price of our common stock upon a change in control. In addition, this concentration of ownership may adversely affect the trading price of our common stock, because investors may perceive disadvantages in owning shares of a company with significant stockholders. See Item 12...

  • Page 33
    ... Item 10, "Directors, Executive Officers and Corporate Governance." We are a holding company with no operations, and we rely on our operating subsidiaries to provide us with the funds necessary to meet our financial obligations and to pay dividends. We are a holding company with no material direct...

  • Page 34
    ... stock less attractive as a result. The result may be a less-active trading market for our common stock and increased stock price volatility. In addition, Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section...

  • Page 35
    ... of our actual operating performance. The stock market in general has from time to time experienced extreme price and volume fluctuations, including recently. In addition, in the past, following periods of volatility in the overall market and decreases in the market price of a company's securities...

  • Page 36
    ...Opening new company-operated restaurants in existing and new markets could require substantial additional capital in excess of cash from operations. We would expect to finance the capital required for new company-operated restaurants through a combination of additional issuances of equity, corporate...

  • Page 37
    ... such vacancy occurs as a result of an increase in the number of directors or otherwise; authorize the issuance of "blank check" preferred stock without any need for action by stockholders; eliminate the ability of stockholders to call special meetings of stockholders; establish advance notice...

  • Page 38
    ... currently set to expire in 2016. We have not included these two licensed restaurants as part of our unit count as presented in this annual report. The table below sets forth the locations (by state) for all restaurants in operation. CompanyState Operated Franchised Total California Nevada Arizona...

  • Page 39
    ..., liquidity, or capital resources. A significant increase in the number of claims, or an increase in amounts owing under successful claims, could materially and adversely affect our business, financial condition, results of operations, and cash flows. ITEM 4. MINE SAFETY DISCLOSURE None. 35

  • Page 40
    ... under the symbol "LOCO" since July 25, 2014. Prior to that date, there was no established public trading market for our common stock. The following table sets forth, for the periods indicated, the high and low intraday sale prices for our common stock on the NASDAQ, as reported by the NASDAQ. Such...

  • Page 41
    ... price on our first day of trading of $24.03), reinvestment of dividends, and no transaction costs. The graph and table are furnished and not filed with the SEC, and are not incorporated by reference into any other filing. They are not a forecast of future performance. S&P Supercomposite Date LOCO...

  • Page 42
    ... of Operations Data: Revenue Company-operated restaurant revenue Franchise revenue Total revenue Cost of operations Food and paper costs Labor and related expenses Occupancy and other operating expenses Company restaurant expenses General and administrative expenses Franchise expenses Depreciation...

  • Page 43
    ... of property owned, net of accumulated depreciation and amortization. Total debt consists of borrowings under the 2014 Revolver, 2013 Credit Agreements, and 2011 Financing Agreements (each, as defined in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations...

  • Page 44
    ... franchised restaurants. In fiscal 2014, we opened eleven new company-operated and five new franchised restaurants across Arizona, California, Nevada, and Texas. Over the long term, we plan to grow the number of El Pollo Loco restaurants by 8% to 10% annually. To increase comparable restaurant sales...

  • Page 45
    ... restaurant openings is excluded. Comparable restaurant sales growth can be generated by an increase in the number of meals sold and/or by increases in the average check amount, resulting from a shift in menu mix and/or higher prices resulting from new products or price increases. Company-Operated...

  • Page 46
    ...food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution margins are generally lower during the start-up period of operation. The average start-up period after which our new restaurants' revenue and expenses normalize is approximately eight to twelve weeks...

  • Page 47
    ... expense (a) Management fees (b) Loss on disposal of assets (c) Impairment and closures (d) Early extinguishment of debt (e) Gain on disposition of restaurants (f) Secondary offering expense (g) Income tax receivable agreement expense (h) Tax credit expense (i) Pre-opening costs (j) Adjusted...

  • Page 48
    ...consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs. These are generally incurred over...

  • Page 49
    ... Fiscal Year 2013 2014 2012 Company-operated restaurant activity: Beginning of period Openings Restaurant sale to franchisee Closures Restaurants at end of period Franchised restaurant activity: Beginning of period Openings Restaurant sale to franchisee Closures Restaurants at end of period Total...

  • Page 50
    ... included elsewhere in this report. Revenue Recognition We record revenue from company-operated restaurants as food and beverage products are delivered to customers and payment is tendered at the time of sale. We present sales net of sales-related taxes and promotional allowances. In the case...

  • Page 51
    ... improvements and betterments. We make judgments and estimates...value upon vacating a property. Franchise Operations We sublease a number of restaurant properties...state net operating loss ("NOL") carryforwards of $116 million and $134 million, respectively. These NOLs expire beginning in 2025 and 2015...

  • Page 52
    ... us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses and... $41 million relating to the present value of our total estimated TRA payments. We are permitted to make TRA payments under the 2014 Revolver. ...

  • Page 53
    ... estimated using four publicly-traded peer companies in our market category. These are selected based on similarities of size and other financial and operational characteristics. Volatility is calculated with reference to the historical daily closing equity prices of our peer companies, prior to the...

  • Page 54
    ... sources: company-operated restaurant revenue and franchise revenue, the latter of which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income. Food and Paper Costs Food and paper costs include the direct costs associated with food, beverage...

  • Page 55
    ...Store Reserves We review long-lived assets such as property, equipment, and intangibles on a unit-by-unit basis for impairment when events or circumstances indicate a carrying value... interest rates than the indebtedness that they replaced. The proceeds from our IPO in ...state taxes on our income. 51

  • Page 56
    ... to an increase in average check size of 3.3% and an increase in traffic of 2.5% compared to the prior year. Company-operated restaurant revenue was also favorably impacted by $8.8 million of additional sales from new restaurants and $4.6 million for the additional week of operations in a 53week...

  • Page 57
    ... primarily to costs associated with our IPO and with securing federal and state tax credits, and (iii) a $1.0 million increase in restaurant opening costs, due primarily to increased company-operated restaurant openings in 2014 as compared to 2013. General and administrative expenses as a percentage...

  • Page 58
    ... to sell six company-operated restaurants in the greater San Antonio area to AA Pollo, resulting in cash proceeds of $5.4 million. Goodwill was decremented by $650,000, based on a calculation of the fair value of the restaurants sold relative to the fair value of the reporting unit retained. We...

  • Page 59
    ...7.1%, in fiscal 2013, primarily due to an increase in company-operated comparable restaurant sales of $14.1 million, or 5.3%. The growth in company-operated comparable sales was primarily the result of an increase in average check size of 2.7% and an increase in traffic of 2.6% compared to the prior...

  • Page 60
    ...company-operated restaurant revenue, and a $0.4 million increase in occupancy expense primarily due to the new restaurants that opened in fiscal 2013 and 2012. These increases...by the increase in general and administrative expenses discussed above. Franchise Expenses Franchise expense increased by ...

  • Page 61
    ... 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...

  • Page 62
    ... (i) increased revenue, due primarily to company-operated comparable restaurant sales growth, and (ii) lower interest payments, due to the 2013 Refinancing and our IPO, the...related to new restaurant construction, the remodel and maintenance of existing restaurants, and other corporate expenditures. ...

  • Page 63
    ..., Holdings may not make certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $1 million per year to repurchase or redeem qualified equity interests of Holdings held by past or present officers, directors, or employees (or their estates) of the Company upon death...

  • Page 64
    ... the accompanying consolidated statements of operations. 2013 Second Lien Credit Agreement...Alternate Base Rate or LIBOR, at EPL's option, plus an applicable margin. The applicable margin rate under ... on a first-priority basis. In conjunction with our IPO, the 2013 Second Lien Term Loan was repaid in ...

  • Page 65
    ...current interest rates) to make future payments pursuant to our debt and other obligations disclosed above and pursuant to our restaurant operating... Operating leases Capital leases Long-term debt Income tax receivable agreement Purchasing commitments-beverage Purchasing commitments-chicken ...

  • Page 66
    ... operations. We have a substantial number of hourly employees who are paid wage rates at or based on the applicable federal or state minimum wage, and increases in the minimum wage will increase our labor costs. Since July 1, 2014, the State of California (where most of our restaurants are located...

  • Page 67
    Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA EL POLLO LOCO HOLDINGS, INC. AND SUBSIDIARIES INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets-December 31...

  • Page 68
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders El Pollo Loco Holdings, Inc. Costa Mesa, California We have audited the accompanying consolidated balance sheets of El Pollo Loco Holdings, Inc. ("Company") as of December 31, 2014 and ...

  • Page 69
    ... Contents EL POLLO LOCO HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data) December 31, 2014 December 25, 2013 Assets Current assets: Cash and cash equivalents Restricted cash Accounts and other receivables, net Inventories Prepaid expenses and other current assets...

  • Page 70
    ... of Contents EL POLLO LOCO HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except share data) For the Years Ended December 31, 2014 December 25, 2013 December 26, 2012 Revenue Company-operated restaurant revenue Franchise revenue Total revenue Cost of operations Food and...

  • Page 71
    Table of Contents EL POLLO LOCO HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ...Balance, December 25, 2013 Stock based compensation Issuance of common stock for initial public offering, net of offering costs of $10,914 Issuance of common stock upon exercise of stock options...

  • Page 72
    ... by operating activities: Depreciation and amortization Loss on early extinguishment of debt Stock-based compensation expense Interest accretion Income tax receivable agreement expense Gain on disposition of restaurants Loss on disposal of assets Impairment of property and equipment Close-store...

  • Page 73
    ... chicken burritos, chicken quesadillas, chicken tortilla soup, Pollo Bowls and Pollo Salads. At December 31, 2014, the Company operated 172 (134 in the greater Los Angeles area) and franchised 243 (137 in the greater Los Angeles area) El Pollo Loco restaurants. In addition, the Company currently...

  • Page 74
    ...generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported... in 2012, of the Company's purchases. In fiscal 2014, 2013, and 2012, Company-operated and franchised restaurants in the greater Los Angeles area generated, in the ...

  • Page 75
    ... and from the acquisition of certain franchise locations. Upon the sale of a restaurant, we decrement goodwill. The amount of goodwill that we include in the cost basis of the asset sold is determined based on the relative fair value of the portion of the reporting unit disposed compared to the fair...

  • Page 76
    ...EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) We perform annual...value are generally consistent with the past performance of the Company's reporting unit and are also consistent with the projections and assumptions that are used in current operating... market value ...

  • Page 77
    ... statements of operations. Restaurant and Franchise Revenue Revenues from the operation of company-operated restaurants are recognized as food and beverage products are delivered to customers and payment is tendered at the time of sale. The Company presents sales net of sales-related taxes...

  • Page 78
    ... pay a monthly fee to the Company that ranges from 4% to 5% of their restaurants' net sales as reimbursement for advertising, public relations and promotional services the Company provides. Fees received in advance of provided services are included in other accrued expenses and current liabilities...

  • Page 79
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) right to control the use of the leased property, which is typically before rent payments are due under the terms of the lease. Rent expense is included in occupancy and other operating expenses on ...

  • Page 80
    ... plans. The guidance also requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The cost is recognized on a straightline basis over the period during which an employee is required to provide service, usually the vesting period...

  • Page 81
    ... Trimaran Pollo Partners, L.L.C. ("LLC") entered into a Franchise Development Option Agreement relating to development of our restaurants in the New York-Newark, NY-NJ-CT-PA Combined Statistical Area (the "Territory"). EPL granted LLC the exclusive option to develop and open fifteen restaurants in...

  • Page 82
    ... sell six company-operated restaurants in the greater San Antonio area to AA Pollo, Inc., resulting in cash proceeds of $5.4 million. Goodwill was decremented by $650,000, based on a calculation of the fair value of the restaurants sold relative to the fair value of the portion of the reporting unit...

  • Page 83
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The Company's restaurant in Norwalk, California, was closed in fiscal 2013 due to an eminent domain purchase by the State of California. The Company received proceeds of approximately $1,348,000. ...

  • Page 84
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) instances, contingent rent based on a percentage of gross operating profit or gross revenues in excess of a defined amount. Initial terms of land and restaurant building leases generally are not ...

  • Page 85
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Minimum future rental income for company-operated properties under noncancelable operating leases, which is recorded on a straight-line basis, in effect as of December 31, 2014, is as follows (in ...

  • Page 86
    ...EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. PRIOR CREDIT AGREEMENTS On October 11, 2013, the Company refinanced its debt, with EPL entering into (i) a new... 2013 First Lien Credit Agreement, General Electric Capital Corporation as issuing bank, swing line ...

  • Page 87
    ...EL POLLO LOCO.... In conjunction with the Company's IPO, the 2013 Second Lien Term ... was due to mature in July 2016. EPL also issued $105 million ...consolidated statements of operations. Second Priority Senior...annum, which was due semi-annually in January and July of ...the effective interest rate method. The ...

  • Page 88
    ... of 3.00% based on 1 month USD LIBOR, terminating on December 1, 2016. The fair value of these instruments is not material at December 31, 2015. 8. OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES Other accrued expenses and current liabilities consist of the following (in thousands): December 31, 2014...

  • Page 89
    ... EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. INCOME TAXES The provision for income taxes is based on the following components (in thousands): December 31, For the Years Ended 2014 December 25, 2013 December 26, 2012 Current income taxes: Federal State...

  • Page 90
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) On July 30, 2014, the Company entered into the TRA. The TRA calls for the Company to pay its pre-IPO stockholders 85% of the cash savings that the Company realizes in its taxes as a result of ...

  • Page 91
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) As of December 31, 2014, the Company has federal and state NOL carryforwards of approximately $116 million and $134 million, respectively, which expire beginning in 2025 and 2015, respectively. The ...

  • Page 92
    ... EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Incentive Plan, has the power to accelerate the vesting schedule of stock-based compensation, and, generally, in the event of an employee termination in connection with a change in control of the Company, any...

  • Page 93
    ... the option grants: expected volatility of 32.4% to 41.0%, expected life of 5.75 years, risk-free interest rate of 1.70% to 1.72%, and expected dividends of 0%. The weighted-average estimated fair value of employee stock options granted during the year ended December 25, 2013 was $1.40 per share...

  • Page 94
    ... to $50,000 divided by our public offering price. These grants vest based on continued service over three years. We base the amount of unearned compensation recorded on the market value of the shares on the date of issuance. In fiscal 2014, the Company recognized share-based compensation expense of...

  • Page 95
    ... Court of the State of California, County of Orange, against EPL on behalf of all putative class members (all hourly employees from 2010 to the present) alleging certain violations of California labor laws, including failure to pay overtime compensation, failure to provide meal periods and rest...

  • Page 96
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Contingent Lease Obligations As a result of assigning the Company's interest in obligations under real estate leases in connection with the sale of Company-operated restaurants to some of the ...

  • Page 97
    Table of Contents EL POLLO LOCO HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 16. STOCK SPLIT, AUTHORIZATION OF ADDITIONAL SHARES, AND INITIAL PUBLIC OFFERING On July 14, 2014, Holdings amended its certificate of incorporation to increase the number of shares that Holdings is...

  • Page 98
    ...period end) Company-operated 172 166 168 168 168 168 167 169 Franchised 243 239 233 233 233 231 231 229 System-wide 415 405 401 401 401 399 398 398 Average unit volume (AUV) (company-operated) (1) 1,839 1,893 1,927 1,813 1,707 1,772 1,833 1,718 Comparable restaurant sales growth (%) Company-operated...

  • Page 99
    ... be disclosed in Exchange Act reports is recorded, processed, summarized, and reported within the required time periods, and that such information is accumulated and communicated to our management, including, as appropriate, to our Chief Executive Officer and Chief Financial Officer, so as to permit...

  • Page 100
    ... our board. Laurance Roberts has been our Chief Financial Officer and Treasurer since July 2013. From 2008 to 2012, he was Chief Operating Officer for KFC, a major fried chicken restaurant chain and a division of Yum! Brands. In 2008, he was also General Manager for KFC Restaurant Operating Company...

  • Page 101
    ... was Chief Executive Officer of an enterprise software company that supported 300 restaurant, retail, and hospitality businesses in the lifecycle management of their real estate assets. Mr. Borgese holds a Certificate of Director Education from the National Association of Corporate Directors. With...

  • Page 102
    ... from our IPO, we will be required to have an audit committee comprised entirely of independent directors. Douglas K. Ammerman and Samuel N. Borgese currently qualify as independent directors. If at any time we cease to be a "controlled company" under NASDAQ rules, our board of directors will take...

  • Page 103
    ...items and changes in accounting policies, with our senior management and our independent registered public accounting firm; reviewing our financial risk...as "non-employee directors" and "outside directors." Nominating and Corporate Governance Committee Our Nominating and Corporate Governance Committee...

  • Page 104
    ... applies to our directors, officers, and employees, available at www.elpolloloco.com. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website. Corporate Governance Guidelines Our board of directors has adopted corporate governance guidelines to...

  • Page 105
    ... 15, 2013. Mr. Valle commenced employment as our Chief Marketing Officer on October 24, 2011. Represents the grant date fair value of options awarded in fiscal 2013 and 2014, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic...

  • Page 106
    ... of company performance measures, specifically EBITDA adjusted for various add-backs permitted by our 2014 Revolver ("Internal EBITDA"). Our El Pollo Loco Support Center Incentive Plan is adopted on an annual basis subject to approval by our board of directors and provides the opportunity for...

  • Page 107
    ... if an employee's employment is terminated for cause. We also granted options with strike prices in excess of the fair market value of our stock... next 2% of contributions by the employee. The 401(k) plan matching contributions provided to our named executive officers in 2013 and 2014 are reflected ...

  • Page 108
    ...2013, 2014, 2015 and 2016 or cumulative performance goals over all or a portion of this time period. Director Compensation The following...IPO, equivalent to $50,000 per capita divided by our public offering price. These grants vest based on continued service over three years. Based on our share price...

  • Page 109
    ... of our executive officers and directors as a group, and (iv) each person known to us to be the beneficial owner of more than 5% of our shares of common stock. Unless otherwise noted below, the address for each person listed below is 3535 Harbor Boulevard, Suite 100, Costa Mesa, California 92626. We...

  • Page 110
    ...LLC is the direct owner. Trimaran Capital, L.L.C., is the managing member of LLC. Mr. Bloom and Mr. Kehler are the managing members of Trimaran Capital, L.L.C., and disclaim beneficial ownership of these shares. All have an address of 1325 Avenue of the Americas, 25th Floor, New York, New York 10019...

  • Page 111
    ..., director nominees or executive officers; any beneficial owner of more than 5% of our outstanding stock; and any immediate family member of any of the foregoing. Our Audit Committee will review any financial transaction, arrangement, or relationship that involves or will involve, directly or...

  • Page 112
    ... provided by the Sponsor Advisors to us. The management agreement provided that we indemnify the Sponsor Advisors and their affiliates and their respective partners, members, directors, officers, employees, and agents in connection with the services rendered to us under the agreement. It also...

  • Page 113
    ... of control, as discussed below) as a result of the utilization of our net operating losses and other tax attributes attributable to periods prior to our IPO together with interest accrued at a rate of LIBOR plus 200 basis points from the date that the applicable tax return is due (without extension...

  • Page 114
    ... with the development of El Pollo Loco restaurants in the New York-Newark, NY-NJ-CT-PA Combined Statistical Area (the "Territory"). Pursuant to the terms of the Franchise Development Option Agreement, EPL has granted LLC the exclusive option to develop and open 15 restaurants within the Territory...

  • Page 115
    ... STATEMENT SCHEDULES The following documents are filed as a part of this report: (1) Financial Statements: Consolidated financial statements filed as part of this report are listed under Item 8. Financial Statements and Supplementary Data. (2) Financial Statement Schedules: None. (3) Exhibits: The...

  • Page 116
    ... of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EL POLLO LOCO HOLDINGS, INC. By: Date: /s/ Stephen J. Sather Stephen J. Sather President and Chief Executive Officer March 16, 2015 SIGNATURES AND POWER OF ATTORNEY We, the...

  • Page 117
    ..., dated as of December 26, 2007, by and between El Pollo Loco Holdings, Inc. (formerly Chicken Acquisition Corp.) and Trimaran Pollo Partners, L.L.C. Second Amended and Restated Limited Liability Company Operating Agreement of Trimaran Pollo Partners, L.L.C., dated as of March 8, 2006 Amendment No...

  • Page 118
    ... Option Plan Form of Option Award Agreement (Fair Market Value Options) under 2014 Omnibus Equity Incentive Plan Form of Non-Officer Director Restricted Share Agreement under 2014 Omnibus Equity Incentive Plan Form of Indemnification Agreement between El Pollo Loco Holdings, Inc. and each of its...

  • Page 119
    ...Number Description Filed Herewith Form Ended Exhibit Date 32.1 Certification of Chief Executive Officer and Chief Financial Officer...X X X X X This exhibit is a management contract or a compensatory plan or arrangement. Furnished herewith. Pursuant to Item 601(b)(32)(ii) of Regulation S-K (17 ...

  • Page 120
    ... of Independent Registered Public Accounting Firm El Pollo Loco Holdings, Inc. Costa Mesa, California We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-197001) of El Pollo Loco Holdings, Inc. of our report dated March 16, 2015, relating to the...

  • Page 121
    ... Stephen J. Sather, certify that: 1. I have reviewed this annual report on Form 10-K of El Pollo Loco Holdings, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 122
    ... Laurance Roberts, certify that: 1. I have reviewed this annual report on Form 10-K of El Pollo Loco Holdings, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 123
    ... (ii) the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Date: March 13, 2015 /s/ Stephen J. Sather Stephen J. Sather President and Chief Executive Officer /s/ Laurance Roberts Laurance Roberts...