El Pollo Loco 2015 Annual Report Download - page 47

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Table of Contents
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis
of our results as reported under GAAP. Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for
capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our working capital needs,
(iii) they do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt,
(iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in
the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-
cash income or expense items that are reflected in our statements of cash flows, (vi) they do not reflect the impact of earnings or charges
resulting from matters we consider not to be indicative of our on-going operations, and (vii) other companies in our industry may calculate these
measures differently than we do, limiting their usefulness as comparative measures.
We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from such non-GAAP financial
measures. We further compensate for the limitations in our use of non-GAAP financial measures by presenting comparable GAAP measures
more prominently.
We believe that EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of
some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies.
These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on
periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment
(affecting relative depreciation expense). We also present EBITDA and Adjusted EBITDA because (i) we believe that these measures are
frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe that investors
will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA
internally as benchmarks to compare our performance to that of our competitors.
The following table sets forth reconciliations of EBITDA and Adjusted EBITDA to our net income (loss):
43
Fiscal Year
2014
2013
2012
Net income (loss)
$
42,463
$
(16,873
)
(7,865
)
Non
-
GAAP adjustments:
(Benefit) provision for income taxes
(63,008
)
1,401
2,027
Interest expense, net
18,062
36,334
38,890
Depreciation and amortization
11,538
10,213
9,530
EBITDA
$
9,055
$
31,075
42,582
Stock based compensation expense
(a)
1,093
822
860
Management fees
(b)
343
624
612
Loss on disposal of assets
(c)
646
868
966
Impairment and closures
(d)
1,033
(101
)
1,494
Early extinguishment of debt
(e)
9,718
21,530
—
Gain on disposition of restaurants
(f)
(2,658
)
(400
)
—
Secondary offering expense
(g)
667
—
—
Income tax receivable agreement expense
(h)
41,382
—
—
Tax credit expense
(i)
415
—
—
Pre
-
opening costs
(j)
1,215
201
320
Adjusted EBITDA
$
62,909
$
54,619
46,834
(a)
Includes non
-
cash, stock
-
based compensation.
(b) Includes management fees and other out-of-pocket costs paid to affiliates of Trimaran and Freeman Spogli up through our IPO. This
agreement was cancelled in conjunction with the IPO.