El Pollo Loco 2016 Annual Report Download - page 47

Food and Paper Costs
Foodandpapercostsincreased$3.3millioninfiscal2015,duetoa$3.7millionincreaseinfoodcostsanda$0.44milliondecreaseinpapercosts.Thisincrease
wasdueprimarilytohighersalesvolumeandtohighercommoditycosts,offsetbylowerpackagingcosts.Foodandpapercostsasapercentageofcompany-
operatedrestaurantrevenuewere31.9%infiscal2015,comparedto31.8%infiscal2014.Thisincreaseinpercentagewasduetohighercommoditycosts,offsetby
increasesinaveragechecksize,duetomenupriceincreasesinthethirdandfourthquarterof2014andthefirstandfourthquartersof2015.
Labor and Related Expenses
Payrollandbenefitexpensesincreased$3.6millioninfiscal2015,comparedtofiscal2014.Thisincreasewasdueprimarilytoadditionallaborneedsarisingfrom
theopeningof14newrestaurantsinfiscal2015and11newrestaurantsinfiscal2014,aminimumwageincreaseinCaliforniainthethirdquarteroffiscal2014
andincreasedmedicalandworkerscompensationexpense,resultingprimarilyfromincreasedclaimsactivity.Payrollandbenefitexpensesasapercentageof
company-operatedrestaurantrevenuewere25.4%infiscal2015,comparedto25.0%infiscal2014.Thisincreasewasdueprimarilytotheincreaseinmedicaland
workerscompensationexpense,notedabove,partiallyoffsetbymenupriceincreases.
Occupancy and Other Operating Expenses
Occupancyandotheroperatingexpensesincreased$1.4millioninfiscal2015,comparedtofiscal2014.Thisincreasewasdueprimarilyto(i)a$1.3million
increaseinoccupancycosts,dueprimarilytoincreasedrent,asaresultofnewrestaurantsopenedinfiscal2015and2014,(ii)a$0.3millionincreaseinadvertising
costs,and(iii)a$0.2millionincreaseinoperatingexpense,resultingprimarilyfromhighercreditanddebitcardprocessingfees.Theseincreaseswerepartially
offsetbya$0.4milliondecreaseinutilitycosts,dueprimarilytolowergascosts.Occupancyandotheroperatingexpensesasapercentageofcompany-operated
restaurantrevenuewere21.1%infiscal2015,comparedto21.3%infiscal2014.Thisdecreaseisprimarilyduetolowerutilitycosts,notedabove.
General and Administrative Expenses
Generalandadministrativeexpensesdecreased$0.5millioninfiscal2015.Thedecreasewasdueprimarilyto(i)a$1.0millioncapitalizationofinternalcosts
relatedtositeselectionandconstructionactivities,(ii)a$0.6milliondecreaseinstockoptionexpense,dueprimarilytocertainoptionsthatwerefullyexpensedin
theprioryearandthereversalofexpenseinthecurrentyearrelatedtovariousperformancebasedoptionsthatarenotexpectedtomeettheirspecificperformance
criteriaand(iii)a$0.2milliondecreaseinpayrollexpense,dueprimarilytoareductionintheaccrualfortheexpectedpaymentsrelatedtotheCompany’sannual
bonusprogram,partiallyoffsetbyanincreaseinmedicalexpenseandanincreaseincorporateemployees.Thesedecreasesinexpensewerepartiallyoffsetbya
$0.9millionincreaseinlegalexpense,resultingprimarilyfromexpenserelatedtoasecuritiesclassactioncaseanda$0.2millionincreaseinrestaurantopening
costs,dueprimarilytoincreasedcompany-operatedrestaurantopeningsin2015ascomparedto2014.Generalandadministrativeexpensesasapercentageoftotal
revenuewere8.2%infiscal2015,comparedto8.6%infiscal2014.Thisdecreasewasdueprimarilytothereductionincosts,notedabove,andincreasedrevenue.
Gain on Disposition of Restaurants
OnSeptember24,2014,wecompletedthesaleof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recognizedanetgainof$2.7milliononthistransaction,whichisrecordedasagainondispositionofrestaurantsintheaccompanyingstatementof
operations.Thesesixrestaurantsarenowincludedinourfranchisedrestauranttotals.
Interest Expense, Net
Interestexpense,net,decreased$14.4millioninfiscal2015,comparedtofiscal2014.Thisdecreasewasdueprimarilyto(i)therepaymentofthe2013Second
LienTermLoanwithIPOproceedsinJuly2014,(ii)the2014Refinancinginthefourthquarteroffiscal2014,whichfurtherreducedtheinterestrateonourdebt
and(iii)thepre-paymentof$42.0milliononthe2014Revolverinfiscal2015.
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