El Pollo Loco 2016 Annual Report Download - page 50
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costs,offsetbyincreasesinaveragechecksize,duetomenupriceincreasesinthefourthquarterof2013andthethirdandfourthquartersof2014.
Labor and Related Expenses
Payrollandbenefitexpensesincreased$5.0millioninfiscal2014,comparedtofiscal2013.Thisincreasewasdueprimarilytoincreasedlaborcostsresultingfrom
highersalesvolume,additionallaborneedsarisingfromtheopeningofelevennewrestaurantsinfiscal2014andtwonewrestaurantsinfiscal2013,anda
minimumwageincreaseinCaliforniainthethirdquarteroffiscal2014.Theseincreaseswerepartiallyoffsetbylowermedicalinsurancecosts,duetolowerclaims
activity.Payrollandbenefitexpensesasapercentageofcompany-operatedrestaurantrevenuewere25.0%infiscal2014,comparedto25.7%infiscal2013.This
decreasewasdueprimarilytoincreaseinrevenue,therelativelyfixednatureofrestaurantmanagementlaborcosts,menupriceincrease,andlowermedical
insurancecosts.
Occupancy and Other Operating Expenses
Occupancyandotheroperatingexpensesincreased$5.4millioninfiscal2014,comparedtofiscal2013.Thisincreasewasdueprimarilyto(i)a$1.4million
increaseinutilitycosts,dueprimarilytohighergasandelectriccostsandadditionalutilitycostsasaresultofnewrestaurantsopenedin2014and2013,(ii)a$2.1
millionincreaseinadvertisingcosts,whichdrovehighersalesandtoadditionaladvertisingcontributionsintheLosAngelesmarketinthesecondandpartofthe
thirdquarterof2014,(iii)a$1.0millionincreaseinoccupancycosts,dueprimarilytoincreasedrent,asaresultofnewrestaurantsopenedin2014and2013,and
(iv)a$0.9millionincreaseinoperatingexpense,resultingprimarilyfromhighercreditanddebitcardprocessingfeesandvariousotheroperating-relatedexpenses.
Occupancyandotheroperatingexpensesasapercentageofcompany-operatedrestaurantsrevenuewere21.3%infiscal2014,comparedto21.5%infiscal2013.
Thisdecreaseisprimarilyduetohigherrevenueandtherelativelyfixednatureofoccupancycosts,partiallyoffsetbythehigherexpensesdiscussedabove.
General and Administrative Expenses
Generalandadministrativeexpensesincreased$4.0millioninfiscal2014.Theincreasewasdueprimarilyto(i)a$2.1millionincreaseinpayrollexpenses,due
primarilytoanincreaseincorporateemployeesandanadditionalweekofoperationspayrollexpenserecognizedforafifty-thirdweekinfiscal2014,partially
offsetbylowermedicalcostsdueprimarilytolowermedicalclaimsactivity,(ii)a$0.8millionincreaseinprofessionalfees,dueprimarilytocostsassociatedwith
ourIPOandwithsecuringfederalandstatetaxcredits,and(iii)a$1.0millionincreaseinrestaurantopeningcosts,dueprimarilytoincreasedcompany-operated
restaurantopeningin2014ascomparedto2013.Generalandadministrativeexpensesasapercentageoftotalrevenuewere8.6%infiscal2014,comparedto8.1%
infiscal2013.Thisincreasewasdueprimarilytothehighercostsnotedabove,partiallyoffsetbyincreasedrevenue.
Gain on Disposition of Restaurants
OnSeptember24,2014,wecompletedanagreementtosellsixcompany-operatedrestaurantsinthegreaterSanAntonioareatoAAPollo,resultingincash
proceedsof$5.4million.Goodwillwasdecrementedby$650,000,basedonacalculationofthefairvalueoftherestaurantssoldrelativetothefairvalueofthe
reportingunitretained.Werecognizedanetgainof$2.7milliononthistransaction,whichisrecordedasagainondispositionofrestaurantsintheaccompanying
statementofoperations.Thesesixrestaurantsarenowincludedinourfranchisedrestauranttotals.
Interest Expense, Net
Interestexpense,net,decreased$18.3millioninfiscal2014comparedtofiscal2013.Thisdecreasewasdueprimarilytothe2013Refinancing,whichreducedthe
interestrateonourdebt,totherepaymentofthe2013SecondLienTermLoanwithIPOproceeds,andtothe2014Refinancinginthefourthquarteroffiscal2014,
whichfurtherreducedtheinterestrateonourdebt.
Early Extinguishment of Debt
TheproceedsfromourIPOinJuly2014wereprimarilyusedtorepaythe2013SecondLienTermLoan.Inconjunctionwiththisrepayment,weincurredan
extinguishmentofdebtchargeof$5.1million,consistingof$1.5millionincallpremium,$2.7millionrelatedtothewrite-offofremainingunamortizeddeferred
financecosts,and$0.9millionrelatingtothewrite-offofunamortizeddiscount.InDecember2014,inconjunctionwithour2014Refinancing,the2013FirstLien
TermLoanwasrepaidinfull,whichresultedina$4.6millionextinguishmentofdebtcharge,consistingof$3.9millionrelatedtothewrite-offofdeferred
financingcostsand$0.7millionrelatedtothewrite-offofunamortizeddiscount.
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