El Pollo Loco 2016 Annual Report Download - page 63

Download and view the complete annual report

Please find page 63 of the 2016 El Pollo Loco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 94

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94

EL POLLO LOCO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Principles of Consolidation
TheaccompanyingconsolidatedfinancialstatementsincludetheaccountsofHoldingsanditswhollyownedsubsidiaries.Allintercompanybalancesand
transactionshavebeeneliminatedinconsolidation.
Use of Estimates
ThepreparationofconsolidatedfinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(“GAAP”)
requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosuresofcontingentassetsandliabilities
atthedateoftheconsolidatedfinancialstatementsandrevenueandexpensesduringtheperiodreported.Actualresultscouldmateriallydifferfromthoseestimates.
TheCompany’ssignificantestimatesincludeestimatesforimpairmentofgoodwill,intangibleassetsandpropertyandequipment,insurancereserves,lease
terminationliabilities,stock-basedcompensation,incometaxreceivableagreementliability,andincometaxvaluationallowances.
Cash and Cash Equivalents
TheCompanyconsidersallhighly-liquidinstrumentswithamaturityofthreemonthsorlessatthedateofpurchasetobecashequivalents.
Restricted Cash
TheCompany’srestrictedcashrepresentscashcollateraltoonecommercialbankforCompanycreditcards.
Subsequent Events
SubsequenttoDecember30,2015,theCompanyandafranchiseeeachcompletedonenewstoreopening.
TheCompanyevaluatedsubsequenteventsthathaveoccurredafterDecember30,2015,anddeterminedthattherewerenoothereventsortransactionsoccurring
duringthisreportingperiodthatrequirerecognitionordisclosureintheconsolidatedfinancialstatements.
Concentration of Risk
Cashandcashequivalentsaremaintainedatfinancialinstitutionsand,attimes,balancesmayexceedfederally-insuredlimits.TheCompanyhasneverexperienced
anylossesrelatedtothesebalances.
TheCompanyhadtwosuppliersforwhichamountsdueatDecember30,2015totaled12%and11%oftheCompany’saccountspayable.AtDecember31,2014,
noamountsduetosuppliersexceeded10%oftheCompany’saccountspayable.PurchasesfromtheCompany’slargestsuppliertotaled36%oftheCompany’s
purchasesforfiscal2015,2014,and2013.PurchasesfromtheCompany’ssecondlargestsupplierdidnotexceed10%forfiscal2015,2014and2013.Infiscal
2015,2014,and2013,Company-operatedandfranchisedrestaurantsinthegreaterLosAngelesareagenerated,intheaggregate,approximately79%,80%,and
80%,respectively,oftotalrevenue.
Accounts and Other Receivables, Net
Accountsandotherreceivablesconsistprimarilyofroyalties,advertisingandsubleaserentandrelatedamountsreceivablefromfranchiseeswhicharedueona
monthlybasisthatmaydifferfromtheCompany’smonth-enddatesaswellascredit/debitcardreceivables.Theneedforanallowancefordoubtfulaccountsis
reviewedonaspecificidentificationbasisbaseduponpastduebalancesandthefinancialstrengthoftheobligor.Baddebtexpensewasimmaterialfortheyears
endedDecember30,2015,December31,2014,andDecember25,2013.
Inventories
Inventoriesconsistprincipallyoffood,beveragesandpapersuppliesandarevaluedatthelowerofaveragecostormarket.
60