El Pollo Loco 2016 Annual Report Download - page 63
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EL POLLO LOCO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Principles of Consolidation
TheaccompanyingconsolidatedfinancialstatementsincludetheaccountsofHoldingsanditswhollyownedsubsidiaries.Allintercompanybalancesand
transactionshavebeeneliminatedinconsolidation.
Use of Estimates
ThepreparationofconsolidatedfinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(“GAAP”)
requiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosuresofcontingentassetsandliabilities
atthedateoftheconsolidatedfinancialstatementsandrevenueandexpensesduringtheperiodreported.Actualresultscouldmateriallydifferfromthoseestimates.
TheCompany’ssignificantestimatesincludeestimatesforimpairmentofgoodwill,intangibleassetsandpropertyandequipment,insurancereserves,lease
terminationliabilities,stock-basedcompensation,incometaxreceivableagreementliability,andincometaxvaluationallowances.
Cash and Cash Equivalents
TheCompanyconsidersallhighly-liquidinstrumentswithamaturityofthreemonthsorlessatthedateofpurchasetobecashequivalents.
Restricted Cash
TheCompany’srestrictedcashrepresentscashcollateraltoonecommercialbankforCompanycreditcards.
Subsequent Events
SubsequenttoDecember30,2015,theCompanyandafranchiseeeachcompletedonenewstoreopening.
TheCompanyevaluatedsubsequenteventsthathaveoccurredafterDecember30,2015,anddeterminedthattherewerenoothereventsortransactionsoccurring
duringthisreportingperiodthatrequirerecognitionordisclosureintheconsolidatedfinancialstatements.
Concentration of Risk
Cashandcashequivalentsaremaintainedatfinancialinstitutionsand,attimes,balancesmayexceedfederally-insuredlimits.TheCompanyhasneverexperienced
anylossesrelatedtothesebalances.
TheCompanyhadtwosuppliersforwhichamountsdueatDecember30,2015totaled12%and11%oftheCompany’saccountspayable.AtDecember31,2014,
noamountsduetosuppliersexceeded10%oftheCompany’saccountspayable.PurchasesfromtheCompany’slargestsuppliertotaled36%oftheCompany’s
purchasesforfiscal2015,2014,and2013.PurchasesfromtheCompany’ssecondlargestsupplierdidnotexceed10%forfiscal2015,2014and2013.Infiscal
2015,2014,and2013,Company-operatedandfranchisedrestaurantsinthegreaterLosAngelesareagenerated,intheaggregate,approximately79%,80%,and
80%,respectively,oftotalrevenue.
Accounts and Other Receivables, Net
Accountsandotherreceivablesconsistprimarilyofroyalties,advertisingandsubleaserentandrelatedamountsreceivablefromfranchiseeswhicharedueona
monthlybasisthatmaydifferfromtheCompany’smonth-enddatesaswellascredit/debitcardreceivables.Theneedforanallowancefordoubtfulaccountsis
reviewedonaspecificidentificationbasisbaseduponpastduebalancesandthefinancialstrengthoftheobligor.Baddebtexpensewasimmaterialfortheyears
endedDecember30,2015,December31,2014,andDecember25,2013.
Inventories
Inventoriesconsistprincipallyoffood,beveragesandpapersuppliesandarevaluedatthelowerofaveragecostormarket.
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