El Pollo Loco 2016 Annual Report Download - page 65
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EL POLLO LOCO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
TheassumptionsusedintheestimateoffairvaluearegenerallyconsistentwiththepastperformanceoftheCompany’sreportingunitandarealsoconsistentwith
theprojectionsandassumptionsthatareusedincurrentoperatingplans.Theseassumptionsaresubjecttochangeasaresultofchangingeconomicandcompetitive
conditions.
NoimpairmentwasrecordedduringtheyearsendedDecember30,2015,December31,2014,orDecember25,2013.
Other Intangibles, Net—Definite Lived
DefinitelivedintangibleassetsconsistofthevalueallocatedtotheCompany’sfavorableandunfavorableleaseholdintereststhatresultedfromtheAcquisition.
FavorableleaseholdinterestrepresentstheassetinexcessoftheapproximatefairmarketvalueoftheleasesassumedasofNovember17,2005,thedateofthe
Acquisition.Theamountisbeingreducedovertheremaininglifeoftheleases.Thisamountisshownasotherintangibleassets,net,ontheaccompanying
consolidatedbalancesheets.
UnfavorableleaseholdinterestliabilityrepresentstheliabilityinexcessoftheapproximatefairmarketvalueoftheleasesassumedasofNovember17,2005,the
dateoftheAcquisition.Theamountisbeingreducedovertheremaininglifeoftheleases.Thisamountisshownasotherintangibleliabilities,net,onthe
accompanyingconsolidatedbalancesheets.
Intangibleassetsandliabilitieswithadefinitelifeareamortizedusingthestraight-linemethodovertheremainingusefullivesasfollows:
Favorableleaseholdinterests 1to18years(remainingleaseterm)
Unfavorableleaseholdinterests 1to20years(remainingleaseterm)
Deferred Financing Fees
Deferredfinancingfeesarecapitalizedandamortizedovertheperiodoftheloanonastraight-linebasis,whichapproximatestheeffectiveinterestmethod.
Includedinotherassetsarefees(netofaccumulatedamortization)of$1.2millionand$1.5millionasofDecember30,2015andDecember31,2014,respectively.
Amortizationexpensefordeferredfinancingcostswas$0.3million,$1.3millionand$2.0millionfortheyearsendedDecember30,2015,December31,2014,
andDecember25,2013,respectively,andisreflectedasacomponentofinterestexpenseintheaccompanyingconsolidatedstatementsofoperations.In
conjunctionwiththeOctober11,2013,refinancingoftheCompany’sdebt,$8.1millionofunamortizeddeferredfinancingcostsrelatedtothepriordebtwere
writtenoff.Inconjunctionwiththe2014repaymentandrefinancingoftheCompany’sdebt,$6.6millionofunamortizeddeferredfinancingcostsrelatedtothe
2013CreditAgreementswerewrittenoff(seeNotes6and7).
Impairment of Long-Lived Assets
TheCompanyreviewsitslong-livedassetsforimpairmentonarestaurant-by-restaurantbasiswhenevereventsorchangesincircumstancesindicatethatthe
carryingvalueofcertainassetsmaynotberecoverable.IftheCompanyconcludesthatthecarryingvalueofcertainassetswillnotberecoveredbasedonexpected
undiscountedfuturecashflows,animpairmentwrite-downisrecordedtoreducetheassetstotheirestimatedfairvalue.TheCompanyrecordednon-cash
impairmentchargesof$181,000,$293,000and$27,000fortheyearsendedDecember30,2015,December31,2014,andDecember25,2013,respectively.
Insurance Reserves
TheCompanyisresponsibleforworkers’compensation,generalandhealthinsuranceclaimsuptoaspecifiedaggregatestoplossamount.TheCompanymaintains
areserveforestimatedclaimsbothreportedandincurredbutnotreported,basedonhistoricalclaimsexperienceandotherassumptions.AtDecember30,2015and
December31,2014,theCompanyhadaccrued$5,021,000and$3,818,000,respectively,andsuchamountsarereflectedasaccruedinsuranceintheaccompanying
consolidatedbalancesheets.TheexpenseforsuchreservesfortheyearsendedDecember30,2015,December31,2014,andDecember25,2013totaled
$8,363,000,$6,124,000,and$6,912,000,respectively.Theseamountsareincludedinlaborandrelatedexpensesandgeneralandadministrativeexpensesonthe
accompanyingconsolidatedstatementsofoperations.
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