El Pollo Loco 2016 Annual Report Download - page 76

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EL POLLO LOCO HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
thedifferencesareexpectedtoaffecttaxableincome.Valuationallowancesareestablishedwhennecessarytoreducedeferredtaxassetstotheamountexpectedto
berealized.
TheCompanyhasevaluatedtheavailableevidencesupportingtherealizationofitsgrossdeferredtaxassets.Afterevaluatingallofthepositiveandnegative
evidence,includingtheCompany’scontinuedincomefromoperationsandthereductionininterestexpenseresultingfromthe2014and2013refinancingofdebt
andfromtheCompany’sIPOandresultantpayoffofthe2013SecondLienTermLoan,theCompanyconcludedthatitismorelikelythannotthatitsdeferredtax
assetswillberealized.Asaresult,infiscal2014,theCompanyreleaseditsvaluationallowanceofapproximately$65million,whichwasrecordedasabenefitto
incometaxes.Infiscal2015,theCompanyrecordeda$2.9millionvaluationallowanceagainstourdeferredtaxassetresultingfromcertaintaxcreditsthatmaynot
berealizablepriortothetimethecreditsexpire.
OnJuly30,2014,theCompanyenteredintotheTRA.TheTRAcallsfortheCompanytopayitspre-IPOstockholders85%ofthecashsavingsthattheCompany
realizesinitstaxesasaresultofutilizingitsNOLsandothertaxattributesattributabletoprecedingperiods.Infiscal2014,theCompanyincurredachargeof
approximately$41millionrelatedtothepresentvalueofitstotalexpectedTRApayments.TheTRAchargeof$41millionisapermanentadd-backtothe
Company’staxableincomeandresultedinapproximately$14millionoftaxexpenseinfiscal2014and$0.1millionoftaxexpenseinfiscal2015.
Infiscal2014,theCompanyappliedforCaliforniaEnterpriseZone(“EZ”)credits,resultinginapproximately$10.3millionofCaliforniataxcreditsand
approximately$6.7millionofadditionaldeferredtaxassetsandtaxbenefits.
TheCompany’sdeferredtaxassetsandliabilitiesconsistofthefollowing(inthousands):
December 30,
2015
December 31,
2014
Deferredassets:    
Capitalleases  $ 273  $ 362
Accruedvacation   583   652
Accruedlegal   216   421
Deferredrent   3,758   3,348
Accruedworkers’compensation   1,778   1,626
Enterprisezoneandothercredits   11,433   10,815
Netoperatinglosses   45,081   50,912
Fixedassets   —   4,621
Other   2,293   3,995
Totaldeferredtaxassets   65,415   76,752
Valuationallowance   (2,920)   —
Netdeferredtaxassets   62,495   76,752
Deferredliabilities:    
Goodwill   (8,557)   (8,272)
Trademark   (26,525)   (26,488)
Prepaidexpense   (761)   (649)
Fixedasset   (1,758)   —
Other   (5,087)   (6,287)
Deferredtaxliabilities   (42,688)   (41,696)
Netdeferredtaxasset  $ 19,807  $ 35,056
73