What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-05 · 162 added, 149 removed, 348 unchanged (47% of the section changed)

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These factors include, but are not limited to:

● the impacts of the COVID-19 pandemic on our company, our employees, our customers, our partners, our industry and the economy as a whole, as well as our franchisees’ ability to maintain operations in their individual restaurants;

● the impacts of the ongoing COVID-19 pandemic or another pandemic, epidemic or infectious disease outbreak on our company, our employees, our customers, our partners, our industry and the economy as a whole, as well as our franchisees’ ability to maintain operations in their individual restaurants;

● global economic or other business conditions that may affect the desire or ability of our customers to purchase our products such as inflationary pressures, high unemployment levels, increases in gas prices, and declines in median income growth, consumer confidence and consumer discretionary spending;

● our ability to open new restaurants in new and existing markets, including difficulty in finding sites and in negotiating acceptable leases;

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Our famous Creamy Cilantro dressings and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience.

Our distinctive menu with better for you and more affordable alternatives appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner.

We believe that our distinctive menu with better for you and more affordable alternatives appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner.

Market Trends and Uncertainties

We may face future business disruption and related risks resulting from the ongoing outbreak of COVID-19 or from another pandemic, epidemic or infectious disease outbreak, or from broader macroeconomic trends, any of which could have a significant impact on our business.

During the thirteen and twenty-six weeks ended June 29, 2022, we incurred $0.3 million and $2.6 million, respectively, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

During the thirteen and twenty-six weeks ended June 30, 2021, we incurred $0.2 million and $3.0 million, respectively, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

In addition, while all of our restaurants had dining rooms open as of June 29, 2022, we continue to experience staffing challenges, including

higher wage inflation, overtime costs and other labor related costs, which resulted in reduced operating hours and service channels at some of our restaurants during the thirteen and twenty-six weeks ended June 29, 2022.

Further, we continue to experience inflationary pressures and supply chain disruptions, which resulted in increased commodity prices and impacted our business and results of operations during the thirteen and twenty-six weeks ended June 29, 2022.

We may face future business disruption and related risks resulting from the ongoing COVID-19 pandemic or from another pandemic, epidemic or infectious disease outbreak, or from broader macroeconomic trends, any of which could have a significant impact on our business.

During both thirteen weeks ended September 28, 2022 and September 29, 2021, respectively, we incurred $0.5 million in COVID-19 related expenses, primarily due to leaves of absence.

During the thirty-nine weeks ended September 28, 2022 and September 29, 2021, respectively, we incurred $3.1 million and $3.5 million, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

In addition, while all of our restaurants had dining rooms open as of September 28, 2022, we continue to experience staffing challenges, including higher wage inflation, overtime costs and other labor related costs.

Labor costs could also be adversely impacted as a result of California Assembly Bill No.

257, the Fast Food Accountability and Standards Recovery Act (“FAST Act”), which was signed into law in September 2022 and authorizes the creation of a council to set minimum standards for industry workers in California, including minimum wages.

The FAST Act, currently subject to a referendum campaign , could result in increased labor cost at our California restaurants thereby potentially impacting the profitability of our California restaurants.

Further, this bill could prompt similar legislation in other states .

Further, we continue to experience inflationary pressures, which resulted in increased commodity prices and impacted our business

and results of operations during the thirteen and thirty-nine weeks ended September 28, 2022.

We expect these pressures to continue during the rest of fiscal 2022.

Due to the fluidity of the COVID-19 pandemic and current macroeconomic environment, we cannot determine the ultimate impact on our condensed consolidated financial condition, liquidity, and future results of operations, and therefore any prediction as to the ultimate materiality of the adverse impact on our condensed consolidated financial condition, liquidity, and future results of operations is uncertain.

Recent Developments

On July 27, 2022, the 2018 Revolver (as defined below) was refinanced pursuant to a credit agreement (the “2022 Credit Agreement”) among El Pollo Loco, Inc., as borrower, us and EPL Intermediate, Inc., as guarantors, the lenders and other parties party thereto and Bank of America, N.A., as administrative agent, swingline lender and L/C issuer, which provides for a $150.0 million five-year senior secured revolving facility (the “2022 Revolver”).

In connection with the refinancing, the 2018 Credit Agreement (as defined below) was terminated.

On July 29, 2022, we made a $20.0 million payment to the 2022 Revolver and the outstanding balance as of August 4, 2022 was $20.0 million.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Subsequent Events” for additional information.

In connection with our entry into the 2022 Credit Agreement, we terminated the interest rate swap previously used to hedge interest rate risk.

In settlement of this swap, we received approximately $0.6 million.

The remaining amount in AOCI related to the hedging relationship will be reclassified into earnings when the hedged forecasted transaction is reported in earnings.

Growth Strategies and Outlook

As of June 29, 2022, we had 481 locations in six states.

As of September 28, 2022, we had 487 locations in six states.

In fiscal 2021, we opened two new company-operated restaurants, one in Nevada and one in California, and our franchisees opened two new restaurants, one in Texas and one in Louisiana.

For the twenty-six weeks ended June 29, 2022, one new company-operated restaurant was opened in Nevada and three new franchised restaurants were opened in California.

For the thirty-nine weeks ended September 28, 2022, one new company-operated restaurant was opened in Nevada and two new company-operated restaurants were opened in California.

For the thirty-nine weeks ended September 28, 2022, seven new franchised restaurants were opened in California.

We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning, by executing the following strategies:

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Comparable Restaurant Sales

For the thirteen and twenty-six weeks ended June 29, 2022, system-wide comparable restaurant sales increased by 7.5% and 7.6%, respectively, from the comparable period in the prior year.

For company-operated restaurants, comparable restaurant sales for the thirteen and twenty-six weeks ended June 29, 2022 increased by 2.9% and 2.6%, respectively.

For the thirteen and thirty-nine weeks ended September 28, 2022, system-wide comparable restaurant sales increased by 3.8% and 6.3%, respectively, from the comparable period in the prior year.

For company-operated restaurants, comparable restaurant sales for the thirteen and thirty-nine weeks ended September 28, 2022 increased by 3.4% and 2.9%, respectively.

For company-operated restaurants, the quarter’s change in comparable restaurant sales consisted of an approximately 7.5% increase in average check size and a decrease in transactions of 4.1% and the year-to-date change in comparable restaurant sales consisted of a 4.1% decrease in transactions and a 7.0% increase in average check size .

For franchised

restaurants, comparable restaurant sales increased 10.6% and 11.0% for the thirteen and twenty-six weeks ended June 29, 2022, respectively.

For franchised restaurants, comparable restaurant sales increased 4.1% and 8.6% for the thirteen and thirty-nine weeks ended September 28, 2022, respectively.

Refer to Comparable Restaurant Sales definition in “Key Performance Indicators” section below.

Restaurant Development

Our restaurant counts at the beginning and end of each of the last three fiscal years and the twenty-six weeks ended June 29, 2022, were as follows:

Twenty-Six Weeks Ended

Our restaurant counts at the beginning and end of each of the last three fiscal years and the thirty-nine weeks ended September 28, 2022, were as follows:

Thirty-Nine Weeks Ended

Fiscal Year Ended

June 29, 2022

September 28, 2022

Company-operated restaurant activity:

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We believe that our remodels using this new design will result in higher restaurant revenue and a strengthened brand.

As of June 29, 2022 we have completed 12 company-operated restaurant remodels and three franchise remodels using the new asset design.

In fiscal 2022, we plan to continue our standard practices for remodels, which includes completing a total of 10-15 company and 20-30 franchise remodels using the new design.

During the year ended September 28, 2022, we have completed four company-operated restaurant remodels and eight franchise remodels using the new asset design.

In fiscal 2022, we plan to continue our standard practices for remodels, which includes completing a total of six company and 20-30 franchise remodels using the new design.

The cost of our restaurant remodels varies depending on the scope of the work required, but on average the investment is $0.3 million to $0.4 million per restaurant.

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As points are available for redemption past the quarter earned, a portion of the revenue associated with the earned points will be deferred until redemption or expiration.

As of June 29, 2022 and December 29, 2021, the revenue allocated to loyalty points that had not been redeemed was $0.6 million and $0.7 million, respectively, which is reflected in our

accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

We had over 3.0 million loyalty program members as of June 29, 2022.

As of September 28, 2022 and December 29, 2021, the revenue allocated to loyalty points that had not been redeemed was $0.5 million and $0.7 million, respectively, which is reflected in our accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

We had over 3.1 million loyalty program members as of September 28, 2022.

Critical Accounting Policies and Use of Estimates

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Management believes that our critical accounting policies and estimates involve the most difficult management judgments, due to the sensitivity of the methods and assumptions used.

For a summary of our critical accounting policies and a discussion of our use of estimates, see “Critical Accounting Policies and Use of Estimates” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 29, 2021.

For a summary of our critical accounting policies and a discussion of our use of estimates, see “Critical Accounting Policies and Estimates” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 29, 2021.

There have been no material changes to our critical accounting policies or uses of estimates since our annual report on Form 10-K for the year ended December 29, 2021.

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Like other expense items, we expect labor costs to grow proportionately as our restaurant revenue grows.

Factors that influence labor costs include minimum wage and payroll tax legislation, overtime, the frequency and severity of workers’ compensation claims, health care costs, and the performance of our restaurants.

Factors that influence labor costs include minimum wage and payroll tax legislation, state labor laws (which, in California, may include the FAST Act), overtime, wage inflation, the frequency and severity of workers’ compensation claims, health care costs, and the performance of our restaurants.

Occupancy Costs and Other Operating Expenses

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Comparison of Results of Operations

Our operating results for the thirteen weeks ended June 29, 2022 and June 30, 2021 and expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as percentages of company-operated restaurant revenue, are compared in the tables below.

Our operating results for the thirteen weeks ended September 28, 2022 and September 29, 2021 and expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as percentages of company-operated restaurant revenue, are compared in the tables below.

Thirteen Weeks Ended

June 29, 2022

June 30, 2021

September 28, 2022

September 29, 2021

Increase / (Decrease)

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Loss on disposal of assets

Loss on assets held for sale

Loss on disposition of restaurants

Impairment and closed-store reserves

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Interest expense, net of interest income

Income tax receivable agreement (income) expense

Income tax receivable agreement income

Income before provision for income taxes

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All other percentages use total revenue.

Our operating results for the twenty-six weeks ended June 29, 2022 and June 30, 2021 and expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as a percentage of company-operated restaurant revenue, are compared below.

Twenty-Six Weeks Ended

June 29, 2022

June 30, 2021

Our operating results for the thirty-nine weeks ended September 28, 2022 and September 29, 2021 and expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as a percentage of company-operated restaurant revenue, are compared below.

Thirty-Nine Weeks Ended

September 28, 2022

September 29, 2021

Increase / (Decrease)

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Loss on disposal of assets

Loss on assets held for sale

Loss on disposition of restaurants

Impairment and closed-store reserves

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Company-Operated Restaurant Revenue

For the quarter, company-operated restaurant revenue decreased $0.5 million, or 0.5%, from the comparable period in the prior year.

The decrease in company-operated restaurant sales was primarily due to a $2.7 million decrease in revenue from the eight company-operated restaurants sold by the Company to an existing franchisee and a $1.0 million decrease in revenue from the closure of three restaurants during or subsequent to the second quarter of 2021.

This restaurant sales decrease was partially offset by an increase in company-operated comparable restaurant revenue of $2.9 million, or 2.9%.

For the quarter, company-operated restaurant revenue increased $3.2 million, or 3.2%, from the comparable period in the prior year.

The increase in company-operated restaurant sales was primarily due to an increase in company-operated comparable restaurant revenue of $3.3 million, or 3.4%.

The company-operated comparable restaurant sales increase consisted of an approximately 7.5% increase in average check size due to increases in menu prices, partially offset by a 4.1% decrease in transactions.

In addition, company-operated restaurant revenue was favorably impacted by $0.3 million of additional sales from restaurants opened during or after the second quarter of 2021.

Year-to-date, company-operated restaurant revenue decreased $0.7 million, or 0.4%, from the comparable period in the prior year.

The decrease in company-operated restaurant sales was primarily due to a $5.3 million decrease in revenue from the eight company-operated restaurants sold by the Company to an existing franchisee and a $1.5 million decrease in revenue from the closure of three restaurants, in each case, during or subsequent to the second quarter of 2021.

In addition, company-operated restaurant revenue was negatively impacted by a $0.3 million decrease in revenue recognized for our loyalty points program.

This restaurant sales decrease was partially offset by an increase in company-operated comparable restaurant revenue of $5.0 million, or 2.6%.

In addition, company-operated restaurant revenue was favorably impacted by $0.9 million of additional sales from restaurants opened during or after the third quarter of 2021 and a $0.1 million increase in revenue recognized for our loyalty points program.

This company-operated restaurant sales increase was partially offset by a $1.1 million decrease in revenue from the closure of three restaurants during or subsequent to the third quarter of 2021.

Year-to-date, company-operated restaurant revenue increased $2.5 million, or 0.8%, from the comparable period in the prior year.

The increase in company-operated restaurant sales was primarily due an increase in company-operated comparable restaurant revenue of $8.3 million, or 2.9%.

The company-operated comparable restaurant sales increase consisted of an approximately 7.0% increase in average check size due to increases in menu prices, partially offset by a 4.1% decrease in transactions.

In addition, company-operated restaurant revenue was favorably impacted by $1.0 million of additional sales from restaurants opened during or after the second quarter of 2021 and a $0.4 million increase in revenue from restaurants that were temporarily closed due to the COVID-19 pandemic during or subsequent to the second quarter of 2021.

In addition, company-operated restaurant revenue was favorably impacted by $1.9 million of additional sales from restaurants opened during or after the third quarter of 2021 and a $0.2 million increase in revenue from restaurants that were temporarily closed due to the COVID-19 pandemic during or subsequent to the third quarter of 2021.

This company-operated restaurant sales increase was partially offset by a $5.3 million decrease in revenue from the eight company-operated restaurants sold by the Company to an existing franchisee and a $2.6 million decrease in revenue from the closure of three restaurants, in each case, during or subsequent to the first quarter of 2021.

Franchise Revenue

For the quarter, franchise revenue increased $0.6 million, or 7.0%, from the comparable period in the prior year.

This increase was primarily due to a franchise comparable restaurant sales increase of 10.6% and the opening of five restaurants and eight company-operated restaurants sold by the Company to an existing franchisee, in each case, during or subsequent to the second quarter of 2021.

This franchise revenue increase was partially offset by the closure of three franchise locations during or subsequent to the second quarter of 2021.

This increase was primarily due to a franchise comparable restaurant sales increase of 4.1%, the opening of nine restaurants and eight company-operated restaurants sold by the Company to an existing franchisee, in each case, during or subsequent to the third quarter of 2021.

This franchise revenue increase was partially offset by the closure of two franchise locations during or subsequent to the third quarter of 2021.

Year-to-date, franchise revenue increased $3.9 million, or 15.8%, from the comparable period in the prior year.

This increase was primarily due to a franchise comparable restaurant sales increase of 11.0% and the opening of five restaurants during or subsequent to the second quarter of 2021.

This franchise revenue increase was partially offset by the closure of three franchise locations during or subsequent to the second quarter of 2021.

This increase was primarily due to a franchise comparable restaurant sales increase of 8.6% and the opening of nine restaurants during or subsequent to the third quarter of 2021.

The remainder of the franchise revenue increase is attributed to the pass through income related to a corresponding increase in franchise expenses.

This franchise revenue increase was partially offset by the closure of three franchise locations during or subsequent to the first quarter of 2021.

Franchise Advertising Fee Revenue

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Y ear-to-date, franchise advertising fee revenue increased $2.2 million, or 11.5%, from the comparable period in the prior year.

As advertising fee revenue is a percentage of franchisees’ revenue, the quarter-to-date fluctuations were due to the increases and decreases noted in franchise revenue above.

As advertising fee revenue is a percentage of franchisees’ revenue, the quarter-to-date and year-to-date fluctuations were due to the increases and decreases noted in franchise revenue above.

Food and Paper Costs

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Year-to-date, food and paper costs as a percentage of company-operated restaurant revenue were 29.5%, up from 26.2% in the comparable period of the prior year.

The percentage increase for both the quarter and year-to-date period was primarily due to commodity inflation and an investment in new elevated packaging, partially offset by an increase in pricing.

The percentage increase for the quarter and year-to-date periods was primarily due to an investment in new elevated packaging, partially offset by an increase in pricing.

Labor and Related Expenses

For the quarter, labor and related expenses increased $5.5 million, or 19.7%, from the comparable period in the prior year.

The increase for the quarter was pr imarily due to a $2.5 million increase primarily related to minimum wage increases in California during fiscal 2022 and other labor wage increases as a result of competitive pressures, a $0.2 million increase from restaurants opened during or after the second quarter of the prior year and a $0.7 million increase in other labor related expenses primarily related to overtime, payroll taxes and training.

The increase in labor and related expenses for the quarter was partially offset by a $1.1 million reduction in labor related to the eight locations sold to an existing franchisee during the prior year and a $0.8 million decrease related to the 4.7% decrease in year-over-year transactions .

The increase for the quarter was pr imarily due to recognizing a $3.2 million Employee Retention Credit (“ERC”) which was recorded as an offset to the corresponding payroll tax expense and was classified as part of the labor and other operating expenses on the condensed consolidated statements of income during the thirteen weeks ended September 29, 2021.

Further, the increase for the quarter was impacted by a $2.1 million increase primarily related to minimum wage increases in California during fiscal 2022 and other labor wage increases as a result of competitive pressures, a $1.0 million increase in other labor related expenses primarily related to overtime and payroll taxes and a $0.4 million increase from restaurants opened during or after the third quarter of the prior year and.

The increase in labor and related expenses for the quarter was partially offset by a $0.8 million decrease related to the 4.1% decrease in year-over-year transactions and a $0.4 million decrease in worker’s compensation expense .

Year-to-date, labor and related expenses increased $8.9 million, or 9.9%, from the comparable period in the prior year.

The increase for the year-to-date period was due to a $4.1 million increase related to higher minimum wage increases in California during fiscal 2022 and other labor wage increases as a result of competitive pressures , a $0.8 million increase in overtime, $0.5 million in higher payroll taxes, a $0.3 million increase from restaurants opened during or after the second quarter of the prior year and a $1.1 million increase in other labor related expenses primarily related to training.

The increase in labor and related expenses for the year-to-date period was partially offset by a $2.0 million reduction in labor related to the eight locations sold to an existing franchisee during the prior year and a $1.4 million decrease related to the 4.1% decrease in year-over-year transactions .

For the quarter, labor and related expenses as a percentage of company-operated restaurant revenue were 31.0%, up from 29.5% in the comparable period in the prior year due to the cost increases highlighted above, partially offset by the higher prices.

The increase for the year-to-date period was due to a $6.2 million increase related to higher minimum wage increases in California during fiscal 2022 and other labor wage increases as a result of competitive pressures , a $1.3 million increase in overtime, $0.8 million in higher payroll taxes, a $0.7 million increase from restaurants opened during or after the third quarter of the prior year and a $1.1 million increase in other labor related expenses primarily related to training.

Further, the increase for the year-to-date period was pr imarily due to recognizing a $3.2 million ERC which was recorded as an offset to the corresponding payroll tax expense and was classified as part of the labor and other operating expenses on the condensed consolidated statements of income during the thirty-nine weeks ended September 29, 2021.

The increase in labor and related expenses for the year-to-date period was partially offset by a $2.0 million reduction in labor related to the eight locations sold to an existing franchisee during the prior year, a $1.8 million decrease related to the 4.1% decrease in year-over-year transactions and a $0.6 million decrease in worker’s compensation expense .

For the quarter, labor and related expenses as a percentage of company-operated restaurant revenue were 32.3%, up from 27.8% in the comparable period in the prior year due to the cost increases highlighted above, partially offset by the higher menu prices.

Year-to-date labor and related expenses as a percentage of company-operated restaurant revenue were 32.6%, up from 29.9% in the comparable period in the prior year.

The year-to-date percentage was impacted by the cost increases highlighted above, partially offset by an increase in pricing.

The year-to-date percentage was impacted by the cost increases highlighted above, partially offset by an increase in menu pricing.

Occupancy and Other Operating Expenses

For the quarter, occupancy and other operating expenses increased $1.8 million, or 7.2%, from the comparable period in the prior year.

The increase was primarily due to a $0.6 million increase in utilities, a $0.2 million increase in market place delivery fees and a $0.2 million increase in other operating expenses.

The increase in occupancy and other operating expenses was partially offset by a $0.4 million decrease in occupancy costs and a $0.1 million decrease in operating supplies.

The increase was primarily due to a $0.7 million increase in utilities, a $0.2 million increase in repairs and maintenance, a $0.2 million increase in market place delivery fees, a $0.2 million increase in occupancy costs and a $0.5 million increase in other operating supplies.

Year-to-date, occupancy and other operating expenses increased $2.3 million, or 3.1%, from the comparable period in the prior year.

The increase was primarily due to a $0.9 million increase in utilities and a $0.4 million increase in market place delivery fees.

The increase in occupancy and other operating expenses was partially offset by a $0.5 million decrease in occupancy costs and a $0.3 million decrease in operating supplies.

The increase was primarily due to a $1.6 million increase in utilities, a $0.5 million increase in market place delivery fees, a $0.3 million increase in repairs and maintenance and a $0.4 million increase in other operating expenses.

The increase in occupancy and other operating expenses was partially offset by a $0.3 million decrease in occupancy costs and a $0.2 million decrease in operating services and supplies.

For the quarter, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 26.1%, up from 25.1% in the comparable period.

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General and Administrative Expenses

For the quarter, general and administrative expenses decreased $0.8 million, or 8.0%, from the comparable period in the prior year.

The decrease for the quarter was due to a $0.4 million decrease in labor related costs, primarily related to a decrease in estimated management bonus expense, a $0.3 million decrease in legal and professional expenses and a $0.1 million decrease in other general and administrative expenses.

For the quarter, general and administrative expenses increased $0.5 million, or 5.3%, from the comparable period in the prior year.

The increase for the quarter was primarily due to a $0.4 million increase in recruiting and training costs.

Year-to-date, general and administrative expenses decreased $0.9 million, or 2.9%, from the comparable period in the prior year.

The decrease for the year-to-date period was due primarily to a $0.8 million decrease in labor related costs, primarily related to a decrease in estimated management bonus expense, a $0.6 million decrease in legal and professional expenses, a $0.3 million decrease in temporary office staff and recruiting costs and a $0.1 million decrease in stock compensation expenses.

This decrease was partially offset by a $0.4 million increase in other general and administrative expenses.

For the quarter, general and administrative expenses as a percentage of total revenue were 7.8%, down from 8.6% in the comparable period of the prior year.

The decrease for the year-to-date period was due primarily to a $0.5 million decrease in labor related costs, primarily related to a decrease in estimated management bonus expense and a $0.5 million decrease in legal and outside professional services.

This decrease was partially offset by a $0.1 million increase in professional services.

For the quarter, general and administrative expenses as a percentage of total revenue were 8.2%, up from 8.1% in the comparable period of the prior year.

Year-to-date, general and administrative expenses as a percentage of total revenue were 8.3%, down from 8.8% in the comparable period of the prior year.

The percentage decrease for the quarterly and year-to-date periods is primarily due to the cost increases discussed above.

The percentage increase for the quarterly period is primarily due to the cost increases discussed above.

The percentage decrease for the year-to-date period is primarily due to the cost decreases noted above.

Loss on Disposition of Restaurants

During the thirteen and thirty-nine weeks ended September 29, 2021, we completed the sale of our eight restaurants within the Sacramento area to an existing franchisee.

This sale resulted in cash proceeds of $4.6 million and a net loss on

sale of restaurants of less than $0.1 million and $1.5 million for the thirteen and thirty-nine weeks ended September 29, 2021, respectively.

Impairment and Closed-Store Reserves

During the thirteen and twenty-six weeks ended June 29, 2022, we recorded non-cash impairment charges of $0.2 million and $0.3 million, respectively, primarily related to the long-lived assets of one restaurant in California.

During the thirteen and twenty-six weeks ended June 30, 2021, we recorded non-cash impairment charges of $0.4 million and

$0.7 million, respectively, primarily related to the carrying value of the ROU assets of one restaurant in Texas closed in 2019, the ROU assets of one restaurant in California, and the long-lived assets of three restaurants in California .

During the thirteen and thirty-nine weeks ended September 28, 2022, we recorded non-cash impairment charges of $0.1 million and $0.4 million, respectively, primarily related to the long-lived assets of one restaurant in California.

During the thirteen and thirty-nine weeks ended September 29, 2021, we recorded non-cash impairment charges of $0.1 million and $0.7 million, respectively, primarily related to the carrying value of the ROU assets of one restaurant in Texas closed in 2019, the ROU assets of one restaurant in California, and the long-lived assets of three restaurants in California .

Given the inherent uncertainty in projecting results for newer restaurants in newer markets we are monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis.

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Additionally, any property tax and CAM payments relating to closed restaurants are included within closed-store expense.

During the thirteen and twenty-six weeks ended June 29, 2022, we recognized less than $0.1 million and $0.1 million, respectively, of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

During the thirteen and twenty-six weeks ended June 30, 2021, we recognized less than $0.1 million and $0.2 million, respectively, of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

During the thirteen and thirty-nine weeks ended September 28, 2022, we recognized $0.1 million and $0.2 million, respectively, of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

During the thirteen and thirty-nine weeks ended September 29, 2021, we recognized $0.1 million and $0.4 million, respectively, of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

Interest Expense, Net

For the quarter, interest expense, net, was consistent with the comparable period in the prior year.

For the quarter, interest expense, net, decreased $0.3 million from t he comparable period in the prior year.

For the year-to-date period, interest expense, net, decreased $0.4 million from the comparable period in the prior year.

The year-to-date decrease was primarily related to lower interest rates and lower outstanding balances on our 2018 Revolver (as defined below).

Both the quarter and year-to-date decreases in interest expense were primarily related to the unwinding of our interest rate swap and the corresponding payout that was recognized as part of interest income during the thirteen and thirty-nine weeks ended September 28, 2022 and lower outstanding balances on our 2022 Revolver (as defined below).

Income Tax Receivable Agreement

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The TRA calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses (“NOLs”) and other tax attributes attributable to preceding periods.

For the thirteen and twenty-six weeks ended June 29, 2022, we recorded income tax receivable agreement income of $0.2 million and $0.3 million, respectively, and for the thirteen and twenty-six weeks ended June 30, 2021 we recorded income tax receivable agreement expense of less than $0.1 million and income tax receivable agreement income of less than $0.1 million, respectively .

For the thirteen and thirty-nine weeks ended September 28, 2022, we recorded income tax receivable agreement income of less than $0.1 million and $0.3 million, respectively, and for both the thirteen and thirty-nine weeks ended September 29, 2021 we recorded income tax receivable agreement income of less than $0.1 million.

Provision for Income Taxes

For the quarter ended June 29, 2022, we recorded an income tax provision of $3.1 million, reflecting an estimated effective tax rate of 30.0%.

For the quarter ended June 30, 2021, we recorded an income tax provision of $3.4 million, reflecting an estimated effective tax rate of approximately 27.8%.

For the year-to-date period ended June 29, 2022, we recorded an income tax provision of $4.0 million, reflecting an estimated effective tax rate of approximately 30.0%.

For the year-to-date ended June 30, 2021, we recorded an income tax provision of $5.0 million, reflecting an estimated effective tax rate of approximately 28.1%.

The difference between the 21.0% statutory rate and our effective tax rate of 30.0% for the year-to-date ended June 29, 2022 is primarily a result of state taxes , the change in valuation allowance against certain state credits, a tax shortfall related to non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit .

For the quarter ended September 28, 2022, we recorded an income tax provision of $1.8 million, reflecting an estimated effective tax rate of 26.2%.

For the quarter ended September 29, 2021, we recorded an income tax provision of $3.7 million, reflecting an estimated effective tax rate of approximately 26.4%.

For the year-to-date period ended September 28, 2022, we recorded an income tax provision of $5.7 million, reflecting an estimated effective tax rate of approximately 28.7%.

For the year-to-date ended September 29, 2021, we recorded an income tax provision of $8.7 million, reflecting an estimated effective tax rate of approximately 27.4%.

The difference between the 21.0% statutory rate and our effective tax rate of 28.7% for the year-to-date ended September 28, 2022 is primarily a result of state taxes , the change in valuation allowance against certain state credits, a tax shortfall related to non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit .

Key Performance Indicators

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Our total revenue in our condensed consolidated statements of income is limited to company-operated restaurant revenue and franchise revenue from our franchisees.

Accordingly, system-wide sales should not be considered in isolation or as a substitute for our results as

reported under GAAP.

Accordingly, system-wide sales should not be considered in isolation or as a substitute for our results as reported under GAAP.

Management believes that system-wide sales are an important figure for investors, because they are widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration.

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

(Dollar amounts in thousands)

June 29, 2022

June 30, 2021

June 29, 2022

June 30, 2021

September 28, 2022

September 29, 2021

September 28, 2022

September 29, 2021

Company-operated restaurant revenue

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Comparable restaurant sales exclude restaurants closed during the applicable period.

At June 29, 2022 and June 30, 2021, there were 465 and 465 comparable restaurants, 183 and 191 company-operated restaurants and 282 and 274 franchised restaurants, respectively.

At September 28, 2022 and September 29, 2021, there were 466 and 462 comparable restaurants, 184 and 189 company-operated restaurants and 282 and 273 franchised restaurants, respectively.

Comparable restaurant sales indicate the performance of existing restaurants, since new restaurants are excluded.

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Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP.

Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable.

Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses

which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable.

Restaurant contribution excludes certain costs, such as general and administrative expenses, depreciation and amortization, impairment and closed-store reserve and other costs that are considered normal operating costs and, accordingly, restaurant contribution is not indicative of overall Company results and does not accrue directly to the benefit of stockholders because of the exclusion of certain corporate-level expenses.

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Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation, or superior to, or as substitutes for the analysis of our results as reported under GAAP.

Management uses restaurant contribution and restaurant contribution margin as key metrics to evaluate the profitability of incremental sales

at our restaurants, to evaluate our restaurant performance across periods, and to evaluate our restaurant financial performance compared with our competitors.

Management uses restaurant contribution and restaurant contribution margin as key metrics to evaluate the profitability of incremental sales at our restaurants, to evaluate our restaurant performance across periods, and to evaluate our restaurant financial performance compared with our competitors.

Management believes that restaurant contribution and restaurant contribution margin are important tools for investors, because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance.

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

(Dollar amounts in thousands)

June 29, 2022

June 30, 2021

June 29, 2022

June 30, 2021

September 28, 2022

September 29, 2021

September 28, 2022

September 29, 2021

Restaurant contribution:

4 unchanged sentences

Loss on disposal of assets

Loss on assets held for sale

Loss on disposition of restaurants

Franchise revenue

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New restaurants often open with an initial start-up period of higher than normal sales volumes, which subsequently decrease to stabilized levels.

New restaurants typically experience normal inefficiencies in the form of higher food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution margins are generally lower during the start-up period of operation.

New restaurants typically experience normal inefficiencies in the form of

higher food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution margins are generally lower during the start-up period of operation.

The average start-up period after which our new restaurants’ revenue and expenses normalize is approximately fourteen weeks.

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EBITDA and Adjusted EBITDA as presented in this report are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP.

EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income, or

any other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity.

EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income, or any other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity.

In addition, in evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate EBITDA and Adjusted EBITDA.

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

(Amounts in thousands)

June 29, 2022

June 30, 2021

June 29, 2022

June 30, 2021

September 28, 2022

September 29, 2021

September 28, 2022

September 29, 2021

Non-GAAP adjustments:

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Loss on disposal of assets (b)

Loss on assets held for sale (c)

Loss on disposition of restaurants (c)

Impairment and closed-store reserves (d)

Income tax receivable agreement expense (income) (e)

Income tax receivable agreement income (e)

Securities class action legal expense (f)

Pre-opening costs (g)

Legal settlements (g)

Special legal expenses (h)

Pre-opening costs (i)

Adjusted EBITDA

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(b) Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.

(c) During the thirteen and twenty-six weeks ended June 30, 2021, we agreed in principle to sell eight restaurants within Sacramento area to an existing franchisee.

The related net assets were reclassified to assets held for sale and

remeasured at their fair value less costs to sell, which resulted in a loss on held for sale assets of $1.5 million for the thirteen and twenty-six weeks ended June 30, 2021.

(c) During the thirteen and thirty-nine weeks ended September 29, 2021, we completed the sale of eight restaurants within the Sacramento area to an existing franchisee.

This sale resulted in cash proceeds of $4.6 million during the thirty-nine weeks ended September 29, 2021 and a net loss on sale of restaurants of less than $0.1 million and $1.5 million for the thirteen and thirty-nine weeks ended September 29, 2021, respectively.

(d) Includes costs related to impairment of long-lived and ROU assets and closing restaurants.

During the thirteen and twenty-six weeks ended June 29, 2022, we recorded non-cash impairment charges of $0.2 million and $0.3 million , respectively , primarily related to the long-lived assets of one restaurant in California.

During the thirteen and twenty-six weeks ended June 30, 2021, we recorded non-cash impairment charges of $0.4 million and $0.7 million, respectively, primarily related to the carrying value of the ROU assets of one restaurant in Texas closed in 2019, the ROU assets of one restaurant in California, and the long-lived assets of three restaurants in California .

During the thirteen and twenty-six weeks ended June 30, 2021, we recognized less than $0.1 million and $0.2 million , respectively, of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

During the thirteen and thirty-nine weeks ended September 28, 2022, we recorded non-cash impairment charges of $0.1 million and $0.4 million , respectively , primarily related to the long-lived assets of one restaurant in California.

During the thirteen and thirty-nine weeks ended September 29, 2021, we recognized $0.1 million and $0.4 million , respectively, of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

(e) On July 30, 2014, we entered into the TRA.

This agreement calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our NOLs and other tax attributes attributable to preceding periods.

For the thirteen and twenty-six weeks ended June 29, 2022 and June 30, 2021, income tax receivable agreement expense (income) consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.

(f) Consists of costs related to the defense of securities lawsuits.

(g) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.

For the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021, income tax receivable agreement income consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.

(f) Consists of costs and recoveries related to the defense of securities lawsuits.

During the thirteen and thirty-nine weeks ended September 29, 2021, we received $0.5 million in insurance proceeds, net of legal expenses, related to a derivative complaint.

(g) Includes $0.5 million received from legal settlement, net of legal expenses.

(h) Consists of costs related to a special dividend declaration.

On October 11, 2022, the Board of Directors declared a special dividend of $1.50 per share on the common stock of the Company.

(i) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.

These are generally incurred over the three to five months prior to opening.

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The following table presents summary cash flow information for the periods indicated (in thousands):

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

(Amounts in thousands)

June 29, 2022

June 30, 2021

September 28, 2022

September 29, 2021

Net cash provided by (used in)

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Operating Activities

For the twenty-six weeks ended June 29, 2022, net cash from operating activities changed by approximately $14.8 million from the comparable period of the prior year.

For the thirty-nine weeks ended September 28, 2022, net cash from operating activities changed by approximately $20.4 million from the comparable period of the prior year.

This change was due to unfavorable working capital fluctuations and lower profitability compared to the same period in the prior year.

Investing Activities

For the twenty-six weeks ended June 29, 2022, net cash used in investing activities changed by $4.6 million from the comparable period of the prior year.

This change was due primarily to the Company receiving a deposit of $4.6 million on sale of eight restaurants within the Sacramento area during the twenty-six weeks ended June 30, 2021.

For the thirty-nine weeks ended September 28, 2022, net cash used in investing activities changed by $4.9 million from the comparable period of the prior year.

This change was due primarily to the Company receiving a deposit of $4.6 million on the sale of eight restaurants within the Sacramento area during the thirty-nine weeks ended September 29, 2021.

Financing Activities

For the twenty-six weeks ended June 29, 2022, net cash from financing activities changed by $24.2 million from the comparable period of the prior year.

This change was due primarily to a $1.6 million cash inflow increase related to option exercises during the twenty-six weeks ended June 29, 2022, compared to a $22.8 million cash outflow related to the pay downs on the 2018 Revolver during the twenty-six weeks ended June 30, 2021.

For the thirty-nine weeks ended September 28, 2022, net cash from financing activities changed by $3.1 million from the comparable period of the prior year.

The change was due primarily to $22.8 million of net pay downs on the 2018 Revolver during the thirty-nine weeks ended September 29, 2021, compared to net pay downs of $20.0 million during the thirty-nine weeks ended September 28, 2022.

This change was partially offset by a $1.6 million cash inflow related to option exercises during the thirty-nine weeks ended September 28, 2022, compared to a $0.9 million cash inflow during the thirty-nine weeks ended September 29, 2021.

Debt and Other Obligations

2 unchanged sentences

The 2022 Revolver and 2022 Credit Agreement will mature on July 27, 2027.

The obligations under the 2018 Credit Agreement and related loan documents are guaranteed by Holdings and Intermediate.

The obligations under the 2022

Credit Agreement and related loan documents are guaranteed by Holdings and Intermediate.

The obligations of Holdings, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets.

Under the 2018 Revolver, Holdings may not make certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $1.0 million per year to repurchase or redeem qualified equity interests of Holdings held by our past or present officers, directors, or employees (or their estates) upon death, disability, or termination of employment, (ii) pay under its TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2018 Revolver.

Borrowings under the 2018 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either LIBOR or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid.

The base rate is calculated as the highest of (a) the federal funds rate plus 0.50%, (b) the published Bank of America prime rate, or (c) LIBOR plus 1.00%.

For LIBOR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%.

The special dividend announced by the Company’s Board of Directors on October 11, 2022 is permitted under the terms of 2022 Revolver pursuant to both subclause (iii)(d) and (iii)(e) of the preceding sentence.

Under the 2022 Revolver, Holdings is restricted from making certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $1.0 million per year to repurchase or redeem qualified equity interests of Holdings held by our past or present officers, directors, or employees (or their estates) upon death, disability, or termination of employment, (ii) pay under its TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid.

The base rate is calculated as the highest of (a) the federal funds rate plus 0.50%, (b) the published Bank of America prime rate, or (c) Term SOFR with a term of one-month SOFR plus 1.00%.

For Term SOFR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%.

Borrowings under the 2022 Revolver may be repaid and reborrowed.

The interest rate range was 1.70% to 2.87% and 1.35% to 2.87% for the thirteen and twenty-six weeks ended June 29, 2022 , respectively , and 1.35% to 1.36% and 1.35% to 1.65% for the thirteen and twenty-six weeks ended June 30, 2021 , respectively .

The interest rate range was 2.87% to 6.00% and 1.35% to 6.00% for the thirteen and thirty-nine weeks ended September 28, 2022 , respectively , and 1.34% to 1.35% and 1.34% to 1.65% for the thirteen and thirty-nine weeks ended September 29, 2021 , respectively .

The 2022 Credit Agreement contains certain financial covenants.

We were in compliance with the financial covenants as of June 29, 2022.

At June 29, 2022, $10.0 million of letters of credit and $40.0 million of borrowings were outstanding under the 2018 Revolver.

There were $100.0 million remaining borrowings available under the 2018 Revolver at June 29, 2022.

During the year ended December 25, 2019, we entered into an interest rate swap with a notional amount of $40.0 million, related to the outstanding borrowings under our 2018 Revolver.

The interest rate swap was designated as a cash flow hedge and effectively converted a portion of our outstanding borrowings to a fixed rate of 1.31%, plus the

applicable margin spread, which was 1.5% for the twenty-six weeks ended June 29, 2022.

The interest rate swap matures in June 2023.

Subsequent to June 29, 2022, we refinanced the 2018 Revolver and entered into the 2022 Credit Agreement.

On July 29, 2022, we made a $20.0 million payment to the 2022 Revolver and the outstanding balance as of August 4, 2022 was $20.0 million.

See “Recent Developments” above and Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Subsequent Events” for additional information.

We were in compliance with the financial covenants as of September 28, 2022.

At September 28, 2022, $10.0 million of letters of credit and $20.0 million of borrowings were outstanding under the 2022 Revolver.

There were $120.0 million remaining borrowings available under the 2022 Revolver at September 28, 2022.

During the year ended December 25, 2019, we entered into an interest rate swap with a notional amount of $40.0 million, related to the outstanding borrowings under our 2018 Revolver (defined below).

The interest rate swap was designated as a cash flow hedge and effectively converted a portion of our outstanding borrowings to a fixed rate of 1.31%, plus the applicable margin spread, which was 1.5% for the thirty-nine weeks ended September 28, 2022.

During the thirty-nine weeks ended September 28, 2022, we refinanced and terminated our credit agreement (the “2018 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provided for a $150.0 million five-year senior secured revolving credit facility (the “2018 Revolver”) and entered into the 2022 Credit Agreement.

On July 29, 2022, we made a $20.0 million payment to the 2022 Revolver and the outstanding balance as of September 28, 2022 was $20.0 million.

See Note 4, “Long-term debt” for additional information.

Material Cash Requirements

Our material cash requirements as of June 29, 2022 have not changed materially since those disclosed under “Material Cash Requirements” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 29, 2021.

Our material cash requirements as of September 28, 2022 have not changed materially since those disclosed under “Material Cash Requirements” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 29, 2021.

Our material cash requirements relate mostly to future (i) debt payments, including expected interest expense, calculated based on current interest rates, (ii) restaurant operating lease payments, (iii) income tax receivable agreement payments, (iv) purchasing commitments for chicken, (v) restaurant finance lease payments, and (vi) capital expenditures .

Share Repurchase Program and Subsequent Borrowings

On October 11, 2022, our Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $20.0 million of shares of our Common Stock.

The repurchase program will terminate on March 28, 2024, may be modified, suspended or discontinued at any time, and does not obligate us to acquire any particular number of shares.

In addition, on October 11, 2022, our Board of Directors declared a special dividend of $1.50 per share on our common stock.

The special dividend is payable on November 9, 2022, to stockholders of record, including holders of restricted stock and restricted stock units, at the close of business on October 24, 2022.

Lastly, on November 3, 2022, we borrowed $46.0 million on our 2022 Revolver and outstanding borrowings as of November 3, 2022 were $66.0 million.

After payment of the special dividend, we are expected to have approximately $10.0 million in cash on hand.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis