Portillo’s(US:PTLO)2023-03-02 13:09Cautionary Note Regarding Forward-Looking Information Forward-looking statements in this report are subject to risks and uncertainties, potentially causing actual results to differ Forward-Looking Statements and Risks This section outlines forward-looking statements, noting their inherent risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements that are subject to known and unknown risks and uncertainties, which may cause actual results to differ materially1112 - Key risks include potential future impact of COVID-19, organizational structure risks, food safety concerns, reliance on IT systems, competition, labor market challenges, regulatory impacts, growth strategy execution, increased operating costs, and supply shortages11 - Forward-looking statements are identified by words such as 'aim,' 'anticipate,' 'believe,' 'estimate,' 'expect,' 'forecast,' 'future,' 'outlook,' 'potential,' 'project,' 'projection,' 'plan,' 'intend,' 'seek,' 'may,' 'could,' 'would,' 'will,' 'should,' 'can,' 'can have,' 'likely,' and similar expressions12 Part I ITEM 1. BUSINESS Portillo's Inc. was formed in 2021 for its IPO and related reorganization, operating 72 restaurants across nine states with a multichannel model - Portillo's Inc. was incorporated on June 8, 2021, for its IPO and related reorganization, becoming the sole managing member of Portillo's OpCo and consolidating its financial results16 - In 2022, the Company completed two secondary offerings, using net proceeds to purchase LLC Units and Class A common stock from pre-IPO LLC Members and Blocker Companies, increasing Portillo's Inc.'s ownership in Portillo's OpCo to 67.0%1920 - As of December 25, 2022, Portillo's owned and operated 72 restaurants across nine states, including a 50% equity interest in one restaurant25 - The company's growth strategy aims to increase its restaurant count by approximately 10% annually over the long term, focusing on markets outside Chicagoland with existing presence and favorable macro-economic tailwinds41 - Portillo's employs a values-driven, people-centered culture, recognized as one of QSR Magazine's Best Brands to Work For in 2022, with a focus on leadership development, employee engagement, and competitive total rewards including an Employee Stock Purchase Plan (ESPP)495563 IPO Details (October 2021) | Metric | Value | | :-------------------------------- | :------------------- | | Shares of Class A Common Stock Sold | 23,310,810 | | Offering Price per Share | $20.00 | | Aggregate Net Proceeds | ~$430.0 million | | Underwriting Discounts and Commissions | $29.1 million | | Other Offering Expenses | ~$7.1 million | ITEM 1A. RISK FACTORS This section outlines significant risks that could adversely affect Portillo's business, financial condition, and results of operations - The business is vulnerable to changes in economic conditions, increases in food and commodity costs (e.g., 15.2% inflation in 2022), and shifts in consumer preferences, which could impact profitability and traffic939497 - Achieving growth strategies, particularly opening new restaurants (aiming for 10% annual increase), is subject to risks such as site availability, construction costs, and performance in new markets99100101 - Significant competition in the restaurant industry, food safety incidents (e.g., E. coli report in 2021), and negative publicity pose risks to brand reputation, sales, and operating margins114115117 - The company's level of indebtedness (approximately $322.4 million as of December 25, 2022) could limit its ability to fund growth and operations, and variable interest rates expose it to interest rate fluctuations152153 - Risks related to the organizational structure include potential conflicts of interest with Berkshire Private Equity, dependence on distributions from Portillo's OpCo, and substantial cash payments required under the Tax Receivable Agreement (estimated $252.8 million as of December 25, 2022)162167170172 - Failure to protect intellectual property, security breaches in IT systems, and non-compliance with evolving privacy and data protection regulations could disrupt operations, harm reputation, and lead to financial losses184185188195 ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments from the SEC - No unresolved staff comments were reported232 ITEM 2. PROPERTIES Portillo's Inc. leases its home office in Oak Brook, IL, and operates 72 restaurants across nine states, along with two food production commissaries in Illinois - The home office is located at 2001 Spring Road, Suite 400, Oak Brook, IL 60523, and is leased233 - As of December 25, 2022, the company operated 72 Portillo's restaurants across nine states, including a restaurant owned by C&O (50% equity)234 - The company operates two food production commissaries in Illinois and two non-traditional locations (a food truck and a ghost kitchen) in Chicago234 Number of Restaurants by State (as of December 25, 2022) | State | Number of Restaurants | | :---------- | :-------------------- | | Arizona | 4 | | California | 2 | | Florida | 4 | | Illinois | 45 | | Indiana | 8 | | Iowa | 1 | | Michigan | 1 | | Minnesota | 3 | | Wisconsin | 4 | | Total | 72 | ITEM 3. LEGAL PROCEEDINGS Information regarding legal proceedings is incorporated by reference from Note 16, Contingencies, in the financial statements - Disclosure on legal proceedings is incorporated by reference from Part II, Item 8, "Financial Statements And Supplementary Data, Note 16. Contingencies"237 ITEM 4. MINE SAFETY DISCLOSURE This item is not applicable to the company - This item is not applicable238 Part II ITEM 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities Portillo's Class A common stock trades on Nasdaq under 'PTLO', while Class B common stock is not listed, and no dividends are anticipated - Portillo's Class A common stock is traded on the Nasdaq Global Select Market under the symbol 'PTLO', while Class B common stock is not listed or traded241 - As of February 23, 2023, there were approximately 30 shareholders of record for Class A common stock and 14 for Class B common stock242 - No dividends have been declared or paid on common stock, and none are anticipated in the foreseeable future, with future decisions at the Board's discretion243 - In Q3 and Q4 2022, the company completed secondary offerings of 8,066,458 and 8,000,000 Class A shares, respectively, at $23.75 and $22.69 per share, which facilitated the purchase of LLC Units and Class A shares from pre-IPO LLC Members249250 Stock Performance Graph (October 21, 2021 - December 25, 2022) | | 10/21/2021 | 12/26/2021 | 4/1/2022 | 7/1/2022 | 10/1/2022 | 12/25/2022 | | :---------------- | :--------- | :--------- | :------- | :------- | :-------- | :--------- | | Portillo's Inc. | $100.00 | $131.75 | $82.10 | $57.53 | $67.66 | $59.0