______________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 8, 1995
______________________________
TO OUR STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of
NPC INTERNATIONAL, INC. (the ``Company``) will be held at the Memorial
Auditorium, 503 North Pine, Pittsburg, Kansas, on Tuesday, August 8,
1995, at 10:00 a.m., Central Daylight Savings Time, for the following
purposes:
1. For the Class A Stockholders to elect two directors to serve a
three-year term and until their successors are elected and
qualified;
2. For the Class A and Class B Stockholders, voting as separate
classes, to approve a stock recapitalization plan for the
Company, including the adoption of an amendment to the Restated
Articles of Incorporation to allow the payment of a dividend to
the holders of the Class A common stock and to subsequently amend
the Restated Articles of Incorporation to reclassify and convert
the outstanding shares of Class A common stock and Class B common
stock into a single class of new common stock; and
3. For the Class A Stockholders to transact such other business
as may properly come before the meeting or any adjournment of the
meeting.
Stockholders of record at the close of business on June 30, 1995,
will be entitled to vote at the meeting. The Class A Stockholders are
entitled to vote on all matters submitted to a vote at the meeting and
the Class B Stockholders are entitled to vote on Proposal Two as
stated above. The annual report for the year ended March 28, 1995, is
enclosed herewith. A complete list of stockholders entitled to notice
of and to vote at the meeting will be available and open to the
examination of any stockholder for any purpose germane to the meeting
during ordinary business hours on and after July 28, 1995, at the
office of the Company, 720 W. 20th Street, Pittsburg, Kansas 66762.
All stockholders are cordially invited to attend the meeting. For
the convenience of those stockholders who do not expect to attend the
meeting in person and desire to have their stock voted, a form of
proxy and an envelope, for which no postage is required, are enclosed.
The white colored proxy card is for use by Class A Stockholders and
the blue colored proxy card is for use by Class B Stockholders. Any
stockholder who later finds he can be present at the meeting, or for
any other reason desires to do so, may revoke this proxy at any time
before it is voted.
Please complete, sign, date and mail promptly the appropriate
proxy card in the return envelope furnished for that purpose, even if
you currently plan to attend the meeting.
By Order of the Board of Directors,
David G. Short
Secretary
Pittsburg, Kansas
June 30, 1995
NPC INTERNATIONAL, INC.
720 W. 20TH STREET
PITTSBURG, KANSAS 66762
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 8, 1995
SOLICITATION AND REVOCATION OF PROXY
This Proxy Statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of
NPC International, Inc. (the ``Company``), to be voted at its Annual
Meeting of Stockholders to be held at the Memorial Auditorium, 503
North Pine, Pittsburg, Kansas at 10:00 a.m. on Tuesday, August 8,
1995. The mailing address of the principal executive offices of the
Company is 720 West 20th Street, Pittsburg, Kansas 66762. The
individuals named as proxies are O. Gene Bicknell and James K.
Schwartz. Proxies may be solicited by use of the mails, by personal
interview, or by telephone and may be solicited by officers and
directors, and by other employees of the Company. Brokers, nominees,
fiduciaries, and other custodians will be requested to forward
soliciting material to the beneficial owners of shares and will be
reimbursed for their expenses in forwarding such material. All costs
of solicitation of proxies will be borne by the Company.
Only holders of record of Class A Common Stock, $.01 par value
per share (the ``Class A Stock``), as of the close of business on June
30, 1995, are entitled to vote on all issues presented for a vote at
the meeting or any adjournment or postponement thereof, and holders of
record of Class B Common Stock, $0.01 par value per share (the ``Class
B Stock``), as of the close of business on June 30, 1995 are entitled
to vote as a separate class on Proposal Two with respect to the
recapitalization plan. All shares of common stock represented by
proxies received will be voted in accordance with instructions
contained therein. In the absence of voting instructions, the shares
will be voted FOR the proposals listed herein. A holder of common
stock giving a proxy has the power to revoke it any time before it is
voted by notifying the Secretary of the Company in writing, by
submitting a substitute proxy having a later date or by voting in
person at the meeting. This Proxy Statement and forms of proxy are
first being mailed to stockholders on July 7, 1995.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, DATE, EXECUTE AND RETURN
THE FORM OF PROXY SENT TO THEM WITH THIS PROXY STATEMENT.
VOTING AT THE MEETING
At the close of business on June 30, 1995, the record date for
the determination of stockholders entitled to vote at the Annual
Meeting, there were [12,355,755 of Class A Common Stock at
5/25/95]_________ shares of Class A Stock outstanding and [12,149,569
at 5/25/95]_________ shares of Class B Stock.
AS OF THE ANNUAL MEETING RECORD DATE, MR. O. GENE BICKNELL, CHIEF
EXECUTIVE OFFICER AND THE CHAIRMAN OF THE BOARD OF DIRECTORS OF THE
COMPANY, BENEFICIALLY HELD 7,705,651 SHARES OF CLASS A STOCK,
CONSTITUTING APPROXIMATELY 62.4% OF THE CLASS A STOCK, AND 7,597,478
SHARES OF THE CLASS B STOCK, CONSTITUTING APPROXIMATELY 62.5% OF THE
CLASS B STOCK. MR. BICKNELL HAS INFORMED THE COMPANY THAT HE INTENDS
TO VOTE ALL SUCH SHARES IN FAVOR OF PROPOSALS ONE AND TWO. IF HE
VOTES SUCH SHARES ACCORDINGLY, THEN SUCH PROPOSALS WILL BE APPROVED
REGARDLESS OF HOW ANY OTHER HOLDER OF SHARES OF CLASS A STOCK OR CLASS
B STOCK VOTES WITH RESPECT TO THE PROPOSALS.
Class A Stock
Each share of Class A Stock is entitled to one vote on all
matters presented for stockholder action at the meeting. All shares of
Class A Stock have cumulative voting rights in the election of
directors, and there are no conditions precedent to the exercise of
those rights. Cumulative voting means a Class A Stockholder is
entitled to cast a total number of votes equal to the number of his
shares multiplied by the number of directors to be elected at the
meeting, and can cast them all for one nominee or can divide them
among as many nominees as he or she chooses. A holder of Class A Stock
may divide his cumulative votes among the nominees by marking the
white colored proxy card according to instructions on the card. If a
Class A Stockholder does not allocate his votes, then such
stockholder`s cumulative votes will be allocated equally among the
nominees for whom authority to vote is granted.
Only Class A Stockholders of record at the close of business on
June 30, 1995, will be entitled to vote on all matters submitted for a
vote at the meeting. Votes submitted as abstentions on any proposal
will be counted as votes against such proposal. An affirmative vote
of the majority of the outstanding shares of Class A Stock present at
the meeting in person or by proxy is required for approval of all
proposals, except Proposal Two. For Proposal Two to be approved, an
affirmative vote of a majority of the total number of outstanding
shares of Class A Stock and a majority of the total number of
outstanding shares of Class B Stock, each voting as a separate class,
is required. Broker non-votes will not count for or against any
proposal, other than Proposal Two, because such shares will not be
counted as shares present at the meeting. Broker non-votes will count
against the Proposal Two. A broker ``non-vote`` occurs when a nominee
holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the
beneficial owner.
Class B Stock
Pursuant to the Restated Articles of Incorporation, Class B Stock
has no voting rights other than those required by law. Under the
Kansas General Corporation Code, holders of Class B Stock will be
entitled to vote on proposals to increase or decrease the number of
authorized shares of Class B Stock, to change the par value of the
Class B Stock, or to alter or change the powers, preferences or
special rights of the shares of Class B Stock so as to affect them
adversely. Consequently, the Class B Stockholders are entitled to vote
as a class on the recapitalization plan as provided in Proposal Two.
On the vote for Proposal Two, each share of Class B Stock is entitled
to one vote. Only Class B Stockholders of record at the close of
business on June 30, 1995, will be entitled to vote at the meeting.
For Proposal Two to be approved, an affirmative vote of a majority of
the total number of outstanding shares of Class A Stock and a majority
of the total number of outstanding shares of Class B Stock, each
voting as a separate class, is required. Votes submitted as
abstentions will be deemed to be and counted as votes against such
proposal. Broker non-votes of Class B Stock will count against
Proposal Two.
PROPOSAL NUMBER ONE
ELECTION OF TWO DIRECTORS
The Board of Directors of the Company is comprised of six
directors and is divided into three classes. At each annual meeting
of stockholders, members of one of the classes, on a rotating basis,
are elected for three year terms. The two persons designated by the
Board of Directors as nominees for election at this meeting to serve a
three year term and until their successors are elected and qualified
are O. Gene Bicknell, who is currently a director, and Mary M. Polfer,
a proposed new member of the Board. Each of the nominees has indicated
a willingness and ability to serve as a director. If a nominee becomes
unable or unwilling to serve, the accompanying proxy may be voted for
the election of such other person as shall be designated by the Board
of Directors. Shares of Class A Stock represented by all proxies
received by the Board of Directors and not marked to withhold
authority to vote for any individual director or for all directors
will be voted (unless one or both nominees are unable or unwilling to
serve) for the election of the nominees named above. Each director
requires an affirmative vote of the majority of the outstanding shares
of the Class A Stock present at the meeting in person or by proxy to
be elected to the Board of Directors. Mr. Bicknell has informed the
Company that he intends to vote his shares of Class A Stock FOR the
election of the nominees named above. If his Class A shares are voted
in this manner, the vote required for election of the nominees listed
above will be achieved, regardless of how other shares of Class A
Stock are voted.
There currently is one vacant seat on the Board of Directors for
an unexpired term to end at the annual meeting to be held in 1996.
The Board is conducting a search to fill this position, but no
candidate is being proposed at this time. The Board has not set a
definitive date by which to fill the vacant directorship.
Nominees for Directors to Serve a Three-Year Term to Expire in 1998:
O. GENE BICKNELL, Age 62, Chairman of the Board of the Company.
Mr. Bicknell has been Chairman of the Board of Directors of the
Company and its predecessors since 1962. Mr. Bicknell re-assumed
the position of Chief Executive Officer, a position he held from
1962 to 1992, on January 31, 1995.
MARY M. POLFER, Age 50, Vice President of Administration, Public
Service Company of Oklahoma.
Ms. Polfer has been with Public Service Company of Oklahoma, a
subsidiary of Central and South West Corporation, since December,
1990, first as Vice President Finance and, since November 1993,
as Vice President of Administration. Prior to that, Ms. Polfer
was Director of Corporate Projects with Farmland Industries, Inc.
Continuing Directors - Not Standing for Election This Year
Director with a Term Expiring in 1996:
JOHN W. CARLIN, Age 54, President of Midwest Superconductivity,
Inc.
Mr. Carlin is currently President of Midwest Superconductivity,
Inc., a high technology research company. Mr. Carlin was first
elected a Director in 1987. He was the Visiting Professor of
Public Administration and International Management at Wichita
State University from 1987 to 1988, and Governor of the State of
Kansas from January 1979 to January 1987.
Directors with Terms Expiring in 1997:
FRAN D. JABARA, Age 70, President of Jabara Ventures Group.
Mr. Jabara was elected a director of the Company in May 1984. He
is currently President of Jabara Ventures Group, a venture
capital firm. From September 1949 to August 1989 he was a
distinguished professor of business at Wichita State University,
Wichita, Kansas. He is also a director of Commerce Bank, Wichita,
Kansas and MidWest Grain, Inc.
ROBERT E. CRESSLER, Age 56, Partner in FRAC Enterprises.
Mr. Cressler was first elected a director of the Company in April
1985. He has been for more than the past five years a partner in
FRAC Enterprises, which previously operated Pizza Hut restaurants
and continues to operate other businesses, including
Nutri/Systems franchises.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met five times during the fiscal year
ended March 28, 1995. The Company`s standing Compensation and Stock
Option Committee met once and the Company`s standing Audit Committee
met twice during the last fiscal year. The Company does not have a
Nominating Committee. The normal duties of such a committee are
carried out by the entire Board of Directors. During the last fiscal
year, none of the Company`s Directors attended fewer than 75% of the
meetings of the Board of Directors or any committee of which he was a
member.
AUDIT COMMITTEE. The Audit Committee is comprised of Messrs.
Carlin, Jabara and Cressler. The Audit Committee recommends to the
Board of Directors the independent auditors that will conduct the
annual audit of the Company, and also reviews the Company`s accounting
practices and control systems and reviews the qualifications and
performance of the proposed independent auditors.
COMPENSATION AND STOCK OPTION COMMITTEE. The Compensation and
Stock Option Committee is comprised of Messrs. Bicknell, Jabara and
Cressler. The Committee reviews and recommends to the Board of
Directors the levels, amounts, and types of compensation to be paid to
executive officers and directors of the Company. The Committee also
determines the number of options to be granted to the Company`s
executive management and receives and reviews executive management`s
recommendations regarding options to be granted to all other Company
employees. All recommendations of the Committee are submitted to the
Board of Directors for approval.
DIRECTOR COMPENSATION
Non-employee Directors are paid a fee of $750 for each Board
meeting attended and $750 per month as additional Director`s
compensation.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee is currently
comprised of Mr. O. Gene Bicknell, the Chairman of the Board of
Directors and the Chief Operating Officer, and two non-employee
Directors, Messrs. Jabara and Cressler. Mr. Bicknell chairs the
Committee. Messrs. Jabara and Cressler have never been employed by the
Company. The Board of Directors, on January 24, 1995, authorized the
purchase of a restaurant facility owned by an affiliate of Mr.
Bicknell. The Company engaged a MAI-certified appraisal company to
perform an appraisal of the property. The Board of Directors upon
review of the proposal and the appraisal, and with Mr. Bicknell
abstaining from any participation in the vote, approved the purchase
of this site for the appraised value of $750,000, plus $50,000 for
excess equipment remaining in the facility. The Company currently
leases two properties from Mr. Bicknell and one restaurant from Mr.
Gordon W. Elliott, a former officer and current Director of the
Company. See the section titled ``Transactions with Management`` for
additional information on the leases. Management believes these
leases are at least as favorable as could be obtained from unrelated
parties.
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDER
AND OF DIRECTORS AND MANAGEMENT
The following table sets forth, as of [June 30, 1995], certain
information as to the number of shares of common stock beneficially
owned by each person who is known by the Company to own beneficially
more than 5% of its outstanding shares of Class A or Class B Stock, by
all directors and nominees, by the Named Executive Officers (as
defined below) and by the directors and executive officers as a group.
Amount and Nature of
Name, Title and Address Beneficial Ownership(1) Percent of Class
Of Beneficial Owner Class A Class B Class A Class B
O. Gene Bicknell (2)
Chairman, Chief
Executive Officer
and Director 8,073,151 7,567,878 63.4% 60.5%
100 N. Pine
Pittsburg, KS 66762
J. Mitchell Boyd
Former Chief
Executive Officer ---- 1,000 ---- *
James K. Schwartz
President and Chief
Operating Officer ---- 65,000 ---- *
Marty D. Couk
Senior Vice President-
Pizza Hut Operations 3,750 8,306 * *
Robert B. Page
President,
Romacorp, Inc. 11,250 20,000 * *
David G. Short
Vice President Legal
and General Counsel ---- ---- ---- ----
R. Frank Brown
Former President,
Skipper`s Inc. ---- ---- ---- ----
Gordon W. Elliott,
Vice Chairman
and Director 275,958 427,258 2.2% 3.4%
John W. Carlin,
Director ---- ---- ---- ----
Robert E. Cressler,
Director ---- ---- ---- ----
Fran D. Jabara,
Director 1,999 1,999 * *
All executive
officers and
directors as a group 8,366,108 8,382,541 65.7% 67.0%
(1)Includes options for 382,500 shares of Class A Stock and
353,750 shares of Class B Stock which could be exercised within
60 days. Does not include options held which are not exercisable
within 60 days.
(2)Includes 22,500 shares each of Class A Stock and Class B Stock
owned by Pitt Plastics, Inc., a corporation controlled by Mr.
Bicknell, and 1,100 shares of Class A Stock and 7,100 shares of
Class B Stock owned by Mr. Bicknell`s spouse.
* Less than 1% ownership.
EXECUTIVE COMPENSATION
The following table summarizes, for each of the three fiscal
years ended March 28, 1995, March 29, 1994, and March 30, 1993, the
compensation awarded to, earned by, or paid to (i) the Chief Executive
Officer (the ``CEO``) of the Company as of March 28, 1995, and (ii)
each of the four most highly compensated executive officers (other
than the CEO) who served as executive officers of the Company or its
subsidiaries as of March 28, 1995, whose annual compensation exceeded
$100,000 for the fiscal year ended March 28, 1995, and (iii) up to two
additional individuals for whom disclosure would have been provided
but for the fact that the individual was not serving as an executive
officer at the end of the fiscal year, ((i), (ii) and (iii)
collectively, the ``Named Executive Officers``). The Company does not
currently award stock appreciation rights, restricted stock and other
long term incentives (other than stock options) under its executive
compensation program.
Summary Compensation Table
Long Term
Name and Fiscal Annual Compensation Compensation All Other
Principal Year Option Award Compensation
Position (1) Salary Bonus (#) (2)
O. Gene Bicknell
Chairman of the 1995 $300,000 $75,000 ---- $11,975
Board and Chief 1994 300,000 60,000 ---- 15,517
Executive 1993 300,000 100,000 235,000 17,039
Officer (3)
J. Mitchell Boyd 1995 152,269 45,000 ---- 5,235
Former Chief 1994 152,000 60,000 5,000 197
Executive 1993 116,846 30,000 65,000 197
Officer (4)
James K. Schwartz 1995 130,750 18,250 100,000 4,049
President and 1994 80,000 10,000 ---- 2,456
Chief Operating 1993 63,286 5,000 15,000 197
Officer (5)
Marty D. Couk 1995 103,000 33,049 50,000 5,105
Senior Vice 1994 89,231 39,432 ---- 3,681
President-Pizza 1993 69,039 8,297 7,500 2,719
Hut Operations
Robert B. Page 1995 115,384 16,500 50,000 3,680
President, 1994 99,231 39,946 ---- 4,794
Romacorp, Inc. 1993 89,904 15,000 10,000 4,214
David G. Short
Vice President 1995 115,177 5,000 5,000 3,917
Legal and 1994 81,577 ---- 5,000 148
General Counsel
R. Frank Brown
Former President, 1995 110,539 ---- ---- 164
Skipper`s Inc.(7) 1994 57,693 ---- 20,000 197
(1)For the fiscal year ended on the last Tuesday in March for the
year noted.
(2)Fiscal 1995 figures consist of the Company`s calendar 1994
profit sharing plan contributions, the cost of group term life
insurance and accidental death benefits and, in the case of Mr.
Bicknell, the economic benefit derived from split-dollar life
insurance policies paid for by Company (see footnote 3), in the
following amounts: Mr. Bicknell, $5,071 profit sharing, $197
group insurance, $6,707 split-dollar insurance; Mr. Boyd, profit
plan $5,071, group insurance $164; Mr. Schwartz, $3,852 profit
sharing, $197 group insurance; Mr. Couk, $4,908 profit sharing,
$197 group insurance; Mr. Page, $3,483 profit plan, $197 group
insurance; Mr. Short, $3,720 profit plan, $197 group insurance;
Mr. Brown, $164 group insurance.
(3)The Company pays 100% of the premiums on split-dollar policies
insuring the life of Mr. Bicknell. The policies state the Company
is entitled to be reimbursed all premiums it paid, without
interest, from the proceeds with the residual to be paid to a
named beneficiary. The Company receives a statement from the
insurance company specifying the economic benefit derived by Mr.
Bicknell under this arrangement, based upon the Company`s rights
under the policy. The benefit derived for each year is as
follows: fiscal 1995, $6,707; fiscal 1994, $10,625; and fiscal
1993, $7,409.
(4)Mr. Boyd joined the Company on June 1, 1992 and resigned on
January 30, 1995. In addition to the above compensation, at the
time of his resignation Mr. Boyd received $505,000 in settlement
of the terms associated with his employment.
(5)Mr. Schwartz has a five year employment contract with the
Company dated January 27, 1995. If Mr. Schwartz is terminated by
the Company for any reason (other than for cause) the Company is
required to pay Mr. Schwartz an amount equal to his then current
base salary for one year and continuation of any benefit plan
available to him immediately prior to the termination of the
contract. His current base salary is $185,000. If there is a
change in control in the Company and his employment with the
Company is terminated, Mr. Schwartz will continue to receive from
the Company or a successor entity, as the case may be, his base
salary as of the date of the contract for a period of one year.
(6)Mr. Short joined the Company on June 8, 1993 and became an
executive officer on July 23, 1993.
(7)Mr. Brown joined the Company on September 27, 1993 and
terminated on January 31, 1995.
STOCK OPTIONS
The following two tables set forth information for the last
completed fiscal year relating to (i) grants to and exercises by the
Named Executive Officers of stock options pursuant to the Company`s
1994 Non-Qualified Stock Option Plan (the ``1994 Plan``) and the
Amended and Restated 1984 Non-Qualified Stock Option Plan (the ``1984
Plan`` or collectively the Company`s ``Stock Option Plans``), and (ii)
holdings at March 28, 1995, by the Named Executive Officers of
unexercised options granted pursuant to the Stock Option Plans. The
Company currently does not award stock appreciation rights under its
executive compensation program.
Option Grants in the Fiscal Year Ended March 28, 1995
Potential Realizable
Value at Assumed
% of Total Annual Rates
Options of Stock Price
Granted to Exercise Appreciation
Options Common Employees or Base Expi- for Option
Granted Stock in Fiscal Price ration Term (2)
Name (1) Class Year ($/Sh) Date 5% 10%
O. Gene
Bicknell ---- ---- ---- ---- ---- --- ----
J. Mitchell
Boyd ---- ---- ---- ---- ---- ---- ---
James K.
Schwartz(3) 100,000 B 27.4% $5.00 1/27/05 $314,224 $796,872
Marty D.
Couk 50,000 B 13.7 5.50 2/17/05 172,946 438,279
Robert B.
Page 50,000 B 13.7 5.50 2/17/05 172,946 438,279
David G.
Short 5,000 B 1.4 5.50 2/17/05 17,295 43,828
R. Frank
Brown ---- ---- ---- ---- ---- --- ----
(1) Options are generally exercisable starting 12 months after
the grant date, with 25% of the shares covered thereby becoming
exercisable at that time and with an additional 25% of the option
shares becoming exercisable on each successive anniversary date,
with full vesting occurring on the fourth anniversary date. All
options were granted at the market price or higher on the date of
grant and expire ten years from such date, subject to earlier
termination in certain events related to termination of
employment. The exercise price and tax withholding obligations
related to exercise may be paid by delivery of already owned
shares or by offset of the underlying shares, subject to certain
conditions. At the Effective Time, each outstanding option to
purchase either one share of Class A Stock or one share of Class
B Stock will be deemed to be an option to purchase one share of
New Common Stock.
(2) The values presented in these two columns are based on
assumed stock price appreciation rates. The potential realizable
dollar value of a grant is the product of (a) the difference
between: (i) the product of the per share market price at the
time of the grant and the sum of 1 plus the adjusted stock price
appreciation rate (the assumed rate of appreciation compounded
annually over the term of the option); and (ii) the per share
exercise price of the option; and (b) the number of securities
underlying the grant at the fiscal year end. THESE ASSUMED
APPRECIATION RATES ARE NOT DERIVED FROM THE HISTORIC OR PROJECTED
PRICES OF THE COMPANY`S STOCK OR RESULTS OF OPERATIONS OR
FINANCIAL CONDITION AND THEY SHOULD NOT BE VIEWED AS A PREDICTION
OF POSSIBLE PRICES FOR THE COMPANY`S STOCK IN THE FUTURE.
(3)Mr. Schwartz received options for 50,000 shares of Class B
Stock on January 27, 1995, which became immediately exercisable
at $5.00 per share, the closing market price on the date of
grant. The remaining option for 50,000 shares is subject to the
four-year vesting schedule as described in footnote (1).
Aggregated Option Exercises in Fiscal 1995 and
Option Value at March 28, 1995
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Common March 28, 1995 March 28, 1995
on Value Stock Exercisable/ Exercisable/
Name Exercise Realized Class Unexercisable Unexercisable
O. Gene
Bicknell -0- -0- A 317,500 / 117,500 $0 /$0
B 211,250 / 3,750 0 / 0
J. Mitchell
Boyd -0- -0- B 0 / 0 0 / 0
James K.
Schwartz -0- -0- B 65,000 / 60,000 0 / 0
Marty D.
Couk -0- -0- A 3,750 / 0 0 / 0
B 7,500 / 53,750 0 / 0
Robert B.
Page -0- -0- A 11,250 / 0 0 / 0
B 20,000 / 56,250 0 / 0
David G.
Short -0- -0- B 1,250 / 8,750 0 / 0
R. Frank
Brown -0- -0- B 0 / 0 0 / 0
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The compensation for the Company`s Chief Executive Officer and
its other executives is administered by the Compensation and Stock
Option Committee. Following review and approval by the Compensation
and Stock Option Committee, all issues pertaining to executive
compensation are submitted to the full Board of Directors for approval
and ratification. In fiscal 1995, the Board of Directors, with Mr.
Bicknell abstaining with respect to his own compensation, approved all
recommendations of the Compensation and Stock Option Committee.
Executive compensation is comprised of three primary components:
a base salary, a non-guaranteed performance bonus and stock option
grants. The first two are based generally upon short-term performance,
with the latter offered as a long-term incentive to the executive.
The Company does not offer any deferred compensation plan to its
employees.
In fiscal 1995, the Committee reviewed surveys published by the
National Restaurant Association to obtain competitive compensation
levels for companies similar in size and nature (i.e., those with
multiple restaurants ``concepts,`` of which the Company has three in
Pizza Hut, Skipper`s and Tony Roma restaurants). The Committee seeks
to establish base rates believed to be competitive so that the Company
is able to attract and retain qualified and experienced executives.
Base salaries are reviewed annually taking into account competitive
salaries in the industry and the relative performance of the
individual and Company during the previous fiscal year. Compensation
surveys reviewed by the Committee include many of the peer companies
reflected in the following Performance Graph; both the surveys and the
graph are based upon the same standard industrial code as that of the
Company.
Annual bonuses, if granted, are based primarily upon the
individual executive`s contribution to the Company. Bonuses are
determined by the Compensation and Stock Option Committee and then
proposed to the full Board of Directors for ratification and approval,
with tentative installments paid quarterly. The Committee does not
believe that the $35 million charge to earnings relating to the
closure of 77 Skipper`s units is necessarily indicative of the overall
performance of all management personnel, while the operating
management of Skipper`s did not receive any bonuses in fiscal 1994 or
1995. Because the relative performance and contribution of an
executive may not perfectly coincide with earnings reported in the
respective fiscal year, bonuses may not correlate directly with a
particular division`s or company-wide earnings results.
Executives participate in the NPC International, Inc. Profit
Sharing Plan (the ``Profit Sharing Plan``) along with store management
and certain corporate staff, to the extent they meet the requirements
for the Profit Sharing Plan. To qualify for the Profit Sharing Plan,
an employee generally must have two years of service, be 21 years of
age or older and be employed on the last day of the plan year. The
Board of Directors determines the overall contribution to the Profit
Sharing Plan for each division, and executives who participate in the
Profit Sharing Plan receive a pro-rata share of that contribution. A
participant`s share of the annual Profit Sharing Plan contribution
generally is computed to be the proportion of his/her salary (as
adjusted to meet ERISA requirements) relative to the combined salaries
of all participants in the Profit Sharing Plan. With the exception of
Mr. Brown (President of Skipper`s), the six executives named in the
Summary Compensation Table participated in the Profit Sharing Plan,
receiving an average of $4,350 in fiscal 1995. Because of Skipper`s
performance in calendar 1994, the Board elected to make no
corresponding contribution on behalf of that concept`s employees.
The Company utilizes long-term awards in the form of stock
options to strengthen the link between executive pay and overall
stockholder return. Stock options have been periodically issued
pursuant to the Stock Option Plans and are an integral part of
executive officer compensation. The Compensation and Stock Option
Committee believes such options will align the interests of the
Company`s executives with those of its stockholders. The Company has
increased the use of stock options in fiscal 1995 to focus the
executives on long-term decisions which it believes will enhance the
value of the Company`s stock, thereby building stockholder value. For
the executives named in the Summary Compensation Table, options for a
total of 205,000 shares were issued in fiscal 1995, compared with
options for 30,000 shares in fiscal 1994. The Committee believes that
Company performance is reflected over time in the corresponding price
of the Company`s stock and that improving the stock price benefits the
stockholders collectively in addition to the individual executive.
The Compensation and Stock Option Committee does not impose
strict formulas or compare results to specific pre-set performance
targets in determining overall compensation for executive officers.
Factors considered by the Compensation and Stock Option Committee in
determining current performance and the related compensation for the
Company`s executive officers for the 1995 fiscal year include (i) the
achievement of minimum performance standards (generally prior year
operating performance, adjusted for those factors in the current or
prior year which are outside the control of the individual being
considered), (ii) current year earnings performance in relation to
performance of the Company`s competitors, (iii) overall stockholder
return (in the form of stock price appreciation), (iv) the
organizational level at which the executive functions, (v) the
individual executive`s success in performing the requisite duties and
responsibilities of his or her office, and (vi) compensation levels
for executives at companies which are similar in size and complexity
to the Company.
While some or all of these factors are considered in judging the
performance of each executive, certain of the factors may have more or
less relevance in determining a specific individual`s performance and
resulting pay. For instance, fiscal 1995 sales in Pizza Hut
operations were 5.4% lower due to fewer product introductions, but
relative operating performance improved to 21.7% of sales from 21.3%
of the prior fiscal year sales. This particular factor may be
considered more relevant to, and weigh more heavily in determination
of compensation for, the executive which exercises operating control
over Pizza Hut operations than for an executive who performs a general
function.
Chief Executive Officer Compensation
The Compensation and Stock Option Committee utilizes the same
factors in determining the compensation of its Chief Executive Officer
as it does for all executives of the Company. Although there are
specific discussions regarding overall company performance and the
Chief Executive Officer`s contribution in achieving those results,
there is no unique criterion applied to the Chief Executive Officer
that is not also applied to other key executives of the Company, as
outlined above. Mr. Bicknell does not participate in Committee
deliberations regarding his own compensation, nor does he participate
in the discussion or vote when such matters are before the Board of
Directors, of which he is a member.
In determining Mr. Bicknell`s bonus in the current and prior
year, the Committee considered the amount of time he spent on
activities which were unrelated to the Company over the course of each
fiscal year.
O. Gene Bicknell
Fran D. Jabara
Robert E. Cressler
COMPARATIVE PERFORMANCE GRAPH
Below is a graph comparing the total return on an indexed basis
of a $100 investment in (i) the Company`s Common Stock, (ii) a peer
group of the Company and (iii) the overall broad equity market in
which the Company participated. The Company`s index includes the
average of Class A Stock and Class B Stock share prices subsequent to
when the Class B stock was issued in July 1991. Management considers
the Company`s peer group to be all publicly-held companies with a
primary Standard Industrial Code between 5800 and 5899 (Eating and
Drinking Establishments) in existence during the reporting period. The
broad equity market index consists of all NASDAQ companies. All
indices are based upon total return, weighted for market
capitalization and with dividends reinvested; they are published by
and available through the University of Chicago`s Center for Research
in Security Prices. The historical stock price performance shown on
this graph is not indicative of future price performance.
Total Returns Index:
3/28/90 3/26/91 3/31/92 3/30/93 3/29/94 3/28/95
NPC International, Inc. 100.0 135.1 93.1 72.1 63.0 51.2
Nasdaq Stock Market
(U.S. Companies) 100.0 113.1 145.2 165.9 183.0 203.0
Nasdaq Stock
(SIC 5800-5899
U.S. Companies) 100.0 114.5 164.6 185.0 190.2 154.5
TRANSACTIONS WITH MANAGEMENT
The Board of Directors on January 24, 1995, authorized the
purchase of real estate owned by an affiliate of Mr. Bicknell, the
Chairman of the Company. The Company engaged an MAI-certified
appraisal company to perform an appraisal of the property. The Board
of Directors upon review of the proposal and the appraisal, and with
the Chairman abstaining from any participation in the vote, approved
the purchase of this site for the appraised value of $750,000. An
additional $50,000 in excess equipment remaining in the facility was
also purchased.
The Board of Directors has authorized a loan to Mr. Bicknell in
the amount of $575,000, which is scheduled to be repaid on September
27, 1995. The loan bears interest at 100 basis points over the
Company`s weighted average cost of capital, adjusted monthly.
Certain Company employees perform accounting and other services
for Mr. Bicknell and his affiliates. At March 28, 1995, Mr. Bicknell
and his affiliates owed the Company approximately $200,000 as
reimbursement for such services. The Company continually monitors all
officer-related receivables and considers all such amounts to be
collectible.
During the fiscal year ended March 28, 1995, the Company leased a
total of five properties from Mr. Bicknell and one property from Mr.
Elliott, a Director of the Company. The Company paid a total of
$73,643 to Mr. Bicknell and $31,769 to Mr. Elliott as rent for these
properties in the fiscal year just ended. The Company continues to
rent two properties from Mr. Bicknell, subject to normal lease terms
set to expire no later than May 1998, at a combined monthly rent of
$2,084 per month. In addition, one restaurant is leased from Mr.
Elliott at a monthly rate of $1,891 with a lease term expiring January
1999. Management believes these leases are at least as favorable as
could be obtained from unrelated parties.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the ``Exchange Act``), requires the Company`s directors, executive
officers, and persons owning more than ten percent of a registered
class of the Company`s securities to file with the United States
Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of equity securities of the Company.
Officers, directors, and greater-than-ten-percent stockholders are
required by the Securities and Exchange Commission`s regulations to
furnish the Company with copies of all Section 16(a) forms that they
file.
To the Company`s knowledge, based solely on its review of copies
of reports furnished to the Company and written representations that
no other reports were required, all filing requirements under Section
16(a) of the Exchange Act were satisfied.
PROPOSAL TWO
APPROVAL OF STOCK RECAPITALIZATION PLAN
Overview
The stockholders of the Company in July 1991 approved an
amendment to the Restated Articles of Incorporation increasing the
authorized capital to 100,000,000 shares of common stock, consisting
of 50,000,000 shares of Class A Stock and 50,000,000 shares of Class B
Stock. The amendment was filed with the Kansas Secretary of State on
July 31, 1991, and automatically converted all of the then outstanding
shares of common stock into Class A Stock. The Board of Directors
contemporaneously distributed to the stockholders as a stock dividend
one share of Class B Stock for each share of Class A Stock held. The
Company`s franchise agreements with Pizza Hut, Inc. (the
``Franchisor``) require Mr. Bicknell to own at least 51% of the
Company`s stock at all times. The creation of two classes of stock
was intended to allow continued compliance with the voting control
requirements of the franchise agreements while at the same time (a)
avoiding the necessity for Mr. Bicknell`s estate to sell voting stock
of the Company to provide for payment of estate tax liabilities in the
event of Mr. Bicknell`s death, and (b) providing the Company the
ability to (i) raise additional equity capital by selling Class B
Stock, (ii) use Class B Stock in employee benefit and incentive plans,
(iii) use Class B Stock in acquisitions of Pizza Hut restaurants, and
(iv) use Class B Stock for general corporate purposes.
Subsequent to the 1991 recapitalization, the Franchisor notified
the Company that in the opinion of the Franchisor the voting control
requirements in the franchise agreements applied to all capital stock
of the Company and that the Franchisor would not recognize the
independent purposes of the two classes of common stock. While
subsequent negotiations with the Franchisor have provided certain
assurances that the selling of Class B Stock to provide for estate tax
liabilities would not violate the franchise agreements, the other
anticipated benefits of the 1991 recapitalization have not been
realized. Also, in informal discussions with various institutional
investors, the Company has learned that most institutional investors
are reluctant to invest, or are prohibited by policy from investing,
in non-voting securities. In addition, the Board of Directors
believes that having two classes of stock with different voting rights
has a negative impact on the liquidity of the Company`s stock.
Consequently, the Board of Directors undertook an evaluation of the
alternatives available to simplify the capital structure of the
Company.
The Board of Directors of the Company (with only Mr. Bicknell
abstaining) has approved and recommends that the stockholders of the
Company approve the following plan to recapitalize the Company (the
``Recapitalization Plan``):
1. Amendment of the Restated Articles of Incorporation of the
Company to allow payment of a special dividend solely to the
Class A Stockholders (the ``First Amendment``). The text of the
First Amendment is included as Exhibit A to this Proxy Statement;
2. Subsequent payment of a cash dividend to the Class A
Stockholders as of the closing of the transfer books of the
Company on August 8, 1995 (the ``Dividend Record Date``) in
the amount of $0.421875 per share of Class A Common Stock
(the ``Dividend``); and
3. Subsequent amendment of the Restated Articles of Incorporation
of the Company (the ``Second Amendment``) to reclassify and
convert each outstanding share of Class A Stock and of Class B
Stock (collectively, the ``Existing Common Stock``) into one new
share of common stock, par value $.01 per share, of the Company
(the ``New Common Stock``). The text of the Second Amendment is
included as Exhibit B to this Proxy Statement.
The Board of Directors has approved the Recapitalization Plan
because it believes that the new, simplified capital structure will
increase the liquidity of the stock and enhance investor interest in
the Company.
The principal effects of the Recapitalization Plan are (i) to
reclassify and convert the two currently authorized classes of
Existing Common Stock into a single class of New Common Stock, each
share of which will have full voting rights; and (ii) to pay to the
holders of the Class A Stock the Dividend to compensate them for the
dilution in their voting power that will occur as a result of the
issuance of voting New Common Stock to the holders of nonvoting Class
B Stock.
Vote on Proposal Two
The various aspects of the Recapitalization Plan will be voted on
as one proposal. A vote in favor of Proposal Two will constitute a
vote in favor of the First Amendment (thus allowing payment of the
Dividend) and the Second Amendment. THE BOARD OF DIRECTORS OF THE
COMPANY HAS DETERMINED THAT THE RECAPITALIZATION PLAN AND THE DIVIDEND
ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND ARE
FAIR TO ALL OF THE STOCKHOLDERS OF THE COMPANY. THE DISINTERESTED
MEMBERS OF THE BOARD OF DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE IN
FAVOR OF PROPOSAL TWO.
The Recapitalization Plan must be approved at the Annual Meeting
by the affirmative vote of the holders of a majority of the total
outstanding shares, as of the closing of the transfer books of the
Company on June 30, 1995 (the ``Annual Meeting Record Date``), of
Class A Stock and Class B Stock, EACH VOTING AS A SEPARATE CLASS.
Votes submitted as abstentions will be deemed to be votes cast against
the proposal. Broker non-votes will be deemed to be votes cast
against Proposal Two. A broker ``non-vote`` occurs when a nominee
holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the
beneficial owner. Under Kansas law, stockholders of the Company do
not have any appraisal rights (i.e., the right to be paid the value of
their shares in cash) if they dissent from or object to the
Recapitalization Plan. Thus, the stockholders of either Class A Stock
or Class B Stock will automatically become holders of the New Common
Stock if the Recapitalization Plan is approved at the Annual Meeting
and implemented thereafter.
AS OF THE ANNUAL MEETING RECORD DATE, MR. BICKNELL, CHIEF
EXECUTIVE OFFICER AND THE CHAIRMAN OF THE BOARD OF DIRECTORS OF THE
COMPANY, HELD 7,705,651 SHARES OF CLASS A STOCK, CONSTITUTING
APPROXIMATELY 62.4% OF THE CLASS A STOCK, AND 7,597,478 SHARES OF THE
CLASS B STOCK, CONSTITUTING APPROXIMATELY 62.5% OF THE CLASS B STOCK.
MR. BICKNELL HAS INFORMED THE COMPANY THAT HE INTENDS TO VOTE ALL SUCH
SHARES IN FAVOR OF PROPOSAL TWO. IF HE VOTES SUCH SHARES IN FAVOR OF
PROPOSAL TWO, THEN PROPOSAL TWO WILL BE APPROVED REGARDLESS OF HOW ANY
OTHER HOLDER OF SHARES OF CLASS A STOCK OR CLASS B STOCK VOTES WITH
RESPECT TO PROPOSAL TWO. FOLLOWING THE IMPLEMENTATION OF THE
PROPOSAL, MR. BICKNELL WILL HOLD 15,641,029 SHARES OF THE NEW COMMON
STOCK, CONSTITUTING APPROXIMATELY [62%] OF THE OUTSTANDING NEW COMMON
STOCK OF THE COMPANY.
If the Recapitalization Plan is approved by the Stockholders at
the Annual Meeting, the First Amendment will become effective upon the
filing and recording with the Kansas Secretary of State of a
Certificate of Amendment as required by the Kansas General Corporation
Code (a ``Certificate of Amendment``). The Dividend will be paid
immediately after the filing of the Certificate of Amendment relating
to the First Amendment, and the Second Amendment will become effective
upon the filing and recording of the Certificate of Amendment relating
to the Second Amendment as soon as practicable after payment of the
Dividend. The date on which the last of such actions is taken is
referred to herein as the ``Effective Time.``
If Proposal Two is not approved by the Stockholders at the Annual
Meeting, then the Restated Articles of Incorporation of the Company
will not be amended, the Dividend will not be paid and its declaration
will become null and void, and the Recapitalization Plan will not be
implemented, with the result that the capital structure of the Company
will remain the same after the Annual Meeting as before.
Current Capital Structure
The authorized capital of the Company currently consists of
50,000,000 shares of Class A Stock and 50,000,000 shares of Class B
Stock. As of the Annual Meeting Record Date, there were issued and
outstanding [12,355,755] shares of Class A Stock and [12,149,569]
issued and outstanding shares of Class B Stock.
The Class A Stock and the Class B Stock are currently listed on
the NASDAQ National Market System under the symbol NPCIA and NPCIB,
respectively.
The following is a brief description of the rights and privileges
currently attaching to the Existing Common Stock, which also will
attach to the New Common Stock after the Effective Time, except as
expressly noted below.
The Class A Stock and the Class B Stock are equal in all respects
and grant to their holders the same powers, preferences,
qualifications, limitations and other rights, with the exception that
Class A Stock has the exclusive right to vote for the election of
directors and for all other purposes. Class B Stock does not have the
right to vote, except as required by law.
The Company`s Restated Articles of Incorporation, as amended,
provides for cumulative voting in the election of directors and
eliminates all preemptive rights to purchase additional or new
securities issued by the Company. Shares of Existing Common Stock are
not subject to further call or assessment.
As of June 30, 1995, under the Company`s Stock Option Plans,
options to acquire [591,968 on 3/28/95] shares of Class A Stock had
been granted, and had not been exercised or canceled, and options to
acquire [1,026,238 on 3/28/95] shares of Class B Stock had been
granted, and had not been exercised or canceled. See ``Executive
Compensation`` and ``Transactions with Management.``
Recapitalization of Existing Common Stock into New Common Stock
The Recapitalization Plan will result in the reclassification of
each share of Class A Stock and each share of Class B Stock
outstanding as of the close of business on the date of the Annual
Meeting into one share of New Common Stock. Each share of New Common
Stock will have one vote per share and will otherwise have rights that
are identical to the Existing Common Stock, as presently constituted.
The Second Amendment also will eliminate from the Restated
Articles of Incorporation certain technical provisions relating to the
fact that two classes of common stock previously were authorized,
including the price parity provisions which were intended to encourage
trading of Class A Stock and Class B Stock at approximately equal
market prices.
Thus, the only substantive impact of the Recapitalization Plan on
the rights and privileges of the holders of the Existing Common Stock
is that the holders of the Class B Stock, who do not have voting
rights except as required by applicable law (such as the separate
class vote on Proposal Two) prior to the Effective Time of the
Recapitalization Plan, will have full voting rights, with one vote per
share after the Effective Time.
The voting control of the holders of the Class A Stock will be
diluted as a result of the Recapitalization Plan. Currently, the
Class A Stockholders have 100% of the voting rights in the Company and
the Class B Stockholders have voting rights only under limited
circumstances. After the Effective Time, the existing Class A
Stockholders will have control of approximately 50.4% of the voting
rights while the existing Class B Stockholders will have control of
approximately 49.6% of the voting rights of the Company. Mr. Bicknell
will continue to be the majority beneficial owner of the Company`s
common stock. Because Mr. Bicknell beneficially owns approximately
63.4% of the outstanding shares of the Class A Stock, he will receive
approximately 63.4% of the Dividends payable (or approximately
[$3,304,778]). After the Effective Time Mr. Bicknell will maintain
control of approximately [62%] of the Company`s voting shares. The
following table shows, on a pro forma basis as of March 28, 1995, the
ownership of common stock by the principal stockholder and the
officers and directors of the Company that would exist after the
Effective Time and the dilution to the voting power of the holders of
the Class A Stock resulting therefrom.
Shares of Common Stock Owned by Certain Persons
Before and After Recapitalization
Current Current Pro Forma Pro Forma
Name Class of Number of Percent Number of Percent
Common Shares (1) Shares (1)
Stock of of
Shares Shares
O. Gene A 7,705,651 62.4%
Bicknell (1) B 7,597,478 62.5%
New
Common
Stock 15,303,129 62.4%
James K. --- --- --- --- ---
Schwartz
J. Mitchell B 1,000 *
Boyd New
Common
Stock 1,000 *
Marty D. B 806 *
Couk New
Common
Stock 806 *
Robert B. --- --- --- --- ---
Page
David G. --- --- --- --- ---
Short
J. Frank --- --- --- --- ---
Brown
Gordon W. A 275,958 2.2%
Elliott B 427,258 3.5%
New
Common
Stock 703,216 2.9%
John W. --- --- --- --- ---
Carlin
Robert E. --- --- --- --- ---
Cressler
Fran D. A 1,999 *
Jabara B 1,999 *
New
Common
Stock 3,998 *
All A 7,983,608 64,6%
executive B 8,027,541 66.1%
officers and New
directors as Common
a group Stock 16,011,149 65.3%
(1) Includes shares owned of record by Mr. Bicknell and beneficially
owned by affiliates of Mr. Bicknell.
* Less than 1% ownership.
New Capital Structure
As of and immediately after the Effective Time of the
Recapitalization Plan, the Company`s authorized capitalization will
consist of 100,000,000 shares of New Common Stock, of which
approximately 24,505,324 shares will be outstanding based on the
number of shares of Class A Stock and Class B Stock outstanding as of
the close of business on the date of the Annual Meeting.
If Proposal Two is approved, stockholders will not be required to
surrender their certificates for shares of Existing Common Stock.
Certificates labeled Class A Stock or Class B Stock will be deemed to
represent the same number of shares of New Common Stock of the Company
and will be treated in the same manner in all respects as certificates
representing New Common Stock. Certificates representing shares of
New Common Stock will be issued if and when the currently outstanding
certificates for shares of Existing Common Stock are surrendered in
the future for transfer.
Holders of shares of New Common Stock will be entitled to one
vote per share on any and all matters acted upon by the Company`s
stockholders and to dividends when, as and if declared by the Board of
Directors out of funds legally available therefor. There will be
cumulative voting in the election of directors. In the event of any
liquidation, dissolution or winding up of the Company, each holder of
the New Common Stock will be entitled to participate ratably as a
single class in all assets of the Company remaining after payment of
liabilities. Holders of the New Common Stock will have no preemptive
or conversion rights and will not be subject to further calls or
assessments by the Company. After the Recapitalization Plan is
implemented, each outstanding option to purchase either one share of
Class A Stock or one share of Class B Stock will be deemed to be an
option to purchase one share of New Common Stock.
The Class A Stock and the Class B Stock currently are listed on
the NASDAQ National Market System under the symbol NPCIA and NPCIB,
respectively. Following the implementation of the Recapitalization
Plan, the New Common Stock will trade on the NASDAQ National Market
System under the symbol NPCI.
Payment of Dividend
As noted above, as a result of the Recapitalization Plan, the
voting power of the holders of the Class A Stock will be diluted by
approximately 50%. The Board of Directors has determined that, as a
part of adoption of the Recapitalization Plan, it is in the best
interests of the Company and its stockholders and fair to the holders
of the Class A Stock and the Class B Stock to pay the Dividend to the
holders of the Class A Stock as a part of the Recapitalization Plan to
compensate them for this dilution. The Dividend will be paid out of
the Company`s line of credit.
The Board of Directors has determined that the best measure of
the value of this dilution is the historical difference between the
trading prices on the NASDAQ National Market System of the Class A
Stock and the Class B Stock, since the sole difference between the
rights of these two classes of publicly-traded securities is the
voting power that will be lost by the holders of the Class A Stock as
a result of the Recapitalization Plan.
Tax Impact of Recapitalization Plan and Payment of Dividend
The Company believes that the Recapitalization Plan should be
treated as a recapitalization of the Company under Section
368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the
``Code``).
A stockholder who receives cash in the Recapitalization Plan may
be required to recognize taxable income or gain. For federal income
tax purposes, each stockholder should be treated as having realized a
gain to the extent that (i)the sum of (a) the fair market value of the
New Common Stock received by the stockholder pursuant to the
Recapitalization Plan plus (b) the amount of cash received by the
stockholder pursuant to the Recapitalization Plan exceeds ii) the tax
basis of the Existing Common Stock surrendered by the stockholder
pursuant to the Recapitalization Plan. The stockholder should be
required to recognize taxable income or gain (the ``Taxable Amount``),
if any, equal to the lesser of (x) the amount of cash received by the
stockholder or (y) the amount of gain realized by the stockholder
(determined in accordance with the preceding sentence).
A stockholder who receives cash pursuant to the Recapitalization
Plan should be deemed to have received shares of New Common Stock
equal in value to the amount of the cash received and to have had such
shares redeemed by the Company. This deemed redemption, and the
related distribution of cash to such stockholder, should be taxable as
a dividend under Section 302 of the Code , to the extent of the
Taxable Amount referred to in the preceding paragraph unless the
deemed redemption (i) is ``substantially disproportionate`` with
respect to the stockholder under Section 302(b)(2) of the Code; or
(ii) is ``not essentially equivalent to a dividend`` with respect to
the stockholder under Section 302(b)(1) of the Code. In determining
whether either of these tests has been met, stock considered to be
owned by such stockholder by reason of certain constructive ownership
rules set forth in Section 318 of the Code, as well as stock actually
owned, must generally be taken into account. A distribution to a
stockholder will be ``not essentially equivalent to a dividend`` if it
results in a ``meaningful reduction`` in the stockholder`s stock
interest in the Company. In this regard, the Internal Revenue Service
(the ``IRS``) has published a ruling indicating that a redemption
which results in a reduction in the proportionate interest in the
Company (taking into account the Section 318 constructive ownership
rules) of a stockholder whose relative stock interest is less than 1%
and who exercises no control over Company affairs should be treated as
being ``not essentially equivalent to a dividend.``
If the stockholder meets either of the two Section 302(b) tests,
the receipt of cash in the deemed redemption of the New Common Stock
should result in taxable gain equal to the Taxable Amount. Such gain
will be capital gain if the stockholder`s Existing Common Stock was
held as a capital asset, and will be long-term capital gain if the
holding period for such stock exceeded one year.
If neither of the two Section 302(b) tests is met, the cash
payment in the deemed redemption would be treated as a distribution
that is taxable as a dividend. In this situation, the amount of cash
received by the stockholder would be taxed first as a dividend to the
extent of the stockholder`s pro rata share of the Company`s current
and accumulated earnings and profits (up to the Taxable Amount) and
then as capital gain to the extent that the Taxable Amount exceeds the
amount treated as a taxable dividend.
Except as provided above, no gain should be recognized by (and no
amount should be included in the income of) a holder of Existing
Common stock in connection with the Recaptialization Plan
The aggregate tax basis of the New Common Stock in the hands of
each stockholder of the Company, after the consummation of the
Recapitalization Plan, will be the same as the tax basis of the
Existing Common Stock held by such stockholder immediately before the
Recapitalization Plan, increased by the Taxable Amount for such
stockholder, and decreased by the amount of cash received by such
stockholder pursuant to the Recapitalization Plan.
Assuming that the Existing Common Stock is held as a capital
asset, the holding period for the New Common Stock received pursuant
to the Recapitalization Plan will include the period during which such
Existing Common Stock was held.
The foregoing summary of the federal income tax consequences of
the Recapitalization Plan and related transactions is for general
information only and there can be no assurance that the IRS will not
take a position contrary to that expressed above. Stockholders are
urged to consult their own tax advisors as to the particular
consequences to them of the Recapitalization Plan, including the
application of state, local and foreign tax laws. This summary may
not be applicable to certain corporate stockholders of the Company,
stockholders who received their Existing Common Stock pursuant to the
exercise of options or otherwise as compensation (including holders of
restricted stock), or stockholders who are not citizens or residents
of the United States. Such stockholders should consult their own tax
advisors as to the tax consequences of the Recapitalization Plan.
Fairness of the Recapitalization Plan and the Dividend
The Board of Directors of the Company (Mr. Bicknell abstaining)
has determined that the Recapitalization Plan, including the payment
of the Dividend, is in the best interests of the Company and is fair
to all of the holders of the outstanding shares of the Existing Common
Stock.
Among other factors considered in reaching this determination,
the Board of Directors relied on the opinion of George K. Baum &
Company (``Baum & Co.``), an independent financial advisor retained by
the Board specifically for the purpose of advising it with respect to
the Recapitalization Plan. In the opinion of Baum & Co., the special,
one time, dividend payment of $0.421875 or 27/64th of a dollar, per
share, to the holders of Class A Stock in the Recapitalization Plan is
fair from a financial point of view to the holders of both the Class A
Stock and the Class B Stock who are neither officers or directors of
the Company nor beneficial owners of five percent or more of the
issued and outstanding Class A Stock and Class B Stock (the
``Opinion``).
In rendering its Opinion, Baum & Co. reviewed (i) the monthly
Summary of Activity created by the Nasdaq Stock Market, Inc. for both
the Class A Stock and the Class B Stock for the period of August 1991
through April 1995, (ii) the daily trading prices of both Class A
Stock and Class B Stock for the month of May 1995 through May 22, 1995
from Bloomberg Financial Markets, and (iii) stock transfer information
on Class A Stock and Class B Stock from the American Stock Transfer &
Trust Company.
The Opinion is dated May 23, 1995, which is the day on which the
Recapitalization Plan was approved by the Board of Directors, and is
immediately prior to the public announcement of the Recapitalization
Plan. Baum & Co. has not been asked by the Board of Directors to
update or reissue the Opinion at a later date since the Board of
Directors believes that the announcement of the Recapitalization Plan
will affect the trading value of the Class A Stock and the Class B
Stock from that date forward. A copy of the Opinion is included as
Exhibit C to this Proxy Statement.
Mr. Bicknell abstained from voting as a director on the
Recapitalization Plan. In his capacity as a stockholder of the
Company, however, Mr. Bicknell has advised the Company that he intends
to vote his shares of Class A Stock and Class B Stock in favor of
Proposal Two, as noted above, which will ensure that the
Recapitalization Plan will be approved.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has recommended and the Board of Directors
has approved the selection of Ernst & Young as independent public
accountants of the Company for the fiscal year ended March 28, 1995.
Ernst and Young examined the financial statements of the Company for
the most recent completed fiscal year. The Audit Committee, in its
meeting on January 24, 1995, recommended Ernst & Young to be the
independent public accountants for the 1996 fiscal year. A
representative of Ernst & Young will be present at the Annual Meeting
with the opportunity to make a statement if he desires to do so and
will be available to respond to appropriate questions.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders of the Company intended to be presented
at the Annual Meeting of Stockholders to be held in 1996 must be
received at the principal executive offices of the Company by the
Board of Directors for inclusion in the proxy statement and form of
proxy relating to that meeting no later than February 7, 1996.
MISCELLANEOUS
No business other than that described herein is expected by the
Board of Directors to come before this meeting, but should any other
matters requiring the vote of stockholders arise, the proxy holders
will vote thereon according to their best judgment.
AVAILABLE INFORMATION
A copy of the Company`s 1995 Annual Report to Stockholders
accompanies this proxy. The financial statements which are included
in such Annual Report to Stockholders are incorporated herein by
reference. Additional copies of the Company`s Annual Report to
Stockholders and copies of the Company`s Annual Report to Stockholders
on Form 10-K for the year ended March 28, 1995 are available without
charge upon request. Request should be addressed to the Chief
Financial Officer, NPC International, Inc., 720 W. 20th Street,
Pittsburg, KS 66762.
By Order of the Board of Directors
David G. Short
Secretary
Pittsburg, Kansas
June 30, 1995
EXHIBIT A
AMENDMENT ONE
If Proposal Two is approved by the stockholders and the
Certificate of Amendment relating thereto is properly filed with the
Kansas Secretary of State, then the second paragraph of section A of
Article FOURTH of the Restated Articles of Incorporation will be
deleted and replaced in its entirety with the following, with the
remainder of Article FOURTH to remain unmodified by the First
Amendment:
Dividends may be paid upon the Common Stock
as and when declared by the Board of Directors out
of funds and other assets legally available for
the payment of dividends. The Board of Directors
may declare a dividend upon all shares of the
Common Stock of the Corporation or may declare a
dividend upon only shares of the Class A Common
Stock or upon only shares of the Class B Common
Stock.
EXHIBIT B
AMENDMENT TWO
If Proposal Two is approved by the stockholders and the
Certificate of Amendment relating thereto is properly filed with the
Kansas Secretary of State, then Article FOURTH of the Restated
Articles of Incorporation will be deleted in its entirety and replaced
with the following:
FOURTH: The aggregate number of shares which
the Corporation has authority to issue is one
hundred million (100,000,000) shares of common
stock, par value $.01 per share (``Common
Stock``).
The authorized but unissued shares of common
stock as well as any shares of common stock now or
hereafter held as treasury shares shall be issued
from time to time, at such time or times, in such
amounts and manner, for such consideration,
whether in cash or property or otherwise, and to
such persons as may be fixed and determined by the
Board of Directors of the Corporation, subject to
this Article FOURTH.
Each share of Common Stock shall be entitled
to one vote on all matters voted upon by the
stockholders.
Dividends may be paid upon the Common Stock
as and when declared by the Board of Directors out
of funds and other assets legally available for
the payment of dividends, subject to all of the
rights of any class of stock authorized after this
Certificate of Amendment of the Restated Articles
of Incorporation becomes effective pursuant to the
General Corporation Code of the State of Kansas
(the ``Effective Time``) that ranks senior to the
Common Stock as to dividends.
In the event of any liquidation, dissolution
or winding up of the Corporation, whether
voluntary or involuntary, and after the holders of
any class of stock authorized after the Effective
Time ranking senior to the Common Stock as to
distributions of assets shall have been paid in
full the amounts to which such holders shall be
entitled, or an amount sufficient to pay the
aggregate amount to which such holders shall be
entitled shall have been set aside for the benefit
of the holders of such stock, the remaining net
assets of the Corporation shall be distributed pro
rata to the holders of the Common Stock.
No stockholder of this Corporation shall by reason of
holding shares of Common Stock have any preemptive
or preferential right to purchase or subscribe for
any shares of Common Stock of this Corporation,
now or hereafter authorized, or any notes,
debentures, bonds, or other securities convertible
into or carrying options or warrants to purchase
shares of Common Stock, now or hereafter
authorized.
At the Effective Time, and without any
further action on the part of the Corporation or
its stockholders, each share of the Corporation`s
Class A Common Stock, par value $.01 par value per
share (``Class A Common Stock``) and Class B
Common Stock, par value $.01 par value per share
(``Class B Common Stock``), then issued, shall
automatically be reclassified and converted into
one fully paid and nonassessable share of Common
Stock. Stock certificates previously representing
shares of Class A Common Stock and certificates
previously representing Class B Common Stock shall
thereafter represent the same number of shares of
the Common Stock.
EXHIBIT C
OPINION OF FINANCIAL ADVISOR
May 23, 1995
Board of Directors
NPC International, Inc.
c/o Mr. James K. Schwartz
President and Chief Operating Officer
720 W. 20th Street
Pittsburg, Kansas 66762
Gentlemen:
You have asked us to render our opinion as to the fairness, from
a financial point of view, to the Public Stockholders (as hereinafter
defined) of NPC International, Inc. (``NPC``) of the special, one
time, cash dividend payable to holders of Class A common stock in the
proposed recapitalization in which NPC`s Class A and Class B common
stock will be converted into a new, single class of voting Common
Stock. ``Public Stockholders`` shall mean, for purposes of this
opinion, holders of NPC Class A and Class B common stock who are
neither officers or directors of NPC nor beneficial owners of five
percent or more of the issued and outstanding NPC Class A and Class B
common stock.
In rendering our opinions, George K. Baum & Company reviewed:
(1) the monthly Summary of Activity created by
the Nasdaq Stock Market, Inc. for both the Class A and
Class B common stock for the period of August 1991
through April 1995;
(2) the daily trading prices of both Class A and
Class B common stock for the month of May 1995 through
May 22, 1995 from Bloomberg Financial Markets; and
(3) stock transfer information on Class A and
Class B common stock from American Stock Transfer &
Trust Company.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of all of the financial
and other information used by us as the basis for our opinion.
It should be noted that his opinion is based, in part, on
economic, market and other conditions as in effect on, and information
made available to us as of, the date hereof, and does not represent an
opinion as to what value NPC Common Stock actually will have to NPC
stockholders if and when the recapitalization is consummated. Such
actual value could be affected by changes in such market conditions,
general economic conditions and other factors which generally
influence the price of securities. Furthermore, any valuation of
securities is only an approximation, subject to uncertainties and
contingencies all of which are difficult to predict and beyond the
control of the firm preparing such opinion or valuation.
George K. Baum & Company, as part of its investment banking
business, is regularly engaged in the evaluation of businesses and
securities in connection with recapitalizations, mergers and
acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and for corporate planning and other
purposes. In the ordinary course of our business, we may, from time
to time, effect transactions for the accounts of our customers in
securities of NPC and receive customary compensation in connection
therewith. Prior to NPC`s engagement of George K. Baum & Company to
render this opinion, we had not been engaged during the last five
years to provide investment banking services to NPC, although from
time to time since April 15, 1994, George K. Baum & Company made a
market in NPC`s Class A and/or Class B common stock. As of this date,
George K. Baum & Company owned for its own account 743 shares of Class
A and 919 shares of Class B common stock.
It is understood that this letter is only for the information of
the Board of Directors of NPC and is not to be quoted or referred to,
in whole or in part, in any registration statement, prospectus, or
proxy statement, or in any other written document used in connection
with the offering or sale of securities, nor shall this letter be used
for any other purposes, without George K. Baum & Company`s prior
written consent, provided, however, that we hereby consent to the
inclusion of this opinion in the 1995 Proxy Statement so long as the
opinion is quoted in full.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion that,
as of the date hereof, the special, one time, dividend payment of
$0.421875 or 27/64th of a dollar, per share, to holders of Class A
common stock in the proposed recapitalization is fair from a financial
point of view to the NPC Public Stockholders.
Respectfully submitted,
GEORGE K. BAUM & COMPANY
CLASS A STOCKHOLDER PROXY
NPC INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For Annual Meeting of Stockholders August 8, 1995
The undersigned hereby appoint O. Gene Bicknell and James K.
Schwartz, and each of them in the order named with full power of
substitution, the proxy or proxies of the undersigned to act at
the Annual Meeting of Stockholders of NPC International, Inc. to
be held at 10:00 A.M. at the Memorial Auditorium, 503 N. Pine,
Pittsburg, Kansas, 66762 on Tuesday, August 8, 1995, and any
adjournment or postponements thereof, and to vote all shares of
said Class A Common Stock which the undersigned would be entitled
to vote if personally present.
(1) TO ELECT TWO DIRECTORS:
___ FOR each nominee listed below
(except as marked to the contrary below).
___ WITHHOLD AUTHORITY to vote for each nominee:
INSTRUCTION: To withhold authority to vote for individual
nominee, strike a line through the nominee`s name below.
O. Gene Bicknell ________%
Mary M. Polfer ________%
You are allowed cumulative voting for the nominees.
Unless indicated otherwise, the proxies named herein will
cumulate your votes and will allocate them equally among the
nominees for whom authority to vote is granted. If you wish
to allocate those votes other than equally, indicate the
percentage of your cumulative votes to be allocated to each
nominee in the blank beside their name. IF THE TOTAL
PERCENTAGE OF VOTES ALLOCATED TO SUCH NOMINEES DOES NOT
EQUAL 100%, THEN THE PROXY MAY NOT BE VALID.
(2) TO APPROVE THE STOCK RECAPITALIZATION PLAN AS DESCRIBED IN
THE PROXY STATEMENT:
_____FOR _____AGAINST _____ABSTAIN
(OVER-PLEASE SIGN ON REVERSE SIDE)
(3) In the discretion of such proxies, upon such other matters
as may properly come before the meeting or any adjournment
thereof.
IF NOT OTHERWISE DIRECTED, SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED IN FAVOR OF THE MATTERS SET FORTH ABOVE. Receipt is
acknowledged of Notice of and Proxy Statement for said Meeting
and of the Annual Report to Stockholders for the year ended March
28, 1995.
Dated _______________________,1995
______________________ (Seal)
______________________ (Seal)
Please sign here exactly as
your name appears at the left.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give your full title as such.
Each joint owner or trustee
should sign the proxy.
PLEASE SIGN, DATE AND MAIL TODAY IN THE ENCLOSED PREPAID
ENVELOPE, or mail to American Stock Transfer, 40 Wall Street, New
York, NY 10005
CLASS B STOCKHOLDER PROXY
NPC INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For Annual Meeting of Stockholders August 8, 1995
The undersigned hereby appoint O. Gene Bicknell and James K.
Schwartz, and each of them in the order named with full power of
substitution, the proxy or proxies of the undersigned to act at
the Annual Meeting of Stockholders of NPC International, Inc. to
be held at 10:00 A.M. at the Memorial Auditorium, 503 N. Pine,
Pittsburg, Kansas, 66762 on Tuesday, August 8, 1995, and any
adjournment or postponements thereof, and to vote all shares of
said Class B Common Stock which the undersigned would be entitled
to vote if personally present.
TO APPROVE THE STOCK RECAPITALIZATION PLAN AS DESCRIBED IN THE
PROXY STATEMENT:
_____FOR _____AGAINST _____ABSTAIN
(OVER-PLEASE SIGN ON REVERSE SIDE)
IF NOT OTHERWISE DIRECTED, SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED IN FAVOR OF THE MATTER SET FORTH ABOVE. Receipt is
acknowledged of Notice of and Proxy Statement for said Meeting
and of the Annual Report to Stockholders for the year ended March
28, 1995.
Dated _______________________,1995
______________________ (Seal)
______________________ (Seal)
Please sign here exactly as
your name appears at the left.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give your full title as such.
Each joint owner or trustee
should sign the proxy.
PLEASE SIGN, DATE AND MAIL TODAY IN THE ENCLOSED PREPAID
ENVELOPE, or mail to American Stock Transfer, 40 Wall Street, New
York, NY 10005
NPC INTERNATIONAL, INC.
NPC International, Inc. is the largest Pizza Hut franchisee in the world
operating 348 Pizza Hut restaurants and delivery kitchens in nine states, not
including 23 Pizza Hut restaurants which were acquired on April 19, 1995.
The Company operates and franchises 120 Skipper`s quick service seafood
restaurants in seven western states and British Columbia. Romacorp, Inc.,
acquired by the Company on June 8, 1993, operates and franchises 170 Tony
Roma`s A Place for Ribs restaurants worldwide. Prior to July, 1994, the
Company was known as National Pizza Company.
The Company`s common shares are traded on the NASDAQ National Market System
under the symbols "NPCIA" and "NPCIB." On August 8, 1995, the Company
anticipates its Class A Stock and Class B Stock will be combined into a new,
single class of common stock and adopt the new ticker symbol "NPCI."
ANNUAL MEETING
The annual meeting of stockholders of NPC International, Inc. will be held at
10:00 a.m. on August 8, 1995, at the Memorial Auditorium, 503 North Pine
Street, Pittsburg, Kansas. Stockholders, vendors and members of the business
community are invited to attend the meeting; Class A Common stockholders of
record as of June 30, 1995, will be entitled to vote on any issues brought
before the group. Class B Common stockholders of record as of June 30, 1995,
will also be entitled to vote on the proposed stock recapitalization plan.
FINANCIAL SUMMARY
Fiscal Year Ended
March 28, March 29, March 30,
1995 1994 1993
***DRAFT***
For the Year:
Revenue $315,527,000 $336,823,000 $285,433,000
Operating income 23,790,000 25,193,000 21,273,000
Loss on disposition of
underperforming assets (35,000,000) ---- ----
Income (loss) before income taxes (17,452,000) 18,506,000 14,668,000
Net income (loss) (15,614,000) 11,295,000 9,124,000
Earnings (loss) per share $ (0.63) $ 0.45 $ 0.35
Performance Measures:
Operating income as a
percent of revenue 7.5% 7.5% 7.5%
Income (loss) before income
taxes as a percent of revenue (5.5)% 5.5% 5.1%
Net income (loss) as
a percent of revenue (4.9)% 3.4% 3.2%
Return (loss) on
average stockholders` equity (17.4)% 12.0% 10.3%
Return (loss) on average assets (7.0)% 5.2% 4.4%
March 28, March 29, March 30,
1995 1994 1993
At Year-End:
Total assets $220,041,000 $229,112,000 $205,310,000
Long-term debt 82,850,000 86,734,000 79,078,000
Stockholders` equity 80,287,000 98,987,000 89,436,000
Number of Company units 481 577 546
Number of franchised units 157 155 18
TEN YEAR FINANCIAL SUMMARY
(Dollars in thousands except per share amounts)
Fiscal Year Ended
March 28, March 29, March 30, March 31, March 26,
1995 1994 1993 1992 (1) 1991
Income Statement Data:
Revenue $315,527 $336,823 $285,433 $298,718 $286,079
Cost of sales 92,392 98,692 82,552 84,722 84,010
Direct labor costs 89,964 97,103 79,829 81,386 71,637
Operating expenses 85,012 88,790 80,475 82,659 78,849
General and
administrative
expenses 24,369 27,045 21,304 22,438 21,902
Operating income 23,790 25,193 21,273 27,513 29,681
Interest expense (6,162) (6,631) (6,390) (6,688) (6,258)
Loss on disposition
of underperforming
assets (35,000) ---- ---- (4,000) ----
Other income(expense) (80) (56) (215) 420 (152)
Premium on
conversion of debt ---- ---- ---- ---- ----
Income (loss)
before income taxes (17,452) 18,506 14,668 17,245 23,271
Provision (benefit)
for income taxes (1,838) 7,211 5,544 6,200 8,233
Net income (loss) (15,614) 11,295 9,124 11,045 15,038
Earnings (loss)
per share:
Primary (0.63) 0.45 0.35 0.40 0.54
Fully diluted (0.63) 0.45 0.35 0.40 0.54
March 28, March 29, March 30, March 31, March 26,
1995 1994 1993 1992 1991
Year-End Data:
Working capital
(deficit) $(11,363) $(19,620) $(16,361) $(13,033) $ (4,890)
Total assets 220,041 229,112 205,310 206,350 200,917
Long-term debt 82,850 86,734 79,078 85,847 86,258
Stockholders`
equity 80,287 98,987 89,436 87,091 85,060
Number of
Company-owned units 481 577 546 560 558
Number of
franchised units 157 155 18 19 21
Number of employees 10,300 12,500 11,200 11,000 10,900
March 27, March 28, March 29, March 31, March 25,
1990 1989 1988 1987 (1) 1986
Income Statement Data:
Revenue $198,382 $141,776 $119,788 $96,479 $68,064
Cost of sales 55,709 39,006 32,987 26,285 19,269
Direct labor costs 48,258 34,689 28,370 22,038 14,900
Operating expenses 52,713 38,591 30,464 24,141 17,032
General and
administrative
expenses 15,948 11,850 9,763 8,487 6,263
Operating income 25,754 17,640 18,204 15,528 10,600
Interest expense (3,515) (2,630) (2,940) (2,518) (1,215)
Loss on disposition
of underperforming
assets ---- ---- ---- ---- ----
Other income
(expense) 407 (548) (460) 777 802
Premium on
conversion of debt ---- ---- (852) ---- ---
Income (loss)
before income taxes 22,646 14,462 13,952 13,787 10,187
Provision (benefit)
for income taxes 7,900 4,630 5,186 6,400 4,403
Net income (loss) 14,746 9,832 8,766 7,387 5,784
Earnings (loss)
per share:
Primary 0.53 0.36 0.33 0.30 0.23
Fully diluted 0.53 0.36 0.31 0.28 0.23
March 27, March 28, March 29, March 31, March 25,
1990 1989 1988 1987 1986
Year-End Data:
Working capital
(deficit) $(11,342) $(3,687) $(4,219) $(5,025) $12,822
Total assets 171,901 102,971 84,838 75,296 57,937
Long-term debt 66,544 27,720 26,867 37,269 23,037
Stockholders`
equity 71,989 56,845 45,707 26,369 26,095
Number of
Company-owned units 526 321 280 240 165
Number of
franchised units 30 ---- ---- ---- ----
Number of
employees 10,200 6,300 5,600 4,400 2,700
(1) Fiscal year included 53 weeks.
MANAGEMENT`S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
At March 28, 1995, NPC International, Inc. owned and operated 261
Pizza Hut restaurants and 87 delivery kitchens in nine states. In
addition, 23 Pizza Hut restaurants were acquired on April 19, 1995,
expanding operations in two additional states. The Company`s pizza
restaurants are generally free standing, full table service
restaurants which offer high quality and moderately priced pizza,
pasta, sandwiches and a salad bar. Beverage service includes soft
drinks and, in most restaurants, beer. Delivery kitchens provide home
delivery and carry out of pizza products, but do not have dining
facilities, salad bars or beer.
At March 28, 1995, the Company owned and operated 106 and franchised
14 Skipper`s quick-service seafood restaurants in seven western states
and British Columbia. Skipper`s offers a limited menu including fish,
shrimp and clams. Each restaurant features a casual atmosphere with a
nautical theme, and beer is served in most locations.
The Company also owned and operated 27 and franchised 143 Tony Roma`s
restaurants, a casual theme restaurant chain with 131 domestic units
in 20 states and 39 international locations as of March 28, 1995.
Tony Roma`s restaurants offer fully staffed, table service and a
varied menu, but are especially "Famous for Ribs." All Tony Roma`s
restaurants serve alcoholic beverages.
RESULTS OF OPERATIONS
Pizza Hut Operations
Fiscal Year Ended
March 28, 1995 March 29, 1994
Restaurants Delivery Restaurants Delivery
Net restaurant sales $149,677,000 $48,829,000 $161,667,000 $54,804,000
Net franchise revenue 77,000 ---- 124,000 ----
Total revenue $149,754,000 $48,829,000 $161,791,000 $54,804,000
Percentage of revenue:
Cost of sales 26.5% 24.8% 26.5% 25.4%
Direct labor costs 25.7% 32.0% 26.3% 32.9%
Operating expenses 25.0% 24.8% 24.7% 24.1%
77.2% 81.6% 77.5% 82.4%
Operating profit 22.8% 18.4% 22.5% 17.6%
Number of Company units 261 87 266 97
Revenue
Total revenue declined $18 million or 8.3% on a nominal basis and 5.4%
on a comparable basis when comparing the fiscal year ended March 28,
1995, with the fiscal year ended March 29, 1994. Much of this decline
is attributable to a significant decrease in BIGFOOT sales from the
prior year. Sales of the one-foot-by-two-foot pizza declined $18
million on a nominal basis when comparing fiscal 1995 with fiscal
1994. In addition, the Company operated 16 fewer units for most of
the current fiscal year as a result of the asset exchange with the
Company`s franchisor completed August, 1994. Total revenue from Pizza
Hut operations for the fiscal year ended March 29, 1994, was $216
million, up 6.7% over the prior fiscal year. In comparable
restaurants and delivery kitchens open in excess of twelve months,
revenue increased approximately 7.3% in fiscal 1994 over the prior
fiscal year reflecting continued positive impact from the value-priced
BIGFOOT pizza and the luncheon buffet. Fiscal 1994`s results also
include approximately $910,000 in sales from the Catering operation,
which was sold November 18, 1993.
Management anticipates, based on the economic environment and
competitive conditions, that comparable unit sales in real dollars
will remain about the same or increase slightly in fiscal 1996 due to
new product introductions such as Stuffed Crust pizza.
The Company renewed its franchise agreement with its franchisor, Pizza
Hut, Inc. (PHI) on June 8, 1994. As part of the renewal and to
consolidate operations, the Company exchanged 84 restaurants it owned
in the eastern and western United States for 50 PHI-owned units which
were near the Company`s primary marketing area. As a franchisee in
good standing, PHI will allow the Company to submit prospective
acquisitions of other Pizza Hut franchisees for approval. Since the
agreement was renewed, the Company has purchased 42 Pizza Hut units,
including 23 units acquired on April 19, 1995 from PHI. However, the
franchisor still retains the right of first refusal on any acquisition
submitted in the future. Under the new franchise agreement, the
Company`s royalty payments for all units owned prior to the renewed
franchise agreement will remain at an effective rate of slightly over
two percent and increase to four percent of sales beginning in July,
1996 through the year 2010. This rate reflects the royalty rate which
was proposed by PHI to Pizza Hut franchisees as part of the 1990
Franchise Agreement and is lower than the royalty rate under PHI`s
current franchise agreement rate. Restaurants acquired will generally
be subject to the seller`s franchise agreement in effect at the time
of purchase.
Costs and Expenses
Cost of sales for the combined Pizza Hut operations, when expressed as
a percent of total revenue, remained about the same in the fiscal year
ended March 28, 1995 (26.1%) with the same period a year ago (26.2%
for the fiscal year ended March 29, 1994). The comparable cost of
sales percentage for the fiscal year ended March 29, 1994, increased
0.5% when compared with the 25.7% cost of sales percentage in fiscal
1993. Cost of sales includes food and beverage costs and the expense
of paper supplies. Some of this increase from fiscal 1993 to fiscal
1994 is due to the higher costs associated with the luncheon buffet
and BIGFOOT pizza, as well as the fluctuation of the price of cheese,
which is approximately 40% of food cost.
Direct labor costs decreased to 27.3% of Pizza Hut fiscal 1995
revenue, from 28.0% the prior year. This decrease was due primarily
to lower sales of the more-labor intensive BIGFOOT pizza in fiscal
1995. Direct labor for the fiscal year ended March 30, 1993 was 27.6%
of revenue. The 0.4% increase in the labor percentage from fiscal
1993 to fiscal 1994 was primarily due to higher training costs
associated with the introduction of BIGFOOT and employee-related costs
such as workers compensation.
Overall, operating expenses rose slightly to 25.0% of Pizza Hut fiscal
1995 revenue from 24.6% of total revenue for the prior year. This
increase is due to slightly higher repairs and maintenance costs at
the restaurants and a lower revenue base. Overall operating expenses
in fiscal 1994 were significantly lower than fiscal 1993, or 24.6% of
fiscal 1994 revenue compared with 26.2% of fiscal 1993 revenue. This
decrease was due to reductions in concept marketing as compared with
unit volume sales and the spread of operating expenditures over a
larger sales base. Many of the major operating expenses in fiscal
1995 for the Pizza Hut operations are also down on a nominal basis,
including advertising ($10.9 million in fiscal 1995, down 8.3% from
fiscal 1994), restaurant depreciation and amortization ($7.9 million
in fiscal 1995, down 10.5% from last fiscal year), and rent ($5.9
million, down 5.4%). This decrease is partially attributable to the
reduction in the number of restaurant units
Skipper`s Operations
Fiscal Year Ended
March 28, 1995 March 29, 1994
Net restaurant sales $69,186,000 $81,073,000
Net franchise revenue 270,000 327,000
Total revenue $69,456,000 $81,400,000
Percentage of revenue:
Cost of sales 38.1% 37.1%
Direct labor costs 32.4% 30.7%
Operating expenses 33.5% 30.6%
104.0% 98.4%
Operating profit (loss) (4.0)% 1.6%
Number of Company units 106 188
Number of franchised units 14 18
On January 28, 1995, the Company announced that it would take a charge
of $35 million before taxes to reserve for costs associated with the
closure and the anticipated loss on disposition of 77 unprofitable
Skipper`s units. Stores which were closed accounted for the following
revenue and operating losses for each of the last three fiscal years:
fiscal 1995, revenue of $19.6 million and an operating loss of $3.9
million; fiscal 1994, revenue of $25.6 million and an operating loss
of $2.8 million; and fiscal 1993, revenue of $25.6 million and an
operating loss of $2.0 million. Significant components of the $35
million charge include the impairment of $13.3 million of remaining
goodwill associated with the Company`s purchase of Skipper`s in 1989,
an expected loss on disposal of owned facilities of $9.9 million, the
present value of obligations related to leased facilities of $8.7
million, and $3.1 million in miscellaneous closure costs.
Management believes downsizing the organization will allow it to
concentrate on those units and regions it believes can be profitable
while it repositions the concept and further refines operations. The
106 Company-owned units which will continue operations accounted for
the following revenue and operating profit, before allocation of
administrative expenses such as field and corporate office overhead:
fiscal 1995, revenue of $49.6 million and an operating profit of $1.1
million; fiscal 1994, revenue of $55.4 million and an operating profit
of $4.1 million; and fiscal 1993, revenue of $55.0 million and an
operating profit of $3.2 million. While management`s current plan is
to operate these facilities, the Company may consider alternative
strategies if improvement is not achieved over the coming 12 months.
As part of this restructuring, Mr. Paul Baird joined Skipper`s to
assist in the turnaround effort, becoming President on April 30, 1995.
Revenue
Skipper`s continued its value pricing strategy from the prior year in
an attempt to improve customer traffic. However, guest counts fell
approximately 8.9% and comparable sales dropped 9.1% for the fiscal
year ended March 28, 1995 when compared with the same store results a
year ago. When comparing fiscal 1994 with fiscal 1993, sales were up
0.6% on a nominal basis and 0.5% on a comparable store basis. The
concept adopted an "everyday low price" strategy early in fiscal 1994
and then tried to promote meals with a higher profit margin, which had
an offsetting effect on sales for the year.
Management anticipates, based on the economic environment and
competitive conditions, that comparable unit sales in real dollars
will compare unfavorably to strong sales in early fiscal 1995 with
recovery in the last half of fiscal 1996 as the remaining units are
stabilized and new operational controls are put into place.
Costs and Expenses
Cost of sales increased to 38.1% of fiscal 1995 revenue compared with
37.1% of fiscal 1994 revenue due to increased food waste associated
with the new food holding system and higher food costs on menu items
with lower price points. The food system retrofit of approximately
120 Skipper`s units in 1994 reduced serving time in an attempt to
improve customer satisfaction. Fiscal 1994`s cost of sales percentage
increased by 0.3% of revenue when compared with the fiscal year ended
March 30, 1993. This increase primarily represents the effect of
similar raw product costs on lower menu prices.
Direct labor costs, consisting of wages, taxes and related fringe
benefits, increased to 32.4% in the current fiscal year compared with
30.7% in fiscal 1994 because of minimum staffing requirements despite
the lower sales base. Labor increased to 30.7% of total revenue for
the fiscal year ended March 29, 1994, compared with 28.8% for the
prior fiscal year, due to an emphasis placed on improving service and
correcting labor inefficiencies associated with implementing Skipper`s
new service system.
Operating expenses also rose in fiscal 1995, to 33.5% of revenue
compared with 30.6% of revenue for the 52 weeks ended March 29, 1994.
Part of this increase is attributable to the decline in sales without
a corresponding decline in fixed costs such as rent and depreciation.
Significant components of operating expenses include advertising ($5.7
million in fiscal 1995, compared with $5.6 million in the prior fiscal
year), restaurant depreciation and amortization ($5.5 million in
fiscal 1995, down 9.5% when compared with the same period a year ago)
and restaurant-related rent expense ($2.6 million, down 13.6% from
last year). Operating expenses declined to 30.6% of fiscal 1994
revenue, compared with 32.9% of revenue for the prior fiscal year.
When comparing fiscal 1994 with fiscal 1993, there was a 20.3% decline
in advertising (to $5.6 million from $7.0 million), a 2.4% decline in
restaurant-related depreciation and a 1% decline in rent for the
restaurants.
Tony Roma`s Operations
For the 52 Weeks Ended For the 42 Weeks Ended
March 28, 1995 March 29, 1994
Net restaurant sales $42,137,000 $33,752,000
Net franchise revenue 5,351,000 4,167,000
Total revenue $47,488,000 $37,919,000
Percentage of revenue:
Cost of sales 29.9% 30.3%
Direct labor costs 28.0% 29.8%
Operating expenses 25.7% 26.8%
83.6% 86.9%
Operating profit 16.4% 13.1%
Number of Company units* 25 24
Number of franchised units 143 137
* Excludes two units operated as joint ventures which are accounted
for under the equity method of accounting.
Revenue
On June 8, 1993, NPC International, Inc. completed its acquisition of
NRH Corporation, owner and franchisor of Tony Roma`s A Place for Ribs
restaurants. Since the acquisition, the Company has focused on
promoting the Tony Roma`s brand, on gaining efficiencies through the
consolidation of backoffice operations, and on working with the
franchise community to provide growth for the concept.
Comparable sales for the 52 weeks ended March 28, 1995, were down 0.3%
when compared with the similar period in the prior year. Sales in the
Company`s primary markets of Texas, Florida and California, were up
0.5%, 1.6% and down 2.9%, respectively. Gross franchise revenue,
before allocation of certain general and administrative costs related
to managing and servicing the franchise business, contributed $8.5
million or 17.9% of total revenue for the 52 weeks ended March 28,
1995, compared with $5.9 million or 15.6% of total revenue for the 42
weeks ended March 29, 1994. Nominal revenue has increased primarily
due to the additional ten weeks of activity in the most recent fiscal
year. During the fiscal year just ended, the Company opened or
purchased three restaurants and closed two underperforming units,
while 14 franchise units were added and eight were closed in the same
52 week period ended March 28, 1995. The Company anticipates that
eight Company units and 14 franchise units will open during the fiscal
year ended March 26, 1996.
Costs and Expenses
Costs of food, labor and operating expenses, when expressed as a
percent of total revenue, have all decreased in the fiscal year ended
March 28, 1995, when compared with the 42 week period ended March 29,
1994. These expense reductions have been achieved due to improved
operating efficiencies established subsequent to the acquisition. In
addition, franchise revenue, which does not have significant food or
labor components, constitutes a slightly higher portion of total
revenue in fiscal 1995.
On a comparable basis, labor has decreased through improved scheduling
and a reduction of workers compensation expenses. Operating expenses
have been lowered through a decrease in television advertising in the
current fiscal year, primarily in the Dallas market, although somewhat
mitigated by an increase in print advertising. The Company also
closed in January, 1994 a money-losing alternative concept that Tony
Roma`s was testing when it was acquired in June, 1993. Major Company
expenses incurred include field and administrative salaries ($2.6
million for the 52 weeks ended March 28, 1995, or 5.5% of total
revenue compared with 5.5% of total revenue for the 42 weeks ended
March 28, 1994), restaurant-related rent ($2.4 million or 5.0% of
fiscal 1995 revenue compared with 5.2% in fiscal 1994), and restaurant-
related depreciation and amortization ($2.4 million or 5.0% compared
with 4.8% in the prior year.)
Consolidated Results
Overall revenue declined $21.3 million on a nominal basis, or 6.3% for
the fiscal year ended March 28, 1995, when compared with the fiscal
year ended March 29, 1994. Much of this decline is attributable to an
$18 million decline in BIGFOOT sales from the prior year and a $11.9
nominal decline in revenue at Skipper`s, offset by a $9.6 million
revenue increase at Tony Roma`s.
Accompanying the nominal decline in consolidated revenue, restaurant-
related operating profit declined $4.0 million, or 7.7% of fiscal 1995
revenue, offset by a decrease in overall general and administrative
costs of $2.7 million, or 9.9%. Individual restaurant-related
operating profit was down 6.3% for Pizza Hut and up 56.8% for Tony
Roma`s, which included ten additional weeks of operations in fiscal
1995. Skipper`s went from a $1.3 million restaurant-related operating
profit in fiscal 1994 to a $2.8 million loss in the current fiscal
year before the restructuring charge.
General and administrative expenses declined to 7.7% of consolidated
revenue for the fiscal year ended March 28, 1995, when compared with
8.0% of revenue for the fiscal year ended March 29, 1994. This
decline is partly attributable to amortization of BIGFOOT start-up
costs becoming fully amortized in the prior year and the reduction in
costs associated with consolidating Tony Roma`s administrative
functions. General and administrative expenses were 7.5% of
consolidated revenue for the fiscal year ended March 30, 1993. This
increase between fiscal 1993 and fiscal 1994 is primarily due to
absorption of administrative costs and amortization of certain
intangibles associated with the Tony Roma`s acquisition. Major
expenses include corporate salaries, amortization of intangible
assets, and bank service charges.
In late fiscal 1995, the Company recognized a $35 million pre-tax
charge for the planned closure and disposition of 77 underperforming
Skipper`s restaurants located in six states plus the write-off of
$13.3 million in remaining goodwill associated with Skipper`s. At
March 28, 1995, the balance of this newly-established reserve plus the
prior closure reserve established in fiscal 1992 was $20.8 million.
Management believes the remaining reserve is adequate to cover the
carrying and disposal costs to be incurred on these restaurants.
Interest expense is lower in this fiscal year, dropping to $6.2
million from $6.6 million for the prior year. Fiscal 1994 interest
expense rose when compared with both fiscal 1995 and 1993 due to
increased debt associated with the June 8, 1993, acquisition of Tony
Roma`s.
NPC`s income tax provisions for the fiscal years ended 1995, 1994 and
1993 resulted in effective tax rates of 10.5%, 39.0%, and 37.8%,
respectively. The March 28, 1995, rate incorporates the write-off of
goodwill associated with Skipper`s, which is not deductible for tax
purposes. Without this adjustment, the Company`s fiscal 1995 rate
would have been approximately 39.6%. See Note 3 of "Notes to
Consolidated Financial Statements" for information regarding the
differences which cause the effective tax rates to vary from the
statutory federal income tax rates. As of March 28, 1995, NPC had a
net deferred income tax asset of $2.1 million, compared with a
deferred tax liability of $4.9 million at March 29, 1994. The
difference in deferred taxes is primarily attributable to the
Skipper`s closure reserve which was recorded in fiscal 1995.
Management has determined that it is more likely than not that this
deferred income tax asset, net of the valuation allowances, will be
realized based on current income tax laws and expectations of future
taxable income stemming from the ordinary operations or the reversal
of existing deferred income tax liabilities. Uncertainties
surrounding income tax law changes and future operating income levels
may, however, affect the ultimate realization of some or all of these
deferred income tax assets.
LIQUIDITY AND CAPITAL RESOURCES
On March 28, 1995, the Company had a working capital deficit of $11.3
million compared with $19.6 million deficit at March 29, 1994, and
$16.4 million at March 30, 1993. Like most restaurant companies, the
Company is able to operate with a working capital deficit because
substantially all of its sales are for cash, while it generally
receives credit from trade suppliers. Further, receivables are not a
significant asset in the restaurant business and inventory turnover is
rapid. Therefore, the Company uses all available liquid assets to
reduce borrowings under its line of credit.
The Company has a $50 million unsecured line of credit, of which $27.6
million was borrowed at year-end. On June 9, 1994, the Company signed
a $20 million "shelf" facility with a major insurance company, $10
million of which was borrowed on December 20, 1994, at 9.09% and the
remaining $10 million available was drawn on April 25, 1995, bearing
interest at the rate of 8.02%. The Company anticipates that,
subsequent to year-end, the $20 million borrowing limit in the shelf
agreement will be increased by an additional $40 million with the
right to borrow under the agreement extended for a period of two
years.
The Company anticipates cash flow from operations and additional
borrowings will be sufficient to fund continuing expansion and
improvements, to service debt obligations and to acquire restaurants
in new territories.
CASH FLOWS
Net cash provided by operating activities for fiscal 1995 decreased
approximately $7.5 million or 21.4% from operating cash flows for
fiscal 1994. This decrease is primarily due to payment of taxes based
upon current operating results with the deferral of Skipper`s closure
reserve to future periods when the disposition losses are anticipated
to be realized for tax purposes. Operating cash flow for the fiscal
year ended March 29, 1994, was up $2.6 million, or 7.9%, from fiscal
1993, because of an increase in earnings and higher non-cash expenses
in fiscal 1994.
Investing activities reflect the stock purchase of NRH Corporation on
June 8, 1993, for approximately $21.4 million. In addition, the
Company renovated six Tony Roma restaurants in fiscal 1994.
On December 20, 1994, the Company issued a senior note for $10
million, the proceeds of which was used to pay down the unsecured line
of credit. No senior notes were issued in the prior fiscal year, and
two senior notes totaling $45 million were issued in fiscal 1993.
Management suspended repurchases of the Company`s common stock in
January, 1995, with 454,500 shares still authorized under the stock
repurchase program approved by the Board of Directors.
SEASONALITY
As a result of continued concept diversification, the Company has not
experienced significant seasonality in its sales. Sales are typically
higher at Skipper`s in the fourth quarter of the fiscal year, during
the Lenten period.
EFFECTS OF INFLATION
Inflationary factors such as increases in food and labor costs
directly affect the Company`s operations. Because most of the
Company`s employees are paid hourly rates related to federal and state
minimum wage and tip credit laws, changes in these laws will result in
increases in the Company`s labor costs. Legislation mandating health
coverage for employees, if passed, will increase benefit costs since
most hourly restaurant employees are not currently covered under
Company plans. The Company cannot always effect immediate price
increases to offset higher costs and no assurance can be given that
the Company will be able to do so in the future.
Increases in interest rates could directly affect the Company`s
financial results. The Company had $27.6 million in borrowings under
its line of credit agreement at a variable market rate at March 28,
1995, as compared with $24.1 million at March 29, 1994. Under the
agreement, the Company may select among alternative interest rate
computations with terms up to six months in length to reduce its
interest exposure.
CONSOLIDATED BALANCE SHEETS
NPC International, Inc. and Subsidiaries
March 28, March 29,
1995 1994
***DRAFT****
ASSETS
Current assets:
Cash and cash equivalents $9,971,000 $ 8,119,000
Accounts receivable, net of
$923,000 and $825,000 reserves,
respectively 2,357,000 3,105,000
Notes receivable, net of
$275,000 reserves at
March 28, 1995, and March 29, 1994 867,000 641,000
Inventories of food and supplies 3,261,000 3,297,000
Deferred income tax asset 5,104,000 ----
Prepaid expenses and
other current assets 2,253,000 2,048,000
Total current assets 23,813,000 17,210,000
Facilities and equipment, net 116,190,000 148,498,000
Assets held for sale, net 18,576,000 262,000
Franchise rights, net 33,939,000 21,047,000
Goodwill, less accumulated amortization of
$3,220,000 and $4,089,000, respectively 18,710,000 33,327,000
Other assets 8,813,000 8,768,000
$220,041,000 $229,112,000
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Accounts payable $ 16,350,000 $ 16,200,000
Payroll taxes 1,332,000 1,283,000
Accrued interest 1,992,000 1,788,000
Accrued payroll 2,284,000 3,303,000
Current portion of closure provision 2,400,000 888,000
Health and workers compensation
insurance reserves 8,268,000 7,008,000
Other accrued liabilities 1,242,000 4,970,000
Current portion of
long-term debt 1,308,000 1,390,000
Total current liabilities 35,176,000 36,830,000
Long-term debt and
obligations under capital leases 82,850,000 86,734,000
Deferred income tax liability 2,996,000 4,899,000
Closure provision and
other deferred items 18,732,000 1,662,000
Stockholders` equity
Common stock, $.01 par value
Class A - 50,000,000 shares
authorized, 13,849,070 issued 139,000 139,000
Class B - 50,000,000 shares
authorized, 13,743,440 issued 137,000 137,000
Paid-in capital 22,020,000 22,322,000
Retained earnings 80,086,000 95,700,000
102,382,000 118,298,000
Less treasury stock at cost,
representing 1,493,315 and
1,267,124 shares of Class A Common,
1,589,871 and 1,312,013 shares
of Class B Common, respectively (22,095,000) (19,311,000)
Total stockholders` equity 80,287,000 98,987,000
$220,041,000 $229,112,000
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
NPC International, Inc. and Subsidiaries
***DRAFT***
Fiscal Year Ended
March 28, March 29, March 30,
1995 1994 1993
Net sales $ 309,829,000 $ 332,206,000 $ 284,972,000
Net franchise revenue 5,698,000 4,617,000 461,000
Total revenue 315,527,000 336,823,000 285,433,000
Cost of sales 92,392,000 98,692,000 82,552,000
223,135,000 238,131,000 202,881,000
Direct labor costs 89,964,000 97,103,000 79,829,000
Operating expenses 85,012,000 88,790,000 80,475,000
General and
administrative expenses 24,369,000 27,045,000 21,304,000
199,345,000 212,938,000 181,608,000
Operating income 23,790,000 25,193,000 21,273,000
Interest expense (6,162,000) (6,631,000) (6,390,000)
Loss on disposition of
underperforming assets (35,000,000) ---- ----
Other expense (80,000) (56,000) (215,000)
Income (loss) before
income taxes (17,452,000) 18,506,000 14,668,000
Provision (benefit)
for income taxes:
Current 5,169,000 8,028,000 4,760,000
Deferred (7,007,000) (817,000) 784,000
(1,838,000) 7,211,000 5,544,000
Net income (loss) $(15,614,000) $ 11,295,000 $ 9,124,000
Earnings (loss) per share $ (0.63) $ 0.45 $ 0.35
Weighted average
shares outstanding 24,763,715 25,167,349 25,903,363
See notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS` EQUITY
NPC International, Inc. and Subsidiaries
<CAPTION>
Total
Common Stock Paid-In Retained Treasury Stockholders`
Class A Class B Capital Earnings Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1992 $139,000 $137,000 $22,398,000 $75,281,000 $(10,864,000) $87,091,000
Net income ---- ---- ---- 9,124,000 --- 9,124,000
Acquisition of
treasury stock ---- ---- ---- ---- (6,791,000) (6,791,000)
Exercise of
stock options ---- ---- (30,000) ---- 42,000 12,000
Balance,
March 30, 1993 139,000 137,000 22,368,000 84,405,000 (17,613,000) 89,436,000
Net income ---- ---- ---- 11,295,000 --- 11,295,000
Acquisition of
treasury stock ---- ---- ---- ---- (1,766,000) (1,766,000)
Exercise of
stock options ---- ---- (46,000) ---- 68,000 22,000
Balance,
March 29, 1994 139,000 137,000 22,322,000 95,700,000 (19,311,000) 98,987,000
Net loss ---- ---- ---- (15,614,000) ---- (15,614,000)
Acquisition of
treasury stock ---- ---- ---- ---- (3,256,000) (3,256,000)
Exercise of
stock options ---- ---- (302,000) ---- 472,000 170,000
Balance,
March 28, 1995 $139,000 $137,000 $22,020,000 $80,086,000 $(22,095,000) $80,287,000
<FN>
See notes to consolidated financial statements.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
NPC International, Inc. and Subsidiaries
Fiscal Year Ended
March 28, March 29, March 30,
1995 1994 1993
CASH FLOWS PROVIDED
BY OPERATING ACTIVITIES:
Net income $(15,614,000) $11,295,000 $ 9,124,000
Non-cash items
included in net income:
Depreciation and amortization 20,990,000 24,008,000 19,329,000
Deferred income taxes and other (8,443,000) (1,791,000) (789,000)
Non-cash portion of
loss on disposition of
underperforming assets 34,235,000 ---- ----
Change in assets and liabilities,
net of acquisitions:
Accounts receivable, net 748,000 452,000 (79,000)
Notes receivable, net (226,000) (302,000) (70,000)
Inventories of
food and supplies 46,000 427,000 136,000
Prepaid expenses and
other current assets (356,000) (56,000) 367,000
Accounts payable 150,000 4,000 1,346,000
Payroll taxes 49,000 (32,000) (596,000)
Accrued interest 204,000 722,000 605,000
Accrued payroll (1,019,000) (354,000) 362,000
Current portion of
closure provision 1,512,000 (35,000) 282,000
Health and workers
compensation
insurance reserves 1,260,000 2,145,000 1,856,000
Other accrued liabilities (6,135,000) (1,631,000) 414,000
Net cash flows provided
by operating activities 27,401,000 34,852,000 32,287,000
CASH FLOWS USED BY
INVESTING ACTIVITIES:
Purchase of NRH Corporation,
net of cash ---- (19,370,000) ----
Capital expenditures, net (9,424,000) (13,202,000) (19,197,000)
Acquisition of
business assets, net (7,803,000) (61,000) ----
Changes in other assets, net (3,213,000) 788,000 617,000
Proceeds from sale
of capital assets 1,943,000 565,000 1,136,000
Net cash flows used
by investing activities (18,497,000) (31,280,000) (17,444,000)
CASH FLOWS USED
BY FINANCING ACTIVITIES:
Purchase of treasury stock (3,256,000) (1,766,000) (6,791,000)
Net change in revolving
credit agreements 3,480,000 23,710,000 (36,120,000)
Proceeds from issuance
of long-term debt 10,000,000 ---- 45,000,000
Payment of long-term debt (17,446,000) (24,616,000) (15,745,000)
Exercise of stock options 170,000 22,000 12,000
Net cash flows used
by financing activities (7,052,000) (2,650,000) (13,644,000)
NET CHANGE IN CASH
AND CASH EQUIVALENTS 1,852,000 922,000 1,199,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 8,119,000 7,197,000 5,998,000
CASH AND CASH EQUIVALENTS
AT END OF YEAR $9,971,000 $ 8,119,000 $7,197,000
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NPC International, Inc. and Subsidiaries
Summary of Significant Accounting Policies
Consolidation - The financial statements include the accounts of NPC
International, Inc. and Subsidiaries (the "Company") and its wholly
owned subsidiaries. All significant intercompany transactions are
eliminated.
Fiscal Year - The Company operates on a 52 or 53 week fiscal year
ending on the last Tuesday in March. The fiscal years ended March 28,
1995, March 29, 1994, and March 30, 1993, each contained 52 weeks.
Cash Equivalents - For purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid debt instruments with a
maturity of three months or less to be cash equivalents. At March 28,
1995, and March 29, 1994, substantially all cash was in the form of
depository accounts.
Inventories - Inventories of food and supplies are valued at the lower
of cost (first-in, first-out method) or market.
Pre-opening Costs - The Company amortizes pre-opening costs, which
principally represents the cost of hiring and training new personnel,
over a period of one year commencing with the restaurant`s opening.
Facilities and Equipment - Facilities and equipment are recorded at
cost. Depreciation is charged on the straight-line basis for
buildings, furniture and equipment. Leasehold improvements are
amortized on the straight-line method over the life of the lease or
the life of the improvements, whichever is shorter.
Assets held for sale - As of March 28, 1995, the Company is holding
approximately 80 Skipper`s units which it plans to sell or lease.
Nearly all of these units were closed in February, 1995.
Franchise Rights - The Company`s Pizza Hut franchise agreements
generally provide franchise rights for a period of 15 years and are
renewable at the option of the Company for an additional 15 years.
Franchise fees were capitalized for accounting purposes and are
amortized over their estimated economic life (original term plus
option renewal period) on a straight-line basis. Purchased franchise
rights are recorded at estimated value and amortized ratably over the
remaining life of the franchise agreement, including the renewal
period. Periodic franchise fees, generally provided for in the
agreements as a percent of gross sales, are recorded as operating
expenses as incurred.
Skipper`s, Inc. granted franchise rights for a term of 20 years to
private operators in exchange for an initial franchise fee which was
not recognized as income until the pre-opening obligations were
satisfied. Royalties based on a percentage of gross sales are
recognized on the accrual basis. Skipper`s has had no franchising
activity for the last several years.
The franchise agreements for Tony Roma`s restaurants similarly provide
for an initial fee and continuing royalty payments based upon gross
sales, in return for operational support, product development,
marketing programs and various administrative services. Royalty
revenue is recognized on the accrual basis, although initial fees are
not recognized until the franchisee`s restaurant is opened.
Franchisees also participate in national and local marketing programs
which are managed by the Company but are not included in the
accompanying financial statements.
Goodwill - Goodwill represents the excess of cost over the
identifiable net assets of companies acquired and is amortized on the
straight-line method over periods ranging from 25 to 40 years. During
1995, the Company wrote off $13,366,000 in remaining goodwill
associated with Skipper`s acquisition based on an assessment of
undiscounted cash flows and other factors.
The Company periodically evaluates the existence of potential
impairment of goodwill by assessing whether the carrying value of
goodwill is fully recoverable from projected, undiscounted net cash
flows from the underlying operations.
Income Taxes - The provision for income taxes includes federal and
state taxes currently payable and those deferred because of temporary
differences between the financial statements and tax bases of assets
and liabilities. Deferred taxes arise principally from accelerated
amortization of franchise rights for tax purposes, the use of
accelerated depreciation for tax purposes, and the deferral of tax
deductions for the insurance and closure reserves accrued for
financial statement purposes.
Earnings Per Share - Earnings per share is computed using the weighted
average number of common and common equivalent shares outstanding
during the period. Common equivalent shares represent the number of
shares which would be issued assuming the exercise of dilutive common
stock options, reduced by the number of shares which could be
purchased with proceeds from the exercise of such options. Earnings
per share attributable to prior years have been restated to reflect
the effect of the fiscal 1992 Class B Common stock dividend. Per
share amounts are not materially different on a fully diluted basis.
Reclassifications - Certain reclasses were made to prior balances to
conform with the current year presentation.
(2) Facilities and Equipment
Facilities and equipment consists of the following:
Estimated
Useful Life March 28, 1995 March
29, 1994
Land $ 27,271,000 $ 35,126,000
Buildings 15-30 years 45,928,000 56,714,000
Leasehold improvements 5-20 years 35,264,000 45,488,000
Furniture and equipment 3-10 years 68,672,000 87,392,000
Capitalized leases 4,574,000 5,103,000
Construction in progress 1,549,000 188,000
183,258,000 230,011,000
Less accumulated
depreciation and amortization (67,068,000) (81,513,000)
$116,190,000 $148,498,000
(3) Income Taxes
The provision (benefit) for income taxes consisted of the following:
March 28, 1995 March 29, 1994 March 30, 1993
Currently payable:
Federal $3,923,000 $ 6,225,000 $ 3,435,000
State 1,246,000 1,803,000 1,325,000
5,169,000 8,028,000 4,760,000
Deferred:
Federal (5,767,000) (727,000) 715,000
State (1,240,000) (90,000) 69,000
(7,007,000) (817,000) 784,000
Provision (benefit)
for income taxes $(1,838,000) $ 7,211,000 $ 5,544,000
The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to earnings
before income taxes are as follows:
Fiscal Year Ended
March 28, 1995 March 29, 1994 March 30, 1993
Tax computed at
statutory rate $(6,108,000) $ 6,477,000 $ 4,987,000
Write-off of
Skipper`s goodwill 4,665,000 --- ---
Tax credits (857,000) (695,000) (660,000)
State taxes, net of
federal effect, and other 462,000 1,429,000 1,217,000
Provision (benefit)
for income taxes $(1,838,000) $ 7,211,000 $ 5,544,000
The significant components of the deferred tax asset and liability at
March 28, 1995, and March 29, 1994, consisted of the following:
March 28, 1995 March 29, 1994
Deferred Deferred Deferred Deferred
Tax Assets Tax Liab Tax Assets Tax Liab
Depreciation and
amortization $ ---- $11,320,000 $---- $9,997,000
Closure reserve (8,187,000) ---- (842,000) ----
Capitalized leases (625,000) ---- (649,000) ----
Tax credit carryforwards (1,348,000) ---- (1,348,000) ----
Insurance reserves (3,036,000) ---- (2,730,000) ----
Other (2,016,000) 281,000 (2,842,000) 1,946,000
Subtotal (15,212,000) 11,601,000 (8,411,000) 11,943,000
Valuation allowances 1,503,000 ---- 1,367,000 ----
Total $(13,709,000) $11,601,000 $(7,044,000) $11,943,000
For income tax purposes, the Company has available at March 28, 1995,
jobs tax credit carryforwards of approximately $1,149,000 which, if
not previously utilized, will expire in varying amounts during years
2001 through 2004. The utilization of the carryforwards is subject to
the ability of the subsidiaries of the Company, from which they
originated, to generate taxable income on a separate company basis.
In the fiscal year ended March 28, 1995, the Company added a $136,000
valuation allowance relating to an unused capital loss carryover which
expires on March 26, 1996.
Cash paid for income taxes in fiscal years 1995, 1994, and 1993 was
$8,542,000, $7,001,000, and $5,107,000, respectively.
(4) Bank Debt and Senior Notes
Long-term debt consisted of the following:
March 28, 1995 March 29, 1994
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Revolving credit agreement $27,620,000 $27,620,000 $24,140,000 $24,140,000
9.09% senior notes 10,000,000 8,778,000 ---- ----
9.03% senior notes ---- ---- 7,000,000 7,103,000
8.49% senior notes 4,000,000 4,014,000 8,000,000 8,115,000
7.58% senior notes 15,000,000 14,857,000 20,000,000 20,058,000
6.35% senior notes 20,000,000 16,327,000 20,000,000 21,677,000
Other 3,182,000 3,268,000 3,813,000 3,648,000
79,802,000 $74,864,000 82,953,000 $84,741,000
Less current installments (547,000) (630,000)
Total long-term debt $79,255,000 $82,323,000
The Company has a $50,000,000 unsecured revolving credit agreement.
Under this agreement, as amended, the Company has the right to borrow,
repay and reborrow up to $50,000,000 until August 10, 1997. The
Company may elect to pay interest at the prime rate, the Interbank
rate or a money market rate (7.0% at March 28, 1995). Commitment fees
of .25% per annum are paid on the unused balance of the facility and
are included in interest expense. One debt covenant under the
revolving credit agreement was waived at March 28, 1995, due to the
Skipper`s charge in the fourth fiscal quarter.
The Company has privately placed the following long-term
uncollateralized senior notes:
Date Principal Carrying Interest Principal Payments
Issued Value Value Rate Begin End
3/13/91 $20,000,000 $ 4,000,000 8.49% 3/92 3/96
5/15/92 25,000,000 15,000,000 7.58 5/93 5/97
3/30/93 20,000,000 20,000,000 6.35 4/96 4/00
12/20/94 10,000,000 10,000,000 9.09 10/97 10/01
Each senior note requires annual principal payments equal to 20% of
the original principal amount. Proceeds from these notes were used
to repay amounts borrowed under the Company`s revolving credit
agreement. The Company has the ability and intent to refinance the
principal payments due under its senior notes through its revolving
credit agreement. Accordingly, such amounts are classified as long-
term debt. On June 9, 1994, the Company signed a $20,000,000 shelf
placement facility with a major insurance company, $10,000,000 of
which was borrowed on December 21, 1994, and the remaining $10,000,000
borrowed on April 25, 1995. This latter note bears interest at a rate
of 8.02%, with principal payments beginning in 1998 and ending in the
year 2002. Also subsequent to year-end, the Company amended this
shelf facility to increase the borrowing capacity by $40,000,000 and
to extend the funding availability date for two more years.
The Company is subject to a number of covenants under its various
credit agreements including limits on additional borrowing,
restrictions on dividend payments and requirements to maintain various
financial ratios and a minimum net worth. The aggregate maturities of
long-term debt, excluding capital leases and the revolving credit
agreement, are as follows: fiscal year 1996 - $9,547,000; fiscal year
1997 - $9,549,000; fiscal year 1998 - $11,520,000; fiscal year 1999 -
$6,522,000; fiscal 2000 - $6,524,000 and $8,520,000 in years beyond.
The average amount outstanding on all bank borrowings and senior notes
for the year ended March 28, 1995, was $77,880,000 and the maximum
borrowings were $86,060,000. Interest expense from bank borrowings
and senior notes for fiscal years 1995, 1994, and 1993 was $5,331,000,
$5,812,000 and $5,785,000, respectively. Weighted average interest
rates during the same periods were 7.36%, 6.44% and 7.71%,
respectively.
Cash paid for interest in fiscal years 1995, 1994, and 1993 was
$5,957,000, $6,198,000 and $5,882,000, respectively.
Statement of Financial Accounting Standards No. 107--Disclosures about
the Fair Market Value of Financial Instruments--requires companies to
disclose the estimated fair value of financial instruments. The
Company`s debt consists of non-trading long-term notes with fixed
rates maturing over the next seven years and a long-term revolving
loan with variable rates. Management has computed the fair market
values of the fixed-rate notes based upon an estimated incremental
borrowing rate of 8.11%. This rate is not substantially different
from the rate spread from similar government bonds with similar
maturities to that of the Company`s debt portfolio. Management
believes the fair market value of the revolving credit agreement to
equal its carrying value, due to its daily rate fluctuation.
(5) Stock Options
At March 28, 1995, the Company has a 1994 Non-Qualified Stock Option
Plan pursuant to which an aggregate of 2,791,450 shares of common
stock are reserved for issuance to employees (including officers) of
the Company. The options have an exercise price equal to the fair
market value of the common stock on the date of grant, and generally
become exercisable over a four-year period in equal annual amounts.
At March 28, 1995, 469,874 options on Class A Common and 557,549
options on Class B Common were exercisable.
Shares Under Option Option Price Range
Class A Class B Class A Class B
March 31, 1992 526,450 608,350
Granted 235,000 362,700 $6.50 $5.75-$7.50
Canceled (39,319) (67,719)
Exercised (5,718) (5,718) $5.17-$6.25 $5.17-$6.25
March 30, 1993 716,413 897,613
Granted ---- 167,050 $6.00
Canceled (61,032) (148,382)
Exercised (3,518) (3,518) $2.19-$5.42 $2.19-$5.42
March 29, 1994 651,863 912,763
Granted ---- 364,500 $5.00-$6.00
Canceled (39,010) (255,048)
Exercised (20,885) (20,977) $1.94-$6.25 $1.94-$6.25
March 28, 1995 591,968 1,001,238
(6) Profit Sharing Plan
The Company instituted the NPC International, Inc. Profit Sharing Plan
on July 1, 1992. To qualify, employees must generally have two years
of service, attain the age of 21 and be employed on the last day of
the plan year. The Company`s contribution to the plan is
discretionary, based upon the earnings of each operating division.
The Company contributed $516,000, $477,000 and $719,000 for calendar
years 1994, 1993, and 1992 and prior, respectively.
(7) Commitments
The Company leases certain restaurant equipment and buildings under
capitalized and operating leases. Rent expense for fiscal years 1995,
1994, and 1993 was $11,410,000, $11,925,000, and $9,998,000,
respectively, including additional rentals of approximately $1,030,000
in 1995, $1,344,000 in 1994, and $978,000 in 1993. The additional
rentals are based upon a percentage of sales in excess of a base
amount as specified in the lease. The majority of the Company`s
leases contain renewal options for 5 to 10 years. The remaining
leases may be renewed upon negotiations.
Facilities and equipment accounts include the following amounts for
capital leases:
March 28, 1995 March 29, 1994
Buildings $ 3,469,000 $ 3,997,000
Equipment 1,106,000 1,106,000
Less accumulated
amortization (1,767,000) (1,612,000)
Net leased facilities
and equipment $ 2,808,000 $ 3,491,000
Minimum lease payments for the next five years at March 28, 1995,
consisted of:
Fiscal Year Capital Leases Operating Leases Total
1996 $ 1,302,000 $ 8,360,000 $ 9,662,000
1997 816,000 7,470,000 8,286,000
1998 702,000 6,207,000 6,909,000
1999 603,000 5,175,000 5,778,000
2000 533,000 4,355,000 4,888,000
Thereafter 3,808,000 22,564,000 26,372,000
Total minimum
lease commitments 7,764,000 $ 54,131,000 $ 61,895,000
Less amounts representing
implicit interest (3,408,000)
Present value of net
minimum lease commitments 4,356,000
Less current portion (761,000)
Long-term capital
lease obligation $ 3,595,000
During the fiscal year ended March 28, 1995, the Company leased six
properties from Company officers at rental rates comparable to terms
the Company could obtain from unrelated lessors. Rental expense under
these leases for fiscal years 1995, 1994, and 1993 was $106,000,
$222,000, and $477,000, respectively. The Company purchased real
estate from an officer of the Company in the amount of $630,000,
$1,456,000, and $3,461,000 in the fiscal years ended March 28, 1995,
March 29, 1994, and March 30, 1993, respectively. The value of the
purchased real estate was determined by an independent certified
appraiser. Additionally, the Company leased a corporate aircraft from
an officer for part of the fiscal year. Management believes the lease
is at least as favorable as could be obtained from unrelated parties.
Rental expense incurred under this lease amounted to $194,000 in
fiscal 1995 and $258,000 for each of the fiscal years ended March 29,
1994 and March 30, 1993.
For purposes of administering its self-insurance program, the Company
has issued three standby letters of credit. One letter of credit for
$9,025,000, expiring July 1, 1995, benefits the insurance company
which administers the Company`s primary workers compensation program.
Two additional letters of credit for $250,000 and $100,000 benefit
another insurance company and state workers compensation program and
expire October 2, 1995 and June 23, 1995, respectively. All claims
are routinely paid in the normal course of business and the Company
does not anticipate that such instruments will be funded.
(8) Loss on Disposition of Underperforming Assets
On January 28, 1995, the Company announced that it would take a charge
of $35,000,000 before taxes to reserve for costs associated with the
closure and the anticipated loss on disposition of 77 unprofitable
Skipper`s units. Significant components of the $35,000,000 charge
include the impairment of $13,336,000 of remaining goodwill associated
with the Company`s purchase of Skipper`s in 1989, an expected loss on
disposal of owned facilities of $9,910,000, the present value of
obligations related to leased facilities of $8,659,000, and $3,095,000
in miscellaneous closure costs.
Stores which were closed accounted for the following revenue and
operating losses, before allocation of general and administrative
expenses such as field and corporate office overhead, for each of the
last three fiscal years: fiscal 1995, revenue of $19,647,000 and an
operating loss of $3,845,000; fiscal 1994, revenue of $25,621,000 and
an operating loss of $2,772,000; and fiscal 1993, revenue of
$25,621,000 and an operating loss of $2,000,000.
As of March 28, 1995, approximately $765,000 in cash had been spent
for rent, tax, and other closure expenses, including severance pay for
those affected by the closures. In addition, three units remain to be
sold or leased from the March, 1992 closure. Total long-term
liabilities established for restaurant closures, including reserves
established in prior years, were $18,397,000 and $1,102,000 at March
28, 1995 and March 29, 1994, respectively.
Included in other accrued liabilities is $2,400,000 and $888,000 at
March 28, 1995 and March 29, 1994, respectively, related to other
current costs of disposing of these restaurants. The Company
anticipates substantially all units will be subleased or disposed by
March, 1997.
(9) Acquisition
On June 8, 1993, the Company executed a definitive stock purchase
agreement to acquire all of the outstanding stock of NRH Corporation,
owner and franchisor of Tony Roma`s restaurants, for an aggregate
purchase price of approximately $21,400,000 in cash. The business
combination was accounted for as a purchase and, accordingly, the
Company tentatively allocated the purchase price as follows:
$16,100,000 to goodwill (amortized primarily over a 25 year period),
$11,800,000 to property, plant and equipment (amortized over six to 15
years, depending on the asset`s remaining life), $1,190,000 to a non-
compete agreement (two year amortization), $551,000 to deferred tax
assets, $1,400,000 to other assets, $5,344,000 to net current
liabilities and $4,300,000 to long-term debt. The results of
operations of NRH Corporation were included in the results of the
Company from the effective date of the acquisition. The proforma
effect of this acquisition would not be materially different than the
results presented herein.
On March 29, 1994, NRH Corporation was merged into its operating
subsidiary Romacorp, Inc. as part of a restructuring of the NRH
Corporate group.
(10) Asset Exchange Agreement
On August 2, 1994, the Company completed an asset exchange agreement
with Pizza Hut, Inc. (PHI) which extended the Company`s Pizza Hut
franchise rights through the year 2010. As a part of the agreement,
the Company exchanged 84 of its Pizza Hut restaurants and delivery
kitchens for 50 Pizza Hut units operated by PHI plus another 11 units
acquired from an unrelated franchisee and cash of $3,490,000. No gain
or loss was recognized as a result of the transaction. Book basis in
certain of the exchanged assets, composed of $6,878,000 in fixed
assets, $2,395,000 in unamortized franchise rights, and $675,000 in
other intangible assets, was recapitalized as $9,948,000 in new
franchise rights to be amortized beginning in 1996 over the life of
the franchise agreement and renewal period. Under the Agreement, the
Company`s royalty payments for all units owned at that time would
increase to four percent of gross sales beginning in July, 1996, from
the Company`s current effective rate of slightly over two percent.
The transaction also involved the Company`s acquisition of six Pizza
Hut restaurants from another Pizza Hut franchisee.
(11) Subsequent Acquisition
The Company announced subsequent to year-end that it acquired 23 Pizza
Hut restaurants in eight states from Pizza Hut, Inc. The transaction
was completed on April 19, 1995, and did not have a material impact on
the financial statements taken as a whole.
(12) Quarterly Results (unaudited)
Summarized results of operations for each quarter of the last two
fiscal years are as follows:
First Second Third Fourth Annual
Fiscal Fiscal Fiscal Fiscal Fiscal
Quarter Quarter Quarter Quarter Total
(Dollars in thousands except per share amounts)
Year Ended
March 28, 1995
Revenue $84,457 $78,472 $77,159 $75,439 $315,527
Gross margin 60,090 55,918 54,265 52,862 223,135
Operating income 7,611 6,344 4,998 4,837 23,790
Net income (loss) 3,755 2,955 2,158 (24,482) (15,614)
Earnings (loss)
per share $ 0.15 $ 0.12 $ 0.09 $ (0.99) $ (0.63)
Year Ended
March 29, 1994
Revenue $78,779 $87,422(1) $83,287 $87,335 $336,823
Gross margin 55,230 61,679 59,113 62,109 238,131
Operating income 6,008 6,001 6,084 7,100 25,193
Net income 2,674 2,522 2,740 3,359 11,295
Earnings
per share $ 0.11 $ 0.10 $ 0.11 $ 0.13 $ 0.45
(1) Romacorp, Inc., operator and franchisor of Tony Roma`s, was
acquired on June 8, 1993. The second fiscal quarter ended September 28, 1993,
is the first full 13 weeks to reflect its operations.
Report of Management
The management of NPC International, Inc. has prepared the
consolidated financial statements and related financial information
included in this Annual Report. Management has the primary
responsibility for the integrity of the consolidated financial
statements and other financial information. The consolidated
financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied in all material
respects and reflect estimates and judgments by management where
necessary. Financial information included throughout this Annual
Report is consistent with the consolidated financial statements.
Management of the Company has established a system of internal
accounting controls that provides reasonable assurance that assets are
properly safeguarded and accounted for and that transactions are
executed in accordance with management`s authorization.
The consolidated financial statements have been audited by our
independent auditors, Ernst & Young LLP, whose unqualified report is
presented herein. Their opinion is based upon procedures performed in
accordance with generally accepted auditing standards, including tests
of the accounting records, obtaining an understanding of the system of
internal accounting controls and such other tests as deemed necessary
in the circumstances to provide them reasonable assurance that the
consolidated financial statements are fairly presented. The Audit
Committee of the Board of Directors, consisting solely of outside
directors, meets with the independent auditors at least twice per year
to discuss the scope and major findings of the audit. The independent
auditors have access to the Audit Committee at any time.
O. Gene Bicknell James K. Schwartz Troy D. Cook
Chairman of the Board President and Vice President Finance and
and Chief Executive Officer Chief Operating Officer Chief Financial Officer
Report of Ernst & Young LLP
Independent Auditors
The Board of Directors and Stockholders
NPC International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of NPC
International, Inc. (formerly National Pizza Company) and Subsidiaries
as of March 28, 1995, and March 29, 1994, and the related consolidated
statements of operations, stockholders` equity and cash flows for each
of the three fiscal years in the period ended March 28, 1995. These
financial statements are the responsibility of the Company`s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of NPC International, Inc. and Subsidiaries at March 28, 1995, and
March 29, 1994, and the consolidated results of their operations and
their cash flows for each of the three fiscal years in the period
ended March 28, 1995, in conformity with generally accepted accounting
principles.
Kansas City, Missouri
May 4, 1995
SHAREHOLDER DATA
Directors, Corporate Officers and Key Personnel
O. Gene Bicknell
Chairman of the Board, Director
and Chief Executive Officer
James K. Schwartz
President and Chief Operating Officer
Marty D. Couk
Senior Vice President, Pizza Hut Operations
Robert B. Page
President, Romacorp, Inc.
Paul R. Baird
President, Skipper`s, Inc.
Troy D. Cook
Vice President Finance, Chief Financial Officer,
Treasurer and Assistant Secretary
David G. Short
Vice President, Legal and Secretary
Frank S. Covvey
Vice President, Management Information Systems
James K. Villamaria
Risk and Regulatory Counsel
Douglas K. Stuckey
Corporate Controller and Chief Accounting Officer
Gordon W. Elliott
Vice Chairman and Director
Fran D. Jabara
Director, President of Jabara Ventures Group
Robert E. Cressler
Director, Partner in FRAC Enterprises
John W. Carlin
Director, President of Midwest Superconductivity, Inc.
Registrar and Transfer Agent Auditors
American Stock Transfer & Trust Company Ernst & Young LLP
40 Wall Street One Kansas City Place
New York, New York 10005 1200 Main Street
Kansas City, Missouri 64105
Legal Counsel
Shook, Hardy & Bacon, P.C.
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Inquiries regarding stock transfers, lost certificates or address
changes should be directed to the Stock Transfer Department of
American Stock Transfer at the above address.
Stock Information
NPC International, Inc.`s common shares are traded on the NASDAQ
National Market System under the symbols "NPCIA" and "NPCIB." On
August 8, 1995, the Company anticipates its Class A common stock and
Class B common stock will be combined into a new, single class of
common stock and adopt the new ticker symbol, "NPCI."
For the calendar periods indicated, the following table sets forth the
range of high and low closing sale prices.
Calendar Period Class A Common Stock Class
B Common Stock
High Low High Low
1993
First Quarter $7-1/2 $6 $7 $5-3/4
Second Quarter 8 6-1/4 7-1/4 6
Third Quarter 7-1/4 5-7/8 7 5-1/2
Fourth Quarter 7-1/8 6 6-3/4 5-3/4
1994
First Quarter 7-1/2 6 6-3/4 5-1/4
Second Quarter 7 5 6-1/4 4-5/8
Third Quarter 6-15/16 5-1/2 6-3/4 5-1/4
Fourth Quarter 6-7/8 5-3/8 6-1/2 5-3/8
1995
First Quarter 6-1/2 5 5-5/8 4-3/4
NPC International`s policy is to retain earnings to fund development
and growth of the business. The Company has not paid cash dividends
during the periods presented and does not contemplate payment of a
recurring cash dividend in future periods. On August 8, 1995,
however, the Company anticipates stockholder approval of a cash
dividend of $0.421875 per Class A share (to stockholders of record on
August 8, 1995) in connection with the concurrent approval of a stock
recapitalization plan.
As of April 25, 1995, the approximate number of stockholders was
6,100, including an estimated number of individual participants in
security position listings.
Form 10-K
NPC International, Inc.`s 1995 Form 10-K Annual Report to the
Securities and Exchange Commission is available without charge to
stockholders upon written request to the Chief Financial Officer, NPC
International, Inc., 720 West 20th Street, Pittsburg, Kansas 66762.
