SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 9, 1997
NPC INTERNATIONAL, INC.
(Exact name of registrant is specified in its charter)
Kansas
(State of incorporation)
0-13007 48-0817298
(Commission Identification No.) (IRS Employer Identification No.)
720 West 20th Street, Pittsburg, Kansas 66762
(Address of principal executive office Zip Code)
Registrant's telephone number: (316/231-3390)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
This filing amends Form 8-K dated March 27, 1997 and filed April 14, 1997
pertaining to the acquisition of 122 Pizza Huts from Pizza Hut, Inc. Financial
statements related to the acquired assets were not available at the time Form 8-
K was filed. However, in accordance with Rule 3-05(b) of regulation S-X, the
applicable statements are included herein.
(a.) Financial statements of business acquired
The financial statements of the acquired business are presented in Exhibit
99-A to this filing and are incorporated herein by reference.
(b.) Pro forma financial information
The pro forma financial information required by Article 11 of Regulation S-
X, related to this acquisition is presented in Exhibit 99-B to this filing
and is incorporated herein by reference.
(c.) Exhibits
The exhibits set forth on the Index to Exhibits on page 3 are incorporated
herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NPC INTERNATIONAL, INC.
DATED: June 9, 1997
Troy D. Cook
Vice President Finance
Chief Financial Officer
Principal Financial Officer
INDEX TO EXHIBITS
PAGE NO.
IN THIS
EXHIBIT DESCRIPTION FILING
99-A Financial statements of business acquired 4
99-B Pro Forma Financial Information 11
Exhibit 99-A
Financial Statements of business acquired
INDEPENDENT AUDITORS' REPORT
The Board of Directors
NPC International, Inc.:
We have audited the statement of net assets purchased of the 122 Pizza Hut
restaurants (The Pizza Hut Units) as of December 25, 1996 and the related
statement of operations for the year then ended. The financial statements are
the responsibility of The Pizza Hut Units' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Pizza Hut Units as of
December 25, 1996, and the results of their operations for the year then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Wichita, Kansas
April 28, 1997
THE PIZZA HUT UNITS
Statement of Net Assets Purchased
December 25, 1996
Current assets:
Cash $
63,998
Inventory 491,008
Prepaid expenses and other current assets 53,047
Total current assets 608,053
Property and equipment, net of accumulated depreciation
(note 3) 11,052,029
Intangible assets, net of accumulated amortization (note 4) 15,889,376
27,549,458
Commitments (note 5)
Total assets purchased $ 27,549,458
See accompanying notes to financial statements.
THE PIZZA HUT UNITS
Statement of Operations
For the Year Ended December 25, 1996
Net sales $ 71,410,529
Costs and expenses:
Costs of food and beverage 20,137,594
Cost of labor 21,366,449
Operating expenses 17,888,628
General and administrative expenses (note 7) 4,457,758
Depreciation expense (note 3) 2,546,544
Amortization expense (note 4) 2,372,083
Provision for impairment 249,019
Total costs and expenses 69,018,075
Earnings before income taxes $ 2,392,454
See accompanying notes to financial statements.
(1)Organization and Operations
The 122 Pizza Hut restaurants (The Pizza Hut Units) are principally located
in Kansas, Oklahoma, Arkansas, Texas, Illinois and Indiana. The Pizza Hut
Units are composed of casual dining restaurants and delivery-carryout
facilities featuring the sale of American and Italian cuisine. Until March
1997, The Pizza Hut Units were operated by Pizza Hut, Inc., a wholly-owned
subsidiary of PepsiCo, Inc.
In March 1997, The Pizza Hut Units were acquired by NPC International, Inc.
and subsidiaries (NPC) pursuant to an Asset Purchase Agreement.
(2)Summary of Significant Accounting Policies
A summary of significant accounting policies followed in the preparation of
the financial statements of The Pizza Hut Units is set forth below.
(a) Basis of Presentation
The statement of net assets purchased represents the assets of The
Pizza Hut Units acquired by NPC and excludes land and buildings owned by
Pizza Hut, Inc., which will be leased by NPC from Pizza Hut, Inc. under
the provisions of the Asset Purchase Agreement.
The statement of operations includes all costs applicable to the
restaurants which were incurred in connection with the operation of The
Pizza Hut Units and for which specific identification was practical,
including depreciation expense related to buildings to be leased to NPC
and which have been excluded from the accompanying statement of net
assets purchased. Certain costs incurred by Pizza Hut, Inc. which
represent the cost of doing business and for which specific
identification to an individual restaurant is not practical have been
allocated to The Pizza Hut Units based on an average cost per
restaurant. Interest expense and income taxes have not been reflected
in the statement of operations.
(b) Inventories
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
(c) Property and Equipment
Property and equipment are stated at cost, except for property and
equipment that have been determined to be impaired, for which the
carrying amount is reduced to estimated fair value. Depreciation of
equipment is recognized using the straight-line method over lives of
three to seven years. Amortization of leasehold improvements is
recognized using the straight-line method and is over the term of the
lease, which includes option periods probable of exercise, and which is
normally in a range of five to twenty years.
(d) Intangible Assets
Goodwill and reacquired franchise rights are amortized using the
straight-line method over a period of twenty years. Other intangible
assets are amortized using the straight-line method over the estimated
period of benefit.
(e) Long-Lived Assets to be Held and Used in the Business
Long-lived assets, certain identifiable intangibles and goodwill
related to those assets to be held and used in the business are reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset or a group of assets may not be
recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If the future net cash
flows are less than the carrying amount of an asset, the impairment
recognized is measured by the amount by which the carrying amount of the
asset exceeds the fair value of the asset.
(f) Advertising
Advertising expense applicable to The Pizza Hut Units amounted to
$4,111,778 and is included in operating expenses in the accompanying
statement of operations.
(g) Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires management of The
Pizza Hut Units to make estimates and assumptions that affect the
reported amounts of assets and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from these estimates.
(3)Property and Equipment
Restaurant property and equipment at December 25, 1996 consists of the
following:
Restaurant equipment $ 18,751,014
Leasehold improvements 10,728,003
Construction in progress 349,220
29,828,237
Accumulated depreciation (18,776,208)
Restaurant property and equipment, net $ 11,052,029
As described in note 1(a), the statement of net assets purchased does not
include certain buildings and land owned by Pizza Hut, Inc. which are to be
leased by NPC with a net carrying value of $4,825,522 and $3,649,410,
respectively. Included in depreciation expense is $503,446 related to the
depreciation of such buildings.
(4)Intangible Assets
Intangible assets at December 25, 1996 consist of the following:
Goodwill and reacquired franchise rights $ 22,744,091
Other intangibles 662,651
23,406,742
Accumulated amortization (7,517,366)
Intangible assets, net $ 15,889,376
Intangible assets arose from the allocation of purchase prices of units
acquired. Included in amortization expense is $1,253,846 related to the
amortization of intangible assets.
(5)Leases
The Pizza Hut Units have commitments under several noncancelable operating
leases for restaurant space that expire over the next ten years. These
leases generally provide for rent escalations and contain renewal options
for periods ranging from three to five years and require the payment of
certain executory costs such as property taxes, maintenance and insurance.
Rental payments include minimum rentals plus contingent rentals based on
store sales. Rental expense for operating leases during 1996 consisted of
the following:
Minimum rentals $ 1,830,052
Contingent rentals 190,110
Rental expense $ 2,020,162
Future minimum lease payments under noncancelable operating leases as of
December 25, 1996 are as follows:
1997 $ 1,821,461
1998 1,470,809
1999 1,094,951
2000 745,643
2001 520,039
Thereafter 879,137
Total minimum lease payments $ 6,532,040
(6) Selected Cash Flow Information
The accompanying financial statements include a statement of net assets
purchased which excludes all operating liabilities. Operating liabilities
have been excluded because it is not possible to identify liabilities
associated with The Pizza Hut Units and because no liabilities have been
assumed by NPC. Since liabilities applicable to The Pizza Hut Units have
not been identified and presented, a separate statement of cash flows is not
presented. Selected cash flow information for the year ended December 25,
1996 is as follows:
Cash flows from operating activities exclusive of
changes in liabilities and income taxes:
Earnings before income taxes $ 2,392,454
Depreciation and amortization 4,918,627
Provision for impairment of property and equipment 249,019
Net change in inventories, prepaids and other current
assets (51,858)
$ 7,508,242
Cash flows from investing activities:
Capital expenditures $ 2,799,917
(7)Cost Allocations
As previously described in note 1(a), the accompanying statement of
operations of The Pizza Hut Units includes all costs applicable to The Pizza
Hut Units which were incurred in connection with the operation of The Pizza
Hut Units and for which specific identification was practical which are
comprised of cost of food and beverage, labor and operating expenses,
depreciation expense, amortization expense and provision for impairment.
General and administrative costs incurred by Pizza Hut, Inc. which represent
part of the cost of doing business and for which specific identification to
an individual restaurant is not practical are allocated to The Pizza Hut
Units based on an average cost per restaurant. Costs allocated include such
items as costs related to executive management, accounting, data processing,
legal, certain employee benefits and certain occupancy costs. Management of
NPC believes that the allocation method is reasonable and that it is not
practical to estimate what The Pizza Hut Units' costs would have been if
they had operated as an unaffiliated entity.
Exhibit 99-B
Pro Forma Financial Information
Pro Forma Condensed
Balance Sheet
NPC International, Inc.
and Subsidiaries
Acquisition from Pizza
Hut, Inc. of 122 Pizza
Hut Units At March 25, 1997
Dollars in thousands
As
Reported
The Pizza Pro Forma Pro Forma
The Hut Units Adjustments Statement
Company
Assets:
Total current assets $ 13,751 $ 608 $ 14,359
Facilities and
equipment, net of
$77,037 accumulated
depreciation 126,461 11,052 (6,896) 130,617
Intangible assets, net
of $16,276 accumulated
amortization 110,546 15,889 8,500 134,935
Other assets 9,149 9,149
Total assets $259,907 $ 27,549 $ 289,060
Liabilities:
Total current
liabilities $ 29,156 $ 29,156
Long-term debt 116,777 29,153 145,930
Other liabilities 18,181 18,181
Total equity 95,793 27,549 (27,549) 95,793
Total liabilities and
equity $259,907 $ 27,549 $ 289,060
See notes to pro forma statements
Pro Forma Statement of
Operations NPC
International, Inc. and
Subsidiaries
Acquisition from Pizza
Hut, Inc. of 122 Pizza
Hut Units
For the 52 weeks ended
March 25, 1997
Dollars in thousands,
except share data
As
Reported
The Pizza Pro Forma Pro Forma
The Hut Units Adjustments Statement
Company
Net sales $295,285 $ 71,411 $ (1,831) $ 364,865
Cost of sales 80,618 20,138 (528) 100,228
Direct labor 81,086 21,367 (609) 101,844
Other 75,523 21,553 996 98,072
Total operating expenses 237,227 63,058 300,144
Income from restaurant
operations 58,058 8,353 64,721
General and
administrative expenses 17,710 4,707 22,417
Depreciation and
amortization 6,121 1,254 127 7,502
Operating income 34,227 2,392 34,802
Interest and other
income/(expense) (5,144) (4,293) (9,437)
Income before taxes 29,083 2,392 25,365
Provision for income
taxes 11,272 (1,441) 9,831
Net income $ 17,811 $ 2,392 $ 15,534
Earnings per share $ 0.71 $ 0.62
Weighted average shares
outstanding 25,021,020 25,021,020
See notes to pro forma statements
Notes to pro forma statements
1. Basis of presentation - The pro forma financial statements include the
accounts and results of operation for NPC International, Inc. and subsidiaries
(the Company), and 122 Pizza Hut units (the Pizza Hut Units) owned and operated
by Pizza Hut, Inc. (PHI) a wholly-owned subsidiary of PepsiCo, Inc. The
statements of the Company are as of and for the 52 weeks ended March 25, 1997,
and the statements of the Pizza Hut Units are as of and for the 52 weeks ended
December 25, 1996. These statements have been prepared in accordance with
Article 11 of the Securities & Exchange Commission Regulation S-X.
2. Description of transaction - In March 1997 the Pizza Hut Units were
acquired by the Company pursuant to an Asset Purchase Agreement. The
transaction closed in two distinct phases. Phase I consisted of 60 units with a
purchase price of $27.3 million and closed on March 6, 1997. Phase II consisted
of 62 units with the purchase price of $28.1 million and closed on March 27,
1997, subsequent to the Company's fiscal year-end.
3. Balance Sheet
a) A full balance sheet has not been presented for the Pizza Hut Units because
PHI does not record certain transactions on an individual unit basis.
Alternatively, a statement of net assets purchased has been presented which
represents the assets of the Pizza Hut Units acquired by the Company and
excludes land and buildings owned by PHI which will be leased by the
Company from PHI.
b) The Company's year end balance sheet reflects facilities and equipment of
$3,741,000 and franchise rights of $23,929,000 based on the purchase price
allocation for Phase I of the transaction. The 60 units consisting of the
Phase I transaction are also included in the statement of net assets
purchased of the Pizza Hut Units. Therefore, the pro forma adjustments
are net of the reversal of these amounts to avoid double counting the
effect of the Phase I transaction.
4. Statement of Operations
a) Interest expense and income taxes have not been reflected in the statement
of operations of the Pizza Hut Units. Pro forma adjustments have been made for
these items. To conform the statement of operations of the Pizza Hut Units to
the presentation used by the Company, depreciation expense of $2,547,000 and
amortization expense of $1,118,000 has been included in other operating
expenses. The provision for impairment of $249,000 presented in the statement
of operations for the Pizza Hut Units has been included in general and
administrative expenses.
b) The Company's statement of operations reflects the results of the 60 Phase
I units for the twenty days from closing to the Company's fiscal year end. The
results for this period include sales of $1,831,000, cost of sales and direct
labor of $528,000 and $609,000 respectively, and other operating expenses of
$460,000 which have been removed in the pro forma adjustments.
c) The pro forma adjustments for other operating expenses include a four
percent royalty to be paid by the Company to PHI, depreciation expense related
to fixed assets of $1,366,000, the reversal of $3,665,000 of depreciation and
amortization expense included in the statement of the Pizza Hut Units, and a net
increase in rental expense of $1,100,000 related to facilities that will
continue to be owned by PHI and leased by the Company. The Company will
depreciate facilities and equipment acquired in the transaction over an average
of six years.
d) Depreciation and amortization expense includes a pro forma adjustment to
increase expense $127,000 related to the amortization of franchise rights over a
35 years based on the 20 year term of the franchise agreement plus one 15 year
renewal option.
e) Interest expense has been computed using an average annual borrowing rate,
as of the beginning of the fiscal year, of 7.7%.
f) The Company's effective tax rate for the fiscal year ended March 25, 1997
was 38.76%, which has been used to compute the pro forma tax adjustment.
