16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Fiscal Quarter Ended June 24, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ____________ to
____________
Commission File Number 0-13007
NPC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0817298
(State of Incorporation) (IRS Employer Identification Number)
720 W. 20th Street, Pittsburg, KS 66762
(Address of principal executive offices)
Registrant's telephone number, including area code (316) 231-3390
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's class of common stock as of
July 29,1997:
Common Stock, $0.01 par value - 24,667,671
NPC INTERNATIONAL, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets --
June 24, 1997 and March 25, 1997 3
Consolidated Statements of Income --
For the Thirteen Weeks Ended
June 24, 1997 and June 25, 1996 4
Condensed Consolidated Statements of Cash Flows
For the Thirteen Weeks Ended
June 24, 1997 and June 25, 1996 5
Notes to Condensed Consolidated Financial Statements6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II.OTHER INFORMATION 14
PART I - FINANCIAL INFORMATION
NPC International, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, dollars in thousands, except share date)
Thirteen Weeks Ended
June 24, 1997 March 25, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 5,281 $ -
Inventories of food and supplies 3,626 2,577
Income tax receivable - 1,737
Other current assets 9,160 9,437
Total current assets 18,067 13,751
Facilities and equipment, net 140,026 126,461
Franchise rights, net 194,159 92,318
Goodwill 18,013 18,228
Other assets 8,427 9,149
TOTAL ASSETS $ 378,692 $ 259,907
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 19,338 $ 11,624
Accrued interest 2,396 1,997
Accrued payroll 8,259 4,412
Other current liabilities 16,162 11,123
Total current liabilities 46,155 29,156
Long-term debt 209,477 116,777
Other deferred items 21,423 18,181
Stockholders' Equity:
Common stock, $.01 par value
100,000,000 shares authorized,
27,592,510 issued 276 276
Paid-in capital 20,976 20,978
Retained earnings 100,552 94,827
121,804 116,081
Less treasury stock at cost, representing
2,942,163 and 2,957,307 shares,
respectively (20,167) (20,288)
Total stockholders' equity 101,637 95,793
TOTAL LIABILITIES AND EQUITY $ 378,692 $ 259,907
See notes to Condensed Consolidated Financial Statements
NPC International, Inc.
Consolidated Statements Of Income
(Unaudited, dollars in thousands, except share data)
Thirteen Weeks Ended
June 24, 1997 June 25, 1996
Net Sales $ 101,067 $ 70,832
Net franchise revenue 2,050 2,094
Total revenue 103,117 72,926
Cost of sales 28,124 19,430
Direct labor 29,424 19,493
Other 26,278 17,738
Total operating expenses 83,826 56,661
Income from restaurant operations 19,291 16,265
General and administrative expenses 5,284 4,561
Depreciation and amortization 2,366 1,303
Operating income 11,641 10,401
Other expense:
Interest expense (3,030) (1,284)
Other 197 (68)
Income before income taxes 8,808 9,049
Provision for income taxes 3,083 3,527
Net income $ 5,725 $ 5,522
Earning per share $ .23 $ .22
Weighted average shares outstanding 25,182,948 25,020,300
See notes to Condensed Consolidated Financial Statements
NPC International, Inc.
Condensed Consolidated Statements Of Cash Flows
(Unaudited, dollars in thousands)
Thirteen Weeks Ended
June 24, 1997 June 25, 1996
Cash Flows Provided By Operating Activities:
Net income $ 5,725 $ 5,522
Depreciation and amortization 5,567 3,883
Amortization of start-up costs 674 330
Change in assets and liabilities,
net of acquisitions 17,959 4,281
Net cash flows provided by operating
activities 29,925 14,016
Cash Flows Used In Investing Activities:
Capital expenditures (8,560) (9,521)
Acquisition of business assets,
net of cash (109,516) -
Proceeds from sale of capital assets 313 7,600
Changes in other assets, net 677 31
Net cash flows used in investing
activities (117,086) (1,890)
Cash Flows Provided By (Used In) Financing Activities:
Net change in revolving credit agreements 51,567 (3,975)
Proceeds from issuance of long-term debt 49,756 -
Payment of long-term debt (9,000) (9,232)
Exercise of stock options 119 1,004
Net cash flows provided by (used in)
financing activities 92,442 (12,203)
Net Change In Cash And Cash Equivalents 5,281 (77)
Cash And Cash Equivalents At
Beginning Of Period - 1,584
Cash And Cash Equivalents At End Of Period $ 5,281 $ 1,507
See notes to Condensed Consolidated Financial Statements
NPC International, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1- Basis Of Presentation
The financial statements include the accounts of NPC International, Inc. and
its wholly owned subsidiaries (the Company). All significant intercompany
balances and transactions are eliminated.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X promulgated by the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles or annual financial statement reporting
purposes. These statements should be read in conjunction with the financial
statements and notes contained in the Company's annual report on Form 10-K for
the fiscal year ended March 25, 1997.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of the Company as of June 24, 1997 and
March 25, 1997, the results of operations and cash flows for the thirteen weeks
ended June 24, 1997 and June 25, 1996. Results for the interim periods are not
necessarily indicative of the results that may be expected for the entire
fiscal year.
Certain reclassifications have been made to the prior year statements to
conform with the current year presentation.
Note 2 - Cash Flows
There were cash receipts from income tax refunds of $146,000 in the thirteen
weeks ended June 24, 1997, and cash payments for income taxes of $749,000 in
the thirteen weeks ended June 25, 1996. Cash paid for interest for the
thirteen weeks ended June 24, 1997 and June 25, 1996 was $2,761,000 and
$2,500,000, respectively.
Note 3 - Acquisitions
On October 31, 1996, the Company acquired 31 units in North Carolina from R&W
Pizza Huts of North Carolina for $27.5 million. Annual sales volume for the
year prior to acquisition was approximately $24 million.
On March 6, 1997, the Company closed on Phase I of a 122 unit acquisition from
Pizza Hut, Inc. (PHI). Phase I consisted of 60 units with a purchase price of
$27.3 million. On March 27, 1997, the Company closed on Phase II of the PHI
acquisition consisting of 62 units and the operations of four others with a
purchase price of $28.1 million. For the year ended December 31, 1996, annual
sales volume for the 122 PHI units was approximately $71 million.
On April 15, 1997, the Company entered into a letter of intent with PHI to
acquire 52 units in North Dakota, South Dakota, and Minnesota for $31 million.
This transaction closed June 5, 1997, except for one unit in Minnesota. The
closing of the remaining unit was on July 10, 1997. For the year ended
December 31, 1996, annual sales volume for the 52 PHI units was approximately
$34 million.
On April 23, 1997, the Company entered into a letter of intent with Jamie B.
Coulter to purchase 100 units in 11 states which generated approximately $60
million in sales during the year ended December 31, 1996 for $57 million. This
transaction closed May 15, 1997, except for 18 North Carolina units, which are
being managed until acquired, subject to resolution of certain contingencies.
The results of these managed units are reflected in the financial statements as
if owned. On July 16, 1997, the Company closed on 10 of the North Carolina
units. The remaining eight North Carolina units are expected to be acquired
subject to certain contingencies.
The following unaudited pro forma results for the thirteen weeks ended June 24,
1997, and June 25, 1996, were developed assuming the above units had been
acquired at the beginning of those quarters. The unaudited pro forma data shown
below is not necessarily indicative of the consolidated results that would have
occurred had the acquisitions taken place at the beginning of the respective
periods nor are they necessarily indicative of results that may occur in the
future.
Pro Forma Results (unaudited)
(Dollars in thousands except June 24, June 25,
per share data) 1997 1996
Total revenues $117,738 $122,481
Net income 6,316 6,162
Net income per share .25 .25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction
with the Notes to Consolidated Financial Statement included in this Form 10-Q
and the audited financial statements and notes thereto together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations incorporated by reference in the Company's Annual Report on Form 10-
K for the year ended March 25, 1997.
Overview - The Company is the largest Pizza Hut franchisee in the world. In
addition to Pizza Hut, the Company is the owner/franchisor of Tony Roma's the
casual theme restaurant "Famous for Ribs". Romacorp, Inc. was acquired in June
1993.
Products - Pizza Hut's main product is high quality, innovative and moderately
priced pizza. Additionally, the menu contains pasta, sandwiches, salad bar and
a luncheon buffet.
Tony Roma's is a casual theme restaurant that is "Famous for Ribs". The
restaurant's signature products are baby back ribs with a mild tangy sauce and
deep fried onion loafs. The menu also includes spare ribs with three sauce
varieties, chicken, seafood, soups, salads, appetizers, a children's menu and
dessert.
All of the Company's concepts serve beer and/or other alcoholic beverages.
These products are not a significant portion of the sales mix at Pizza Hut, and
they comprise approximately 12% of sales for Tony Roma's.
Service - Pizza Hut provides a buffet with table service for beverages during
lunch and full table service for dinner, with delivery and carry-out available
throughout the day. Tony Roma's offers a fully staffed dining experience
throughout the day and evening.
Period of Operation - The Company operates on a 52 or 53 week fiscal year
ending the last Tuesday in March. Fiscal year ended March 31, 1998, will
contain 53 weeks and the fourth quarter will contain 14 weeks.
Development
Activity with respect to unit count during the quarter is set forth in the
table below:
SYSTEM UNIT ACTIVITY
1998 FIRST QUARTER
Beginning Developed (3) Acquired Closed (3) Sold Ending
Company Owned
Pizza Hut (1)
Restaurant 358 3 179 (1) -- 539
Delivery 115 -- 42 (1) -- 156
Total Pizza Hut 473 3 221 (2) -- 695
Tony Roma's (2) 40 1 -- -- -- 41
Total Company Owned 513 4 221 (2) -- 736
Franchised
Tony Roma's 140 3 -- (1) -- 142
Total System 653 7 221 (3) -- 878
(1) Includes the following units being operated by NPC under management
agreements: 2 restaurants and 2 delivery units in Louisiana,
2 restaurants in Illinois, 16 restaurants and 2 delivery units in North
Carolina, and 8 restaurants in Delaware.
(2) Excludes 2 units operated as joint ventures by the Company.
(3) Excludes one Tony Roma's and one Pizza Hut replacement unit.
During the quarter, 221 Pizza Hut units or operations were acquired. This
includes 113 units purchased from PHI, 74 units purchased from franchisee
Jamie B. Coulter, and four units purchased from franchisee Glen Long. The
operations of four units were purchased from PHI and the operations of eight
units were purchased from Jamie B. Coulter. The Company also managed 18 units
in North Carolina for Coulter and recorded the results as if owned. Ten of
the 18 North Carolina units were purchased subsequent to the period end. The
remaining eight are expected to be acquired subject to certain contingencies.
(See Note 3 of the Notes to Condensed Consolidated Financial Statements for
additional information on the acquisitions.)
Additionally, three Pizza Hut units were developed and one replacement store
opened during the quarter.
Tony Roma's opened three stores during the quarter which included one
replacement unit. To date the Company has completed the construction of four
new units and under its ongoing strategy to maximize stockholder value will
continue to evaluate its allocation of capital for the planned development of
Tony Roma's after consideration of the following: (1) the Company's capital
requirements and return expectations relative to its Pizza Hut acquisition
strategy (2) overall maintenance of the Company's leverage and capital
structure and (3) availability of real estate in the Company's development
territories at prices which justify such investment.
Two Tony Roma international franchise units opened and one domestic franchise
unit opened during the quarter. The Company expects franchisees to open
approximately 15 units during the fiscal year.
Results of Operations - Set forth below is a table of revenues, and operating
expenses as a percent of revenues for the thirteen weeks ended June 24, 1997
and June 25, 1996 (dollars in thousands) at the beginning of the section
discussing the results of operations for each concept operated by the Company.
Cost of sales includes the cost of food and beverage products sold. Direct
labor represents the salary and related fringe benefit costs associated with
restaurant based personnel. Other operating expenses include royalties (Pizza
Hut only), rent, depreciation, advertising, utilities, supplies and insurance
among other costs directly associated with operating a restaurant facility.
PIZZA HUT OPERATIONS
(Unaudited)
Thirteen Weeks Ended
June 24, 1997 June 25, 1996
Revenue
Restaurant Sales $ 64,201 $ 41,664
Delivery Sales 16,641 12,911
Total Revenue $ 80,842 $ 54,575
Restaurant Operating Expenses
as a Percentage of Revenue:
Total Expenses (1)
Cost of Sales 26.6% 25.6%
Direct Labor 28.5% 26.8%
Other 26.5% 25.5%
Total Operating Expenses 81.6% 77.9%
Restaurant Based Income 18.4% 22.1%
Restaurant Expenses (2)
Cost of Sales 26.7% 25.7%
Direct Labor 27.3% 25.5%
Other 26.9% 25.7%
Total Operating Expense 80.9% 76.9%
Restaurant Based Income 19.1% 23.1%
Delivery Expenses (3)
Cost of Sales 26.3% 25.0%
Direct Labor 33.2% 30.7%
Other 24.6% 24.6%
Total Operating Expenses 84.1% 80.3%
Restaurant Based Income 15.9% 19.7%
(1) As a percent of total revenue
(2) As a percent of restaurant sales
(3) As a percent of delivery sales
Comparison of Pizza Hut Operating Results for the Thirteen Weeks Ended
June 24, 1997 with the Thirteen Weeks Ended June 25, 1996
Net revenue from Pizza Hut operations was $80.8 million for the quarter, which
was $26.3 million or 48.1% above the same period last year due to acquisitions
during the past year. (See Note 3 of the Notes to Condensed Consolidated
Financial Statements for additional information on the acquisitions.) The
increase in revenue from acquired stores was partially offset by a comparable
sales decline of 9.7% which is primarily due to the decline in the sales of
TripleDecker. For the quarter ended June 25, 1996, TripleDecker sales
represented 7.7% of sales but represented only .2% of sales in the current
quarter. On May 1, Pizza Hut introduced it's "Totally New Pizzas". Effective
with the introduction all pizzas made by Pizza Hut feature larger, more
abundant toppings including fresh vegetables
Cost of sales as a percent of revenue increased from 25.6% during the same
quarter last year, to 26.6% for this year. The increase is attributable to the
addition of newly acquired restaurants which have not yet adopted the Company's
food cost management systems and historically experienced higher food cost and
higher food costs associated with the new pizza. Cheese costs for the quarter
remained favorable, an average of 8.3% lower than the same quarter last year.
(See Effects of Inflation and Other Matters for additional information on
cheese costs.)
Direct labor for the quarter was 170 basis points higher than the same period
last year. This variance results from higher labor costs than typically
experienced by the Company in the acquired stores, training costs associated
with the assimilation of 221 acquired units during the quarter, de-leveraging
of labor due to lower unit volumes, training associated with the new pizza and
the increase in minimum wage effective October, 1996. (See Effects of
Inflation and Other Matters for additional information on minimum wage
increases.)
Other operating expense for the quarter was 100 basis points over the prior
year. This is largely due to the July, 1996, increase in the franchise fee
paid to the Company's franchisor from an effective rate of 2.25% to 4%. This
increase was partially offset by a decrease in net customer delivery expenses.
TONY ROMA'S OPERATIONS
(Unaudited)
Thirteen Weeks Ended
June 24, 1997 June 25, 1996
Revenue
Restaurant Sales $ 20,225 $ 16,257
Franchise Revenue 2,050 2,094
Total Revenue $ 22,275 $ 18,351
Restaurant Operating Expenses
as a Percentage of Sales
Cost of Sales 32.6% 33.7%
Direct Labor 31.5% 30.1%
Other 24.2% 23.7%
Total Operating Expenses 88.3% 87.5%
Restaurant Based Income 11.7% 12.5%
Income from System Operations (1) 19.9% 22.5%
(1) Net franchise revenue and restaurant based income as a percent of
total revenue
Comparison of Tony Roma's Operating Results for the Thirteen Weeks Ended
June 24, 1997 with the Thirteen Weeks Ended June 25, 1996
Restaurant sales for the quarter increased 24.4% or $4 million over the same
period of last year. The increase is attributable to restaurant development
and a comparable sales increase of 2.5% for stores open for more than 18
months. Also impacting the change in sales was a price increase of
approximately 2% in October, 1996. The Company estimates it realized
approximately 50% of this increase due to changes in sales mix.
Net franchise revenue for the quarter was down $44,000 or 2.1% compared to the
same quarter last year. This is largely due to the sale of certain
international territory rights during the same quarter last year.
Cost of sales as a percent of revenue declined 110 basis points from the same
quarter last year. This improvement is despite an increase of approximately
15% in rib costs over the prior year. (See Effects of Inflation and Other
Matters for additional information on rib costs.) This improvement in cost of
sales as a percent of revenue is due to the menu price increase in October,
1996, a planned migration to higher margin products and reduced waste.
Direct labor as a percentage of revenue for the quarter increased from 30.1% in
the prior year to 31.5% in the current period. The increase is attributed to
inefficiencies related to the five stores opened in the last six months and the
three scheduled to open in the next three months. Strategically, staffing
levels at restaurant openings are higher than at units with a mature operation.
Additionally, during this time, focus is placed on maintaining the number of
tables in service at lower than normal levels. This is done to ensure a
quality experience and promote long-term, repeat business. This results in
additional labor cost during the first six months of operation although
significant improvement is expected within the first sixteen weeks.
Other operating expense increased 50 basis points. During the fourth quarter
of fiscal 1996 the Company recorded an impairment charge related to eight
restaurants to be closed. In the first quarter of fiscal 1997 seven of these
restaurants remained in operation, however, in accordance with the provisions
of SFAS 121 no depreciation was recorded for these units benefiting other
operating expenses. During the first quarter of fiscal 1998 only one of these
restaurants remained in operation through May 18, 1997, when the store was
relocated. Consequently, other operating expense as a percent of sales is
higher in the current quarter than it was in the same quarter of the prior
year.
Consolidated Results
Comparison of Consolidated Operating Results for the Thirteen Weeks Ended
June 24, 1997 with the Thirteen Weeks Ended June 25, 1996
Total consolidated revenue was $103.1 million, up 41.4%, or $30.2 million over
the $72.9 million recorded during the same quarter last year. This growth is
due to the revenue contributed from the acquired Pizza Hut units and Tony
Roma's unit development and comparable sales growth. (See Note 3 of the Notes
to Condensed Consolidated Financial Statements for additional information on
the acquisitions.)
Consolidated income from restaurant operations was $19.3 million or 18.7% of
revenue for the quarter compared to $16.3 million or 22.3% last year for an
increase of $3 million or 18.6%. Income from restaurant operations as a
percent of revenue decreased from the prior year due to the decrease in
operating margin attributable to the factors previously outlined in the concept
specific discussion of operating results.
While consolidated revenue increased 41.4%, increased leverage on general and
administrative costs was apparent as these costs increased $723,000 or 15.9%
compared to the same quarter last year. As a percent of sales, these costs
declined 120 basis points compared to the same quarter last year due to
increased leverage on these costs from the acquired stores. Depreciation and
amortization increased 50 basis points as a percent of sales due to increased
franchise rights amortization associated with acquisitions completed since the
same quarter last year.
Increased borrowings associated with the acquisitions resulted in a $1.7
million increase for the quarter in interest charges compared to same period
last year. Net income for the quarter was $5,725,000 compared to $5,522,000
for the same period last year. The effective income tax rate for the quarter
was 35% compared to 39% for the same period last year. The decrease in the
income tax rate is due to the realization of tax benefits associated with the
implementation of a corporate reorganization and the realization of various tax
credits.
Liquidity, Capital Resources and Cash Flows
The Company's primary source of cash is its operations. Adjusted for various
changes in balance sheet accounts, cash flow provided by operating activities
was $29.9 million for the quarter an increase of 114% over the $14 million for
the same period of the prior year. This improvement is due to the initial
leverage obtained from acquired stores, which like the Company operate with a
working capital deficit.
In addition to cash provided by operations, the Company has a $200 million
unsecured line of credit through March 3, 2000. At June 24, 1997, the Company
had $78 million available borrowing capacity under this agreement. The
acquisitions completed during the quarter were funded through the line of
credit and the issuance of $50 million of senior unsecured notes to
institutional lenders. Predominately cash sales and rapid inventory turnover
allow the Company to use all available cash to reduce borrowings under its line
of credit. The low requirement for the maintenance of current assets, combined
with credit from trade suppliers produces a working capital deficit, which is
consistent with past experience.
At June 24, 1997, the Company had not closed on 23 Pizza Hut units under asset
purchase agreements. The purchase of 11 of these units occurred subsequent to
June 24, 1997, for $6.9 million. The purchase of the remaining twelve units is
expected to close during the next quarter for $5.3 million.
During the quarter ended June 24, 1997, the Company made all scheduled
principal and interest payments.
Restaurant development at Tony Roma's and Pizza Hut, in addition to normal
recurring capital expenditures and technology investments in the acquired
stores, resulted in $8.6 million of total capital expenditures for the quarter
ended June 24, 1997 compared to $9.5 million of total capital expenditures for
the same period a year ago. Investing activities for the current quarter also
included $110 million paid for acquisitions previously discussed.
The Company anticipates cash flow from operations and additional borrowing will
be sufficient to fund continuing expansion and improvements and to service debt
obligations. The Company's ability to make additional acquisitions is subject
to certain financial covenants or, if necessary and warranted, the Company's
ability to obtain additional equity capital.
Seasonality
As a result of the diversification in restaurant concepts, the Company has
historically not experienced significant seasonal sales fluctuations on a
consolidated basis. However, each concept is impacted by individual sales
trends. Tony Roma's sales are traditionally higher from January to March due
to an increase in vacation and part time residence activity in the desert and
beach areas where a significant number of the Company's facilities are located.
Pizza Hut sales are largely driven through advertising and promotion and are
adversely impacted in economic times that generally require high cash flow from
consumers such as back-to-school and holiday seasons.
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 on
an hourly basis, changes in rates related to federal and state minimum wage and
tip credit laws will effect the Company's labor costs. 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.
Federal wage laws will increase the minimum wage to $5.15 per hour in September
1997. Notwithstanding potential menu price increases and operational
strategies, this increase is expected to raise labor costs one half of one
percentage point for both concepts.
Cheese represents approximately 40% of the cost of a pizza. The price of this
commodity changes throughout the year due to changes in demand and supply
resulting from school lunch programs, weather and other factors. Baby back
ribs represent approximately 28% of the menu mix at Tony Roma's. Because ribs
are a by-product of pork processing, their price is influenced largely by the
demand for boneless pork. Significant changes in the prices of these
commodities would have an impact on the Company's food cost as a percent of
revenue.
Cheese costs are expected by the Company to be at or below last year's levels
for the second quarter and, provided favorable weather and supply and demand
conditions continue, cost should remain below last year's unusually high levels
into the third quarter.
The prices of baby-back ribs are expected to be impacted by two factors which
could have opposite effects on such prices. First, downward pressure on prices
is anticipated in the fall due to expected increased demand from Japan for
boneless pork in the United States. Taiwan, Japan's primary supply of boneless
pork, was recently adversely impacted by "Hoof and Mouth" disease which is
expected to cause Japan to look to the United States to meet demand. Increased
boneless pork production in the United States would increase the supply of baby-
back ribs. Second, a significant increase in domestic demand for baby-back
ribs has caused upward pressure on prices. Currently, baby-back rib prices are
25% to 40% above last year's levels. The Company expects that the net effect
of the two factors discussed above will be that baby-back rib prices will
exceed last year's levels. However, due to market volatility, the magnitude of
this increase cannot be fully quantified until the Company makes its fall rib
purchase.
Increases in interest rates would directly affect the Company's financial
results. At the end of the quarter $92 million or 44% of the Company's
borrowings were under long-term fixed rate agreements. Under the Company's
revolving credit agreements alternative interest rate options are available
which can be used to limit the Company's exposure to fluctuating rates. The
Company actively utilizes these options as well as other hedging strategies
including interest rate swap products to reduce interest rate exposure.
Forward Looking Comments
The statements under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other statements which are not
historical facts contained herein are forward looking statements that involve
risks and uncertainties, including but not limited to: consumer demand and
market acceptance risk; the effectiveness of franchisor advertising programs,
and the overall success of the Company's franchisor; the integration and
assimilation of acquired restaurants; training and retention of skilled
management and other restaurant personnel; the Company's ability to locate and
secure acceptable restaurant sites; the effect of economic conditions,
including interest rate fluctuations, the impact of competing restaurants and
concepts, the cost of commodities and other food products, labor shortages and
costs and other risks detailed in the Company's Securities and Exchange
Commission filings.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes in the legal proceedings reported in the
Company's Annual Report on Form 10-K for the year ended March 25, 1997.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on July 15, 1997.
(b) Proxies were solicited by the Company pursuant to Regulation 14 under the
Securities Exchange Act of 1934, there was no solicitation in opposition of the
nominees as listed in the proxy statement, and all such nominees were elected
pursuant to the vote stockholders.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following Exhibits are filed as part of this Report:
Exhibit 11 - Statement Regarding Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Forms 8-K (incorporated by reference)
The following reports on Form 8-K were filed during the thirteen weeks
ended June 24, 1997:
April 14, 1997 Closing on 122 unit acquisition from Pizza Hut, Inc. and
Subsidiaries
April 17, 1997 Announcement of the Company's acquisition of 52 Pizza Hut
units from Pizza Hut, Inc.
May 12, 1997 Announcement of the Company's acquisition of 100 Pizza Hut
units from Jamie B. Coulter
May 29, 1997 Closing on 100 unit acquisition from Jamie B. Coulter
June 09, 1997 Amendment to Form 8K dated March 27, 1997 and April 14,
1997 pertaining to 122 unit acquisition from Pizza Hut,
Inc. and Subsidiaries to include audited and pro forma
financial information
June 20, 1997 Closing on 52 unit acquisition from Pizza Hut, Inc. and
Subsidiaries
Signature
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.
(Registrant)
DATE: August 6, 1997
Vice President Finance Troy D. Cook
Chief Financial Officer
Principal Financial Officer
DATE: August 6, 1997
Corporate Controller Alan L. Salts
Chief Accounting Officer
Principal Accounting Officer
Exhibit 11
NPC INTERNATIONAL, INC.
Statement Regarding Computation of Per Share Earnings
(Unaudited)
Thirteen Weeks Ended
June 24, 1997 June 25,1996
PRIMARY
Shares outstanding at beginning of period 24,604,269 24,522,432
Weighted average of shares
issued during period 8,082 98,230
Assuming exercise of options and warrants
reduced by the number of shares which could
have been purchased with the proceeds from exercise 570,597 399,638
Shares outstanding for computation
of per share earnings 25,182,948 25,020,300
Net income $ 5,725,000 $ 5,522,000
Earnings per share $ .23 $ .22
FULLY DILUTED
Shares outstanding at beginning of period 24,604,269 24,522,432
Weighted average of shares issued
during period 8,082 99,230
Assuming exercise of options and warrants
reduced by the number of shares which could
have been purchased with the proceeds from exercise 618,006 399,638
Shares outstanding for computation
of per share earnings 25,230,357 25,021,300
Net income $ 5,725,000 $ 5,522,000
Earnings per share $ .23 $ .22
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-24-1997
<CASH> 5281000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3626000
<CURRENT-ASSETS> 18067000
<PP&E> 140026000
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 378692000
<CURRENT-LIABILITIES> 46155000
<BONDS> 0
0
0
<COMMON> 276000
<OTHER-SE> 101361000
<TOTAL-LIABILITY-AND-EQUITY> 378692000
<SALES> 101067000
<TOTAL-REVENUES> 103117000
<CGS> 28124000
<TOTAL-COSTS> 28124000
<OTHER-EXPENSES> 63352000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3030000
<INCOME-PRETAX> 8808000
<INCOME-TAX> 3083000
<INCOME-CONTINUING> 5725000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5725000
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
<FN>
<F1>Not required to be separately provided per interim financial statement
purposes.
</FN>
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