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 30, 1998
[ ] 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 August 4, 1998:
Common Stock, $0.01 par value - 24,767,623
NPC INTERNATIONAL, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets --
June 30, 1998 and March 31, 1998 3
Consolidated Statements of Income --
For the Thirteen Weeks Ended
June 30, 1998 and June 24, 1997 4
Consolidated Statements of Cash Flows --
For the Thirteen Weeks Ended
June 30, 1998 and June 24, 1997 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION 13
PART I. FINANCIAL INFORMATION
NPC International, Inc.
Consolidated Balance Sheets
(Unaudited, dollars in thousands)
ASSETS June 30, 1998 March 31, 1998
Current assets:
Cash and cash equivalents $ 4,681 $ 4,548
Accounts receivable, net 104,389 2,375
Inventories of food and supplies 2,447 4,177
Deferred income tax asset 2,662 3,245
Prepaid expenses and other
current assets 2,568 3,874
Total current assets 116,747 18,219
Facilities and equipment, net 86,904 138,779
Assets held for sale 2,098 3,157
Notes receivable, net 378 465
Franchise rights, net 197,131 198,917
Goodwill, net 2,806 17,364
Investment in Romacorp, Inc. 6,750 --
Deferred income tax asset -- 344
Other assets 5,201 5,247
TOTAL ASSETS $ 418,015 $ 382,492
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,216 $ 18,143
Sales taxes 1,673 2,561
Payroll taxes 1,394 1,742
Accrued interest 2,306 4,130
Accrued payroll 6,080 8,669
Income tax payable 16,392 650
Current portion of closure reserve 1,260 1,360
Insurance reserves 4,310 5,613
Other accrued liabilities 7,646 6,188
Total current liabilities 57,277 49,056
Long-term debt 196,200 204,033
Deferred income tax liability 1,079 --
Closure reserve 8,084 8,936
Health and workers' compensation
reserves 8,000 9,000
Other deferred items 6,971 4,431
Stockholders' Equity:
Common stock, $.01 par value
100,000,000 shares authorized,
27,592,510 issued 276 276
Paid-in capital 21,055 21,033
Retained earnings 138,307 105,157
159,638 126,466
Less treasury stock at cost,
representing 2,826,212 shares (19,234) (19,430)
Total stockholders' equity 140,404 107,036
TOTAL LIABILITIES AND EQUITY $ 418,015 $ 382,492
The accompanying notes are an integral part of these Consolidated
Financial Statements.
NPC International, Inc.
Consolidated Statements of Income
(Unaudited, dollars in thousands, except share data)
Thirteen Weeks Ended
June 30, 1998 June 24, 1997
Net Sales $ 113,388 $ 101,067
Net franchise revenue 2,114 2,050
Total revenue 115,502 103,117
Cost of sales 30,646 28,124
Direct labor 32,185 29,424
Other 30,484 26,278
Total operating expenses 93,315 83,826
Income from restaurant operations 22,187 19,291
General and administrative expenses 6,262 5,284
Depreciation and amortization 2,531 2,366
Operating income 13,394 11,641
Other expense:
Interest expense (3,882) (3,030)
Other 266 197
Income before income taxes and
gain on recapitalization of
subsidiary 9,778 8,808
Gain on recapitalization of
Romacorp, Inc. 39,400 --
Income before income taxes 49,178 8,808
Provision for income taxes 16,028 3,083
Net income $ 33,150 $ 5,725
Earnings per share - Basic $ 1.34 $ .23
Earnings per share - Diluted $ 1.31 $ .23
Weighted average shares
outstanding - Basic 24,758,341 24,643,285
Weighted average shares
outstanding - Diluted 25,238,181 25,011,426
The accompanying notes are an integral part of these Consolidated
Financial Statements.
NPC International, Inc.
Consolidated Statements of Cash Flows
(Unaudited, dollars in thousands)
Thirteen Weeks Ended
June 30, 1998 June 24, 1997
Operating Activities:
Net income $ 33,150 $ 5,725
Non-cash items included in
net income:
Depreciation and amortization 6,491 5,567
Amortization of start-up costs 348 674
Deferred income taxes -- (170)
Non-cash gain on recapitalization
of Romacorp, Inc. (38,758) --
Change in assets and liabilities,
net of acquisitions and
divestitures:
Accounts receivable, net (106) (39)
Notes receivable, net 25 19
Inventories of food and supplies (397) (108)
Prepaid expenses and other
current assets (57) (610)
Accounts payable (812) 7,714
Payroll taxes (15) 325
Accrued interest (1,796) 399
Income tax payable 15,742 3,439
Accrued payroll (1,792) 3,847
Health and workers' compensation
reserves 147 1,040
Other accrued liabilities 1,037 2,103
Net cash flows provided by
operating activities 13,207 29,925
Investing Activities:
Capital expenditures (5,767) (8,560)
Acquisition of business assets,
net of cash -- (109,516)
Proceeds from sale of capital assets 316 313
Changes in other assets, net (1,341) 677
Net cash flows used in investing
activities (6,792) (117,086)
Financing Activities:
Net change in revolving
credit agreements 1,500 51,567
Proceeds from issuance of
long-term debt -- 49,756
Payment of long-term debt (8,000) (9,000)
Exercise of stock options 218 119
Net cash flows (used in)
provided by financing
activities (6,282) 92,442
Net Change in Cash and
Cash Equivalents 133 5,281
Cash and Cash Equivalents
at Beginning of Period 4,548 --
Cash and Cash Equivalents at
End of Period $ 4,681 $ 5,281
The accompanying notes are an integral part of these Consolidated
Financial Statements.
NPC International, Inc.
Notes to 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
were eliminated. (See Note 4 - Recapitalization of Romacorp, Inc.
for information regarding the accounting method used to record
this formerly wholly-owned subsidiary's activity for the quarter
ended June 30, 1998.)
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 for 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 31, 1998.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position of
the Company as of June 30, 1998, and March 31, 1998, the results
of operations and cash flows for the thirteen weeks ended June 30,
1998 and June 24, 1997. 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 net cash payments for income tax of $226,000 in the
thirteen weeks ended June 30, 1998, and cash receipts from income
tax refunds of $146,000 in the thirteen weeks ended June 24, 1997.
Cash paid for interest for the thirteen weeks ended June 30, 1998
and June 24, 1997 was $5,632,000 and $2,761,000, respectively.
Note 3 - Acquisitions
On March 6, 1997, the Company acquired 60 Pizza Hut units from
Pizza Hut, Inc. (PHI).
On March 27, 1997, the Company acquired 62 Pizza Hut units from
PHI. Simultaneous with the closing, the Company assumed
operational responsibility for four units which have been
reflected in the Company's financial statements as if owned.
These four units were acquired on September 2, 1997.
On June 5, 1997, the Company acquired an additional 51 units from
PHI. One additional PHI unit was purchased on July 10, 1997.
On May 15, 1997, the Company acquired 82 units from Jamie B.
Coulter (Coulter). Simultaneously, the Company assumed operational
responsibility for 18 additional Coulter units, which have been
reflected in the Company's financial statements as if owned. The
Company acquired 10 of the units on July 16, 1997, four more on
August 19, 1997 and on October 2, 1997 the Company closed on the
remaining four units.
The following unaudited pro forma results for the thirteen weeks
ended June 24, 1997, were developed assuming that all of the
acquired units previously described had been acquired at the
beginning of the period. 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 period nor is it necessarily indicative of
results that may occur in the future.
Pro Forma Results (unaudited)
(Dollars in thousands
except per share data) June 24, 1997
Total revenue $117,738
Net income 6,316
Net income per share - Basic .26
Net income per share - Diluted .25
Note 4 - Recapitalization of Romacorp, Inc.
Effective June 28, 1998, the Company completed the
recapitalization of its previously wholly-owned subsidiary,
Romacorp, Inc (Romacorp). Romacorp redeemed stock held by the
Company so that the Company held 20% of the equity of Romacorp
following the transaction. Sentinel Capital Partners became the
majority equity owner of Romacorp following the transaction.
Romacorp was a wholly-owned subsidiary of the Company throughout
the quarter, its results of operations have been consolidated and
reflected in the Consolidated Statement of Income for the thirteen
weeks ended June 30, 1998. The Company's remaining investment in
Romacorp is presented on its balance sheet and will be accounted
for using the cost method of accounting.
Note 5 - Earnings per Share
The following table sets forth the computation of basic and
diluted earnings per share:
Thirteen Weeks Ended
June 30, 1998 June 24, 1997
Numerator:
Net Income $ 33,150,000 $ 5,725,000
Denominator:
Denominator for basic
earnings per share - weighted
average shares 24,758,341 24,643,285
Effect of dilutive securities:
Employee stock options 479,839 368,141
Denominator for diluted
earnings per share -
adjusted weighted average
shares and assumed
conversions 25,238,181 25,011,426
Earnings per share - Basic $ 1.34 $ .23
Earnings per share - Dilutive $ 1.31 $ .23
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 31, 1998.
Overview - The Company is the largest Pizza Hut franchisee in the
world and at June 30, 1998, operated 658 Pizza Hut units in 24
states. The Company and PHI have agreed that the Company may
acquire additional Pizza Hut units and, as a result, operate up to
a total of 1,300 units, subject to availability and certain
conditions. During the preceding 18 months, the Company has
acquired over 300 units from the franchisor, PHI, and other
franchisees. The Company, estimates that is operates
approximately 9% of the entire Pizza Hut system. As a result of a
recapitalization of its Romacorp, Inc. subsidiary, effective June
28, 1998, the Company has reduced its equity holdings in this
entity to 20%, and therefore, no longer controls its operations.
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.
Certain of the Company's Pizza Huts units serve beer. This product
is not a significant portion of the Pizza Hut sales mix.
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.
Period of Operation - The Company operates on a 52 or 53 week
fiscal year ending the last Tuesday in March. The fiscal year
ending March 30, 1999 will contain 52 weeks.
Development
Activity with respect to unit count during the quarter is set
forth in the table below:
SYSTEM UNIT ACTIVITY
1999 FIRST QUARTER
Beginn- Conver- Develop Acquir Closed End-
ing sions -ed -ed ing
Company Owned
Pizza Hut
Restaurant 539 (1) 2 - 13 527
Delivery 141 1 - - 11 131
Total
Pizza Hut 680 - 2 - 24 658
Tony Roma's(1) 45 - - - 45*
Total Company
Owned 725 2 24 703
Franchised
Tony Roma's 147 2 - 2 147*
Total System 872 4 - 26 850
(1) Excludes 2 units operated as joint ventures by the Company.
*Effective June 28, 1998, NPC International, Inc. sold 80% of its
equity interest in Romacorp, Inc. and, therefore, no longer
controls the operations of Romacorp, Inc., and subsidiaries. (See
Note 4 - Recapitalization of Romacorp, Inc. for further
information.)
On April 27, 1998 the Company announced plans to consolidate and
relocate 53 Pizza Hut units to 45 new locations to redefine trade
areas, improve market presence, and to upgrade certain assets to a
more competitive format. Relocated units will be moved to
improved trade areas and fall into the following categories:
relocation of delivery units to more visible locations and
improved formats; relocation of older dine-in assets in rural
markets to new prototype units; and conversions of certain metro
markets to "Main-Path" restaurants. In conjunction with this
strategy, the Company closed 24 Pizza Hut units during the quarter
ended June 30, 1998. Additionally, two Pizza Hut units were
developed during the quarter.
One Tony Roma international franchise unit and one domestic
franchise unit opened during the quarter.
Results of Operations - Set forth at the beginning of the section
discussing the results of operations for each concept operated by
the Company is a table of revenue and operating expenses expressed
as a percent of revenue, or sales as indicated, for the thirteen
weeks ended June 30, 1998 and June 24, 1997. 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)
(dollars in thousands)
Thirteen Weeks Ended
June 30, 1998 June 24, 1997
Revenue
Restaurant Sales $ 72,240 $ 64,201
Delivery Sales 18,635 16,641
Total Revenue 90,875 $ 80,842
Restaurant Operating Expenses
as a Percentage of Revenue:
Total Expenses(1)
Cost of Sales 25.1% 26.6%
Direct Labor 27.9% 28.5%
Other 27.7% 26.5%
Total Operating Expenses 80.8% 81.6%
Restaurant Based Income 19.2% 18.4%
Restaurant Expenses(2)
Cost of Sales 25.2% 26.8%
Direct Labor 26.8% 27.3%
Other 28.4% 26.9%
Total Operating Expense 80.4% 81.0%
Restaurant Based Income 19.6% 19.0%
Delivery Expenses(3)
Cost of Sales 24.7% 26.3%
Direct Labor 32.5% 33.2%
Other 25.0% 24.6%
Total Operating Expenses 82.2% 84.1%
Restaurant Based Income 17.8% 15.9%
(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 30, 1998 with the Thirteen Weeks Ended June 24, 1997
Revenue from the Company's Pizza Hut operations was $90.9 million
during the quarter, for an increase of 12% over the same period of
the prior year. This increase was due to the operation of 222
units during the quarter which were acquired throughout the same
quarter of the prior year. The increase in units operated during
the quarter more than offset the impact of closing 24 low volume
units without replacement as planned during the quarter. Sales
from delivery units was $18.6 million during the quarter for an
increase of 12% over the $16.6 million recorded last year.
Comparable sales growth of 5.1% and an increase in the number of
units operated contributed to this increase in sales. The
Company's restaurants (Red Roofs) accounted for the balance of the
Pizza Hut sales volume. These units recorded a decrease in
comparable sales of 2%, which was more than offset by the increase
in units operated relative to the prior year. For all unit types
combined, comparable sales declined by 0.7% during the quarter
while average unit volumes increased by 2% over the prior year due
to the favorable impact of the asset re-imaging plan. (See
Development section for further information regarding the
Company's asset re-imaging strategy.)
Cost of sales as a percent of revenue improved 150 basis points
compared to the same quarter of the prior year due to more
normalized ingredient costs, reduced waste in acquired stores and
a decline in cheese cost for the quarter of approximately 3%
compared to the same period of the prior year. The Company
benefited from reduced ingredient costs compared to the same
period of the prior year due to better optimization of ingredient
formulations and supply contract negotiations.
Direct labor for the quarter declined 60 basis points compared to
the same period of the prior year despite the increase in minimum
wage effective September, 1997 which has contributed to a 6%
increase in the average hourly wage incurred relative to last
year. This improvement results from labor efficiencies primarily
achieved in acquisition markets. (See Effects of Inflation and
Other Matters for additional information on minimum wage
increases.)
Other operating expense for the quarter increased 120 basis points
over the comparable period of the prior year. This is largely
attributable to higher occupancy costs as the Company leases a
higher percent of its facilities than in the prior year and
increased store manager bonuses due to improvements in
controllable profit.
TONY ROMA'S OPERATIONS
(Unaudited)
(dollars in thousands)
Thirteen Weeks Ended
June 30, 1998 June 24, 1997
Revenue
Restaurant Sales $ 22,513 $ 20,225
Franchise Revenue 2,114 2,050
Total Revenue $ 24,627 $ 22,275
Restaurant Operating Expenses
as a Percentage of Sales
Cost of Sales 34.8% 32.6%
Direct Labor 30.2% 31.5%
Other 23.5% 24.2%
Total Operating Expenses 88.5% 88.3%
Restaurant Based Income 11.5% 11.7%
Income from System Operations(1) 19.1% 19.9%
(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 30, 1998 with the Thirteen Weeks Ended June 24, 1997
Restaurant sales were $22.5 million for the quarter for an 11.3%
or $2.3 million increase over the same quarter of the prior year.
The increase is attributable to restaurant development and a
comparable sales increase of 1.9% for stores open more than 18
months. The improvement in comparable sales was due largely to a
new menu implemented late in the third quarter of fiscal 1998.
Net franchise revenue was $2,114,000 during the quarter, which was
essentially flat compared to the $2,050,000 recorded during the
same period of the prior year.
Direct labor, as a percentage of sales, declined 130 basis points
for the quarter due to leverage obtained from increased store
volume and comparable sales. Also affecting the change for the
quarter was the opening of only one new store during the last six
months compared to the opening of five new stores during the same
period of the prior year. Unusually high labor costs are incurred
with store openings due to increased training and staffing levels
to ensure the customer's experience is favorable.
Other operating expense, as a percent of sales, declined 70 basis
points for the quarter compared to the same period of the prior
year. This improvement is due largely to the above mentioned
leverage obtained from increased store volume and comparable
sales.
Consolidated Results
Comparison of Consolidated Operating Results for the Thirteen
Weeks Ended June 30, 1998 with the Thirteen Weeks Ended June 24,
1997
Total consolidated revenue for the quarter was $115.5 million, for
an increase of 12%, or $12.4 million over the same period of the
prior year. The growth was due largely 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
Consolidated Financial Statements for additional information on
the acquisitions.)
Consolidated income from restaurant operations was $22.2 million
or 19.2% of revenue for the quarter compared to $19.3 million or
18.7% last year for an increase of $2.9 million or 15%. Income
from restaurant operations as a percent of revenue increased over
the prior year due to improved margin performance in the Company's
Pizza Hut units.
General and administrative expenses, as a percent of revenue,
increased 30 basis points over the same period of the prior year
as the Pizza Hut infrastructure required to support the acquired
stores was not fully developed at the end of the first quarter of
fiscal 1998. Depreciation and amortization increased $165,000 or
7% over last year due to increased amortization of franchise
rights associated with acquisitions, but increased only 10 basis
points as a percent of sales, compared to the same period of the
prior year due to increased revenue.
Increased borrowings associated with fiscal 1998 acquisitions
resulted in an increase in interest charges of $852,000 for the
quarter compared to same period of the prior fiscal year. Net
income for the quarter was $33.2 million which included $39.4
million in pre-tax income related to the gain on the
recapitalization of Romacorp, Inc. and $12.6 million of income tax
expense related to that gain. Consistent with last year, income
taxes have been provided for at 35% for income not related to the
recapitalization gain. (See Note 4 - Recapitalization of
Romacorp, Inc. for further information.)
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 $12.6 million for the quarter, a
decrease of 58% compared to the $29.9 million for the same period
of the prior year. Cash flow from operations last year was
positively impacted by the working capital contribution realized
from the 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. Borrowing
capacity will be increased as a result of the Romacorp, Inc.
transaction as net of tax proceeds of approximately $90 million
will be used to reduce outstanding borrowings on the line of
credit. After giving effect to this repayment, the Company had
$176 million in unused borrowing capacity under this agreement,
access to which is limited by the Company's debt covenants. The
acquisitions completed during fiscal 1998 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.
During the quarter ended June 30, 1998, 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 resulted in $5.8 million
of total capital expenditures for the quarter ended June 30, 1998
compared to $8.6 million of total capital expenditures for the
same period of the prior year.
The Company anticipates cash flow from operations and capacity
under its existing line of credit will be sufficient to fund
continuing expansion, acquisitions and improvements and to service
debt obligations.
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 were
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 were
located. Pizza Hut sales are largely driven through advertising
and promotion and are adversely impacted in economic times that
generally negatively impact consumer discretionary income such as
back-to-school and post 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 increased the minimum wage to $5.15 per hour in
September 1997. In addition to the federal minimum wage increase
in September 1997, the state of Oregon increased the state minimum
wage rate to $6.00 per hour on January 1, 1998. The Company
currently operates 22 Pizza Hut units in the State of Oregon.
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. Significant changes in the price of cheese
have an impact on the Company's food cost as a percent of revenue.
During the quarter, cheese prices were 3% less than the costs
incurred during the comparable period of the prior year. However,
management expects cheese costs to exceed last year's levels
during the second fiscal quarter by 20% to 25% based upon current
prices and available forecasts.
Increases in interest rates would directly affect the Company's
financial results. Subsequent to receiving proceeds from the
Romacorp recapitalization transaction, approximately 83% 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 estimates, risks and
uncertainties, including but not limited to: consumer demand and
market acceptance risk; the level of and the effectiveness of
marketing campaigns by the Company and PHI, 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,
new product introductions, product mix and pricing, 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 31, 1998.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibit is filed as part of this Report:
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 30, 1998:
May 8, 1998 Acquisition or Disposition of Assets pertaining
to the recapitalization of Romacorp, Inc.
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 11, 1998
Vice President Finance Troy D. Cook
Chief Financial Officer
Principal Financial Officer
DATE: August 11, 1998
Vice President, Alan L. Salts
Restaurant Services
Chief Accounting Officer
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0
0
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</TABLE>
