NPC International, Inc.
NPC Restaurant Holdings, LLC (Form: 8-K, Received: 11/09/2016 17:23:53)

 


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2016

NPC RESTAURANT HOLDINGS, LLC
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation)
333-180524-04
(Commission
File Number )
20-4509045
(I.R.S. Employer
Identification No.)

7300 West 129 th Street
Overland Park, Kansas 66213
(Address of principal executive office)(Zip Code)

(913) 327-5555
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 




Item 2.02.    Results of Operations and Financial Condition
On November 9, 2016, NPC International, Inc. (the “Company”), which is a wholly-owned subsidiary of NPC Restaurant Holdings, LLC ("Parent"), issued a press release entitled “NPC International, Inc. Reports Third Quarter Results.” A copy of the press release containing the announcement is attached hereto as Exhibit 99.1.
As a result of Parent's guarantee of the Company's 10.50% Senior Notes due 2020, Parent is required to file reports with the Securities and Exchange Commission which include consolidated financial statements of Parent and its subsidiaries (including the Company). Parent's only material asset is all of the stock of the Company.

The information in this Form 8-K and Exhibit 99.1 hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as and when expressly set forth by such specific reference in such filing. 

Item 9.01    Financial Statements and Exhibits.
(d)    Exhibits
Number
Description
99.1
NPC International, Inc. Reports Third Quarter Results





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 hereunto duly authorized.

 
NPC RESTAURANT HOLDINGS, LLC
 
 
 
 
By:
/s/ Troy D. Cook
 
Troy D. Cook
 
Executive Vice President—Finance and Chief Financial Officer
 
 
Date: November 9, 2016
 





INDEX TO EXHIBITS
Exhibit
Description
99.1
NPC International, Inc. Reports Third Quarter Results




NEWSRELEASELOGO.JPG

NPC International, Inc. Reports Third Quarter Results

Overland Park, Kansas, (November 9, 2016) - NPC International, Inc. (the “Company” or “NPC”), today reported results for its third fiscal quarter ended September 27, 2016.

THIRD QUARTER HIGHLIGHTS:

Pizza Hut comparable store sales were -2.7%.
Wendy’s comparable store sales were +1.7%.
The Company had a net loss of $(4.5)MM compared to $(2.1)MM last year.
Adjusted EBITDA (reconciliation attached) was $24.7MM; an increase of $2.7MM or 12.4% from the prior year.
Adjusted EBITDA margin improved to 8.5% from 7.6% last year.

YEAR-TO-DATE HIGHLIGHTS:

Pizza Hut comparable store sales were +0.3%.
Wendy’s comparable store sales were +1.2%.
Net income was $4.4MM, an increase of $1.5MM from last year.
Adjusted EBITDA (reconciliation attached) was $91.9MM; an increase of $8.1MM or 9.7% from the prior year.
Adjusted EBITDA margin improved to 10.4% from 9.6% last year.
Cash balances were $16.1MM compared to $32.7MM at the prior fiscal year end, after investing $36.8MM in the acquisition of 39 Wendy’s units during the quarter.
Our leverage ratio improved to 4.33X Consolidated EBITDA, net of allowable cash balances (as defined in our Credit Agreement) from 4.75X at the prior fiscal year end.


NPC’s President and CEO Jim Schwartz said, “Our Wendy’s business rebounded this quarter and posted solid comparable store sales growth of 1.7% while driving significant margin improvement and profit growth. Our Pizza Hut operations generated disappointing comparable store sales with a decline of 2.7% this quarter but remains in positive comp territory on a year to date basis.

Our Pizza Hut business had a difficult quarter as top-line momentum has waned since the first quarter and our promotional activities failed to activate the consumer. We are conducting extensive brand research at an unprecedented level and introducing new advertising demonstrating why “No One out Pizzas the Hut”; these changes provide us encouragement heading into fiscal 2017.

Our Wendy’s business leveraged core product offerings, innovation and unique value to generate profitable sales growth. This top-line momentum combined with lower ingredient prices and improved labor efficiencies drove significant increases in Adjusted EBITDA margins and improved profitability for the quarter.

Additionally, we completed the acquisition of 39 Wendy’s restaurants in the Raleigh-Durham market early in the quarter. The assimilation of this market is going smoothly and the operations contributed to our impressive Wendy’s results for the quarter.

We continued to make significant progress against our delco relocation efforts in our Pizza Hut business and image activation efforts in our Wendy’s operations this quarter. We remain on target to fully deliver upon these two key investment initiatives for the full year.

Finally, after investing $37 million in the acquisition, we ended the quarter with significant liquidity and improved credit statistics. We are focused upon closing fiscal 2016 in the best way possible given the relative current performance of the brands in our portfolio while also strategically planning for a successful 2017.”








The Company is a wholly-owned subsidiary of NPC Restaurant Holdings, LLC ("Parent"), which has guaranteed the Company's 10.50% Senior Notes due 2020. As a result of its guaranty, Parent is required to file reports with the Securities and Exchange Commission which include consolidated financial statements of Parent and its subsidiaries (including the Company). Parent's only material asset is all of the stock of the Company. The quarterly financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations for Parent and the Company on a consolidated basis are set forth in Parent's Form 10-Q for the fiscal quarter ended September 27, 2016 which can be accessed at www.sec.gov .


CONFERENCE CALL INFORMATION:

The Company’s third quarter earnings conference call will be held Thursday, November 10, 2016 at 9:00 a.m. CT (10:00 a.m. ET). In addition to a discussion of third quarter results, the presentation may also include discussion of Company developments, forward-looking information and other material information about business and financial matters. You can access this call by dialing 888-391-6937. The access code for the call is 8627627. The Company also intends to include a live presentation available via webcast, which can be accessed through the Company’s website at www.npcinternational.com under Events and Presentations in the investor information.

For those unable to participate live, a replay of the call will be available until November 17, 2016 by dialing 855-859-2056. The conference ID for the replay is 8627627. An archived webcast with the accompanying slides will also be available on the Company’s website.


NPC International, Inc. is the world’s largest Pizza Hut franchisee and currently operates 1,228 Pizza Hut units in 27 states and 183 Wendy’s units in 5 states.
    
For more complete information regarding the Company’s financial position and results of operations, investors are encouraged to review the Parent’s financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Parent’s Form 10-Q which can be accessed at www.sec.gov .


“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Certain statements contained in this news release that do not relate to historical or current facts constitute forward-looking statements. These include statements regarding our plans and expectations, including our current expectations for future operations, costs and financial results. Forward-looking statements are subject to inherent risks and uncertainties and there can be no assurance that such statements will prove to be correct. Actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors, including lower than anticipated consumer discretionary spending; deterioration in general economic conditions; competition in the quick service restaurant market; adverse changes in food, labor and other costs; price inflation or deflation; our ability to successfully integrate recent acquisitions and successfully complete additional acquisitions of restaurant units; and other factors. These risks and other risks are described in Parent’s filings with the Securities and Exchange Commission, including Parent's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Copies of these filings may be obtained by contacting NPC or may be accessed at www.sec.gov. All forward-looking statements made in this news release are made as of the date hereof. NPC does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances, except as otherwise required by law. Investors are cautioned not to place undue reliance on any forward-looking statements.












NPC INTERNATIONAL, INC.
Consolidated Statements of Operations
(Dollars in thousands)
(Unaudited)
 
13 Weeks Ended
 
 
September 27, 2016
 
September 29, 2015
 
 
 
 
 
 
 
 
 
 
Net product sales (1)
$
291,250

 
100.0
 %
 
$
288,025

 
100.0
 %
 
Fees and other income (2)
13,830

 
4.7
 %
 
12,627

 
4.4
 %
 
Total sales
305,080

 
104.7
 %
 
300,652

 
104.4
 %
 
 
 
 
 
 
 
 
 
 
Cost of sales (3)
85,512

 
29.4
 %
 
85,541

 
29.7
 %
 
Direct labor  (4)
87,218

 
29.9
 %
 
87,127

 
30.2
 %
 
Other restaurant operating expenses  (5)
101,242

 
34.8
 %
 
99,275

 
34.5
 %
 
General and administrative expenses (6)
19,387

 
6.7
 %
 
17,773

 
6.2
 %
 
Corporate depreciation and amortization of intangibles
5,634

 
1.9
 %
 
5,316

 
1.8
 %
 
Net facility impairment and closure costs (7)
1,392

 
0.5
 %
 
1,050

 
0.4
 %
 
Other
151

 
0.1
 %
 
(153
)
 
(0.1
)%
 
     Total costs and expenses
300,536

 
103.3
 %
 
295,929

 
102.7
 %
 
     Operating income
4,544

 
1.4
 %
 
4,723

 
1.7
 %
 
Interest expense (8)
11,174

 
3.7
 %
 
10,240

 
3.6
 %
 
Loss before income taxes
(6,630
)
 
(2.3
)%
 
(5,517
)
 
(1.9
)%
 
    Income taxes
(2,137
)
 
(0.8
)%
 
(3,401
)
 
(1.2
)%
 
 
 
 
 
 
 
 
 
 
    Net loss
$
(4,493
)
 
(1.5
)%
 
$
(2,116
)
 
(0.7
)%
 
 
 
 
 
 
 
 
 
 
Percentages are shown as a percent of net product sales.
 
 
 
 
 
 
 
 
 
 
Comparable store sales (net product sales only):
 
 
 
 
 
 
 
 
     Pizza Hut
(2.7
)%
 
 
 
(0.9
)%
 
 
 
     Wendy's
1.7
 %
 
 
 
3.1
 %
 
 
 
 Comparable stores sales are only reported for locations that have been operated by the Company for at least 12 months.
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
$
19,920

 
 
 
$
15,531

 
 
 
Cash Rent Expense
$
17,334

 
 
 
$
16,680

 
 
 

(1)  
Net product sales increased 1.1% due to growth in our Wendy’s business with the July acquisition of 39 Wendy’s restaurants and an increase in comparable store sales of 1.7%. This increase was largely offset by a comparable store sales decline of -2.7% in our Pizza Hut operations and a decrease in Pizza Hut equivalent units.
(2)  
Fees and other income increased 9.5% due to increased delivery fees in our Pizza Hut operations.
(3)  
Cost of sales, as a percentage of net product sales, decreased primarily due to lower ingredient costs.
(4)  
Direct labor, as a percentage of net product sales, decreased due to productivity gains in both operations and sales leveraging in our Wendy’s operations.
(5)  
Other restaurant operating expenses, as a percentage of net product sales, increased due to higher depreciation and amortization expense and increased rent expense, primarily due to the acquisition of Wendy’s restaurants partially offset by lower insurance and advertising expense.
(6)  
General and administrative expenses increased due to the timing of incentive compensation accruals, increased field personnel and support costs and higher credit card processing fees.
(7)  
Net facility impairment and closure costs increased due to closure charges in our Pizza Hut operations largely associated with our delco relocation efforts.
(8)  
Interest expense increased due to the increase in our average borrowing rate as a result of the term loan amendment in December 2015, which was partially offset by a decline in our average outstanding debt balance.

Note: The explanations above are abbreviated disclosures. For complete disclosure see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Parent's Form 10-Q filed with the SEC.




NPC INTERNATIONAL, INC.
Consolidated Statements of Operations
(Dollars in thousands)
(Unaudited)
 
39 Weeks Ended
 
 
September 27, 2016
 
September 29, 2015
 
 
 
 
 
 
 
 
 
 
Net product sales (1)
$
886,501

 
100.0
 %
 
$
876,547

 
100.0
 %
 
Fees and other income (2)
42,098

 
4.7
 %
 
39,549

 
4.5
 %
 
Total sales
928,599

 
104.7
 %
 
916,096

 
104.5
 %
 
 
 
 
 
 
 
 
 
 
Cost of sales (3)
255,748

 
28.8
 %
 
255,871

 
29.2
 %
 
Direct labor (4)
263,481

 
29.7
 %
 
264,135

 
30.1
 %
 
Other restaurant operating expenses (5)
297,657

 
33.6
 %
 
292,150

 
33.3
 %
 
General and administrative expenses (6)
56,501

 
6.4
 %
 
51,887

 
5.9
 %
 
Corporate depreciation and amortization of intangibles
16,223

 
1.8
 %
 
15,825

 
1.8
 %
 
Net facility impairment and closure costs (7)
3,966

 
0.4
 %
 
5,727

 
0.7
 %
 
Other
(38
)
 
0.0
 %
 
240

 
0.0
 %
 
     Total costs and expenses
893,538

 
100.7
 %
 
885,835

 
101.0
 %
 
     Operating income
35,061

 
4.0
 %
 
30,261

 
3.5
 %
 
Interest expense (8)
33,716

 
3.8
 %
 
31,197

 
3.6
 %
 
Income (loss) before income taxes
1,345

 
0.2
 %
 
(936
)
 
(0.1
)%
 
    Income taxes
(3,092
)
 
(0.3
)%
 
(3,867
)
 
(0.4
)%
 
 
 
 
 
 
 
 
 
 
    Net income
$
4,437

 
0.5
 %
 
$
2,931

 
0.3
 %
 
 
 
 
 
 
 
 
 
 
Percentages are shown as a percent of net product sales.
 
 
 
 
 
 
 
 
 
 
Comparable store sales (net product sales only):
 
 
 
 
 
 
 
 
     Pizza Hut
0.3
%
 
 
 
(1.3
)%
 
 
 
     Wendy's
1.2
%
 
 
 
1.4
 %
 
 
 
 Comparable stores sales are only reported for locations that have been operated by the Company for at least 12 months.
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
$
45,313

 
 
 
$
41,997

 
 
 
Cash Rent Expense
$
51,172

 
 
 
$
50,662

 
 
 

(1)  
Net product sales increased 1.1% primarily due to the growth in our Wendy’s business with the July acquisition of 39 Wendy’s restaurants and a comparable store sales increase of +1.2% as well as an increase in comparable store sales in our Pizza Hut operations of +0.3%. These increases were partially offset by a reduction in Pizza Hut equivalent units.
(2)  
Fees and other income increased 6.4% due to increased delivery fees and delivery transactions for our Pizza Hut restaurants.
(3)  
Cost of sales, as a percentage of net product sales, decreased primarily due to lower ingredient costs.
(4)  
Direct labor, as a percentage of net product sales, decreased due to productivity gains in both operations and sales leveraging in our Wendy’s operations.
(5)  
Other restaurant operating expenses, as a percentage of net product sales, increased due to higher depreciation and amortization expense and higher restaurant manager bonuses, partially offset by lower utility expenses.
(6)  
General and administrative expenses increased due to the timing of incentive compensation accruals, increased field personnel and support costs and higher credit card processing fees.
(7)  
Net facility impairment and closure costs decreased due to a reduction in impairment charges which was partially offset by increased closure charges in our Pizza Hut operations largely associated with our delco relocation efforts.
(8)  
Interest expense increased due to the increase in our average borrowing rate as a result of the term loan amendment in December 2015, which was partially offset by a decline in our average outstanding debt balance.

Note: The explanations above are abbreviated disclosures. For complete disclosure see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Parent's Form 10-Q filed with the SEC




NPC INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)


 
 
 
 
 
 
 
September 27, 2016
 
December 29, 2015
Assets
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
16,053

 
$
32,717

 
Other current assets
25,457

 
30,398

 
   Total current assets
41,510

 
63,115

 
 
 
 
 
Facilities and equipment, net
230,599

 
203,468

Franchise rights, net
623,192

 
620,518

Other noncurrent assets
325,323

 
323,595

 
   Total assets
$
1,220,624

 
$
1,210,696

Liabilities and Members' Equity
 
 
 
Current liabilities:
 
 
 
 
Other current liabilities
$
113,386

 
$
104,038

 
Current portion of debt
2,950

 
4,158

 
   Total current liabilities
116,336

 
108,196

 
 
 
 
 
Long-term debt
576,249

 
577,011

Other noncurrent liabilities
247,474

 
251,800

 
   Total liabilities
940,059

 
937,007

Members' equity
280,565

 
273,689

 
   Total liabilities and members' equity
$
1,220,624

 
$
1,210,696



 




NPC INTERNATIONAL, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

 
 
39 Weeks Ended
 
 
September 27, 2016
 
September 29, 2015
 
 
 
 
 
Operating activities
 
 
 
Net income
$
4,437

 
$
2,931

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Depreciation and amortization
51,908

 
47,151

 
Amortization of debt issuance costs
3,222

 
2,893

 
Deferred income taxes
(4,717
)
 
(5,491
)
 
Net facility impairment and closure costs
3,966

 
5,727

 
Other
(342
)
 
335

 
Changes in assets and liabilities, excluding acquisitions:
 
 
 
 
Assets
4,144

 
7,131

 
Liabilities
6,733

 
2,593

Net cash provided by operating activities
69,351

 
63,270

Investing activities
 
 
 
 
Capital expenditures
(45,313
)
 
(41,997
)
 
Purchase of Wendy's business, net of cash acquired
(44,783
)
 

 
Proceeds from sale-leaseback transactions
7,155

 
1,408

 
Proceeds from disposition of assets
1,252

 
521

Net cash used in investing activities
(81,689
)
 
(40,068
)
Financing activities
 
 
 
 
Payments on term bank facilities
(4,326
)
 
(3,119
)
Net cash used in financing activities
(4,326
)
 
(3,119
)
Net change in cash and cash equivalents
(16,664
)
 
20,083

Beginning cash and cash equivalents
32,717

 
12,063

Ending cash and cash equivalents
$
16,053

 
$
32,146

 
 
 
 
 



























NPC INTERNATIONAL, INC.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
(Unaudited)
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
September 27, 2016
 
September 29, 2015
 
September 27, 2016
 
September 29, 2015
Adjusted EBITDA:
 
 
 
 
 
 
 
Net (loss) income
$
(4,493
)
 
$
(2,116
)
 
$
4,437

 
$
2,931

Adjustments:
 
 
 
 
 
 
 
 
Interest expense
11,174

 
10,240

 
33,716

 
31,197

 
Income taxes
(2,137
)
 
(3,401
)
 
(3,092
)
 
(3,867
)
 
Depreciation and amortization
18,155

 
16,072

 
51,908

 
47,151

 
Pre-opening expenses and other
624

 
143

 
926

 
621

 
Net facility impairment and closure costs
1,392

 
1,050

 
3,966

 
5,727

Adjusted EBITDA (1)
$
24,715

 
$
21,988

 
$
91,861

 
$
83,760

Adjusted EBITDA Margin (2)
8.5
%
 
7.6
%
 
10.4
%
 
9.6
%
 
 
 
 
 
 
 
 
 
Free Cash Flow:
 
 
 
 
 
 
 
Net cash provided by operating activities
$
17,008

 
$
14,221

 
$
69,351

 
$
63,270

Adjustments:
 
 
 
 
 
 
 
 
Capital expenditures
(19,920
)
 
(15,531
)
 
(45,313
)
 
(41,997
)
 
Free Cash Flow (3)
$
(2,912
)
 
$
(1,310
)
 
$
24,038

 
$
21,273


Unit Count Activity
 
 
39 Weeks Ended
 
 
September 27, 2016
 
September 29, 2015
 
 
Combined
Wendy's
Pizza Hut
 
Combined
Wendy's
Pizza Hut
Beginning of period
1,395

144

1,251

 
1,420

143

1,277

 
Acquired
42

42


 



 
Developed (4)
22


22

 
10


10

 
Closed (4)
(48
)
(3
)
(45
)
 
(24
)

(24
)
End of period
1,411

183

1,228

 
1,406

143

1,263

 
 
 
 
 
 
 
 
 
Equivalent units (5)
1,391

154

1,237

 
1,407

142

1,265

 
 
 
 
 

(1) The Company defines Adjusted EBITDA as consolidated net (loss) income plus interest, income taxes, depreciation and amortization, pre-opening expenses, net facility impairment and closure costs and certain other items that are non-operational in nature. Management believes the elimination of these items, as well as certain other items of a non-operational nature, as may be noted in the table above, give investors and management useful information to compare the performance of our core operations over different periods and to compare our operating performance with the performance of other companies that have different financing and capital structures or tax rates. Adjusted EBITDA is a non-GAAP financial measure, has limitations as an analytical tool, and should not be considered in isolation from, or as a substitute for analysis of, the Company’s financial information reported under GAAP. Adjusted EBITDA, as defined above, may not be similar to EBITDA measures of other companies.
(2) Calculated as a percentage of net product sales.
(3) The Company defines Free Cash Flow as cash flows from operations less capital expenditures. Management believes that the free cash flow measure is important to investors to provide a measure of how much cash flow is available, after current changes in working capital and acquisition of property and equipment, to be used for working capital needs or for strategic opportunities, including servicing debt, making acquisitions, and making investments in the business. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures.
(4) For Pizza Hut, 21 and six units were relocated or rebuilt and are included in both the developed and closed totals above for the 39 weeks ended September 27, 2016, and September 29, 2015, respectively. The closed units for the 39 weeks ended September 27, 2016 and September 29, 2015 included one unit and three units, respectively, which are being relocated and will re-open upon completion.
(5) Equivalent units represent the number of units open at the beginning of a given period, adjusted for units opened, closed, acquired or sold during the period on a weighted average basis .

Contact: Troy D. Cook, Executive Vice President-Finance & Chief Financial Officer
913-327-3109
7300 W 129 th St
Overland Park, KS 66213