NPC International, Inc. Reports Third Quarter 2012 Results
NPC International, Inc. Reports Third Quarter 2012 Results
OVERLAND PARK, Kan.--(BUSINESS WIRE)-- NPC International, Inc. (the "Company"), today reported results for its third fiscal quarter ended September 25, 2012.
THIRD QUARTER HIGHLIGHTS:
Comparable store sales increased 1.3% rolling over an increase of 0.4% last year.
Adjusted EBITDA (reconciliation attached) of $26.6MM was $5.1MM or 24% greater than last year.
Adjusted EBITDA margins expanded 150 basis points over last year.
Net income of $2.4MM was $1.1MM below last year.
YEAR-TO-DATE RESULTS:
Comparable store sales increased 3.9% rolling over a decrease of (2.5)% last year.
Adjusted EBITDA (reconciliation attached) of $99.7MM was $21.1MM or 27% greater than last year.
Adjusted EBITDA margins expanded 190 basis points over last year.
Cash balances increased $20.4MM from our opening balance sheet, despite investing $19.4MM in the acquisition of 36 units and $4.9MM refinancing our term loan.
Net income of $14.4MM was $3.8MM below last year.
Our leverage ratio was 3.74X Consolidated EBITDA, net of allowable cash balances of $30.0MM, compared to pro-forma leverage of 4.85X at the closing of the transaction on December 28, 2011.
NPC's President and CEO Jim Schwartz said, "We are pleased to report a 24% increase in our third quarter Adjusted EBITDA on the strength of continued sales growth and continued margin expansion, which was fueled by our margin management initiatives and a softening commodities environment.
The brand continued to promote compelling value this quarter with our $10 Any Pizza promotion while also bringing innovation to the category with the introduction of Garlic Bread Pizza. Our strategy of core value, unique product bundling and product innovation continues to resonate well with the consumer.
Our Delco Lite growth initiative gained significant traction this quarter with the opening of 15 Delco Lites. We have opened 27 Delco Lites this fiscal year-to-date, and 11 since quarter end for a total of 38 opened to date. We expect to comfortably exceed our target of 40 new Delco Lites this year; accordingly, we are turning our attention to next year's growth plan. Importantly, these new locations continue to deliver results that are well in line with our return expectations and, as a result, we are enthusiastically targeting another 40 new units in fiscal 2013.
Our strong fiscal 2012 results and cash flows have allowed us to de-leverage our business by more than one full turn of EBITDA resulting in significant financial flexibility. This increased flexibility affords the opportunity to comfortably pursue our aggressive growth plans.
We look forward to closing this year with solid momentum as we start to look towards fiscal 2013 with a strong focus on excellent operations, organic top line growth, and high return investments."
The Company is a wholly-owned subsidiary of NPC Restaurant Holdings, LLC ("Parent", formerly NPC Acquisition Holdings, LLC), 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 25, 2012 which can be accessed atwww.sec.gov.
CONFERENCE CALL INFORMATION:
The Company's third quarter earnings conference call will be held Tuesday, November 6, 2012 at 9:00 am CT (10:00 ET). You can access this call by dialing 866-314-5232. The international number is 617-213-8052. The access code for the call is 75258959.
For those unable to participate live, a replay of the call will be available until November 13, 2012 by dialing 888-286-8010 or by dialing international at 617-801-6888. The access code for the replay is 74077880.
A replay of the call will also be available at the Company's website at www.npcinternational.com.
NPC International, Inc. is the world's largest Pizza Hut franchisee and currently operates 1,222 Pizza Hut restaurants and delivery units in 28 states.
For more complete information regarding the Company's financial position and results of operations, investors are encouraged to review the Parent'squarterly financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations, incorporated into the Parent's Form 10-Q which can be accessed atwww.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. 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; and other factors. These risks and other risks are described in Parent's and NPC's filings with the Securities and Exchange Commission, including Parent's and NPC's Post Effective Amendment No. 1 to Form S-4 Registration Statement, 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. 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. Investors are cautioned not to place undue reliance on any forward-looking statements.
NPC INTERNATIONAL, INC. Consolidated Statements of Income (Dollars in thousands) (Unaudited) | ||||||||||||||||||
13 Weeks Ended | ||||||||||||||||||
Sept. 25, 2012 | Sept. 27, 2011 | |||||||||||||||||
Net product sales (1) | $ | 243,533 | 100.0 | % | $ | 228,021 | 100.0 | % | ||||||||||
Fees and other income (2) | 12,700 | 5.2 | % | 9,830 | 4.3 | % | ||||||||||||
Total sales | 256,233 | 105.2 | % | 237,851 | 104.3 | % | ||||||||||||
Comparable store sales (net product sales only) | 1.3 | % | 0.4 | % | ||||||||||||||
Cost of sales (3) | 70,408 | 28.9 | % | 70,695 | 31.0 | % | ||||||||||||
Direct labor (4) | 73,244 | 30.1 | % | 66,841 | 29.3 | % | ||||||||||||
Other restaurant operating expenses (5) | 81,099 | 33.3 | % | 74,113 | 32.5 | % | ||||||||||||
General and administrative expenses (6) | 14,320 | 5.9 | % | 13,102 | 5.7 | % | ||||||||||||
Corporate depreciation and amortization of intangibles | 4,488 | 1.8 | % | 3,078 | 1.3 | % | ||||||||||||
Other | 6 | 0.0 | % | 902 | 0.5 | % | ||||||||||||
Total costs and expenses | 243,565 | 100.0 | % | 228,731 | 100.3 | % | ||||||||||||
Operating income | 12,668 | 5.2 | % | 9,120 | 4.0 | % | ||||||||||||
Interest expense (7) | 11,416 | 4.7 | % | 6,131 | 2.7 | % | ||||||||||||
Income before income taxes | 1,252 | 0.5 | % | 2,989 | 1.3 | % | ||||||||||||
Income tax benefit | (1,126 | ) | -0.5 | % | (480 | ) | -0.2 | % | ||||||||||
Net income | $ | 2,378 | 1.0 | % | $ | 3,469 | 1.5 | % | ||||||||||
Percentages are shown as a percent of net product sales. | ||||||||||||||||||
Capital Expenditures | $ | 12,464 | $ | 9,036 | ||||||||||||||
Cash Rent Expense | $ | 13,001 | $ | 12,506 | ||||||||||||||
(1) | Net product sales increased 6.8% due to a 1.3% increase in comparable store sales and a 5.3% increase in equivalent units. | |
(2) | Fees and other income increased 29.2% due to higher delivery charge income from increased delivery transactions, customer delivery charge increases and increased equivalent units. | |
(3) | Cost of sales, as a percentage of net product sales, decreased primarily due to savings from the margin management initiative and lower commodity costs partially offset by product mix changes associated with the $10 Any Pizza promotion. | |
(4) | Direct labor, as a percentage of net product sales, increased largely due to increased delivery transactions, which are more labor intensive, and to a lesser extent lower net selling prices. | |
(5) | Other restaurant operating expenses, as a percentage of net product sales, increased largely due to higher delivery driver reimbursement expense, increased depreciation expense and higher restaurant manager bonus expense partially offset by the sales leveraging effect on fixed and semi-fixed costs, primarily occupancy costs, the benefit of the 2012 development incentives from Pizza Hut, Inc. and lower advertising expenses. | |
(6) | General and administrative expenses increased largely due to higher incentive compensation and salaries expense. | |
(7) | Interest expense increased primarily due to higher average debt levels and interest rates as a result of the acquisition of our Company by Olympus Partners on December 28, 2011. | |
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 Income (Dollars in thousands) (Unaudited) | ||||||||||||||||||
39 Weeks Ended | ||||||||||||||||||
Sept. 25, 2012 | Sept. 27, 2011 | |||||||||||||||||
Net product sales (1) | $ | 753,148 | 100.0 | % | $ | 695,727 | 100.0 | % | ||||||||||
Fees and other income (2) | 37,060 | 4.9 | % | 31,875 | 4.6 | % | ||||||||||||
Total sales | 790,208 | 104.9 | % | 727,602 | 104.6 | % | ||||||||||||
Comparable store sales (net product sales only) | 3.9 | % | -2.5 | % | ||||||||||||||
Cost of sales (3) | 216,660 | 28.8 | % | 209,248 | 30.1 | % | ||||||||||||
Direct labor (4) | 220,459 | 29.3 | % | 204,298 | 29.4 | % | ||||||||||||
Other restaurant operating expenses (5) | 238,033 | 31.6 | % | 222,090 | 31.9 | % | ||||||||||||
General and administrative expenses (6) | 43,158 | 5.7 | % | 39,420 | 5.7 | % | ||||||||||||
Corporate depreciation and amortization of intangibles | 13,123 | 1.7 | % | 8,978 | 1.3 | % | ||||||||||||
Other | 509 | 0.1 | % | 1,530 | 0.2 | % | ||||||||||||
Total costs and expenses | 731,942 | 97.2 | % | 685,564 | 98.6 | % | ||||||||||||
Operating income | 58,266 | 7.7 | % | 42,038 | 6.0 | % | ||||||||||||
Other expense: | ||||||||||||||||||
Interest expense (7) | 35,797 | 4.8 | % | 19,075 | 2.7 | % | ||||||||||||
Loss on debt extinguishment (8) | 5,144 | 0.6 | % | - | 0.0 | % | ||||||||||||
Income before income taxes | 17,325 | 2.3 | % | 22,963 | 3.3 | % | ||||||||||||
Income tax expense | 2,953 | 0.4 | % | 4,838 | 0.7 | % | ||||||||||||
Net income | $ | 14,372 | 1.9 | % | $ | 18,125 | 2.6 | % | ||||||||||
Percentages are shown as a percent of net product sales. | ||||||||||||||||||
Capital Expenditures | $ | 28,504 | $ | 17,763 | ||||||||||||||
Cash Rent Expense | $ | 38,857 | $ | 37,854 | ||||||||||||||
(1) | Net product sales increased 8.3% due to a 3.9% increase in comparable store sales and a 4.2% increase in equivalent units. | |
(2) | Fees and other income increased 16.3% due to higher delivery charge income from increased delivery transactions, increased equivalent units and customer delivery charge increases. | |
(3) | Cost of sales, as a percentage of net product sales, decreased primarily due to savings from the margin management initiative and lower commodity costs partially offset by product mix changes associated with the $10 Any Pizza promotion and value bundling. | |
(4) | Direct labor, as a percentage of net product sales, decreased largely due to the benefit of the sales leveraging effect on fixed labor costs partially offset by an increase in delivery transactions, which are more labor intensive. | |
(5) | Other restaurant operating expenses, as a percentage of net product sales, decreased largely due to the sales leveraging effect on fixed and semi-fixed costs, primarily occupancy costs, the benefit of the 2012 development incentives from Pizza Hut, Inc., and lower advertising expenses, partially offset by increased depreciation, higher restaurant manager bonus expense and increased delivery driver reimbursement expense. | |
(6) | General and administrative expenses increased largely due to higher incentive compensation and salaries expense, increased credit card transaction fees and costs associated with our enterprise resource planning system implementation. | |
(7) | Interest expense increased primarily due to higher average debt levels and interest rates as a result of the acquisition of our Company by Olympus Partners on December 28, 2011. | |
(8) | Loss on debt extinguishment related to the refinancing of the Company's term loan. | |
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 25, 2012 | December 27, 2011 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 32,358 | $ | 78,394 | |||||
Other current assets | 26,804 | 35,105 | |||||||
Total current assets | 59,162 | 113,499 | |||||||
Facilities and equipment, net | 142,672 | 131,744 | |||||||
Franchise rights, net | 626,371 | 390,110 | |||||||
Other noncurrent assets | |||||||||
