NPC International reports Q3 net earnings of US$2.6M, compared with year-ago earnings of US$2.4M; comparable store sales fall 3.6%
OVERLAND PARK, Kansas
November 8, 2013
– NPC International, Inc. (the “Company”), today reported results for its third fiscal quarter ended September 24, 2013.
THIRD QUARTER HIGHLIGHTS:
Comparable store sales decreased (3.6)% rolling over an increase of +1.3% last year.
Adjusted EBITDA (reconciliation attached) of $25.3MM was $1.4MM or 5% below the prior year.
Net income was $2.6MM or $0.2MM higher than last year.
Acquired 35 Wendy’s units for $21.5MM.
Comparable store sales decreased (3.2)% rolling over an increase of +3.9% last year.
Adjusted EBITDA (reconciliation attached) of $97.1MM was $2.6MM or 3% below last year.
Free Cash Flow was $41.8MM and capital expenditures totaled $35.8MM.
Cash balances increased $17.9MM from the prior year end, despite investing $21.5MM in acquisitions.
Net income was $23.9MM, or $9.5MM higher than last year.
Our leverage ratio was 3.67X Consolidated EBITDA, net of allowable cash balances of $30.0MM (as defined in our Credit Agreement).
NPC’s President and CEO Jim Schwartz said, “The third quarter remained challenging for the Pizza Hut brand, as demonstrated by our overall soft top line performance. Despite soft sales and ongoing commodity pressure, EBITDA remained relatively stable compared to the prior year primarily due to the team's exceptional delivery of certain labor improvement initiatives implemented at the beginning of this year.
The brand promoted significant value this quarter through our carryout channel generating growth in this occasion’s sales. However, these gains were more than offset by sales declines in our delivery and dine in channels where our value message was simply not adequate to activate the consumer. Fortunately, our operations team delivered stellar controls posting improved labor margins versus the prior year, despite the soft top-line results, thereby limiting the sales deleveraging effect on our overall financial results.
We are actively engaged with Pizza Hut’s leadership team to get this great brand growing again. We are encouraged by the early work of the new advertising agency on behalf of the brand and believe that their messaging and creativity will play a significant role in regaining our momentum. The path forward will remain focused on delivering attractive core value to the consumer while leveraging our penchant for product innovation and our leadership position in the category.
We remain encouraged by the results of our Delco Lite initiative opening 13 this quarter for a total of 34 year to date and will deliver on our targeted growth of 40 new Delco Lites for the year. We look forward to continuing this effort in 2014 and bringing our brand to more under-penetrated trade areas.
We ended the quarter with ample liquidity to fuel our growth objectives as demonstrated by the $43 million in cash on our balance sheet and $82 million in available borrowings on our revolver. Furthering our financial flexibility, we also have significant cushion in our leverage covenant with leverage at a very comfortable 3.67X relative to our leverage limit of 6.00X.
We remain enthused with the opportunity that lies before us to grow in the Wendy’s system. Our acquisition of 35 units in the Kansas City market has served to confirm our initial belief that this is a terrific brand with significant future upside. Accordingly, we remain highly interested in expanding our footprint in the Wendy’s system and plan to leverage the same disciplined and opportunistic approach that has served us well historically.”
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, the Company and the Company's subsidiaries on a consolidated basis are set forth in Parent's Form 10-Q for the fiscal quarter ended September 24, 2013 which can be accessed at www.sec.gov.
CONFERENCE CALL INFORMATION:
The Company’s third quarter earnings conference call will be held Friday, November 8, 2013 at 10:00 am CT (11:00 ET). In addition to a discussion of third quarter results, the call 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 877-415-3181. The international number is 857-244-7324. The access code for the call is 96721896.
For those unable to participate live, a replay of the call will be available until November 15, 2013 by dialing 888-286-8010 or by dialing international at 617-801-6888. The access code for the replay is 71132831.
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 1,252 Pizza Hut restaurants and delivery units in 28 states and 37 Wendy’s units in 2 states.
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