NPC International reports Q1 net earnings of US$3M, compared to year-ago earnings of US$13.2M; total sales rise 6.2% to US$296.3M

OVERLAND PARK, Kansas , May 10, 2014 (press release) – NPC International, Inc. (the “Company”), today reported results for its first fiscal quarter ended April 1, 2014.

FIRST QUARTER HIGHLIGHTS:

Pizza Hut comparable store sales decreased (4.7)% rolling over a decrease of (2.2)% last year.

Adjusted EBITDA (reconciliation attached) was $29.0MM; a decline of $9.6MM from the prior year.

Net income was $3.0MM compared to $13.2MM last year.

Our leverage ratio was 4.04X Consolidated EBITDA, net of allowable cash balances of $4.4MM (as defined in our Credit Agreement).

NPC’s President and CEO Jim Schwartz said, “Continued soft sales in our Pizza Hut business and significant inflation in ingredient costs combined to significantly pressure our margins this quarter causing EBITDA to fall below prior year levels.

We have been working with the leadership team at Pizza Hut since last year to address the challenges that lay before the brand in the marketplace. We are evaluating all aspects of the brand including brand relevance and positioning. We have made meaningful progress in identifying areas of opportunity for the brand. However, the results of these efforts are not fully developed as additional work is required to comprehensively address our current consumer shortfall. I am encouraged by the progress and look forward to getting the brand back in its historical position of category leadership.

Unfortunately we are experiencing significant margin pressure from increased ingredient costs. As a result, we are now forecasting ingredient inflation in our Pizza Hut business in the 3% to 4% range, which is in stark contrast to the flat to deflationary environment we expected coming into the year. This inflation is currently expected to continue to pressure margins for the balance of the year.

We are pleased with the momentum in our Wendy’s business and the Wendy’s system in general. The 'Cut Above' positioning is truly resonating with consumers and driving consumer demand in a very competitive marketplace. We are truly impressed with the progress that our operational teams are making in customer service and productivity. It is becoming increasingly evident to us that we can seamlessly assimilate and integrate other brands, such as Wendy’s, while successfully transferring our core competencies of operational excellence and margin performance. This result buoys our confidence in the future growth prospects for our Wendy’s business and NPC.

We will continue to leverage our significant liquidity and strong cash flow characteristics to manage through this period of soft comparable store sales and inflationary pressures. We remain abundantly confident in the two great brands that we have the good fortune to operate and look forward to working with the leadership of both brands in their pursuit for category leadership.”

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 April 1, 2014 which can be accessed at www.sec.gov.

CONFERENCE CALL INFORMATION:

The Company’s first quarter earnings conference call will be held Monday, May 12, 2014 at 9:00 a.m. CT (10:00 ET). In addition to a discussion of first 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 866-515-2915. The international number is 617-399-5129. The access code for the call is 93247701.

For those unable to participate live, a replay of the call will be available until May 19, 2014 by dialing 888-286-8010 or by dialing international at 617-801-6888. The access code for the replay is 18445483.

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 1,263 Pizza Hut units in 28 states and 91 Wendy’s units in 3 states.

Industry Intelligence Editor's Note: This press release omits select charts and/or marketing language for editorial clarity. Click here to view the full report.

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