NPC International, Inc. (Nasdaq: NPCI):
Quarterly Highlights:
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- 2Q diluted eps of $.23, before facility actions, exceeds prior year by 15%
- Comparable store sales growth of 1.7%:
- Restaurants +2.2%; Delivery negative 0.3%
- Re-imaged restaurants accounted for 2.7% comparable sales growth for the quarter
- The Insider Pizza has driven comparable store sales growth of 6% since its launch on September 26th
- Cheese block market remains favorable:
- Cheese costs were 29% below last year’s level during Q2
- Expected to be 15% below the prior year during Q3
The Company’s earnings conference call will be simulcast on the Internet October 24, 2000, at 9:00 a.m. CT. Go to www.npcinternational.com and click on Street Events logo in the investor information section or go to www.streetevents.com.
NPC International, Inc. (Nasdaq: NPCI), today announced 15% growth in diluted earnings per share, before facility action charges, for the quarter ended September 26, 2000. Net income for the quarter, before facility action charges, was $5,003,000, or $.23 per diluted share, compared to $.20 per diluted share, before facility action gains, reported in the same period of the prior fiscal year. Including pre-tax charges from facility actions of $475,000, the Company earned net income of $4,694,000, or $.21 per diluted share, for the quarter. Year-to-date earnings, before facility action charges, were $11,445,000, or $.51 per diluted share, compared to $.47 per diluted share, before facility action gains and cumulative effect adjustments, reported during the same period of the prior fiscal year. Including pre-tax facility action charges of $1,415,000, the Company has earned net income of $10,525,000, or $.47 per diluted share, during the fiscal year to date.
Consolidated revenue for the second quarter increased by 10.7% over the same period of the prior year due to revenue contributed from acquired units and comparable store sales growth of 1.7%. For the year to date, consolidated revenue increased 11.5% due to acquired store revenues and comparable store sales growth of 1.8%. The number of restaurants operated increased over the comparable periods of the prior year due to the 64-unit acquisition completed on June 8, 2000, and the 70-unit acquisition completed on July 21, 1999.
Second-quarter results:
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By GlobalData- Comparable store sales increased 1.7% due to the continued success of the Company’s asset re-imaging program, which has consistently driven post re-imaging unit sales gains of 30% or more. Fifty-four restaurants re-imaged in the last 18 months accounted for 2.7% comparable store sales growth for the quarter. The favorable impact of this program is primarily reflected in the Company’s dine-in restaurants, which had revenue of $97.3 million and comparable store sales growth of 2.2%. Our delivery business generated revenue of $28.3 million and a comparable store sales decline of 0.3%. For the year-to-date comparable store sales have increased 1.8% for all asset types, with restaurants increasing 2.2% and delivery units increasing 0.2%. Re-imaged restaurants have contributed 2.5% to the fiscal year-to-date comparable store sales results.
- Store level margins for the quarter were 16.2%, an increase of 30 basis points from the prior year. Cost of sales declined 170 basis points from the prior year due to a 29% reduction in cheese costs and the favorable effect of the Company’s new beverage contract. These decreases were partially offset by increases in meat ingredient costs. Labor costs increased 60 basis points due to increasing wage rates that were not fully offset by productivity gains and higher labor costs in the 64 units acquired in the first fiscal quarter. Other operating expenses increased 80 basis points due to higher royalty expense resulting from recent acquisitions, an increase in occupancy costs for re-imaged assets, and increases in certain other operating costs, primarily utilities.
- General and administrative expenses were 5.0% of revenue during the quarter and essentially flat with the prior year as a percent of revenue.
- Depreciation, amortization and pre-opening expenses remained flat at 2.3% of revenue compared to the same period of the prior year. Pre-tax pre-opening expenses totaled $414,000, or $.01 per diluted share, for the quarter, compared to $144,000 during the same period of the prior year. On a year-to-date basis pre-tax pre-opening expenses totaled $941,000, or $.03 per diluted share, compared to $296,000, or $.01 per diluted share, during the comparable period of the prior year. These increases in pre-opening expenses were due to the higher level of re-imaging activity compared to the prior year.
- Facility actions at 20 locations resulted in a net pre-tax charge of $475,000 for the quarter. For the year to date, facility actions at 37 locations have resulted in a pre-tax charge of $1,415,000. These facility action charges reduced diluted earnings per share by $.02 and $.04 to the $.21 and $.47 reported, for the quarter and fiscal year-to-date.
- The Company is pleased with the performance of the 64 units recently acquired from PHI. These units continue to exhibit margin improvement consistent with management’s pre-acquisition expectations.
- The Company continued to aggressively pursue its asset re-imaging plan during the quarter, opening one main-path unit, and 11 dine-in units. For the fiscal year to date, the Company has completed eight main-path units, 20 dine-in units, and one delivery unit. Since the end of our second quarter, we have opened one dine-in asset and we currently have under construction one main-path unit, 16 dine-in units and one delivery unit. The Company is currently on track to meet its re-imaging goal of approximately 60 units for the fiscal year.
Early Insider Sales Results and Q3 Sales and Earnings Outlook
The recent launch of the Insider Pizza is driving strong sales growth with comparable sales increasing 6% during the first three weeks of the Company’s third fiscal quarter while mixing in the high teens. Management expects this promotion and the continued positive effects of re-imaging will drive comparable store sales gains of 3.5% to 4.5% for the Company’s third fiscal quarter, resulting in 15% to 20% growth in diluted earnings per share, before facility action charges, over the prior year’s third-quarter results.
The Company will begin reporting comparable store sales results on a monthly basis beginning with the Company’s October period. The Company will report these results on or about the twelfth day of the month following the reporting period.
Effective October 23, 2000, the Company’s Board of Directors increased its share repurchase authorization by 500,000 shares, increasing the remaining share repurchase authorization to 677,500 shares.
Gene Bicknell, Chairman and CEO, said: “Pizza Hut continues to stake its claim as the most powerful and innovative brand in the pizza segment. The recent launch of the Insider Pizza is just another example of Pizza Hut’s ability to capitalize upon its variety while maintaining its position as the quality leader. This type of innovation will continue to differentiate our brand in this ultra-competitive segment.”
Jim Schwartz, President and COO, stated: “We are pleased with our performance during the quarter as we were able to drive earnings growth of 15% despite sluggishness in our top line which was pervasive throughout the segment. Our re-imaging program continues to drive sales gains in excess of 30% in re-imaged assets. The enthusiasm surrounding this program is contagious within our company and the communities we serve. The enthusiasm created by the Insider Pizza, our latest new product, is equally exciting. The Insider is off to a very solid start with comparable store sales growth of around 6% since its launch on September 26th.”
With the exception of historical information, certain of the matters discussed in this news release are forward-looking statements, including, in particular, those statements relating to the Company’s expectations for: (i) future cheese block market performance, (ii) third-quarter comparable sales results, (iii) continued consumer demand for the Insider Pizza, (iv) continued performance and consumer acceptance of the Company’s asset re-imaging program, and (v) third-quarter operating results and earnings. Such forward-looking statements involve estimates that are subject to certain risks and uncertainties that could cause actual results to materially differ, either better or worse, from those projected. Such risks include, but are not limited to, economic conditions, consumer demand, the level of and the effectiveness of marketing campaigns by the Company and Pizza Hut, Inc., competitive conditions, food cost, availability of food ingredient supply and distribution of product, labor costs, new product introductions, product mix and pricing and other risks indicated in filings with the Securities and Exchange Commission.
NPC International, Inc. is the world’s largest Pizza Hut franchisee and currently operates 841 Pizza Hut restaurants and delivery kitchens in 27 states.
Financial Results
(Unaudited, Dollars in Thousands Except Per-share Data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Sept. 26, Sept. 28, Sept. 26, Sept. 28,
2000 1999 2000 1999
Net Revenue $ 125,616 $113,494 $246,502 $221,170
Operating income before
facility action
charges $ 11,126 $ 9,899 $ 23,934 $ 22,209
Facility action charges 475 (580) 1,415 (310)
Operating Income $ 10,651 $ 10,479 $ 22,519 $ 22,519
Income before facility
action charges and
cumulative effect of
change in accounting
principle $ 5,003 $ 4,883 $ 11,445 $ 11,736
Earnings per share --
basic $ .23 $ .20 $ .52 $ .48
Earnings per share --
diluted $ .23 $ .20 $ .51 $ .47
Income before
cumulative effect of
change in accounting
principle $ 4,694 $ 5,260 $ 10,525 $ 11,937
Earnings per share --
basic $ .21 $ .21 $ .47 $ .49
Earnings per share --
diluted $ .21 $ .21 $ .47 $ .48
Weighted average
shares outstanding --
basic 21,973,675 24,511,409 22,165,640 24,526,070
Weighted average
shares outstanding --
diluted 22,136,958 24,884,705 22,319,185 24,995,721
For more information, contact Troy D. Cook, Senior Vice President, Finance, and Chief Financial Officer, NPC International, Inc., 14400 College Boulevard, Suite 201, Lenexa, Kansas 66215; telephone number: 913/327-3109.
