NPC: Reports Fourth Quarter and FY 2016 Results

Overland Park / KS. (npc) NPC International Inc., wholly-owned subsidiary of NPC Restaurant Holdings LLC, reported results for its fourth fiscal quarter and fiscal year ended December 27, 2016.

Fourth Quarter Highlights

  • Pizza Hut comparable store sales were -5.8 percent rolling over an increase of +3.2 percent last year.
  • Wendy’s comparable store sales were +0.8 percent rolling over an increase of +5.8 percent last year.
  • The Company generated net income of 4.3 MM USD compared to 3.8 MM USD last year.
  • Adjusted Ebitda was 35.8 MM USD; an increase of 4.2 MM USD or 13.3 percent from the prior year.
  • Adjusted Ebitda margin improved to 12.2 percent from 10.8 percent last year.

Full Year Highlights

  • Pizza Hut comparable store sales were -1.2 percent rolling over flat comparable store sales last year.
  • Wendy’s comparable store sales were +1.1 percent rolling over an increase of +2.8 percent.
  • Net income was 8.7 MM USD, an increase of 2.0 MM USD from last year.
  • Adjusted Ebitda (reconciliation attached) was 127.6 MM USD; an increase of 12.3 MM USD or 10.7 percent from the prior year.
  • Adjusted Ebitda margin improved to 10.8 percent from 9.9 percent last year.
  • Cash balances were 13.6 MM USD a decrease of 19.1 MM USD from prior fiscal year end due to acquisition activities.
  • Our leverage ratio improved to 4.32X 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, «Despite ongoing challenges in our Pizza Hut business, we were able to execute with financial intensity delivering an increase of almost 11 percent in Adjusted Ebitda for the full fiscal year. For the fourth fiscal quarter, we were quite pleased with the results of our Wendy’s business, which posted comparable store sales growth of almost 1 percent and grew comps 6.6 percent on a two-year basis. The top-line sales momentum combined with favorable commodities and solid execution from our operators resulted in significant margin improvement and profit growth. Our Pizza Hut operations generated disappointing comparable store sales with a decline of 5.8 percent rolling over growth of 3.2 percent last year driven by the successful launch of the Triple Treat Box. Despite the sales decline, lower ingredient prices and favorable insurance adjustments related to improved loss trends served to maintain restaurant margins consistent with the prior year.

«Our Pizza Hut business has continued to struggle to consistently activate the consumer and drive the top-line in an otherwise thriving category. As previously communicated, the Brand and the Franchise Association have completed independent brand related research which will significantly inform the go-forward strategy. Concurrently, Pizza Hut and its franchisees are formulating a transformational plan to deliver upon a strategy to modernize the brand and to continue on our mission to make it easier for consumers to get a better pizza.

«Our Wendy’s business leveraged innovation and core product offerings again this quarter and successfully drove profitable sales growth while rolling over the very successful launch of the 4 for 4 USD value bundle deal. Wendy’s continues to expand the 4 for 4 USD offering and the incremental variety has continued to meet the needs of the consumer while bringing new news to the category. Most recently, the Double Stack has been added to this offering providing the consumer more value and more choice when ordering the 4 for 4 USD deal.

«We continued to execute upon our Delco relocation efforts in our Pizza Hut business and Image Activation efforts in our Wendy’s operations this quarter and fully delivered upon our targets for fiscal 2016. As we move into 2017, we will continue with these investments as we contemporize our restaurants to better meet the needs of today’s consumer and provide a best on block image.

«We are pleased to have deleveraged our business by almost a half of a turn of leverage during fiscal 2016 due to an increase of almost 11 percent in Adjusted Ebitda and the benefit of our accretive acquisition of 39 Wendy’s units in Raleigh, North Carolina in July 2016. In addition, we ended the year with ample liquidity which we will tap to fund our recently announced pending acquisition of 62 Wendy’s restaurants in Pennsylvania.

«Looking to 2017, we remain enthusiastic about the opportunity to continue to diversify our restaurant portfolio through the acquisition of additional Wendy’s restaurants and we will remain active in this pursuit as we work to increase our ownership of this great brand. We are also increasingly optimistic and enthusiastic about the future direction of Pizza Hut as we continue to work with brand leadership on future strategy and direction. We look forward to continuing to update you on the execution of key brand strategies and our performance into 2017».

NPC International, Inc. is the world’s largest Pizza Hut franchisee and currently operates 1’152 Pizza Hut units in 27 states and 184 Wendy’s units in 5 states.

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