Acquisition costs eat into Pizza Hut franchisee's profits

Nation's Restaurant News,  April 9, 2007  

Tags: acquisition, Pizza Hut

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Overland Park, Kan. -- Despite a revenue increase of 5.4 percent driven by restaurant acquisitions and increased same-store sales, NPC International Inc., operator of 873 Pizza Hut locations, reported a 97-percent drop in fourth-quarter profit on increased interest expenses and other costs related to its May 2006 acquisition by Merrill Lynch Global Private Equity.

For the quarter ended Dec. 26, NPC earned $395,000, compared with $13.6 million in the prior fourth quarter. NPC's interest expense in its latest quarter more than doubled from a year earlier to $9.4 million. In addition, NPC's gain on the sale of assets declined to $171,000, versus $3.9 million a year earlier.

Latest-quarter total sales increased 5.4 percent to $158.7 million, helped by the purchase of 39 Pizza Huts early in the quarter and a 1.1-percent increase in same-store sales, the company reported.

For the full year, the No. 1 franchisee of Yum! Brands Inc.-owned Pizza Hut posted a net loss of $2.7 million, versus a profit of $47.3 million for fiscal 2005. NPC's latest-year net income included $24.3 million of expenses from the acquisition by Merrill Lynch and increased interest expense of $14.4 million from related financing.

Fiscal 2006 sales rose 1 percent to $618.3 million. Annual same-store sales remained unchanged from a year earlier, the company said.

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