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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-Q





(Mark one)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2009

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to

Commission file number 333-138338





NPC INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|KANSAS                                                         |  | 48-0817298                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification number)



|                                         |  |           
|---------------------------------------- |  | ----------
|7300 W. 129thStreet Overland Park, KS    |  | 66213     
|(Address of principal executive offices) |  | (Zip Code)

Telephone: (913) 327-5555

(Registrants telephone number, including area code)





Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ̈    No  x

(Note: As a voluntary filer, not subject to the filing requirements, the registrant filed all reports required under Section 13 or 15(d) of the
Exchange Act during the preceding 12 months.)

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large
Accelerated filer   ̈      Accelerated filer   ̈      Non-accelerated filer  x      Smaller reporting company   ̈



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

There is no market for the Registrants equity. As of August 14, 2009, there were 1,000 shares of common stock outstanding.









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INDEX



|              |  |                       |  |                                                                                       |  |     
|------------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|              |  |                       |  |                                                                                       |  | Page
|Part I        |  | FINANCIAL INFORMATION |  |                                                                                      
|              |  |                       | 
|              |  | Item 1.               |  | Condensed Consolidated Financial Statements (unaudited)                               |  | 2   
|              |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14  
|              |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 26  
|              |  | Item 4.               |  | Controls and Procedures                                                               |  | 26  
|              |  | Item 4T.              |  | Controls and Procedures                                                               |  | 26  
|              |  |                      
|Part II       |  | OTHER INFORMATION     |  |                                                                                      
|              |  |                       | 
|              |  | Item 1.               |  | Legal Proceedings                                                                     |  | 27  
|              |  | Item 1A.              |  | Risk Factors                                                                          |  | 27  
|              |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 27  
|              |  | Item 3.               |  | Defaults Upon Senior Securities                                                       |  | 27  
|              |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                   |  | 27  
|              |  | Item 5.               |  | Other Information                                                                     |  | 27  
|              |  | Item 6.               |  | Exhibits                                                                              |  | 28  
|Exhibit Index |  | 28                   
|Signatures    |  | 31                   



1



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PART I

PART I. FINANCIAL INFORMATION



|Item 1. | Condensed Consolidated Financial Statements
|------- | -------------------------------------------

NPC
INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)



|                                                                                                                                          |  |              |         |   |                  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                          |  | June 30,2009 |         |   | December 30,2008 |  
|Assets                                                                                                                                    |  |              |         |   |                  |   |         |  
|Current assets:                                                                                                                           |  |              |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                 |  | $            | 6,116   |   |                  | $ | 5,327   |  
|Accounts receivable                                                                                                                       |  |              | 3,973   |   |                  |   | 4,110   |  
|Inventories                                                                                                                               |  |              | 6,275   |   |                  |   | 7,291   |  
|Prepaid expenses and other current assets                                                                                                 |  |              | 5,628   |   |                  |   | 4,633   |  
|Income taxes receivable                                                                                                                   |  |              | 2,391   |   |                  |   | 2,086   |  
|Deferred income taxes                                                                                                                     |  |              | 4,519   |   |                  |   | 4,531   |  
|Assets held for sale                                                                                                                      |  |              | 1,210   |   |                  |   | 20,934  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total current assets                                                                                                                      |  |              | 30,112  |   |                  |   | 48,912  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Facilities and equipment                                                                                                                  |  |              | 264,942 |   |                  |   | 236,999 |  
|Less accumulated depreciation                                                                                                             |  |              | (87,124 | ) |                  |   | (67,885 | )
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Net facilities and equipment                                                                                                              |  |              | 177,818 |   |                  |   | 169,114 |  
|Franchise rights, less accumulated amortization of $26,756 and $22,008, respectively                                                      |  |              | 413,466 |   |                  |   | 407,915 |  
|Goodwill                                                                                                                                  |  |              | 191,673 |   |                  |   | 188,530 |  
|Other assets, net                                                                                                                         |  |              | 26,008  |   |                  |   | 25,044  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                              |  | $            | 839,077 |   |                  | $ | 839,515 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Liabilities and stockholders equity                                                                                                      |  |              |         |   |                  |   |         |  
|Current liabilities:                                                                                                                      |  |              |         |   |                  |   |         |  
|Accounts payable                                                                                                                          |  | $            | 26,252  |   |                  | $ | 22,998  |  
|Accrued payroll                                                                                                                           |  |              | 15,055  |   |                  |   | 14,294  |  
|Sales tax payable                                                                                                                         |  |              | 3,626   |   |                  |   | 5,212   |  
|Payroll taxes                                                                                                                             |  |              | 3,096   |   |                  |   | 3,012   |  
|Accrued interest                                                                                                                          |  |              | 4,378   |   |                  |   | 6,317   |  
|Other accrued liabilities                                                                                                                 |  |              | 15,996  |   |                  |   | 14,277  |  
|Current portion of insurance reserves                                                                                                     |  |              | 8,622   |   |                  |   | 8,240   |  
|Current portion of debt                                                                                                                   |  |              | 1,340   |   |                  |   | 17,094  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total current liabilities                                                                                                                 |  |              | 78,365  |   |                  |   | 91,444  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Long-term debt                                                                                                                            |  |              | 437,370 |   |                  |   | 436,710 |  
|Other deferred items                                                                                                                      |  |              | 36,649  |   |                  |   | 35,556  |  
|Insurance reserves                                                                                                                        |  |              | 11,200  |   |                  |   | 11,133  |  
|Deferred income taxes                                                                                                                     |  |              | 118,126 |   |                  |   | 117,240 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total long-term liabilities                                                                                                               |  |              | 603,345 |   |                  |   | 600,639 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Commitments and contingencies                                                                                                             |  |              |         |   |                  |   |         |  
|Stockholders equity:                                                                                                                     |  |              |         |   |                  |   |         |  
|Common stock ($0.01 par value, 2,000 shares authorized and 1,000 shares issued and outstanding as of June 30, 2009 and December 30,
2008) |  |              |        |   |                  |   |        |  
|Paid-in-capital                                                                                                                           |  |              | 163,325 |   |                  |   | 163,325 |  
|Accumulated other comprehensive loss                                                                                                      |  |              | (3,510  | ) |                  |   | (4,125  | )
|Retained deficit                                                                                                                          |  |              | (2,448  | ) |                  |   | (11,768 | )
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                |  |              | 157,367 |   |                  |   | 147,432 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                |  | $            | 839,077 |   |                  | $ | 839,515 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  

See accompanying notes to the condensed consolidated financial statements.



2



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands)



|                                                       |  |                            |         |   |                            |   |         |  
|------------------------------------------------------ |  | -------------------------- | ------- | - | -------------------------- | - | ------- | -
|                                                       |  | 13 Weeks EndedJune 30,2009 |         |   | 13 Weeks EndedJune 24,2008 |  
|Sales:                                                 |  |                            |         |   |                            |   |         |  
|Net product sales                                      |  | $                          | 214,336 |   |                            | $ | 160,315 |  
|Fees and other income                                  |  |                            | 9,477   |   |                            |   | 4,780   |  
|                                                       |  |                            |         |   |                            |   |         |  
|Total sales                                            |  |                            | 223,813 |   |                            |   | 165,095 |  
|Costs and expenses:                                    |  |                            |         |   |                            |   |         |  
|Cost of sales                                          |  |                            | 57,421  |   |                            |   | 46,240  |  
|Direct labor                                           |  |                            | 65,304  |   |                            |   | 45,027  |  
|Other restaurant operating expenses                    |  |                            | 73,807  |   |                            |   | 50,972  |  
|General and administrative expenses                    |  |                            | 12,092  |   |                            |   | 9,964   |  
|Corporate depreciation and amortization of intangibles |  |                            | 2,933   |   |                            |   | 2,554   |  
|Other                                                  |  |                            | 123     |   |                            |   | 196     |  
|                                                       |  |                            |         |   |                            |   |         |  
|Total costs and expenses                               |  |                            | 211,680 |   |                            |   | 154,953 |  
|                                                       |  |                            |         |   |                            |   |         |  
|Operating income                                       |  |                            | 12,133  |   |                            |   | 10,142  |  
|                                                       |  |                            |         |   |                            |   |         |  
|Other expense:                                         |  |                            |         |   |                            |   |         |  
|Interest expense                                       |  |                            | (7,819  | ) |                            |   | (8,220  | )
|Miscellaneous                                          |  |                            |        |   |                            |   | (22     | )
|                                                       |  |                            |         |   |                            |   |         |  
|Income before income taxes                             |  |                            | 4,314   |   |                            |   | 1,900   |  
|Income tax expense                                     |  |                            | 957     |   |                            |   | 800     |  
|                                                       |  |                            |         |   |                            |   |         |  
|Income from continuing operations                      |  |                            | 3,357   |   |                            |   | 1,100   |  
|Income from discontinued operations, net of taxes      |  |                            |        |   |                            |   | 872     |  
|                                                       |  |                            |         |   |                            |   |         |  
|Net income                                             |  | $                          | 3,357   |   |                            | $ | 1,972   |  
|                                                       |  |                            |         |   |                            |   |         |  

See accompanying notes to the condensed consolidated financial statements.



3



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands)



|                                                         |  |                            |         |   |                            |   |         |  
|-------------------------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | -
|                                                         |  | 26 Weeks EndedJune 30,2009 |         |   | 26 Weeks EndedJune 24,2008 |  
|Sales:                                                   |  |                            |         |   |                            |   |         |  
|Net product sales                                        |  | $                          | 436,696 |   |                            | $ | 319,973 |  
|Fees and other income                                    |  |                            | 19,458  |   |                            |   | 9,962   |  
|                                                         |  |                            |         |   |                            |   |         |  
|Total sales                                              |  |                            | 456,154 |   |                            |   | 329,935 |  
|Costs and expenses:                                      |  |                            |         |   |                            |   |         |  
|Cost of sales                                            |  |                            | 116,951 |   |                            |   | 90,830  |  
|Direct labor                                             |  |                            | 131,729 |   |                            |   | 90,429  |  
|Other restaurant operating expenses                      |  |                            | 147,963 |   |                            |   | 101,379 |  
|General and administrative expenses                      |  |                            | 24,770  |   |                            |   | 19,495  |  
|Corporate depreciation and amortization of intangibles   |  |                            | 5,855   |   |                            |   | 4,994   |  
|Other                                                    |  |                            | 765     |   |                            |   | 306     |  
|                                                         |  |                            |         |   |                            |   |         |  
|Total costs and expenses                                 |  |                            | 428,033 |   |                            |   | 307,433 |  
|                                                         |  |                            |         |   |                            |   |         |  
|Operating income                                         |  |                            | 28,121  |   |                            |   | 22,502  |  
|                                                         |  |                            |         |   |                            |   |         |  
|Other expense:                                           |  |                            |         |   |                            |   |         |  
|Interest expense                                         |  |                            | (15,743 | ) |                            |   | (16,794 | )
|Miscellaneous                                            |  |                            |        |   |                            |   | (22     | )
|                                                         |  |                            |         |   |                            |   |         |  
|Income before income taxes                               |  |                            | 12,378  |   |                            |   | 5,686   |  
|Income tax expense                                       |  |                            | 2,999   |   |                            |   | 1,716   |  
|                                                         |  |                            |         |   |                            |   |         |  
|Income from continuing operations                        |  |                            | 9,379   |   |                            |   | 3,970   |  
|(Loss) income from discontinued operations, net of taxes |  |                            | (59     | ) |                            |   | 2,206   |  
|                                                         |  |                            |         |   |                            |   |         |  
|Net income                                               |  | $                          | 9,320   |   |                            | $ | 6,176   |  
|                                                         |  |                            |         |   |                            |   |         |  

See accompanying notes to the condensed consolidated financial statements.



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(Unaudited)

(in thousands, except share data)



|                                                                                 |  |                      |  |             |   |                |   |                 |  |   |                                   |   |  |                          |        |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | -------------------- |  | ----------- | - | -------------- | - | --------------- |  | - | --------------------------------- | - |  | ------------------------ | ------ | - |  | - | ------- | -
|                                                                                 |  | Sharesof commonstock |  | Commonstock |   | Paid-incapital |   | Retaineddeficit |  |   | Accumulatedothercomprehensiveloss |   |  | Totalstockholdersequity |       
|Balance at December 30, 2008                                                     |  | 1,000                |  | $           |  |                | $ | 163,325         |  | $ | (11,768                           | ) |  | $                        | (4,125 | ) |  | $ | 147,432 |  
|Comprehensive income:                                                            |  |                      |  |             |   |                |   |                 |  |   |                                   |   |  |                          |        |   |  |   |         |  
|Net income                                                                       |  |                     |  |             |  |                |   |                |  |   | 9,320                             |   |  |                          |       |   |  |   | 9,320   |  
|Net unrealized change in cash flow hedging derivatives                           |  |                     |  |             |  |                |   |                |  |   |                                  |   |  |                          | (1,391 | ) |  |   | (1,391  | )
|Reclassification adjustment into income for derivatives used in cash flow hedges |  |                     |  |             |  |                |   |                |  |   |                                  |   |  |                          | 2,006  |   |  |   | 2,006   |  
|                                                                                 |  |                      |  |             |   |                |   |                 |  |   |                                   |   |  |                          |        |   |  |   |         |  
|Total comprehensive income                                                       |  |                      |  |             |   |                |   |                 |  |   |                                   |   |  |                          |        |   |  |   | 9,935   |  
|                                                                                 |  |                      |  |             |   |                |   |                 |  |   |                                   |   |  |                          |        |   |  |   |         |  
|Balance at June 30, 2009                                                         |  | 1,000                |  | $           |  |                | $ | 163,325         |  | $ | (2,448                            | ) |  | $                        | (3,510 | ) |  | $ | 157,367 |  
|                                                                                 |  |                      |  |             |   |                |   |                 |  |   |                                   |   |  |                          |        |   |  |   |         |  

See accompanying notes to the condensed consolidated financial statements.



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



|                                                                              |  |                           |          |   |                           |   |          |  
|----------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ------------------------- | - | -------- | -
|                                                                              |  | 26 WeeksEndedJune 30,2009 |          |   | 26 WeeksEndedJune 24,2008 |  
|Operating activities                                                          |  |                           |          |   |                           |   |          |  
|Net income                                                                    |  | $                         | 9,320    |   |                           | $ | 6,176    |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                           |          |   |                           |   |          |  
|Depreciation and amortization                                                 |  |                           | 25,995   |   |                           |   | 20,324   |  
|Amortization of debt issuance costs                                           |  |                           | 997      |   |                           |   | 760      |  
|Net facility impairment charges                                               |  |                           | 251      |   |                           |   | 297      |  
|Deferred income taxes                                                         |  |                           | 480      |   |                           |   | 1,269    |  
|Net loss on disposition of assets                                             |  |                           | 102      |   |                           |   | 9        |  
|Changes in assets and liabilities, excluding acquisitions:                    |  |                           |          |   |                           |   |          |  
|Accounts receivable                                                           |  |                           | 364      |   |                           |   | 2,569    |  
|Inventories                                                                   |  |                           | 1,304    |   |                           |   | (565     | )
|Prepaid expenses and other current assets                                     |  |                           | (894     | ) |                           |   | (1,516   | )
|Accounts payable                                                              |  |                           | 2,894    |   |                           |   | (2,260   | )
|Payroll and sales taxes                                                       |  |                           | (1,502   | ) |                           |   | 319      |  
|Income taxes                                                                  |  |                           | (305     | ) |                           |   | 933      |  
|Accrued interest                                                              |  |                           | (1,939   | ) |                           |   | (897     | )
|Accrued payroll                                                               |  |                           | 761      |   |                           |   | 540      |  
|Other accrued liabilities                                                     |  |                           | 1,291    |   |                           |   | 1,121    |  
|Insurance reserves                                                            |  |                           | 449      |   |                           |   | 1,747    |  
|Other deferred items                                                          |  |                           | 2,257    |   |                           |   | (997     | )
|Other assets                                                                  |  |                           | (2,094   | ) |                           |   | 1,137    |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Net cash provided by operating activities                                     |  |                           | 39,731   |   |                           |   | 30,966   |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Investing activities                                                          |  |                           |          |   |                           |   |          |  
|Capital expenditures                                                          |  |                           | (14,755  | ) |                           |   | (19,562  | )
|Net proceeds from sale of units                                               |  |                           | 19,463   |   |                           |   |         |  
|Purchase of business assets, net of cash acquired                             |  |                           | (32,968  | ) |                           |   | (32      | )
|Proceeds from sale or disposition of assets                                   |  |                           | 640      |   |                           |   | 51       |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Net cash used in investing activities                                         |  |                           | (27,620  | ) |                           |   | (19,543  | )
|                                                                              |  |                           |          |   |                           |   |          |  
|Financing activities                                                          |  |                           |          |   |                           |   |          |  
|Borrowings under revolving credit facility                                    |  |                           | 170,283  |   |                           |   | 127,400  |  
|Payments under revolving credit facility                                      |  |                           | (168,283 | ) |                           |   | (142,900 | )
|Payments on term bank facilities                                              |  |                           | (17,094  | ) |                           |   | (4,196   | )
|Debt issue costs                                                              |  |                           | (21      | ) |                           |   | (45      | )
|Proceeds from sale-leaseback transactions                                     |  |                           | 2,891    |   |                           |   | 6,896    |  
|Proceeds from sale-leaseback transactions on formerly leased properties       |  |                           | 902      |   |                           |   |         |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Net cash used in financing activities                                         |  |                           | (11,322  | ) |                           |   | (12,845  | )
|                                                                              |  |                           |          |   |                           |   |          |  
|Net change in cash and cash equivalents                                       |  |                           | 789      |   |                           |   | (1,422   | )
|Beginning cash and cash equivalents                                           |  |                           | 5,327    |   |                           |   | 7,609    |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Ending cash and cash equivalents                                              |  | $                         | 6,116    |   |                           | $ | 6,187    |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Supplemental disclosures of cash flow information:                            |  |                           |          |   |                           |   |          |  
|Net cash paid for interest                                                    |  | $                         | 16,685   |   |                           | $ | 16,930   |  
|Net cash paid for income taxes                                                |  | $                         | 2,667    |   |                           | $ | 97       |  
|Non-cash investing activities:                                                |  |                           |          |   |                           |   |          |  
|Accrued capital expenditures                                                  |  | $                         | 583      |   |                           | $ | 1,718    |  

See accompanying notes to the condensed consolidated financial statements.



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NPC INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1  Basis of Presentation

NPC
International, Inc., together with its subsidiaries, is referred to herein as NPC and the Company. NPC Acquisition Holdings, LLC, its ultimate parent company, is referred to herein as Holdings.

On May 3, 2006, all of NPCs outstanding stock was acquired by Holdings, a company controlled by Merrill Lynch Global Private Equity
(MLGPE) and certain of its affiliates. In connection with the acquisition, the Company issued $175.0 million principal amount of notes and entered into a $375.0 million Senior Secured Credit Facility. The $375.0 million Senior Secured
Credit Facility consists of a $300.0 million term loan due 2013 and a $75.0 million revolving credit facility due 2012.

The accompanying
unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for reporting on Form 10-Q. Accordingly, certain information and
disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein.

The interim statements should be read in conjunction with the financial statements and notes thereto included in the Companys latest Annual Report on Form 10-K.

The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. The Company believes this
information includes all adjustments, consisting of normal recurring accruals, necessary to fairly present the financial condition, statements of income and cash flows for the periods then ended.

Reclassifications. Certain reclassifications have been made to the Consolidated Balance Sheets and Consolidated Statements of Cash Flows to
conform to current year reporting. Reclassifications have been made to the prior years Consolidated Statements of Income and all related notes to reflect the effect of discontinued operations. (See Note 3.)

Note 2  Business Combinations and Acquisitions

Between September 2008 and February 2009, the Company acquired 393 Pizza Hut units, including 294 units from Pizza Hut, Inc. (PHI) and 99 units from another franchisee. These acquisitions were funded through the issuance of a
$40.0 million term loan under the Companys Senior Secured Credit Facility, proceeds from the sale of units to PHI, proceeds drawn on the Company's revolving credit facility and cash on hand. The acquisitions were accounted for using the
purchase method in accordance with SFAS No. 141(R) and SFAS No. 141, Business Combinations. Accordingly, net assets were recorded at their estimated fair values. The purchase price was allocated using information currently
available. The allocation of the purchase price to the assets acquired is preliminary and will be finalized as information becomes available. As the purchase price exceeded the fair value of the assets, including identified intangible assets,
goodwill associated with this transaction was recorded in the Consolidated Balance Sheets. The goodwill recorded reflects the Companys ability to synergize acquired units with its existing operations. All of the goodwill recognized for these
acquisitions will be deductible for income tax purposes.



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##### Table of Contents

Identification and allocation of values assigned to the intangible assets are based on the provisions of
SFAS No. 141(R) and SFAS No. 141. The fair value was estimated by performing the generally accepted valuation income approach. The income approach is predicated upon the value of the future cash flows that an asset will generate over its
remaining useful life, which is consistent with how purchase price is typically determined for purchases such as these. The preliminary purchase price allocations, net of cash acquired, were as follows:



|                                    |  |      |            |      |   |            |  |   |                   |   |  |   |            |  |   |            |  
|----------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ----------------- | - |  | - | ---------- |  | - | ---------- | -
|(Dollars in thousands)              |  |      |            |      |   |            |  |   |                   |   |  |  
|                                    |  | 2009 |            | 2008 |  
|Acquired from Date acquired         |  |      | PHI1/20/09 |      |   | PHI2/17/09 |  |   | Franchisee9/30/08 |   |  |   | PHI12/9/08 |  |   | PHI12/9/08 |  
|Number of units                     |  |      | 55         |      |   | 50         |  |   | 99                |   |  |   | 88         |  |   | 101        |  
|Fee properties                      |  |      |           |      |   |           |  |   | 9                 |   |  |   | 1          |  |   |           |  
|Market locations                    |  |      | CO         |      |   | MO, IL     |  |   | VA, WV,MD         |   |  |   | FL, IA     |  |   | MO, KS,GA  |  
|Purchase price allocation:          |  |      |            |      |   |            |  |   |                   |   |  |   |            |  |   |            |  
|Franchise rights                    |  | $    | 8,655      |      | $ | 1,938      |  | $ | 18,950            |   |  | $ | 9,318      |  | $ | 12,111     |  
|Goodwill                            |  |      | 1,077      |      |   | 1,022      |  |   | 2,290             |   |  |   | 3,023      |  |   | 1,283      |  
|Fixed assets                        |  |      | 8,621      |      |   | 10,740     |  |   | 15,490            |   |  |   | 14,996     |  |   | 12,850     |  
|(Unfavorable) favorable leases, net |  |      | 142        |      |   | 215        |  |   | (487              | ) |  |   | 104        |  |   | (221       | )
|Other                               |  |      | 182        |      |   | 239        |  |   | (56               | ) |  |   | 778        |  |   | 997        |  
|                                    |  |      |            |      |   |            |  |   |                   |   |  |   |            |  |   |            |  
|Total purchase price                |  | $    | 18,677     |      | $ | 14,154     |  | $ | 36,187            |   |  | $ | 28,219     |  | $ | 27,020     |  
|                                    |  |      |            |      |   |            |  |   |                   |   |  |   |            |  |   |            |  
|Estimated annual rent               |  | $    | 2,100      |      | $ | 1,938      |  | $ | 3,662             |   |  | $ | 3,536      |  | $ | 4,008      |  

The above purchase price allocations were adjusted during the second quarter of 2009 to reflect an
increase of $0.9 million to goodwill and $0.3 million to other with offsetting decreases of $1.2 million to fixed assets.

The weighted
average amortization period assigned to the franchise rights acquired during 2009 was 44 years.

The pro forma impact on the results of
operations is included in the below table for periods prior to the acquisition date in which the acquisitions were not previously consolidated. The pro forma results of operations are not necessarily indicative of the results that would have
occurred had these acquisitions been consummated at the beginning of the periods presented, nor are they necessarily indicative of future operating results.



|                                  |                             |                                    |                |               |   |         |  |   |        
|--------------------------------- | --------------------------- | ---------------------------------- | -------------- | ------------- | - | ------- |  | - | -------
|                                  |                             | Pro forma(unaudited)(in thousands)
|                                  | 13 Weeks EndedJune 24, 2008 |                                    | 26 Weeks Ended
|                                  |                             | June 30, 2009                      |                | June 24, 2008
|Total sales                       |                             | $                                  | 254,319        |               | $ | 465,144 |  | $ | 508,383
|Income before income taxes        |                             |                                    | 2,545          |               |   | 12,215  |  |   | 7,570  
|Income from continuing operations |                             |                                    | 1,487          |               |   | 9,281   |  |   | 5,100  

The Consolidated Statements of Income for the 13 weeks and 26 weeks ended June 30, 2009
included $78.1 million and $154.0 million, respectively, of total sales related to the above acquired units. It is impracticable to disclose earnings for these acquired units as earnings of such units are not tracked on an individual basis.



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##### Table of Contents

Note 3  Discontinued Operations

In December 2008 and January 2009, the Company completed the sale of 70 units and 42 units, respectively and the results of operations for these units
have been reflected in discontinued operations.

Summarized financial information for discontinued operations on units sold
December 8, 2008 and January 20, 2009 is shown below (in thousands):



|                                                         |  |                             |        |                |               |       |   |  |   |       
|-------------------------------------------------------- |  | --------------------------- | ------ | -------------- | ------------- | ----- | - |  | - | ------
|                                                         |  | 13 Weeks EndedJune 24, 2008 |        | 26 Weeks Ended
|                                                         |  | June 30, 2009               |        |                | June 24, 2008
|Total sales                                              |  | $                           | 23,879 |                | $             | 2,009 |   |  | $ | 47,789
|                                                         |  |                             |        |                |               |       |   |  |   |       
|(Loss) income before income taxes                        |  |                             | 1,506  |                |               | (84   | ) |  |   | 3,265 
|Income tax (benefit) expense                             |  |                             | 634    |                |               | (25   | ) |  |   | 1,059 
|                                                         |  |                             |        |                |               |       |   |  |   |       
|(Loss) income from discontinued operations, net of taxes |  | $                           | 872    |                | $             | (59   | ) |  | $ | 2,206 
|                                                         |  |                             |        |                |               |       |   |  |   |       

Note 4  Goodwill and Other Intangible Assets

Changes in goodwill are summarized below (in thousands):



|                             |  |   |        
|---------------------------- |  | - | -------
|Balance at December 30, 2008 |  | $ | 188,530
|Acquisitions                 |  |   | 3,143  
|                             |  |   |        
|Balance at June 30, 2009     |  | $ | 191,673
|                             |  |   |        

Goodwill increased $3.1 million as a result of the 2009 acquisitions and adjustments related to
the 2008 acquisitions as presented in Note 2.

The Company completed its annual impairment testing during the second quarter of 2009 and
determined that goodwill was not impaired.

Amortizable other intangible assets consist of franchise rights, leasehold interests,
internally developed software and a non-compete agreement. These intangible assets are amortized on a straight-line basis over the lesser of their economic lives or the remaining life of the applicable agreement. Intangible assets subject to
amortization pursuant to SFAS No. 142, Goodwill and Other Intangible Assets, are summarized below (in thousands):



|                                |  |                      |         |   |                         |   |         |               |  |   |         |  
|------------------------------- |  | -------------------- | ------- | - | ----------------------- | - | ------- | ------------- |  | - | ------- | -
|                                |  | June 30, 2009        |        
|                                |  | Gross CarryingAmount |         |   | AccumulatedAmortization |   |         | Net BookValue | 
|Amortizable intangible assets:  |  |                      |         |   |                         |   |         |               |  |   |         |  
|Franchise rights                |  | $                    | 440,222 |   |                         | $ | (26,756 | )             |  | $ | 413,466 |  
|Favorable leasehold interests   |  |                      | 10,114  |   |                         |   | (1,827  | )             |  |   | 8,287   |  
|Unfavorable leasehold interests |  |                      | (4,425  | ) |                         |   | 883     |               |  |   | (3,542  | )
|Internally developed software   |  |                      | 1,069   |   |                         |   | (677    | )             |  |   | 392     |  
|Non-compete                     |  |                      | 1,925   |   |                         |   | (1,219  | )             |  |   | 706     |  
|                                |  |                      |         |   |                         |   |         |               |  |   |         |  
|Total                           |  | $                    | 448,905 |   |                         | $ | (29,596 | )             |  | $ | 419,309 |  
|                                |  |                      |         |   |                         |   |         |               |  |   |         |  
|                                | 
|                                |  | December 30, 2008    |        
|                                |  | Gross CarryingAmount |         |   | AccumulatedAmortization |   |         | Net BookValue | 
|Amortizable intangible assets:  |  |                      |         |   |                         |   |         |               |  |   |         |  
|Franchise rights                |  | $                    | 429,923 |   |                         | $ | (22,008 | )             |  | $ | 407,915 |  
|Favorable leasehold interests   |  |                      | 9,597   |   |                         |   | (1,945  | )             |  |   | 7,652   |  
|Unfavorable leasehold interests |  |                      | (3,778  | ) |                         |   | 584     |               |  |   | (3,194  | )
|Internally developed software   |  |                      | 1,069   |   |                         |   | (570    | )             |  |   | 499     |  
|Non-compete                     |  |                      | 1,925   |   |                         |   | (1,027  | )             |  |   | 898     |  
|                                |  |                      |         |   |                         |   |         |               |  |   |         |  
|Total                           |  | $                    | 438,736 |   |                         | $ | (24,966 | )             |  | $ | 413,770 |  
|                                |  |                      |         |   |                         |   |         |               |  |   |         |  

Amortization expense on intangible assets was $2.7 million and $1.9 million for the 13
weeks ended June 30, 2009 and June 24, 2008, respectively, and $5.4 million and $3.9 million for the 26 weeks ended June 30, 2009 and June 24, 2008, respectively. The Company expects annual amortization expense for amortizable
other assets for the next five fiscal years to range from approximately $10.0 million to $10.3 million.



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##### Table of Contents

Note 5  Debt

The Companys debt consisted of the following (in thousands):



|                                         |  |              |         |                  |   |        
|---------------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                         |  | June 30,2009 |         | December 30,2008
|Senior Secured Credit Facility           |  | $            | 258,710 |                  | $ | 275,804
|Senior Subordinated Notes                |  |              | 175,000 |                  |   | 175,000
|Senior Secured Revolving Credit Facility |  |              | 5,000   |                  |   | 3,000  
|                                         |  |              |         |                  |   |        
|                                         |  |              | 438,710 |                  |   | 453,804
|Less current portion                     |  |              | 1,340   |                  |   | 17,094 
|                                         |  |              |         |                  |   |        
|                                         |  | $            | 437,370 |                  | $ | 436,710
|                                         |  |              |         |                  |   |        

The Companys debt facilities contain restrictions on additional borrowing, certain asset
sales, capital expenditures, dividend payments, certain investments and related-party transactions, as well as requirements to maintain various financial ratios. At June 30, 2009, the Company was in compliance with all of its debt covenants.

Based upon the provisions of the Senior Secured Credit Facility, the Company may be required to make an excess cash flow mandatory
prepayment on the term loan notes not later than 120 days after the Companys fiscal year end. Based upon the amount of excess cash flow generated during fiscal 2008 and the Companys leverage at fiscal 2008 year end, each of which is
defined in the credit agreement, the mandatory prepayment was determined to be $17.1 million. This amount was included in the current portion of long-term debt at December 30, 2008 and was paid utilizing cash reserves and borrowings on the
Revolving Credit Facility on April 24, 2009. Based on currently expected 2009 results, the Company anticipates that it will be required to make such a mandatory prepayment of between $25 million and $31 million for 2009 depending upon the
amount of excess cash flow generated during its fiscal year and its leverage at fiscal year-end. The excess cash flow mandatory prepayment is an annual requirement under the credit agreement. As the excess cash flow mandatory
prepayment is an estimate, the final excess cash flow mandatory prepayment could ultimately differ materially from the amounts reflected above.

Based upon independent trading data the estimated fair value of the Companys debt facilities was as follows (in thousands):



|                               |  |              |         |                  |   |        
|------------------------------ |  | ------------ | ------- | ---------------- | - | -------
|                               |  | June 30,2009 |         | December 30,2008
|Senior Secured Credit Facility |  | $            | 240,600 |                  | $ | 208,232
|Senior Subordinated Notes      |  |              | 161,000 |                  |   | 131,250
|Revolving Credit Facility      |  |              | 5,000   |                  |   | 3,000  
|                               |  |              |         |                  |   |        
|                               |  | $            | 406,600 |                  | $ | 342,482
|                               |  |              |         |                  |   |        

The Company determined the estimated fair value using available market information. However, the
fair value estimates presented herein are not necessarily indicative of the amount that the Companys debtholders could realize in an actual market transaction.

Note 6  Income Taxes

For the 26 weeks ended June 30, 2009 the Company recorded income tax
expense of $3.0 million which resulted in an effective income tax rate of 24.2%. The lower than statutory rate is attributable to the impact of tax credits and $1.0 million of favorable discrete adjustments related to state tax rate adjustments and
federal tax credit carry back adjustments. The Companys effective tax rate of 30.2% for the 26 weeks ended June 24, 2008 was also impacted by tax credits.

The liability for uncertain tax positions was $12.0 million as of June 30, 2009, was considered long term and was included in other deferred items in the Consolidated Balance Sheet. We expect to release certain
reserves over the next 12 months as statutes expire, which would impact the effective tax rate.



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##### Table of Contents

Note 7  Commitments and Contingencies

On May 12, 2009, a lawsuit against the Company, entitled Jeffrey Wass, et al. v. NPC International, Inc., Case No. 2:09-CV-2254-JWL-KGS, was
filed in the United States District Court for the District of Kansas. An Amended Complaint, entitled Jeffrey Wass and Mark Smith, et al. v. NPC International, Inc., was filed on July 2, 2009. Plaintiffs have brought the action individually and
on behalf of similarly situated employees who work or previously worked as delivery drivers for NPC. The Amended Complaint states that the lawsuit is brought as a collective action under the Fair Labor Standards Act (FLSA) to recover unpaid wages
and excessive deductions owed to plaintiffs and similarly situated workers employed by NPC in 28 states, and as a class action under Colorado law on behalf of one of the plaintiffs and all other similarly situated workers employed by NPC in Colorado
to recover unpaid minimum wages and excess payroll deductions and certain costs relating to uniforms and special apparel. The Amended Complaint alleges among other things that NPC deprived plaintiffs and other NPC delivery drivers of minimum wages
by providing insufficient reimbursements for automobile and other job-related expenses incurred for the purposes of delivering NPC's pizza and other food items. With respect to the claim under the FLSA, the Amended Complaint seeks compensatory
damages, liquidated damages, attorneys' fees and costs, and pre-judgment and post-judgment interest. With respect to the claim under Colorado law, the Amended Complaint seeks compensatory damages, costs of litigation, and pre-judgment and
post-judgment interest.

At this time, the Company is not able to predict the outcome of the lawsuit, any possible loss or possible range
of loss associated with the lawsuit or any potential effect on the Companys business, results of operations or financial condition. However, the Company believes the lawsuit is wholly without merit and will defend itself from these claims
vigorously.

Note 8  Derivative Financial Instruments

The Company participates in interest rate related derivative instruments to manage its exposure on its debt instruments. In accordance with the provisions of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS 133), as amended, the Company designates these forward contracts as cash flow hedges. Gains and losses on derivative instruments designated as cash flow hedges are reported in other
comprehensive income and reclassified into earnings in the periods in which earnings are impacted by the hedged item. The following interest rate swap contracts were entered into as a hedge to fix a portion of the term loan notes under the Senior
Secured Credit Facility and provide for fixed rates as compared to the three-month LIBOR rate on the following notional amounts of floating rate debt at June 30, 2009:



|                  |  |                                                                                                                            |        |     |               |      |   |               |                   |  | 
|----------------- |  | -------------------------------------------------------------------------------------------------------------------------- | ------ | --- | ------------- | ---- | - | ------------- | ----------------- |  | 
|Effective Date    |  | NotionalAmount(in thousands)                                                                                               |        |     | FixedRatePaid |      |   | Maturity Date
|June 6, 2006      |  | $                                                                                                                          | 50,000 | (1) |               | 5.39 | % |               | December 31, 2010
|January 31, 2008  |  |                                                                                                                            | 50,000 |     |               | 3.16 | % |               | January 31, 2011 
|April 7, 2008     |  |                                                                                                                            | 50,000 |     |               | 2.79 | % |               | April 7, 2011    
|November 18, 2008 |  |                                                                                                                            | 30,000 |     |               | 2.81 | % |               | November 18, 2011
|                  |  |                                                                                                                            |        |     |               |      |   |               |                   |  | 
|                  |  |                                                                                                                            |        | $   | 180,000       |      |   |               |                   |  | 
|                  |  |                                                                                                                            |        |     |               |      |   |               |                   |  | 
|                 
|                  | 
|(1)               |  | Amortized from $85.0 million to $50.0 million on 12/31/08 based on the interest rate swap contracts amortization schedule.

The following table presents the fair value of the Companys hedging portfolio as of
June 30, 2009 and December 30, 2008 (in thousands):



|                       |  |               |       |                   |   |      
|---------------------- |  | ------------- | ----- | ----------------- | - | -----
|Liability Derivatives 
|Balance Sheet Location |  | Fair Value   
|                       |  | June 30, 2009 |       | December 30, 2008
|Other deferred items   |  | $             | 5,763 |                   | $ | 6,796



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##### Table of Contents

The effect of the derivative instruments on the Condensed Consolidated Financial Statements was as
follows (in thousands):



|                        |  |                                                        |      |   |                                                                      |   |        |              |  |                       |              |   |                       |   |      |              |  |                  |              |   |        |              |  |   |              |   |  |   |        |   |  |   |      |  
|----------------------- |  | ------------------------------------------------------ | ---- | - | -------------------------------------------------------------------- | - | ------ | ------------ |  | --------------------- | ------------ | - | --------------------- | - | ---- | ------------ |  | ---------------- | ------------ | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | - |  | - | ---- | -
|                        |  | LossRecognized in OCI on Derivative(Effective Portion) |      |   | LossReclassified from AccumulatedOCI into Income (Effective Portion) |  
|                        |  | For the13 Weeks Ended                                  |      |   | For the26 Weeks Ended                                                |   |        | Location     |  | For the13 Weeks Ended |              |   | For the26 Weeks Ended |  
|                        |  | June 30,2009                                           |      |   | June 24,2008                                                         |   |        | June 30,2009 |  |                       | June 24,2008 |   |                       |   |      | June 30,2009 |  |                  | June 24,2008 |   |        | June 30,2009 |  |   | June 24,2008 |  
|Interest rate contracts |  | $                                                      | (595 | ) |                                                                      | $ | (1,987 | )            |  | $                     | (1,391       | ) |                       | $ | (555 | )            |  | Interest expense |              | $ | (1,135 | )            |  | $ | (571         | ) |  | $ | (2,006 | ) |  | $ | (682 | )

The Company currently expects that approximately $3.9 million of the change in the fair value of
the interest rate swap contracts included in Accumulated other comprehensive loss as of June 30, 2009 will be realized in earnings as additional interest expense within the next twelve months, contemporaneously with the net
settlement of the underlying quarterly interest payments, which may vary based on actual changes within the LIBOR market rates.

The
Company measures the fair value of its interest rate swap contracts under a Level 2 input as defined by SFAS 157. The Company uses a mark-to-market valuation based on observable interest rate yield curves which are adjusted for credit risk. During
the second quarter of fiscal 2009 and 2008, there was virtually no ineffectiveness related to cash flow hedges.

Note 9  Related-Party
Transactions

MLGPE Advisory Agreement. On May 3, 2006, the Company entered into an advisory agreement with an affiliate of
MLGPE pursuant to which such entity or its affiliates will provide advisory services to the Company. Under the agreement MLGPE or its affiliates will continue to provide financial, investment banking, management advisory and other services on the
Companys behalf for an annual fee of $1.0 million. The Company has paid $1.0 million to MLGPE for this fee for 2009, which is being amortized ratably to expense.

Bank of America Merchant Services. In January 2009, Bank of America Corporation acquired the parent company of MLGPE, Merrill Lynch & Co., Inc. During year-to-date 2009 the Company paid Bank of America
Merchant Services $0.2 million for credit card processing services.

Note 10  New Accounting Pronouncements

Newly Adopted Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). SFAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes
and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date fair value. SFAS 141(R) significantly changes the accounting for business
combinations in a number of areas including the treatment of contingent consideration, preacquisition contingencies, transaction costs, in-process research and development and restructuring costs. In addition, under SFAS 141(R), changes in an
acquired entitys deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. SFAS 141(R) provides guidance regarding what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company adopted SFAS 141(R) as of December 31, 2008
and the adoption did not have a material impact on the Companys consolidated financial statements.

In April 2009, the FASB released
Staff Position (FSP) SFAS 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (SFAS 107-1 and APB 28-1). This FSP amends FASB Statement
No. 107, Disclosures about Fair Values of Financial Instruments, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. The FSP also amends APB
Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. This FSP is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim
periods ending after March 15, 2009. The Company adopted SFAS 107-1 and APB 28-1 and provided the additional disclosure requirements for first quarter 2009.



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##### Table of Contents

In April 2009, the FASB issued FSP SFAS 115-2, SFAS 124-2, and EITF 99-20-2, Recognition and
Presentation of Other-Than-Temporary Impairments. This FSP provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such
instruments. This FSP is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company adopted the provisions of this FSP during second
quarter 2009 and such adoption did not have a material impact on the Companys consolidated financial statements.

In May 2009, the
FASB issued SFAS No. 165, Subsequent Events. SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be
issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The Company adopted SFAS No. 165 and provided the additional disclosure requirements for the quarter ending June 30, 2009.

Accounting Pronouncements Not Yet Adopted

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. SFAS No. 168 identifies the FASB Accounting Standards
Codification as the authoritative source of generally accepted accounting principles for nongovernmental entities in the United States. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under federal securities laws are
also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company plans to adopt the provisions of SFAS 168 during
the third quarter 2009, but does not believe this guidance will have a material impact on the Companys consolidated financial statements.

Note 11
 Subsequent Events

The Company has evaluated subsequent events through August 14, 2009 and determined that there were no
subsequent events that would impact the Companys condensed consolidated financial statements for the quarterly period June 30, 2009.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Cautionary Statement Regarding Forward Looking Information

This report includes forward-looking
statements regarding, among other things, our plans, strategies, and prospects, both business and financial. All statements contained in this document other than current and historical information are forward-looking statements. Forward-looking
statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results or other developments, and may contain words and phrases such as may, expect,
should, anticipate, intend, or similar expressions. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties,
many of which are beyond our control or are subject to change, actual results could be materially different. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are
reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Important factors that could cause actual results to
differ materially from the forward-looking statements include, but are not limited to, the following:



| |  |  | competitive conditions;
| | - |  | -----------------------



| |  |  | general economic and market conditions, including the recent worsening of conditions in the credit markets and in general economic conditions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | effectiveness of franchisor advertising programs and the overall success of the franchisor;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | increases in food, labor, fuel and other costs;
| | - |  | -----------------------------------------------



| |  |  | effectiveness of the hedging program for cheese prices directed by the Unified Foodservice Purchasing Co-op (UFPC);
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | significant disruptions in service or supply by any of our suppliers or distributors;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | changes in consumer tastes, geographic concentration and demographic patterns;
| | - |  | ------------------------------------------------------------------------------



| |  |  | consumer concerns about health and nutrition;
| | - |  | ---------------------------------------------



| |  |  | our ability to manage our growth and successfully implement our business strategy;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the risks associated with the expansion of our business, including risks relating to the integration of the substantial number of Pizza Hut units recently
acquired by us;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effect of disruptions to our computer and information systems;
| | - |  | ------------------------------------------------------------------



| |  |  | the effect of local conditions, events and natural disasters;
| | - |  | -------------------------------------------------------------



| |  |  | general risks associated with the restaurant industry;
| | - |  | ------------------------------------------------------



| |  |  | the outcome of pending or yet-to-be instituted legal proceedings;
| | - |  | -----------------------------------------------------------------



| |  |  | regulatory factors;
| | - |  | -------------------



| |  |  | the loss of our executive officers and certain key personnel;
| | - |  | -------------------------------------------------------------



| |  |  | our ability to service our substantial indebtedness;
| | - |  | ----------------------------------------------------



| |  |  | restrictions contained in our debt agreements;
| | - |  | ----------------------------------------------



| |  |  | availability, terms and deployment of capital;
| | - |  | ----------------------------------------------



| |  |  | our ability to obtain debt or equity financing on reasonable terms in light of recent changes in the capital and credit markets, to the extent we require such
financing for acquisitions or to expand or support our business in the future;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | and, various other factors beyond our control.
| | - |  | ----------------------------------------------

Consequently, such forward-looking statements should be regarded solely as our current plans, estimates and beliefs. We do not intend, and do not undertake, any obligation to update any forward looking statements to
reflect future events or circumstances after the date of such statements. For a more detailed discussion of the principal factors that could cause actual results to be materially different, you should read our risk factors in Item 1A of our
Annual Report on Form 10-K for the fiscal year ended December 30, 2008 (2008 Form 10-K).

Overview

Who We Are. We are the largest Pizza Hut franchisee and the largest franchisee of any restaurant concept in the United States according to the 2008
Top 200 Restaurant Franchisees by Franchise Times. We were founded in 1962 and, as of



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June 30, 2009 we operated 1,153 Pizza Hut units in 28 states with significant presence in the Midwest, South and Southeast. As of the second quarter
2009, our operations represented approximately 19% of the domestic Pizza Hut restaurant system and 23% of the domestic Pizza Hut franchised restaurant system as measured by number of units, excluding licensed units which operate with a limited menu
and no delivery in certain of our markets.

Our Fiscal Year. We operate on a 52- or 53-week fiscal year ending on the last Tuesday
in December. Fiscal year 2009 contains 52 weeks and fiscal year 2008 contained 53 weeks.

Acquisitions and Dispositions. Between
September 2008 and February 2009 we acquired 294 Pizza Hut units from Pizza Hut, Inc. (PHI) for approximately $88.1 million and 99 units from another Pizza Hut franchisee for $36.2 million. During this same time period, we also sold 112
units to PHI for approximately $37.8 million. The acquisitions were funded through the issuance of a $40.0 million term loan, proceeds from the sale of units to PHI, borrowings under our revolving credit facility and cash on hand.

As a result of the sale of units in 2008 and the sale of units in 2009, which were classified as held for sale at December 30, 2008, our
consolidated statements of income for all years presented have been adjusted to remove the operations of the 2008 and 2009 sold units and reclassify them as discontinued operations. Also included in discontinued operations for the fiscal year ended
December 30, 2008 was the loss on the sale of those units. The amounts presented below, except where otherwise indicated, relate to continuing operations only.

Our Sales

Net Product Sales. Net product sales are comprised of sales of food and beverages
from our restaurants, net of discounts. Year-to-date for fiscal 2009, pizza sales accounted for approximately 77% of net product sales. Beginning in April 2008, we began offering the Tuscani Pasta menu layer which has affected our sales mix. Various
factors influence sales at a given unit, including customer recognition of the Pizza Hut brand, our level of service and operational effectiveness, pricing, marketing and promotional efforts and local competition. Several factors affect our sales in
any period, including the number of units in operation, comparable store sales and seasonality. Comparable store sales refer to period-over-period net product sales comparisons for units under our operation for at least 12 months.

Fees and Other Income. Fees and other income are comprised primarily of delivery fees charged to customers, vending receipts and
other fee income and are not included in our comparable store sales metric.

Seasonality. Our business is seasonal in nature with
net product sales typically being lower in the second and third fiscal quarters. Sales are largely driven by product innovation, advertising and promotional activities and can be adversely impacted by holidays and economic times that generally
negatively impact consumer discretionary spending, such as the back to school season. As a result of these seasonal fluctuations, our operating results may vary substantially between fiscal quarters. Further, results for any quarter are not
necessarily indicative of the results that may be achieved for the full fiscal year.

Restaurant formats. We operate our Pizza Hut
restaurants through three different formats to cater to the needs of our customers in each respective market. Delivery units, or Delcos, are typically located in strip centers and provide delivery and carry-out, with a greater proportion
being located in more densely populated areas. Red Roof units, or RRs, are traditional free-standing, dine-in restaurants which offer on-location dining room service as well as carry-out service. Restaurant-Based Delivery units, or
RBDs, conduct delivery, dine-in, and carry-out operations from the same free-standing location. Approximately 43% of our units include the WingStreet product line at June 30, 2009. The WingStreet menu includes bone-in
and bone-out fried chicken wings which are tossed in one of eight sauces and appetizers which are available for dine-in, carry-out and delivery.



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The following table sets forth certain information with respect to each year-to-date fiscal period:



|                                                     |  |                            |     |  |                            |    
|---------------------------------------------------- |  | -------------------------- | --- |  | -------------------------- | ---
|                                                     |  | 26 weeksendedJune 30, 2009 |     |  | 26 weeksendedJune 24, 2008 |    
|Sales by occasion:                                   |  |                            |     |  |                            |    
|Delivery                                             |  | 41                         | %   |  | 35                         | %  
|Carryout                                             |  | 39                         | %   |  | 41                         | %  
|Dine-in                                              |  | 20                         | %   |  | 24                         | %  
|Number of restaurants open at the end of the period: |  |                            |     |  |                            |    
|Delco                                                |  | 432                        |     |  | 207                        |    
|RR                                                   |  | 188                        |     |  | 152                        |    
|RBD                                                  |  | 533                        |     |  | 416                        |    
|                                                     |  |                            |     |  |                            |    
|                                                     |  | 1,153                      | (1) |  | 775                        | (1)
|                                                     | 



| | (1) | Includes 500 and 142 units offering the
WingStreet product line, as of the year-to-date periods ended 2009 and 2008, respectively.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

Our Costs

Our operating costs and expenses are comprised of cost of sales, direct labor, other restaurant expenses and general and administrative expenses. Our cost
structure is highly variable with approximately 70% of operating costs variable to sales and volume of transactions.

Cost of sales.
Cost of sales includes the cost of food and beverage products sold, less rebates from suppliers, as well as paper and packaging, and is primarily influenced by fluctuations in commodity prices. Historically, our cost of sales has primarily been
comprised of the following: cheese: 30-35%; dough: 16-19%; meat: 13-17%; and packaging: 8-10%. These costs can fluctuate from year-to-year given the commodity nature of the cost category, but are constant across regions. We are a member of the UFPC,
a cooperative set up to act as a central procurement service for the operators of Yum! Brands, Inc. restaurants, and participate in various cheese hedging and procurement programs that are directed by the UFPC for cheese, meat and certain other
commodities to help reduce the price volatility of those commodities from period-to-period. Based on information provided by the UFPC, the UFPC expects to hedge approximately 30% to 50% of the Pizza Hut system's anticipated cheese purchases for
fiscal year 2009 through a combination of derivatives taken under the direction of the UFPC.

Direct Labor. Direct labor includes
the salary, payroll taxes, fringe benefit costs and workers compensation expense associated with restaurant based personnel. Direct labor is highly dependent on federal and state minimum wage rate legislation given that the vast majority of
our workers are hourly employees. To control labor costs, we are focused on proper scheduling and adequate training and testing of our store employees, as well as retention of existing employees.

Other restaurant operating expenses. Other restaurant operating expenses include all other costs directly associated with operating a restaurant
facility, which primarily represents royalties, advertising, rent and depreciation (facilities and equipment), utilities, delivery expenses, supplies, repairs, insurance, and other restaurant related costs.

Included within other restaurant operating expenses are royalties paid to PHI, which will be impacted in the future as follows. For delivery units
currently operating under the Companys existing franchise agreements and currently paying a 4.0% royalty rate, the franchise agreements provide for future increases in the royalty rates to be paid. The first such increase will occur in certain
delivery units effective January 1, 2010, when royalty rates are scheduled to increase by 0.5% of sales to 4.5% or approximately $0.9 million of additional annual royalty expense based on current estimated sales. Effective January 1, 2020,
royalty rates for these delivery units are scheduled to increase to 4.75% and, effective January 1, 2030, these rates will increase to 5.0%.

Our blended average royalty rate for the year-to-date period of 2009 was 4.8% of total sales compared to 4.4% for 2008. The increase is primarily due to the units acquired since October 2008 (acquisition units) which have a
higher average royalty rate than our comparable stores.

General and administrative expenses. General and administrative expenses
include field supervision and personnel costs and the corporate and administrative functions that support our restaurants, including employee wages and benefits, travel, information systems, recruiting and training costs, professional fees,
supplies, insurance and bank service and credit card transaction fees.



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Trends and Uncertainties Affecting Our Business

We believe that as a franchisee of such a large number of Pizza Hut restaurants, our financial success is driven less by variable factors that affect
regional restaurants and their markets, and more by trends affecting the food purchase industry  specifically the Quick Service Restaurants or QSR industry. The following discussion describes certain key factors that may affect our
future performance.

General Economic Conditions and Consumer Spending

Higher unemployment rates, declining home values and sales, the negative impact of changes in the credit markets, declining stock prices, and low consumer
confidence as a result of the changes within the economic environment have caused the consumer to experience a real and perceived reduction in disposable income which has negatively impacted consumer spending in most segments of the restaurant
industry, including the segment in which we compete. We believe these economic trends and the resulting negative impact on consumer sentiment are the primary causes of our lower comparable store sales.

Competition

The QSR industry is a fragmented
market, with competition from national and regional chains, as well as independent operators, which affects pricing strategies and margins. In the pizza segment, limited product variability can make differentiation among competitors difficult. Thus,
competitors continuously promote and market new product introductions, price discounts and bundled deals, and rely heavily on effective marketing and advertising to drive sales.

Commodity Prices

Commodity prices of packaging products (liner board) and ingredients such as
cheese, dough (wheat), and meat, can vary. The prices of these commodities can fluctuate throughout the year due to changes in supply and demand. Our costs can also fluctuate as a result of changes in ingredients or packaging instituted by Pizza
Hut. Overall, our commodity costs continued to retract during the second quarter of 2009; such decreases more than offset the higher costs associated with Pizza Huts ingredient reformulation and packaging redesign in 2009.

The block cheese price for the second quarter of fiscal 2009 averaged $1.16 per pound, a decrease of $0.83 or 42% versus the historically high average
price for the second quarter of fiscal year 2008 and dough costs declined 16% from the prior year. Our average costs of meat and packaging increased during the second quarter of fiscal 2009 by 11% and 24%, respectively, as compared to the prior
year. These increases exceeded changes in the commodity market prices for these categories primarily due to higher ingredient costs associated with the 2009 product ingredient reformulation and the new packaging design.

Labor Cost

The restaurant industry is labor
intensive and known for having a high level of employee turnover given low hourly wages and the part-time composition of the workforce. To the extent that our delivery sales mix increases due to acquisition of stores or customer preference, our
labor costs would be expected to increase due to the more labor intensive nature of the delivery transaction. Direct labor is highly dependent on federal and state minimum wage rate legislation given the vast majority of workers are hourly employees
whose compensation is either determined or influenced by the minimum wage rate. There has been legislation passed to increase certain states minimum wage rates. This has resulted in incremental direct labor expense which we have attempted to
mitigate through pricing initiatives, productivity improvement in our restaurants, better overall wage management tactics and other auxiliary cost reduction strategies. Further, in May 2007, the United States Congress passed a bill, which was signed
into law, to increase the federal minimum wage rate per hour as follows: from $5.15 to $5.85 effective July 24, 2007; $6.55 effective July 24, 2008 and $7.25 effective July 24, 2009. The federal tipped wage rate remained unchanged at
$2.13 per hour. The expected impact on our direct labor costs for these changes is described below under Inflation and Deflation. We believe we have effective strategies in place to offset some of this anticipated impact; however, we
cannot be certain that we will be able to offset any or all of this increase through auxiliary cost savings, productivity improvements in our restaurants and to a lesser extent pricing.

Additionally, potential changes in federal labor laws, including the possible enactment of the Employee Free Choice Act (EFCA), could result
in portions of our workforce being subjected to greater organized labor influence. The EFCA, also referred to as the card check bill, if passed in its current form could significantly change the nature of labor relations in the United
States, specifically, how union elections and contract negotiations are conducted. Although we do not currently have union employees, the EFCA could impose more requirements and union activity on our business, thereby potentially increasing our
costs, and could have a material adverse effect on our business, results of operations and financial condition.



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In addition, the federal government and several state governments have proposed legislation regarding
health care, including legislation that in some cases would require employers to either provide health care coverage to their employees or pay into a fund that would provide coverage for them. If this type of legislation is enacted in geographic
areas where we do business, it would likely increase our costs and could have a material adverse effect on our business, results of operations and financial condition.

Inflation and Deflation

Inflationary factors, such as increases in food and labor costs,
directly affect our operations. Because most of our employees are paid on an hourly basis, changes in rates related to federal and state minimum wage and tip credit laws will affect our labor costs. We are not always able to offset higher costs with
price increases. We anticipate that the aforementioned state minimum wage rates will increase direct labor expense in our comparable units (excluding acquisition units) by approximately an additional $0.7 million in fiscal 2009. We project the
federal minimum wage increase, which impacted approximately 93% of our units, will result in an increase of our direct labor expense in our comparable units of approximately $4.0 million in fiscal 2009. We believe we have effective strategies in
place to offset some of this anticipated impact; however, we cannot be certain that we will be able to offset any or all of this increase through auxiliary cost savings, productivity improvements in our restaurants and to a lesser extent pricing.

If the economy experiences deflation, which is a persistent decline in the general price level of goods and services, we may suffer a
decline in revenues as a result of the falling prices. In that event, given our fixed costs and minimum wage requirements, it is unlikely that we would be able to reduce our costs at the same pace as any declines in revenues. Consequently, a period
of prolonged or significant deflation would likely have a material adverse effect on our business, results of operations and financial condition.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
are based upon our unaudited Condensed Consolidated Financial Statements. The preparation of these financial statements requires estimation and judgment that affect the reported amounts of revenue, expenses, assets, and liabilities. We base our
estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. If these estimates differ materially from actual results, the impact on the unaudited Condensed Consolidated Financial Statements may be material. Our critical accounting policies are available in Item 7 of
our 2008 Form 10-K. There have been no significant changes with respect to these policies during the first 26 weeks of fiscal 2009.

Accounting for Goodwill. The Company has one operating segment and reporting unit for purposes of evaluating goodwill for impairment. Goodwill was $191.7 million and $188.5 million as of June 30, 2009 and December 30, 2008,
respectively.

Goodwill primarily originated with the acquisition of the Company by a new controlling shareholder in May 2006. Additional
goodwill was recorded in connection with multiple acquisitions of Pizza Hut units since 2006.

We evaluate goodwill for impairment annually
and at any other date when events or changes in circumstances indicate that potential impairment is more likely than not in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS
142).

The goodwill impairment test involves a two-step process. The first step is a comparison of the reporting units fair
value to its carrying value. If the carrying value exceeds fair value, goodwill is considered potentially impaired and we must complete the second step of the goodwill impairment test. Under step two, the implied fair value of the reporting
units goodwill is compared with the carrying amount of the reporting units goodwill. If the carrying amount of goodwill is greater than the implied fair value of goodwill, an impairment loss would be recognized in an amount equal to the
excess. The implied fair value of goodwill is calculated in the same manner that the amount of goodwill that is recognized in a business combination. This process involves allocating fair value to all assets and liabilities (both recognized and
unrecognized), as prescribed by FAS 141(R) guidance on performing a purchase price allocation. The difference between the fair value and the sum of the amounts that are assigned to recognized and unrecognized assets and liabilities is the implied
value of goodwill.

Three calculation methodologies are considered when determining fair value of the reporting unit: the asset approach,
the market approach and the income approach. The asset approach was not used as we have significant intangible value that



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is dependent on our cash flow. The market approach was not used due to deficiencies in the quality and quantity of comparable company data. The income
approach explicitly recognizes that the current value of an investment or asset is premised upon the expected receipt of future economic benefits. When applied to a business ownership interest, a value indication is developed by discounting expected
cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of the funds, the expected rate of inflation, and the risk associated with the particular investment. The discount rate selected is generally
based on the rates of return available from alternative investments of similar type and quality as of the valuation date. The discounted cash flow method provides an indication of value by discounting future net cash flows available for distribution
to their present worth at a rate that reflects both the current requirement of the market and the risk inherent in the specific investment. The income approach was used to determine our fair value.

Management judgment is a significant factor in determining whether an indicator of impairment has occurred. Management relies on estimates in determining
the fair value of each reporting unit, which include the following critical quantitative factors:

Anticipated future cash flows and
terminal value for each reporting unit. The income approach to determining fair value relies on the timing and estimates of future cash flows, including an estimate of terminal value. The projections use managements estimates of economic
and market conditions over the projected period including growth rates in sales and estimates of expected changes in operating margins. Our projections of future cash flows are subject to change if actual results are achieved that differ from those
anticipated. We are not expecting actual results to vary significantly from estimates.

Selection of an appropriate discount rate.
The income approach requires the selection of an appropriate discount rate, which is based on a weighted average cost of capital analysis. The discount rate is subject to changes in short-term interest rates and long-term yield as well as variances
in the typical capital structure of marketplace participants in the quick service restaurant industry. The discount rate is determined based on assumptions that would be used by marketplace participants, and for that reason, the capital structure of
selected marketplace participants was used in the weighted average cost of capital analysis. Given the current volatile economic conditions, it is possible that the discount rate could change.

We completed our annual impairment testing during the second quarter of 2009 and determined that goodwill was not impaired. A key assumption on our fair
value estimate using the income approach is the discount rate. We selected a weighted average cost of capital of 10.6%. We noted that an increase in the weighted average cost of capital of approximately 40 basis points would result in a reduction in
fair value of approximately $37.0 million. A change in fair value of this amount would have resulted in a fair value that would have still been in excess of carrying value.

Recently Issued Accounting Statements and Pronouncements

See Note 10 of the Condensed Consolidated
Financial Statements for new accounting standards, including the expected dates of adoption and estimated effects on our Condensed Consolidated Financial Statements.



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Results of Operations

The table below presents (i) comparable store sales indices, (ii) equivalent unit count, (iii) average weekly sales and (iv) selected restaurant operating results as a percentage of net product sales
for the 13-week and 26-week periods ended June 30, 2009 and June 24, 2008, respectively:



|                                      |  |                |    |  |                |   |  |               |    |  |               |  
|------------------------------------- |  | -------------- | -- |  | -------------- | - |  | ------------- | -- |  | ------------- | -
|                                      |  | 13 Weeks Ended |    |  | 26 Weeks Ended |  
|                                      |  | June 30, 2009  |    |  | June 24, 2008  |   |  | June 30, 2009 |    |  | June 24, 2008 |  
|Comparable store sales                |  | (12.6          | )% |  | 7.2            | % |  | (8.8          | )% |  | 3.8           | %
|Equivalent units(1)                   |  | 1,154          |    |  | 776            |   |  | 1,141         |    |  | 776           |  
|Average weekly sales(2)(in thousands) |  | 14,286         |    |  | 15,898         |   |  | 14,720        |    |  | 15,860        |  
|Net product sales                     |  | 100            | %  |  | 100            | % |  | 100           | %  |  | 100           | %
|Direct restaurant costs and expenses: |  |                |    |  |                |   |  |               |    |  |               |  
|Cost of sales                         |  | 26.8           | %  |  | 28.8           | % |  | 26.8          | %  |  | 28.4          | %
|Direct labor                          |  | 30.5           | %  |  | 28.1           | % |  | 30.2          | %  |  | 28.3          | %
|Other restaurant operating expenses   |  | 34.4           | %  |  | 31.8           | % |  | 33.9          | %  |  | 31.7          | %

| | 
| | 

| | (1) | Equivalent units represents the
number of units open at the beginning of a given period, adjusted for units opened, closed, acquired or sold during the period on a weighted average basis.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | In computing these averages, total net
product sales for the quarter and year-to-date periods were divided by equivalent units for the respective periods.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

Activity with respect to unit count is set forth in the table below:



|                                                                                                                                                                                                                       |  |                            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -
|                                                                                                                                                                                                                       |  | 26 WeeksEndedJune 30, 2009 |  
|Beginning of period                                                                                                                                                                                                    |  | 1,098                      |  
|Developed(1)                                                                                                                                                                                                           |  | 3                          |  
|Acquired(2)                                                                                                                                                                                                            |  | 105                        |  
|Sold                                                                                                                                                                                                                   |  | (42                        | )
|Closed(1)
(2)                                                                                                                                                                                                          |  | (11                        | )
|                                                                                                                                                                                                                       |  |                            |  
|End of period                                                                                                                                                                                                          |  | 1,153                      |  
|                                                                                                                                                                                                                       |  |                            |  
|(1)For the 26 weeks ended June 30, 2009
three units were relocated or rebuilt and are included in both the developed and closed totals above. (2)Includes one unit acquired that was closed immediately upon purchase. | 

During the 26 weeks ended June 30, 2009 we added the WingStreet product line to 26
units (23 units converted and 3 units newly constructed), acquired 90 WingStreet units and sold one unit for a total of 500 units offering the WingStreet product line at June 30, 2009.

Thirteen Weeks Ended June 30, 2009 Compared to June 24, 2008-adjusted for discontinued operations

Net Product Sales. Net product sales for the second quarter of 2009 compared to 2008, were $214.3 million and $160.3 million, respectively, an
increase of $54.0 million, or 33.7%, resulting largely from a 49% increase in equivalent units due to acquisitions and development, with comparable store sales decreasing 12.6% for the second quarter of 2009, rolling over last years second
quarter comparable store sales increase of 7.2%.

Due to the anticipated continued negative effect of the recession on consumer spending
and our category, and strong comparable store sales growth during our 3rd quarter last year, we currently expect to experience negative comparable store sales until at least the fourth quarter when we begin to compare results to a period where the
effects of the recession began to materially impact our business. However, based on preliminary results, we currently expect that comparable store sales for the upcoming quarter will be less negative than our second fiscal quarter results based upon
rolling over softer prior year comparable store sales of 4.5%.

Fees and Other Income. Fees and other income were $9.5 million for
the second quarter of 2009, compared to $4.8 million for the prior year, for an increase of $4.7 million or 98.3%. The increase was primarily due to increased delivery transactions from acquisitions and to a lesser extent customer delivery charge
increases effective July 2008, in conjunction with the federal minimum wage increase.



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Cost of Sales. Cost of sales was $57.4 million for the second quarter of 2009, compared to $46.2
million for the prior year for an increase of $11.2 million or 24.2%. Cost of sales decreased 2.0%, as a percentage of net product sales, to 26.8%, compared to 28.8% in the prior year. This decrease was primarily due to an 11% decrease in cheese
costs (net of UFPC hedging effect) and a 16% decrease in dough costs. These decreases were partially offset by a 24% increase in packaging costs and an 11% increase in meat ingredient costs (primarily due to Pizza Hut ingredient reformulation and
package design changes) compared to the prior year. Improved waste controls at the restaurant level and a modest shift in product mix account for the remainder of the overall reduction in cost of sales versus the prior year.

Direct Labor. Direct labor costs for the second quarter of 2009 as compared to the prior year were $65.3 million and $45.0 million, respectively,
an increase of $20.3 million, or 45.0%. Direct labor costs were 30.5% of net product sales for the second quarter 2009, a 2.4% increase compared to the prior year. Labor costs as a percent of net product sales increased by approximately 80 basis
points (bps) due primarily to higher acquisition-unit labor costs which were a result of higher delivery sales mix in these units which is more labor intensive than other occasions, higher average wage rates and general labor inefficiencies due to
acquisition integration and training. The remaining 160 bps increase was primarily due to the de-leveraging impact on fixed and semi-fixed labor costs as a result of the comparable store sales decline.

Other Restaurant Operating Expenses. Other restaurant operating expenses for the 13 weeks ended June 30, 2009 and June 24, 2008 were
$73.8 million and $51.0 million, respectively, an increase of $22.8 million, or 44.8%. Other operating expenses were 34.4% of net product sales for the second quarter 2009 compared to 31.8% of net product sales for the prior year, an increase of
2.6%. Approximately 120 bps of the increase, as a percentage of net product sales compared to the prior year, was due to the economics of the acquisition units, which caused an increase in our royalty expense (50 bps), higher depreciation expense
associated with purchase accounting asset values (40 bps), higher delivery driver reimbursement expenses due to a higher delivery mix (20 bps) and outsourced call center expenses for a certain acquisition market (20 bps), which were partially offset
by lower rent (10 bps). The remaining net variance of 140 bps was largely due to the de-leveraging impact on fixed and semi-fixed costs due to the comparable store sales decline consisting primarily of occupancy costs (100 bps), depreciation (50
bps) and advertising (20 bps) and increased delivery driver insurance costs due to adverse claims development during the quarter (30 bps). These increases were partially offset by the decline in delivery driver reimbursement expenses for
comparable stores due to lower fuel prices (40 bps) and lower store level bonuses (20 bps).

Depreciation expense for store operations was
$9.9 million or 4.6% of net product sales for the second quarter of 2009 compared to $5.9 million or 3.7% of net product sales for the prior year.

General and Administrative Expenses. General and administrative expenses for the 13 weeks ended June 30, 2009 were $12.1 million compared to $10.0 million for the 13 weeks ended June 24, 2008, an increase of $2.1 million or
21.4%. As a direct result of the 2009 and 2008 acquisitions, general and administrative expenses increased approximately $3.0 million for the following: increased field supervisory personnel costs of $1.7 million, increased credit card transaction
fees of $1.1 million and acquisition integration training costs of $0.2 million. These increases were partially offset by lower on-going operational training and profit sharing expenses as compared to the prior year.

Corporate Depreciation and Amortization. Corporate depreciation and amortization costs were $2.9 million and $2.6 million for the second quarter
of 2009 and 2008, respectively.

Other. We recorded expense of $0.1 million and $0.2 million for other expenses during the second
quarter of 2009 and 2008, respectively.

Interest Expense. Interest expense was $7.8 million for the second quarter of 2009 compared
to $8.2 million for the prior year, a decrease of $0.4 million due to lower interest rates as compared to the prior year. Our cash borrowing rate decreased 1.0% to 6.4% during the second quarter of 2009 compared to the prior year, however, our
average outstanding debt balance increased $35.6 million to $451.7 million in the second quarter of 2009 largely due to the issuance of a $40.0 million incremental term loan during the fourth quarter of 2008 used to fund acquisition activity.
Interest expense included $0.5 million for amortization of deferred debt issuance costs in both the second quarter 2009 and 2008, respectively.

Income Taxes. For the 13 weeks ended June 30, 2009, we recorded income tax expense of $1.0 million which resulted in an effective income tax rate of 22.2% compared to an effective tax rate of 42.1%, or $0.8 million, for the 13
weeks ended June 24, 2008. The lower than statutory rate for the second quarter of 2009 was due to the impact of tax credits in relation to income before taxes and a favorable discrete tax adjustment of $0.4 million for federal tax credit carry
back adjustments. The prior year anticipated annual effective rate was increased to 31.0% during the second quarter of 2008 which resulted in a second quarter effective tax rate of 42.1%. This increase was due to changes to anticipated permanent
deductions.

Income from Continuing Operations, net of taxes. Income from continuing operations for the 13 weeks ended June 30,
2009 was $3.4 million, compared to $1.1 million for the prior year. The increase was primarily due to the benefit of a 33.7%



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increase in net product sales, increased customer delivery charge income, lower commodity costs and lower interest expense which were partially offset by
increases in restaurant operating expenses, direct labor, general and administrative expenses and higher income tax expense.

Income
from Discontinued Operations, net of taxes. Income from discontinued operations was $0.9 million for the second quarter of 2008. In December 2008, we completed the sale of 70 units to PHI and in January 2009, we completed the sale of 42 units to
PHI (which were classified as held for sale at December 30, 2008).

Twenty-Six Weeks Ended June 30, 2009 Compared to June 24,
2008-adjusted for discontinued operations

Net Product Sales. Net product sales for the 26 weeks ended June 30, 2009
were $436.7 million compared to $320.0 million for the same period of 2008, an increase of $116.7 million, or 36.5%, resulting largely from a 47% increase in equivalent units due to acquisitions and development, with comparable store sales
decreasing 8.8% for the 2009 year-to-date period, rolling over last years comparable store sales increase of 3.8%.

Fees and Other
Income. Fees and other income were $19.5 million for year-to-date 2009, compared to $10.0 million for the prior year, for an increase of $9.5 million or 95.3%. The increase was primarily due to increased delivery transactions from acquisitions
and to a lesser extent customer delivery charge increases effective July 2008, in conjunction with the federal minimum wage increase, which were preceded by modest increases in most markets during the second quarter of fiscal 2008.

Cost of Sales. Cost of sales was $117.0 million for year-to-date 2009, compared to $90.8 million for the prior year for an increase of $26.2
million or 28.8%. Cost of sales decreased 1.6%, as a percentage of net product sales, to 26.8%, compared to 28.4% in the prior year. This decrease was primarily due to a 12% decrease in cheese costs (net of UFPC hedging effect) and a 10% decrease in
dough costs. These decreases were partially offset by a 15% increase in meat ingredient costs and a 24% increase in packaging costs (primarily due to Pizza Hut ingredient reformulation and package design changes) compared to the prior year. Improved
waste controls at the restaurant level and a modest shift in product mix account for the remainder of the overall reduction in cost of sales versus the prior year. Pricing initiatives beginning in the second quarter of 2008 also positively impacted
our year-over-year cost of sales margins.

Direct Labor. Direct labor costs for year-to-date 2009 as compared to the prior year were
$131.7 million and $90.4 million, respectively, an increase of $41.3 million, or 45.7%. Direct labor costs were 30.2% of net product sales for year-to-date 2009, a 1.9% increase compared to the prior year. Labor costs as a percent of net product
sales increased by approximately 80 basis points (bps) due primarily to higher acquisition-unit labor costs which were a result of higher delivery sales mix in these units which is more labor intensive than other occasions, higher average wage rates
and general labor inefficiencies due to acquisition integration and training. The remaining 110 bps increase was primarily due to the de-leveraging impact on fixed and semi-fixed labor costs (100 bps) as a result of the comparable store sales
decline and increased self-insured health insurance costs due to adverse claims development (10 bps).

Other Restaurant Operating
Expenses. Other restaurant operating expenses for year-to-date 2009 and 2008 were $148.0 million and $101.4 million, respectively, an increase of $46.6 million, or 46.0%. Other operating expenses were 33.9% of net product sales for year-to-date
2009 compared to 31.7% of net product sales for the prior year, an increase of 2.2%. Approximately 110 bps of the increase, as a percentage of net product sales compared to the prior year, was due to the economics of the acquisition units, which
caused an increase in our royalty expense (50 bps), higher depreciation expense associated with purchase accounting asset values (30 bps), higher delivery driver reimbursement expenses due to a higher delivery mix (30 bps) and outsourced call center
expenses for a certain acquisition market (20 bps) which were partially offset by lower rent (20 bps). The remaining net variance of 110 bps was largely due to the de-leveraging impact on fixed and semi-fixed costs due to the comparable store sales
decline consisting primarily of occupancy costs (90 bps), depreciation (50 bps) and advertising (20 bps). These increases were partially offset by a decline in delivery driver reimbursement expenses for comparable stores due to lower fuel
prices (50 bps) and an overall decrease in delivery driver insurance costs due to higher adverse claims development and activity in the prior year (10 bps).

Depreciation expense for store operations was $19.6 million or 4.5% of net product sales for the year-to-date period of 2009 compared to $11.6 million or 3.6% of net product sales for the prior year.

General and Administrative Expenses. General and administrative expenses for year-to-date 2009 were $24.8 million compared to $19.5 million for
the prior year, an increase of $5.3 million or 27.1%. As a direct result of the 2009 and 2008 acquisitions, general and administrative expenses increased approximately $5.8 million for the following: increased field supervisory personnel costs of
$3.2 million, increased credit card transaction fees of $2.1 million and acquisition integration training costs of $0.5 million. These increases were partially offset by lower on-going operational training and profit sharing expenses as compared to
the prior year.



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Corporate Depreciation and Amortization. Corporate depreciation and amortization costs were $5.9
million and $5.0 million for 2009 and 2008, respectively.

Other. We recorded expense of $0.8 million and $0.3 million for other
expenses for the year-to-date periods of 2009 and 2008, respectively. Included in this category were direct acquisition costs which are required to be expensed under FAS 141(R) effective for fiscal year 2009 of $0.4 million.

Interest Expense. Interest expense was $15.7 million for 2009 compared to $16.8 million for the prior year, a decrease of $1.1 million due to
lower interest rates as compared to the prior year. Our cash borrowing rate decreased 1.1% to 6.4% during the first half of 2009 compared to the prior year, however, our average outstanding debt balance increased $32.6 million to $454.5 million for
the first half of 2009 largely due to the issuance of a $40.0 million incremental term loan during the fourth quarter of 2008 used to fund acquisition activity. Interest expense included $1.0 million and $0.8 million for amortization of deferred
debt issuance costs in year-to-date 2009 and 2008, respectively.

Income Taxes. For the 26 weeks ended June 30, 2009, we
recorded income tax expense of $3.0 million which resulted in an effective income tax rate of 24.2% compared to an effective tax rate of 30.2%, or $1.7 million, for the prior year. The lower than statutory rates for both years are due to the impact
of tax credits in relation to income before taxes, and for 2009, favorable discrete tax adjustments of $1.0 million ($0.6 million for state tax rate adjustment and $0.4 million for federal tax credit carry back adjustments).

Income from Continuing Operations, net of taxes. Income from continuing operations for the 26 weeks ended June 30, 2009 was $9.4 million,
compared to $4.0 million for the prior year. The increase was primarily due to the benefit of a 36.5% increase in net product sales, increased customer delivery charge income, lower commodity costs and lower interest expense which were
partially offset by increases in restaurant operating expenses, direct labor, general and administrative expenses and higher income tax expense.

(Loss) Income from Discontinued Operations, net of taxes. Loss from discontinued operations was $0.1 million for the year-to-date period of 2009 compared to income for the prior year-to-date period of $2.2 million. In December 2008,
we completed the sale of 70 units to PHI and in January 2009, we completed the sale of 42 units to PHI (which were classified as held for sale at December 30, 2008).



23



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##### Table of Contents

Liquidity and Sources of Capital

Our short-term and long-term liquidity needs will arise primarily from: (1) interest and principal payments related to our existing credit facility and the Senior Subordinated Notes; (2) capital
expenditures, including those for our re-imaging plan, maintenance capital expenditures, and the introduction of the WingStreet product line at certain existing locations; (3) opportunistic acquisitions of Pizza Hut restaurants or other
acquisition opportunities; and (4) working capital requirements as may be needed to support our business. We intend to fund our operations, interest expense, capital expenditures, acquisitions and working capital requirements principally from
cash from operations, cash reserves and borrowings on our revolving credit facility. Future acquisitions, depending on the size, may require borrowings beyond those available on our existing revolving credit facility and therefore may require
further utilization of the additional remaining term loan borrowing capacity under our credit facility described below as well as other sources of debt or additional equity capital.

Recently, credit and capital markets have experienced unusual volatility and disruption, and equity and debt financing have become more expensive and
difficult to obtain. These recent changes in the financial and credit markets may impair our ability to obtain additional debt financing at costs similar to that of our current credit facility, if at all. In addition utilization of the additional
remaining term loan borrowing capacity under our existing credit facility, beyond parameters established in our current agreement, would result in a reset of the interest rate on our existing term loan borrowings, which would increase our borrowing
costs based on current market conditions. We will continue to evaluate the impact from these market changes as we assess our acquisition and other growth opportunities.

Our working capital was a deficit of $48.3 million as of June 30, 2009. Like most restaurant companies, we are a cash business with low levels of inventories and accounts receivable. Because our sales are
primarily cash and we receive credit from our suppliers, we operate on a net working capital deficit. Further, receivables are not a significant asset in the restaurant business and inventory turnover is rapid. Therefore, historically we have used
available liquid assets to reduce borrowings under our revolving line of credit.

Cash flows from operating activities, inclusive of discontinued
operations

Cash from operations is our primary source of funds. Changes in earnings and working capital levels are the two key factors
that generally have the greatest impact on cash from operations. Our operating activities provided net cash inflows of $39.7 million for the 26 weeks ended June 30, 2009 compared to $31.0 million for 2008. Cash flows from operations during 2009
were positively impacted by an $8.3 million increase in after tax cash flows from operations (after adding back non-cash items to net income) as compared to the prior year. These increases in operating cash flows were largely due to the positive
impact of acquisitions on net income and working capital leverage.

Cash flows from investing activities

Cash flows used in investing activities were $27.6 million during the 26 weeks ended June 30, 2009 compared to $19.5 million for the 26 weeks ended
June 24, 2008. During 2009, we completed an asset purchase and sale transaction in which we purchased 55 units for $18.7 million and sold 42 units for $19.5 million. We also completed an acquisition of 50 units for $14.2 million. During the
year-to-date period of 2009 we invested $14.8 million in capital expenditures, consisting of approximately $9.4 million in our existing operations (including approximately $0.6 million for WingStreet development at 26 units) and $5.4 million
for acquisition related information technology equipment. In the prior year, we invested $19.6 million in capital expenditures for existing operations (including approximately $5.3 million for WingStreet development at 119 units).

We have reduced our capital expenditure estimate for 2009 from the previous target of $36 million to approximately $29 million, not including
acquisitions. We anticipate that we will receive related sale-leaseback proceeds of approximately $3 million for a net capital expenditure of approximately $26 million. The reduction is primarily due to a $7 million decrease in our WingStreet
development plan from 200 originally planned to 40 units in an attempt to conserve free cash flow in light of the impact of the recession upon our sales volumes. The revised capital expenditure estimate includes an investment of approximately $2
million to add the WingStreet product line to 40 units and $6 million to convert the PHI acquisition units to our proprietary POS (point of sale) system.

Cash flows from financing activities

Net cash outflows for financing activities were $11.3 million for the 26 weeks ended
June 30, 2009 compared to net outflows of $12.8 million for the 26 weeks ended June 24, 2008. Net borrowings under the revolving credit facility were $2.0 million for the 26 weeks ended June 30, 2009 despite borrowing approximately
$14.2 million to fund our acquisition of 50



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##### Table of Contents

units in February 2009 and $15.0 million to partially fund our mandatory excess cash flow prepayment during the second quarter, compared to net repayments of
$15.5 million during the prior year. During the current year, we paid our mandatory excess cash flow prepayment of $17.1 million on our Senior Secured Credit Facility compared to $4.2 million in the prior year. During the first half of 2009 we
completed sale-leaseback transactions for six properties acquired in Virginia during the fourth quarter of 2008 for $2.9 million and completed sale-leaseback transactions on two formerly leased properties (purchased in 2008) for $0.9 million. During
the first half of 2008, we completed five sale-leaseback transactions on assets principally constructed during 2007 for $6.9 million.

We
are required, under certain circumstances as defined in our credit agreement, to make an excess cash flow mandatory prepayment on the term loan notes not later than 120 days after our 2009 fiscal year-end. Based on currently
expected 2009 results, we anticipate that we will be required to make a mandatory prepayment of an amount between $25 million and $31 million depending upon the amount of excess cash flow generated during our fiscal year and our leverage at fiscal
year-end. The excess cash flow mandatory prepayment is an annual requirement under the credit agreement. As the excess cash flow mandatory prepayment is an estimate, the final excess cash flow mandatory prepayment could
ultimately differ materially from the amounts reflected above.

As of June 30, 2009, we were in compliance with all of the financial
covenants under our senior secured credit facility. Further, as shown in the following table, our financial leverage has declined from 3.92x at fiscal 2008 year end to 3.83x, despite the significant capital investment in acquisition activity. Our
ratios under the foregoing financial covenants in our Credit Agreement as of June 30, 2009 are as follows:



| |                                 |  |       |        |                     |                      |  | 
| | ------------------------------- |  | ----- | ------ | ------------------- | -------------------- |  | 
| |                                 |  |       | Actual |                     | Covenant Requirement |  | 
| | Maximum leverage ratio          |  | 3.83x |        | Not more than 5.25x |                     
| | Minimum interest coverage ratio |  | 2.02x |        | Not less than 1.65x |                     

The credit agreement defines Leverage Ratio as the ratio of Consolidated Debt for
Borrowed Money to Consolidated EBITDA; Consolidated Interest Coverage Ratio is defined as the ratio of (x) Consolidated EBITDA plus Rent Expense to (y) Consolidated Interest Expense plus Rent Expense. All of the foregoing
capitalized terms are defined in the Credit Agreement, which was filed with the Securities and Exchange Commission on October 31, 2006 as Exhibit 10.2 to the Companys Registration Statement on Form S-4 (File No 333-138338). The Credit
Agreement provides that each of the above defined terms include the pro forma effect of acquisitions and divestitures on a full year basis. This pro forma effect used in connection with the financial debt covenant ratio calculations is not the same
calculation we use to determine Adjusted EBITDA, which we disclose to investors in our earnings releases.

Based upon current operations,
we believe that our cash flows from operations, together with borrowings that are available under the revolving credit facility portion of our senior secured credit facility, will be adequate to meet our anticipated requirements for working capital,
capital expenditures, and scheduled principal and interest payments through the next 12 months. At June 30, 2009, we had $53.9 million of borrowing capacity available under our revolving line of credit net of $16.1 million of outstanding
letters of credit. We will consider additional sources of financing to fund our long-term growth if necessary, including the remaining $60.0 million of term loan capacity available under our existing credit facility.

In borrowing amounts under our revolving credit facility, we are dependent upon the ability of participating financial institutions to honor draws on the
facility. The disruptions in the global credit markets may impede the ability of financial institutions syndicated under our revolving credit facility to fulfill their commitments. CIT Lending Services Corporation (CIT) currently is
responsible for funding approximately $10.0 million of our revolving credit facility. As of the current date, CIT is fulfilling all lending requests made under our revolving credit facility. Based upon the current market conditions, we do not
anticipate any potential reduction in commitments from CIT to have a material impact upon the current or future liquidity of the Company.

Letters of
Credit

As of June 30, 2009, we had letters of credit of $16.1 million issued under our existing credit facility in support of
self-insured risks.



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We are exposed to various market risks. Market risk is the potential loss arising from adverse changes in market prices and rates. We do not enter into derivative or other financial instruments for trading or speculative purposes.

Interest Rate Risk. Our primary market risk exposure is interest rate risk. All of our borrowings under our senior secured credit
facility bear interest at a floating rate. As of June 30, 2009, we had $263.7 million in funded floating rate debt outstanding under our senior secured credit facility. We have interest rate swap agreements that provide for fixed rates as
compared to LIBOR on the following notional amounts of floating rate debt:



|               |  |                             |       |               |      |   |               |              
|-------------- |  | --------------------------- | ----- | ------------- | ---- | - | ------------- | -------------
|Effective Date |  | NotionalAmount(in millions) |       | FixedRatePaid |      |   | Maturity Date
|June 6, 2006   |  | $                           | 50.0  |               | 5.39 | % |               | Dec. 31, 2010
|Jan. 31, 2008  |  |                             | 50.0  |               | 3.16 | % |               | Jan. 31, 2011
|April 7, 2008  |  |                             | 50.0  |               | 2.79 | % |               | April 7, 2011
|Nov. 18, 2008  |  |                             | 30.0  |               | 2.81 | % |               | Nov. 18, 2011
|               |  |                             |       |               |      |   |               |              
|               |  | $                           | 180.0 |               |      |   |               |              
|               |  |                             |       |               |      |   |               |              

After giving effect to these swaps, which leaves us with $83.7 million of floating rate debt, a
100 basis point increase in this floating rate would increase annual interest expense by approximately $0.8 million.

Commodity
Prices. Commodity prices such as cheese can vary. The price of this commodity can change throughout the year due to changes in supply and demand. Cheese has historically represented approximately 30% of our cost of sales. We are a member of the
UFPC, and participate in cheese hedging programs that are directed by the UFPC to help reduce the volatility of this commodity from period-to-period. Based on information provided by the UFPC, the UFPC expects to hedge approximately 30% to 50% of
the Pizza Hut system's anticipated cheese purchases for fiscal year 2009 through a combination of derivatives taken under the direction of the UFPC.

The estimated increase in our food costs from a hypothetical 10% adverse change in the average cheese block price per pound (approximately $0.12 for the 26 weeks ended June 30, 2009 and $0.19 per pound for 2008)
would have been approximately $2.2 million and $3.0 million for the 26 weeks ended June 30, 2009 and June 24, 2008, respectively, without giving effect to the UFPC directed hedging programs.



|Item 4. | Controls and Procedures.
|------- | ------------------------

Not applicable.



|Item 4T. | Controls and Procedures.
|-------- | ------------------------

Evaluation of Disclosure Controls and
Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (Exchange
Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date to provide reasonable assurance that the information required to be
disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is
accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting that occurred
during our second fiscal quarter of 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

On May 12, 2009, a lawsuit
against the Company, entitled Jeffrey Wass, et al. v. NPC International, Inc., Case No. 2:09-CV-2254-JWL-KGS, was filed in the United States District Court for the District of Kansas. An Amended Complaint, entitled Jeffrey Wass and Mark Smith,
et al. v. NPC International, Inc., was filed on July 2, 2009. Plaintiffs have brought the action individually and on behalf of similarly situated employees who work or previously worked as delivery drivers for NPC. The Amended Complaint states
that the lawsuit is brought as a collective action under the Fair Labor Standards Act (FLSA) to recover unpaid wages and excessive deductions owed to plaintiffs and similarly situated workers employed by NPC in 28 states, and as a class action under
Colorado law on behalf of one of the plaintiffs and all other similarly situated workers employed by NPC in Colorado to recover unpaid minimum wages and excess payroll deductions and certain costs relating to uniforms and special apparel. The
Amended Complaint alleges among other things that NPC deprived plaintiffs and other NPC delivery drivers of minimum wages by providing insufficient reimbursements for automobile and other job-related expenses incurred for the purposes of delivering
NPCs pizza and other food items. With respect to the claim under the FLSA, the Amended Complaint seeks compensatory damages, liquidated damages, attorneys fees and costs, and pre-judgment and post-judgment interest. With respect to the
claim under Colorado law, the Amended Complaint seeks compensatory damages, costs of litigation, and pre-judgment and post-judgment interest.

At this time, the Company is not able to predict the outcome of the lawsuit, any possible loss or possible range of loss associated with the lawsuit or any potential effect on the Companys business, results of operations or financial
condition. However, the Company believes the lawsuit is wholly without merit and will defend itself from these claims vigorously.



|Item 1A. | Risk Factors.
|-------- | -------------

The following risk factor disclosure
is in addition to the disclosure of risks in Item 1A of our 2008 Form 10-K, and should be read in conjunction with those disclosures:

Our
results of operations could be adversely affected by increased costs if health care legislation is adopted.

The federal government and several
state governments have proposed legislation regarding health care, including legislation that in some cases would require employers to either provide health care coverage to their employees or pay into a fund that would provide coverage for them. If
this type of legislation is enacted in geographic areas where we do business, it would likely increase our costs and could have a material adverse effect on our business, results of operations and financial condition.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

Not applicable.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

Not applicable.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

Not applicable.



|Item 5. | Other Information.
|------- | ------------------

Not applicable.



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##### Table of Contents

|Item 6. | Exhibits, Financial Statement Schedules
|------- | ---------------------------------------

Pursuant
to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the documents referenced below as exhibits to this Form 10-Q. The documents include agreements to which the Company is a party or has
a beneficial interest. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about the Company or its business or operations.
In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be
qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set
forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information
concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in the Companys public disclosures.
Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about the Company or its business or operations on the date hereof.



|            |  |                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document Description                                                                                                                                                                                                                                                                                 
|2.1*        |  | Stock Purchase Agreement dated as of March 3, 2006 among NPC Acquisition Holdings, LLC, NPC International, Inc. and the stockholders of NPC International, Inc. named therein                                                                                                                        
|            | 
|2.2*        |  | Merger Agreement dated as of May 3, 2006 between Hawk-Eye Pizza, LLC and NPC Management, Inc.                                                                                                                                                                                                        
|            | 
|2.3         |  | Asset Sale Agreement by and between NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. dated as of November 3, 2008 (incorporated herein by reference to Exhibit 2.1
to the Companys Current Report on Form 8-K filed with the Commission on December 9, 2008)                 
|            | 
|2.4         |  | Asset Purchase and Sale Agreement by and between NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. dated as of November 3, 2008 (incorporated herein by reference to
Exhibit 2.2 to the Companys Current Report on Form 8-K filed with the Commission on December 9, 2008)    
|            | 
|2.5         |  | Amendment to Asset Sale Agreement dated as of December 8, 2008 among NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. (incorporated herein by reference to Exhibit
2.3 to the Companys Current Report on Form 8-K filed with the Commission on December 9, 2008)             
|            | 
|2.6         |  | Amendment to Asset Purchase and Sale Agreement dated as of December 8, 2008 among NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. (incorporated herein by
reference to Exhibit 2.4 to the Companys Current Report on Form 8-K filed with the Commission on December 8, 2008)
|            | 
|2.7         |  | Asset Purchase and Sale Agreement by and between NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. dated as of December 15, 2008 (incorporated herein by reference
to Exhibit 2.5 to the Companys Current Report on Form 8-K filed with the Commission on January 20, 2009)   
|            | 
|2.8         |  | Asset Sale Agreement by and between NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. dated as of January 13, 2009 (incorporated herein by reference to Exhibit 2.6
to the Companys Current Report on Form 8-K filed with the Commission on February 17, 2009)                
|            | 
|2.9         |  | Amendment to Asset Sale Agreement dated as of February 12, 2009 between NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. (incorporated herein by reference to
Exhibit 2.7 to the Companys Current Report on Form 8-K filed with the Commission on February 17, 2009)         
|            | 
|2.10        |  | Second Amendment to Asset Sale Agreement dated as of February 16, 2009 between NPC International, Inc., Pizza Hut of America, Inc. and Pizza Hut, Inc. (incorporated herein by reference
to Exhibit 2.8 to the Companys Current Report on Form 8-K filed with the Commission on February 17, 2009)  
|            | 
|3.1*        |  | Amended and Restated Articles of Incorporation of NPC International, Inc.                                                                                                                                                                                                                            
|            | 
|3.2*        |  | Bylaws of NPC International, Inc.                                                                                                                                                                                                                                                                    
|            | 
|4.1*        |  | Indenture dated as of May 3, 2006 among NPC International, Inc., NPC Management, Inc. and Wells Fargo Bank, National Association, related to the issue of the 9 1/2% Senior Subordinated Notes due 2014                                                                                              



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document Description                                                                                                                                                                                                                                                                                                                                                                                                              
|4.2*        |  | Form of 9 1/2% Senior Subordinated Note due 2014 (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                        
|            | 
|4.3*        |  | Registration Rights Agreement dated as of May 3, 2006 among NPC International, Inc., NPC Management, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.
Morgan Securities Inc.                                                                                                                                                                                                                                     
|            | 
|10.1*       |  | Hawk-Eye Interests Purchase Agreement, dated as of May 3, 2006, among NPC International, Inc., Oread Capital Holdings, LLC and Troy D. Cook                                                                                                                                                                                                                                                                                       
|            | 
|10.2*       |  | Credit agreement dated as of May 3, 2006 among NPC International, Inc., NPC Acquisition Holdings, LLC as a Guarantor, the other Guarantors party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, Collateral Agent and Issuing Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Syndication Agent, Bank of America, N.A. and Sun Trust Bank, as Co-Documentation Agents, and the Lenders signatory
thereto
|            | 
|10.3*       |  | Distribution Agreement, dated as of January 5, 2004, between McLane Foodservice, Inc. and NPC International, Inc.                                                                                                                                                                                                                                                                                                                 
|            | 
|10.4*       |  | Advisory Agreement, dated as of May 3, 2006, among NPC International, Inc., NPC Acquisition Holdings, LLC and Merrill Lynch Global Partners, Inc.                                                                                                                                                                                                                                                                                 
|            | 
|10.5*       |  | Employment Agreement, dated as of May 3, 2006, among NPC International, Inc., NPC Acquisition Holdings, LLC and James K. Schwartz                                                                                                                                                                                                                                                                                                 
|            | 
|10.6*       |  | Employment Agreement, dated as of May 3, 2006, among NPC International, Inc., NPC Acquisition Holdings, LLC and Troy D. Cook                                                                                                                                                                                                                                                                                                      
|            | 
|10.7*       |  | NPC International, Inc. Deferred Compensation and Retirement Plan                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|10.8*       |  | NPC International, Inc. POWR Plan for Key Employees                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.9*       |  | Form of Location Franchise Agreement dated as of January 1, 2003 between Pizza Hut, Inc. and NPC Management, Inc.                                                                                                                                                                                                                                                                                                                 
|            | 
|10.10*      |  | Form of Territory Franchise Agreement dated as of January 1, 2003 between Pizza Hut, Inc. and NPC Management, Inc.                                                                                                                                                                                                                                                                                                                
|            | 
|10.11*      |  | Purchase Agreement and Escrow Instructions dated as of August 26, 2006 between Realty Income Corporation and NPC International, Inc.                                                                                                                                                                                                                                                                                              
|            | 
|10.12*      |  | Purchase Agreement dated as of April 25, 2006 among Merrill Lynch & Co. and J.P. Morgan Securities Inc., as representative for the initial purchasers, NPC International, Inc, and NPC
Management, Inc.                                                                                                                                                                                                                           
|            | 
|10.13       |  | Pizza Hut National Purchasing Coop, Inc. Membership Subscription and Commitment Agreement (incorporated herein by reference to Exhibit 10.32 to the Registrants Annual Report on
Form 10-K filed with the Commission on May 28, 1999 (File No. 0-13007))                                                                                                                                                                         
|            | 
|10.14*      |  | ISDA Master Agreement dated as of June 6, 2006 between Merrill Lynch Capital Services, Inc. and NPC International, Inc.                                                                                                                                                                                                                                                                                                           
|            | 
|10.15       |  | NPC Acquisition Holdings, LLC Management Option Plan (including forms of executive and director option agreements) dated January 24, 2007 (incorporated herein by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K filed with the Commission on January 25, 2007)                                                                                                                                            
|            | 
|10.16       |  | Amendment to Franchise Agreement dated as of December 25, 2007 between Pizza Hut, Inc. and NPC International, Inc. (incorporated herein by reference as Exhibit 10.16 to the Companys
Annual Report on Form 10-K filed with the Commission on March 14, 2008)                                                                                                                                                                    
|            | 
|10.17       |  | Swap Transaction Confirmation dated March 31, 2008 between Merrill Lynch Capital Services, Inc. and NPC International, Inc. (incorporated herein by reference to Exhibit 10.17 to the
Companys Quarterly Report on Form 10-Q filed with the Commission on May 9, 2008)                                                                                                                                                           
|            | 
|10.18       |  | Amended and Restated Employment Agreement, dated as of December 29, 2008 among NPC International, Inc., NPC Acquisition Holdings, LLC and James K. Schwartz (incorporated herein by reference
as Exhibit 10.17 to the Companys Current Report on Form 8-K filed with the Commission on January 5, 2009)                                                                                                                          
|            | 
|10.19       |  | Amended and Restated Employment Agreement, dated as of December 29, 2008 among NPC International, Inc., NPC Acquisition Holdings, LLC and Troy D. Cook (incorporated herein by reference as
Exhibit 10.18 to the Companys Current Report on Form 8-K filed with the Commission on January 5, 2009)                                                                                                                               



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document Description                                                                                                                                                                                                                                                                                                                              
|10.20       |  | Amendment, dated as of March 10, 2009, to Amended and Restated Employment Agreement, dated as of December 29, 2008, among NPC International, Inc., NPC Acquisition Holdings, LLC and James K.
Schwartz (incorporated herein by reference as Exhibit 10.19 to the Companys Current Report on Form 8-K filed with the Commission on March 16, 2009)
|            | 
|10.21       |  | Amendment, dated as of March 10, 2009, to Amended and Restated Employment Agreement, dated as of December 29, 2008, among NPC International, Inc., NPC Acquisition Holdings, LLC and Troy D.
Cook (incorporated herein by reference as Exhibit 10.20 to the Companys Current Report on Form 8-K filed with the Commission on March 16, 2009)     
|            | 
|14.1        |  | Code of Business Conduct and Ethics (incorporated herein by reference to the Registrants Annual Report on Form 10-K filed with the Commission on March 23,
2007)                                                                                                                                                                                 
|            | 
|21.1**      |  | List of subsidiaries                                                                                                                                                                                                                                                                                                                              
|            | 
|31.1***     |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                
|            | 
|31.2***     |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                
|            | 
|32.1***     |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                 
|            | 
|32.2***     |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                 



|* | Filed as an exhibit with corresponding number to the registrants registration statement on Form S-4 (File No 333-138338) and incorporated herein by reference
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Filed as an exhibit with the corresponding number to Amendment No. 1 to the registrants registration statement on Form S-4 (File No. 333-138338) and incorporated
herein by reference
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** | Filed herewith
|--- | --------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized, on August 14, 2009.



NPC INTERNATIONAL, INC.By:

/s/ Troy D. CookName:

Troy D. CookTitle:

Executive Vice PresidentFinance, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer)By:

/s/ Susan G. DechantName:

Susan G. DechantTitle:

Vice PresidentAdministration and Chief Accounting Officer (Principal Accounting Officer)




31