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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 March 31, 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. 129thStreetOverland 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 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 May 15, 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 |  | 13
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 22
|Item 4.       |  | Controls and Procedures                                                               |  | 22
|Item 4T.      |  | Controls and Procedures                                                               |  | 22
|              |  |                                                                                      
|Part II       |  | OTHER INFORMATION                                                                     |  |   
|              |  |                                                                                      
|Item 1.       |  | Legal Proceedings                                                                     |  | 23
|Item 1A.      |  | Risk Factors                                                                          |  | 23
|Item 2.       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 23
|Item 3.       |  | Defaults Upon Senior Securities                                                       |  | 23
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                   |  | 23
|Item 5.       |  | Other Information                                                                     |  | 23
|Item 6.       |  | Exhibits                                                                              |  | 24
|Exhibit Index |  |                                                                                      
|Signatures    |  | 27                                                                                   



1



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PART I

PART 1. FINANCIAL INFORMATION



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

NPC
INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)



|                                                                                                                                           |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                           |  | March 31,2009 |         |   | December 30,2008 |  
|Assets                                                                                                                                     |  |               |         |   |                  |   |         |  
|Current assets:                                                                                                                            |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                  |  | $             | 11,361  |   |                  | $ | 5,327   |  
|Accounts receivable                                                                                                                        |  |               | 4,082   |   |                  |   | 4,110   |  
|Inventories                                                                                                                                |  |               | 6,683   |   |                  |   | 7,291   |  
|Prepaid expenses and other current assets                                                                                                  |  |               | 6,333   |   |                  |   | 4,633   |  
|Assets held for sale                                                                                                                       |  |               | 1,888   |   |                  |   | 20,934  |  
|Deferred income taxes                                                                                                                      |  |               | 4,519   |   |                  |   | 4,531   |  
|Income taxes receivable                                                                                                                    |  |               | 908     |   |                  |   | 2,086   |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                                       |  |               | 35,774  |   |                  |   | 48,912  |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Facilities and equipment                                                                                                                   |  |               | 259,175 |   |                  |   | 236,999 |  
|Less accumulated depreciation                                                                                                              |  |               | (77,271 | ) |                  |   | (67,885 | )
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Net facilities and equipment                                                                                                               |  |               | 181,904 |   |                  |   | 169,114 |  
|Franchise rights, less accumulated amortization of $24,382 and $22,008, respectively                                                       |  |               | 415,840 |   |                  |   | 407,915 |  
|Goodwill                                                                                                                                   |  |               | 190,812 |   |                  |   | 188,530 |  
|Other assets, net                                                                                                                          |  |               | 25,457  |   |                  |   | 25,044  |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                               |  | $             | 849,787 |   |                  | $ | 839,515 |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Liabilities and stockholders equity                                                                                                       |  |               |         |   |                  |   |         |  
|Current liabilities:                                                                                                                       |  |               |         |   |                  |   |         |  
|Accounts payable                                                                                                                           |  | $             | 25,725  |   |                  | $ | 22,998  |  
|Accrued payroll                                                                                                                            |  |               | 13,380  |   |                  |   | 14,294  |  
|Sales tax payable                                                                                                                          |  |               | 4,004   |   |                  |   | 5,212   |  
|Payroll taxes                                                                                                                              |  |               | 3,889   |   |                  |   | 3,012   |  
|Accrued interest                                                                                                                           |  |               | 8,582   |   |                  |   | 6,317   |  
|Other accrued liabilities                                                                                                                  |  |               | 15,988  |   |                  |   | 14,277  |  
|Current portion of insurance reserves                                                                                                      |  |               | 8,464   |   |                  |   | 8,240   |  
|Current portion of debt                                                                                                                    |  |               | 17,094  |   |                  |   | 17,094  |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total current liabilities                                                                                                                  |  |               | 97,126  |   |                  |   | 91,444  |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Long-term debt                                                                                                                             |  |               | 433,710 |   |                  |   | 436,710 |  
|Other deferred items                                                                                                                       |  |               | 36,798  |   |                  |   | 35,556  |  
|Insurance reserves                                                                                                                         |  |               | 11,200  |   |                  |   | 11,133  |  
|Deferred income taxes                                                                                                                      |  |               | 117,483 |   |                  |   | 117,240 |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total long-term liabilities                                                                                                                |  |               | 599,191 |   |                  |   | 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 March 31, 2009 and December 30,
2008) |  |               |        |   |                  |   |        |  
|Paid-in-capital                                                                                                                            |  |               | 163,325 |   |                  |   | 163,325 |  
|Accumulated other comprehensive loss                                                                                                       |  |               | (4,050  | ) |                  |   | (4,125  | )
|Retained (deficit) earnings                                                                                                                |  |               | (5,805  | ) |                  |   | (11,768 | )
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                 |  |               | 153,470 |   |                  |   | 147,432 |  
|                                                                                                                                           |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                 |  | $             | 849,787 |   |                  | $ | 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 EndedMarch 31,2009 |         |   | 13 Weeks EndedMarch 25,2008 |  
|Sales:                                                   |  |                             |         |   |                             |   |         |  
|Net product sales                                        |  | $                           | 222,360 |   |                             | $ | 159,658 |  
|Fees and other income                                    |  |                             | 9,981   |   |                             |   | 5,182   |  
|                                                         |  |                             |         |   |                             |   |         |  
|Total sales                                              |  |                             | 232,341 |   |                             |   | 164,840 |  
|Costs and expenses:                                      |  |                             |         |   |                             |   |         |  
|Cost of sales                                            |  |                             | 59,530  |   |                             |   | 44,590  |  
|Direct labor                                             |  |                             | 66,425  |   |                             |   | 45,402  |  
|Other restaurant operating expenses                      |  |                             | 74,156  |   |                             |   | 50,407  |  
|General and administrative expenses                      |  |                             | 12,678  |   |                             |   | 9,531   |  
|Corporate depreciation and amortization of intangibles   |  |                             | 2,922   |   |                             |   | 2,440   |  
|Other                                                    |  |                             | 642     |   |                             |   | 110     |  
|                                                         |  |                             |         |   |                             |   |         |  
|Total costs and expenses                                 |  |                             | 216,353 |   |                             |   | 152,480 |  
|                                                         |  |                             |         |   |                             |   |         |  
|Operating income                                         |  |                             | 15,988  |   |                             |   | 12,360  |  
|Interest expense                                         |  |                             | (7,924  | ) |                             |   | (8,574  | )
|                                                         |  |                             |         |   |                             |   |         |  
|Income before income taxes                               |  |                             | 8,064   |   |                             |   | 3,786   |  
|Income tax expense                                       |  |                             | 2,042   |   |                             |   | 916     |  
|                                                         |  |                             |         |   |                             |   |         |  
|Income from continuing operations                        |  |                             | 6,022   |   |                             |   | 2,870   |  
|(Loss) income from discontinued operations, net of taxes |  |                             | (59     | ) |                             |   | 1,334   |  
|                                                         |  |                             |         |   |                             |   |         |  
|Net income                                               |  | $                           | 5,963   |   |                             | $ | 4,204   |  
|                                                         |  |                             |         |   |                             |   |         |  

See accompanying notes to the condensed consolidated financial statements.



3



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(Unaudited)

(in thousands, except share data)



|                                                                                 |  |                      |  |             |   |                |   |                           |  |   |                                   |   |  |                          |        |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | -------------------- |  | ----------- | - | -------------- | - | ------------------------- |  | - | --------------------------------- | - |  | ------------------------ | ------ | - |  | - | ------- | -
|                                                                                 |  | Sharesof commonstock |  | Commonstock |   | Paid-incapital |   | Retained(deficit)earnings |  |   | Accumulatedothercomprehensiveloss |   |  | Totalstockholdersequity |       
|Balance at December 30, 2008                                                     |  | 1,000                |  | $           |  |                | $ | 163,325                   |  | $ | (11,768                           | ) |  | $                        | (4,125 | ) |  | $ | 147,432 |  
|Comprehensive income:                                                            |  |                      |  |             |   |                |   |                           |  |   |                                   |   |  |                          |        |   |  |   |         |  
|Net income                                                                       |  |                     |  |             |  |                |   |                          |  |   | 5,963                             |   |  |                          |       |   |  |   | 5,963   |  
|Net unrealized change in cash flow hedging derivatives                           |  |                     |  |             |  |                |   |                          |  |   |                                  |   |  |                          | (796   | ) |  |   | (796    | )
|Reclassification adjustment into income for derivatives used in cash flow hedges |  |                     |  |             |  |                |   |                          |  |   |                                  |   |  |                          | 871    |   |  |   | 871     |  
|                                                                                 |  |                      |  |             |   |                |   |                           |  |   |                                   |   |  |                          |        |   |  |   |         |  
|Total comprehensive income                                                       |  |                      |  |             |   |                |   |                           |  |   |                                   |   |  |                          |        |   |  |   | 6,038   |  
|                                                                                 |  |                      |  |             |   |                |   |                           |  |   |                                   |   |  |                          |        |   |  |   |         |  
|Balance at March 31, 2009                                                        |  | 1,000                |  |             |  |                | $ | 163,325                   |  | $ | (5,805                            | ) |  | $                        | (4,050 | ) |  | $ | 153,470 |  
|                                                                                 |  |                      |  |             |   |                |   |                           |  |   |                                   |   |  |                          |        |   |  |   |         |  

See accompanying notes to the condensed consolidated financial statements.



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



|                                                                              |  |                            |         |   |                            |   |         |  
|----------------------------------------------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | -
|                                                                              |  | 13 WeeksEndedMarch 31,2009 |         |   | 13 WeeksEndedMarch 25,2008 |  
|Operating activities                                                          |  |                            |         |   |                            |   |         |  
|Net income                                                                    |  | $                          | 5,963   |   |                            | $ | 4,204   |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                            |         |   |                            |   |         |  
|Depreciation and amortization                                                 |  |                            | 12,964  |   |                            |   | 10,123  |  
|Amortization of debt issuance costs                                           |  |                            | 498     |   |                            |   | 269     |  
|Net facility impairment charges                                               |  |                            | 151     |   |                            |   | 105     |  
|Deferred income taxes                                                         |  |                            | 140     |   |                            |   | 580     |  
|Net loss on disposition of assets                                             |  |                            | 96      |   |                            |   | 5       |  
|Changes in assets and liabilities, excluding acquisitions:                    |  |                            |         |   |                            |   |         |  
|Accounts receivable                                                           |  |                            | (111    | ) |                            |   | 1,853   |  
|Inventories                                                                   |  |                            | 896     |   |                            |   | (518    | )
|Prepaid expenses and other current assets                                     |  |                            | (1,530  | ) |                            |   | (2,139  | )
|Accounts payable                                                              |  |                            | 2,727   |   |                            |   | (6,944  | )
|Payroll and sales taxes                                                       |  |                            | (331    | ) |                            |   | (99     | )
|Income taxes                                                                  |  |                            | 1,178   |   |                            |   | 507     |  
|Accrued interest                                                              |  |                            | 2,265   |   |                            |   | 2,879   |  
|Accrued payroll                                                               |  |                            | (914    | ) |                            |   | 1,939   |  
|Other accrued liabilities                                                     |  |                            | 1,249   |   |                            |   | 2,184   |  
|Insurance reserves                                                            |  |                            | 291     |   |                            |   | 1,970   |  
|Other deferred items                                                          |  |                            | 504     |   |                            |   | 376     |  
|Other assets                                                                  |  |                            | (122    | ) |                            |   | (115    | )
|                                                                              |  |                            |         |   |                            |   |         |  
|Net cash provided by operating activities                                     |  |                            | 25,914  |   |                            |   | 17,179  |  
|                                                                              |  |                            |         |   |                            |   |         |  
|Investing activities                                                          |  |                            |         |   |                            |   |         |  
|Capital expenditures                                                          |  |                            | (7,203  | ) |                            |   | (9,747  | )
|Net proceeds from sale of units                                               |  |                            | 19,463  |   |                            |   |        |  
|Purchase of business assets, net of cash acquired                             |  |                            | (32,937 | ) |                            |   | (32     | )
|Proceeds from sale or disposition of assets                                   |  |                            | 20      |   |                            |   | 5       |  
|                                                                              |  |                            |         |   |                            |   |         |  
|Net cash used in investing activities                                         |  |                            | (20,657 | ) |                            |   | (9,774  | )
|                                                                              |  |                            |         |   |                            |   |         |  
|Financing activities                                                          |  |                            |         |   |                            |   |         |  
|Borrowings under revolving credit facility                                    |  |                            | 59,779  |   |                            |   | 79,500  |  
|Payments under revolving credit facility                                      |  |                            | (62,779 | ) |                            |   | (95,000 | )
|Debt issue costs                                                              |  |                            | (16     | ) |                            |   |        |  
|Proceeds from sale-leaseback transactions                                     |  |                            | 2,891   |   |                            |   | 5,703   |  
|Proceeds from sale-leaseback transactions on formerly leased properties       |  |                            | 902     |   |                            |   |        |  
|                                                                              |  |                            |         |   |                            |   |         |  
|Net cash provided by (used in) financing activities                           |  |                            | 777     |   |                            |   | (9,797  | )
|                                                                              |  |                            |         |   |                            |   |         |  
|Net change in cash and cash equivalents                                       |  |                            | 6,034   |   |                            |   | (2,392  | )
|Beginning cash and cash equivalents                                           |  |                            | 5,327   |   |                            |   | 7,609   |  
|                                                                              |  |                            |         |   |                            |   |         |  
|Ending cash and cash equivalents                                              |  | $                          | 11,361  |   |                            | $ | 5,217   |  
|                                                                              |  |                            |         |   |                            |   |         |  
|Supplemental disclosures of cash flow information:                            |  |                            |         |   |                            |   |         |  
|Net cash paid for interest                                                    |  | $                          | 5,161   |   |                            | $ | 5,246   |  
|Net cash paid for income taxes                                                |  | $                          | 398     |   |                            | $ | 27      |  
|Non-cash investing activities:                                                |  |                            |         |   |                            |   |         |  
|Accrued capital expenditures                                                  |  | $                          | 507     |   |                            | $ | 1,566   |  

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

During the first quarter of 2009 the Company acquired 105 Pizza Hut units from Pizza Hut, Inc. PHI. These acquisitions were funded by 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), 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 will be finalized as necessary, up to one year after the acquisition closing date, 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 Sheet. 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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Identification and allocation of values assigned to the intangible assets are based on the provisions of
SFAS No. 141(R). 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                            |  |      | 965        |      |   | 754        |  |   | 2,162             |   |  |   | 2,743      |  |   | 1,140      |  
|Fixed assets                        |  |      | 8,733      |      |   | 11,224     |  |   | 15,609            |   |  |   | 15,316     |  |   | 13,060     |  
|(Unfavorable) favorable leases, net |  |      | 142        |      |   | 215        |  |   | (487              | ) |  |   | 104        |  |   | (221       | )
|Other                               |  |      | 182        |      |   | 23         |  |   | (56               | ) |  |   | 726        |  |   | 924        |  
|                                    |  |      |            |      |   |            |  |   |                   |   |  |   |            |  |   |            |  
|Total purchase price                |  | $    | 18,677     |      | $ | 14,154     |  | $ | 36,178            |   |  | $ | 28,207     |  | $ | 27,014     |  
|                                    |  |      |            |      |   |            |  |   |                   |   |  |   |            |  |   |            |  
|Estimated annual rent               |  | $    | 2,100      |      | $ | 1,938      |  | $ | 3,662             |   |  | $ | 3,536      |  | $ | 4,008      |  

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 EndedMarch 31, 2009       |         | 13 Weeks EndedMarch 25,
2008
|Total sales                       |  | $                                  | 241,331 |                              | $ | 254,064
|Income before income taxes        |  |                                    | 7,878   |                              |   | 4,431  
|Income from continuing operations |  |                                    | 5,910   |                              |   | 3,257  

The Consolidated Statement of Income for the 13 weeks ended March 31, 2009 included $75.9 million
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 EndedMarch 31, 2009 |       |   | 13 Weeks EndedMarch 25, 2008
|Total sales                                              |  | $                            | 2,009 |   |                              | $ | 23,910
|                                                         |  |                              |       |   |                              |   |       
|(Loss) income before income taxes                        |  |                              | (84   | ) |                              |   | 1,759 
|Income tax (benefit) expense                             |  |                              | (25   | ) |                              |   | 425   
|                                                         |  |                              |       |   |                              |   |       
|(Loss) income from discontinued operations, net of taxes |  | $                            | (59   | ) |                              | $ | 1,334 
|                                                         |  |                              |       |   |                              |   |       

Note 4  Goodwill and Other Intangible Assets

Changes in goodwill are summarized below (in thousands):



|                             |  |   |        
|---------------------------- |  | - | -------
|Balance at December 30, 2008 |  | $ | 188,530
|Acquisitions                 |  |   | 2,282  
|                             |  |   |        
|Balance at March 31, 2009    |  | $ | 190,812
|                             |  |   |        

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):



|                                |  |                      |         |   |                         |   |         |               |  |   |         |  
|------------------------------- |  | -------------------- | ------- | - | ----------------------- | - | ------- | ------------- |  | - | ------- | -
|                                |  | March 31, 2009       |        
|                                |  | Gross CarryingAmount |         |   | AccumulatedAmortization |   |         | Net BookValue | 
|Amortizable intangible assets:  |  |                      |         |   |                         |   |         |               |  |   |         |  
|Franchise rights                |  | $                    | 440,222 |   |                         | $ | (24,382 | )             |  | $ | 415,840 |  
|Favorable leasehold interests   |  |                      | 10,114  |   |                         |   | (1,618  | )             |  |   | 8,496   |  
|Unfavorable leasehold interests |  |                      | (4,425  | ) |                         |   | 707     |               |  |   | (3,718  | )
|Internally developed software   |  |                      | 1,069   |   |                         |   | (624    | )             |  |   | 445     |  
|Non-compete                     |  |                      | 1,925   |   |                         |   | (1,123  | )             |  |   | 802     |  
|                                |  |                      |         |   |                         |   |         |               |  |   |         |  
|Total                           |  | $                    | 448,905 |   |                         | $ | (27,040 | )             |  | $ | 421,865 |  
|                                |  |                      |         |   |                         |   |         |               |  |   |         |  
|                                | 
|                                |  | 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 $2.0 million for the 13
weeks ended March 31, 2009 and March 25, 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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Note 5  Debt

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



|                                         |  |               |         |                  |   |        
|---------------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|                                         |  | March 31,2009 |         | December 30,2008
|Senior Secured Credit Facility           |  | $             | 275,804 |                  | $ | 275,804
|Senior Subordinated Notes                |  |               | 175,000 |                  |   | 175,000
|Senior Secured Revolving Credit Facility |  |               |        |                  |   | 3,000  
|                                         |  |               |         |                  |   |        
|                                         |  |               | 450,804 |                  |   | 453,804
|Less current portion                     |  |               | 17,094  |                  |   | 17,094 
|                                         |  |               |         |                  |   |        
|                                         |  | $             | 433,710 |                  | $ | 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 March 31, 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 March 31, 2009 and December 30, 2008 and was paid utilizing cash reserves
and borrowings on the Revolving Credit Facility on April 24, 2009.

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



|                               |  |               |         |                  |   |        
|------------------------------ |  | ------------- | ------- | ---------------- | - | -------
|                               |  | March 31,2009 |         | December 30,2008
|Senior Secured Credit Facility |  | $             | 241,328 |                  | $ | 208,232
|Senior Subordinated Notes      |  |               | 138,250 |                  |   | 131,250
|Revolving Credit Facility      |  |               |        |                  |   | 3,000  
|                               |  |               |         |                  |   |        
|                               |  | $             | 379,578 |                  | $ | 342,482
|                               |  |               |         |                  |   |        

The Company has elected not to report its debt facilities at fair value within the Consolidated
Balance Sheets, but rather, at historical cost. 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 if these debt facilities were redeemed by the Company at the end of each period presented.

Note 6 
Income Taxes

For the 13 weeks ended March 31, 2009, the Company recorded income tax expense of $2.0 million which resulted in an
effective income tax rate of 25.3% compared to income tax expense of $0.9 million or an effective tax rate of 24.2% during the prior year. For first quarter of 2009, the lower than statutory rates are attributable to the impact of tax credits and a
$0.6 million favorable discrete state tax adjustment. The Companys effective tax rate of 24.2% for the first quarter of fiscal 2008 was also impacted by tax credits.

The liability for uncertain tax positions was $12.1 million as of March 31, 2009, was considered long term and was included in other deferred items
in the Consolidated Balance Sheet.

Note 7  Commitments and Contingencies

From time-to-time, the Company is involved in litigation, most of which is incidental to its business.



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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 swap agreements 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 March 31, 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 swaps amortization schedule.
| | --- | ---------------------------------------------------------------------------------------------------

The following table presents the fair value of the Companys hedging
portfolio as of March 31, 2009 and December 30, 2008 (in thousands):



|                       |  |                |       |                   |   |      
|---------------------- |  | -------------- | ----- | ----------------- | - | -----
|Liability Derivatives 
|Balance Sheet Location |  | Fair Value    
|                       |  | March 31, 2009 |       | December 30, 2008
|Other deferred items   |  | $              | 6,606 |                   | $ | 6,796

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



|                        |  |                                                          |      |   |               |   |                                                                        |   |  |                  |  |   |               |   |  |   |      |  
|----------------------- |  | -------------------------------------------------------- | ---- | - | ------------- | - | ---------------------------------------------------------------------- | - |  | ---------------- |  | - | ------------- | - |  | - | ---- | -
|                        |  | (Loss)Recognized in OCI on Derivative(Effective Portion) |      |   |               |   | (Loss)Reclassified from AccumulatedOCI into Income (Effective Portion) |  
|                        |  | For the13 Weeks Ended                                    |      |   | Location      |   | For the13 Weeks Ended                                                  |  
|                        |  | March 31,2009                                            |      |   | March 25,2008 |   |                                                                        |   |  | March 31,2009    |  |   | March 25,2008 |  
|Interest rate contracts |  | $                                                        | (796 | ) |               | $ | (1,432                                                                 | ) |  | Interest expense |  | $ | (871          | ) |  | $ | (111 | )

The Company currently expects that approximately $3.6 million of the change in the fair value of
the swap contract included in Accumulated other comprehensive loss as of March 31, 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 swaps 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 first 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.



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Merrill Lynch & Company Investments Derivative Transactions.On June 6, 2006, the
Company entered into an amortizing floating-to-fixed rate interest rate swap agreement expiring December 31, 2010. The notional amount of this swap was $50.0 million at March 31, 2009. Merrill Lynch Capital Services, Inc.
(MLCS) was the counterparty on $25.0 million of the total notional amount, and JPMorgan Chase Bank, N.A., an unrelated party, was the counterparty on the residual $25.0 million. Under this swap, the Company will pay both counter-parties
5.39% and receive the three-month LIBOR rate as determined on the reset dates. These swaps were entered into to provide a hedge against the effects of rising interest rates on a portion of the term loan notes under the Senior Secured Credit
Facility.

Effective April 7, 2008, the Company entered into a floating-to-fixed rate interest rate swap agreement expiring
April 7, 2011, on a notional amount of $50.0 million with MLCS as the counterparty to the transaction. Under this swap, the Company will pay MLCS 2.79% and receive the three-month LIBOR rate as determined on the reset dates. This swap was
entered into as a hedge to fix a portion of the term loan notes under the Senior Secured Credit Facility. The terms of this agreement were comparable to an agreement that would be obtained in an arms-length transaction.

Bank of America Merchant Services.In January 2009, Bank of America Corporation acquired the parent company of MLGPE, Merrill Lynch &
Co., Inc. During the first quarter of fiscal 2009 the Company paid Bank of America Merchant Services $0.1 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 2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the Useful Life of Intangible
Assets. FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, Goodwill and Other
Intangible Assets. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial
statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company adopted FSP 142-3 as of December 31, 2008 and the adoption did not have a material impact on its consolidated financial statements.

In April 2009, the FASB released Staff Position 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 proposal 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 proposal also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial
statements. This proposal 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.

Accounting Pronouncements Not Yet Adopted

In April 2009, the FASB released Staff Position SFAS 157-4, Determining Whether a Market Is Not Active and a Transaction Is Not Distressed
(SFAS 157-4). This proposal provides additional guidance in determining whether a market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in SFAS 157, Fair Value
Measurements. SFAS 157-4 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 plans to adopt the provisions of SFAS 157-4
during second quarter 2009, but does not believe this guidance will have a significant impact on the Companys consolidated financial statements.



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In April 2009, the FASB issued Staff Position SFAS 115-2, SFAS 124-2, and EITF 99-20-2, Recognition
and Presentation of Other-Than-Temporary Impairments. This proposal provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such
instruments. This Proposed Staff Position 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 plans to adopt the provisions of
this Proposed Staff Position during second quarter 2009, but does not believe this guidance will have a significant impact on the Companys consolidated financial statements.



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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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March 31, 2009 we operated 1,156 Pizza Hut units in 28 states with significant presence in the Midwest, South and Southeast. As of the end of fiscal
2008, our operations represented approximately 18% of the domestic Pizza Hut restaurant system and 22% 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 $87.9 million and 99 units from another Pizza Hut franchisee for $36.1 million. During this same time period, we also sold 112
units to PHI for approximately $37.8 million. The acquisitions were funded through our revolving credit facility, the issuance of a $40.0 million term loan, proceeds from the sale of units to PHI 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 which were reclassified 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 76% 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 store, 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 stores 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 41% of our units include the WingStreet product line. 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 fiscal period:



|                                                     |  |                   |         |     |                   |   |         |    
|---------------------------------------------------- |  | ----------------- | ------- | --- | ----------------- | - | ------- | ---
|                                                     |  | First Quarter2009 |         |     | First Quarter2008 |  
|Average quarterly revenue per restaurant(1)          |  | $                 | 196,954 |     |                   | $ | 205,744 |    
|Sales by occasion:                                   |  |                   |         |     |                   |   |         |    
|Delivery                                             |  |                   | 41%     |     |                   |   | 36%     |    
|Carryout                                             |  |                   | 40%     |     |                   |   | 41%     |    
|Dine-in                                              |  |                   | 19%     |     |                   |   | 23%     |    
|Number of restaurants open at the end of the period: |  |                   |         |     |                   |   |         |    
|Delco                                                |  |                   | 433     |     |                   |   | 205     |    
|RR                                                   |  |                   | 191     |     |                   |   | 155     |    
|RBD                                                  |  |                   | 532     |     |                   |   | 417     |    
|                                                     |  |                   |         |     |                   |   |         |    
|                                                     |  |                   | 1,156   | (2) |                   |   | 777     | (2)

| | 
| | 

| | (1) | In computing these averages, total net product sales for the
fiscal periods were divided by equivalent units which 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.
Equivalent units were 1,129 and 776 for the first quarter of 2009 and 2008, respectively.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes 477 and 75 units offering the WingStreet product
line, as of the first quarter 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 first quarter of fiscal 2009 was 4.7% of total sales compared to 4.3% for the first quarter of fiscal 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.



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##### Table of Contents

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.

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

Declining home values and sales, the negative impact of changes in the credit markets, declining stock prices, higher unemployment rates 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 have negatively impacted consumer sentiment and as a result have lowered our 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 retracted during the first 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 first quarter of fiscal 2009 averaged $1.18 per pound, a decrease of $0.72 or 38% versus the historically high average
price for the first quarter of fiscal year 2008 and dough costs declined 4% from the prior year. Our average costs of meat and packaging increased during the first quarter of fiscal 2009 by 20% 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 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,



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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.

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 will result in an increase of our direct labor
expense in our comparable units of approximately $4.3 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 13 weeks of
fiscal 2009.

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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##### Table of Contents

Results of Operations

The table below presents (i) comparable store sales indices and (ii) selected restaurant operating results as a percentage of net product sales for the 13-week periods ended March 31, 2009 and
March 25, 2008, respectively:



|                                      |  |                             |    |  |                             |  
|------------------------------------- |  | --------------------------- | -- |  | --------------------------- | -
|                                      |  | 13 WeeksEndedMarch 31, 2009 |    |  | 13 WeeksEndedMarch 25, 2008 |  
|Comparable store sales                |  | (5.0                        | )% |  | 0.4                         | %
|Net product sales                     |  | 100                         | %  |  | 100                         | %
|Direct restaurant costs and expenses: |  |                             |    |  |                             |  
|Cost of sales                         |  | 26.8                        | %  |  | 27.9                        | %
|Direct labor                          |  | 29.9                        | %  |  | 28.4                        | %
|Other restaurant operating expenses   |  | 33.3                        | %  |  | 31.6                        | %

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



|                                        |  |                             |   |  |                             |  
|--------------------------------------- |  | --------------------------- | - |  | --------------------------- | -
|                                        |  | 13 WeeksEndedMarch 31, 2009 |   |  | 13 WeeksEndedMarch 25, 2008 |  
|Beginning of period                     |  | 1,098                       |   |  | 888                         |  
|Developed(1)                            |  | 2                           |   |  | 8                           |  
|Acquired(2)                             |  | 105                         |   |  |                            |  
|Sold                                    |  | (42                         | ) |  |                            |  
|Closed(1) (2)                           |  | (7                          | ) |  | (7                          | )
|                                        |  |                             |   |  |                             |  
|End of period                           |  | 1,156                       |   |  | 889                         |  
|                                        |  |                             |   |  |                             |  
|Equivalent Units, continuing operations |  | 1,129                       |   |  | 776                         |  

| | 
| | 

| | (1) | For the 13 weeks ended March 31, 2009 and March 25, 2008, two units and three units, respectively, were
relocated or rebuilt and are included in both the developed and closed total above.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes one unit acquired that was closed immediately upon purchase.
| | --- | ---------------------------------------------------------------------

We added the WingStreet product line to 2 units during the 13 weeks ended March 31, 2009 and acquired 90 WingStreet units for a total of
477 units offering the WingStreet product line at March 31, 2009.

Thirteen Weeks Ended March 31, 2009 Compared to March 25,
2008-adjusted for discontinued operations

Net Product Sales.Net product sales for the first quarter of 2009 compared to
2008, were $222.4 million and $159.7 million, respectively, an increase of $62.7 million, or 39.3%, resulting largely from a 45.5% increase in equivalent units due to acquisitions and development, with comparable store sales decreasing 5.0% for the
first quarter of 2009, rolling over last years first quarter comparable store sales increase of 0.4%.

Due to the anticipated
continued negative effect of the recession on consumer spending and our category, we expect to experience lower 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 impact our business. In addition, based on preliminary results, we expect that comparable store sales for the upcoming quarter will be more negative than our first fiscal quarter results due to the fact that Tuscani pasta was introduced in
the second quarter of last year, which produced a 7.2% comparable store sales increase in the prior year.

Fees and Other Income.Fees and other income were $10.0 million for the first quarter of 2009, compared to $5.2 million for the prior year, for an increase of $4.8 million or 92.6%. The increase was primarily due to increased delivery units 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 $59.5 million for the first quarter of 2009, compared to $44.6 million for the prior year for an increase of
$14.9 million or 33.5%. Cost of sales decreased 1.1%, as a percentage of net product sales, to 26.8%, compared to 27.9% in the prior year. This decrease was primarily due to a 13% decrease in cheese costs (net of UFPC hedging benefits) and a 4%
decrease in dough costs. These decreases were partially offset by a 20% 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. Pricing initiatives beginning in the second quarter of 2008 also positively impacted our year-over-year cost of sales margins.



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Direct Labor.Direct labor costs for the first quarter of 2009 as compared to the prior year were
$66.4 million and $45.4 million, respectively, an increase of $21.0 million, or 46.3%. Direct labor costs were 29.9% of net product sales for the first quarter 2009, a 1.5% increase compared to the prior year. Labor costs as a percent of net product
sales increased by approximately 90 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
in the acquisition markets, less efficient labor scheduling in the acquisition units than our comparable stores and general labor inefficiencies due to acquisition integration and training. The remaining 60 bps increase was primarily due to the
de-leveraging impact on fixed and semi-fixed labor costs (40 bps) as a result of the comparable store sales decline and increased self-insured health insurance costs due to adverse claims development (20 bps).

Other Restaurant Operating Expenses.Other restaurant operating expenses for the 13 weeks ended March 31, 2009 and March 25, 2008 were
$74.2 million and $50.4 million, respectively, an increase of $23.8 million, or 47.1%. Other operating expenses were 33.3% of net product sales for the first quarter 2009 compared to 31.6% of net product sales for the prior year, an increase of
1.7%. Approximately 100 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 (40 bps), higher depreciation expense
associated with purchase accounting asset values (20bps), higher delivery driver reimbursement expenses due to a higher delivery mix (20bps) and outsourced call center expenses for a certain acquisition market (20 bps). The remaining variance
of 70 bps was largely due to the de-leveraging impact on fixed costs, primarily occupancy costs, due to the comparable store sales decline which was partially offset by a decrease in delivery driver insurance costs due to adverse claims development
and activity in the prior year and the decline in delivery driver reimbursement expenses for comparable stores.

Depreciation expense for
store operations was $9.7 million or 4.4% of net product sales for the first quarter of 2009 compared to $5.7 million or 3.6% of net product sales for the prior year.

General and Administrative Expenses.General and administrative expenses for the 13 weeks ended March 31, 2009 were $12.7 million compared to $9.5 million for the 13 weeks ended March 25, 2008, an
increase of $3.2 million or 33.0%. As a direct result of the 2009 and 2008 acquisitions, general and administrative expenses increased approximately $2.8 million for the following: increased field supervisory personnel costs of $1.4 million,
increased credit card transaction fees of $1.1 million and training costs of $0.3 million.

Corporate Depreciation and Amortization.Corporate depreciation and amortization costs were $2.9 million and $2.4 million for the first quarter of 2009 and 2008, respectively.

Other.We recorded expense of $0.6 million and $0.1 million for other expenses during the first quarter 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 $7.9 million for the first
quarter of 2009 compared to $8.6 million for the prior year, a decrease of $0.7 million due to lower interest rates as compared to the prior year. Our cash borrowing rate decreased 1.3% to 6.5% during the first quarter of 2009 compared to the prior
year, however, our average outstanding debt balance increased $29.6 million to $457.4 million in the first 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 and $0.3 million for amortization of deferred debt issuance costs in the first quarter 2009 and 2008, respectively.

Income Taxes.For the 13 weeks ended March 31, 2009, we recorded income tax expense of $2.0 million which resulted in an effective income tax
rate of 25.3% compared to an effective tax rate of 24.2%, or $0.9 million, for the 13 weeks ended March 25, 2008. The lower than statutory rates are due to the impact of tax credits in relation to income before taxes and the effect of a $0.6
million favorable discrete state tax adjustment recorded in the first quarter of 2009.

Income from Continuing Operations, net of taxes.Income from continuing operations for the 13 weeks ended March 31, 2009 was $6.0 million, compared to $2.9 million for the prior year. The increase was primarily due to the benefit of a 39.3% 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 in the first quarter of 2009
compared to income in 2008 of $1.3 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).



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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 $61.4 million as of March 31, 2009. This includes the benefit of $6.5 million for cash reserves which is cash exceeding the amounts required for store operations, which
was more than offset by $17.1 million for the mandatory term loan pre-payment included in current portion of debt. The proceeds of the sale of units in January 2009 were entirely used to fund the acquisition of 55 units from PHI immediately
thereafter. 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 $25.9 million for the first quarter of 2009 compared to $17.2 million for 2008. Cash flows from operations during the 13 weeks ended March 31, 2009 were positively impacted by a $4.1 million increase from net
changes in working capital and a $4.5 million positive impact of 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.

To the extent positive cash and cash equivalent account
balances remain with the same institution as book overdraft account balances at period end and the institution has the right of offset, we are required to net those amounts for financial reporting purposes. During the quarter ended March 31,
2009, the Company had no invested cash netted against book overdrafts. For the quarter ended March 25, 2008 the Company had $6.0 million of cash invested in an overnight investment account netted against book overdrafts resulting in a
negative change in accounts payable in the first quarter of 2008. The impact of these changes for accounts payable resulted in a $6.0 million increase in cash flows from working capital period-over-period as compared to 2008. The remaining change is
due to fluctuations in working capital items.

Cash flows from investing activities

Cash flows used in investing activities were $20.7 million during the 13 weeks ended March 31,
2009 compared to $9.8 million for the 13 weeks ended March 25, 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 first quarter of 2009 we invested $7.2 million in capital expenditures, consisting of approximately $4.0 million in our existing operations and $3.2 million for acquisition related information
technology equipment. In the prior year, we invested $9.7 million in capital expenditures for existing operations (including approximately $1.0 million for WingStreetdevelopment at 36 units).

We have reduced our
capital expenditure estimate for 2009 from the previous target of $34 million to approximately $26 million, net of anticipated related sale-leaseback proceeds and not including acquisitions. This reduction is primarily due to a
$7.4 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 recent impact of
the recession upon our operating results. This estimate includes an investment of approximately $2.1 million to add the WingStreetproduct line to 40 units and $5.0 million to convert the PHI acquisition units to our proprietary POS system.



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Cash flows from financing activities

Net cash inflows from financing activities were $0.8 million for the 13 weeks ended March 31, 2009 compared to net outflows of $9.8 million for the 13 weeks ended March 25, 2008. Net pay-downs under the
revolving credit facility were $3.0 million for the first quarter of 2009 compared to $15.5 million during the prior year. During the first quarter 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 quarter of 2008, we completed five sale-leaseback transactions on assets
principally constructed during 2007 for $5.7 million.

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 March 31, 2009 and December 30,
2008 and was paid utilizing our cash reserves and borrowings on the Revolving Credit Facility on April 24, 2009.

As of March 31,
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 significantly from 3.92x at fiscal 2008 year end to 3.82x,
despite the significant capital investment in acquisition activity. Our ratios under the foregoing financial covenants in our Credit Agreement as of March 31, 2009 are as follows:



|                                |  |        |  |                     
|------------------------------- |  | ------ |  | --------------------
|                                |  | Actual |  | Covenant Requirement
|Maximum leverage ratio          |  | 3.82x  |  | Not more than 5.25x 
|Minimum interest coverage ratio |  | 2.04x  |  | 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 March 31, 2009, we had $58.9 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.

Letters of Credit

As of March 31, 2009, we had
letters of credit of $16.1 million issued under our existing credit facility primarily in support of self-insured risks.



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|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 March 31, 2009, we had $275.8 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 $95.8 million of floating rate debt, a
100 basis point increase in this floating rate would increase annual interest expense by approximately $1.0 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 first quarter of 2009 and $0.19 per pound for 2008) would have
been approximately $1.0 million and $1.5 million for the 13 weeks ended March 31, 2009 and March 25, 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 first 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.
|------- | ------------------

From time-to-time, the Company
is involved in litigation, most of which is incidental to its business.



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

There have been no material changes
in our risk factors from those disclosed in our 2008 Form 10-K.



|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
|------- | ---------------------------------------



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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                                                                                                                                                                                                                           
|            | 
|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.                                                                                                                                                                                                                                                                                 



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document Description                                                                                                                                                                                                                                                                                                                              
|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 the Registrants Annual Report on Form 10-K filed with
the Commission on May 28, 1999)                                                                                                                             
|            | 
|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 by reference as 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 by reference as Exhibit 10.16 to the Companys Annual Report
on Form 10-K filed 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)                                               
|            | 
|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 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                                                                                                                                                                                                                                                



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##### Table of Contents

|            |  |                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document Description                                                                                                                             
|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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##### Table of Contents

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 May 15, 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)




27