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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-Q





(Mark one)

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

For the quarterly period ended June 24, 2008

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. 129th Street Overland Park, KS                         |  | 66213                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

Telephone: (913) 327-5555

(Registrants telephone number, including area code)





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

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

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

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

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

There is no market for the Registrants equity. As of August 8, 2008, 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                            |  | 21  
|              |  | Item 4.               |  | Controls and Procedures                                                               |  | 21  
|              |  | Item 4T.              |  | Controls and Procedures                                                               |  | 21  
|              |  |                      
|Part II       |  | OTHER INFORMATION     |  |                                                                                      
|              |  |                       | 
|              |  | Item 1.               |  | Legal Proceedings                                                                     |  | 22  
|              |  | Item 1A.              |  | Risk Factors                                                                          |  | 22  
|              |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 22  
|              |  | Item 3.               |  | Defaults Upon Senior Securities                                                       |  | 22  
|              |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                   |  | 22  
|              |  | Item 5.               |  | Other Information                                                                     |  | 22  
|              |  | Item 6.               |  | Exhibits                                                                              |  | 23  
|Exhibit Index |  |                       |  |                                                                                      
|Signatures    |  |                       |  | 25                                                                                   



1



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##### Table of Contents

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)



|                                                                                                                                          |  |              |         |   |                  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                          |  | June 24,2008 |         |   | December 25,2007 |  
|Assets                                                                                                                                    |  |              |         |   |                  |   |         |  
|Current assets:                                                                                                                           |  |              |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                 |  | $            | 6,187   |   |                  | $ | 7,609   |  
|Accounts receivable                                                                                                                       |  |              | 3,252   |   |                  |   | 5,821   |  
|Inventories                                                                                                                               |  |              | 6,060   |   |                  |   | 5,495   |  
|Prepaid expenses and other current assets                                                                                                 |  |              | 5,555   |   |                  |   | 4,370   |  
|Assets held for sale                                                                                                                      |  |              | 1,499   |   |                  |   | 433     |  
|Deferred income taxes                                                                                                                     |  |              | 2,377   |   |                  |   | 2,377   |  
|Income taxes receivable                                                                                                                   |  |              | 1,961   |   |                  |   | 2,894   |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total current assets                                                                                                                      |  |              | 26,891  |   |                  |   | 28,999  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Facilities and equipment                                                                                                                  |  |              | 205,020 |   |                  |   | 195,738 |  
|Less accumulated depreciation                                                                                                             |  |              | (62,088 | ) |                  |   | (49,278 | )
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Net facilities and equipment                                                                                                              |  |              | 142,932 |   |                  |   | 146,460 |  
|Franchise rights, less accumulated amortization of $20,334 and $15,521, respectively                                                      |  |              | 428,350 |   |                  |   | 433,073 |  
|Goodwill                                                                                                                                  |  |              | 191,903 |   |                  |   | 191,920 |  
|Other assets, net                                                                                                                         |  |              | 27,734  |   |                  |   | 29,507  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total assets                                                                                                                              |  | $            | 817,810 |   |                  | $ | 829,959 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Liabilities and stockholders equity                                                                                                      |  |              |         |   |                  |   |         |  
|Current liabilities:                                                                                                                      |  |              |         |   |                  |   |         |  
|Accounts payable                                                                                                                          |  | $            | 21,012  |   |                  | $ | 23,284  |  
|Accrued payroll                                                                                                                           |  |              | 10,960  |   |                  |   | 10,420  |  
|Payroll and sales taxes                                                                                                                   |  |              | 6,524   |   |                  |   | 6,205   |  
|Accrued interest                                                                                                                          |  |              | 5,327   |   |                  |   | 6,224   |  
|Other accrued liabilities                                                                                                                 |  |              | 13,171  |   |                  |   | 12,530  |  
|Current portion of insurance reserves                                                                                                     |  |              | 7,981   |   |                  |   | 6,934   |  
|Current portion of debt                                                                                                                   |  |              |        |   |                  |   | 4,246   |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total current liabilities                                                                                                                 |  |              | 64,975  |   |                  |   | 69,843  |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Long-term debt                                                                                                                            |  |              | 410,804 |   |                  |   | 426,254 |  
|Other deferred items                                                                                                                      |  |              | 25,287  |   |                  |   | 27,303  |  
|Insurance reserves                                                                                                                        |  |              | 10,700  |   |                  |   | 10,000  |  
|Deferred income taxes                                                                                                                     |  |              | 130,291 |   |                  |   | 128,219 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total long-term liabilities                                                                                                               |  |              | 577,082 |   |                  |   | 591,776 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Commitments and contingencies                                                                                                             |  |              |         |   |                  |   |         |  
|Stockholders equity:                                                                                                                     |  |              |         |   |                  |   |         |  
|Common stock ($0.01 par value, 2,000 shares authorized and 1,000 shares issued and outstanding as of June 24, 2008 and December 25,
2007) |  |              |        |   |                  |   |        |  
|Paid-in-capital                                                                                                                           |  |              | 163,325 |   |                  |   | 163,325 |  
|Accumulated other comprehensive loss                                                                                                      |  |              | (34     | ) |                  |   | (1,271  | )
|Retained earnings                                                                                                                         |  |              | 12,462  |   |                  |   | 6,286   |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                |  |              | 175,753 |   |                  |   | 168,340 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                |  | $            | 817,810 |   |                  | $ | 829,959 |  
|                                                                                                                                          |  |              |         |   |                  |   |         |  

See accompanying notes to the condensed consolidated financial statements.



2



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands)



|                                                        |  |                            |         |   |                            |   |         |  
|------------------------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | -
|                                                        |  | 13 Weeks EndedJune 24,2008 |         |   | 13 Weeks EndedJune 26,2007 |  
|Sales:                                                  |  |                            |         |   |                            |   |         |  
|Net product sales                                       |  | $                          | 183,675 |   |                            | $ | 167,452 |  
|Fees and other income                                   |  |                            | 5,299   |   |                            |   | 4,498   |  
|                                                        |  |                            |         |   |                            |   |         |  
|Total sales                                             |  |                            | 188,974 |   |                            |   | 171,950 |  
|Costs and expenses:                                     |  |                            |         |   |                            |   |         |  
|Cost of sales (excluding depreciation and amortization) |  |                            | 53,187  |   |                            |   | 44,454  |  
|Direct labor                                            |  |                            | 51,539  |   |                            |   | 47,453  |  
|Other restaurant and operating expenses                 |  |                            | 58,448  |   |                            |   | 56,014  |  
|General and administrative expenses                     |  |                            | 10,556  |   |                            |   | 9,341   |  
|Corporate depreciation and amortization of intangibles  |  |                            | 3,403   |   |                            |   | 3,025   |  
|Net facility impairment charges                         |  |                            | 192     |   |                            |   | 265     |  
|Net loss (gain) on disposition of assets                |  |                            | 4       |   |                            |   | (149    | )
|                                                        |  |                            |         |   |                            |   |         |  
|Total costs and expenses                                |  |                            | 177,329 |   |                            |   | 160,403 |  
|                                                        |  |                            |         |   |                            |   |         |  
|Operating income                                        |  |                            | 11,645  |   |                            |   | 11,547  |  
|Other income (expense):                                 |  |                            |         |   |                            |   |         |  
|Interest expense                                        |  |                            | (8,220  | ) |                            |   | (9,691  | )
|Miscellaneous                                           |  |                            | (19     | ) |                            |   | 11      |  
|                                                        |  |                            |         |   |                            |   |         |  
|Income before income taxes                              |  |                            | 3,406   |   |                            |   | 1,867   |  
|Income tax expense                                      |  |                            | 1,434   |   |                            |   | 505     |  
|                                                        |  |                            |         |   |                            |   |         |  
|Net income                                              |  | $                          | 1,972   |   |                            | $ | 1,362   |  
|                                                        |  |                            |         |   |                            |   |         |  

See accompanying notes to the condensed consolidated financial statements.



3



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands)



|                                                        |  |                            |         |   |                            |   |         |  
|------------------------------------------------------- |  | -------------------------- | ------- | - | -------------------------- | - | ------- | -
|                                                        |  | 26 Weeks EndedJune 24,2008 |         |   | 26 Weeks EndedJune 26,2007 |  
|Sales:                                                  |  |                            |         |   |                            |   |         |  
|Net product sales                                       |  | $                          | 366,729 |   |                            | $ | 335,877 |  
|Fees and other income                                   |  |                            | 10,995  |   |                            |   | 9,161   |  
|                                                        |  |                            |         |   |                            |   |         |  
|Total sales                                             |  |                            | 377,724 |   |                            |   | 345,038 |  
|Costs and expenses:                                     |  |                            |         |   |                            |   |         |  
|Cost of sales (excluding depreciation and amortization) |  |                            | 104,554 |   |                            |   | 89,432  |  
|Direct labor                                            |  |                            | 103,495 |   |                            |   | 95,315  |  
|Other restaurant and operating expenses                 |  |                            | 116,257 |   |                            |   | 110,505 |  
|General and administrative expenses                     |  |                            | 20,624  |   |                            |   | 19,086  |  
|Corporate depreciation and amortization of intangibles  |  |                            | 6,730   |   |                            |   | 6,247   |  
|Net facility impairment charges                         |  |                            | 297     |   |                            |   | 348     |  
|Net loss (gain) on disposition of assets                |  |                            | 9       |   |                            |   | (490    | )
|                                                        |  |                            |         |   |                            |   |         |  
|Total costs and expenses                                |  |                            | 351,966 |   |                            |   | 320,443 |  
|                                                        |  |                            |         |   |                            |   |         |  
|Operating income                                        |  |                            | 25,758  |   |                            |   | 24,595  |  
|Other income (expense):                                 |  |                            |         |   |                            |   |         |  
|Interest expense                                        |  |                            | (16,794 | ) |                            |   | (19,066 | )
|Miscellaneous                                           |  |                            | (13     | ) |                            |   | 15      |  
|                                                        |  |                            |         |   |                            |   |         |  
|Income before income taxes                              |  |                            | 8,951   |   |                            |   | 5,544   |  
|Income tax expense                                      |  |                            | 2,775   |   |                            |   | 1,772   |  
|                                                        |  |                            |         |   |                            |   |         |  
|Net income                                              |  | $                          | 6,176   |   |                            | $ | 3,772   |  
|                                                        |  |                            |         |   |                            |   |         |  

See accompanying notes to the condensed consolidated financial statements.



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(Unaudited)

(in thousands, except share data)



|                                                                                 |  |                      |  |             |   |                |   |                  |  |                                            |        |  |                          |        |   |  |   |        
|-------------------------------------------------------------------------------- |  | -------------------- |  | ----------- | - | -------------- | - | ---------------- |  | ------------------------------------------ | ------ |  | ------------------------ | ------ | - |  | - | -------
|                                                                                 |  | Sharesof commonstock |  | Commonstock |   | Paid-incapital |   | Retainedearnings |  | Accumulatedothercomprehensiveincome (loss) |        |  | Totalstockholders'equity
|Balance at December 25, 2007                                                     |  | 1,000                |  | $           |  |                | $ | 163,325          |  | $                                          | 6,286  |  | $                        | (1,271 | ) |  | $ | 168,340
|Comprehensive income:                                                            |  |                      |  |             |   |                |   |                  |  |                                            |        |  |                          |        |   |  |   |        
|Net income                                                                       |  |                     |  |             |  |                |   |                 |  |                                            | 6,176  |  |                          |       |   |  |   | 6,176  
|Net unrealized change in cash flow hedging derivatives                           |  |                     |  |             |  |                |   |                 |  |                                            |       |  |                          | 555    |   |  |   | 555    
|Reclassification adjustment into income for derivatives used in cash flow hedges |  |                     |  |             |  |                |   |                 |  |                                            |       |  |                          | 682    |   |  |   | 682    
|                                                                                 |  |                      |  |             |   |                |   |                  |  |                                            |        |  |                          |        |   |  |   |        
|Total comprehensive income                                                       |  |                      |  |             |   |                |   |                  |  |                                            |        |  |                          |        |   |  |   | 7,413  
|                                                                                 |  |                      |  |             |   |                |   |                  |  |                                            |        |  |                          |        |   |  |   |        
|Balance at June 24, 2008                                                         |  | 1,000                |  |             |  |                | $ | 163,325          |  | $                                          | 12,462 |  | $                        | (34    | ) |  | $ | 175,753
|                                                                                 |  |                      |  |             |   |                |   |                  |  |                                            |        |  |                          |        |   |  |   |        

See accompanying notes to the condensed consolidated financial statements.



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NPC INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



|                                                                              |  |                           |          |   |                           |   |          |  
|----------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ------------------------- | - | -------- | -
|                                                                              |  | 26 WeeksEndedJune 24,2008 |          |   | 26 WeeksEndedJune 26,2007 |  
|Operating activities                                                          |  |                           |          |   |                           |   |          |  
|Net income                                                                    |  | $                         | 6,176    |   |                           | $ | 3,772    |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                           |          |   |                           |   |          |  
|Depreciation and amortization                                                 |  |                           | 20,324   |   |                           |   | 22,460   |  
|Amortization of debt issuance costs                                           |  |                           | 760      |   |                           |   | 1,094    |  
|Net facility impairment charges                                               |  |                           | 297      |   |                           |   | 348      |  
|Deferred income taxes                                                         |  |                           | 1,269    |   |                           |   | (1,139   | )
|Net loss (gain) on disposition of assets                                      |  |                           | 9        |   |                           |   | (490     | )
|Changes in assets and liabilities, excluding acquisitions:                    |  |                           |          |   |                           |   |          |  
|Accounts receivable                                                           |  |                           | 2,569    |   |                           |   | 1,117    |  
|Inventories                                                                   |  |                           | (565     | ) |                           |   | (115     | )
|Prepaid expenses and other assets                                             |  |                           | (379     | ) |                           |   | 1,154    |  
|Accounts payable                                                              |  |                           | (2,260   | ) |                           |   | 10,055   |  
|Payroll and sales taxes                                                       |  |                           | 319      |   |                           |   | (84      | )
|Income taxes                                                                  |  |                           | 933      |   |                           |   | (4,902   | )
|Accrued interest                                                              |  |                           | (897     | ) |                           |   | (284     | )
|Accrued payroll                                                               |  |                           | 540      |   |                           |   | 901      |  
|Other accrued liabilities                                                     |  |                           | 1,121    |   |                           |   | 64       |  
|Insurance reserves                                                            |  |                           | 1,747    |   |                           |   | 1,137    |  
|Other deferred items                                                          |  |                           | (997     | ) |                           |   | 1,234    |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Net cash provided by operating activities                                     |  |                           | 30,966   |   |                           |   | 36,322   |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Investing activities                                                          |  |                           |          |   |                           |   |          |  
|Capital expenditures                                                          |  |                           | (19,562  | ) |                           |   | (13,548  | )
|Purchase of business assets, net of cash acquired                             |  |                           | (32      | ) |                           |   | (27,294  | )
|Proceeds from sale or disposition of assets                                   |  |                           | 51       |   |                           |   | 871      |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Net cash used in investing activities                                         |  |                           | (19,543  | ) |                           |   | (39,971  | )
|                                                                              |  |                           |          |   |                           |   |          |  
|Financing activities                                                          |  |                           |          |   |                           |   |          |  
|Borrowings under revolving credit facility                                    |  |                           | 127,400  |   |                           |   | 104,700  |  
|Payments under revolving credit facility                                      |  |                           | (142,900 | ) |                           |   | (107,200 | )
|Payments on term bank facilities                                              |  |                           | (4,196   | ) |                           |   |         |  
|Debt issue costs                                                              |  |                           | (45      | ) |                           |   | (91      | )
|Proceeds from sale-leaseback transactions, net                                |  |                           | 6,896    |   |                           |   | 2,009    |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Net cash used in financing activities                                         |  |                           | (12,845  | ) |                           |   | (582     | )
|                                                                              |  |                           |          |   |                           |   |          |  
|Net change in cash and cash equivalents                                       |  |                           | (1,422   | ) |                           |   | (4,231   | )
|Beginning cash and cash equivalents                                           |  |                           | 7,609    |   |                           |   | 9,289    |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Ending cash and cash equivalents                                              |  | $                         | 6,187    |   |                           | $ | 5,058    |  
|                                                                              |  |                           |          |   |                           |   |          |  
|Supplemental disclosures of cash flow information:                            |  |                           |          |   |                           |   |          |  
|Net cash paid for interest                                                    |  | $                         | 16,930   |   |                           | $ | 18,256   |  
|Net cash paid for taxes                                                       |  |                           | 97       |   |                           |   | 6,212    |  
|Non-cash investing activities:                                                |  |                           |          |   |                           |   |          |  
|Accrued capital expenditures                                                  |  | $                         | 1,718    |   |                           | $ | 2,304    |  

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/A.

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.

Note 2  Acquisitions

On September 26, 2007, the Company acquired 17 Pizza Hut units in and around Ft. Myers and Naples, Florida from a Pizza Hut franchisee for $5.4 million (including capitalized acquisition costs of $0.1 million). This
acquisition was accounted for by the purchase method of accounting, whereby operating results subsequent to the acquisition date are included in the consolidated financial results.

On March 13, 2007, the Company acquired 59 Pizza Hut units located primarily in Idaho and the Spokane Valley from a Pizza Hut franchisee. The
purchase price was $27.3 million (including capitalized acquisition costs of $0.2 million). This acquisition was accounted for by the purchase method of accounting, whereby operating results subsequent to the acquisition date are included in the
consolidated financial results.

The unaudited pro forma results of operations provided below for the 13 weeks and 26 weeks ended
June 26, 2007, are presented as though the above mentioned unit acquisitions had occurred at the beginning of the period presented, after giving effect to purchase accounting adjustments relating to depreciation and amortization of the revalued
assets and other acquisition related adjustments in connection with these acquisitions. 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 period presented, nor are they necessarily indicative of future operating results.



|                           |  |                             |         |                             |   |        
|-------------------------- |  | --------------------------- | ------- | --------------------------- | - | -------
|                           |  | Pro forma(in thousands)    
|                           |  | 13 Weeks EndedJune 26, 2007 |         | 26 Weeks EndedJune 26, 2007
|Total sales                |  | $                           | 176,225 |                             | $ | 363,514
|Income before income taxes |  |                             | 2,097   |                             |   | 7,059  
|Net income                 |  |                             | 1,512   |                             |   | 4,757  



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##### Table of Contents

Note 3  Goodwill and Other Intangible Assets

Changes in goodwill are summarized below (in thousands):



|                             |  |   |         |  
|---------------------------- |  | - | ------- | -
|Balance at December 25, 2007 |  | $ | 191,920 |  
|Other, net                   |  |   | (17     | )
|                             |  |   |         |  
|Balance at June 24, 2008     |  | $ | 191,903 |  
|                             |  |   |         |  

Amortizable other intangible assets consist of franchise rights, leasehold interests, contract
rights 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
Statement of Financial Accounting Standards No. 142 (SFAS No. 142), Goodwill and Other Intangible Assets, are summarized below (in thousands):



|                               |  |                      |         |                         |   |         |               |  |   |        
|------------------------------ |  | -------------------- | ------- | ----------------------- | - | ------- | ------------- |  | - | -------
|                               |  | June 24, 2008       
|                               |  | Gross CarryingAmount |         | AccumulatedAmortization |   |         | Net BookValue
|Amortizable intangible assets: |  |                      |         |                         |   |         |               |  |   |        
|Franchise rights               |  | $                    | 448,684 |                         | $ | (20,334 | )             |  | $ | 428,350
|Favorable leasehold interests  |  |                      | 10,194  |                         |   | (1,955  | )             |  |   | 8,239  
|Non-compete                    |  |                      | 1,925   |                         |   | (834    | )             |  |   | 1,091  
|Contract rights                |  |                      | 547     |                         |   | (547    | )             |  |   |       
|                               |  |                      |         |                         |   |         |               |  |   |        
|                               |  | $                    | 461,350 |                         | $ | (23,670 | )             |  | $ | 437,680
|                               |  |                      |         |                         |   |         |               |  |   |        



|                               |  |                      |         |                         |   |         |               |  |   |        
|------------------------------ |  | -------------------- | ------- | ----------------------- | - | ------- | ------------- |  | - | -------
|                               |  | December 25, 2007   
|                               |  | Gross CarryingAmount |         | AccumulatedAmortization |   |         | Net BookValue
|Amortizable intangible assets: |  |                      |         |                         |   |         |               |  |   |        
|Franchise rights               |  | $                    | 448,594 |                         | $ | (15,521 | )             |  | $ | 433,073
|Favorable leasehold interests  |  |                      | 10,194  |                         |   | (1,431  | )             |  |   | 8,763  
|Non-compete                    |  |                      | 1,925   |                         |   | (642    | )             |  |   | 1,283  
|Contract rights                |  |                      | 547     |                         |   | (547    | )             |  |   |       
|                               |  |                      |         |                         |   |         |               |  |   |        
|                               |  | $                    | 461,260 |                         | $ | (18,141 | )             |  | $ | 443,119
|                               |  |                      |         |                         |   |         |               |  |   |        

Amortization expense on intangible assets was $2.7 million and $2.8 million for the 13
weeks ended June 24, 2008 and June 26, 2007, respectively, and $5.5 million and $5.6 million for the 26 weeks ended June 24, 2008 and June 26, 2007, respectively. The Company expects annual amortization expense for
amortizable other assets for the next five fiscal years to range from approximately $10.2 million to $10.8 million.

Note 4  Debt

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



|                                         |  |              |         |                  |   |        
|---------------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                         |  | June 24,2008 |         | December 25,2007
|Senior Secured Credit Facility           |  | $            | 235,804 |                  | $ | 240,000
|Senior Subordinated Notes                |  |              | 175,000 |                  |   | 175,000
|Senior Secured Revolving Credit Facility |  |              |        |                  |   | 15,500 
|                                         |  |              |         |                  |   |        
|                                         |  |              | 410,804 |                  |   | 430,500
|Less current portion                     |  |              |        |                  |   | 4,246  
|                                         |  |              |         |                  |   |        
|                                         |  | $            | 410,804 |                  | $ | 426,254
|                                         |  |              |         |                  |   |        

The Companys debt facilities contain restrictions on additional borrowing, certain asset
sales, capital expenditures, dividend payments, certain investments and related-party transactions, as well as requirements to maintain various financial ratios. At June 24, 2008, 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. For fiscal 2007 the mandatory prepayment was determined to be $4.2 million. This amount was included in the current portion of long-term debt at
December 25, 2007 and was paid on April 11, 2008. Based on projected 2008 results, the Company anticipates



8



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##### Table of Contents

that they will be required to make such a mandatory prepayment of between $13.3 million and $19.9 million depending upon the amount of excess cash flow
generated during its fiscal year and its leverage at fiscal year-end. The excess cash flow mandatory prepayment is an annual requirement under the credit agreement. As the excess cash flow mandatory prepayment estimates are
preliminary and are therefore subject to further refinement, the final excess cash flow mandatory prepayment could ultimately differ materially from the amounts reflected above.

Based upon independent trading data considered to be a Level 1 input, as defined by SFAS No. 157, Fair Value Measurements, the estimated
fair value of the Companys debt facilities was as follows (in thousands):



|                               |  |              |         |                  |   |        
|------------------------------ |  | ------------ | ------- | ---------------- | - | -------
|                               |  | June 24,2008 |         | December 25,2007
|Senior Secured Credit Facility |  | $            | 223,800 |                  | $ | 225,300
|Senior Subordinated Notes      |  |              | 154,000 |                  |   | 155,800
|Revolving Credit Facility      |  |              |        |                  |   | 15,500 
|                               |  |              |         |                  |   |        
|                               |  | $            | 377,800 |                  | $ | 396,600
|                               |  |              |         |                  |   |        

The decline in the fair value from the carrying amount of outstanding debt is primarily due to the
current state of the credit market for similar debt instruments. The Company determined the estimated fair value using available market information. However, the fair value estimates presented herein are not necessarily indicative of the amount that
the Companys debtholders could realize in a current market exchange.

Note 5  Income Taxes

For the 26 weeks ended June 24, 2008, the Company recorded income tax expense of $2.8 million which resulted in an effective income tax rate of 31.0%
compared to income tax expense of $1.8 million or an effective tax rate of 32.0% during the prior year. The lower than statutory rates are attributable to the impact of high tax credits. The current year anticipated annual effective tax rate was
increased from 24.1% in the first quarter to 31.0% in the second quarter which resulted in a second quarter rate of 42.1%. This increase was due to changes in anticipated permanent deductions.

The liability for uncertain tax positions was $11.3 million as of June 24, 2008, was considered long term and was included in other deferred items
in the consolidated balance sheet.

Note 6  Commitments and Contingencies

On January 11, 2008, a lawsuit against the Company, entitledHildreth v. NPC International, Inc. Case No. 2:08-CV-10-FTM-34-DNF
(Hildreth), was filed in the United States District Court for the Middle District of Florida. The Hildreth case was settled during the second quarter of fiscal 2008 for an insignificant monetary payment.

Note 7  Employee Benefit Plans

In May 2006,
Holdings agreed to establish a new stock incentive plan (the Plan), which governs, among other things, (i) the issuance of matching options on purchased membership interests and (ii) the grant of options with respect to the
membership interests. This stock incentive plan is accounted for under the provisions of SFAS 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which is a revision of SFAS 123, Accounting for Stock-Based
Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amended Financial Accounting Standards Board (FASB) Statement No. 95, Statement of Cash Flows.



|                                 |  |                                |   |  |                               |      |                                                   |    
|-------------------------------- |  | ------------------------------ | - |  | ----------------------------- | ---- | ------------------------------------------------- | ---
|                                 |  | Number ofOptions(in thousands) |   |  | WeightedAverageExercise Price |      | WeightedAverageRemainingContractualTerm(in years)
|Outstanding at December 25, 2007 |  | 12,841                         |   |  | $                             | 1.62 |                                                   |    
|Granted                          |  | 1,370                          |   |  |                               | 1.95 |                                                   |    
|Exercised                        |  |                               |   |  |                               |     |                                                   |    
|Forfeited                        |  | (937                           | ) |  |                               | 1.71 |                                                   |    
|                                 |  |                                |   |  |                               |      |                                                   |    
|Outstanding at June 24, 2008     |  | 13,274                         |   |  | $                             | 1.70 |                                                   | 8.7
|                                 |  |                                |   |  |                               |      |                                                   |    
|Exercisable at June 24, 2008     |  | 2,130                          |   |  | $                             | 1.00 |                                                   |    



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As of June 24, 2008, no options had been exercised by management. One member of management
terminated employment on February 29, 2008; non-vested options previously granted to this member were forfeited immediately, with vested options forfeited during the second quarter of fiscal 2008, based upon the provisions of the
Plan, as shown above.

The Company currently has in place the NPC International, Inc. 401(k) and Deferred Compensation Plan, to which the
Company provides matching contributions to its employees. Contributions by the Company are maintained in a rabbi trust held with a third party administrator. The Company records the plan assets of these funds at the fair market value of the
underlying investments at each reporting period. Investments held within the rabbi trust were $6.8 million and $7.3 million as of June 24, 2008 and December 25, 2007, respectively. The fair market value of the underlying investment was
based upon independent market data considered to be a Level 1 input under SFAS 157.

Note 8  Derivative Financial Instruments

The Company participates in interest rate related derivative instruments to manage its exposure on its debt instruments. The Company records all
derivative instruments on the balance sheet as either assets or liabilities measured at fair value under the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as
amended. In accordance with SFAS No. 133, 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 $300.0 million term loan notes under the Senior Secured Credit Facility and provide
for fixed rates as compared to the three-month LIBOR rate on the following notional amounts of floating rate debt at June 24, 2008:



|                 |  |                              |         |               |      |   |               |                  
|---------------- |  | ---------------------------- | ------- | ------------- | ---- | - | ------------- | -----------------
|Effective Date   |  | NotionalAmount(in thousands) |         | FixedRatePaid |      |   | Maturity Date
|June 6, 2006     |  | $                            | 85,000  |               | 5.39 | % |               | December 31, 2010
|January 31, 2008 |  |                              | 50,000  |               | 3.16 | % |               | January 31, 2010 
|April 7, 2008    |  |                              | 50,000  |               | 2.79 | % |               | April 7, 2011    
|                 |  |                              |         |               |      |   |               |                  
|                 |  | $                            | 185,000 |               |      |   |               |                  
|                 |  |                              |         |               |      |   |               |                  

All of the Companys derivatives are designated as hedging instruments under SFAS
No. 133. The following table presents the fair value of the Companys hedging portfolio as of June 24, 2008 and December 25, 2007 (in thousands):



|                        |  |                      |  |                   |       |                       |              |               |   |                   |  |                      |  |                   |  |                      |       |           |                   |  |   |      
|----------------------- |  | -------------------- |  | ----------------- | ----- | --------------------- | ------------ | ------------- | - | ----------------- |  | -------------------- |  | ----------------- |  | -------------------- | ----- | --------- | ----------------- |  | - | -----
|                        |  | Asset Derivatives    |  |                   |       | Liability Derivatives
|                        |  | June 24, 2008        |  | December 25, 2007 |       |                       |              | June 24, 2008 |   | December 25, 2007
|                        |  | BalanceSheetLocation |  | FairValue         |       | BalanceSheetLocation  |              | FairValue     |   |                   |  | BalanceSheetLocation |  | FairValue         |  | BalanceSheetLocation |       | FairValue
|Interest rate contracts |  | Other assets         |  | $                 | 1,569 |                       | Other assets |               | $ |                  |  |                      |  | Other assets      |  | $                    | 1,281 |           | Other liabilities |  | $ | 1,049
|Interest rate contracts |  | Other liabilities    |  | $                 | 943   |                       | Other assets |               | $ |                  |  |                      |  | Other liabilities |  | $                    | 1,285 |           | Other liabilities |  | $ | 1,045

All of the Companys derivatives were in SFAS No. 133 cash flow hedging relationships. The
effect of the derivative instruments on the Consolidated Condensed Financial Statements was as follows (in thousands):



|                        |  |                                                                  |       |                                                                                |   |              |  |                       |     |  |                       |              |  |                  |              |    |     |              |  |    |              |   |  |    |     |   |  |    |    |  
|----------------------- |  | ---------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------ | - | ------------ |  | --------------------- | --- |  | --------------------- | ------------ |  | ---------------- | ------------ | -- | --- | ------------ |  | -- | ------------ | - |  | -- | --- | - |  | -- | -- | -
|                        |  | Gain or (Loss)Recognized in OCI on
Derivative(Effective Portion) |       | Gain or (Loss)Reclassified from AccumulatedOCI into Income (Effective Portion) |  
|                        |  | For the13 Weeks Ended                                            |       | For the26 Weeks Ended                                                          |   | Location     |  | For the13 Weeks Ended |     |  | For the26 Weeks Ended |             
|                        |  | June 24,2008                                                     |       | June 26,2007                                                                   |   | June 24,2008 |  | June 26,2007          |     |  |                       | June 24,2008 |  |                  | June 26,2007 |    |     | June 24,2008 |  |    | June 26,2007 |  
|Interest rate contracts |  | $                                                                | 1,987 |                                                                                | $ | 596          |  | $                     | 555 |  | $                     | 597          |  | Interest expense |              | ($ | 571 | )            |  | ($ | 13           | ) |  | ($ | 682 | ) |  | ($ | 21 | )



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##### Table of Contents

As of December 26, 2007, the Company adopted SFAS 157 for the fair value measurement of recurring
items, in particular its interest rate swaps. There was no impact on the basis for which the fair value of these items was determined.

The
Company measures the fair value of its of 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. During the 26 weeks ended June 24, 2008, and
June 26, 2007, there was 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 2008, which is being amortized ratably to expense.

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 $85.0 million at June 24, 2008. Merrill Lynch Capital Services, Inc. (MLCS) was the counterparty on $42.5 million of the total notional amount, and JPMorgan Chase Bank, N.A., an unrelated party, was the
counterparty on the residual $42.5 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 $300.0 million 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 $300.0 million term loan notes under the Senior Secured Credit Facility.

Note 10  New Accounting Pronouncements

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements and related FSP No. 157-1 and FSP No. 157-2 in February 2008. This statement defines fair value, establishes a framework for using fair value to measure
assets and liabilities, and expands disclosures about fair value measurements. The statement applies whenever other statements require or permit assets or liabilities to be measured at fair value. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. However, on December 14, 2007, the FASB issued FSP FAS 157-b, which deferred the effective date of SFAS 157 for one year, as it relates to nonfinancial assets and liabilities. The Company
adopted SFAS No. 157 as it relates to financial assets and liabilities beginning December 26, 2007, which did not have a material impact on the Companys consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities. This statement permits
entities to choose to measure many financial instruments and certain other items at fair value. If the fair value option is elected, unrealized gains and losses will be recognized in earnings at each subsequent reporting date. SFAS
No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted this statement as of December 26, 2007, and did not elect the fair value option to measure certain financial instruments.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R 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 141R 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 141R, changes in an acquired entitys deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. SFAS 141R 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 141R is effective for fiscal years beginning after December 15, 2008 with early
application prohibited. The Company will adopt SFAS 141R beginning in the first quarter of fiscal 2009 and will change its accounting treatment for business combinations on a prospective basis.



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##### Table of Contents

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 (SAB 110) which was
effective January 1, 2008. SAB 110 expresses the views of the Staff of the SEC regarding the use of the simplified method, as discussed in SAB No. 107, in developing an estimate of the expected term of plain vanilla share
options in accordance with SFAS No. 123R. The Company does not expect the implementation of SAB 110 to have a material impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities. This statement requires enhanced
disclosures about an entitys derivative and hedging activities. The Company elected early adoption of SFAS 161 as of March 25, 2008, and the adoption did not have a material impact on the Companys financial position or results of
operations.

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. Early adoption is prohibited. The Company does not expect the adoption of FSP 142-3 to have a material impact on its
consolidated financial statements.

Note 11  Subsequent Events

On August 6, 2008, the Company signed an asset purchase agreement to acquire 99 Pizza Hut units, primarily located in Virginia, from a Pizza Hut franchisee for $35.0 million. The transaction will be funded
primarily by borrowings on the Companys $75.0 million revolving credit facility and to a much lesser extent excess cash reserves. Consummation of the transaction is subject to the approval of Pizza Hut, Inc. and Yum! Brands, Inc., satisfactory
completion of confirmatory due diligence and other customary approvals.



12



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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;
| | - |  | ---------------------------------------



| |  |  | 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;
| | - |  | --------------------------------------------------------



| |  |  | 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;
| | - |  | ----------------------------------------------



| |  |  | 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 25, 2007 (2007 Form 10-K).

Overview

Who We Are.NPC International, Inc., together with its subsidiaries, (referred to herein as NPC, the
Company or in the first person notations of we, us and our) is the largest Pizza Hut franchisee and the largest franchisee of any restaurant concept in the United States according to the "2007 Chain
Restaurant Industry Review" by GE Capital Solutions. We were founded in 1962 and, as of June 24, 2008, we operated 887 Pizza Hut units in 24 states with significant presence in the Midwest, South and Southeast. As of the end of fiscal 2007, our
operations represented approximately 15% of the domestic Pizza Hut restaurant system and 18% 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.



13



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##### Table of Contents

Our Fiscal Year.We operate on a 52- or 53-week fiscal year ended on the last Tuesday in December.
Fiscal year 2008 contains 53 weeks and fiscal year 2007 contained 52 weeks.

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
2008, pizza sales accounted for approximately 83% of net product sales. On April 1, 2008, we began offering the Tuscani Pasta menu layer. 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 stores in operation, comparable store sales and
seasonality.

Fees and Other Income.Fees and other income are comprised primarily of delivery fees charged to customers, vending
receipts and other fee income.

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.

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 2008 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 franchise fees, advertising, rent and depreciation
(facilities and equipment), utilities, delivery expenses, supplies, repairs, insurance, and other restaurant related costs.

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 discount 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.



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Demographics and Consumer Spending

Lifestyle and demographic trends are generally positive drivers of the restaurant industry. The QSR industry has experienced consistent growth driven by
historically favorable economic and consumer trends, including the increasing number of dual-income and single-parent households, increased disposable income and discretionary spending, an aging baby boomer generation, the rising time constraints of
todays average consumer and relatively low levels of inflation. However, increased gas prices, declining home values and sales, the negative impact of changes in the subprime mortgage market, 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 certain segments of the restaurant
industry, including the segment in which we compete.

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 and ingredients such as cheese, dough, and meat, can vary. The prices of these commodities can change throughout
the year due to changes in supply and demand. We continued to experience significant inflation in the block cheddar cheese market during the second quarter of 2008. The block cheese price for the second quarter of fiscal 2008 averaged $1.99, an
increase of $0.30 or 18.0% versus the average price for the second quarter of fiscal 2007.

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. 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. Legislation
was 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.

Inflation

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 the aforementioned state minimum wage rates will increase direct labor expense by approximately an additional $1.8 million in fiscal 2008.
Further, we anticipate that the federal minimum wage rate increases effective July 24, 2007 and July 24, 2008 will increase our direct labor expense by approximately $3.9 million in fiscal 2008. We believe we have implemented effective
strategies to offset most of this impact; however, we cannot be certain that we will be able to leverage the future wage increases through pricing initiatives, auxiliary cost savings and productivity improvements in our restaurants.

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 2007 Form 10-K. There have been no significant changes with respect to these policies during the first 26 weeks of fiscal 2008.



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Recently Issued Accounting Statements and Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157 (SFAS
No. 157), Fair Value Measurements and related FSP No. 157-1 and FSP No. 157-2 in February 2008. This statement defines fair value, establishes a framework for using fair value to measure assets and liabilities, and
expands disclosures about fair value measurements. The statement applies whenever other statements require or permit assets or liabilities to be measured at fair value. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. However, on December 14, 2007, the FASB issued FSP FAS 157-b, which deferred the effective date of SFAS 157 for one year, as it relates to nonfinancial assets and liabilities. We adopted SFAS No. 157
as it relates to financial assets and liabilities beginning December 26, 2007, which did not have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities. This statement permits entities to choose to measure many financial instruments and
certain other items at fair value. If the fair value option is elected, unrealized gains and losses will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007. We adopted this statement as of December 26, 2007 and did not elect the fair value option to measure certain financial instruments.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R 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 141R 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
141R, changes in an acquired entitys deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. SFAS 141R 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 141R is effective for fiscal years beginning after December 15, 2008 with early application prohibited. We will adopt SFAS 141R beginning in the
first quarter of fiscal 2009 and will change our accounting treatment for business combinations on a prospective basis.

In December 2007,
the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110, (SAB 110) which was effective January 1, 2008. SAB 110 expresses the views of the Staff of the SEC regarding the use of the simplified method, as
discussed in SAB No. 107, in developing an estimate of the expected term of plain vanilla share options in accordance with SFAS No. 123R. We do not expect SAB 110 to have a material impact on our consolidated financial
statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities.
This statement requires enhanced disclosures about an entitys derivative and hedging activities. We elected early adoption of SFAS No. 161 as of March 25, 2008 and the adoption did not have a material impact on our financial position
or results of operations.

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. Early adoption is prohibited. We do not expect the adoption of FSP 142-3 to have a material
impact on our consolidated financial statements.



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Results of Operations

The table below presents selected restaurant operating results as a percentage of net product sales for the 13-week and 26-week periods ended June 24, 2008 and June 26, 2007, respectively:



|                                      |  |                            |   |  |                            |   |  |                            |   |  |                            |  
|------------------------------------- |  | -------------------------- | - |  | -------------------------- | - |  | -------------------------- | - |  | -------------------------- | -
|                                      |  | 13 WeeksEndedJune 24, 2008 |   |  | 13 WeeksEndedJune 26, 2007 |   |  | 26 WeeksEndedJune 24, 2008 |   |  | 26 WeeksEndedJune 26, 2007 |  
|Net product sales                     |  | 100                        | % |  | 100                        | % |  | 100                        | % |  | 100                        | %
|Direct restaurant costs and expenses: |  |                            |   |  |                            |   |  |                            |   |  |                            |  
|Cost of sales                         |  | 29.0                       | % |  | 26.5                       | % |  | 28.5                       | % |  | 26.6                       | %
|Direct labor                          |  | 28.1                       | % |  | 28.3                       | % |  | 28.2                       | % |  | 28.4                       | %
|Other restaurant operating expenses   |  | 31.8                       | % |  | 33.5                       | % |  | 31.7                       | % |  | 32.9                       | %

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



|                    |  |                            |   |  |                            |  
|------------------- |  | -------------------------- | - |  | -------------------------- | -
|                    |  | 26 WeeksEndedJune 24, 2008 |   |  | 26 WeeksEndedJune 26, 2007 |  
|Beginning of period |  | 888                        |   |  | 816                        |  
|Developed(1)        |  | 11                         |   |  | 8                          |  
|Acquired            |  |                           |   |  | 59                         |  
|Closed(1)           |  | (12                        | ) |  | (12                        | )
|                    |  |                            |   |  |                            |  
|End of period       |  | 887                        |   |  | 871                        |  
|                    |  |                            |   |  |                            |  



|(1) | Four units and five units were relocated or rebuilt and are included in both the developed and closed total above for the 26 weeks ended June 24, 2008 and June 26, 2007,
respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We added the WingStreet product line to 83 units and 119 units during the 13 weeks and 26 weeks ended
June 24, 2008, respectively, for a total of 177 units offering the WingStreet product line at June 24, 2008.

Thirteen Weeks Ended
June 24, 2008 Compared to June 26, 2007

Net Product Sales.Net product sales for the 13 weeks ended June 24,
2008 compared to the 13 weeks ended June 26, 2007, were $183.7 million and $167.5 million, respectively, an increase of $16.2 million or 9.7% resulting largely from a 7.1% comparable store sales increase for the second quarter of 2008, rolling
over last years second quarter comparable store sales increase of 3.5% and a 2.4% increase in equivalent units due to acquisitions and development. Equivalent units represents the number of units open at the beginning of a given
period, adjusted for units opened, closed, acquired or sold during the period on a weighted average basis.

Fees and Other Income.Fees and other income were $5.3 million for the 13 weeks ended June 24, 2008, compared to $4.5 million for the 13 weeks ended June 26, 2007, for an increase of $0.8 million or 17.8%. The increase was primarily due to increased delivery
fees attributable to increased customer delivery charges in most markets and increased delivery transactions.

Cost of Sales.Cost
of sales was $53.2 million for the 13 weeks ended June 24, 2008, compared to $44.5 million for the 13 weeks ended June 26, 2007, for an increase of $8.7 million or 19.6%. Cost of sales increased 2.5%, as a percentage of net product sales,
to 29.0%, compared to 26.5% in the prior year. This increase was primarily due to increases in the following commodity costs: 15.2% for cheese costs (net of UFPC hedging benefits), 31.5% for dough costs, 8.9% for packaging costs and 3.2% for meat
costs as compared to the prior year, and the higher product costs associated with the new Tuscani Pasta menu layer. The impact of these overall increases was partially offset by pricing initiatives.

Direct Labor.Direct labor costs for the 13 weeks ended June 24, 2008 as compared to June 26, 2007 were $51.5 million and $47.5 million,
respectively, an increase of $4.0 million or 8.6%. Direct labor costs for the second quarter decreased 0.2%, as a percentage of net product sales, to 28.1%, compared to 28.3% for the prior year. This decrease was primarily due to the positive impact
of sales leverage achieved on fixed labor costs and effective labor management strategies which more than offset higher wage rates caused largely by federal and certain state minimum wage increases.

Other Restaurant Operating Expenses.Other restaurant operating expenses for the 13 weeks ended June 24, 2008
and June 26, 2007 were $58.4 million and $56.0 million, respectively, an increase of $2.4 million or 4.3%. Other operating expenses were 31.8% of net product sales for the second quarter of 2008 compared to 33.5% for the prior year, a decrease
of 1.7%. The decrease of expenses as a percentage of net product sales compared to the prior year was primarily due to lower depreciation expense associated with short-lived assets becoming fully depreciated during the second quarter of 2007,
without replacement, lower delivery driver reimbursement expenses related to changes in our delivery driver reimbursement



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program in late second quarter 2007, and the leveraging impact on fixed and semi-fixed costs due to higher sales. Depreciation expense for store operations
was $6.7 million or 3.7% of net product sales for second quarter 2008 compared to $7.4 million or 4.4% of net product sales in the second quarter of 2007.

General and Administrative Expenses.General and administrative expenses for the 13 weeks ended June 24, 2008 were $10.6 million compared to $9.3 million for the 13 weeks ended June 26, 2007. General
and administrative expenses increased approximately $1.3 million compared to the prior year primarily due to increased credit card fees attributable to increased transaction volume and increased salaries expense.

Corporate Depreciation and Amortization.Corporate depreciation and amortization costs for the 13 weeks ended June 24, 2008 and June 26,
2007 were $3.4 million and $3.0 million, respectively. The increase over the prior year is largely due to increased pre-opening expenses related to the addition of the WingStreet product line at 83 units in the second quarter of 2008.

Net Facility Impairment Charges.We recorded charges of $0.2 million for seven properties during the second quarter of 2008 and
$0.3 million for seven properties during the second quarter of 2007.

Loss (Gain) on Disposition of Assets.Loss on asset
dispositions was minimal for the 13 weeks ended June 24, 2008 compared to gains of $0.1 million for the 13 weeks ended June 26, 2007.

Interest Expense.Interest expense was $8.2 million for the 13 weeks ended June 24, 2008 compared to $9.7 million for the 13 weeks ended June 26, 2007, a decrease of $1.5 million primarily due to lower interest rates and
lower debt levels as compared to the prior year. Our cash borrowing rate decreased 0.8% to 7.4% during the second quarter of 2008 compared to the second quarter of 2007 and our average outstanding debt balance decreased $22.2 million to $416.1
million in the second quarter of 2008 as compared to the prior year. Cash borrowing rate represents interest expense, excluding debt issue amortization, divided by weighted average debt outstanding. Interest expense included $0.5 million
and $0.6 million for amortization of deferred debt issuance costs in the second quarter 2008 and 2007, respectively.

Income Taxes.For the 13 weeks ended June 24, 2008, we recorded income tax expense of $1.4 million which resulted in an effective income tax rate of 42.1% compared to an effective tax rate of 27.0% or $0.5 million for the 13 weeks ended June 26,
2007. The current year anticipated annual effective rate was increased to 31.0% during the second quarter which resulted in a second quarter effective tax rate of 42.1% compared to 24.2% in the first quarter of 2008. This increase was due to changes
to anticipated permanent deductions.

Net Income.Net income for the 13 weeks ended June 24, 2008 was $2.0 million, compared to
$1.4 million for the 13 weeks ended June 26, 2007. The increase in net income was primarily due to the benefit of a 9.7% increase in net product sales, reduced depreciation and amortization expense and lower interest expense which were
largely offset by increases in commodity costs, general and administrative expenses and income tax expense.

Twenty-Six Weeks Ended June 24,
2008 Compared to June 26, 2007

Net Product Sales.Net product sales for the 26 weeks ended June 24, 2008 compared
to the 26 weeks ended June 26, 2007 were $366.7 million and $335.9 million, respectively, an increase of $30.8 million or 9.2% resulting largely from a 5.2% increase in equivalent units due to acquisitions and development and an increase
in comparable store sales of 3.7%, while rolling over last years comparable store sales increase of 2.0%.

Fees and Other Income.Fees and other income were $11.0 million for the 26 weeks ended June 24, 2008, compared to $9.2 million for the 26 weeks ended June 26, 2007, for an increase of 20.0%. The increase is primarily due to higher delivery fees attributable
to increased customer delivery charges in most markets and increased weighted average stores in operation.

Cost of Sales.Cost of
sales was $104.6 million for the 26 weeks ended June 24, 2008, compared to $89.4 million for the 26 weeks ended June 26, 2007, for an increase of $15.2 million or 16.9%. Cost of sales increased 1.9%, as a percentage of net product sales,
to 28.5%, compared to 26.6% in the prior year. The increase was primarily due to increases in the following commodity costs: 18.9% for cheese costs (net of UFPC hedging benefits), 26.2% for dough costs and 6.5% for packaging costs, with meat costs
flat as compared to the prior year. The impact of these overall increases was partially offset by pricing initiatives.

Direct Labor.Direct labor costs were $103.5 million for the 26 weeks ended June 24, 2008, compared to $95.3 million for the 26 weeks ended June 26, 2007, an increase of $8.2 million or 8.6%. Direct labor costs decreased 0.2%, as a percentage of net
product sales, to 28.2% compared to 28.4% in the prior year. This decrease was primarily due to the positive impact of sales leverage achieved on fixed labor costs and effective labor management strategies which more than offset higher wage rates
caused largely by federal and certain state minimum wage increases.



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Other Restaurant Operating Expenses.Other restaurant operating expenses for the 26 weeks ended
June 24, 2008 were $116.3 million compared to $110.5 million for the prior year. Other restaurant operating expenses decreased 1.2% as a percent of net product sales, to 31.7% for the 26 weeks ended June 24, 2008 compared to 32.9% for the
prior year. The decrease of expenses as a percentage of net product sales compared to the prior year was primarily due to lower depreciation expense associated with short-lived assets becoming fully depreciated during the second quarter of 2007,
without replacement, and lower delivery driver reimbursement expenses related to changes in our delivery driver reimbursement program in second quarter 2007 and the leveraging impact on fixed and semi-fixed costs due to higher comparable store
sales. Depreciation expense for store operations was $13.3 million or 3.6% of net product sales for the 26 weeks ended June 24, 2008 compared to $15.5 million or 4.6% of net product sales in the prior year-to-date period. These decreases were
partially offset by increased delivery driver insurance costs due to adverse claims development and activity.

General and
Administrative Expenses.General and administrative expenses for the 26 weeks ended June 24, 2008 were $20.6 million compared to $19.1 million in the prior year. General and administrative expenses increased approximately $1.5 million
compared to the prior year primarily due to increased credit card fees attributable to increased transaction volume and higher weighted average stores in operation and increased salaries expense which were partially offset by prior year acquisition
integration costs.

Corporate Depreciation and Amortization.Corporate depreciation and amortization costs for the 26 weeks ended
June 24, 2008 were $6.7 million compared to $6.2 million for the prior year. The increase over the prior year is largely due to increased pre-opening expenses related to the addition of the WingStreet product line at 119 units in 2008.

Net Facility Impairment Charges.We recorded charges of $0.3 million during both the 26 weeks ended June 24, 2008 and
June 26, 2007 for 12 properties and 13 properties, respectively.

Loss (Gain) on Disposition of Assets.Loss on asset
dispositions was minimal for the 26 weeks ended June 24, 2008 compared to gains of $0.5 million for the 26 weeks ended June 26, 2007.

Interest Expense.Interest expense was $16.8 million for the 26 weeks ended June 24, 2008 compared to $19.1 million for the prior year, a decrease of $2.3 million primarily due to lower interest rates and lower debt levels
as compared to the prior year. Our cash borrowing rate decreased 0.7% to 7.5% during the 26 weeks ended June 24, 2008 compared to the same period of 2007 and our average outstanding debt balance decreased $11.8 million to $423.3 million in 2008
as compared to the prior year. Interest expense included $0.8 million and $1.1 million for amortization of deferred debt issuance costs in the year-to-date period for 2008 and 2007, respectively.

Income Taxes.For the 26 weeks ended June 24, 2008, we recorded income tax expense of $2.8 million which resulted in an effective income tax
rate of 31.0% compared to an effective tax rate of 32.0% or $1.8 million for the 26 weeks ended June 26, 2007. The lower than statutory rates are attributable to the impact of high tax credits.

Net Income.Net income for the 26 weeks ended June 24, 2008 was $6.2 million, compared to $3.8 million for the 26 weeks ended
June 26, 2007. The increase in net income was primarily due to the benefit of a 9.2% increase in net product sales, reduced depreciation and amortization expense and lower interest expense which were partially offset by increases in commodity
costs, general and administrative expenses and income tax expense.

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 Senior Secured 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 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 utilization of the additional term loan borrowing capacity under our credit facility described below as well as other sources of debt or additional equity capital. 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 the Company were to access additional debt financing beyond our existing credit facility, it is
anticipated that any such additional financing may be at higher costs than the Companys currently outstanding borrowings under its existing credit facility. In addition utilization of the additional term loan borrowing capacity under our
existing credit facility, beyond parameters established in our current agreement, may result in a reset of the interest rate on our existing term loan borrowings, which could 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.



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Our working capital was a deficit of $38.1 million as of June 24, 2008. 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

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 $31.0 million
for the 26 weeks ended June 24, 2008 and $36.3 million for the 26 weeks ended June 26, 2007. Cash flows from operations during the 26 weeks ended June 24, 2008 were negatively impacted by a $5.9 million reduction in working capital as
compared to the prior year. 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 year-to-date period ended June 24, 2008, the Company had no invested cash netted against book overdrafts. For the year-to-date period ended June 26, 2007 the Company had a $12.1
million positive change due to cash invested in an overnight investment account netted against book overdrafts. The impact of these changes results in a $12.1 million reduction in cash flows from working capital from period-to-period which was
partially offset by a $5.8 million positive change in income taxes, primarily due to higher income tax payments during the first half of 2007.

Cash flows from investing activities

Cash flows used in investing
activities were $19.5 million during the 26 weeks ended June 24, 2008 compared to $40.0 million for the 26 weeks ended June 26, 2007. During the 26 weeks ended June 24, 2008, we invested $19.6 million in capital expenditures compared
to $13.5 million during the prior year. The increase in capital expenditures was primarily due to the addition of the WingStreetproduct line
to 119 units during the first half of 2008 for approximately $5.3 million. During the 26 weeks ended June 26, 2007, we completed an acquisition of 59 stores for $27.3 million (including capitalized acquisition costs of $0.1 million), and
received proceeds from asset sales of $0.9 million.

We expect our capital
expenditure investment, net of anticipated related sale-leaseback proceeds, to be between $28 million and $31 million in fiscal year 2008, not including acquisitions. This range includes an investment of approximately $10.0 million to $11.0 million
to add the WingStreetproduct line to 190 units. We are significantly ahead of schedule on our asset re-image, rebuild/remodel requirements
and have the option to reduce capital expenditures at managements discretion to increase free cash flow and remain comfortably in compliance with our franchise agreements.

Cash flows from financing activities

Net financing cash outflows were $12.8 million for the 26 weeks
ended June 24, 2008 compared to $0.6 million for the 26 weeks ended June 26, 2007. Net pay-downs under the revolving credit facility were $15.5 million for the first half of fiscal 2008 compared to $2.5 million during the prior year
including the effect of borrowing approximately $11.0 million during the first quarter of 2007 to partially fund our acquisition of 59 stores on March 13, 2007. During the current period, we also paid our mandatory excess cashflow prepayment of
$4.2 million on our Senior Secured Credit Facility. During the first half of fiscal 2008 we completed six sale-leaseback transactions on assets principally constructed during 2007 for approximately $6.9 million compared to $2.0 million for a
sale-leaseback transaction of two properties in the same period of 2007.

We are required, under certain circumstances as defined
in our credit agreement, to make an excess cash flow mandatory prepayment on the term loan notes not later than 120 days after our 2008 fiscal year-end. Based on projected 2008 results, we anticipate that we will be required
to make a mandatory prepayment of an amount between $13.3 million and $19.9 million depending upon the amount of excess cash flow generated during our fiscal year and our leverage at fiscal year-end. The excess cash flow mandatory prepayment is
an annual requirement under the credit agreement. As the excess cash flow mandatory prepayment estimates are preliminary and are therefore subject to further refinement, the final excess cash flow mandatory prepayment could
ultimately differ materially from the amounts reflected above.

At June 24, 2008, we had $50.5 million of borrowing capacity available
under our revolving line of credit net of $24.5 million of outstanding letters of credit. We will consider additional sources of financing to fund our long-term growth if necessary, including $100.0 million of term loan capacity available under our
existing credit facility.



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Letters of Credit

As of June 24, 2008, we had letters of credit of $24.5 million issued under our existing credit facility primarily in support of self-insured risks and franchise agreement obligations.



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

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

Interest Rate Risk. Our primary market risk exposure is interest rate risk. All of our borrowings under our
Senior Secured Credit Facility bear interest at a floating rate. As of June 24, 2008, we had $235.8 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 as noted below:



|                                     |  |                              |        |           |      |  
|------------------------------------ |  | ---------------------------- | ------ | --------- | ---- | -
|                                     |  | NotionalAmount(in thousands) |        | FixedRate |     
|Interest rate swap agreements:       |  |                              |        |           |      |  
|June 6, 2006 to December 31, 2010    |  | $                            | 85,000 |           | 5.39 | %
|January 31, 2008 to January 31, 2010 |  | $                            | 50,000 |           | 3.16 | %
|April 7, 2008 to April 7, 2011       |  | $                            | 50,000 |           | 2.79 | %

After giving effect to these swaps, which leaves us with $50.8 million of floating rate debt, a
1.0% increase in this floating rate would increase annual interest expense by approximately $0.5 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 30-35% 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 2008 through a combination of derivatives taken under the direction of the UFPC. The estimated increase in our food costs from a hypothetical $0.10 adverse change in the average cheese block
price per pound would have been approximately $1.6 million and $1.8 million for the 26 weeks ended June 24, 2008 and June 26, 2007, 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 controls over financial reporting.There has been no change in our internal control over financial reporting that occurred
during our second fiscal quarter of 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION



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

As
reported in the Companys Quarterly Report on 10-Q for the period ended March 25, 2008, on January 11, 2008, a lawsuit against the Company, entitled Hildreth v. NPC International, Inc. Case No. 2:08-CV-10-FTM-34-DNF
(Hildreth), was filed in the United States District Court for the Middle District of Florida. The Hildreth case was settled during the second quarter of fiscal 2008 for an insignificant monetary payment.



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

There have
been no material changes in our risk factors from those disclosed in our 2007 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.                                                                                                                                                                                                                                                                                                                                     
|            | 
|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 91/2% Senior Subordinated Notes due 2014                                                                                                                                                                                                                            
|            | 
|4.2*        |  | Form of 91/2% Senior Subordinated Note due 2014 (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                         
|            | 
|4.3*        |  | Registration Rights Agreement dated as of May 3, 2006 among NPC International, Inc., NPC Management, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan
Securities Inc.                                                                                                                                                                                                                                     
|            | 
|10.1*       |  | Hawk-Eye Interests Purchase Agreement, dated as of May 3, 2006, among NPC International, Inc., Oread Capital Holdings, LLC and Troy D. Cook                                                                                                                                                                                                                                                                                       
|            | 
|10.2*       |  | Credit Agreement dated as of May 3, 2006 among NPC International, Inc., NPC Acquisition Holdings, LLC as a Guarantor, the other Guarantors party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, Collateral Agent and Issuing Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Syndication Agent, Bank of America, N.A. and Sun Trust Bank, as Co-Documentation Agents, and the Lenders signatory
thereto
|            | 
|10.3*       |  | Distribution Agreement, dated as of January 5, 2004, between McLane Foodservice, Inc. and NPC International, Inc.                                                                                                                                                                                                                                                                                                                 
|            | 
|10.4*       |  | Advisory Agreement, dated as of May 3, 2006, among NPC International, Inc., NPC Acquisition Holdings, LLC and Merrill Lynch Global Partners, Inc.                                                                                                                                                                                                                                                                                 
|            | 
|10.5*       |  | Employment Agreement, dated as of May 3, 2006, among NPC International, Inc., NPC Acquisition Holdings, LLC and James K. Schwartz                                                                                                                                                                                                                                                                                                 
|            | 
|10.6*       |  | Employment Agreement, dated as of May 3, 2006, among NPC International, Inc., NPC Acquisition Holdings, LLC and Troy D. Cook                                                                                                                                                                                                                                                                                                      
|            | 
|10.7*       |  | NPC International, Inc. Deferred Compensation and Retirement Plan                                                                                                                                                                                                                                                                                                                                                                 
|            | 
|10.8*       |  | NPC International, Inc. POWR Plan for Key Employees                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.9*       |  | Form of Location Franchise Agreement dated as of January 1, 2003 between Pizza Hut, Inc. and NPC Management, Inc.                                                                                                                                                                                                                                                                                                                 



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                            
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document Description                                                                                                                                                                                                                                                       
|10.10*      |  | Form of Territory Franchise Agreement dated as of January 1, 2003 between Pizza Hut, Inc. and NPC Management, Inc.                                                                                                                                                         
|            | 
|10.11*      |  | Purchase Agreement and Escrow Instructions dated as of August 26, 2006 between Realty Income Corporation and NPC International, Inc.                                                                                                                                       
|            | 
|10.12*      |  | Purchase Agreement dated as of April 25, 2006 among Merrill Lynch & Co. and J.P. Morgan Securities Inc., as representative for the initial purchasers, NPC International, Inc, and NPC
Management, Inc.                                                                    
|            | 
|10.13       |  | Pizza Hut National Purchasing Coop, Inc. Membership Subscription and Commitment Agreement (incorporated herein by reference to Exhibit 10.32 to the Registrants Annual Report on
Form 10-K filed with the Commission on May 28, 1999 (File No. 0-13007))                  
|            | 
|10.14*      |  | ISDA Master Agreement dated as of June 6, 2006 between Merrill Lynch Capital Services, Inc. and NPC International, Inc.                                                                                                                                                    
|            | 
|10.15       |  | NPC Acquisition Holdings, LLC Management Option Plan (including forms of executive and director option agreements) dated January 24, 2007 (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed January 25, 2007)                   
|            | 
|10.16       |  | Amendment to Franchise Agreement dated as of December 25, 2007 between Pizza Hut, Inc. and NPC International, Inc. (incorporated herein by reference to Exhibit 10.16 to the Registrants
Annual Report on Form 10-K filed with the Commission on March 14, 2008)          
|            | 
|10.17       |  | Swap Transaction Confirmation dated March 31, 2008 between Merrill Lynch Capital Services, Inc. and NPC International, Inc. (incorporated herein by reference to Exhibit 10.17 to the
Registrants Quarterly Report on Form 10-Q filed with the Commission on Mary 9, 2008)
|            | 
|14.1        |  | Code of Business Conduct and Ethics (incorporated herein by reference to the Registrants Annual Report on Form 10-K filed with the Commission on March 23, 2007)                                                                                                          
|            | 
|21.1**      |  | List of subsidiaries                                                                                                                                                                                                                                                       
|            | 
|31.1***     |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                         
|            | 
|31.2***     |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                         
|            | 
|32.1***     |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                          
|            | 
|32.2***     |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                          



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

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

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



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized, on August 8, 2008.



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)




25