Acquisitions and Business Combinations (Notes)

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Acquisitions and Business Combinations

Acquisitions and Business Combinations

Effective July 14, 2014, NPC’s wholly-owned subsidiary, NPCQB, completed the acquisition of 56 Wendy’s restaurants, including 20 fee-owned properties, from a Wendy’s franchisee for $57.1 million, less an adjustment for working capital of $0.3 million. This acquisition was funded with $40.0 million of incremental term loan borrowings, borrowings from the Company’s revolving credit facility and cash on hand. All of the acquired Wendy’s restaurants are owned and operated by NPCQB and are located in North Carolina and Virginia. Subsequent to the closing, the Company sold 10 of the fee-owned properties for $19.4 million and leased them back over an initial lease term of 20 years with fourfive-year renewal options. In contemplation of the acquisition, the Company identified eight fee-owned units that it plans to sell within the next 12 months and cease operations as a Wendy’s restaurant. These properties were recorded as assets held for sale.

The acquisition was accounted for using the purchase method of accounting. As a result of this acquisition, purchase accounting adjustments were made to the underlying assets based upon the valuation. The purchase price, net of cash acquired, was allocated as follows (in thousands):

Facilities and equipment	$	32,584
Franchise rights	16,570
Assets held for sale	5,121
Favorable leases	873
Goodwill	1,925
Other	(270		)
Total purchase price	$	56,803

All of the goodwill recognized will be deductible for income tax purposes. The weighted average amortization period assigned to the acquired franchise rights was approximately 21 years.

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

	Pro forma (unaudited) (in thousands)
	13 Weeks Ended				39 Weeks Ended
	Sept. 30, 2014		Sept. 24, 2013		Sept. 30, 2014		Sept. 24, 2013
Total sales	$	302,326	$	279,896	$	922,458	$	859,006
Net income	306		2,888		2,565		24,873

The unaudited Consolidated Statements of Income for the 13-week and 39-week periods ended September 30, 2014 included $16.9 million of total sales related to the units acquired in the above acquisition. It is impracticable to disclose earnings for the post-acquisition period for these acquired units as earnings of such units are not tracked on an individual basis. The Company paid direct acquisition-related costs of $0.5 million which were included in other expense for the 13-week and 39-week periods ended September 30, 2014.