For Immediate Release Toronto Stock Exchange: BPF.UN
BOSTON PIZZA ROYALTIES INCOME FUND ANNOUNCES RECORD
QUARTERLY FRANCHISE SALES OF $186.3 MILLION
Same store sales growth of 3.2% for the first quarter. Subsequent
to the Period
Boston Pizza opens its 350th location in Canada.
Highlights
- Highest
ever quarterly Franchise Sales[1] from
royalty pool restaurants of $186.3 million.
- Same
store sales growth of 3.2% for the Period rolling on the very strong 7.5%
SSSG for the same period in 2012.
- Distributable
Cash[2] and
Distributable Cash2 per Unit both increase for the Period
versus the same period in 2012.
- Distribution
increase announced during the Period of 4.1% effective for the February
2013 distribution paid in March 2013.
- Non-cash
fair value adjustments of $5.8 million result in net loss of $0.8 million
for the Period but do not affect the Fund’s business operations or ability
to pay distributions.
- Trustees
declare April distribution to unitholders of 10.2 cents per unit.
- Subsequent
to the Period, Boston Pizza opens its 350th location in Canada.
VANCOUVER,
BC, May 9, 2013 - Boston Pizza Royalties Income Fund (the “Fund”) and Boston Pizza International Inc. (“BPI”) each reported today financial results for the period from January
1, 2013 to March 31, 2013 (the “Period”).
A copy of this press release, the consolidated interim financial statements for
the Period and related Management’s Discussion and Analysis of the Fund and BPI
are available at www.sedar.com and www.bpincomefund.com. The Fund will host a conference call to discuss the
results on May 9, 2013 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time). The
call can be accessed by dialling 1-800-319-4610 or 604-638-5340. A replay will be available until June 8, 2013 by dialling 1-800-319-6413 or
604-638-9010 and entering the pin
code: 4452 followed by the # sign.
Same store sales growth (“SSSG”), a key driver of distribution
growth for unitholders of the Fund, was 3.2% for the Period compared to 7.5%
for the same period in 2012. Franchise Sales1, the basis upon which
royalties are paid by BPI to
the Fund, exclude revenue from the sale of liquor, beer, wine and tobacco and
approved national promotions and discounts. On a Franchise Sales1
basis, SSSG was 3.5% for the Period compared to 6.9% for the same period in 2012.
The positive SSSG in the Period was principally due to higher take-out and
delivery sales resulting from continued promotion of Boston Pizza’s online
ordering system, higher chicken wing sales resulting from the introduction of
“All Meat Wings” in 2012 and menu re-pricing. The positive SSSG results for the
period were achieved in spite of several challenges including the strong SSSG
figures posted in the same period one year ago, the one fewer day in the Period
compared to the first quarter of 2012 due to the leap year in 2012 and the poor
weather experienced in many parts of Canada during the Period. Franchise Sales1
of restaurants in the royalty pool were an all-time quarterly record of $186.3
million for the Period compared to $176.6 million in the same period in 2012.
The increase in Franchise Sales1 for the Period is attributed to the
positive SSSG experienced in the Period and the addition of five net new
restaurants to the Fund’s
royalty pool on January 1, 2013.
“Boston
Pizza’s national promotions during the Period, including “Hockey’s Back”,
“Finger Cooking” and “Careful You Don’t Become a Foodie”, attracted guests to
three distinct areas of our restaurants: the sports bar, take-out and delivery,
and dining room. This approach helped drive positive SSSG of 3.2% in the first
quarter of 2013, which is particularly impressive given the strong comparable
SSSG posted in the same period one year ago,” said Mark Pacinda, President and
CEO of BPI. “As a result of the continued positive sales momentum, the Fund’s
trustees announced
an increase of 4.1% to the monthly distribution amount to unitholders effective
for the February 2013 distribution. This marks the 16th distribution
increase since the initial public offering and, including the April 2013
distribution announced today and payable in May 2013, the Fund will have paid
out 130 consecutive monthly distributions totaling almost $164 million.”
The Fund’s
net loss was $0.8 million for the Period compared to a net loss of $6.9 million
in the same period in 2012. The change in net loss for the Period was mainly
driven by the $5.7 million difference in fair value adjustments on the class B general
partner units of Boston Pizza Royalties Limited Partnership (the “Class B Unit liability”). The Fund’s
net income under International Financial Reporting Standards (“IFRS”) contains non-cash items, such as
the fair value adjustment on the Class B Unit liability, that do not affect the
Fund’s business operations or its ability to pay distributions to unitholders.
In the Fund’s view, net income is not the only or most meaningful measurement
of the Fund’s ability to pay distributions. Consequently, the Fund reports the
non-IFRS metrics of Distributable Cash2 and Payout Ratio3
to provide investors with more meaningful information regarding the amount of
cash that the Fund has generated to pay distributions. Readers are cautioned
that Distributable Cash2 and Payout Ratio3 are non-IFRS
financial measures that do not have standardized meanings prescribed by IFRS
and therefore may not be comparable to similar measures presented by other
issuers. For a reconciliation between cash flow from operating activities (the
most directly comparable IFRS measure) and Distributable Cash2 and a
detailed discussion on the Fund’s Distributable Cash2 and Payout
Ratio3, please see the “Operating Results – Distributable Cash /
Payout Ratio” section in the Fund’s Management’s Discussion and Analysis for
the Period.
The Fund’s Distributable Cash2 was $4.3 million or $0.277 per
unit of the Fund (“Unit”) for the
Period compared to $4.0 million or $0.274 per Unit for the same period,
respectively, in 2012. This represents increases of 8.0% and 1.1%,
respectively, for the Period compared to the same period one year ago. The
increase in Distributable Cash2 was driven primarily by BPI’s
exchange of class B general partner units of Boston Pizza Royalties Limited
Partnership into 1,000,000 Fund Units in November 2012 and higher royalty
revenue in the Period compared to the same period one year ago, partially
offset by temporary changes in working capital. The increase in Distributable
Cash2 on a per Unit basis was attributed to higher royalty revenue,
partially offset by temporary changes in working capital. Distributions for the
Period were funded entirely by cash flow from operations. No debt was incurred
at any point during the Period to fund distributions.
The Fund’s Payout Ratio3 was 108.7% for the Period compared to 105.0%
in the same period one year ago. The Fund’s Payout Ratio3 for the
Period increased compared to the same period one year ago primarily due to an
increase in working capital during the Period that will reverse over time. The
Fund strives to provide unitholders with regular monthly distributions, and as
a result, the Fund will generally experience seasonal fluctuations in its Payout
Ratio3. On a trailing
12-month basis, the Fund’s Payout Ratio3 was 100.3% as at March 31,
2013. The Fund’s Payout Ratio3 is likely to be higher in the first
and fourth quarters compared to the second and third quarters since Boston
Pizza restaurants experience higher Franchise Sales1 during the
summer months when restaurants open their patios and benefit from increased tourist
traffic. Higher Franchise Sales1
generally results in increases in Distributable Cash2. A key feature of the Fund is that it is a
“top line” structure, in which BPI pays the Fund a royalty equal to 4% of Franchise
Sales1 from restaurants in the Fund’s royalty pool. Accordingly,
Fund unitholders are not directly exposed to changes in the operating costs or
profitability of BPI or of individual Boston Pizza restaurants. Given this
structure, and that the Fund has no current mandate to retain capital for other
purposes, it is expected that the Fund will maintain a Payout Ratio3
close to 100% over time as the trustees of the Fund continue to distribute all
available cash in order to maximize returns to unitholders. As the Payout Ratio3
is calculated from a formula which includes Distributable Cash2,
which is a non-IFRS measure, a reconciliation of Payout Ratio3 to an
IFRS measure is not possible.
The trustees of the Fund announced a cash distribution to unitholders of 10.2
cents per Unit for April 2013. The distribution will be payable to unitholders
of record at the close of business on May 21, 2013 and will be paid on May 31,
2013. The Fund periodically reviews distribution levels based on its policy of
stable and sustainable distribution flow to unitholders. Since the Fund’s
initial public offering in 2002, unitholders have received 16 distribution
increases. The most recent distribution increase of 4.1% was effective for the
February 2013 distribution payable in March 2013 and increased the monthly distribution
amount from 9.8 cents per Unit to 10.2 cents per Unit. Including the April 2013
distribution, which will be paid in May 2013, the Fund will have paid out 130
consecutive monthly distributions totalling $163.9 million or $13.18 per Unit.
FINANCIAL SUMMARY
The tables below sets out selected information from the consolidated interim
financial statements of the Fund together with other data and should be read in
conjunction with the consolidated interim financial statements of the Fund for
the Period and in conjunction with the consolidated financial statements for
the twelve month period ended December 31, 2012.
| | Q1 2013 | Q1 2012 |
| (in thousands of dollars – except restaurants,
SSSG, Payout Ratio3 and per Unit items) | | |
| System-wide Gross Sales4 | 236,324 | 226,065 |
| Number of restaurants in Royalty Pool5 | 348 | 342 |
| Franchise Sales1
reported by restaurants in the Royalty Pool | 186,338 | 176,581 |
| | | |
| Revenues | | |
| Royalty revenue – 4% of Franchise Sales1 | 7,454 | 7,063 |
| Interest income | 453 | 455 |
| Total revenues | 7,907 | 7,518 |
| | | |
| Expenses | | |
| Administrative expenses and interest on bank
debt | (477) | (477) |
| Interest expense on Class B Units and
Class C Units6 | (898) | (1,061) |
| Fair value adjustment on Class B Unit
liability7 | (5,712) | (11,563) |
| Fair value adjustment on interest rate swap | (89) | - |
| Subtotal | (7,176) | (13,101) |
| Current income tax expense | (1,463) | (1,301) |
| Deferred income tax expense | (20) | (20) |
| Total expenses | (8,659) | (14,422) |
| | | |
| Net loss | | |
| Net loss | (752) | (6,904) |
| Basic loss per Unit | (0.05) | (0.47) |
| Diluted loss per Unit | (0.05) | (0.47) |
| | | |
| Distributable Cash2 / Distributions /
Payout Ratio3 | | |
| Cash flows from operating activities | 5,815 | 334 |
| Class C
distributions to BPI | (450) | (450) |
| BPI Class B
entitlement | (903) | (1,154) |
| Interest paid
on long-term debt | (213) | (257) |
| SIFT tax on
Units8 | 67 | 5,524 |
| Distributable
Cash2 | 4,316 | 3,997 |
| Distributions payable9 | 4,692 | 4,196 |
| Payout Ratio3 | 108.7% | 105.0% |
| Distributable Cash per Unit2 | 0.277 | 0.274 |
| Distributions payable per Unit9 | 0.302 | 0.288 |
| | | |
| Other | | |
| Same store sales growth | 3.2% | 7.5% |
| Number of restaurants opened during the period | 0 | 2 |
| Number of restaurants closed during the period | 0 | 1 |
| | Mar 31, 2013 | Dec 31, 2012 |
| Total assets | 268,808 | 264,632 |
| Total liabilities | 108,285 | 99,353 |
| | | |
| Q1
2013 | Q4
2012 | Q3
2012 | Q2
2012 |
| (in thousands of dollars – except restaurants, Payout
Ratio3 and per Unit items) | | | | |
| System-wide Gross Sales4 | 236,324 | 239,764 | 239,269 | 237,955 |
| Number of restaurants in Royalty Pool5 | 348 | 341 | 341 | 341 |
| Franchise Sales1
reported by restaurants in the Royalty Pool | 186,338 | 185,197 | 186,081 | 183,593 |
| | | | | |
| Revenues | | | | |
| Royalty revenue
– 4% of Franchise Sales | 7,454 | 7,408 | 7,443 | 7,344 |
| Interest income | 453 | 453 | 453 | 453 |
| Total revenues | 7,907 | 7,861 | 7,896 | 7,797 |
| | | | | |
| Expenses | | | | |
| Administrative
expenses and interest on bank debt | (477) | (462) | (616) | (512) |
| Interest on
Class B Units and Class C Units6 | (898) | (1,978) | (1,628) | (1,628) |
| Fair value adjustment on Class B Unit liability7 | (5,712) | 633 | (5,890) | 1,953 |
| Fair value adjustment on interest rate swap | (89) | 69 | 67 | - |
| Subtotal | (7,176) | (1,738) | (8,067) | (187) |
| Current income tax expense | (1,463) | (1,421) | (1,350) | (1,351) |
| Deferred income tax expense | (20) | (360) | (60) | (70) |
| Total expenses | (8,659) | (3,519) | (9,477) | (1,608) |
| | | | | |
| Net Income (loss) | | | | |
| Net income (loss) | (752) | 4,342 | (1,581) | 6,189 |
| Basic earnings (loss) per Unit | (0.05) | 0.29 | (0.11) | 0.42 |
| Diluted earnings (loss) per Unit | (0.05) | 0.23 | (0.11) | 0.24 |
| | | | | |
| Distributable Cash2 / Distributions /
Payout Ratio3 | | | | |
| Cash flows from operating activities | 5,815 | 6,221 | 6,319 | 6,188 |
| Class C
distributions to BPI | (450) | (450) | (450) | (450) |
| BPI Class B
entitlement | (903) | (986) | (1,211) | (1,178) |
| Interest paid
on long-term debt | (213) | (215) | (130) | (285) |
| SIFT tax on
Units8 | 67 | (31) | - | (1) |
| Distributable
cash2 | 4,316 | 4,539 | 4,528 | 4,274 |
| Distributions payable9 | 4,692 | 4,480 | 4,284 | 4,284 |
| Payout Ratio3 | 108.7% | 98.7% | 94.6% | 100.2% |
| Distributable cash per Unit2 | 0.277 | 0.303 | 0.311 | 0.293 |
| Distributions payable per Unit9 | 0.302 | 0.294 | 0.294 | 0.294 |
| | Q1
2012 | Q4
2011 | Q3
2011 | Q2
2011 |
| (in thousands of dollars – except
restaurants, Payout Ratio3
and per Unit items) | | | | |
| System-wide Gross Sales4 | 226,065 | 232,713 | 235,911 | 228,766 |
| Number of restaurants in Royalty Pool5 | 342 | 336 | 336 | 338 |
| Franchise Sales1
reported by restaurants in the Royalty Pool | 176,581 | 177,465 | 183,163 | 175,568 |
| | | | | |
| Revenues | | | | |
| Royalty revenue
– 4% of Franchise Sales | 7,063 | 7,098 | 7,327 | 7,023 |
| Interest income | 455 | 454 | 454 | 455 |
| Total revenues | 7,518 | 7,552 | 7,781 | 7,478 |
| | | | | |
| Expenses | | | | |
| Administrative
expenses and interest on bank debt | (477) | (432) | (449) | (511) |
| Interest expense on Class B Units and Class C
Units6 | (1,061) | (2,042) | (1,447) | (1,388) |
| Fair value adjustment on Class B Unit
liability7 | (11,563) | (3,308) | 1,148 | 2,707 |
| Subtotal | (13,101) | (5,782) | (748) | 808 |
| Current income tax expense | (1,301) | (1,396) | (1,449) | (1,366) |
| Deferred income tax expense | (20) | (70) | (100) | (70) |
| Total expenses | (14,422) | (7,248) | (2,297) | (628) |
| | | | | |
| Net Income (loss) | | | | |
| Net income (loss) | (6,904) | 304 | 5,484 | 6,850 |
| Basic earnings (loss) per Unit | (0.47) | 0.02 | 0.38 | 0.47 |
| Diluted earnings (loss) per Unit | (0.47) | 0.02 | 0.24 | 0.23 |
| | | | | |
| Distributable Cash2 / Distributions /
Payout Ratio3 | | | | |
| Cash flows from operating activities | 334 | 7,271 | 7,440 | 7,191 |
| Class C
distributions to BPI | (450) | (450) | (450) | (450) |
| BPI Class B
entitlement | (1,154) | (1,099) | (1,077) | (1,023) |
| Interest paid
on long-term debt | (257) | (234) | (174) | (269) |
| SIFT tax on
Units8 | (5,524) | (1,396) | (1,449) | (1,366) |
| Distributable
cash2 | 3,997 | 4,092 | 4,290 | 4,083 |
| Distributions payable9 | 4,196 | 4,021 | 4,021 | 3,672 |
| Payout Ratio3 | 105.0% | 98.3% | 93.7% | 89.9% |
| Distributable cash per Unit2 | 0.274 | 0.281 | 0.294 | 0.280 |
| Distributions payable per Unit9 | 0.288 | 0.276 | 0.276 | 0.252 |
OUTLOOK
The Canadian Restaurant and Foodservices Association has forecast average
annual sales growth of 3.5% for the Canadian full-service restaurant sector in
2013. BPI’s management believes that Boston Pizza is well positioned to
continue outperforming this overall sales growth rate by maintaining positive
SSSG and continuing to open new Boston Pizza locations across Canada.
The two principal factors that affect SSSG
are changes in customer traffic and changes in average guest cheque. BPI’s
strategies to drive higher guest traffic include attracting a wide variety of
guests into the restaurant, sports bar and take-out/delivery parts of each
location, offering a compelling value proposition to our guests and leveraging a
larger marketing budget versus the previous year along with a revised calendar
of national and local store promotions. Increased average cheque levels are
expected to be achieved through a combination of culinary innovation and annual
menu re-pricing. In addition, BPI’s franchise agreement requires that each
Boston Pizza restaurant undergo a complete store renovation every seven years.
Restaurants typically close for two to three weeks to complete the renovation
and experience an incremental sales increase in the year following the
re-opening.
Boston Pizza remains well positioned for
future expansion as evidenced by the two new Boston Pizza restaurants that have
opened so far 2013 and the four additional locations that are currently under
construction. BPI’s management believe that Boston Pizza will continue to
strengthen its position as the number one casual dining brand in Canada by
pursuing further restaurant development opportunities across the country.
Certain information in this press release may constitute “forward-looking
information” that involves known and unknown risks, uncertainties, future
expectations and other factors which may cause the actual results, performance
or achievements of the Fund, Boston Pizza Holdings Trust, the Partnership, Boston
Pizza Holdings Limited Partnership, Boston Pizza Holdings GP Inc., Boston Pizza
GP Inc., BPI, Boston Pizza restaurants, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking information.
When used in this press release, forward-looking information may include
words such as “anticipate”, “estimate”, “may”, “will”, “expect”, “believe”,
“plan” and other similar terminology. This information reflects current expectations
regarding future events and operating performance and speaks only as of the
date of this press release. Except as required by law, the Fund and BPI assume
no obligation to update previously disclosed forward-looking information.
For a
complete list of the risks associated with forward-looking information and our
business, please refer to the “Risks and Uncertainties” and “Note Regarding
Forward-Looking Information” sections included in the Fund’s most recent Management’s
Discussion and Analysis for the Period available at www.sedar.com and www.bpincomefund.com. The trustees of the Fund have approved the contents of this press release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Boston Pizza Royalties Income Fund
Jordan Holm - Vice President of Investor Relations
Tel: 604-303-6083
investorrelations(at)bostonpizza.com
www.bpincomefund.com
® Boston Pizza Royalties Limited Partnership. All Boston Pizza registered Canadian trade-marks and unregistered Canadian trade-marks containing the words "Boston", "BP", and/or "Pizza" are trade-marks owned by the Boston Pizza Royalties Limited Partnership and licensed by the Boston Pizza Royalties Limited Partnership to Boston Pizza International Inc.
© Boston Pizza International Inc. 2013
[1] Franchise sales is the basis on which the royalty is
payable; it means the revenues of Boston Pizza restaurants in respect of which
the royalty is payable (“Franchise Sales”).
The term “revenue” refers to the gross revenue: (i) of the corporate
Boston Pizza restaurants in Canada owned by BPI; and (ii) reported to BPI
by franchised Boston Pizza restaurants in Canada, without audit or other form
of independent assurance, and in the case of both (i) and (ii), after deducting
revenue from the sale of liquor, beer, wine and tobacco and revenue from BPI
approved national promotions and discounts and excluding applicable sales and
similar taxes. Nevertheless, BPI periodically conducts audits of the Franchise
Sales reported to it by its franchisees, and the Franchise Sales reported
herein include results from sales audits of earlier periods.
[2] Distributable Cash is a non-IFRS financial measure that
does not have a standardized meaning prescribed by IFRS and therefore may not
be comparable to similar measures presented by other issuers. This non-IFRS financial measure provides
useful information to investors regarding the amount of cash the Fund has
generated for distribution on the Units.
Investors are cautioned that this should not be construed as an
alternative net income measure of profitability. The
related tables in the Fund’s Management Discussion and Analysis for the
Period provide a reconciliation from this non-IFRS financial measure to cash
flows from operating activities, which is the most directly comparable IFRS
measure.
3 Payout Ratio is calculated by dividing the
interest / distributions payable by the Fund in respect of the applicable
period by the Distributable Cash generated in that period. Payout Ratio is a non-IFRS financial measure
that does not have a standardized meaning prescribed by IFRS and therefore may
not be comparable to similar measures presented by other issuers. This non-IFRS financial measure provides
investors with useful information regarding the extent to which the Fund distributes
cash on the Units. Investors are
cautioned that this should not be construed as an alternative net income
measure of profitability.
4 System-wide gross sales means the gross revenue:
(i) of the corporate Boston Pizza restaurants in Canada owned by BPI; and
(ii) reported to BPI by franchised Boston Pizza restaurants in Canada,
without audit or other form of independent assurance, and in the case of both
(i) and (ii), including revenue from the sale of liquor, beer, wine and tobacco
and revenue from BPI approved national promotions and discounts and excluding
applicable sales and similar taxes (“System-wide
Gross Sales”).
5 Number of restaurants in the Royalty Pool excludes restaurants that permanently closed
during the applicable period.
6 The Class B general partner units of the
Partnership (the “Class B Units”)
and the Class C general partner units of the Partnership (the “Class C Units”) are classified as
financial liabilities under IFRS, and as such, amounts paid by the Partnership
to BPI in respect of the Class B Units and Class C Units are
classified as interest expense and not distributions.
9 Under the declaration of trust governing the Fund,
the Fund pays distributions on the Units in respect of any particular calendar
month not later than the last business day of the immediately subsequent
month. Accordingly, distributions on the
Units in respect of the calendar month of January are paid no later than the
last business day of February, distributions on the Units in respect of the
calendar month of February are paid no later than the last business day of
March and so forth. Consequently,
distributions payable by the Fund on the Units in respect of the Period (as
defined herein) were the January 2013 distribution (which was paid on January
31, 2013), the February 2013 distribution (which was paid on March 31,
2013) and the March 2013 distribution (which was paid on April 30,
2013). Similarly, the distributions payable
by the Fund on the Units in respect of any other period are the distributions
paid in the immediately subsequent month of each month comprising such other
period.