For Immediate Release Toronto Stock Exchange: BPF.UN
BOSTON PIZZA ROYALTIES INCOME FUND ANNOUNCES FRANCHISE SALES RECORDS
OF $185 MILLION FOR THE FOURTH QUARTER AND $731 MILLION FOR THE YEAR
Distributable cash increased 10.9% for the fourth quarter and 8.0% for 2012
Highlights
- Record
Franchise Sales[1]
from royalty pool restaurants for the fourth quarter of $185.2 million and
for the Year of $731.5 million compared to $177.5 million and $699.3
million, respectively, in 2011.
- Same
store sales growth of 2.2% for the Period and 3.3% for the Year.
- Distributable
Cash[2] increased 10.9%
for the Period and 8.0% for the Year versus the same periods in 2011.
- Payout
Ratio3 of 98.7% for the
Period and 99.3% for the Year.
- Trustees
declare January distribution to unitholders of 9.8 cents per unit
VANCOUVER,
BC, February 7, 2013 - Boston Pizza Royalties Income Fund (the “Fund”) and Boston Pizza International
Inc. (“BPI”) each reported today
financial results for the period from October 1, 2012 to December 31, 2012 (the
“Period”) and from January 1, 2012
to December 31, 2012 (the “Year”). A
copy of this press release, the consolidated annual financial statements for
the Year 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 February 7, 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 March 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 2.2% for the Period and 3.3% for the Year
compared to 6.4% and 4.9%, respectively, for the same periods in 2011. 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 3.0% for the Period
and 3.4% for the Year compared to 5.8% and 4.9%, respectively, for the same
periods in 2011. The positive SSSG in the Period and Year was principally due
to higher takeout and delivery sales resulting from continued promotion of
Boston Pizza’s online ordering system and higher chicken wing sales resulting
from the introduction of “All Meat Wings” earlier in 2012. Franchise Sales1
of restaurants in the royalty pool were a fourth quarter record of $185.2 million
for the Period and an annual record of $731.5 million for the Year compared to
$177.5 million and $699.3 million, respectively, in the same periods in 2011.
The increases in Franchise Sales1 for the Period and Year are
attributed to the positive SSSG experienced in the Period and Year
and the addition of three net new restaurants to the Fund’s royalty pool on January 1, 2012.
“2012
was another strong year for Boston Pizza with record top-line sales and seven
new restaurant openings,” said Mark Pacinda, President and CEO of BPI. “In addition, we were excited to reach some significant
milestones during the year such as our 125th consecutive monthly
distribution to unitholders, surpassing $150 million in total distributions
since the Fund’s inception in 2002, our 15th increase to the monthly
distribution amount and the Fund’s 10 year trading anniversary on the Toronto
Stock Exchange.”
The Fund’s net income was $4.3 million for
the Period and $2.0 million for the Year compared to net income of $0.3 million
and of $15.6 million, respectively, in the same periods in 2011. The changes in
net income for the Period and Year were mainly driven by the changes in fair
value adjustments on the Class B 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 has provided
the non-IFRS metrics of Distributable Cash2 and Payout Ratio[3]
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 Ratio2 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 $4.5 million or $0.303 per unit of the Fund (“Unit”) for the Period and $17.4 million or $1.184 per Unit for the
Year compared to $4.1 million or $0.281 per Unit and $16.1 million or $1.104
per Unit for the same periods, respectively, in 2011. This represents increases
of 10.9% for the Period and 8.0% for the Year compared to the same periods,
respectively, one year ago. These increases were mainly driven by higher
royalty revenue. Distributions for the Period and the Year were funded entirely
by cash flow from operations. No debt was incurred at any point during the
Period or the Year to fund distributions.
The Fund’s Payout Ratio3
was 98.7% for the Period and 99.3% for the Year compared to 98.3% and 95.7% in
the same periods, respectively, one year ago. The Fund’s Payout Ratio3
for the Period and the Year increased compared to the same periods one year ago
primarily due to the distribution increase beginning with the February 2012
distribution to unitholders. 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. 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 result 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. For a reconciliation of Distributable Cash2
to its closest IFRS measure, cash flows from operating activities, see the
“Operating Results – Distributable Cash / Payout Ratio” section in the Fund’s
Management’s Discussion and Analysis for the Period.
The trustees of the Fund
announced a cash distribution to unitholders of 9.8 cents per Unit for January
2013. The distribution will be payable to unitholders of record at the close of
business on February 21, 2013 and will be paid on February 28, 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 15 distribution increases. The most
recent distribution increase of 6.5% was effective for the February 2012 distribution
payable in March 2012 and increased the monthly distribution amount from 9.2
cents per Unit to 9.8 cents per Unit. Including the January 2013 distribution,
which will be paid in February 2013, the Fund will have paid out 127
consecutive monthly distributions totalling $159.1 million or $12.87 per Unit.
FINANCIAL
SUMMARY
The tables below sets out selected information from
the consolidated financial statements of the Fund together with other data and
should be read in conjunction with the consolidated financial statements of the
Fund.
| | Q4 2012 | Q4 2011 | 2012 | 2011 |
| (in thousands of dollars – except restaurants,
SSSG, Payout Ratio3 and per Unit items) | | | | |
| System-wide Gross Sales[4] | 239,764 | 232,713 | 943,053 | 904,872 |
| Number of restaurants in Royalty Pool[5] | 341 | 336 | 341 | 336 |
| Franchise Sales1
reported by restaurants in the Royalty Pool | 185,197 | 177,465 | 731,455 | 699,329 |
| | | | | |
| Revenues | | | | |
| Royalty revenue – 4% of Franchise Sales1 | 7,408 | 7,098 | 29,258 | 27,973 |
| Interest income | 453 | 454 | 1,814 | 1,815 |
| Total revenues | 7,861 | 7,552 | 31,072 | 29,788 |
| | | | | |
| Expenses |
|
|
|
|
| Administrative expenses and interest on bank
debt | (462) | (432) | (2,067) | (1,894) |
| Interest expense on Class B Units and
Class C Units[6] | (1,978) | (2,042) | (6,295) | (5,814) |
| Fair value adjustment on Class B Unit
liability[7] | 633 | (3,308) | (14,867) | (731) |
| Fair value adjustment on interest rate swap | 69 | - | 136 | - |
| Subtotal | (1,738) | (5,782) | (23,093) | (8,439) |
| Current income tax expense | (1,421) | (1,396) | (5,423) | (5,474) |
| Deferred income tax expense | (360) | (70) | (510) | (290) |
| Total expenses | (3,519) | (7,248) | (29,026) | (14,203) |
| |
|
|
|
|
| Net Income |
|
|
|
|
| Net income | 4,342 | 304 | 2,046 | 15,585 |
| Basic earnings per Unit | 0.29 | 0.02 | 0.14 | 1.07 |
| Diluted earnings per Unit | 0.23 | 0.02 | 0.14 | 1.06 |
| |
|
|
|
|
| Distributable Cash2 / Distributions /
Payout Ratio3 |
|
|
|
|
| Cash flows from operating activities | 6,006 | 7,037 | 18,175 | 27,490 |
| Class C
distributions to BPI | (450) | (450) | (1,800) | (1,800) |
| Class B
entitlement to BPI | (986) | (1,099) | (4,495) | (4,130) |
| SIFT tax on
Units[8] | (31) | (1,396) | 5,492 | (5,474) |
| Distributable
Cash2 | 4,539 | 4,092 | 17,372 | 16,086 |
| Distributions payable[9] | 4,480 | 4,021 | 17,244 | 15,387 |
| Payout Ratio3 | 98.7% | 98.3% | 99.3% | 95.7% |
| Distributable Cash per Unit2 | 0.303 | 0.281 | 1.184 | 1.104 |
| Distributions payable per Unit9 | 0.294 | 0.276 | 1.170 | 1.056 |
| | | | | |
| Other | | | | |
| Same store sales growth (SSSG) | 2.2% | 6.4% | 3.3% | 4.9% |
| Number of restaurants opened during the period | 4 | 2 | 7 | 7 |
| Number of restaurants closed during the period | 0 | 0 | 2 | 4 |
| | | | Dec 31, 2012 | Dec 31, 2011 |
| Total assets | | | 264,632 | 261,571 |
| Total liabilities | | | 99,353 | 99,794 |
| | Q4
2012 | Q3
2012 | Q2
2012 | Q1
2012 |
| (in thousands of dollars – except restaurants, Payout
Ratio3 and per Unit items) | | | | |
| System-wide Gross Sales4 | 239,764 | 239,269 | 237,955 | 226,065 |
| Number of restaurants in Royalty Pool5 | 341 | 341 | 341 | 342 |
| Franchise Sales1
reported by restaurants in the Royalty Pool | 185,197 | 186,081 | 183,593 | 176,581 |
| | | | | |
| Revenues | | | | |
| Royalty revenue
– 4% of Franchise Sales | 7,408 | 7,443 | 7,344 | 7,063 |
| Interest income | 453 | 453 | 453 | 455 |
| Total revenues | 7,861 | 7,896 | 7,797 | 7,518 |
| | | | | |
| Expenses | | | | |
| Administrative
expenses and interest on bank debt | (462) | (616) | (512) | (477) |
| Interest on
Class B Units and Class C Units6 | (1,978) | (1,628) | (1,628) | (1,061) |
| Fair value adjustment on Class B Unit
liability7 | 633 | (5,890) | 1,953 | (11,563) |
| Fair value adjustment on interest rate swap | 69 | 67 | - | - |
| Subtotal | (1,738) | (8,067) | (187) | (13,101) |
| Current income tax expense | (1,421) | (1,350) | (1,351) | (1,301) |
| Deferred income tax expense | (360) | (60) | (70) | (20) |
| Total expenses | (3,519) | (9,477) | (1,608) | (14,422) |
| | | | | |
| Net Income (loss) | | | | |
| Net income (loss) | 4,342 | (1,581) | 6,189 | (6,904) |
| Basic earnings (loss) per Unit | 0.29 | (0.11) | 0.42 | (0.47) |
| Diluted earnings (loss) per Unit | 0.23 | (0.11) | 0.24 | (0.47) |
| | | | | |
| Distributable Cash2 / Distributions /
Payout Ratio3 | | | | |
| Cash flows from operating activities | 6,006 | 6,189 | 5,903 | 77 |
| Class C
distributions to BPI | (450) | (450) | (450) | (450) |
| Class B
entitlement to BPI | (986) | (1,211) | (1,178) | (1,154) |
| SIFT tax on
Units8 | (31) | - | (1) | 5,524 |
| Distributable
cash2 | 4,539 | 4,528 | 4,274 | 3,997 |
| Distributions payable9 | 4,480 | 4,284 | 4,284 | 4,196 |
| Payout Ratio3 | 98.7% | 94.6% | 100.2% | 105.0% |
| Distributable cash per Unit2 | 0.303 | 0.311 | 0.293 | 0.274 |
| Distributions payable per Unit9 | 0.294 | 0.294 | 0.294 | 0.288 |
| | Q4
2011 | Q3
2011 | Q2
2011 | Q1
2011 |
| (in thousands of dollars – except
restaurants, Payout Ratio3
and per Unit items) | | | |
|
| System-wide Gross Sales4 | 232,713 | 235,911 | 228,766 | 207,482 |
| Number of restaurants in Royalty Pool5 | 336 | 336 | 338 | 339 |
| Franchise Sales1
reported by restaurants in the Royalty Pool | 177,465 | 183,163 | 175,568 | 163,133 |
| | | | | |
| Revenues | | | | |
| Royalty revenue
– 4% of Franchise Sales | 7,098 | 7,327 | 7,023 | 6,525 |
| Interest income | 454 | 454 | 455 | 452 |
| Total revenues | 7,552 | 7,781 | 7,478 | 6,977 |
| | | | | |
| Expenses | | | | |
| Administrative
expenses and interest on bank debt | (432) | (449) | (511) | (502) |
| Interest expense on Class B Units and Class C
Units6 | (2,042) | (1,447) | (1,388) | (937) |
| Fair value adjustment on Class B Unit
liability7 | (3,308) | 1,148 | 2,707 | (1,278) |
| Subtotal | (5,782) | (748) | 808 | (2,717) |
| Current income tax expense | (1,396) | (1,449) | (1,366) | (1,263) |
| Deferred income tax expense | (70) | (100) | (70) | (50) |
| Total expenses | (7,248) | (2,297) | (628) | (4,030) |
| | | | | |
| Net Income | |
| | |
| Net income | 304 | 5,484 | 6,850 | 2,947 |
| Basic earnings per Unit | 0.02 | 0.38 | 0.47 | 0.20 |
| Diluted earnings per Unit | 0.02 | 0.24 | 0.23 | 0.20 |
| | | | | |
| Distributable Cash2 / Distributions /
Payout Ratio3 | | | | |
| Cash flows from operating activities | 7,037 | 7,266 | 6,922 | 6,265 |
| Class C
distributions to BPI | (450) | (450) | (450) | (450) |
| Class B entitlement
to BPI | (1,099) | (1,077) | (1,023) | (952) |
| SIFT tax on
Units8 | (1,396) | (1,449) | (1,366) | (1,263) |
| Distributable
cash2 | 4,092 | 4,290 | 4,083 | 3,600 |
| Distributions payable9 | 4,021 | 4,021 | 3,672 | 3,672 |
| Payout Ratio3 | 98.3% | 93.7% | 89.9% | 102.0% |
| Distributable cash per Unit2 | 0.281 | 0.294 | 0.280 | 0.247 |
| Distributions payable per Unit9 | 0.276 | 0.276 | 0.252 | 0.252 |
OUTLOOK
The Canadian Restaurant and Foodservices
Association has forecast average annual sales growth of 3.9% 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
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 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 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 seven new Boston Pizza restaurants that
opened in 2012 and the five 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 most 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.
[7] The
Fund is required under IFRS to fair value the Class B Unit liability at the end
of each period and adjust for any increase or decrease in the fair value of
that liability as compared to the fair value of that liability at the end of
the immediately preceding period. This
adjustment has no impact on the Fund’s Distributable Cash.
[8] Specified
Investment Flow through tax (”SIFT Tax”)
on Units is the SIFT Tax expense for the respective period (as a negative
number) plus the amount of SIFT Tax paid in the respective period.
[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 October 2012 distribution (which was paid on November 30, 2012), the
November 2012 distribution (which was paid on December 31, 2012) and the
December 2012 distribution (which was paid on January 31, 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.