For Immediate Release Toronto Stock Exchange: BPF.UN
BOSTON PIZZA ROYALTIES INCOME FUND ANNOUNCES FRANCHISE SALES FROM ROYALTY POOL RESTAURANTS OF $186.4 MILLION FOR THE FIRST QUARTER
Top line results driven by 10 net new restaurants added to the Fund’s royalty pool in 2014
Highlights
- System-Wide Gross Sales for the Period of $238.0 million, an increase of $1.7 million versus the same period one year ago.
- Franchise Sales from royalty pool restaurants for the Period of $186.4 million, relatively unchanged from the same period one year ago.
- Same store sales growth of negative 1.7% and Distributable Cash per Unit decrease of 1.8% for the Period mainly due to extreme winter weather in many parts of Canada and a higher number of restaurant renovations in the Period compared to the same period one year ago.
- Ten net new Boston Pizza restaurants opened in 2013 added to the Fund’s royalty pool on January 1, 2014.
- Trustees previously declared April 2014 distribution to unitholders of 10.2 cents per Unit.
VANCOUVER, BC, May 14, 2014 - Boston Pizza Royalties Income Fund (the “Fund”) and Boston Pizza International Inc. (“BPI”) reported financial results today for the first quarter period from January 1, 2014 to March 31, 2014 (the “Period”). A copy of this press release, the interim consolidated financial statements 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 14, 2014 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 13, 2014 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 negative 1.7% for the Period compared to positive 3.2% for the same period in 2013. Franchise Sales, 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 Sales basis, SSSG was negative 1.9% for the Period compared to positive 3.5% for the same period in 2013. The negative SSSG for the Period was principally due to extreme winter weather in many parts of Canada and a higher number of restaurant renovations in the Period compared to the same period one year ago. Franchise Sales of restaurants in the royalty pool were $186.4 million for the Period compared to $186.3 million in the same period, respectively, in 2013. The nominal change in Franchise Sales for the Period is attributed to additional Franchise Sales from 10 net new store openings from the prior year that were added to the Fund’s royalty pool on January 1, 2014, offset by negative SSSG in the Period as previously discussed.
“Boston Pizza’s marketing activities in the first quarter focused on families with our $6.99 Kids Meals and Pasta Tuesdays, while our sports bar promotions welcomed thousands of Canadian hockey fans across the country to watch the gold medal game with us” said Mark Pacinda, President and CEO of BPI. “On August 12, 2014, Boston Pizza will celebrate our 50th anniversary and we have a number of exciting events planned to recognize this milestone across the country including local parties, a national contest, special historical menu items and even our own Boston Pizza 50th anniversary beer to mark the occasion. We invite everyone to come and celebrate with BP.”
The Fund’s net income and comprehensive income was $6.4 million for the Period compared to a net loss and comprehensive loss of $0.8 million for the first quarter of 2013. The $7.1 million increase in net income for the Period was driven by the net $7.5 million difference in fair value adjustments mainly on the class B general partner units of Boston Pizza Royalties Limited Partnership (the “Class B Unit liability”) partially offset by a $0.2 million change in non-cash deferred income taxes. The Fund’s net income under International Financial Reporting Standards (“IFRS”) contains non-cash items, such as the fair value adjustments on the Class B Unit liability and interest rate swaps, 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 Cash and Payout Ratio4 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 Cash and Payout Ratio 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 Cash see the “Financial Summary” section of the Fund’s Management’s Discussion and Analysis for the Period. For a detailed discussion on the Fund’s Distributable Cash and Payout Ratio, 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 Cash was $4.1 million or $0.272 per unit of the Fund (“Unit”) for the Period compared to $4.3 million or $0.277 per Unit for the same period in 2013. This represents a decrease to Distributable Cash of 4.2% for the Period, primarily due to the payment of accrued interest expenses in the Period. It is important to note that while Distributable Cash is negatively impacted by the increase to interest expense when debt is used to fund purchases under the Fund’s normal course issuer bid (the “NCIB”) there is an offsetting decrease to distributions payable when the Fund units acquired under the NCIB are cancelled. Distributions for the Period 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 Ratio was 115.1% for the Period compared to 108.7% in the same period one year ago. The Fund’s Payout Ratio for the Period increased compared to the same period one year ago due to the decrease in Distributable Cash and the increase in distributions. The Fund strives to provide unitholders with regular monthly distributions, and as a result, the Fund will generally experience seasonal fluctuations in its Payout Ratio. The Fund’s Payout Ratio 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 Sales during the summer months when restaurants open their patios and benefit from increased tourist traffic. Higher Franchise Sales generally results in increases in Distributable Cash. On a trailing 12-month basis, the Fund’s Payout Ratio was 102.1% as at March 31, 2014. 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 Sales 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 Ratio close to 100% over time as the trustees of the Fund continue to distribute all available cash in order to maximize returns to unitholders.
On May 8, 2014 the trustees of the Fund announced a cash distribution to unitholders of 10.2 cents per Unit for April 2014. The distribution will be payable to unitholders of record at the close of business on May 21, 2014 and will be paid on May 30, 2014. 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. Including the April 2014 distribution, which will be paid in May 2014, the Fund will have paid out 142 consecutive monthly distributions totalling $182.6 million or $14.40 per Unit.