Press Release Details

For Immediate Release                                                                           Toronto Stock Exchange: BPF.UN

BOSTON PIZZA ROYALTIES INCOME FUND ANNOUNCES FOURTH QUARTER SSSG OF 5.3% AND RECORD SYSTEM-WIDE GROSS SALES OF $1.0 BILLION FOR THE YEAR

Distributable cash per Unit increases by 5.8% for the fourth quarter

Highlights

• System-Wide Gross Sales¹ of $260.2 million for the Period and $1.0 billion for the Year.
• Franchise Sales² from royalty pool restaurants of $197.5 million for the Period and $781.9 million for the Year.
• Same store sales growth of 5.3% for the Period and 1.7% for the Year.
• Distributable Cash³ per Unit increases 5.8% for the Period and 1.7% for the Year.
• Boston Pizza opened eight net new full service restaurants and completed a record 53 restaurant renovations in 2014.
• Fund pays out 150th consecutive monthly distribution to unitholders totalling $15.22 per Unit since the IPO.
• Trustees declare January 2015 distribution to unitholders of 10.2 cents per Unit.

VANCOUVER, BC, February 6, 2015 - Boston Pizza Royalties Income Fund (the “Fund”) and Boston Pizza International Inc. (“BPI”) reported financial results today for the fourth quarter period from October 1, 2014 to December 31, 2014 (the “Period”) and for the fiscal year period from January 1, 2014 to December 31, 2014 (the “Year”). A copy of this press release, the annual 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 February 6, 2015 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time). The call can be accessed by dialing 1-800-319-4610 or 604-638-5340. A replay will be available until March 6, 2015 by dialing 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  5.3% for the Period and 1.7% for the Year compared with negative 1.5% and positive 1.5%, respectively, for the same periods 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 approved national promotions and discounts. On a Franchise Sales basis, SSSG was 5.3% for the Period and 1.4% for the Year compared with negative 2.3% and positive 1.4%, respectively, for the same periods in 2013.  SSSG for the Period was principally due to an increase in take-out and delivery sales, higher customer traffic, and better weather compared with the same period in 2013.  SSSG for the Year was principally due to an increase in take-out and delivery sales resulting from continued promotion of Boston Pizza’s online ordering system and menu re-pricing partially offset by a higher number of temporary closures due to restaurant renovations compared with the same period one year ago.  

Franchise Sales of restaurants in the royalty pool were $197.5 million for the Period and $781.9 million for the Year compared with $183.7 million and $755.4 million in the same periods, respectively, in 2013.  The increases in Franchise Sales for the Period and Year are attributed to SSSG and the addition of 10 net new restaurants to the Fund’s royalty pool on January 1, 2014.

“It was a year of milestones as we celebrated Boston Pizza’s 50th anniversary in August by serving a record 85,000 gourmet pizzas in a single day to our guests from coast to coast.  We then achieved system-wide gross sales of $1.0 billion for the year, a first for any full-service restaurant brand in Canadian history,” said Mark Pacinda, President and CEO of BPI. “Our results in 2014 were driven by same store sales growth, the opening of new Boston Pizza restaurants and continued investment in the brand as evidenced by a record number of renovations completed during the Year”.

The Fund’s net income and comprehensive income was $2.6 million for the Period and $16.5 million for the Year compared with $8.2 million and $14.8 million, respectively, for the same periods in 2013.  The changes in net income for the Period and Year were mainly driven by the change in the fair value adjustments on the class B general partner units of Boston Pizza Royalties Limited Partnership (the “Class B Unit liability”) and higher royalty income. 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 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 “Summary of Quarterly Results” section at the end of this press release. 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 and Year.

The Fund’s Distributable Cash was $4.8 million or $0.309 per unit of the Fund (“Unit”) for the Period compared with $4.4 million or $0.292 per Unit for the fourth quarter in 2013, representing increases of 8.9% and 5.8% respectively.  The Fund generated Distributable Cash of $19.1 million or $1.229 per Unit for the Year compared with $18.4 million or $1.208 per Unit for the same period in 2013, representing increases of 3.5% and 1.7% respectively.  The increases in Distributable Cash and Distributable Cash per Unit for the Period and Year compared with the same periods one year ago are primarily attributable to the increase in cash flow from operating activities due to an increase in royalty income.  The percentage increase in Distributable Cash for the Period and Year was larger than the percentage increase in Distributable Cash per Unit for the Period and Year, respectively, due to the combined effects of the Fund repurchasing and cancelling Units under its normal course issuer bids and BPI having exchanged Class B General Partner Units of Boston Pizza Royalties Limited Partnership for 790,006 Units on March 10, 2014.  Distributions for the Period and Year were funded entirely by cash flow from operations.  No debt was incurred at any point during the Period or Year to fund distributions.

The Fund’s Payout Ratio was 99.0% for the Period compared with 104.9% in the same period one year ago. The Fund’s Payout Ratio was 99.9% for the Year compared with 100.8% in 2013. The Fund’s Payout Ratio for the Period and the Year decreased compared with the same periods, respectively, one year ago due to the increases in Distributable Cash, as discussed above, exceeding the increase in distributions paid in respect of the period.  The increases in distributions paid in respect of the Period and the Year compared with the same periods, respectively, one year ago were due to the increase in the number of Fund Units outstanding resulting from the Exchange, partially offset by the Fund repurchasing and cancelling Fund Units under its normal course issuer bid activities.  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 with 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.  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.

The trustees of the Fund announced a cash distribution to unitholders of 10.2 cents per Unit for January 2015. The distribution will be payable to unitholders of record at the close of business on February 21, 2015 and will be paid on February 27, 2015. 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 January 2015 distribution, which will be paid in February 2015, the Fund will have paid out 151 consecutive monthly distributions totalling $196.8 million or $15.32 per Unit.

FINANCIAL SUMMARY

The tables below set out selected information from the Fund’s annual consolidated financial statements together with other data and should be read in conjunction with the annual consolidated financial statements of the Fund for the years ended December 31, 2014 and 2013.

SUMMARY OF QUARTERLY RESULTS

SUMMARY OF QUARTERLY RESULTS (continued)

 Notes:

1)  “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 revenue from BPI approved national promotions and discounts and excluding applicable sales and similar taxes.

2)  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 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.

3)  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 preceding tables provide a reconciliation from this non-IFRS financial measure to cash flows from operating activities, which is the most directly comparable IFRS measure.  For additional information regarding this financial metric, see the heading "Description of Non-IFRS and Additional IFRS Measures" in the Funds’s Management's Discussion and Analysis for the Period and Year.

4)  Payout Ratio is calculated by dividing the 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. As the Payout Ratio is calculated from a formula which includes Distributable Cash, which is a non-IFRS measure, a reconciliation of Payout Ratio to an IFRS measure is not possible.  For additional information regarding this financial metric, see the heading "Description of Non-IFRS and Additional IFRS Measures" in the Management's Discussion and Analysis for the Period and Year.

5)  Other capitalized terms used in these tables are defined in the Fund’s Management's Discussion and Analysis for the Period and Year.

6)  Profit before fair value adjustments and income taxes is an additional IFRS measure.  For additional information regarding these financial metrics, see the heading "Description of Non-IFRS and Additional IFRS Measures" in the Fund’s Management's Discussion and Analysis for the Period and Year.

OUTLOOK

Boston Pizza is well positioned for future growth and should continue to strengthen its position as the number one casual dining brand in Canada by continuing to achieve positive SSSG and opening 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 eight net new Boston Pizza Restaurants that opened in 2014.  There are currently three new locations under construction with more planned for later in 2015.  BPI’s management believes 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 constitutes “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.  All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Fund or management of BPI expects or anticipates will or may occur in the future, including such things as, seasonal fluctuations in the Payout Ratio, the Payout Ratio is likely to be higher in the first and fourth quarters, higher Franchise Sales generally result in increases in Distributable Cash, a Payout Ratio close to 100% will be maintained, trustees of the Fund will continue to distribute all available cash in order to maximize returns to unitholders, Boston Pizza being well positioned for future growth, the strengthening of Boston Pizza’s position as the number one casual dining brand in Canada, the achievement of positive SSSG, opening of new restaurants, increases in average guest cheques levels, incremental sales increasing after store renovations, plans to pursue restaurant development opportunities and other such matters are forward-looking information.  When used in this press release, forward-looking information may include words such as “anticipate”, “estimate”, “may”, “will”, “expect”, “believe”, “plan”, “should”, “continue” and other similar terminology.  The material factors and assumptions used to develop the forward-looking information contained in this press release include the following: future results being similar to historical results, expectation related to future general economic conditions, business plans, receipt of franchise fees and other amounts, franchisees access to financing, pace of commercial real estate development, protection of intellectual property rights of the Partnership and absence of changes of laws. Risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by the forward-looking information contained herein, relate to (among others) competition, demographic trends, consumer preferences and discretionary spending patterns, business and economic conditions, legislation and regulation, Distributable Cash and reliance on operating revenues, accounting policies and practices,  the results of operations and financial condition of BPI and the Fund, as well as those factors discussed under the heading “Risks and Uncertainties” in the most recent Annual Information Form of the Fund. 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 Management’s Discussion and Analysis for the Period and Year available at www.sedar.com and www.bpincomefund.com.

The trustees of the Fund 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