Toronto Stock Exchange: BPF.UN
VANCOUVER, Jan. 2, 2018
/CNW/ - Boston Pizza Royalties Income Fund (the "Fund")
(TSX: BPF.UN) and Boston Pizza International Inc. ("BPI")
announced today that effective January 1, 2018, the Fund's
royalty pool (the "Royalty Pool") has been adjusted to
include the 11 new full service restaurants opened across
Canada between January 1,
2017 and December 31, 2017 (the "Period"), and to
remove the three full service restaurants that were permanently
closed during the Period. With the adjustment for these
openings and closures during 2017, the Royalty Pool now includes
391 Boston Pizza restaurants. This is the sixteenth
consecutive year of adding new Boston Pizza restaurants into the
Royalty Pool.
"We are very pleased with the 11 new Boston Pizza restaurants
opened in 2017, including six in Western Canada, four in Eastern Canada, and one in Québec. These
new locations further strengthen our position as Canada's number one casual dining brand" said
Jordan Holm, President of BPI.
"Since the inception of the Fund, 237 net new Boston Pizza
restaurants have been added to the Royalty Pool, growing from 154
in 2002 to 391 locations across the country today."
The Fund effectively receives 5.5% of franchise revenues of
Boston Pizza restaurants in the Royalty Pool less the pro rata
portion payable to BPI in respect of its retained interest in the
Fund.1 Annually, the Royalty Pool of Boston Pizza
restaurants is adjusted to include the new Boston Pizza restaurants
that opened, and to remove Boston Pizza restaurants that
permanently closed, in the prior year.
On January 1 of each year (the "Adjustment Date"),
an adjustment is made to add to the Royalty Pool new Boston Pizza
restaurants that opened and to remove any Boston Pizza restaurants
that permanently closed since the last Adjustment Date (the "Net
New Restaurants"). In return for adding net additional
Royalty and Distribution Income from Net New Restaurants, BPI
receives the right to indirectly acquire additional units of the
Fund (in respect of additional Royalty, the "Class B
Additional Entitlements" and in respect of additional
Distribution Income, the "Class 2 Additional
Entitlements", and collectively, "Additional
Entitlements"). The calculation of Additional
Entitlements is designed to be accretive to unitholders of the Fund
as the expected increase in net franchise revenues from the Net New
Restaurants added to the Royalty Pool is valued at a 7.5%
discount. The Additional Entitlements are calculated at 92.5%
of the estimated Royalty and Distribution Income expected to be
generated by the Net New Restaurants, multiplied by one minus the
effective tax rate estimated to be paid by the Fund during that
year, divided by the yield of the Fund, divided by the weighted
average unit price over a specified time. BPI receives 80% of
the Additional Entitlements initially, with the balance received
when the actual full year performance of the Net New Restaurants
and the actual effective tax rate paid by the Fund are known with
certainty (such balance of units in respect of the additional
Royalty, the "Class B Holdback", and in respect of the
additional Distribution Income, the "Class 2 Holdback",
and collectively, the "Holdback"). BPI receives 100%
of distributions from the Additional Entitlements (including the
Holdback) throughout the year. Once the Net New Restaurants
have been part of the Royalty Pool for a full year, an audit of the
franchise revenues of these restaurants is performed, and the
actual effective tax rate paid by the Fund is determined. At
such time, an adjustment is made to reconcile distributions paid to
BPI and the Additional Entitlements received by BPI.
In return for adding net additional Royalty and Distribution
Income from the eight Net New Restaurants added to the Royalty
Pool, BPI received 298,036 Additional Entitlements (representing
80% of the total Additional Entitlements), comprised of
216,754 Class B Additional Entitlements and
81,282 Class 2 Additional Entitlements, and the Holdback
is 74,510 Additional Entitlements (representing 20% of the
total Additional Entitlements), comprised of
54,189 Class B Holdback and 20,321 Class 2
Holdback. The Holdback (as adjusted) will be received by BPI
when both the actual full year performance of the Net New
Restaurants and the effective tax rate paid by the Fund are known
with certainty. The 298,036 Additional Entitlements
represent 1.2% of Fund units on a fully diluted basis.
Including the 298,036 Additional Entitlements, BPI holds
Class B general partner units of Boston Pizza Royalties
Limited Partnership that are exchangeable for 2,008,838 Fund units,
and Class 2 general partner units of Boston Pizza Canada Limited
Partnership that are exchangeable for 673,110 Fund units.
Together, the Class B general partner units of Boston Pizza
Royalties Limited Partnership and Class 2 general partner
units of Boston Pizza Canada Limited Partnership held by BPI are
currently exchangeable for 2,681,948 Fund units, representing the
equivalent of a 10.9% interest in the Fund on a fully-diluted
basis. The 372,546 Additional Entitlements (being the
298,036 Additional Entitlements received by BPI plus the
74,510 Holdback) represents 1.5% of Fund units on a fully
diluted basis. Including the 372,546 Additional
Entitlements described above, BPI has the right to acquire
2,860,265 Fund units, representing an 11.6% interest in the
Fund on a fully diluted basis. The issuance of the Additional
Entitlements to BPI is subject to approval by the Toronto Stock
Exchange.
The estimated annual franchise revenues in 2018 for the
11 new Boston Pizza restaurants that opened in 2017 is
$19.0 million. BPI is
required to deduct from this amount the actual franchise revenues
received from the three Boston Pizza restaurants that permanently
closed in 2017 during the first 12 month period immediately
following their addition to the Royalty Pool, which is $5.5 million. Consequently, the
estimated annual net franchise revenues in 2018 for the
eight Net New Restaurants added to the Royalty Pool on
January 1, 2018 is $13.5 million. The estimated Royalty
and Distribution Income expected to be generated by these
eight Net New Restaurants is 5.5% of this amount, or
$0.7 million. The pre-tax
amount for the purposes of calculating the Additional Entitlements,
therefore, is approximately $0.7 million or 92.5% of $0.7 million. The estimated effective
tax rate that the Fund will pay in the calendar year 2018 is
25.0%. Accordingly, the after-tax additional Royalty and
Distribution Income for the purposes of calculating the Additional
Entitlements is approximately $0.5 million ($0.7 million x (1 – 0.25)). Once the
actual performance of the 11 new Boston Pizza restaurants
added to the Royalty Pool on January 1, 2018 for 2018 and the
actual effective tax rate paid by the Fund for 2018 are known, the
number of Additional Entitlements will be adjusted in 2019 to
reflect the actual franchise revenues generated by these Boston
Pizza restaurants in 2018 and the actual effective tax rate paid by
the Fund in 2018.
The following table sets forth a summary of the issued and
outstanding units of the Fund, together with Additional
Entitlements, as at both December 31, 2017 and January 1,
2018.
Summary of Boston Pizza Royalties Income Fund
Units
|
Dec. 31, 2017
Excluding Holdback
|
Dec. 31, 2017
Including Holdback
|
Jan. 1, 2018
Excluding Holdback
|
Jan. 1, 2018
Including Holdback
|
|
Units
Outstanding
|
|
|
|
|
|
Total Issued and
Outstanding Fund Units
|
21,886,063
|
21,886,063
|
21,886,063
|
21,886,063
|
|
|
|
|
|
|
|
Class B
Additional Entitlements Outstanding
|
|
|
|
|
|
Class B
Additional Entitlements (Excluding Jan. 1, 2018 Adjustment
Date)
|
1,792,084
|
1,792,084
|
1,792,084
|
1,792,084
|
|
Class B Holdback
(Excluding Jan. 1, 2018 Adjustment Date)
|
N/A
|
75,496
|
N/A
|
75,496
|
(1)
|
Class B
Additional Entitlements – Issued January 1, 2018 (Eight Net
New Restaurants)
|
N/A
|
N/A
|
216,754
|
216,754
|
|
Class B Holdback
– Created January 1, 2018 (Eight Net New
Restaurants)
|
N/A
|
N/A
|
N/A
|
54,189
|
(2)
|
Total Class B
Additional Entitlements
|
1,792,084
|
1,867,580
|
2,008,838
|
2,138,523
|
|
|
|
|
|
|
|
Class 2
Additional Entitlements Outstanding
|
|
|
|
|
|
Class 2
Additional Entitlements (Excluding Jan. 1, 2018 Adjustment
Date)
|
591,828
|
591,828
|
591,828
|
591,828
|
|
Class 2 Holdback
(Excluding Jan. 1, 2018 Adjustment Date)
|
N/A
|
28,311
|
N/A
|
28,311
|
(1)
|
Class 2
Additional Entitlements – Issued January 1, 2018
(Eight Net New Restaurants)
|
N/A
|
N/A
|
81,282
|
81,282
|
|
Class 2 Holdback
– Created January 1, 2017 (11 Net New
Restaurants)
|
N/A
|
N/A
|
N/A
|
20,321
|
(3)
|
Total Class 2
Additional Entitlements
|
591,828
|
620,139
|
673,110
|
721,742
|
|
|
|
|
|
|
|
Summary
|
|
|
|
|
|
Total Issued and
Outstanding Fund Units
|
21,886,063
|
21,886,063
|
21,886,063
|
21,886,063
|
|
Total Additional
Entitlements
|
2,383,912
|
2,487,719
|
2,681,948
|
2,860,265
|
|
Total Diluted
Units
|
24,269,975
|
24,373,782
|
24,568,011
|
24,746,328
|
|
BPI's Total
Percentage Ownership
|
9.8%
|
10.2%
|
10.9%
|
11.6%
|
|
BPI's Percentage
Ownership based only on the Eight Net New Restaurants added to the
Royalty Pool on January 1, 2018
|
N/A
|
N/A
|
1.2%
|
1.5%
|
|
(1)
|
Additional
Entitlements from the 11 Net New Restaurants added to Royalty
Pool on January 1, 2017 prior to the audit of the 11 Net New
Restaurants and determination of the actual effective tax rate paid
by the Fund.
|
(2)
|
Class B Holdback
from eight Net New Restaurants added to the Royalty Pool on
January 1, 2018. The actual number of Class B
Additional Entitlements will be determined in early 2019, effective
January 1, 2018, once audited results of the eight Net New
Restaurants and actual effective tax rate paid by the Fund are
known.
|
(3)
|
Class 2 Holdback
from eight Net New Restaurants added to the Royalty Pool on
January 1, 2018. The actual number of Class 2
Additional Entitlements will be determined in early 2019, effective
January 1, 2018, once audited results of the eight Net
New Restaurants and actual effective tax rate paid by the Fund are
known.
|
ABOUT US
The Fund is a limited purpose open ended trust with an
excellent track record for investors since its IPO in 2002.
Including the December 2017
distribution which will be payable on January 31, 2018, the Fund will have delivered 18
distribution increases and 186 consecutive monthly distributions to
unitholders totalling $276.6 million or $19.26 per unit since 2002. The Fund earns
revenue based on the franchise system sales of the 391 Boston Pizza
restaurants included in the Fund's royalty pool.
BPI is Canada's number one
casual dining brand with annual gross sales in excess of
$1.0 billion serving more than 45
million guests through over 390 mainly franchisee operated
restaurants. The Boston Pizza brand has successfully existed
for over 50 years since opening its first restaurant in
Edmonton, Alberta in 1964.
BPI has been recognized as a Platinum Member of Canada's 50 Best Managed Companies and has
been a Franchisees' Choice Designation winner for six consecutive
years.
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, Boston Pizza Royalties Limited
Partnership, Boston Pizza Holdings Limited Partnership, Boston
Pizza Holdings GP Inc., Boston Pizza GP Inc., BPI, BP Canada LP,
Boston Pizza Canada Holdings Inc., Boston Pizza Canada Holdings
Partnership, 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 the estimated annual gross franchise revenue received
from the 11 new Boston Pizza restaurants that opened in 2017
and the estimated effective tax rate that will be paid by the Fund
for 2018 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, expectations 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
Boston Pizza Royalties Limited 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 Fund's Management Discussions and
Analysis for the third quarter of 2017. 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 third quarter of 2017 available at
www.sedar.com and www.bpincomefund.com.
The Trustees of the Fund have approved the contents of this news
release.
® 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
trademarks owned by Boston Pizza Royalties Limited Partnership and
licensed by Boston Pizza Royalties Limited Partnership to Boston
Pizza International Inc.
________________________________________
1 The Fund indirectly owns the Boston Pizza trademarks and
trade names used by Boston Pizza restaurants in Canada. In 2002,
the Fund licensed these trademarks to BPI for 99 years and in
return BPI pays the Fund a top line royalty of 4% of franchise
revenues of Boston Pizza restaurants in the Royalty Pool
("Royalty"). On May 6, 2015, the Fund completed an indirect
investment in Boston Pizza Canada Limited Partnership (a limited
partnership controlled and operated by BPI) that entitles the Fund
to receive distribution income from Boston Pizza Canada Limited
Partnership ("Distribution Income") equal to 1.5% of
franchise revenues of Boston Pizza restaurants in the Royalty Pool
less the pro rata portion payable to BPI in respect of its retained
interest in the Fund.
|
SOURCE Boston Pizza Royalties Income Fund