Toronto Stock Exchange: BPF.UN
Highlights
- Franchise Sales1 of $178.6
million for the Period, representing an increase of 38.5%
versus the same period one year ago.
- Same Restaurant Sales2 of positive 39.1% for the
Period. As COVID-19 began to adversely affect sales in Boston Pizza
restaurants in March of 2020, the Fund believes that it is also
useful to calculate and report SRS comparing 2022 Franchise Sales
to 2019 Franchise Sales. If SRS were calculated comparing Franchise
Sales in the Period to Franchise Sales in the first quarter of
2019, SRS would be negative 10.5%.
- Cash flows generated from operating activities of $6.7 million for the Period, representing an
increase of 12.4% versus the same period one year ago.
- Distributable Cash3 increased 28.1% for the Period,
and Distributable Cash per Unit4 increased 28.2% for the
Period.
- Payout Ratio5 of 116.8% for the Period. Cash balance
at the end of the Period was $4.1
million.
- On May 10, 2022, the trustees of
the Fund declared the April 2022
distribution to unitholders of the Fund ("Unitholders") of
$0.085 per unit of the Fund
("Unit").
VANCOUVER, BC, May 11, 2022
/CNW/ - 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,
2022 to March 31, 2022 (the "Period"). A copy of
this press release, the condensed consolidated interim financial
statements and related management's discussion and analysis
("MD&A") 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 11, 2022 at 6:30 am
Pacific Time (9:30 am Eastern
Time). The call can be accessed by dialling 1-800-319-4610
or 604-638-5340. A replay will be available until June 11, 2022 by dialling 1-800-319-6413 or
604-638-9010 and entering the access code: 8765 followed by the #
sign. The replay will also be available at www.bpincomefund.com.
Capitalized terms used in this press release that are not otherwise
defined have the meanings ascribed to them in the Fund's MD&A
for the Period.
"We are pleased to see our sales performance improve compared to
the same period one year ago. Midway through the first
quarter in many regions, we saw an easing of dining restrictions
and an increase in guest traffic to our restaurants," said
Jordan Holm, President of BPI. "We
are excited to welcome our guests and open our patios in the coming
months, while ensuring we continue to safely operate the dining
rooms, sports bars and patios of Boston Pizza restaurants across
Canada."
ONGOING EFFECTS OF COVID-19
At the end of 2021 and the beginning of 2022, all regions in
Canada were significantly impacted
by the omicron variant of COVID-19 and the resulting fifth wave of
the pandemic. The significant increase in COVID-19 cases resulted
in capacity restrictions and closures of dining rooms. By the end
of the first quarter of 2022, COVID-19 case counts improved and
government restrictions were relaxed.
COVID-19 continues to impact the business of the Fund, BPI and
Boston Pizza Canada Limited Partnership ("BP Canada LP"), and the
operation of Boston Pizza restaurants. Despite the impact of
COVID-19, Franchise Sales of Boston Pizza restaurants in the
Royalty Pool, and the resulting Royalty and Distribution Income,
for April 2022 increased by
approximately 82% compared to April
2021 and approximately 3% compared to April 2019. SRS for April
2022 was approximately 84% when compared to the same period
in 2021 and approximately 7% when compared to the same period in
2019.
PERIOD RESULTS
SRS, a key driver of distribution growth for Unitholders,
was positive 39.1% for the Period compared to negative 24.9% for
the same period one year ago. If SRS were calculated comparing
Franchise Sales in the Period to Franchise Sales for the same
period in 2019, SRS would be negative 10.5%. The increase in SRS
for the Period was principally due to increases in restaurant guest
traffic mainly due to the easing of dining restrictions during the
Period.
Franchise Sales of Boston Pizza restaurants in the Royalty Pool
were $178.6 million for the Period
compared to $129.0 million for the
first quarter of 2021. The $49.6
million increase in Franchise Sales for the Period was
primarily due to positive SRS.
The Fund's net and comprehensive income was $12.9 million for the Period compared to
$11.6 million for the first quarter
of 2021. The $1.3 million increase in
the Fund's net and comprehensive income for the Period compared to
the first quarter of 2021 was primarily due to an increase in
Royalty and Distribution Income of $2.6
million and an increase in fair value gain of $0.8 million, partially offset by an increase in
income tax expense of $1.9 million
and an increase in interest expense on Class B Units of
$0.2 million.
The Fund's cash flows generated from operating activities was
$6.7 million for the Period compared
to $5.9 million for the first quarter
of 2021. The increase of $0.7 million
was due to an increase of Royalty and Distribution Income of
$2.6 million, partially offset by a
decrease in changes in working capital of $1.3 million and an increase in income taxes paid
of $0.6 million.
The Fund generated Distributable Cash of $4.7 million for the Period compared to
$3.7 million for the first quarter of
2021. The increase in Distributable Cash of $1.0 million or 28.1% was primarily due to an
increase in cash flow generated from operating activities of
$0.7 million and a decrease in
repayments of long-term debt of $0.5
million, partially offset by increased BPI Class B Unit
entitlement of $0.2 million.
The Fund generated Distributable Cash per Unit of $0.218 for the Period compared to $0.170 per Unit for the first quarter of 2021.
The increase in Distributable Cash per Unit of $0.048 or 28.2% was primarily attributable to the
increase in Distributable Cash outlined above.
The Fund's Payout Ratio for the Period was 116.8% compared to
231.8% in the first quarter of 2021. The decrease in the Fund's
Payout Ratio for the Period was due to distributions paid
decreasing by $3.0 million or 35.4%
and Distributable Cash increasing by $1.0
million or 28.1%. Payout Ratio is calculated by
dividing the amount of distributions paid during the applicable
period by the Distributable Cash for that period.
Accordingly, the Payout Ratio for the first quarter of 2021 factors
in the Special Distribution (as defined below) that was paid on
January 29, 2021 even though the cash
generated to fund the Special Distribution was generated during
2020. If the Special Distribution was excluded in the calculation
of Payout Ratio for the first quarter of 2021, the Payout Ratio
would be 114.5%. The Fund's Payout Ratio is typically higher in the
first and fourth quarters compared to the second and third quarters
since Boston Pizza restaurants generally experience higher
Franchise Sales levels during the summer months when restaurants
open their patios and benefit from increased tourist traffic. On a
trailing 12-month basis, the Fund's Payout Ratio was 90.2% as at
March 31, 2022.
COVID-19 has resulted in material declines to Franchise Sales
and SRS when compared to periods prior to COVID-19. The declines in
Franchise Sales and SRS will result in significant declines to
Royalty and Distribution Income payable by BPI and BP Canada LP to
the Fund when compared to periods prior to COVID-19, and
significant declines in the amount of Distributable Cash available
for distribution to unitholders when compared to periods prior to
COVID-19. The effects of COVID-19 may materially affect the Fund's
Payout Ratio in the future.
DISTRIBUTIONS
During the Period, the Fund declared distributions on the Units
in the aggregate amount of $3.7
million or $0.170 per Unit.
During the first quarter of 2021, the Fund declared distributions
on the Units in the aggregate amount of $2.8
million or $0.130 per Unit.
During the Period, the Fund paid distributions on the Units in the
aggregate amount of $5.5 million or
$0.255 per Unit. During the first
quarter of 2021, the Fund paid distributions on the Units in the
aggregate amount of $8.5 million or
$0.395 per Unit. The amount of
distributions declared during the Period increased by $0.040 per Unit due to the monthly distribution
rate increasing from $0.065 per Unit
to $0.085 per Unit commencing with
the September 2021
distribution. The amount of distributions paid during the
Period decreased by $0.140 due to a
combination of the special distribution of $0.20 per Unit, that was declared on December 16, 2020 and paid on January 29, 2021 to Unitholders of record at the
close of business on December 31, 2020 (the "Special
Distribution") without any special distribution being paid
during the Period, partially offset by the monthly distribution
rate increasing from $0.065 per Unit
to $0.085 per Unit commencing with
the September 2021 distribution.
On May 10, 2022, the trustees of the Fund declared a
distribution for the period of April 1, 2022 to April 30,
2022 of $0.085 per Unit, which
will be payable on May 31, 2022 to Unitholders of record on
May 21, 2022. Including the April
2022 distribution, which will be paid on May 31, 2022,
the Fund will have paid out total distributions of $377.0 million or $23.89 per Unit which includes 232 monthly
distributions and the Special Distribution.
FINANCIAL SUMMARY
The tables below set out selected information from the Fund's
condensed consolidated interim financial statements together
with other data and should be read in conjunction with the
condensed consolidated interim financial statements and
MD&A of the Fund for the three month periods ended
March 31, 2022 and 2021.
For the periods
ended March 31
|
Q1 2022
|
Q1 2021
|
(in thousands of
dollars – except restaurants, SRS, Payout Ratio and per Unit
items)
|
Number of restaurants
in Royalty Pool
|
383
|
387
|
Franchise Sales
reported by restaurants in the Royalty Pool
|
178,602
|
128,997
|
|
|
|
Royalty6 income
|
7,144
|
5,160
|
Distribution
Income7
|
2,363
|
1,717
|
Total
revenue
|
9,507
|
6,877
|
Administrative
expenses
|
(338)
|
(346)
|
Interest expense on
debt and financing fees
|
(939)
|
(941)
|
Interest expense on
Class B Unit liability
|
(565)
|
(414)
|
Interest
income
|
5
|
40
|
Profit before fair
value gain (loss) and income taxes
|
7,670
|
5,216
|
Fair value gain on
investment in BP Canada LP
|
11,566
|
11,566
|
Fair value loss on
Class B Unit liability
|
(5,154)
|
(5,152)
|
Fair value gain on
Swaps
|
1,876
|
1,118
|
Current and deferred
income tax expense
|
(3,059)
|
(1,168)
|
Net and comprehensive
income
|
12,899
|
11,580
|
|
|
|
Basic earnings per
Unit
|
0.60
|
0.54
|
Diluted earnings per
Unit
|
0.60
|
0.54
|
|
|
|
Distributable Cash /
Distributions / Payout Ratio
|
|
|
Cash flows generated
from operating activities
|
6,651
|
5,917
|
BPI Class
B Unit entitlement8
|
(664)
|
(466)
|
Interest
paid on long-term debt
|
(884)
|
(880)
|
Principal
repayments on long-term debt
|
(500)
|
(1,036)
|
Current
income tax expense
|
(1,769)
|
(1,118)
|
Current
income tax paid
|
1,864
|
1,250
|
Distributable
Cash
|
4,698
|
3,667
|
Distributions
paid
|
5,488
|
8,501
|
Payout Ratio
|
116.8%
|
231.8%
|
Distributable Cash per
Unit
|
0.218
|
0.170
|
Distributions paid per
Unit
|
0.255
|
0.395
|
|
|
|
Other
|
|
|
Same Restaurant
Sales
|
39.1%
|
(24.9%)
|
Number of restaurants
opened
|
0
|
0
|
Number of restaurants
closed
|
2
|
1
|
|
|
|
Mar 31, 2022
|
Dec 31, 2021
|
Total assets
|
423,988
|
411,313
|
Total
liabilities
|
138,949
|
135,514
|
SHORT-TERM OUTLOOK
COVID-19 had sudden, unexpected and unprecedented impacts on the
general economy, the restaurant industry and has specifically
caused significant disruption to the business of the Fund, BPI and
BP Canada LP. The focus of BPI's management is to continue to:
(i) monitor carefully the continuously evolving COVID-19
situation; (ii) modify the operating procedures of Boston
Pizza restaurants to ensure the safety of guests and staff of
BP Canada LP's franchisees; (iii) responsibly and
safely operate the dining rooms, sports bars and patios of Boston
Pizza restaurants across Canada as
permitted by applicable provincial health authorities;
(iv) maximize the opportunity to grow its take-out and
delivery business; and (v) review and adapt current and future
plans to responsibly address the challenges and opportunities
presented by COVID-19.
The trustees of the Fund will continue to closely monitor BPI's
and BP Canada LP's business as the COVID-19 situation
continues to develop and consider the best interests of the Fund
and its stakeholders. While COVID-19 persists, the trustees
of the Fund expect that Franchise Sales and SRS at Boston Pizza
restaurants, and resulting Royalty, Distribution Income and
Distributable Cash available for distribution to unitholders will
continue to be adversely affected.
Forward Looking Information
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 its trustees expect or
anticipate will or may occur in the future, including such things
as, Boston Pizza continuing to safely operate the dining rooms,
sports bars and patios of Boston Pizza Restaurants across
Canada, COVID-19 could continue to
have a negative impact on the business of Boston Pizza restaurants
during 2022, the declines in Franchise Sales and SRS will result in
significant declines to Royalty and Distribution Income payable by
BPI and BP Canada LP to the Fund when compared to periods prior to
COVID-19, and significant declines in the amount of Distributable
Cash available for distribution to unitholders when compared to
periods prior to COVID-19, the potential for COVID-19 to continue
to materially affect the Fund's Payout Ratio in the future, that
COVID-19 continues to impact the business of the Fund, BPI and
Boston Pizza Canada LP, that Boston Pizza restaurants generally
experience higher Franchise Sales levels during the summer months
when restaurants open their patios and benefit from increased
tourist traffic, the focus of BPI's management to continue to: (i)
monitor carefully the continuously evolving COVID-19 situation;
(ii) modify the operating procedures of Boston Pizza restaurants to
ensure the safety of guests and staff of BP Canada LP's
franchisees; (iii) responsibly and safely operate the dining rooms,
sports bars and patios of Boston Pizza restaurants across
Canada as permitted by applicable
provincial health authorities; (iv) maximize the opportunity to
grow its take-out and delivery business; and (v) review and adapt
current and future plans to responsibly address the challenges and
opportunities presented by COVID-19, the trustees of the Fund
continuing to closely monitor BPI's and BP Canada LP's business as
the COVID-19 situation continues to develop and consider the best
interests of the Fund and its stakeholders, the expectation that
Franchise Sales and SRS at Boston Pizza restaurants, and resulting
Royalty, Distribution Income and Distributable Cash available for
distribution to unitholders will continue to be adversely affected
while COVID-19 persists, 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: the Fund maintaining the same
distribution policy, expectations related to future general
economic conditions, expectations that the Fund's Payout Ratio is
typically higher in the first and fourth quarter, Boston Pizza
restaurants maintaining operational excellence, the COVID-19
pandemic continuing to negatively impact the restaurant industry,
Franchise Sales, SRS and Distributable Cash, and that COVID-19 and
its negative impacts will eventually dissipate. 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, reliance on operating revenues,
accounting policies and practices, the results of operations and
financial condition of BPI, BP Canada LP and the Fund, pandemics
and national health crises, in particular COVID-19, 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, neither the Fund nor BPI
assumes any obligation to update previously disclosed
forward-looking information. For a complete list of the risks
associated with forward-looking information and the Fund's
business, please refer to the "Risks and Uncertainties" and "Note
Regarding Forward-Looking Information" sections included in the
most recent Annual Information Form of the Fund 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 trademarks and unregistered Canadian trademarks
containing the words "Boston", "BP", and/or "Pizza" are trademarks
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. 2022.
Notes – Non-GAAP, Specified Financial Measures and Other
Information
1
|
"Franchise
Sales" is the basis upon which Royalty and Distribution Income
are payable, and means the gross revenue: (i) of the corporate
Boston Pizza restaurants in Canada owned by BPI that are in the
Royalty Pool; and (ii) reported to BP Canada LP by franchised
Boston Pizza restaurants in Canada that are in the Royalty Pool,
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 BP Canada LP approved national
promotions and discounts and excluding applicable sales and similar
taxes. Nevertheless, BP Canada LP 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. Franchise Sales is reported on a quarterly
basis in the Fund's financial statements, however, the financial
statements do not report it on a monthly basis. Therefore, when
disclosed on a monthly basis herein, this is a supplementary
financial measure under National Instrument 52-112 Non-GAAP and
Other Financial Measures Disclosure ("NI 52‑112").
The Fund believes that Franchise Sales for this month provides
useful information to investors regarding recent performance of
Boston Pizza.
|
|
|
2
|
"Same Restaurant
Sales" or "SRS" is a supplementary financial measure
under NI 52-112 and therefore may not be comparable to similar
measures presented by other issuers. Prior to the fourth quarter of
2021, the Fund defined SRS as the change in gross revenues of
Boston Pizza restaurants in the Royalty Pool as compared to the
gross revenues for the same period in the previous year (where
restaurants were open for a minimum of 24 months). Commencing with
the fourth quarter of 2021, the Fund defines SRS as the change in
Franchise Sales of Boston Pizza restaurants in the Royalty Pool as
compared to the Franchise Sales for the same period in the previous
year (where restaurants were open for a minimum of 24 months). The
Fund believes that the current method of calculating SRS provides
unitholders more meaningful information regarding the performance
of Boston Pizza restaurants since Royalty and Distribution Income
are payable to the Fund by BPI and BP Canada LP on Franchise Sales
and not gross revenues of Boston Pizza restaurants. All historical
SRS figures contained in this press release have been restated to
conform to the current method of calculating SRS.
|
|
|
3
|
"Distributable
Cash" is a non-GAAP financial measure under NI 52-112.
Distributable Cash is not a standardized financial measure under
IFRS and may not be comparable to similar financial measures
disclosed by other issuers. The Fund defines Distributable Cash to
be, in respect of any particular period, the Fund's cash flows
generated from operating activities for that period (being the most
comparable financial measure in the Fund's primary financial
statements) minus (a) BPI's entitlement in respect of its Class B
Units in respect of the period (see note 8 below), minus
(b) interest paid on long-term debt during the period, minus
(c) principal repayments on long-term debt that are
contractually required to be made during the period, minus
(d) the current income tax expense in respect of the period,
plus (e) current income tax paid during the period (the sum of
(d) and (e) being "SIFT Tax on Units"). Management believes
that Distributable Cash provides investors with useful information
about the amount of cash the Fund has generated and has available
for distribution on the Units in respect of any period. The
tables in the "Financial Highlights" section of this press release
provide a reconciliation from this non-GAAP financial measure to
cash flows generated from operating activities, which is the most
directly comparable IFRS measure. Current income tax expense
in respect of any period is prepared using reasonable and
supportable assumptions (including that the base rate of SIFT Tax
will not increase throughout the calendar year and that certain
expenses of the Fund will continue to be deductible for income tax
purposes), all of which reflect the Fund's planned courses of
action given management's judgment about the most probable set of
economic conditions. There is a risk that the federal
government of Canada could increase the base rate of SIFT Tax or
that applicable taxation authorities could assess the Fund on the
basis that certain expenses of the Fund are not deductible.
Investors are cautioned that if either of these possibilities
occurs, then the actual results for this component of Distributable
Cash may vary, perhaps materially, from the amounts used in the
reconciliation.
|
|
|
4
|
"Distributable Cash
per Unit" is a non-GAAP ratio under NI 52-112. Distributable
Cash per Unit is not a standardized financial measure under IFRS
and may not be comparable to similar financial measures disclosed
by other issuers. The Fund defines Distributable Cash per Unit for
any period as the Distributable Cash generated in that period
divided by the weighted average number of Units outstanding during
that period. Management believes that Distributable Cash per
Unit provides investors with useful information regarding the
amount of cash per Unit that the Fund has generated and has
available for distribution in respect of any period.
|
|
|
5
|
"Payout Ratio"
is a non-GAAP ratio under NI 52-112. Payout Ratio is not a
standardized financial measure under IFRS and may not be comparable
to similar financial measures disclosed by other issuers. The Fund
defines Payout Ratio for any period as the aggregate distributions
paid by the Fund during that period divided by the Distributable
Cash generated in that period. Management believes that Payout
Ratio provides investors with useful information regarding the
extent to which the Fund distributes cash generated on
Units.
|
|
|
6
|
Boston Pizza Royalties
Limited Partnership ("Royalties LP") licenses BPI the
right to use various Boston Pizza trademarks in return for BPI
paying Boston Pizza Royalties Limited Partnership a royalty equal
to 4% of Franchise Sales of Boston Pizza restaurants (the
"Royalty") in the Fund's royalty pool (the "Royalty
Pool").
|
|
|
7
|
"Distribution
Income" is income received indirectly by the Fund on Class 1 LP
Units and Class 2 LP Units of BP Canada LP. See the "Overview –
Purpose of the Fund / Sources of Revenue" section of the Fund's
MD&A for the Period for more details.
|
|
|
8
|
"BPI Class B
Unit entitlement" is a supplementary financial measure under NI
52-112 and therefore may not be comparable to similar measures
presented by other issuers. The BPI Class B Unit entitlement is the
interest expense on Class B Units in respect of a period plus
management's estimate of how much cash BPI would be entitled to
receive pursuant to the limited partnership agreement governing
Royalties LP (a copy of which is available on www.sedar.com) on its
Class B Units if Royalties LP fully distributed any residual cash
generated in respect of that period after the Fund pays interest on
long-term debt, principal repayments on long-term debt and SIFT Tax
on Units in respect of that period. Management believes that the
BPI Class B Unit entitlement is an important component in
calculating Distributable Cash since it represents the amount of
residual cash generated that BPI would be entitled to receive and
therefore would not be available for distribution to
Unitholders. Management prepares such estimate using
reasonable and supportable assumptions that reflect the Fund's
planned courses of action given management's judgment about the
most probable set of economic conditions.
|
SOURCE Boston Pizza Royalties Income Fund