Pizza Pizza Royalty Income Fund announces 2007 and fourth quarter results

    TORONTO, March 4 /CNW/ - Pizza Pizza Royalty Income Fund (the "Fund")
today reported its financial results for January 1, 2007 to December 31, 2007
(the "Year") and fourth quarter results from October 1, 2007 to December 31,
2007 (the "Period").

    Full Year Highlights:
    -   Royalty Pool sales increased 16%
    -   Pizza 73 Acquisition was 4% accretive to unitholders at the
        July closing
    -   Same store sales grew 4.6%
    -   Distributable cash per unit increased 7.8%

    Fourth Quarter Highlights:
    -   Same store sales grew 4.9%
    -   Distributable cash per unit increased 9.3%

    During the Year, the Fund, indirectly through the Pizza Pizza Royalty
Limited Partnership (the "Partnership"), acquired the Pizza 73 trademarks
thereby increasing the Royalty Pool to 572 restaurants, with the addition of
41 "Pizza 73" locations.
    Same store sales growth ("SSSG"), the key driver of yield growth for Fund
unitholders, was 4.9% for the Period and 4.6% for the Year. By brand for the
Period, Pizza 73 SSSG was 18.2% and Pizza Pizza SSSG was 2.6%; for the Year,
Pizza 73 SSSG was 19.2% and Pizza Pizza SSSG was 3.4%.
    "The exceptional Pizza 73 sales growth coupled with Pizza Pizza's
consistent growth continues to generate excellent returns for our unitholders.
Pizza Pizza is very pleased with the operational performance and the progress
of the integration plan at our Alberta acquisition", said Curt Feltner, Chief
Financial Officer.
    The annual system sales of the restaurants in the Royalty Pool on which
the Fund earns royalties increased by 16% for the Year to $409.5 million from
$353.1 million in 2006. Sales from the 531 Pizza Pizza restaurants were
$376.4 million for the Year and sales from the 41 Pizza 73 restaurants were
$33.1 million for the period from July 24 to December 31, 2007. The increase
in system sales and the corresponding royalty income was the result of the
positive SSSG, the 30, net new Pizza Pizza restaurants added to the Royalty
Pool on January 1, 2007, and the 41 Pizza 73 restaurants added on July 24,

    Net earnings after non-cash future income taxes and issuance costs

    Due to substantively enacted income tax legislation which affected all
income trusts in 2007, the pre-tax earnings of $18.7 million or $0.954 per
unit were reduced to $10.3 million or $0.526 per unit, as a result of
recording a non-cash, future tax expense of $8.2 million. In addition, net
earnings were also affected by the write-off of issuance costs by the
Partnership, the Fund's share of which was $169,000. Net earnings in 2006 were
$15.9 million or $0.885 per unit.

    Distributable Cash

    As a result of the increase in Royalty Pool sales, distributable cash for
the Period increased by 9.3% to $0.259 per unit or $5.6 million compared to
$0.237 per unit or $4.2 million for the fourth quarter of 2006. The Fund
declared distributions of $5.0 million or $0.228 per unit for the period
compared to $3.8 million or $0.213 for the same period last year, or a 7.0%
increase. The payout ratio for the Period was 88%.
    Distributable cash for the Year was $18.7 million or $0.954 per unit
compared to $15.9 million or $0.885 per unit for 2006, equating to a 7.8%
increase. The Fund declared distributions of $17.6 million or $0.888 per unit
for the Year compared with $15.1 million or $0.842 per unit for 2006, or a
5.5% increase. The payout ratio for the Year was 94%.
    During the Year, the Fund increased its monthly distribution in January
(by 2%) and again in September (by 4%).
    For those unitholders holding units outside a tax deferred plan, the 2007
distributions will be treated as 65% taxable income and 35% as a tax-deferred
return of capital.
    As of December 31, 2007, working capital of the Partnership was
$1.9 million (December 31, 2006 - $1.5 million), accumulated as a reserve to
cover seasonality and any unusual administrative expenditures.


    During the Period, the Company opened seven traditional and ten
non-traditional Pizza Pizza restaurants and closed one non-traditional
location. During the Year, 12 traditional and 24 non-traditional Pizza Pizza
restaurants were opened and eight non-traditional locations were closed. This
brings the total number of Pizza Pizza restaurants to 559 of which 531 were in
the Fund's 2007 Royalty Pool. The 559 restaurants are comprised of 367
traditional restaurants and 192 non-traditional locations. Seven traditional
Pizza 73 restaurants were opened during the Period, bringing the total number
of Pizza 73 restaurants to 57 of which 41 were in the Fund's 2007 Royalty
    Effective January 1, 2008, the Royalty Pool was increased to include the
royalties from 36 new Pizza Pizza restaurants and nine new Pizza 73
restaurants. The Royalty Pool was decreased by eight non-traditional Pizza
Pizza locations which were closed during the Year. The nine Pizza 73
restaurants are comprised of eight traditional restaurants and one
non-traditional restaurant opened on or before September 1, 2007. With the
addition of the 37 net, new restaurants, royalties are now paid to the Fund on
609 restaurants in the Royalty Pool.


    The following table sets out selected financial highlights of the Fund and
the Partnership:

                              3 months ended             12 months ended
                         December 31,  December 31, December 31, December 31,
                               2007         2006        2007          2006
                         (unaudited)(1)  (unaudited) (audited)(1)   (audited)
                 (in thousands of dollars, except number of
                      restaurants and per unit amounts)

    Restaurants in Royalty
     Pool(1)                    572          501          572          501
    Same store sales growth     4.9%         5.0%         4.6%         4.5%
    System sales reported by
     Pizza Pizza restaurants
     in the Royalty Pool    $  99,654    $  93,866    $ 376,375    $ 353,138
    System sales reported
     by Pizza 73 restaurants
     in the Royalty Pool       19,230            -       33,124            -
                            $ 118,884    $  93,866    $ 409,499    $ 353,138

    Royalty - 6% on
     Pizza Pizza system
     sales                  $   5,979    $   5,632    $  22,583    $  21,188
    Royalty - 9% on
     Pizza 73 system sales      1,731            -        2,981            -
    Total Royalty on System
     Sales                      7,710        5,632       25,564       21,188
    Partnership expenses(2)      (896)        (426)      (2,545)      (1,710)
    Earnings available for
     distribution to the Fund
     and Pizza Pizza            6,814        5,206       23,019       19,478
    Pizza Pizza Limited's
     interest(3)               (1,619)      (1,414)      (6,200)      (5,388)
    Fund equity income
     excluding issuance
     costs                      5,195        3,792       16,819       14,090
    Interest income(4)            450          450        1,849        1,800
    Distributable cash      $   5,645    $   4,242    $  18,668    $  15,890

    Distributions declared  $   4,974    $   3,822    $  17,608    $  15,108
    Distributable cash
     per unit               $   0.259    $   0.237    $   0.954    $   0.885
    Distributions per
     Fund unit              $   0.228    $   0.213    $   0.888    $   0.842

    Payout ratio                   88%          90%          94%          95%

                                 December 31, 2007         December 31, 2006

    Total assets                         $ 212,643                 $ 171,796
    Total liabilities(5)                 $   9,866                 $   1,275

    (1) Pizza 73 trademarks were acquired on July 24, 2007 and resulted in
        the addition of 41 restaurants to the Royalty Pool.
    (2) The Fund, indirectly through the Partnership, incurs administrative
        expenses and interest expense on the $47 million outstanding bank
        loan. Interest expense on the bank loan for the current quarter was
        $697 and $1.8 million for year (2006 - $267 and $1.1 million) .
        Partnership expenses exclude the write-off of $207 in issuance costs
        paid from the proceeds raised to acquire the Pizza 73 trademarks and
        rights on July 24, 2007.
    (3) Represents the interest of Pizza Pizza in the earnings of the
        Partnership from Class B, Class C, and Class D Partnership units. The
        Class B units are exchangeable into Fund units based on value of the
        Class B Exchange Multiplier at the time of exchange as defined in the
        Pizza Pizza Licence and Royalty Agreement and represents 18.4% of the
        fully diluted units of the Fund at December 31, 2007. The Class D
        Units are exchangeable into Fund units based on the value of the
        Class D Exchange Multiplier at the time of exchange as defined in the
        Pizza 73 Licence and Royalty Agreement (which was nil at
        December 31, 2007).
    (4) The Fund indirectly earns interest income on the $30 million loan to
        Pizza Pizza, with interest income accruing at 6% per annum, payable
    (5) The Fund's liabilities at December 31, 2007 include $8.2 million of
        future tax, which is a non-cash item (2006 - nil).

    Distributable cash is not an earnings measure recognized by generally
accepted accounting principles ("GAAP") and therefore may not be comparable to
similar measures presented by other issuers. Distributable cash, calculated as
net earnings before non-cash, future income tax expense and issuance costs, is
based on the operating activities of the Fund and its share of the operations
of the Partnership. These measures are considered to be important measures
used by the investment community to assess the source and sustainability of
the Fund's cash distributions and should be used to supplement other
performance measures prepared in accordance with GAAP in Canada.
    The audited, consolidated financial statements of the Fund, together with
its Management's Discussion and Analysis, will be available at
and on the Fund's website at on or before
March 5, 2008.
    The Fund will host a conference call to discuss the results on March 5,
2008 at 9:00 a.m. EST. The call can be accessed by dialing 416-642-5212 or
1-866-321-6651. A replay will be available until March 18, 2008 by dialing
647-436-0148 or 1-888-203-1112 and entering the reservation number: 4409074.

    Forward-Looking Statements

    Certain statements in this report may constitute "forward-looking"
statements which involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. When used in this
report, such statements include such words as "may", "will", "expect",
"believe", "plan", and other similar terminology. These statements reflect
management's current expectations regarding future events and operating
performance and speak only as of the date of this report. These
forward-looking statements involve a number of risks and uncertainties. The
following are some factors that could cause actual results to differ
materially from those expressed in or underlying such forward-looking
statements: competition; changes in demographic trends; changing consumer
preferences and discretionary spending patterns; changes in national and local
business and economic conditions; legislation and governmental regulation;
accounting policies and practices; and the results of operations and financial
condition of Pizza Pizza. The foregoing list of factors is not exhaustive and
should be considered in conjunction with the other risks and uncertainties
described in the Fund's Annual Information Form. The Fund assumes no
obligation to update these forward-looking statements, except as required by
applicable securities laws.

    About the Fund, a publicly-traded entity

    The Fund is a limited purpose, open-ended trust established under the
laws of Ontario. The Fund, indirectly through the Partnership, has acquired
the trademarks and trade names used by Pizza Pizza Limited ("the Company") in
its Pizza Pizza and Pizza 73 restaurants. The Pizza Pizza trademarks were
licensed to the Company in 2005 for 99 years, for which the Company pays the
Fund a royalty equal to 6% of the system sales of its Pizza Pizza restaurants
in the Royalty Pool. There are 559 Pizza Pizza restaurants in the Royalty Pool
for 2008. On July 24, 2007, the Partnership, acquired the trademarks and other
intellectual property of Pizza 73 (the "Pizza 73 Rights") and licensed them to
the Company for 99 years, for which the Company pays the Fund a royalty equal
to 9% of the 50 Pizza 73 restaurants in the Royalty Pool for 2008. The 2008
Royalty Pool has 609 total restaurants.
    A key attribute of the Fund is that revenues are based on top-line,
system sales of the Royalty Pool restaurants and not on the profitability of
either the Company or the restaurants in the Royalty Pool. Moreover, the Fund
is not subject to the variability of earnings or expenses of the operating
companies. The Fund's only expenses are administration expenses and the
interest on debt. Thus, the success of the Fund depends primarily on the
ability of the Company to maintain and increase system sales of the Royalty
Pool and to meet its royalty obligations.
    The Fund's trust units are listed on the Toronto Stock Exchange under the
symbol PZA.UN.

    About Pizza Pizza Limited, the privately-owned operating company

    The Company, a privately-held Canadian corporation, is one of Canada's
most successful operators in the QSR industry. It operates franchised,
owner/operator and corporate restaurants under the brand names Pizza Pizza and
Pizza 73. The Pizza Pizza brand celebrated its 40th anniversary in 2007 and
dominates the Ontario pizza QSR. The Pizza 73 brand celebrated its 22nd
anniversary and was awarded the distinction of being named one of Canada's "50
Best Managed" companies for 2006. The Company is guided by a mission to
provide the "best food, made especially for you" and a focus on quality
ingredients, customer service, community contribution and continual
innovation, especially in offering health-conscious menu choices.

    %SEDAR: 00022262EF

For further information:

For further information: Curtis Feltner, Chief Financial Officer, Pizza
Pizza Limited, (416) 967-1010,; Christine D'Sylva,
Investor Relations Manager, Pizza Pizza Limited, (416) 967-1010,;,
and or

Organization Profile


More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890