Pizza Pizza Announces Fourth Quarter and 2011 Annual Results
(firmenpresse) - TORONTO, ONTARIO -- (Marketwire) -- 03/28/12 -- Attention Business Editors:
Pizza Pizza Royalty Income Fund (the "Fund") (TSX: PZA.UN) and Pizza Pizza Limited ("PPL") released audited financial results today for the fourth quarter and year ended December 31, 2011. These results are unchanged from the unaudited, preliminary results released February 22, 2012.
See "Financial Highlights" for additional information.
SALES
As previously reported, same store sales growth ("SSSG") for the year 2011 was 2.6% compared to 2010. By brand, Pizza Pizza reported SSSG of 2.4% and Pizza 73 reported 3.9% for the year. In the fourth quarter, SSSG was 1.4% compared to the same quarter in 2010 with Pizza Pizza reporting SSSG of 1.1% and Pizza 73 reporting 3% for the quarter. SSSG is the key driver of yield growth for Fund unitholders.
Total sales reported by restaurants in the Royalty Pool in 2011 increased 2.7% to $467.9 million compared to $455.8 million in 2010. For the fourth quarter, Royalty Pool sales increased 1.1% to $123.6 million compared to $122.3 million for the same quarter in 2010. The increase in sales is a result of the increase in SSSG plus the increase in the number of restaurants in the 2011 Royalty Pool to 695 compared to 671 in 2010.
Paul Goddard, CEO, Pizza Pizza Limited, said: "Overall, our market-leading brands performed well in a competitive industry and in an uncertain economy. Going into 2012, I see innovation and customer satisfaction as the keys to accelerating our growth and further separating our brands from the competition. We'll also continue leveraging our modernized restaurant network and "Hot and Fresh" menu to grow market share."
NET EARNINGS FROM OPERATIONS
Earnings per unit before income taxes and other non-cash International Financial Reporting Standards ("IFRS") adjustments increased 8.1% in 2011 when compared to 2010. For the fourth quarter, earnings per unit before income taxes, other non-cash charges, and non-cash IFRS adjustments increased 6.7% over the comparable 2010 quarter.
The basic earnings per Fund unit as reported under IFRS was $0.046 for the quarter and $0.545 for the year ended December 31, 2011. Adjusted, basic earnings per unit for the quarter was $0.255 ($0.239 - 2010) and $0.945 ($0.874 - 2010) for the year. Basic earnings per unit is adjusted by the per unit effect of current income tax expense, non-cash deferred tax expense, mark-to-market adjustment on exchangeable units, and the non-cash termination costs on the interest swap agreements extended in July 2011.
RESTAURANT DEVELOPMENT
During the year, the Pizza Pizza brand opened six traditional and four non-traditional restaurants; nine traditional and seven non-traditional restaurants were closed. Historically PPL has maintained a low closure rate throughout its chains, with 2011 being an exception largely a result of exercising favorable real estate lease options at underperforming locations. For the Pizza 73 brand, one non-traditional restaurant was opened and there were no restaurant closures. This brings the total number of restaurants to 690 at December 31, 2011. Management at PPL expects to grow its total number of restaurants by over 2% in 2012.
As previously announced, the number of restaurants in the Fund's Royalty Pool decreased to 690 from 695 on the January 1, 2012 Adjustment Date.
TAX CONSIDERATIONS
In 2007, the Federal Government of Canada amended the Income Tax Act (Canada) to include the Specified Investment Flow Through tax provisions, or SIFT Tax, which is an entity-level tax on Canadian publicly listed income trusts, including the Fund.
The Fund became a taxable entity effective January 1, 2011. As a result of the SIFT Tax, the Fund's taxation rate will be equal to or less than the rate applicable on income earned by a Canadian public corporation. The SIFT Tax reduces the Fund's amount of cash available for distribution to unitholders.
An additional rule under the SIFT Tax provisions allows entities such as the Fund to convert from an income trust to a Canadian corporation on a tax-deferred rollover basis if the conversion is completed prior to January 1, 2013. The Fund plans to take advantage of the tax-deferred rollover option by converting to a corporation effective at or near the end of December 2012. The new corporate structure will also allow for increased financial flexibility.
The key terms and economics reflected in the partnership agreement and all other agreements between PPL and the Pizza Pizza Royalty Limited Partnership ("Partnership") will not be affected by the corporate conversion. The Fund and the Partnership will continue to operate independently from PPL, the privately-held operating company. The Fund expects voting on the conversion plan to occur at the annual and special meeting of unitholders scheduled for May 30, 2012.
CURRENT INCOME TAX EXPENSE
The Fund's incurred a current tax expense of $1 million for the fourth quarter and $3.7 million expense for the year ended December 31, 2011. This reflects the SIFT Tax rate of 28.25% and the use of discretionary deductions to lower taxable income.
DISTRIBUTIONS - DIVIDENDS
In conjunction with the SIFT Tax legislation, a portion of the Fund's 2011 distributions became deemed dividends. For the year, distributions to unitholders were $15.3 million or $0.7008 per unit which equates to a 90% payout ratio. For the fourth quarter, the Fund declared distributions of $3.8 million or $0.1752 per unit equating to an 84% payout ratio. For tax purposes in 2011, the Fund's distributions will be treated as 38.4% return of capital and 61.6% as an eligible dividend.
In prior years, distributions were taxable as interest income as opposed to dividend income; all years contained a return of capital component. In 2010, for example, the Fund declared distributions of $20.3 million or $0.93 per unit and the distributions were considered 90.5% taxable interest income and 9.5% return of capital.
As a result of the SIFT Tax introduction on January 1, 2011, the Fund's annual distribution was reset to $0.70 from $0.93. As shown in the table below, the impact of the Fund's 2011 distribution policy results in an increase to after-tax cash retained by an Ontario taxable individual when compared to the annual distribution per unit in 2010.
The Fund, which consolidates the Partnership under IFRS, increased its working capital balance by $1.5 million during the year, bringing the working capital reserve balance to $2.8 million at December 31, 2011.
CREDIT FACILITY
In December 2011, the Fund renewed its $47 million credit facility with a Canadian chartered bank for a five year term. Using interest rate swaps, the credit facility's new interest rate is currently 4.37% (previously 5.29%). The credit facility's new interest rate is comprised of a portion fixed using the new swap agreements plus a credit spread. Beginning July 25, 2011, the interest rate portion fixed with the new swaps has decreased from a blended rate of 4.04% to 2.87%. The credit spread increased from 1.25% to 1.50% in December when the credit facility was renewed. The credit spread can increase or decrease with the Fund's financial performance as per the credit facility agreement.
FINANCIAL HIGHLIGHTS
The following table sets out selected financial information and other data of the Fund and should be read in conjunction with the audited consolidated financial statements of the Fund. Readers should note that the 2011 results are not directly comparable to the 2010 results due to the difference in the number of restaurants in the Royalty Pool between the two periods.
A copy of management's discussion and analysis and audited financial statements of the Fund and PPL for the quarter and year will be available at and on or before March 29, 2012. The Fund will host a conference call to discuss the results on Thursday, March 29, 2012 at 9:00 a.m. Eastern Standard Time. The call can be accessed by dialing 416-640-5925 or 1-800-711-9538. A replay will be available until Thursday, April 12, 2012 by dialing 647-436-0148 or 1-888-203-1112 and entering the reservation number: 5465960.
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; changes in the Fund's distribution policy, tax position and availability and use of deductions and related structuring decisions; and the results of operations and financial condition of the Fund. 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.
Contacts:
Pizza Pizza Limited
Curt Feltner
Chief Financial Officer
(416) 967-1010
Pizza Pizza Limited
Christine D'Sylva
Investor Relations Director
(416) 967-1010
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Datum: 28.03.2012 - 14:01 Uhr
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