Pizza Pizza Royalty Income Fund Announces First Quarter Financial Results and Distribution Increase Wednesday, May 2nd, 2012


Toronto, Ontario, May 2, 2012 – Pizza Pizza Royalty Income Fund (the “Fund”) (TSX: PZA.UN) today announced results for the first quarter ended March 31, 2012.

First Quarter Highlights:
Same store sales increased 2.9%
Royalty income increased 4.9%
Working capital reserve increased $541,000
Payout ratio was 88%

The Fund also announced a 2.7% increase in its monthly cash distribution. The distribution increase reflects the strong quarterly results, positive same store sales growth and growth in the working capital reserve.

For the period May 1 to May 30, the distribution per unit will increase to $0.06 from $0.0584 and will be payable June 15, 2012 to unitholders of record at the close of business on May 30, 2012.


The Fund´s two market-leading brands generated same store sales growth (“SSSG”) of 2.9% in the first quarter (4.5% – 2011). By brand, Pizza Pizza reported comparable sales of 3.2% and Pizza 73 reported 1.4% for the quarter.

Paul Goddard, CEO, Pizza Pizza Limited, said: “We´ve had a great start to the year as our strong brand recognition and value offerings generated solid customer traffic increases as well as upward movement in the average customer cheque, which together topped a strong quarter last year.”

Total sales reported by restaurants in the Royalty Pool for the first quarter of 2012 increased 5% to $117.9 million compared to $112.3 million in 2011. The increase in sales is a result of the positive SSSG, the extra day of sales in February 2012 due to the leap year, offset by the lost sales from the five restaurants closed in 2011 and removed from the Royalty Pool on January 1, 2012.


A portion of the Fund´s 2012 distributions will be treated as taxable eligible dividends and a portion as return of capital. For the first quarter of 2012, distributions to unitholders were $3.8 million or $0.1752 per unit which equates to an 88% payout ratio. For the comparable quarter in 2011, the Fund declared distributions of $3.8 million or $0.1752 per unit equating to a 92% payout ratio.

The Fund, which consolidates the Partnership under IFRS, increased its working capital balance by $541,000 during the quarter, bringing the working capital reserve balance to $3.3 million at March 31, 2012.


During the quarter, the Pizza Pizza brand opened two traditional restaurants and one non-traditional location; one non-traditional restaurant was closed. For the Pizza 73 brand, there was no movement in the number of restaurants. This brings the total number of restaurants to 692 at March 31, 2012.  Management at PPL expects to grow its total number of restaurants by over 2% in 2012.


The Fund became a taxable entity effective January 1, 2011. As a result of the Specified Investment Flow Through tax provisions or SIFT Tax, the Fund´s taxation rate will be equal to 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 December 31, 2012.  The new corporate structure will also allow for increased financial flexibility. Details of the conversion can be found in the Fund´s Information Circular filed on Sedar on May 1, 2012.

The key terms and economics reflected in the partnership agreement and all other agreements between Pizza Pizza Limited (“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.

Voting on the conversion plan will occur at the annual and special meeting of unitholders scheduled for May 30, 2012.


The following table sets out selected financial information and other data of the Fund and should be read in conjunction with the unaudited interim consolidated financial statements of the Fund. Readers should note that the 2012 results are not directly comparable to the 2011 results due to the difference in the number of restaurants in the Royalty Pool between the two periods.






3 months ended March 31, 2012

3 months ended March 31, 2011

(in thousands of dollars, except number of restaurants and per unit amounts)

Restaurants in Royalty Pool





Same store sales growth





Days in Quarter





System Sales reported by Pizza Pizza restaurants in the



$                98,221

$              93,249


Royalty Pool





System Sales reported by Pizza 73 restaurants in the

      Royalty Pool









$              117,936

$            112,342

Royalty – 6% on Pizza Pizza System Sales



$                  5,893

$                5,595

Royalty – 9% on Pizza 73 System Sales





Total Royalty on System Sales





Partnership interest and administrative expenses(1)





Earnings available for distribution to the Fund and Pizza






Pizza Limited





Pizza Pizza Limited´s interest





Equity income





Interest income





Net earnings before income tax expense (2)



$                  5,283

$                5,023

Provision for current income taxes





Net earnings from operations(3)



$                  4,356

$                4,161

Adjusted basic earnings per Fund unit (2)



$                  0.242

$                0.230

Basic loss per Fund unit



$                (0.129)

$              (0.058)

Distributions declared



$                  3,823

$                3,823

Distributions per Fund unit



$                0.1752

$              0.1752

Payout ratio(4)





1. The Fund, indirectly through the Partnership, incurs administrative expenses and interest expense on the $47,000 outstanding bank loan.  Cash paid interest expense on the bank loan, including the $62 (2011 – $nil) of cash paid to draw down the termination cost, was $511 (2011 – $617) for the quarter ended March 31, 2012.

2. “Net earnings before income tax expense” and “Adjusted basic earnings per Fund unit” are not recognized measures under Canadian GAAP. References to “net earnings before income tax expense” and “adjusted basic earnings per Fund unit”  are to earnings determined in accordance with GAAP applicable to the financial statements before amounts for taxes, termination costs on derivative financial instrument, net of termination cost repayments during the year, and change in fair-value of exchangeable units, as included in net earnings. The Fund believes that, in addition to net earnings, net earnings before income tax is a useful supplemental measure in evaluating its performance as it provides investors with an indication of operating earnings. Investors are cautioned, however, that this should not be construed as an alternative to net earnings as a measure of profitability. The method of calculating net earnings before tax for the purposes of this report may differ from that used by other issuers and, accordingly, it may not be comparable to that used by other issuers.

3. References to “net earnings from operations” are to earnings determined in accordance with GAAP applicable to the financial statements before amounts for deferred taxes (2012 – $759 and 2011 – $814), and change in fair value of exchangeable units (2012 – $6,464 and 2011 – $4,606), as included in net earnings, plus cash paid to draw down the termination costs (2012 – $62 and 2011 – $nil).

4. “Payout Ratio” is calculated as distributions declared divided by net earnings from operations. This non-GAAP financial measure provides investors with useful information regarding the extent to which the Fund distributes cash to unitholders. Investors are cautioned that this should not be construed as an alternative to net income as a measure of profitability.


A copy of management´s discussion and analysis and financial statements of the Fund and PPL for the quarter will be available at and on or before May 3, 2012. The Fund will host a conference call to discuss the results on Thursday, May 3, 2012 at 9:00 a.m. Eastern Time. The call can be accessed by dialing 416-640-5925 or 1-800-711-9538. A replay will be available until Thursday, May 17, 2012 by dialing 647-436-0148 or 1-888-203-1112 and entering the reservation number: 9005246.

Forward Looking Statements

This release may contain certain forward-looking statements, which reflect management’s expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in the Fund’s filings with the Canadian securities regulatory authorities, including its quarterly reports and Annual Information Form.

For further information:

Curt Feltner, Chief Financial Officer, Pizza Pizza Limited
(416) 967-1010

 Christine D´Sylva, Director of Finance and Investor Relations, Pizza Pizza Limited
(416) 967-1010 and or