News Feed Item

Pizza Pizza Royalty Corp. Announces Second Quarter Financial Results

TORONTO, ONTARIO -- (Marketwired) -- 08/07/14 --

Attention Business Editors:

Pizza Pizza Royalty Corp. (TSX:PZA) (the "Company"),which owns the Pizza Pizza and Pizza 73 Rights and Marks, released financial results today for the second quarter and six months ended June 30, 2014.

Second Quarter highlights:

--  Royalty Pool sales increased 2.0% 
--  Same store sales decreased 0.3% 
--  Adjusted earnings per share ("EPS") increased 1.5% 
--  Restaurant network grew by seven 

Year-to-date highlights:

--  Dividends increased 2.6% in January 
--  Royalty Pool sales increased 2.4% 
--  Same store sales increased 0.7% 
--  Loan interest rate decreased 0.25% 
--  Adjusted EPS increased 1.7% 
--  Restaurant network increased by four 


In the second quarter ended June 30, 2014 ("Quarter"), System Sales from the 722 restaurants in the Royalty Pool increased 2.0% to $121.4 million from $119.0 million in the same quarter last year when there were 694 restaurants in the Pool. For the six months, Royalty Pool System Sales increased 2.4% to $245.8 million from $240.1 million in the same period last year.

Same store sales growth ("SSSG"), the key driver of yield growth for shareholders of the Company, decreased by 0.3% (1.3% increase - 2013) for the Quarter when compared to the same period in 2013, and has increased 0.7% (2.4% increase - 2013) for the six month period.

                                      Second Quarter            Year-to-date
                                                 (%)                     (%)
Same Store Sales Growth             2014        2013        2014        2013
Pizza Pizza                         -2.1         0.8        -0.8         2.0
Pizza 73                             8.8         3.9         8.0         4.5
Combined                            -0.3         1.3         0.7         2.4

SSSG is driven by growth in the average customer cheque and growth in customer traffic. Compared to the same quarter and six month period last year, the average customer cheque increased while the traffic counts decreased.

Paul Goddard, CEO, Pizza Pizza Limited ("PPL"), said: "Our results are indicative of the overall Canadian economies as Ontario lags the stronger Alberta market. While this quarter fell below our overall expectations, we continue to feel confident about our long-term growth opportunities. Going forward, in western Canada, we expect Pizza 73 to continue outperforming competitors while we expect many of the challenges faced by Pizza Pizza this quarter to persist for the near future, namely strong competitive activity, continued consumer price sensitivity and ongoing cost pressures amid modest economic growth in Ontario. We remain focused on matters within our control, with the customer and restaurant profitability as major priorities."


The Company declared shareholder dividends of $4.4 million ($0.2001 per share) for the Quarter compared to $4.2 million ($0.1900 per share) for the prior year comparable quarter which equates to a 5.3% increase. The payout ratio was 105% for the Quarter compared to 99% in the second quarter of 2013.

For the six months ended June 30, 2014 the Company declared dividends of $8.7 million ($0.4002 per share) compared to $8.2 million ($0.3775 per share) for the same period in 2013; the payout ratio for the six month period was 103% and was 98% in the same period of 2013.

In January 2014, the Company increased the monthly dividend by 2.6% to $0.0667 per Share. On an annualized basis, the dividend was increased by $0.02 to $0.80. The previous dividend increase was in June 2013 when the Company increased the monthly dividend by 4% to $0.065 ($0.78 annualized) from $0.0625 ($0.75 annualized). Prior to the June 2013 dividend increase, the Company had increased the dividend in January 2013 by 4.2% to $0.0625 per Share.

The Company's working capital reserve is $3.7 million at June 30, 2014, which is a decrease of $204,000 for the Quarter and a decrease of $1.3 million for the six month period. As previously announced, the majority of the decrease in the reserve was the result of a decision made by the Board of Directors, on the January 1, 2014 Adjustment date, to compensate PPL in cash of $1.1 million in lieu of PPL receiving 85,571 equivalent Shares. By doing so, the Company performed a share buyback.


Fully-diluted EPS for the Quarter was $0.197 per share compared to $0.193 per share in the same quarter last year. For the six month period, EPS was $0.403 compared to $0.389 for the same period in 2013. However, instead of EPS, the Company considers "adjusted" EPS(1) to be a more meaningful indicator of the

Company's operating performance and, thus, also presents fully-diluted adjusted EPS.

For the Quarter, adjusted EPS increased 1.5% to $0.207 per share compared to $0.204 per share in the same quarter last year; for the six month period adjusted EPS increased 1.7% to $0.419 from $0.412 for the same period of 2013.

(1) Adjusted earnings and adjusted EPS are not recognized measures under International Financial Reporting Standards ("IFRS") and may be calculated in a manner that differs from that used by other issuers. For additional information about the calculation and use of these measures, please see "Reconciliation of Non-IFRS Measures" in the Company's Management's Discussion & Analysis ("MD&A").


Current income tax expense remained consistent at $1.0 million for the Quarter compared to 2013. For the six months ended June 30, 2014, the income tax expense was $2.1 million compared to $2.0 million for the same period of 2013. The increase is due to increased taxable income and a decline in the tax amortization.

Of particular note is that the Company's earnings from operations before income taxes differs significantly from its taxable income due largely to the tax amortization of the Pizza Pizza and Pizza 73 Rights and Marks. The amount of the tax amortization deducted is based on a declining basis and will decrease yearly.


For the four quarter period ended March 31, 2014, the Company achieved a certain profitability threshold at which the interest rate decreased by 0.25% effective April 22, 2014. The Company's $47,000,000 credit facility agreement contains a financial covenant which is customary for agreements of this nature. In particular, the Company has agreed to a financial covenant using a four quarter rolling basis in which the loan amount is divided by earnings before interest expense, taxes depreciation and amortization. The covenant will continue to be tested going forward.


As previously announced, the number of restaurants in the Company's Royalt y Pool increased to 722 on the January 1, 2014 Adjustment Date from 694 in 2013. The number of restaurants in the Royalty Pool will remain unchanged for the year.

During the Quarter, PPL opened 11 restaurants and closed four, increasing the overall number of restaurants to 727. By brand, for the Quarter, Pizza Pizza opened four traditional restaurants and two non- traditional locations; four non-traditional Pizza Pizza restaurants were closed. Pizza 73 opened one traditional and four non-traditional locations and none were closed.

For the six months period, PPL opened 13 restaurants and closed nine, increasing the overall number of restaurants by four. By brand, for the six months, Pizza Pizza opened five traditional restaurants and three non-traditional locations; eight non-traditional locations were closed. Pizza 73 opened one traditional and four non-traditional locations; one non-traditional location was closed.


The following tables set out selected financial information and other data of the Company and should be read in conjunction with the unaudited interim condensed consolidated financial statements of the Company. Readers should note that the 2014 results are not directly comparable to the 2013 results because there are 722 restaurants in the 2014 Royalty Pool compared to 694 restaurants in the 2013 Royalty Pool.

                                     3 months ended          6 months ended 
(in thousands of dollars,                                                   
 except number of                                                           
 restaurants and              June 30,     June 30,    June 30,    June 30, 
per Share amounts)                2014         2013        2014        2013 
Restaurants in Royalty Pool        722          694         722         694 
Same store sales growth(1)        -0.3%         1.3%        0.7%        2.4%
Days in Period                      91           91         181         181 
System Sales reported by                                                    
 Pizza Pizza restaurants in                                                 
 the Royalty Pool(5)         $  99,831   $   99,502   $ 202,243   $ 200,118 
System Sales reported by                                                    
 Pizza 73 restaurants in                                                    
 the Royalty Pool(5)            21,529       19,504      43,550      39,970 
Total System Sales           $ 121,360   $  119,006   $ 245,793   $ 240,088 
Royalty - 6% on Pizza Pizza                                                 
 System Sales                $   5,990   $    5,970   $  12,135   $  12,007 
Royalty - 9% on Pizza 73                                                    
 System Sales                    1,937        1,755       3,919       3,597 
Royalty income               $   7,927   $    7,725   $  16,054   $  15,604 
Interest paid on                                                            
 borrowings(2)                    (498)       (520)      (1,013)     (1,034)
Administrative expenses           (117)       (115)        (241)       (243)
Adjusted earnings available                                                 
 for distribution to the                                                    
 Company and Pizza Pizza                                                    
 Limited                     $   7,312        7,090   $  14,800   $  14,327 
Pizza Pizza Limited's                                                       
 distribution(3)                (2,123)     (1,938)      (4,196)     (3,914)
Adjusted earnings available                                                 
 for distribution to the                                                    
 Company                     $   5,189        5,152   $  10,604   $  10,413 
Current income tax expense      (1,036)       (978)      (2,102)     (1,984)
Add back:                                                                   
Pizza Pizza Limited's                                                       
 distribution on Class B                                                    
 and Class D                                                                
Exchangeable Shares              2,123        1,938       4,196       3,914 
Adjusted earnings from                                                      
 operations(4)               $   6,276   $    6,112   $  12,698   $  12,343 
Adjusted earnings per                                                       
 share(4)                    $   0.207   $    0.204   $   0.419   $   0.412 
Basic earnings per share     $   0.197   $    0.193   $   0.403   $   0.389 
 declared by the Company     $   4,366   $    4,145   $   8,732   $   8,236 
Dividend/distributions per                                                  
 share                       $  0.2001   $   0.1900   $  0.4002   $  0.3775 
Payout ratio                       105%          99%        103%         98%
                                                       June 30,         31, 
                                                           2014        2013 
Working capital                                       $   3,749   $   5,097 
Total assets                                          $ 334,004   $ 329,598 
Total liabilities                                     $  59,983   $  59,798 
(1) Same store sales growth ("SSSG") means the change in annual gross       
    revenue of a particular Pizza Pizza or Pizza 73 restaurant as compared  
    to sales in the previous period, where the restaurant has been open at  
    least 13 months. Additionally, for a Pizza 73 restaurant whose          
    restaurant territory was adjusted due to an additional restaurant, a    
    Step-Out Payment may be added to sales to arrive at SSSG.               
(2) The Company, indirectly through the Pizza Pizza Royalty Limited         
    Partnership (the "Partnership"), incurs interest expense on the $47,000 
    outstanding bank loan. Interest expense also includes amortization of   
    loan fees. See "Interest Expense" in the Company's MD&A.                
(3) Represents the distribution to PPL from the Partnership on Class B and  
    Class D Units of the Partnership. The Class B and D Units are           
    exchangeable into common shares of the Company based on the value of    
    the Class B Exchange Multiplier and the Class D Exchange Multiplier at  
    the time of exchange as defined in the amended and restated Pizza Pizza 
    license and royalty agreement (the "Pizza Pizza License and Royalty     
    Agreement") and the amended and restated Pizza 73 license and royalty   
    agreement (the "Pizza 73 License and Royalty Agreement"), respectively, 
    and represents 28.0% of the fully diluted Shares at June 30, 2014 (June 
    30, 2013 - 27.1%). During the first quarter, as a result of the final   
    calculation of the equivalent Class B and Class D Share entitlements    
    related to the January 1, 2013 Adjustment to the Royalty Pool, PPL      
    returned a distribution on additional equivalent Shares as if such      
    Shares were outstanding as of January 1, 2013. Included in first        
    quarter was the return of a dividend amount of $41 pursuant to the      
    true-up calculation (2013 - PPL received $57).                          
(4) "Adjusted earnings from operations" and "Adjusted earnings per Share"   
    do not have any standardized meaning under International Financial      
    Reporting Standards ("IFRS"). Therefore, these figures are unlikely to  
    be comparable to similar figures presented by other companies. See      
    "Reconciliation of Non-IFRS Measures" in the Company's MD&A.            
(5) System Sales (as defined in the License and Royalty Agreements)         
    reported by Pizza Pizza and Pizza 73 restaurants include the gross      
    sales of Pizza Pizza company-owned, jointly-controlled and franchised   
    restaurants, excluding sales and goods and service tax or similar       
    amounts levied by any governmental or administrative authority. System  
    Sales do not represent the consolidated operating results of the        
    Company but are used to calculate the royalties payable to the          
    Partnership as presented above.                                         

A copy of the Company's interim consolidated financial statements and related MD&A will be available at www.sedar.com and www.pizzapizza.ca after the market closes on August 7, 2014.

As previously announced, the Company will host a conference call to discuss the results. The details of the conference call are as follows:

Date:                         Thursday, August 7, 2014                      
Time:                         5:30 p.m. ET                                  
Call-in number:               416-340-2218 / 866-225-0198                   
Recording call in number:     905-694-9451 / 800-408-3053 / 800-3366-3052   
                              Available until midnight, August 21, 2104     
                              Passcode: 3925547                             

A recording of the call will also be available on the Company's website www.pizzapizza.ca.

Forward Looking Statements

Certain statements in this report, including under the heading "Restaurant Development", 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 Company'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 Company. The foregoing list of factors is not exhaustive and should be considered in conjunction with the other risks and uncertainties described in the Company's Annual Information Form. The Company assumes no obligation to update these forward looking statements, except as required by applicable securities laws.

www.pizzapizza.ca and www.pizza73.com or www.sedar.com.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Cloud based infrastructure deployment is becoming more and more appealing to customers, from Fortune 500 companies to SMEs due to its pay-as-you-go model. Enterprise storage vendors are able to reach out to these customers by integrating in cloud based deployments; this needs adaptability and interoperability of the products confirming to cloud standards such as OpenStack, CloudStack, or Azure. As compared to off the shelf commodity storage, enterprise storages by its reliability, high-availabil...
The IoT industry is now at a crossroads, between the fast-paced innovation of technologies and the pending mass adoption by global enterprises. The complexity of combining rapidly evolving technologies and the need to establish practices for market acceleration pose a strong challenge to global enterprises as well as IoT vendors. In his session at @ThingsExpo, Clark Smith, senior product manager for Numerex, will discuss how Numerex, as an experienced, established IoT provider, has embraced a ...
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at @ThingsExpo, James Kirkland, Red Hat's Chief Arch...
@DevOpsSummit has been named the ‘Top DevOps Influencer' by iTrend. iTrend processes millions of conversations, tweets, interactions, news articles, press releases, blog posts - and extract meaning form them and analyzes mobile and desktop software platforms used to communicate, various metadata (such as geo location), and automation tools. In overall placement, @DevOpsSummit ranked as the number one ‘DevOps Influencer' followed by @CloudExpo at third, and @MicroservicesE at 24th.
We are reaching the end of the beginning with WebRTC, and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will w...
When people aren’t talking about VMs and containers, they’re talking about serverless architecture. Serverless is about no maintenance. It means you are not worried about low-level infrastructural and operational details. An event-driven serverless platform is a great use case for IoT. In his session at @ThingsExpo, Animesh Singh, an STSM and Lead for IBM Cloud Platform and Infrastructure, will detail how to build a distributed serverless, polyglot, microservices framework using open source tec...
November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Penta Security is a leading vendor for data security solutions, including its encryption solution, D’Amo. By using FPE technology, D’Amo allows for the implementation of encryption technology to sensitive data fields without modification to schema in the database environment. With businesses having their data become increasingly more complicated in their mission-critical applications (such as ERP, CRM, HRM), continued ...
SYS-CON Events announced today that Cloudbric, a leading website security provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Cloudbric is an elite full service website protection solution specifically designed for IT novices, entrepreneurs, and small and medium businesses. First launched in 2015, Cloudbric is based on the enterprise level Web Application Firewall by Penta Security Sys...
The Open Connectivity Foundation (OCF), sponsor of the IoTivity open source project, and AllSeen Alliance, which provides the AllJoyn® open source IoT framework, today announced that the two organizations’ boards have approved a merger under the OCF name and bylaws. This merger will advance interoperability between connected devices from both groups, enabling the full operating potential of IoT and representing a significant step towards a connected ecosystem.
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
A completely new computing platform is on the horizon. They’re called Microservers by some, ARM Servers by others, and sometimes even ARM-based Servers. No matter what you call them, Microservers will have a huge impact on the data center and on server computing in general. Although few people are familiar with Microservers today, their impact will be felt very soon. This is a new category of computing platform that is available today and is predicted to have triple-digit growth rates for some ...
Without lifecycle traceability and visibility across the tool chain, stakeholders from Planning-to-Ops have limited insight and answers to who, what, when, why and how across the DevOps lifecycle. This impacts the ability to deliver high quality software at the needed velocity to drive positive business outcomes. In his general session at @DevOpsSummit at 19th Cloud Expo, Eric Robertson, General Manager at CollabNet, will discuss how customers are able to achieve a level of transparency that e...
Effectively SMBs and government programs must address compounded regulatory compliance requirements. The most recent are Controlled Unclassified Information and the EU’s GDPR have Board Level implications. Managing sensitive data protection will likely result in acquisition criteria, demonstration requests and new requirements. Developers, as part of the pre-planning process and the associated supply chain, could benefit from updating their code libraries and design by incorporating changes.
SYS-CON Events announced today that Enzu will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Enzu’s mission is to be the leading provider of enterprise cloud solutions worldwide. Enzu enables online businesses to use its IT infrastructure to their competitive advantage. By offering a suite of proven hosting and management services, Enzu wants companies to focus on the core of their online busine...
SYS-CON Events announced today that Roundee / LinearHub will exhibit at the WebRTC Summit at @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LinearHub provides Roundee Service, a smart platform for enterprise video conferencing with enhanced features such as automatic recording and transcription service. Slack users can integrate Roundee to their team via Slack’s App Directory, and '/roundee' command lets your video conference ...