Boston Pizza Royalties Income Fund
TSX : BPF.UN

Boston Pizza Royalties Income Fund
Boston Pizza International Inc.

Boston Pizza International Inc.

November 14, 2005 08:00 ET

Boston Pizza Royalties Income Fund & Boston Pizza International Inc. Announce 2005 Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 14, 2005) - Boston Pizza Royalties Income Fund (TSX:BPF.UN) and Boston Pizza International Inc. -

Boston Pizza has a Strong Third Quarter Posting 8.7% Same Store Sales Growth

Distributions increased during the Quarter for the Seventh time since Initial Public Offering

Net Earnings up 19.1%

Boston Pizza Royalties Income Fund (the "Fund") and Boston Pizza International Inc. ("BPI") each reported today third quarter financial results for the period of July 1, 2005 to September 30, 2005 (the "Period"). A copy of the combined 2005 third quarter report is available at www.sedar.com and www.bpincomefund.com.

Boston Pizza is pleased to announce continued positive results for 2005. During the third quarter, the company posted 8.7% same store sales growth ("SSSG") over the same period in 2004. Year-to-date SSSG was 7.0%. Overall growth in Franchise Sales of royalty pooled restaurants, a combination of new restaurants added to the royalty pool and SSSG, was 19.2%. Royalty income for the Period was $4,181,776 and distributions of $0.30 per unit were declared. Distributions declared per unit rose during the Period by 4.2% compared with the third quarter of 2004 in which distributions declared were $0.29 per unit. The current monthly distribution translates into an annualized distribution of $1.21.

Boston Pizza continued to expand its presence across Canada opening nine new Boston Pizza restaurants during the Period, with no restaurants being closed. Subsequent to the Period an additional 13 restaurants were opened. For 2005 the company opened 30 new restaurants; more than any other year in the Boston Pizza's history. As of November 8, 2005 BPI has 225 restaurants open across Canada.

"The third quarter of 2005 was one of the best quarters for Boston Pizza since the IPO in 2002. We continued to open new restaurants, deliver very strong same store sales growth, and we were very pleased to pass on these successes to our unitholders in the form of increased distributions. The most recent increase was the seventh one since our IPO just over three years ago," said Mike Cordoba, Chief Executive Officer of Boston Pizza. Cordoba also noted, "During the Period we opened our first restaurant in the province of Quebec. We now have four restaurants operating in Quebec and preliminary indicators point towards the concept being very well received. Early sales results show that each one of our four restaurants in Quebec are very busy and are exceeding our weekly national sales average."

HIGHLIGHTS

The following table sets out selected historical information and other data of the Fund, which should be read in conjunction with the attached consolidated financial statements of the Fund.



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Jul. 1, Jul. 1, Jan. 1, Jan. 1,
2005 2004 2005 2004
to to to to
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2005 2004 2005 2004
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(in thousands of dollars - except restaurants and per unit items)

Restaurants
in Royalty
Pool 195 177 195 177

Franchise
Sales
reported by
restaurants
in Royalty
Pool $ 104,544 $ 87,692 $ 291,008 $ 247,352

Royalty
Income - 4%
of Franchise
Sales of
Royalty Pool
Restaurants $ 4,182 $ 3,508 $ 11,640 $ 9,895

Partnership
administrative
and interest
expenses $ 199 $ 178 $ 686 $ 527

Partnership
earnings for
the period
before
undernoted $ 3,983 $ 3,330 $ 10,954 $ 9,368

BPI's
Interest $ 1,312 $ 1,160 $ 3,877 $ 3,474

Equity income
related to
BPI royalties
earned by
the Fund $ 2,671 $ 2,170 $ 7,077 $ 5,894

Interest
Income $ 450 $ 450 $ 1,350 $ 1,350

Net Earnings $ 3,121 $ 2,620 $ 8,427 $ 7,244

Basic and
diluted
earnings per
Fund unit $ 0.32 $ 0.30 $ 0.89 $ 0.85

Distributions
declared per
Fund unit $ 0.30 $ 0.29 $ 0.80 $ 0.73
Same Store
Sales Growth 8.7% 6.1% 7.0% 7.4%

Number of
restaurants
opened during
Period 9 5 17 14

Number of
restaurants
closed during
Period 0 0 0 0
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Outlook

Going forward BPI management continues to focus on opening new stores and delivering industry-leading SSSG. SSSG, the primary source of revenue growth for individual unitholders, will continue to be achieved through executing effective national and local marketing promotions, superior customer service, and Boston Pizza's unique renovation program, which requires each Boston Pizza location conduct a full renovation every seven years. BPI anticipates that a total of 22 renovations will be completed in 2005, up from the previous estimate of 18 renovations.

We remain confident that Boston Pizza will continue to enhance its position as Canada's Number One Casual Dining Brand.

Certain statements in this quarterly 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 quarterly report such statements are 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 quarterly 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 BPI. The foregoing list of factors is not exhaustive.



BOSTON PIZZA ROYALTIES INCOME FUND
Consolidated Balance Sheets

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September 30, December 31,
2005 2004
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(unaudited) (change in
basis of
presentation
- note 1)
Assets

Current assets:
Cash $ 1,401 $ 1,356
Interest receivable on note
receivable from Boston Pizza
International Inc. 150,000 150,000
Distributions receivable - 694,068
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151,401 845,424

Note receivable from Boston Pizza
International Inc. 24,000,000 24,000,000

Investment in Boston Pizza
Royalties Limited Partnership
(note 3) 77,824,728 62,798,866
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$ 101,976,129 $ 87,644,290
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Liabilities and Unitholders' Equity

Current liabilities:
Accounts payable and accrued
liabilities $ 50 $ 50
Distributions payable to Fund
unitholders - 844,063
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50 844,113

Unitholders' equity 101,976,079 86,800,177
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$ 101,976,129 $ 87,644,290
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Contingency (note 4)

See accompanying notes to consolidated financial statements.


BOSTON PIZZA ROYALTIES INCOME FUND
Consolidated Statement of Earnings
(Unaudited)

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Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2005 2004 2005 2004
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(change in (change in
basis of basis of
presentation presentation
- note 1) - note 1)

Revenue:
Equity income
related to
BPI royalties
(notes 1
and 3) $ 2,671,015 $ 2,169,917 $ 7,077,367 $ 5,894,102
Interest
income 450,015 450,015 1,350,040 1,350,040
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Net earnings $ 3,121,030 $ 2,619,932 $ 8,427,407 $ 7,244,142
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Weighted
average
units
outstanding 9,684,841 8,728,674 9,499,212 8,564,724

Basic and
diluted
earnings per
Fund unit $ 0.32 $ 0.30 $ 0.89 $ 0.85
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Consolidated Statement of Unitholders' Equity
(Unaudited)

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Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
(change in (change in
basis of basis of
presentation presentation
- note 1) - note 1)

Balance,
beginning of
period $101,731,447 $ 84,251,131 $ 86,800,177 $ 75,545,497

Issuance of
Boston Pizza
Royalties
Income Fund
units - - 14,237,327 7,894,433

Net earnings 3,121,030 2,619,932 8,427,407 7,244,142

Distributions
declared (2,876,398) (2,487,669) (7,488,832) (6,300,678)
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Balance, end
of period $101,976,079 $ 84,383,394 $101,976,079 $ 84,383,394
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See accompanying notes to consolidated financial statements.


BOSTON PIZZA ROYALTIES INCOME FUND
Consolidated Statement of Cash Flows
(Unaudited)

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Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
(change in (change in
basis of basis of
presentation presentation
- note 1) - note 1)
Cash provided
by (used in):

Operations:
Net earnings $ 3,121,030 $ 2,619,932 $ 8,427,407 $ 7,244,142
Equity
earnings, an
item not
affecting
cash (2,671,015) (2,169,917) (7,077,367) (5,894,102)
Distributions
received 2,426,398 2,037,668 6,982,900 5,650,179
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2,876,413 2,487,683 8,332,940 7,000,219

Financing:
Distributions
paid to
unitholders (2,876,398) (2,487,669) (8,332,895) (7,000,175)
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Increase in
cash 15 14 45 44

Cash, beginning
of period 1,386 1,327 1,356 1,297
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Cash, end of
period $ 1,401 $ 1,341 $ 1,401 $ 1,341
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Supplementary
information:
Non-cash
financing and
investing
activities:
Issuance of
Fund units
to acquire
additional
interest in
Boston Pizza
Royalties
Limited
Partner-
ship $ - $ - $ 14,237,327 $ 7,894,433
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See accompanying notes to consolidated financial statements.


BOSTON PIZZA ROYALTIES INCOME FUND
Notes to the Consolidated Financial Statements
(Unaudited)
Three and nine month periods ended September 30, 2005 and 2004


1. Basis of presentation:

These interim consolidated financial statements have been prepared using Canadian generally accepted accounting principles. The interim financial statements include all adjustments consisting solely of normal recurring adjustments, which in management's opinion, are necessary for a fair presentation of the financial results of the interim period presented.

The disclosures in these statements do not include all the disclosure requirements of Canadian generally accepted accounting principles for annual financial statements. These statements should be read in conjunction with the significant accounting policies and other information in the Fund's most recent annual financial statements. These statements follow the same accounting policies and methods of their application as the most recent annual financial statements, except as described below.

In June 2003, the CICA issued Accounting Guideline 15, "Consolidation of Variable Interest Entities" ("AcG-15"), requiring the consolidation of variable interest entities ("VIEs"). A VIE is any type of legal structure in which consolidation is required due to contractual or other financial arrangements, as opposed to traditional voting rights, if certain conditions exist. AcG-15 is effective for the Fund starting January 1, 2005 with retroactive application to its comparative results for the prior year.

Boston Pizza Royalties Limited Partnership (the "Partnership") is considered to be a VIE and Boston Pizza International Inc. ("BPI") is the primary beneficiary of the Partnership accordingly, BPI is now required to consolidate the Partnership. In the past, the Partnership was consolidated with the Fund based on its voting rights. The Partnership has been established to acquire and hold the Boston Pizza trademarks and trade names which were previously owned by BPI and used in connection with the operation of Boston Pizza restaurants in Canada (collectively the "BP Rights"). The Partnership, and BPI also entered into a License and Royalty agreement to allow BPI the use of BP Rights for a term of 99 years, for which BPI pays 4% of the Franchise Revenues (as defined) of certain restaurants located in Canada (the "Royalty Pool").

The following changes to the consolidated carrying values of the assets and liabilities of the Fund and the results of its operations have arisen as a result of changing the Fund's method of accounting for the Partnership to the equity basis from the consolidation basis. The application of the equity method has resulted in the inclusion of the Partnership assets and liabilities as a one line item on the balance sheet. Previously, under the consolidation method, the assets and liabilities of the Partnership were consolidated with those of the Fund in the Fund's financial statements.



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September 30, December 31,
2005 2004
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Balance Sheet:

Changes in assets:
Decrease in working capital $ 1,807,650 $ 140,920
Decrease in intangible assets
(BP Rights) 138,138,545 122,904,145
Decrease in deferred financing
charges 7,600 28,250
Increase in investment in
Partnership 77,824,728 62,798,866
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62,129,067 60,274,449

Changes in liabilities and
unitholders' equity:
Decrease in term loan 5,000,000 5,000,000
Decrease in non-controlling interest 24,150,000 24,000,000
Decrease in Unitholders' equity 32,979,067 31,274,449
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$ 62,129,067 $ 60,274,449
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Earnings per Fund unit:

Earnings per Fund unit are unchanged as a result of this accounting change.

During the fourth quarter of the year ended December 31, 2004, the Company adopted the Canadian Institute of Chartered Accountants recommendations of the Emerging Issues Committee (EIC 151) relating to the presentation of exchangeable securities issued by subsidiaries of income funds. The adoption of EIC 151 during the fourth quarter of 2004 resulted in the inclusion of certain exchangeable shares of the Partnership as part of the Fund's unitholders' equity together with the inclusion of earnings attributable to these interests. As a result of the application of AcG-15, the Partnership is no longer considered, for accounting purposes, to be a subsidiary of the Fund.

The change in accounting for the Fund's investment in Partnership and changes resulting from the application of AcG-15 has not resulted in any change to basic or fully diluted earnings per Fund unit since exchangeable Partnership units and earnings related to these units are no longer included in Fund's financial statements.

2. Operations:

(a) Franchise revenue reported by Boston Pizza Restaurants in the Royalty Pool during the period ended September 30, 2005 is $291,007,879 (2004 - $247,351,802).

Equity and interest income earned by the Fund has been derived as follows:



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Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2005 2004 2005 2004
--------------------------------------------------------------------
(in thousands of dollars, except number of restaurants in the
Royalty Pool and earnings per Fund unit)

Restaurants
in the
Royalty Pool 195 177 195 177
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Franchise
revenue
reported by
restaurants
in the
Royalty Pool $ 104,544 $ 87,692 $ 291,008 $ 247,352
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Royalty
income - 4%
of franchise
revenue $ 4,182 $ 3,508 $ 11,640 $ 9,895

Administrative
and interest
expenses (199) (178) (686) (527)
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Partnership
earnings for
the period
before
undernoted 3,983 3,330 10,954 9,368
BPI's interest (1,312) (1,160) (3,877) (3,474)
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Equity income
related to BPI
royalties
earned by
Fund 2,671 2,170 7,077 5,894
Interest income 450 450 1,350 1,350
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Net earnings $ 3,121 $ 2,620 $ 8,427 $ 7,244
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Basic and
diluted
earnings per
Fund unit $ 0.32 $ 0.30 $ 0.89 $ 0.85
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(b) On January 5, 2005, 18 (2004 - 15) new Boston Pizza restaurants opened during the period from November 2, 2003 to November 1, 2004, and were added to the Royalty Pool. The Franchise revenue of these 18 new restaurants has been estimated at $38.9 million. The total number of restaurants in the Royalty Pool has increased to 195. The yield of the Fund units was determined to be 7.58% calculated using a weighted average unit price of $14.69. Weighted average unit price is calculated based on the market price of the units traded on the TSX Stock Exchange during the period of twenty consecutive days ending on the fifth trading day before January 1, 2005. As a result of the contribution of the additional net sales to the Royalty Pool, and assuming 100% of the Additional Entitlement, BPI's Additional Entitlement is equivalent to 1,292,182 (2004 - 922,932) Fund units. BPI will also receive a proportionate increase in monthly distributions from the Partnership. Of the Additional Entitlement, 20% (2005 - 258,436 units; 2004 - 184,587 units), remain unissued and are not eligible for conversion to Fund units until January 1, 2006 (2004 units - January 1, 2005) based on the actual performance of the new stores.

(c) On January 1, 2005, adjustments to royalty payments and Additional Entitlement were made based on the actual performance of fifteen restaurants added to the Royalty Pool on January 1, 2004. Based on these adjustments, BPI received its pro rata portion of the remaining Additional Entitlement, 161,463 Fund units. BPI also repaid an amount of $25,747 for monthly distributions to the Partnership.

(d) On February 22, 2005, BPI exchanged 566,616 Class A and 13,859,268 Class B Partnership units for 956,167 Fund units. BPI then sold these Fund units to the public. As of March 31, 2005, there were 9,684,841 Fund units issued and BPI had a 20% indirect interest in the Fund.

BPI has committed to maintain a minimum of 20% indirect interest in the Fund until there are 275 restaurants in the Royalty Pool.

3. Investment in Boston Pizza Royalties Limited Partnership:



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Balance as at December 31, 2003 $ 54,890,846
Acquisition of additional Partnership
units by issuing Fund units 7,894,433
Equity income 7,875,677
Distributions received from the Partnership (7,862,090)
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Balance as at December 31, 2004 62,798,866

Acquisition of additional Partnership
units by issuing Fund units 14,237,327
Equity income 7,077,367
Distributions received from the Partnership (6,288,832)
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Balance as at September 30, 2005 $ 77,824,728
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4. Contingency:

BPI and the Fund (as indirect owner of the Boston Pizza trademarks through its administrator Boston Pizza Royalties Limited Partnership, collectively, the "Boston Pizza Group") are involved in trademark litigation with entities affiliated with McDonald's Restaurant of Canada (the "McDonalds' Group"), opposing the registration by the McDonald's Group in Canada of the Boston Market trademark. To date, the Boston Pizza Group has successfully opposed such registration.

Management of BPI believes that there is likelihood that the Boston Market trademark will not be registered. Additionally, the Boston Pizza Group has commenced an action against the McDonald's Group to prevent it from infringing the Boston Pizza trademarks by operating Boston Market in Canada. The McDonald's Group has filed a counterclaim and a separate action challenging the validity of the registered trademark "Boston Pizza" and related trademarks under the Trade-Marks Act (Canada). Management does not believe that this action will succeed. However, in the event that the challenge to the Boston Pizza trademarks is successful, the Boston Pizza Group would lose the benefits of registration of the Boston Pizza trademarks under the Trade-Marks Act (Canada), which may mean losing the ability to prevent others from using the registered trademarks for the goods and services for which they are registered and to prevent others from using similar or confusing trademarks or names. However, the loss of the registration under the Trade-Marks Act (Canada), would not prevent the Boston Pizza Royalties Limited Partnership, administrator to the Fund from continuing to license and use the "Boston Pizza" and related trademarks in the existing operations and geographic territories where they are presently used and from taking other measures to protect their rights in respect of, and their ability to use, the "Boston Pizza" and related trademarks, in new areas where BPI and its sub-licensees do not presently operate Boston Pizza restaurants.

5. Subsequent event:

On October 4, 2005, the Fund announced an increase in distributions from $0.099 to $0.101 per unit for the period September 1, 2005 to September 30, 2005.

6. Comparative figures:

Certain of the figures presented for comparative purposes have been reclassified to conform with the financial statement presentation adopted for the current period.

The trustees of the Fund have approved the contents of this press release.

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