Boston Pizza Royalties Limited Partnership
TSX : BPF.UN

Boston Pizza International Inc.

Boston Pizza International Inc.

November 07, 2006 10:00 ET

Boston Pizza Royalties Income Fund & Boston Pizza International Inc. Announce 2006 Third Quarter Results and October Distribution

Higher same store sales and new restaurant openings drive royalty income up 23% over the year ago period

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 7, 2006) - Boston Pizza Royalties Income Fund (the "Fund") (TSX:BPF.UN) and Boston Pizza International Inc. ("BPI") each reported financial results today for the fiscal period from July 1, 2006 to September 30, 2006 (the "Period") and the year-to-date results from January 1, 2006 to September 30, 2006 ("Year-to-date"). A copy of the combined 2006 third quarter report is available at www.sedar.com and www.bpincomefund.com.

The Fund reported another strong quarter with same store sales growth ("SSSG"), the key metric for revenue growth of the Fund, of 6.8% for the Period and 8.9% Year-to-date. Franchise sales by restaurants in the royalty pool were $128.3 milllion, a $23.7 million increase over the same period last year. Year-to-date franchise sales by royalty pool restaurants were $362.1 million, $71.1 million higher than in 2005. Royalty income for the Period was $5.1 million, an increase of 22.7% versus the third quarter of 2005. On a Year-to-date basis, royalty income was $14.5 million, up 24.4% compared to 2005.

As a result of these continued positive results, Trustees of the Fund approved the monthly cash distribution of 10.9 cents per unit for October 2006. The distribution will be paid to unitholders of record at the close of business on November 21, 2006 and will be payable on November 30, 2006. The Fund periodically reviews distribution levels based on its policy of smoothing the distribution flow to unitholders. Monthly distributions have been increased three times Year-to-date and a total of ten times since the Fund's inception. The current distribution translates to an annualized rate per unit of $1.31, an increase of 7.9% Year-to-date and 30.8% since the Fund's inception.

During the Period, Boston Pizza continued to expand its presence across Canada opening six new restaurants, with no restaurants being closed. Subsequent to the Period an additional five restaurants were opened while one restaurant was closed bringing the total as of November 6, 2006, to 253 restaurants across Canada of which 226 restaurants are in the royalty pool. Royalties paid to the Fund are adjusted annually to include the franchise revenues of all new Boston Pizza restaurants opened prior to December 31 of each year.

"Boston Pizza continues to increase sales in our existing stores and to add new locations. This marks our seventeenth quarter of consecutive increases in same store sales going back to the Fund's initial public offering in 2002. We are very proud to have achieved a milestone recently by opening the 250th Boston Pizza restaurant, which is located in Morden, Manitoba. With our continued focus on enhancing the guest experience, our commitment to franchise profitability and the concept's proven success in cities from coast to coast, we are confident that Boston Pizza will further strengthen its position as Canada's number one casual dining brand," said Mike Cordoba, Chief Executive Officer of BPI.

The Fund will hold a conference call to discuss third quarter results on November 7, 2006 at 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time). The call can be accessed by dialling toll-free 1-866-249-5221 or (416) 644-3419. A replay will be available until November 16, 2006, by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode: 21207206 followed by the number sign.

HIGHLIGHTS

The following table sets out selected historical information and other data from the financial statements of the Fund and the Boston Pizza Royalties Limited Partnership (the "Partnership"), which should be read in conjunction with the attached consolidated financial statements of the Fund.



------------------------------------------------------------------------
------------------------------------------------------------------------
Jul. 1, Jul. 1, Jan. 1, Jan. 1,
2006 2005 2006 2005
to to to to
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2006 2005 2006 2005
------------------------------------------------------------------------
(in thousands of dollars - except restaurants and per unit items)

Restaurants in
Royalty Pool 226 195 226 195
Franchise Sales
reported by restaurants
in Royalty Pool $128,280 $104,544 $362,134 $291,008
Royalty income - 4%
of Franchise Sales of
Royalty Pool Restaurants $ 5,131 $ 4,182 $ 14,485 $ 11,640
Partnership
administrative and
interest expenses $ 255 $ 199 $ 765 $ 686
Partnership earnings
for the period before
undernoted $ 4,876 $ 3,983 $ 13,720 $ 10,954
BPI's interest $ 1,530 $ 1,312 $ 4,625 $ 3,877
Equity income related
to BPI royalties
earned by the Fund $ 3,346 $ 2,671 $ 9,095 $ 7,077
Interest income $ 450 $ 450 $ 1,350 $ 1,350
Net earnings $ 3,796 $ 3,121 $ 10,445 $ 8,427
Earnings per Fund unit $ 0.35 $ 0.32 $ 0.97 $ 0.89
Diluted earnings per
Fund unit $ 0.35 $ 0.32 $ 0.97 $ 0.89
Distributions
declared per Fund unit $ 0.32 $ 0.30 $ 0.84 $ 0.80
Same Store Sales Growth 6.8% 8.7% 8.9% 7.0%
Number of restaurants
opened during Period 6 9 23 17
Number of restaurants
closed during Period 0 0 0 0
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------------------------------------------------------------------------


OUTLOOK

In 2006, BPI management anticipates that approximately 40 new locations will open across Canada. In addition, BPI management believes that in 2006 the organization can continue to deliver industry-leading SSSG from national and local marketing programs and BPI's unique renovation program that requires each location to renovate every seven years. BPI anticipates up to 28 locations will conduct major renovations this year which will contribute to Boston Pizza delivering industry-leading SSSG. Management will continue to pursue further development in Western Canada, Ontario, and the Atlantic Provinces while aggressively pursuing additional opportunities in Quebec. Boston Pizza is well positioned for future growth and should continue to strengthen its position as the number one casual dining brand in Canada.

The Fund is a limited purpose, open-ended trust established under the laws of British Columbia to acquire indirectly certain trademarks and trade names used by BPI in its Boston Pizza restaurants in Canada. The trademarks are licensed to BPI for 99 years for which BPI pays the Fund 4% of franchise revenues of royalty pooled restaurants. As of January 1, 2006 there were 226 restaurants in the royalty pool.

Certain statements in this quarterly report may constitute "forward looking" statements that involve known and unknown risks, uncertainties, future expectations and other factors which may cause the actual results, performance or achievements of the Fund, the Boston Pizza Holdings Trust, the Partnership, BPI, Boston Pizza restaurants, or industry results, 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 use such words as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect 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, uncertainties and future expectations including, but not limited to the risks and uncertainties set out in the Fund's management discussion and analysis dated November 6, 2006 in "Risks & Uncertainties" and in the Fund's Annual Information Form under "Risks Related to the Structure of the Fund". The quarterly report discusses some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward looking statements. Forward looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.

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



BOSTON PIZZA ROYALTIES INCOME FUND
Consolidated Balance Sheets

----------------------------------------------------------------------
----------------------------------------------------------------------
September 30, December 31,
2006 2005
----------------------------------------------------------------------
(Unaudited)
Assets

Current assets:
Cash $ 260 $ 1,415
Interest receivable on note
receivable from Boston Pizza
International Inc. 150,000 150,000
Distributions receivable from
Boston Pizza Royalties
Limited Partnership - 828,173
----------------------------------------------------------------------
150,260 979,588

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

Investment in Boston Pizza
Royalties Limited Partnership
(note 3) 99,914,351 77,100,557
----------------------------------------------------------------------

$ 124,064,611 $ 102,080,145
----------------------------------------------------------------------
----------------------------------------------------------------------

Liabilities and Unitholders'
Equity

Current liabilities:
Accounts payable and accrued
liabilities $ - $ 50
Distributions payable to Fund
unitholders - 978,169
----------------------------------------------------------------------
- 978,219

Unitholders' equity:
Fund units 122,606,237 100,829,377
Retained earnings 1,458,374 272,549
----------------------------------------------------------------------
124,064,611 101,101,926
----------------------------------------------------------------------

$ 124,064,611 $ 102,080,145
----------------------------------------------------------------------
----------------------------------------------------------------------

Contingency (note 4)

See accompanying notes to consolidated financial statements.


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

------------------------------------------------------------------------
------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
----------------------- ------------------------
2006 2005 2006 2005
------------------------------------------------------------------------

Revenue (note 2(a))
Equity income related
to BPI royalties $ 3,345,705 $ 2,671,015 $ 9,095,006 $ 7,077,367
Interest income 450,015 450,015 1,350,040 1,350,040
------------------------------------------------------------------------

Net earnings $ 3,795,720 $ 3,121,030 $10,445,046 $ 8,427,407
------------------------------------------------------------------------
------------------------------------------------------------------------

Weighted average
units outstanding 10,996,700 9,684,841 10,746,822 9,499,212
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic and diluted
earnings per Fund
unit $ 0.35 $ 0.32 $ 0.97 $ 0.89
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statements of Retained Earnings
(Unaudited)

------------------------------------------------------------------------
------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
----------------------- ------------------------
2006 2005 2006 2005
------------------------------------------------------------------------

Retained earnings,
beginning of period $ 1,214,588 $ 902,070 $ 272,549 $ 208,127

Net earnings 3,795,720 3,121,030 10,445,046 8,427,407

Distributions
declared to Fund
unitholders (3,551,934) (2,876,398) (9,259,221) (7,488,832)
------------------------------------------------------------------------
Retained earnings,
end of period $ 1,458,374 $ 1,146,702 $ 1,458,374 $ 1,146,702
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


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

------------------------------------------------------------------------
------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
----------------------- ------------------------
2006 2005 2006 2005
------------------------------------------------------------------------

Cash provided by
(used in):

Operations:
Net earnings $ 3,795,720 $ 3,121,030 $10,445,046 $ 8,427,407
Equity earnings, an
item not
affecting cash (3,345,705) (2,671,015) (9,095,006) (7,077,367)
Distributions
received from Boston
Pizza Royalties
Limited Partnership 3,100,784 2,426,398 8,886,245 6,982,900
Accounts payable and
accrued liabilities (50) - (50) -
------------------------------------------------------------------------
3,550,749 2,876,413 10,236,235 8,332,940

Financing:
Distributions paid to
Fund unitholders (3,551,934) (2,876,398) (10,237,390) (8,332,895)
------------------------------------------------------------------------

Increase (decrease)
in cash (1,185) 15 (1,155) 45

Cash, beginning of
period 1,445 1,386 1,415 1,356
------------------------------------------------------------------------

Cash, end of period $ 260 $ 1,401 $ 260 $ 1,401
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplementary
information:
Non-cash financing
and investing
activities:
Issuance of Fund
units to acquire
additional interest
in Boston Pizza
Royalties Limited
Partnership $ - $ - $21,776,860 $14,237,327
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


1. Basis of presentation:

These consolidated financial statements include the accounts of the Boston Pizza Royalties Income Fund, its wholly-owned subsidiary Boston Pizza Holdings Trust (the "Trust"), and its 80%-owned subsidiary Boston Pizza GP Inc. ("BPGP") (collectively the "Companies" or "Fund"). BPGP is the managing general partner and Boston Pizza International Inc. ("BPI") is a general partner of the Partnership. All residual ownership of BPGP is either directly or indirectly controlled by BPI.

Boston Pizza Royalties Limited Partnership (the "Partnership") is considered to be a Variable Interest Entity. BPI is a primary beneficiary of the Partnership and accordingly is now required to consolidate the Partnership. Prior to 2005, the Partnership was consolidated with the Fund based on its voting rights.

These interim consolidated financial statements have been prepared using Canadian generally accepted accounting principles.

The disclosures in these statements do not include all the disclosures required by 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.

2. Operations:

(a) Franchise sales reported by Boston Pizza Restaurants in the Royalty Pool during the nine months ended September 30, 2006 were $362,133,519 (2005 - $291,007,879).

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



------------------------------------------------------------------------
------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
----------------------- ------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
(in thousands of dollars, except number of restaurants in the Royalty
Pool and earnings per Fund unit)

Restaurants in the
Royalty Pool 226 195 226 195
------------------------------------------------------------------------
------------------------------------------------------------------------

Franchise sales
reported by
restaurants in the
Royalty Pool $ 128,280 $ 104,544 $ 362,134 $ 291,008
------------------------------------------------------------------------
------------------------------------------------------------------------

Royalty income - 4%
of Franchise sales $ 5,131 $ 4,182 $ 14,485 $ 11,640
Administrative and
interest expenses (255) (199) (765) (686)
------------------------------------------------------------------------

Partnership earnings
for the period
before undernoted 4,876 3,983 13,720 10,954
BPI's interest (1,530) (1,312) (4,625) (3,877)
------------------------------------------------------------------------

Equity income related
to BPI royalties
earned by Fund 3,346 2,671 9,095 7,077
Interest income 450 450 1,350 1,350
------------------------------------------------------------------------

Net earnings $ 3,796 $ 3,121 $ 10,445 $ 8,427
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic and diluted
earnings per Fund
unit $ 0.35 $ 0.32 $ 0.97 $ 0.89
------------------------------------------------------------------------
------------------------------------------------------------------------


(b) On January 1, 2006, adjustments to royalty payments and Additional Entitlement were made based on the actual performance of eighteen restaurants added to the Royalty Pool on January 1, 2005. Based on these adjustments, BPI received its pro rata portion of the remaining Additional Entitlement, being 115,977 Fund units.

(c) On January 1, 2006, 31 new Boston Pizza restaurants opened during the period from November 2, 2004 to December 31, 2005, were added to the Royalty Pool. The Franchise sales of these 31 new restaurants has been estimated at $61.1 million. The total number of restaurants in the Royalty Pool has increased to 226. The yield of the Fund units was determined to be 7.61% calculated using a weighted average unit price of $15.59. Weighted average unit price is calculated based on the market price of the unit traded on the TSX Stock Exchange during the period of twenty consecutive days ending on the fifth trading day before January 1, 2006. 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 1,904,808 (2005 - 1,292,182) Fund units. BPI will also receive a proportionate increase in monthly distributions from the Partnership. Of the Additional Entitlement, 20% (2006 - 380,962 units; 2005 - 258,436 units), remain unissued and are not eligible for conversion to Fund units until January 1, 2007 (2005 units - January 1, 2006) based on the actual performance of the new stores.

(d) On February 17, 2006, BPI exchanged Class B Partnership units for 1,311,859 Fund units. BPI then sold these Fund units to the public. As of September 30, 2006, there were 10,996,700 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:



----------------------------------------------------------------------
----------------------------------------------------------------------

Balance as at December 31, 2004 $ 62,798,866

Acquisition of additional Partnership units by
issuing Fund units 14,237,327
Equity income 9,665,871
Distributions from the Partnership (9,601,507)
----------------------------------------------------------------------

Balance as at December 31, 2005 77,100,557

Acquisition of additional
Partnership units by issuing Fund units 21,776,860
Equity income 9,095,006
Distributions from the Partnership (8,058,072)
----------------------------------------------------------------------

Balance as at September 30, 2006 $ 99,914,351
----------------------------------------------------------------------
----------------------------------------------------------------------


Summarized financial information of the Partnership is as follows:

----------------------------------------------------------------------
----------------------------------------------------------------------
September 30, December 31,
2006 2005
----------------------------------------------------------------------

Current assets $ 6,661,942 $ 6,741,761
Long-term assets, consisting of
the BP Rights 160,049,887 138,145,095
----------------------------------------------------------------------

Total assets $ 166,711,829 $ 144,886,856
----------------------------------------------------------------------
----------------------------------------------------------------------

Current liabilities $ 3,982,091 $ 5,880,053
Long-term liabilities 5,000,000 5,000,000

Partners' surplus 157,729,738 134,006,803
----------------------------------------------------------------------

Total liabilities and surplus $ 166,711,829 $ 144,886,856
----------------------------------------------------------------------
----------------------------------------------------------------------


4. Contingency:

BPI and the Fund are involved in trademark litigation with entities affiliated with McDonald's Restaurants of Canada (the "McDonald's Group"), opposing the registration by the McDonald's Group in Canada of the Boston Market trademark. Additionally, BPI and the Fund have commenced an action against the McDonald's Group to prevent them from infringing BPI's and the Fund's respective interests in 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 Fund would lose the benefits of registration of its 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 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.

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