Changes in value of units behind big swings in net profit: Boston Pizza

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VANCOUVER - Boston Pizza Royalties Income Fund (TSX:BPF.UN) is reporting a big increase in fourth-quarter net profit, but a similarly large decline in full-year net earnings.

However, the Vancouver-based franchisor of casual dining restaurants says that in both cases the numbers don't accurately reflect the company's business operations or ability to pay distributions to unitholders.

Boston Pizza reported net income of $4.3 million, or 23 cents per diluted unit, for the most recent quarter, up from $300,000, or two cents per unit, in the final quarter of 2011.

Total revenues rose to $7.86 million from $7.55 million amid a four per cent increase in royalty revenue on franchise sales.

Full-year net earnings, however, fell to $2 million, or 14 cents per diluted unit, on total revenue of $31.1 million, down from $15.6 million, or $1.06 per unit, on revenue of $29.8 million.

Boston Pizza said net profit numbers in both the Q4 and full-year periods were mainly driven by the changes in fair value adjustments on the class B units of Boston Pizza Royalties Limited Partnership.

It posted a $633,000 gain on the fair value adjustment of the units in the most recent period versus a $3.3-million loss in the 2011 quarter, while on a full-year basis it posted an almost $14.9-million value adjustment loss, versus a $731,000 loss the prior year.

Same store sales growth, a key driver of distribution growth for unitholders of the fund, was 2.2 per cent for the fourth quarter and 3.3 per cent for the year, compared with an increase of 6.4 per cent in prior-year's final quarter and 4.9 per cent for all of 2011.

"2012 was another strong year for Boston Pizza with record top-line sales and seven new restaurant openings," said president and CEO Mark Pacinda.

Boston Pizza says the non-IFRS metrics of distributed cash and payout ratio are a better measure of the company's operations.

Distributable cash was $4.5 million, or 30.3 cents per unit, in the latest quarter and $17.4 million, or $1.18 per unit, for the year, while the fund's payout ratios were 98.7 and 99.3 per cent respectively.

That compared with distributable cash of $4.1 million, or 28.1 cents per unit, in Q4 last year and $16.1 million, or $1.10 per unit, for all of 2011 when respective payout ratios were 10.9 and 8.0 per cent.

On the Toronto Stock Exchange, Boston Pizza units were down 17 cents at $19.92 in morning trading Thursday.