From January 1 Adjustment Date, PPL is entitled to receive 80% of the calculated, additional equivalent Shares and distributions thereon resulting from a change in an Exchange Multiplier. The final equivalent Shares entitlement is determined following the year-end when the restaurants' actual sales performance is known with certainty. At that time, if the actual system sales exceeded 80% of the forecasted system sales, PPL would be entitled to additional equivalent Shares to reflect that difference. Conversely, if the actual system sales are less than 80% of the forecasted system sales, PPL must return a calculated portion of the equivalent Shares with which it was previously credited. In any given year, the calculated Exchange Multipliers cannot be less than at the end of the previous year.
Effective January 1, 2013, the Class B Exchange Multiplier is adjusted based on the 2013 forecasted system sales of $6.6 million from the 21 new Pizza Pizza restaurants, less sales of $3.4 million from 17 permanently closed Pizza Pizza non-traditional restaurants resulting in net, forecasted Pizza Pizza system sales of $3.2 million added to the Royalty Pool. The Class D Exchange Multiplier will not be adjusted at this time since the 2013 forecasted additional system sales from the one new Pizza 73 non-traditional restaurant, estimated at $100,000, is offset by $100,000 in sales from one permanently closed non-traditional restaurant, resulting in no estimated sales being added to the Royalty Pool.
In exchange for adding the forecasted Pizza Pizza system sales to the Royalty Pool, PPL has received 163,054 additional equivalent Shares (through the change to the Class B Exchange Multiplier). These represent 80% of the forecasted equivalent Shares entitlement to be received (203,817 equivalent Shares represent 100%), with the final equivalent Shares entitlement to be determined when the new restaurants' 2013 actual sales performance is known with certainty in early 2014.
On January 1, 2013, PPL added no Pizza 73 system sales to the Royalty Pool due to one non-traditional Pizza 73 restaurant opening and one closing. Therefore, PPL has received no additional Class D equivalent Shares. Final Class D equivalent Shares will be determined when the new restaurant's 2013 actual sales performance is known with certainty in early 2014.
After giving effect to these additional, equivalent Share entitlements at January 1, 2013, PPL now owns equivalent Shares representing 27.1% of the Company's fully diluted Shares.
Table 1 - Summary of the Company's Outstanding and Fully-Diluted Shares, including an analysis before and after the 20% entitlement holdback:
Issued & Outstanding Issued & Shares, Outstanding Equivalent SharesShares outstanding & issuable Shares, and and Holdback of on December 31, 2012 Equivalent Shares Equivalent Shares-------------------------------------------------------------------------Public float 21,818,392 21,818,392Class B equivalent Shares held by PPL 6,338,554 6,338,554 (1)PPL Additional Class B equivalent Shares - 20% Holdback as of December 31, 2012 - 66,205 (1)Class D equivalent Shares held by PPL 1,547,131 1,547,131 (2)PPL Additional Class D equivalent Shares - 20% Holdback as of December 31, 2012 - 940 (2) -----------------------------------------Fully-diluted Shares 29,704,077 29,771,222-------------------------------------------------------------------------Percentage of fully-diluted Shares available for exchange by PPL at December 31, 2012 26.5% 26.7%-------------------------------------------------------------------------Shares outstanding & issuable after January 1, 2013 Annual AdjustmentPublic float 21,818,392 21,818,392Class B equivalent Shares held by PPL 6,404,759 6,404,759 (1)Class D equivalent Shares held by PPL 1,548,071 1,548,071 (2)Additional PPL Class B equivalent Shares as of January 1, 2013 (80%) 163,054 163,054 (3)Additional PPL Class B equivalent Shares - 20% Holdback as of January 1, 2013 - 40,763 (4)Additional PPL Class D equivalent Shares as of January 1, 2013 (80%) - - (3)Additional PPL Class D equivalent Shares - 20% Holdback as of January 1, 2013 - - (4) -----------------------------------------Number of fully-diluted Shares 29,934,276 29,975,039-------------------------------------------------------------------------Percentage of fully-diluted Shares available for exchange by PPL at January 1, 2013 27.1% 27.2%-------------------------------------------------------------------------(1) The final calculation of the equivalent Shares entitlement related tothe six net Pizza Pizza restaurants that were removed from the Royalty Poolon January 1, 2012 was completed and independently reviewed in early 2013,and became effective as of January 1, 2012. Actual Additional System Salesof new restaurants for 2012 were greater than Forecasted Additional SystemSales. As a result of the true-up, PPL's Class B equivalent Shares increasedby 66,205 and 2012 distributions thereon were paid to PPL in January 2013from the Partnership effective January 1, 2012.(2) The final calculation of the equivalent Shares entitlement related tothe one net Pizza 73 restaurant that was added to the Royalty Pool onJanuary 1, 2012 was completed and independently reviewed in early 2013, andbecame effective as of January 1, 2012. Actual Additional System Sales ofthe new restaurant for 2012 was slightly higher than Forecasted AdditionalSystem Sales. As a result of the true-up, PPL's Class D equivalent Sharesincreased by 940 and 2012 distributions thereon were paid to PPL in January2013 from the Partnership effective January 1, 2012.(3) Additional Class B and Class D equivalent Shares available January 1,2013 are shown in the table. The final equivalent Shares entitlement will bedetermined in early 2014, effective January 1, 2013, once actual sales ofthe restaurants are known. Note that forecasted Pizza 73 system sales addedto the Royalty Pool were zero due to one non-traditional Pizza 73 restaurantopening and one closing. Therefore, PPL has received no additional Class Dequivalent Shares on January 1, 2013.(4) A preliminary calculation of the 20% holdback of equivalent Sharesentitlement was done as of January 1, 2013 using the net, positive,forecasted sales from the addition of 22 restaurants to the Royalty Poolless the closure of 18 non-traditional restaurants subtracted from theRoyalty Pool on January 1, 2013. The final Class B and D equivalent Sharesentitlement will be determined in early 2014, effective January 1, 2013 onceactual sales of the restaurants are known.
Forward-Looking Statements
Certain statements in this press release, including those concerning forecasted sales performance of new restaurants and related adjustments to the Exchange Multipliers, may constitute "forward-looking" statements, which involve known and unknown risks, uncertainties and other factors that 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 press release, such statements include such words as "may", "will", "expect", "believe", "plan", and other similar meaning in conjunction with a discussion of future operating or financial performance. These statements reflect management's current expectations regarding future events and operating performance of the restaurants added to the Royalty Pool and speak only as of the date of this press release. Material factors or assumptions reflected in the presentation of Forecasted Additional System Sales include: demographic and competitive studies, historical sales performance of similar stores and economic forecasts for the retail industry. These forward-looking statements involve a number of risks and uncertainties. The following are some factors that could affect the forecasted performance of these restaurants, causing actual results to differ materially from those expressed in or underlying such forward-looking statements: competition, the store owner's performance, changes in demographic trends, changing consumer preferences and discretionary spending patterns, changes in national and local business and economic conditions, and legislation and governmental regulation. The foregoing list of factors is not exhaustive and should be considered in conjunction with the other risks and uncertainties described in the Fund's 2011 Annual Information Form. The Company assumes no obligation to update these forward looking statements, except as required by applicable securities laws.
Contacts:
Pizza Pizza Limited
Curtis Feltner
Chief Financial Officer
(416) 967-1010 extension 307
cfeltner@pizzapizza.ca
www.pizzapizza.ca
www.pizza73.com
www.sedar.com
