A&W REVENUE ROYALTIES INCOME FUND ANNOUNCES THIRD QUARTER 2010 RESULTS AND SPECIAL DISTRIBUTION
October 20 2010 - 12:09PM
PR Newswire (Canada)
VANCOUVER, Oct. 20 /CNW/ -- TRADING SYMBOL: The Toronto Stock
Exchange - AW.UN VANCOUVER, Oct. 20 /CNW/ - Highlights -- Same
store sales growth((1)) 1.7% for the third quarter, 2.8% year to
date -- Royalty income increased to $5.7 million, up 4.6% -- Year
to date royalty income increased to $16.1 million, up 8.2% -- Year
to date distributable cash((2)) increased to $15.2 million, up 8.2%
-- Trustees announce Special Distribution of $0.10 per unit,
payable November 30 A&W Revenue Royalties Income Fund (the
Fund) reported today its results for the third quarter ended
September 12, 2010. The Fund will hold a conference call to
discuss third quarter results on Wednesday, October 20, 2010 at
1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be
accessed by dialling toll-free 1-877-974-0446 or (416)
644-3417. A replay will be available until November 3, 2010,
by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode:
4375415#. Same store sales growth in A&W restaurants is
the most important driver of growth in the Fund. With a same
store sales increase of 1.7% for the quarter, A&W has now
posted 30 straight quarterly increases in same store sales going
back to Q2, 2003. Sales reported by restaurants in the
Royalty Pool and corresponding royalty income increased by 4.6% to
$5.7 million compared to $5.4 million in the same quarter of 2009.
This was due to the same store sales growth and the increase in the
number of restaurants to the Royalty Pool from 685 to 700. In
addition, the first quarter of 2010 had six more days of sales
compared to the first quarter of 2009. There were 84 days in the
second and third quarters of both years. Year to date same store
sales growth is reported based on an equal number of days in each
quarter. On a year to date basis, same store sales growth is
now 2.8%. Year to date royalty income increased 8.2% to $16.1
million compared to $14.9 million in 2009 year to
date. The increase in sales and royalty income
resulted in distributable cash per equivalent unit increasing to
37.2¢ for the quarter and $1.036 year to date. "With continuing
uncertain economic conditions and the impact of the Harmonized
Sales Tax on British Columbia, our same store sales growth of 1.7%
for the quarter and 2.8% year to date is a solid result" said Paul
Hollands, President and Chief Executive Officer of A&W Food
Services of Canada Inc. (A&W Food Services). "Our
continued focus on providing our customers with premium burgers
like the Mini Sirloin Twins and our Cruisin' the Dub events through
the summer months contributed to the sales increases. We are
pleased that the Fund is able to pay a second Special Distribution
to unitholders this year." FINANCIAL HIGHLIGHTS (dollars in
12 week 12 week Period from Period from thousands period ending
period ending Jan 1, 2010 Jan 1, 2009 to except per Sep 12, 2010
Sep 6, 2009 to Sep 12, Sep 6, 2009 unit amounts) 2010 Same store
1.7% 0.3% 2.8% 2.5% sales growth ( (1)) Number of 700 685 700 685
restaurants in the Royalty Pool Sales reported $188,453 $180,253
$537,801 $496,824 by the restaurants in the Royalty Pool Royalty
income $5,654 $5,408 $16,134 $14,905 General and $52 $57 $478 $480
administrative expenses Net third $130 $133 $401 $387 party
interest expense Recovery of - - ($43) current income - taxes
Partnership $6 $16 - distributions - to Food Services Total $5,466
$5,218 $15,239 $14,081 distributable cash generated for
distributions and dividends ((2)) Distributable $0.372 $0.365
$1.036 $0.985 cash ((2) )per equivalent unit (2010 - 14,705,897
units; 2009 - 14,289,993 units)( (3)) Distributions $0.318 $0.318
$0.848 $0.848 and dividends declared per equivalent unit Special -
- $0.100 $0.100 distribution per equivalent unit Trade Marks'
$1,195 $1,086 $2,617 $2,045 net earnings The Fund's net $2,741
$2,698 $8,349 $7,614 earnings The Fund's $0.329 $0.324 $1.001
$0.913 basic and diluted earnings per unit (8,340,000 units) (()(1)
)Same store sales growth is not an earnings measure recognized by
generally accepted accounting principles (GAAP) and therefore may
not be comparable to similar measures presented by other
issuers. This information is provided as it is a key driver
of growth in the Fund. See "Same Store Sales Growth". ((2))(
)Distributable cash is not an earnings measure recognized by
GAAP and therefore may not be comparable to similar measures
presented by other issuers. This information is provided as it
identifies the amount of actual cash available to pay distributions
to unitholders and dividends to Food Services. See
"Distributable Cash". ((3)() )For purposes of calculating
distributable cash per equivalent unit, the number of equivalent
units for 2010 includes 83,181 equivalent units representing the
remaining 20% of the consideration for the January 5, 2010
adjustment to the Royalty Pool which is held back until December
2010 when the actual annual sales are reported by the new
restaurants. Financial Results Royalty income for the third
quarter increased by $246,000 or 4.6% to $5,654,000 compared to the
same quarter in 2009. Year to date royalty income increased by
$1,229,000 or 8.2% to $16,134,000 compared to 2009. These increases
in royalty income were driven by the same store sales growth of
1.7% for the quarter and 2.8% year to date, the increase in the
number of restaurants in the Royalty Pool to 700 in 2010 from 685
in 2009, and more days of sales in the first quarter compared to
2009. Cash expenses, interest and taxes decreased by $2,000
in the quarter but increased by $71,000 year to date. The year to
date increase was due to higher interest expense due to the longer
first quarter compared to 2009 and an income tax recovery of
$43,000 in 2009. Distributable cash generated to pay
distributions to unitholders and dividends to A&W Food Services
increased by $248,000 or 4.8% to $5,466,000 for the third quarter
of 2010 compared to the same quarter in 2009. Year to date
distributable cash increased by $1,158,000 or 8.2% to $15,239,000
for 2010 compared to 2009 year to date. Distributable cash per
fully diluted unit and equivalents increased to 37.2¢ from 36.5¢
for the quarter and to $1.036 from 98.5¢ for the year to date
period. Distributions of 31.8¢ per equivalent unit were
declared in the third quarter. Year to date monthly distributions
total 84.8¢ per equivalent unit. The current monthly
distribution rate of 10.6¢ per unit translates into an annualized
distribution of $1.272 per unit. In addition, a Special
Distribution of 10.0¢ per equivalent unit was paid in May this
year, bringing the total amount of cash distributed year to date to
94.8¢ per equivalent unit. Food Services earns dividends on its
investment in Trade Marks at the same rate. The
Trustees of the Fund have approved the payment of a second Special
Distribution of 10¢ per unit, payable on November 30, 2010 to
unitholders of record as at November 15, 2010. A copy of the Fund's
management discussion and analysis and the financial statements of
the Fund, Trade Marks and A&W Food Services for the third
quarter will be available on www.sedar.com and www.awincomefund.ca
on or before October 25, 2010. Overview The Fund is a limited
purpose trust established to invest in Trade Marks, which through
its interest in A&W Trade Marks Limited Partnership (the
Partnership), owns the A&W trade-marks used in the A&W
quick service restaurant business in Canada. The A&W
trade-marks comprise some of the best-known brand names in the
Canadian foodservice industry. In return for licensing A&W Food
Services to use its trade-marks, Trade Marks (through the
Partnership) receives royalties equal to 3% of the sales of A&W
restaurants in the Royalty Pool. A&W is the second largest
quick-service hamburger restaurant chain in Canada. Operating
coast-to-coast, A&W restaurants feature famous trade-marked
menu items such as The Burger Family, Chubby Chicken and A&W
Root Beer. The Royalty Pool is adjusted annually to reflect sales
from new A&W restaurants, net of the sales of any A&W
restaurants that have permanently closed. Additional limited
partnership units (LP units) are issued to A&W Food Services to
reflect the annual adjustment. A&W Food Services' additional LP
units will be exchanged for additional shares of Trade Marks which
are exchangeable for units of the Fund. A&W Food Services
currently owns 43% of the common shares of Trade Marks, and
therefore currently owns the equivalent of 43% of the units of the
Fund on a fully-diluted basis. Trade Marks'
dividends to A&W Food Services and the Fund, and the Fund's
distributions to unitholders are based on top-line revenues of the
A&W restaurants in the Royalty Pool, less interest, general and
administrative expenses and current income taxes of Trade Marks,
and are thereby isolated from many of the factors that impact an
operating business. In October 2006 the Federal Government
announced a new "SIFT Tax" on income trusts. As a result of
this new tax, the Fund initiated a reorganization of the capital
structure of Trade Marks and received unitholder approval of the
reorganization at its AGM on May 4, 2010. This reorganization will
allow the Fund to remain as an income trust and to continue to pay
its regular monthly distributions at 10.6 cents per unit monthly
($1.272 per unit annualized) for the remainder of 2010 and
2011. The reorganization, which will be implemented in
January 2011, will replace the A&W notes of Trade Marks
currently held by the Fund with non-voting common shares of Trade
Marks, and will result in Trade Marks' earnings being taxed at an
effective rate of 18% versus an approximate rate of 25% if the
reorganization were not implemented. As Trade Marks will pay
income taxes in 2011, it is currently anticipated that the Fund
will not receive additional dividends from Trade Marks to enable
the Fund to make special distributions in 2011. However, the amount
of dividends paid by Trade Marks will be evaluated from time to
time depending upon its financial performance at that time.
Certain statements in this report may be forward-looking in
nature. These include references to distributions, liquidity,
dividends, earnings and anticipated earnings from growth in same
store sales and new restaurant openings, A&W Food Services'
strategy to "make A&W the number one national burger choice for
baby boomers and the fastest growing and most successful burger
businesses in Canada" A&W Food Services' plans to respond
tactically to market conditions; A&W Food Services' plans to
build the A&W brand through advertising and marketing
campaigns, menu innovation, facilities design and expanding to
serve customers in new markets; and A&W Food Services' plans to
modernize and enhance the appeal of its restaurants. Actual
results may differ materially from those expressed or implied in
these forward-looking statements. The forward-looking
statements are based on assumptions that management considered
reasonable at the time they were prepared. These
forward-looking statements are subject to a number of risk factors,
including the ability of A&W Food Services to implement its
marketing strategies and opening new A&W restaurants, general
economic and business conditions, unemployment, harmonization of
sales taxes, financial and political instability, and other factors
disclosed previously and from time to time in the Fund's public
filings. Additional information relating to the Fund is on
SEDAR at www.sedar.com and on the Fund's website at
www.awincomefund.ca. To view this news release in HTML
formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/October2010/20/c3789.html
pDon Leslie, Chief Financial Officer: (604) 988-2141 or a
href="mailto:investorrelations@aw.ca"investorrelations@aw.ca/a/p
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