TRADING SYMBOL: The Toronto Stock Exchange –
AW.UN
A&W POSTS STRONG FOURTH QUARTER
- Same store sales up 7.9% for the quarter
- Annual same store sales growth 6.3%
- Royalty income increased 14.5% for the quarter and 11.8% for
the year
- Distributable cash increased by $2.5
million
- Payout ratio improved to 96.6%
VANCOUVER, Feb. 11, 2015 /CNW/ - A&W Revenue Royalties
Income Fund (the Fund) and A&W Food Services of Canada Inc.
(A&W Food Services) reported today results for the fourth
quarter and year ended December 31,
2014. The Fund will hold a conference call to discuss
the results on Wednesday, February 11,
2015 at 1:00 p.m. Pacific Time
(4:00 p.m. Eastern Time). The
call can be accessed by dialling toll-free 1-866-530-1553 or (416)
847-6330 Passcode 7601126. A replay will be available until
February 17, 2015, by dialling
toll-free 1-888-203-1112 or (647) 436-0148 Passcode
7601126.
A&W restaurants enjoyed excellent results in the fourth
quarter with same store sales growth of +7.9%. This
raised the same store sales growth for the full year 2014 to 6.3%
as compared to 2013. The strong same store sales growth along
with the sales from 30 net new restaurants added to the Fund's
Royalty Pool in January 2014 led to a
14.5% increase in both sales and royalty income for the quarter and
11.8% for the year.
The amount of cash generated in 2014 for distributions and
dividends increased by 13.4% to $20,813,000. Distributable cash per unit
increased by 10.5¢ to $1.454 per unit
compared to $1.349 per unit in
2013. The annual payout ratio is 96.6% and surplus
distributable cash on hand is $2.4
million.
"We are very pleased to report that our same store sales growth
accelerated in the fourth quarter resulting in a very strong
year. Our strategic initiatives aimed at growing market share
in the quick service restaurant burger market have been extremely
successful," said Paul Hollands,
President and CEO of A&W Food Services. "Over the last
two years, we have introduced beef raised without the use of
hormones or steroids, eggs from hens fed a vegetarian diet without
animal by-products, and chicken raised without the use of
antibiotics. I am pleased that in January this year we were
the first major chain to launch organic and Fair Trade
coffee. All of these "better ingredients" have been very
positively received by our guests."
A&W Food Services' strategy also includes accelerating the
pace of growth of new restaurants. Thirty seven new A&W
restaurants were opened across the country in 2014 with 26 of these
in Ontario and Quebec, both important growth markets for
A&W.
Financial Highlights
|
|
|
|
|
(dollars in
thousands except per unit
amounts)
|
16
week
period
ended
Dec 31,
2014
|
16 week
period
ended
Dec 31,
2013
|
Period
from
Jan 1, 2014
to
Dec 31,
2014
|
Period
from
Jan 1, 2013
to
Dec 31,
2013
|
Same store sales
growth(1)
|
+7.9%
|
+3.1%
|
+6.3%
|
+0.4%
|
Number of restaurants
in the Royalty Pool
|
790
|
760
|
790
|
760
|
Sales reported by the
restaurants in the Royalty Pool
|
$318,365
|
$278,097
|
$957,194
|
$856,379
|
Royalty
income
|
$9,551
|
$8,343
|
$28,716
|
$25,691
|
General and
administrative expenses
|
337
|
252
|
779
|
676
|
Net third party
interest expense
|
760
|
754
|
2,421
|
2,413
|
Current income
taxes
|
1,387
|
1,290
|
4,703
|
4,242
|
Total distributable
cash generated for distributions and
dividends(2)
|
$7,067
|
$6,047
|
$20,813
|
$18,360
|
Distributable
cash per equivalent unit (2014 – 14,319,708
units; 2013 –
13,611,878 units)(2)(3)
|
$0.494
|
$0.444
|
$1.454
|
$1.349
|
Distributions and
dividends declared per equivalent unit
|
$0.468
|
$0.468
|
$1.404
|
$1.404
|
Net
income(4)
|
$5,844
|
$5,621
|
$16,987
|
$21,626
|
Net income, excluding
non-cash items (4)
|
$7,067
|
$6,047
|
$20,813
|
$18,360
|
(1)
|
Same store sales
growth is not an earnings measure recognized by IFRS 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.
|
(2)
|
Distributable cash is
not an earnings measure recognized by IFRS 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.
|
(3)
|
The number of
equivalent units and distributable cash per equivalent unit in 2014
includes the 210,490 LP units exchanged for 420,980 common shares
of Trade
Marks representing
the final consideration paid in December 2014 for the January 5,
2014 adjustment to the Royalty Pool. The number of equivalent
units and
distributable cash
per equivalent unit in 2013 includes the 131,650 LP units exchanged
for 263,300 common shares of Trade Marks representing the
final
consideration paid in
December 2013 for the January 5, 2013 adjustment to the Royalty
Pool.
|
(4)
|
Net income in 2014
and 2013 includes non-cash gains and losses on interest rate swaps,
amortization of deferred financing fees and deferred income
taxes.
These non-cash items
have no impact on the Fund's ability to pay distributions to
unitholders. The Fund's net income excluding these non-cash
items is presented
for information
purposes only.
|
Royalty income for the fourth quarter of 2014 was $9,551,000 based on sales of $318,365,000. This was an increase of 14.5%
from royalty income of $8,343,000 and
sales of $278,097,000 for the fourth
quarter of 2013. Annual royalty income for 2014 was
$28,716,000 based on sales of
$957,194,000, an increase of 11.8%
from royalty income of $25,691,000
and sales of $856,379,000 in
2013.
Distributable cash generated in the fourth quarter of 2014 to
pay distributions to unitholders and dividends to Food Services was
$7,067,000 compared to $6,047,000 in the fourth quarter of 2013, an
increase of 16.9%. Distributable cash generated in 2014 was
$20,813,000 compared to $18,360,000 in 2013, an increase of 13.4%.
Distributable cash generated per equivalent unit increased by
5.0¢ to 49.4¢ per unit in the fourth quarter of 2014 from 44.4¢ for
the fourth quarter of 2013. Annual distributable cash
generated per unit in 2014 increased by 10.5¢ to $1.454 per unit from $1.349 per unit for 2013. The increase in
distributable cash per equivalent unit was due to the increase in
royalty income flowing from the same store sales growth less higher
income tax expense.
Net income for 2014 was $16,987,000 compared to $21,626,000 for 2013. The decrease in net
income was due to non-cash losses on interest rate swaps which are
required to be recorded in net income under International Financial
Reporting Standards. These non-cash items have no impact on
the Fund's ability to pay distributions to unitholders. Of
more interest to unitholders is the distributable cash calculation
which identifies the amount of actual cash available to pay
distributions to unitholders and dividends to Food Services.
As noted above, annual distributable cash increased by 13.4% or
$2,453,000 and the cumulative surplus
of distributable cash at the end of 2014 was $2,372,000 compared to a cumulative surplus of
$1,393,000 at the beginning of the
year.
Four monthly distributions totalling 46.8¢ per unit were
declared in the fourth quarter of 2014, the same as 2013.
2014 annual distributions were $1.404
per unit, the same as 2013. The annual payout ratio improved
to 96.6% for 2014 from 104.1% for 2013. The Fund's objective
is to maintain an annual payout ratio at or below 100%, and this
objective was met in 2014.
On January 5, 2015, the annual
adjustment to the Fund's Royalty Pool took place. On that
date, the number of A&W restaurants for which royalties are
paid to the Fund increased by 32 new restaurants that opened
between October 2013 and September 2014 less eight restaurants that
permanently closed during this period. The addition of these 24 net
new A&W restaurants brings the total number of A&W
restaurants in the Royalty Pool to 814.
About the Fund
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
are exchanged for additional shares of Trade Marks which are
exchangeable for units of the Fund. A&W Food Services
owns 17.4% of the common shares of Trade Marks, and therefore owns
the equivalent of 17.4% 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.
Certain statements in this press release may contain
forward-looking information within the meaning of applicable
securities laws in Canada
(forward-looking information). The words "anticipates", "believes",
"budgets", "could", "estimates", "expects", "forecasts", "intends",
"may", "might", "plans", "projects", "schedule", "should", "will",
"would" and similar expressions are often intended to identify
forward-looking information, although not all forward-looking
information contains these identifying words. The
forward-looking information is based on assumptions that management
considered reasonable at the time it was prepared. The
forward-looking information is subject to risks, uncertainties and
other factors that could cause actual results to differ materially
from the results anticipated by the forward-looking information.
The factors which could cause results to differ from current
expectations are described in the Fund's most recent Management
Discussion and Analysis under the heading "Risks and Uncertainties"
and the Fund's Annual Information Form under the heading "Risk
Factors", available on SEDAR at www.sedar.com.
Additional information relating to the Fund is available at
www.awincomefund.ca.
SOURCE A&W Revenue Royalties Income Fund