A&W Revenue Royalties Income Fund announces second quarter 2012 results

TRADING SYMBOL:  The Toronto Stock Exchange - AW.UN

  • Sales and royalty income up 0.9% for the quarter; 2.2% year to date
  • Same store sales impacted by soft economic and business conditions

VANCOUVER, July 24, 2012 /CNW/ - A&W Revenue Royalties Income Fund (the Fund) reported today results for the second quarter ended June 17, 2012. The Fund will hold a conference call to discuss the results on Tuesday, July 24, 2012 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time).  The call can be accessed by dialling toll-free 1-800-814-4859 or (416) 644-3415.  A replay will be available until August 7, 2012, by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode: 4552849#.

Total sales reported by restaurants in the Royalty Pool increased by 0.9% to $189.4 million in the second quarter of 2012 compared to $187.8 million in the second quarter of 2011.  2012 year to date sales increased by 2.2% to $362.8 million compared to $355.0 million in 2011 year to date.  Royalty income was $5,683,000 for the quarter compared to $5,633,000 for the same quarter of 2011.  Year to date royalty income was $10,884,000 compared to $10,650,000 for 2011 year to date.  The increase in sales and royalty income resulted from the increase in the number of restaurants in the Royalty Pool from 715 to 737.

Following a positive first quarter, same store sales for the second quarter of 2012 decreased by 3.0% compared to the second quarter of 2011.  The decrease in same store sales is attributable to tough comparables in the same quarter last year and challenging market conditions, particularly in Ontario and BC.  Year to date same store sales decreased by 1.4%.

"2012 is proving to be another challenging year economically," said Paul Hollands, President and CEO of A&W Food Services of Canada Inc. (A&W Food Services).  "In key markets such as Ontario and BC, we are responding aggressively to current market conditions with promotional programs and activities designed to build customer traffic.  I am pleased to highlight the continued growth of the A&W brand with 12 new restaurants opened to date in 2012."

Distributable cash of $4,060,000 was generated in the quarter compared to $4,236,000 in the same quarter of 2011.  Year to date distributable cash was $7,401,000 compared to $7,817,000 in 2011 year to date.  Distributable cash was affected by new income tax rules for partnerships that alter the timing of the tax.  In addition, there is no longer a tax loss carry forward available to Trade Marks in 2012, compared to a loss carry forward available in 2011 of $1,557,000.  As a result of these increased income taxes, distributable cash per equivalent unit decreased by 2.4 cents per unit to 31.2 cents per unit for the quarter compared to 33.6 cents per unit in the same quarter in 2011, and by 5.2 cents per unit to 56.8 cents per unit compared to 62.0 cents in 2011 year to date.

Total distributions of 35.1¢ per unit were declared in the second quarter of 2012 and 58.5¢ per unit year the date, the same as in 2011. The cumulative surplus of distributable cash at the end of the second quarter of 2012 was $2,014,000, compared to a cumulative surplus of $2,548,000 at the end of the second quarter of 2011.

The Fund's Financial Highlights

 
(dollars in thousands except per unit amounts) 12 week period
ended
Jun 17,2012
12 week
period ended
Jun 19, 2011
Period from
Jan 1, 2012 to
Jun 17, 2012
Period from
Jan 1, 2011 to
Jun 19, 2011
Same store sales growth(1) -3.0% 3.4% -1.4% 0.3%
Number of restaurants in the Royalty Pool 737 715 737 715
Sales reported by the restaurants in the Royalty Pool $189,448 $187,791 $362,817 $355,017
Royalty income $5,683 $5,633 $10,884 $10,650
General and administrative expenses 81 110 364 411
Net third party interest expense 689 688 1,386 1,396
Current income taxes 853 599 1,733 1,024
Partnership distributions to Food Services - - - 2
Total distributable cash generated for distributions and dividends(2) $4,060 $4,236 $7,401 $7,817
Distributable cash per equivalent unit (2012 - 13,041,278 units; 2011 - 12,588,605 units) (2)(3) $0.312 $0.336 $0.568 $0.620
Distributions and dividends declared per equivalent unit $0.351 $0.351 $0.585 $0.585
The Fund's net income (4) $3,865 $17,631 $7,107 $16,101

(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.  See "Same Store Sales Growth".

(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.  See "Distributable Cash".

(3)  The number of equivalent units and distributable cash per equivalent unit in 2012 includes the 90,535 LP units exchangeable for 181,070 common shares of Trade Marks representing the remaining 20% of the consideration for the January 5, 2012 adjustment to the Royalty Pool which is held back until December 2012 when the actual annual sales are reported by the new restaurants.  The number of equivalent units in 2011 includes the 86,873 LP units exchanged for 173,746 common shares of Trade Marks representing the final consideration paid in December 2011 for the January 5, 2011 adjustment to the Royalty Pool.

(4)  The Fund's net income in 2011 was impacted by non-cash changes in the fair value of the Fund units in accordance with IFRS.

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 will be exchanged for additional shares of Trade Marks which are exchangeable for units of the Fund.  A&W Food Services owns 13.7% of the common shares of Trade Marks, and therefore owns the equivalent of 13.7% 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 and on the Fund's website at www.awincomefund.ca.

Additional information relating to the Fund is available at www.sedar.com and www.awincomefund.ca

SOURCE: A&W Revenue Royalties Income Fund

For further information:

Don Leslie, Chief Financial Officer:  (604) 988-2141 or investorrelations@aw.ca


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