A&W Revenue Royalties Income Fund Reports Strong Third Quarter 2015 Results and Announces Distribution Increase

TRADING SYMBOL:  The Toronto Stock Exchange – AW.UN   

VANCOUVER, Oct. 13, 2015 /CNW/ - HIGHLIGHTS

  • A&W enjoys another strong quarter
  • Double digit sales growth of 11.4% for the quarter and 11.6% year to date
  • Same store sales growth up 8.3% for the quarter
  • Distributions increased by 3.3% - second increase of the year

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 third quarter ended September 6, 2015.  The Fund will hold a conference call to discuss the results on Tuesday, October 13, 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 9763518.  A replay will be available until October 21, 2015, by dialling toll-free 1-888-203-1112 or (647) 436-0148 Passcode 9763518. 

Sales reported by the 814 A&W restaurants in the Royalty Pool were $261,177,000 for the quarter, an increase of 11.4% from the same quarter of the prior year.  Year to date sales increased by 11.6% to $712,735,000.  The increase in Royalty Pool sales during the quarter and year to date reflect the same store sales increases of 8.3% for the quarter and 8.8% year to date, and the sales of the 24 net new restaurants added to the Fund's Royalty Pool in January 2015.

As a result of the strong performance of the Fund and the underlying A&W restaurants, the Fund is pleased to announce that it is increasing monthly cash distributions by 3.3%, from 12.1¢ per unit to 12.5¢ per unit beginning with the October 2015 distribution.  On an annualized basis this represents a distribution rate of $1.50 per unit.  The October distribution of 12.5¢ per unit will be payable to unitholders of record on November 15, 2015 and will be paid on November 30, 2015.

"We are very pleased with A&W's continued strong sales growth, both for the quarter and year to date", said Paul Hollands, Chairman and CEO of A&W Food Services.  "Our relentless focus on bringing better ingredients to our guests, like our beef raised without the use of hormones or steroids, eggs from hens raised without the use of antibiotics and fed an all-vegetarian diet, chicken raised without the use of antibiotics, and organic and Fair Trade coffee, is having a powerful impact.  Our strong restaurant expansion program is also fuelling growth.  I am delighted that our strong results have allowed the Fund to increase distributions for the second time this year." 

Royalty income increased by $804,000 or 11.4% from $7,031,000 in the third quarter of 2014 to $7,835,000 in the third quarter of 2015.  Year to date, royalty income increased by $2,217,000 or 11.6% from $19,165,0000 in 2014 to $21,382,000 in 2015 year to date.

Distributable cash available to pay distributions to unitholders and dividends to A&W Food Services increased by $634,000 or 12.4% from $5,133,000 (35.8¢ per unit) to $5,767,000 (39.0¢ per unit) for the quarter, and by $1,681,000 or 12.2% from $13,746,000 (96.0¢ per unit) to $15,427,000 ($1.044 per unit) year to date.  The surplus of distributable cash on hand is $3,486,000.  The Fund's payout ratio was 86.9% for the third quarter of 2015 and 93.3% year to date.  The trailing four quarter payout ratio is 92.1%. 

Financial Highlights







(dollars in thousands except per unit amounts)


Period from
Jun 15, 2015 to
Sep 6, 2015

Period from
June 16, 2014
to Sep 7, 2014

Period from
Jan 1, 2015 to
Sep 6, 2015

Period from
Jan 1, 2014 to
Sep 7, 2014

Same store sales growth(1)


+8.3%

+5.7%

+8.8%

+5.8%

Number of restaurants in the Royalty Pool


814

790

814

790

Sales reported by the restaurants in the Royalty Pool


$261,177

$234,378

$712,735

$638,829

Royalty income


$7,835

$7,031

$21,382

$19,165

General and administrative expenses


100

99

441

442

Net third party interest expense


557

559

1,646

1,661

Current income taxes


1,411

1,240

3,868

3,316

Total distributable cash generated for distributions and dividends(2)


$5,767

$5,133

$15,427

$13,746

Distributable cash per equivalent unit (2015 – 14,781,656 units;
2014 – 14,319,708 units)(2)(3)  


$0.390

$0.358

$1.044

$0.960

Distributions and dividends declared per equivalent unit


$0.359

$0.351

$0.944

$0.936

Net income(4)


$4,386

$4,550

$13,613

$11,143

Net income, excluding non-cash items(4)


$5,767

$5,133

$15,427

$13,746



(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 A&W Food Services. 

(3)   

The number of equivalent units and distributable cash per equivalent unit in 2015 includes the 92,390 LP units exchangeable for 184,780 common shares of Trade Marks representing the remaining 20% of the consideration for the January 5, 2015 adjustment to the Royalty Pool which is held back until December 2015 when the actual annual sales are reported by the new restaurants.  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. 

(4)  

Net income in 2015 and 2014 includes non-cash 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. 

The Fund's net income for the third quarter of 2015 was $4,386,000 compared to $4,550,000 for the third quarter of 2014.  Year to date net income was $13,613,000 compared to $11,143,000 for the prior year.  Net income in both years includes non-cash 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.  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 A&W Food Services.  As noted above, distributable cash increased by 12.4% for the quarter and 12.2% year to date and the Fund has a cumulative surplus of distributable cash on hand of $3,486,000.        

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.

Follow A&W on Facebook (www.facebook.com/AWCanada) and Twitter @AWCanada or visit www.awincomefund.ca.

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.   

SOURCE A&W Revenue Royalties Income Fund

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

RELATED LINKS
www.awincomefund.ca

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