PDM Royalties Income Fund announces second quarter and six months 2009 financial results



    MONCTON, NB, Aug. 14 /CNW/ - PDM Royalties Income Fund ("PDM" or the
"Fund") (TSX: PDM.UN, PDM.DB) announced today its financial results for the
second quarter and six months ending June 30, 2009. The Fund indirectly owns
the trademarks and intellectual property for the Pizza Delight(R), Mikes(R),
Scores(R), and Baton Rouge(R) brands and has licensed them to Imvescor.
    Total royalty income for the fund was $5.16 million during the second
quarter of 2009 compared to $5.23 million for the same quarter in 2008. For
the six-month period ending June 30, 2009, total royalty income was $10.18
million compared to $10.11 million last year.
    On a comparable basis, same stores sales (SSSG) in the second quarter for
the four brands posted a 5.1% decline due largely to difficult general
economic conditions that have adversely affected the restaurant industry in
Canada. However, the performance of Imvescor brands compares favourably to
other publicly traded restaurant funds, which as a group averaged SSSG of
-5.5% during the second quarter. Overall results were affected by fires that
forced the closing of two restaurants (one Baton Rouge restaurant and one
Scores restaurant), which were closed for rebuilding. Including those
restaurants, SSSG during the quarter was -7.3%.
    For the Quarter, at the brand level, SSSG for Pizza Delight was -1.3%
compared to a 3.8% increase for the same period in 2008. Mikes experienced a
SSSG decline of -7.4% compared to an increase of +3.8% for the same period in
2008. Excluding the unit affected by fire, Scores is estimated to have
recorded SSSG of +0.1% compared to -2.7% for the same period in 2008. Baton
Rouge, which operates in the casual dining segment that is most affected by
the recession, experienced an estimated SSSG decline of -11.5% compared to
growth of +0.6% for the same period in 2008. The Baton Rouge results also
exclude the unit affected by the fire.
    "Despite very tough economic conditions, two of our brands, Pizza Delight
and Scores, performed very well in the quarter" said William Lane, executive
vice-president and chief financial officer of Imvescor. "We believe that all
of our brands are fundamentally strong and will continue to be strong
competitors in our traditional markets in Eastern Canada, and in new locations
and markets, including Ontario and Alberta.
    System sales from the 259 restaurants in the royalty pool were $101.9
million for the quarter, a 2.2% decrease compared to system sales of $104.2
million for Royalty Pool restaurants in the same quarter last year. For the
six months ending June 30, 2009, system sales were $203.3 million compared to
$200.9 million in the same six months in 2008. Year-to-date in 2009, Imvescor
opened one new Scores restaurant and renovated two Pizza Delight restaurants,
three Mikes restaurants and one Scores restaurant.
    Management conducts regular impairment tests on its intangible assets in
accordance with Canadian generally accepted accounting principles. The
prolonged weakness in the financial markets has contributed to increased
discount rates used in the valuation process compared to previous quarters.
The second quarter impairment testing indicated that the franchise rights held
at the partnership level are impaired and required a pre-tax non-cash
adjustment of approximately $50.6 million of which the Fund share is
approximately $37.2 million.
    Net loss of the Fund was $32.6 million ($4.361 per unit on a fully
diluted basis) compared to net earnings of $3.3 million ($0.402 per unit on a
fully diluted basis) for the same quarter in 2008. The decrease in net
earnings is due primarily to the impairment charge and slower sales during the
current recessionary period.
    Complete financial statements and Management's Discussion and Analysis of
Results are available at www.sedar.com.

    
    Conversion to Corporate Status and Combination Agreement to form Imvescor
    Restaurant Group Inc.
    

    On July 28, 2009, PDM announced that it had signed a definitive agreement
(the "Combination Agreement") with 7209835 Canada Inc. ("PDMCo"), Imvescor
Inc. ("Imvescor"), Imvescor Restaurants Inc. ("IRI") and Imvescor's two
shareholders, General Financial Corporation Ltd. ("GFC") and Delighted Guests
Ltd. ("DGL") and related parties, setting out the principal terms of a
proposed arrangement (the "Arrangement") to form a new, publicly-traded
corporation which will be named Imvescor Restaurant Group Inc. ("IRG"). If
approved by unitholders, IRG will own all intellectual property and operate
franchised and corporate restaurants under the brand names Pizza Delight(R),
Mikes(R), Scores(R), and Baton Rouge(R).
    The Trustees of the Fund have recommended unanimously that unitholders
vote their proxy in favour of the transaction, which in the opinion of the
Trustees and their advisors, will have several positive benefits for
unitholders including the following:

    
    1. Future growth in the Imvescor restaurant system will accrue to all
       investors equally.

      - The arrangement between PDM and Imvescor currently includes a highly
        dilutive "vend-in" formula, by which Imvescor receives shares as
        payment for royalty streams from restaurants vended in to PDM. This
        arrangement, which is common to all restaurant royalty income funds,
        will be eliminated.

      - The transaction is anti-dilutive to the public unitholders of PDM.
        Since PDM completed its Initial Public Offering in 2005, Imvescor's
        interest in the Fund rose from 10% to 37%. As a result of the
        transaction, Imvescor`s interest will decrease to approximately 35%
        of the new company from 37%. Independent PDM unitholders will
        therefore hold a larger equity interest in the new company
        (approximately 65%) than their interest in PDM today (approximately
        63%)

      - All shareholders will subsequently benefit from the same tax
        treatment. The right of Imvescor shareholders to continue to receive
        their share of income from the limited partnership on a pre-tax basis
        after January 2011 will be eliminated.

    2. The new corporate structure will provide greater transparency to
       shareholders and the Board of the new Imvescor Restaurant Group, which
       will answer to all shareholders and will oversee the Imvescor business
       and its management team.

    3. A simplified corporate structure will consolidate intellectual
       property, debt, cash flow and earnings within one entity.

      - Imvescor Restaurant Group will enjoy full ownership of current and
        future brands and related intellectual property

      - The consolidation of cash flow within Imvescor Restaurant Group will
        facilitate financing, business planning and capital spending. In
        addition, the consolidation of debt and assets within a single entity
        is expected to increase financial flexibility and reduce borrowing
        costs

      - Overhead and administrative expenses will be reduced.

    4. As a result of the transaction, Imvescor Restaurant Group is expected
       to implement a cash management policy that will enable it to :

      - Pay dividends in accordance with a dividend policy to be determined
        by the Board of Directors of Imvescor Restaurant Group; and

      - Create additional value by paying down debt or repurchasing IRG
        shares in the market
    

    RSM Richter Inc. ("RSM Richter") has prepared a formal valuation of the
Imvescor business and the IRG shares to be received by unitholders if the
Arrangement is approved. RSM Richter has also provided an opinion to the
trustees of PDM that the Arrangement is fair, from a financial point of view,
to the unitholders other than Imvescor. A copy of the fairness report is
included as an appendix to PDM's information circular prepared in connection
with the Meeting (the "Information Circular"), which has been mailed to
unitholders.
    Unitholders are being asked to vote on the transaction at the Annual and
Special Meeting of Unitholders that will take place on September 4, 2009 in
Halifax, Nova Scotia. For the transaction to be approved, 66 2/3% of PDM's
voting units represented at the meeting (including a majority of the voting
units held by disinterested unitholders) must vote in favour. The transaction
must also meet other conditions, including a condition to secure a commitment
letter for re-financing prior to closing, and Final Approval of the Nova
Scotia Supreme Court. Closing of the transaction is expected to take place on
or about October 10, 2009. For more detailed information, please consult the
Information Circular, which is available on SEDAR (www.sedar.com).

    About PDM Royalties Income Fund

    The Fund is a limited purpose open-ended trust established under the laws
of Ontario. The Fund indirectly owns the trademarks and intellectual property
for the Pizza Delight(R), Mikes(R), Scores(R), and Baton Rouge(R) brands and
has licensed them to Imvescor in consideration for a royalty equal to 4% of
system sales for Pizza Delight(R) and Mikes(R) restaurants, and a royalty rate
of 6% for Scores(R) and Baton Rouge(R) restaurants.

    About Imvescor

    Imvescor is a privately owned corporation, headquartered in Moncton, New
Brunswick. Pizza Delight(R) operates primarily in Atlantic Canada, where it
dominates the family/mid-scale segment. Mikes(R) and Scores(R) restaurants
operate primarily in Quebec in the family and casual dining segments and the
take-out and delivery segments. Baton Rouge(R) operates in the Province of
Quebec and Ontario in the casual dining segment.

    Forward-Looking Statements

    Certain information regarding the Fund contained herein may constitute
forward-looking statements within the meaning of applicable securities laws.
Forward-looking statements may include estimates, plans, expectations,
opinions, forecasts, projections, guidance or other statements that are not
statements of fact. Although the Fund believes that the expectations reflected
in such forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to have been correct. The Fund cautions that
actual performance will be affected by a number of factors, many of which are
beyond the Fund's control, and that future events and results may vary
substantially from what the Fund currently foresees. Discussion of the various
factors that may affect future results is contained in the annual information
form of the Fund and the Information Circular, which are available at
www.sedar.com. The Fund assumes no obligation to update such forward-looking
statements, except as required by applicable securities laws. The Fund's
forward-looking statements are expressly qualified in their entirety by this
cautionary statement.
    %SEDAR: 00018600EF




For further information:

For further information: Mélanie Joly, Cohn & Wolfe Public Relations,
(514) 845-2257, ext 247; William R. Lane, CMA, Executive Vice-President and
Chief Financial Officer, Imvescor Inc., (506) 853-8412; www.pdmfund.ca,
www.imvescor.ca, www.pizzadelight.ca, www.mikes.ca, www.scores.ca or
www.batonrougerestaurants.com

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PDM ROYALTIES INCOME FUND

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