A&W Revenue Royalties Income Fund Announces December 2020 Cash Distribution, Payment of Deferred Royalties by A&W Food Services of Canada Inc. and Special Cash Distribution
TRADING SYMBOL: TSX: AW.UN
VANCOUVER, BC, Dec. 3, 2020 /CNW/ -
December 2020 Cash Distribution and Special Distribution
A&W Revenue Royalties Income Fund (the "Fund") today declared a cash distribution of 10.0 cents per trust unit of the Fund (each a "Unit") for the period November 1 to November 30, 2020 and a special distribution of $0.20 per Unit (the "Special Distribution"). The distributions, totalling $0.30 per Unit, will be paid on December 31, 2020 to unitholders of record at the close of business December 15, 2020. These distributions will be taxed as non-eligible dividends, as the source of funds to pay the distributions are dividends from A&W Trade Marks Inc. ("Trade Marks").
Trade Marks will declare equivalent dividends on the shares of Trade Marks held by A&W Food
Services of Canada Inc. ("A&W Food Services").
Payment of Deferred Royalties
The Fund also announced today that A&W Food Services has confirmed that, by the close of business today, it will pay the previously deferred royalty payments totaling $7,448,000 plus accrued interest of $184,000 payable to the Fund for gross sales reported by restaurants in the royalty pool for the period from February 24, 2020 to May 17, 2020. A&W Food Services will pay this amount from its existing cash reserves.
Concurrent with A&W Food Services' payment of the deferred royalties and interest to the Fund, Trade Marks will pay an aggregate of $3,471,000 to A&W Food Services in respect of dividends declared on the common shares of Trade Marks held by A&W Food Services during the period July 2020 through November 2020. As previously disclosed, Trade Marks and A&W Food Services had agreed that the payment of such dividends would be withheld by Trade Marks until A&W Food Services had paid all deferred royalties together with interest.
Special Cash Distribution
In determining to pay the Special Distribution of $0.20 per Unit, the Trustees considered the receipt of the deferred royalties and interest, payment of the withheld dividends and the cash balance of the Fund after giving effect to the forgoing.
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, the Fund (through Trade Marks and the Partnership) is entitled to royalties equal to 3% of the gross sales reported by A&W restaurants in the Royalty Pool.
The royalty pool is adjusted annually to reflect gross sales from new A&W restaurants, net of the gross 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.
As at December 3, 2020, A&W Food Services owned 23.6% of the common shares of Trade Marks, and therefore owned the equivalent of 23.6% 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.
ABOUT A&W FOOD SERVICES
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®.
Forward-Looking Information
Certain statements in this news 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. Specific forward-looking statements include statements with respect to: the payment and record dates for the special distribution to be paid on the units in December 2020; the payment and record dates for the ordinary December cash distribution to be paid on the units in December 2020; the declaration and payment of equivalent dividends on the common shares of Trade Marks in December 2020; the payment of the deferred royalties and interest by A&W Food Services through the use of its existing cash reserves by close of business today and the concurrent payment by Trade Marks to Food Services of those dividend payments previously withheld by Trade Marks. The forward-looking information is based on assumptions that management considered reasonable at the time it was prepared, which assumptions include: A&W Food Services will use its existing cash reserves to pay the deferred royalties and interest by close of business today and Trade Marks will concurrently pay the withheld dividends to A&W Food Services; no intervening events will arise which would cause the Fund not to pay the Special Distribution or the ordinary December distribution, or Trade Marks not to pay equivalent dividends on its common shares, in accordance with the timing contemplated herein. 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. Those risks and uncertainties include, among other things, risks related to: the possibility that the timing of payment of the Special Distribution or the ordinary December distribution of the Fund and related dividends of Trade Marks could be deferred; the possibility that the payment of the deferred royalties and interest by A&W Food Services and payment of the withheld dividends by Trade Marks could be delayed beyond today's date; and the impacts of the COVID-19 pandemic on the Canadian economy, the QSR industry, the willingness of the general public to dine outside their homes and travel, the level of consumer confidence in the safety of QSR restaurants and A&W restaurants, all of which have and are expected to continue to negatively impact A&W Food Services and the Fund and have or may, as applicable, adversely affect each of A&W Food Services', their franchisees' and the Fund's respective investments, results of operations, financial condition, ability to obtain additional equity or debt financing, or re-finance existing debt, or make interest and principal payments to their respective lenders, and otherwise satisfy their respective financial obligations as they become due and may cause each of A&W Food Services, their franchisees and the Fund to be in non-compliance with one or more of the financial covenants under their respective existing credit facilities and cause a default thereunder. Additional risk factors which could cause results to differ from current expectations and the forward-looking information contained herein are described in the Fund's most recent Management Discussion and Analysis under the heading "Risks and Uncertainties" and the Fund's most recent Annual Information Form under the heading "Risk Factors", available on SEDAR at www.sedar.com. The forward-looking information contained in this news release represent the Fund's expectations as of the date of this news release, and are subject to change after this date. The Fund assumes no obligation to update or revise any forward-looking information, except as required by applicable law.
SOURCE A&W Revenue Royalties Income Fund
For the Fund and A&W Food Services: Kelly Blankstein, Chief Financial Officer: (604) 988-2141 or [email protected]; Follow A&W on Facebook (www.facebook.com/AWCanada) and Twitter @AWCanada or visit www.awincomefund.ca.
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