Priszm Income Fund reports first quarter 2007 financial results

    TORONTO, April 26 /CNW/ - Priszm Income Fund (TSX: QSR.UN) ("Priszm")
today announced financial results for the first quarter ended March 25, 2007.
The Company operates on a 13-period accounting basis, with the first three
quarters consisting of 12 weeks and the fourth quarter consisting of
approximately 16 weeks.

    First Quarter Financial Highlights

    -   Same store sales from KFC/Taco Bell multi-branded locations up
        2.1 per cent compared to prior year
    -   Sales $100.7 million
    -   EBITDA(*) $3.0 million
    -   Distributable cash(*) $1.0 million
    -   483 restaurants compared to 478 at March 20, 2006

    (*)See section entitled Non-GAAP measures.

    "We look forward to our busy season and the balance of the year when we
generate the bulk of our sales and distributable cash," said John Bitove,
Chairman and Chief Executive Officer of Priszm. "The first quarter is
traditionally a slow period for our restaurants. We remain on target to
multi-brand and open new locations and we will continue to execute our proven
growth strategy over the balance of 2007."

    Priszm Financial Performance

    Sales for the first quarter were $100.7 million, a decrease of
$0.5 million or 0.5% as compared with the same period in 2006. Priszm's
business is seasonal, with sales for the three-month period of January,
February and March typically accounting for 20% of annual sales, compared to
75% over the next three quarters. Unusually harsh weather at the beginning of
the quarter in several provinces also contributed to the slight decline in
    Same store sales from the multi-branded KFC/Taco Bell locations continued
to outperform our stand-alone KFC locations, posting sales growth of 2.1% for
the first quarter. Sales growth in this segment is impacted by the number of
conversion projects that have been in the portfolio for less than one year at
any point in time. In the first quarter of 2007, there were nine such
conversion projects compared to fifteen in the prior time frame last year.
There are currently 94 multi-branded locations of the 483 restaurants Priszm
    Cost of restaurant sales, as a percentage of sales, for the first quarter
was 61.0%, which was up from 60.0% in the first quarter of 2006. Food costs
and labour expenses both increased during the quarter. Food cost increases
were driven mainly by an increase in chicken prices. Raw chicken prices
increased by 3.5% versus the same quarter a year ago and negatively impacted
the business. We do not believe this pricing will continue in the long-term.
Lower food efficiencies, driven by reduced sales volumes, also contributed to
the higher food cost in the quarter. Labour costs rose to 24.7% of sales, up
from 24.1% in the comparable quarter in 2006.
    In the first quarter, EBITDA amounted to $3.0 million compared to $5.2
million in the first quarter of last year. Distributable cash was $1.0 million
in the first quarter of 2007 compared to $3.7 million in the comparable
quarter of 2006. The sales decline, in combination with increased food and
labour costs resulted in reduced profitability relative to the prior year.
    "On the marketing front, one of our most important initiatives is the
recent launch of our zero grams of trans fat products. We have an exciting
line up of products and promotions ready for the balance of the year,
especially during our key summer season," said Jeff O'Neill, President and
Chief Operating Officer of Priszm. "We remain keenly focused on turning around
results in Ontario and we are making good progress. At the end of the first
quarter, we hired Jim Robertson as our new vice-president of operations for
Ontario. Jim has 20 years experience in the retail food industry and for the
last six years he has been with Tim Hortons as part of their expansion in the
Quebec market. Jim's mandate at Priszm is to strengthen performance and to
ensure we are delivering quality product service and speed in each and every
one of our Ontario stores."

    Non-GAAP Measures

    Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
    EBITDA is defined as earnings before interest expense, income taxes,
depreciation and amortization and other items. EBITDA is not a recognized
measure under Canadian generally accepted accounting principles ("GAAP") and
may not be comparable to similar measures used by other companies. Priszm
believes that EBITDA is a useful supplementary measure of operating
performance as it provides investors with an indication of cash available for
distribution prior to debt service and capital expenditures. Investors should
be cautioned, however, that EBITDA should not be construed as an alternative
to net income determined in accordance with GAAP or to cash flows from
operating, investing and financing activities.

    Distributable Cash
    Distributable cash and maintenance capital expenditures are not measures
recognized by GAAP, do not have standardized meanings prescribed by GAAP, and
therefore, may not be comparable to similar measures presented by other
issuers. Priszm believes that distributable cash is a useful supplemental
measure of performance as it provides investors with an indication of the
amount of cash available for distribution to unitholders. However, readers are
advised that distributable cash is not meant to be an alternative to using net
earnings as a measure of profitability or the statement of cash flows.

    Quarterly Analyst Conference Call/Audio Webcast

    Priszm will hold an analyst call at 10 a.m. EST on Thursday April 26,
2007 to discuss its results for the first quarter of 2007. The call may be
accessed by dialing 416-644-3417 within the Toronto area, or 1-800-731-6941
(toll-free) outside of Toronto. The call will be simultaneously audio webcast
    The conference call webcast and a presentation to investors and analysts
will be archived on Priszm's website at A playback of the call
can also be accessed until Saturday May 26, 2007 by dialing 416-640-1917 from
within the Toronto area or 1-877-289-8525 (toll-free) outside of Toronto. The
passcode for the replay is 21226206 followed by the number sign.

    About Priszm Income Fund

    Priszm Income Fund (TSX: QSR.UN) has a 60.2 per cent interest in Priszm
LP and its general partner, Priszm Inc., which owns and operates 483 quick
service restaurants in seven provinces across Canada. The KFC, Taco Bell,
Pizza Hut and Long John Silver's restaurants under Priszm, which generated
annual revenues in excess of $500 million in 2006, serve 1.5 million customers
a week and employ more than 9,000 people. Currently, 94 locations are
multi-branded, combining two or more of the Fund's restaurant concepts. To
find out more about Priszm Income Fund (TSX: QSR.UN), visit our website at

    Forward-Looking Statements

    Any forward-looking statements in this document are based on current
expectations that are subject to significant risks and uncertainties that are
difficult to predict. Actual results might differ materially from projections
suggested in any forward-looking statements due to factors such as the
competitive nature of the quick service restaurant industry, the ability of
Priszm and Priszm LP to execute a growth and development strategy, the
reliance of Priszm and Priszm LP on key personnel, the terms and conditions of
Priszm LP's franchise arrangements, and risk associated with the structure of
income trusts. Priszm and Priszm LP assume no obligation to update the
forward-looking statements, or to update the reasons why actual results could
differ from those reflected in the forward-looking statements. Additional
information identifying risks and uncertainties is contained in Priszm's
filings with the Canadian securities regulators, available at

    The following selected financial information, with the exception of
Distributable Cash and Distributable Cash Per Unit, has been derived from and
should be read in conjunction with the first quarter 2007 unaudited financial
statements and Management's Discussion and Analysis for the year ended
December 31, 2006. Additional information can be found in Priszm's filings at

    (in thousands of dollars except per Unit amounts)

                                                             First Quarter
                                                           2007         2006

    Cash provided by (used in) operating
     activities                                     $    (8,869) $     2,384
    Net change in non-cash working capital(1)            10,695        1,867
    Maintenance capital expenditures(2)                    (799)        (574)
    Distributable cash                              $     1,027  $     3,677
    Distributions made during the period(3)               8,265        8,133
    Distributable cash per Unit                           0.040        0.142
    Distributions per Unit(3)                             0.320        0.315
    Payout ratio                                           805%         221%


    (1) Priszm does not need to finance its working capital as it operates in
        an environment where cash sales precede the payment of restaurant
        food, supplies and labour. While fluctuations will occur within
        quarters, on a full year basis these changes should not impact
        Priszm's ability to make Unit distributions.

    (2) Maintenance capital expenditures refer to capital expenditures that
        are necessary to sustain current revenue levels. Priszm believes that
        funding for maintenance capital expenditures must come out of
        operating cash flow. Development capital expenditures are not
        recorded as a reduction from distributable cash since these
        expenditures are expected to generate increases in future
        distributable cash and distributions.

    (3) Distributions per Unit for the first quarter of 2007 include all
        declared distributions for the period January 1 to March 25, 2007 and
        January 1 to March 20, 2006.

    (in thousands of dollars)

                                                       March 25, December 31,
                                                           2007         2006
    Current assets
    Cash                                            $     7,753  $    29,206
    Trade and other accounts receivable                   3,069        2,327
    Inventories                                           4,141        5,021
    Prepaid expenses                                      2,025        1,044
    Other assets                                            242          241
                                                         17,230       37,839
    Property and equipment                               87,871       88,031
    Deferred financing charge                                 -        1,357
    Franchise rights                                     53,691       54,560
    Goodwill                                            159,227      159,227
                                                        318,019      341,014
    Current liabilities
    Accounts payable and accrued liabilities             46,398       56,338
    Distributions payable to unitholders                  3,857        5,397
                                                         50,255       61,735
    Long-term debt                                       74,751       75,633
    Deferred contract amounts                             5,149        5,072
                                                        130,155      142,440
    Non-controlling interest                             76,824       81,089

    Capital contributions                               142,290      142,290
    Contributed surplus                                     113           99
    Deficit                                             (31,363)     (24,904)
    Accumulated other comprehensive income                    -            -
                                                        111,040      117,485
                                                        318,019      341,014

    (in thousands of dollars, except per unit amounts)

                                                    Period from  Period from
                                                      January 1,   January 1,
                                                        2007 to      2006 to
                                                       March 25,    March 20,
                                                           2007         2006

    Restaurant sales                                $   100,686  $   101,148
    Restaurant cost and expenses
    Cost of restaurant sales                             61,428       60,748
    Restaurant operating expenses                        16,872       16,165
    Rent                                                  8,675        8,342
    Franchise royalty expense                             6,045        6,072
    Depreciation and amortization                         2,930        2,989
                                                         95,950       94,316
    Income from restaurant operations                     4,736        6,832
    General and administrative expenses,
     including amortization of $957 (2006 - $997)         5,836        5,635
    (Loss) income before the undernoted                  (1,100)       1,197
    Interest income                                          45           86
    Interest expense                                     (1,404)      (1,503)
    Loss before non-controlling interest                 (2,459)        (220)
    Non-controlling interest                                978           88
    Net loss for the period                              (1,481)        (132)
    Deficit - Beginning of the period                   (24,904)     (16,069)
    Distributions                                        (4,978)      (4,899)
    Deficit - End of the period                         (31,363)     (21,100)

    Basic and diluted loss per Unit                     (0.0952)     (0.0085)

    (in thousands of dollars)

                                                    Period from  Period from
                                                      January 1,   January 1,
                                                        2007 to      2006 to
                                                       March 25,    March 20,
                                                           2007         2006
    Net loss for the period                              (1,481)        (132)
    Other comprehensive income                                -            -
    Comprehensive loss                                   (1,481)        (132)

    (in thousands of dollars)

                                                    Period from  Period from
                                                      January 1,   January 1,
                                                        2007 to      2006 to
                                                       March 25,    March 20,
                                                           2007         2006
    Cash provided by (used in)
    Operating activities
    Net loss for the period                         $    (1,481) $      (132)
    Add: Non-cash items
      Non-controlling interest                             (978)         (88)
      Amortization of property and equipment              2,941        2,891
      Amortization of franchise rights                      869          856
      Amortization of prepaid financing fees                117           37
      Accretion expenses of interest on
       long-term debt                                        53            -
      Amortization of deferred contract amount               77          239
      (Gain) loss on disposal of property and
       equipment                                             (2)          41
      Write-off of deferred financing fees
       relating to long-term debt repaid                      -          393
      Unit-based compensation                                14           14
      Long term incentive plan accrual                      216            -
    Cash provided by operations                           1,826        4,251
    Net change in non-cash working capital              (10,695)      (1,867)
    Cash provided by (used in) operating
     activities                                          (8,869)       2,384

    Investing activities
    Net proceeds on disposals                                 2           20
    Purchase of property and equipment                   (2,781)      (4,597)
    Purchase of franchise rights                              -          (12)
    Cash used in investing activities                    (2,779)      (4,589)
    Financing activities
    Deferred financing fees on new long-term debt             -         (657)
    Repayment of long-term debt                               -      (60,000)
    Proceeds of new long-term debt                            -       73,596
    Distributions to unitholders                         (9,805)      (8,133)
    Cash provided by (used in) financing
     activities                                          (9,805)       4,806
    Change in cash during the period                    (21,453)       2,601
    Cash - Beginning of the period                       29,206       14,018
    Cash - End of the period                              7,753       16,619

    %SEDAR: 00019884E

For further information:

For further information: Investors: Trish Moran, (416) 624-5133,; Media: Wilcox Group, (416) 203-6666,

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