Priszm Income Fund reports solid year-end and fourth quarter 2006 financial results

    Distributable cash increases more than 23 per cent versus 2005
    First ever special cash distribution announced at year end
    Priszm announces name change

    TORONTO, March 8 /CNW/ - Priszm Income Fund (TSX: QSR.UN) ("Priszm")
today announced it has changed its name and also reported its financial
results for the full year and fourth quarter ended December 31, 2006.
    Priszm announced today that effective immediately it is changing its name
from Priszm Canadian Income Fund to Priszm Income Fund. In addition, its
operating companies, KIT Inc. and KIT Limited Partnership, have changed their
names to Priszm Inc. and Priszm LP, respectively.

    2006 Financial Highlights
    -   Sales $503.4 million, an increase of 3.9 per cent from the prior year
    -   EBITDA(*) $44.2 million, an increase of 21.7 per cent versus 2005
    -   Distributable cash(*) $36.4 million, an increase of 23.2 per cent
        from the prior year
    -   Sales from KFC/Taco Bell multi-branded locations up 6.4 per cent
        compared to 2005
    -   Quebec same store sales growth up 8.1 per cent over 2005
    -   50 per cent of Subordinated Limited Partnership Units qualified for
        conversion into Exchangeable Units
    -   Completed 13 multi-brand projects

    Fourth Quarter 2006 Financial Highlights
    -   Sales $156.4 million, a 4.1 per cent increase from the comparative
    -   EBITDA(*) $13.3 million, up 9.8 per cent from the fourth quarter of
    -   Distributable cash(*) $11.1 million, up 11.5 per cent from the same
        quarter last year
    -   Sales from KFC/Taco Bell multi-branded locations, up 4.9 per cent
        from the comparative period
    -   Quebec same store sales growth up 9.7 per cent from the fourth
        quarter of 2005
    -   Announced monthly cash distribution increased from $0.105 to $0.1067
    -   Special distribution of $0.06 per unit declared in December

    (*) See section entitled Non-GAAP measures.

    "2006 was a year of solid growth and key achievements in the business
with great performance out of Quebec, continued success from the execution of
our multi-branding strategy, and the beginning of a positive response to our
action plans in Ontario," said John Bitove, Chairman and Chief Executive
Officer of Priszm. "Our strong performance throughout the year, in terms of
both sales growth and operational efficiency, allowed us to reward our
unitholders with a special cash distribution of $0.06 at the end of the year.
We are very pleased with our performance and will continue to grow the
business in 2007."

    Priszm Financial Performance

    Annual sales were $503.4 million, an increase of $18.9 million or 3.9 per
cent from the prior year. Sales for the fourth quarter rose from
$150.2 million in 2005 to $156.4 million in 2006, a 4.1 per cent increase.
Growth in sales was driven by solid marketing campaigns which included
successful new products and flavour extensions, promotional individual meal
underlays that consistently drove growth in small pack offerings, and
successful targeted coupon mailers. The net increase in number of restaurants
accounted for $4.1 million of the total annual sales growth.
    Full year income from restaurant operations was $52.2 million, an
increase of $7.7 million or 17.4 per cent over the prior year. Income from
restaurant operations improved by 14.8 per cent in the fourth quarter of 2006,
reaching $15.5 million and up from $13.5 million in the fourth quarter of
2005. As a percentage of sales, income from restaurant operations improved to
9.9 per cent from 9.0 per cent in the same quarter a year ago. The combination
of sales growth, driven by new products, marketing programs, strong
operational execution and lower costs helped increase restaurant profitability
relative to the prior year.
    Within the fourth quarter, cost of restaurant sales was lower by 1.2 per
cent driven by lower food cost. Restaurant operating expenses were higher than
the same quarter a year ago due to the timing of prior year advertising and
marketing expenses. During 2005, advertising expenses were reduced during the
fourth quarter in order to bring the full year expense in line with historical
    Income from restaurant operations expressed as a percentage of sales,
improved to 10.4 per cent from 9.2 per cent in 2005. Food cost was lower than
prior year in all four quarters of the year while labour cost increased
slightly. Annual restaurant operating expenses amounted to $76.4 million or
15.2 per cent of sales which was an improvement from 15.4 per cent in 2005.
    At December 31, 2006, Priszm had $29.2 million of cash and cash
equivalents compared to $14.0 million at the end of 2005. This increase is due
to strong earnings performance, a change in the level of accounts payable and
an increase in financing activities.
    On a full year basis, EBITDA and distributable cash amounted to
$44.2 million and $36.4 million, respectively, compared to $36.4 million and
$29.5 million in 2005, respectively. In the fourth quarter, EBITDA amounted to
$13.3 million compared to $12.1 million in the fourth quarter of 2005 and
distributable cash was $11.1 million compared to $10.0 million for the fourth
quarter of 2005.
    "2007 will build on the momentum we created over the last twelve months,"
said Jeff O'Neill, President and Chief Operating Officer of Priszm. "This year
is one of opportunity for Priszm and we intend to leverage our strengths in
multi-branding, consumer insight, and product and promotional innovation in
order to continue our positive growth trend. We have a clear strategy in place
to grow Priszm and the company-wide discipline and operational strength to
execute with excellence. We will continue to grow the business through our
world leading multi-branding concept and acquisitions. Our goal is to maximize
value for our unitholders while continuing, as always, to provide exceptional
products and service to our customers."

    Monthly Distribution

    The Company also announced today its cash distribution for the month of
March 2007 of $0.1067 per unit payable on April 13, 2007 to Ordinary
Unitholders of record on March 30, 2007. The March distribution is the 40th
consecutive cash distribution declared since Priszm began operations on
November 10, 2003.
    Priszm also announced a cash distribution for the month of March 2007 of
$0.1067 per unit to holders of Exchangeable Limited Partnership Units of
record on March 7, 2007. In addition, Priszm announced a cash distribution of
$0.3201 per unit to holders of Subordinated Limited Partnership Units of
record on March 7, 2007.

    Conversion of Subordinated Limited Partnership Units

    In accordance with the terms of the Subordinated Limited Partnership
Units, 2,582,000 Subordinated Limited Partnership Units were automatically
converted into 2,582,000 Exchangeable Units on March 8, 2007. As a result,
there are currently 7,688,000 Exchangeable Units and 2,582,000 Subordinated
Limited Partnership Units outstanding.

    Fourth Quarter 2006 Key Operational Achievements

    Priszm Opens Quebec's First Taco Bell Restaurant

    In December, Priszm opened the first-ever Taco Bell in Quebec. The
KFC/Taco Bell multi-brand restaurant in Montreal has already exceeded traffic
expectations. The Company has plans to open additional KFC/Taco Bell
multi-branded locations in Quebec in 2007.

    KFC Canada Phases in Zero Grams Trans Fat Menu in All Restaurants

    During the fourth quarter of 2006, KFC Canada began to phase in a
Canadian-made trans fat free canola cooking oil that will reduce the trans fat
in a number of menu items to zero grams.
    The new canola cooking oil was introduced during the last two months of
2006 and completed in early 2007. In keeping with the Company's goal to
provide customers with the best quality Canadian products possible, Priszm
developed a Canadian-made trans fat free cooking oil that delivers the same
great KFC taste that customers have come to love with zero grams of trans fat
in the Colonel's Original Recipe Chicken. In addition, KFC Canada's
preliminary nutritional analysis has also shown that with the new trans fat
free cooking oil, saturated fat levels have decreased an average of 40 per
cent across KFC products.

    Increase in Cash Distributions

    On November 15, 2006, the Trustees of the Fund declared an increase in
cash distributions to holders of Ordinary and Exchangeable units, effective
with the distribution paid on December 15, 2006. With this annualized increase
of $0.02, unitholders will receive $1.28 per annum, or $0.1067 per unit per
month. This is the second increase in cash distribution levels since the
Fund's inception in November 2003.

    Special Cash Distribution

    On December 20, 2006, Priszm announced a special year end cash
distribution of $0.06 per unit payable on January 15, 2007 to Ordinary and
Exchangeable Unitholders of record on December 29, 2006. Including this
special dividend payout, Priszm's cash distributions declared in 2006 totaled
$1.323 per unit. Priszm also announced a special year end distribution to
holders of Subordinated Limited Partnership Units of $0.06 per unit payable on
January 15, 2007. The special distribution, valued at approximately
$1.5 million, represents excess distributable cash arising from Priszm's
strong financial performance in 2006 and is not indicative of future

    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. The Company
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. The Company 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 Friday March 9, 2007
to discuss its fourth quarter and year-end results. The call may be accessed
by dialing 416-644-3414 within the Toronto area, or 1-800-733-7560 (toll-free)
outside of Toronto. The call will be simultaneously audio webcast at
    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 Monday April 9, 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 21217592 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, which owns and operates 482 quick service restaurants in seven provinces
across Canada. The KFC, Taco Bell, Pizza Hut and Long John Silver's
restaurants under Priszm generate annual revenues of approximately
$503 million, serve 1.5 million customers a week and employ more than 9,000
people. Currently, 92 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
EBITDA, Distributable Cash and Distributable Cash Per Unit, has been derived
from and should be read in conjunction with the historical audited financial
statements of Priszm for the years ended December 31, 2006 and 2005, and the
notes thereto included in Priszm's annual filings at

    (in thousands of dollars except per Unit amounts)

                                  Fourth Quarter             Year-to-Date
                                 2006         2005         2006         2005
    Cash provided by
     activities           $    22,239  $    16,240  $    52,859  $    34,920
    Net change in
     non-cash working
     capital(1)                (9,428)      (5,011)     (12,165)      (1,094)
    Maintenance capital
     expenditures(2)           (1,707)      (1,267)      (4,329)      (4,313)
    Distributable cash    $    11,104  $     9,962  $    36,365  $    29,513
    Distributions made
     during the period(3)      12,480       10,844       34,169       32,533
    Distributable cash
     per Unit                   0.430        0.386        1.408        1.143
    Distributions per
     Unit(2)                    0.483        0.420        1.323        1.260
    Payout ratio
     before special
     dividend                98.4 per    108.9 per     89.7 per    110.2 per
                                 cent         cent         cent         cent
    Payout ratio            112.4 per    108.9 per     94.0 per    110.2 per
                                 cent         cent         cent         cent


    (1) The Company 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 will not impact
        the Company's ability to make Unit distributions.

    (2) Maintenance capital expenditures refer to capital expenditures that
        are necessary to sustain current revenue levels. The Company 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. Fourth quarter maintenance
        capital was higher than the same quarter a year ago due to timing of
        expenditures with the full year cost in 2006 consistent with 2005.

    (3) Distributions per Unit include all declared distributions for the
        period January 1 to December 31 for each respective year, including
        the special dividend of $0.06 per Unit or $1,549 in 2006.

    As at December 31 (in thousands of dollars)
                                                           2006         2005
    Current assets
    Cash and cash equivalents                        $   29,206   $   14,018
    Trade and other accounts receivable                   2,327        1,669
    Inventories                                           5,021        5,014
    Prepaid expenses                                      1,044        1,020
    Other assets                                            241          239
                                                         37,839       21,960
    Property and equipment                               88,031       84,869
    Deferred financing charge                             1,357          550
    Franchise rights                                     54,560       57,841
    Goodwill                                            159,227      157,187
                                                        341,014      322,407
    Current liabilities
    Accounts payable and accrued liabilities             56,338       43,282
    Current portion of long-term debt                         -       60,000
    Distributions payable to unitholders                  5,397        3,795
                                                         61,735      107,077
    Long-term debt                                       75,633            -
    Deferred contract amounts                             5,072        2,148
                                                        142,440      109,225
    Non-controlling interest                             38,207       41,140

    Capital contributions                               193,350      193,350
    Contributed surplus                                      99           38
    Deficit                                             (33,082)     (21,346)
                                                        160,367      172,042
                                                        341,014      322,407

    For the years ended December 31 (in thousands
     of dollars, except per unit amounts)
                                                           2006         2005
    Restaurant sales                                 $  503,385   $  484,515
    Restaurant cost and expenses
    Cost of restaurant sales                            294,507      288,113
    Restaurant operating expenses                        76,442       74,455
    Rent                                                 36,421       35,541
    Franchise royalty expense                            30,224       29,086
    Depreciation and amortization                        13,097       11,933
    Write-down of restaurant assets                         499          919
                                                        451,190      440,047
    Income from restaurant operations                    52,195       44,468
    General and administrative expenses,
     including amortization of $4,176
     (2005 - $4,212)                                     27,450       26,003
    Income before the undernoted                         24,745       18,465
    Interest income                                         411          363
    Interest expense                                     (5,656)      (3,348)
    Income before non-controlling interest               19,500       15,480
    Non-controlling interest                             (3,900)      (3,096)
    Net income for the year                              15,600       12,384
    Deficit - Beginning of year                         (21,346)      (7,703)
    Distributions                                       (27,336)     (26,027)
    Deficit - End of year                               (33,082)     (21,346)
    Basic and diluted earnings per Unit                   0.755        0.599

    For the years ended December 31
     (in thousands of dollars)
                                                           2006         2005
    Cash provided by (used in)
    Operating activities
    Net income for the year                          $   15,600   $   12,384
    Add: Non-cash items
      Non-controlling interest                            3,900        3,096
      Amortization of property and equipment             12,485       11,427
      Write-down of restaurant assets to net
       recoverable amount                                   499          919
      Amortization of franchise rights                    3,743        3,659
      Amortization of deferred financing fees               215          455
      Step lease amortization                             1,045        1,059
      Unit-based compensation                                61           38
      Long-term incentive plan accrual                    1,072            -
      Loss on disposal of property and equipment            591          789
      Write-off of deferred financing fees
       relating to long-term debt                           393            -
    Cash provided by operations                          39,604       33,826
    Net change in non-cash working capital               12,165        1,094
    Supply contract prepayment                            1,090            -
    Cash provided by operating activities                52,859       34,920
    Investing activities
    Acquisition of restaurants, net of acquired
     restaurant cash                                     (3,572)      (3,160)
    Purchase of property and equipment                  (15,447)     (20,941)
    Purchase of franchise rights                           (329)        (388)
    Net proceeds on disposals                                26        1,037
    Cash used in investing activities                   (19,322)     (23,452)
    Financing activities
    Deferred financing fees                              (1,415)        (157)
    Repayment of long-term debt                         (60,000)           -
    Proceeds of new long-term debt                       75,633            -
    Distributions to unitholders                        (32,567)     (32,533)
    Cash used in financing activities                   (18,349)     (32,690)
    Change in cash and cash equivalents
     during the year                                     15,188      (21,222)
    Cash and cash equivalents - Beginning of year        14,018       35,240
    Cash and cash equivalents - End of year              29,206       14,018
    %SEDAR: 00019884E

For further information:

For further information: Investors, Trish Moran, (416) 739-2906,; Media, Wilcox Group, (416) 203-6666,

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