Priszm Income Fund reports year-end and fourth quarter 2007 financial results

    Plans to refocus, restructure and reorganize business are well underway
    to establish an improved platform for future growth

    TORONTO, March 3 /CNW/ - Priszm Income Fund (TSX: QSR.UN) ("Priszm")
today reported its financial results for the full year and fourth quarter
ended December 30, 2007.

    Fiscal 2007 Highlights

    -   Full-year sales from continuing operations of $383.8 million
    -   Priszm generated EBITDA(*) of $30.1 million and distributable cash(*)
        of $20.9 million for fiscal 2007 prior to taking a one-time
        restructuring charge in the fourth quarter of 2007
    -   Strong cash position with $24.5 million in cash, cash equivalents and
        short-term investments
    -   Quebec-based multi-branded locations increased sales by 11.2 per cent
    -   Closed 19 underperforming restaurants in 2007 and one subsequent to
        year end
    -   Initiated the sales process for 128 locations
    -   Completed 11 multi-brand projects
    -   Reinstated monthly distribution to $0.10 per unit commencing with the
        January 2008 distribution

    (*)See section entitled Non-GAAP measures.

    "As we promised in October, our distribution has been reinstated to $0.10
per unit per month," said John Bitove, Chairman and Chief Executive Officer of
Priszm. "We believe our forecast for this year is achievable and that the
current level of distribution can be sustained with our cash flow from
operations in 2008. Going forward we believe our strengthened asset base and
the addition of further multi-branded locations will provide a solid platform
for growth and improved profits and surplus cash for unitholders."

    Priszm Financial Performance

    Priszm announced a strategy to improve operating performance and increase
unitholder value on October 18, 2007. As part of the execution of this
strategy, Priszm closed 20 underperforming restaurants, initiated the sale of
128 restaurants and reduced support staff by 25 per cent in order to realign
the organization. It is now focusing on increasing sales and driving down
costs at its remaining 338 locations.
    Priszm Venture Assets Group ("PVA") was created as part of a company-wide
refocusing strategy and is being led by Rupert Altschuler to drive the process
of re-franchising the 128 locations to new owners. Mr. Altschuler, formerly
Priszm's President of Operations, resigned from Priszm to lead PVA effective
December 30, 2007.
    "Although the process for the sale of the 128 restaurants has just
commenced, we are very pleased with our progress and the level of interest we
have received from prospective buyers," said Jeff O'Neill, President and Chief
Operating Officer of Priszm. "In fact, we have received more than four hundred
offers for our stores, and anticipate that this sales process will generate
between $20 and $30 million in proceeds. The streamlining of our operations
will both serve to strengthen our financial performance and provide for a more
focused investment strategy with the proceeds from the sale of the restaurants
being redirected to fund higher return initiatives."
    As part of the reorganization and streamlining of the business, the
company's operations have now also been divided into two geographic regions.
Jim Robertson has assumed the role of Vice President, Operations Ontario and
Western Canada, and Jean Trudel has assumed the role of Vice President,
Operations, Quebec and Eastern Canada.
    Additionally, the company has realigned the structure of its business to
fit with its revised asset base and reduced restaurant support staff by 25 per
cent. The realignment of the organization, which began in November 2007, will
generate estimated savings of $4.0 million in fiscal 2008. In total, the
Company recorded a one-time restructuring and closed stores expense of $5.8
million in 2007, $0.8 million of which has been paid and $5.0 million has been
accrued. The Company continues to pursue other cost-savings initiatives.
    Restaurants identified as ongoing operations are reported as continuing
operations in both the Company's consolidated financial statements and
management's discussion and analysis. The 128 "held for sale" restaurants are
reported as discontinued operations.
    In accordance with GAAP, the Company undertook an impairment review of
intangible assets, including goodwill and franchise rights, during the fourth
quarter of 2007. Following an analysis by an independent consultant,
management elected to recognize and record a charge of $51.3 million
comprising of $26.3 million, which is associated with continuing operations,
and $25.0 million in connection with discontinued operations.

    Results from Continuing Operations

    Sales from continuing operations for the fourth quarter were $115.5
million, a decrease of $7.7 million, or 6.3 per cent, from the same quarter in
2006. Restaurant closures, which took effect in mid-November, accounted for
$2.3 million of the decline with comparable restaurant sales down $5.4 million
from 2006.
    Sales growth from multi-brand locations continued to outperform
stand-alone KFC locations during each quarter of the year demonstrating the
effectiveness of this portfolio and asset-leverage strategy. An additional
three restaurants were multi-branded in the Quebec market during the fourth
quarter, to bring the total in that province to six locations. Sales in
Quebec-based multi-branded locations increased 11.2 per cent in the fourth
quarter of 2007 compared to the fourth quarter of 2006. In total, 11 KFC/Taco
Bell multi-branded locations were added during the year to bring Priszm's
total number of multi-branded locations to 99.
    Cost of restaurant sales, as a percentage of sales, for the fourth
quarter of 2007 was 58.8 per cent, which was up from 56.9 per cent in the
fourth quarter of 2006. Cost containment of maintenance and other supplies
were not enough to offset higher food, labour and utilities expenses during
the quarter.
    Income from restaurant operations declined in the fourth quarter of 2007
to $10.0 million from $16.5 million in the same period in 2006. As a
percentage of sales, income from restaurant operations decreased to 8.7 per
cent from 13.4 per cent in the same quarter a year ago. The sales decline in
combination with increased costs resulted in reduced profitability relative to
the prior year.
    In the fourth quarter, EBITDA amounted to $1.7 million compared to $13.2
million in the fourth quarter of last year. Distributable cash was negative
$2.2 million in the fourth quarter of 2007 compared to $11.1 million in the
comparable quarter of 2006. The Company generated EBITDA(*) of $7.5 million and
distributable cash(*) of $3.6 million for the fourth quarter of 2007 prior to
taking a one-time restructuring charge in the same quarter.
    "We are concentrating our efforts on reshaping our core business and we
are focused on doing so with the primary goal of improving our platform for
future growth," said O'Neill. "Our new product pipeline for 2008 is
exceptional. We have identified our challenges with respect to sales and our
objective is to aggressively pursue our strategy to attract consumers with
innovative new products that are higher margin menu items. I am confident
that, with our strong team, a sound strategic plan and three great global
brands, KFC, Taco Bell and Pizza Hut, we will emerge stronger than ever

    Monthly Distribution

    The Company also announced today its cash distribution for the month of
March 2008 of $0.10 per unit payable on April 15, 2008 to Ordinary and
Exchangeable Unitholders of record on March 31, 2008. The March distribution
is the 52nd consecutive cash distribution declared since Priszm began
operations on November 10, 2003.

    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 Conference Call/Audio Webcast

    Priszm will hold a conference call at 10 a.m. EST on Tuesday March 4,
2008 to discuss its fourth quarter and year-end results. The call may be
accessed by dialing 416-644-3414 within the Toronto area, or 1-800-733-7571
(toll-free) outside of Toronto. The call will be simultaneously audio webcast
    The conference call webcast and presentation will be archived on Priszm's
website at A recording of the call can be accessed until
Thursday April 3, 2008 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
21255333 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 466 quick service restaurants in seven provinces
across Canada. The KFC, Taco Bell and Pizza Hut restaurants under Priszm serve
1.5 million customers a week and employ more than 9,000 people. Currently, 99
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 historical audited financial statements
of Priszm for the years ended December 30, 2007 and December 31, 2006, and the
notes thereto are included in Priszm's annual filings at

    (in thousands of dollars except per Unit amounts)

                                          Fourth Quarter       Year-to-Date
                                          2007      2006      2007      2006
    Cash provided by operating
     activities                         $7,564   $22,239   $12,719   $52,859
    Net change in non-cash working
     capital(1)                         (7,845)   (9,428)    6,891   (12,165)
    Debt restructuring charge             (500)        -      (500)        -
    Maintenance capital expenditures(2) (1,373)   (1,707)   (3,992)   (4,329)
    Distributable cash including
     one-time restructuring charges    ($2,154)  $11,104   $15,118   $36,365
    Restructuring charges                5,771         -     5,771         -
    Distributable cash before one-time
     restructuring charges               3,617    11,104    20,889    36,365
    Distributions made during the
     period(3)                           4,846    12,480    26,886    34,169
    Distributable cash per Unit         (0.083)    0.430     0.586     1.408
    Distributions per Unit(3)            0.187     0.483     1.041     1.323

    Payout ratio including one-time
     restructuring charges                -nm-     112.4%    177.8%     94.0%
    Payout ratio before one-time
     restructuring charges              134.0%     112.4%    128.7%     94.0%
    nm = not meaningful


    (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.

    (3) Distributions per Unit includes all declared distributions for the
        period January 1 to December 30 for 2007 and January 1 to December 31
        for 2006, including the special dividend of $0.06 per unit or $1,549
        paid in 2006.

    (in thousands of dollars)

                                                   December 30,  December 31,
                                                          2007          2006
    Current assets
    Cash and cash equivalents                         $ 19,499      $ 29,206
    Short-term investments                               5,002             -
    Trade and other accounts receivable                  2,436         2,327
    Inventories                                          3,618         3,984
    Prepaid expenses                                     1,578         1,028
    Other assets                                           169           177
                                                        32,252        36,722
    Property and equipment                              70,860        71,284
    Deferred financing charge                                -         1,357
    Future income taxes                                  4,225             -
    Franchise rights                                    39,294        43,919
    Goodwill                                           120,357       145,301
    Assets of discontinued operations                   16,471        42,431
                                                       283,459       341,014
    Current liabilities
    Accounts payable and accrued liabilities            45,027        53,486
    Distributions payable to Unitholders                   697         5,397
                                                        45,724        58,883
    Long-term loan                                      74,224        75,633
    Convertible debentures                              28,008             -
    Future income taxes                                  4,455             -
    Deferred contract amounts                            5,072         4,480
    Liabilities of discontinued operations               5,600         3,444
                                                       163,083       142,440
    Non-controlling interest                            49,804        81,089

    Equity                                             143,198       142,389
    Deficit                                            (72,626)      (24,904)
                                                        70,572       117,485
                                                       283,459       341,014

    For the years ended (in thousands of dollars,
     except per Unit amounts)

                                                   December 30,  December 31,
                                                          2007          2006
    Restaurant sales                                 $ 383,757     $ 398,153
    Restaurant cost and expenses
    Cost of restaurant sales                           226,962       229,169
    Restaurant operating expenses                       55,779        57,700
    Rent                                                27,910        27,149
    Franchise royalty expense                           23,042        23,902
    Amortization                                        10,527        10,052
    Write-down of restaurant assets and franchise
     rights                                              1,314             -
                                                       345,534       347,972
    Income from restaurant operations                   38,223        50,181
    Restructuring and impairment costs                  27,354             -
    General and administrative expenses,
     including amortization of $3,323
     (2006 - $3,363)                                    21,869        24,473
    Income (loss) before the undernoted                (11,000)       25,708
    Interest income                                        485           411
    Interest expense                                    (7,436)       (5,656)
    Income (loss) before income taxes and
     non-controlling interest                          (17,951)       20,463
    Income taxes                                           230             -
    Income (loss) from continuing operations
     before non-controlling interest                   (18,181)       20,463
    Non-controlling interest                             7,231        (8,138)
    Income (loss) from continuing operations           (10,950)       12,325
    Loss from discontinued operations, net of
     income taxes and non-controlling interest         (20,440)         (580)
    Net income (loss) for the year                     (31,390)       11,745

    Basic and diluted earnings (loss) per Unit
    Continuing operations                               (0.704)        0.792
    Discontinued operations                             (1.315)       (0.037)
                                                        (2.019)        0.755

    For the years ended (in thousands of dollars)

                                                   December 30,  December 31,
                                                          2007          2006

    Deficit - Beginning of year                      $ (24,904)    $ (16,069)
    Net income (loss) for the year                     (31,390)       11,745
    Distributions                                      (16,332)      (20,580)
    Deficit - End of year                              (72,626)      (24,904)

    For the years ended (in thousands of dollars)

                                                   December 30,  December 31,
                                                          2007          2006
    Net income (loss) for the year                   $ (31,390)     $ 11,745
    Other comprehensive income                               -             -
    Comprehensive income (loss)                        (31,390)       11,745

    For the years ended (in thousands of dollars)

                                                   December 30,  December 31,
                                                          2007          2006
    Cash provided by (used in)
    Operating activities
    Income (loss) from continuing operations
     for the year                                    $ (10,950)     $ 12,325
    Add: Non-cash items
      Future income taxes                                  230             -
      Non-controlling interest                          (7,231)        8,138
      Amortization of property and equipment            10,321         9,657
      Amortization of franchise rights                   2,969         3,018
      Amortization of deferred financing charge            530           215
      Interest accretion                                   469             -
      Amortization of deferred contract amounts            148           828
      Loss on disposal of property and equipment           322           591
      Unit-based compensation                               62            61
      Write-off of deferred financing charges
       relating to long-term loan                            -           393
      Long-term incentive plan accrual                    (611)        1,072
      Write-down of restaurant assets and
       franchise rights                                  1,314             -
      Write-down of goodwill                            24,944             -
    Cash provided by continuing operations              22,517        36,298
    Net change in continuing non-cash working
     capital                                            (9,034)       11,241
    Supply contract prepayment                           1,235         1,090
    Cash from continuing operations                     14,718        48,629
    Loss from discontinued operations                  (20,440)         (580)
    Change in discontinued operations
     - non-cash items                                   16,300         3,886
    Net change in discontinued non-cash working
     capital                                             2,141           924
    Cash provided by operating activities               12,719        52,859
    Investing activities
    Acquisition of restaurants, net of acquired
     restaurant cash                                         -        (3,572)
    Purchase of property and equipment                 (13,475)      (15,447)
    Purchase of franchise rights                          (283)         (329)
    Purchase of short-term investments                  (5,002)            -
    Net proceeds on disposal of property and
     equipment                                              58            26
    Cash used in investing activities                  (18,702)      (19,322)
    Financing activities
    Deferred financing charges                          (2,188)       (1,415)
    Repayment of long-term loan                              -       (60,000)
    Proceeds of new long-term loan                           -        75,633
    Proceeds of convertible debentures                  30,000             -
    Distributions to Unitholders                       (31,586)      (32,567)
    Cash used in financing activities                   (3,774)      (18,349)
    Change in cash and cash equivalents during
     the year                                           (9,757)       15,188
    Cash and cash equivalents - Beginning of year       29,206        14,018
    Cash and cash equivalents - End of year             19,449        29,206
    %SEDAR: 00019884E

For further information:

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

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