Priszm reports third quarter 2009 financial results

    Announces intention to make a normal course issuer bid for its
    convertible unsecured subordinated debentures

TORONTO, Oct. 16 /CNW/ - Priszm Income Fund (TSX: QSR.UN) ("Priszm" or the "Company") today reported its financial results for the third quarter of 2009.

Third Quarter 2009 Highlights

Quarter ended September 6, 2009 versus quarter ended September 7, 2008

    - Cash and cash equivalents strengthen by $3.0 million to $11.7 million
    - Reported restaurant sales of $113.7 million
    - Generated EBITDA* of $11.0 million

    * See section entitled Non-GAAP measures.

"Our cash position coming off the high summer season is ahead of expectations," said John Bitove, Executive Chairman of Priszm Income Fund. "This allowed us to not only announce one normal course issuer bid for our units a couple of weeks ago, but also one for our convertible unsecured subordinated debentures today. We believe buybacks provide an excellent return on capital as we strengthen the core of our entire business for the long term."

Results from Continuing Operations

Restaurant sales from continuing operations were $113.7 million for the third quarter of 2009, an increase of $0.1 million, or 0.1 per cent, from the same quarter in 2008. During the third quarter of 2009, same store sales growth decreased marginally by 0.5 per cent over the same quarter of 2008.

Restaurant costs and expenses for the third quarter of 2009 increased to $101.2 million from $100.8 million relative to the third quarter of 2008. Cost of restaurant sales (comprised of food and paper as well as labour costs) improved slightly to $66.9 million, versus the third quarter of 2008. Restaurant operating expenses were $16.5 million, flat to the third quarter of 2008.

Income from restaurant operations for the third quarter of 2009 decreased by $0.2 million to $12.4 million.

General and administrative expenses decreased to $4.7 million for the third quarter of 2009 versus $4.9 million in the corresponding quarter of 2008.

EBITDA for the third quarter of 2009 was $11.0 million, flat versus the third quarter of 2008.


For the third quarter ended September 6, 2009, cash provided by operating activities was $8.8 million compared to $10.4 million during the previous year's third quarter primarily due to changes in non-cash working capital accounts. Cash used in investing activities was $3.1 million versus $3.4 million in the prior year. Included in the current quarter's amount was $1.8 million in franchise right renewal fees. Capital purchases were significantly lower than the previous year with the majority of this year's spend on maintenance capital expenditures and information technology investments in store management systems. Cash used in financing activities was $2.7 million compared to $5.7 million during the previous year's third quarter due to the change in distribution policy. As a result of the aforementioned items, Priszm ended its third quarter with $11.7 million of cash on hand, which is more than adequate to support seasonal cash demands.

October 2009 Distribution

Priszm also announced a cash distribution for the month of October 2009 of $0.01 per Unit payable on November 16, 2009 to Ordinary and Exchangeable Unitholders of record on October 30, 2009. The October distribution is the 71st consecutive cash distribution declared since Priszm began operations on November 10, 2003.

Normal Course Issuer Bid

Convertible Unsecured Subordinated Debentures

In addition to the current active normal course issuer bid ("NCIB") for its Units, Priszm announced today that the Toronto Stock Exchange ("TSX") has approved its notice of intention to make an NCIB for its Series 2007 6.50% Convertible Unsecured Subordinated Debentures with a maturity date of June 30, 2012 ("Debentures") as appropriate opportunities arise from time to time. The Company's normal course issuer bid will be made in accordance with the policies of the TSX. The Company may purchase its Debentures during the period from October 20, 2009 to October 19, 2010.

Pursuant to the notice, the Company intends to acquire up to a maximum, per trading day, of $6,000 principal amount of Debentures (six Debentures), being approximately 25 per cent of the average daily trading volume (except where such purchases are made in accordance with the block purchase exemption under available TSX policy), and up to a maximum, in a 12-month period, of $2,999,000 principal amount of Debentures (2,999 Debentures), being approximately 10 per cent of the public float. There was a principal amount of $30,000,000 (30,000 Debentures) issued and outstanding as of October 15, 2009. Purchases will be made at market prices through the facilities of the TSX. Any tendered Debentures taken up and paid for by the Company will be cancelled. The Company believes that the ongoing purchase of its outstanding Debentures is an appropriate use of its resources at this time due to the disparity between the market price and the inherent value of the Debentures.

Non-GAAP Measures

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")

EBITDA is defined by management as earnings before net interest income/expense, income taxes, depreciation and amortization and other items as noted in the table below. EBITDA is not a recognized measure under GAAP in Canada 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 earnings determined in accordance with GAAP or to cash flows from operating, investing and financing activities.

Distributable Cash

Distributable cash is a non-GAAP measure that generally refers to the net cash generated by the businesses or assets of the income trust that, at its discretion, is available for distribution to the Unitholders. 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 to using the Statement of Cash Flows to measure the Company's operating cash flows.

The Company defines distributable cash as cash provided by operating activities, per the Company's Consolidated Statement of Cash Flows, excluding net change in non-cash working capital and reduced for maintenance capital expenditures that are required to maintain productive capacity. The cash that is available for distribution per Unit will vary with the operating performance of the Company's business or assets, its capital requirements, debt obligations and the number of Units outstanding. Readers are cautioned that distributable cash and maintenance capital expenditures do not have standardized meanings prescribed by GAAP, and therefore, may not be comparable to similar measures presented by other issuers.

About Priszm Income Fund

Priszm Income Fund (TSX: QSR.UN) holds approximately a 60 per cent interest in Priszm Limited Partnership, which owns and operates more than 400 quick service restaurants in seven provinces across Canada. The KFC, Taco Bell and Pizza Hut restaurants under Priszm serve more than one million customers a week and employ approximately 7,400 people. Currently, more than 100 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

Certain information in this document may constitute forward-looking statements within the meaning of securities laws that involve known and unknown risks, uncertainties, future expectations and other factors with respect to industry sector performance, business plans, activities, trends and events anticipated by the Priszm Income Fund (the "Company") and which may cause the Company's future performance and results to be materially different from those implied by the forward-looking information. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or the negative of these terms or other comparable terminology concerning matters that are not historical facts. Forward-looking information is based on certain factors and assumptions regarding, among other things, the number of restaurants, the renewal of the franchise agreement, the industry sector performance, business plans, activities, trends and events anticipated by the Company. Although the Company believes that the assumptions underlying such statements are reasonable, any of the assumptions may prove to be inaccurate and, as a result, the forward-looking information may prove to be incorrect. The forward-looking information, assumptions and statements reflect the views of the Company's management with respect to future events and outcomes as of the date of this document and there should be no expectation that such information will be updated, revised and/or supplemented whether as a result of new information, changing circumstances, future events or other cause. Actual events or outcomes may be materially different and cause the performance of the Company to differ materially from any forward-looking statement.

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 second quarter 2009 unaudited financial statements and the MD&A in the Company's annual report for the year ended December 28, 2008. Additional information can be found at


    The following table reconciles cash provided by operating activities to
    distributable cash per the consolidated statements of cash flows, which
    includes the results of both continuing and discontinued operations:

                                       Third quarter         Year to date
    (in thousands except per
    Unit amounts)                      2009       2008       2009       2008

    Cash provided by (used in)
     operating activities            $8,785    $10,370    $13,838     $6,897
    Net change in non-cash
     working capital(1)                 291     (1,008)     1,093     11,743
    Maintenance capital
     expenditures(2)                   (782)      (859)    (1,896)    (2,180)
    Distributable cash                8,294      8,503     13,035     16,460
    Distributions declared
     during the period(3)             1,617      2,326      7,340     16,278
    Distributable cash per Unit       0.063      0.329      0.509      0.637

    Distributions per Fund and
     Exchangeable Unit(3)             0.070      0.100      0.320      0.700
    Distributions per
     Unit                                 -          -          -          -
    Distributions per Unit -
     diluted                          0.063      0.090      0.287      0.630
    Payout ratio                       111%        30%        63%       110%
    Payout ratio (fully
     diluted)                          100%        27%        56%        99%

    (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 quarterly fluctuations
        will occur, on a full year basis these changes will not impact the
        Company's ability to make Unit distributions and therefore the
        Company adds back the net change in non-cash working capital to
        reconcile to distributable cash.

    (2) Maintenance capital expenditures are defined by management as capital
        expenditures that are necessary to sustain current production
        capacity. 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. Maintenance
        capital expenditures and development 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.

    (3) Distributions per Unit include declared distributions.


    The following table reconciles net income from the Company's consolidated
    statements of operations, which includes the results for both continuing
    and discontinued operations, to EBITDA:

                                       Third quarter         Year to date
    (in thousands of dollars)          2009       2008       2009       2008

    Net income for the period        $3,226     $3,517     $2,389     $4,458
    Income tax (recovery)
     expense                             57          -       (476)        25
    Interest income                      (1)       (22)        (9)      (136)
    Interest expense
      (including accretion and
       amortization of
       deferred financing
       charges)                       2,093      1,829      6,282      6,118
    Non-controlling interest          2,187      2,320      1,259      2,938
    Amortization and
     impairment                       3,416      3,209     10,558      9,489
    Unit-based compensation              52         89        222        492
    Long-term incentive plan
     accrual                                        20        (52)       (24)
    EBITDA                           11,030     10,962     20,173     23,360

%SEDAR: 00019884E


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

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