A&W Revenue Royalties Income Fund announces strong fourth quarter and year end results
A&W Revenue Royalties Income Fund will hold a conference call to discuss
fourth quarter and year end results on February 6, 2007 at 1:00 p.m.
Pacific Time (4:00 p.m. Eastern Time). The call can be accessed by
dialing toll-free 1-800-591-7539 or (416) 644-3417. A replay will be
available until February 20, 2008, by dialing toll-free 1-877-289-8525 or
(416) 640-1917 Passcode: 21261388 followed by the number sign.
TRADING SYMBOL: The Toronto Stock Exchange - AW.UN
VANCOUVER, Feb. 6 /CNW/ - A&W Revenue Royalties Income Fund (the Fund)
and A&W Trade Marks Inc. (Trade Marks) each reported today financial results
for the fourth quarter and year ended December 31, 2007. Same store sales,
royalty income and distributable cash all increased from the comparable
periods of the prior year.
Same store sales growth of the A&W restaurants in the Royalty Pool was
4.0% in the fourth quarter of 2007 compared to the same quarter of 2006. This
brought the full year same store sales growth to 3.7%. As a result, royalty
income and distributable cash also posted strong increases over the prior
year. Based on this strong performance, the Trustees of the Fund have declared
a Special Distribution of 10 cents per unit payable on February 29, 2008 to
unitholders of record on February 15, 2008.
"The A&W business has again delivered strong same store sales growth for
the 19th consecutive quarter, which in turn led to growth in royalty income
and distributable cash for the Fund," said Paul Hollands, President and Chief
Executive Officer of A&W Food Services of Canada Inc. "We are pleased that
this strong performance enabled the Fund to not only increase the monthly
distribution rate twice and pay a Special Distribution during 2007, but also
to provide a Special Distribution to its unitholders in 2008."
Sales reported by A&W restaurants in the Royalty Pool increased by 7.8%
to $206,464,000 for the fourth quarter compared to the fourth quarter of 2006
and by 6.7% to $638,750,000 for the year. The increase in sales and
corresponding increase in royalty income reflects the same store sales growth
and the increase in the number of restaurants in the Royalty Pool from 654
during 2006 compared to 660 during 2007.
As a result of the increase in royalty income, distributable cash
available to pay distributions to unitholders and dividends on Class A and B
preferred shares and common shares increased by 8.0% to $5,928,000 for the
quarter and by 7.1% to $18,210,000 for the year.
The following table sets out selected financial highlights of the Fund
and Trade Marks.-------------------------------------------------------------------------
(dollars in Period from Period from Period from Period from
thousands Sep 10, Sep 11, Jan 1, Jan 1,
except per 2007 to 2006 to 2007 to 2006 to
unit amounts) Dec 31, 2007 Dec 31, 2006 Dec 31, 2007 Dec 31, 2006
Same store sales
growth 4.0% 6.2% 3.7% 7.4%
Number of restaurants
in the Royalty Pool(1) 660 654 660 654
Sales reported by
the restaurants in
the Royalty Pool $206,464 $191,474 $638,750 $598,551
Royalty income $6,194 $5,745 $19,163 $17,957
expenses $138 $117 $502 $462
Net third party
interest expense $128 $138 $451 $495
net earnings $1,443 $500 $2,453 $1,184
net earnings $3,792 $4,355 $10,610 $11,008
The Fund's basic
earnings per unit
(8,340,000 units) $0.455 $0.522 $1.272 $1.320
and dividends(2) $5,928 $5,490 $18,210 $17,000
per equivalent unit
(2007 - 13,473,911
units; 2006 -
13,138,455 units(3)) $0.440 $0.418 $1.352 $1.294
declared per unit
(8,340,000 units) $0.421 $0.397 $1.227 $1.155
declared per unit
(8,340,000 units) - - $0.080 -
(1) The net six new restaurants added to the Royalty Pool on December 31,
2006 are excluded for purposes of presenting 2006 results as they
were not in the Royalty Pool during 2006.
(2) Distributable cash is not an earnings measure recognized by generally
accepted accounting principles ("GAAP") and therefore may not be
comparable to similar measures presented by other issuers. This
information is provided as it identifies the amount of actual cash
available to pay distributions to unitholders and dividends to Food
(3) The number of equivalent units for 2006 excludes the 299,413 Class B
and common shares issued on December 31, 2006 as consideration for
the December 31, 2006 adjustment to the Royalty Pool.Distributable cash per fully diluted unit and equivalents increased from
41.8 cents for the fourth quarter in 2006 to 44.0 cents in 2007. Distributable
cash per fully diluted unit for the year increased from $1.294 to $1.352.
Distributions of 42.1 cents per unit were declared in the fourth quarter,
bringing the total distributions for 2007 to $1.307 per unit, an increase of
13.2% over the 2006 amount of $1.155 per unit. Food Services earned dividends
on its investment in Trade Marks at the same rate.
At the end of the year, there was a cumulative surplus of distributable
cash of $4,117,000 compared to a cumulative surplus of $3,517,000 at the end
Monthly distributions to unitholders were increased two times in 2007.
The current monthly distribution rate of 10.6 cents per unit translates into
an annualized distribution of $1.272 per unit. As mentioned earlier, the
Trustees of the Fund have approved the payment of a Special Distribution of 10
cents per unit. This Distribution will be payable on February 29, 2008 to
unitholders of record on February 15, 2008.
The number of restaurants in the Royalty Pool increased from 654 during
2006 to 660 at the beginning of 2007, and increased again on January 5, 2008
to 676 restaurants.
The Fund is a limited purpose trust established to invest in Trade Marks,
which 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 Food
Services to use its trade-marks, Trade Marks receives royalties equal to 3% of
the sales of A&W restaurants in the Royalty Pool. Same store sales growth of
the A&W restaurants in the Royalty Pool is therefore the primary driver of
growth in the Fund's revenue.
The Royalty Pool is adjusted in January of each year (except in 2006 when
the Royalty Pool was adjusted on January 5, 2006 and December 31, 2006, and
2007 in which there is no adjustment) to include the royalty stream from new
restaurants, net of the sales of any A&W restaurants that have permanently
closed. Trade Marks pays Food Services for the additional royalty stream in
the form of common shares and Class B shares of Trade Marks which are the
economic equivalent of units of the Fund. Food Services currently owns 40% of
the common shares of Trade Marks, and therefore owns the equivalent of 40% of
the units of the Fund on a fully-diluted basis.
Trade Marks' dividends to 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, and are thereby isolated
from many of the factors that impact an operating business.
Certain statements in this report may be forward-looking in nature. These
include references to liquidity, subordinated dividends, earnings and
anticipated earnings from growth in same store sales and new restaurant
openings. Actual results may differ materially from those expressed or implied
in these forward-looking statements. The forward-looking statements are based
on assumptions that management considered reasonable at the time they were
prepared. These forward-looking statements are subject to a number of risk
factors, including the ability of A&W Food Services of Canada Inc. to
implement its marketing strategies, the opening of new A&W restaurants,
general economic and business conditions, financial and political instability,
and other factors disclosed previously and from time to time in the Fund's
Additional information relating to the Fund is on SEDAR at www.sedar.com
and on the Fund's website at www.awincomefund.ca.