A&W Revenue Royalties Income Fund

Press Releases


TRADING SYMBOL:  The Toronto Stock Exchange - AW.UN

VANCOUVER, Oct. 20 /CNW/ -


  • Same store sales growth(1) 1.7% for the third quarter, 2.8% year to date
  • Royalty income increased to $5.7 million, up 4.6%
  • Year to date royalty income increased to $16.1 million, up 8.2%
  • Year to date distributable cash(2) increased to $15.2 million, up 8.2%
  • Trustees announce Special Distribution of $0.10 per unit, payable November 30

A&W Revenue Royalties Income Fund (the Fund) reported today its results for the third quarter ended September 12, 2010.  The Fund will hold a conference call to discuss third quarter results on Wednesday, October 20, 2010 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be accessed by dialling toll-free 1-877-974-0446 or (416) 644-3417.  A replay will be available until November 3, 2010, by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode: 4375415#. 

Same store sales growth in A&W restaurants is the most important driver of growth in the Fund. With a same store sales increase of 1.7% for the quarter, A&W has now posted 30 straight quarterly increases in same store sales going back to Q2, 2003. 

Sales reported by restaurants in the Royalty Pool and corresponding royalty income increased by 4.6% to $5.7 million compared to $5.4 million in the same quarter of 2009. This was due to the same store sales growth and the increase in the number of restaurants to the Royalty Pool from 685 to 700. In addition, the first quarter of 2010 had six more days of sales compared to the first quarter of 2009. There were 84 days in the second and third quarters of both years. Year to date same store sales growth is reported based on an equal number of days in each quarter. 

On a year to date basis, same store sales growth is now 2.8%. Year to date royalty income increased 8.2% to $16.1 million compared to $14.9 million in 2009 year to date.   

The increase in sales and royalty income resulted in distributable cash per equivalent unit increasing to 37.2¢ for the quarter and $1.036 year to date.

"With continuing uncertain economic conditions and the impact of the Harmonized Sales Tax on British Columbia, our same store sales growth of 1.7% for the quarter and 2.8% year to date is a solid result" said Paul Hollands, President and Chief Executive Officer of A&W Food Services of Canada Inc. (A&W Food Services).  "Our continued focus on providing our customers with premium burgers like the Mini Sirloin Twins and our Cruisin' the Dub events through the summer months contributed to the sales increases. We are pleased that the Fund is able to pay a second Special Distribution to unitholders this year."  


(dollars in thousands except per unit amounts)

12 week period ending Sep 12, 2010

12 week period ending Sep 6, 2009

Period from Jan 1, 2010 to Sep 12, 2010

Period from Jan 1, 2009 to Sep 6, 2009

Same store sales growth (1)





Number of restaurants in the Royalty Pool





Sales reported by the restaurants in the Royalty Pool





Royalty income





General and administrative expenses





Net third party interest expense





Recovery of current income taxes





Partnership distributions to Food Services





Total distributable cash generated for distributions and dividends  (2)





Distributable cash (2) per equivalent unit (2010 - 14,705,897 units; 2009 - 14,289,993 units) (3)





Distributions and dividends declared per equivalent unit





Special distribution per equivalent unit





Trade Marks' net earnings 





The Fund's net earnings





The Fund's basic and diluted earnings per unit (8,340,000 units)





(1) Same store sales growth 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 is a key driver of growth in the Fund.  See "Same Store Sales Growth".

(2)  Distributable cash is not an earnings measure recognized by 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 Services.  See "Distributable Cash".

(3) For purposes of calculating distributable cash per equivalent unit, the number of equivalent units for 2010 includes 83,181 equivalent units representing the remaining 20% of the consideration for the January 5, 2010 adjustment to the Royalty Pool which is held back until December 2010 when the actual annual sales are reported by the new restaurants. 

Financial Results

Royalty income for the third quarter increased by $246,000 or 4.6% to $5,654,000 compared to the same quarter in 2009. Year to date royalty income increased by $1,229,000 or 8.2% to $16,134,000 compared to 2009. These increases in royalty income were driven by the same store sales growth of 1.7% for the quarter and 2.8% year to date, the increase in the number of restaurants in the Royalty Pool to 700 in 2010 from 685 in 2009, and more days of sales in the first quarter compared to 2009. 

Cash expenses, interest and taxes decreased by $2,000 in the quarter but increased by $71,000 year to date. The year to date increase was due to higher interest expense due to the longer first quarter compared to 2009 and an income tax recovery of $43,000 in 2009. 

Distributable cash generated to pay distributions to unitholders and dividends to A&W Food Services increased by $248,000 or 4.8% to $5,466,000 for the third quarter of 2010 compared to the same quarter in 2009. Year to date distributable cash increased by $1,158,000 or 8.2% to $15,239,000 for 2010 compared to 2009 year to date. Distributable cash per fully diluted unit and equivalents increased to 37.2¢ from 36.5¢ for the quarter and to $1.036 from 98.5¢ for the year to date period. 

Distributions of 31.8¢ per equivalent unit were declared in the third quarter. Year to date monthly distributions total 84.8¢ per equivalent unit. The current monthly distribution rate of 10.6¢ per unit translates into an annualized distribution of $1.272 per unit. In addition, a Special Distribution of 10.0¢ per equivalent unit was paid in May this year, bringing the total amount of cash distributed year to date to 94.8¢ per equivalent unit. Food Services earns dividends on its investment in Trade Marks at the same rate.    

The Trustees of the Fund have approved the payment of a second Special Distribution of 10¢ per unit, payable on November 30, 2010 to unitholders of record as at November 15, 2010.

A copy of the Fund's management discussion and analysis and the financial statements of the Fund, Trade Marks and A&W Food Services for the third quarter will be available on www.sedar.com and www.awincomefund.ca on or before October 25, 2010. 


The Fund is a limited purpose trust established to invest in Trade Marks, which through its interest in A&W Trade Marks Limited Partnership (the Partnership), 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 A&W Food Services to use its trade-marks, Trade Marks (through the Partnership) receives royalties equal to 3% of the sales of A&W restaurants in the Royalty Pool. A&W is the second largest quick-service hamburger restaurant chain in Canada. Operating coast-to-coast, A&W restaurants feature famous trade-marked menu items such as The Burger Family, Chubby Chicken and A&W Root Beer.

The Royalty Pool is adjusted annually to reflect sales from new A&W restaurants, net of the sales of any A&W restaurants that have permanently closed. Additional limited partnership units (LP units) are issued to A&W Food Services to reflect the annual adjustment. A&W Food Services' additional LP units will be exchanged for additional shares of Trade Marks which are exchangeable for units of the Fund.

A&W Food Services currently owns 43% of the common shares of Trade Marks, and therefore currently owns the equivalent of 43% of the units of the Fund on a fully-diluted basis.   

Trade Marks' dividends to A&W 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.

In October 2006 the Federal Government announced a new "SIFT Tax" on income trusts.  As a result of this new tax, the Fund initiated a reorganization of the capital structure of Trade Marks and received unitholder approval of the reorganization at its AGM on May 4, 2010. This reorganization will allow the Fund to remain as an income trust and to continue to pay its regular monthly distributions at 10.6 cents per unit monthly ($1.272 per unit annualized) for the remainder of 2010 and 2011. 

The reorganization, which will be implemented in January 2011, will replace the A&W notes of Trade Marks currently held by the Fund with non-voting common shares of Trade Marks, and will result in Trade Marks' earnings being taxed at an effective rate of 18% versus an approximate rate of 25% if the reorganization were not implemented. As Trade Marks will pay income taxes in 2011, it is currently anticipated that the Fund will not receive additional dividends from Trade Marks to enable the Fund to make special distributions in 2011. However, the amount of dividends paid by Trade Marks will be evaluated from time to time depending upon its financial performance at that time. 

Certain statements in this report may be forward-looking in nature. These include references to distributions, liquidity, dividends, earnings and anticipated earnings from growth in same store sales and new restaurant openings, A&W Food Services' strategy to "make A&W the number one national burger choice for baby boomers and the fastest growing and most successful burger businesses in Canada" A&W Food Services' plans to respond tactically to market conditions; A&W Food Services' plans to build the A&W brand through advertising and marketing campaigns, menu innovation, facilities design and expanding to serve customers in new markets; and A&W Food Services' plans to modernize and enhance the appeal of its restaurants.  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 to implement its marketing strategies and opening new A&W restaurants, general economic and business conditions, unemployment, harmonization of sales taxes, financial and political instability, and other factors disclosed previously and from time to time in the Fund's public filings. 

Additional information relating to the Fund is on SEDAR at www.sedar.com and on the Fund's website at www.awincomefund.ca

For further information:

Don Leslie, Chief Financial Officer: (604) 988-2141 or investorrelations@aw.ca