TRADING SYMBOL:  The Toronto Stock Exchange - AW.UN

• Strong same store sales growth of 3.4% for the quarter
• Royalty income up 5.7% from Q2, 2010

VANCOUVER, July 26, 2011 /CNW/ - A&W Revenue Royalties Income Fund (the Fund) reported today results for the second quarter ended June 19, 2011.  The Fund will hold a conference call to discuss second quarter results on Tuesday, July 26, 2011 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time).  The call can be accessed by dialling toll-free 1-800-814-4859or (416) 644-3415.  A replay will be available until August 9, 2011, by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode: 4457091#.

The second quarter same store sales growth of 3.4% marks a return to A&W's historical same store sales growth levels.  The strong same store sales growth for the quarter erased the negative results of the first quarter caused by poor weather, and brings year to date same store sales growth to 0.3%.  Growth in same store sales is the most important driver of growth in the Fund.

"As a strategy driven company, we continue to focus on the increasing demand for premium hamburgers like the Prime Rib Grandma Burger and on accelerating the pace of growth of new restaurants," said Paul Hollands, President and Chief Executive Officer of A&W Food Services of Canada Inc. (A&W Food Services).  "Despite continuing uncertain economic conditions, we are pleased that the A&W business demonstrated solid growth in the second quarter.  Looking forward, we will continue to focus on strategic goals, but we will also continue to introduce advertising and promotional programs to respond to economic conditions."

Total sales reported by restaurants in the Royalty Pool increased by 5.7% to $187.8 million in the second quarter of 2011 compared to $177.7 million in the same quarter of 2010.  The increase in sales resulted from the increase in the number of restaurants in the Royalty Pool from 700 to 715 and the same store sales growth.  Royalty income also increased by 5.7% for the quarter to $5,633,000.

Financial Highlights

⁽¹⁾  Same store sales growth is not an earnings measure recognized by International Financial Reporting Standards (IFRS) 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.

⁽²⁾   Distributable cash is not an earnings measure recognized by IFRS 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 A&W Food Services.

Financial Results
The financial results for 2011 reflect two important changes from previous years.  The first is the payment of taxes for the first time since the inception of the Fund in 2002.  The second change is the interest cost associated with the debt introduced for the substantial issuer bid, which was undertaken to enhance distributable cash per unit.

Royalty income for the second quarter was $5,633,000, representing an increase of $303,000 or 5.7% compared to the same quarter in 2010.  Year to date royalty income was $10,650,000, an increase of $170,000 or 1.6% compared to year to date 2010.  The increase in royalty income was driven by the same store sales growth and the impact of the increase in the number of restaurants in the Royalty Pool to 715 in 2011 from 700 in 2010.

Total cash expenses, including interest and taxes, increased by $1,195,000 for the quarter and $2,126,000 year to date compared to last year.  Interest expense increased by $556,000 in the quarter and $1,125,000 year to date due to the increase in A&W Trade Marks Inc.'s (Trade Marks) term loan from $10 million to $60 million to buy back Fund units for cancellation under the Fund's substantial issuer bid in December last year.  Trade Marks' earnings are now subject to income taxes at 18%, and therefore income tax expense was $599,000 for the quarter and $1,024,000 year to date, compared to no taxes payable in 2010.     

Distributable cash generated to pay distributions to unitholders and dividends to A&W Food Services decreased to $4,236,000 compared to $5,128,000 for the second quarter of 2010 due to the higher interest and tax expenses as noted above.  Year to date distributable cash decreased to $7,817,000 compared to $9,773,000 for 2010 year to date.  The number of equivalent units also decreased, from 14,705,897 units in 2010 to 12,571,435 units in 2011, due to the substantial issuer bid in December 2010 which resulted in the Fund purchasing for cancellation 2,500,000 units.  Therefore, distributable cash per equivalent unit decreased by only 1.2¢ to 33.7¢ per unit for the quarter, and decreased by only 4.3¢ to 62.2¢ per unit year to date.  The decrease in distributable cash per equivalent unit is due to the income tax expense which was 4.8¢ per unit for the quarter and 8.2¢ per unit year to date.

The monthly distribution rate was increased to 11.7¢ per unit from 10.6¢ per unit effective with the distribution for the month of January 2011 and payable as and from February 28, 2011.  Total distributions of 35.1¢ per unit were declared in the quarter and 58.5¢ per unit year to date.  The new monthly distribution rate of 11.7¢ per unit translates into an annualized distribution of $1.404 per unit.  The cumulative surplus of distributable cash at the end of the second quarter was $2,548,000, compared to a cumulative surplus of $2,353,000 at the end of the first quarter of 2011. 

About the Fund
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 10% of the common shares of Trade Marks, and therefore currently owns the equivalent of 10% 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.

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, A&W Food Services' plans to introduce aggressive promotional programs and activities, especially in the BC market; A&W Food Services' plans to continue to focus on its strategic goals and develop promotional programs and activities; A&W Food Services' plans to focus on the growing "premium burger" market; A&W Food Services' plans to accelerate the pace of growth of new restaurants, particularly in the key Ontario market; 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 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 strategy, implement marketing and promotional programs and activities, focus on the growing "premium burger" market, accelerate the pace of growth of new A&W restaurants, modernize and enhance the appeal of 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.