A&W Revenue Royalties Income Fund reports strong first quarter 2016 results

A&W Revenue Royalties Income Fund (the Fund) and A&W Food Services of Canada Inc. (A&W Food Services) reported today results for the first quarter ended March 27, 2016. The Fund will hold a conference call to discuss the results on Tuesday May 3, 2016 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be accessed by dialling toll-free 1-866-530-1553 or (416) 847-6330 Passcode 4754254. A replay will be available until May 12, 2016, by dialling toll-free 1-888-203-1112 or (647) 436-0148 Passcode 4754254.

A&W enjoyed another strong quarter, with same store sales growth increasing by 8.6%. This same store sales growth is particularly notable when added to last year's +9.1% same store sales growth, bringing the two year stacked same store sales growth for the quarter to +17.7%. A&W has now reported positive same store sales growth for 12 consecutive quarters.

Total sales reported by restaurants in the Royalty Pool increased 20.4% to $243.8 million compared to $202.4 million in the same quarter of 2015. The increase in sales and corresponding increase in royalty income was due to the same store sales growth and the increase in the number of restaurants in the Royalty Pool from 814 to 838. In addition, the number of days of sales reported in the quarter was higher than the first quarter of 2015. While same store sales growth is reported based on an equal number of days in each quarter, the fiscal first quarter of 2016 had 87 days of sales compared to 81 days in the first quarter of 2015. This longer time period also contributed to the reported growth in sales and royalty income.

"We are very pleased to report that our strong trend of positive same store sales growth dating back to 2013 has continued into 2016", said Paul Hollands, Chairman and CEO of A&W Food Services. "Beginning in 2013, A&W became an industry leader for natural ingredients by responding to Canadians' interest and desire for more natural foods."

A&W Food Services serves its guests beef raised without the use of hormones and steroids, eggs from hens fed only a diet without animal by-products and chicken raised without the use of antibiotics. In the first quarter of 2016, A&W launched bacon from pork raised without the use of antibiotics. This is another first for A&W, making it the only quick service restaurant in North America to serve pork raised this way.

FINANCIAL RESULTS
Royalty income for the quarter increased by $1,241,000 or 20.4% to $7,314,000 compared to the same quarter in 2015. This increase in royalty income was driven by the strong same store sales growth, the increase in the number of restaurants in the Royalty Pool to 838 in 2016 from 814 in 2015, and more days of sales in the quarter compared to 2015.

General and administrative expenses and interest increased by $73,000. General and administrative expenses did not change significantly in the first quarter of 2016 as compared to the first quarter of 2015. Interest on the term loan increased to $611,000 for the first quarter of 2016 compared to $535,000 for the first quarter of 2015. The interest rate on the term loan increased from 4.0% per annum to 4.3% per annum under an interest rate swap agreement which became effective on December 22, 2015. The increase in the number of days in the quarter from 81 to 87 also had an impact on interest expense for the quarter.

The Fund's net income for the first quarter of 2016 was $3,329,000, an increase of 64.0% over $2,030,000 for the first quarter of 2015. Net income in both years includes non-cash losses on interest rate swaps, amortization of deferred financing fees and deferred income taxes. These non-cash items have no impact on the Fund's ability to pay distributions to unitholders.

Distributable cash generated in the first quarter of 2016 to pay distributions to unitholders and dividends to Food Services was$5,044,000 compared to $4,083,000 in the first quarter of 2015. The $961,000 increase in distributable cash was comprised of the$1,241,000 increase in royalty income, less the $73,000 increase in general and administrative and interest expenses and a $207,000increase in the current income tax provision. The current income tax provision for the quarter includes transitional partnership tax of$216,000 compared to $161,000 in the first quarter last year. Total transitional partnership tax is expected to be $909,000 in 2016 which is the last year that this tax is payable.

Distributable cash generated per equivalent unit increased by 5.1¢ to 32.6¢ per unit in the first quarter of 2016 from 27.5¢ for the first quarter of 2015. The increase in distributable cash per equivalent unit was due to the increase in royalty income less the increase in cash expenses and taxes as discussed above.

Two monthly distributions totalling 25.0¢ per unit were declared in the first quarter of 2016 compared to 23.4¢ per unit in the same quarter of 2015. The payout ratio for the first quarter of 2016 was 109.5% compared to 113.5% for the same quarter of 2015.

The cumulative surplus of distributable cash at the end of the first quarter of 2016 was $2,662,000, compared to a cumulative surplus of$4,148,000 at the beginning of the year, a decrease of $1,486,000. Surplus distributable cash historically decreases in the first half of the year due to the seasonality of sales in A&W restaurants. Refundable income tax of $1,009,000 also impacted the surplus distributable cash. Refundable income tax paid or payable in 2016 is expected to be substantially recoverable in future years when sufficient dividends are paid by A&W Trade Marks Inc. (Trade Marks).

A copy of the Fund's management discussion and analysis and the financial statements of the Fund and A&W Food Services for the first quarter will be available on www.sedar.com and www.awincomefund.ca on or before May 6, 2016.

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 are exchanged for additional shares of Trade Marks which are exchangeable for units of the Fund. A&W Food Services owns 21.0% of the common shares of Trade Marks, and therefore owns the equivalent of 21.0% 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.

On May 3, 2016, A&W Food Services declared a dividend on its common shares of $4,000,000 payable to its shareholder on May 5, 2016.

Certain statements in this press release may contain forward-looking information within the meaning of applicable securities laws inCanada (forward-looking information). The words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "schedule", "should", "will", "would" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. The forward-looking information is based on assumptions that management considered reasonable at the time it was prepared. The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by the forward-looking information. The factors which could cause results to differ from current expectations are described in the Fund's most recent Management Discussion and Analysis under the heading "Risks and Uncertainties" and the Fund's Annual Information Form under the heading "Risk Factors", available on SEDAR at www.sedar.com.


(dollars in thousands except per unit amounts)	Period from Jan 1, 2016 to Mar 27, 2016	Period from Jan 1, 2015 to Mar 22, 2015
Same store sales growth(1)	+8.6%	+9.1%
Number of restaurants in the Royalty Pool	838	814
Sales reported by the restaurants in the Royalty Pool	$243,796	$202,448
Royalty income	$7,314	$6,073
General and administrative expenses	256	259
Net third party interest expense	611	535
Current income taxes	1,403	1,196
Total distributable cash generated for distributions and dividends(2)	$5,044	$4,083
Distributable cash per equivalent unit (2016 – 15,482,676 units; 2015 – 14,870,367 units)(2)(3)	$0.326	$0.275
Distributions and dividends declared per equivalent unit	$0.250	$0.234
Net income(4)	$3,329	$2,030
Net income, excluding non-cash items(4)	$4,035	$4,083

(1)	Same store sales growth does not have a standardized meaning prescribed by 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. Same store sales growth is based on an equal number of days in each quarter.
(2)	Distributable cash does not have a standardized meaning prescribed 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 Food Services.
(3)	The number of equivalent units and distributable cash per equivalent unit in 2016 includes the 122,462 LP units exchangeable for 244,924 common shares of Trade Marks representing the remaining 20% of the consideration for the January 5, 2016 adjustment to the Royalty Pool which is held back until December 2016 when the actual annual sales are reported by the new restaurants. The number of equivalent units and distributable cash per equivalent unit in 2015 includes the 181,101 LP units exchanged for 362,202 common shares of Trade Marks representing the final consideration paid in December 2015 for the January 5, 2015 adjustment to the Royalty Pool.
(4)	Net income in 2016 and 2015 includes non-cash losses on interest rate swaps, amortization of deferred financing fees and deferred income taxes. These non-cash items have no impact on the Fund's ability to pay distributions to unitholders. The Fund's net income excluding these non-cash items is presented for information purposes only.

A&W Revenue Royalties Income Fund

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