A&W REVENUE ROYALTIES INCOME FUND ANNOUNCES COMPLETION OF REORGANIZATION
January 10 2011 - 12:05PM
PR Newswire (Canada)
VANCOUVER, Jan. 10 /CNW/ -- TRADING SYMBOL: The Toronto Stock
Exchange - AW.UN VANCOUVER, Jan. 10 /CNW/ - A&W Revenue
Royalties Income Fund (the Fund) today announced that it has
completed the reorganization of the capital structure of its
subsidiary, A&W Trade Marks Inc. (Trade Marks). This
reorganization was approved by unitholders at the Annual General
Meeting held May 4, 2010, and was initiated to minimize the impact
of the new Special Investment Flow Through (SIFT) tax on income
trusts announced by the Federal Government in October 2006.
The SIFT tax is effective January 1, 2011 and treats an income
trust like a corporation, requiring it to pay tax on its taxable
income. As announced last year, the Fund will remain as an income
trust. Under the reorganization of Trade Marks, the
subordinated notes of Trade Marks (the A&W Notes) currently
held by the Fund were replaced with non-voting common shares of
Trade Marks. As a result, the Fund now receives dividends
from Trade Marks, which are not subject to the SIFT tax, rather
than interest income on the A&W Notes. Trade Marks'
earnings (representing the royalty paid by A&W Food Services
less interest on its term loan and general and administrative
expenses) are taxed at an effective rate of 18% versus an
approximate rate of 25% if the reorganization had not been
implemented. In effect this leaves 82% of Trade Mark's net
income before income taxes available to be paid as dividends,
instead of 75% if the reorganization had not been implemented. The
Trustees of the Fund have approved an increase in monthly
distributions to unitholders to 11.7 cents per Unit per month, from
the current rate of 10.6 cents per Unit per month. The new monthly
distribution rate will be effective January 1, 2011 and will be
payable as and from February 28, 2011. The distributions will be
considered non-eligible dividends for Canadian tax purposes. The
reorganization also included the exchange of the Class A and Class
B preferred shares of Trade Marks currently owned by A&W Food
Services with non-voting common shares of Trade Marks. All
the voting and non-voting common shares held by the Fund and
A&W Food Services are entitled to the same dividends per
share. About the Fund The Fund is a limited
purpose trust established to invest in Trade Marks, which through
its interest in the 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 Food
Services 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 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
exchangeable for additional non-voting common shares of Trade Marks
which are exchangeable for units of the Fund. A&W Food
Services currently owns 34% of the common shares of Trade Marks,
and therefore currently owns the equivalent of 34% of the units of
the Fund on a fully-diluted basis. Trade Marks'
dividends to the Fund and A&W Food Services, 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. 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 general economic and
business conditions, unemployment, harmonization of sales taxes,
financial and political instability, changes in income tax laws or
their application to the Fund and other factors disclosed
previously and from time to time in the Fund's public filings
Forward-looking information is provided as of the date hereof and,
except as required by law, we assume no obligation to update or
revise forward-looking information to reflect new events or
circumstances. Additional information relating to the Fund is
on SEDAR at www.sedar.com and on the Fund's website at
www.awincomefund.ca. To view this news release in HTML
formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/January2011/10/c9482.html
pDon Leslie, Chief Financial Officer: (604) 988-2141 or a
href="mailto:investorrelations@aw.ca"investorrelations@aw.ca/a/p
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