VANCOUVER, Feb. 8 /CNW/ -- -- Same store sales growth((1)) +2.2%
for the year; +1.1% for the fourth quarter -- Total system sales of
A&W Food Services of Canada Inc. up 5.0% for the year --
Royalty income for 2010 increased 5.5% -- Distributable cash((2))
before one-time transaction costs up 5.2% for 2010. VANCOUVER, Feb.
8 /CNW/ -- TRADING SYMBOL: The Toronto Stock Exchange - AW.UN
VANCOUVER, Feb. 8 /CNW/ - A&W Revenue Royalties Income Fund
(the Fund) reported today results for the fourth quarter period
from September 13, 2010 to December 31, 2010 and the full year
results from January 1, 2010 to December 31, 2010. Same store
sales growth in A&W restaurants, the most important driver of
growth in the Fund, was +2.2% for the year and +1.1% for the
quarter compared to the same periods last year. This marks
the 8(th) consecutive year and 31(st) consecutive quarter of same
store sales increases. "The fourth quarter was an important one for
the Fund," said Paul Hollands, President and Chief Executive
Officer of A&W Food Services of Canada Inc. (A&W Food
Services). "In addition to posting our 31(st) straight
quarter of increases in same store sales, we undertook a
significant reorganization in the Fund. The combination of
this reorganization and the successful substantial issuer bid
enabled us to maximize ongoing distributions to unitholders.
We are delighted that as a result we have been able to increase
distributions to 11.7 cents per unit per month despite the
imposition of the new Specified Investment Flow Through tax on
income funds effective January 1, 2011, while many other income
funds have been forced to reduce their distributions." "We're
pleased with the continued same store sales growth which occurred
despite the uncertain economic conditions and the impact of the HST
on the restaurant industry in British Columbia," Hollands
added. Total sales of restaurants in the royalty pool and
corresponding royalty income increased by 5.5% in 2010 versus
2009. This growth was achieved through the same store sales
growth and the addition of 15 new restaurants to the Royalty Pool
on January 5, 2010. Due to there being six fewer days in the
fourth quarter in 2010 compared to 2009, sales and royalty income
decreased by 0.2% for the quarter. Same store sales growth is
based on an equal number of days in each quarter.
A copy of the management discussion and analysis and financial
statements of the Fund, A&W Trade Marks Inc. (Trade Marks) and
Food Services for the year will be available on www.sedar.com and
www.awincomefund.ca on or before February 11, 2011. The Fund
will hold a conference call to discuss the results on Tuesday,
February 8, 2011 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern
Time). The call can be accessed by dialling toll-free
1-800-814-4861 or (416) 644-3416. A replay will be available
until February 22, 2011, by dialling toll-free 1-877-289-8525 or
(416) 640-1917 Passcode: 4407210#. Highlights (dollars in
thousands Q4 2010 Q4 2009 Year end 2010 Year end 2009 except per
unit amounts) Same store sales growth 1.1% 0.03% 2.2% 1.5% ((1))
Number of restaurants 700 685 700 685 in the Royalty Pool Sales
reported by the $238,900 $239,385 $776,701 $736,209 restaurants in
the Royalty Pool Royalty income $7,167 $7,181 $23,301 $22,086
General and 237 167 601 647 administrative expenses
Recapitalization and 661 - 775 - reorganization costs Financing
fees 449 - 449 - Net third party 269 183 670 570 interest expense
Recovery of current - - - (43) income taxes Partnership 7 - 23 -
distributions to A&W Food Services Total distributable $5,544
$6,831 $20,783 $20,912 cash generated for distributions and
dividends((2)) Distributable cash((2) $0.382 $0.478 $1.419 $1.463
)per weighted average equivalent unit (2010 - 14,644,999 units;
2009 - 14,289,993 units)( ) Distributions and $0.424 $0.424 $1.272
$1.272 dividends declared per equivalent unit Special distribution
$0.100 $0.100 $0.200 $0.200 per equivalent unit Trade Marks' net
$1,031 $1,962 $3,648 $4,007 earnings The Fund's net earnings $3,633
$4,010 $11,982 $11,624 The Fund's basic and $0.436 $0.481 $1.437
$1.394 diluted earnings per unit Weighted average units 8,332,994
8,340,000 8,337,889 8,340,000 outstanding
((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. )
((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. ) Financial Results Royalty income for 2010 was
$23,301,000 based on sales of $776,701,000, an increase of 5.5%
over royalty income of $22,086,000 and sales of $736,209,000 for
2009. The increases in sales and royalty income are due to
the combined impact of the additional net 15 restaurants in the
Royalty Pool and the same store sales increase of 2.2% for the
year. Royalty income in the fourth quarter was $7,167,000
based on sales of $238,900,000 reported by the A&W restaurants
in the Royalty Pool. This was a decrease of 0.2% over royalty
income of $7,181,000 and sales of $239,385,000 during the same
quarter of 2009. The decrease in the fourth quarter was due
to the quarter having six fewer days in 2010 compared to the same
quarter in 2009. Same store sales growth for the fourth
quarter was 1.1%. Same store sales growth is based on an
equal number of days in each quarter. General and
administrative expenses for 2010, including expenses for the Fund
under the administration agreement between Trade Marks and the
Fund, decreased by $46,000 to $601,000, compared to $647,000 for
2009. General and administrative expenses for the fourth quarter
increased by $70,000 to $237,000, compared to $167,000 in the
fourth quarter of 2009. The Fund completed a substantial issuer bid
and purchased for cancellation 2,500,000 of its units on December
22, 2010. Subsequently, Trade Marks completed the
reorganization of its capital structure as approved by the Fund's
unitholders on May 4, 2010. The costs of these transactions
were $775,000 and were paid by Trade Marks under the administration
agreement between Trade Marks and the Fund. These costs are
comprised mainly of professional fees. Trade Marks' interest
expense on its term loan, net of interest income, for 2010 was
$670,000 compared to $570,000 for 2009. Interest on the term
loan for the fourth quarter of 2010 was $269,000, compared to
$183,000 for the same quarter of 2009. The increase in term
loan interest was due to the increase in the amount of the term
loan by $50,000,000 to $60,000,000 effective December 22,
2010. Also included in interest expense was a $49,000 payment
to terminate the interest rate swap on the $10,000,000 term loan.
Before payment of the $775,000 one-time transaction costs for the
Fund's substantial issuer bid and Trade Marks' reorganization,
Trade Marks' net earnings for 2010 increased by $416,000 over
2009. After payment of the one-time transaction costs, Trade
Marks' 2010 net earnings were $3,648,000 compared to $4,007,000 for
2009. Trade Marks' net earnings for the quarter were
$1,031,000 compared to $1,962,000 for the same quarter of 2009. The
Fund's net earnings for 2010 were $11,982,000 or $1.437 per
weighted average unit outstanding compared to $11,624,000 or $1.394
per unit for 2009. The Fund's net earnings for the fourth
quarter were $3,633,000 or 43.6¢ per weighted average unit
outstanding compared to $4,010,000 or 48.1¢ per unit for the same
quarter in 2009. The Fund's net earnings for 2010 and the fourth
quarter were also negatively impacted by the Fund's share of the
one-time costs incurred by Trade Marks. The transaction costs
of $775,000 along with financing fees of $449,000 related to Trade
Marks' new term loan also impacted distributable cash. Before
payment of these one-time costs totalling $1,224,000, distributable
cash generated in 2010 increased by $1,095,000 or 5.2% over
2009. After payment of the one-time costs, distributable cash
generated to pay distributions to unitholders and dividends to
A&W Food Services decreased by $129,000 from $20,912,000 for
2009 to $20,783,000 for 2010, and decreased by $1,287,000 from
$6,831,000 for the fourth quarter of 2009 to $5,544,000 for the
fourth quarter of 2010. Distributable cash and earnings in
the fourth quarter were also negatively impacted by the decrease in
the number of days in the quarter compared to 2009. The amount of
cash distributed in 2010 to unitholders and A&W Food Services
in monthly distributions and dividends was $1.272 per equivalent
unit compared to distributable cash generated of $1.419. In
addition, two Special Distributions of $0.100 per equivalent unit
each were paid in 2010, bringing the total amount of cash
distributed in 2010 to $1.472 per equivalent unit. At the end
of 2010 there was a cumulative surplus of distributable cash of
$2,971,000 compared to a cumulative surplus of $3,706,000 at the
end of 2009. Overview The Fund is a limited purpose trust
established to invest in Trade Marks, which through its interest in
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. The Partnership pays A&W Food Services for the
additional royalty stream in the form of an increase in the limited
partnership interest of A&W Food Services. A&W Food
Services' limited partnership interest may be exchanged 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 holds indirectly the equivalent of 34% 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, dividends, earnings and anticipated earnings from growth
in same store sales, annual adjustments to the Royalty Pool 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 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. To view this news release in HTML
formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/February2011/08/c8916.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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