TRADING SYMBOL: The
Toronto
Stock Exchange - AW.UN
VANCOUVER
,
Dec. 14
/CNW/ - A&W Revenue Royalties Income Fund (the Fund) and A&W Food Services of
Canada
Inc. (A&W Food Services) announced today that, effective
January 5, 2010
, the number of A&W restaurants for which royalties are paid to A&W Trade Marks Limited Partnership (the Partnership) will be increased by 23 new restaurants opened across
Canada
between
October 2008
and
September 2009
, less eight restaurants that were permanently closed during this period. The addition of these 15 net new restaurants brings the total number of A&W restaurants in the Royalty Pool to 700. This is the eighth increase in the number of restaurants in the Royalty Pool since the inception of the Fund in 2002. Since that time, the number of restaurants for which royalties are paid to the Fund (through the Partnership) has increased by 115 restaurants, from 585 to 700.
"We are very pleased to have opened 23 new A&W restaurants in the past year," said
Paul Hollands
, President and Chief Executive Officer of A&W Food Services. "Since 2002, A&W Food Services has opened 191 new restaurants. We are delighted with this growth of new A&W restaurants across
Canada
and in particular in Ontario, our most important growth market in the country. These new restaurants further strengthen our position as Canada's second largest burger chain."
The estimated annualized sales of the 23 new A&W restaurants being added to the Royalty Pool are
$24,879,000
and annual sales for the eight permanently closed restaurants were
$2,817,000
. The net sales of
$22,062,000
from the 15 net new restaurants translate into estimated additional annual royalty payments to the Fund of
$662,000
on the basis of the royalty of 3% of sales. The initial consideration for the estimated additional royalty revenue is
$5,947,000
, calculated by discounting the estimated additional royalties by 7.5% and dividing the result by the yield on units of the Fund. The yield is based on the weighted average trading price of the units of the Fund for the 20 trading days ending
October 26, 2009
, or
$14.30
. The consideration will be paid on
January 5, 2010
by issuance of 332,723 limited partnership (LP) units representing 80% of the initial consideration. Also on
January 5, 2010
, the 332,723 additional LP units will be exchanged for additional Class B and voting common shares (or Class A and non-voting common shares) of A&W Trade Marks Inc. (Trade Marks). These additional shares of Trade Marks may be exchanged at the option of A&W Food Services for units of the Fund, subject to the approval of the TSX.
A final adjustment to the consideration and number of LP units issued and exchanged for Trade Marks' shares will be made in
December 2010
based upon the actual annual sales of the new restaurants.
The actual sales of the new restaurants added to the Royalty Pool on
January 5, 2009
have now been determined. The actual annual sales for the 52 weeks ended
November 1, 2009
for the 17 new restaurants added on
January 5, 2009
were
$20,832,000
compared to the original estimate of
$19,664,000
. As a result, the 61,684 shares held in escrow will now be released to A&W Food Services and, due to the sales exceeding the original estimate, additional consideration of
$269,000
is payable to A&W Food Services in the form of 23,612 Class B and 23,612 voting common shares of Trade Marks.
After these amendments to the Royalty Pool, the remaining balance of the purchase price of the trade-marks has been paid in full by Trade Marks to A&W Food Services. As a result of the additional shares of Trade Marks issued to A&W Food Services, A&W Food Services will receive a proportionate increase in monthly dividends from Trade Marks, and will own the equivalent of 43% of the units of the Fund on a fully-diluted basis.
The growth of the Royalty Pool reflects the continuing strength and success of the A&W restaurant business. The Fund's current annual distribution rate is
$1.272
per unit and in addition, the Fund paid two Special Distributions totaling
$0.200
per unit in 2009.
About the Fund
--------------
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. The Royalty Pool is adjusted annually to add new restaurants, less any A&W restaurants that have permanently closed. The Partnership pays A&W Food Services for the additional net new restaurants in the form of an increase in the limited partnership interest of A&W Food Services, based upon a formula set out in the licence agreement. A&W Food Services' additional limited partnership interest will be exchanged for additional shares of Trade Marks which are exchangeable for units of the Fund. These annual adjustments to the Royalty Pool are required under the licence agreement.
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.
This release may contain certain forward-looking statements reflecting A&W Revenue Royalties Income Fund's current expectations in the quick service segment of the restaurant food industry in
Canada
. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including, without limitation, changes in market, competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in
Canada
.
For further information: Don Leslie, Chief Financial Officer, A&W Food Services of Canada Inc., (604) 988-2141, email: [email protected], www.awincomefund.ca
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