A&W Revenue Royalties Income Fund announces fourth quarter 2009 results

- Same store sales growth(1) slightly positive for the fourth quarter; +1.5% for the year

- Total system sales of A&W Food Services of Canada Inc. up 4.5% for the year

- Royalty income for fourth quarter increased to $7.2 million , up 2.7%

- Quarterly distributable cash(2) increased to $6.8 million , up 3.3%

- Annual total distributable cash(2) increased to $20.9 million , up 3.2%

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 7, 2009 to December 31, 2009 and the full year results from January 1, 2009 to December 31, 2009 . A copy of the management discussion and analysis and financial statements of the Fund, A&W Trade Marks Inc. (Trade Marks) and A&W Food Services of Canada Inc. (A&W Food Services) for the year will be available on www.sedar.com and www.awincomefund.ca on or before February 19, 2010 . The Fund will hold a conference call to discuss the results on Monday, February 8, 2010 at 1:00 p.m. Pacific Time ( 4:00 p.m. Eastern Time ). The call can be accessed by dialling toll-free 1-866-250-4877 or [phone]. A replay will be available until February 22, 2010 , by dialling toll-free 1-877-289-8525 or [phone] Passcode: 4207635 followed by the number sign.

Same store sales growth in A&W restaurants, the most important driver of growth in the Fund, was +0.03% for the quarter and +1.5% for the year compared to the same periods last year. Sales of restaurants in the Royalty Pool and corresponding royalty income increased by 2.7% for the quarter and 3.6% for the year versus 2008. This growth was achieved through the same store sales growth and the addition of net nine new restaurants to the Royalty Pool on January 5, 2009 .

"With weak economic conditions and high unemployment weighing on Canada's foodservice industry throughout 2009, we are pleased to have posted our seventh consecutive year of same store sales increases" said Paul Hollands , President and Chief Executive Officer of A&W Food Services. "During the fourth quarter, our limited time offer of the Sirloin Baby Burger Twins was very well received by our customers. Overall, our continued focus on premium burger innovation has strengthened the brand and helped retain customers in a challenging market."

    
    Highlights

    -------------------------------------------------------------------------
    (dollars in thousands except                          Year end  Year end
     per unit amounts)                 Q4 2009   Q4 2008      2009      2008
    -------------------------------------------------------------------------
    Same store sales growth(1)            0.03%      7.5%      1.5%      7.3%
    Number of restaurants in the
     Royalty Pool                          685       676       685       676
    Sales reported by the restaurants
     in the Royalty Pool              $239,385  $233,032  $736,209  $710,479
    Royalty income                      $7,181    $6,991   $22,086   $21,314
    General and administrative
     expenses                             $167      $179      $647      $504
    Net third party interest expense      $183      $155      $570      $484
    Current income taxes paid
     (recoverable)                           -       $43      ($43)      $43
    Trade Marks' net earnings           $1,962    $1,881    $4,007    $3,773
    The Fund's net earnings             $4,010    $3,981   $11,624   $11,869
    The Fund's basic and diluted
     earnings per unit (8,340,000
     units)                             $0.481    $0.477    $1.394    $1.423
    Total distributable cash generated
     for distributions and dividends(2) $6,831    $6,614   $20,912   $20,257
    Distributable cash per equivalent
     unit (2009 - 14,289,993 units;
     2008 - 13,957,962 units)(2)        $0.478    $0.474    $1.463    $1.451
    Monthly distributions declared per
     unit (8,340,000 units)             $0.424    $0.424    $1.272    $1.272
    Special distribution declared per
     unit (8,340,000 units)             $0.100    $0.100    $0.200    $0.200
    Total distributions per unit
     (8,340,000 units)                  $0.524    $0.524    $1.472    $1.472
    -------------------------------------------------------------------------
    (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 in the fourth quarter was $7,181,000 based on sales of $239,385,000 reported by the A&W restaurants in the Royalty Pool. This was an increase of 2.7% over royalty income of $6,991,000 and sales of $233,032,000 during the same quarter of 2008. Royalty income for the year was $22,086,000 based on sales of $736,209,000 , an increase of 3.6% over royalty income of $21,314,000 and sales of $710,479,000 for 2008. These increases are due to the combined impact of the additional net nine restaurants in the Royalty Pool and the same store sales increase of 0.03% for the quarter and 1.5% for the year.

The Fund's net earnings for the quarter were $4,010,000 or 48.1cents per unit compared to $3,981,000 or 47.7cents for the same quarter in 2008. The Fund's net earnings for 2009 were $11,624,000 or $1.394 per unit compared to $11,869,000 or $1.423 for the prior year. The $245,000 decrease in the Fund's net earnings was due to a $329,000 decrease in the Fund's dilution gain, less an increase in Trade Marks' earnings and corresponding equity pick-up of the earnings by the Fund.

Trade Marks' net earnings for the quarter were $1,962,000 compared to $1,881,000 for the same quarter in 2008. Trade Marks' net earnings for 2009 were $4,007,000 compared to $3,773,000 for 2008. The increase of $81,000 for the quarter and $234,000 for the year was due to higher royalty income, offset by higher interest expense and general and administrative expenses. The higher general and administrative expenses resulted from the internal reorganization of the Fund's subsidiary Trade Marks involving the creation of A&W Trade Marks Limited Partnership (the Partnership), which took place in 2009.

Total distributable cash generated was $6,831,000 for the quarter and $20,912,000 for the full year compared to $6,614,000 for the same quarter in 2008 and $20,257,000 for 2008. The increase of $217,000 for the quarter and $655,000 for the year was due to the increase in royalty income less higher expenses discussed previously.

The amount of cash distributed in the quarter to unitholders and A&W Food Services in monthly distributions and dividends was $0.424 per equivalent unit compared to distributable cash generated of $0.478 . Monthly distributions and dividends for 2009 were $1.272 per equivalent unit compared to distributable cash generated of $1.463 . In addition, two Special Distributions of $0.100 per equivalent unit each were paid in 2009, bringing the total amount of cash distributed in 2009 to $1.472 per equivalent unit.

At the end of 2009 there was a cumulative surplus of distributable cash of $3,706,000 compared to a cumulative surplus of $3,828,000 at the end of 2008.

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 preferred and non-voting common shares of Trade Marks which are exchangeable for units of the Fund.

A&W Food Services currently owns 43% of the common shares of Trade Marks, and therefore currently owns the equivalent of 43% 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.

Outlook

The current slowing of the foodservice industry sales continues to affect sales in A&W restaurants. This is expected to continue until the overall economy and, in particular, employment recovers. A&W Food Services is responding tactically to market conditions, as well as continuing to focus on building the A&W brand through successful advertising and marketing campaigns, menu innovation, facilities design and expanding to serve customers in new markets. A&W Food Services is a strategy driven company whose mission is "to make A&W the number one national burger choice for baby boomers and the fastest growing and most successful burger businesses in Canada ."

The launch of the Cheddar Bacon Uncle Burger and the limited time offer of the Sirloin Baby Burger Twins in 2009 along with new advertising campaigns extended A&W's reputation as having the best tasting hamburgers in Canada . The Uncle Burger and the Baby Burger Twins are unique products featuring real sirloin.

The Cruisin' the Dub program was a great success again in the summer of 2009, with over 3,700 events held at A&W restaurants across Canada . On August 27th, 2009 , A&W held its first national Cruisin' for a Cause Day to benefit the Multiple Sclerosis Society of Canada (MS). Cruisin' for a Cause is affiliated with A&W's Cruisin' the Dub program and it created an opportunity for Canadian baby boomers who grew up enjoying warm summer evenings in their cars at A&W drive-ins - often with the radio blaring and trays of Teen Burgers, onion rings and icy cold A&W Root Beer delivered by car hops - to revisit those fond memories and support MS. One dollar from every Teen Burger sold across the country went to MS and the total amount raised was over $400,000 .

Another strategic initiative underway is A&W's "next generation" re-image program, to modernize and enhance the appeal of A&W restaurants. This program will begin roll-out in 2010.

A&W Food Services opened 22 new restaurants in 2009, and in 2010 will continue to focus on expanding the brand to more Canadians by building new restaurants across Canada , with a special emphasis on Ontario.

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; A&W Food Services' Mission and 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 respond tactically to market conditions; 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; A&W Food Services' plans to modernize and enhance the appeal of its restaurants; and A&W Food Services' plans to expand the brand by building new restaurants in 2010 with emphasis on Ontario. 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, 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.

For further information: Don Leslie, Chief Financial Officer: [phone] or [email protected]