A&W Revenue Royalties Income Fund Announces Fourth Quarter 2013 Results
A&W POSTS STRONG FOURTH QUARTER
- Same store sales up 3.1% for the quarter
- 14 new A&W restaurants opened during the quarter
- Royalty income increased 7.6% for the quarter
TRADING SYMBOL: The Toronto Stock Exchange - AW.UN
VANCOUVER, Feb. 6, 2014 /CNW/ - 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 fourth quarter and year ended December 31, 2013. The Fund will hold a conference call to discuss the results on Thursday, February 6, 2014 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be accessed by dialling toll-free 1-800-814-4859 or (416) 644-3414. A replay will be available until February 20, 2014, by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode: 4662721#.
A&W restaurants generated strong results in the fourth quarter on all key measures. Same store sales growth for the fourth quarter of 2013 was +3.1%. This strong performance occurred despite an ice storm that had many homes and businesses without power for some days during the peak Christmas shopping season in central and eastern Canada. On an annual basis, same store sales growth for 2013 was +0.4% as compared to 2012, erasing the impact of a soft first quarter which was impacted by poor weather. Total sales for all A&W restaurants in the Royalty Pool increased by 7.6% for the quarter.
"We are pleased to report strong same store sales growth in the fourth quarter and positive same store sales growth for the year. The launch of our new beef with no added hormones or steroids has been very positively received by our guests," said Paul Hollands, President and CEO of A&W Food Services of Canada Inc. (A&W Food Services). "We are focussed on our strategy to reposition and differentiate the A&W brand as a "better burger" quick service restaurant, and are pleased with the progress we are making."
Distributable cash per unit increased by 3.7 cents to 44.4 cents per unit in the fourth quarter of 2013 and increased by 3.7 cents to $1.349 per unit in 2013.
A&W Food Services' strategy also includes accelerating the pace of growth of new restaurants. Thirty seven new A&W restaurants were opened across the country in 2013 and 26 of these are in Ontario and Quebec, important growth markets for A&W. An important milestone was achieved in December with the opening of the 800th A&W restaurant in Canada.
On January 5, 2014, the annual adjustment to the Fund's Royalty Pool took place. On that date, the number of A&W restaurants for which royalties are paid to the Fund increased by 38 new restaurants that opened between October 2012 and September 2013 less eight restaurants that permanently closed during this period. The addition of these 30 net new A&W restaurants brings the total number of A&W restaurants in the Royalty Pool to 790.
"We are proud that this is the largest annual increase to the Royalty Pool since the inception of the Fund in 2002. Since 2002, the number of A&W restaurants for which royalties are paid to the Fund has increased by 205 restaurants, from 585 to 790" said Hollands.
Total sales reported by A&W restaurants in the Royalty Pool increased by 7.6% to $278.1 million in the fourth quarter of 2013 compared to $258.4 million in the fourth quarter of 2012. 2013 sales increased by 4.0% to $856.4 million compared to $823.3 million in 2012. Royalty income was $8,343,000 for the quarter compared to $7,752,000 for the same quarter of 2012. 2013 royalty income was $25,691,000 compared to $24,700,000 for 2012. The increase in sales and royalty income resulted from the increase in the number of A&W restaurants in the Royalty Pool from 737 to 760 effective January 5, 2013 and the same store sales growth.
Distributable cash of $6,047,000 was generated in the quarter compared to $5,328,000 in the same quarter of 2012. Distributable cash of $18,360,000 was generated in 2013 compared to $17,163,000 in 2012. Distributable cash per equivalent unit for the quarter increased by 3.7 cents to 44.4 cents per unit compared to 40.7 cents for the same quarter of 2012. 2013 distributable cash per unit has increased by 3.7 cents to $1.349 per unit compared to $1.312 in 2012. The increase in distributable cash per unit was a result of lower interest costs on the term loan which was refinanced in December 2012, less the impact of higher income tax expense. Income taxes were higher in 2013 due to an increase in corporate income tax rates. In addition, the new tax rules for partnerships with misaligned year ends announced in March 2011 resulted in $718,000 income tax expense in 2013 as compared to $517,000 in 2012.
Total distributions of 46.8¢ per unit were declared in the fourth quarter and $1.404 in 2013, the same as in 2012. The cumulative surplus of distributable cash at the end of 2013 was $1,393,000, compared to a cumulative surplus of $1,974,000 at the beginning of the year. The increase in income tax expense contributed to the decrease in the cumulative surplus of distributable cash.
| Financial Highlights |
||||
| (dollars in thousands except per unit amounts) |
Period from Sep 9, 2013 to Dec 31, 2013 |
Period from Sep 10, 2012 to Dec 31, 2012 |
Period from Jan 1, 2013 to Dec 31, 2013 |
Period from Jan 1, 2012 to Dec 31, 2012 |
| Same store sales growth(1) | +3.1% | +0.5% | +0.4% | -0.7% |
| Number of restaurants in the Royalty Pool |
760 | 737 | 760 | 737 |
| Sales reported by the restaurants in the Royalty Pool |
$278,097 | $258,427 | $856,379 | $823,350 |
| Royalty income | $8,343 | $7,752 | $25,691 | $24,700 |
| General and administrative expenses |
252 | 258 | 676 | 709 |
| Net third party interest expense | 754 | 918 | 2,413 | 2,993 |
| Current income taxes | 1,290 | 1,082 | 4,242 | 3,669 |
| Financing fees | - | 166 | - | 166 |
| Total distributable cash generated for distributions and dividends(2) |
$6,047 | $5,328 | $18,360 | $17,163 |
| Distributable cash per equivalent unit (2013 - 13,611,878 units; 2012 - 13,076,718 units)(2)(3) |
$0.444 | $0.407 | $1.349 | $1.312 |
| Distributions and dividends declared per equivalent unit |
$0.468 | $0.468 | $1.404 | $1.404 |
| Net income, excluding non-cash gains and losses on interest rate swaps and non-cash loss on refinancing (4) |
$6,238 | $5,644 | $17,547 | $16,921 |
| Net income(4) | $5,621 | $3,026 | $21,626 | $14,303 |
| (1) | Same store sales growth is not an earnings measure recognized by International Financial Reporting Standards (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. |
| (2) | Distributable cash is not an earnings measure recognized 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 2013 includes the 131,650 LP units exchanged for 263,300 common shares of Trade Marks representing the final consideration paid in December 2013 for the January 5, 2013 adjustment to the Royalty Pool. The number of equivalent units and distributable cash per equivalent unit in 2012 includes the 125,975 LP units exchanged for 251,950 common shares of Trade Marks representing the final consideration paid in December 2012 for the January 5, 2012 adjustment to the Royalty Pool. |
| (4) | Net income in 2013 includes non-cash gains on interest rate swaps. Net income in 2012 was impacted by a non-cash loss on refinancing and non-cash losses on interest rate swaps. 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. |
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 14% of the common shares of Trade Marks, and therefore owns the equivalent of 14% 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 press release may contain forward-looking information within the meaning of applicable securities laws in Canada (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.
Additional information relating to the Fund is available at www.awincomefund.ca.
SOURCE: A&W Revenue Royalties Income Fund
Don Leslie, Chief Financial Officer: (604) 988-2141 or [email protected]
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