A&W Revenue Royalties Income Fund Announces Second Quarter 2013 Results

TRADING SYMBOL:  The Toronto Stock Exchange - AW.UN

• Same store sales up 0.4% for the quarter
• Royalty income increased 4.1% for the quarter

VANCOUVER, July 23, 2013 /CNW/ - A&W Revenue Royalties Income Fund (the Fund) reported today results for the second quarter ended June 16, 2013. The Fund will hold a conference call to discuss the results on Tuesday, July 23, 2013 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 [phone].  A replay will be available until August 6, 2013, by dialling toll-free 1-877-289-8525 or [phone] Passcode: 4630320#.

Same stores sales growth for the second quarter of 2013 was +0.4%, an improvement of 4 points over the first quarter of 2013 which was impacted by poor weather and generally weak retail sales.  The stronger performance in the second quarter improved year to date same store sales to -1.5%.  .

"We are encouraged by the significant positive swing in our results for the second quarter," said Paul Hollands, President and CEO of A&W Food Services of Canada Inc. (A&W Food Services).  "Despite continued choppy economic conditions, and a generally soft foodservice market, our marketing activities were successful.  The launch of our new Value Deals Spicy Chipotle Chubby Chicken Wraps and the limited-time offer of the Spicy Guacamole Teen Burger enjoyed good success in the second quarter.  Our restaurant re-image program continues to roll out, with 21 completed year to date, and a further 34 in the pipeline."

Total sales reported by restaurants in the Royalty Pool increased by 4.1% to $197.3 million in the second quarter of 2013 compared to $189.4 million in the second quarter of 2012.  2013 year to date sales increased by 1.2% to $367.2 million compared to $362.8 million in 2012 year to date.  Royalty income was $5,919,000 for the quarter compared to $5,683,000 for the same quarter of 2012.  Year to date royalty income was $11,015,000 compared to $10,884,000 for 2012 year to date.  The increase in sales and royalty income resulted from the increase in the number of restaurants in the Royalty Pool from 737 to 760.

Distributable cash of $4,278,000 was generated in the quarter compared to $4,060,000 in the same quarter of 2012.  Year to date distributable cash was $7,838,000 compared to $7,401,000 in 2012 year to date.  Distributable cash per equivalent unit for the quarter increased by 0.4 cents to 31.5 cents per unit compared to 31.1 cents for the same quarter of 2012.  Year to date distributable cash per unit increased by 1.1 cents to 57.7 cents per unit compared to 56.6 cents in 2012 year to date. The increase in distributable cash per unit was a result of the lower interest rate on the term loan after it was refinanced in December last year.

Total distributions of 35.1¢ per unit were declared in the second quarter of 2013 and 58.5¢ per unit year the date, the same as in 2012. The cumulative surplus of distributable cash at the end of the second quarter of 2013 was $1,152,000, compared to a cumulative surplus of $1,974,000 at the beginning of the year.  Surplus distributable cash historically decreases in the first half of the year due to the seasonality of the business, and the soft sales in the first quarter of 2013 contributed to the seasonal decrease. 

Financial Highlights
(dollars in thousands except per unit amounts)	12 week period ended Jun 16, 2013	12 week period ended Jun 17, 2012	Period from Jan 1, 2013 to Jun 16, 2013	Period from Jan 1, 2012 to Jun 17, 2012
Same store sales growth^(1)	+0.4%	-3.0%	-1.5%	-1.4%
Number of restaurants in the Royalty Pool	760	737	760	737
Sales reported by the restaurants in the Royalty Pool	$197,300	$189,448	$367,164	$362,817
Royalty income	$5,919	$5,683	$11,015	$10,884
General and administrative expenses	89	81	334	364
Net third party interest expense	556	689	1,103	1,386
Current income taxes	996	853	1,740	1,733
Total distributable cash generated for distributions and dividends^(2)	$4,278	$4,060	$7,838	$7,401
Distributable cashper equivalent unit (2013 - 13,581,106 units; 2012 - 13,076,718units)^(2)(3)	$0.315	$0.311	$0.577	$0.566
Distributions and dividends declared per equivalent unit	$0.351	$0.351	$0.585	$0.585
The Fund's net income^(4)	$5,598	$3,865	$9,540	$7,107

⁽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 100,878 LP units exchangeable for 201,756 common shares of Trade Marks representing the remaining 20% of the consideration for the January 5, 2013 adjustment to the Royalty Pool which is held back until December 2013 when the actual annual sales are reported by the new restaurants.  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⁾  The Fund's net income in 2013 includes non-cash gains on interest rate swaps which have no impact on the Fund's ability to pay distributions to unitholders.

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.  The 11^th annual adjustment to the Royalty Pool took place on January 5, 2013 at which time the number of restaurants in the Royalty Pool increased from 737 to 760.

A&W Food Services owns 10% of the common shares of Trade Marks, and therefore owns the equivalent of 10% 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:  [phone] or [email protected]