Priszm reports financial results for fourth quarter and year end 2009; amends
loan agreement
TORONTO, March 12 /CNW/ - Priszm Income Fund (TSX: QSR.UN) ("Priszm" or the "Company") today reported its financial results for the fourth quarter and fiscal 2009.
Fiscal 2009 Highlights
Year ended December 27, 2009 versus year ended December 28, 2008
- Cash position of $25.7 million
- Completed sale of Toronto salad production facility
- Reported income from restaurant operations of $28.9 million
- Same store sales declined by 3.3 per cent
- Generated EBITDA* of $34.2 million, which included the one-time
gain of approximately $9.2 million on the sale of the salad
production facility in December 2009
"Strengthening our balance sheet was a key focus for us in 2009," said John Bitove, Executive Chairman of Priszm Income Fund. "We spent much of the year improving our operations by continuing to invest in and strengthen our business both in home delivery operations and inside our restaurants. As we move forward in 2010, we remain focused on driving customers to our restaurants and everything we are doing is with the customer in mind."
Results from Continuing Operations
Restaurant sales for the fourth quarter were $131.3 million, a decrease of $9.1 million or 6.5 per cent versus the same quarter in 2008. The sales decline is due to operating four fewer stores compared to the same quarter in 2008 and declines in same store sales of 6.2 per cent. Despite the launch of the new Original Recipe(TM) Boneless Fillets, the marketing campaigns in the fourth quarter were unable to generate sufficient sales growth.
Restaurant sales for fiscal year 2009 of $441.8 million fell, on a same store sales basis, by $4.4 million or 3.3 per cent versus the prior year while the remaining reduction of $8 million was directly attributable to the change in the number of restaurants operated by the Company. A series of family-oriented new products and licensed property-based meal promotions were unable to increase same store sales. Difficult employment and economic conditions in a number of regions restricted consumer spending, which resulted in test market outcomes failing to hold up in all regions. This period of economic downturn resulted in a competitive disadvantage as Priszm, compared to other quick service restaurants, offers a relatively larger proportion of family meals with higher average guest cheques.
Income from restaurant operations for the fourth quarter of 2009 was $4.8 million compared to $0.3 million in the same period in the prior year. Although sales were down in fiscal 2009, income from restaurant operations of $28.9 million for the full year was virtually flat versus prior year due to the fact that the Company recorded a smaller write-down of restaurant assets and franchise rights in 2009 compared with 2008.
EBITDA for the fourth quarter of 2009 was $14.1 million versus $9.6 million in the fourth quarter of 2008. EBITDA for fiscal 2009 was $34.2 million compared to $33 million in fiscal 2008. Both the fourth quarter and fiscal 2009 included a one-time gain of approximately $9.2 million on the sale of the salad production facility.
Liquidity
At December 27, 2009, the Company had total cash on hand and short-term investments of $25.7 million, up from $11.4 million at the end of 2008. This included the net proceeds from the sale of the Company's salad production facility of $10 million. The net increase in cash is also a result of the Trustees' decision to reduce distributions to Unitholders to ensure liquidity leading up to the Company's long-term debt renewal as described below and to retain cash for investment in facilities following the negotiation of franchise renewals.
Loan Agreement on Long-Term Debt
The Company has two tranches of long-term debt, with face value totalling $75.6 million.
The Company entered into negotiations with its lender and received a waiver and amendment to permit the sale of the salad production facility and to amend certain financial performance covenants for the fourth quarter of 2009 as a contingency plan in the event the asset sale was not completed by year end. The salad production facility was sold and, accordingly, the Company met all of the original and amended financial covenants and was in compliance with its long-term debt covenants at December 27, 2009.
Subsequent to year end the Company and the lender amended the existing terms of the long-term debt and established new performance covenants. This amendment eliminated all previous financial covenants and established a simple threshold EBITDA to be achieved quarterly for the remainder of the term. In addition the lender will receive early repayment of a total of $10 million of principal, in three instalments over the first three quarters of 2010 resulting in $65 million of remaining long-term debt to be repaid no later than December 31, 2010. Under the amendment the Fund is precluded from making distributions or any further purchases under its normal course issuer bids. The Company presently expects to remain in compliance with all of the covenants on its long-term debt facility for the coming year and is actively pursuing replacement financing for its long-term debt. The Trustees are currently considering hiring an investment banking firm to assist in the refinancing effort and to further continue investigations into various capital reorganization options available to the Company including any changes to the business structure, driven by the legislated change in income tax treatment which will apply to income trusts in 2011.
Non-GAAP Measures
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is defined by management as earnings before net interest income/expense, income taxes, depreciation and amortization and other items as noted in the table below. EBITDA is not a recognized measure under GAAP in Canada and may not be comparable to similar measures used by other companies. The Company believes that EBITDA is a useful supplementary measure of operating performance as it provides investors with an indication of cash available for distribution prior to debt service and capital expenditures. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with GAAP or to cash flows from operating, investing and financing activities.
Distributable Cash
Distributable cash is a non-GAAP measure that generally refers to the net cash generated by the businesses or assets of the income trust that, at its discretion, is available for distribution to the Unitholders. The Company believes that distributable cash is a useful supplemental measure of performance as it provides investors with an indication of the amount of cash available for distribution to Unitholders. However, readers are advised that distributable cash is not meant to be an alternative to using net earnings as a measure of profitability or to using the Statement of Cash Flows to measure the Company's operating cash flows.
The Company defines distributable cash as cash provided by operating activities, per the Company's Consolidated Statement of Cash Flows, excluding net change in non-cash working capital and reduced for maintenance capital expenditures that are required to maintain productive capacity. The cash that is available for distribution per Unit will vary with the operating performance of the Company's business or assets, its capital requirements, debt obligations and the number of Units outstanding. Readers are cautioned that distributable cash and maintenance capital expenditures do not have standardized meanings prescribed by GAAP, and therefore, may not be comparable to similar measures presented by other issuers.
About Priszm Income Fund
Priszm Income Fund (TSX: QSR.UN) holds approximately a 60 per cent interest in Priszm Limited Partnership, which owns and operates more than 400 quick service restaurants in seven provinces across Canada. The KFC, Taco Bell and Pizza Hut restaurants under Priszm serve more than one million customers a week and employ approximately 7,300 people. Approximately 100 locations are multi-branded, combining two or more of the Fund's restaurant concepts.
To find out more about Priszm Income Fund (TSX: QSR.UN), visit our website at http://www.priszm.com.
Forward-Looking Statements
Certain information in this document may constitute forward-looking statements within the meaning of securities laws that involve known and unknown risks, uncertainties, future expectations and other factors with respect to industry sector performance, business plans, activities, trends and events anticipated by the Priszm Income Fund (the "Company") and which may cause the Company's future performance and results to be materially different from those implied by the forward-looking information. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or the negative of these terms or other comparable terminology concerning matters that are not historical facts. Forward-looking information is based on certain factors and assumptions regarding, among other things, the number of restaurants, the renewal of the franchise agreements, ability to meet capital expenditure requirements, the industry sector performance, business plans, activities, success of refinancing on commercially viable terms, trends and events anticipated by the Company. Although the Company believes that the assumptions underlying such statements are reasonable, any of the assumptions may prove to be inaccurate and, as a result, the forward-looking information may prove to be incorrect. The forward-looking information, assumptions and statements reflect the views of the Company's management with respect to future events and outcomes as of the date of this document and there should be no expectation that such information will be updated, revised and/or supplemented whether as a result of new information, changing circumstances, future events or other cause. Actual events or outcomes may be materially different and cause the performance of the Company to differ materially from any forward-looking statement.
The following selected financial information, with the exception of EBITDA, Distributable Cash and Distributable Cash Per Unit, has been derived from and should be read in conjunction with the Company's consolidated financial statements and the MD&A for the years ended December 27, 2009 and December 28, 2008. Additional information can be found at www.sedar.com.
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO DISTRIBUTABLE CASH
The following table reconciles cash provided by operating activities to distributable cash per the consolidated statements of cash flows, which includes the results of both continuing and discontinued operations:
Fourth quarter Full Year
(in thousands except per Unit
amounts) 2009 2008 2009 2008
Cash provided by operating
activities $ 7,490 $ 9,948 $ 21,328 $ 16,845
Net change in non-cash working
capital(1) (4,675) (2,512) (3,582) 9,231
Franchise renewal fees (1,970) - (1,970) -
Maintenance capital
expenditures(2) (1,142) (1,176) (3,038) (3,356)
-------------------- --------------------
Distributable cash (297) 6,260 12,738 22,720
-------------------- --------------------
Distributions declared during
the period(3) 459 4,598 7,802 20,876
Distributable cash per Unit (0.012) 0.245 0.500 0.882
Distributions per Fund and
Exchangeable Unit(3) 0.020 0.200 0.340 0.900
Distributions per Subordinated
Unit - - - -
Distributions per Unit
- diluted 0.018 0.180 0.306 0.810
Payout ratio nm* 82% 68% 102%
* not meaningful
Notes:
(1) The Company does not need to finance its working capital as it
operates in an environment where cash sales precede the payment of
restaurant food, supplies and labour. While quarterly fluctuations
will occur, on a full year basis these changes will not impact the
Company's ability to make Unit distributions and therefore the
Company adds back the net change in non-cash working capital to
reconcile to distributable cash
(2) Maintenance capital expenditures are defined by management as capital
expenditures that are necessary to sustain current production
capacity. The Company believes that funding for maintenance capital
expenditures must come out of operating cash flow. Development
capital expenditures are not recorded as a reduction from
distributable cash since these expenditures are expected to generate
increases in future distributable cash and distributions. Maintenance
capital expenditures and development capital expenditures are not
measures recognized by GAAP, do not have standardized meanings
prescribed by GAAP, and therefore, may not be comparable to similar
measures presented by other issuers.
(3) Distributions per Unit include all declared distributions for the
2008 and 2009 fiscal years.
RECONCILIATION OF NET INCOME TO EBITDA
The following table reconciles net income from the Company's consolidated statements of operations, which includes the results for both continuing and discontinued operations, to EBITDA:
Fourth quarter Full year
------------------------------------------
(in thousands of dollars) 2009 2008 2009 2008
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Net loss for the period $ (3,106) $(34,452) $ (717) $(29,994)
Income tax recovery (284) (4,358) (760) (4,333)
Interest income (3) (28) (12) (164)
Interest expense
(including accretion and
amortization of deferred
financing charges) 2,730 2,779 9,012 8,897
Non-controlling interest (2,276) (26,317) (1,017) (23,379)
Amortization, impairment and
loss on disposal of PP&E 17,005 71,884 27,563 81,392
Unit-based compensation 4 168 226 660
Long-term incentive plan
accrual - (61) (52) (85)
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EBITDA 14,070 9,615 34,243 32,994
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%SEDAR: 00019884E
For further information: Investors: Deborah Papernick, (416) 739-2942, [email protected]; Media: Wilcox Group, (416) 203-6666, [email protected]
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