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VANCOUVER, Oct. 20 /CNW/ --
TRADING SYMBOL: The Toronto Stock Exchange - AW.UN
VANCOUVER, Oct. 20 /CNW/ -
Highlights
-- Same store sales growth((1)) 1.7% for the third quarter, 2.8%
year to date
-- Royalty income increased to $5.7 million, up 4.6%
-- Year to date royalty income increased to $16.1 million, up 8.2%
-- Year to date distributable cash((2)) increased to $15.2
million, up 8.2%
-- Trustees announce Special Distribution of $0.10 per unit,
payable November 30
A&W Revenue Royalties Income Fund (the Fund) reported today its results
for the third quarter ended September 12, 2010. The Fund will hold a
conference call to discuss third quarter results on Wednesday, October
20, 2010 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call
can be accessed by dialling toll-free 1-877-974-0446 or (416)
644-3417. A replay will be available until November 3, 2010, by
dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode:
4375415#.
Same store sales growth in A&W restaurants is the most important driver
of growth in the Fund. With a same store sales increase of 1.7% for the
quarter, A&W has now posted 30 straight quarterly increases in same
store sales going back to Q2, 2003.
Sales reported by restaurants in the Royalty Pool and corresponding
royalty income increased by 4.6% to $5.7 million compared to $5.4
million in the same quarter of 2009. This was due to the same store
sales growth and the increase in the number of restaurants to the
Royalty Pool from 685 to 700. In addition, the first quarter of 2010
had six more days of sales compared to the first quarter of 2009. There
were 84 days in the second and third quarters of both years. Year to
date same store sales growth is reported based on an equal number of
days in each quarter.
On a year to date basis, same store sales growth is now 2.8%. Year to
date royalty income increased 8.2% to $16.1 million compared to $14.9
million in 2009 year to date.
The increase in sales and royalty income resulted in distributable cash
per equivalent unit increasing to 37.2¢ for the quarter and $1.036 year
to date.
"With continuing uncertain economic conditions and the impact of the
Harmonized Sales Tax on British Columbia, our same store sales growth
of 1.7% for the quarter and 2.8% year to date is a solid result" said
Paul Hollands, President and Chief Executive Officer of A&W Food
Services of Canada Inc. (A&W Food Services). "Our continued focus on
providing our customers with premium burgers like the Mini Sirloin
Twins and our Cruisin' the Dub events through the summer months
contributed to the sales increases. We are pleased that the Fund is
able to pay a second Special Distribution to unitholders this year."
FINANCIAL HIGHLIGHTS
(dollars in 12 week 12 week Period from Period from
thousands period ending period ending Jan 1, 2010 Jan 1, 2009 to
except per Sep 12, 2010 Sep 6, 2009 to Sep 12, Sep 6, 2009
unit amounts) 2010
Same store 1.7% 0.3% 2.8% 2.5%
sales growth (
(1))
Number of 700 685 700 685
restaurants in
the Royalty
Pool
Sales reported $188,453 $180,253 $537,801 $496,824
by the
restaurants in
the Royalty
Pool
Royalty income $5,654 $5,408 $16,134 $14,905
General and $52 $57 $478 $480
administrative
expenses
Net third $130 $133 $401 $387
party interest
expense
Recovery of - - ($43)
current income -
taxes
Partnership $6 $16 -
distributions -
to Food
Services
Total $5,466 $5,218 $15,239 $14,081
distributable
cash generated
for
distributions
and dividends
((2))
Distributable $0.372 $0.365 $1.036 $0.985
cash ((2) )per
equivalent
unit (2010 -
14,705,897
units; 2009 -
14,289,993
units)( (3))
Distributions $0.318 $0.318 $0.848 $0.848
and dividends
declared per
equivalent
unit
Special - - $0.100 $0.100
distribution
per equivalent
unit
Trade Marks' $1,195 $1,086 $2,617 $2,045
net earnings
The Fund's net $2,741 $2,698 $8,349 $7,614
earnings
The Fund's $0.329 $0.324 $1.001 $0.913
basic and
diluted
earnings per
unit
(8,340,000
units)
(()(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.
See "Same Store Sales Growth".
((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. See "Distributable Cash".
((3)() )For purposes of calculating distributable cash per equivalent unit, the
number of equivalent units for 2010 includes 83,181 equivalent units
representing the remaining 20% of the consideration for the January 5,
2010 adjustment to the Royalty Pool which is held back until December
2010 when the actual annual sales are reported by the new restaurants.
Financial Results
Royalty income for the third quarter increased by $246,000 or 4.6% to
$5,654,000 compared to the same quarter in 2009. Year to date royalty
income increased by $1,229,000 or 8.2% to $16,134,000 compared to 2009.
These increases in royalty income were driven by the same store sales
growth of 1.7% for the quarter and 2.8% year to date, the increase in
the number of restaurants in the Royalty Pool to 700 in 2010 from 685
in 2009, and more days of sales in the first quarter compared to 2009.
Cash expenses, interest and taxes decreased by $2,000 in the quarter but
increased by $71,000 year to date. The year to date increase was due to
higher interest expense due to the longer first quarter compared to
2009 and an income tax recovery of $43,000 in 2009.
Distributable cash generated to pay distributions to unitholders and
dividends to A&W Food Services increased by $248,000 or 4.8% to
$5,466,000 for the third quarter of 2010 compared to the same quarter
in 2009. Year to date distributable cash increased by $1,158,000 or
8.2% to $15,239,000 for 2010 compared to 2009 year to date.
Distributable cash per fully diluted unit and equivalents increased to
37.2¢ from 36.5¢ for the quarter and to $1.036 from 98.5¢ for the year
to date period.
Distributions of 31.8¢ per equivalent unit were declared in the third
quarter. Year to date monthly distributions total 84.8¢ per equivalent
unit. The current monthly distribution rate of 10.6¢ per unit
translates into an annualized distribution of $1.272 per unit. In
addition, a Special Distribution of 10.0¢ per equivalent unit was paid
in May this year, bringing the total amount of cash distributed year to
date to 94.8¢ per equivalent unit. Food Services earns dividends on its
investment in Trade Marks at the same rate.
The Trustees of the Fund have approved the payment of a second Special
Distribution of 10¢ per unit, payable on November 30, 2010 to
unitholders of record as at November 15, 2010.
A copy of the Fund's management discussion and analysis and the
financial statements of the Fund, Trade Marks and A&W Food Services for
the third quarter will be available on www.sedar.com and www.awincomefund.ca on or before October 25, 2010.
Overview
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 will be exchanged for additional 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.
In October 2006 the Federal Government announced a new "SIFT Tax" on
income trusts. As a result of this new tax, the Fund initiated a
reorganization of the capital structure of Trade Marks and received
unitholder approval of the reorganization at its AGM on May 4, 2010.
This reorganization will allow the Fund to remain as an income trust
and to continue to pay its regular monthly distributions at 10.6 cents
per unit monthly ($1.272 per unit annualized) for the remainder of 2010
and 2011.
The reorganization, which will be implemented in January 2011, will
replace the A&W notes of Trade Marks currently held by the Fund with
non-voting common shares of Trade Marks, and will result in Trade
Marks' earnings being taxed at an effective rate of 18% versus an
approximate rate of 25% if the reorganization were not implemented. As
Trade Marks will pay income taxes in 2011, it is currently anticipated
that the Fund will not receive additional dividends from Trade Marks to
enable the Fund to make special distributions in 2011. However, the
amount of dividends paid by Trade Marks will be evaluated from time to
time depending upon its financial performance at that time.
Certain statements in this report may be forward-looking in
nature. These include references to distributions, liquidity,
dividends, earnings and anticipated earnings from growth in same store
sales and new restaurant openings, A&W Food Services' 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; and A&W Food Services' plans to
modernize and enhance the appeal of its restaurants. 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 the ability of A&W Food Services to
implement its marketing strategies and opening new A&W restaurants,
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.
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/October2010/20/c3789.html
pDon Leslie, Chief Financial Officer: (604) 988-2141 or a href="mailto:investorrelations@aw.ca"investorrelations@aw.ca/a/p