A&W Revenue Royalties Income Fund announces second quarter 2010 results
28 July 2010 - 2:07AM
PR Newswire (Canada)
VANCOUVER, July 27 /CNW/ -- TRADING SYMBOL: The Toronto Stock
Exchange - AW.UN VANCOUVER, July 27 /CNW/ - Highlights - Same store
sales growth(1) 1.1% for the second quarter, 3.4% year to date -
Royalty income increased to $5.3 million, up 4.2% - Year to date
royalty income increased to $10.5 million, up 10.4% - Year to date
distributable cash(2) increased to $9.8 million, up 10.3% A&W
Revenue Royalties Income Fund (the Fund) reported today its results
for the second quarter ended June 20, 2010. The Fund will hold a
conference call to discuss second quarter results on Tuesday, July
27, 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 (416)
644-3419. A replay will be available until August 10, 2010, by
dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode:
4333081 followed by the number sign. The second quarter same store
sales growth of 1.1% marks A&W's 29th consecutive quarter of
same store sales growth. Year to date same store sales growth is
3.4%. Growth in same store sales is the most important driver of
growth in the Fund. Total sales reported by restaurants in the
Royalty Pool increased by 4.2% over the same quarter of 2009 and by
10.4% year to date compared to 2009. The sales increase was due to
the same store sales growth and the increase in the number of
restaurants in 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 quarter of
both years. Year to date same store sales growth is reported based
on an equal number of days in each quarter. The increase in sales
resulted in royalty income increasing by 4.2% for the quarter and
distributable cash per equivalent unit increasing to 34.9 cents for
the quarter. "As a strategy driven company we continue to build our
relationship with our core baby boomer customers, by focusing on
the increasing demand for premium hamburgers like the Sirloin Uncle
Burger and also accelerating the pace of growth of new
restaurants," said Paul Hollands, President and Chief Executive
Officer of A&W Food Services of Canada Inc. (A&W Food
Services). "Despite continuing bumpy economic conditions, we are
pleased that the A&W business demonstrated solid growth in the
second quarter. Looking forward, we will continue to focus on
implementing our strategy, but we will also tactically adjust
advertising and promotional programs to respond to economic
conditions as well as any negative impact that the implementation
of the Harmonized Sales Tax may have on sales of the overall
restaurant industry in British Columbia." The Fund also today
declared the regular monthly distribution of 10.6 cents per unit
for the period July 1 to July 31, 2010. This distribution will be
paid on August 31, 2010 to unitholders of record as at August 15,
2010. For tax purposes, 8.958 cents per unit of this distribution
will be other taxable income and 1.642 cents will be non-eligible
dividends. A&W Food Services will also receive the regular
monthly dividend of 10.6 cents per share from A&W Trade Marks
Inc. (Trade Marks) on its investment in Trade Marks. FINANCIAL
HIGHLIGHTS
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(dollars in thousands except Period Period per unit amounts) 12
week 12 week from from period period Jan 1, Jan 1, ending ending
2010 to 2009 to Jun 20, Jun 14, Jun 20, Jun 14, 2010 2009 2010 2009
-------------------------------------------------------------------------
Same store sales growth(1) 1.1% 1.3% 3.4% 3.8% Number of
restaurants in the Royalty Pool 700 685 700 685 Sales reported by
the restaurants in the Royalty Pool $177,690 $170,506 $349,348
$316,571 Royalty income $5,330 $5,115 $10,480 $9,497 General and
administrative expenses $65 $85 $426 $423 Net third party interest
expense $132 $131 $271 $254 Recovery of current income taxes - - -
($43) Partnership distributions to Food Services $5 - $10 - Total
distributable cash generated for distributions and dividends(2)
$5,128 $4,899 $9,773 $8,863 Distributable cash(2) per equivalent
unit (2010 - 14,705,897 units; 2009 - 14,289,993 units)(3) $0.349
$0.343 $0.665 $0.620 Distributions and dividends declared per
equivalent unit $0.318 $0.318 $0.530 $0.530 Special distribution
per equivalent unit $0.100 $0.100 $0.100 $0.100 Trade Marks' net
earnings $921 $825 $1,422 $959 The Fund's net earnings $2,585
$2,546 $5,608 $4,916 The Fund's basic and diluted earnings per unit
(8,340,000 units) $0.310 $0.305 $0.672 $0.589
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(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
generally accepted accounting principles ("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 second
quarter increased by $215,000 or 4.2% to $5,330,000 compared to the
same quarter in 2009. Year to date royalty income increased by
$983,000 or 10.4% to $10,480,000 compared to 2009. These increases
in royalty income were driven by the same store sales growth of
1.1% for the quarter and 3.4% 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 $14,000 in the
quarter and increased by $73,000 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
$229,000 or 4.7% to $5,128,000 for the second quarter of 2010
compared to the same quarter in 2009. Year to date distributable
cash increased by $910,000 or 10.3% to $9,773,000 for 2010 compared
to 2009 year to date. Distributable cash per fully diluted unit and
equivalents increased to 34.9 cents from 34.3 cents for the quarter
and to 66.5 cents from 62.0 cents for the year to date period.
Distributions of 31.8 cents per equivalent unit were declared in
the second quarter. Year to date monthly distributions total 53.0
cents per equivalent unit, and in addition, in May 2010 a Special
Distribution of 10.0 cents per equivalent unit was paid, bringing
the total amount of cash distributed year to date to 63.0 cents per
equivalent unit. The current monthly distribution rate of 10.6
cents per unit translates into an annualized distribution of $1.272
per unit. 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 second quarter will be available on
www.sedar.com and www.awincomefund.ca on or before July 30, 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. 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 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. Don
Leslie, Chief Financial Officer: (604) 988-2141 or
investorrelations@aw.ca
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