A&W POSTS STRONG FIRST QUARTER RESULTS
- Same store sales up 9.1% for the quarter
- Royalty income increased 10.3% for the quarter
- Distributable cash increased by 1.0¢ per unit
TRADING SYMBOL: The Toronto Stock Exchange –
AW.UN
VANCOUVER, April 28, 2015 /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 first
quarter ended March 22, 2015.
The Fund will hold a conference call to discuss the results
on Tuesday, April 28, 2015 at
1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be
accessed by dialling toll-free 1-800-524-8950 or (416) 260-0113
Passcode 7773770. A replay will be available until
May 5, 2015, by dialling toll-free
1-888-203-1112 or (647) 436-0148 Passcode 7773770.
A&W restaurants in the Royalty Pool posted the strongest
quarterly same store sales growth in seven years, with same store
sales for the first quarter of 2015 growing by 9.1% over the same
quarter of 2014. The impressive same store sales growth along
with the sales from 24 net new restaurants added to the Fund's
Royalty Pool in January 2015, boosted
the Fund's sales and royalty income to a 10.3% increase for the
quarter.
A&W Food Services' system sales growth for all A&W
restaurants across Canada (which
includes restaurants that have not yet been added to the Royalty
Pool) was 12.5% for the quarter. These strong quarterly sales
pushed A&W Food Services' total system sales on a trailing four
quarter basis to over $1 Billion.
The amount of cash generated by the Fund in the quarter for
distributions and dividends increased by 7.2% to $4,083,000. Distributable cash per unit
increased by 1.0¢ to 27.6¢ per unit compared to 26.6¢ per unit for
the same quarter of 2014. The trailing four quarters payout
ratio is 95.9% and surplus distributable cash on hand is
$1.9
million.
"We are very pleased to report that our strong trend of positive
same store sales growth dating back to 2013 has continued into
2015", said Paul Hollands, President
and CEO of A&W Food Services. "Over the last two years,
we have introduced simple, great-tasting ingredients, farmed with
care, to reposition and differentiate A&W as a "better burger"
QSR restaurant. Our guests have been delighted with this
change and I am pleased to report that A&W Food Services has
broken the $1 Billion sales
threshold."
In 2013, A&W Food Services was the first major QSR chain to
use only beef raised without the use of hormones and
steroids. Chicken is one of the fastest growing segments of
the QSR industry, and A&W Food Services' move in 2014 to serve
only chicken raised without the use of antibiotics was a key
element in its strategy to accelerate growth. A&W Food
Services also enhanced its breakfast menu by moving to eggs from
hens fed only a vegetarian diet without animal by-products.
Breakfast was further supported by the launch in January 2015 of organic and Fair Trade coffee,
another first for a major chain.
Another major strategic initiative of A&W Food Services is
the extensive re-imaging program to modernize and enhance the
appeal of existing A&W restaurants. The new design has
been developed to create high visibility and instant recognition of
the Home of The Burger Family®. Over half of
A&W's existing restaurants have completed the re-image to the
new design. Including the new restaurants opened in the new
design since the beginning of the re-image program, 500 restaurants
in the A&W chain now have the new design. "With our
updated image as well as our "better ingredients", we're attracting
many new guests to our restaurants," Hollands said.
A&W Food Services is continuing to grow the number of
restaurants across Canada,
concentrating its growth in Ontario and Quebec. Three new A&W
restaurants were opened in the first quarter of 2015.
Financial
Highlights
|
|
|
(dollars in
thousands except per unit amounts)
|
Period
from
Jan 1, 2015
to
Mar 22,
2015
|
Period
from
Jan 1, 2014
to
Mar 23,
2014
|
Same store sales
growth(1)
|
+9.1%
|
+4.6%
|
Number of restaurants
in the Royalty Pool
|
814
|
790
|
Sales reported by the
restaurants in the Royalty Pool
|
$202,448
|
$183,584
|
Royalty
income
|
$6,073
|
$5,507
|
General and
administrative expenses
|
259
|
239
|
Net third party
interest expense
|
535
|
543
|
Current income
taxes
|
1,196
|
918
|
Total distributable
cash generated for distributions and
dividends(2)
|
$4,083
|
$3,807
|
Distributable
cash per equivalent unit (2015 – 14,781,656
units;
2014 –
14,319,708 units)(2)(3)
|
$0.276
|
$0.266
|
Distributions and
dividends declared per equivalent unit
|
$0.234
|
$0.234
|
Net
income(4)
|
$2,030
|
$2,440
|
Net income, excluding
non-cash items(4)
|
$4,083
|
$3,807
|
(1)
|
Same store sales
growth 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 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 A&W Food
Services.
|
(3)
|
The number of
equivalent units and distributable cash per equivalent unit in 2015
includes the 92,390 LP units exchangeable for 184,780 common shares
of Trade Marks representing the remaining 20% of the consideration
for the January 5, 2015 adjustment to the Royalty Pool which is
held back until December 2015 when the actual annual sales are
reported by the new restaurants. The number of equivalent
units and distributable cash per equivalent unit in 2014 includes
the 210,490 LP units exchanged for 420,980 common shares of Trade
Marks representing the final consideration paid in December 2014
for the January 5, 2014 adjustment to the Royalty
Pool.
|
(4)
|
Net income in 2015
and 2014 includes non-cash losses on interest rate swaps,
amortization of deferred financing fees and deferred income
taxes. 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.
|
The Fund's royalty income for the first quarter of 2015 was
$6,073,000 based on sales of
$202,448,000. This was an
increase of 10.3% from royalty income of $5,507,000 and sales of $183,584,000 for the first quarter of 2014.
The increase in sales and royalty income was due to the same store
sales growth of 9.1% for the quarter as compared to the same
quarter of 2014, and from the additional sales from the 24 net new
A&W restaurants added to the Royalty Pool on January 5, 2015.
Distributable cash generated in the first quarter of 2015 to pay
distributions to unitholders and dividends to A&W Food Services
was $4,083,000 compared to
$3,807,000 in the first quarter of
2014. Distributable cash generated per equivalent unit
increased by 1.0¢ to 27.6¢ per unit in the first quarter of 2015
from 26.6¢ for the first quarter of 2014.
The Fund's net income for the first quarter of 2015 was
$2,030,000 compared to $2,440,000 for the first quarter of 2014.
The decrease in net income was due to non-cash losses on interest
rate swaps which are required to be recorded in net income under
International Financial Reporting Standards. These non-cash
items have no impact on the Fund's ability to pay distributions to
unitholders. Of more interest to unitholders is the
distributable cash calculation which identifies the amount of
actual cash available to pay distributions to unitholders and
dividends to A&W Food Services. As noted above,
distributable cash for the quarter increased by 7.2% and the Fund
has a cumulative surplus of distributable cash on hand of
$1,871,000. "Our strong
financial results reflect the continued strength and growth of our
business", said Paul
Hollands.
Two monthly distributions totalling 23.4¢ per unit were declared
in the first quarter of 2015, the same as in the first quarter of
2014. The Fund's annual distribution rate is $1.404 per unit, the same as 2014.
On January 5, 2015, 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 32 new restaurants that opened
between October 2013 and September 2014 less eight restaurants that
permanently closed during this period. The addition of these 24 net
new A&W restaurants brings the total number of A&W
restaurants in the Royalty Pool to 814.
A&W Food Services also announced today that it has declared
and paid dividends in the amount of $3.5
million to its shareholders. These dividends were paid
out of A&W Food Services' available working capital and are
separate and distinct from distributions declared by the Fund to
unitholders of the Fund.
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 17.4% of the common shares of Trade Marks, and therefore owns
the equivalent of 17.4% 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.
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Twitter @AWCanada or visit www.awincomefund.ca.
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.
SOURCE A&W Revenue Royalties Income Fund