- Published: 30 April 2013
- Written by Editor
A&W Revenue Royalties Income Fund announces first quarter 2013 results
TRADING SYMBOL: The Toronto Stock Exchange - AW.UN
- Same store sales hit by winter weather
- Both distributable cash and net income grow
A&W Revenue Royalties Income Fund (the Fund) reported today results for the first quarter ended March 24, 2013. The Fund will hold a conference call to discuss the results on Tuesday, April 30, 2013 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be accessed by dialling toll-free 1-877-974-0445 or (416) 644-3414. A replay will be available until May 14, 2013, by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode: 4616097#.
Same store sales for the first quarter of 2013 were -3.7% as compared to the first quarter of 2012. The winter weather had a severe impact on sales in the quarter, especially in comparison to last year's unseasonably warm temperatures, as during winter storms customers stay home and many restaurants in several key markets had to sharply reduce hours. In addition, generally weak economic conditions impacted many retail sectors, including restaurants.
Total sales reported by restaurants in the Royalty Pool were $169.9 million, a decrease of 2.0% from sales of $173.4 million in the first quarter of 2012. Royalty income was $5,096,000 for the first quarter of 2013 compared to $5,201,000 for the same quarter of 2012. The increase in sales and royalty income resulting from the additional net 23 restaurants added to the Royalty Pool on January 5, 2013 was offset by the same store sales decrease.
"This winter has been one of the longest and coldest Canadian winters in recent memory and this has had a significant impact on our same store sales" said Paul Hollands, President and CEO of A&W Food Services of Canada Inc. (A&W Food Services). "Despite this, A&W is focused on its strategies to attract new customers and grow market share. We have implemented important innovations in our restaurants, including the launch of new menu items to enhance our appeal to our customers. Sweet Potato Fries and a new Russet Thick-Cut Fry were both launched earlier this month. We also introduced a new addition to our Value Deals Menu, Spicy Chipotle Chubby Chicken Wraps. The response to these menu additions has been positive."
Distributable cash of $3,560,000 was generated in the first quarter of 2013 compared to $3,341,000 in the same quarter of 2012. Distributable cash per equivalent unit increased by 0.7 cents per unit to 26.2 cents per unit for the quarter compared to 25.5 cents per unit in the same quarter in 2012. The increase in distributable cash per equivalent unit was due to the lower interest rate on the term loan after it was refinanced in December last year.
Two monthly distributions totalling 23.4¢ per unit were declared in the quarter, the same as in the first quarter of 2012. The cumulative surplus of distributable cash at the end of the quarter was $1,230,000, compared to a cumulative surplus of $1,974,000 at the beginning of the year. Surplus distributable cash historically decreases in the first quarter due to the seasonality of the business, and the soft sales in the quarter contributed to the seasonal decrease.
Net income for the first quarter of 2013 was $3,942,000 compared to $3,242,000 for the first quarter of 2012.
|(dollars in thousands except per unit amounts)||Period from
Jan 1, 2013 to
Mar 24, 2013
Jan 1, 2012 to
Mar 25, 2012
|Same store sales growth(1)||-3.7%||0.4%|
|Number of restaurants in the Royalty Pool||760||737|
|Sales reported by the restaurants in the Royalty Pool||$169,864||$173,369|
|General and administrative expenses||245||283|
|Net third party interest expense||547||697|
|Current income taxes||744||880|
|Total distributable cash generated for distributions and
|Distributable cash per equivalent unit (2013 -
13,581,106 units; 2012 - 13,076,718 units) (2)(3)
|Distributions and dividends declared per equivalent unit||$0.234||$0.234|
|The Fund's net income, excluding non-cash items (4)||$3,714||$3,262|
|The Fund's net income||$3,942||$3,242|
(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 and 2012 was impacted by non-cash items that did not affect 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.
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 11th 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