- Published: 03 February 2009
- Written by Editor
A&W Revenue Royalties Income Fund announces strong 2008 fourth quarter and year end results
Highlights
----------
- Same store sales grow 7.5% in fourth quarter, 7.3% in 2008
- Royalty income increases 11.2% to $21.3 million - Distributable cash(1) increases 11.2% to $20.3 million
A&W Revenue Royalties Income Fund (TSX:AW.UN) (the Fund) today reported strong financial results for the fourth quarter and year ended December 31, 2008 reflecting increased sales from the national chain of A&W quick service restaurants.
Despite the Canadian economy entering a serious slowdown in 2008, A&W restaurants achieved same store sales growth of 7.5% during the fourth quarter of 2008 and 7.3% growth for the full year. Total fourth quarter 2008 sales for A&W restaurants in the Royalty Pool increased 12.9% to $233 million. Total sales for 2008 increased 11.2% to $710.5 million.
Paul Hollands, President and Chief Executive Officer of A&W Food Services of Canada Inc., said A&W's strong performance was due to its ongoing strategy of strengthening its relationship with baby boomers who literally grew up with A&W. As part of this strategy, in September 2008, A&W introduced the first new member of the Burger Family in 40 years. The Uncle Burger is a premium sirloin burger which has been extremely popular with Canadians who love a great hamburger.
Hollands said another important strategy was an expanded Cruisin' the Dub program, which features car hops, hot rods and classic cars. Last year, A&W restaurants across the country held over 3,200 Cruisin' events to celebrate and revisit all the good times and fond memories Canadians have enjoyed at A&W for more than 50 years.
"We are very pleased that our business continued its strong growth during the fourth quarter, a period in which the overall Canadian economy slowed dramatically and the foodservice industry faced significant challenges," said Hollands. "It's too soon to determine whether our customers are visiting A&W more frequently as an alternative to more expensive options. But our same store sales growth in the fourth quarter, along with our overall performance in 2008, provides great evidence of the strength of our ongoing strategy."
<<
-------------------------------------------------------------------------
Sales Highlights Q4 2008 Q4 2007 2008 2007
-------------------------------------------------------------------------
Same store sales growth 7.5% 4.0% 7.3% 3.7%
Sales reported by the
restaurants in the Royalty
Pool $233,032 $206,464 $710,479 $638,750
Number of restaurants in the
Royalty Pool 676 660 676 660
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Financial Highlights Q4 2008 Q4 2007 2008 2007
-------------------------------------------------------------------------
Royalty income $6,991 $6,194 $21,314 $19,163
General and administrative
expenses $179 $138 $504 $502
Net third party interest
expense $155 $128 $484 $451
Current income taxes $43 - $43 -
Trade Marks' net earnings $1,881 $1,443 $3,773 $2,453
The Fund's net earnings $3,981 $3,792 $11,869 $10,610
The Fund's basic and diluted
earnings per unit
(8,340,000 units) $0.477 $0.455 $1.423 $1.272
Total distributable cash
generated for distributions
and dividends(1) $6,614 $5,928 $20,257 $18,210
Distributable cash(1) per
equivalent unit (2008 -
13,957,962 units; 2007 -
13,473,911 units) $0.474 $0.440 $1.451 $1.352
Monthly distributions and
dividends declared per
equivalent unit $0.424 $0.421 $1.272 $1.227
-------------------------------------------------------------------------
Special distributions and
dividends declared per
equivalent unit $0.100 - $0.200 $0.080
-------------------------------------------------------------------------
Total distributions and
dividends per equivalent unit $0.524 $0.421 $1.472 $1.307
-------------------------------------------------------------------------
($ in thousands except per unit amounts.)
(1) Distributable cash is not an earnings measure recognized by generally
accepted accounting principles 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
>>
Financial Results
The number of restaurants in the Royalty Pool increased from 660 during 2007 to 676 at the beginning of 2008, and increased again on January 5, 2009 to 685 restaurants.
Royalty income for the fourth quarter increased by $797,000 or 12.9% to $6,991,000 compared to the same quarter in 2007. Full year royalty income increased by $2,151,000 or 11.2% to $21,314,000 compared to 2007. These increases in royalty income were driven by the strong same store sales growth and the increase in the number of restaurants in the Royalty Pool.
As a result of the increase in royalty income, distributable cash available to pay distributions to unitholders and dividends to A&W Food Services of Canada Inc. (Food Services) increased by 11.6% to $6,614,000 for the quarter and by 11.2% to $20,257,000 for the full year.
Distributable cash per fully diluted unit and equivalents increased to 47.4 cents for the fourth quarter in 2008 from 44.0 cents for the fourth quarter of 2007. Annual distributable cash per fully diluted unit increased to $1.451 from $1.352 for the prior year.
Monthly distributions of 42.4 cents per unit were declared in the quarter and $1.272 for the year. In addition, a Special Distribution of 10 cents per unit was paid in November 2008, bringing Special Distributions paid in the year to 20 cents per unit and total distributions to $1.472 per unit. Food Services earned dividends on its investment in Trade Marks at the same rate. At the end of the year, there was a cumulative surplus of distributable cash of $3,828,000 compared to $4,117,000 at the end of 2007.
A&W Food Services of Canada Inc. is also pleased to announce that its total system sales from restaurants across Canada grew by 10% to $724.2 million in 2008 compared to $658.5 million in 2007. Twenty new A&W restaurants were opened in 2008 compared to 16 in 2007.
A&W to Host Conference Call at 1:00 p.m. PST on February 3, 2009
A&W Revenue Royalties Income Fund will hold a conference call to discuss fourth quarter and year end results on Tuesday, February 3, 2009 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be accessed by dialling toll-free 1-800-731-6941 or (416) 644-3415. A replay will be available until February 17, 2009, by dialling toll-free 1-877-289-8525 or (416) 640-1917 Passcode: 21296248 followed by the number sign.
The Fund Overview
The Fund is a limited purpose trust established to invest in Trade Marks, which 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 Food Services to use its trade-marks, Trade Marks 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 include the royalty stream from new restaurants, net of the sales of any A&W restaurants that have permanently closed. Trade Marks pays Food Services for the additional royalty stream in the form of common shares and Class B shares of Trade Marks which are the economic equivalent of units of the Fund. Food Services currently owns 41.5% of the common shares of Trade Marks, and therefore owns the equivalent of 41.5% of the units of the Fund on a fully-diluted basis.
Trade Marks' dividends to 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. 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 of Canada Inc. to implement its marketing strategies, the opening of new A&W restaurants, general economic and business conditions, 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.
SOURCE: A&W Food Services of Canada Inc.
SOURCE: A&W Revenue Royalties Income Fund
Investors: Don Leslie, Chief Financial Officer, (604) 988-2141 or This email address is being protected from spambots. You need JavaScript enabled to view it.; Media: Karen Cook, Hoggan & Associates, (604) 739-7500 or This email address is being protected from spambots. You need JavaScript enabled to view it.
