TRADING SYMBOL: TSX: AW.UN
VANCOUVER, BC, May 2, 2023
/CNW/ -
- Royalty income increased by 8.1% in Q1 2023 as compared to Q1
2022.
- Royalty Pool Same Store Sales Growth(i) was +6.1%
for Q1 2023 as compared to Q1 2022.
FIRST QUARTER 2023 RESULTS
A&W Revenue Royalties
Income Fund (the "Fund") and A&W Food Services of Canada Inc.
("A&W Food Services") today reported the Fund's results for the
first quarter ended March 26, 2023
which will be filed on SEDAR at www.sedar.com on May 5, 2023. The Fund will hold a conference call
to discuss the results on Wednesday, May 3,
2023 at 1:00 p.m. Pacific Time
(4:00 p.m. Eastern Time).
The call will be webcast live and may be accessed at
https://events.q4inc.com/attendee/645967986. Participants who wish
to ask questions or are unable to join via webcast may dial-in by
calling toll-free 1-888-886-7786 or 1-416-764-8658 and by using the
conference ID 97827278 or quoting "A&W Revenue Royalties" when
prompted by the operator. For those unable to participate in
the live call, a replay will be made available for one year at
https://events.q4inc.com/attendee/645967986.
"A&W is pleased to report strong results for the first
quarter of 2023, with our Royalty Pool Same Store Sales
Growth(i) coming in at +6.1%", said Susan Senecal, President and CEO of A&W Food
Services. "We believe our mission "To become #1 with millennial
burger lovers, chosen and trusted for truly good food and the
convenience they crave" will help us continue to
grow successfully and win the loyalty of our guests".
Royalty income for the first quarter of 2023 was $11,439,000 based on Gross sales reported by
restaurants in the Royalty Pool(i) of $381,298,000, compared to royalty income of
$10,578,000 and Gross sales reported
by A&W restaurants in the Royalty Pool(i) of
$352,614,000 for the first quarter of
2022.
The increase in royalty income for the quarter is driven by
Royalty Pool Same Store Sales Growth(i), which was +6.1%
for the quarter, and the gross sales from the 22 net new
restaurants added to the Royalty Pool on January 5, 2023. The increase was partially
offset by there being one less day in the first quarter of 2023 as
compared to the first quarter of 2022. Royalty Pool Same Store
Sales Growth is based on an equal number of days in the quarter and
year.
Royalty Pool Same Store Sales Growth(i) for the first
quarter of 2023 was +6.1% as compared to the same quarter of 2022.
The Royalty Pool Same Store Sales Growth was primarily driven by
there being no public health restrictions related to COVID-19 in
place across Canada during the
first quarter of 2023 as compared to the first quarter of 2022.
There were no temporary closures of A&W restaurants due to
COVID-19 restrictions in Q1 2022 however, many A&W restaurants
were still required to operate with reduced operating hours and
capacity limits on dine in guests for all, or a portion, of the
quarter.
FINANCIAL RESULTS
(dollars in thousands
except per unit amounts)
|
Period
from
Jan 1, 2023 to
Mar 26, 2023
|
Period from
Jan 1, 2022
to
Mar 27, 2022
|
Royalty Pool Same Store
Sales Growth(i)
|
6.1 %
|
11.5 %
|
Number of restaurants
in the Royalty Pool
|
1,037
|
1,015
|
Gross sales reported by
A&W restaurants in the Royalty Pool(i)
|
$381,298
|
$352,614
|
Royalty
income
|
$11,439
|
$10,578
|
General and
administrative expenses
|
$249
|
$266
|
Term loan and other
interest (net)
|
$305
|
$574
|
Current income tax
provision
|
$2,813
|
$3,755
|
Distributable cash
generated(ii)
|
$8,072
|
$5,983
|
Number of equivalent
units(iii)
|
20,368,874
|
19,813,593
|
Distributable cash per
equivalent unit(iv)
|
$0.396
|
$0.302
|
Distributions and
dividends declared per equivalent unit(iv)
|
$0.320
|
$0.310
|
Payout
ratio(iv)
|
112.9 %
|
145.0 %
|
Net cash generated from
operating activities
|
$2,298
|
$7,942
|
Net
income(v)
|
$7,573
|
$9,688
|
(i) "Royalty
Pool Same Store Sales Growth" and "Gross sales reported by A&W
restaurants in the Royalty Pool" are non-IFRS supplementary
financial measures. See the "Non-IFRS Measures" section of this
news release.
|
(ii)
"Distributable cash generated" is a non-IFRS financial
measure. Refer to the table below for a reconciliation of this
measure to the most comparable IFRS measure and the "Non-IFRS
Measures" section of this news release.
|
(iii)
Equivalent units include Units and Limited Voting Units of the Fund
("Limited Voting Units" and together with the Units, the "Trust
Units") and common shares of A&W Trade Marks Inc. ("Trade
Marks") that are exchangeable for Trust Units. The number of
equivalent units in 2023 is calculated on a fully-diluted basis and
includes the 95,092 limited partnership units (the "LP units") that
are exchangeable for 190,184 common shares of Trade Marks
representing the remaining 20% of the initial consideration for the
January 5, 2023 adjustment to the Royalty Pool, which LP units are
held back until the number of LP units is determined in December
2023 based on the actual annual sales reported by the new
restaurants. The number of equivalent units in 2022 is calculated
on a fully-diluted basis and includes 111,082 LP units,
exchangeable for 222,164 common shares of Trade Marks representing
the remaining 20% of the initial consideration for the January 5,
2022 adjustment to the Royalty Pool but does not include the
adjustment to increase the final consideration by 79,821 LP units,
equivalent to 159,642 common shares of Trade Marks, made in
December 2022 based on the actual system sales for the A&W
Restaurants added to the Royalty Pool as part of the January 5,
2022 adjustment to the Royalty Pool.
|
(iv)
"Distributable cash per equivalent unit", "Distributions and
dividends declared per equivalent unit" and "Payout ratio" are
non-IFRS ratios. See the "Non-IFRS Measures" section of this news
release.
|
(v) Net
income includes unrealized gains and losses on interest rate swaps,
amortization of financing fees and deferred income taxes.
These non-cash items have no impact on the Fund's ability to pay
distributions to unitholders.
|
The following table provides a reconciliation of "Distributable
cash generated" to "Net cash generated from operating activities",
the most comparable IFRS measure, for the periods
indicated.
(dollars in
thousands)
|
Period
from
Jan 1, 2023 to
Mar 26, 2023
|
Period from
Jan 1, 2022 to
Mar 27, 2022
|
Net cash generated from
operating activities
|
$2,298
|
$7,942
|
Interest
expense
|
(305)
|
(574)
|
Current income tax
provision
|
(2,813)
|
(3,755)
|
Net changes in items of
non-cash working capital
|
330
|
346
|
Interest
paid
|
374
|
684
|
Income tax
paid
|
8,188
|
1,340
|
Distributable cash
generated
|
$8,072
|
$5,983
|
Two monthly distributions totaling 32.0¢ per Unit were declared in
the first quarter of 2023 compared to two monthly distributions
totaling 31.0¢ per Unit in the first quarter of 2021.
The quarterly Payout ratio reported by the Fund is impacted by
seasonality of sales of the A&W restaurants and the timing of
current income taxes, which can vary by quarter, and the
distribution rate in effect at the time. The Payout
ratio(iv) for the first quarter of 2023 was 112.9%,
which is higher than the trailing four quarter Payout ratio of
92.0%, due primarily to the timing impact of current income
taxes.
NON-IFRS MEASURES
This news release makes references
to the following non-IFRS measures: "Gross sales reported by
A&W restaurants in the Royalty Pool", "Royalty Pool Same Store
Sales Growth", "Distributable cash generated", "Distributable cash
per equivalent unit", "Distributions and dividends declared per
equivalent unit" and "Payout ratio". The Fund believes that
disclosing these non-IFRS measures provides readers of this news
release with important information regarding the Fund's financial
performance and its ability to pay distributions to
unitholders. By considering these measures in combination
with IFRS measures, the Fund believes that readers are provided
with additional and more useful information about the Fund than
readers would have if they simply considered IFRS measures alone.
The non-IFRS measures reported by the Fund do not have a
standardized meaning prescribed by IFRS and the Fund's method of
calculating these measures may differ from those of other issuers
or companies and may not be comparable to similar measures used by
other issuers or companies.
Refer to the "Financial Results" section of this news release
for a reconciliation of Distributable cash generated to Net cash
generated from operating activities, the most comparable IFRS
measure and the "Non-IFRS Measures" section of the Fund's MD&A
for the first quarter ended March 26,
2023, for further details on how these measures are
calculated and used to assess the Fund's performance which will be
filed on SEDAR at www.sedar.com on May 5,
2023.
ABOUT THE FUND
The Fund is a limited purpose trust
established to invest in Trade Marks, which through its interest in
the 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) is entitled to royalties equal to 3% of the gross
sales reported by A&W restaurants in the Royalty
Pool.
The Royalty Pool is adjusted annually to reflect gross sales
from new A&W restaurants, net of the gross sales of any A&W
restaurants that have permanently closed. Additional 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 common shares of Trade Marks which are
exchangeable for Trust Units. The 21st annual
adjustment to the Royalty Pool took place on January 5, 2023 at which time the number of
restaurants in the Royalty Pool increased from 1,015 to
1,037.
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.
ABOUT A&W FOOD SERVICES
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®.
Follow A&W on Facebook (www.facebook.com/AWCanada) and
Twitter @AWCanada or visit www.awincomefund.ca.
FORWARD-LOOKING INFORMATION
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, which
assumptions include: restaurant performance will continue to
improve; the Fund will receive sufficient revenue in the future (in
the form of royalty payments from A&W Food Services) to
maintain monthly distributions; the projections for the A&W
business and the Fund provided by A&W Food Services are
accurate; no material changes will occur in the quick service
restaurant burger market including as a result of changes in
consumer taste, changes in economic conditions or unemployment, or
a disease outbreak. 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. Those risks and uncertainties
include, among other things, risks related to: A&W Food
Services may become liable for the lease obligations of certain of
its franchisees, if such franchisees default on their leases, and
such obligations may be significant and A&W Food Services may
be unsuccessful in seeking recovery from such franchisees, all of
which may adversely affect A&W Food Services' investments,
results of operations and financial condition; A&W Food
Services' projections may be inaccurate, and do not represent a
financial forecast and actual results may differ materially from
those anticipated by the projections; monthly distributions are not
guaranteed and may be reduced, suspended or terminated at any time;
the current sales improvement trends of the A&W restaurants in
the Royalty Pool may not continue and may slow or regress; supply
interruptions or staff shortages; and changes in economic
conditions, including economic recession or changes in the rate of
inflation or deflation, employment rates and household debt,
seasonality of sales, political uncertainty, interest rates,
currency exchange rates or derivative and commodity prices.
Additional 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. The forward-looking
information contained in this news release represents the Fund's
expectations as of the date of this news release, and are subject
to change after this date. The Fund assumes no obligation to update
or revise any forward-looking information, except as required by
applicable law.
SOURCE A&W Revenue Royalties Income Fund