TRADING SYMBOL: TSX:
AW.UN
VANCOUVER, BC, Feb. 16, 2022 /CNW/ -
- Royalty income increased by 16.5% year over year and by 12.0%
in Q4 2021.
- Royalty Pool Same Store Sales Growth(i) was +14.0%
for the year and +13.8% for Q4 2021.
- Including the 5¢ per Unit special distribution that was paid to
unitholders on December 31, 2021, the
distributions declared by the Fund in 2021 increased by 14.6% from
2020. The current distribution rate translates to an
annualized distribution rate of $1.86
per Unit.
FOURTH QUARTER 2021 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 fourth quarter and year ended December 31, 2021. The Fund will hold a
conference call to discuss the results on Wednesday, February 16, 2022 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be
accessed by dialling toll-free 1-888-394-8218 or 647-484-0475 and
by using the passcode 6229672#. A replay will be available until
February 23, 2022 by dialling
toll-free 1-888-203-1112 or 647-436-0148 and by using the passcode
6229672#.
Royalty income for the fourth quarter of 2021 was $14,956,000 based on Gross sales reported by
restaurants in the Royalty Pool(i) of $498,558,000, compared to royalty income of
$13,350,000 and Gross sales reported
by A&W restaurants in the Royalty Pool(i) of
$444,977,000 for the fourth quarter
of 2020. Annual royalty income for 2021 was $47,081,000 based on Gross sales reported by
restaurants in the Royalty Pool(i) of $1,569,377,000, compared to royalty income of
$40,422,000 and Gross sales reported
by A&W restaurants in the Royalty Pool(i) of
$1,347,387,000 for 2020.
The increase in royalty income for the quarter and year is
driven by Royalty Pool Same Store Sales Growth(i), which
was +13.8% for the quarter and +14.0% for the year, and the gross
sales from the 23 net new restaurants added to the Royalty Pool on
January 5, 2021. The increase in
royalty income for the quarter was partially offset by there being
six fewer days in the fourth quarter of 2021 as compared to the
fourth quarter of 2020. The increase in royalty income for the year
was partially offset by there being one less day in 2021 than in
2020. Royalty Pool Same Store Sales Growth is based on an
equal number of days in the quarter and year.
The +13.8% Royalty Pool Same Store Sales Growth(i) in
the quarter was primarily driven by there being fewer COVID-19
related restrictions in place which led to a reduction in the
number of A&W restaurants that were temporarily closed or were
not able to offer dine-in services, as compared to the fourth
quarter of 2020. As of today and December 31, 2021 all of the A&W restaurants
that had been temporarily closed due to COVID-19 related
restrictions had reopened.
The actions required in 2020 and 2021 in response to COVID-19
have adversely impacted A&W restaurant operations across
Canada, particularly for those
restaurants located on urban street fronts and in shopping centres.
Since the second quarter of 2020 when COVID-19 impacts on A&W
were at their peak, the impact of COVID-19 on Royalty Pool Same
Store Sales has lessened. There does, however, continue
to be uncertainty related to COVID-19 and its impact on our
business. It is possible that there will be restaurants that are
required to temporarily close or that other restrictions or
requirements are introduced affecting operations, guest counts
and/or sales.
"We are pleased to report another quarter of strong results and
are delighted that all of our restaurants that were temporarily
closed due to COVID-19 restrictions are back open", said
Susan Senecal, President and CEO of
A&W Food Services. "Our successes in 2021 are a testament to
the loyalty of our guests, the resilience of our franchisee network
and the strength of the partnerships that Food Services has with
its franchisees and suppliers."
FINANCIAL RESULTS
|
(dollars in thousands
except per unit
amounts)
|
Period
from
Sep 13, 2021
to
Dec 31, 2021
|
Period
from
Sep 7, 2020 to
Dec 31, 2020
|
Period
from
Jan 1, 2021 to
Dec 31, 2021
|
Period
from
Jan 1, 2020 to
Dec 31, 2020
|
|
Royalty Pool Same
Store Sales
Growth(i)
|
13.8%
|
-9.3%
|
14.0%
|
-14.3%
|
|
Number of restaurants
in the
Royalty Pool
|
994
|
971
|
994
|
971
|
|
Gross sales reported
by A&W
restaurants in the Royalty Pool(i)
|
$498,558
|
$444,977
|
$1,569,377
|
$1,347,387
|
|
Royalty
income
|
$14,956
|
$13,350
|
$47,081
|
$40,422
|
|
General and
administrative expenses
|
$412
|
$463
|
$817
|
$994
|
|
Term loan and other
interest (net)
|
$717
|
$681
|
$2,514
|
$2,177
|
|
Current income tax
provision
|
$1,265
|
$2,798
|
$7,277
|
$7,242
|
|
Distributable cash
generated(ii)
|
$12,387
|
$9,408
|
$36,298
|
$30,009
|
|
Number of equivalent
units(iii)
|
19,258,184
|
18,551,185
|
19,258,184
|
18,551,185
|
|
Distributable cash
per equivalent
unit(iv)
|
$0.643
|
$0.508
|
$1.885
|
$1.618
|
|
Distributions and
dividends declared
per equivalent unit(iv)
|
$0.665
|
$0.900
|
$1.740
|
$1.518
|
|
Payout
ratio(iv)
|
81.5%
|
162.0%
|
92.3%
|
93.8%
|
|
Net cash generated
from operating
activities
|
$11,713
|
$14,629
|
$34,113
|
$30,409
|
|
Net
income(v)
|
$14,124
|
$11,194
|
$37,854
|
$28,374
|
|
(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 of the Fund ("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 and Distributable cash per equivalent unit in 2021
are calculated on a fully-diluted basis and include the 241,683
limited partnership units ("LP Units") exchanged for 483,366 common
shares of Trade Marks representing the remaining consideration paid
in December 2021 for the January 5, 2021 adjustment to the Royalty
Pool (as defined below). The number of equivalent units and
Distributable cash per equivalent unit in 2020 are calculated on a
fully-diluted basis and include 147,772 LP Units exchanged for
295,544 common shares of Trade Marks representing the remaining
consideration paid in December 2020 for the January 5, 2020
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
Sep 13, 2021
to
Dec 31, 2021
|
Period
from
Sep 7, 2020 to
Dec 31, 2020
|
Period
from
Jan 1, 2021 to
Dec 31, 2021
|
Period
from
Jan 1, 2020 to
Dec 31, 2020
|
|
Net cash generated
from operating
activities
|
$11,713
|
$14,629
|
$34,113
|
$30,409
|
|
Interest
expense
|
(717)
|
(681)
|
(2,514)
|
(2,177)
|
|
Current income tax
provision
|
(1,265)
|
(2,798)
|
(7,277)
|
(7,242)
|
|
Net changes in items
of non-cash
working capital
|
(1,045)
|
(7,881)
|
(159)
|
35
|
|
Financing fees
paid
|
(175)
|
-
|
(175)
|
-
|
|
Interest
paid
|
1,195
|
1,099
|
2,520
|
1,933
|
|
Income tax
paid
|
2,681
|
5,040
|
9,790
|
7,051
|
|
Distributable cash
generated
|
$12,387
|
$9,408
|
$36,298
|
$30,009
|
Four monthly distributions totaling 61.5¢ per Unit and one
special distribution of 5.0¢ per Unit were declared in the fourth
quarter of 2021 compared to four monthly distributions totaling
40.0¢ per Unit and two special distributions totaling 50.0¢ per
Unit in the fourth quarter of 2020. Twelve monthly distributions
totaling $1.690 per Unit and one
special distribution of 5.0¢ per Unit were declared in 2021
compared to nine monthly distributions totaling $1.018 per Unit and two special distributions
totaling 50.0¢ per Unit in 2020. No monthly distributions were
declared in the second quarter of 2020 as the Trustees had
temporarily suspended monthly distributions on the Units commencing
with the March 2020 distribution that
would ordinarily have been declared in April
2020. The Trustees approved the resumption of monthly
distributions on July 7, 2020
commencing with the June distribution of 10¢ per Unit that was paid
on July 31, 2020 to unitholders of
record as of the close of business on July
15, 2020. Total monthly distributions and special
distributions declared in 2021 were $1.740 per Unit as compared to total monthly
distributions and special distributions of $1.518 per Unit in 2020.
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 fourth quarter ended December 31,
2021, 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 in due course.
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 20th annual
adjustment to the Royalty Pool took place on January 5, 2022 at which time the number of
restaurants in the Royalty Pool increased from 994 to
1,015.
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. Specific
forward-looking statements include statements with respect to: the
impact of COVID-19, including its impact on store closures, on the
global economy in general and on the businesses of A&W Food
Services and the A&W franchisees in particular. 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 or health concerns or changes in economic conditions
or unemployment, the COVID-19 pandemic or a disease outbreak; and
the impacts of COVID-19 on the A&W system will not
significantly worsen. 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: the impacts of
COVID-19 on the Canadian economy, the QSR industry, the willingness
of the general public to dine outside their homes and travel, all
of which have negatively impacted A&W Food Services and the
Fund and have or may, as applicable, adversely affect each of
A&W Food Services', their franchisees' and the Fund's
respective investments, results of operations, and financial
condition; 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; the A&W restaurant that is
currently temporarily closed may not reopen; government
restrictions related to COVID-19 may have their durations extended,
or may be reinstated, in the case of those that have recently been
lifted, which measures may restrict the ability of A&W
restaurants to operate, or result in forced closures, further
reduced guest traffic, supply interruptions or staff shortages;
and, government programs expected to be helpful to A&W
Franchisees may not be available to some franchisees, and may not
be available in amounts expected for those franchisees for which
such programs are available and may be terminated at any time, and
following the termination of such programs, or the reduction of
amounts available under such programs, franchisees currently
receiving support under those programs may need to find alternative
sources of financial support and may make requests for such support
from, among other parties, A&W Food Services. 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