A&W REVENUE ROYALTIES INCOME FUND ANNOUNCES THIRD QUARTER 2024 RESULTS

Canada NewsWire

VANCOUVER, BC, Oct. 15, 2024

TRADING SYMBOL: TSX: AW.UN

VANCOUVER, BC, Oct. 15, 2024 /CNW/ -

   -- Royalty income increased by 0.3% in Q3 2024 and 0.9% year to date, as 
      compared to the comparable periods in 2023. 
 
   -- Royalty Pool Same Store Sales Growth(i) was -1.0% for Q3 2024 and nil 
      year to date. 
 
   -- The Fund and Food Services entered into a combination agreement on July 
      21, 2024 pursuant to which Food Services will be amalgamated with certain 
      holding companies to form a new publicly-traded company ("A&W Food 
      Services NewCo") and will acquire all of the Fund's Trust Units (the 
      "Transaction") for consideration of cash, common shares of A&W Food 
      Services NewCo, or a combination of both. The Transaction is structured 
      as a statutory plan of arrangement under the Canada Business Corporations 
      Act. 
 
   -- On October 8, 2024, the Fund's unitholders ("Unitholders") approved the 
      Transaction. 
 
   -- On October 11, 2024, the Ontario Superior Court of Justice (Commercial 
      List) issued a final order approving the Transaction. 
 
   -- The Transaction will be effective on October 17, 2024, subject to the 
      satisfaction or waiver of certain customary closing conditions. 

THIRD QUARTER 2024 RESULTS

A&W Revenue Royalties Income Fund (the "Fund") and A&W Food Services of Canada Inc. ("A&W Food Services or "A&W") today reported the Fund's results for the third quarter ended September 8, 2024.

"With 19 new A&W restaurants opened in the first three quarters of 2024 and 20 additional restaurants under construction at the end of the quarter, we are pleased with the pace at which Food Services has been able to expand the A&W brand across Canada so far this year," said Susan Senecal, President and CEO of A&W Food Services. "The number of A&W restaurants opened in the first three quarters of 2024 puts Food Services on track to exceed the annual number of new restaurants opened in the years since the onset of the COVID-19 pandemic, which disrupted businesses across Canada and slowed down the pace of A&W's expansion".

Royalty income for the third quarter of 2024 was $13,742,000 based on Gross sales reported by restaurants in the Royalty Pool(i) of $458,078,000, compared to royalty income of $13,705,000 and Gross sales reported by A&W restaurants in the Royalty Pool(i) of $456,842,000 for the third quarter of 2023. Year to date royalty income was $38,260,000 based on gross sales reported by restaurants in the Royalty Pool(i) of $1,275,348,000, compared to royalty income of $37,917,000 and gross sales reported by restaurants in the Royalty Pool(i) of $1,263,908,000 for the comparable period in 2023.

The increase in royalty income is driven by the 10 net new restaurants added to the Royalty Pool on January 5, 2024. The increase in the year to date period was partially offset by there being one less day in Q1 2024 than in Q1 2023.

Royalty Pool Same Store Sales Growth is a function of changes in guest counts and check size, which are impacted by party size, menu prices and menu mix and changes in consumers discretionary spending. The Royalty Pool Same Store Sales Growth(i) of -1.0% for the third quarter and nil year to date primarily results from a decrease in guest counts partially offset by an increase in average check size due in part to industry-wide inflation on goods, services, and labour. The decrease in guest counts reflects A&W's proportionate share of an overall decline in traffic at burger quick service restaurants ("QSR") across Canada. Food Services believes the decline in traffic at A&W restaurants and burger QSR more generally is attributable to increased interest rates and inflation, along with market uncertainty, which have impacted consumer discretionary spending. In response to these economic conditions, Food Services continues to seek new and innovative ways to offer A&W's guests a delicious and affordable experience and in turn increase guest traffic.

Full quarterly results are expected to be filed today on SEDAR+ at www.sedarplus.ca.

Strategic Combination of the Fund and A&W Food Services

The Fund and Food Services entered into the Combination Agreement on July 21, 2024 whereby Food Services will be amalgamated with certain holding companies to form A&W Food Services Newco, a new publicly-traded company, and will acquire all of the Fund's Trust Units. The Transaction is structured as a statutory plan of arrangement under the Canada Business Corporations Act.

On October 8, 2024, a special meeting of the Unitholders was held, and the Transaction was approved by Unitholders.

On October 11, 2024, the Ontario Superior Court of Justice (Commercial List) issued a final order (the "Final Order") approving the plan of arrangement under the Canada Business Corporations Act in respect of the Transaction.

Completion of the Transaction remains subject to the satisfaction or waiver of certain customary closing conditions. In accordance with the Final Order, the Transaction will become effective after the close of business on October 17, 2024 (the "Effective Date"), subject to the terms and conditions of the combination agreement in respect of the Transaction, all of which have been or are expected to be satisfied by or on such date, and the filing of articles of arrangement in respect of the Transaction. The common shares of A&W Food Services NewCo have been conditionally approved for listing on the Toronto Stock Exchange ("TSX"), subject to fulfilling all of the requirements of the TSX. Subject to the approval of the TSX, it is expected that (a) the Fund's Trust Units will be delisted from the TSX after the close of business on the Effective Date, (b) the common shares of A&W Food Services Newco will be listed (but not yet posted for trading) on the TSX after the close of business on the Effective Date, and (c) the common shares of A&W Food Services Newco will be posted and begin trading on the TSX at the open of business on the business day immediately following the Effective Date, being October 18, 2024, under the symbol "AW".

For further information regarding the Transaction, please refer to the Fund's management information circular dated August 29, 2024 available on the Fund's SEDAR+ profile at www.sedarplus.ca.

Conference Call

The Fund will hold a conference call to discuss the results and the combination with A&W Food Services on Tuesday, October 15, 2024 at 12:00 p.m. Pacific Time (3:00 p.m. Eastern Time).

The call will be webcast live and may be accessed at https://events.q4inc.com/attendee/780817360. Participants who wish to ask questions or are unable to join via webcast may dial-in by calling toll-free 1-800-579-2543 or 1-785-424-1789 and by quoting the conference ID "AWRRIF" 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/780817360.

FINANCIAL RESULTS

 
(dollars in thousands   Period        Period        Period        Period 
except per unit         fromJun 17,   fromJun 19,   fromJan 1,    fromJan 1, 
amounts)                2024 to       2023 to       2024 to       2023 to 
                        Sep 8, 2024   Sep 10, 2023  Sep 8, 2024   Sep 10, 2023 
Royalty Pool Same 
 Store Sales Growth(i)        -1.0 %         1.1 %         0.0 %         3.0 % 
Number of restaurants 
 in the Royalty 
 Pool                          1,047         1,037         1,047         1,037 
Gross sales reported 
 by A&W restaurants 
 in the Royalty 
 Pool(i)                    $458,078      $456,842    $1,275,348    $1,263,908 
Royalty income               $13,742       $13,705       $38,260       $37,917 
General and 
 administrative 
 expenses                       $189          $134          $578          $509 
Term loan and other 
 interest (net)                 $222          $272          $777          $872 
Current income tax 
 provision                    $1,881        $2,223        $7,250        $7,256 
Distributable cash 
 generated(ii)                $8,990       $11,076       $27,195       $29,280 
Number of equivalent 
 units(iii)               20,655,650    20,368,874    20,655,650    20,368,874 
Distributable cash per 
 equivalent unit(iv)          $0.435        $0.544        $1.317        $1.437 
Distributions and 
 dividends declared 
 per 
 equivalent unit(iv)          $0.480        $0.480        $1.280        $1.280 
Distributions and 
 dividends declared 
 and 
 accrued per 
 equivalent unit(iv)          $0.441        $0.442        $1.322        $1.331 
Payout ratio(iv)             101.4 %        81.3 %       100.4 %        92.6 % 
Net cash generated 
 from operating 
 activities                  $11,215       $10,077       $30,789       $21,628 
Net income(v)                 $9,526       $10,636       $28,176       $29,502 
 
 
(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 ("Units") and 
 limited voting units of the Fund (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 
 2024 is calculated on a fully-diluted basis and includes 
 the 54,507 limited partnership units (the "LP units") 
 that are exchangeable for 109,014 common shares of 
 Trade Marks representing the remaining 20% of the 
 initial consideration for the January 5, 2024 adjustment 
 to the Royalty Pool, which LP units are held back 

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