Prime Restaurants Royalty Income Fund
TSX : EAT.UN

Prime Restaurants Royalty Income Fund

March 27, 2006 16:30 ET

Prime Restaurants Royalty Income Fund Announces 2005 Results

MISSISSAUGA, ONTARIO--(CCNMatthews - March 27, 2006) - Prime Restaurants Royalty Income Fund ("the Fund")(TSX:EAT.UN) today reported results for the three months and year ended December 31, 2005.

Financial Review of the Fund

Distributable cash available to Unitholders in the fourth quarter was $1.7 million or $0.28 per unit, and $6.9 million or $1.13 per unit for the year ended December 31, 2005. The Fund declared cash distributions of $1.7 million or $0.28 per unit in the quarter and $6.9 million or $1.13 per unit for the year ended December 31, 2005.

Gross revenue reported by the royalty pooled restaurants for the three months ended December 31, 2005 was $78.6 million compared to $71.2 million last year. For the year ended December 31, 2005 gross revenue was $319.5 million compared to $292.1 million last year. There were 156 royalty pooled restaurants in 2005 compared with 140 in 2004. For the year ended December 31, 2005 royalty income was $10.6 million compared to $9.6 million last year.

Same store sales growth ("SSSG") for the royalty pooled restaurants increased by 2.11% in the fourth quarter of 2005 from the same period in 2004. Strong growth was generated by all brands in the period: the pubs posted positive growth of 9.85%; Casey's restaurants had positive SSSG of 4.61%; and East Side Mario's had positive SSSG of 0.72%. Quebec posted SSSG of 1.34% in the quarter, while Ontario had positive SSSG of 2.38%. Ontario represented 76% of total same store sales in the royalty pool for the three months ended December 31, 2005. Same store sales growth for the year ended December 31, 2005 was negative 0.79%, due primarily to reduced performance earlier in the year.

Operational Review

For restaurants available to be included into the royalty pool on January 1, 2006, seven restaurants were opened, all franchisee-owned, and seven restaurants were closed for the year. Three of the restaurant closures were due to lease expirations or non-renewals and four were due to underperformance. In addition, during 2005 a net three corporate-owned restaurants were sold to franchisees.

Major renovations were completed at eight locations during 2005. Following these renovation projects, SSSG at these locations rose by an average of 6.4% compared to their performance before the renovations were made.

In February 2006 Prime Restaurants of Canada was pleased to be named one of Canada's Fifty Best Managed Companies.

"We experienced a number of positive trends through 2005, the result of numerous programs and strategies implemented during the year to drive sales growth," commented John Rothschild, Chairman and CEO of PRC. "We are confident that these initiatives will generate much improved performance in 2006, returning Prime Restaurants to its twenty-five year track record of growth going forward."

"We were pleased with the positive momentum experienced in the fourth quarter, and are confident the numerous initiatives being implemented will lead to further progress through 2006," added Douglas Black, Chairman of the Board of Trustees of Prime Restaurants Royalty Income Fund.



FINANCIAL HIGHLIGHTS:

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Three Three Twelve Twelve
months months months months
($000's, except ended ended ended ended
per unit data and December December December December
# of restaurants) 31, 2005 31, 2004 31, 2005 31, 2004
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Interest Income from
TradeMarkCo Note 1,733 1,733 6,874 6,892
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Net earnings of the Fund 1,780 1,828 7,081 7,100
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Basic earnings per Trust
Unit (6,110,000 units) $0.29 $0.30 $1.16 $1.16
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Net earnings of the Fund
- if PRC shares
converted to units 2,665 2,449 10,620 9,583
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Diluted earnings per
Trust Unit (9,255,476
units) (1) $0.29 $0.29 $1.15 $1.15
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Distributable cash
available to
Unitholders 1,733 1,733 6,873 6,892
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Distributable cash
available per unit $0.28 $0.28 $1.13 $1.13
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Distributions declared
per unit $0.28 $0.28 $1.13 $1.13
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(1) For 2004 - 8,316,976 units


Outlook

During 2005 management responsibilities were realigned into two distinct business units to focus operational, marketing and training efforts on each specific brand. This realignment will permit an important single brand focus within a multi-brand concept, leading to faster and more effective decisions, increased accountability, and improved performance through 2006 and going forward.

East Side Mario's will leverage its readily identifiable brand and solid reputation for value to grow its business across the country. Management will build on the success of the new home delivery and take-out offering in Ontario to expand the program into Western Canada and Quebec. A 25% increase in media spending will drive new and return guest visits. Planned renovations at eighteen restaurants should generate similar increases in same store sales growth experienced in updated locations during 2005. New menus and promotions are targeted at enhancing the brand's value proposition to attract new customers and encourage them to return. In addition, the establishment of a new Western Canadian management and operations team will accelerate expansion in these strong and growing markets.

Casey's will continue to update locations with its new and exciting branding and format. New menus will focus on the classic meals for which Casey's restaurants have become famous, while introducing innovative offerings targeting more international trends. Training initiatives will reinforce brand strengths and position, while new productivity and purchasing standards will enhance operational performance. Expansion opportunities in Quebec will also be evaluated.

The pubs business will benefit from new operational, purchasing and training programs aimed at enhancing the guest experience. In addition, new menus and value promotions are targeted at generating interest and growth at all of the brand's attractive and popular pub locations.

During 2005 the services of a new creative marketing agency were engaged to support all three of Prime's well-known brands. Downtown Partners bring their internationally renowned and award-winning creative work to Prime, and initial response has been very positive.

The Fund's financial statements and Management's Discussion and Analysis for the three months and year ended December 31, 2005 and 2004 are available at www.primeincomefund.ca and www.sedar.com.

PRC's Consolidated Financial Statements and MD&A

PRC's consolidated financial statements, notes and MD&A can be accessed at www.sedar.com under the "other" document type for the Fund.

Quarterly Conference Call

Prime Restaurants Royalty Income Fund will host a conference call on Tuesday, March 28, 2006 at 10:00 a.m. ET to discuss the results of the Fund and operations and performance of PRC. Interested participants may dial (416) 849-2719 or toll-free at (866) 500-7709 to access the call. A recording will be made available until midnight, April 4, 2006. To access the rebroadcast, please dial (800) 395-0359, pass code 5018954.

Certain information included in this news release is forward looking and based on current expectations and entails various risks and uncertainties. These risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied. The forward-looking information contained in this document is current only as of the date of the document. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

Prime Restaurants Royalty Income Fund (the Fund) is a limited purpose trust with an unlimited number of Trust Units (Units) established to invest in PRC Trademarks Inc. (TradeMarkCo). The source of revenue for the Fund is through its ownership in TradeMarkCo. The Fund receives interest income on the TradeMarkCo Note from TradeMarkCo based on 11.25% per annum which it distributes to its Unitholders. TradeMarkCo owns the Prime Restaurants of Canada Inc. (PRC) trademarks and licenses their use to PRC which operates the restaurant and bar business. In return, TradeMarkCo receives royalty income based on 3.25% of gross revenue from the royalty pooled restaurants operated by PRC.

Distributable Cash is a useful supplemental measure of operating performance that provides investors with an indication of cash available for distribution. Distributable Cash is a non-GAAP measure and therefore may not be comparable to similar measures presented by other issuers. Distributable cash is calculated as operating cash flows for the Fund (net earnings adjusted for non-cash items such as deferred revenue).



Prime Restaurants Royalty Income Fund
Balance Sheets
As at December 31, 2005 and 2004

2005 2004
$ $
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Assets
Current Asset
Interest receivable 583,788 583,788

Investment in PRC Trademarks Inc. 61,100,000 61,100,000

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Total Assets 61,683,788 61,683,788
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Liabilities and Unitholders' Equity

Current Liabilities
Distributions payable 574,340 574,340
Due to PRC Trademarks Inc. 167,810 148,742
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742,150 723,082

Deferred revenue 5,922,000 6,130,000

Unitholders' Equity 55,019,638 54,830,706
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Total Liabilities and Unitholders'
Equity 61,683,788 61,683,788
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Prime Restaurants Royalty Income Fund
Statements Of Earnings
Years ended December 31, 2005 and 2004

2005 2004
$ $
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Revenue
Interest income 6,873,638 6,892,469
Dividend income 57,065 -
Amortization of deferred revenue 208,000 208,000
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7,138,703 7,100,469

Operating expense
Administrative expenses 57,691 389
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Net earnings for the year 7,081,012 7,100,080
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Basic earnings per Trust Unit (note 7) $1.16 $1.16
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Diluted earnings per Trust Unit (note 7) $1.15 $1.15
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Statement of Unitholders' Equity
Years ended December 31, 2005 and 2004

2005 2004
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(restated -
see note 3)
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Balance - Beginning of year 54,830,706 54,622,706
Net earnings 7,081,012 7,100,080
Distributions (6,892,080) (6,892,080)
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Balance - End of year 55,019,638 54,830,706
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