Prime Restaurants Royalty Income Fund
TSX : EAT.UN

Prime Restaurants Royalty Income Fund
East Side Mario's

East Side Mario's
Casey's

Casey's
Fionn MacCool's

Fionn MacCool's

May 05, 2009 16:30 ET

Prime Restaurants Royalty Income Fund Announces First Quarter 2009 Results

MISSISSAUGA, ONTARIO--(Marketwire - May 5, 2009) - Prime Restaurants Royalty Income Fund ("the Fund") (TSX:EAT.UN) today reported results for the three months ended March 31, 2009.

Gross revenue reported by the royalty pooled restaurants in the first quarter of 2009 was $79.7 million compared to $82.3 million for the same period last year. There are 161 royalty pooled restaurants in 2009 compared to 155 royalty pooled restaurants in 2008. For the three months ended March 31, 2009, royalty income from royalty pooled restaurants was $2.6 million compared to $2.7 million for the same period last year.

Distributable cash available to Unitholders was $1.8 million or $0.28 per unit for the three months ended March 31, 2009. The Fund declared cash distributions of $1.8 million or $0.28 per unit in the quarter.

Overall sales were affected by intense competition and the negative impact of the current economic recession on consumer's discretionary spending and the casual dining sector. As a result, same store sales for the three months ended March 31, 2009 were negative 5.2% for the royalty pooled restaurants. By concept, Casey's, East Side Mario's, and the Prime pubs posted same store sales declines of 5.5%, 5.3% and 3.4% respectively in the quarter. On a regional basis, Atlantic Canada posted positive growth in the quarter of 2.6% while Western Canada, Ontario and Quebec posted same store sales declines of 8.1%, 4.6 and 9.0%, respectively.

"Our system sales results in the first quarter were consistent with the overall casual dining industry, which is forecasted to decline by 3.1% in 2009, including menu inflation of 3.2% . We are implementing new menus across all of our brands during the second quarter of 2009 to include price increases. As a result, we expect to be in line with the overall industry for the full 2009 year. In addition, we believe that our ongoing initiatives to attract and retain guests, combined with our multi-brand approach covering all segments and price points of the casual dining sector, will help us mitigate some of the market challenges currently being faced," commented John Rothschild, Chairman and CEO of Prime Restaurants of Canada Inc.

Operational Review

Three new restaurants were opened in the first quarter of 2009; one East Side Mario's in Nova Scotia and one in British Columbia, and one pub location in Ontario. One East Side Mario's location in Alberta was closed during the period. Additionally, one East Side Mario's restaurant underwent renovations during the quarter.



FINANCIAL HIGHLIGHTS OF THE FUND:

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($000's, except per unit data) Three months Three months
ended ended
March 31, 2009 March 31, 2008

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Interest and dividend income $ 1,886 $ 1,760
Net earnings 1,855 1,732
Total assets 59,255 56,979
Distributions to Unitholders 1,844 1,723
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Trust units - outstanding 6,538,174 6,110,000
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Trust units - diluted 9,749,794 9,321,620
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Basic earnings per Trust Unit $ 0.28 $ 0.28
Diluted earnings per Trust Unit $ 0.28 $ 0.28
Distributions paid per Trust Unit $ 0.28 $ 0.28
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SELECTIVE YEAR-TO-DATE TRADEMARKCO FINANCIAL HIGHLIGHTS:

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($000's except # of Royalty Pooled 2009 2008
Restaurants)
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# of Royalty Pooled Restaurants 161 155
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Gross Revenue Royalty Pooled Restaurants $ 79,703 $ 82,301
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Royalty Income 2,590 2,675
Operating Expenses 161 247
Dividends accrued on Class A and Class B shares 891 901
Interest Expense 1,753 1,714
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Outlook

The re-branding of the Casey's division over the last three years has resulted in solid performance improvements. A new "Food First" marketing and operating strategy is being introduced in 2009 with a commitment to operational excellence while maintaining Casey's heritage of delivering a value proposition built on quality. A new core menu focusing on in-house preparation using fresh ingredients, accompanied by a refreshed and updated wine and drinks offering, was launched in April 2009, with an emphasis on reducing menu complexity and enhancing quality. A new summer menu will also be introduced in the second quarter of 2009 supported by radio, print and direct mail advertising.

In the pubs business, a new and innovative summer menu will be launched during the second quarter of 2009 supported by radio, print and direct mail advertising to build on the brand's industry-leading culinary programs and to broaden the appeal of a Prime pub. In addition, numerous promotions such as Keith's® Wednesdays and Guinness® Fridays are generating solid results.

At East Side Mario's, management continues to roll out the new refreshed and high energy design, taking the brand back to its roots to provide an authentic taste of Little Italy. With a twenty-year heritage of providing fun and value to Canadian families, East Side Mario's has a well-established identity with an 82% brand loyalty factor as measured by an independent survey. During the second quarter of 2009 a new value-oriented "Three Course Meal" promotion was launched supported by a six-week radio campaign. In addition, late in the second quarter numerous enhancements to the core menu will be introduced following a review of base ingredients in the brand's kitchens and supply chain with the aim of taking the menu closer to the East Side Mario's "Authentic Taste of Little Italy".

Looking ahead, management believes that over the near-term consumer concerns about the economic slowdown in Canada will continue to impact restaurant sales across all sectors of the industry. However, management also believes that its multi-brand approach covering all spectrums of the Canadian casual dining and pubs business will help to mitigate some of this impact as consumers may trend toward the Company's lower-priced offerings from other higher-priced brands. In addition, management believes its ongoing renovation programs, new restaurant openings, new menus and other sales initiatives, combined with its rigorous focus on customer service, will continue to attract new and repeat guests to all of its brands.

The Fund's financial statements and Management's Discussion and Analysis for the three months ended March 31, 2009 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 "financial statements of operating entity" and "other" document types for the Fund.

Quarterly Conference Call

Prime Restaurants Royalty Income Fund will host a conference call on Wednesday, May 6, 2009 at 10:00 a.m. ET to discuss the results of the Fund and operations and performance of PRC. Interested participants may dial (416) 849-2698 or toll-free at (1-866) 400-2270 to access the call. The conference call will also be broadcast over the Fund's website at www.primeincomefund.ca.

Prime Restaurants Royalty Income Fund ("the Fund") is a limited purpose trust authorised to issue an unlimited number of Trust Units ("Units") and established to invest in PRC Trademarks Inc. ("TradeMarkCo"). The source of revenue for the Fund is through its ownership in, and debt instrument issued by, TradeMarkCo. The Fund receives interest income on the $63,202,630 TradeMarkCo Note based on 11.25% per annum which it distributes to its Unitholders. TradeMarkCo owns certain trade-marks and licenses their use to Prime Restaurants of Canada Inc. ("PRC") which operates and franchises the restaurant and bar business. In return, TradeMarkCo receives royalty income based on 3.25% of gross revenue from the royalty pooled restaurants operated and franchised by PRC.

The public communications of the Fund often include written or oral forward-looking statements. Statements of this type are included in this new release, and may be included in filings with Canadian securities regulators, or in other communications. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for 2009 and beyond, our and PRC's strategies or planned future actions, our and PRC's targets or expectations for our financial performance and condition, PRC's ability to pay the Royalty and our ability to pay the distributions. All statements, other than statements of historical fact, contained in this new release are forward-looking statements, including, without limitation, statements regarding the future financial position and operations (including estimated revenue from Royalty Pooled Restaurants and the estimated administrative and other operating expenses of the Fund), business strategy, distributions, plans and objectives of or involving the Fund and PRC. Readers can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" and similar words or the negative thereof. Although management of the Fund and Prime Restaurants of Canada Inc. ("PRC") believe that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties including those discussed in the Fund's MD&A and the Fund's annual information form dated March 11, 2009, (the "AIF") under "Narrative Description of the Business -- Risk Factors" which are available at www.sedar.com. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

Assumptions and analysis about the performance of the Fund and PRC and the markets in which they operate are considered in forecasting the Fund's and PRC's expected financial results, PRC's ability to pay the Royalty and the Fund's ability to pay distributions and in making related forward-looking statements. The key assumption in respect of the Fund's level of distributions is that the cumulative distributable cash will be able to support the Fund's current level of distributions. The Fund receives the cash it distributes from PRC Trademarks Inc ("TradeMarkCo"). TradeMarkCo receives all of the cash it pays to the Fund through a royalty from PRC. Accordingly, the ability of the Fund to pay its distributions depends on PRC's financial performance and ability to pay the royalty. In respect of the ability to maintain and grow the royalty pooled revenue and PRC's financial performance, key assumptions include those relating to the demand for the goods and services under the Prime Marks and in respect of the Canadian markets in which the Royalty Pooled Restaurants operate. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.

The information set forth in the MD&A and AIF identifies factors that could affect the operating results and performance of the Fund and PRC. We caution that the list of factors discussed in the MD&A and the AIF is not exhaustive, and that, when relying on forward-looking statements to make decisions with respect to the Fund, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release. Except as required by applicable securities laws, the Fund does not undertake to update any forward-looking statement, whether written or oral, that it may make or that may be made, from time to time, on its behalf.

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).

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