Prime Restaurants Royalty Income Fund
TSX : EAT.UN

Prime Restaurants Royalty Income Fund

March 20, 2007 17:00 ET

Prime Restaurants Royalty Income Fund Announces Fourth Quarter and Year-End 2006 Results

MISSISSAUGA, ONTARIO--(CCNMatthews - March 20, 2007) - Prime Restaurants Royalty Income Fund ("the Fund") (TSX:EAT.UN) today reported results for the three months and year ended December 31, 2006.

2006 Highlights:

- Positive growth in all three casual dining brands

- Casey's posts strong 4.7% same store sales growth

- Pubs SSSG up 6.3%

- Design for refreshed look of East Side Mario's brand completed - to begin implementing in 2007

- Roll-out of new look Casey's restaurant continues

Solid Same Store Sales Growth

Same store sales growth ("SSSG") for the year ended December 31, 2006 for the royalty pooled restaurants rose 1.54%, up from negative 0.79% SSSG in the prior year year. Strong growth was generated by all of Prime's brands, including 4.71% SSSG at Casey's, 6.33% in the pubs business, and positive 0.20% growth for East Side Mario's. On a geographic basis, Ontario, Atlantic Canada, and Western Canada posted positive SSSG of 1.55%, 4.28%, and 2.27%, respectively, with Quebec posting a negative SSSG of 0.31% for the year ended December 31, 2006.

For the three months ended December 31, 2006 SSSG for the royalty pooled restaurants was up 0.44%. Casey's and the pubs posted SSSG of 3.82% and 8.07% respectively in the quarter while East Side Mario's was negative 1.52%, due primarily to negative impacts in the casual dining sector in Ontario and Quebec resulting from reduced tourism, more Canadians travelling abroad, and economic factors such as rising interest rates, fuel costs and other inflationary forces causing consumers to have fewer meals outside the home. Approximately 84% of the Fund's sales are in Ontario and Quebec. On a geographic basis, Atlantic Canada, the West and Ontario posted positive SSSG of 0.90%, 0.20% and 0.71% respectively in the quarter, while Quebec was down 1.42%.

"We were very pleased to have generated positive growth across all of our casual dining brands in 2006, a solid improvement from the prior year" commented John Rothschild, Chairman and CEO of Prime Restaurants of Canada Inc. "The refocusing of our Casey's brand has had a significant and positive impact on same store sales, and we look to duplicate this success as we begin to roll out our new, refreshed and high energy concept for East Side Mario's during 2007."

Gross revenue reported by the royalty pooled restaurants in the fourth quarter was $79.8 million compared to $78.5 million for the same period last year. For the year gross revenue for the royalty pooled restaurants was up 2.28% to $326.8 million compared to $319.5 million last year. There were 156 royalty pooled restaurants in both years. For the three months and year ended December 31, 2006, royalty income from royalty pooled restaurants was $1.8 million and $6.9 million respectively, in-line with results for the same periods last year.

Distributable cash available to Unitholders was $7.1 million or $1.17 per unit for the year ended December 31, 2006, in-line with last year's results. The Fund declared cash distributions of $6.9 million or $1.13 per unit in both 2006 and 2005.

Operational Review

For restaurants available to enter the royalty pool on January 1, 2007, five new East Side Mario's restaurants were opened, three of which are located in Ontario while two are located in Western Canada. One Casey's location was opened in Ontario in 2006. Six restaurants were closed during this period, three Casey's and three East Side Mario's. Five of the closed restaurants were located in Ontario and one was located in Western Canada. One of the closed locations was a corporate-owned restaurant.

Franchisees performed major renovations at 11 locations through 2006. Eight of the renovated restaurants are in Ontario, two are in Quebec and one is in Alberta. Six of the locations were East Side Mario's restaurants and five were Casey's restaurants. Following the renovations, SSSG at these locations increased by an average of 4.0% from their performance before the renovations were made.

In February 2006 the Fund's operating company, Prime Restaurants of Canada Inc., was pleased to be named a Platinum Member of Canada's Fifty Best Managed Companies for demonstrating six consecutive years of excellence and leadership in all areas of its business. Canada's 50 Best Managed Companies is sponsored by Deloitte, CIBC Commercial Banking, National Post and Queen's School of Business.



FINANCIAL HIGHLIGHTS:

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($000's, except Three months Three months Twelve months Twelve months
per unit data) ended December ended December ended December ended December
31, 2006 31, 2005 31, 2006 31, 2005
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Interest income
- TradeMarkCo
Note 1,848 1,796 6,874 6,874
Net earnings 1,831 1,780 7,268 7,081
Total assets 61,684 61,684 61,684 61,684
Deferred
Liability 5,714 5,922
Distributions
to
Unitholders 1,723 1,723 6,892 6,892
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Trust units
- outstanding 6,110,000 6,110,000 6,110,000 6,110,000
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Trust units
- diluted 9,266,841 9,255,476 9,266,841 9,255,476
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Basic earnings
per Trust Unit $0.30 $0.29 $1.19 $1.16
Diluted earnings
per Trust Unit $0.29 $0.29 $1.17 $1.15
Distributions
paid per Trust
Unit $0.28 $0.28 $1.13 $1.13

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Outlook

Management continues to execute its successful strategies to drive continued growth.

The re-branding of the Casey's division is essentially complete and has resulted in solid improvements in SSSG. For 2007, management plans to renovate six Casey's locations to maintain the positive trend being experienced with the rejuvenated concept. Two new restaurants are planned for opening in 2007 based on the platform of the new prototype, with a target of opening an additional twenty-four new locations over the next five years, primarily focused in eastern Canada.

In the pubs business a new and expanded menu was introduced and is proving very popular. In addition, numerous promotions such as Keith's Wednesdays and Guiness Fridays are generating solid growth, while the repositioning of certain locations to expand beyond the highly successful Irish theme will continue.

At East Side Mario's, management will be introducing a new re-freshed and high energy concept that will take the brand back to its roots and 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 88% brand loyalty factor as measured by an independent survey. A new prototype will be unveiled in the summer of 2007 at a corporate-owned restaurant to include an authentic new decor in keeping with a Little Italy street party, as well as a new uniform program and various innovative new guest touch points. A new and re-positioned menu will also be launched in the spring focusing on East Side Mario's signature pasta dishes and authentic Italian pizzas, items that continue to be guest favorites. Six new restaurants utilizing the rejuvenated prototype concept are planned for opening in 2007 while eight locations will be renovated. Management's target over the next five years is to open a total of forty-five new East Side Mario's locations with a focus on building the brand's presence in Western Canada and Quebec.

"With 108 locations currently across Canada, East Side Mario's is our largest concept within the Prime family of casual dining and pub brands. With the roll-out of our new prototype in 2007 and going forward, we expect to duplicate the significant growth and success we achieved with the re-design of our Casey's locations," Mr. Rothschild concluded.

The Fund's financial statements and Management's Discussion and Analysis for the three months and year ended December 31, 2006 and 2005 will be available at www.primeincomefund.ca and www.sedar.com by March 31, 2007.

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 by March 31, 2007.

Quarterly Conference Call

Prime Restaurants Royalty Income Fund will host a conference call on Wednesday, March 21, 2007 at 10.00 a.m. ET (7:00 a.m. Pacific Time) 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, March 27, 2007. To access the rebroadcast, please dial (416) 915-1035 or toll-free (866) 245-6755, pass code 742641#.

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.

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.

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, 2006 and 2005

2006 2005
$ $
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Assets
Current asset
Interest receivable 583,788 583,788

Investment in PRC Trademarks Inc. (note 3) 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. (note 4) - 167,810
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574,340 742,150
Deferred revenue 5,714,000 5,922,000
Unitholders' equity (note 5) 55,395,448 55,019,638

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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, 2006 and 2005

2006 2005
$ $
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Revenue
Interest income 6,873,638 6,873,638
Dividend income 254,454 57,065
Amortization of deferred revenue 208,000 208,000
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7,336,092 7,138,703
Operating expense
Administrative expenses 68,202 57,691
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Net earnings for the year 7,267,890 7,081,012
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Basic earnings per Trust Unit (note 7) $1.19 $1.16
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Diluted earnings per Trust Unit (note 7) $1.17 $1.15
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Statement of Unitholders' Equity
Years ended December 31, 2006 and 2005

2006 2005
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$ $
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Balance - Beginning of year 55,019,638 54,830,706
Net earnings 7,267,890 7,081,012
Distributions (6,892,080) (6,892,080)
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Balance - End of year 55,395,448 55,019,638
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