Prime Restaurants Royalty Income Fund
TSX : EAT.UN

Prime Restaurants Royalty Income Fund

March 11, 2009 16:30 ET

Prime Restaurants Royalty Income Fund Announces Fourth Quarter and Year End 2008 Results

MISSISSAUGA, ONTARIO--(Marketwire - March 11, 2009) - Prime Restaurants Royalty Income Fund ("the Fund") (TSX:EAT.UN) today reported results for the three months and year ended December 31, 2008.

2008 HIGHLIGHTS:

- Despite weakening Canadian economy, SSSG down by modest 0.47%

- Six net new restaurants added to Royalty Pool for 2009

- Cash distributions remain stable and sustainable

Gross revenue reported by the royalty pooled restaurants in the fourth quarter of 2008 was $82.1 million compared to $83.4 million for the same period last year. For the year ended December 31, 2008 gross revenue increased to $340.6 million compared to $339.3 million last year. There were 155 royalty pooled restaurants in 2008 compared to 156 royalty pooled restaurants for 2007. For the three months and year ended December 31, 2008, royalty income from royalty pooled restaurants was $2.7 million and $11.1 million respectively, compared to $2.7 million and $11.0 million for the same respective periods in the prior year.

Distributable cash available to Unitholders was $1.7 million or $0.28 per unit for the three months ended December 31, 2008 and $6.9 million or $1.13 per unit for the year. The Fund declared cash distributions of $1.7 million or $0.28 per unit in the fourth quarter of 2008 and $6.9 million or $1.13 per unit for 2008, consistent with the prior year periods.

Same Store Sales Growth ("SSSG") for the three months ended December 31, 2008 was negative 2.95% for the royalty pooled restaurants. Growth was generated in Prime's Pubs brand, resulting in 0.9% SSSG in the fourth quarter of 2008. SSSG at East Side Mario's and Casey's were down in the fourth quarter, both posting negative SSSG of 3.3%. On a geographic basis, positive results were generated in the Atlantic Canada market, with SSSG up 9.2% during the fourth quarter. Ontario, Western Canada and Quebec posted negative SSSG during the quarter of 2.4%, 9.0% and 5.7%, respectively, due primarily to the negative impact of the weakening economy on consumers discretionary spending and the casual dining industry.

For the year ended December 31, 2008 the Royalty Pooled Restaurants posted a marginal negative cumulative SSSG of 0.47%. By concept, Casey's and our Pubs segment posted positive SSSG of 0.2% and 2.8% in 2008, respectively, while East Side Mario's posted negative SSSG of 1.1% for the year. On a geographic basis, positive SSSG was experienced in Atlantic Canada, up 6.6%, while Ontario, Qu?bec, and Western Canada experienced negative SSSG of 0.1%, 2.3%, and 4.0%, respectively.

"While our performance in the fourth quarter is in large part a reflection of the challenging economic climate in Canada and its impact on the consumer, we are confident 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 these market challenges and maintain our stable and sustainable cash distributions for the foreseeable future," commented John Rothschild, Chairman and CEO of Prime Restaurants of Canada Inc.

Operational Review

For restaurants available to enter the royalty pool on January 1, 2009, three new restaurants were opened in the fourth quarter of 2008, one East Side Mario's, one Casey's and one pub location. No locations were closed during the quarter. For the year ended December 31, 2008, twelve restaurants were opened and six locations were closed. As a result, six net new locations were added to the Royalty Pool on January 1, 2009.

Renovations were completed at two East Side Mario's locations during the fourth quarter of 2008. For the year ended December 31, 2008, renovations have been completed at ten royalty pooled restaurants.



FINANCIAL HIGHLIGHTS OF THE FUND:

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($000's, except per unit data) Three Three
months months Year Year
ended ended ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2008 2007 2008 2007

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Interest and dividend income $ 1,779 $ 1,773 $ 7,049 $ 7,036
Net earnings 1,749 3,526 6,931 8,707
Total assets 57,009 56,970 57,009 56,970
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 9,321,620 9,321,620 9,321,620 9,321,620
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Basic earnings per Trust Unit $ 0.28 $ 0.57 $ 1.13 $ 1.42
Diluted earnings per Trust Unit $ 0.28 $ 0.48 $ 1.13 $ 1.32
Distributions paid per Trust Unit $ 0.28 $ 0.28 $ 1.13 $ 1.13
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SELECTIVE YEAR-TO-DATE TRADEMARKCO FINANCIAL HIGHLIGHTS:

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($000's except # of Royalty Pooled 2008 2007
Restaurants)
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# of Royalty Pooled Restaurants 155 156
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Gross Revenue Royalty Pooled Restaurants $ 340,552 $ 339,281
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Royalty Income 11,068 11,026
Operating Expenses 585 440
Dividends accrued on Class A and Class B shares 3,613 3,613
Interest Expense 6,892 6,875
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Outlook

The re-branding of the Casey's division over the last two years has resulted in solid performance improvements. A new "Food First" marketing and operating strategy is being introduced through the first quarter of 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 will be launched in quarter two with an emphasis on reducing menu complexity and enhancing quality.

In the pubs business, new and innovative seasonal menus and value promotions are being introduced, supported by media campaigns, 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 growth.

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 each quarter of 2009 new programs highlighting one of the "Brand Pillars" - Great Italian Cooking, Passion for the Guest, Welcoming Atmosphere and Part of my Neighbourhood - will be introduced, supported by intensive staff training. New menu offerings and promotional programs are targeted for Western Canada to build the brand in that region. In addition, new seasonal and value promotions will be launched through the year to highlight East Side Mario's highly attractive value proposition.

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 certain 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 and contribute to growth. Assuming current economic and market conditions, management continues to believe that, over the long term, same store sales will increase and remains committed to its long-term SSSG target of 3%.

The Fund's financial statements and Management's Discussion and Analysis for the three months and year ended December 31, 2008 and 2007 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 Thursday, March 12, 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 $61,099,000 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 strategies or planned future actions, and our targets or expectations for our financial performance and condition. 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. 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 compete are considered in forecasting the Fund's expected financial results 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 distributable cash from the cash flow from operating activities of the Fund. In respect of the ability to maintain and grow the royalty pooled revenue, 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 the Royalty Pooled Restaurants. In making forward-looking statements, the Fund makes assumptions about the risk factors that are relevant. 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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