Prime Restaurants Royalty Income Fund
TSX : EAT.UN

Prime Restaurants Royalty Income Fund

May 05, 2008 16:30 ET

Prime Restaurants Royalty Income Fund Announces Improved First Quarter 2008 Results

MISSISSAUGA, ONTARIO--(Marketwire - May 5, 2008) - Prime Restaurants Royalty Income Fund ("the Fund") (TSX:EAT.UN) today reported results for the three months ended March 31, 2008.



Q1 2008 HIGHLIGHTS:

- Positive same store sales growth at all brands

- Casey's, Pubs, and East Side Mario's post positive SSSG
of 1.3%, 7.3%, and 0.3% respectively

- Renovation programs, price increases and exciting new menus
contribute to improved performance

- Opened three new locations in the quarter.


Gross revenue reported by the royalty pooled restaurants in the first quarter of 2008 was $82.3 million compared to $80.7 million for the same period last year. There were 155 royalty pooled restaurants in the period compared to 156 royalty pooled restaurants for the same quarter in 2007. For the three months ended March 31, 2008, royalty income from royalty pooled restaurants was $2.7 million compared to $2.6 million for the same period last year.

Distributable cash available to Unitholders was $1.7 million or $0.28 per unit for the three months ended March 31, 2008. The Fund declared cash distributions of $1.7 million or $0.28 per unit in the first quarter of 2008.

SSSG for the three months ended March 31, 2008 was 1.1% for the royalty pooled restaurants. Strong growth was generated in Prime's Casey's and Pubs brands, resulting in 1.3% SSSG for Casey's in the first quarter of 2008 and 7.3% SSSG for the Pubs. East Side Mario's also posted positive SSSG in the first quarter of 0.3%. On a geographic basis, positive SSSG was generated in Ontario at 1.3%, Quebec at 1.2%, and Atlantic Canada at 4.0%. Western Canada posted a SSSG decline of 1.1%, impacted by reduced operating hours from the tight labour market. Growth in the quarter was somewhat moderated by adverse weather during the month of March compared with the prior year.

"We are very pleased with our positive performance through the first three months of 2008 as our new menus, renovation programs and other initiatives are driving an increase in new and return visits to our popular and high quality family of brands," 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 first quarter of 2008, one East Side Mario's and one Pub in Ontario and one Casey's location in Quebec. Two restaurants were closed during the quarter of 2008, one East Side Mario's restaurant in Nova Scotia and one Pub in Ontario.

Renovations were completed at one East Side Mario's location during the first quarter of 2008. SSSG at this restaurant increased 9.8% compared to its pre-renovation sales.

"Looking ahead, we are confident that menu price increases and training programs implemented in the first quarter, our plan to open fifteen new restaurant and pub locations by the end of this year, and our ongoing renovation programs will continue to drive growth across all of our brands through 2008 and going forward," Mr. Rothschild concluded.



FINANCIAL HIGHLIGHTS OF THE FUND:

-----------------------------------------------------------------
($000's, except per unit data) Three Three
months months
ended ended
March 31, March 31,
2008 2007
-----------------------------------------------------------------
-----------------------------------------------------------------
Interest and dividend income 1,760 1,735
Net earnings 1,723 1,708
Total assets 56,979 55,165
Distributions to Unitholders 1,732 1,723
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Trust units - outstanding 6,110,000 6,110,000
-----------------------------------------------------------------
Trust units - diluted 9,321,620 9,298,546
-----------------------------------------------------------------
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 TRADEMARKCO FINANCIAL HIGHLIGHTS:

Three Months
-----------------------------------------------------------------
($000's except # of Royalty Pooled 2008 2007
Restaurants)
-----------------------------------------------------------------
# of Royalty Pooled Restaurants 155 156
-----------------------------------------------------------------
-----------------------------------------------------------------
Gross Revenue Royalty Pooled
Restaurants 82,301 80,698
-----------------------------------------------------------------
Royalty Income 2,675 2,623
Operating Expenses 148 119
Dividends accrued on Class A 901 883
and Class B shares
Interest Expense 1,714 1,695
-----------------------------------------------------------------


Outlook

The re-branding of the Casey's division has resulted in solid improvements in SSSG. For the rest of 2008, management plans to renovate another three Casey's locations to maintain the positive trend being experienced with the rejuvenated concept. In addition, three new locations will be opened in 2008. Casey's is targeting the opening of an additional twenty-three new locations over the next five years, primarily focused in eastern Canada.

In the pubs business, new and innovative menus are being introduced and are proving very popular. In addition, numerous promotions such as Keith's® Wednesdays and Guinness® Fridays are generating solid growth. Three new pubs are slated to open in 2008, including one at the Ottawa International Airport. Management is also looking at opportunities to further develop the Bier Markt brand. The Bier Markt offers a premium and unique experience to consumers. Currently, plans have been set in motion that will see a second Bier Markt open in downtown Toronto. Over the next five years the opening of 25 new pubs and five new BierMarket locations are planned.

At East Side Mario's, management is in the process of launching a new re-freshed and high energy design that will take 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 88% brand loyalty factor as measured by an independent survey. For the remainder of 2008, East Side Mario's will increase its media budget, including a return to television advertising, as well as increased marketing support during the peak summer months. Eight new restaurants utilizing the rejuvenated prototype design are planned for opening in 2008 while ten locations plan renovations incorporating elements of the new design. Management's target over the next five years is to open a total of forty-eight new East Side Mario's locations with a focus on building the brand's presence in Western Canada and Quebec.

The Fund's financial statements and Management's Discussion and Analysis for the three months ended March 31, 2008 and 2007 are available at 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 Tuesday, May 6, 2008 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 (866) 400-2270 to access the call. A recording will be made available until midnight, May 13, 2008. To access the rebroadcast, please dial (416) 915-1035 or toll-free(866) 245-6755, pass code 967119#.

Prime Restaurants Royalty Income Fund ("the Fund") is a limited purpose trust authorised to issue 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, 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.

Certain information included in this news release is forward looking and based on current expectations and entails various risks and uncertainties. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for 2008 and beyond, our strategies or future actions, and our targets or expectations for our financial performance and condition (including estimated revenue from royalty pooled restaurants and the prospective number of new restaurants and pubs). Although management of the Fund and 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 (such as, on the demand for the goods and services provided under the Prime Marks) and are subject to inherent risks and uncertainties, including those discussed in the current annual information form of the Fund and annual and quarter MD&A of the Fund and PRC, 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 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.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements are made as of the date hereof. 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 cash flow from operating activities for the Fund (net earnings adjusted for non-cash items such as non-cash interest).

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