| TORONTO, Apr 26, 2007 (Canada NewsWire via COMTEX News Network) -- Priszm Income Fund (TSX: QSR.UN) ("Priszm") today announced financial results for the first quarter ended March 25, 2007. The Company operates on a 13-period accounting basis, with the first three quarters consisting of 12 weeks and the fourth quarter consisting of approximately 16 weeks.
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First Quarter Financial Highlights
- Same store sales from KFC/Taco Bell multi-branded locations up
2.1 per cent compared to prior year
- Sales $100.7 million
- EBITDA* $3.0 million
- Distributable cash* $1.0 million
- 483 restaurants compared to 478 at March 20, 2006
*See section entitled Non-GAAP measures.
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"We look forward to our busy season and the balance of the year when we generate the bulk of our sales and distributable cash," said John Bitove, Chairman and Chief Executive Officer of Priszm. "The first quarter is traditionally a slow period for our restaurants. We remain on target to multi-brand and open new locations and we will continue to execute our proven growth strategy over the balance of 2007." Priszm Financial Performance Sales for the first quarter were $100.7 million, a decrease of $0.5 million or 0.5% as compared with the same period in 2006. Priszm's business is seasonal, with sales for the three-month period of January, February and March typically accounting for 20% of annual sales, compared to 75% over the next three quarters. Unusually harsh weather at the beginning of the quarter in several provinces also contributed to the slight decline in sales. Same store sales from the multi-branded KFC/Taco Bell locations continued to outperform our stand-alone KFC locations, posting sales growth of 2.1% for the first quarter. Sales growth in this segment is impacted by the number of conversion projects that have been in the portfolio for less than one year at any point in time. In the first quarter of 2007, there were nine such conversion projects compared to fifteen in the prior time frame last year. There are currently 94 multi-branded locations of the 483 restaurants Priszm owns. Cost of restaurant sales, as a percentage of sales, for the first quarter was 61.0%, which was up from 60.0% in the first quarter of 2006. Food costs and labour expenses both increased during the quarter. Food cost increases were driven mainly by an increase in chicken prices. Raw chicken prices increased by 3.5% versus the same quarter a year ago and negatively impacted the business. We do not believe this pricing will continue in the long-term. Lower food efficiencies, driven by reduced sales volumes, also contributed to the higher food cost in the quarter. Labour costs rose to 24.7% of sales, up from 24.1% in the comparable quarter in 2006. In the first quarter, EBITDA amounted to $3.0 million compared to $5.2 million in the first quarter of last year. Distributable cash was $1.0 million in the first quarter of 2007 compared to $3.7 million in the comparable quarter of 2006. The sales decline, in combination with increased food and labour costs resulted in reduced profitability relative to the prior year. "On the marketing front, one of our most important initiatives is the recent launch of our zero grams of trans fat products. We have an exciting line up of products and promotions ready for the balance of the year, especially during our key summer season," said Jeff O'Neill, President and Chief Operating Officer of Priszm. "We remain keenly focused on turning around results in Ontario and we are making good progress. At the end of the first quarter, we hired Jim Robertson as our new vice-president of operations for Ontario. Jim has 20 years experience in the retail food industry and for the last six years he has been with Tim Hortons as part of their expansion in the Quebec market. Jim's mandate at Priszm is to strengthen performance and to ensure we are delivering quality product service and speed in each and every one of our Ontario stores." Non-GAAP Measures Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization and other items. EBITDA is not a recognized measure under Canadian generally accepted accounting principles ("GAAP") and may not be comparable to similar measures used by other companies. Priszm believes that EBITDA is a useful supplementary measure of operating performance as it provides investors with an indication of cash available for distribution prior to debt service and capital expenditures. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net income determined in accordance with GAAP or to cash flows from operating, investing and financing activities. Distributable Cash Distributable cash and maintenance capital expenditures are not measures recognized by GAAP, do not have standardized meanings prescribed by GAAP, and therefore, may not be comparable to similar measures presented by other issuers. Priszm believes that distributable cash is a useful supplemental measure of performance as it provides investors with an indication of the amount of cash available for distribution to unitholders. However, readers are advised that distributable cash is not meant to be an alternative to using net earnings as a measure of profitability or the statement of cash flows. Quarterly Analyst Conference Call/Audio Webcast Priszm will hold an analyst call at 10 a.m. EST on Thursday April 26, 2007 to discuss its results for the first quarter of 2007. The call may be accessed by dialing 416-644-3417 within the Toronto area, or 1-800-731-6941 (toll-free) outside of Toronto. The call will be simultaneously audio webcast at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1800260. The conference call webcast and a presentation to investors and analysts will be archived on Priszm's website at www.priszm.com. A playback of the call can also be accessed until Saturday May 26, 2007 by dialing 416-640-1917 from within the Toronto area or 1-877-289-8525 (toll-free) outside of Toronto. The passcode for the replay is 21226206 followed by the number sign. About Priszm Income Fund Priszm Income Fund (TSX: QSR.UN) has a 60.2 per cent interest in Priszm LP and its general partner, Priszm Inc., which owns and operates 483 quick service restaurants in seven provinces across Canada. The KFC, Taco Bell, Pizza Hut and Long John Silver's restaurants under Priszm, which generated annual revenues in excess of $500 million in 2006, serve 1.5 million customers a week and employ more than 9,000 people. Currently, 94 locations are multi-branded, combining two or more of the Fund's restaurant concepts. To find out more about Priszm Income Fund (TSX: QSR.UN), visit our website at http://www.priszm.com. Forward-Looking Statements Any forward-looking statements in this document are based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from projections suggested in any forward-looking statements due to factors such as the competitive nature of the quick service restaurant industry, the ability of Priszm and Priszm LP to execute a growth and development strategy, the reliance of Priszm and Priszm LP on key personnel, the terms and conditions of Priszm LP's franchise arrangements, and risk associated with the structure of income trusts. Priszm and Priszm LP assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements. Additional information identifying risks and uncertainties is contained in Priszm's filings with the Canadian securities regulators, available at www.sedar.com. The following selected financial information, with the exception of Distributable Cash and Distributable Cash Per Unit, has been derived from and should be read in conjunction with the first quarter 2007 unaudited financial statements and Management's Discussion and Analysis for the year ended December 31, 2006. Additional information can be found in Priszm's filings at www.sedar.com.
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RECONCILIATION OF DISTRIBUTABLE CASH
(in thousands of dollars except per Unit amounts)
First Quarter
2007 2006
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Cash provided by (used in) operating
activities $ (8,869) $ 2,384
Net change in non-cash working capital(1) 10,695 1,867
Maintenance capital expenditures(2) (799) (574)
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Distributable cash $ 1,027 $ 3,677
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Distributions made during the period(3) 8,265 8,133
Distributable cash per Unit 0.040 0.142
Distributions per Unit(3) 0.320 0.315
Payout ratio 805% 221%
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Notes:
(1) Priszm does not need to finance its working capital as it operates in
an environment where cash sales precede the payment of restaurant
food, supplies and labour. While fluctuations will occur within
quarters, on a full year basis these changes should not impact
Priszm's ability to make Unit distributions.
(2) Maintenance capital expenditures refer to capital expenditures that
are necessary to sustain current revenue levels. Priszm believes that
funding for maintenance capital expenditures must come out of
operating cash flow. Development capital expenditures are not
recorded as a reduction from distributable cash since these
expenditures are expected to generate increases in future
distributable cash and distributions.
(3) Distributions per Unit for the first quarter of 2007 include all
declared distributions for the period January 1 to March 25, 2007 and
January 1 to March 20, 2006.
INTERIM CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands of dollars)
March 25, December 31,
2007 2006
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ASSETS
Current assets
Cash $ 7,753 $ 29,206
Trade and other accounts receivable 3,069 2,327
Inventories 4,141 5,021
Prepaid expenses 2,025 1,044
Other assets 242 241
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17,230 37,839
Property and equipment 87,871 88,031
Deferred financing charge - 1,357
Franchise rights 53,691 54,560
Goodwill 159,227 159,227
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318,019 341,014
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LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 46,398 56,338
Distributions payable to unitholders 3,857 5,397
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50,255 61,735
Long-term debt 74,751 75,633
Deferred contract amounts 5,149 5,072
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130,155 142,440
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Non-controlling interest 76,824 81,089
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UNITHOLDERS' EQUITY
Capital contributions 142,290 142,290
Contributed surplus 113 99
Deficit (31,363) (24,904)
Accumulated other comprehensive income - -
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111,040 117,485
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318,019 341,014
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INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT (UNAUDITED)
(in thousands of dollars, except per unit amounts)
Period from Period from
January 1, January 1,
2007 to 2006 to
March 25, March 20,
2007 2006
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Restaurant sales $ 100,686 $ 101,148
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Restaurant cost and expenses
Cost of restaurant sales 61,428 60,748
Restaurant operating expenses 16,872 16,165
Rent 8,675 8,342
Franchise royalty expense 6,045 6,072
Depreciation and amortization 2,930 2,989
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95,950 94,316
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Income from restaurant operations 4,736 6,832
General and administrative expenses,
including amortization of $957 (2006 - $997) 5,836 5,635
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(Loss) income before the undernoted (1,100) 1,197
Interest income 45 86
Interest expense (1,404) (1,503)
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Loss before non-controlling interest (2,459) (220)
Non-controlling interest 978 88
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Net loss for the period (1,481) (132)
Deficit - Beginning of the period (24,904) (16,069)
Distributions (4,978) (4,899)
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Deficit - End of the period (31,363) (21,100)
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Basic and diluted loss per Unit (0.0952) (0.0085)
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INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands of dollars)
Period from Period from
January 1, January 1,
2007 to 2006 to
March 25, March 20,
2007 2006
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Net loss for the period (1,481) (132)
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Other comprehensive income - -
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Comprehensive loss (1,481) (132)
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CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
Period from Period from
January 1, January 1,
2007 to 2006 to
March 25, March 20,
2007 2006
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Cash provided by (used in)
Operating activities
Net loss for the period $ (1,481) $ (132)
Add: Non-cash items
Non-controlling interest (978) (88)
Amortization of property and equipment 2,941 2,891
Amortization of franchise rights 869 856
Amortization of prepaid financing fees 117 37
Accretion expenses of interest on
long-term debt 53 -
Amortization of deferred contract amount 77 239
(Gain) loss on disposal of property and
equipment (2) 41
Write-off of deferred financing fees
relating to long-term debt repaid - 393
Unit-based compensation 14 14
Long term incentive plan accrual 216 -
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Cash provided by operations 1,826 4,251
Net change in non-cash working capital (10,695) (1,867)
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Cash provided by (used in) operating
activities (8,869) 2,384
Investing activities
Net proceeds on disposals 2 20
Purchase of property and equipment (2,781) (4,597)
Purchase of franchise rights - (12)
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Cash used in investing activities (2,779) (4,589)
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Financing activities
Deferred financing fees on new long-term debt - (657)
Repayment of long-term debt - (60,000)
Proceeds of new long-term debt - 73,596
Distributions to unitholders (9,805) (8,133)
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Cash provided by (used in) financing
activities (9,805) 4,806
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Change in cash during the period (21,453) 2,601
Cash - Beginning of the period 29,206 14,018
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Cash - End of the period 7,753 16,619
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%SEDAR: 00019884E SOURCE: Priszm Income Fund SOURCE: KIT Limited Partnership Investors: Trish Moran, (416) 624-5133, trish.moran@priszm.com; Media: Wilcox Group, (416) 203-6666, priszm@wilcoxgroup.com Copyright (C) 2007 CNW Group. All rights reserved. |