MONCTON, NB, Aug. 14 /CNW/ - PDM ROYALTIES INCOME FUND (the "Fund") reported today its financial results for the quarter ended June 30, 2007 and also announced that Pizza Delight Corporation Ltd. (PDC) reported its financial results for the same period.
For the quarter and year to date, PDC and the Fund are achieving record levels of sales, revenues, and earnings. Since inception of the Fund the same store sales growth has been positive in every quarter except Q2, 2006. The Scores brand will have grown from a sales base in 2005 of $67 million to over $100 million in 2007. Also of significance is that the opening of the new Baton Rouge restaurants in Ontario in 2007 will enhance our presence in Ontario.
Total revenues during the period were $3.6 million compared to $2.6 million for 2006. Basic earnings per Fund unit before income taxes for the period were $0.394 per basic unit outstanding compared to actual distributions paid of $0.360 per unit. The revenue increase was generated by the acquisition of the Baton Rouge restaurants and the addition of new restaurants vended in January 1, 2007.
PDC achieved same store sales growth (SSSG) of 2.7% for the second quarter of 2007 (2006 (equal sign) -0.7%). Scores was the strongest division for the quarter with SSSG of 11.8% (2006 (equal sign) 0.1%) with Pizza Delight at 5.2% (2006 (equal sign) 0.7%), Mikes -2.5% (2006 (equal sign) -1.7%), and Baton Rouge was 1.0%.
For the first six months on 2007 PDC achieved same store sales growth (SSSG) of 1.9% (2006 (equal sign) 0.9%). Scores lead the group with SSSG of 11.3% (2006 (equal sign) 4.8%) with Pizza Delight at 3.4% (2006 (equal sign) 2.7%), Mikes -3.2% (2006 (equal sign) -2.0%), and Baton Rouge was 0.6%.
System sales for the 261 restaurants (2006 (equal sign) 251) included in the royalty pool increased to $93.5 million compared to $70.3 million for 2006. The growth reflects the addition of the Baton Rouge restaurants and the new restaurants added to the royalty pool on January 1, 2007.
On June 12, 2007, the Canadian federal government's legislation to tax publicly traded income trusts passed third reading in the House of Commons and thus the associated income tax became substantively enacted for accounting purposes. The legislation imposes a tax of 31.5% on distributions from Canadian public income trusts. The new tax is not expected to apply to the Fund until January 1, 2011 as a transition period applies to publicly traded trusts that existed prior to November 1, 2006. Historically, the Fund has been exempt from recognizing future income tax assets and liabilities associated with temporary differences arising in the Fund and its equity accounted investment, the PDM Royalties Limited Partnership. As a result of the substantive enactment of the new tax legislation, the Fund was required to give accounting recognition to these new rules and recognized a future income tax expense and corresponding liability, of $2,150,000 during the quarter. Future income tax expense is a non-cash item that does not affect cash flow.
In 2006, PDC completed significant brand research and evaluation of its Pizza Delight and Mikes brands to better understand its positioning in the market place. Based on the research, The Pizza Delight brand completed its design process for a new concept and opened its prototype restaurant in April 2007. The modified concept is an enhancement to its already well received decor while providing several new products and styles of service in a very inviting atmosphere. Sales results to date have been better than expected and have exceeded the target. Mikes is in the final stages of design of its new concept that is intended to focus the brand towards its core Italian offerings. Mikes opened a test location in June and expects to open the prototype in September, 2007.
Management expects significant SSSG from renovations to these new concepts in its current markets while the new format will provide a solid platform in the new markets where PDC plans to expand. The prototyping and testing of these new concepts will be completed in 2007 with a roll out of a renovation plan for existing restaurants to commence in 2008.
Having multiple brands enables PDC to continue opening new restaurants while prototypes are being completed. PDC has opened seven Scores, one Pizza Delight, and one Mikes restaurants to date in 2007 and expects to open an additional three Scores, three Baton Rouge, and one Mikes restaurants this year. PDC has also renovated four Pizza Delight and two Mikes locations and expects to renovate an additional four restaurants in 2007.
The addition of Ron Magruder, a 36 year veteran of the restaurant industry, as the President and Chief Executive Officer of PDC adds substantial depth, knowledge and resources at the senior executive level. During the past few months Ron has gained a solid knowledge of PDC and its brands and is providing positive guidance in the expansion into new markets as well as providing increased direction and focus for each brand.
Complete financial statements are available at www.sedar.com
The Fund is a limited purpose open-ended trust established under the laws of Ontario. The Fund will make monthly distributions of its available cash to holders of units. The Fund indirectly owns the trade marks and intellectual property for the Pizza Delight, Mikes, Scores, and Baton Rouge brands and has licensed them to PDC in consideration for a royalty equal to 4% of system sales for Pizza Delight and Mikes restaurants and a royalty rate of 6% for Scores and Baton Rouge restaurants.
PDC is a privately owned corporation, headquartered in Moncton, New Brunswick. It operates franchised and corporate restaurants under the brand names Pizza Delight(R), Mikes(R), Scores(R), and Baton Rouge(R) restaurants. Pizza Delight(R) operates primarily in Atlantic Canada, where it dominates the family/mid-scale segment. Mikes(R) and Scores(R) restaurants operate primarily in Quebec in the family and casual dining segments and the take-out and delivery segments. Baton Rouge(R) operates in the Province of Quebec and Ontario in the casual dining segment.