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Imvescor Restaurant Group Inc. (IRG)
Market: CDN Consolidated
$ 1.94
Aug 28, 2014, 6:59 PM EDT
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PDM Royalties Income Fund announces 3rd Quarter Results

MONCTON, NB, Nov. 14 /CNW/ - PDM ROYALTIES INCOME FUND (the "Fund") reported today its financial results for the quarter ended September 30, 2007 and also announced that Imvescor Inc. (Imvescor) reported its financial results for the same period.

For the quarter and year to date, Imvescor and the Fund are achieving record levels of sales, revenues, and earnings. With the exception of Q2, 2006, same store sales growth has been positive in every quarter since the inception of the Fund. 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 further increase our presence in Ontario.

The Fund continues to generate strong cash flows above that required to make its monthly distributions to its unitholders and the interest payments to the holders of the convertible debentures. Brian Flemming, chairman of the Trustees states "The Fund is in a very good financial position and the Board of Trustees is evaluating, on an ongoing basis, the best use for the excess cash. We realize the tax changes are coming and we want to make long term strategic uses of our capital".

Total revenues during the period were $3.8 million compared to $2.9 million for 2006. Basic earnings per Fund unit before income taxes for the period were $0.458 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 on January 1, 2007.

For the quarter same store sales growth (SSSG) of 1.8% (2006 (equal sign) 1.2%). Pizza Delight was the strongest division with SSSG of 4.7% (2006 (equal sign) 4.4%), Scores at 4.2% (2006 (equal sign) 5.0%), Mikes at -1.0% (2006 (equal sign) -2.5%), and Baton Rouge was 1.7%.

For the first nine months of 2007 Imvercor achieved SSSG of 2.0% (2006 (equal sign) 1.0%). Scores lead the group with SSSG of 8.9% (2006 (equal sign) 4.8%), Pizza Delight at 4.1% (2006 (equal sign) 3.3%), Mikes at -2.4% (2006 (equal sign) -2.2%), and Baton Rouge was 0.9%.

System sales for the 261 restaurants (2006 (equal sign) 251) included in the royalty pool increased to $95.6 million compared to $73.6 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 $1,955,000. Future income tax expense is a non-cash item that does not affect cash flow.

In 2006, Imvescor 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 increases to date have been in excess of 20% and generated strong franchisee support leading to a franchisee completing the second renovated location in late October, 2007 with sales results also being exceptionally strong. 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 December, 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 Imvescor 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 Imvescor to continue opening new restaurants while prototypes are being completed. Imvescor has opened eight Scores, three Baton Rouge, one Pizza Delight, and one Mikes restaurants to date in 2007 and expects to open an additional one Scores and one Mikes restaurants this year. Imvesocr has also renovated seven Pizza Delight, four Mikes, and two Scores locations and expects to renovate an additional two restaurants before year end 2007.

The addition of Ron Magruder, a 36 year veteran of the restaurant industry, as the President and Chief Executive Officer of Imvescor adds substantial depth, knowledge and resources at the senior executive level. During the past few months Ron has gained a solid knowledge of Imvescor 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.

Financial Highlights

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(in thousands except restaurants        Q3        Q3       YTD       YTD
 and per unit items)                  2007      2006      2007      2006
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Number of restaurants in the
 Royalty Pool                          261       251       261       251
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Royalty pool sales                  95,609    73,591   278,246   211,146
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Royalty income of the Partnership    4,636     3,319    13,627     9,538
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Earnings for the Fund before
 income taxes                        3,167     2,501     8,865     7,772
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Basic Earnings before income
 taxes per Fund unit                $0.431    $0.398     1.216     1.102
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Fully diluted earnings before
 income taxes per Fund unit         $0.387    $0.398     0.923     1.102
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Distributions declared per
 Fund unit                          $0.360    $0.360     1.080     1.080
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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 Imvescor 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.

Imvescor 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.

%SEDAR: 00018600E

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