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Prime Restaurants Royalty Income Fund Announces Fourth Quarter and Year End 2007 Results

By: Prime Restaurants of Canada Inc. |  1,023 Shares     92 Reads

MISSISSAUGA, ONTARIO--(Marketwire - March 11, 2008) - Prime Restaurants Royalty Income Fund ("the Fund") (TSX:EAT.UN) today reported results for the three months and year ended December 31, 2007.

2007 HIGHLIGHTS:

• Positive same store sales growth ("SSSG")
  
• Casey's and Pubs SSSG of positive 3.0% and 12.0% respectively
  
• Ontario and Western Canada locations post positive SSSG of 1.0% and 1.8%
  
• Renovation programs and exciting new menus contribute to improved performance
  

Gross revenue reported by the royalty pooled restaurants in the fourth quarter was $81.0 million compared to $79.8 million for the same period last year. For the year ended December 31, 2007, gross revenue reported by the royalty pooled restaurants was $333.1 million compared to $326.8 million last year. There were 156 royalty pooled restaurants in both years. For the three months and year ended December 31, 2007, royalty income from royalty pooled restaurants was $2.7 million and $11.0 million respectively.

Distributable cash available to Unitholders was $1.7 million or $0.28 per unit for the three months ended December 31, 2007 and $6.9 million or $1.13 for the year ended December 31, 2007. The Fund declared cash distributions of $1.7 million or $0.28 per unit in the fourth quarter of 2007 and $6.9 million or $1.13 per unit for the year ended December 31, 2007.

SSSG for the year ended December 31, 2007 was 0.6% for the royalty pooled restaurants. Strong growth was generated in Prime's pubs and Casey's brands, resulting in 3.0% SSSG for Casey's in 2007 and 12.0% SSSG for the pubs. East Side Mario's posted negative SSSG of 1.6% for the year, due primarily to inclement weather in Ontario and Quebec during the fourth quarter. On a geographic basis, Ontario posted SSSG of 1.0%, Western Canada at 1.8%, while Quebec posted negative SSSG of 2.2% due primarily to the negative impact of a non-smoking law passed in late 2006.

"We were pleased with our positive performance in 2007, the result of our continued focus on providing the highest quality experience for our guests," commented John Rothschild, Chairman and CEO of Prime Restaurants of Canada Inc. "We continue to focus on achieving our long-term goal of 3% annual SSSG, and expect to see further progress in 2008."

Operational Review

For restaurants available to enter the royalty pool on January 1, 2008, four East Side Mario's restaurants and one Casey's restaurant were opened in 2007, one in Ontario, one in B.C., and three in Ontario. Six restaurants were closed during the year, resulting in the total number of restaurants in the royalty pool declining to 155 as of January 1, 2008.

Renovations were completed at eleven locations during 2007 - four Casey's and seven East Side Mario's. SSSG at these renovated restaurants increased 2.9% compared to their pre-renovation sales. Management was pleased that the five East Side Mario's locations renovated in 2007 to the new brand image generated post-renovation SSSG of 4.7%.

"East Side Mario's is celebrating its 20th anniversary in Canada in 2008, a significant milestone. Looking ahead, we will leverage this heritage of success and significant brand equity through our rejuvenated concept that combines the essence of our roots with our passion for food and life," Mr. Rothschild concluded.

Tax Treatment of Distributions

The Fund also announced today that of the $1.128 per unit of distributions declared for the year ended December 31, 2007, $1.107 (98.14%) will be taxable as Investment Income and $0.021 (1.86%) will be designated as Non-Eligible Dividend.

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

                                     December  December  December  December

                                     31, 2007  31, 2006  31, 2007  31, 2006

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Interest and dividend income            1,773     1,796     7,036     7,128

Net earnings                            3,526     1,831     8,707     7,268

Total assets                           56,970    61,684    56,970    61,684

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 9,266,867 9,321,620 9,266,867

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Basic earnings per Trust Unit          $ 0.58    $ 0.30    $ 1.42    $ 1.19

Diluted earnings per Trust Unit        $ 0.48    $ 0.29    $ 1.32    $ 1.17

Distributions paid per Trust Unit      $ 0.28    $ 0.28    $ 1.13    $ 1.13





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SELECTIVE TRADEMARKCO FINANCIAL HIGHLIGHTS:





                                           Three Months                Year

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($000's except # of Royalty               2007     2006      2007      2006

 Pooled Restaurants) 

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# of Royalty Pooled Restaurants            156      156       156       156

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Gross Revenue Royalty

 Pooled Restaurants                     80,959   79,822   333,859   326,822

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Royalty Income                           2,691    2,661    11,006    10,857

Operating Expenses                          83      127       440       483

Dividends on Class A and

 Class B shares                            931      904     3,613     3,551

Interest Expense                         1,734    1,845     6,875     6,986

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Outlook

The re-branding of the Casey's division has resulted in solid improvements in SSSG. For 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.

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 2008, East Side Mario's will increase its media budget, including a return to television advertising. 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 and year ended December 31, 2007 and 2006 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 "other" document type for the Fund.

Quarterly Conference Call

Prime Restaurants Royalty Income Fund will host a conference call on Wednesday, March 12, 2008 at 10:30 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, March 18, 2008. To access the rebroadcast, please dial (416) 915-1035 or toll-free (866) 245-6755, pass code 563402#.

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 operating cash flows for the Fund (net earnings adjusted for non-cash items such as deferred revenue).

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