March 26th 2012
VANCOUVER, BRITISH COLUMBIA--(March 26, 2012) - The Keg Royalties Income Fund (TSX:KEG.UN) (the "Fund") is pleased to announce its financial results for the three and twelve months ended December 31, 2011.
The gross sales reported by the 102 Keg restaurants in the Royalty Pool increased $7,837,000 or 6.9% for the quarter to $122,135,000, and by $19,494,000 or 4.3% to $472,280,000 for the year. These increased sales reflect the very successful new Keg restaurants which were added to the Royalty Pool on January 1, 2011, combined with strong same store sales growth of 5.0% for the quarter and 3.5% for the year.
The Keg's same store sales (sales of restaurants that operated during the entire period of both the current and prior years) increased by 4.8% in Canada and by 5.1% in the United States for the 13-week period ended January 1, 2012. For the 52-week period ended January 1, 2012, same store sales increased by 3.9% in both Canada and the United States. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales increased by 5.0% for the 13-week period and by 3.5% for the 52-week period. For the 13-week period, the average exchange rate increased from 1.01 to 1.02, slightly increasing the Canadian dollar equivalent of the U.S. restaurant sales. For the 52-week period, the average exchange rate decreased from 1.03 to 0.99, significantly decreasing the Canadian dollar equivalent of the U.S. restaurant sales.
Royalty income increased by $289,000 or 6.2% from $4,697,000 in the three months ended December 31, 2010 to $4,986,000 in the three months ended December 31, 2011. For the year, royalty income increased by $808,000 or 4.4% from $18,422,000 in 2010 to $19,230,000 in 2011. Same store sales growth was the primary driver of the increase in royalty income during both the quarter and the year.
On January 1, 2011, the Fund was required to adopt International Financial Reporting Standards ("IFRS") and as a result all financial results for periods commencing on or after January 1, 2009 have been prepared in accordance with IFRS. Also on January 1, 2011, changes to the tax treatment of certain income trusts as a result of the Specified Investment Flow-through Trust tax ("SIFT tax") came into effect. As a result, income trusts are no longer entitled to deduct distributions for tax purposes, and are now subject to taxation similar to corporations.
Distributable cash before SIFT tax increased by $398,000 from $3,056,000 (28.8 cents/Fund unit) to $3,454,000 (30.4 cents/Fund unit) for the quarter, and by $1,367,000 from $12,864,000 ($1.241/Fund unit) to $14,231,000 ($1.262/Fund unit) for the year. Because the Fund is now required to deduct SIFT taxes prior to distributing earnings to unitholders, distributable cash available to pay distributions decreased from $3,056,000 (28.8 cents/Fund unit) to $2,499,000 (22.0 cents/Fund unit) for the quarter and by $2,280,000 from $12,864,000 ($1.241/Fund unit) to $10,584,000 (93.9 cents/Fund unit) for the year. The decrease in distributable cash available to pay distributions to public unitholders was entirely as a result of the SIFT tax.
The Fund remains financially well positioned with surplus cash on hand of $4,011,000 and a positive working capital balance of $951,000 as of December 31, 2011.
"We are very pleased to once again present record year-end results for The Keg Royalties Income Fund," said David Aisenstat, President and CEO of Keg Restaurants Ltd. "The strength of The Keg brand and our continuing focus on providing consistently great guest experiences in our steakhouses and bars have combined to result in exceptionally strong sales for 2011. We are confident that going forward our growth will continue through both new locations and same store sales increases."
FINANCIAL HIGHLIGHTS
| Oct. 1 | Oct.1 | Jan. 1 | Jan.1 | |||||||||||||
| ($000's except per unit | to Dec. 31, | to Dec. 31, | to Dec. 31, | to Dec. 31, | ||||||||||||
| amounts) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Restaurants in the Royalty Pool | 102 | 102 | 102 | 102 | ||||||||||||
| Gross sales reported by Keg restaurants | ||||||||||||||||
| in the Royalty Pool | $ | 122,135 | $ | 114,298 | $ | 472,280 | $ | 452,786 | ||||||||
| Royalty income (1) | $ | 4,986 | $ | 4,697 | $ | 19,230 | $ | 18,422 | ||||||||
| Interest income (2) | 1,080 | 1,079 | 4,281 | 4,278 | ||||||||||||
| Total income | $ | 6,066 | $ | 5,776 | $ | 23,511 | $ | 22,700 | ||||||||
| Administrative expenses (3) | (96 | ) | (112 | ) | (472 | ) | (417 | ) | ||||||||
| Interest and financing expenses (4) | (183 | ) | (178 | ) | (705 | ) | (651 | ) | ||||||||
| Operating income | $ | 5,787 | $ | 5,486 | $ | 22,334 | $ | 21,632 | ||||||||
| Distributions to KRL (5) | (2,031 | ) | (2,168 | ) | (7,979 | ) | (8,775 | ) | ||||||||
| Distributions declared to Fund unitholders (6) | - | (4,516 | ) | - | (13,360 | ) | ||||||||||
| Earnings (loss) before fair value adjustment and income taxes | $ | 3,756 | $ | (1,198 | ) | $ | 14,355 | $ | (503 | ) | ||||||
| Fair value adjustment(7) | (2,057 | ) | (5,373 | ) | 896 | (10,542 | ) | |||||||||
| Income taxes (8) | (990 | ) | (41 | ) | (3,936 | ) | (201 | ) | ||||||||
| Net earnings (loss) | $ | 709 | $ | (6,612 | ) | $ | 11,315 | $ | (11,246 | ) | ||||||
| Distributable cash before SIFT tax (9) | $ | 3,454 | $ | 3,056 | $ | 14,231 | $ | 12,864 | ||||||||
| Distributable cash (10) | $ | 2,499 | $ | 3,056 | $ | 10,584 | $ | 12,864 | ||||||||
| Distributions paid to Fund unitholders | $ | 2,725 | $ | 3,388 | $ | 11,120 | $ | 13,264 | ||||||||
| Payout Ratio (11) | 109.0 | % | 110.9 | % | 105.1 | % | 103.1 | % | ||||||||
