VANCOUVER, BRITISH COLUMBIA--The Keg Royalties Income Fund (TSX:KEG.UN) (the "Fund") has reported its financial results for the three months ended March 31, 2011.
The gross sales reported by the 102 Keg restaurants in the Royalty Pool were $120,604,000 for the quarter, an increase of $3,651,000 or 3.1% from the comparable quarter of the prior year, primarily due to same store sales growth. The Keg's same store sales (sales of restaurants that operated during the entire 13-week period of both the current and prior years) increased by 3.8% in Canada and by 3.2% in the United States. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales for the comparable 13-week periods increased 3.1%.
Royalty income increased by $172,000 or 3.7% from $4,695,000 in the three months ended March 31, 2010 to $4,867,000 in the three months ended March 31, 2011. Distributable cash before SIFT tax increased by $431,000 from $3,401,000 to $3,832,000 for the quarter, but decreased slightly by 0.3 cents/Fund unit, from 35.0 cents/Fund unit in the first quarter of 2010 to 34.7 cents/Fund unit in the first quarter of 2011. Distributable cash available to pay distributions to public unitholders decreased from $3,401,000 (35.0 cents/Fund unit) to 2,906,000 (26.3 cents/Fund unit) during the comparable quarter, solely as a result of the SIFT tax. The Fund remains financially well positioned with surplus cash on hand of $1,752,000 and a positive working capital balance of $2,807,000 as of March 31, 2011.
"We are very pleased with the sales performance of Keg Restaurants Ltd. during the quarter in both Canada and the U.S.," said Christopher Woodward, Chairman of The Keg Royalties Income Fund. "Continued growth in sales translates into growth in royalty income, and distributable cash available for distributions to Fund unitholders."
The Fund was required to adopt International Financial Reporting Standards ("IFRS") as of January 1, 2011. As a result, all financial results for periods commencing on or after January 1, 2009 have therefore been prepared in accordance with IFRS. The Fund's transition to IFRS from Canadian Generally Accepted Accounting Principles ("GAAP") has had no impact, nor is it expected to have any future impact, on the operations of the Fund's business, the contractual obligations between the Fund, and Keg Restaurants Ltd, the operating company from which the Fund receives the royalty payments, nor on the amount of cash that is available for distribution to the Fund's unitholders. IFRS requires numerous and sometimes significant non-cash adjustments which can distort earnings and earnings per Fund unit in any reporting period. This has rendered these traditional earnings measurements virtually meaningless for income trusts.
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.
Due to these changes, the key metric for unitholders to assess the cash generated by the business during any reporting period is distributable cash. Future discussion will describe distributable cash, both before and after the SIFT tax, so that unitholders also have a basis for comparison of the distributable cash generated in prior periods.
The Fund (TSX:KEG.UN) is a limited purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, owns certain trademarks and other related intellectual property used by Keg Restaurants Ltd. ("KRL"). In exchange for use of those trademarks, Keg Restaurants Ltd pays the Fund a royalty of 4% of gross sales of Keg restaurants included in the royalty pool.
Vancouver-based KRL is the leading operator and franchisor of the steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steakhouses. KRL has been named one of the "50 Best Employers in Canada" for the past nine years by Aon Hewitt. For more information on our brand, visit www.kegsteakhouse.com.
This press release may contain certain "forward looking" statements reflecting The Keg Royalties Income Fund's current expectations in the casual dining segment of the restaurant food industry. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those relating to the Keg's ability to continue to realize historical same store sales growth, changes in market and existing competition, new competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in Canada.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of the prospectus, nor shall there be any sale of the Fund units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state, province or jurisdiction. The Keg Royalties Income Fund units have not been, and will not be registered under the U.S. Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an application for exemption from the registration requirement under U.S. securities laws.
The Trustees of the Fund have approved the contents of this press release.
For information contact:
Karyn Byrne, Investor Relations Manager