Vancouver, BC -- The Keg Royalties Income Fund (TSX:KEG.UN) (the "Fund") is pleased to announce its financial results for the three and nine months ended September 30, 2011.
The gross sales reported by the 102 Keg restaurants in the Royalty Pool were $117,125,000 for the quarter, an increase of $6,743,000 or 6.1% from the comparable quarter of the prior year. The year-to-date gross sales increased by $11,657,000 or 3.4% to $350,145,000. Same store sales growth increases were the principal driver of the increases.
The Keg's same store sales (sales of restaurants that operated during the entire period of both the current and prior years) increased by 5.2% in Canada and by 3.6% in the United States for the 13-week period ended October 2, 2011. For the 39 week period ended October 2, 2011, same store sales increased by 3.6% in Canada and by 3.5% in the United States. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales increased by 4.5% for the 13-week period and by 3.0% for the 39-week period. The exchange rate from US dollars to Canadian dollars declined materially from the same periods last year and this decline offset a portion of the same store sales growth.
Royalty income increased by $259,000 or 5.7% from $4,527,000 in the three months ended September 30, 2010 to $4,786,000 in the three months ended September 30, 2011. For the nine months ended September 30, 2011 royalty income increased by $519,000 or 3.8% from $13,725,000 to $14,244,000. The Fund remains financially well positioned with surplus cash on hand of $3,198,000 and a positive working capital balance of $1,772,000 as of September 30, 2011.
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. 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 $277,000 from $3,206,000 (30.2 cents/Fund unit) to $3,483,000 (30.7 cents/Fund unit) for the quarter and by $967,000 from $9,808,000 (95.4 cents/Fund unit) to $10,775,000 (95.8 cents/Fund unit) for the nine-month period. Because the Fund is now required to deduct SIFT taxes prior to distributing earnings to Unitholders, distributable cash available to pay distributions to public unitholders decreased from $3,206,000 (30.2 cents/Fund unit) to $2,579,000 (22.7 cents/Fund unit) for the quarter and by $1,725,000 from $9,808,000 (95.4 cents/Fund unit) to $8,083,000 (71.9 cents/Fund unit) year to date. The decreases in distributable cash available to pay distributions to public unitholders were solely as a result of the SIFT tax.
"We are very pleased with The Keg Royalties Income Fund's third quarter results," said David Aisenstat, President and CEO of Keg Restaurants Ltd. "The strength of The Keg's brand and the focus the restaurants have on providing exceptional and consistent guest experiences, have once again served KRIF and its unitholders well."
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 ten 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.
The Keg Royalties Income Fund
Investor Relations Manager