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, 2012.
The gross sales reported by the 102 Keg restaurants in the Royalty Pool were $119,285,000 for the quarter, an increase of $2,160,000 or 1.8% from the comparable quarter of the prior year. Year to date gross sales increased by $12,031,000 or 3.4% to $362,176,000.
The Keg's same store sales (sales of restaurants that operated during the entire period of both the current and prior years) decreased by 0.7% in Canada and by 0.8% in the United States for the 13-week period ended September 30, 2012. For the 39-week period ended September 30, 2012, same store sales increased by 0.8% in Canada and by 0.7% in the United States. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales decreased by 0.6% for the 13-week period and increased by 1.0% for the 39-week period. The average exchange rate moved from 0.98 to 0.99 in the comparable 13-week period, and from 0.98 to 1.00 in the comparable 39-week period, slightly increasing the Canadian dollar equivalent of the U.S. restaurant sales.
Royalty income decreased by $14,000 or 0.3% from $4,786,000 in the three months ended September 30, 2011 to $4,772,000 in the three months ended September 30, 2012. For the nine months ended September 30, 2012 royalty income increased by $261,000 or 1.8% from $14,244,000 to $14,505,000. Distributable cash before SIFT tax increased by $155,000 from $3,483,000 (30.7 cents/Fund unit) to $3,638,000 (32.0 cents/Fund unit) for the quarter and by $434,000 from $10,776,000 (95.8 cents/Fund unit) to $11,210,000 (98.7 cents/Fund unit) for the nine-month period. Distributable cash available to pay distributions to public unitholders increased by $205,000 from $2,579,000 (22.7 cents/Fund unit) to $2,784,000 (24.5 cents/Fund unit) for the quarter and by $527,000 from $8,084,000 (71.9 cents/Fund unit) to $8,611,000 (75.8 cents/Fund unit) year to date.
The Fund remains financially well-positioned with cash on hand of $560,000 and a positive working capital balance of $1,955,000 as at September 30, 2012. The Fund's payout ratio was 97.9% for the third quarter of 2012 and was 94.9% year to date.
"We are pleased that we have continued to grow both Royalty Pool sales and Distributable Cash once again this quarter," said David Aisenstat, President and CEO of The Keg. "These are important measures to our unitholders and our results are a good indication that The Keg guests enjoy the experience we provide in our restaurants."
(1) The Fund, indirectly through the Partnership, earns royalty income equal to 4% of gross sales of Keg restaurants in the Royalty Pool.
(2) The Fund directly earns interest income on the $57.0 million Keg Loan, with interest income accruing at 7.5% per annum, payable monthly.
(3) The Fund, indirectly through the Partnership, incurs administrative expenses and interest on the operating line of credit, to the extent utilized.
(4) The Fund, indirectly through the Trust, incurs interest expense on the $14.0 million term loan and amortization of deferred financing charges.
(5) Represents the distributions of the Partnership attributable to KRL during the respective periods on the Exchangeable and Class C units held by KRL. The Class A, entitled Class B and Class D Partnership units are exchangeable into Fund units on a one-for-one basis ("Exchangeable units"). These distributions are presented as interest expense in the financial statements.
(6) Represents the distributions declared on the publicly traded Fund units during the period. The distributions declared to the Fund's public unitholders since January 1, 2011 have been recorded as distributions and charged to unitholder's equity whereas the distributions declared prior to December 31, 2010 were expensed as interest.
(7) Market value adjustment is the non-cash increase or decrease in the market value of the Exchangeable units held by KRL during the respective period. Exchangeable units are classified as a financial liability under IFRS. The Fund is required to determine the market value of that liability at the end of each reporting period and adjust for any increase or decrease, taking into consideration the sale of any Exchangeable units during the same period.
(8) Income taxes for the quarter ended September 30, 2012, include SIFT tax expense of $854,000 (quarter ended September 30, 2011 - $904,000) and non-cash deferred taxes of $22,000 (quarter ended September 30, 2011 - $32,000). Income taxes for the nine months ended September 30, 2012 include SIFT tax expense of $2,599,000 (nine months ended September 30, 2011 - $2,692,000) and non-cash deferred taxes of $86,000 (nine months ended September 30, 2011 - $254,000). The obligation to pay SIFT tax came into effect on January 1, 2011.
(9) Distributable cash before SIFT tax, is defined as the periodic cash flows from operating activities as reported in the IFRS financial statements, including the effects of changes in non-cash working capital, plus SIFT tax paid (including current year instalments), less the earnings of the Partnership attributable to KRL through its ownership of Exchangeable units. Distributable cash before SIFT tax is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS, and therefore may not be comparable to similar measures presented by other issuers.
(10) Distributable cash is the amount of cash available for distribution to the Fund's public unitholders and is calculated as distributable cash before SIFT tax, less current year SIFT tax expense. Distributable cash is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS, and therefore may not be comparable to similar measures presented by other issuers. However, the Fund believes that distributable cash, both before and after SIFT tax, provides useful information regarding the amount of cash available for distribution to the Fund's public unitholders.
(11) Payout ratio is computed as the ratio of aggregate cash distributions paid during the period (numerator) to the aggregate distributable cash of the period (denominator).
(12) All per unit amounts are calculated based on the weighted average number of Fund units outstanding, which are those units held by public unitholders during the respect