Vancouver, November 7, 2006 – The Keg Royalties Income Fund (the “Fund”) today reported its third quarter financial results for the three and nine months ended September 30, 2006. Gross sales and same stores sales reported by Keg Restaurants Ltd. (“KRL”), royalty income, earnings, and distributable cash all increased from the comparable quarter of the prior year.
Gross sales reported by Keg restaurants in the Royalty Pool increased by $11,687,000 or 14.6% to $91,564,000 during the quarter and by $33,288,000 or 13.8% to $273,788,000 year to date. The increase in gross sales reflects the net impact of the addition of net new sales to the Royalty Pool at the beginning of the year and an increase in same store sales.
KRL’s same store sales (sales of restaurants that operated during the entire period of both the current and prior years) increased by 8.9% in Canada and by 7.1% in the United States for the 13-week period ended October 1, 2006, and by 8.1% in Canada and by 7.0% in the U.S. for the 39-week period ended October 1, 2006. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales increased by 7.3% for the comparable 13-week period, and by 6.4% for the comparable 39-week period, despite of the continuing negative effect of the exchange rate between Canadian and US dollars.
Royalty income increased by $507,000 or 15.7% to $3,734,000 for the quarter, and by $1,371,000 or 14.2% to $11,059,000 year to date, as a result of the increase in gross sales.
Earnings increased by 6.3% to 28.8 cents/Fund unit from 27.1 cents/Fund unit during the quarter and by 6.3% to 87.9 cents/Fund unit from 82.7 cents/Fund unit year to date. Distributable cash available to pay distributions to Fund unitholders increased by 6.3% to 28.9 cents/Fund unit from 27.2 cents/Fund unit for the quarter, and by 6.3% to 88.1 cents/Fund unit from 82.9 cents/Fund unit year to date.
“We are extremely pleased with these results,” said David Aisenstat, President and CEO of Keg Restaurants Ltd. “We have once again delivered record sales which have led to continued growth in both earnings and distributable cash for the Fund. The Keg brand has never been stronger in its thirty-five year history.” The Fund declared distributions of 28.3 cents/Fund unit during the quarter and 75.4 cents/Fund unit during the first nine months of 2006.
On October 31, 2006, The Federal Department of Finance announced a new Distribution Tax on publicly traded income trusts. “We are very disappointed with the government’s shameless and sudden about face on its tax treatment of income trusts, and are extremely unhappy with the impact that this has had on our unitholders,” said Mr. Aisenstat. “That having been said, The Keg will remain focused on running great steakhouses and bars, and increasing sales at both new locations and our existing restaurants.”
A copy of the complete financial results will be available at www.sedar.com or on the Fund’s website at www.kegincomefund.com.
The Keg Royalties Income 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, KRL pays the Fund a royalty of 4% of gross sales of Keg restaurants included in the royalty pool. Vancouver-based Keg Restaurants Ltd. 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. For more information on Keg Restaurants Ltd. visit www.kegsteakhouse.com.
Vancouver-based Keg Restaurants Ltd. is the leading operator and franchisor of 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. Keg Restaurants Ltd. has been named one of the “50 Best Employers in Canada” for the past four years by the Globe and Mail’s Report on Business Magazine.
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 further information:
Karyn Byrne, Investor Relations Manager
Tel: (416) 646-4960,
For more information on our brand, visit www.kegsteakhouse.com