VANCOUVER, BRITISH COLUMBIA -- The Keg Royalties Income Fund (the "Fund")(TSX:KEG.UN) has reported its financial results for the three and six months ended June 30, 2007. Gross sales and same stores sales reported by Keg Restaurants Ltd. ("KRL"), royalty income, earnings before income taxes, and distributable cash all increased from the comparable period of the prior year.
As previously announced, gross sales reported by Keg restaurants in the Royalty Pool increased by $12,718,000 or 14.4% to $100,984,000 during the quarter and by $24,000,000 or 13.2% to $206,224,000 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 11.0% in Canada and by 5.9% in the United States for the 13-week period ended July 1, 2007, and by 9.5% in Canada and by 4.6% in the U.S. for the 26-week period ended July 1, 2007. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales increased by 9.7% for the 13-week period and by 8.6% for the 26-week period, despite the continuing negative effect of the exchange rate between Canadian and US dollars.
"We are exceptionally pleased with our continued positive sales results at The Keg," said David Aisenstat, President and CEO of Keg Restaurants Ltd. "Both same store sales at existing locations and very successful new Kegs are contributing to our continued growth both in Canada and the U.S. This adds strength and value to The Keg brand, and translates into consistent distributions for the Fund's unitholders."
Royalty income increased by $546,000 or 15.3% to $4,110,000 for the quarter and by $1,045,000 or 14.3% to $8,370,000 year to date, as a result of the increase in gross sales.
Earnings before income taxes increased by 10.2% to 31.2 cents/Fund unit from 28.3 cents/Fund unit during the quarter and by 8.3% to 64.0 cents/Fund unit from 59.1 cents/Fund unit year to date. Distributable cash available to pay distributions to Fund unitholders increased by 9.9% to 31.2 cents/Fund unit from 28.4 cents/Fund unit for the quarter, and by 8.1% to 64.1 cents/Fund unit from 59.3 cents/Fund unit year to date. The Fund declared distributions of 29.7 cents/Fund unit during the quarter and 49.4 cents/Fund unit year to date.
On June 12, 2007, the Canadian federal government's legislation to tax publicly traded income trusts passed third reading in the House of Commons and thus the associated income tax became substantively enacted for accounting purposes. The legislation imposes a tax of 31.5% on distributions from Canadian public income trusts. The new tax is not expected to apply to the Fund until January 1, 2011 as a transition period applies to publicly traded trusts that existed prior to November 1, 2006. Historically, the Fund has been exempt from recognizing future income tax assets and liabilities associated with temporary differences arising in the Fund and its equity accounted investment, The Keg Rights Limited Partnership. As a result of the substantive enactment of the new tax legislation, the Fund was required to give accounting recognition to these new rules and recognized a future income tax expense, and corresponding liability, of $1,775,000 during the quarter. Future income tax expense is a non-cash item that does not affect cash flow.
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.
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 five years by the Globe and Mail's Report on Business Magazine. 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 further information:
Karyn Byrne, Investor Relations Manager
Tel: (416) 646-4960, email@example.com
For more information on our brand, visit www.kegsteakhouse.com