NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE U.S.
The Keg Royalties Income Fund (TSX:KEG.UN) (the "Fund") is pleased to announce
its financial results for the three and six months ended June 30, 2013.
The gross sales reported by the 102 Keg restaurants in the Royalty Pool were
$114,426,000 for the quarter, a decrease of $4,099,000 or 3.5% from the
comparable quarter of the prior year. Year to date gross sales decreased by
$4,136,000 or 1.7% to $238,755,000. The decrease in gross sales for both the
quarter and year to date was primarily due to the closure of three corporate
restaurants at the beginning of the year.
The Keg's same store sales (sales of restaurants that operated during the entire
period of both the current and prior years) decreased by 2.0% in Canada and
increased by 1.4% in the United States for the 13-week period ended June 30,
2013. For the 26-week period ended June 30, 2013, same store sales decreased by
1.0% in Canada and increased by 2.4% in the United States. After translating the
sales of the U.S. restaurants into their Canadian dollar equivalent,
consolidated same store sales decreased by 1.6% for the 13-week period and by
0.4% for the 26-week period. The average exchange rate moved from 0.97 to 1.01
in the comparable 13-week period, and from 0.98 to 1.01 in the comparable
26-week period, slightly increasing the Canadian dollar equivalent of the U.S.
restaurant sales.
Royalty income decreased by $48,000 or 1.0% from $4,741,000 in the three months
ended June 30, 2012 to $4,693,000 in the three months ended June 30, 2013. For
the six months ended June 30, 2013 royalty income increased by $26,000 or 0.3%
from $9,733,000 to $9,759,000.
Distributable cash before SIFT tax decreased by $53,000 from $3,492,000 (30.8
cents/Fund unit) to $3,439,000 (30.3 cents/Fund unit) for the quarter and by
$39,000 from $7,572,000 (66.7 cents/Fund unit) to $7,533,000 (66.3 cents/Fund
unit) for the six-month period. Distributable cash available to pay
distributions to public unitholders decreased by $100,000 from $2,643,000 (23.3
cents/Fund unit) to $2,543,000 (22.4 cents/Fund unit) for the quarter and by
$104,000 from $5,827,000 (51.3 cents/Fund unit) to $5,723,000 (50.4 cents/Fund
unit) year to date.
The Fund remains financially well-positioned with cash on hand of $859,000 and a
positive working capital balance of $2,096,000 as at June 30, 2013. The Fund's
payout ratio was 107.2% for the second quarter of 2013 and was 95.2% year to
date.
"We are very satisfied with our results for the second quarter, particularly
given the relatively weak economy and some extreme weather conditions which
negatively impacted sales in some regions during the quarter," said David
Aisenstat, President and CEO of Keg Restaurants Ltd. "The support and loyalty we
continue to enjoy from our guests has once again provided us with strong
results."
FINANCIAL HIGHLIGHTS
Apr. 1 Apr. 1 Jan. 1 Jan. 1
to Jun. to Jun. to Jun. to Jun.
30, 30, 30, 30,
($000's except per unit amounts) 2013 2012 2013 2012
---------------------------------------------------------------------------
Restaurants in the Royalty Pool 102 102 102 102
Gross sales reported by Keg
restaurants in the Royalty Pool $ 114,426 $ 118,525 $ 238,755 $ 242,891
---------------------------------------
Royalty income (1) $ 4,693 $ 4,741 $ 9,759 $ 9,733
Interest income (2) 1,067 1,066 2,123 2,133
---------------------------------------
Total income $ 5,760 $ 5,807 $ 11,882 $ 11,866
Administrative expenses (3) (91) (104) (190) (208)
Interest and financing expenses (4) (174) (174) (347) (348)
---------------------------------------
Operating income $ 5,495 $ 5,529 $ 11,345 $ 11,310
Distributions to KRL (5) (1,980) (1,989) (4,038) (4,030)
---------------------------------------
Profit (loss) before fair value
adjustment and taxes $ 3,515 $ 3,540 $ 7,307 $ 7,280
Fair value adjustment (7) 3,107 1,863 769 (3,708)
Taxes (8) (950) (862) (1,923) (1,809)
---------------------------------------
Profit (loss) $ 5,672 $ 4,541 $ 6,153 $ 1,763
---------------------------------------
Distributable cash before SIFT tax
(9) $ 3,439 $ 3,492 $ 7,533 $ 7,572
---------------------------------------
Distributable cash (10) $ 2,543 $ 2,643 $ 5,723 $ 5,827
---------------------------------------
Distributions paid to Fund
unitholders $ 2,725 $ 2,725 $ 5,450 $ 5,450
---------------------------------------
Payout Ratio (11) 107.2% 103.1% 95.2% 93.5%
---------------------------------------
Per Fund unit information (12)
Profit (loss) before market value
adjustment and income taxes $ .310 $ .312 $ .644 $ .641
---------------------------------------
Profit (loss) $ .500 $ .400 $ .542 $ .155
---------------------------------------
Distributable cash before SIFT tax
(9) $ .303 $ .308 $ .663 $ .667
---------------------------------------
Distributable cash (10) $ .224 $ .233 $ .504 $ .513
---------------------------------------
Distributions paid to Fund
unitholders $ .240 $ .240 $ .480 $ .480
---------------------------------------
SSSG (13)
Canada (2.0)% 1.3% (1.0)% 1.5%
United States 1.4% 1.6% 2.4% 1.4%
Consolidated (1.6)% 1.8% (0.4)% 1.8%
Restaurant Openings/Closings (14)
Opened 1 -- 1 --
Closed -- -- 3 --
Relocated -- -- -- --
Net Opened (Closed) 1 -- (2) --
Notes:
(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) Fair 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 fair
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) Taxes for the quarter ended June 30, 2013, include SIFT tax expense
of $896,000 (quarter ended June 30, 2012 - $849,000) and non-cash
deferred taxes of $54,000 (quarter ended March 31, 2012 - $13,000).
Taxes for the six months ended June 30, 2013 include SIFT tax expense
of $1,810,000 (six months ended June 30, 2012 - $1,745,000) and non-
cash deferred tax of $113,000 (six months ended June 30, 2012 -
$64,000). 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 consolidated
financial statements, including the effects of changes in non-cash
working capital, plus SIFT tax paid (including current year
instalments), less interest and financing fees paid on the term loan,
less the Partnership distributions 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 respective period. The weighted average
number of Fund units outstanding for the three months ended June 30,
2013 was 11,353,500 (three months ended June 30, 2012 - 11,353,500)
and for the six months ended June 30, 2013 was 11,353,500 (six months
ended June 30, 2012 - 11,353,500).
(13) Same Store Sales Growth ("SSSG") is the overall increase or decrease
in gross sales from Keg restaurants (that operated during the entire
period of both the current and the prior year) as compared to gross
sales for the same period of the prior year. SSSG is not an IFRS
financial measure and 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 SSSG
provides useful information regarding the increase or decrease in
gross sales for comparable restaurants.
(14) The number of restaurants added to the Royalty Pool each year may
differ from the number of restaurant openings and closings reported
by KRL on an annual basis, as the periods for which they are reported
differ slightly.
(15) The interim financial results for all periods presented herein have
not been audited.
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 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
The Keg Royalties Income Fund
Karyn Byrne
Investor Relations
(416) 646-4960
karynb@kegrestaurants.com
www.kegincomefund.com
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