The Keg Royalties Income Fund Announces First Quarter 2014 Financial Results
May 15 2014 - 4:18PM
Marketwired Canada
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S.
The Keg Royalties Income Fund (TSX:KEG.UN) (the "Fund") has reported its
financial results for the three months ended March 31, 2014.
The gross sales reported by the 103 Keg restaurants in the Royalty Pool were
$134,760,000 for the quarter, an increase of $10,431,000 or 8.4% from the
comparable quarter of the prior year. The increase in Royalty Pool sales during
the quarter reflect the sales of the new Keg restaurants opened during the
period from October 3, 2012 to October 3, 2013, which were added to the Royalty
Pool on January 1, 2014, and same store sales increases of 4.2% for the quarter.
The Keg's same store sales (sales of restaurants that operated during the entire
13-week period of both the current and prior years) increased by 3.3% in Canada
and by 2.7% in the United States. After translating the sales of the U.S.
restaurants into their Canadian dollar equivalent, consolidated same store sales
for the comparable 13-week periods increased 4.2%. The average exchange rate
moved from 1.008 in the first quarter of 2013 to 1.099 in the first quarter of
2014, significantly increasing the Canadian dollar equivalent of the U.S.
restaurant sales.
Royalty income increased by $325,000 or 6.4% from $5,066,000 in the three months
ended March 31, 2013 to $5,391,000 in the three months ended March 31, 2014.
Distributable cash before SIFT tax increased by $5,000 from $4,094,000 (36.1
cents/Fund unit) to $4,099,000 (36.1 cents/Fund unit) for the quarter.
Distributable cash available to pay distributions to public unitholders
decreased from $3,180,000 (28.0 cents/Fund unit) to $3,094,000 (27.3 cents/Fund
unit) during the comparable quarter. Distributions of $2,725,000 (24.0
cents/Fund unit) were paid to Fund unitholders in both the first quarter of 2014
and 2013.
The Fund remains financially well positioned with surplus cash on hand of
$1,298,000 and a positive working capital balance of $2,363,000 as of March 31,
2014.
"We are very pleased with the same store sales growth generated during the
quarter," said David Aisenstat, President and CEO of Keg Restaurants Ltd. "Same
store sales growth is the largest driver of increases to royalty income and
ultimately to increases in cash available for distribution to the Fund's
unitholders."
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Jan. 1 Jan. 1
to Mar. 31, to Mar. 31,
($000's except per unit amounts) 2014 2013
---------------------------------------------------------------------------
Restaurants in the Royalty Pool 103 102
Gross sales reported by restaurants in the
Royalty Pool $ 134,760 $ 124,32
-------------------------------
Royalty income (1) $ 5,391 $ 5,066
Interest income (2) 1,055 1,055
-------------------------------
Total income $ 6,446 $ 6,121
Administrative expenses (3) (92) (100)
Interest and financing expenses (4) (153) (171)
-------------------------------
Operating income $ 6,201 $ 5,850
Distributions to KRL (5) (2,216) (2,058)
-------------------------------
Profit (loss) before fair value adjustment
and taxes $ 3,985 $ 3,792
Fair value adjustment (6) 266 (2,338)
Taxes (7) (1,053) (973)
-------------------------------
Profit (loss) and comprehensive income
(loss) $ 3,198 $ 481
-------------------------------
Distributable cash before SIFT tax (8) $ 4,099 $ 4,094
-------------------------------
Distributable cash (9) $ 3,094 $ 3,180
-------------------------------
Distributions paid to Fund unitholders $ 2,725 $ 2,725
-------------------------------
Payout Ratio (10) 88.1% 85.7%
-------------------------------
Per Fund unit information (11)Profit (loss)
before fair value adjustment and taxes $ .351 $ .334
-------------------------------
Profit (loss) and comprehensive income
(loss) $ .282 $ .042
-------------------------------
Distributable cash before SIFT tax (8) $ .361 $ .361
-------------------------------
Distributable cash (9) $ .273 $ .280
-------------------------------
Distributions paid to Fund unitholders $ .240 $ .240
-------------------------------
Notes:
(1)
The
Fund,
indire
ctly
throug
h the
Partne
rship,
earns
royalt
y
income
equal
to 4%
of
gross
sales
of Keg
restau
rants
in the
Royalt
y
Pool.
(2)
The
Fund
direct
ly
earns
intere
st
income
on the
$57.0
millio
n Keg
Loan,
with
intere
st
income
accrui
ng at
7.5%
per
annum,
payabl
e
monthl
y.
(3)
The
Fund,
indire
ctly
throug
h the
Partne
rship,
incurs
admini
strati
ve
expens
es and
intere
st on
the
operat
ing
line
of
credit
, to
the
extent
utiliz
ed.
(4)
The
Fund,
indire
ctly
throug
h the
Trust,
incurs
intere
st
expens
e on
the
$14.0
millio
n term
loan
and
amorti
zation
of
deferr
ed
financ
ing
charge
s.
(5)
Repres
ents
the
distri
bution
s of
the
Partne
rship
attrib
utable
to KRL
during
the
respec
tive
period
s on
the
Exchan
geable
and
Class
C
units
held
by
KRL.
The
Class
A,
entitl
ed
Class
B and
Class
D
Partne
rship
units
are
exchan
geable
into
Fund
units
on a
one-
for-
one
basis
("Exch
angeab
le
units"
).
These
distri
bution
s are
presen
ted as
intere
st
expens
e in
the
financ
ial
statem
ents.
(6)
Fair
value
adjust
ment
is the
non-
cash
increa
se or
decrea
se in
the
market
value
of the
Exchan
geable
units
held
by KRL
during
the
respec
tive
period
.
Exchan
geable
units
are
classi
fied
as a
financ
ial
liabil
ity
under
IFRS.
The
Fund
is
requir
ed to
determ
ine
the
fair
value
of
that
liabil
ity at
the
end of
each
report
ing
period
and
adjust
for
any
increa
se or
decrea
se,
taking
into
consid
eratio
n the
sale
of any
Exchan
geable
units
and
additi
onal
entitl
ements
during
the
same
period
.
(7)
Taxes
for
the
quarte
r
ended
March
31,
2014,
includ
e SIFT
tax
expens
e of
$1,005
,000
(quart
er
ended
March
31,
2013 -
$914,0
00)
and
non-
cash
deferr
ed
taxes
of
$48,00
0
(quart
er
ended
March
31,
2013 -
$59,00
0).
(8)
Distri
butabl
e cash
before
SIFT
tax is
define
d as
the
period
ic
cash
flows
from
operat
ing
activi
ties
as
report
ed in
the
IFRS
consol
idated
financ
ial
statem
ents,
includ
ing
the
effect
s of
change
s in
non-
cash
workin
g
capita
l,
plus
SIFT
tax
paid
(inclu
ding
curren
t year
instal
ments)
, less
intere
st and
financ
ing
fees
paid
on the
term
loan,
less
the
Partne
rship
distri
bution
s
attrib
utable
to KRL
throug
h its
owners
hip of
Exchan
geable
units.
Distri
butabl
e cash
before
SIFT
tax is
a non-
IFRS
financ
ial
measur
e that
does
not
have a
standa
rdized
meanin
g
prescr
ibed
by
IFRS,
and
theref
ore
may
not be
compar
able
to
simila
r
measur
es
presen
ted by
other
issuer
s.
(9)
Distri
butabl
e cash
is the
amount
of
cash
availa
ble
for
distri
bution
to the
Fund's
public
unitho
lders
and is
calcul
ated
as
distri
butabl
e cash
before
SIFT
tax,
less
curren
t year
SIFT
tax
expens
e.
Distri
butabl
e cash
is a
non-
IFRS
financ
ial
measur
e that
does
not
have a
standa
rdized
meanin
g
prescr
ibed
by
IFRS,
and
theref
ore
may
not be
compar
able
to
simila
r
measur
es
presen
ted by
other
issuer
s.
Howeve
r, the
Fund
believ
es
that
distri
butabl
e
cash,
both
before
and
after
SIFT
tax,
provid
es
useful
inform
ation
regard
ing
the
amount
of
cash
availa
ble
for
distri
bution
to the
Fund's
public
unitho
lders.
(10)
Payout
ratio
is
comput
ed as
the
ratio
of
aggreg
ate
cash
distri
bution
s paid
during
the
period
(numer
ator)
to the
aggreg
ate
distri
butabl
e cash
of the
period
(denom
inator
).
(11)
All
per
unit
amount
s are
calcul
ated
based
on the
weight
ed
averag
e
number
of
Fund
units
outsta
nding,
which
are
those
units
held
by
public
unitho
lders
during
the
respec
tive
period
. The
weight
ed
averag
e
number
of
Fund
units
outsta
nding
for
the
three
months
ended
March
31,
2014
was
11,353
,500
(three
months
ended
March
31,
2013 -
11,353
,500).
(12)
The
interi
m
financ
ial
result
s for
all
period
s
presen
ted
herein
have
not
been
audite
d.
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,
KRL 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 twelve 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
Ryan Bullock
Director of Marketing
(416) 646-4960
ryan.bullock@kegrestaurants.com
www.kegincomefund.com
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