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 twelve months ended December 31, 2013.
The gross sales reported by the 102 Keg restaurants in the Royalty Pool were
$120,093,000 for the quarter, a decrease of $2,299,000 or 1.9% from the
comparable quarter of the prior year. For the year, gross sales were
$474,864,000, a decrease of $9,704,000 or 2.0% over the prior year. These gross
sales reflect the closure of four corporate restaurants in the current year, and
a same store sales increase of 0.04% for the quarter and a same store sales
decrease of 0.3% for 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 0.6% in Canada and
increased by 0.3% in the United States ("U.S.") for the 13-week period ended
December 29, 2013. For the 52-week period ended December 29, 2013, same store
sales decreased by 0.8% in Canada and increased by 1.5% in the U.S. After
translating the sales of the U.S. restaurants into their Canadian dollar
equivalent, consolidated same store sales increased by 0.04% for the 13-week
period and decreased by 0.3% for the 52-week period. The average exchange rate
moved from 0.99 to 1.05 in the comparable 13-week period, significantly
increasing the Canadian dollar equivalent of the U.S. restaurant sales, and from
1.00 to 1.03 in the comparable 52-week period, somewhat increasing the Canadian
dollar equivalent of the U.S. restaurant sales.
Royalty income increased by $65,000 or 1.3% from $4,896,000 in the three months
ended December 31, 2012 to $4,961,000 in the three months ended December 31,
2013. For the year ended December 31, 2013, royalty income increased by $95,000
or 0.5% from $19,401,000 to $19,496,000. Distributable cash before SIFT tax
increased by $17,000 from $3,441,000 (30.3 cents/Fund unit) to $3,458,000 (30.5
cents/Fund unit) for the quarter, but decreased by $9,000 from $14,650,000
($1.290/Fund unit) to $14,641,000 ($1.290/Fund unit) for the year. Distributable
cash available to pay distributions to public unitholders decreased by $24,000
from $2,558,000 (22.5 cents/Fund unit) to $2,534,000 (22.3 cents/Fund unit) for
the quarter and by $144,000 from $11,168,000 (98.4 cents/Fund unit) to
$11,024,000 (97.1 cents/Fund unit) for the year. The decrease in distributable
cash for both the quarter and the year was primarily due to the increase in the
SIFT tax rate on April 1, 2013.
The Fund remains financially well-positioned with cash on hand of $798,000 and a
positive working capital balance of $1,198,000 as at December 31, 2013. The
Fund's payout ratio was 107.5% for the fourth quarter of 2013 and was 98.9% for
the year.
"We are pleased that the Fund has had another strong year in 2013," said David
Aisenstat, President and CEO of The Keg. "Our results are a clear indication
that the Keg guests continue to enjoy the experience we provide in our
restaurants."
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
Oct. 1 Oct. 1 Jan. 1 Jan. 1
($000's except per unit to Dec. 31, to Dec. 31, to Dec. 31, to Dec. 31,
amounts) 2013 2012 2013 2012
---------------------------------------------------------------------------
Restaurants in the Royalty
Pool 102 102 102 102
Gross sales reported by Keg
restaurants in the Royalty
Pool $ 120,093 $ 122,392 $ 474,864 $ 484,568
---------- ---------- ---------- ----------
Royalty income (1) $ 4,961 $ 4,896 $ 19,496 $ 19,401
Interest income (2) 1,078 1,075 4,279 4,282
---------- ---------- ---------- ----------
Total income $ 6,039 $ 5,971 $ 23,775 $ 23,683
Administrative expenses (3) (114) (86) (422) (398)
Interest and financing
expenses (4) (161) (176) (681) (705)
---------- ---------- ---------- ----------
Operating income $ 5,764 $ 5,709 $ 22,672 $ 22,580
Distributions to KRL (5) (2,039) (2,030) (8,072) (8,057)
---------- ---------- ---------- ----------
Profit before fair value
adjustment and taxes $ 3,725 $ 3,679 $ 14,600 $ 14,523
Fair value adjustment (6) (4,231) (152) (5,740) (5,338)
Taxes (7) (973) (914) (3,800) (3,599)
---------- ---------- ---------- ----------
Profit (loss) $ (1,479) $ 2,613 $ 5,060 $ 5,586
---------- ---------- ---------- ----------
Distributable cash before
SIFT tax (8) $ 3,458 $ 3,441 $ 14,641 $ 14,650
---------- ---------- ---------- ----------
Distributable cash (9) $ 2,534 $ 2,558 $ 11,024 $ 11,168
---------- ---------- ---------- ----------
Distributions paid to Fund
unitholders $ 2,725 $ 2,725 $ 10,899 $ 10,899
---------- ---------- ---------- ----------
Payout Ratio (10) 107.5% 106.5% 98.9% 97.6%
---------- ---------- ---------- ----------
Per Fund unit information
(11)
Profit before fair value
adjustment and income
taxes $ .328 $ .324 $ 1.286 $ 1.279
---------- ---------- ---------- ----------
Profit (loss) $ (.130) $ .230 $ .446 $ .492
---------- ---------- ---------- ----------
Distributable cash before
SIFT tax (8) $ .305 $ .303 $ 1.290 $ 1.290
---------- ---------- ---------- ----------
Distributable cash (9) $ .223 $ .225 $ .971 $ .984
---------- ---------- ---------- ----------
Distributions paid to Fund
unitholders $ .240 $ .240 $ .960 $ .960
---------- ---------- ---------- ----------
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) 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.
(7) Taxes for the quarter ended December 31, 2013, include SIFT tax
expense of $924,000 (quarter ended December 31, 2012 - $883,000)
and non-cash deferred taxes of $49,000 (quarter ended December
31, 2012 - $31,000). Taxes for the year ended December 31, 2013
include SIFT tax expense of $3,617,000 (year ended December 31,
2012 - $3,482,000) and non-cash deferred tax of $183,000 (year
ended December 31, 2012 - $117,000). The obligation to pay SIFT
tax came into effect on January 1, 2011.
(8) 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.
(9) 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.
(10) 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).
(11) 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 December 31, 2013 was 11,353,500 (three months ended
December 31, 2012 - 11,353,500) and for the year ended December
31, 2013 was 11,353,500 (year ended December 31, 2012 -
11,353,500).
(12) 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.
(13) 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.
(14) 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, K
RL 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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