The Keg Royalties Income Fund
TSX : KEG.UN

The Keg Royalties Income Fund

November 17, 2008 07:00 ET

The Keg Royalties Income Fund Posts Record Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 17, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S.

The Keg Royalties Income Fund (the "Fund") (TSX:KEG.UN) has reported its financial results for the three and nine months ended September 30, 2008.

As previously announced, gross sales reported by Keg restaurants in the Royalty Pool increased by $5,041,000 or 4.9% to $108,035,000 during the quarter and by $18,057,000 or 5.8% to $327,275,000 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 1.1% in Canada and declined by 8.3% in the United States for the 13-week period ended September 28, 2008, and increased by 3.9% in Canada and declined by 6.6% in the U.S. for the 39-week period ended September 28, 2008. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales were flat for the 13-week period and increased by 1.9% for the 39-week period, despite the continuing negative effect of the exchange rate between Canadian and US dollars.

"We are very pleased with our third quarter results, particularly in light of the current economic slowdown," said David Aisenstat, President and CEO of The Keg. "Consumer spending has clearly tightened and, along with the rest of the casual dining industry, we have felt the impact of this in our US locations. So far in Canada, we believe the strength of our brand and consistency of the Keg experience in the eyes of our guests has allowed us to continue to grow not only total system sales, but same store sales as well."

Royalty income increased by $172,000 or 4.1% to $4,383,000 for the quarter, and by $624,000 or 5.0% to $13,205,000 year to date, as a result of increased gross sales.

Earnings before income taxes increased by 3.9% to 31.6 cents/Fund unit from 30.4 cents/Fund unit during the quarter, and by 2.2% to 96.4 cents/Fund unit from 94.3 cents/Fund unit year to date.

Distributable cash available to pay distributions to Fund unitholders decreased by 1.8% to 32.2 cents/Fund unit from 32.8 cents/Fund unit for the quarter entirely due to changes in working capital, but remained unchanged at 96.7 cents/Fund unit year to date. The Fund has paid distributions of 32.0 cents/Fund unit during the quarter, and 95.3 cents/Fund unit year to date.



FINANCIAL HIGHLIGHTS

---------------------------------------------------------------------------
---------------------------------------------------------------------------
Jul. 1 to Jul.1 to Jan.1 to Jan.1 to
($000's except per Sept. 30, Sept. 30, Sept. 30, Sept. 30,
unit amounts) 2008 2007 2008 2007
---------------------------------------------------------------------------

Restaurants in the
Royalty Pool 96 95 96 95

Gross sales reported
by Keg restaurants
in the Royalty Pool $ 108,035 $ 102,994 $ 327,275 $ 309,218
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Royalty income $ 4,383 $ 4,211 $ 13,205 $ 12,581

Partnership expenses (93) (97) (273) (292)
----------- ----------- ----------- -----------

Partnership earnings 4,290 4,114 12,932 12,289

KRL's interest (2,118) (2,016) (6,208) (5,776)
----------- ----------- ----------- -----------

Equity income 2,172 2,098 6,724 6,513

Interest income 1,084 1,090 3,236 3,226
----------- ----------- ----------- -----------

Total income 3,256 3,188 9,960 9,739

Interest and
financing expenses (190) (242) (602) (702)
----------- ----------- ----------- -----------

Earnings before
income taxes $ 3,066 $ 2,946 $ 9,358 $ 9,037
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Net earnings $ 3,066 $ 2,871 $ 9,508 $ 7,187
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Distributable cash $ 3,120 $ 3,183 $ 9,384 $ 9,258
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Distributions paid $ 3,100 $ 2,937 $ 9,242 $ 8,500
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Earnings before
income taxes per
Fund unit(1) $ .316 $ .304 $ .964 $ .943
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Earnings per Fund
unit(1) $ .316 $ .296 $ .980 $ .750
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Distributable cash
per Fund unit(1) $ .322 $ .328 $ .967 $ .967
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Distributions paid
per Fund unit(2) $ .320 $ .303 $ .953 $ .887
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Payout Ratio(1) 99.4% 92.3% 98.5% 91.8%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

(1) 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.

(2) Net earnings for the three months ended September 30, 2008, reflect
the non-cash future income tax expense of nil, and for the nine months
ended September 30, 2008, reflect the non-cash future income tax
recovery of $150,000.


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 six 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.

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