Not for distribution to U.S. News wire services or dissemination in the U.S.VANCOUVER, British Columbia, Feb. 27, 2020 (GLOBE NEWSWIRE) — The Keg Royalties Income Fund (the “Fund”) (TSX:KEG.UN) and Keg Restaurants Ltd. (“KRL”) are pleased to announce that as of January 1, 2020, an estimated $19,111,000 in annual net sales were added to the Royalty Pool. Five new restaurants that opened during the period from October 3, 2018 through October 2, 2019, with estimated gross sales of $34,000,000 annually, were added to the Royalty Pool. Four permanently closed restaurants with annual sales of $14,889,000 were removed from the Royalty Pool. The total number of restaurants in the Royalty Pool increased to 106. The pre-tax yield of the Fund units was determined to be 9.72%, calculated using a weighted average unit price of $16.42.
“The sales performance of the new Kegs, which will be added to the Fund’s Royalty Pool, has once again exceeded expectations,” said David Aisenstat, The Keg’s CEO. “We view this as a continued endorsement of the strength of The Keg brand, during what has been a challenging period for the Canadian restaurant industry in general. We are proud that The Keg has continued to maintain our performance levels.” The Fund indirectly owns certain trademarks and other related intellectual property used by KRL in both the operation and franchising of its Keg restaurants in Canada and the United States. The trademarks are licensed to KRL for 99 years and in return KRL pays the Fund a top-line royalty of 4% of gross sales of Keg restaurants included in the Royalty Pool.Annually on January 1st, the Fund’s Royalty Pool is adjusted to include the gross sales from new Keg restaurants that have opened on or before October 2nd of the prior year, after deducting the gross sales from any Keg restaurants that were permanently closed during the preceding calendar year. In return for adding these net sales to the Royalty Pool, KRL receives the right to indirectly acquire additional Fund units (the “Additional Entitlement”). This Additional Entitlement is determined based on 92.5% of the royalty revenue added to the Royalty Pool, divided by the annual pre-tax yield of the Fund units, divided by the weighted average unit price of the Fund units. KRL receives 80% of the estimated Additional Entitlement initially, with the balance determined and awarded when the actual full-year performance of the new restaurants is known with certainty retroactive to January 1st of that year.As a result of the contribution of the additional net sales to the Royalty Pool, and assuming 100% of the estimated Additional Entitlement is received, KRL’s Additional Entitlement will be equivalent to 443,015 Fund units, being 2.73% of the Fund units on a fully diluted basis.On January 1, 2020, KRL received 80% of this entitlement, representing the equivalent of 354,412 Fund units, being 2.20% of the Fund units on a fully diluted basis. KRL will also receive a proportionate increase in monthly distributions from the Partnership. Including the initial portion of the Additional Entitlement described above, KRL will have the right to exchange its units in the capital of the Partnership for 4,762,336 Fund units, representing 29.55% of the Fund units on a fully diluted basis.On December 25, 2019, but effective January 1, 2019, KRL received the remaining balance of the 2019 Additional Entitlement. The actual sales generated by the three new restaurants added to the Royalty Pool on January 1, 2019, were confirmed to be $17,290,000, approximately $1,290,000 or 8.1% more than the amount originally estimated. This resulted in KRL receiving an additional entitlement equivalent to 89,067 Fund units, and KRL having the right to exchange its units in the capital of the Partnership for 4,407,924 Fund units, representing 27.97% of the Fund units on a fully diluted basis. Combined with the January 1, 2020 Additional Entitlement, and assuming receipt of 100% of that Additional Entitlement, KRL will be entitled to the equivalent of 4,850,939 Fund units, representing 29.94% of the Fund units on a fully diluted basis.Management of KRL has advised the Trustees of the Fund that it expects to open two restaurants prior to October 2, 2020, consisting of one corporate and one franchise restaurant in Canada. Management of KRL has further advised the Trustees that the scheduled opening of these new restaurants is conditional upon the timely receipt of required municipal approvals and construction permits.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. KRL has been named one of the “50 Best Employers in Canada” by Aon Hewitt for the past seventeen years.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: Ryan Bullock, Chief Marketing Officer Tel: (416) 646-4960 www.kegincomefund.com
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