SIR Royalty Income Fund announces SIR Corp. fiscal 2010 first quarter results

BURLINGTON , ON, Dec. 21 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) ("the Fund") today announced that SIR Corp. ("SIR") the operating entity from which the Fund derives distribution income and interest income, has filed its financial results for the 12-week period ("Q1 2010") ended November 22, 2009 .

Financial Highlights

SIR has advised the Fund that revenue for the first quarter of fiscal 2010 declined 1.0% to $44.6 million compared to $45.1 million in Q1 2009. The decrease reflect same store sales(1) ("SSS") decline for Royalty Pooled Restaurants of 3.7% compared to SSS decline of 0.5% for the same period in 2009. Management believes that the weak economic environment that affected Ontario throughout 2009 led to less discretionary spending by consumers on food and entertainment. Although all of the Royalty Pooled Restaurants experienced SSS decline, management believes that SIR's flagship Concept Restaurant, Jack Astor's(R) which represents approximately 68% of year-to-date Pooled Revenue may have been less affected due to its relative lower average cheque. As illustrated by the table below, SSS declined 2.5% at Jack Astor's while Canyon Creek(R) declined 5.7%, Alice Fazooli's(R) declined 5.2%, and the downtown Signature restaurants declined 7.9% for the 12-week period ended November 22, 2009 .

    
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                                                    First Quarter
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                                          12-weeks ended     12-weeks ended
                                        November 22, 2009  November 23, 2008
    SSS                                    (unaudited)        (unaudited)
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    Jack Astor's                                    (2.5%)              2.0%
    Canyon Creek Chop House                         (5.7%)             (5.5%)
    Alice Fazooli's                                 (5.2%)             (2.9%)
    Signature Restaurants                           (7.9%)             (4.0%)
    Overall SSS                                     (3.7%)             (0.5%)
    -------------------------------------------------------------------------
    

SIR's net loss for Q1 2010 of $0.6 million was a $1.5 million improvement over the Q1 2009 net loss of $2.2 million . This was achieved by prudent management of restaurant and corporate costs during the current weak economic conditions, as well as a small unrealized foreign exchange gain of $0.04 million compared to a foreign exchange loss of $0.5 million in Q1 2009.

For the 12-week period ended November 22, 2009 , net cash provided by operations totaled $2.9 million compared to $2.5 million in Q1 2009. SIR's cash used in investing activities of $0.4 million in Q1 2010 was substantially lower than the same period in 2009 of $4.3 million when two new Jack Astor's restaurants were opened; one near the corner of Don Mills Road and Lawrence Avenue in Toronto , Ontario, and another at the corner of Yonge and Bloor Streets, one of Toronto's busiest and most highly-visible locations.

SIR Corporate Developments

As previously announced, in response to the weak economic environment, SIR determined that the most prudent course of action was to slow its new restaurant development plans. SIR currently has 45 restaurants open in Canada and since the Fund's Initial Public Offering in October 2004 , SIR has opened fourteen new restaurants to date. Going forward, SIR has secured three additional sites, one with a planned opening in calendar 2010 and two with planned openings in calendar 2011. However, management will continue to evaluate the economic environment as well as consumer confidence and adjust its construction and opening schedules accordingly. In addition, SIR will continue to review cost savings initiatives and undertake cash preservation strategies while maintaining focused on providing restaurant guests with excellence and innovation in their dining experiences.

Liquidity and Capital Resources

As at November 22, 2009 , SIR had cash and cash equivalents of $6.4 million compared to $2.2 million as at November 23, 2008 . On November 13, 2009 , SIR entered into a new $26.0 million credit facility with a new senior lender to refinance and replace its current revolving line of credit and construction facility, and to facilitate the repurchase of certain of its common shares for $17.0 million .

SIR's first quarter 2010 filings, which include its unaudited consolidated financial statements and management's discussion & analysis, can be accessed via the Fund's profile on the SEDAR web site at www.sedar.com under "Other".

    
    (1) Same store sales includes revenue from all SIR restaurants except for
        those restaurants that were not open for the entire comparable
        periods in fiscal 2010 and fiscal 2009. The U.S. restaurant is not
        part of SSS. SSS is a non-GAAP measure that do not have standardized
        meanings prescribed by GAAP. However, SIR believes that SSS is a
        useful measure and provide investors with an indication of the change
        in year-over-year sales. SIR's method of calculating SSS may differ
        from those of other issuers and accordingly, SSS may not be
        comparable to measures used by other issuers.
    

About SIR Corp.

SIR is a privately held Canadian corporation that owns and operates a portfolio of 45 restaurants in Canada . SIR's concept brands include: Jack Astor's Bar and Grill(R), with 29 locations; Alice Fazooli's(R), with five locations; and Canyon Creek Chop House(R), with eight locations. SIR also operates one-of-a-kind "signature" brands in downtown Toronto , which comprise the upscale reds(R), Far Niente(R)/FOUR(TM)/Petit Four(TM), and the Loose Moose Tap & Grill(R). All trademarks related to the concept and signature brands noted above are used by SIR under a license agreement with SIR Royalty Limited Partnership in consideration for a Royalty, payable by SIR to the Partnership, equal to six percent of the revenue of the 45 Royalty Pooled Restaurants. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit www.sircorp.com.

About SIR Royalty Income Fund

The Fund is a trust governed by the laws of the province of Ontario that receives distribution income from its investment in the SIR Royalty Limited Partnership and interest income from the SIR Loan. The Fund intends to pay distributions to unitholders on a monthly basis.

Caution concerning forward-looking statements

Statements in this release, including the information set forth as to the future financial or operating performance of the Fund or SIR, that are not current or historical factual statements may constitute "forward-looking" information within the meaning of securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund, the Trust, the Partnership, SIR, the SIR Restaurants, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this document, such statements may include, among other language, such words as "may", "will", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology. These statements reflect Management's current expectations, estimates and projections regarding future events and operating performance and speak only as of the date of this document. Readers should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: competition; changes in demographic trends; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation; accounting policies and practices; and the results of operations and financial condition of SIR. The foregoing list of factors is not exhaustive. Many of these issues can affect the Fund's or SIR's actual results and could cause their actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Fund or SIR. Readers are cautioned that forward-looking statements are not guarantees of future performance, and should not place undue reliance on them. The Fund and SIR expressly disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations, estimates and projections with regard thereto or any changes in events, conditions or circumstances on which any statement is based, except as expressly required by law.

In formulating the forward-looking statements contained herein, Management has assumed that business conditions affecting SIR's restaurants and the Fund will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, regulations (including those regarding employees, food safety, tobacco and alcohol), weather, taxes, foreign exchange rates and interest rates, that there will be no pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products, and that there will be no unplanned material changes in its facilities, equipment, customer and employee relations, or credit arrangements. Management is not anticipating an improvement, in the near future, in economic conditions (particularly as it relates to the recent unprecedented deterioration of the economic environment and consumer confidence, which could significantly negatively affect sales and profit prospects in the near future). Management is not anticipating an improvement, in the near future, in the availability of credit (particularly as it relates to the recent disruption of world credit markets, which could significantly negatively affect sales and profit prospects in the near future). These assumptions, although considered reasonable by Management at the time of preparation, may prove to be incorrect. In particular, in estimating the revenues for the five new Jack Astor's restaurants and one new Canyon Creek restaurant added to the Royalty Pooled Restaurants on January 1, 2009 , Management has assumed that they will operate consistent with other Jack Astor's and Canyon Creek restaurants. For more information concerning the Fund's risks and uncertainties, please refer to the October 2004 final prospectus, and/or its March 31, 2009 Annual Information Form, all of which are available under the Fund's profile at www.sedar.com.

    
    (1) Same store sales and same store sales growth exclude revenue from
        restaurants which are not Royalty Pooled Restaurants, and exclude
        revenue from restaurants opened or closed during the current or prior
        fiscal year and therefore not open for the full period in both years.
        Same store sales growth is the percentage increase in SSS over the
        prior comparable period. SSS and SSSG are non-GAAP measures that do
        not have standardized meanings prescribed by GAAP. However, SIR
        believes that SSS and SSSG are useful measures and provide investors
        with an indication of the change in year-over-year sales. SIR's
        method of calculating SSS and SSSG may differ from those of other
        issuers and, accordingly, SSS and SSSG may not be comparable to
        measures used by other issuers.
    

%SEDAR: 00020914E

For further information: Jeff Good, Chief Financial Officer, SIR Corp., Tel: [phone]; Bruce Wigle or Alice Dunning, Investor Relations, Tel: [phone] ext. 228 or ext. 255, Email: [email protected] or [email protected]