SIR Royalty Income Fund Reports 2013 Fourth Quarter and Year End Results
BURLINGTON, ON, March 11, 2014 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the quarter ("Q4 2013") and fiscal year ended December 31, 2013. All comparisons in the following summary are to the corresponding periods in the prior fiscal year. Percentage calculations are based on the numbers in the financial statements and may not correspond to rounded figures presented in this release.
2013 Highlights
- Net earnings for the Fund were $7.1 million, or $1.08 per Fund unit, compared with $5.9 million, or $1.08 per Fund unit, in 2012;
- Pooled Revenue increased 8.7% to $234.7 million with the addition of four Royalty Pooled Restaurants effective January 1, 2013;
- SSSG(1) for Royalty Pooled Restaurants increased 0.4%;
- Distributable cash(2) per Fund unit (basic and diluted) totalled $1.10 in 2013, representing a payout ratio(2) of 104.9%, slightly above the Fund's target payout ratio of 100%;
- A special cash distribution of $0.05 per Fund unit was paid to unitholders during the first quarter;
- The Trustees approved an increase to monthly unitholder distributions from $0.088 per Fund unit to $0.095 per Fund unit effective June 2013, the Fund's fifth distribution increase since inception;
- SIR Corp. introduced the new Scaddabush Italian Kitchen & BarTM and Duke's RefresherTM & Bar brands;
- Effective January 1, 2014, four new restaurants were added to Royalty Pooled Restaurants, including three Jack Astor's® and one new Signature Restaurant.
"SIR Corp. continues to deliver on its commitment to build value for SIR Royalty Income Fund unitholders through ongoing renovations to the Royalty Pooled Restaurants, new restaurant openings, and a constant focus on innovation. Supported by continued growth trends in Royalty Pooled Revenue, the Fund Trustees approved an eight percent increase to the Fund's monthly cash distributions during 2013, effective for the Fund's distribution paid in June," said Peter Fowler, President and CEO of SIR Corp. "During 2013 we completed restaurant renovations at five Jack Astor's, the Loose Moose and one Alice Fazooli's location, which was re-opened as Scaddabush Italian Kitchen & Bar. We also completed a patio renovation at Reds Wine Tavern. New restaurants opened during the year included three Jack Astor's, Reds Midtown Tavern and Duke's Refresher & Bar. The three new Jack Astor's and the new Reds Midtown Tavern were added to Royalty Pooled Restaurants on January 1, 2014."
"The introduction of our new Scaddabush Italian Kitchen & Bar and Duke's Refresher & Bar brands demonstrates our unrelenting focus on innovation. Both of these new brands have been performing well. Subsequent to year-end, we opened a second Scaddabush location alongside Reds Midtown Tavern and Duke's Refresher & Bar in the new Aura condominium development in downtown Toronto. We look forward to increasing traffic at these locations as this impressive residential and retail development nears completion," added Mr. Fowler. "Looking ahead, SIR will continue to focus on building value through new restaurant openings and restaurant renovations, as market conditions permit, and through our passion and dedication to operating best-in-class restaurants."
Financial Results
| ($000s except restaurants and per unit amounts) (unaudited) |
Three-month period ended Dec. 31, 2013 |
Three-month period ended Dec. 31, 2012 |
12-month period ended Dec. 31, 2013 |
12-month period ended Dec. 31, 2012 |
|||||||||
| Royalty Pooled Restaurants | 49 | 47 | 49 | 47 | |||||||||
| Pooled Revenue generated by SIR | 57,760 | 54,396 | 234,667 | 215,822 | |||||||||
| Royalty income to Partnership - 6% of Pooled Revenue | 3,466 | 3,263 | 14,080 | 12,949 | |||||||||
| Make-Whole Payment(3) | - | 93 | - | 339 | |||||||||
| Partnership other income | 12 | 10 | 43 | 39 | |||||||||
| Partnership expenses | (18) | (20) | (99) | (78) | |||||||||
| Partnership earnings | 3,460 | 3,346 | 14,024 | 13,249 | |||||||||
| SIR Corp.'s interest (Class A, B, and C GP Units) | (1,698) | (1,911) | (6,709) | (7,832) | |||||||||
| Partnership income allocated to Fund | 1,762 | 1,435 | 7,315 | 5,417 | |||||||||
| Interest income | 750 | 750 | 3,000 | 3,000 | |||||||||
| Total income of the Fund | 2,512 | 2,185 | 10,315 | 8,417 | |||||||||
| General & administrative expenses | (100) | (85) | (417) | (374) | |||||||||
| Net earnings before income taxes of the Fund | 2,412 | 2,100 | 9,898 | 8,043 | |||||||||
| Income tax expense | (675) | (585) | (2,777) | (2,181) | |||||||||
| Net earnings for the period | 1,737 | 1,515 | 7,121 | 5,862 | |||||||||
| Earnings per Fund unit (basic and diluted) | $0.26 | $0.27 | $1.08 | $1.08 |
Pooled Revenue increased 6.2% to $57.8 million in Q4 2013, up from $54.4 million in Q4 2012. As at December 31, 2013, there were 49 restaurants included in Royalty Pooled Restaurants, compared to 47 restaurants included in Royalty Pooled Restaurants as at December 31, 2012.
The Fund's net earnings for Q4 2013 totalled $1.7 million, or $0.26 per Fund unit (basic and diluted), compared with $1.5 million, or $0.27 per Fund unit (basic and diluted) for Q4 2012.
Distributable cash(2) for Q4 2013 totalled $1.8 million or $0.26 per Fund unit (basic and diluted), and distributions to Unitholders totalled $1.9 million, representing a payout ratio(2) of 110.2% for the quarter. The Fund's payout ratio for the quarter and year ended December 31, 2013 was impacted by the increased monthly unitholder distributions of $0.095 per unit, effective June 30, 2013. Cash distributed to unitholders for the year ended December 31, 2013 also includes the special year-end distribution of $0.05 per unit that was declared in December 2012 and paid on January 11, 2013. The Fund's payout ratio(2) is intended to average 100% per annum. The payout ratio(2) since the Fund's inception, up to and including Q4 2013, is 99.2%.
Distributable Cash(2)
The following table reconciles the relationship between cash provided by operating activities and distributable cash(2):
| (in thousands of dollars except per unit amounts and payout ratio(2)) (unaudited) |
Three-month period ended Dec. 31, 2013 |
Three-month period ended Dec. 31, 2012 |
12-month period ended Dec. 31, 2013 |
12-month period ended Dec. 31, 2012 |
||||||||||
| Cash provided by operating activities | 1,571 | 1,385 | 7,884 | 3,831 | ||||||||||
| Add/(deduct): | ||||||||||||||
| Net change in non-cash working capital items | 149 | 780 | (171) | (162) | ||||||||||
| Net change in income tax payable | 398 | (38) | (543) | 2,151 | ||||||||||
| Net change in distribution receivable from the Partnership | (365) | (601) | 99 | 86 | ||||||||||
| Distributable cash(2) | 1,753 | 1,526 | 7,269 | 5,906 | ||||||||||
| Cash distributed for the period | 1,931(4) | 1,506 | 7,624(4), (5) | 5,615 | ||||||||||
| Surplus/(shortfall) of distributable cash(2) | (178) | 20 | (355) | 291 | ||||||||||
| Payout ratio(2) | 110.2%(4) | 98.7% | 104.9%(4), (5) | 95.1% | ||||||||||
| Distributable cash(2) per Fund unit (basic and diluted) |
$0.26 | $0.27 | $1.10 | $1.09 | ||||||||||
Same Store Sales (SSS)(1)
| SSSG(1) for Royalty Pooled Restaurants | Three-month period ended Dec. 31, 2013 |
Three-month period ended Dec. 31, 2012 |
12-month period ended Dec. 31, 2013 |
12-month period ended Dec. 31, 2012 |
|||||||||
| Jack Astor's® | (0.8%) | 1.0% | 0.6% | 5.0% | |||||||||
| Canyon Creek® | (2.7%) | (3.7%) | (3.2%) | (1.0%) | |||||||||
| Alice Fazooli's®/Scaddabush Italian Kitchen & BarTM | (10.1%) | (4.5%) | (9.6%) | (3.9%) | |||||||||
| Signature Restaurants | 4.8% | 1.7% | 14.3% | (4.4%) | |||||||||
| Overall SSSG(1) | (1.3%) | 0.0% | 0.4% | 2.8% |
Unfavourable weather in Q4 2013 compared to the fourth quarter of 2012 had a negative impact on SSS(1) for all Royalty Pooled Restaurants. Jack Astor's, which generated approximately 73% of Pooled Revenue in Q4 2013, had a Same Store Sales (SSS)(1) decline of 0.8%, primarily as a result of the temporary closure of four Jack Astor's for renovations during the quarter. The Signature Restaurants generated SSSG(1) of 4.8% in Q4 2013, led by strong contributions from the fully renovated and repositioned Reds® Wine Tavern and the fully renovated Loose Moose®. Canyon Creek and Alice Fazooli's had SSS(1)declines of 2.7% and 10.1%, respectively, in Q4 2013. During the third quarter, SIR closed its Alice Fazooli's Square One location in Mississauga, Ontario for renovations and re-opened the restaurant as Scaddabush Italian Kitchen & Bar. Scaddabush Italian Kitchen & Bar generated SSSG(1) of 12.8% in Q4 2013. Management continues to review initiatives to enhance value at Canyon Creek.
Corporate Developments
SIR opened five new restaurants in 2013, including three Jack Astor's (Kitchener, north Toronto and Pickering, Ontario) and two Signature restaurants, Reds® Midtown Tavern and Duke's Refresher & Bar, located at the site of the new Aura condominium development in downtown Toronto. The three new Jack Astor's and Reds Midtown Tavern were added to Royalty Pooled Restaurants on January 1, 2014. SIR also opened a second Scaddabush Italian Kitchen & Bar location on February 18, 2014 in the Aura condominium development.
Outlook
SIR Management will continue to monitor economic conditions and consumer confidence and has advised the Fund that it is considering new store growth where appropriate. Based on its assessment of these conditions, the timing of restaurant construction and opening schedules will be reviewed regularly by SIR Management and adjusted as necessary.
SIR currently has plans to open three new Jack Astor's restaurants and a new seasonal Signature outlet in 2014 and 2015. One of the new Jack Astor's restaurants is planned for St. John's, Newfoundland, a new market that SIR believes offers strong potential due to the city's economic growth and the attractive location SIR has secured in the heart of St. John's historic waterfront.
The Fund's audited consolidated Financial Statements and Management's Discussion & Analysis ("MD&A"), and the SIR Royalty Limited Partnership's (the "Partnership") Financial Statements, for the 12-month period ended December 31, 2013, are available via the SEDAR website at www.sedar.com and SIR's website at www.sircorp.com.
(1) Same store sales ("SSS") and same store sales growth ("SSSG") are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS. However, the Fund believes that SSS and SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. The Fund'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. SSS includes revenue from all SIR Restaurants included in Pooled Revenue except for those locations that were not open for the entire comparable periods in fiscal 2013 and fiscal 2012 as well as the seasonal Duke's Refresher™ and Abbey's Bake House® both located in Muskoka, Ontario. SSS for Alice Fazooli's includes three Alice Fazooli's restaurants and one Scaddabush Italian Kitchen & Bar restaurant, representing the Square One location in Mississauga, Ontario, which was renovated and re-opened as Scaddabush Italian Kitchen & Bar on July 23, 2013.
(2) Distributable cash and payout ratio are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS. However, the Fund believes that distributable cash and the payout ratio are useful measures as they provide investors with an indication of cash available for distribution. The Fund's method of calculating distributable cash and the payout ratio may differ from that of other issuers and, accordingly, distributable cash and the payout ratio may not be comparable to measures used by other issuers. Investors are cautioned that distributable cash and the payout ratio should not be construed as an alternative to the statement of cash flows as a measure of liquidity and cash flows of the Fund. The payout ratio is calculated as cash distributed for the period as a percentage of the distributable cash for the period. Distributable cash represents the amount of money which the Fund expects to have available for distribution to Unitholders of the Fund, and is calculated as cash provided by operating activities of the Fund, adjusted for the net change in non-cash working capital items including a reserve for income taxes payable and the net change in the distribution receivable from the SIR Royalty Limited Partnership. For a detailed explanation of how the Fund's distributable cash is calculated, please refer to the Fund's MD&A for the 12-month period ended December 31, 2013, which can be accessed via the SEDAR website (www.sedar.com).
(3) The Alice Fazooli's restaurant in Toronto and the Jack Astor's restaurant in Kitchener, Ontario were closed on January 27, 2012 and February 13, 2012, respectively. Under the terms of the License and Royalty Agreement, SIR was required to pay a Make-Whole Payment for these locations from their dates of closure until December 31, 2012.
(4) The payout ratio for the three and 12-month periods ended December 31, 2013 were impacted by the increased monthly unitholder distributions of $0.095 per unit, effective June 30, 2013.
(5) Cash distributed to Unitholders for the year ended December 31, 2013 includes the special year-end distribution of $0.05 per unit that was declared in December 2012 and paid on January 11, 2013. The payout ratio for 2013 was significantly affected by the special distribution.
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 57 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 locations; Alice Fazooli's® together with Scaddabush Italian Kitchen & Bar™, for a total of five locations; and Canyon Creek Chop House®, with eight locations. SIR also operates one-of-a-kind "Signature" brands in downtown Toronto, which comprise the upscale Reds® Wine Tavern, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four®, The Loose Moose® and Duke's Refresher™ & Bar. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty 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 53 restaurants currently included in the Royalty Pool. SIR also owns and operates two seasonal Signature restaurants: Abbey's Bake House® and Duke's Refresher™, which are not currently part of the Royalty Pool. 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
Certain statements contained in this report, or incorporated herein by reference, 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 applicable securities laws ("forward-looking statements"). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, the SIR Holdings Trust (the "Trust"), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "would", "should", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Fund, the Trust, the Partnership, SIR, the SIR Restaurants or industry results, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. 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. Risks related to forward-looking statements include, among other things, challenges presented by a number of factors, including: competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; changes in foreign exchange; 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. Given these uncertainties, 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 disclose or release any updates or revisions to any forward looking statements. Forward-looking statements are based on Management's current plans, estimates, projections, beliefs and opinions, and the Fund and SIR do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.
In formulating the forward-looking statements contained herein, Management has assumed that business and economic conditions affecting SIR's restaurants and the Fund will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, competition, general levels of economic activity (including in downtown Toronto), 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. These assumptions, although considered reasonable by Management at the time of preparation, may prove to be incorrect. In particular, Management has assumed that the tax effects on distributions will remain consistent with current regulations or pronouncements, and also in estimating the revenue for new restaurants, Management has assumed that they will operate consistent with other similar SIR restaurants. For more information concerning the Fund's risks and uncertainties, please refer to the March 2014 Annual Information Form, for the period ended December 31, 2013, which is available under the Fund's profile at www.sedar.com.
All of the forward-looking statements made herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund or SIR.
SOURCE: SIR Royalty Income Fund
Jeff Good
Chief Financial Officer
Tel: 905-681-2997
Bruce Wigle
BMIR Investor Relations
Tel: 416-447-4740 ext. 232
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