SIR Royalty Income Fund Reports 2013 Second Quarter Results

BURLINGTON, ON, Aug. 12, 2013 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the three-month ("Q2 2013") and six-month ("YTD 2013") periods ended June 30, 2013. All comparisons in the following summary of the Fund's Q2 2013 financial results are to the corresponding period in the prior fiscal year ("Q2 2012"). Percentage calculations are based on the numbers in the financial statements and may not correspond to rounded figures presented in this release.

Q2 2013 Summary

• Net earnings for the Fund increased to $2.0 million, or $0.30 per Fund unit, in Q2 2013, from $1.5 million, or $0.28 per Fund unit, in Q2 2012;
• Pooled Revenue increased 13.6% to $62.9 million;
• Same Store Sales Growth (SSSG)⁽¹⁾ for Royalty Pooled Restaurants was 4.1% in Q2 2013;
• Distributable cash⁽²⁾ per Fund unit (basic and diluted) totalled $0.30, representing a payout ratio⁽²⁾ of 90.6%;
• The Fund increased its monthly unitholder distributions from $0.088 per unit to $0.095 per unit, representing an estimated annualized distribution of $1.14 per unit. The increase became effective for the Fund's distribution paid on June 28, 2013; and
• During Q2 2013, SIR Corp. ("SIR") opened two new Jack Astor's restaurants, one in North Toronto and one in Pickering, Ontario.

"We continue to strengthen the market presence of our core Jack Astor's brand with the opening of two new locations in the quarter, including one in North Toronto and one in Pickering, Ontario. To date in 2013, we have opened three new Jack Astor's, completed a patio renovation at Reds Wine Tavern, and completed renovations to the Loose Moose Tap & Grill and one Jack Astor's. SIR's investments in repositioning Reds Wine Tavern in Q3 2012 and renovations to the Loose Moose have contributed to our Signature Group's 31.8% Same Store Sales Growth⁽¹⁾ in the quarter," said Peter Fowler, President and CEO of SIR Corp. "We remain focused on improving the performance of both Alice Fazooli's and Canyon Creek and we are pleased to report that we have moved forward with our performance improvement plan for Alice Fazooli's. Our former Square One Alice Fazooli's location in Mississauga has now been transitioned to a variant on the concept called Scaddabush, which offers our guests a new, refreshing take on Italian dining. Scaddabush tested very well in our early stage consumer appraisals, and we look forward to hearing our guests' in-person responses to this concept innovation."

"SIR is committed to building value for our Fund unitholders through innovation, a constant focus on strengthening our brands, and as market conditions permit, new restaurant openings and renovations," continued Mr. Fowler. "We expect to open three additional restaurants in 2013, all located at street level within the new 78-storey Aura condominium development at Yonge and Gerrard Streets in downtown Toronto."

Financial Results

($000s except restaurants and per Unit amounts) (unaudited)		Three-month period ended June 30, 2013	Three-month period ended June 30, 2012	Six-month period ended June 30, 2013	Six-month period ended June 30, 2012
Royalty Pooled Restaurants		49	47	49	47
Pooled Revenue generated by SIR		62,855	55,333	117,554	107,410
Royalty income to Partnership - 6% of Pooled Revenue		3,771	3,320	7,053	6,445
Make-Whole Payment^(4)		-	91	-	152
Partnership other income		10	9	20	20
Partnership expenses		(21)	(25)	(49)	(36)
Partnership earnings		3,760	3,395	7,024	6,581
SIR Corp.'s interest (Class A, B, and C GP Units)		(1,641)	(2,000)	(3,420)	(3,935)
Partnership income allocated to Fund		2,119	1,395	3,604	2,646
Interest income		750	750	1,500	1,500
Total income of the Fund		2,869	2,145	5,104	4,146
General & administrative expenses		(111)	(121)	(223)	(207)
Net earnings before income taxes of the Fund		2,758	2,024	4,881	3,939
Income tax expense		(747)	(550)	(1,409)	(1,064)
Net earnings for the period		2,011	1,474	3,472	2,875
Earnings per Fund Unit (basic and diluted)		$0.30	$0.28	$0.54	$0.54

Pooled Revenue increased 13.6% to $62.9 million in Q2 2013, up from $55.3 million in Q2 2012.  As at June 30, 2013, there were 49 restaurants included in Royalty Pooled Restaurants, compared to 47 restaurants included in Royalty Pooled Restaurants as at June 30, 2012.

The Fund's net earnings for Q2 2013 totalled $2.0 million, or $0.30 per Fund Unit (basic and diluted), compared with $1.5 million, or $0.28 per Fund Unit (basic and diluted) for Q2 2012.

Distributable cash⁽²⁾ for Q2 2013 totalled $2.0 million or $0.30 per Fund Unit (basic and diluted), and distributions to Unitholders totalled $1.8 million, representing a payout ratio⁽²⁾ of 90.6% for the quarter.  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 Q2 2013, is 98.8%.

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 June 30, 2013	Three-month period ended June 30, 2012	Six-month period ended June 30, 2013	Six-month period ended June 30, 2012
Cash provided by operating activities		1,946	1,850	3,637	1,133
Add/(deduct):
	Net change in non-cash working capital items	(112)	(659)	(224)	(859)
	Net change in income tax payable	(237)	(2)	(262)	2,173
	Net change in distribution receivable from the Partnership	430	296	440	450
Distributable cash^(2)		2,027	1,485	3,591	2,897
Cash distributed for the period		1,836	1,361	3,761^(3)	2,694
Surplus/(shortfall) of distributable cash^(2)		191	124	(170)	203
Payout ratio^(2)		90.6%	91.6%	104.8%^(3)	93.0%
Distributable cash^(2) per Fund Unit (basic and diluted)		$0.30	$0.28	$0.56	$0.54

Same Store Sales (SSS)⁽¹⁾

SSSG^(1) for Royalty Pooled Restaurants	Three-month period ended June 30, 2013	Three-month period ended June 30, 2012	Six-month period ended June 30, 2013	Six-month period ended June 30, 2012
Jack Astor's^®	3.9%	5.0%	1.7%	7.6%
Canyon Creek^®	(0.4%)	(2.6%)	(4.4%)	(0.5%)
Alice Fazooli's^®	(10.1%)	(5.7%)	(10.3%)	(2.6%)
Signature Restaurants	31.8%	(8.2%)	15.2%	(4.4%)
Overall SSSG^(1)	4.1%	2.2%	1.1%	4.7%

Jack Astor's, which accounted for approximately 77% of Pooled Revenue in Q2 2013, generated Same Store Sales Growth (SSSG)⁽¹⁾ of 3.9% in Q2 2013. The Signature Restaurants generated SSSG⁽¹⁾ of 31.8% in Q2 2013, led by strong contributions from the repositioned Reds Wine Tavern and the recently renovated Loose Moose Tap & Grill. Canyon Creek and Alice Fazooli's reported declines in SSS⁽¹⁾ of 0.4% and 10.1%, respectively, in Q2 2013.  SIR's Management is committed to maximizing the performance of all of its restaurants and is reviewing initiatives to enhance value at the Canyon Creek concept. SIR recently initiated a program to evolve the Alice Fazooli's concept, and is currently testing a variant of the concept called Scaddabush™ at the former Alice Fazooli's Square One location in Mississauga, Ontario. Scaddabush offers guests a new, refreshing take on Italian dining.

Corporate Developments
In Q2 2013, SIR opened two new Jack Astor's restaurants, one in North Toronto (opened April 1, 2013) and one in Pickering, Ontario (opened May 21, 2013). In Q1 2013, on March 4, 2013, SIR opened a new Jack Astor's restaurant in Kitchener, Ontario. These three restaurants will be added to Royalty Pooled Restaurants on January 1, 2014.

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.

Over the remainder of 2013, SIR expects to open three more restaurants at street level in one of the largest condominium developments in Canada, located at Yonge and Gerrard Streets in downtown Toronto. SIR also currently expects to open two new Jack Astor's restaurants in Ottawa, Ontario, one in 2014 and one in 2015.

The Fund's unaudited interim consolidated Financial Statements and Management's Discussion & Analysis ("MD&A"), and the SIR Royalty Limited Partnership's Financial Statements, for the three and six-month periods ended June 30, 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.

(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 three and six-month periods ended June 30, 2013, which can be accessed via the SEDAR website (www.sedar.com).

(3) Cash distributed to Unitholders for the six-month period ended June 30, 2013 includes the special year-end distribution of $0.05 per unit or $0.3 million that was declared in December 2012 and paid on January 11, 2013. The payout ratio for the six-month period ended June 30, 2013 was significantly affected by the special year-end distribution.

(4) 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.

About SIR Corp.
SIR Corp. (SIR) is a privately held Canadian corporation that owns and operates a portfolio of 54 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 locations; Alice Fazooli's®, together with Scaddabush™, for a total of four 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, Far Niente®/FOUR®/Petit Four®, and the Loose Moose Tap & Grill®. 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 49 restaurants currently included in the Royalty pool. SIR also owns and operates two seasonal Signature restaurants: Abbey's Bakehouse™ and Duke's Refresher™. These two restaurants are not currently part of Royalty Pooled Restaurants. For more information on SIR 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", "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; 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.  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 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 28, 2013 Annual Information Form, for the period ended December 31, 2012, which is available under the Fund's profile at www.sedar.com.

All of the forward-looking statements made in this report 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: [phone]

Bruce Wigle
BMIR Investor Relations
Tel: [phone] ext. 232