SIR Royalty Income Fund Reports First Quarter 2012 Results

Solid first quarter same store sales growth of 7.5%

BURLINGTON, ON, May 10, 2012 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the three-month period ended March 31, 2012 (Q1 2012).  All comparisons are to the corresponding period in the prior fiscal year.

Q1 2012 Highlights:

• Net earnings for the Fund were $1.4 million in Q1 2012, or $0.26 per unit, compared to $1.3 million, or $0.23 per unit, for Q1 2011;
• Pooled Revenue increased 8.3% to $52.1 million in Q1 2012 from $48.1 million in Q1 2011;
• Same Store Sales Growth (SSSG)⁽¹⁾ for the Royalty Pooled Restaurants was 7.5% in Q1 2012 compared to a decrease of 0.6% in Q1 2011;
• Distributable cash⁽²⁾ per Fund unit (basic and diluted) was $0.26; and
• The payout ratio⁽²⁾ decreased to 94.4% in Q1 2012 from 119.2%⁽⁴⁾ of distributable cash⁽²⁾ in Q1 2011.

"Same store sales growth was strong in the first quarter," said Peter Fowler, President and Chief Executive Officer of SIR Corp.  "As we move into 2012, we are focused on sustaining and growing restaurant sales and profits.  During the first quarter we closed the Alice Fazooli's restaurant located on Adelaide Street in Toronto, Ontario and the Jack Astor's restaurant located in Kitchener, Ontario.  We have also secured four additional sites for five new restaurants with expected openings for three restaurants in 2012 and the other two in 2013.  We will continue to monitor the factors that affect our industry including economic conditions and consumer confidence.  We remain focused on delivering positive and reliable results for Unitholders."

Financial Results

Financial Highlights ($000s except restaurants and per Unit amounts) (unaudited)		3-month period ended Mar 31, 2012	3-month period ended Mar 31, 2011
Royalty Pooled Restaurants		47	46
Pooled Revenue generated by SIR		52,076	48,094
Royalty income to Partnership - 6% of Pooled Revenue		3,125	2,886
Make-Whole Payment^(3)		62	-
Partnership other income		11	8
Partnership expenses		(12)	(24)
Partnership earnings		3,186	2,870
SIR Corp.'s interest (Class A, B, and C GP Units)		(1,934)	(1,767)
Partnership income allocated to Fund		1,252	1,103
Interest income		750	750
Total income of the Fund		2,002	1,853
General & administrative expenses		(86)	(99)
Net earnings before income taxes of the Fund		1,916	1,754
Income tax expense		(515)	(503)
Net earnings for the period		1,401	1,251
Earnings per Fund Unit (basic and diluted)		$0.26	$0.23

The Fund's net earnings for Q1 2012 totaled $1.4 million, or $0.26 per Fund Unit (basic and diluted), compared with $1.3 million, or $0.23 per Fund Unit (basic and diluted) for Q1 2011.

Pooled Revenue for Q1 2012 increased 8.3% to $52.1 million compared with $48.1 million for the comparable period in 2011.  As at March 31, 2012, there were 47 restaurants included in Royalty Pooled Restaurants.

Distributable cash⁽²⁾ for Q1 2012 totaled $1.4 million or $0.26 per Fund Unit (basic and diluted), and distributions to unitholders totaled $1.3 million, representing a payout ratio⁽²⁾ of 94.4% for the period.  The payout ratio⁽²⁾ since the Fund's inception, up to and including Q1 2012, is 98.7%.

The following table provides disclosure regarding the relationship between cash provided by operating activities and distributable cash:

(in thousands of dollars except per Unit amounts and payout ratio^(2)) (unaudited)		3-month period ended Mar 31, 2012	3-month period ended Mar 31, 2011
Cash provided by operating activities		(717)	1,848
Add/(deduct):
	Net change in non-cash working capital items	1,975	(590)
	Net change in distribution receivable from the Partnership	154	5
Distributable cash^(2)		1,412	1,263
Cash distributed for the period		1,334	1,505
Surplus/(shortfall) of distributable cash^(2)		78	(242)
Payout ratio^(2)		94.4%	119.2%^(4)
Distributable cash^(2) per Fund Unit (basic and diluted)		$0.26	$0.24

Effective January 1, 2011, the Fund became taxable and therefore the cash available for distribution to Unitholders is reduced.

Same Store Sales⁽¹⁾

SSSG^(1) for Royalty Pooled Restaurants	3-month period ended Mar 31, 2012	3-month period ended Mar 31, 2011
Jack Astor's^®	10.7%	(0.9%)
Canyon Creek^®	1.6%	2.2%
Alice Fazooli's^®	1.0%	(9.1%)
Signature Restaurants	(1.1%)	5.9%
Overall SSSG^(1)	7.5%	(0.6%)

For the three-month period ended March 31, 2012, SIR reported to the Fund an increase in SSS⁽¹⁾ of 7.5%. SSSG⁽¹⁾ for all concepts was affected positively by one extra day of sales due to 2012 being a leap year, as well as favourable weather.  Part of the decline in Q1 2011 can be attributed to unfavourable results in two locations that were closed in Q1 2012.  Jack Astor's, which accounts for approximately 71% of Pooled Revenue, reported an increase in SSS⁽¹⁾ of 10.7% for Q1 2012. Jack Astor's sales in Q1 2012 were supported by additional media advertising in Q1 2012 as compared to Q1 2011.  The Signature Restaurants experienced a decline in SSS⁽¹⁾ of 1.1% in Q1 2012.  Part of this decline is attributed to a decline in sales at reds®.  The landlord of the building in which reds is located is refacing the entire building and this construction has had a significant impact on the restaurant's sales.

Corporate Developments

During Q1 2012, SIR closed its Alice Fazooli's restaurant located on Adelaide Street in Toronto, Ontario and its Jack Astor's restaurant located in Kitchener, Ontario.  SIR is required to pay a Make-Whole Payment for these locations from their date of closures until December 31, 2012.  On January 1, 2013, the revenue of the closed restaurants will be netted against the revenue of the new SIR Restaurants opened from November 2, 2011 to November 1, 2012, to determine the number of Class B GP Units of the Partnership, held by SIR, which can be converted into Class A GP Units of the Partnership.

During Q2 2011, SIR opened a Jack Astor's in London, Ontario on May 2, 2011.  This restaurant was added to Royalty Pooled Restaurants on January 1, 2012 as a New Additional Restaurant.  In addition, SIR has secured six additional sites for seven new restaurants.  It is expected that, during the remainder of 2012, there will be a new Jack Astor's restaurant opening in Toronto, Ontario (on Front Street near the St. Lawrence Market), in Kingston, Ontario, in Laval, Quebec and in Pickering, Ontario.  A new Jack Astor's restaurant will open in Kitchener, Ontario in fiscal 2013 and two new restaurants will be opening at the corner of Yonge and Gerrard Streets in Toronto, Ontario also in fiscal 2013.

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.  Additional sites will be considered where appropriate.

The Fund's consolidated Financial Statements and Management's Discussion & Analysis ("MD&A"), and the SIR Royalty Limited Partnership's Financial Statements, for the three-months ended March 31, 2012 will be filed on SEDAR today and will be available via the SEDAR web site at www.sedar.com tomorrow. The Fund's first quarter 2012 consolidated Financial Statements and MD&A are also available via SIR's website at www.sircorp.com.

(1) Same store sales ("SSS") and same store sales growth ("SSSG") are not IFRS or Canadian GAAP financial measures and do not have standardized meanings prescribed by IFRS or Canadian GAAP.  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 2012 and fiscal 2011.

(2) Distributable cash and payout ratio are not IFRS 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 3-month period ended March 31, 2012, which can be accessed via the SEDAR web site (www.sedar.com).

(3) The Alice Fazooli's restaurant in Toronto, Ontario 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 is required to pay a Make-Whole Payment for these locations from their dates of closure until December 31^st of the year of closure.

(4) The payout ratio for the 3-month period ended March 31, 2011 was impacted by the effect of seasonality in SIR's business as well as the cash distributed for the period being affected by the December 2010 distribution that was declared and paid in January 2011 at a rate of $0.115 per unit, when the distributable cash was decreased by the obligation to pay income taxes.

About SIR Corp.

SIR is a privately held Canadian corporation that owns and operates a portfolio of 46 restaurants in Canada. SIR's concept brands include: Jack Astor's Bar and Grill®, with 31 locations; Alice Fazooli's®, with 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®, 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 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 47 restaurants included in the Royalty pool as at March 31, 2012. 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 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, 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 the tax effects on distributions will remain consistent with current regulations or pronouncements, and also in estimating the revenue for the new Jack Astor's restaurant, Management has assumed that it will operate consistent with other Jack Astor's restaurants.  For more information concerning the Fund's risks and uncertainties, please refer to the October 2004 final prospectus, and/or its March 30, 2012 Annual Information Form, all of which are 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.

            
 

 

 

 

 

Jeff Good
Chief Financial Officer
SIR Corp.
5360 South Service Road, Suite 200
Burlington, Ontario, Canada L7L 5L1
Tel: [phone]

Lawrence Chamberlain
Investor Relations
Tel: [phone] ext. 257
Email: [email protected]