SIR Royalty Income Fund reports fiscal 2009 results
BURLINGTON, ON, March 16 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) ("the Fund") today reported its financial results for the three and twelve-month periods ended December 31, 2009.
2009 Highlights:
- Net earnings totaled $7.3 million or $1.35 per Fund unit (basic and
diluted) compared to $7.5 million or $1.40 per fund unit (basic and
diluted) in F2008;
- Pooled Revenue increased 10.9% to $194.1 million, up from $175.0
million in F2008;
- The Fund generated distributable cash(2) of $7.1 million and declared
distributions totaling $7.4 million, representing a payout ratio(2)
of 103.6%. This compares to distributable cash(2) of $7.5 million and
declared distributions of $7.3 million, representing a payout ratio
(2) of 96.8% in F2008;
- Same store sales(1) ("SSS") for the Royalty Pooled Restaurants
declined 5.7% compared to same store sales(1) growth ("SSSG") of 2.3%
in F2008;
- On January 1, 2009 five new Jack Astor's(R) restaurants and one
Canyon Creek(R) restaurant were added to the Royalty Pooled
Restaurants;
- On November 13, 2009 SIR Corp. entered into a new credit agreement
"With the weak economic environment that began in late 2008 and persisted in 2009, SIR, like the full service restaurant industry as a whole, experienced declines in SSS(1). However, there were some positive signs in the fourth quarter of 2009 as Jack Astor's posted 0.4% SSSG(1) and each of the other concepts experienced their lowest declines of the year (please refer to SSSG(1) for Royalty Pooled Restaurants)," said Peter Fowler, Chief Executive Officer of SIR Corp. ("SIR"). "During 2009, we were prudent in our capital investment and shifted some of our marketing focus towards individual restaurant initiatives. In the second quarter of 2009, we launched the "Get Fresh" advertising campaign for Jack Astor's, and during Q3 2009, SIR advised the Fund that it would be returning to its regular advertising initiatives including mobile phone applications, print, television, on-line, and radio-based advertising. SIR began a four-week media campaign for Canyon Creek that included print, television, on-line, and radio advertisements. In Q4 2009, SIR focused on gift card advertising initiatives, starting with a bonus program, followed by consumer awareness initiatives, including targeted direct mail, on-line advertising and television advertising," continued Mr. Fowler. "Going forward, we will continue to focus on providing our guests with exciting and memorable dining experiences characterized by innovative menu choices and excellence in service which is the foundation of our success."
Financial Results
The Fund's net earnings for Q4 2009 totaled $1.8 million or $0.34 per Fund Unit (basic and diluted), compared to net earnings of $1.8 million or $0.33 per Fund Unit (basic and diluted) for the same period in 2008. For the years ended December 31, 2009 and 2008 net earnings totaled $7.3 million and $7.5 million, respectively.
Revenue for Royalty Pooled Restaurants ("Pooled Revenue") for the three-month period ended December 31, 2009, increased 15.0% to $50.5 million compared to $43.9 million for the same period in 2008. For the twelve-month period ended December 31, 2009, Pooled Revenue increased 10.9% to $194.1 million compared to $175.0 million for the same period in 2008. The increase in Pooled Revenue in 2009 resulted primarily from the addition of six new restaurants to Royalty Pooled Restaurants effective January 1, 2009. The year-to-date revenues of the six new SIR Restaurants added to Royalty Pooled Restaurants on January 1, 2009, exceeded 80% of the Initial Adjustment's estimated revenue and as a result, a Conversion Distribution of $0.3 million was declared in December 2009 and paid in January 2010. There were nil new restaurants added to SIR's Royalty Pooled Restaurants on January 1, 2010. As a result, there will not be a Conversion Distribution declared in December 2010. On January 1, 2010, SIR converted 243,909 Class B GP Units of the Partnership into 243,909 Class A GP Units of the Partnership.
Distributable cash(2) for Q4 2009 totaled $1.7 million or $0.32 per Fund Unit (basic and diluted), and declared distributions to unitholders totaled $1.8 million, representing a payout ratio(2) of 108.3% for the period. For Q4 2008, distributable cash(2) totaled $1.8 million or $0.33 per Fund Unit (basic and diluted) and declared distributions totaled $1.8 million, representing a payout ratio(2) of 103.6%. For the twelve-month period ended December 31, 2009, distributable cash(2) totaled $7.1 million and declared distributions totaled $7.4 million, representing a payout ratio(2) of 103.6%. For the twelve-month period ended December 31, 2008 distributable cash(2) totaled $7.5 million and declared distributions totaled $7.3 million, representing a payout ratio(2) of 96.8%. The payout ratio since the Fund's inception up to and including Q4 2009 is 98.5%.
3-month 3-month 12-month 12-month
Financial Highlights period period period period
($000s except restaurants ended ended ended ended
and per Unit amounts) Dec. 31, Dec. 31, Dec. 31, Dec. 31,
(unaudited) 2009 2008 2009 2008
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Royalty Pooled Restaurants 45 39 45 39
Pooled Revenue generated by SIR 50,485 43,902 194,143 175,030
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Royalty income to Partnership -
6% of Pooled Revenue 3,030 2,635 11,649 10,502
Partnership other income 6 13 27 60
Partnership expenses (12) (24) (116) (112)
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Partnership earnings 3,024 2,624 11,560 10,450
SIR Corp.'s interest (Class A,
B, and C GP Units) (1,955) (1,477) (6,967) (5,484)
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Partnership income allocated
to Fund 1,069 1,147 4,593 4,966
Interest income 750 750 3,000 3,000
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Total income of the Fund 1,819 1,897 7,593 7,966
General & administrative
expenses (111) (113) (458) (471)
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Net earnings before income
taxes of the Fund 1,708 1,784 7,135 7,495
Future income tax recovery 121 - 121 -
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Net earnings for the period 1,829 1,784 7,256 7,495
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Earnings per Fund unit (basic
and fully diluted) $0.34 $0.33 $1.35 $1.40
Distributable cash(2) per
Fund unit $0.32 $0.33 $1.33 $1.40
Management believes that weaknesses in the general economy have negatively impacted Pooled Revenue and the resulting Royalty, the Fund's net earnings, distributable cash(2) and payout ratios(2) for the three and twelve-month periods ended December 31, 2009, compared to the same periods in 2008.
Same Store Sales(1)
3-month 3-month 12-month 12-month
period period period period
ended ended ended ended
SSSG(1) for Royalty Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Pooled Restaurants 2009 2008 2009 2008
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Jack Astor's 0.4% 2.3% (3.1%) 3.6%
Canyon Creek (5.0%) (4.9%) (10.5%) (0.4%)
Alice Fazooli's (0.7%) (6.1%) (6.9%) 2.0%
Signature Restaurants (6.8%) (13.9%) (13.7%) (0.6%)
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Overall SSSG(1) (1.4%) (2.1%) (5.7%) 2.3%
For the three and twelve-month periods ended December 31, 2009, SIR reported to the Fund a decline in SSS(1) of 1.4% and 5.7%, respectively, compared to a decline in SSS(1) of 2.1% and SSSG(1) of 2.3% respectively in 2008. Jack Astor's(R), which accounts for approximately 69% of Pooled Revenue, reported SSSG(1) of 0.4% for the three-month period ended December 31, 2009, compared to SSSG(1) of 2.3% in Q4 2008. Alice Fazooli's(R) had SSS(1) decline of 0.7% in Q4 2009 compared to SSS(1) decline of 6.1% in Q4 2008. Canyon Creek(R)reported SSS(1) decline of 5.0% in Q4 2009, compared to SSS(1) decline of 4.9% in Q4 2008. For the downtown Toronto Signature Restaurants, which include reds(R), Loose Moose Tap & Grill(R), Far Niente(R)/FOUR(TM)/Petit Four(TM), SSS(1) declined 6.8% in Q4 2009 compared to SSS(1) decline of 13.9% in Q4 2008.
SIR's management believes that the Jack Astor's restaurants, with somewhat lower average cheques, have been less affected by the weaker economy than the higher average cheque restaurants such as Alice Fazooli's, Canyon Creek and the Signature Restaurants. In addition, Jack Astor's sales have been supported by the "Get Fresh" campaign, which launched in Q2 2009 and continued into Q3 2009. This campaign included direct mail, radio and television banner advertisements supporting Jack Astor's key markets. During Q3 2009, SIR advised the Fund that it would be returning to its regular advertising initiatives including mobile phone applications, print, television, on-line and radio advertising. SIR launched a four-week media campaign for Canyon Creek that included print, television, on-line, and radio advertisements. In Q4, SIR focused on gift card advertising iniatives, starting with a bonus program, followed by consumer awareness initiatives, including targeted direct mail, on-line advertising and television advertising.
Corporate Development and Liquidity
SIR has secured sites for three additional new restaurants. Two sites are located at the corners of Yonge and Gerrard Streets in downtown Toronto, with estimated openings in 2011, and the third site is located in Boisbriand, Quebec, where SIR plans to construct a Jack Astor's restaurant with an estimated opening in 2010. Management will continue to monitor economic conditions and consumer confidence. Based on its assessment of these conditions, the timing of restaurant construction and opening schedules will be reviewed regularly and adjusted as necessary.
On November 13, 2009, SIR announced that it entered into a $26.0 million new senior term debt facility ("Credit Agreement"). Part of the proceeds from this Credit Agreement was used to repay $12.7 million outstanding on SIR's construction line. The remaining proceeds as well as a portion of existing cash on hand, were used to repurchase 5,407,000 common shares of SIR from one shareholder of SIR, to acquire the rights to certain debts owed by U.S. S.I.R. L.L.C. from one shareholder of SIR and to pay professional fees and transaction costs related to these transactions. This facility has a 3-year term and a 10-year amortization. Interest is calculated as the greater of 7.80% per annum and the three-month Canadian dollar bankers' acceptance rate ("BA Rate") plus 7.55% per annum. Certain financial covenants apply to SIR. The loan is secured by substantially all of the assets of SIR and most of its subsidiaries, which are also guarantors. The Partnership and the Fund did not guarantee the Credit Agreement. The Credit Agreement qualifies as "permitted indebtedness" within the meaning of the agreements between the Fund, the Partnership and SIR, and as a result the Fund and the Partnership have agreed to subordinate and postpone their claims against SIR to the claims of the new lender.
The Fund's consolidated Financial Statements and Management's Discussion & Analysis ("MD&A"), and the SIR Royalty Limited Partnership's Financial Statements, for the twelve-month periods ended December 31, 2009 will be filed on SEDAR today and will be available via the SEDAR web site at www.sedar.com tomorrow. The Fund's fiscal 2009 consolidated Financial Statements and MD&A are also available via SIR's website at www.sircorp.com.
Fiscal 2009 Conference Call & Webcast
Management of SIR Royalty Income Fund will host a conference call to discuss the Fund's fiscal 2009 results on Wednesday, March 17, 2010 at 10:00 a.m. (ET). The call will be audio-cast live and archived for 90 days at www.newswire.ca or www.sircorp.com. A replay of the conference call will be available until Wednesday, March 24, 2010 at midnight by calling 1-800-642-1687 or 1-416-849-0833, reference number 59497100 followed by the number sign.
(1) Same store sales and same store sales growth exclude revenue from
restaurants which are not included in 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. SSSG 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.
(2) Distributable cash and payout ratio are non-GAAP financial measures
and do not have a standardized meaning prescribed by GAAP. 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. For a detailed
explanation of how the Fund's distributable cash is calculated, please
refer to the Fund's MD&A for the three-month and twelve-month periods
ended December 31, 2009, which can be accessed via the SEDAR web site
(www.sedar.com).
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, 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. Management is not anticipating an improvement, in the near future, in economic conditions (particularly as it relates to the recent deterioration of the economic environment and consumer confidence, 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. For more information concerning the Fund's risks and uncertainties, please refer to the March 31, 2009 Annual Information Form which is available under the Fund's profile at www.sedar.com.
%SEDAR: 00020914E
For further information: Jeff Good, Chief Financial Officer, SIR Corp., 5360 South Service Road, Suite 200, Burlington, Ontario, Canada, L7L 5L1, Tel: (905) 681-2997; Alice Dunning, Investor Relations, Tel: (416) 815-0700 ext. 255, Email: [email protected]
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