SIR Royalty Income Fund Reports Fourth Quarter and Year End Fiscal 2011 Results

Fourth quarter performance marked by same store sales growth of 5.0%

BURLINGTON, ON, March 22, 2012 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the three-month and twelve-month periods ended December 31, 2011 (Q4 2011 and fiscal 2011 year, respectively).  All comparisons are to the corresponding period in the prior fiscal year.

Beginning with the first quarter of 2011, the Fund is reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"), as required for public companies in Canada. Previously, the Fund reported its financial results under Canadian Generally Accepted Accounting Principles ("GAAP"). The Fund has consistently applied the same accounting policies in its opening IFRS consolidated balance sheet at January 1, 2010 and throughout all 2011 quarters, as if these policies had always been in effect.

Q4 2011 Highlights:

• Net earnings for the Fund were $1.4 million in Q4 2011, or $0.27 per unit, compared to a net loss under IFRS of $5.9 million for Q4 2010⁽¹⁾;
• Pooled Revenue increased 7.0% to $54.7 million in Q4 2011 from $51.1 million in Q4 2010;
• Same Store Sales Growth (SSSG)⁽²⁾ for the Royalty Pooled Restaurants was 5.0% in Q4 2011 compared to 1.2% in Q4 2010;
• Distributable cash⁽³⁾ per Fund unit (basic and diluted) was $0.27;
• The payout ratio⁽³⁾ decreased to 91.6% from 98.4% of distributable cash⁽³⁾ in Q4 2010; and
• SIR entered into a First Amendment to its Amended Credit Agreement to extend and make coterminous the terms of the $12.0 million Development Loan and the $26.0 million Term Loan, extending both terms to November 14, 2016 along with a reduction of the variable interest rate of the Term Loan to the same rate as that of the Development Loan.

Fiscal 2011 Highlights:

• Net earnings for the Fund were $5.5 million in fiscal 2011, or $1.02 per unit, compared to a net loss under IFRS of $15.0 million for 2010⁽¹⁾;
• Pooled Revenue increased 4.8% to $209.2 million in fiscal 2011 from $199.6 million in fiscal 2010;
• SSSG⁽²⁾ for the Royalty Pooled Restaurants was 2.8% in both fiscal 2011 and 2010;
• Distributable cash⁽³⁾ per Fund unit (basic and diluted) was $1.03;
• The payout ratio⁽³⁾ decreased to 99.9% from 100.1% of distributable cash⁽³⁾ in 2010; and
• SIR has secured four additional sites for five new restaurants with expected openings for three in 2012 and the other two restaurants in 2013.

"Our positive results for the year reflect a modest increase in overall same store sales of 2.8% over 2010," said Peter Fowler, President and Chief Executive Officer of SIR Corp.  "We completed renovations at a number of our Jack Astor's restaurants in conjunction with our commitment to maximizing performance at our locations.  Overall, we are committed to appropriately managing costs while at the same time sustaining and growing restaurant sales.  We continue to monitor the factors affecting our industry including economic conditions and consumer confidence in an effort to deliver positive and reliable results for Unitholders."

Financial Results

Financial Highlights ($000s except restaurants and per Unit amounts) (unaudited)		3-month period ended Dec 31, 2011	3-month period ended Dec 31, 2010	12-month period ended Dec 31, 2011	12-month period ended Dec 31, 2010
Royalty Pooled Restaurants		46	45	46	45
Pooled Revenue generated by SIR		54,667	51,073	209,187	199,647
Royalty income to Partnership - 6% of Pooled Revenue		3,279	3,065	12,551	11,979
Partnership other income		13	9	37	28
Partnership expenses		(13)	(35)	(79)	(116)
Partnership earnings		3,279	3,039	12,509	11,891
SIR Corp.'s interest (Class A, B, and C GP Units)		(1,948)	(1,790)	(7,475)	(7,092)
Partnership income allocated to Fund		1,331	1,249	5,034	4,799
Interest income		750	750	3,000	3,000
Total income of the Fund		2,081	1,999	8,034	7,799
General & administrative expenses		(73)	(120)	(376)	(416)
Earnings before Change in amortized cost on Fund Units and Income tax expense		2,008	1,879	7,658	7,383
Change in amortized cost on Fund Units		-	(7,767)^(1)	-	(22,418)^(1)
Net earnings (loss) before income taxes of the Fund		2,008	(5,888)	7,658	(15,035)
Income tax expense		(564)	-	(2,191)	-
Net earnings (loss) for the period		1,444	(5,888)	5,467	(15,035)
Earnings per Fund Unit (basic and diluted)		$0.27	n/a^(1)	$1.02	n/a^(1)

The Fund's net earnings for Q4 2011 totaled $1.4 million, or $0.27 per Fund Unit (basic and diluted), compared to a net loss under IFRS of $5.9 million for Q4 2010⁽¹⁾.

Pooled Revenue for Q4 2011 increased 7.0% to $54.7 million compared with $51.1 million for the comparable period in 2010.  As at December 31, 2011, there were 46 restaurants included in Royalty Pooled Restaurants.

Distributable cash⁽³⁾ for Q4 2011 totaled $1.5 million or $0.27 per Fund Unit (basic and diluted), and distributions to unitholders totaled $1.3 million, representing a payout ratio⁽³⁾ of 91.6% for the period. For the fiscal 2011 year, distributable cash⁽³⁾ totaled $5.5 million or $1.03 per Fund Unit (basic and diluted) and distributions to unitholders totaled $5.5 million, representing a payout ratio⁽³⁾ of 99.9%.  The payout ratio since the Fund's inception, up to and including Q4 2011, is 98.9%.

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^(3)) (unaudited)		3-month period ended Dec 31, 2011	3-month period ended Dec 31, 2010	12-month period ended Dec 31, 2011	12-month period ended Dec 31, 2010
Cash provided by operating activities		2,151	1,848	7,607	7,392
Add/(deduct):
	Net change in non-cash working capital items	(429)	180	(2,236)	(116)
	Net change in distribution receivable from the Partnership	(267)	(149)	142	107
Distributable cash^(3)		1,455	1,879	5,513	7,383
Cash distributed for the period		1,334	1,848	5,507	7,392
Surplus/(shortfall) of distributable cash^(3)		121	31	6	(9)
Payout ratio^(3)		91.6%	98.4%	99.9%	100.1%
Distributable cash^(3) per Fund Unit (basic and diluted)		$0.27	$0.35	$1.03	$1.38

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

Same Store Sales⁽²⁾

SSSG^(2) for Royalty Pooled Restaurants	3-month period ended Dec 31, 2011	3-month period ended Dec 31, 2010	12-month period ended Dec 31, 2011	12-month period ended Dec 31, 2010
Jack Astor's^®	7.3%	1.8%	3.9%	3.2%
Canyon Creek^®	(0.7%)	0.7%	0.4%	0.5%
Alice Fazooli's^®	(0.9%)	(3.9%)	(4.5%)	1.3%
Signature Restaurants	3.3%	3.3%	5.7%	5.8%
Overall SSS^(2)	5.0%	1.2%	2.8%	2.8%

For the three-month and twelve-month periods ended December 31, 2011, SIR reported to the Fund an increase in SSS⁽²⁾ of 5.0% and 2.8%, respectively. Jack Astor's, which accounts for approximately 69% of Pooled Revenue, reported an increase in SSS⁽²⁾ of 7.3% for Q4 2011 and 3.9% for the fiscal 2011 year.  For Q4 2011 and fiscal 2011 year, Alice Fazooli's reported a decline in SSS⁽²⁾ of 0.9% and 4.5% respectively.  Alice Fazooli's has two locations that have been renovated.  These two renovated locations are growing SSS⁽²⁾ in both, Q4 2011 and the fiscal 2011 year. This growth in SSS⁽²⁾ is being offset by declines in SSS⁽²⁾ in the other three Alice Fazooli's locations, one of which has been closed subsequent to fiscal 2011.  SIR's Signature Restaurants, which include reds^®, Loose Moose Tap & Grill^®, and Far Niente^®/FOUR^®/Petit Four^® reported SSSG⁽²⁾ of 3.3% and 5.7% for Q4 2011 and fiscal 2011 year, respectively.

SIR continues to focus on sustaining and growing restaurant sales and profits while managing costs in light of the economic conditions in Canada.  The Canadian Restaurant and Foodservices Association, in its 2012 - 2016 Long Term Foodservice Forecast is forecasting that sales in 2012, in the full service restaurant industry, will have a modest increase.  SIR remains cautious and continues to monitor the economy and consumer confidence as its sales have not yet achieved its pre-recession levels.

Corporate Developments

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 sites for five new restaurants.  It is expected that there will be a new Jack Astor's restaurant opening on Front Street near the St. Lawrence Market in Toronto, Ontario, in Q2 2012, in Kingston, Ontario, in Q3 2012, and in Pickering, Ontario, in Q4 2012.  Additionally, two new restaurants will be opening at the corner of Yonge and Gerrard Streets in Toronto, Ontario in fiscal 2013.

Subsequent to year end, 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 revenues 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.

On August 26, 2011, SIR entered into an Amended and Restated Loan Agreement that added a $12.0 million Development Loan to its existing $26.0 million Term Loan.  The Development Loan is available to SIR by way of multiple advances, dispensed on or prior to May 18, 2012 and is intended to finance the building of new restaurants and to renovate existing restaurants to increase SSS⁽²⁾ and strengthen SIR's portfolio of restaurants.  Further to this, on November 25, 2011, SIR entered into a First Amendment to the Amended Credit Agreement to extend and make coterminous the terms of the $12.0 million Development Loan and the $26.0 million Term Loan.  Under the terms of the First Amendment, the term of the $26.0 million Term Loan was extended from November 13, 2012 to November 14, 2016 and the term of the Development Loan was extended from August 26, 2016 to November 14, 2016.  Additionally, under the terms of the First Amendment, the variable interest rate of the Term Loan is reduced to the same rate as that of the Development Loan.

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 year ended December 31, 2011 will be filed on SEDAR today and will be available via the SEDAR web site at www.sedar.com tomorrow. The Fund's fiscal 2011 consolidated Financial Statements and MD&A are also available via SIR's website at www.sircorp.com.

(1) Under IFRS, the Fund Units have been classified as a liability with changes in the carrying value in the Fund Units recorded in the consolidated statement of earnings (loss).  The Fund's Declaration of Trust was amended on December 20, 2010 at which time the Fund Units met the definition of a puttable instrument under IFRS and were then reclassified to equity.  As a result, earnings per unit have not been calculated for fiscal 2010.

(2) 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 2011 and fiscal 2010.

(3) 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 year ended December 31, 2011, 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 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 46 restaurants included in the Royalty pool as at December 31, 2011. 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 31, 2011 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]