SIR Royalty Income Fund reports second quarter results
BURLINGTON, ON, Aug. 12 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) ("the Fund") today reported its financial results for the three- and six-month periods ended June 30, 2010. All comparisons are to the second quarter and year to date in the prior fiscal year.
Second quarter highlights:
- Net earnings for the Fund were relatively unchanged at $1.9 million,
or $0.35 per unit;
- Pooled revenue increased 2.9% to $51.1 million from $49.6 million, the
result of same store sales growth (SSSG(1));
- Distributable cash(2) per unit (basic and diluted) was unchanged at
$0.35; and,
- The payout ratio(2) increased to 98.4% of distributable cash(2), from
97.5%.
"Same store sales(1) continued to experience some positive momentum during the second quarter of 2010 with growth across the majority of our concept brands, as well as at our Signature Restaurants, and an increase in pooled revenue to more than $51 million, while net earnings and distributable cash(2) were relatively unchanged compared to the same period last year," said Peter Fowler, Chief Executive Officer of SIR Corp. "We are encouraged by these results, however, against the backdrop of continued uncertainty around consumer confidence, remain cautiously optimistic about the remainder of 2010. Accordingly, we continue to focus on maximizing the financial performance of our existing restaurants, managing costs, and controlling leverage within the context of modest, prudent expansion to support the stability of our results moving forward."
On March 12, 2009, Bill C-10 - Budget Implementation Act 2009, which further modifies the rules applicable to certain publicly traded or listed trusts and partnerships, received Royal Assent. In particular, Bill C-10 provides rules to facilitate the conversion of an income trust into a corporation on a tax-deferred basis (the "Conversion Rules"). The Conversion Rules provide income trusts with tax efficient structuring options to convert to corporate form in advance of their 2011 taxation year - at which time most income trusts would become subject to a new entity-level tax based on corporate income tax rates. However, the new income tax rules under Bill C-52 do not require certain publicly traded or listed trusts and partnerships to convert into a corporation prior to December 31, 2010. The Fund does not have any current plans to convert to a corporation. As a result, assuming no material changes in the Fund's financial performance from its current levels, the Fund would be expected to reduce its distributions from their then current levels by approximately 30% commencing January 2011.
Financial Results
Financial Highlights
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3-month 3-month 6-month 6-month
(in thousands of dollars period period period period
except restaurants and ended ended ended ended
per Unit amounts) June 30, June 30, June 30, June 30,
(unaudited) 2010 2009 2010 2009
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Royalty Pooled Restaurants 45 45 45 45
Pooled Revenue generated by SIR 51,064 49,627 98,604 95,119
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6% of Pooled Revenue 3,064 2,977 5,916 5,707
Partnership other income 6 6 12 15
Partnership expenses (19) (27) (50) (73)
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Partnership earnings 3,051 2,956 5,878 5,649
SIR's interest (Class A, B
and C GP Units) (1,791) (1,715) (3,521) (3,330)
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Partnership income allocated
to Fund(3) 1,260 1,241 2,357 2,319
Interest income(4) 750 750 1,500 1,500
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Total income of the Fund 2,010 1,991 3,857 3,819
General & administrative expenses (133) (96) (211) (224)
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Net earnings for the period 1,877 1,895 3,646 3,595
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Earnings per Fund unit (basic
and fully diluted) $0.35 $0.35 $0.68 $0.67
Distributable cash per Fund unit $0.35 $0.35 $0.68 $0.67
The Fund's net earnings for the quarter totaled $1.9 million, or $0.35 per Fund Unit (basic and diluted), compared to $1.9 million, or $0.35 per Fund Unit (basic and diluted), for the second quarter of last year.
Revenue for the Royalty Pooled Restaurants for the quarter increased 2.9% to $51.1 million compared to $49.6 million for the same period in 2009. The increase was the result of growth in SSS(1). There were no new restaurants opened during the comparable periods.
Distributable cash(2) for the quarter totaled $1.9 million, or $0.35 per Fund unit (basic and diluted), and declared distributions to unitholders totaled $1.8 million, representing a payout ratio(2) of 98.4% for the period. For Q2, 2009, distributable cash(2) totaled $1.9 million, or $0.35 per Fund unit (basic and diluted), and declared distributions totaled $1.8 million, representing a payout ratio(2) of 97.5%.
Same Store Sales
For the three-month period ended June 30, 2010, SIR reported to the Fund SSSG(1) of 2.9% for the Royalty Pooled Restaurants. During 2010, the Canadian Restaurant and Foodservices Association is projecting a modest increase in sales.
SSSG(2) for the 3-month period 6-month period
Royalty Pooled ended ended
Restaurants June 30, 2010 June 30, 2010
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Jack Astor's 3.6% 4.5%
Canyon Creek (0.8%) (0.3%)
Alice Fazooli's 3.5% 4.2%
Signature Restaurants 1.9% 2.9%
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Overall SSSG(2) 2.9% 3.7%
The Fund's 2010 second quarter unaudited consolidated Financial Statements and Management's Discussion & Analysis ("MD&A") and the SIR Royalty Limited Partnership's Financial Statements, for the three-month and six-month periods ended June 30, 2010 will be filed on SEDAR today and will be available via the SEDAR web site at www.sedar.com tomorrow. The Fund's 2010 second quarter 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")
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- and six-month periods
ended June 30, 2010, 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
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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. 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 pronouncements. For more information concerning the Fund's risks and uncertainties, please refer to the March 31, 2010 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; Lawrence Chamberlain, Investor Relations, Tel: 416-815-0700 ext. 257, Email: [email protected]
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