SIR Royalty Income Fund Reports SIR Corp. Fiscal 2012 Year End Results
BURLINGTON, ON, Nov. 22, 2012 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) ("the Fund") today announced that SIR Corp. ("SIR"), the operating entity from which the Fund earns distribution income and interest income, has filed its financial results for the 16-week and 52-week periods ended August 26, 2012 ("Q4 FY2012" and "fiscal 2012", respectively).
SIR has advised the Fund that revenue from corporate restaurant operations for Q4 FY2012 increased 5.3% to $71.4 million compared to $67.8 million for the 16-week period ended August 28, 2011 ("Q4 FY2011"). For fiscal 2012, revenue increased 7.2% to $221.6 million compared to $206.7 million for the 52-week period ended August 28, 2011 ("fiscal 2011"). Increased revenue resulted from overall Same Store Sales Growth(1) ("SSSG") and the addition of two new Jack Astor's® restaurants, partially offset by the closure of two restaurants, during fiscal 2012.
| Same Store Sales Growth(1) ("SSSG") |
16-week period ended August 26, 2012 (unaudited) |
52-week period ended August 26, 2012 (unaudited) |
| Jack Astor's ® | 4.9% | 6.4% |
| Canyon Creek® | 0.7% | (0.1%) |
| Alice Fazooli's® | (4.5%) | (0.7%) |
| Signature Restaurants | (3.9%) | (0.6%) |
| Overall SSSG(1) | 3.1% | 4.3% |
Same store sales(1) ("SSS") for Q4 FY2012 increased 3.1% to $64.7 million from $62.7 million in Q4 FY2011. For fiscal 2012, SSS(1) increased 4.3% to $204.7 million from $196.2 million in fiscal 2011.
The net loss attributable to shareholders of SIR Corp. for Q4 FY2012 was $0.2 million, compared to a net loss of $2.2 million for Q4 FY2011. The net loss attributable to shareholders of SIR Corp. for fiscal 2012 was $2.2 million, compared to a net loss of $4.8 million in fiscal 2011.
SIR Corporate Development
During Q4 FY2012, SIR had 49 restaurants open in Canada. In the first quarter of fiscal 2012, SIR opened a new Jack Astor's restaurant on Argentia Road in Mississauga, Ontario. In Q4 FY2012, SIR opened a new Jack Astor's restaurant on Front St., near the St. Lawrence Market, in downtown Toronto, Ontario. Subsequent to fiscal 2012 year-end, SIR opened two new Jack Astor's restaurants, one in Laval, Quebec and one in Kingston, Ontario. These four new Jack Astor's restaurants will be added to the Royalty Pooled Restaurants effective January 1, 2013.
SIR completed renovations of four Jack Astor's restaurants in fiscal 2012. Subsequent to fiscal 2012 year-end, SIR completed a major renovation at Reds® and repositioned this core Signature restaurant as Reds® Wine Tavern. SIR also completed a renovation of another Jack Astor's restaurant subsequent to fiscal 2012 year-end.
During fiscal 2012, SIR closed its Alice Fazooli's® restaurant in downtown Toronto, Ontario and its Jack Astor's restaurant in Kitchener, Ontario. SIR is compensating the Fund for these restaurant closures through a Make-Whole Payment from the date of their respective closures until they cease to be part of the Royalty Pooled Restaurants on January 1, 2013. In addition, the number of Class B GP Units that SIR will convert to Class A GP Units for new SIR Restaurants will be reduced by an adjustment for these Closed Restaurants.
SIR has commitments to lease properties upon which it plans to build six new restaurants. SIR expects to open five of these new restaurants in fiscal 2013, with the remaining one new restaurant expected to open in fiscal 2014.
Subsequent to August 26, 2012, SIR filed a notice of its intention to convert up to 600,000 Class A GP Units into Fund units and to sell the Fund units. The proceeds will be used to fund the construction of new restaurants and the renovation of existing restaurants. As at November 19, 2012, 523,900 Class A GP units have been converted to Fund units and subsequently sold. The conversion and sale of units will be completed by November 22, 2012.
As a result of SIR exercising its rights to convert these Class A GP units into Fund units, the Fund issued 523,900 Fund units to SIR in exchange for an increased interest in the Partnership. Accordingly, this transaction does not have a dilutive effect on the Fund unitholders. In addition, the number of outstanding Fund units increases by 523,900 or 9.8%, from 5,356,667 to 5,880,567.
Liquidity and Capital Resources
As at August 26, 2012, SIR had cash and cash equivalents of $10.5 million compared to $5.2 million as at August 28, 2011. Cash provided by continuing operations for Q4 FY2012 totaled $5.2 million, compared with $4.2 million for Q4 FY2011. Cash provided by continuing operations for fiscal 2012 was $7.4 million compared with $5.3 million for fiscal 2011. During Q4 FY2012, cash used in continuing investing activities was $4.5 million compared with $2.1 million in Q4 FY2011. For fiscal 2012, SIR used cash in continuing investing activities of $11.1 million compared with $6.1 million in fiscal 2011. Increased investing activities in fiscal 2012 were primarily attributable to construction costs incurred for four new Jack Astor's restaurants, two of which opened in Q1 and Q4 FY2012, respectively, and the remaining two opened in the first quarter of fiscal 2013. In addition, there were capital expenditures for four Jack Astor's renovations in fiscal 2012. In fiscal 2011, there were construction costs incurred for two new Jack Astor's restaurants, and capital expenditures for two Jack Astor's renovations.
On August 26, 2011, SIR entered into an Amended Credit Agreement that added a $12.0 million Development Loan to its existing $26.0 million Term Loan to finance the building of new restaurants and to renovate existing restaurants to increase SSS(1) and strengthen SIR's portfolio of restaurants. As at August 26, 2012, the Development Loan was fully drawn. The Term Loan and the Development Loan are due November 14, 2016.
Outlook
The Canadian Restaurant and Foodservice Association ("CRFA") has forecasted that sales in the full-service restaurant category in Canada will increase by 4.1% in calendar 2012, and average 4.0% growth over the next five years. SIR will continue to focus on sustaining and growing same store sales and profits, and strategically expanding its restaurant portfolio. The Company will carefully monitor economic conditions and manage its capital expenditures and growth plans accordingly. In addition to the six new restaurants that SIR has lease commitments for, new restaurant sites will be considered when appropriate and will be subject to the availability of long-term financing.
SIR's fiscal 2012 year-end filings, which include its audited consolidated financial statements and management's discussion & analysis, can be accessed via the Fund's profile on the SEDAR web site at www.sedar.com under "Other".
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 51 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 34 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® 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 47 restaurants currently included in the Royalty pool (45 operating and two closed restaurants). SIR also owns and operates two seasonal Signature restaurants: Abbey's Bakehouse™ and Duke's Refresher™. These two restaurants are not subject to the License and Royalty Agreement. 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.
(1) Same store sales includes revenue from all SIR restaurants except for those restaurants that were not open for the entire comparable periods in fiscal 2012 and fiscal 2011. Same store sales growth ("SSSG") is the percentage increase in SSS over the prior comparable period. SSS and SSSG are non-GAAP financial measures and do not have standardized meanings prescribed by ASPE. 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.
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 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.
SOURCE: SIR Royalty Income Fund
Jeff Good
Chief Financial Officer
Tel: 905-681-2997
Bruce Wigle
BMIR Investor Relations
Tel: 416-447-4740 ext. 232
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