SIR Royalty Income Fund Reports SIR Corp. Fiscal 2016 Second Quarter Results

BURLINGTON, ON, March 30, 2016 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today announced that SIR Corp. ("SIR" or the "Company"), the operating entity from which the Fund earns equity income and interest income, has filed its financial results for the 12-week and 24-week periods ended February 14, 2016 ("Q2 2016" and "YTD 2016", respectively).   

SIR has advised the Fund that revenue from corporate restaurant operations for Q2 2016 increased 4.1% to $61.2 million compared to $58.8 million for the 12-week period ended February 15, 2015 ("Q2 2015"). Revenue from corporate restaurant operations for YTD 2016 increased 4.5% to $124.3 million from $119.0 million for the 24-week period ended February 15, 2015 ("YTD 2015"). The increase in revenue for both periods is attributable to the addition of new restaurants and overall same store sales growth ("SSSG")⁽¹⁾.

Same Store Sales^(1)	12-week period ended February 14, 2016 (unaudited)	24-week period ended February 14, 2016 (unaudited)
Jack Astor's®	(0.6%)	0.3%
Canyon Creek®	4.5%	2.5%
Scaddabush Italian Kitchen & Bar® / Alice Fazooli's®	14.9%	9.9%
Signature Restaurants	4.1%	8.1%
Overall SSSG^(1)	1.6%	2.0%

Overall same store sales ("SSS")⁽¹⁾ increased 1.6% and 2.0% for Q2 2016 and YTD 2016, respectively, compared to the corresponding periods in the prior year. Jack Astor's, which contributed approximately 71% of Pooled Revenue in Q2 2016, experienced a decline in SSS⁽¹⁾ of 0.6% in the quarter and same store sales growth ("SSSG")⁽¹⁾ of 0.3% for YTD 2016. Jack Astor's YTD 2016 SSSG⁽¹⁾ reflects increased guest counts during the Toronto Blue Jays' strong end to their 2015 regular season and subsequent playoff run during SIR's fiscal 2016 first quarter. The slight decline in Jack Astor's SSS⁽¹⁾ in Q2 2016 reflects the temporary closure of the Jack Astor's location in Scarborough, Ontario for renovations during the quarter, and a decline in overall beverage sales compared to the corresponding period a year ago. SIR management has since made revisions to its beverage programs to address the decline in beverage sales. Jack Astor's Scarborough was closed for 16 days during Q2 2016 and reopened on December 16, 2015. Excluding the sales of Jack Astor's Scarborough, Jack Astor's generated SSSG⁽¹⁾ of 0.7% and 1.1% in Q2 2016 and YTD 2016, respectively.

Increased guest counts at Canyon Creek positively contributed to the strong SSSG⁽¹⁾ of 4.5% and 2.5% for Q2 2016 and YTD 2016, respectively. Management continues to evaluate a comprehensive plan to improve the long-term performance of all Canyon Creek locations.

Scaddabush Italian Kitchen & Bar ("Scaddabush"), together with Alice Fazooli's, generated SSSG⁽¹⁾ of 14.9% and 9.9% for Q2 2016 and YTD 2016, respectively, largely due to SIR's continuation of its program to evolve the Alice Fazooli's concept into the popular Scaddabush brand. Since introducing its new Scaddabush concept, SIR has converted two Alice Fazooli's to Scaddabush (Mississauga and Richmond Hill) and opened one new Scaddabush location (downtown Toronto). The strong SSSG⁽¹⁾ for Scaddabush has been offset by SSS⁽¹⁾ declines in the two remaining Alice Fazooli's locations that have not yet been converted to Scaddabush. SIR intends to convert these two remaining Alice Fazooli's restaurants in calendar 2016.

The Signature Restaurants generated SSSG⁽¹⁾ of 4.1% and 8.1% for Q2 2016 and YTD 2016, respectively.  This was primarily attributable to increased guest counts at the Loose Moose due to the Toronto Blue Jays' strong end to their 2015 regular season and subsequent playoff run in Q1 2016, and the improved sales performance at Reds Midtown Tavern and Dukes Refresher & Bar in YTD 2016.

SIR's net earnings and comprehensive income for Q2 2016 were $9.1 million, compared to a net loss and comprehensive loss of $4.6 million in Q2 2015. SIR's positive net earnings and comprehensive income for Q2 2016 reflects the positive impact created by a $14.7 million change in the expense related to the non-cash amortized cost of Ordinary LP Units and Class A LP Units of the SIR Royalty Limited Partnership (the "Partnership") compared to Q2 2015, partially offset by a $0.4 million decrease in earnings from corporate restaurant operations. The decrease in earnings from corporate restaurant operations in Q2 2016 was primarily attributable to the 16-day closure of Jack Astor's Scarborough for renovations during the period. Although, the minimum wage increase that went into effect on October 1, 2015 in Ontario also negatively impacted Q2 2016 earnings from corporate restaurant operations, Management was successful in mitigating the impact with improved labour administration.

SIR's net earnings and comprehensive income for YTD 2016 were $5.3 million, compared to a net loss and comprehensive loss of $4.6 million. SIR's positive net earnings and comprehensive income for YTD 2016 reflects the positive impact created by a $12.6 million change in the expense related to the non-cash amortized cost of Ordinary LP Units and Class A LP Units of the Partnership, partially offset by a $2.0 million decrease in earnings from corporate restaurant operations. The decrease in earnings from corporate restaurant operations in YTD 2016 was attributable to increased marketing costs and costs associated with the launch of a new menu at Jack Astor's, which affected food costs, employee training costs and operating costs; the increase in Ontario's minimum wage, effective October 1, 2015; and the opening of one new Jack Astor's restaurant at the beginning of Q1 2016, as costs are typically higher at the beginning of a new restaurant opening as a percentage of sales.

SIR's Adjusted Net Loss⁽²⁾ for Q2 2016 was $0.03 million, compared to Adjusted Net Earnings⁽²⁾  of $0.9 million in Q2 2015. Adjusted Net Loss⁽²⁾ for YTD 2016 was $0.7 million, compared to Adjusted Net Earnings⁽²⁾ of $1.9 million in YTD 2015.  The negative variances are primarily attributable to decreased year-over-year earnings from corporate restaurant operations, as noted above.

SIR Corporate Developments
In March 2015, SIR opened a third Jack Astor's restaurant in the Ottawa, Ontario market. The second Jack Astor's restaurant in the Ottawa market was opened in September 2015. Both of these new Jack Astor's restaurants were added to the Fund's Royalty Pool on January 1, 2016. In October 2015, SIR completed the conversion of its Alice Fazooli's location in Richmond Hill, Ontario into a new Scaddabush location. In December 2015, SIR completed a major renovation of its Jack Astor's restaurant in Scarborough, Ontario. SIR is currently building a new Scaddabush restaurant in the extra space that was created after renovating this Jack Astor's restaurant.

Liquidity and Capital Resources
As at February 14, 2016, SIR had cash and cash equivalents of $3.4 million, compared to $7.9 million as at August 30, 2015, SIR's fiscal 2015 year end. The decrease is attributable to $4.0 million used in investing activities and $1.1 million used in financing activities during the period, partially offset by $0.5 million in cash provided by operations.

On July 6, 2015 SIR entered into a new credit agreement (the "Credit Agreement") with a Schedule I Canadian chartered bank (the "Lender"). The Credit Agreement provides a maximum principal amount of $30.0 million, consisting of a $20.0 million revolving term credit facility ("Credit Facility 1") and a $10.0 million revolving term loan ("Credit Facility 2"). SIR and the Lender have also entered into a purchase card agreement providing credit of up to an additional $5.0 million. The previous term loan was repaid by a full draw down of Credit Facility 2 and a partial draw down of Credit Facility 1. The remaining funds available through Credit Facility 1 will be used for general corporate and operating purposes, including capital spending on new and renovated restaurants.

Outlook
SIR currently has plans to open two new Scaddabush restaurants in calendar year 2016, followed by one new Jack Astor's restaurant and one new Reds restaurant during calendar year 2017. SIR plans to convert its two remaining Alice Fazooli's locations to the popular Scaddabush brand by the end of calendar year 2016. SIR's management is currently evaluating the recent Jack Astor's renovations and considering a system-wide evolution. 

SIR continues to monitor economic conditions and consumer confidence and considers new store developments and renovations to existing restaurants where appropriate. Based on its assessment of these conditions, the timing of new restaurant construction and renovations as well as related opening schedules will be reviewed regularly by SIR and adjusted as necessary.

SIR's Q2 2016 filings, which include its unaudited consolidated financial statements and management's discussion & analysis, can be accessed via the Fund's profile on the SEDAR website at www.sedar.com under "Other".

About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 59 restaurants and one seasonal retail outlet in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 40 locations; Scaddabush Italian Kitchen & Bar®, together with Alice Fazooli's®, for a total of five locations; and Canyon Creek®, with eight locations. SIR also operates one-of-a-kind "Signature" brands in downtown Toronto, including Reds® Wine Tavern, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four®, and The Loose Moose®. 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 57 restaurants currently included in the Royalty Pool. SIR also owns and operates Duke's Refresher® & Bar in downtown Toronto, one seasonal Signature restaurant, Abbey's Bake House®, and one seasonal retail outlet, which are not currently part of the Royalty Pool. 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 ("SSS") and same store sales growth ("SSSG") are non-GAAP financial measures and do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS"). 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. SSSG is the percentage increase in SSS over the prior comparable period. SSS includes revenue from all SIR restaurants except for those restaurants that were not open for the entire comparable period and the seasonal Duke's Refresher & Bar and Abbey's Bakehouse, which are both located in Muskoka, Ontario. SSS for Scaddabush/Alice Fazooli's includes three Scaddabush Italian Kitchen & Bar restaurants and two Alice Fazooli's restaurants.

(2) Adjusted Net Earnings (Loss) is calculated by removing the change in amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership from the net earnings (loss) and comprehensive income (loss) for the period. Adjusted Net Earnings (Loss) is a non-GAAP financial measure and does not have a standardized meaning prescribed by IFRS. Management believes that in addition to net earnings (loss) and comprehensive income (loss), Adjusted Net Earnings (Loss) is a useful supplemental measure to evaluate SIR's performance. Changes in the amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership is a non-cash transaction and varies with changes in the market price of the Fund units. The exclusion of the change in amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership eliminates this non-cash impact.  Management cautions investors that Adjusted Net Earnings (Loss) should not replace net earnings or loss or cash flows from operating, investing and financing activities (as determined in accordance with IFRS), as an indicator of SIR's performance. SIR's method of calculating Adjusted Net Earnings (Loss) may differ from the methods used by other issuers. Therefore, SIR's Adjusted Net Earnings (Loss) may not be comparable to similar measures presented 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 SIR Holdings Trust (the "Trust"), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "would", "should", "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: market conditions at the time of this filing; competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; changes in foreign exchange; 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 disclose or 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, competition, 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 that the tax effects on distributions will remain consistent with current regulations or pronouncements, and also in estimating the revenue for new restaurants, Management has assumed that they will operate consistent with other similar SIR restaurants. For more information concerning the Fund's risks and uncertainties, please refer to the March 11, 2016 Annual Information Form, for the period ended December 31, 2015, which is 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: [phone]; Bruce Wigle, Bay Street Communications, Tel: [phone]