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

BURLINGTON, ON, June 21, 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 36-week periods ended May 8, 2016 ("Q3 2016" and "YTD 2016", respectively).   

SIR has advised the Fund that revenue from corporate restaurant operations for Q3 2016 increased 3.8% to $64.4 million compared to $62.1 million for the 12-week period ended May 10, 2015 ("Q3 2015"). Revenue from corporate restaurant operations for YTD 2016 increased 4.3% to $188.8 million from $181.0 million for the 36-week period ended May 10, 2015 ("YTD 2015"). The increase in revenue for both periods is attributable to the addition of two new restaurants and same store sales growth ("SSSG")⁽¹⁾.

Same Store Sales^(1)	12-week period ended May 8, 2016 (unaudited)	36-week period ended May 8, 2016 (unaudited)
Jack Astor's®	(2.1%)	(0.5%)
Canyon Creek®	4.0%	3.0%
Scaddabush Italian Kitchen & Bar®/Alice Fazooli's®	13.9%	11.2%
Signature Restaurants	22.8%	12.7%
Overall SSSG^(1)	1.6%	1.8%

Overall same store sales ("SSS")⁽¹⁾ increased 1.6% and 1.8% for Q3 2016 and YTD 2016, respectively, compared to the corresponding periods in the prior year. Jack Astor's, which contributed approximately 73% of Pooled Revenue in Q3 2016, had SSS⁽¹⁾ declines of 2.1% in the quarter and 0.5% for YTD 2016.  SSS⁽¹⁾ for Jack Astor's locations, especially those near Toronto's Rogers Centre and Air Canada Centre, were favourably impacted by the strong end-of-season and playoff runs of the Toronto Blue Jays and Toronto Raptors in the first and third quarters of 2016, respectively. This favourable impact was offset by the negative sales impact resulting from the late start to the patio season in Q3 2016 relative to Q3 2015, due to cooler temperatures in April 2016, and sales declines in two restaurants affected by their weak local economies (Jack Astor's in Calgary, Alberta and Jack Astor's in St. John's, Newfoundland). Additionally, SSS⁽¹⁾ in the YTD 2016 period was unfavourably affected by the 16-day closure for renovations of the Jack Astor's location in Scarborough, Ontario, as well as a decline in overall beverage sales compared to the corresponding period a year ago. SIR management has since made revisions to its beverage programs, including the recent launch of its new summer beverage menu.

Concerted efforts by SIR's management to improve leadership and execution at Canyon Creek locations are resulting in significantly improved performance. Including Q3 2016, Canyon Creek has posted three consecutive quarters of SSSG⁽¹⁾, including SSSG⁽¹⁾ of 4.0% and 3.0% for the 12-week and 36-week periods ended May 8, 2016 respectively.

Scaddabush Italian Kitchen & Bar ("Scaddabush"), together with Alice Fazooli's, generated SSSG⁽¹⁾ of 13.9% and 11.2% for Q3 2016 and YTD 2016, respectively. The improvement is largely due to SIR's continuation of its program to evolve the Alice Fazooli's concept into the more popular Scaddabush brand, which continues to generate double-digit improvement in sales. The strong combined Scaddabush/Alice Fazooli's SSSG⁽¹⁾ for YTD 2016 was partially offset by SSS⁽¹⁾ declines at the two remaining Alice Fazooli's locations that have not yet been converted to Scaddabush. SIR intends to convert these restaurants during calendar year 2017 and also plans to open a new Scaddabush restaurant in Scarborough, Ontario this fiscal year, and a fifth location on Front Street in downtown Toronto in the first quarter of fiscal 2017.

The Signature Restaurants posted SSSG⁽¹⁾ of 22.8% and 12.7% for Q3 2016 and YTD 2016, respectively.  Strong sales at the Loose Moose® benefitted, in part, from the Blue Jays and Raptors success, as noted above, in the first and third quarters of 2016. In addition, both Reds Midtown Tavern® and Dukes Refresher & Bar® continue to demonstrate improved sales performance for YTD 2016. SSSG⁽¹⁾ of the Signature Restaurants also reflects a full quarter sales contribution from Far Niente^®/FOUR^®/Petit Four^® in Q3 2016, as this restaurant was closed for 40 days during Q3 2015 in order to repair water damage caused by a burst pipe.  

SIR's net loss and comprehensive loss were $13.4 million and $8.1 million for Q3 2016 and YTD 2016, respectively, compared to net loss and comprehensive loss of $3.7 million and $8.3 million for Q3 2015 and YTD 2015, respectively. The increased net loss and comprehensive loss for Q3 2016 reflects the negative impact created by the $11.0 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 during the quarter, partially offset by a $1.2 million increase in earnings from corporate restaurant operations.  

SIR's Adjusted Net Earnings⁽²⁾ were $1.8 million and $1.1 million in Q3 2016 and YTD 2016, respectively, compared to $0.6 million and $2.5 million in Q3 2015 and YTD 2015, respectively. The variances are primarily due to increased earnings from corporate restaurant operations in Q3 2016 and a decrease in YTD 2016. 

SIR Corporate Developments
During the third quarter of fiscal 2015, SIR opened one new Jack Astor's restaurant in Ottawa, Ontario, followed by a second Jack Astor's restaurant in Ottawa in Q1 2016. Both of these new Jack Astor's restaurants were added to the Fund's Royalty Pool on January 1, 2016. During Q1 2016, SIR completed the conversion of its Alice Fazooli's location in Richmond Hill, Ontario into a new Scaddabush location. During Q2 2016, SIR completed a major renovation of a Jack Astor's restaurant in Scarborough, Ontario and is currently building a new Scaddabush restaurant in the extra space that was created following the renovation. SIR has also started construction of a new Scaddabush location on Front Street in downtown Toronto. Subsequent to Q3 2016, SIR completed a major renovation of the Jack Astor's restaurant in Halifax, Nova Scotia.

Liquidity and Capital Resources
As at May 8, 2016, SIR had cash and cash equivalents of $2.9 million, compared to $7.9 million as at August 30, 2015, SIR's fiscal 2015 year end. The decrease is attributable to purchases of $6.2 million of property and equipment and other assets, and $2.6 million used in financing activities during the period, offset by $3.6 million provided by operations.   

Outlook
SIR currently has plans to open two new Scaddabush restaurants in calendar year 2016, followed by one new Reds restaurant during calendar year 2017, and one new Jack Astor's restaurant during calendar year 2018. SIR plans to convert its two remaining Alice Fazooli's locations to the more popular Scaddabush brand by the end of calendar year 2017. SIR's management is currently evaluating the two most recent Jack Astor's renovations in Scarborough, Ontario and Halifax, Nova Scotia, and considering similar renovations at additional Jack Astor's locations in the future. 

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 Q3 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 private company amalgamated under the Business Corporations Act of Ontario.  As at May 8, 2016, SIR operated 59 Concept and Signature Restaurants in Canada (in Ontario, Quebec, Alberta, Nova Scotia, and Newfoundland).  The Concept Restaurants include Jack Astor's, Canyon Creek and Scaddabush/Alice Fazooli's. The Signature group of restaurants located in downtown Toronto include Reds^® Wine Tavern, Reds^® Midtown Tavern, Far Niente^®/FOUR^®/Petit Four^® and the Loose Moose^®.  SIR also owns and operates a Duke's Refresher^® & Bar, in downtown Toronto and one seasonal restaurant:  Abbey's Bakehouse^®, in addition to one seasonal Abbey's Bakehouse retail outlet, which are not part of Royalty Pooled Restaurants. SIR owns 100% of all its Canadian restaurants. As at May 8, 2016, 57 SIR Restaurants were included in SIR 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.

(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: 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]