SIR Royalty Income Fund Reports SIR Corp. Second Quarter 2014 Results

BURLINGTON, ON, March 26, 2014 /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 9, 2014 ("Q2 FY2014" and "YTD FY2014", respectively).

SIR has advised the Fund that revenue from corporate restaurant operations for Q2 FY2014 increased 5.8% to $55.2 million compared to $52.2 million for the 12-week period ended February 10, 2013 ("Q2 FY2013"). Revenue from corporate restaurant operations for YTD FY2014 increased 8.5% to $111.3 million from $102.6 million for the 24-week period ended February 10, 2013 ("YTD FY2013"). Revenue growth was driven by the addition of new restaurants.

Same Store Sales Growth^(1) ("SSSG")	12-week period ended Feb. 9, 2014 (unaudited)			24-week period ended Feb. 9, 2014 (unaudited)
Jack Astor's®	(1.4%)			(0.4%)
Canyon Creek®	(2.4%)			(2.1%)
Alice Fazooli's® / Scaddabush Italian Kitchen & Bar®	(10.2%)			(8.1%)
Signature Restaurants	5.6%			12.9%
Overall SSSG^(1)	(1.6%)			(0.2%)

Same store sales⁽¹⁾ ("SSS") decreased 1.6% to $49.2 million in Q2 FY2014 and 0.2% to $99.3 million for YTD FY2014, primarily as a result  of the unfavourable weather during the periods compared to the same periods last year, which offset the positive effect of the return of National Hockey League ("NHL") hockey after the lock-out in the prior year. Jack Astor's, which has contributed approximately 74% of the Fund's Royalty Pooled Revenue in YTD FY2014, experienced SSS⁽¹⁾ declines of 1.4% and 0.4% for the 12-week and 24-week periods ended February 9, 2014. Canyon Creek had SSS⁽¹⁾ declines of 2.4% and 2.1% for the 12-week and 24-week periods ended February 9, 2014, respectively. Management continues to review initiatives to enhance value at Canyon Creek. Alice Fazooli's, together with Scaddabush Italian Kitchen & Bar® ("Scaddabush"), had SSS⁽¹⁾ declines of 10.2% and 8.1% for the 12-week and 24-week periods ended February 9, 2014, respectively. As part of its initiative to evolve the Alice Fazooli's concept, SIR closed its Alice Fazooli's Square One location in Mississauga, Ontario for renovations and re-opened the restaurant as Scaddabush last summer. Scaddabush generated SSSG⁽¹⁾ of 13.3% and 15.1% for the 12-week and 24-week periods ended February 9, 2014. The downtown Toronto Signature Restaurants generated SSSG⁽¹⁾ of 5.6% and 12.9% for the 12-week and 24-week periods ended February 9, 2014, respectively, with the strong performance primarily attributable to fiscal 2013 renovations.

SIR's net earnings and comprehensive income for Q2 FY2014 was $0.1 million, compared to a net loss and comprehensive loss of $2.8 million in Q2 FY2013. The favourable variance in net earnings and comprehensive income in Q2 FY2014 was primarily due to the favourable change in the amortized cost of Ordinary LP Units and Class A LP Units of the SIR Royalty Limited Partnership (the "Partnership") of $3.5 million for Q2 FY2014. The Adjusted Net Loss⁽²⁾ for Q2 FY2014 was $0.2 million, which is a decrease of $0.6 million compared to the same period in the prior year. The unfavourable variance is primarily the result of decreased earnings from corporate restaurant operations of $0.6 million.

SIR Corporate Development
During the 12-week period ended November 17, 2013 ("Q1 FY2014"), SIR opened Reds® Midtown Tavern at the site of the new Aura condominium development in downtown Toronto.  During Q2 FY2014, SIR opened a Duke's Refresher™ & Bar, also located at the Aura condominium site.  Four Jack Astor's restaurants were renovated during the YTD FY2014 period. Subsequent to Q2 FY2014, on February 18, 2014, SIR opened one new Scaddabush restaurant, also located at the Aura condominium site.

Liquidity and Capital Resources
As at February 9, 2014, SIR had cash and cash equivalents of $3.5 million compared to $7.7 million as at August 25, 2013 (SIR's fiscal 2013 year-end). Cash provided by continuing operations totaled $1.5 million and $1.6 million in Q2 FY2014 and YTD FY2014, respectively, compared to $3.3 million for both Q2 FY2013 and YTD FY2013. Cash used in continuing investing activities was $5.3 million and $5.5 million for Q2 FY2014 and YTD FY2014, respectively, compared to $1.2 million and $4.7 million for Q2 FY2013 and YTD FY2013, respectively. The majority of the capital expenditures for the 24-week period ended February 9, 2014 relate to the construction costs incurred for the new Reds Midtown Tavern that opened during Q1 FY2014, on October 30, 2013, the new Duke's Refresher & Bar that opened in Q2 FY2014, on December 4, 2013, and the new Scaddabush that opened subsequent to Q2 FY2014, on February 18, 2014, as well as the renovation costs for three Jack Astor's restaurants during Q1 FY2014 and one during Q2 FY2014.

Subsequent to Q2 FY2014, on February 10, 2014, SIR converted 500,000 Class A GP Units to Fund units and sold these Fund units for net proceeds of $6.8 million (net of transaction costs of $0.2 million). SIR's interest in the Partnership was affected by the conversions of the Class A GP Units into Fund units. After the net effect of the adjustments to Royalty Pooled Restaurants on January 1, 2014 and the February 10, 2014 transaction, SIR's interest in the Partnership is currently at 25.5%.

Outlook
SIR has four commitments to lease properties, upon which the Company plans to build three new Jack Astor's restaurants and one new seasonal Abbey's Bake House retail outlet in Port Carling, Ontario, which are expected to open in the remainder of fiscal 2014 and later in fiscal 2015. One of the new Jack Astor's restaurants planned for fiscal 2014 will be located in St. John's, Newfoundland, a new market for SIR. There can be no assurance that these restaurants will be opened or will become part of Royalty Pooled Restaurants.

SIR will continue to focus on sustaining and growing existing restaurant sales and profits while managing costs and carefully monitoring the current economic environment. The Company considers new restaurant growth and renovations when appropriate and subject to availability of acceptable long-term financing.

SIR's Q2 FY2014 interim filings, which include its unaudited 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 57 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 locations; Alice Fazooli's® together with Scaddabush Italian Kitchen & Bar®, for a total of five 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, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four®, The Loose Moose® and Duke's Refresher™ & Bar.  All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with the Partnership in consideration for a Royalty, payable by SIR to the Partnership, equal to six percent of the revenue of the 53 restaurants currently included in the Royalty Pool. SIR also owns and operates two seasonal Signature restaurants: Abbey's Bake House® and Duke's Refresher™ & Bar, both located in Muskoka, Ontario, which are not 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 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 Bake House, which are both located in Muskoka, Ontario. SSS for Alice Fazooli's includes three Alice Fazooli's restaurants and one Scaddabush Italian Kitchen & Bar restaurant, representing the Square One location in Mississauga, Ontario, which was renovated and re-opened as Scaddabush on July 23, 2013.

(2) Adjusted Net Earnings (Loss) is calculated by subtracting 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. 

Adjusted Net Loss for Q2 FY2014 is calculated as net earnings and comprehensive income for the period of $0.1 million less the change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership of $0.3 million.  Adjusted Net Earnings for Q2 FY2013 is calculated as net loss and comprehensive loss for the period of $2.8 million plus the change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership of $3.2 million.

Adjusted Net Loss for YTD FY2014 is calculated as net loss and comprehensive loss for the period of $11.6 million plus the change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership of $10.8 million.  Adjusted Net Loss for YTD FY2013 is calculated as net loss and comprehensive loss for the period of $4.8 million plus the change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership of $3.8 million.

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, 2014 Annual Information Form, for the period ended December 31, 2013, 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
BMIR Investor Relations
Tel: [phone] ext. 232