SIR Royalty Income Fund Reports SIR Corp. First Quarter 2014 Results
BURLINGTON, ON, Dec. 19, 2013 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today announced that SIR Corp. ("SIR"), the operating entity from which the Fund earns equity income and interest income, has filed its financial results for the 12-week period ended November 17, 2013 ("Q1 FY2014").
SIR has advised the Fund that revenue from corporate restaurant operations for Q1 FY2014 increased 11.3% to $56.1 million compared to $50.4 million for the 12-week period ended November 18, 2012 ("Q1 FY2013"). Revenue growth was driven by Same Store Sales Growth(1) ("SSSG") and new restaurants.
Same Store Sales Growth(1)
12-week period ended
November 17, 2013
|Alice Fazooli's®/Scaddabush Italian Kitchen & BarTM||(5.9%)|
Same store sales(1) ("SSS") for Q1 FY2014 increased 1.2% to $50.0 million from $49.4 million in Q1 FY2013. Jack Astor's had SSSG(1) of 0.5% in Q1 FY2014. Canyon Creek and Alice Fazooli's®/Scaddabush Italian Kitchen & BarTM ("Scaddabush") experienced SSS(1) declines in Q1 FY2014 of 1.8% and 5.9%, respectively. SIR has initiated a program to evolve the Alice Fazooli's concept. In Q4 FY2013, SIR closed the Alice Fazooli's Square One location in Mississauga, Ontario for a full renovation, and re-opened the restaurant on July 23, 2013, as Scaddabush. Scaddabush offers guests a new, refreshing take on Italian dining. The downtown Toronto Signature Restaurants had SSSG(1) of 22.1% in Q1 FY2014. SSSG(1) for the Signature Restaurants was positively affected by the renovation and repositioning of Reds® Wine Tavern and the Loose Moose® in the first half of fiscal 2013, as well as the patio renovation and extension at Reds® in Q3 FY2013. SIR's Management continues to focus on enhancing value and maximizing performance at all of its restaurants.
SIR's net loss and comprehensive loss for Q1 FY2014 was $11.7 million, compared to a net loss and comprehensive loss of $2.0 million in Q1 FY2013. The unfavourable variance in net loss and comprehensive loss in Q1 FY2014 was primarily attributable to the unfavourable change in the amortized cost of Ordinary LP Units and Class A LP Units of the SIR Royalty Limited Partnership (the "Partnership") of $11.1 million in Q1 FY2014. The change in the amortized cost is a non-cash transaction and has no impact on cash flows. SIR's Adjusted Net Loss(2) for Q1 FY2014 totaled $0.6 million, compared to a loss of $1.4 million in Q1 FY2013. The favourable variance in Adjusted Net Loss(2) was primarily the result of increased earnings from corporate restaurant operations of $0.8 million and reduced interest (income) and other expense (income) - net of $0.2 million, offset by increased corporate costs of $0.2 million.
SIR Corporate Development
During Q1 FY2014, SIR opened Reds® Midtown Tavern at the site of the new Aura condominium development in downtown Toronto. Subsequent to Q1 FY2014, SIR opened a Duke's Refresher™ & Bar which is also located at the Aura condominium site. Four restaurants will be added to Royalty Pooled Restaurants on January 1, 2014, consisting of two new Jack Astor's restaurants opened during Q3 FY2013, one new Jack Astor's restaurant opened during Q4 FY2013 and one new Signature restaurant, Reds Midtown Tavern. During Q1 FY2014, three Jack Astor's restaurants were renovated. Subsequent to Q1 FY2014, one Jack Astor's restaurant was renovated.
Liquidity and Capital Resources
As at November 17, 2013, SIR had cash and cash equivalents of $6.7 million compared to $7.7 million as at August 25, 2013 (SIR's fiscal 2013 year-end). Cash provided by operations for Q1 FY2014 totaled $0.07 million, compared to $0.03 million in Q1 FY2013. Investing activities used cash of $0.2 million in Q1 FY2014, compared to cash used in investing activities of $3.5 million in Q1 FY2013. Cash used in investing activities in Q1 FY2014 includes the net cash proceeds received from restricted funds of $3.0 million related to the conversion of Class A GP Units to Fund units and their subsequent sale. The majority of capital expenditures in the period relate to construction costs incurred for the new Reds Midtown Tavern opened during Q1 FY2014 and the new Duke's Refresher & Bar that opened subsequent to Q1 FY2014. SIR also incurred renovation costs for three Jack Astor's restaurants during Q1 FY2014 and one subsequent to Q1 FY2014.
SIR currently has four commitments to lease properties. On one of these properties, SIR opened Reds Midtown Tavern in Q1 FY2014 and a new Duke's Refresher & Bar subsequent to Q1 FY2014. One other restaurant is expected to open on this same property in fiscal 2014. SIR plans to build three new Jack Astor's restaurants on the other three leased properties over the remainder of fiscal 2014 and later in fiscal 2015. One of the new restaurants planned will be a Jack Astor's restaurant in St. John's, Newfoundland, a new market for SIR.
The Canadian Restaurant and Foodservice Association estimates that total sales in the full-service category will grow by an average of 4.4% over the next four years. SIR will continue to focus on sustaining and growing existing restaurant sales and profits, and strategically expanding its restaurant portfolio. SIR will carefully monitor economic conditions and manage its growth and capital expenditures accordingly.
SIR's Q1 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 56 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 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, 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 49 restaurants currently included in the Royalty pool. SIR also owns and operates two seasonal Signature restaurants: Abbey's Bake House™ and Duke's Refresher™, 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 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") includes revenue from all SIR restaurants except for those restaurants that were not open for the entire comparable period. 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 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. SSS does not include the seasonal Duke's Refresher or Abbey's Bake House 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) consist of net earnings (loss) and comprehensive income (loss) excluding the change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership. Adjusted Net Earnings (Loss) is a financial measure that does not have a standardized meaning prescribed by IFRS. However, SIR believes that Adjusted Net Earnings (Loss) is a useful estimate of the core business' contribution to cash flow from operations and uses this measure as a supplemental measure of SIR's performance.
Adjusted Net Earnings for Q1 FY2014 is calculated as net loss and comprehensive loss for the period of $11.7 million plus the change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership of $11.1 million. Adjusted Net Earnings for Q1 FY2013 is calculated as net loss and comprehensive loss for the period of $2.0 million plus the change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership of $0.6 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", "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, 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 28, 2013 Annual Information Form, for the period ended December 31, 2012, 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 FundFor further information:
Chief Financial Officer
BMIR Investor Relations
Tel: 416-447-4740 ext. 232