SIR Royalty Income Fund Announces SIR Corp. Fiscal 2011 Fourth Quarter Results

BURLINGTON, ON, Nov. 21, 2011 /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 28, 2011 ("Q4" and "fiscal 2011", respectively).

SIR has advised the Fund that revenue for Q4 increased 9.0% to $67.8 million from $62.2 million for the same period a year ago. For fiscal 2011, revenue increased 4.2% to $206.7 million from $198.3 million for fiscal 2010.

Same Store Sales Growth(1)
("SSSG") 
      16-week period ended
August 28, 2011
(unaudited)
      52-week period ended
August 28, 2011
(unaudited)
Jack Astor's®       4.4%       1.9%
Canyon Creek®       (0.9%)       0.8%
Alice Fazooli's®       (4.0%)       (5.4%)
Signature Restaurants       7.8%       5.1%
Overall SSSG(1)       3.1%       1.3%

Same store sales(1) ("SSS") for Q4 increased 3.1% to $64.2 million from $62.2 million for the same period a year ago. For fiscal 2011, SSS(1) increased 1.3% to $200.9 million compared with $198.3 million for the same period a year ago.

Net loss from continuing operations for Q4 2011 was $1.1 million compared with net loss from continuing operations of $0.2 million for the same period in fiscal 2010. Net loss from continuing operations for fiscal 2011 was $3.5 million compared to net earnings of $0.2 million for fiscal 2010. The higher net losses in the fiscal 2011 periods were primarily attributable to:

  • Higher corporate costs, including higher salary and bonus expenses and higher consulting costs related to manager development and branding initiatives;
  • Higher costs of restaurant operations relative to revenue mainly attributable to the opening of two new Jack Astor's restaurants in Q1 and Q3;
  • Higher labour costs, primarily due to the increase in the minimum wage in Q3 of fiscal 2010; and,
  • A provision for impairment of long-lived assets of $0.9 million in fiscal 2011.

SIR Corporate Development

During Q4, SIR had 47 restaurants open in Canada. In Q1 2011, SIR opened a new Jack Astor's restaurant in Boisbriand, Quebec. This restaurant was added to the Royalty Pooled Restaurants effective January 1, 2011. During Q1 SIR completed one renovation at the Alice Fazooli's restaurant in Richmond Hill, Ontario and two renovations, during Q4, one at the Jack Astor's located in Calgary, Alberta and one at the Jack Astor's located in Vaughan, Ontario. During Q2, SIR assumed a lease in London, Ontario, and converted this site into a Jack Astor's that opened on May 2, 2011. Subsequent to Q4, SIR opened a new Jack Astor's restaurant on Argentia Road in Mississauga, Ontario on November 14, 2011. SIR has secured two additional sites for Jack Astor's, one in Pickering, Ontario and one in Toronto, Ontario on Front Street, near the St. Lawrence Market. These restaurants are expected to open in fiscal year 2012. SIR has also secured two additional sites, at one location, at the corner of Yonge and Gerrard Streets in Toronto, Ontario, with expected opening dates in fiscal year 2013. Subsequent to fiscal 2011, SIR completed three other Jack Astor's renovations, one at the location in Barrie, Ontario, one at the location on Front Street, in Toronto, Ontario and one at the location in Etobicoke, Ontario.  SIR has invested in existing restaurants to ensure that it remains well positioned with modern and relevant concepts.  Management remains focused on maximizing the performance of its restaurants through growth in sales and earnings over time.

Liquidity and Capital Resources

As at August 28, 2011, SIR had cash and cash equivalents of $5.2 million compared with $9.6 million as at August 29, 2010. Cash provided by continuing operations for Q4 totaled $4.2 million compared with $4.8 million for the same period of fiscal 2010. Cash provided by continuing operations for the 52-week period ended August 28, 2011 was $5.3 million compared with $10.0 million for fiscal 2010.  During Q4, cash used in continuing investing activities was $2.1 million compared with $1.3 million for the same period in fiscal 2010. For the 52-week period ended August 28, 2011, SIR used cash in continuing investing activities of $6.1 million compared with $2.2 million for same period in fiscal 2010. The increase in investing activities is mainly due to the increase in purchases of property and equipment in fiscal 2011, over the prior year, due to increased construction activity for new and existing restaurants.

On August 26, 2011, SIR entered into an Amended and Restated Loan Agreement that added a $12.0 million Development Loan to its existing $26.0 million Term Loan. The Development Loan will be used in the next six to nine months to finance the building of new restaurants and to renovate existing restaurants to increase SSS(1) and strengthen SIR's portfolio of restaurants.  In the Amended and Restated Loan Agreement, SIR has the option to extend the maturity date of the Term Loan from November 13, 2012 to be co-terminus with the maturity date of the Development Loan. While there can be no certainty that the lender will grant the extension, SIR has requested this extension.

Outlook

While the economy is continuing to show some signs of improvement, SIR remains cautious as it believes that the economic conditions may continue to impact its sales and profit prospects in the near future. The Canadian Restaurant and Foodservice Association ("CRFA") in its 2011 - 2015 Long Term Foodservice Forecast is forecasting that sales in calendar year 2011, in the full service restaurant industry, will have a modest increase. SIR continues to focus on sustaining and growing existing restaurant sales and profits while managing costs. SIR continues to carefully monitor the current economic environment and is considering new restaurant growth and renovations. In addition to the four restaurant sites already secured, new restaurant sites will be considered when appropriate and will be subject to availability of long-term financing.

SIR's Q4 fiscal 2011 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 48 restaurants in Canada. SIR's concept brands include: Jack Astor's Bar and Grill®, with 32 locations; Alice Fazooli's!®, with 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®, 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 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 46 restaurants currently included in 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.

Caution concerning forward-looking statements
Statements in this release, 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 securities laws.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund, the Trust, the Partnership, SIR, the SIR Restaurants, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  When used in this document, such statements may include, among other language, such words as "may", "will", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology.  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.  These forward-looking statements involve a number of risks and uncertainties.  The following are some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: 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.  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 contained herein to reflect any change in expectations, estimates and projections with regard thereto or any changes in events, conditions or circumstances on which any statement is based, except as expressly required by law. 

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, in estimating the revenue for the new Jack Astor's restaurant added to Royalty Pooled Restaurants on January 1, 2011, 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 31, 2011 Annual Information Form which is available under the Fund's profile at www.sedar.com.

1 Same store sales and same store sales growth exclude revenue from restaurants which are not included in the Royalty pool, and exclude revenue from restaurants opened or closed during the current or prior fiscal year and therefore not open for the full period in both years. Same store sales growth is the percentage increase in SSS over the prior comparable period. SSS and SSSG are non-GAAP measures that do not have standardized meanings prescribed by GAAP. 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.

SOURCE SIR Royalty Income Fund

For further information:

Jeff Good
Chief Financial Officer
SIR Corp.
5360 South Service Road, Suite 200
Burlington, Ontario, Canada L7L 5L1
Tel: 905-681-2997
 
 
 
 
 
 
 
 
 
 
 
 
       
 
 
 
 
 
Lawrence Chamberlain
Investor Relations
Tel: 416-815-0700 ext. 257
Email: lchamberlain@equicomgroup.com
            
 

 


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