SIR ROYALTY INCOME FUND ANNOUNCES SIR CORP. FISCAL 2011 FIRST QUARTER RESULTS

BURLINGTON, ON, Dec. 22 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) ("the Fund") today announced that SIR Corp. ("SIR"), the operating entity from which the Fund derives distribution and interest income, has filed its financial results for the 12-week period ended November 21, 2010 ("Q1 2011").

SIR has advised the Fund that revenue for the quarter increased 1.7% to $45.4 million compared to $44.6 million for the same period a year ago. Same store sales1 ("SSS") increased by 1.1% for the quarter compared to the same period a year ago. SSS growth1 ("SSSG") for Jack Astor's®, SIR's flagship Concept Restaurant brand, which generated approximately 69% of the current fiscal 2011 Pooled Revenue, increased 2.4% during the quarter. The following chart shows the SSS1 for each of the restaurant concepts and for the Signature Restaurants:

SSS(in thousands of dollars unless otherwise indicated) 12-week period ended November 21, 2010 12-week period ended November 22, 2009 % Change
Jack Astor's® 30,634 29,930 2.4
Canyon Creek® 6,404 6,493 -1.4
Alice Fazooli's® 3,935 4,085 -3.7
Signature Restaurants 3,501 3,468 1.0
Overall SSS1 44,474 43,976 1.1

SIR reported a net loss from operations of $2.0 million in the quarter compared to $0.6 million for the comparable period in fiscal 2010. The net loss in Q1 2011 compared to the same period last year is primarily attributable to:

  • Increased professional consulting costs related to manager development and branding initiatives;
  • Higher restaurant operational costs compared against revenue related primarily to the additional costs associated with the opening of a new Jack Astor's during the quarter, including pre-opening costs, which are typical of a new restaurant opening.  In addition, there were higher labour costs, primarily due to the higher minimum wage rates compared to the prior year;
  • Higher interest expense in Q1 2011 compared to the same period last year due to increased debt acquired near the end of Q1 2010.

SIR Corporate Development
During Q1, SIR opened a new Jack Astor's restaurant in Boisbriand, Quebec. This restaurant will be added to the Royalty Pooled Restaurants effective January 1, 2011. During Q1, SIR also renovated the Alice Fazooli's restaurant in Richmond Hill.  SIR has secured two additional sites at the corner of Yonge and Gerrard Streets in Toronto, ON, with expected opening dates in calendar year 2013. Subsequent to Q1, SIR assumed a lease in London, Ontario, where two restaurants currently operate.  SIR plans to convert this site into a Jack Astor's with an expected opening date later this fiscal year.

SIR currently has 46 restaurants open in Canada and since October 2004, the date of the Fund's Initial Public Offering, SIR has opened 15 new restaurants.  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 November 21, 2010, SIR had cash and cash equivalents of $5.6 million compared to $6.4 million as at November 22, 2009. SIR used cash in continuing operations of $1.8 million for Q1 2011 compared to cash provided from operations of $2.9 million for the same period last year.  SIR used cash in investing activities of $1.7 million and $0.4 million for the first quarter of fiscal 2011 and fiscal 2010, respectively. 

At present, Management believes that current cash resources are sufficient to fund its working capital requirements.

While the economy is showing some early signs of improvement, SIR's Management remains cautious with regard to growth and conservation of cash. SIR believes that the economic conditions may continue to impact its sales and profit prospects in the near future, particularly in the higher cheque average restaurants, which have not returned to their pre-recession levels. 

Outlook
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 three restaurant sites already secured, new restaurant sites will be considered when appropriate and will be subject to raising acceptable long-term financing.

SIR's first quarter fiscal 2011 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 46 restaurants in Canada. SIR's concept brands include: Jack Astor's Bar and Grill®, with 30 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
Certain statements in this news release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund 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 are such words as "may", "will", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology.  These statements reflect SIR Management's current expectations regarding future events and operating performance and speak only as of the date of this document.  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 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.  For more information concerning the Fund's risks and uncertainties, please refer to the Fund's periodic interim filings, and/or its March 31, 2010 Annual Information Form.

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: For further information:

Jeff Good                                  Lawrence Chamberlain   
Chief Financial Officer   Investor Relations
SIR Corp.   Tel: 416-815-0700 ext. 257
Tel: 905-681-2997   Email: lchamberlain@equicomgroup.com


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