SIR Royalty Income Fund reports 2007 third quarter results



    BURLINGTON, ON, Nov. 13 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN)
("the Fund") today reported its financial results for the three and nine-month
periods ended September 30, 2007.

    
    Q3 2007 (three-month period ended September 30, 2007) Highlights

    -   Net earnings were $1.85 million, or $0.35 per Fund Unit
    -   Pooled Revenue increased 12.0% to $40.8 million compared to Q3 2006
    -   5.2% same store sales growth ("SSSG(1)") for restaurants in the
        Royalty pool
    -   Distributable cash(2) for the period totaled $1.85 million and
        distributions paid to unitholders were $1.77 million, representing a
        payout ratio(2) of 95.6% for the quarter
    -   Completed renovation at Loose Moose Tap & Grill(R)
    -   Subsequent to the end of Q3, introduced Petit Four(TM) Bakery concept
        at Soul of the Vine(R)
    -   SIR Corp. ("SIR") secured a $16.0 million credit facility to
        facilitate new restaurant expansion activities
    

    "Our Royalty Pooled restaurants continued to generate positive same store
sales growth in the third quarter, led by our flagship concept Jack Astor's
with 6% same store sales growth," said Peter Fowler, Chief Executive Officer
("CEO") of SIR Corp. "We continue to invest in our restaurants to drive same
store sales growth. During the quarter, we completed renovations at Armadillo
Texas Grill/the Loose Moose, converting this location to a two-storey,
14,000 square foot Loose Moose Tap & Grill. The Loose Moose lower level
remains one of Toronto's premier sports bars, while the upper level is now a
large venue for downtown nightlife featuring state-of-the-art audio visual
equipment, a dance floor and a stage for live bands. Subsequent to the end of
the third quarter, we also introduced an innovative new bakery concept, Petit
Four, at Soul of the Vine, to take advantage of the lucrative daytime catering
market and take-out demand in downtown Toronto's financial district."
    "During the quarter, SIR also secured a seven-year, $16.0 million credit
facility with a senior lender to fund our future expansion plans. We
anticipate that, over the long term, new restaurant expansion will benefit the
Fund as it both increases the scale of our restaurant network and enhances our
geographic diversification," added Mr. Fowler. "We are currently developing a
new Jack Astor's at the intersection of Yonge and Dundas Streets in downtown
Toronto. Currently under construction are a new Jack Astor's and a new Canyon
Creek near Toronto's Pearson International Airport. We expect to open all of
these restaurants in fiscal 2008."

    Financial Results

    Revenue for the restaurants in the Royalty pool (or "Pooled Revenue") for
the three-month period ended September 30, 2007, increased 12.0% to
$40.8 million, compared to Pooled Revenue of $36.4 million in the third
quarter of 2006. The increase in Pooled Revenue resulted primarily from the
addition of three new Canyon Creek restaurants to the Royalty pool, effective
January 1, 2007 and same store sales growth(1) from SIR's Concept Restaurants.
    The Fund's net earnings for the third quarter of 2007 totaled
$1.85 million or $0.35 per Fund Unit (basic and diluted), compared to net
earnings of $1.76 million, or $0.33 per Fund Unit (basic and diluted) in the
third quarter of 2006.
    Distributable cash(2) for the third quarter of 2007 totaled
$1.85 million, or $0.35 per Fund Unit (basic and diluted), and distributions
paid to unitholders totaled $1.77 million, representing a payout ratio(2) of
95.6% for the period. Distributable cash(2) for the third quarter of 2006
totaled $1.76 million or $0.33 per Fund Unit (basic and diluted) and
distributions paid totaled $1.69 million, representing a payout ratio of 95.9%
in the third quarter a year ago.
    The Fund's net earnings for the first nine months of 2007 were
$4.5 million, or $0.84 per Fund Unit (basic and diluted), compared to
$5.2 million, or $0.98 per Fund Unit (basic and diluted) in the first nine
months of 2006. Pooled Revenue for the nine-month period ended September 30,
2007, increased 9.4% to $121.2 million, compared to Pooled Revenue of
$110.8 million in the first nine months of 2006. Distributable cash(2) for the
nine months ended September 30, 2007 was $5.37 million, or $1.00 per Fund Unit
(basic and diluted), and distributions paid totaled $5.17 million,
representing a payout ratio of 96.2%.

    
    Financial Highlights               3-month   3-month   9-month   9-month
    ($000s except restaurants           period    period    period    period
     and per unit amounts)               ended     ended     ended     ended
    (unaudited)                       Sept. 30, Sept. 30, Sept. 30, Sept. 30,
                                          2007      2006      2007      2006

    Restaurants in the Royalty pool         38        36        38        36
    Pooled Revenue generated by SIR     40,814    36,447   121,221   110,813

    Royalty income to Partnership - 6%
     of Pooled Revenue                   2,449     2,190     7,273     6,652
    Make Whole Payment                       -        41         -        59

    Total Royalty income to Partnership  2,449     2,231     7,273     6,711
    Partnership other income                15        13        43        34
    Partnership expenses                   (27)      (21)      (88)     (112)

    Partnership earnings                 2,437     2,223     7,228     6,633

    SIR's interest (Class A, B, and C
     GP Units)                          (1,252)   (1,090)   (3,710)   (3,262)

    Partnership income allocated
     to Fund                             1,185     1,133     3,518     3,371
    Interest income                        750       750     2,250     2,250

    Total income of the Fund             1,935     1,883     5,768     5,621
    General & administrative expenses      (85)     (123)     (394)     (377)
    Net earnings before income taxes
     of the Fund                         1,850     1,760     5,374     5,244
    Future income taxes                      -         -      (853)        -
    Net earnings of the Fund             1,850     1,760     4,521     5,244

    Earnings per Fund unit (basic and
     fully diluted)                       0.35      0.33      0.84      0.98
    Distributable cash(2) per Fund unit
     (basic and fully diluted)            0.35      0.33      1.00      0.98


    Same Store Sales(1)

    For the three-month period ended September 30, 2007, SIR reported to the
Fund 5.2% SSSG(1) for restaurants in the Royalty pool. For the nine-month
period ended September 30, 2007, SIR reported to the Fund 4.0% SSSG(1) for
restaurants in the Royalty pool.


    SSSG(1) for Restaurants in                  3-month            9-month
     the Royalty pool                        period ended       period ended
                                            Sept. 30, 2007     Sept. 30, 2007
                                              (unaudited)        (unaudited)
    -------------------------------------------------------------------------
    Jack Astor's(R)                                 6.0%                3.5%
    Canyon Creek Chop House(R)                      8.4%                6.3%
    Alice Fazooli's!(R)                             4.3%                5.5%
    Signature Restaurants                         (1.7)%                3.2%
    -------------------------------------------------------------------------
    Overall SSSG(1)                                 5.2%                4.0%
    

    SIR initiated a system-wide evolution program for Jack Astor's in 2004
and only one location in the Royalty pool remains to be evolved. SSSG(1) at
evolved Jack Astor's locations averaged over 10% in the first year following
the year of their evolutions. As the Jack Astor's evolution program is near
completion and most of the evolved restaurants have been operating for more
than one year, the rate of Jack Astor's SSSG(1) driven by evolution has
decreased. Additionally, the Smoke-Free Ontario Act, which became effective on
May 30, 2006, has negatively impacted certain Jack Astor's locations that
previously had enclosed smoking areas. SIR believes the negative effect of the
Smoke-Free Ontario Act will soften over time as non-smoking guests replace
smoking guests and smoking guests gradually return. Jack Astor's SSSG(1)
sequentially increased from 1.4% in the first quarter of 2007 to 3.3% in the
second quarter of 2007 and 6.0% in the third quarter of 2007.
    Canyon Creek and Alice Fazooli's! continue to perform well with SSSG(1)
of 8.4% and 4.3% respectively for the third quarter of 2007; and SSSG(1) of
6.3% and 5.5% respectively for the first nine months of 2007. The performance
of the Signature Restaurants in downtown Toronto was negatively impacted in
the third quarter by the closing of the Armadillo Texas Grill/the Loose Moose
for eight days for renovations. SSS(1) for the Signature Restaurants declined
by 1.7% for the three-month period ended September 30, 2007. For the
nine-month period ended September 30, 2007, SSSG(1) for the Signature
Restaurants was 3.2%.

    SIR Corporate Developments

    Year-to-date, SIR has opened three new Jack Astor's restaurants and
closed one Jack Astor's location. During the third quarter, SIR closed the
Jack Astor's in Burlington, Ontario and, subsequent to the end of the third
quarter, on October 15, 2007, a new Jack Astor's was opened in Burlington. The
new site is expected to generate higher guest counts and a greater revenue
stream to the Partnership. With respect to the closed Burlington restaurant,
SIR is required to pay a Make-Whole Payment from the date of closure to
December 31, 2007. It is expected that these new restaurants will be added to
and the closed restaurant removed from the Royalty pool on January 1, 2008.
    SIR has secured additional new development sites for two Jack Astor's and
one Canyon Creek. The two new Jack Astor's development sites are in the
following locations: the corner of Dundas and Yonge Streets in downtown
Toronto, and near Pearson International Airport in Toronto. The Canyon Creek
development site is also located near Pearson International Airport. These new
restaurants are expected to be added to the Royalty Pooled Restaurants on
January 1, 2009, provided that they are in operation prior to November 1,
2008.
    During the third quarter, a major renovation was completed at the
Armadillo Texas Grill/the Loose Moose. SIR is now operating the entire space
as the Loose Moose Tap & Grill. The Loose Moose lower level remains one of
Toronto's premier sports bars, while the upper level is now a large venue for
downtown nightlife with state-of-the-art audio visual equipment, a dance floor
and a stage for live bands. SIR expects these innovations to lead to increased
guest counts and higher revenues. Subsequent to the end of the third quarter,
the former take-out portion of Soul of the Vine was renovated in order to
introduce an innovative new bakery concept, Petit Four, which targets the
lucrative catering market and daytime take-out demand in the downtown
Toronto's financial district.
    SIR continued its marketing efforts during the third quarter as Canyon
Creek ran its first multi-station radio campaign on three major radio stations
in the Greater Toronto Area ("GTA"). The campaign focused on Canyon Creek's
attention to detail and its tenth anniversary celebrations. Subsequent to the
end of the third quarter, Alice Fazooli's! aired its second multi-station
radio campaign on two GTA stations.
    On August 9, 2007, SIR entered into a Credit Agreement with a Canadian
Schedule 1 bank. The Credit Agreement is a seven-year facility for a maximum
principal amount of $16.0 million and is designed primarily to facilitate
construction of new restaurants by SIR. These new restaurants are expected to
become part of the Royalty Pooled Restaurants over the next few years as they
are completed. This will benefit the Fund both as a result of geographic
diversification and increased scale and because new restaurant growth is
designed to be accretive to Fund unitholders. Copies of the Credit Agreement
and the Interlender Agreement have been filed on SEDAR.
    The Fund's 2007 third quarter Financial Statements and Management's
Discussion & Analysis ("MD&A"), and the Partnership's Financial Statements,
for the three and nine-month periods ended September 30, 2007 will be filed on
SEDAR today and will be available via the SEDAR web site at www.sedar.com
tomorrow. The Fund's 2007 third quarter Financial Statements and MD&A are also
available via SIR's website at www.sircorp.com.

    2007 Third Quarter Conference Call & Web Cast

    SIR Management will host a conference call on November 14th at 10:00 a.m.
(ET) to review the financial results. The call will be hosted by Peter Fowler,
Chief Executive Officer, and Jeff Good, Chief Financial Officer. The call will
be audio-cast live and archived for 90 days at www.newswire.ca or
www.sircorp.com. A taped replay of the conference call will also be available
until Wednesday, November 21st at midnight by calling 1-877-289-8525 or
416-640-1917, reference number 21251354, followed by the number sign.

    
    (1) Same store sales ("SSS") and same store sales growth ("SSSG") are
        non-GAAP financial measures that do not have standardized meanings
        prescribed by GAAP. However, the Fund believes that SSS and SSSG are
        useful measures and provide investors with an indication of the
        change in year-over-year sales. The Fund'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
        includes revenue from all SIR Restaurants included in Pooled Revenue
        except for the Jack Astor's location in Don Mills, Ontario and the
        Canyon Creek locations in Scarborough, Vaughan, and at the Fallsview
        Casino Resort in Niagara Falls, Ontario because they were not open
        for the entire period of both 2007 and 2006. SSSG is the percentage
        increase in SSS over the prior comparable period.

    (2) Distributable cash and payout ratio are non-GAAP financial measures
        and do not have a standardized meaning prescribed by GAAP. However,
        the Fund believes that distributable cash and the payout ratio are
        useful measures as they provide investors with an indication of cash
        available for distribution. The Fund's method of calculating
        distributable cash and the payout ratio may differ from that of other
        issuers and, accordingly, distributable cash and the payout ratio may
        not be comparable to measures used by other issuers. Investors are
        cautioned that distributable cash and the payout ratio should not be
        construed as an alternative to the statement of cash flows as a
        measure of liquidity and cash flows of the Fund. For a detailed
        explanation of how the Fund's distributable cash and the payout ratio
        are calculated, please refer to the Fund's MD&A for the three and
        nine-month periods ended September 30, 2007, which can be accessed
        via the SEDAR web site (www.sedar.com).
    

    About SIR Corp.

    SIR is a privately held Canadian corporation that owns and operates a
portfolio of more than 40 restaurants in Canada. SIR's concept brands include:
Jack Astor's Bar and Grill(R), with 24 locations; Alice Fazooli's!(R), with
five locations; and Canyon Creek Chop House(R), with seven locations. SIR also
operates one-of-a-kind "signature" brands in downtown Toronto, which comprise
the upscale reds(R), Far Niente(R), Soul of the Vine(R) & Petit Four(TM),
Brasserie Frisco(R) and the Loose Moose Tap & Grill(R). 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 38 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 document 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 or SIR to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements reflect SIR Management's current expectations
regarding future events and operating performance and speak only as of the
date of this document. 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 with regard thereto or
any changes in events, conditions or circumstances on which any statement is
based. For more information concerning the risk factors that could affect the
Fund and/or SIR, please refer to the Fund's March 30, 2007 Annual Information
Form.

    %SEDAR: 00020914E




For further information:

For further information: Peter Fowler, CEO, SIR Corp., Tel: (905)
681-2997; Bruce Wigle, Investor Relations, Tel: (416) 815-0700 ext. 228,
Email: bwigle@equicomgroup.com


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