SIR Royalty Income Fund Reports 2015 Third Quarter Results

BURLINGTON, ON, Nov. 11, 2015 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the three-month ("Q3 2015") and nine-month ("YTD 2015") periods ended September 30, 2015. All comparisons in the following summary are to the corresponding periods in the prior fiscal year. Percentage calculations are based on the numbers in the financial statements and may not correspond to rounded figures presented in this release.

Q3 2015 Summary

  • Net earnings for the Fund were $2.3 million, or $0.30 per Fund unit, compared with $2.1 million, or $0.29 per Fund unit, for the three months ended September 30, 2014 ("Q3 2014");
  • Pooled Revenue increased by 5.6% to $70.1 million, supported by the addition of two Royalty Pooled Restaurants on January 1, 2015;
  • 0.5% Same Store Sales Growth ("SSSG")(1) for Royalty Pooled Restaurants; and
  • Distributable cash(2) per Fund unit (basic and diluted) was $0.30, representing a payout ratio(2) of 95.5% as compared to distributable cash per Fund unit (basic and diluted) of $0.29 and a payout ratio of 97.3% in Q3 2014.

"We continue to focus on initiatives to elevate SIR brands and create value for Fund unitholders," said Peter Fowler, President and CEO of SIR Corp.  "Currently, we are executing on a number of strategic initiatives to drive both same store sales and pooled revenue growth in support of increasing cash available for distributions.  With the completion of major renovations of two Jack Astor's restaurants during the third quarter, our second system-wide evolution of Jack Astor's is now in the test phase. After completing our second conversion of an Alice Fazooli's location to the popular Scaddabush brand, on October 6, 2015, we are on track to complete the conversion of the remaining Alice Fazooli's locations to Scaddabush by the end of 2016. We are currently evaluating a comprehensive plan to improve performance at our Canyon Creek restaurants and will provide further details on this initiative in the upcoming year. SIR opened two new Jack Astor's restaurants in Ottawa in fiscal 2015, including one in the third quarter. It is expected that these new Jack Astor's restaurants will be added to Royalty Pooled Restaurants on January 1, 2016.  Future expansion plans currently include the opening of one new Jack Astor's restaurant in 2017 and two new Scaddabush restaurant openings by the end of 2016. The Fund's year-to-date payout ratio is 99.8%, in line with our long term target of 100%."

Financial Results

($000s except restaurants and per Unit amounts)



 period ended

Sept. 30, 2015


 period ended

Sept. 30, 2014


 period ended

Sept. 30, 2015


 period ended

Sept. 30, 2014

Royalty Pooled Restaurants





Pooled Revenue generated by SIR Corp.





Royalty income to Partnership –
6% of Pooled Revenue





Partnership other income





Partnership expenses





Partnership earnings





SIR Corp.'s interest
(Class A, B, and C GP Units)






Partnership income allocated to Fund






Interest income





Total income of the Fund





General & administrative expenses





Net earnings before income taxes of the Fund





Income tax expense





Net earnings for the period





Earnings per Fund Unit

(basic and diluted)





Pooled Revenue increased by 5.6% to $70.1 million in Q3 2015, from $66.4 million in Q3 2014. Increased Pooled Revenue resulted from the two additional restaurants added to the Royalty pool as of January 1, 2015, supported by SSSG(1) of 0.5%.  As at September 30, 2015, there were 55 restaurants included in Royalty Pooled Restaurants, compared to 53 restaurants as at September 30, 2014.

The Fund's net earnings for Q3 2015 totaled $2.3 million, or $0.30 per Fund unit (basic and diluted), compared with $2.1 million, or $0.29 per Fund unit (basic and diluted) for Q3 2014.

Distributable cash(2) for Q3 2015 totaled $2.3 million, or $0.30 per Fund unit (basic and diluted), and distributions to Unitholders totaled $2.2 million, representing a payout ratio(2) of 95.5%. Distributable cash(2) for Q3 2014 totaled $2.1 million, or $0.29 per Fund unit (basic and diluted), and distributions to Unitholders totaled $2.1 million, representing a payout ratio(2) of 97.3%. The Fund's payout ratio(2) is intended to average 100% per annum.

Since the Fund's inception in October 2004 up to and including Q3 2015, the Fund has generated $77.5 million in cumulative distributable cash(2) and has paid cumulative cash distributions of $77.0 million, representing a cumulative payout ratio(2) (the ratio of cumulative cash distributions paid since inception to cumulative distributable cash generated(2)) of  99.4%.

Distributable Cash(2)
The following table reconciles the relationship between cash provided by operating activities and distributable cash(2):

(in thousands of dollars except per unit amounts and payout ratio(2))



period ended

Sept. 30, 2015


period ended

Sept. 30, 2014


period ended

Sept. 30, 2015


period ended

Sept. 30, 2014

Cash provided by operating activities






Net change in non-cash working capital items





Net change in income tax payable





Net change in distribution receivable from the Partnership





Distributable cash(2)





Cash distributed for the period





Surplus/(shortfall) of distributable cash(2)





Payout ratio(2)





Distributable cash(2) per Fund unit (basic and diluted)






Same Store Sales ("SSS") (1)  

SSS(1) for Royalty Pooled Restaurants

period ended

Sept. 30, 2015

period ended

Sept. 30, 2014

period ended

Sept. 30, 2015

period ended

Sept. 30, 2014

Jack Astor's®





Canyon Creek®





Alice Fazooli's®/Scaddabush Italian Kitchen & Bar®





Signature Restaurants





Overall SSS(1)





Jack Astor's, which generated approximately 77% of the Fund's Pooled Revenue in Q3 2015, reported SSSG(1) of 0.3% in the quarter.  SIR management believes that Jack Astor's SSSG(1) in Q3 2015 was favourably impacted by the success of the Toronto Blue Jays near the end of the quarter.  This success resulted in increased revenue during the period leading up to the Major League Baseball playoffs for Jack Astor's, as well as other SIR Corp. ("SIR") restaurants near the Rogers Centre. Canyon Creek generated SSSG(1) of 0.2% in Q3 2015. During the third quarter of 2014, SIR completed a renovation of its Canyon Creek location in Burlington and management is currently evaluating a comprehensive performance enhancement plan for all Canyon Creek locations. Alice Fazooli's, together with Scaddabush, reported a 2.6% decline in SSS(1) in Q3 2015 . The first Alice Fazooli's location converted to the popular Scaddabush brand continues to experience strong SSSG(1) each quarter, but the remaining Alice Fazooli's locations that have not been converted to Scaddabush by the end of Q3 2015 generated SSS(1) declines during Q3 2015.  The conversion of one of these Alice Fazooli's was completed subsequent to Q3 2015 on October 6, 2015 and SIR expects to complete the conversions of the two remaining Alice Fazooli's locations to the Scaddabush brand by the end of 2016.  The downtown Toronto Signature Restaurants generated SSSG(1) of 5.5% in Q3 2015 as sales normalized at Far Niente, FOUR and Petit Four following a 40-day closure in Q1 2015 to repair water damage caused by a burst pipe.  

Corporate Developments
On July 6, 2015 SIR entered into a new credit agreement (the "Credit Agreement") with a Schedule I Canadian chartered bank (the "Lender").  The Credit Agreement provides a maximum principal amount of $30.0 million, consisting of a $20.0 million revolving term credit facility ("Credit Facility 1") and a $10.0 million revolving term loan ("Credit Facility 2"). SIR and the Lender have also entered into a purchase card agreement providing credit of up to an additional $5.0 million. The previous term loan was repaid by a full draw down of Credit Facility 2 and a partial draw down of Credit Facility 1. The remaining funds available through Credit Facility 1 will be used for general corporate and operating purposes, including capital spending on new and renovated restaurants. The Credit Agreement includes more favourable interest rates on outstanding debt than SIR's prior credit facility and thereby lowers SIR's debt service costs. Further details on the Credit Agreement are available in the Fund's 2015 third quarter Management's Discussion & Analysis ("MD&A"), Concurrent with the Credit Agreement, SIR announced that Competitive Foods Canada Ltd. acquired 3,190,691 common shares of SIR, representing 26.5% of SIR's common shares on a fully diluted basis (29.9% of the currently issued and outstanding shares). The share capital was acquired directly and indirectly from certain of the existing minority common shareholders and common share option holders of SIR. Peter Fowler Enterprises Ltd. did not sell any of its holdings in SIR in this transaction and remains the majority shareholder of SIR.

Update on Diversity and Board Renewal
As a passive Income Fund, the Fund seeks to pass through substantially all of its distributable cash to its investors. It weighs the benefits of adopting any additional policies and procedure against their costs, which could lead to reductions in such distributions. The Fund supports and embraces diversity. The ongoing success of the Royalty Pooled Restaurants depends on diversity. The Fund has not adopted, and does not currently intend to adopt, a written policy relating to the identification and nomination of women directors. Selection is based on a range of diversity criteria including, but not limited to: gender, age, professional experience, cultural and educational background, skill set, expertise in a particular field and length of service. The appointment is based on merit and contribution that each candidate brings to the board. The board composition and criteria is discussed annually by the Governance Committee. Currently, one-fifth of the Fund's Trustees are women.

The Fund has no paid executive officers. Rather, the CEO and CFO of SIR Corp. from time to time also fulfil these functions for the Fund without additional compensation. Accordingly, the Fund does not consider the level of representation of women in making executive officer appointments. The incumbents in these positions are recruited by SIR Corp. The independent Governance Committee of the Fund reviews the qualifications of SIR's executives for their suitability of their roles in the governance and management of the Fund. The current CFO's immediate predecessor was a woman. At the present time, both the CEO and CFO are men.

The Fund does not have a mandatory age for the retirement of trustees and there are no term limits. In this context, given the limited operations and mandate of the Fund, the Board's view is that it benefits from the experience of its trustees and does not perceive a need for renewal at this time.

SIR continues to monitor economic conditions and consumer confidence and has advised the Fund that it is considering new store developments and renovations to existing restaurants where appropriate.  Based on its assessment of these conditions, the timing of new restaurant construction and renovations as well as related opening schedules will be reviewed regularly by SIR and adjusted as necessary. SIR currently has plans to open one new Jack Astor's restaurant in 2017. SIR also plans to open two new Scaddabush restaurants in 2016. SIR has advised the Fund that it plans to complete major renovations to two Jack Astor's locations, one in the fourth quarter of 2015, the other in the first quarter of 2016, and plans to convert its two remaining Alice Fazooli's locations to the popular Scaddabush brand by the end of 2016, after a second location was converted on October 6, 2015.          

The Fund's consolidated Financial Statements and MD&A, and the Partnership's Financial Statements, for the three and nine-month periods ended September 30, 2015, are available via the SEDAR website at and SIR's website at

(1) Same store sales ("SSS") and same store sales growth ("SSSG") are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS.  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 those locations that were not open for the entire comparable periods in fiscal 2015 and fiscal 2014. SSS for Alice Fazooli's includes three Alice Fazooli's restaurants and one Scaddabush restaurant, representing the Square One location in Mississauga, Ontario, which was renovated and re-opened as Scaddabush on July 23, 2013.

(2) Distributable cash and payout ratio are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS.  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.  The payout ratio is calculated as cash distributed for the period as a percentage of the distributable cash for the period.  Distributable cash represents the amount of money which the Fund expects to have available for distribution to Unitholders of the Fund, and is calculated as cash provided by operating activities of the Fund, adjusted for the net change in non-cash working capital items including a reserve for income taxes payable and the net change in the distribution receivable from the SIR Royalty Limited Partnership.  For a detailed explanation of how the Fund's distributable cash is calculated, please refer to the Fund's MD&A for the three and nine-month periods ended September 30, 2015, which can be accessed via the SEDAR website (

About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 59 restaurants and one seasonal retail outlet in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 40 locations; Alice Fazooli's® together with Scaddabush Italian Kitchen & Bar®, for a total of five locations; and Canyon Creek®, with eight locations.  SIR also operates one-of-a-kind "Signature" brands in downtown Toronto, including Reds® Wine Tavern, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four®, and The Loose Moose®.  All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty 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 55 restaurants currently included in the Royalty Pool. SIR also owns and operates Dukes Refresher® & Bar in downtown Toronto, one seasonal Signature restaurant, Abbey's Bake House®, and one seasonal retail outlet, which are not currently part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit

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 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: market conditions at the time of this filing; 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.  There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. 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, and has assumed that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. For more information concerning the Fund's risks and uncertainties, please refer to the March 18, 2015 Annual Information Form, for the period ended December 31, 2014, which is available under the Fund's profile at

All of the forward-looking statements made herein 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

For further information: Jeff Good, Chief Financial Officer, Tel: 905-681-2997; Bruce Wigle, Bay Street Communications, Tel: 647-496-7856


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