SIR Royalty Income Fund reports fiscal 2006 results



    BURLINGTON, ON, March 29 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN)
("the Fund") today reported its fiscal 2006 fourth quarter and year end
financial results for the three and twelve-month periods ending December 31,
2006.

    2006 Highlights

    
    -   5.9% same store sales growth ("SSSG")(1) for restaurants in the
        Royalty pool compared to the year ended December 31, 2005;
    -   Net earnings increased by 6.5% to $6.89 million or $1.29 per Fund
        unit (basic and diluted) compared to the year ended December 31,
        2005;
    -   Distributable cash(2) for the year totaled $6.89 million and declared
        distributions to unitholders were $6.62 million representing a payout
        ratio(2) of 96.1% for the year;
    -   Estimated annualized cash distributions were increased 5.0% to $1.26
        per trust unit from $1.20 per trust unit;
    -   Three new Canyon Creek Chop House(R) restaurants were opened in
        fiscal 2006 and added to the Royalty pool in January 2007, subsequent
        to fiscal 2006 year end;
    -   Evolutions completed at three Jack Astor's(R) restaurants, leaving
        only one more to evolve;
    -   Renovations and menu enhancements completed at the final two Alice
        Fazooli's!(R) restaurants; and,
    -   Renovations completed at reds(R) in downtown Toronto.
    

    "Throughout 2006 we continued to invest in our Royalty pool restaurants
to strengthen our brands and drive same store sales growth, while also further
expanding our network of Royalty pool restaurants. These initiatives are aimed
at generating stable and growing distribution income for our unitholders and
strengthening our foundation for future growth," said Peter Fowler, President
& CEO of SIR Corp. "By these measures, we believe 2006 was another successful
year. We have now nearly completed the multi-year evolution of Jack Astor's,
completed our system-wide renovation program for Alice Fazooli's!, as well as,
a significant makeover of reds. The sales performance of the two Jack Astor's
added to the Royalty pool, effective January 1, 2006, were in the top quartile
of Jack Astor's system-wide. System-wide SSSG(1) increased 5.9% in 2006,
unitholder distributions were increased 5% during the year and we added three
new Canyon Creek(TM) restaurants to the Royalty pool, effective January 1,
2007."
    "Looking ahead, we remain committed to investing in our existing Royalty
pool restaurants where appropriate and further expanding our network of
Royalty pool restaurants," added Mr. Fowler. "We opened a new Jack Astor's in
Hamilton on March 26, 2007 and have two additional development sites for
Jack Astor's. The first is currently under construction and is expected to
open in 2007 and the second site is planned for a 2008 opening. We continue to
look for additional strategic locations in support of our long term restaurant
expansion plan."

    Financial Results
    Revenue for the restaurants in the Royalty pool (or "Pooled Revenue") for
the three months ended December 31, 2006, increased by 9.9% to $38.7 million
compared to Pooled Revenue of $35.2 million in the fourth quarter of 2005. The
increase in Pooled Revenue resulted primarily from the addition of two new
Jack Astor's restaurants to the Royalty Pool effective January 1, 2006, and
SSSG(1) for Jack Astor's, Canyon Creek(TM), and Alice Fazooli's! ("Concept
Restaurants"), as well as reds and Far Niente(R) within the Signature
Restaurant group.
    Distributable cash(2) for the fourth quarter of 2006 totaled $1.64
million or $0.31 per Fund Unit (basic and diluted), and declared distributions
to unitholders totaled $1.69 million, representing a payout ratio(2) of 102.8%
for the period. Distributable cash(2) for the fourth quarter of 2005 totaled
$1.77 million or $0.33 per Fund Unit (basic and diluted) and declared
distributions totaled $1.61 million, representing a payout ratio(2) of 91.0%
in the fourth quarter a year ago.
    The Fund's net earnings for the fourth quarter of 2006 totaled
$1.64 million, or $0.31 per Fund Unit (basic and diluted), compared to net
earnings of $1.77 million or $0.33 per Fund Unit (basic and diluted) in the
fourth quarter of 2005. The net earnings, distributable cash(2), and payout
ratio(2) for the fourth quarter of 2006 were affected by the $0.23 million
Priority Special Conversion Distribution paid by the SIR Royalty Limited
Partnership (the "Partnership") to SIR Corp. ("SIR"). This Priority Special
Conversion Distribution was paid on the Class B GP units that were converted
to Class A GP units, effective January 1, 2007 related to the Second
Incremental Adjustment for the restaurants added to the Royalty pool effective
January 1, 2006. As no new restaurants were added to the Royalty pool
effective January 1, 2005, there was no similar Priority Special Conversion
Distribution in the fourth quarter of 2005.
    Pooled Revenue for the year ended December 31, 2006, increased 14.8% to
$149.5 million, compared to Pooled Revenue of $130.2 million in the year ended
December 31, 2005. Distributable cash(2) for the twelve months ended December
31, 2006 totaled $6.89 million, or $1.29 per Fund Unit (basic and diluted),
and declared distributions totaled $6.62 million, representing a payout
ratio(2) of 96.1% for the year. The Fund's net earnings for the year ended
December 31, 2006 increased 6.5% to $6.89 million, or $1.29 per Fund Unit
(basic and diluted), compared to net earnings of $6.47 million, or $1.21 per
Fund Unit (basic and diluted) in 2005.
    The Fund's 2006 fourth quarter and year end Financial Statements and
Management's Discussion & Analysis ("MD&A"), and the Partnership's Financial
Statements, for the three and twelve months ended December 31, 2006 will be
filed on SEDAR today and will be available via the SEDAR web site at
www.sedar.com tomorrow. The Fund's 2006 fourth quarter and year end Financial
Statements and MD&A are also available via SIR Corp.'s web site at
www.sircorp.com.

    
    Financial Highlights
    ($000s except restaurant            3 mos.    3 mos.   12 mos.   12 mos.
     and per unit amounts)              ended     ended     ended     ended
    (unaudited)                        Dec. 31   Dec. 31   Dec. 31   Dec. 31
                                         2006      2005      2006      2005
    -------------------------------------------------------------------------
    Restaurants in the Royalty pool         36        34        36        34
    Pooled Revenue generated by SIR     38,716    35,219   149,529   130,246
                                        -------------------------------------
                                        -------------------------------------
    Royalty income to Partnership
     - 6% of Pooled Revenue              2,323     2,113     8,972     7,815
    Make-Whole Payment                      42         -       104         -
                                        -------------------------------------
    Total Royalty income to Partnership  2,365     2,113     9,076     7,815
    Partnership other income                13         8        47        31
    Partnership expenses                   (45)      (25)     (157)     (102)
                                        -------------------------------------
    Partnership earnings                 2,333     2,096     8,966     7,744
    SIR Corp.'s interest (Class A, B,
     and C GP Units)                    (1,336)     (946)   (4,605)   (3,719)
                                        -------------------------------------
    Partnership income allocated to
     Fund                                  990     1,150     4,361     4,025
    Interest income                        750       750     3,000     3,000
                                        -------------------------------------

    Total income of the Fund             1,740     1,900     7,361     7,025
    General & administrative expenses      (99)     (134)     (476)     (559)
                                        -------------------------------------

    Net earnings of the Fund             1,641     1,766     6,885     6,466

    Earnings per Fund unit (basic and
     fully diluted)                       0.31      0.33      1.29      1.21
    Distributions declared per Fund unit  0.32      0.30      1.24      1.20
    

    Same Store Sales(1)
    For the three months ended December 31, 2006, SIR Corp. ("SIR") reported
to the Fund 2.5% same store sales growth ("SSSG")(1) for restaurants in the
Royalty pool versus the comparable period in 2005. For the year ended
December 31, 2006, SIR reported to the Fund 5.9% SSSG(1) for restaurants in
the Royalty pool compared to the year ended December 31, 2005.

    
    SSSG(1) for Restaurants in the      3 months ended      12 months ended
     Royalty pool                     December 31, 2006    December 31, 2006
                                          (unaudited)          (unaudited)
    -------------------------------------------------------------------------
    Jack Astor's                              0.3%                 5.5%
    Canyon Creek Chop House                   5.0%                 7.4%
    Alice Fazooli's!                          3.7%                 8.3%
    Signature Restaurants                     8.1%                 4.2%
    -------------------------------------------------------------------------
    Overall SSSG(1)                           2.5%                 5.9%
    

    SSSG(1) in the Concept Restaurants was supported by ongoing sales
building evolution and marketing programs. SSSG(1) was lower at Jack Astor's
in the fourth quarter of 2006 compared to previous quarters as most of the
evolved Jack Astor's are now in their second or third year following the
evolution. 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. Canyon Creek Chop House
continues to perform well with SSSG(1) of 5.0% and 7.4% for the fourth quarter
and year ended December 31, 2006, respectively. Alice Fazooli's! also
continues to perform well with SSSG(1) of 3.7% and 8.3% for the fourth quarter
and year ended December 31, 2006, respectively. For the year ended
December 31, 2006, consolidated SSSG(1) for the Concept Restaurants was 6.2%.
    SSSG(1) in the Signature Restaurants for the fourth quarter of 2006 was
8.1%. This growth resulted primarily by sales increases at reds and Far
Niente, partially offset by sales declines for Brasserie Frisco(TM), the
casual Armadillo Texas Grill(R) and the Loose Moose Tap & Grill(R). For the
year ended December 31, 2006, SSSG(1) for the Signature Restaurants was 4.2%.

    SIR Corporate Developments
    During the fourth quarter of 2006, renovations and menu enhancements were
completed at one additional Alice Fazooli's!. Renovations of all five
Alice Fazooli's! restaurants in the Royalty pool have now been completed. SIR
completed evolutions of three additional Jack Astor's in 2006, and now, all
but one location currently operating has been evolved.
    During 2006, SIR opened three new Canyon Creek Chop House restaurants,
including: the Canyon Creek across from the Scarborough Town Centre in
Scarborough, Ontario; the Canyon Creek in Vaughan, Ontario; and the Canyon
Creek at the Fallsview Casino Resort in Niagara Falls, Ontario. These three
new restaurants were added to the Royalty Pooled Restaurants (the "Royalty
pool") from which the Fund earns distribution income, effective January 1,
2007.
    SIR has secured two new development sites for Jack Astor's restaurants,
one in Hamilton, Ontario and one in Dartmouth, Nova Scotia. The Hamilton
location opened on March 26, 2007 and the Dartmouth location is expected to
open later in 2007. SIR plans to add both restaurants to the Royalty pool in
January 2008, provided the Dartmouth location is in operation 60 days prior to
calendar year end. SIR has also secured a third site for Jack Astor's located
at the corner of Dundas and Yonge Streets in Toronto, Ontario, which is
planned to open in 2008. SIR continues to look for additional strategic
locations for its restaurant expansion plan.

    Tax Treatment of 2006 Distributions
    For those unitholders holding units outside a tax deferred plan, 89.43%
of the Fund's declared distributions in fiscal 2006 were taxable to
unitholders as other taxable income with the remaining 10.57% of distributions
being a return of capital.

    Other
    On October 31, 2006, the Federal Department of Finance announced a "Tax
Fairness Plan" that proposes changes to the manner in which distributions from
publicly listed flow-through entities ("FTE's") including income funds are
taxed. The proposed changes to the current legislation would have certain
distributions of FTE's income subject to tax at corporate income tax rates and
investors in the FTE would be taxed as though the distributions were
dividends. Existing Income Trusts would not be subject to this proposed
taxation of distributions until the 2011 taxation year so long as the Fund
meets the requirements for "normal growth" as defined in the December 15, 2006
guidance released by the Federal Department of Finance. On December 21, 2006,
the Federal Department of Finance issued draft legislation on the proposed
taxation legislation for public comment. On March 27, 2007, the Minister of
Finance issued a Notice of Ways and Means Motion to implement the draft
legislation. These proposed changes to the income tax legislation have not
been approved at this time.
    The Fund Trustees are considering this announcement and the possible
impact of the proposed rules to the Fund. The proposed rules may adversely
affect the marketability of the Fund's units and the ability to undertake
financings, and at such time as the proposed rules apply to the Fund, the
distributable cash of the Fund may be materially reduced. The Trustees of the
Fund and senior management of SIR will continue to monitor this development.

    2006 Year End Conference Call & Web Cast
    Management of SIR Royalty Income Fund will host a conference call to
discuss the Fund's 2006 financial results on Friday, March 30, 2007 at
10:30 a.m. (EST). The call will be audio-cast live and archived for 90 days at
www.newswire.ca or www.sircorp.com. A replay of the conference call will be
available by telephone approximately one hour following the conclusion of the
call. To access the replay by telephone, dial 416-640-1917 or 1-877-289-8525
(reference No. 21219831 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 except for the Jack Astor's
        locations in Whitby, on Front Street in Toronto and in Don Mills,
        Ontario because they were not open for the entire year of both 2005
        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. The payout ratio is
        calculated as cash distributed for the period as a percentage of the
        distributable cash for the period. For a detailed explanation of how
        the Fund's distributable cash is calculated, please refer to the
        Fund's MD&A for the twelve months ended December 31, 2006, which can
        be accessed via the SEDAR web site (www.sedar.com).
    

    About SIR Corp.
    SIR Corp. ("SIR") is a privately held Canadian corporation that owns and
operates a portfolio of more than 39 restaurants in Canada. SIR's concept
brands include: Jack Astor's Bar and Grill, with 23 locations; Alice
Fazooli's!, with five locations; and Canyon Creek Chop House, with seven
locations. SIR also operates one-of-a-kind "signature" brands in downtown
Toronto, which comprise the upscale reds, Far Niente & Soul of the Vine(R),
Brasserie Frisco, the casual Armadillo Texas Grill 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 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 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.
    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 industry conditions, general
levels of economic activity (including in downtown Toronto), regulations
(including regarding employees, food safety, tobacco and alcohol), weather,
taxes, foreign exchange rates and interest rates, that there will be no
pandemics or other 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. For more information concerning the Fund's risks and
uncertainties, please refer to the Fund's periodic interim filings, October,
2004 prospectus and/or its March 31, 2006 Annual Information Form.

    %SEDAR: 00020914E




For further information:

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; Bruce Wigle, Investor Relations, Tel: (416) 815-0700 ext. 228,
Email: bwigle@equicomgroup.com


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