SIR Royalty Income Fund reports fiscal 2007 results



    BURLINGTON, ON, Feb. 21 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN)
("the Fund") today reported its fiscal 2007 year end financial results for the
twelve-month period ending December 31, 2007.

    
    2007 Highlights

    -   4.2% same store sales growth ("SSSG")(1) for restaurants in the
        Royalty Pool compared to the year ended December 31, 2006;
    -   Net earnings were $6.44 million or $1.20 per Fund unit (basic and
        diluted) compared to $6.89 million or $1.29 per fund unit (basic and
        diluted) for the year ended December 31, 2006;
    -   Distributable cash(2) for the year totaled $7.24 million and declared
        distributions to unitholders were $6.94 million representing a payout
        ratio(2) of 95.8% for the year;
    -   On May 23, 2007, the Trustees authorized a 4.8% distribution increase
        to Unitholders. The monthly distributions increased from $0.105 per
        unit to $0.110 per unit beginning with the distribution paid in June
        2007. This is expected to increase the annualized distribution from
        $1.26 to $1.32.
    -   Three new Jack Astor's(R) were opened in fiscal 2007 and added to the
        Royalty pool in January 2008, subsequent to fiscal 2007 year end;
    -   Evolutions now completed at all Jack Astor's originally in the
        Royalty Pool;
    -   Renovations completed at The Loose Moose Tap & Grill(R);
    -   Introduced innovative bakery concept, Petit Four(TM);
    -   SIR Corp. ("SIR") secured a seven-year, $16.0 million credit facility
        to facilitate the construction of new restaurants. The Fund and the
        SIR Royalty Limited Partnership (the "Partnership") entered into an
        Interlender Agreement with SIR and the bank which, under certain
        conditions, subordinates and postpones their claims against SIR to
        the claims of the bank.
    -   The subordination of the distributions on SIR's initial 10% share
        (595,185 Class A GP Units) ended effective August 26, 2007 when the
        required conditions were met.
    

    "During 2007 we continued to build on the solid foundation for growth
that we have established by investing in our Royalty Pool restaurants and
expanding our restaurant network into new strategic markets," said Peter
Fowler, Chief Executive Officer of SIR Corp. "During the year, we successfully
completed a number of renovation, marketing and advertising programs to drive
same store sales growth and generate stable and growing levels of distribution
income for our unitholders. These initiatives included: major renovations at
our original Canyon Creek(TM) location in Etobicoke; the repositioning of the
Loose Moose Tap & Grill; and the introduction of the innovative bakery
concept, Petit Four. We believe these efforts have yielded positive results,
as system-wide same store sales(1) increased by 4.2% in 2007 and annualized
cash distributions increased 4.8% to an expected $1.32 per trust unit."
    "Looking ahead, we will continue to seek opportunities for the prudent
and sustainable expansion of our restaurant network and, to support this
expansion, SIR has secured a seven year, $16.0 million credit facility to
facilitate the construction of new restaurants," continued Mr. Fowler. "We
have secured six sites for development in 2008, including five for Jack
Astor's and one for Canyon Creek. One of the new Jack Astor's will be located
at the intersection of Yonge and Dundas Streets in downtown Toronto and plans
are in place to develop another Jack Astor's at the former Brasserie Frisco(R)
location in Toronto's entertainment district. We believe we have Jack Astor's
evolved into a strong Canadian restaurant brand and the development of these
high-profile, downtown Toronto locations is part of an ongoing strategy that
will significantly increase Jack Astor's presence in Toronto's downtown core."

    Financial Results

    Revenue for the restaurants in the Royalty Pool (or "Pooled Revenue") for
the three months ended December 31, 2007, increased by 8.8% to $42.1 million
compared to Pooled Revenue of $38.7 million in the fourth 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
SSSG(1) for Jack Astor's, Canyon Creek, and Alice Fazooli's!(R) ("Concept
Restaurants"), as well as the Signature Restaurant group.
    Distributable cash(2) for the fourth quarter of 2007 totaled
$1.87 million or $0.35 per Fund Unit (basic and diluted), and declared
distributions to unitholders totaled $1.77 million, representing a payout
ratio(2) of 94.7% for the period. 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 totaled $1.69 million, representing a payout ratio(2)
of 102.8% in the fourth quarter a year ago.
    The Fund's net earnings for the fourth quarter of 2007 totaled
$1.92 million, or $0.36 per Fund Unit (basic and diluted), compared to net
earnings of $1.64 million or $0.31 per Fund Unit (basic and diluted) in the
fourth quarter of 2006. The net earnings, distributable cash(2), and payout
ratio(2) for the fourth quarter of 2007 were affected by the $0.08 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, 2008 related to the Second
Incremental Adjustment for the restaurants added to the Royalty pool effective
January 1, 2007.
    Pooled Revenue for the year ended December 31, 2007, increased 9.2% to
$163.4 million, compared to Pooled Revenue of $149.5 million in the year ended
December 31, 2006. Distributable cash(2) for the twelve months ended
December 31, 2007 totaled $7.24 million, or $1.35 per Fund Unit (basic and
diluted), and declared distributions totaled $6.94 million, representing a
payout ratio(2) of 95.8% for the year. The Fund's net earnings for the year
ended December 31, 2007 decreased 6.4% to $6.44 million, or $1.20 per Fund
Unit (basic and diluted), compared to net earnings of $6.89 million, or $1.29
per Fund Unit (basic and diluted) in 2006. The Fund's net earnings in 2007
were impacted by $0.80 million in future income taxes that were calculated and
recorded in the financial statements of the Fund. This is a result of proposed
changes to the manner in which distributions from certain publicly-listed flow
through entities, including income funds, are taxed. The proposed changes were
announced by the Federal Department of Finance in 2006 and are now considered
substantively enacted.
    The Fund's 2007 year end Financial Statements and Management's Discussion
& Analysis ("MD&A"), and the Partnership's Financial Statements, for the year
ended December 31, 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 year end
Financial Statements and MD&A are also available via SIR Corp.'s web site at
www.sircorp.com.


    
    Financial Highlights                   3 mos.   3 mos.  12 mos.  12 mos.
    ($000s except restaurant               ended    ended    ended    ended
     and per unit amounts)                Dec. 31  Dec. 31  Dec. 31  Dec. 31
    (unaudited)                             2007     2006     2007     2006
    -------------------------------------------------------------------------
    Restaurants in the Royalty pool            38       36       38       36
    Pooled Revenue generated by SIR        42,132   38,716  163,353  149,529
                                          -----------------------------------
                                          -----------------------------------
    Royalty income to Partnership
     - 6% of Pooled Revenue                 2,562    2,323    9,801    8,972

    Make-Whole Payment                         34       42       34      104
                                          -----------------------------------
    Total Royalty income to Partnership     2,562    2,365    9,835    9,076
    Partnership other income                   15       13       58       47
    Partnership expenses                      (16)     (45)    (104)    (157)
                                          -----------------------------------
    Partnership earnings                    2,561    2,333    9,789    8,966
    SIR Corp.'s interest (Class A, B,
     and C GP Units)                       (1,355)  (1,343)  (5,065)  (4,605)
                                          -----------------------------------

    Partnership income allocated to Fund    1,206      990    4,724    4,361
    Interest income                           750      750    3,000    3,000
                                          -----------------------------------

    Total income of the Fund                1,956    1,740    7,724    7,361
    General & administrative expenses         (89)     (99)    (483)    (476)
                                          -----------------------------------

    Net earnings of the Fund before
     income taxes                           1,867    1,641    7,241    6,885
    Future income taxes                        56        -     (797)       -
                                          -----------------------------------
    Net earnings of the Fund                1,923    1,641    6,444    6,885
                                          -----------------------------------
                                          -----------------------------------

                                          -----------------------------------
    Earnings per Fund unit (basic and
     fully diluted)                          0.36     0.31     1.20     1.29
    Distributable cash per Fund unit         0.35     0.31     1.35     1.29
    

    Same Store Sales(1)

    For the three-month period ended December 31, 2007, SIR Corp. ("SIR")
reported to the Fund 4.2% same store sales growth ("SSSG")(1) for restaurants
in the Royalty pool versus the comparable period in 2006. For the twelve-month
period ended December 31, 2007, SIR reported to the Fund 4.2% SSSG(1) for
restaurants in the Royalty pool compared to the year ended December 31, 2006.

    
                                                     3 months     12 months
                                                      ended         ended
    SSSG(1) for Restaurants in the Royalty pool    December 31,  December 31,
                                                       2007          2007
                                                   (unaudited)   (unaudited)
    -------------------------------------------------------------------------
    Jack Astor's                                          1.3%          2.9%
    Canyon Creek Chop House                               6.7%          6.4%
    Alice Fazooli's!                                      5.3%          5.5%
    Signature Restaurants                                15.6%          7.6%
    -------------------------------------------------------------------------
    Overall SSSG(1)                                       4.2%          4.2%
    

    SSSG(1) in the Concept Restaurants was supported by ongoing marketing and
advertising programs. In 2007, Jack Astor's, Canyon Creek and Alice Fazooli's
all ran multi-station radio advertising campaigns in the Greater Toronto Area
("GTA"). The campaigns aired on two major radio stations in the GTA and
focused on the casual and inviting atmosphere that SIR's newly renovated
restaurants offer, as well as the fresh and flavourful Italian food that
guests enjoy at SIR's five Alice Fazooli's! locations. During the third
quarter of 2007, Canyon Creek ran its first multi-station radio campaign. The
campaign aired on three major radio stations in the GTA and focused on Canyon
Creek's attention to detail as well as its tenth anniversary celebrations.
    SSSG(1) for Jack Astor's was 1.3% and 2.9% for the fourth quarter and the
year ended December 31, 2007, respectively. SIR believes that changes in
smoking legislation in Ontario and Quebec negatively impacted bar sales in
2007, particularly in restaurants that had previously benefited from
Designated Smoking Rooms. However, SIR believes that the effect of the Smoke
Free Ontario Act has begun to mitigate over time, especially during the summer
months when patios were open and smoking guests began to return. Canyon Creek
Chop House continues to perform well with SSSG(1) of 6.7% and 6.4% for the
fourth quarter and year ended December 31, 2007, respectively. Alice
Fazooli's! also continues to perform well with SSSG(1) of 5.3% and 5.5% for
the fourth quarter and year ended December 31, 2007, respectively.
    SSSG(1) in the Signature Restaurants for the fourth quarter of 2007 was
15.6%. This growth resulted primarily from sales increases at reds(R) and Far
Niente/Soul of the Vine and Petit Four, as well as the newly renovated Loose
Moose Tap & Grill. SSSG(1) also improved due to the removal of the
underperforming Brasserie Frisco, from same store sales calculations for both
the quarter and the year. Brasserie Frisco was closed on December 22, 2007 and
SIR expects to open a new Jack Astor's in the former Brasserie Frisco location
during 2008. For the year ended December 31, 2007, SSSG(1) for the Signature
Restaurants was 7.6%.

    SIR Corporate Developments

    During 2007, SIR continued its evolution and renovations programs for
both the Concept and Signature restaurants. The Canyon Creek restaurant
located in Etobicoke, Ontario was closed for 11 days during the second quarter
for a major renovation. This restaurant was SIR's first Canyon Creek and
recently celebrated its tenth anniversary. The update to both the interior and
exterior of the restaurant better reflect Canyon Creek's "Chop House" market
positioning. Also during 2007, SIR completed a renovation and repositioning of
the Armadillo Texas Grill/the Loose Moose Tap & Grill and is now operating the
entire space as the Loose Moose Tap & Grill. The renovated location is a large
rock and roll themed venue geared to downtown Toronto nightlife. SIR also
introduced Petit Four, an innovative bakery concept designed to take advantage
of downtown Toronto's lucrative takeout market and daytime catering business.
    Subsequent to year end, renovations began in the remaining portion of
Soul of the Vine, converting it into Four(TM) restaurant. Four will be a new
healthy upscale restaurant focusing on guilt-free dining with each dish having
less than 650 calories.
    During 2007, SIR closed two restaurants and opened three new restaurants.
The Jack Astor's in Burlington, Ontario was closed during the third quarter of
2007 and 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. SIR also opened a new Jack Astor's in Hamilton,
Ontario and a new Jack Astor's in Dartmouth, Nova Scotia during 2007. These
three new restaurants were added to the Royalty Pooled Restaurants (the
"Royalty pool") from which the Fund earns distribution income, effective
January 1, 2008.
    During the fourth quarter of 2007, Brasserie Frisco was closed and SIR
expects to open a new Jack Astor's in the former Brasserie Frisco location
during fiscal 2008. After evaluating a range of options, SIR determined that
converting Brasserie Frisco into a new Jack Astor's is the best use of this
prime downtown Toronto location. Brasserie Frisco was treated as a 2007 Closed
Restaurant and it is expected that the new Jack Astor's will be added to the
Royalty Pool effective January 1, 2009.
    SIR has also secured five additional development sites for Jack Astor's
and Canyon Creek restaurants, with expected openings in 2008. One of the new
sites is for a Jack Astor's at the corner of Yonge and Dundas streets in
downtown Toronto. SIR has also secured a site for a new Jack Astor's in a
"lifestyle mall" in Don Mills, Ontario and two sites near Toronto's Pearson
International Airport where it intends to open a Jack Astor's and a Canyon
Creek, under one lease. The final site is for a Jack Astor's to be opened in
Boisbriand, Quebec. All of these restaurants are expected to be added to the
Royalty Pool, effective January 1, 2009. SIR continues to look for additional
strategic locations in both new markets and markets where it already has an
established presence, as it continues to execute on its restaurant expansion
plan.
    During the third quarter of 2007, SIR entered into a seven year,
$16.0 million maximum credit agreement designed primarily to facilitate the
construction of new restaurants. 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.

    Tax Treatment of 2007 Distributions

    For those unitholders holding units outside a tax deferred plan 90.84% of
the Fund's declared distributions in fiscal 2007 were taxable to unitholders
as other taxable income with the remaining 9.16% of distributions being a
return of capital.

    2007 Year End Conference Call & Web Cast

    Management of SIR Royalty Income Fund will host a conference call to
discuss the Fund's 2007 financial results on Friday, February 22, 2008 at
10:00 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 number 21262581 followed by the number sign).

    
    (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.
        SSSG 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.

    (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, 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), 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 39 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 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 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, 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. 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.
    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. These assumptions, although considered reasonable by SIR
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, its October 2004 final prospectus, and/or its
March 30, 2007 Annual Information Form, all of which are available under the
Fund's profile at www.sedar.com

    %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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