SIR Royalty Income Fund announces SIR Corp. fiscal 2009 year end results

BURLINGTON, ON, Nov. 26 /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 income and interest income, has filed its financial results for the 16-week ("Q4 2009") and 52-week ("fiscal 2009") periods ended August 30, 2009.

SIR's 2008 fiscal year consisted of 53 weeks and its fiscal 2008 fourth quarter consisted of 17 weeks, therefore the Company's fiscal 2009 and Q4 2009 results reflect one less week of operations compared to the corresponding periods in 2008. In order to assist readers in assessing year-over-year performance, this news release includes same store sales(1) ("SSS"(1)) data for fiscal 2008 on a 16-week and 52-week basis for comparative purposes.

Financial Results

SIR has advised the Fund that revenue for the 16-week period ended August 30, 2009 of $61.4 million was 6.0% lower than $65.3 million for the 17-week period ended August 31, 2008. For the 52-week period ended August 30, 2009, revenue increased 4.4% to $196.7 million compared to $188.4 million for the 53-week period ended August 31, 2008.

SIR's net earnings from continuing operations was $0.7 million for the 16-week period ended August 30, 2009, compared to a net loss of $0.5 million for the 17-week period ended August 31, 2008. For the 52-week period in fiscal 2009, SIR's net loss from continuing operations was $1.0 million compared to a net loss of $2.4 million for the 53-week period in fiscal 2008.

SIR's cash provided by continuing operations for the 16-week period ended August 30, 2009 totaled $3.9 million compared to $4.4 million for the 17-week period ended August 31, 2008. For the 52-week period in fiscal 2009, cash provided by continuing operations increased 45.5% to $12.6 million, up from $8.7 million for the 53-week period in fiscal 2008. Cash used in investing activities for Q4 2009 was $0.4 million compared to $10.9 million in the fourth quarter of fiscal 2008.

Same Store Sales(1)

SIR has advised the Fund that SSS(1) for Royalty Pooled Restaurants for the 16-week period ended August 30, 2009 decreased 13.2% to $49.4 million compared to $57.0 million for the 17-week period ended August 31, 2008. For the 52-week period ended August 30, 2009, SSS(1) declined 6.7% to $162.5 million compared to $174.2 million for the 53-week period a year ago. If the additional week of revenue is removed from revenue in fiscal 2008, SSS(1) for Royalty Pooled Restaurants would have declined by 7.6% and 4.8% for Q4 and fiscal 2009, respectively.

    
    -------------------------------------------------------------------------
                            Fourth Quarter                Fiscal Year
    -------------------------------------------------------------------------
                    16-weeks 2009  16-weeks 2009    52-weeks       52-weeks
                    vs. 17-weeks   vs. 16-weeks   2009 vs. 53-   2009 vs. 52-
    SSS(1)               2008          2008*     weeks 2008   weeks 2008*
                     (unaudited)    (unaudited)    (unaudited)    (unaudited)
    -------------------------------------------------------------------------
    Jack Astor's(R)       (9.9%)         (3.9%)         (3.6%)         (1.5%)
    Canyon Creek
     Chop House(R)       (18.9%)        (13.8%)        (11.5%)         (9.9%)
    Alice Fazooli's(R)   (17.0%)        (11.9%)         (9.2%)         (7.4%)
    Signature
     Restaurants         (23.8%)        (19.9%)        (15.3%)        (14.2%)
    Overall SSSG(1)      (13.2%)         (7.6%)         (6.7%)         (4.8%)
    -------------------------------------------------------------------------
    *After removing additional week in 2008
    

Excluding the additional week in 2008, Jack Astor's(R) (SIR's flagship Concept Restaurant which accounted for approximately 67% of fiscal 2009 Pooled Revenue) SSS(1) decline was 3.9% and 1.5% for Q4 and fiscal 2009, respectively. Excluding the additional week in 2008: the SSS(1) decline for Canyon Creek(R) was 13.8% and 9.9% for Q4 and fiscal 2009, respectively; 11.9% and 7.4% declines for Alice Fazooli's(R), and 19.9% and 14.2% for the Signature Restaurants, in Q4 and fiscal 2009, respectively. Fiscal 2009 SSS(1) were negatively impacted by the weak economic environment as consumer discretionary spending declined. SIR management believes that Jack Astor's, with its lower average cheque was less impacted by the economic downturn than restaurants with higher average cheques such as Alice Fazooli's, Canyon Creek, and the downtown Toronto Signature Restaurants.

SIR Corporate Developments

In fiscal 2009, SIR opened two new restaurants in the following locations:

    
    -   Jack Astor's at the intersection of Don Mills Road and Lawrence
        Avenue in Toronto, opened on October 6, 2008; and
    -   Jack Astor's at the corner of Yonge and Bloor Streets in Toronto,
        opened on October 31, 2008
    

These restaurants were added to the Royalty Pooled Restaurants on January 1, 2009.

Subsequent Event

Subsequent to year end, SIR announced on November 13, 2009 that it has entered into a new Credit Agreement ("Credit Agreement") with a new senior lender to refinance its current revolving line of credit and construction facility, and to facilitate the repurchase of certain of its common shares for cancellation. A copy of the Credit Agreement is filed on SEDAR. The Credit Agreement provides for a maximum of $26.0 million senior term debt facility. This facility has a three year term and a 10 year amortization. Interest is the greater of 7.8% per annum and the three-month Canadian dollar bankers' acceptance rate plus 7.55% per annum, which on November 13, 2009 was 7.86%. Certain financial covenants apply to SIR, including a minimum fixed charge coverage ratio. The loan is secured by substantially all of the assets of SIR and most of its subsidiaries, which are also guarantors. SIR Royalty Limited Partnership ("the Partnership") and the Fund have not guaranteed the Credit Agreement. The Credit Agreement qualifies as "permitted indebtedness" within the meaning of the agreements between the Fund, the Partnership, and SIR, and as a result, the Fund and the Partnership have, as contemplated in the existing agreements, subordinated and postponed their claims against SIR to the claims of the new lender. The terms of the subordination includes a subordination of the Partnership's rights under the License and Royalty Agreement between the Partnership and SIR whereby the Partnership licenses to SIR the right to use trademarks and related intellectual property in return for royalty payments based on revenues and is effected pursuant to the terms of a Subordination and Postponement Agreement, a copy of which, is also filed on SEDAR. In addition, the original five-year restrictions on repurchases of shares by SIR contained in the agreements between the Fund, the Partnership and SIR have expired. For further details see the Liquidity and Capital Resources section of SIR's Management Discussion and Analysis.

Outlook

SIR limited its media advertising during 2009. SIR had one mass media campaign during Q2 2009 and launched its exciting new "Get Fresh" advertising campaign for Jack Astor's during Q3 2009. This campaign included direct mail, radio and television banner advertisements supporting Jack Astor's key markets. SIR intends to return to its regular advertising initiatives and recently launched a four-week media campaign for Canyon Creek that included print, television, on-line and radio advertisements.

Management is carefully monitoring the effects of the continued weakness in economic conditions and consumer confidence on SIR's business. The current economic downturn could continue to negatively impact SIR's financial performance in the near future. In anticipation of a continuing economic downturn, SIR has implemented certain cost saving initiatives and continues to evaluate other cost saving opportunities. The Company is also undertaking cash preservation strategies, which include the previously announced slowing of its restaurant expansion plans. SIR will continue to focus on sustaining and growing restaurant sales and profits while managing costs in light of the current economic conditions in Canada.

SIR's fiscal 2009 filings, which include its audited 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 45 restaurants in Canada. SIR's concept brands include: Jack Astor's Bar and Grill(R), with 29 locations; Alice Fazooli's(R), with five locations; and Canyon Creek Chop House(R), with eight locations. SIR also operates one-of-a-kind "signature" brands in downtown Toronto, which comprise the upscale reds(R), Far Niente(R)/FOUR(TM)/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 45 Royalty Pooled Restaurants. 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, 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 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, the Trust, the Partnership, SIR, the SIR Restaurants, or industry results, 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 may include, among other language, such words as "may", "will", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology. 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. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: competition; changes in demographic trends; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; 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. 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, estimates and projections 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 conditions affecting SIR's restaurants and the Fund will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, 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. Management is not anticipating an improvement, in the near future, in economic conditions (particularly as it relates to the recent unprecedented deterioration of the economic environment and consumer confidence, which could significantly negatively affect sales and profit prospects in the near future). Management is not anticipating an improvement, in the near future, in the availability of credit (particularly as it relates to the recent disruption of world credit markets, which could significantly negatively affect sales and profit prospects in the near future). These assumptions, although considered reasonable by Management at the time of preparation, may prove to be incorrect. In particular, in estimating the revenues for the five new Jack Astor's restaurants and one new Canyon Creek restaurant added to the Royalty Pooled Restaurants on January 1, 2009, Management has assumed that they will operate consistent with other Jack Astor's and Canyon Creek restaurants. For more information concerning the Fund's risks and uncertainties, please refer to the October 2004 final prospectus, and/or its March 31, 2009 Annual Information Form, all of which are available under the Fund's profile at www.sedar.com.

    
    (1) Same store sales and same store sales growth exclude revenue from
        restaurants which are not Royalty Pooled Restaurants, 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.
    

%SEDAR: 00020914E

SOURCE SIR Royalty Income Fund

For further information: For further information: Jeff Good, Chief Financial Officer, SIR Corp., Tel: (905) 681-2997; Bruce Wigle or Alice Dunning, Investor Relations, Tel: (416) 815-0700 ext. 228 or ext. 255, Email: bwigle@equicomgroup.com or adunning@equicomgroup.com


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