BURLINGTON, ON, June 19, 2012 /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 12-week and 36-week periods ended May 6, 2012 ("Q3" and "YTD", respectively).
SIR has advised the Fund that revenue for Q3 increased 6.2% to $50.9 million from $48.0 million for the same period a year ago. For YTD, revenue increased 8.2% to $150.2 million from $138.9 million for the same period a year ago.
Same store sales(1) ("SSS") for Q3 increased 3.8% to $47.7 million from $46.0 million for the same period a year ago. YTD SSS(1) increased 4.9% to $140.0 million compared with $133.4 million for the same period a year ago.
| Same Store Sales Growth(1)
| 12-week period ended
May 6, 2012
| 36-week period ended
May 6, 2012
Q3 and YTD SSS(1) for Jack Astor's, SIR's flagship Concept Restaurant brand, which generates approximately 70% of YTD Pooled Revenue, was 6.7% and 7.1%, respectively. Jack Astor's sales in Q3 were supported by additional media advertising as compared to the same period a year ago. Alice Fazooli's had a weak Q3, with a SSS(1) decline of 3.2%, but has posted positive YTD SSSG(1) of 1.1%. The YTD growth is largely due to the growth from the two Alice Fazooli's locations that have been renovated since fiscal 2009. The downtown Toronto Signature Restaurants had a SSS(1) decline of 4.6% and an increase of 0.5% for Q3 and YTD, respectively. Part of the decline in SSS(1) in Q3 is attributed to a decline in sales at reds®. The landlord of the building in which reds® is located is refacing the entire building and this construction has had a significant impact on the restaurant's sales.
Net loss attributable to shareholders of SIR for Q3 was $0.7 million compared with $0.3 million for the same period a year ago. Net loss for YTD was $2.1 million compared with $2.6 million for the same period a year ago. The unfavourable variance in Q3 net loss is primarily due to unfavourable earnings from corporate restaurant operations, resulting from the SSS(1) declines in Alice Fazooli's and the Signature Restaurants, as well as the impact of increased media spending in the quarter and some on-going costs in the two restaurants closed in fiscal 2012. The favourable variance for YTD is primarily due to the favourable earnings from corporate restaurant operations, resulting primarily from YTD SSSG(1).
SIR Corporate Development
At May 6, 2012, SIR had 46 restaurants open in Canada. The new Jack Astor's restaurant in London, Ontario, opened on May 2, 2011, was added to Royalty Pooled Restaurants on January 1, 2012. The new Jack Astor's restaurant in Mississauga, Ontario, that opened in Q1 2012, on November 14, 2011 and the new Jack Astor's restaurant that opened subsequent to Q3 on May 16, 2012 will be added to the Royalty Pooled Restaurants on January 1, 2013.
During Q2 2012, on January 27, 2012, SIR closed the Alice Fazooli's restaurant in Toronto, Ontario. During Q3, on February 13, 2012, SIR closed the Jack Astor's restaurant in Kitchener, Ontario. SIR is required to pay a Make-Whole Payment for these locations from their date of closure until they cease to be part of Royalty Pooled Restaurants on January 1, 2013.
SIR completed three Jack Astor's restaurant renovations in Q1 2012 and one Jack Astor's restaurant renovation subsequent to Q3 2012. SIR has five commitments to lease properties upon which it plans to build six restaurants. It is expected that one of these restaurants will open in fiscal year 2012 and the remaining five will open in fiscal year 2013.
SIR has invested in existing restaurants to ensure that it remains well positioned with modern and relevant concepts. Management remains focused on maximizing the performance of its restaurants through growth in sales and earnings over time.
Liquidity and Capital Resources
As at May 6, 2012, SIR had cash and cash equivalents of $3.9 million compared with $5.2 million as at August 28, 2011. Cash used in continuing operations for Q3 totaled $0.001 million and cash provided by continuing operations for YTD totaled $2.2 million, compared with cash provided by continuing operations of $2.1 million and $1.1 million for the same periods a year ago, respectively. The decrease in cash provided by operations in Q3 is primarily due to the variance in the net change in working capital items of $1.8 million and this is mainly due to the timing of payments. The increase in YTD is primarily due to the favourable change in net earnings from continuing operations of $0.7 million.
Cash used in continuing investing activities for Q3 and YTD was $1.8 million and $6.6 million, compared with $0.9 million and $4.0 million for the same periods a year ago, respectively. The majority of the capital expenditures in the current year relate to the construction costs incurred for the new Jack Astor's in Mississauga, Ontario that opened in Q1 2012, the new Jack Astor's restaurant in Toronto, Ontario that opened subsequent to Q3, the new Jack Astor's restaurants expected to open later in fiscal 2012 and early fiscal 2013, and the three Jack Astor's restaurant renovations that occurred in Q1 2012. Management expects that the investments in new and existing restaurants and other profit enhancing initiatives, such as new patios and patio expansions, as well as maintenance capital expenditures, will help position SIR favourably in the market.
On August 26, 2011, SIR entered into an Amended Credit Agreement with its senior lender to add a $12.0 million Development Loan to its existing $26.0 million Term Loan that was negotiated on November 13, 2009.
On November 25, 2011, SIR entered into a First Amendment to the existing Amended and Restated Loan Agreement with its senior lender ("First Amendment") to extend and make coterminous the terms of the $12.0 million Development Loan and the $26.0 million Term Loan. Under the terms of the First Amendment, the term of the $26.0 million Term Loan was extended from November 13, 2012 to November 14, 2016 and the term of the Development Loan was extended from August 26, 2016 to November 14, 2016. Additionally, under the terms of the First Amendment the variable interest rate of the Term Loan is reduced to the same rate as that of the Development Loan.
SIR continues to focus on sustaining and growing existing restaurant sales and profits while managing costs. The Canadian Restaurant and Foodservices Association ("CRFA"), in its 2012 - 2016 Long Term Foodservice Forecast is forecasting that sales in calendar year 2012 and over the next five years, in the full service restaurant industry, will show a modest increase. Going forward, SIR continues to carefully monitor the current economic environment. SIR considers new restaurant growth and renovations, when appropriate and subject to acceptable long-term financing.
SIR's Q3 fiscal 2012 filings, which include its unaudited 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 47 restaurants in Canada. SIR's concept brands include: Jack Astor's Bar and Grill®, with 32 locations; Alice Fazooli's!®, with four locations; and Canyon Creek Chop House®, with eight locations. SIR also operates one-of-a-kind "signature" brands in downtown Toronto, which comprise the upscale reds®, Far Niente®/FOUR®/Petit Four™, 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 47 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 contained in this release, 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 Trust, the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "would", "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: 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. 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 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, 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, in estimating the revenue for the new Jack Astor's restaurant added to Royalty Pooled Restaurants on January 1, 2012, Management has assumed that it will operate consistent with other Jack Astor's restaurants. For more information concerning the Fund's risks and uncertainties, please refer to the October 2004 final prospectus, and/or its March 30, 2012 Annual Information Form, all of which are available under the Fund's profile at www.sedar.com.
All of the forward-looking statements made in this report 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.
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. 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.
For further information:
Chief Financial Officer
5360 South Service Road, Suite 200
Burlington, Ontario, Canada L7L 5L1
Tel: 416-815-0700 ext. 257
Email: [email protected]