SIR Royalty Income Fund reports 2007 second quarter results



    BURLINGTON, ON, Aug. 14 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN)
("the Fund") today reported its financial results for the three and six-month
periods ended June 30, 2007.

    
    Q2 2007 (three-month period ended June 30, 2007) Highlights

    -   Net earnings before income taxes were $1.79 million and net earnings
        were $0.94 million
    -   4.1% same store sales growth ("SSSG(1)") for restaurants in the
        Royalty pool
    -   Pooled Revenue increased 9.2% to $41.0 million compared to Q2 2006
    -   Distributable cash(2) for the period totaled $1.79 million and
        distributions paid to unitholders were $1.71 million, representing a
        payout ratio(2) of 95.5% for the quarter
    -   Annualized distributions were increased by 4.8% from $1.26 per trust
        unit to $1.32 per trust unit, effective with the Fund's distribution
        paid in June
    -   Completed major renovation of Canyon Creek Chop House(R) in
        Etobicoke, Ontario
    -   New Jack Astor's(R) restaurant opened in Dartmouth, Nova Scotia in
        May 2007
    -   Subsequent to the end of the quarter, SIR Corp. ("SIR") secured a
        $16 million credit facility primarily to facilitate new restaurant
        expansion activities
    

    "Both our Concept and Signature restaurant groups have generated solid
same store sales growth in the second quarter and year-to-date in 2007. This
sustained growth resulted in our Fund Trustees recently approving a 4.8%
increase to unitholder distributions," said Peter Fowler, President & CEO of
SIR Corp. "We continue to invest in our existing Royalty pool restaurants to
build value for our unitholders, both through renovations and marketing
campaigns designed to drive guest counts and increased SSSG(1). In the second
quarter of 2007, we completed a major renovation of one of our Canyon Creek(R)
locations and ran our first multi-station radio advertising campaign to
promote our five Alice Fazooli's!(R) locations in the Greater Toronto Area. We
also continue to invest in future Royalty pool restaurants through our
expansion program. We have opened two new restaurants and have an additional
new restaurant scheduled to open later this year and have three additional
restaurants slated for development in 2008."

    Financial Results

    Revenue for the restaurants in the Royalty pool (or "Pooled Revenue") for
the three-month period ended June 30, 2007, increased 9.2% to $41.0 million,
compared to Pooled Revenue of $37.5 million in the second 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
same store sales growth(1) from SIR's Concept and Signature Restaurant groups.
    The Fund's net earnings for the second quarter of 2007 totaled
$0.94 million or $0.18 per Fund Unit (basic and diluted), compared to net
earnings of $1.76 million, or $0.33 per Fund Unit (basic and diluted) in the
second quarter of 2006. The decline in net earnings is the result of the
substantive enactment of the Department of Finance's proposed legislation on
the taxation of certain publicly traded income funds. Since its announcement,
the proposed legislation has received a third reading and therefore is
considered substantively enacted. As a result, future income taxes of
$0.85 million have been calculated and recorded in the second quarter and
year-to-date financial statements of the Fund.
    Distributable cash(2) for the second quarter of 2007 totaled
$1.79 million, or $0.33 per Fund Unit (basic and diluted), and distributions
paid to unitholders totaled $1.71 million, representing a payout ratio(2) of
95.5% for the period. Distributable cash(2) for the second quarter of 2006
totaled $1.76 million or $0.33 per Fund Unit (basic and diluted) and
distributions paid totaled $1.63 million, representing a payout ratio of 92.6%
in the second quarter a year ago.
    Pooled Revenue for the six-month period ended June 30, 2007, increased
8.1% to $80.4 million, compared to Pooled Revenue of $74.4 million in the
first six months of 2006. Distributable cash(2) for the six months ended
June 30, 2007 was $3.53 million, or $0.66 per Fund Unit (basic and diluted),
and distributions paid totaled $3.40 million, representing a payout ratio of
96.5%. The Fund's net earnings for the first six months of 2007 were
$2.67 million, or $0.50 per Fund Unit (basic and diluted), compared to
$3.48 million, or $0.65 per Fund Unit (basic and diluted) in the first six
months of 2006.

    
                                       3-month   3-month   6-month   6-month
    Financial Highlights                period    period    period    period
    ($000s except restaurants and       ended     ended     ended     ended
     per unit amounts)                 June 30,  June 30,  June 30,  June 30,
    (unaudited)                          2007      2006      2007      2006

    Restaurants in the Royalty pool         38        36        38        36
    Pooled Revenue generated by SIR     40,956    37,506    80,407    74,366

    Royalty income to Partnership
     - 6% of Pooled Revenue              2,457     2,250     4,824     4,462
    Make Whole Payment                       -        18         -        18

    Total Royalty income to Partnership  2,457     2,268     4,824     4,480
    Partnership other income                14        12        28        21
    Partnership expenses                   (22)      (41)      (61)      (91)
    Partnership earnings                 2,449     2,239     4,791     4,410

    SIR's interest (Class A, B,
     and C GP Units)                    (1,238)   (1,090)   (2,458)   (2,172)

    Partnership income allocated
     to Fund                             1,211     1,149     2,333     2,238
    Interest income                        750       750     1,500     1,500

    Total income of the Fund             1,961     1,899     3,833     3,738
    General & administrative expenses     (167)     (135)     (309)     (254)
    Net earnings before income taxes
     of the Fund                         1,794     1,764     3,524     3,484
    Future income taxes                   (853)        -      (853)        -
    Net earnings of the Fund               941     1,764     2,671     3,484

    Earnings per Fund unit
     (basic and fully diluted)            0.18      0.33      0.50      0.65
    Distributable cash(2) per Fund
     unit (basic and fully diluted)       0.33      0.33      0.66      0.65
    

    Same Store Sales(1)

    For the three-month period ended June 30, 2007, SIR reported to the Fund
4.1% SSSG(1) for restaurants in the Royalty pool. For the six-month period
ended June 30, 2007, SIR reported to the Fund 3.5% SSSG(1) for restaurants in
the Royalty pool.

    
                                     3-month period        6-month period
    SSSG(1) for Restaurants in     ended June 30, 2007   ended June 30, 2007
     the Royalty pool                  (unaudited)           (unaudited)
    -------------------------------------------------------------------------
    Jack Astor's(R)                        3.3%                 2.4%
    Canyon Creek Chop House(R)             4.5%                 5.3%
    Alice Fazooli's!(R)                    6.5%                 6.2%
    Signature Restaurants                  5.8%                 5.3%
    -------------------------------------------------------------------------
    Overall SSSG(1)                        4.1%                 3.5%
    

    SIR initiated a system-wide evolution program for Jack Astor's in 2004
and only one location in the Royalty pool remains to be evolved. SSSG(1) at
evolved Jack Astor's locations averaged over 10% in the first year following
the year of their evolutions. As the Jack Astor's evolution program is near
completion and most of the evolved restaurants have been operating for more
than one year, the rate of Jack Astor's SSSG(1) driven by evolution has
decreased. 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. Jack Astor's SSSG(1)
sequentially increased from 1.4% in the first quarter of 2007 to 3.3% in the
second quarter of 2007. Canyon Creek and Alice Fazooli's! continue to perform
well with SSSG(1) of 4.5% and 6.5% respectively for the second quarter of
2007; and SSSG(1) of 5.3% and 6.2% respectively for the first six months of
2007. SSSG(1) for the Signature Restaurants in downtown Toronto was 5.8% for
the three-month period ended June 30, 2007. For the six-month period ended
June 30, 2007, SSSG(1) for the Signature Restaurants was 5.3%. SSSG(1) in the
Signature group was driven by the strong performances of Far Niente/Soul of
the Vine(R) and reds(R).

    SIR Corporate Developments

    Year-to-date, SIR has opened two new Jack Astor's restaurants. During the
second quarter, SIR opened a new Jack Astor's in Dartmouth, Nova Scotia and in
the first quarter of 2007, SIR opened a new Jack Astor's in Hamilton, Ontario.
These new Jack Astor's are expected to be added to the Royalty pool effective
January 1, 2008.
    SIR has secured additional new development sites for three Jack Astor's
and one Canyon Creek. The three new Jack Astor's development sites are in the
following locations: the corner of Dundas and Yonge Streets in downtown
Toronto; Burlington, Ontario; and, near Pearson International Airport in
Toronto. The Canyon Creek development site is also located near Pearson
International Airport. These new restaurants are expected to be added to the
Royalty Pooled Restaurants on January 1, 2009, provided that they are in
operation prior to November 1, 2008. It is expected that the existing Jack
Astor's restaurant in Burlington will be closed and the new Jack Astor's in
Burlington will open in the fourth quarter this year. If the new Burlington
Jack Astor's opens before November 1, 2007, it is expected that this
restaurant would be added to the Royalty Pooled Restaurants effective
January 1, 2008.
    Subsequent to the end of the second quarter, SIR entered into a Credit
Agreement with a Canadian Schedule 1 bank. The Credit Agreement is a
seven-year facility for a maximum principal amount of $16.0 million and is
designed primarily to facilitate construction of new restaurants by SIR. These
new restaurants are expected to become part of the Royalty Pooled Restaurants
over the next few years as they are completed, and thus 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. Copies of
the Credit Agreement and the Interlender Agreement have been filed on SEDAR.
    The Fund's 2007 second quarter Financial Statements and Management's
Discussion & Analysis ("MD&A"), and the Partnership's Financial Statements,
for the three and six-month periods ended June 30, 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 second quarter Financial Statements and MD&A are also
available via SIR's website at www.sircorp.com.

    2007 Second Quarter Conference Call & Web Cast

    SIR Management will host a conference call on August 15th at 10:00 am
(EDT) to review the financial results. The call will be hosted by Peter
Fowler, President and CEO, and Jeff Good, Chief Financial Officer. The call
will be audio-cast live and archived for 90 days at www.newswire.ca or
www.sircorp.com. A taped replay of the conference call will also be available
until Wednesday, August 22nd at midnight by calling 1-877-289-8525 or
416-640-1917, reference number 21240792 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 included in Pooled Revenue
        except for the Jack Astor's location in Don Mills, Ontario and the
        Canyon Creek locations in Scarborough, Vaughan, and at the Fallsview
        Casino Resort in Niagara Falls, Ontario because they were not open
        for the entire period of both 2007 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. For a detailed
        explanation of how the Fund's distributable cash and the payout ratio
        are calculated, please refer to the Fund's MD&A for the three and
        six-month periods ended June 30, 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(R) Bar and Grill, 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), Brasserie Frisco(TM),
and the casual Armadillo Texas Grill(R)/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 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 document 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 or SIR to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements reflect SIR Management's current expectations
regarding future events and operating performance and speak only as of the
date of this document. 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 with regard thereto or
any changes in events, conditions or circumstances on which any statement is
based. For more information concerning the risk factors that could affect the
Fund and/or SIR, please refer to the Fund's October 1, 2004 prospectus and its
March 30, 2007 Annual Information Form.

    %SEDAR: 00020914E




For further information:

For further information: Peter Fowler, President & CEO, SIR Corp., Tel:
(905) 681-2997; Bruce Wigle, Investor Relations, Tel: (416) 815-0700 ext. 228,
Email: bwigle@equicomgroup.com


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