SIR Royalty Income Fund Reports SIR Corp. First Quarter 2013 Results

BURLINGTON, ON, Dec. 20, 2012 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) ("the Fund") today announced that SIR Corp. ("SIR"), the operating entity from which the Fund earns distribution income and interest income, has filed its financial results for the 12-week period ended November 18, 2012 ("Q1 FY2013").

SIR has advised the Fund that revenue from corporate restaurant operations for Q1 FY2013 increased 2.4% to $50.4 million compared to $49.2 million for the 12-week period ended November 20, 2011 ("Q1 FY2012").

Same Store Sales Growth(1)
            12-week period ended
November 18, 2012
Jack Astor's ®             1.4%
Canyon Creek®             (1.8%)
Alice Fazooli's®             (7.1%)
Signature Restaurants             (14.0%)
Overall SSSG(1)             (0.8%)

Same store sales(1) ("SSS") for Q1 FY2013 declined 0.8% to $47.8 million from $48.2 million in Q1 FY2012. Jack Astor's had same store sales growth of 1.4% in Q1 FY2013. Canyon Creek, Alice Fazooli's and the Signature Restaurants experienced declines of 1.8%, 7.1% and 14.0%, respectively. Sales in Q1 FY2013 were negatively impacted by the National Hockey League (the "NHL") lock-out which has generally impacted all Jack Astor's locations, but the effect is most significant at the seven SIR Restaurants located in close proximity to NHL venues (four Jack Astor's, one Canyon Creek and three Signature restaurants).  In addition, a major portion of the Signature Restaurants' decline is attributed to Reds® having been closed for 32 days in the quarter for a now completed major renovation and repositioning.  Management is currently reviewing initiatives to enhance value at Canyon Creek and Alice Fazooli's.

The net loss attributable to shareholders of SIR Corp. for Q1 FY2013 was $2.3 million, compared to a net loss of $1.2 million for Q1 FY2012. The unfavourable variance in Q1 FY2013 is primarily due to unfavourable earnings from corporate restaurant operations.  This is largely a result of relatively flat SSSG(1) and additional restaurant operation costs associated with opening two new restaurants in the period and the impact of closing Reds for a major renovation and repositioning.

SIR Corporate Development

During Q1 FY2013, SIR opened two new Jack Astor's restaurants, one in Laval, Quebec and one in Kingston, Ontario.  These restaurants will be added to Royalty Pooled Restaurants on January 1, 2013.

During Q1 FY2013, SIR temporarily closed Reds, located in Toronto's financial district, for 32 days to complete a renovation and repositioning of this core Signature restaurant as Reds Wine Tavern. SIR also completed a renovation of one Jack Astor's restaurant in Q1 FY2013.

At November 18, 2012, SIR had five commitments to lease properties upon which it plans to build six new restaurants. It is expected that five of these restaurants will open in fiscal year 2013, with the remaining restaurant expected to open in fiscal year 2014.

During Q1 FY2013, SIR converted 523,900 Class A GP units of SIR Royalty Limited Partnership (the "Partnership") into Fund units and subsequently sold the Fund units for net proceeds of $6.6 million, of which $5.1 million is held in an account that is restricted by SIR's lender.  The proceeds must be used to fund the construction of new restaurants and the renovation of existing restaurants. 

As a result of SIR exercising its right to convert these Class A GP units of the Partnership into Fund units, the Fund issued 523,900 Fund units to SIR in exchange for an increased interest in the Partnership.  Accordingly, this transaction does not have a dilutive effect on the Fund unitholders.  In addition, the number of outstanding Fund units increases by 523,900 or 9.8%, from 5,356,667 units to 5,880,567 units.

Liquidity and Capital Resources

As at November 18, 2012, SIR had cash and cash equivalents of $5.0 million compared to $6.0 million as at November 20, 2011. Cash used in continuing operations for Q1 FY2013 totaled $1.1 million, compared with $0.3 million for Q1 FY2012.  The increase is primarily a result of the increase in net loss for the period of $1.1 million.  During Q1 FY2013, cash used in continuing investing activities was $3.5 million compared with cash used in investing activities of $1.9 million in Q1 FY2012. Cash provided by continuing investing activities in Q1 FY2013 includes net cash proceeds received from restricted funds of $1.5 million related to the conversion of Class A GP units to Fund units and their subsequent sale. The majority of capital expenditures in the period were primarily attributable to construction costs incurred for the two new Jack Astor's restaurants that opened in Q1 and renovation costs for Reds Wine Tavern and one Jack Astor's restaurant. 


The Canadian Restaurant and Foodservice Association ("CRFA") estimates that sales in the full-service category will grow by 4.1% in calendar 2012 and by 3.9% in calendar 2013.  The CRFA estimates that growth in the full-service category will then average 4.0% over the next three years. SIR will continue to focus on sustaining and growing existing restaurant sales and profits, and strategically expanding its restaurant portfolio. The Company will carefully monitor economic conditions and manage its growth and capital expenditures accordingly. In addition to the six new restaurants that SIR has lease commitments for, additional restaurant sites will be considered when appropriate and will be subject to the availability of long-term financing or other available funds.

SIR's Q1 FY2013 interim 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 under "Other".

About SIR Corp.

SIR is a privately held Canadian corporation that owns and operates a portfolio of 51 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 34 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® Wine Tavern, 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 and Royalty 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 (45 operating and two closed restaurants). SIR also owns and operates two seasonal Signature restaurants: Abbey's Bakehouse™ and Duke's Refresher™. These two restaurants are not subject to the License and Royalty Agreement. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit

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.

(1) Same store sales includes revenue from all SIR restaurants except for those restaurants that were not open for the entire comparable periods in fiscal 2013 and fiscal 2012. Same store sales growth ("SSSG") is the percentage increase in SSS over the prior comparable period. SSS and SSSG are non-GAAP financial measures and do not have standardized meanings prescribed by ASPE. 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.

Caution concerning forward-looking statements

Certain statements contained in this report, 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, Management has assumed the tax effects on distributions will remain consistent with current regulations or pronouncements, and also in estimating the revenue for the new Jack Astor's restaurant, 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 March 30, 2012 Annual Information Form, all of which are available under the Fund's profile at

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.

SOURCE: SIR Royalty Income Fund

For further information:

Jeff Good
Chief Financial Officer
Tel: 905-681-2997

Bruce Wigle
BMIR Investor Relations
Tel: 416-447-4740 ext. 232

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