BURLINGTON, ON, Dec. 23, 2014 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today announced that SIR Corp. ("SIR" or the "Company"), the operating entity from which the Fund earns equity income and interest income, has filed its financial results for the 12-week period ended November 23, 2014 ("Q1 2015").
SIR has advised the Fund that revenue from corporate restaurant operations for Q1 2015 increased 7.4% to $60.2 million compared to $56.1 million for the 12-week period ended November 17, 2013 ("Q1 2014"). The increase in revenue was attributable to the addition of new restaurants and same store sales growth ("SSSG")(1).
Same Store Sales Growth(1)
12-week period ended
November 23, 2014
Alice Fazooli's®/Scaddabush Italian Kitchen & Bar™
Overall same store sales ("SSS")(1) increased by 0.9% for Q1 2015 compared to Q1 2014. Jack Astor's, which generated approximately 75% of Pooled Revenue in Q1 2015, had flat SSS(1) for the period. Canyon Creek generated SSSG(1) of 2.8% and Alice Fazooli's, together with Scaddabush Italian Kitchen & Bar ("Scaddabush"), generated SSSG(1) of 0.9%. SIR's Signature Restaurants generated SSSG(1) of 8.5%.
SIR's net earnings and comprehensive income for Q1 2015 was $0.04 million, compared to a net loss and comprehensive loss of $11.7 million in Q1 2014. The increased earnings from corporate restaurant operations during Q1 2015 of $1.6 million has contributed to this favourable variance. The variance is also due to a favourable change in the amortized cost of Ordinary LP Units and Class A LP Units of the SIR Royalty Limited Partnership (the "Partnership"), which was an expense of $1.0 million for Q1 2015 compared to an expense of $11.1 million for Q1 2014, resulting from an increase in the number of Class A LP Units held by the Fund compared to the end of SIR's fiscal 2014 fourth quarter ("Q4 2014") offset by a decrease in the underlying Fund unit price compared to the price at the end of SIR's Q4 2014. Adjusted net earnings(2) were $1.0 million in Q1 2015, compared to an adjusted net loss of $0.6 million in Q1 2014. The favourable variance is attributable to the aforementioned increased earnings from corporate restaurant operations during Q1 2015.
SIR Corporate Development
There were no new SIR restaurant openings in Q1 2015. SIR completed a renovation of one Canyon Creek restaurant during the quarter. Two restaurants will be added to Royalty Pooled Restaurants on January 1, 2015, consisting of the new Jack Astor's opened during Q4 2014 and the Scaddabush restaurant opened during SIR's fiscal 2014 third quarter.
Liquidity and Capital Resources
As at November 23, 2014, SIR had cash and cash equivalents of $9.5 million, up from $4.6 million as at August 31, 2014, SIR's fiscal 2014 year end. SIR's increased cash and cash equivalents at the end of Q1 2015 resulted primarily from the cash provided by operations of $7.0 million during Q1 2015. The comparable cash from operations for Q1 2014 was $0.07 million.
During Q1 2015, on November 19, 2014, SIR exchanged 350,000 Class A GP Units of the Partnership into Fund units and sold these Fund units, resulting in net proceeds of $4.3 million. The net proceeds were deposited into SIR's restricted cash account and during Q1 2015, SIR drew $2.0 million from this account to finance capital expenditures. SIR will use the remaining net proceeds to finance capital expenditures, including restaurant renovations, new restaurant construction and other lender-approved purposes. The Class A GP Units received by the Fund in exchange for the Fund units issued were converted to Class A LP Units of the Partnership, which are entitled to a pro rata share of residual income of the Partnership. Accordingly, this transaction did not have a dilutive effect on the Fund. SIR's residual interest in the Partnership is now at 21.9%.
As previously reported, SIR entered into a Third Amended and Restated Loan Agreement (the "Credit Agreement"), with its existing senior lender, on June 23, 2014, which provided contemplated financing of a $6.0 million Tranche C Development Loan (the "Tranche C"), in addition to its existing loan facilities. Under the terms of the Credit Agreement, the Tranche C was intended to be drawn by September 19, 2014, with the date open to extension until March 19, 2015. As a result of the transaction discussed above, SIR decided that it does not, at this time, intend to proceed with an extension of the Tranche C facility.
Cash provided by investing activities was $0.08 million in Q1 2015, compared to cash used in investing activities of $0.2 million in Q1 2014. The majority of the capital expenditures incurred during Q1 2015 relate to the renovation of one Canyon Creek restaurant and the construction costs of one new Jack Astor's restaurant, expected to open later in fiscal 2015.
SIR currently has commitments to lease three properties, upon which it plans to build three new Jack Astor's restaurants. These new locations are expected to open during fiscal 2015 and fiscal 2016. There can be no assurance that these restaurants will be opened or will become part of Royalty Pooled Restaurants.
SIR will continue to focus on sustaining and growing existing restaurant sales and profits while managing costs and monitoring economic conditions. The Company considers new restaurant growth and renovations when appropriate and subject to availability of acceptable long-term financing.
SIR's Q1 2015 filings, which include its unaudited consolidated financial statements and management's discussion & analysis, can be accessed via the Fund's profile on the SEDAR website at www.sedar.com under "Other".
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 58 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 38 locations; Alice Fazooli's® together with Scaddabush Italian Kitchen & Bar®, for a total of five locations; and Canyon Creek Chop House®, with eight locations. SIR also operates "Signature" brands in downtown Toronto, including Reds® Wine Tavern, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four® and The Loose Moose®. 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 53 restaurants currently included in the Royalty Pool. SIR also owns and operates a Duke's Refresher™ & Bar in downtown Toronto and two seasonal Signature restaurants: Abbey's Bakehouse® and Duke's Refresher™, in addition to one seasonal Abbey's Bakehouse retail outlet, which are not currently part of 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 Partnership and interest income from the SIR Loan. The Fund intends to pay distributions to unitholders on a monthly basis.
(1) Same store sales ("SSS") and same store sales growth ("SSSG") are non-GAAP financial measures and do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS"). 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. SSSG is the percentage increase in SSS over the prior comparable period. SSS includes revenue from all SIR restaurants except for those locations that were not open for the entire comparable periods in fiscal 2015 and fiscal 2014, the seasonal Duke's Refresher and Abbey's Bakehouse, which are both located in Muskoka, Ontario and the seasonal Abbey's Bakehouse retail outlet. SSS for Alice Fazooli's includes three Alice Fazooli's restaurants and one Scaddabush restaurant, representing the Square One location in Mississauga, Ontario.
(2) Adjusted Net Earnings (Loss) is calculated by removing the change in amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership from the net earnings (loss) and comprehensive income (loss) for the period. Adjusted Net Earnings (Loss) is a non-GAAP financial measure and does not have a standardized meaning prescribed by IFRS. Management believes that in addition to net earnings (loss) and comprehensive income (loss), Adjusted Net Earnings (Loss) is a useful supplemental measure to evaluate SIR's performance. Changes in the amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership is a non-cash transaction and varies with changes in the market price of the Fund units. The exclusion of the change in amortized cost of the Ordinary LP Units and Class A LP Units of the Partnership eliminates this non-cash impact. Management cautions investors that Adjusted Net Earnings (Loss) should not replace net earnings or loss or cash flows from operating, investing and financing activities (as determined in accordance with IFRS), as an indicator of SIR's performance. SIR's method of calculating Adjusted Net Earnings (Loss) may differ from the methods used by other issuers. Therefore, SIR's Adjusted Net Earnings (Loss) may not be comparable to similar measures presented 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 SIR Holdings Trust (the "Trust"), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "would", "should", "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: market conditions at the time of this filing; competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; changes in foreign exchange; 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. There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender, or that it will be entitled to utilize any funds in the restricted account. 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 disclose or release any updates or revisions to any forward looking statements, except as required by securities legislation. 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, competition, 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 that the tax effects on distributions will remain consistent with current regulations or pronouncements, and also in estimating the revenue for new restaurants, Management has assumed that they will operate consistent with other similar SIR restaurants and has assumed that SIR will remain compliant in the future with all of its financial covenants under its Credit Agreement and imposed by the lender and that SIR will be entitled to utilize any funds in its restricted account. For more information concerning the Fund's risks and uncertainties, please refer to the March 11, 2014 Annual Information Form, for the period ended December 31, 2013, which is 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.
SOURCE: SIR Royalty Income Fund
For further information: Jeff Good, Chief Financial Officer, Tel: 905-681-2997; Bruce Wigle, Bay Street Communications, Tel: 647-496-7856