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