BURLINGTON, ON, March 28, 2013 /CNW/ - SIR Royalty Income Fund (TSX:
SRV.UN) (the "Fund") today reported its financial results for the
three-month ("Q4") and 12-month ("YTD") periods ended December 31,
2012. All comparisons are to the corresponding periods in the prior
fiscal year. Percentage calculations are based on the numbers in the
financial statements and may not correspond to rounded figures
presented in this release.
2012 Highlights
-
Net earnings for the Fund were $5.9 million in YTD 2012, or $1.08 per
Fund unit, up from $5.5 million, or $1.02 per Fund unit, in YTD 2011;
-
Pooled Revenue increased 3.2% to $215.8 million in YTD 2012 from $209.2
million in YTD 2011;
-
Same Store Sales Growth(1) (SSSG)of 2.8% for the Royalty Pooled Restaurants in YTD 2012;
-
Distributable cash(2) per Fund unit (basic and diluted) totaled $1.09 for YTD 2012 with a
payout ratio(2) of 95.1%;
-
Effective January 1, 2012, one new Jack Astor's® restaurant was added to
Royalty Pooled Restaurants:
-
The Fund Trustees authorized a 6.0% increase to unitholder
distributions, beginning with the distribution paid in June 2012,
resulting in annualized distributions increasing to $1.056 per Fund
unit;
-
The Fund also declared a special year-end cash distribution of $0.05 per
unit in December 2012;
-
During Q4 2012, the Fund issued 523,900 Fund units in exchange for an
increased investment in the SIR Royalty Limited Partnership (the
"Partnership"). This transaction did not have a dilutive effect on the
Fund unitholders.
-
SIR opened three new Jack Astor's® restaurants during YTD 2012, which,
along with the Jack Astor's restaurant that opened in Q4 2011, were
added to Royalty Pooled Restaurants effective January 1, 2013;
-
SIR completed renovations at two Jack Astor's restaurants; and
-
SIR completed a major renovation and repositioning of Reds®,
transitioning the restaurant to Reds® Wine Tavern.
"We had a successful year in delivering on our commitment to build value
for SIR Royalty Income Fund unitholders. We started the year with the
addition of a new Jack Astor's to Royalty Pooled Restaurants, and as
part of our continuing focus on driving Same Store Sales(1) at our existing restaurants, SIR completed renovations at two Jack
Astor's, and a major renovation and repositioning of Reds during the
year. We re-launched Reds as Reds Wine Tavern in the fall. SIR also
opened three new Jack Astor's restaurants in 2012, each in prime
locations, including downtown Toronto, Ontario, Kingston, Ontario and
Laval, Quebec. These three new Jack Astor's restaurants, along with a
Jack Astor's that we opened in Mississauga, Ontario, late in 2011, were
added to the Royalty pool effective January 1, 2013," said Peter
Fowler, President and Chief Executive Officer of SIR Corp. "We
announced a six percent increase to unitholder distributions in June,
the Fund's fourth distribution increase since its inception,
demonstrating our confidence in the sustainability and future growth
potential of Royalty Pooled Restaurants."
"Looking ahead, SIR will continue to focus on building value for SIR
Royalty Income Fund unitholders through new restaurant openings and
restaurant renovations, as market conditions permit, and maintaining
our constant focus on innovation and strengthening our restaurant
brands," added Mr. Fowler.
Financial Results
($000s except restaurants and per Unit amounts) (unaudited)
|
|
3-month period ended Dec. 31, 2012
|
3-month
period ended Dec. 31, 2011
|
12-month period ended Dec. 31, 2012
|
12-month
period ended Dec. 31, 2011
|
|
|
|
|
|
|
Royalty Pooled Restaurants
|
|
47
|
46
|
47
|
46
|
Pooled Revenue generated by SIR
|
|
54,396
|
54,667
|
215,822
|
209,187
|
|
|
|
|
|
|
Royalty income to Partnership -
6% of Pooled Revenue
|
|
3,263
|
3,279
|
12,949
|
12,551
|
Make-Whole Payment(3) |
|
93
|
-
|
339
|
-
|
Partnership other income
|
|
10
|
13
|
39
|
37
|
Partnership expenses
|
|
(20)
|
(13)
|
(78)
|
(79)
|
Partnership earnings
|
|
3,346
|
3,279
|
13,249
|
12,509
|
SIR Corp.'s interest
(Class A, B, and C GP Units)
|
|
(1,911)
|
(1,948)
|
(7,832)
|
(7,475)
|
Partnership income allocated to Fund
|
|
1,435
|
1,331
|
5,417
|
5,034
|
Interest income
|
|
750
|
750
|
3,000
|
3,000
|
Total income of the Fund
|
|
2,185
|
2,081
|
8,417
|
8,034
|
General & administrative
expenses
|
|
(85)
|
(73)
|
(374)
|
(376)
|
|
|
|
|
|
|
Net earnings before income taxes of the Fund
|
|
2,100
|
2,008
|
8,043
|
7,658
|
Income tax expense
|
|
(585)
|
(564)
|
(2,181)
|
(2,191)
|
Net earnings for the period
|
|
1,515
|
1,444
|
5,862
|
5,467
|
Earnings per Fund Unit
(basic and diluted)
|
|
$0.27
|
$0.27
|
$1.08
|
$1.02
|
Pooled Revenue decreased 0.5% to $54.4 million in Q4 2012 from $54.7
million in Q4 2011. As at December 31, 2012, there were 47 restaurants
included in Royalty Pooled Restaurants.
The Fund's net earnings for Q4 2012 totaled $1.5 million, or $0.27 per
Fund Unit (basic and diluted), compared with $1.4 million, or $0.27 per
Fund Unit (basic and diluted) for Q4 2011.
Distributable cash(2) for Q4 2012 totaled $1.5 million or $0.27 per Fund Unit (basic and diluted), and distributions to
Unitholders totaled $1.5 million, representing a payout ratio(2) of 98.7% for the period. The payout ratio(2) since the Fund's inception, up to and including Q4 2012, is 98.5%. The
Fund's payout ratio(2) is intended to average 100% per annum.
Distributable Cash(2)
The following table reconciles the relationship between cash provided by
operating activities and distributable cash(2):
|
|
|
|
|
(in thousands of dollars except per Unit amounts and payout ratio(2)) (unaudited)
|
3-month period ended Dec. 31, 2012
|
3-month
period ended Dec. 31, 2011
|
12-month period ended Dec. 31, 2012
|
12-month
period ended Dec. 31, 2011
|
Cash provided by operating activities
|
1,385
|
2,151
|
3,381
|
7,607
|
Add/(deduct):
|
|
|
|
|
|
Net change in non-cash working capital items
|
780
|
124
|
(162)
|
(92)
|
|
Net change in income tax payable
|
(38)
|
(553)
|
2,151
|
(2,144)
|
|
Net change in distribution receivable from the Partnership
|
(601)
|
(267)
|
86
|
142
|
Distributable cash(2) |
1,526
|
1,455
|
5,906
|
5,513
|
Cash distributed for the period
|
1,506
|
1,334
|
5,615
|
5,507
|
Surplus/(shortfall) of distributable cash(2) |
20
|
121
|
291
|
6
|
Payout ratio(2)
|
98.7%
|
91.6%
|
95.1%
|
99.9%
|
Distributable cash(2) per Fund Unit (basic and diluted)
|
$0.27
|
$0.27
|
$1.09
|
$1.03
|
Same Store Sales(1)
SSSG(1) for Royalty Pooled Restaurants
|
3-month period ended Dec. 31, 2012
|
3-month
period ended Dec. 31, 2011
|
12-month period ended Dec. 31, 2012
|
12-month
period ended Dec. 31, 2011
|
|
|
|
|
|
Jack Astor's® |
1.0%
|
7.3%
|
5.0%
|
3.9%
|
Canyon Creek® |
(3.7%)
|
(0.7%)
|
(1.0%)
|
0.4%
|
Alice Fazooli's® |
(4.5%)
|
(0.9%)
|
(3.9%)
|
(4.5%)
|
Signature Restaurants
|
1.7%
|
3.3%
|
(4.4%)
|
5.7%
|
Overall SSSG(1) |
0.0%
|
5.0%
|
2.8%
|
2.8%
|
Jack Astor's, which accounted for approximately 70% of Pooled Revenue in
Q4 2012, generated SSSG(1) of 1.0% and 5.0% for Q4 2012 and YTD 2012, respectively. The Signature
Restaurants generated SSSG(1) of 1.7% in Q4 2012 and experienced a decline in SSS(1) of 4.4% in YTD 2012, respectively. Sales in Q4 2012 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 eight SIR Restaurants located in close proximity to
NHL venues (four Jack Astor's, one Canyon Creek and three Signature
restaurants). In addition, part of the YTD 2012 decline in the
Signature Restaurants was attributed to a decline in sales at Reds, as
the landlord of the building in which Reds is located refaced the
entire building and the construction work has had an ongoing
significant impact on the restaurant's YTD 2012 sales. SIR completed a
major renovation and repositioning of Reds in September 2012 to enhance
sales of this prime downtown property. As a result, Reds was closed for
32 days, reopening on October 2, 2012 as Reds® Wine Tavern. Canyon
Creek experienced a decline in SSS(1) of 3.7% in Q4 2012 and a decline of 1.0% in YTD 2012. Alice Fazooli's
reported a decline of 4.5% in Q4 2012 and a decline of 3.9% in YTD
2012. Management continues to review initiatives to enhance value at
both of the Alice Fazooli's and Canyon Creek concepts.
Corporate Developments
During Q4 2012, SIR opened new Jack Astor's restaurants in Laval, Quebec
and Kingston, Ontario. In Q2 2012, SIR opened a new Jack Astor's
restaurant on Front Street near the St. Lawrence Market in downtown
Toronto. These new restaurants along with the Jack Astor's restaurant
that opened during Q4 2011 in Mississauga, Ontario were added to
Royalty Pooled Restaurants effective January 1, 2013. Subsequent to Q4
2012, on March 4, 2013, SIR opened a new Jack Astor's restaurant in
Kitchener, Ontario. This restaurant will be added to Royalty Pooled
Restaurants effective January 1, 2014.
During Q4 2012, the Fund issued 523,900 Fund units. The Fund units were
issued in exchange for Class A GP Units held by SIR. The Fund units
were subsequently sold by SIR on the TSX at a price of $13.00 per Fund
unit, resulting in gross proceeds of $6.8 million. The Fund then
converted the Class A GP Units into Class A LP Units of the
Partnership, which are entitled to a pro rata share of the residual
income of the Partnership. As the Fund's investment in the Partnership
has increased, this transaction did not have a dilutive effect on the
Fund unitholders. The number of outstanding Fund units increased by
523,900 or 9.8%, from 5,356,667 to 5,880,567 units.
Subsequent to Q4 2012, the Fund filed a short form prospectus to qualify
the distribution of 895,000 Fund units by SIR. On March 14, 2013, SIR
converted 895,000 of its Class A GP Units in the Partnership into Fund
units and sold these Fund units generating gross proceeds of
approximately $11.0 million. As a result of the conversion of the Class
A GP Units into Fund units, SIR's interest in the Partnership changed
to 24.4%. 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 receive a pro rata share of the
residual income of the Partnership. Accordingly, this transaction does
not have a dilutive effect on the Fund unitholders.
Outlook
SIR Management will continue to monitor economic conditions and consumer
confidence and has advised the Fund that it is considering new store
growth where appropriate. Based on its assessment of these conditions,
the timing of restaurant construction and opening schedules will be
reviewed regularly by SIR Management and adjusted as necessary.
SIR expects to open five additional restaurants in 2013, including two
new Jack Astor's, to be located in north Toronto and Pickering,
Ontario. The other three new restaurants are expected to be opened in
the Aura condominium development located at Yonge and Gerrard Streets
in Toronto, which is one of the largest condominium developments in
Canada. SIR also expects to open one new Jack Astor's restaurant in
2014.
The Fund's audited consolidated Financial Statements and Management's
Discussion & Analysis ("MD&A"), and the SIR Royalty Limited
Partnership's Financial Statements, for the 12-month period ended
December 31, 2012, will be filed on SEDAR today and will be available
via the SEDAR web site at www.sedar.com tomorrow. The Fund's December 31, 2012 audited consolidated Financial
Statements and MD&A are also available via SIR's website at www.sircorp.com.
(1) Same store sales ("SSS") and same store sales growth ("SSSG") are
non-GAAP financial measures and do not have standardized meanings
prescribed by IFRS. 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
those locations that were not open for the entire comparable periods in
fiscal 2012 and fiscal 2011.
(2) Distributable cash and payout ratio are non-GAAP financial measures
and do not have standardized meanings prescribed by IFRS. 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. The payout ratio is calculated as cash
distributed for the period as a percentage of the distributable cash
for the period. Distributable cash represents the amount of money
which the Fund expects to have available for distribution to
Unitholders of the Fund, and is calculated as cash provided by
operating activities of the Fund, adjusted for the net change in
non-cash working capital items including a reserve for income taxes
payable and the net change in the distribution receivable from the SIR
Royalty Limited Partnership. For a detailed explanation of how the
Fund's distributable cash is calculated, please refer to the Fund's
MD&A for the 3-month and 12-month periods ended December 31, 2012,
which can be accessed via the SEDAR web site (www.sedar.com).
(3) The Alice Fazooli's restaurant in Toronto and the Jack Astor's
restaurant in Kitchener, Ontario were closed on January 27, 2012 and
February 13, 2012, respectively. Under the terms of the License and
Royalty Agreement, SIR was required to pay a Make-Whole Payment for
these locations from their dates of closure until December 31, 2012.
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a
portfolio of 52 restaurants in Canada. SIR's Concept brands include:
Jack Astor's Bar and Grill®, with 35 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 49 restaurants currently included
in the Royalty pool. SIR also owns and operates two seasonal Signature
restaurants: Abbey's Bakehouse™ and Duke's Refresher™. These two
restaurants 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 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 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", "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, 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. For more information
concerning the Fund's risks and uncertainties, please refer to the
March 28, 2013 Annual Information Form, for the period ended December
31, 2012, 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