BURLINGTON, ON, Nov. 25, 2015 /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 16-week and 52-week periods ended August 30, 2015 ("Q4 2015" and "Fiscal 2015", respectively).

SIR's Fiscal 2015 consisted of 52 weeks compared to 53 weeks for Fiscal 2014 and Q4 2015 consisted of 16 weeks compared to 17 weeks for the fourth quarter of Fiscal 2014. Therefore all revenue and expense information for Q4 2015 and Fiscal 2015, unless otherwise noted, includes one less week of operations and should be considered when compared to the corresponding prior year periods.

SIR has advised the Fund that revenue from corporate restaurant operations for Q4 2015 decreased 7.4% to $88.7 million compared to $95.8 million for the 17-week period ended August 31, 2014 ("Q4 2014"). Revenue from corporate restaurant operations for Fiscal 2015 increased 1.1% to $269.8 million from $266.8 million for the 53-week period ended August 31, 2014 ("Fiscal 2014"). Decreased revenue for Q4 2015 is primarily attributable to the additional week of revenue in Q4 2014. The additional week of operations in Fiscal 2014 also affected the revenue variance for Fiscal 2015 compared to Fiscal 2014.

The following table summarizes actual same store sales growth (decline) ("SSSG")⁽¹⁾ for Q4 2015 and Fiscal 2015 compared to the 17-week and 53-week periods ending August 31, 2014. The table also provides Adjusted SSSG⁽¹⁾, which reflects the removal of the additional week of operations in the 17-week and 53-week periods ending August 31, 2014.     

Overall same store sales ("SSS")⁽¹⁾ declined 9.0% and 2.5% for Q4 2015 and Fiscal 2015, respectively, compared to the corresponding periods in the prior year. Excluding the additional week of revenue in Q4 2014 and Fiscal 2014, the year-over-year declines in overall SSS⁽¹⁾ were 3.0% and 0.3% for Q4 2015 and Fiscal 2015, respectively. 

Jack Astor's, which contributed approximately 75% of Pooled Revenue in Fiscal 2015, had a decline in Adjusted SSSG⁽¹⁾ of 3.3% in Q4 2015 and 0.4% for Fiscal 2015. SIR management believes that Jack Astor's Q4 2015 SSS⁽¹⁾ was impacted by increased precipitation during June 2015 compared to June 2014, which negatively affected patio sales, the positive impact that the 2014 FIFA World Cup had on Jack Astor's guest counts during Q4 2014, and the closure of two Jack Astor's restaurants for renovations during Q4 2015, all of which served to offset SSSG⁽¹⁾ generated in the first three quarters of Fiscal 2015. 

Canyon Creek's Adjusted SSSG⁽¹⁾ declined 2.8% in Q4 2015 and increased 0.6% in Fiscal 2015.  During the first quarter of Fiscal 2015, SIR completed a renovation of one Canyon Creek restaurant and management is currently evaluating a comprehensive plan to improve the long-term performance of all Canyon Creek locations.

Alice Fazooli's, together with Scaddabush Italian Kitchen & Bar ("Scaddabush") Adjusted SSSG⁽¹⁾ declined 1.7% in Q4 2015 and increased 1.4% in Fiscal 2015.  The one Scaddabush, located in Mississauga, Ontario, generated Adjusted SSSG⁽¹⁾ of 7.1% and 11.8% in Q4 2015 and Fiscal 2015, respectively. SIR converted one of the three remaining Alice Fazooli's into Scaddabush subsequent to year-end. The remaining two Alice Fazooli's locations are expected to be converted to Scaddabush locations by the end of 2016.

The Signature Restaurants' Adjusted SSSG⁽¹⁾ declined 1.3% and 2.4% in Q4 2015 and Fiscal 2015, respectively. The decline in SSS⁽¹⁾ in Fiscal 2015 is primarily attributable to the closure of Far Niente® / FOUR® / Petit Four® for a period of 40 days during February and March in order to complete restoration work, as a burst pipe on the premises resulted in significant water damage. The decline in SSS⁽¹⁾ in Q4 2015 is primarily attributable to the gradual recovery of guest counts at Far Niente, FOUR and Petit Four following the 40-day closure due water damage. SIR maintains adequate business interruption insurance to mitigate the risk of such events.

SIR's net earnings and comprehensive income for Q4 2015 were $4.2 million, an increase of $2.6 million over Q4 2014.  This increase is primarily attributable to the benefit of a $3.8 million change in the non-cash amortized cost of Ordinary LP Units and Class A LP Units of the SIR Royalty Limited Partnership (the "Partnership") compared to Q4 2014, offset in part by decreased year-over-year earnings from corporate restaurant operations of $1.7 million.

SIR recorded a net loss and comprehensive loss of $4.1 million in Fiscal 2015, compared to a net loss and comprehensive loss of $9.4 million in Fiscal 2014. The decreased net loss and comprehensive loss reported in Fiscal 2015 is primarily attributable to the positive impact created by a $3.6 million reduction in the expense related to the non-cash amortized cost of Ordinary LP Units and Class A LP Units of the Partnership in addition to increased year-over-year earnings from corporate restaurant operations of $1.4 million.

Adjusted Net Earnings⁽²⁾ for Q4 2015 were $0.02 million compared to $1.2 million in Q4 2014. Adjusted Net Earnings⁽²⁾ for Fiscal 2015 were $2.5 million, an increase of $1.7 million over Fiscal 2014. Variances are primarily attributable to changes in year-over-year earnings from corporate restaurant operations as outlined above.

SIR Corporate Developments

On January 1, 2015, two restaurants were added to the Royalty Pooled Restaurants consisting of one Jack Astor's and one Scaddabush restaurant, both having opened during Fiscal 2014. During the third quarter of Fiscal 2015, SIR opened one new Jack Astor's restaurant in Ottawa, Ontario. Subsequent to the end of Fiscal 2015, SIR opened a second new Jack Astor's restaurant in Ottawa. Both of these restaurants are expected to be added to the Fund's Royalty Pool on January 1, 2016.

During the first quarter of Fiscal 2015, SIR completed the renovation of one Canyon Creek restaurant. During Q4 2015, SIR completed major renovations of two Jack Astor's restaurants. Subsequent to year-end, SIR completed the conversion of a second Alice Fazooli's into a Scaddabush located in Richmond Hill, Ontario.

On July 6, 2015, SIR announced that Competitive Foods Canada Ltd. ("CFC") acquired 3,190,691 common shares of SIR, representing 26.46% of SIR's common shares on a fully diluted basis (29.90% of the currently issued and outstanding shares). The share capital was acquired directly and indirectly from certain of the existing minority common shareholders and common share option holders of SIR. Peter Fowler Enterprises Ltd. ("PFEL") did not sell any of its holdings in SIR and remains the majority shareholder of SIR. Following this transaction, other than PFEL and CFC, no other shareholders of SIR hold more than 10% of SIR's common shares on a fully diluted basis (or more than 10% of the currently issued and outstanding shares).

SIR no longer operates the seasonal Duke's Refresher located in Muskoka, Ontario. The landlord of this location decided they will operate their own restaurant on the premises under a new name with no association to SIR. While the operation of this seasonal restaurant was instrumental for SIR in developing the Duke's Refresher & Bar brand, this development will not negatively impact SIR's financial results or cash flow. As this location was not part of Royalty Pooled Restaurants, this development has no impact on Pooled Revenue, the Partnership or the Fund.        

Liquidity and Capital Resources
As at August 30, 2015, SIR had cash and cash equivalents of $7.9 million, compared to $4.6 million as at August 31, 2014, SIR's fiscal 2014 year end. The increase is attributable to cash provided by operations of $16.4 million, partially offset by cash used in financing activities of $10.0 million and cash used in investing activities of $3.1 million during Fiscal 2015.

On July 6, 2015 SIR entered into a new credit agreement (the "Credit Agreement") with a Schedule I Canadian chartered bank (the "Lender"). The Credit Agreement provides a maximum principal amount of $30.0 million, consisting of a $20.0 million revolving term credit facility ("Credit Facility 1") and a $10.0 million revolving term loan ("Credit Facility 2"). SIR and the Lender have also entered into a purchase card agreement providing credit of up to an additional $5.0 million. The previous term loan was repaid by a full draw down of Credit Facility 2 and a partial draw down of Credit Facility 1. The remaining funds available through Credit Facility 1 will be used for general corporate and operating purposes, including capital spending on new and renovated restaurants. The Credit Agreement includes more favourable interest rates on outstanding debt than SIR's prior credit facility and thereby lowers SIR's debt service costs. Further details on the Credit Agreement are available in SIR's Q4 and Fiscal 2015 Management's Discussion & Analysis. 

On November 19, 2014, SIR converted 350,000 Class A GP Units into Fund units and sold these Fund units for net proceeds of $4.3 million (the "Transaction). These funds were used to finance capital expenditures, including restaurant renovations and new restaurant construction. 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, the Transaction did not have a dilutive effect on the Fund. SIR's residual interest in the Partnership was effected by the conversion of the Class A GP Units into Fund units. Following the Transaction, SIR's residual interest in the Partnership decreased to 21.9%, but increased 2.7% after the net effect of the adjustments to Royalty Pooled Restaurants on January 1, 2015. Currently, SIR's residual interest in the Partnership is 24.6%.

Outlook

SIR currently has plans to open one new Jack Astor's restaurant in 2017. SIR also plans to open two new Scaddabush restaurants in 2016. SIR has advised the Fund that it plans to complete major renovations to two Jack Astor's locations, the first renovation is expected to be completed by the end of 2015 and the second in early 2016. SIR plans to convert its two remaining Alice Fazooli's locations to the popular Scaddabush brand by the end of 2016.  

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 Fiscal 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 59 restaurants and one seasonal retail outlet in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 40 locations; Alice Fazooli's® together with Scaddabush Italian Kitchen & Bar®, for a total of five locations; and Canyon Creek®, with eight locations. SIR also operates one-of-a-kind "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 55 restaurants currently included in the Royalty Pool. SIR also owns and operates Dukes Refresher® & Bar in downtown Toronto, one seasonal Signature restaurant, Abbey's Bake House®, and one seasonal 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 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 ("SSS"), same store sales growth ("SSSG") and adjusted same store sales growth ("Adjusted SSSG") are non-GAAP financial measures and do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS"). However, SIR believes that SSS, SSSG and Adjusted SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. SIR's method of calculating SSS, SSSG and Adjusted SSSG may differ from those of other issuers and accordingly, SSS, SSSG and Adjusted 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 restaurants that were not open for the entire comparable period and the seasonal Duke's Refresher & Bar and Abbey's Bakehouse, which are both located in Muskoka, Ontario. SSS for Alice Fazooli's includes three Alice Fazooli's restaurants and one Scaddabush Italian Kitchen & Bar restaurant, representing the Square One location in Mississauga, Ontario. Adjusted SSSG is SSSG after removing the additional week of revenue in Q4 2014 and fiscal 2014 which totals $4.4 million for Jack Astor's, $0.5 million for Canyon Creek, $0.3 million for Alice Fazooli's/Scaddabush and $0.4 million for the Signature restaurants in these periods. SIR believes this adjustment makes the periods more directly comparable.

(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: 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. 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. 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 18, 2015 Annual Information Form, for the period ended December 31, 2014, 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