BURLINGTON, ON, March 29, 2017 /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 and 24-week periods ended February 12, 2017 ("Q2 2017" and "YTD 2017", respectively).
SIR has advised the Fund that revenue from corporate restaurant operations for Q2 2017 increased 1.9% to $62.4 million compared to $61.2 million for the 12-week period ended February 14, 2016 ("Q2 2016"). Revenue from corporate restaurant operations for YTD 2017 increased 1.3% to
$125.9 million from $124.3 million for the 24-week period ended
February 14, 2016 ("YTD 2016"). The increase in revenue for both periods is primarily attributable
to the addition of new restaurants.
Same Store Sales(1)
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12-week period ended
February 12, 2017
(unaudited)
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24-week period ended
February 12, 2017
(unaudited)
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Jack Astor's®
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(0.1%)
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(1.0%)
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Canyon Creek®
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(5.6%)
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(4.5%)
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Scaddabush Italian Kitchen & Bar®/Alice Fazooli's®
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3.5%
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7.9%
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Signature Restaurants
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9.2%
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6.5%
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Overall SSSG(1)
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0.3%
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(0.1%)
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Overall same store sales ("SSS")(1) increased 0.3% in Q2 2017 and declined 0.1% in YTD 2017, compared to the
corresponding periods in the prior year. Jack Astor's, which contributed approximately 72% of
pooled revenue in Q2 2017, had SSS(1) declines of 0.1% in the quarter and 1.0% for YTD 2017. Jack Astor's sales in Q2 2017 were impacted by sales declines at two restaurants affected by their weakened
local economies (Jack Astor's in Calgary, Alberta, and
Jack Astor's in St. John's, Newfoundland) and a decline in
beverage sales. These unfavourable impacts were partially offset by the positive impact on SSS(1) from the 2017 IIHF
World Hockey Championship, which took place in Toronto during December
2016, particularly at Jack Astor's locations near the Air Canada Centre. In addition to the aforementioned factors
impacting Q2 2017 SSS(1), YTD SSS(1) were negatively impacted by the closure of six Jack Astor's locations for renovations compared to two Jack Astor's locations
in YTD 2016, partially offset by the positive impact from the World Cup of Hockey, which took place in Toronto during September 2016, particularly at Jack Astor's locations near the
Air Canada Centre. SIR management continues to review its beverage programs with a view to improving sales. SIR also plans to
continue with renovations at additional Jack Astor's in order to drive same store sales growth
(SSSG)(1). These renovations include enhanced beverage programs to help drive beverage sales.
Canyon Creek had SSS(1) declines of 5.6% and 4.5% for the 12-week and 24-week periods ended February 12, 2017, respectively. The SSS(1) declines are primarily attributable to the impact of a
recent significant competitive intrusion at one of the eight Canyon Creek locations, which had SSS(1) declines of 23%
in Q2 2017 and 22% in YTD 2017.
Scaddabush Italian Kitchen & Bar ("Scaddabush"), together with Alice Fazooli's, SSSG(1) of 3.5% and 7.9% for Q2
2017 and YTD 2017, respectively, is primarily attributable to the strong performance of Scaddabush and SIR's continuation of its
program to convert the Alice Fazooli's concept into the more popular Scaddabush brand. Since introducing the Scaddabush concept,
SIR has converted two Alice Fazooli's locations (Mississauga and Richmond Hill, Ontario) to Scaddabush and opened three new locations. The new locations include: one at the
intersection at Yonge Street and Gerrard Street in downtown Toronto, one in Scarborough, Ontario, and one on Front Street in downtown
Toronto that opened in Q1 2017. The strong combined Scaddabush/Alice Fazooli's
SSSG(1) for Q2 2017 and YTD 2017 was partially offset by SSS(1) declines at the two remaining Alice
Fazooli's locations that have not yet been converted to Scaddabush. SIR has started the conversion of one of these Alice
Fazooli's locations and plans to complete the conversion of the remaining location by the end of calendar year 2017. These Alice
Fazooli's locations will be treated as New Closed Restaurants and the Scaddabush restaurants will be treated as New Additional
Restaurants. Beginning in the quarter each of these Alice Fazooli's restaurants are closed (Q3 2017 for the Oakville location), their respective sales will be excluded, retroactively, from the calculation of
SSS(1), as would be any permanently closed location. The new Scaddabush location in Scarborough was added to Royalty Pooled Restaurants on January 1, 2017, and
the location on Front Street in downtown Toronto will be added to Royalty Pooled Restaurants on
January 1, 2018. These two locations are not currently included in the above mentioned
SSSG(1).
The Signature Restaurants SSSG (1) of 9.2% and 6.5% for Q2 2017 and YTD 2017, respectively, is primarily
attributable to strong sales at the Loose Moose®, partially due to the World Cup of Hockey in September
2016 and the 2017 IIHF World Junior Hockey Championship in December 2016. Further, Duke's
Refresher® & Bar continues to demonstrate improved sales performance. The above mentioned SSSG(1) does not include
Far Niente®/FOUR®/Petit Four®, as this location was closed effective October 15, 2016.
SIR's net loss and comprehensive loss was $9.9 million in Q2 2017, compared to net income and
comprehensive income of $9.1 million in Q2 2016. SIR's net loss and comprehensive loss for YTD 2017
was $11.1 million, compared to net income and comprehensive income of $5.3
million for YTD 2016.
The unfavourable variances are primarily the result of the change in the amortized cost of the Ordinary LP Units and Class A
Units of SIR Royalty Limited Partnership ("the Partnership") that SIR holds. This resulted in expenses of $10.1 million and $10.8 million for Q2 2017 and YTD 2017, respectively, compared
to income of $9.1 million and $6.0 million for Q2 2016 and YTD 2016,
respectively. These changes in Q2 2017 and YTD 2017 are due to an increase in the underlying unit price of the SIR Royalty Income
Fund (the "Fund") compared to the end of Q1 2017 and Q4 2016, respectively.
SIR's Adjusted Net Earnings(2) for Q2 2017 were $0.2 million, compared to an Adjusted
Net Loss(2) of $0.03 million in Q2 2016. Adjusted Net Loss(2) for YTD 2017
was $0.3 million, compared to $0.7 million in YTD 2016. The increase
in earnings from corporate restaurant operations in both Q2 2017 and YTD 2017 has contributed to the decrease in Adjusted Net
Loss(2).
SIR Q2 2017 Corporate Developments
During Q2 2017, SIR completed renovations to two Jack Astor's locations (St. Catharines and Barrie, Ontario). One additional Jack Astor's renovation was completed subsequent to Q2 2017.
Subsequent to Q2 2017, SIR closed the Alice Fazooli's restaurant in Oakville, Ontario,
effective March 19, 2017, to convert it to a Scaddabush restaurant, expected to open in
April 2017.
During Q2 2017, effective January 1, 2017, a new Scaddabush location (Scarborough, Ontario) was added to Royalty Pooled Restaurants.
Liquidity and Capital Resources
As at February 12, 2017, SIR had cash and cash equivalents of $2.9 million, compared to $3.9 million as at August 28,
2016. The decrease is attributable to $5.9 million used in investing activities and
$2.9 million used in operations in the period, partially offset by $7.8
million provided by financing activities.
SIR management believes that currently there are sufficient cash resources retained in SIR from its cash generated by
operations and from its financing activities to fund its working capital requirements, scheduled debt repayments, and future
construction commitments.
Outlook
As at March 27, 2017, SIR has one commitment to lease a property upon which it plans to build a new
Reds® restaurant, which is expected to open in calendar year 2017. SIR has terminated a previous commitment to lease a property
in Calgary, Alberta.
SIR continues to convert its remaining Alice Fazooli's locations to the more popular Scaddabush brand. Subsequent to Q2 2017,
effective March 19, 2017, SIR permanently closed the Alice Fazooli's restaurant in Oakville, Ontario and began the conversion into a Scaddabush restaurant, which is expected to open in
April 2017. SIR plans to convert its last Alice Fazooli's location in Vaughan, Ontario by the end of calendar year 2017.
SIR has elected, as is its option, under the License and Royalty Agreement, to treat the Alice Fazooli's location in
Oakville as a New Closed Restaurant and to treat the Scaddabush restaurant in Oakville as a New Additional Restaurant. SIR is obligated to pay a Make-Whole Payment from the date of
closure, March 19, 2017, to December 31, 2017. The Alice Fazooli's
restaurant in Oakville will cease to be part of Royalty Pooled Restaurants on January 1, 2018 and the new Scaddabush restaurant will be added to Royalty Pooled Restaurants on January 1, 2018. It is expected that the conversion of the Alice Fazooli's restaurant in Vaughan to a Scaddabush restaurant, which is planned prior to the end of 2017, will also be treated as a
permanent closure and New Additional Restaurant.
SIR has recently completed renovations to nine Jack Astor's locations, including two in Fiscal
2016, four in Q1 2017, two in Q2 2017, and one subsequent to Q2 2017. SIR's Management is pleased with the performance at the
recently renovated Jack Astor's locations and plans to continue to implement similar renovations
at additional Jack Astor's locations in the future, in order to enhance SSSG(1).
The new Scaddabush location on Front Street in downtown Toronto will be added to Royalty
Pooled Restaurants on January 1, 2018.
SIR continues to focus on sustaining and growing existing restaurant sales and profits while managing costs. SIR continues to
monitor economic conditions, competitive actions, and consumer confidence, and considers new store developments and renovations
to existing restaurants where appropriate. Based on its assessment of these conditions, the timing of new restaurant
construction and renovations, as well as related opening schedules, will be reviewed regularly by SIR and adjusted as
necessary.
SIR's Q2 2017 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 a portfolio of 60 restaurants and one seasonal retail outlet in
Canada. SIR's Concept brands include: Jack Astor's Bar and
Grill®, with 40 locations; Scaddabush Italian Kitchen & Bar®, together with Alice Fazooli's®, for a total of seven locations;
and Canyon Creek®, with eight locations. SIR also owns one-of-a-kind "Signature" brands in downtown Toronto, including Reds® Wine Tavern, Reds® Midtown Tavern, 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 57
restaurants currently included in the Royalty Pool. SIR also owns Duke's Refresher® & Bar in downtown Toronto, one seasonal Signature restaurant, Abbey's Bakehouse®, and 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 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") 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 restaurants that were not open for the entire comparable period. The seasonal Abbey's Bakehouse and
Abbey's Bakehouse retail outlet are not SIR Restaurants. SSS for Scaddabush/Alice Fazooli's includes three Scaddabush Italian
Kitchen & Bar restaurants and two Alice Fazooli's restaurants.
(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. For Q2 2017, Adjusted Net Earnings of $0.2 million (Q2 2016 – Adjusted Net Loss of
$0.03 million) is equal to the net loss for the period of $9.9
million (Q2 2016 – Net Earnings of $9.1 million) minus the change in amortized cost of
Ordinary LP Units and Class A LP Units of the Partnership of $10.1 Million (Q2 2016 – negative
$9.2 million). For YTD 2017, Adjusted Net Loss of $0.3 million (YTD
2016 – $0.7 million) is equal to the net loss for the period of $11.1
million (YTD 2016 – Net Earnings of $5.3 million) minus the change in amortized cost of
Ordinary LP Units and Class A LP Units of the Partnership of $10.8 million (YTD 2016 – negative
$6.0 million).
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 14, 2017
Annual Information Form, for the year ended December 31, 2016, 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
To view the original version on PR Newswire, visit: http://www.newswire.ca/en/releases/archive/March2017/29/c2185.html