News Column

SIR Royalty Income Fund Reports 2014 First Quarter Results

May 13, 2014

BURLINGTON, ON, May 13, 2014/CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the quarter ended March 31, 2014 ("Q1 2014"). All comparisons in the following summary 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.

Q1 2014 Summary

Net earnings for the Fund were $1.8 million, or $0.25 per Fund unit, compared with $1.5 million, or $0.24 per Fund unit, in Q1 2013;Pooled Revenue increased 6.4% to $58.2 million with the addition of four Royalty Pooled Restaurants on January 1, 2014;SSS(1) for Royalty Pooled Restaurants declined 0.9%;Distributable cash(2) per Fund unit (basic and diluted) totaled $0.25 in Q1 2014, representing a payout ratio(2) of 113.1%;SIR Corp. ("SIR") opened one new restaurant, Scaddabush Italian Kitchen & Bar®, in Toronto, Ontario;Effective January 1, 2014, four new restaurants were added to Royalty Pooled Restaurants, including three Jack Astor's® and one new Signature Restaurant;The Fund issued 500,000 Fund units in exchange for Class A GP units of the SIR Royalty Limited Partnership (the "Partnership") held by SIR.  SIR sold these Fund units, generating gross proceeds of approximately $7.0 million, which must be used to fund new restaurant construction and existing restaurant renovations.

"SIR Corp. continues to drive value for SIR Royalty Income Fund unitholders through pooled revenue growth, brand revitalization, new restaurant development and expansion into attractive markets," said Peter Fowler, President and CEO of SIR Corp. "We have had a tremendous guest response to our new concept restaurant Scaddabush Italian Kitchen and Bar in Mississauga, which generated same store sales growth of 19.5% in the first quarter of 2014. In February, we opened a second Scaddabush location alongside Reds Midtown Tavern and our new Duke's Refresher & BarSignature group brand in the new Aura condominium development in downtown Toronto. Four new restaurants were added to the Royalty Pool on January 1, 2014, including three new Jack Astor's and the new Reds Midtown Tavern, bringing the total number of number of Royalty Pooled Restaurants to 53. " 

  Financial Results

($000s except restaurants and per Unit amounts)



 period ended

March 31, 2014


 period ended

March 31, 2013

Royalty Pooled Restaurants



Pooled Revenue generated by SIR




Royalty income to Partnership – 6% of Pooled Revenue




Partnership other income



Partnership expenses



Partnership earnings



SIR Corp.'s interest

(Class A, B, and C GP Units)




Partnership income allocated to Fund




Interest income



Total income of the Fund




General & administrative expenses




Net earnings before income taxes of the Fund




Income tax expense



Net earnings for the period





Earnings per Fund Unit

(basic and diluted)




Pooled Revenue increased 6.4% to $58.2 million in Q1 2014, up from $54.7 million in Q1 2013.  As at March 31, 2014, there were 53 restaurants included in Royalty Pooled Restaurants, compared to 49 restaurants included in Royalty Pooled Restaurants as at March 31, 2013.

The Fund's net earnings for Q1 2014 totaled $1.8 million, or $0.25 per Fund unit (basic and diluted), compared with $1.5 million, or $0.24 per Fund unit (basic and diluted) for Q1 2013.

Distributable cash(2) for Q1 2014 totaled $1.8 millionor $0.25 per Fund unit (basic and diluted), and distributions to Unitholders totaled $2.0 million, representing a payout ratio(2) of 113.1% for the quarter.  The Fund's payout ratio(2)for the quarter ended March 31, 2014 was impacted by seasonality and is typically higher in the colder months of the year.  The Fund's payout ratio(2) is intended to average 100% per annum.  The payout ratio(2) since the Fund's inception, up to and including Q1 2014, is 99.6%.

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))



period ended

March 31, 2014


period ended

March 31, 2013

Cash provided by operating activities




     Net change in non-cash working capital items





     Net change in income tax payable



     Net change in distribution receivable from the Partnership



Distributable cash(2)



Cash distributed for the period



Surplus/(shortfall) of distributable cash(2)



Payout ratio(2)



Distributable cash(2)per Fund unit (basic and diluted)




Same Store Sales (SSS)(1)

SSS(1) for Royalty Pooled Restaurants


period ended

March 31, 2014


period ended

March 31, 2013

Jack Astor's®



Canyon Creek®



Alice Fazooli's®/Scaddabush Italian Kitchen & Bar®



Signature Restaurants



Overall SSSG(1)



Unfavourable weather in Q1 2014 compared to the first quarter of 2013 had a negative impact on SSS(1) for all Royalty Pooled Restaurants. Jack Astor's, which generated approximately 74% of Pooled Revenue in Q1 2014, had a Same Store Sales (SSS)(1) decline of 1.8%.The Signature Restaurants generated SSSG(1) of 7.7% in Q1 2014, led by a strong contribution from the fully renovated Loose Moose Tap & Grill®.Canyon Creek had SSSG of 1.3%.  Alice Fazooli's had a SSS(1) decline of 5.5% in Q1 2014. During Q3 2013, SIR introduced a variant of the Alice Fazooli's concept called Scaddabush Italian Kitchen & Bar ("Scaddabush"). Scaddabush offers guests a new, refreshing take on Italian dining.  During the third quarter of 2013, SIR closed its Alice Fazooli's Square One location in Mississauga, Ontario for renovations and re-opened the restaurant as Scaddabush. Scaddabush generated SSSG(1) of 19.5% in Q1 2014.

Corporate Developments

SIR opened a second Scaddabush location on February 18, 2014 in downtown Toronto which is expected be added to Royalty Pooled Restaurants on January 1, 2015. 

During Q1 2014, the Fund issued 500,000 Fund units. The Fund units were issued in exchange for Class A GP Units of the Partnership held by SIR. The Fund units were subsequently sold by SIR, resulting in gross proceeds of approximately $7.0 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 ownership in the Partnership has increased, the transaction did not have a dilutive effect on the Fund. As at March 31, 2014, SIR retained a 25.5% interest in the residual earnings of the Partnership.


SIR Management will continue to monitor economic conditions and consumer confidence and has advised the Fund that it is considering new store development 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 currently has plans to open three new Jack Astor's restaurants and a new seasonal Abbey's Bake House retail outlet in 2014 and 2015. One of the new Jack Astor's restaurants is planned for St. John's, Newfoundland, a new market that SIR believes offers strong potential due to the city's economic growth and the attractive location SIR has secured in the heart of St. John's historic waterfront.

The Fund's consolidated Financial Statements and Management's Discussion & Analysis ("MD&A"), and the SIR Royalty Limited Partnership's (the "Partnership") Financial Statements, for the three-month period ended March 31, 2014, are available via the SEDAR website at and SIR's website at

(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 2014 and fiscal 2013 as well as the seasonal Duke's Refresher™ and Abbey's Bake House® both located in Muskoka, Ontario. SSS for Alice Fazooli's includes three Alice Fazooli's restaurants and one Scaddabush restaurant, representing the Square One location in Mississauga, Ontario, which was renovated and re-opened as Scaddabush on July 23, 2013.

(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 three-month period ended March 31, 2014, which can be accessed via the SEDAR website (

(3) Cash distributed to Unitholders for the three-month period ended March 31, 2013 includes the special 2012 year-end distribution of $0.05 per unit or $0.3 million that was declared in December 2012 and paid on January 11, 2013. The payout ratio for the three-month period ended March 31, 2013 was significantly affected by the special 2012 year-end distribution.

About SIR Corp.

SIR is a privately held Canadian corporation that owns and operates a portfolio of 57 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 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 one-of-a-kind "Signature" brands in downtown Toronto, which comprise the upscale Reds® Wine Tavern, Reds® Midtown Tavern, Far Niente®/FOUR®/Petit Four®, The Loose Moose® and Duke's Refresher™ & Bar.  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 two seasonal Signature restaurants: Abbey's Bake House® and Duke's Refresher™, which are not currently part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit  

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", "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 2014 Annual Information Form, for the period ended December 31, 2013, which is available under the Fund's profile at

All of the forward-looking statements made herein 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

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