logo
  Join        Login             Stock Quote

SIR Royalty Income Fund Reports Third Quarter 2012 Results

Monday, November 12, 2012 6:36 PM


BURLINGTON, ON, Nov. 12, 2012 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the three-month period ended September 30, 2012 ("Q3") and nine-month period ended September 30, 2012 ("YTD").  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.

Q3 2012 Highlights

  • Net earnings for the Fund were $1.5 million in Q3 2012, or $0.27 per Unit, compared to $1.4 million, or $0.26 per Unit, in Q3 2011;
  • Pooled Revenue increased 2.6% to $54.0 million in Q3 2012, up from $52.6 million in Q3 2011;
  • Same Store Sales Growth (SSSG)(1) for the Royalty Pooled Restaurants was 2.1% in Q3 2012 and 3.8% in YTD 2012;
  • SIR completed a major renovation and repositioning of Reds® in the quarter; and
  • Distributable cash(2) per Fund Unit (basic and diluted) was $0.28 in Q3 2012 and cash distributed per Fund Unit totaled $0.26, representing a payout ratio of 95.4%

"We are pleased with the continued popularity of our Jack Astor's concept which generated same store sales growth of 4.2% in the quarter and 6.4% year-to-date. Jack Astor's accounted for approximately 76% of the Fund's Pooled Revenue in the third quarter of 2012," said Peter Fowler, President and Chief Executive Officer of SIR Corp. "We continue to review strategic initiatives to improve same store sales performance at Alice Fazooli's and within our Signature Group restaurants. SIR completed a major renovation and repositioning of Reds in the quarter, redefining this prime location in Toronto's financial district as Reds Wine Tavern. We remain committed to optimizing the performance of all of our restaurants."

Subsequent to September 30, 2012, SIR filed a notice of its intention to convert up to 600,000 Class A GP units into Fund units and to sell the Fund units.  The Fund units are expected to be sold privately and/or through the facilities of the Toronto Stock Exchange or other marketplaces. It is anticipated that the disposal will be completed by November 23, 2012.  As at November 7, 2012, 373,900 Class A GP units have been converted and subsequently sold.  The proceeds from the sale of Fund units must be used to fund costs associated with constructing new restaurants and renovating existing restaurants.

As a result of SIR exercising its rights to convert these Class A GP units into Fund units, the Fund issued 373,900 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.

Financial Results

($000s except restaurants and per Unit amounts)
(unaudited)
  3-month
period ended
Sept 30, 2012
    3-month
period ended
Sept 30, 2011
    9-month
period ended
Sept 30, 2012
    9-month
period ended
Sept 30, 2011
                       
Royalty Pooled Restaurants   47     46     47     46
Pooled Revenue generated by SIR   54,017     52,647     161,427     154,520
                       
Royalty income to Partnership - 6% of Pooled Revenue   3,241     3,159     9,686     9,271
Make-Whole Payment(3)   93     -     245     -
Partnership other income   9     8     29     25
Partnership expenses   (21)     (22)     (57)     (66)
Partnership earnings   3,322     3,145     9,903     9,230
SIR Corp.'s interest (Class A, B, and C GP Units)   (1,987)     (1,871)     (5,922)     (5,527)
Partnership income allocated to Fund   1,335     1,274     3,981     3,703
Interest income   750     750     2,250     2,250
Total income of the Fund   2,085     2,024     6,231     5,953
General & administrative expenses   (82)     (91)     (289)     (303)
                       
Net earnings before income taxes of the Fund   2,003     1,933     5,942     5,650
Income tax expense   (531)     (556)     (1,595)     (1,627)
Net earnings for the period   1,472     1,377     4,347     4,023
Earnings per Fund Unit (basic and diluted)   $0.27     $0.26     $0.81     $0.75
                       

Pooled Revenue for Q3 2012 increased 2.6% to $54.0 million compared with $52.6 million in Q3 2011.  As at September 30, 2012, there were 47 restaurants included in Royalty Pooled Restaurants.

The Fund's net earnings for Q3 2012 totaled $1.5 million, or $0.27 per Fund Unit (basic and diluted), compared with $1.4 million, or $0.26 per Fund Unit (basic and diluted) for Q3 2011.

Distributable cash(2) for Q3 2012 totaled $1.5 million or $0.28 per Fund Unit (basic and diluted), and distributions to Unitholders totaled $1.4 million, or $0.26 per Fund Unit, representing a payout ratio(2) of 95.4% for the period. The payout ratio(2) since the Fund's inception, up to and including Q3 2012, is 98.5%. The Fund's payout ratio is intended to average 100% per annum.  

Distributable Cash
The following table reconciles the relationship between cash provided by operating activities and distributable cash:

                           
(in thousands of dollars except per Unit amounts
and payout ratio(2))
(unaudited)
      3-month
period ended
September
30, 2012
    3-month
period ended
September
30, 2011
    9-month
period ended
September
30, 2012
    9-month
period ended
September
30, 2011
Cash provided by operating activities       1,313     1,759     2,446     5,456
Add/(deduct):    
                   
  Net change in non-cash working capital items       (83)     (3)     (943)     (215)
  Net change in income tax payable       16     (544)     2,189     (1,592)
  Net change in distribution receivable from the Partnership       237     176     687     409
Distributable cash(2)       1,483     1,388     4,379     4,058
Cash distributed for the period       1,414     1,334     4,109     4,173
Surplus/(shortfall) of distributable cash(2)       69     54     270     (115)
Payout ratio(2)       95.4%     96.1%     93.8%     102.8%
Distributable cash(2) per Fund Unit (basic and diluted)       $0.28     $0.26     $0.82     $0.76
                           

Same Store Sales(1)

SSSG(1) for Royalty Pooled Restaurants       3-month
period ended
Sept 30, 2012
    3-month
period ended
Sept 30, 2011
    9-month
period ended
Sept 30, 2012
    9-month
period ended
Sept 30, 2011
                           
Jack Astor's®       4.2%     5.4%     6.4%     2.8%
Canyon Creek®       1.5%     (3.5%)     0.1%     0.8%
Alice Fazooli's®       (6.0%)     (3.1%)     (3.7%)     (5.7%)
Signature Restaurants       (12.4%)     1.7%     (6.7%)     6.7%
Overall SSSG(1)       2.1%     3.2%     3.8%     2.0%
                           

The overall YTD 2012 SSSG(1) for all concepts was positively affected by one extra day of sales due to 2012 being a leap year, as well as favourable weather.  Jack Astor's, which accounted for approximately 76% of Pooled Revenue in Q3 2012, generated SSSG(1) of 4.2% and 6.4% for Q3 2012 and YTD 2012, respectively.  The Signature Restaurants experienced declines in SSS(1) of 12.4% and 6.7% in Q3 2012 and YTD 2012, respectively.  Part of this decline is 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 sales.  Further, SIR completed a major renovation and repositioning of Reds in September 2012, which resulted in the restaurant being closed for 32 days. Reds re-opened as Reds Wine Tavern on October 2, 2012.  Canyon Creek SSSG(1) was 1.5% in Q3 2012 and in YTD 2012, there was a slight increase of 0.1%.  Alice Fazooli's SSS(1) declined 6.0% in Q3 2012 and 3.7% YTD 2012. Management is currently reviewing initiatives to enhance value at both, the Alice Fazooli's and Canyon Creek concepts.

Corporate Developments
Subsequent to Q3 2012, SIR opened a new Jack Astor's restaurant in Laval, Quebec on October 4, 2012 and in Kingston, Ontario on November 2, 2012.  During 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 will be added to Royalty Pooled Restaurants on January 1, 2013.

SIR has secured future sites for six new restaurants.  New Jack Astor's restaurants will open in Pickering, Ontario, Kitchener, Ontario and at 5051 Yonge Street in north Toronto in fiscal 2013.  SIR plans to open two new restaurants at the corner of Yonge and Gerrard Streets in Toronto in fiscal 2013, and one new restaurant in Ottawa in fiscal 2014.

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.

The Fund's consolidated Financial Statements and Management's Discussion & Analysis ("MD&A"), and the SIR Royalty Limited Partnership's Financial Statements, for the three-month and nine-month periods ended September 30, 2012, will be filed on SEDAR today and will be available via the SEDAR web site at www.sedar.com tomorrow. The Fund's third quarter 2012 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 9-month periods ended September 30, 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 is required to pay a Make-Whole Payment for these locations from their dates of closure until December 31st of the year of closure.

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.

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 October 2004 final prospectus, and/or its 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

Jeff Good
Chief Financial Officer
Tel: 905-681-2997

Bruce Wigle
BMIR Investor Relations
Tel: 416-447-4740 ext. 232

(Source: CNW )
(Source: Quotemedia)

Advertisement

Related Stories

  • No Stories Found

Advertisement



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.