BURLINGTON, ON, May 11, 2016 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the first quarter ended March 31, 2016 ("Q1 2016"). All comparisons in the following summary are to the quarter ended March 31, 2015 ("Q1 2015"). Percentage calculations are based on the numbers in the financial statements and may not correspond to rounded figures presented in this release.

Q1 2016 Summary

• On January 1, 2016, two new Jack Astor's® restaurants were added to the Royalty Pooled Restaurants;

• Net earnings for the Fund were $2.0 million for Q1 2016, up from $1.9 million for Q1 2015. Net earnings per Fund unit were $0.26, consistent with the prior year;

• Pooled Revenue increased by 6.6% to $63.3 million, supported by the addition of two new Royalty Pooled Restaurants on January 1, 2016 and overall Same Store Sales Growth ("SSSG")⁽¹⁾ of 3.7%; and

• Distributable cash⁽²⁾ per Fund unit (basic and diluted) was $0.26, representing a payout ratio of 109.7%.  The Fund's payout ratio⁽²⁾ since inception, up to and including Q1 2016, is 99.7%.

"As a result of both the continued expansion of the Royalty Pooled Restaurants and our ongoing efforts to drive same store sales growth through continuous innovation, Pooled Revenue increased by 6.6% during the quarter.  We generated overall same store sales growth of 3.7% in the quarter with positive performances from each of our Concept brands and Signature restaurants. Scaddabush was particularly strong, significantly contributing to same store sales growth in Scaddabush/Alice Fazooli's of 15.9%, reflecting the strong guest reception of our Scaddabush concept," said Peter Fowler, President and CEO of SIR Corp. "SIR remains committed to growing Pooled Revenue in support of unitholder distributions. Looking ahead, we intend on continuing with our evaluation of our recent Jack Astor's renovations with consideration towards a system-wide evolution of Jack Astor's. We plan to open two new Scaddabush locations in 2016 and complete the remaining two conversions of Alice Fazooli's to Scaddabush during 2017. Our longer term new restaurant plans currently include opening one new Jack Astor's location and our third Reds location during 2017."

Q1 2016 Financial Results

Pooled Revenue for Q1 2016 totaled $63.3 million, an increase of 6.6% from $59.3 million in Q1 2015. Increased Pooled Revenue resulted from the two restaurants added to the Royalty Pool as of January 1, 2016 and overall SSSG⁽¹⁾. As at March 31, 2016, there were 57 restaurants included in Royalty Pooled Restaurants, compared to 55 restaurants as at March 31, 2015.

The Fund's net earnings were $2.0 million for Q1 2016, up from $1.9 million for Q1 2015.  Net earnings per Fund unit (basic and diluted) were $0.26, unchanged from Q1 2015.

Distributable cash⁽²⁾ for Q1 2016 totaled $2.0 million, or $0.26 per Fund unit (basic and diluted), and distributions to Unitholders totaled $2.2 million, representing a payout ratio⁽²⁾ of 109.7%. Distributable cash⁽²⁾ for Q1 2015 totaled $2.0 million, or $0.26 per Fund unit (basic and diluted), and distributions to Unitholders totaled $2.2 million, representing a payout ratio⁽²⁾ of 110.7%. The Fund's payout ratio⁽²⁾ is intended to average 100% per annum.

Since the Fund's inception in October 2004 up to and including Q1 2016, the Fund has generated $81.6 million in cumulative distributable cash⁽²⁾ and has paid cumulative cash distributions of $81.3 million, representing a cumulative payout ratio⁽²⁾ (the ratio of cumulative cash distributions paid since inception to cumulative distributable cash generated⁽²⁾) of 99.7%.

Distributable Cash⁽²⁾
The following table reconciles the relationship between cash provided by operating activities and distributable cash⁽²⁾:

Jack Astor's, which generated approximately 72% of the Fund's Pooled Revenue in Q1 2016, reported SSSG⁽¹⁾ of 1.0% in the quarter. Canyon Creek generated SSSG⁽¹⁾ of 3.9% in Q1 2016, the third consecutive quarter of growth for Canyon Creek. Scaddabush Italian Kitchen & Bar® ("Scaddabush") together with Alice Fazooli's®, reported SSSG⁽¹⁾ of 15.9% in Q1 2016, attributable to the continuation of SIR's program to evolve the Alice Fazooli's concept into the popular Scaddabush brand. Strong performance of the Scaddabush locations were offset, in part, by SSS⁽¹⁾ declines in the remaining Alice Fazooli's locations that have not yet been converted to Scaddabush. SIR has advised the Fund that it now plans to convert the remaining two Alice Fazooli's to Scaddabush restaurants in 2017.  SIR has further advised that it also plans to open two new Scaddabush restaurants in the Greater Toronto Area during 2016.

The downtown Toronto Signature Restaurants generated SSSG⁽¹⁾ of 18.0% in Q1 2016, attributable, in part, to  improved sales performance at Reds Midtown Tavern and the Loose Moose. The strong SSSG⁽¹⁾ of the Signature Restaurants in Q1 2016 also reflects the 40-day closure of Far Niente®/FOUR®/Petite Four® during the first quarter in the prior year due to a flood. Excluding the sales of Far Niente/FOUR/Petite Four, SSSG⁽¹⁾ for the Signature Restaurants was 8.1%.

Outlook
SIR continues to monitor economic conditions and consumer confidence. SIR has advised the Fund that it is considering new restaurant developments and renovations to existing restaurants where appropriate. The rate of growth will be impacted by ongoing earnings from current operations and is subject to the availability of acceptable long-term financing. 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 completed renovations of three Jack Astor's locations during 2015, reopening these locations in August 2015, September 2015 and December 2015, and is currently evaluating a system-wide evolution of Jack Astor's. SIR converted one Alice Fazooli's to Scaddabush during 2015. SIR has advised the Fund that it now intends to convert the two remaining Alice Fazooli's to Scaddabush restaurants in 2017. New restaurant development plans currently include two new Scaddabush locations in 2016, one new Jack Astor's location in 2017, and one new Reds location in 2017.

The Fund's consolidated Financial Statements and MD&A, and the Partnership's Financial Statements, for the quarter ended March 31, 2016, are available via the SEDAR website at www.sedar.com and 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 2016 and fiscal 2015. SSS for Alice Fazooli's includes three Scaddabush restaurants and two Alice Fazooli's restaurants.

(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, 2016, which can be accessed via the SEDAR website (www.sedar.com).

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; Scaddabush Italian Kitchen & Bar®, together with Alice Fazooli's®, 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 57 restaurants currently included in the Royalty Pool. SIR also owns and operates Duke's 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.

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: market conditions at the time of this filing; 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.  There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. 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, and has assumed that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. For more information concerning the Fund's risks and uncertainties, please refer to the March 15, 2016 Annual Information Form, for the period ended December 31, 2015, which is available under the Fund's profile at www.sedar.com. 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