BURLINGTON, ON, Nov. 23, 2016 /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 28, 2016 ("Q4 2016" and "Fiscal 2016", respectively).   

SIR has advised the Fund that revenue from corporate restaurant operations for Q4 2016 increased 3.7% to $92.0 million compared to $88.7 million for the 16-week period ended August 30, 2015 ("Q4 2015"). Revenue from corporate restaurant operations for Fiscal 2016 increased 4.1% to $280.8 million from $269.8 million for the 52-week period ended August 30, 2015 ("Fiscal 2015"). Increased revenue in Q4 2016 and Fiscal 2016 is attributable to the addition of new restaurants and same store sales growth ("SSSG")⁽¹⁾.

Overall same store sales ("SSS")⁽¹⁾ increased 2.2% and 2.0% for Q4 2016 and Fiscal 2016, respectively, compared to the corresponding periods in the prior year. Jack Astor's, which contributed approximately 77% of Pooled Revenue in Q4 2016, had 0.7% same store sales growth ("SSSG")⁽¹⁾ in the quarter and had a SSS⁽¹⁾ decline of 0.1% in Fiscal 2016.  Jack Astor's sales in Q4 2016 benefitted from the heightened interest in the Toronto Blue Jays and an increase in average attendance for the 2016 regular season, which began during SIR Corp.'s fiscal 2016 third quarter, compared to the corresponding quarter a year ago. Increased attendance at Blue Jays home games had a positive effect on Jack Astor's locations near the Rogers Centre in downtown Toronto. This favourable impact was partially offset 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. During Q4 2016, SIR management made revisions to its beverage programs, including the launch of a summer beverage menu, which helped mitigate the decline in beverage sales. SIR management continues to review its beverage programs with a view to improving sales.

In addition to the factors impacting Jack Astor's Q4 2016 SSS⁽¹⁾, Fiscal 2016 SSS⁽¹⁾ were favourably impacted by the Toronto Raptors' 2016 playoff run during Q3 2016, and negatively impacted by the late start to patio season due to cooler temperatures in April 2016 and the temporary closures of two restaurants for renovations in Q2 2016 and Q4 2016, for 16 days and 11 days, respectively.

Canyon Creek's 1.4% decline in SSS⁽¹⁾ in Q4 2016 was primarily attributable to recent significant competitive intrusion at one of the eight Canyon Creek locations, which had a decline in SSS⁽¹⁾ of 18.5%. Canyon Creek's 1.7% SSSG⁽¹⁾ in Fiscal 2016 was attributable to SIR management's concerted effort to improve leadership and execution from the top down. SIR continues to fine tune its operational performance initiatives for Canyon Creek.  

Scaddabush Italian Kitchen & Bar ("Scaddabush"), together with Alice Fazooli's, SSSG⁽¹⁾ of 12.5% and 11.6% for Q4 2016 and Fiscal 2016, respectively, is attributable to SIR's continuation of its program to evolve the Alice Fazooli's concept into the more popular Scaddabush brand. Since introducing the Scaddabush concept, SIR has renovated and 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, subsequent to the end of Fiscal 2016, one on Front Street in downtown Toronto. The strong combined Scaddabush/Alice Fazooli's SSSG⁽¹⁾ for Q4 2016 and Fiscal 2016 was partially offset by SSS⁽¹⁾ declines at the two remaining Alice Fazooli's locations that have not yet been converted to Scaddabush. SIR intends to convert these restaurants during calendar year 2017. The two new Scaddabush locations in Scarborough, Ontario and on Front Street in Toronto, Ontario are not currently included in the above mentioned SSSG⁽¹⁾.    

The Signature Restaurants SSSG⁽¹⁾ of 11.9% and 12.5% for Q4 2016 and YTD 2016, respectively, is primarily attributable to strong sales at the Loose Moose®, partially due to the heightened interest in the Toronto Blue Jays during Q3 2016 and Q4 2016. Further, the Toronto Raptors playoff run during Q3 2016 positively impacted the Loose Moose's Fiscal 2016 sales. SSSG⁽¹⁾ of the Signature Restaurants for Fiscal 2016 also reflects a full quarter sales contribution from Far Niente^®/FOUR^®/Petit Four^® in Q3 2016, as this restaurant was closed for 40 days during Q3 2015 in order to repair water damage caused by a burst pipe.  

SIR's net loss and comprehensive loss was $15.6 million in Q4 2016, compared to net income and comprehensive income of $4.2 million in Q4 2015. SIR's net loss and comprehensive loss was $23.7 million in Fiscal 2016, compared to a net loss and comprehensive loss of $4.2 million in Fiscal 2015.

The unfavourable variances are primarily the result of a 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 $16.1 million and $25.3 million for Q4 2016 and YTD 2016, respectively, compared to income of $4.1 million for Q4 2015 and an expense of $6.6 million for YTD 2015, respectively. These changes in Q4 2016 and YTD 2016 are due to an increase in the underlying unit price of the SIR Royalty Income Fund (the "Fund") compared to the end of Q3 2016 and Q4 2015, respectively, partially offset by a decrease in the number of Class A LP Units held by SIR compared to the end of Q4 2015 and Fiscal 2015, respectively, due to a unit sale during Q4 2016.  

SIR's Adjusted Net Earnings⁽²⁾ were $0.5 million and $1.6 million in Q4 2016 and Fiscal 2016, respectively, compared to $0.02 million and $2.5 million in Q4 2015 and Fiscal 2015, respectively.

SIR 2016 Corporate Developments
During the third quarter of fiscal 2015, SIR opened one new Jack Astor's restaurant in Ottawa, Ontario, followed by a second Jack Astor's restaurant in Ottawa in Q1 2016. Both of these new Jack Astor's restaurants were added to the Fund's Royalty Pool on January 1, 2016.

During Q1 2016, SIR completed the conversion of its Alice Fazooli's location in Richmond Hill, Ontario into a new Scaddabush location. During Q2 2016, SIR completed a major renovation of a Jack Astor's restaurant in Scarborough, Ontario and, in Q4 2016, opened a new Scaddabush restaurant in the extra space that was created following the renovation. Subsequent to Fiscal 2016, on November 3, 2016, SIR opened a new Scaddabush location on Front Street in downtown Toronto. The new Scaddabush locations in Scarborough and on Front Street in downtown Toronto will be added to Royalty Pooled Restaurants on January 1, 2017 and January 1, 2018, respectively. SIR plans to convert the two remaining Alice Fazooli's to Scaddabush restaurants by the end of calendar 2017. 

SIR completed renovations of two Jack Astor's locations in Fiscal 2016, including Scarborough, Ontario in Q2 2016 and Halifax, Nova Scotia in Q4 2016. SIR completed four additional Jack Astor's renovations subsequent to Fiscal 2016. SIR's Management is pleased with the performance at the recently renovated Jack Astor's locations, two completed during Fiscal 2016, and four additional renovations completed subsequent to year-end, and therefore plans to continue to implement similar renovations at additional Jack Astor's locations in the future.

Subsequent to Fiscal 2016, SIR permanently closed Far Niente®/FOUR®/Petit Four® at 187 Bay Street in downtown Toronto, effective October 15, 2016, as it was unable to negotiate a lease extension with the landlord with sufficient term to ensure a suitable return on its planned investment in the location.

Far Niente/FOUR/Petit Four are considered as one restaurant under the Fund's Royalty Pooled Revenue accounting structure. Under terms of the License and Royalty Agreement between SIR and the SIR Royalty Limited Partnership (the "Partnership"), SIR is obligated to indirectly pay the Fund, via the Partnership, a "Make-Whole Payment", subject to certain terms, initially equal to the amount of the Royalty that otherwise would have been paid to the Partnership by Far Niente/FOUR/Petit Four from their date of closure until December 31, 2016.  On January 1, 2017, SIR will convert the same number of Class A GP units that it received for this restaurant when it was added to the Royalty Pooled restaurants at the time of the Fund's initial public offering in October 2004, into Class B GP units. This will have the net effect of increasing the Fund's share of the Partnership's earnings.

SIR expects the impact to Royalty Pool Revenue in 2017 and beyond resulting from the closure of Far Niente/FOUR/Petit Four to be offset by the aforementioned conversion of Class A GP units to Class B GP units and the anticipated positive contributions from the addition of new restaurants to the Royalty Pool going forward and from investments by SIR to drive future same store sales growth.

Liquidity and Capital Resources
During Q4 2016, SIR Corp. sold 750,000 units of the Fund at a price of $14.15 per unit for gross proceeds of $10,612,500. SIR sold the units primarily to invest the net proceeds in new restaurants and/or in the renovation of existing restaurants. SIR now owns 2,061,097 Class A GP Units, representing the equivalent of approximately 19.75% of the issued and outstanding Units on a fully diluted basis.

As at August 28, 2016, SIR had cash and cash equivalents of $3.9 million, compared to $7.9 million as at August 30, 2015. The decrease is attributable to: a $6.5 million increase in investing activities, including purchases of property and equipment and other assets and a $4.4 decrease in cash provided by operations, partially offset by a $3.7 million decrease in cash used for financing activities.     

Outlook
SIR currently has plans to open one new Reds restaurant during calendar year 2017, and a second new restaurant during calendar year 2018. SIR plans to convert its two remaining Alice Fazooli's locations to the more popular Scaddabush brand by the end of calendar year 2017. SIR's Management is pleased with the performance at the recently renovated Jack Astor's locations, two completed during Fiscal 2016, and four additional renovations completed subsequent to year-end, and therefore plans to continue to implement similar renovations at additional Jack Astor's locations in the future.

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 Q4 2016 and Fiscal 2016 filings, which include its audited 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 operates 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 (56 operating restaurants and one closed restaurant) 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 and the seasonal Duke's Refresher & Bar and Abbey's Bakehouse, which are both located in Muskoka, Ontario. 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. 

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 11, 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 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