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SIR Royalty Income Fund Reports 2021 First Quarter Results

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- Pandemic-related operating restrictions continue to impact financial performance, while amended credit agreement provides extensions to existing waivers and additional liquidity -

BURLINGTON, ON, May 17, 2021 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the first quarter ended March 31, 2021 ("Q1 2021") and provided a business update.

Q1 2021 Summary

  • The operations of SIR Corp. ("SIR") were adversely impacted by a series of restrictions in the various regions in which it operates that were introduced to mitigate the spread of COVID-19. Please refer to the Fund's Management Discussion and Analysis ("MD&A") for Q1 2021 for additional details on the timing and duration of various restrictions that impacted SIR's operations.

  • Reduced services and restaurant closures have resulted in material declines to sales at SIR restaurants. As a result of the significant decline in sales at SIR restaurants, Pooled Revenue and royalty income in the Partnership, along with the Fund's equity income from the Partnership and cash available for distribution to unitholders of the Fund, continues to be significantly reduced compared to prior years.

  • The SIR Royalty Limited Partnership (the "Partnership') continues to defer the collection of royalties and the Fund continues to defer the collection of interest on a loan owing by SIR to the Fund (the "SIR Loan") as part of the conditions required by SIR's senior lender to grant SIR a series of waiver and amending agreements under its Credit Agreement.

  • On January 1, 2021, the new Scaddabush Kitchen & Bar® ("Scaddabush") location in Burlington, Ontario was added to the Royalty Pooled Restaurants (the "Royalty Pool"), while the closed Jack Astor's® restaurant in Calgary, Alberta was removed from the Royalty Pool.

  • Effective January 8, 2021, SIR permanently closed the Canyon Creek® locations at the Square One shopping centre in Mississauga, Ontario and in Scarborough, Ontario.

  • Effective February 9, 2021, SIR permanently closed three restaurants located at the corner of Yonge and Gerrard in downtown Toronto. The three restaurants included a Scaddabush location, Reds® Midtown Tavern and a Duke's Refresher & Bar™. The Scaddabush and Reds locations were part of the Royalty Pool.

  • Effective March 31, 2021, SIR permanently closed the Canyon Creek location in Vaughan, Ontario.

  • On March 31, 2021, the Fund and the Partnership entered into a seventh waiver and extension agreement (the "Amendment") with SIR's senior lender providing a waiver for any and all existing breaches of covenants and events of default under the various agreements between SIR, the Fund, and the Partnership until July 6, 2021. Additionally, this Amendment includes the addition of a new $6.25 million Business Development Bank of Canada ("BDC") guaranteed Highly Affected Sectors Credit Availability Program facility to the Credit Agreement. Further, the senior lender consented to SIR making a payment to the Partnership and/or the Fund in an amount up to $1,000,000 for previously deferred royalty payments and/or payments of interest on the SIR Loan. This amount was paid in April 2021. The Fund expects to use this payment to fund operations and for general corporate purposes. As a result of the Amendment, the period of the deferral of interest on the SIR Loan to the Fund and royalties to the Partnership has been extended from March 31, 2021 to July 6, 2021.

Subsequent Event

  • Effective April 8, 2021, the province of Ontario declared a State of Emergency and a province-wide stay-at-home order was issued, which will last until at least May 20, 2021. SIR is continuing to offer takeout and delivery services at certain of its Jack Astor's, Scaddabush and Canyon Creek restaurants.

"The Fund's financial performance in the first quarter was negatively impacted by heightened government restrictions on indoor dining, particularly in Ontario and Quebec. Accordingly, Pooled Revenue declined sequentially relative to the fourth quarter of 2020, when overall operating restrictions were more variable. Pooled Revenue was down significantly compared to the first quarter of 2020, as the onset of the pandemic and related restaurant operating restrictions commenced in mid-March last year," said Peter Fowler, CEO of SIR Corp. "Operating conditions have remained highly challenging to date in the second quarter of 2021, as a province-wide stay-at-home order in Ontario, where the majority of SIR restaurants are located, has been in effect since early April."

"COVID-19 vaccinations continue to ramp up across Canada, which gives us some confidence that operating restrictions will be gradually eased in the second half of 2021," added Mr. Fowler. "We continue our efforts to enhance financial liquidity to position SIR for long-term success and eventually enable the resumption of unitholder distributions. As part of those efforts, SIR entered into an amended credit agreement during the quarter and permanently closed six restaurants, five of which were part of the Royalty Pool."

Q1 2021 Financial Results Summary

($000s except restaurants

and per Unit amounts)



period ended

March 31,


period ended

March 31,

Royalty Pooled Restaurants



Pooled Revenue generated by
SIR Corp.



Royalty income to Partnership –
6% of Pooled Revenue



Make-Whole Payment



Total Royalty income to



Partnership other income



Impairment of Intangible Assets



Partnership expenses



Partnership earnings (loss)



SIR Corp.'s interest
(Class A, B, and C GP Units)



SIR's interest

(impairment of intangible assets)



Partnership income (loss)
allocated to Fund



Impairment of financial assets



Change in estimated fair value
of the SIR Loan





General & administrative



Net earnings (loss) before
income taxes of the Fund



Income tax recovery (expense)



Net earnings (loss) for the



Net Earnings (loss) per Fund
Unit (diluted)



Pooled Revenue in Q1 2021 was $15.5 million, compared to $50.3 million for the first quarter ended March 31, 2020 ("Q1 2020"). The decline in Pooled Revenue in Q1 2021 reflects lower Same Store Sales ("SSS")(1), which was primarily attributable to the negative impact of the COVID-19 pandemic. The decline in Q1 2021 also reflects the permanent closure of one SIR restaurant during 2020, and six SIR restaurants during Q1 2021.

Net loss was $0.8 million, or $0.10 per Fund unit (basic and diluted), in Q1 2021, compared to a net loss of $30.8 million, or $3.67 per Fund unit (basic and diluted), in Q1 2020. Adjusted net earnings(2) for Q1 2021 were $0.2 million, or $0.03 per Fund unit, compared to adjusted net earnings(2) of $1.9 million, or $0.23 per Fund unit, in Q1 2020.


Restaurant closures and/or limited capacity re-openings of in-restaurant and outdoor patio dining due to the COVID-19 pandemic are expected to continue to impact sales at SIR restaurants. As a result of the significant decline in sales at SIR restaurants, Pooled Revenue and royalty income in the Partnership, along with the Fund's equity income from the Partnership and cash available for distribution to unitholders of the Fund, will continue to be significantly reduced compared to the levels recorded prior to 2020.

SIR has been deemed eligible for the Canada Emergency Wage Subsidy ("CEWS") program. As a result, SIR has received a subsidy from the federal government to partially offset certain of its wage costs starting in mid-March 2020. The federal government recently announced an extension of the CEWS program until June 5, 2021, and SIR expects to continue to remain eligible for the program.

SIR has advised the Fund that its ability to meet its obligations for the next 12 to 18 months is dependent on its ability to obtain increased and extended financing through further amendments to its Credit Agreement and the availability of credit under the current Credit Agreement or other financing sources and/or additional government assistance to aid businesses.

SIR's ability to meet its obligations for the next 12 to 18 months also depends on, among other factors: the duration of restaurant closures or capacity restrictions due to the pandemic, SIR's ability to return to increased or full operating capacity in the near future, Canadian economic conditions after bars and restaurants are able to fully re-open, the type and impact of any new government mandated pandemic-related operating regulations, and SIR's ability to negotiate longer term extended credit terms from its suppliers, including negotiating deferrals of rent obligations over the terms of its leases and SIR's ability to negotiate an extension to its current credit agreement with its senior lender which is scheduled to mature on July 6, 2021. SIR is currently negotiating an extension to this agreement. Negotiations include the restarting the payment of royalties. There can be no assurance that SIR can complete such arrangements, remain in compliance with such agreements, or receive additional waivers in future.

SIR's insurer has denied any business interruption claims due to pandemic related closures. However, SIR continues to pursue a Business Interruption claim against its insurer by way of Notice of Application in the Ontario Superior Court which is due to be heard on May 19th, 2021. This claim includes a rider provision to SIR's property policy which is in favour of the Fund and covers income reduction for lost royalties for a maximum of 180 days. There can be no assurance this action will be successful.

Accordingly, given the uncertainty surrounding the pandemic and the government mandated shutdowns or capacity restrictions and the related impact to SIR, which the Fund is dependent on for cash flow, the Fund's ability to continue as a going concern for the next 12 to 18 months involves significant judgement. The consolidated interim consolidated financial statements of the Fund have been prepared using International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS) applicable to a going concern, which contemplates the realization of assets and the settlement of liabilities during the normal course of operations for the foreseeable future. Please refer to Note 1 of the Fund's financial results for Q1 2021 for the Fund's complete going concern disclosure.

Under the Seventh Amending Agreement, payments by SIR of royalties and interest on the SIR Loan to the Partnership and the Fund continue to be deferred until at least July 6, 2021, other than the $1,000,000 amount which was paid in April 2021. Consequently, Fund distributions to unitholders continue to be suspended.

Q1 2021 Interim Filings

The Fund's unaudited interim consolidated Financial Statements and MD&A, and the Partnership's Financial Statements, for Q1 2021 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 Q1 2021 and Q1 2020. SSSG is the percentage increase in SSS over the prior comparable period.

(2) References to Adjusted Net Earnings (Loss) are to the Fund's net earnings (loss) plus or minus the impairment on financial assets and the investment in the Partnership and replacing the change in estimated fair value of the SIR Loan as reported in the statement of earnings with the interest received on the SIR Loan during the period and the corresponding deferred tax expense or recovery from the net earnings for the period. Adjusted Net Earnings (Loss) per Fund unit represents the portion of net earnings adjusted for any impairment adjustment on financial assets and the investment in the Partnership and the change in estimated fair value of the SIR Loan and the deferred tax expense or recovery for the period allocated to each outstanding Fund unit. Adjusted Net Earnings (Loss) and Adjusted Net Earnings (Loss) per Fund unit are non-GAAP financial measures and do not have a standardized meaning prescribed by IFRS. Management believes that in addition to net earnings (loss), Adjusted Net Earnings (Loss) and Adjusted Earnings per Fund unit are useful supplemental measures to evaluate the Fund's performance. The change in estimated fair value of the SIR Loan is a non-cash fair value transaction resulting from IFRS 9 and varies with changes in a discount rate that fluctuates based on current market interest rates adjusted for SIR's credit risk. The replacement of the non-cash change in estimated fair value of the SIR Loan with the interest received, and the corresponding deferred tax amount, 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 the Fund's performance. The Fund's method of calculating Adjusted Net Earnings (Loss) may differ from the methods used by other issuers. Please refer to the reconciliations of net earnings (loss) for the period to Adjusted Net Earnings (Loss) in the Fund's Q1 2021 MD&A.

About SIR Corp.

SIR Corp. ("SIR") is a privately held Canadian corporation that owns a portfolio of 53 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 locations; Scaddabush Italian Kitchen & Bar® with nine locations; and Canyon Creek®, with two locations. SIR also operates one-of-a-kind "Signature" brands including Reds® Wine Tavern, Reds® Square One 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. SIR also owns one Duke's Refresher® & Bar location in downtown Toronto, and one seasonal Signature restaurant, Abbey's Bakehouse®, which are currently not in consideration to be 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 indirectly has interests in the trademarks used by SIR.

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", "should", "would", 'could", "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 the 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: the impact of the COVID-19 pandemic; 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; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; changes in tariffs and international trade; changes in foreign exchange and interest rates; 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, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of restaurants and bars; laws affecting the sale and use of alcohol (including availability and enforcement); changes in cannabis laws; accounting policies and practices; changes in tax laws; 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, SIR Management has assumed that it will be successful in dealing with the effects of the COVID-19 pandemic and that business and economic conditions affecting SIR's restaurants and the Fund will return to normalcy within the medium term.

For more information concerning the Fund's risks and uncertainties, please refer to the March 31, 2021 Annual Information Form, for the period ended December 31, 2020, 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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