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Sonic Reports 22% Earnings Growth for First Quarter 2013

OKLAHOMA CITY - Jan. 3, 2013 - (BUSINESS WIRE) - Sonic Corp. (NASDAQ: SONC), the nation's largest chain of drive-in restaurants, today announced results for the first quarter ended November 30, 2012.

Key highlights of the company's first quarter report included:

  • The company's net income per diluted share increased 22% to $0.11 compared with net income per diluted share of $0.09 in the first quarter of fiscal 2012;
  • System-wide same-store sales increased 3.0% during the first quarter, with an increase of 4.2% at company drive-ins and 2.9% at franchise drive-ins;
  • Company drive-in margins improved by 80 basis points; and
  • The company purchased $18 million of stock representing 3% of its outstanding stock.

"We are pleased the momentum in our business continues to build with a strong start in fiscal 2013," said Cliff Hudson, Chairman and Chief Executive Officer. "Sustaining positive same-store sales during the quarter was the result of our improved day-part promotional strategy and effective creative messaging, complemented by our long-standing initiatives to improve customer service, product quality and value perception. This growth in sales led to an 80 basis point improvement in drive-in margins. In addition, during the quarter, we purchased $18 million of stock representing more than 1.8 million shares or approximately 3% of our outstanding stock. These three factors — same-store sales growth, operating leverage and use of free cash flow1 — are key components in our multi-layered growth strategy.

"We will continue to focus on key initiatives to drive our multi-layered growth strategy in calendar 2013. Starting this month, we will enhance our media purchasing by allocating a greater percentage of our media spend to national cable. In addition, over the next two to three years, initiatives such as our new point-of-sale system will complement our same-store sales initiatives to increase sales and profits and the new lower-cost small building prototype will improve return on investment on new drive-ins, spurring increased development," added Hudson. "We are confident our multi-layered growth strategy, which incorporates same-store sales growth, leverage from higher sales, deployment of free cash flow, increasing royalty revenues and new drive-in development, will enable us to achieve double-digit earnings per share growth in the near and long term."

Financial Overview

For the first fiscal quarter ended November 30, 2012, the company's net income totaled $6.1 million or $0.11 per diluted share compared with net income of $5.5 million or $0.09 per diluted share in the same period prior year. Company drive-in sales in the first quarter of fiscal 2013 declined by $3.3 million compared to the first quarter of fiscal 2012 as a result of the refranchising of 34 company drive-ins during the second fiscal quarter of 2012, partially offset by an increase in same-store sales.

Same-Store Sales

For the first fiscal quarter ended November 30, 2012, system-wide same-store sales increased 3.0%, which was comprised of a 4.2% increase at company drive-ins and a 2.9% increase at franchise drive-ins.

Development

Across the Sonic system, one new franchise drive-in was opened in the first quarter of fiscal 2013 versus two new franchise drive-in openings during the first quarter of fiscal 2012. New franchise drive-in openings in fiscal 2013 are expected to be slightly higher than new franchise drive-in openings in fiscal 2012.

Fiscal Year 2013 Outlook

The company expects its initiatives to drive sales improvements going forward. However, uncertainty with regard to the macroeconomic environment and its impact on consumer confidence may result in sales volatility. The outlook for fiscal 2013 anticipates the following elements:

  • Positive same-store sales in the low single digit range;
  • Restaurant-level margins to improve between 50 to 100 basis points;
  • Slightly more new franchise drive-in openings than in fiscal 2012;
  • Selling, general and administrative expenses of $68 to $69 million;
  • Subsequent to the end of the quarter, the company completed the sale of that was previously leased to a franchisee. As a result, franchise lease revenue is now expected to be $3 to $3.5 million; and depreciation and amortization is expected to be $40 to $41 million. The company realized net cash proceeds of approximately $30 million and a 24 month note of approximately $9 million on the sale;
  • Net interest expense of approximately $29 million;
  • Subsequent to the end of the quarter, legislation was passed that reinstated and extended certain employment tax credits. The company estimates it will realize a tax benefit of $500 thousand to $1 million related to the retroactive portion of the employment tax credit program in the second fiscal quarter and further expects its tax rate to be reduced to the 37% to 38% range in its third and fourth fiscal quarters from the ongoing impact of the reinstated tax credit program;
  • Capital expenditures of $30 to $35 million which includes a partial point-of-sale system implementation in company drive-ins and supply chain management implementation for the system; and
  • Free cash flow of $45 to $50 million for fiscal 2013.

1 Free cash flow is defined as net income plus depreciation, amortization and stock compensation expense, less capital expenditures.

About Sonic

Sonic, America's Drive-In, originally started as a and root beer stand in 1953 in Shawnee, Oklahoma called Top Hat Drive-In, and then changed its name to Sonic in 1959. The first drive-in to adopt the Sonic name is still serving customers in Stillwater, Oklahoma. Sonic has more than 3,500 drive-ins coast to coast, where approximately three million customers eat every day. For more information about Sonic Corp. and its subsidiaries, visit Sonic at www.sonicdrivein.com.

Earnings Conference Call

The company will host a conference call and online web simulcast this afternoon beginning at 5:00 p.m. ET. The conference call can be accessed live over the phone by dialing (888) 656-7429 or (913) 981-5525 for international callers. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 7437689. The replay will be available until Thursday, January 10, 2013. An online replay of the conference call will be available approximately two hours after the conclusion of the live broadcast. A link to this event will be available on the investor section of the company's website, www.sonicdrivein.com.

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those expressed in, or underlying, these forward-looking statements are detailed in the company's annual and quarterly report filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

The tables that follow provide information regarding the number of company drive-ins, franchise drive-ins and system drive-ins in operation as of the end of the periods indicated. In addition, these tables provide information regarding franchise sales, system growth in sales, and both franchise and system average drive-in sales and change in same-store sales. System information includes both company and franchise drive-in information, which we believe is useful in analyzing the growth of our brand. While we do not record franchise drive-in sales as revenues, we believe this information is important in understanding our financial performance since we calculate and record franchise royalties based on a percentage of franchise sales. This information also is indicative of the financial of our franchisees.

SONIC CORP.

Unaudited Supplemental Information

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

 

November 30,

 

 

 

 

2012

 

 

 

 

2011

 

Statement of Operations

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

Company Drive-In sales

 

 

$

93,456

 

 

 

$

96,782

 

Franchise Drive-Ins:

 

 

 

 

 

 

Franchise royalties and fees

 

 

 

29,920

 

 

 

 

29,076

 

Lease revenue

 

 

 

1,486

 

 

 

 

1,288

 

Other

 

 

 

1,146

 

 

 

 

1,133

 

 

 

 

 

126,008

 

 

 

 

128,279

 

Costs and expenses:

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

Food and packaging

 

 

 

26,632

 

 

 

 

27,725

 

Payroll and other employee benefits

 

 

 

33,465

 

 

 

 

35,084

 

Other operating expenses, exclusive of

 

 

 

 

 

 

depreciation and amortization included below

 

 

 

21,976

 

 

 

 

22,911

 

 

 

 

 

82,073

 

 

 

 

85,720

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

 

16,130

 

 

 

 

15,417

 

Depreciation and amortization

 

 

 

10,595

 

 

 

 

10,466

 

Other operating (income) expense, net

 

 

 

7

 

 

 

 

(78

)

 

 

 

 

108,805

 

 

 

 

111,525

 

Income from operations

 

 

 

17,203

 

 

 

 

16,754

 

 

 

 

 

 

 

 

Interest expense

 

 

 

7,675

 

 

 

 

8,041

 

Interest income

 

 

 

(141

)

 

 

 

(164

)

Net interest expense

 

 

 

7,534

 

 

 

 

7,877

 

Income before income taxes

 

 

 

9,669

 

 

 

 

8,877

 

Provision for income taxes

 

 

 

3,536

 

 

 

 

3,378

 

Net income

 

 

$

6,133

 

 

 

$

5,499

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

Basic

 

 

$

0.11

 

 

 

$

0.09

 

Diluted

 

 

$

0.11

 

 

 

$

0.09

 

Weighted average shares used in calculation:

 

 

 

 

 

 

Basic

 

 

 

57,672

 

 

 

 

61,693

 

Diluted

 

 

 

58,085

 

 

 

 

61,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

 

November 30,

 

 

 

 

2012

 

 

 

 

2011

 

Drive-Ins in Operation

 

 

 

 

 

 

Company:

 

 

 

 

 

 

Total at beginning of period

 

 

 

409

 

 

 

 

446

 

Opened

 

 

 

-

 

 

 

 

-

 

Sold to franchisees

 

 

 

-

 

 

 

 

-

 

Closed (net of re-openings)

 

 

 

-

 

 

 

 

-

 

Total at end of period

 

 

 

409

 

 

 

 

446

 

Franchise:

 

 

 

 

 

 

Total at beginning of period

 

 

 

3,147

 

 

 

 

3,115

 

Opened

 

 

 

1

 

 

 

 

2

 

Acquired from company

 

 

 

-

 

 

 

 

-

 

Closed (net of re-openings)

 

 

 

(8

)

 

 

 

(8

)

Total at end of period

 

 

 

3,140

 

 

 

 

3,109

 

System-wide:

 

 

 

 

 

 

Total at beginning of period

 

 

 

3,556

 

 

 

 

3,561

 

Opened

 

 

 

1

 

 

 

 

2

 

Closed (net of re-openings)

 

 

 

(8

)

 

 

 

(8

)

Total at end of period

 

 

 

3,549

 

 

 

 

3,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

 

November 30,

 

 

 

 

2012

 

 

 

 

2011

 

 

 

 

($ in thousands)

Sales Analysis

 

 

 

 

 

 

Company drive-ins:

 

 

 

 

 

 

Total sales

 

 

$

93,456

 

 

 

$

96,782

 

Average drive-in sales

 

 

 

230

 

 

 

 

218

 

Change in same-store sales

 

 

 

4.2

%

 

 

 

-0.1

%

Franchised drive-ins:

 

 

 

 

 

 

Total sales

 

 

$

808,660

 

 

 

$

781,703

 

Average drive-in sales

 

 

 

262

 

 

 

 

251

 

Change in same-store sales

 

 

 

2.9

%

 

 

 

0.2

%

System-wide:

 

 

 

 

 

 

Change in total sales

 

 

 

2.7

%

 

 

 

0.5

%

Average drive-in sales

 

 

$

258

 

 

 

$

247

 

Change in same-store sales

 

 

 

3.0

%

 

 

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

Note: Change in same-store sales based on restaurants open for a minimum of 15 months.

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

 

 

 

 

 

 

 

November 30,

 

 

 

 

 

 

 

 

 

2012

 

 

2011

 

 

 

 

 

 

Margin Analysis (percentage of Company Drive-In sales)

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

28.5

%

 

 

28.6

%

 

 

 

 

 

 

Payroll and employee benefits

 

 

35.8

%

 

 

36.3

%

 

 

 

 

 

 

Other operating expenses

 

 

23.5

%

 

 

23.7

%

 

 

 

 

 

 

 

 

 

87.8

%

 

 

88.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 30,

 

 

August 31,

 

 

 

 

 

 

 

 

 

2012

 

 

2012

Balance Sheet Data

 

 

 

 

 

 

 

 

(In thousands)

Cash and cash equivalents

 

 

 

 

 

 

 

 

42,730

 

 

52,647

Current assets

 

 

 

 

 

 

 

 

122,775

 

 

107,151

Property, equipment and capital leases, net

 

 

 

 

 

 

 

 

399,064

 

 

443,008

Total assets

 

 

 

 

 

 

 

 

656,807

 

 

680,760

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities, including capital lease obligations and long-term debt due within one year

 

 

70,550

 

 

80,516

Obligations under capital leases due after one year

 

 

 

 

 

 

 

 

26,300

 

 

27,377

Long-term debt due after one year

 

 

 

 

 

 

 

 

462,854

 

 

466,613

Total liabilities

 

 

 

 

 

 

 

 

608,161

 

 

621,513

Stockholders' equity

 

 

 

 

 

 

 

 

48,646

 

 

59,247

 

 

 

 

 

 

 

 

 

 

 

 

 

SONC-G

Contact:

Sonic Corp.
Claudia San Pedro
405-225-4846
Vice President of Investor Relations and Treasurer

Source: Sonic Corp.

 

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