OKLAHOMA CITY - (BUSINESS WIRE) - March 27, 2018 - Sonic Corp. (NASDAQ: SONC), the nation’s largest chain of drive-in restaurants, today announced results for its second fiscal quarter ended February 28, 2018.
Key highlights of the company’s second quarter of fiscal year 2018 included:
“Our second quarter same-store sales decline reflected unfavorable weather and continued aggressive discounting by the competition. Excluding the impact of weather, which was a particular challenge in January and February, same-store sales were flat, consistent with the first quarter and indicative of stable underlying sales performance during the first half of our fiscal year,” said Cliff Hudson, Sonic Corp. CEO. “We continued to support a simplified everyday value message via the Drive-In Duo in December and January, which featured a cheeseburger and shake for $3.99, and a Quarter-Pound Jr. Double Cheeseburger and Tots for $2.99 in February. These types of broadly appealing value offerings provide a compelling price point and highlight Sonic’s quality differentiation.
“Looking at the second half of fiscal 2018, updated media strategies are now in the marketplace, including new television creative, an increased number of consumer impressions and a retooled digital presence on both social media and proprietary channels. On the new product front, our Signature Slinger launched to considerable fanfare, inviting guests to enjoy a savory burger with none of the guilt; and our Pretzel Twist has been very well received by customers. March also saw the launch of the first full-market rollout of mobile order ahead, backed by the complete integration of digital and traditional marketing tools, which has shown strong operational results in the first few weeks. We expect this relentless focus on delighting our core guest to generate improved traffic, accelerating operating profit growth and generating strong free cash flow for shareholders.
“Finally, we continue to optimize our capital structure. During the quarter, we repurchased 1.2 million shares, bringing the total to 2.8 million shares through the first half of fiscal year 2018, or 6% of shares outstanding. Our targeted leverage range remains 3.5-4.5x net-debt-to-EBITDA, and we anticipate concluding the year at the higher end of the range.”
Financial Overview
For the second fiscal quarter of 2018, the company’s net income totaled $19.6 million or $0.51 per diluted share compared to net income of $11.0 million or $0.25 per diluted share in the same period of the prior year. Excluding the items outlined below, net income decreased 1% and net income per diluted share totaled $0.17. The lower tax rate resulting from federal tax reform benefited adjusted earnings per share by approximately $0.04. Excluding the total impact of federal tax reform, adjusted net income per diluted share declined 13% to $0.13 in the second quarter.
The following analysis of non-GAAP adjustments is intended to supplement the presentation of the company’s financial results in accordance with GAAP. The company believes the presentation of this analysis provides useful information to investors and management regarding the underlying business trends and the performance of the company’s ongoing operations and is helpful for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the financial results of the company and predicting future performance.
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For the first six months of fiscal year 2018, the company’s net income totaled $31.0 million or $0.79 per diluted share compared to net income of $24.1 million or $0.53 per diluted share in the same period of the prior year. Excluding the items outlined below, net income increased 3% and net income per diluted share increased 21% to $0.47. The lower tax rate resulting from federal tax reform benefited adjusted earnings per share by approximately $0.04. Excluding the total impact of federal tax reform, adjusted net income per diluted share improved 10% to $0.43 in the first six months of fiscal year 2018.
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While the macroeconomic environment may impact results, the company now expects adjusted earnings per share for fiscal year 2018 to be between $1.43 and $1.50 inclusive of tax reform. Excluding the impact of tax reform, the company expects an increase of 2% to 7% year over year. The outlook for fiscal 2018 anticipates the following elements:
Earnings Conference Call
The company will host a conference call to review financial results at 5:00 PM ET this evening. The conference call can be accessed live over the phone by dialing (800) 263-0877 or (323) 794-2094 for international callers. A replay will be available one hour after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 4289913. The replay will be available until Tuesday, April 3, 2018. 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, sonicdrivein.com.
SONIC, America's Drive-In is the nation's largest drive-in restaurant chain serving approximately 3 million customers every day. Nearly 94 percent of SONIC's 3,500 drive-in locations are owned and operated by local business men and women. For 64 years, SONIC has delighted guests with signature menu items, 1.3 million drink combinations and friendly service by iconic Carhops. Since the 2009 launch of SONIC's Limeades for Learning philanthropic campaign in partnership with DonorsChoose.org, SONIC has donated $9.5 million to public school teachers nationwide to fund essential learning materials and innovative teaching resources to inspire creativity and learning in their students. To learn more about Sonic Corp. (NASDAQ/NM: SONC), please visit sonicdrivein.com and please visit or follow us on Facebook and Twitter. To learn about SONIC's Limeades for Learning initiative, please visit LimeadesforLearning.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 health of our franchisees.
SONC-F
(1) Free cash flow is defined as net income plus depreciation, amortization and stock compensation expenses, less capital expenditures net of spending on build-to-suit drive-in development.
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The following analysis of non-GAAP adjustments is intended to supplement the presentation of the company’s financial results in accordance with GAAP. The company believes the presentation of this analysis provides useful information to investors and management regarding the underlying business trends and the performance of the company’s ongoing operations and is helpful for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the financial results of the company and predicting future performance.
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Corey Horsch
Sonic Corp.
Vice President, Chief Financial Officer and Treasurer
405-225-4800
SOURCE Sonic