Sonic Reports Third Fiscal Quarter 2013 Financial Results

OKLAHOMA CITY - June 24, 2013 - (BUSINESS WIRE) - Sonic Corp. (NASDAQ: SONC), the nation's largest chain of drive-in restaurants, today announced results for the third fiscal quarter ended May 31, 2013.

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

  • The company's net income per diluted share increased 8% to $0.26 in the third quarter of fiscal 2013 compared with net income per diluted share of $0.24 in the third quarter of fiscal 2012;
  • System-wide same-store sales increased 0.1% during the third quarter, consisting of 0.2% same-store sales increase at franchise drive-ins and a decrease of 1.1% at company drive-ins; weather is estimated to have had a 300 to 400 basis point adverse impact on system-wide same-store sales for the quarter; and
  • The company purchased $11 million of stock during the third fiscal quarter bringing fiscal year-to-date purchases to $35.5 million representing approximately 6% of its outstanding stock as of the beginning of the fiscal year.

"While challenging weather in March and April had a significant impact on our third quarter results, we were pleased to see our same-store sales return to positive in April and May," said Clifford Hudson, Chairman, Chief Executive Officer and President. "Our new product pipeline and the increased efficiency of our media spending, including the shift to increased national advertising, continue to be positive drivers of our business.

"We remain confident in our plan to grow shareholder value by way of the company's multi-layered growth strategy," added Hudson. "We expect the increased effectiveness of our media, our innovative product pipeline and layered day-part promotional strategy to continue to drive same-store sales growth and in turn margin improvement, which will also be enhanced by technology investments. This, combined with a new lower-cost, small building prototype, will improve the return on investment of new drive-ins, encouraging increased development. Finally, we will continue to utilize the strength and flexibility of our franchise business model to grow operating income and use our free cash flow1 to opportunistically invest in our brand, repurchase stock and pay down debt. We expect each of the layers in our growth strategy to contribute to our ability to grow earnings per share at a rate in the low-to-mid teens in both the near term and long term."

Financial Overview

For the third fiscal quarter ended May 31, 2013, the company's net income totaled $14.8 million or $0.26 per diluted share compared with net income of $14.4 million or $0.24 per diluted share in the same period of the prior year.

For the first nine months of fiscal 2013, net income totaled $24.5 million or $0.43 per diluted share compared with net income of $21.6 million or $0.36 per diluted share for the same period in 2012 representing a 19% increase fiscal year-to-date.

The following non-GAAP adjustments are intended to supplement the presentation of the company's financial results in accordance with GAAP. The company believes that the presentation of these items 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

 

Nine months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31, 2013

 

 

 

May 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

 

Diluted

 

 

 

Net

 

 

 

Diluted

 

 

 

Net Income

 

 

 

 

Diluted EPS

 

 

 

 

 

Income

 

 

 

EPS

 

 

 

Income

 

 

 

EPS

 

 

 

$ Change

 

 

% Change

 

 

 

 

$ Change

 

 

% Change

 

Reported — GAAP

 

 

$

24,503

 

 

 

$

0.43

 

 

 

$

21,583

 

 

$

0.36

 

 

$

 

2,920

 

 

14

%

 

 

$

 

0.07

 

 

19

%

After-tax loss from early extinguishment of debt

 

 

 

315

 

 

 

 

0.01

 

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retroactive tax benefit of WOTC and resolution of tax matters

 

 

 

(743

)

 

 

 

(0.02

)

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

 

$

24,075

 

 

 

$

0.42

 

 

 

$

21,583

 

 

$

0.36

 

 

$

 

2,492

 

 

12

%

 

 

$

 

0.06

 

 

17

%

Company drive-in sales for the first nine months of fiscal 2013 decreased by $8.4 million compared to the same period in the prior year primarily as a result of the refranchising of 34 company drive-ins during the second fiscal quarter of 2012.

Same-Store Sales

For the third quarter ended May 31, 2013, system-wide same-store sales increased 0.1%, which was comprised of 0.2% same-store sales increase at franchise drive-ins and a decrease of 1.1% at company drive-ins. Weather is estimated to have had a 300 to 400 basis point adverse impact on system-wide same-store sales for the quarter. Despite the adverse weather, system-wide same-store sales were positive in April and improved further in May.

Development

Five new franchise drive-ins were opened in the third quarter of fiscal 2013 versus seven new franchise drive-in openings during the third quarter of 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;
  • Drive-in level margins to improve from 50 to 75 basis points;
  • 25 to 30 new franchise drive-in openings;
  • Selling, general and administrative expenses of $66 to $66.5 million;
  • Depreciation and amortization of $40 to $40.5 million;
  • Net interest expense of approximately $28 to $28.5 million excluding the impact of debt extinguishment charges;
  • An income tax rate between 36.5% and 37.5% for the fourth fiscal quarter and between 34.5% and 35.5% for fiscal 2013;
  • Capital expenditures of $35 to $40 million which includes partial implementation of technology initiatives in company drive-ins and implementation of the supply chain management system; and
  • Free cash flow of $45 to $50 million for fiscal 2013.

Investor Day

The company will host an investor day with industry analysts and institutional investors on Thursday, June 27, 2013. The meeting will begin at 8:00 a.m. EDT at the NASDAQ Marketsite. The event will be simulcast over the internet and a link to this event may be found on the company's investor relations website at http://ir.sonicdrivein.com/.

Earnings Conference Call

The company will host a conference call and online web simulcast this afternoon beginning at 5:00 p.m. EDT. The conference call can be accessed live by dialing (888) 811-5427 or (913) 981-5578 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 2939382. The replay will be available until Monday, July 1, 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 may be found on the company's investor relations website at http://ir.sonicdrivein.com/.

About Sonic

SONIC®, America's Drive-In®, is the nation's largest chain of drive-in restaurants with more than 3,500 drive-ins serving approximately three million customers every day. Over the past 60 years, SONIC has delighted guests with signature menu items, more than one million drink combinations, friendly service by iconic Carhops and ongoing support of education through its award-winning Limeades for Learning® program. SONIC received top honors as America's "#1 burger quick service restaurant" in the 2013 Temkin Experience Ratings report. For more information about Sonic Corp. (NASDAQ/NM: SONC) and its subsidiaries, please visit www.sonicdrivein.com. Customers can also connect with SONIC at facebook.com/sonicdrivein or on Twitter @sonicdrive_in.

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.

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

SONC-G

SONIC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

May 31,

 

 

May 31,

 

 

 

2013

 

 

2012

 

 

2013

 

 

2012

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

$

 

108,445

 

 

 

$

 

110,070

 

 

 

$

 

285,607

 

 

 

$

 

294,037

 

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties and fees

 

 

 

 

35,833

 

 

 

 

 

35,801

 

 

 

 

 

91,749

 

 

 

 

 

90,831

 

Lease revenue

 

 

 

 

1,089

 

 

 

 

 

2,056

 

 

 

 

 

3,524

 

 

 

 

 

4,605

 

Other

 

 

 

 

1,267

 

 

 

 

 

1,500

 

 

 

 

 

2,903

 

 

 

 

 

3,317

 

Total revenues

 

 

 

 

146,634

 

 

 

 

 

149,427

 

 

 

 

 

383,783

 

 

 

 

 

392,790

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

 

 

30,776

 

 

 

 

 

30,600

 

 

 

 

 

80,954

 

 

 

 

 

83,011

 

Payroll and other employee benefits

 

 

 

 

37,924

 

 

 

 

 

38,539

 

 

 

 

 

102,837

 

 

 

 

 

106,363

 

Other operating expenses, exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation and amortization included below

 

 

 

 

21,356

 

 

 

 

 

22,261

 

 

 

 

 

62,143

 

 

 

 

 

65,899

 

Total cost of Company Drive-In sales

 

 

 

 

90,056

 

 

 

 

 

91,400

 

 

 

 

 

245,934

 

 

 

 

 

255,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

 

 

16,943

 

 

 

 

 

16,951

 

 

 

 

 

48,540

 

 

 

 

 

48,452

 

Depreciation and amortization

 

 

 

 

9,783

 

 

 

 

 

10,288

 

 

 

 

 

30,447

 

 

 

 

 

31,264

 

Provision for impairment of long-lived assets

 

 

 

 

-

 

 

 

 

 

203

 

 

 

 

 

-

 

 

 

 

 

376

 

Other operating income, net

 

 

 

 

(142

)

 

 

 

 

(151

)

 

 

 

 

(353

)

 

 

 

 

(613

)

Total costs and expenses

 

 

 

 

116,640

 

 

 

 

 

118,691

 

 

 

 

 

324,568

 

 

 

 

 

334,752

 

Income from operations

 

 

 

 

29,994

 

 

 

 

 

30,736

 

 

 

 

 

59,215

 

 

 

 

 

58,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

7,170

 

 

 

 

 

7,836

 

 

 

 

 

22,293

 

 

 

 

 

23,807

 

Interest income

 

 

 

 

(153

)

 

 

 

 

(174

)

 

 

 

 

(462

)

 

 

 

 

(477

)

Loss from early extinguishment of debt

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

492

 

 

 

 

 

-

 

Net interest expense

 

 

 

 

7,017

 

 

 

 

 

7,662

 

 

 

 

 

22,323

 

 

 

 

 

23,330

 

Income before income taxes

 

 

 

 

22,977

 

 

 

 

 

23,074

 

 

 

 

 

36,892

 

 

 

 

 

34,708

 

Provision for income taxes

 

 

 

 

8,184

 

 

 

 

 

8,667

 

 

 

 

 

12,389

 

 

 

 

 

13,125

 

Net income

 

 

$

 

14,793

 

 

 

$

 

14,407

 

 

 

$

 

24,503

 

 

 

$

 

21,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

 

$

 

0.26

 

 

 

$

 

0.24

 

 

 

$

 

0.43

 

 

 

$

 

0.36

 

Diluted income per share

 

 

$

 

0.26

 

 

 

$

 

0.24

 

 

 

$

 

0.43

 

 

 

$

 

0.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares

 

 

 

 

56,005

 

 

 

 

 

59,936

 

 

 

 

 

56,492

 

 

 

 

 

60,736

 

Weighted average diluted shares

 

 

 

 

56,845

 

 

 

 

 

59,961

 

 

 

 

 

57,118

 

 

 

 

 

60,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

May 31,

 

 

May 31,

 

 

May 31,

 

 

May 31,

 

 

 

2013

 

 

2012

 

 

2013

 

 

2012

Drive-Ins in Operation

 

 

 

 

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

405

 

 

 

412

 

 

 

409

 

 

 

446

 

Opened

 

 

1

 

 

 

-

 

 

 

1

 

 

 

-

 

Acquired from (sold to) franchisees

 

 

1

 

 

 

(1

)

 

 

1

 

 

 

(35

)

Closed (net of re-openings)

 

 

-

 

 

 

(2

)

 

 

(4

)

 

 

(2

)

Total at end of period

 

 

407

 

 

 

409

 

 

 

407

 

 

 

409

 

Franchise:

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

3,121

 

 

 

3,138

 

 

 

3,147

 

 

 

3,115

 

Opened

 

 

5

 

 

 

7

 

 

 

9

 

 

 

19

 

Acquired from (sold to) the company

 

 

(1

)

 

 

1

 

 

 

(1

)

 

 

35

 

Closed (net of re-openings)

 

 

(6

)

 

 

(5

)

 

 

(36

)

 

 

(28

)

Total at end of period

 

 

3,119

 

 

 

3,141

 

 

 

3,119

 

 

 

3,141

 

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

3,526

 

 

 

3,550

 

 

 

3,556

 

 

 

3,561

 

Opened

 

 

6

 

 

 

7

 

 

 

10

 

 

 

19

 

Closed (net of re-openings)

 

 

(6

)

 

 

(7

)

 

 

(40

)

 

 

(30

)

Total at end of period

 

 

3,526

 

 

 

3,550

 

 

 

3,526

 

 

 

3,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

Nine months ended

 

 

 

 

 

 

May 31,

 

 

 

May 31,

 

 

 

 

 

May 31,

 

 

 

May 31,

 

 

 

 

 

 

2013

 

 

 

2012

 

 

 

 

 

2013

 

 

 

2012

 

 

 

 

 

 

($ in thousands)

 

 

 

 

 

($ in thousands)

 

Sales Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

$

 

108,445

 

 

 

 

$

 

110,070

 

 

 

$

 

285,607

 

 

 

$

 

294,037

 

Average drive-in sales

 

 

 

 

267

 

 

 

 

 

 

268

 

 

 

 

 

704

 

 

 

 

 

688

 

Change in same-store sales

 

 

 

 

(1.1

)

%

 

 

 

 

3.7

%

 

 

 

 

1.5

%

 

 

 

 

2.3

%

Franchised Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

$

 

937,092

 

 

 

 

$

 

934,449

 

 

 

$

 

2,469,033

 

 

 

$

 

2,431,649

 

Average drive-in sales

 

 

 

 

306

 

 

 

 

 

 

298

 

 

 

 

 

798

 

 

 

 

 

779

 

Change in same-store sales

 

 

 

 

0.2

 

%

 

 

 

 

2.7

%

 

 

 

 

0.9

%

 

 

 

 

2.2

%

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in total sales

 

 

 

 

0.1

 

%

 

 

 

 

2.4

%

 

 

 

 

1.0

%

 

 

 

 

2.9

%

Average drive-in sales

 

 

$

 

301

 

 

 

 

$

 

294

 

 

 

$

 

787

 

 

 

$

 

768

 

Change in same-store sales

 

 

 

 

0.1

 

%

 

 

 

 

2.8

%

 

 

 

 

0.9

%

 

 

 

 

2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

Nine months ended

 

 

 

 

 

May 31,

 

 

 

 

May 31,

 

 

 

 

May 31,

 

 

 

 

May 31,

 

 

 

 

 

2013

 

 

 

 

2012

 

 

 

 

2013

 

 

 

 

2012

Revenues (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

$

 

108,445

 

 

$

 

110,070

 

 

$

 

285,607

 

 

$

 

294,037

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties

 

 

 

 

35,756

 

 

 

 

35,599

 

 

 

 

91,491

 

 

 

 

89,980

Franchise fees

 

 

 

 

77

 

 

 

 

202

 

 

 

 

258

 

 

 

 

851

Lease revenue

 

 

 

 

1,089

 

 

 

 

2,056

 

 

 

 

3,524

 

 

 

 

4,605

Other

 

 

 

 

1,267

 

 

 

 

1,500

 

 

 

 

2,903

 

 

 

 

3,317

Total revenues

 

 

$

 

146,634

 

 

$

 

149,427

 

 

$

 

383,783

 

 

$

 

392,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

Nine months ended

 

 

 

 

May 31,

 

 

 

May 31,

 

 

 

May 31,

 

 

 

May 31,

 

 

 

 

2013

 

 

 

2012

 

 

 

2013

 

 

 

2012

 

Margin Analysis (percentage of Company Drive-In sales)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

28.4

%

 

 

27.8

%

 

 

28.3

%

 

 

28.2

%

Payroll and employee benefits

 

 

35.0

 

 

 

35.0

 

 

 

36.0

 

 

 

36.2

 

Other operating expenses

 

 

19.6

 

 

 

20.2

 

 

 

21.8

 

 

 

22.4

 

Cost of Company Drive-In sales

 

 

83.0

%

 

 

83.0

%

 

 

86.1

%

 

 

86.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31,

 

 

August 31,

 

 

 

2013

 

 

2012

Balance Sheet Data

 

 

(In thousands)

Cash and cash equivalents

 

 

$

 

53,554

 

 

$

 

52,647

Current assets

 

 

 

 

110,948

 

 

 

 

107,151

Property, equipment and capital leases, net

 

 

 

 

400,968

 

 

 

 

443,008

Total assets

 

 

 

 

642,504

 

 

 

 

680,760

 

 

 

 

 

 

 

 

 

 

 

Current liabilities, including capital lease obligations and

 

 

 

 

 

 

 

 

 

 

long-term debt due within one year

 

 

 

 

71,865

 

 

 

 

80,516

Obligations under capital leases due after one year

 

 

 

 

23,904

 

 

 

 

27,377

Long-term debt due after one year

 

 

 

 

436,135

 

 

 

 

466,613

Total liabilities

 

 

 

 

582,068

 

 

 

 

621,513

Stockholders' equity

 

 

$

 

60,436

 

 

$

 

59,247

 

 

 

 

 

 

 

 

 

 

 

Contact:

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

Source: Sonic Corp.

###

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