Sonic Announces 4.6% System Same-Store Sales Increase for Fourth Fiscal Quarter

Adjusted EPS Increase of 17% for the Fiscal Year

OKLAHOMA CITY - October 21, 2014 - (BUSINESS WIRE) - Sonic Corp. (NASDAQ:SONC), the nation's largest chain of drive-in restaurants, today announced results for the fourth fiscal quarter and fiscal year ended August 31, 2014.

Key highlights of the company's fiscal year 2014 included:

  • Net income per diluted share was $0.85 compared with net income per diluted share of $0.64 in fiscal 2013; excluding certain adjustments outlined below, net income per diluted share increased 17% to $.84 compared with $0.72 in fiscal 2013;
  • System same-store sales increased 3.5%, consisting of a 3.5% same-store sales increase at both franchise and company drive-ins;
  • Company drive-in margins improved by 90 basis points;
  • 40 new drive-ins were opened; and
  • The company repurchased $80 million in stock representing 7% of the company's outstanding shares as of the beginning of the fiscal year.

Key highlights of the company's fourth fiscal quarter included:

  • Net income per diluted share was $0.34 compared with net income per diluted share of $0.21 in the fourth fiscal quarter of 2013; excluding certain adjustments outlined below, net income per diluted share increased 13%;
  • System same-store sales increased 4.6% over a 5.9% increase in the fourth quarter of fiscal 2013, consisting of a 4.5% same-store sales increase at franchise drive-ins and an increase of 4.9% at company drive-ins;
  • Company drive-in margins improved by 150 basis points versus the fourth quarter of fiscal 2013;
  • 17 new drive-ins were opened; and
  • The company repurchased approximately $10.6 million of stock.

"Our fourth quarter capped off a great year for Sonic, and we believe that the business is well positioned for continued growth," said Cliff Hudson, Sonic Corp. CEO, "Our same-store sales growth over the past fiscal year reflects not only the success of our promotional strategy but also improvements in our core menu and base business.

"We continue to implement our technology initiatives, which include new digital menu boards and a new point-of-sale system. In fiscal 2014, we completed implementation of these initiatives in all company drive-ins, and we will begin the roll-out to franchise locations this winter. We expect these initiatives to complement our innovative product pipeline and media strategies to drive improved sales and profits over the next several years."

Hudson continued, "We are confident our multi-layered growth strategy, which incorporates same-store sales growth, leverage from higher sales, deployment of free cash flow1, increasing royalty revenues and new drive-in development, will continue to result in double-digit earnings per share growth for the next several years. We also believe that our initiation of a quarterly cash dividend and our $105 million share repurchase program, announced in August, highlight the confidence we have in our brand and our commitment to increasing value for shareholders."

Same-Store Sales

For the fourth fiscal quarter ended August 31, 2014, system same-store sales increased 4.6%, which was comprised of a 4.5% same-store sales increase at franchise drive-ins and an increase of 4.9% at company drive-ins. For the 12 months ended August 31, 2014, system same-store sales increased 3.5%, including a 3.5% same-store sales increase at franchise drive-ins and a 3.5% increase at company drive-ins.

Financial Overview

For the fourth fiscal quarter of 2014, the company's net income increased to $18.8 million or $0.34 per diluted share compared with net income of $12.2 million or $0.21 per diluted share in the same period in the prior year, resulting in earnings per share growth of 62%. Excluding the items outlined below, net income and net income per diluted share increased by 9% and 13%, respectively.

For fiscal 2014, net income totaled $47.9 million or $0.85 per diluted share compared with net income of $36.7 million or $0.64 per diluted share for fiscal 2013. Excluding the items outlined below, net income and net income per diluted share increased by 15% and 17%, respectively.

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.

 

 

 

Three months ended

 

Three months ended

 

 

 

 

August 31, 2014

 

August 31, 2013

 

 

 

 

Net

 

Diluted

 

Net

 

Diluted

 

Net Income

 

Diluted EPS

 

 

Income

 

EPS

 

Income

 

EPS

 

$ Change

 

% Change

 

$ Change

 

% Change

Reported - GAAP

 

$

18,825

 

 

$

0.34

 

 

$

12,198

 

 

$

0.21

 

 

$

6,627

 

54

%

 

$

0.13

 

62

%

After-tax loss from early extinguishment of debt

 

 

-

 

 

 

-

 

 

 

2,483

 

 

 

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax loss on closure of Company Drive-Ins

 

 

-

 

 

 

-

 

 

 

1,510

 

 

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax impairment charges for point-of-sale assets

 

 

-

 

 

 

-

 

 

 

1,013

 

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

$

18,825

 

 

$

0.34

 

 

$

17,204

 

 

$

0.30

 

 

$

1,621

 

9

%

 

$

0.04

 

13

%

 

 

 

 

Fiscal year ended

 

Fiscal year ended

 

 

 

 

August 31, 2014

 

August 31, 2013

 

 

 

 

Net

 

Diluted

 

Net

 

Diluted

 

Net Income

 

Diluted EPS

 

 

Income

 

EPS

 

Income

 

EPS

 

$ Change

 

% Change

 

$ Change

 

% Change

Reported - GAAP

 

$

47,916

 

 

$

0.85

 

 

$

36,701

 

 

$

0.64

 

 

$

11,215

 

31

%

 

$

0.20

 

31

%

Tax benefit from the IRS' acceptance of a federal tax method change

 

 

(484

)

 

 

(0.01

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax loss from early extinguishment of debt

 

 

-

 

 

 

-

 

 

 

2,798

 

 

 

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

Retroactive tax benefit of WOTC and resolution of tax matters

 

 

-

 

 

 

-

 

 

 

(743

)

 

 

(0.02

)

 

 

 

 

 

 

 

 

 

 

 

 

After-tax loss on closure of Company Drive-Ins

 

 

-

 

 

 

-

 

 

 

1,510

 

 

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax impairment charge for point-of-sale assets

 

 

-

 

 

 

-

 

 

 

1,013

 

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

$

47,432

 

 

$

0.84

 

 

$

41,279

 

 

$

0.72

 

 

$

6,153

 

15

%

 

$

0.12

 

17

%

 

Fiscal Year 2015 Outlook

While the macroeconomic environment may impact results, the company expects its initiatives to drive 18% to 20% earnings per share growth in fiscal 2015, versus adjusted EPS in fiscal 2014. The outlook for fiscal 2015 anticipates the following elements:

  • Positive same-store sales in the low single digit range for the system;
  • Company drive-in same-store sales growth expected to outperform franchisees for the fiscal year as a result of the recent implementation of new digital menu boards and point-of-sale systems, with this outperformance weighted toward the latter portion of the fiscal year;
  • In addition to royalty revenue growth from same-store sales improvements and new unit development, incremental royalty revenue of approximately $8 million as a result of approximately 900 stores converting to a higher royalty rate structure at the beginning of fiscal 2015;
  • 50 to 60 new franchise drive-in openings, resulting in net unit growth for the system;
  • Drive-in-level margin improvement of between 50 to 100 basis points, depending upon the degree of same-store sales growth at company drive-ins and commodity cost inflation;
  • Selling, general and administrative expenses of $75 million to $76 million, reflecting increased investment in human resources to support the brand initiatives described above;
  • Depreciation and amortization expense of $45.5 million to $46.5 million as a result of increased capital investment in fiscal 2014;
  • Net interest expense of $25 million to $25.5 million;
  • An income tax rate of between 37% to 37.5%, which may vary depending upon the reinstatement of certain tax credit programs;
  • Capital expenditures of $30 million to $40 million;
  • Free cash flow of $65 million to $75 million;
  • The planned repurchase of $105 million of stock across the fiscal year; and
  • A quarterly cash dividend of $0.09 per share resulting in an estimated payout of $19 million during the fiscal year.

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 by dialing (888) 778-9067 or (816) 581-1736 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 3862361. The replay will be available until Tuesday, October 28, 2014. 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 3 million customers every day. Over the past 61 years, SONIC has delighted guests with signature menu items, more than 1 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," ranking in the top 5 of all brands in the 2014 Temkin Experience Ratings report. For more information about Sonic Corp. (NASDAQ/NM:SONC) and its subsidiaries, please visit 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.

SONC-F

 

SONIC CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

 

 

Three months ended

 

Fiscal year ended

 

 

August 31,

 

August 31,

 

 

2014

    

2013

    

2014

    

2013

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

$

119,002

 

 

$

116,689

 

 

$

405,363

 

 

$

402,296

 

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties and fees

 

 

41,818

 

 

 

38,988

 

 

 

138,416

 

 

 

130,737

 

Lease revenue

 

 

1,609

 

 

 

1,261

 

 

 

4,291

 

 

 

4,785

 

Other

 

 

1,340

 

 

 

1,864

 

 

 

4,279

 

 

 

4,767

 

Total revenues

 

 

163,769

 

 

 

158,802

 

 

 

552,349

 

 

 

542,585

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

34,871

 

 

 

33,591

 

 

 

116,325

 

 

 

114,545

 

Payroll and other employee benefits

 

 

38,831

 

 

 

39,674

 

 

 

139,939

 

 

 

142,511

 

Other operating expenses, exclusive of depreciation and amortization included below

 

 

23,796

 

 

 

24,010

 

 

 

85,845

 

 

 

86,153

 

Total cost of Company Drive-In sales

 

 

97,498

 

 

 

97,275

 

 

 

342,109

 

 

 

343,209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

18,885

 

 

 

17,482

 

 

 

69,415

 

 

 

66,022

 

Depreciation and amortization

 

 

11,123

 

 

 

9,940

 

 

 

42,210

 

 

 

40,387

 

Provision for impairment of long-lived assets

 

 

85

 

 

 

1,776

 

 

 

114

 

 

 

1,776

 

Other operating (income) expense, net

 

 

(110

)

 

 

2,296

 

 

 

(176

)

 

 

1,943

 

Total costs and expenses

 

 

127,481

 

 

 

128,769

 

 

 

453,672

 

 

 

453,337

 

Income from operations

 

 

36,288

 

 

 

30,033

 

 

 

98,677

 

 

 

89,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

6,287

 

 

 

6,805

 

 

 

25,382

 

 

 

29,098

 

Interest income

 

 

(96

)

 

 

(130

)

 

 

(469

)

 

 

(592

)

Loss from early extinguishment of debt

 

 

-

 

 

 

3,951

 

 

 

-

 

 

 

4,443

 

Net interest expense

 

 

6,191

 

 

 

10,626

 

 

 

24,913

 

 

 

32,949

 

Income before income taxes

 

 

30,097

 

 

 

19,407

 

 

 

73,764

 

 

 

56,299

 

Provision for income taxes

 

 

11,272

 

 

 

7,209

 

 

 

25,848

 

 

 

19,598

 

Net income

 

$

18,825

 

 

$

12,198

 

 

$

47,916

 

 

$

36,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

$

0.35

 

 

$

0.22

 

 

$

0.87

 

 

$

0.65

 

Diluted income per share

 

$

0.34

 

 

$

0.21

 

 

$

0.85

 

 

$

0.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.09

 

 

$

-

 

 

$

0.09

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares

 

 

54,022

 

 

 

56,061

 

 

 

55,164

 

 

 

56,384

 

Weighted average diluted shares

 

 

55,419

 

 

 

57,408

 

 

 

56,619

 

 

 

57,191

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

Three months ended

 

Fiscal year ended

 

 

August 31,

 

August 31,

 

 

2014

  

2013

 

2014

 

2013

Drive-Ins in Operation

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

Total at beginning of period

 

389

 

 

407

 

 

396

 

 

409

 

Opened

 

2

 

 

1

 

 

3

 

 

2

 

Acquired from (sold to) franchisees

 

-

 

 

-

 

 

(7

)

 

1

 

Closed (net of re-openings)

 

-

 

 

(12

)

 

(1

)

 

(16

)

Total at end of period

 

391

 

 

396

 

 

391

 

 

396

 

Franchise:

 

 

 

 

 

 

 

 

Total at beginning of period

 

3,121

 

 

3,119

 

 

3,126

 

 

3,147

 

Opened

 

15

 

 

16

 

 

37

 

 

25

 

Acquired from (sold to) the company

 

-

 

 

-

 

 

7

 

 

(1

)

Closed (net of re-openings)

 

(9

)

 

(9

)

 

(43

)

 

(45

)

Total at end of period

 

3,127

 

 

3,126

 

 

3,127

 

 

3,126

 

System-wide:

 

 

 

 

 

 

 

 

Total at beginning of period

 

3,510

 

 

3,526

 

 

3,522

 

 

3,556

 

Opened

 

17

 

 

17

 

 

40

 

 

27

 

Closed (net of re-openings)

 

(9

)

 

(21

)

 

(44

)

 

(61

)

Total at end of period

 

3,518

 

 

3,522

 

 

3,518

 

 

3,522

 

 

 

 

 

 

Three months ended

 

Fiscal year ended

 

 

August 31,

 

August 31,

 

 

2014

 

2013

 

2014

 

2013

 

 

($ in thousands)

 

($ in thousands)

Sales Analysis

 

 

 

 

    

 

 

 

    

 

 

 

    

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

119,002

 

 

$

116,689

 

 

$

405,363

 

 

$

402,296

 

Average drive-in sales

 

 

305

 

 

 

286

 

 

 

1,043

 

 

 

990

 

Change in same-store sales

 

 

4.9

%

 

 

5.2

%

 

 

3.5

%

 

 

2.5

%

Franchised Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

1,058,640

 

 

$

1,003,216

 

 

$

3,627,395

 

 

$

3,479,880

 

Average drive-in sales

 

 

343

 

 

 

327

 

 

 

1,170

 

 

 

1,125

 

Change in same-store sales

 

 

4.5

%

 

 

6.0

%

 

 

3.5

%

 

 

2.3

%

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in total sales

 

 

5.2

%

 

 

6.0

%

 

 

3.9

%

 

 

2.4

%

Average drive-in sales

 

$

338

 

 

$

322

 

 

$

1,153

 

 

$

1,109

 

Change in same-store sales

 

 

4.6

%

 

 

5.9

%

 

 

3.5

%

 

 

2.3

%

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

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

Three months ended

 

Fiscal year ended

 

 

August 31,

 

August 31,

 

 

2014

 

2013

 

2014

 

2013

Revenues (in thousands)

 

 

 

    

 

 

    

 

 

    

 

 

Company Drive-In sales

 

$

119,002

 

$

116,689

 

$

405,363

 

$

402,296

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties

 

 

41,317

 

 

38,518

 

 

137,125

 

 

130,009

Franchise fees

 

 

501

 

 

470

 

 

1,291

 

 

728

Lease revenue

 

 

1,609

 

 

1,261

 

 

4,291

 

 

4,785

Other

 

 

1,340

 

 

1,864

 

 

4,279

 

 

4,767

Total revenues

 

$

163,769

 

$

158,802

 

$

552,349

 

$

542,585

 

 

 

 

 

Three months ended

 

Fiscal year ended

 

 

August 31,

 

August 31,

 

 

2014

 

2013

 

2014

 

2013

Margin Analysis (percentage of Company Drive-In sales)

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

29.3

%

 

28.8

%

 

28.7

%

 

28.5

%

Payroll and employee benefits

 

32.6

 

 

34.0

 

 

34.5

 

 

35.4

 

Other operating expenses

 

20.0

 

 

20.6

 

 

21.2

 

 

21.4

 

Cost of Company Drive-In sales

 

81.9

%

 

83.4

%

 

84.4

%

 

85.3

%

 

 

 

 

 

August 31,

 

August 31,

 

 

2014

 

2013

Selected Balance Sheet Data

 

(In thousands)

Cash and cash equivalents

 

$

35,694

    

$

77,896

Current assets

 

 

95,712

 

 

140,722

Property, equipment and capital leases, net

 

 

441,969

 

 

399,661

Total assets

 

$

650,972

 

$

660,794

 

 

 

 

 

 

 

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

 

$

79,511

 

$

72,930

Obligations under capital leases due after one year

 

 

23,050

 

 

22,458

Long-term debt due after one year

 

 

427,527

 

 

437,380

Total liabilities

 

 

588,297

 

 

583,330

Stockholders' equity

 

$

62,675

 

$

77,464

SOURCE Sonic Corp.

Contact:

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

###

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