Sonic Doubles Earnings Per Share for Second Fiscal Quarter of 2015

Same-Store Sales Increase 11.5%

OKLAHOMA CITY - March 24, 2015 - (BUSINESS WIRE) - Sonic Corp. (NASDAQ:SONC), the nation's largest chain of drive-in restaurants, today announced results for the second fiscal quarter ended February 28, 2015.

Key highlights of the company's second quarter of fiscal year 2015 included:

  • Net income per diluted share was $0.14 compared with net income per diluted share of $0.07 in the prior-year period; excluding items outlined below, net income per diluted share was $0.13 in the second fiscal quarter of 2015, resulting in an 86% increase, on an adjusted basis;
  • System same-store sales increased 11.5%, consisting of an 11.5% same-store sales increase at franchise drive-ins and an increase of 11.2% at company drive-ins;
  • Company drive-in margins improved by 110 basis points; and
  • The company repurchased $75 million of stock through accelerated stock repurchase transactions representing approximately 4% of its outstanding stock.

"Successful company initiatives combined with an improving macro environment resulted in an exceptionally strong second fiscal quarter with 11.5% same-store sales growth. We are particularly pleased that traffic drove two-thirds of our same-store sales increase," said Cliff Hudson, Sonic Corp. CEO. "This increase is primarily a result of growth in our core menu items and product innovation, complemented by our national media strategy. As we move into the second half of fiscal 2015 we expect our business momentum to continue. In addition, we expect technology initiatives to provide an additional layer of growth to build sales and profits over the next several years.

"We also executed accelerated share repurchase agreements during the second quarter to purchase $75 million of stock. Our fiscal year-to-date share repurchases now total $95 million, representing approximately 5% of our outstanding shares as of the beginning of the fiscal year. Since our current repurchase program began in fiscal 2012, we have repurchased nearly $242 million of stock representing 23% of our outstanding shares. We have completed these repurchases while strengthening our balance sheet, which reflects the stability of our franchise business model.

"We will continue to focus on 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, to build shareholder value. We believe all of these initiatives will enable us to continue to achieve double-digit earnings per share growth for the next several years," concluded Mr. Hudson.

Same-Store Sales

For the second fiscal quarter ended February 28, 2015, system same-store sales increased 11.5%, which was comprised of an 11.5% same-store sales increase at franchise drive-ins and an increase of 11.2% at company drive-ins.

Financial Overview

For the second fiscal quarter of 2015, the company's net income increased to $7.7 million or $0.14 per diluted share compared with net income of $4.1 million or $0.07 per diluted share in the same period in the prior year. Excluding a $0.7 million tax benefit representing the retroactive reinstatement of the Work Opportunity Tax Credit (WOTC) for fiscal 2014, earnings per share increased 86%.

The following non-GAAP adjustment is intended to supplement the presentation of the company's financial results in accordance with GAAP. The company believes that the presentation of this item 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

 

 

 

 

 

 

 

 

 

February 28, 2015

 

 

February 28, 2014

 

 

 

 

 

 

 

 

 

Net

 

 

Diluted

 

 

Net

 

 

Diluted

 

 

Net Income

 

 

Diluted EPS

 

 

 

 

 

Income

 

 

EPS

 

 

Income

 

 

EPS

 

 

$ Change

 

 

% Change

 

 

$ Change

 

 

% Change

Reported - GAAP

 

 

 

 

$

7,662

 

 

 

$

0.14

 

 

 

$

4,107

 

 

$

0.07

 

 

$

3,555

 

 

87

%

 

 

$

0.07

 

 

100

%

Retroactive tax benefit of WOTC

and resolution of tax matters

 

 

 

 

 

(666

)

 

 

 

(0.01

)

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

 

 

 

$

6,996

 

 

 

$

0.13

 

 

 

$

4,107

 

 

$

0.07

 

 

$

2,889

 

 

70

%

 

 

$

0.06

 

 

86

%

 

For the first six months of fiscal 2015, net income totaled $17.7 million or $0.32 per diluted share compared with net income of $12.3 million or $0.21 per diluted share for the same period in 2014. Excluding the items outlined below, net income and net income per diluted share increased 44% and 55%, respectively.

 

 

 

 

 

 

Six months ended

 

 

Six months ended

 

 

 

 

 

 

 

February 28, 2015

 

 

February 28, 2014

 

 

 

 

 

 

 

Net

 

 

Diluted

 

 

Net

 

 

Diluted

 

 

Net Income

 

 

Diluted EPS

 

 

 

 

 

Income

 

 

EPS

 

 

Income

 

 

EPS

 

 

$ Change

 

 

% Change

 

 

$ Change

 

 

% Change

Reported - GAAP

 

 

 

 

$

17,747

 

 

 

$

0.32

 

 

 

$

12,315

 

 

 

$

0.21

 

 

 

$

5,432

 

 

44

%

 

 

$

0.11

 

 

52

%

Tax benefit from the IRS'

acceptance of a federal tax method

change

 

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(484

)

 

 

 

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retroactive tax benefit of WOTC

and resolution of tax matters

 

 

 

 

 

(666

)

 

 

 

(0.01

)

 

 

 

-

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

 

 

 

$

17,081

 

 

 

$

0.31

 

 

 

$

11,831

 

 

 

$

0.20

 

 

 

$

5,250

 

 

44

%

 

 

$

0.11

 

 

55

%

 

Fiscal Year 2015 Outlook

The company expects its initiatives to drive 25% to 27% earnings per share growth, on an adjusted basis, in fiscal 2015 as compared to the adjusted non-GAAP earnings per share for fiscal 2014. The macroeconomic environment may impact results. The outlook for the second half of fiscal 2015 anticipates the following elements:

  • Positive same-store sales in the low to mid-single digit range for the system for the third and fourth fiscal quarters;
  • Company drive-in same-store sales growth expected to outperform franchisees as a result of the recent implementation of new digital menu boards and point-of-sale systems;
  • Incremental royalty revenue growth from same-store sales improvements, new unit development, and 900 drive-ins converting to a higher royalty rate structure at the beginning of fiscal 2015;
  • 34 to 44 new franchise drive-in openings, resulting in net unit growth for the system;
  • Drive-in-level margin improvement of between 100 to 150 basis points, reflecting an improving outlook for commodity cost inflation and leverage from company drive-in same-store sales growth;
  • Selling, general and administrative expenses of $39.5 million to $40.5 million, reflecting increased investment in human resources to support the brand initiatives described above;
  • Depreciation and amortization expense of $23 million to $23.5 million;
  • Net interest expense of $13 million to $13.5 million; and
  • An income tax rate of between 36% and 37%, reflecting the benefit of various ongoing tax credit programs.

The company anticipates the following elements for fiscal 2015:

  • Capital expenditures of $30 million to $40 million;
  • Free cash flow of $70 million to $80 million;
  • The planned repurchase of $105 million of stock; and
  • A quarterly cash dividend of $0.09 per share resulting in an estimated payout of $19 million.

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 (877) 340-7912 or (719) 325-4765 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 2813890. The replay will be available until Tuesday, March 31, 2015. 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 drive-in restaurant chain serving more than 3 million customers every day. Nearly 90 percent of SONIC's 3,500 drive-in locations are owned and operated by local business men and women. Over the past 60 years, SONIC has delighted guests with signature menu items, more than 1.3 million drink combinations and friendly service by iconic Carhops. To learn more about Sonic Corp. (NASDAQ/NM: SONC), please visit sonicdrivein.com or follow us on Facebook and Twitter.

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.

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

SONC-F

 

SONIC CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

 

 

 

February 28,

 

 

February 28,

 

 

 

 

 

 

2015

 

    

2014

 

    

2015

 

    

2014

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

 

 

 

$

92,309

 

 

 

$

81,848

 

 

 

$

192,447

 

 

 

$

175,347

 

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties and fees

 

 

 

 

 

 

32,407

 

 

 

 

26,582

 

 

 

 

70,671

 

 

 

 

57,803

 

Lease revenue

 

 

 

 

 

 

979

 

 

 

 

715

 

 

 

 

2,044

 

 

 

 

1,601

 

Other

 

 

 

 

 

 

524

 

 

 

 

596

 

 

 

 

913

 

 

 

 

1,642

 

Total revenues

 

 

 

 

 

 

126,219

 

 

 

 

109,741

 

 

 

 

266,075

 

 

 

 

236,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

 

 

 

 

25,828

 

 

 

 

23,043

 

 

 

 

54,401

 

 

 

 

49,279

 

Payroll and other employee benefits

 

 

 

 

 

 

33,880

 

 

 

 

30,031

 

 

 

 

69,151

 

 

 

 

63,371

 

Other operating expenses, exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation and amortization included below

 

 

 

 

 

 

19,924

 

 

 

 

18,437

 

 

 

 

42,529

 

 

 

 

40,244

 

Total cost of Company Drive-In sales

 

 

 

 

 

 

79,632

 

 

 

 

71,511

 

 

 

 

166,081

 

 

 

 

152,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

 

 

 

 

18,138

 

 

 

 

15,886

 

 

 

 

36,926

 

 

 

 

32,891

 

Depreciation and amortization

 

 

 

 

 

 

11,539

 

 

 

 

10,031

 

 

 

 

23,199

 

 

 

 

20,065

 

Other operating (income) expense, net

 

 

 

 

 

 

(81

)

 

 

 

(36

)

 

 

 

340

 

 

 

 

(165

)

Total costs and expenses

 

 

 

 

 

 

109,228

 

 

 

 

97,392

 

 

 

 

226,546

 

 

 

 

205,685

 

Income from operations

 

 

 

 

 

 

16,991

 

 

 

 

12,349

 

 

 

 

39,529

 

 

 

 

30,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

6,318

 

 

 

 

6,384

 

 

 

 

12,599

 

 

 

 

12,767

 

Interest income

 

 

 

 

 

 

(97

)

 

 

 

(144

)

 

 

 

(199

)

 

 

 

(261

)

Net interest expense

 

 

 

 

 

 

6,221

 

 

 

 

6,240

 

 

 

 

12,400

 

 

 

 

12,506

 

Income before income taxes

 

 

 

 

 

 

10,770

 

 

 

 

6,109

 

 

 

 

27,129

 

 

 

 

18,202

 

Provision for income taxes

 

 

 

 

 

 

3,108

 

 

 

 

2,002

 

 

 

 

9,382

 

 

 

 

5,887

 

Net income

 

 

 

 

 

$

7,662

 

 

 

$

4,107

 

 

 

$

17,747

 

 

 

$

12,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

 

 

 

 

$

0.14

 

 

 

$

0.07

 

 

 

$

0.33

 

 

 

$

0.22

 

Diluted income per share

 

 

 

 

 

$

0.14

 

 

 

$

0.07

 

 

 

$

0.32

 

 

 

$

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares

 

 

 

 

 

 

53,171

 

 

 

 

55,958

 

 

 

 

53,226

 

 

 

 

56,125

 

Weighted average diluted shares

 

 

 

 

 

 

54,660

 

 

 

 

57,408

 

 

 

 

54,744

 

 

 

 

57,653

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

Three months ended

 

 

 

Six months ended

 

 

 

 

 

 

February 28,

 

 

 

February 28,

 

 

 

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

Drive-Ins in Operation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

 

 

 

389

 

 

 

 

388

 

 

 

 

391

 

 

 

 

396

 

Opened

 

 

 

 

 

-

 

 

 

 

-

 

 

 

 

1

 

 

 

 

-

 

Acquired from (sold to) franchisees

 

 

 

 

 

3

 

 

 

 

-

 

 

 

 

1

 

 

 

 

(7

)

Closed (net of re-openings)

 

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(1

)

 

 

 

(1

)

Total at end of period

 

 

 

 

 

392

 

 

 

 

388

 

 

 

 

392

 

 

 

 

388

 

Franchise:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

 

 

 

3,128

 

 

 

 

3,129

 

 

 

 

3,127

 

 

 

 

3,126

 

Opened

 

 

 

 

 

4

 

 

 

 

6

 

 

 

 

16

 

 

 

 

13

 

Acquired from (sold to) the company

 

 

 

 

 

(3

)

 

 

 

-

 

 

 

 

(1

)

 

 

 

7

 

Closed (net of re-openings)

 

 

 

 

 

(13

)

 

 

 

(16

)

 

 

 

(26

)

 

 

 

(27

)

Total at end of period

 

 

 

 

 

3,116

 

 

 

 

3,119

 

 

 

 

3,116

 

 

 

 

3,119

 

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

 

 

 

3,517

 

 

 

 

3,517

 

 

 

 

3,518

 

 

 

 

3,522

 

Opened

 

 

 

 

 

4

 

 

 

 

6

 

 

 

 

17

 

 

 

 

13

 

Closed (net of re-openings)

 

 

 

 

 

(13

)

 

 

 

(16

)

 

 

 

(27

)

 

 

 

(28

)

Total at end of period

 

 

 

 

 

3,508

 

 

 

 

3,507

 

 

 

 

3,508

 

 

 

 

3,507

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

Six months ended

 

 

 

 

 

 

February 28,

 

 

 

February 28,

 

 

 

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

 

 

 

 

 

($ in thousands)

 

 

 

($ in thousands)

Sales Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

 

 

 

$

92,309

 

 

 

 

$

81,848

 

 

 

 

$

192,447

 

 

 

 

$

175,347

 

Average drive-in sales

 

 

 

 

 

 

237

 

 

 

 

 

213

 

 

 

 

 

496

 

 

 

 

 

452

 

Change in same-store sales

 

 

 

 

 

 

11.2

%

 

 

 

 

1.3

%

 

 

 

 

9.5

%

 

 

 

 

1.6

%

Franchised Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

 

 

 

$

818,601

 

 

 

 

$

725,270

 

 

 

 

$

1,732,254

 

 

 

 

$

1,559,540

 

Average drive-in sales

 

 

 

 

 

 

267

 

 

 

 

 

235

 

 

 

 

 

561

 

 

 

 

 

502

 

Change in same-store sales

 

 

 

 

 

 

11.5

%

 

 

 

 

1.5

%

 

 

 

 

9.8

%

 

 

 

 

1.8

%

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in total sales

 

 

 

 

 

 

12.8

%

 

 

 

 

0.8

%

 

 

 

 

10.9

%

 

 

 

 

1.5

%

Average drive-in sales

 

 

 

 

 

$

264

 

 

 

 

$

234

 

 

 

 

$

554

 

 

 

 

$

499

 

Change in same-store sales

 

 

 

 

 

 

11.5

%

 

 

 

 

1.4

%

 

 

 

 

9.8

%

 

 

 

 

1.8

%

 

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

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

Six months ended

 

 

 

 

 

 

February 28,

 

 

 

February 28,

 

 

 

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

2014

 

 

 

 

 

 

(In thousands)

 

 

 

(In thousands)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

 

 

 

$

92,309

 

 

 

$

81,848

 

 

 

$

192,447

 

 

 

$

175,347

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties

 

 

 

 

 

 

32,236

 

 

 

 

26,376

 

 

 

 

69,012

 

 

 

 

57,288

Franchise fees

 

 

 

 

 

 

171

 

 

 

 

206

 

 

 

 

1,659

 

 

 

 

515

Lease revenue

 

 

 

 

 

 

979

 

 

 

 

715

 

 

 

 

2,044

 

 

 

 

1,601

Other

 

 

 

 

 

 

524

 

 

 

 

596

 

 

 

 

913

 

 

 

 

1,642

Total revenues

 

 

 

 

 

$

126,219

 

 

 

$

109,741

 

 

 

$

266,075

 

 

 

$

236,393

 

 

 

 

 

 

 

Three months ended

 

 

 

Six months ended

 

 

 

 

 

 

February 28,

 

 

 

February 28,

 

 

 

 

 

 

2015

 

 

2014

 

 

 

2015

 

 

 

2014

Margin Analysis (percentage of Company Drive-In sales)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

 

 

 

28.0

%

 

 

28.2

%

 

 

 

28.3

 

%

 

 

 

28.1

%

Payroll and employee benefits

 

 

 

 

 

36.7

 

 

 

36.7

 

 

 

 

35.9

 

 

 

 

 

36.1

 

Other operating expenses

 

 

 

 

 

21.6

 

 

 

22.5

 

 

 

 

22.1

 

 

 

 

 

23.0

 

Cost of Company Drive-In sales

 

 

 

 

 

86.3

%

 

 

87.4

%

 

 

 

86.3

 

%

 

 

 

87.2

%

 

 

 

 

 

 

 

February 28,

 

 

August 31,

 

 

 

 

 

 

2015

 

 

2014

 

 

 

 

 

 

(In thousands)

Selected Balance Sheet Data

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

$

 

 

27,232

 

 

 

$

 

35,694

Current assets

 

 

 

 

 

 

 

 

78,720

 

 

 

 

 

95,712

Property, equipment and capital leases, net

 

 

 

 

 

 

 

 

434,678

 

 

 

 

 

441,969

Total assets

 

 

 

 

 

$

 

 

625,812

 

 

 

$

 

650,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities, including capital lease obligations and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

long-term debt due within one year

 

 

 

 

 

$

 

 

64,975

 

 

 

$

 

79,511

Obligations under capital leases due after one year

 

 

 

 

 

 

 

 

22,367

 

 

 

 

 

23,050

Long-term debt due after one year

 

 

 

 

 

 

 

 

471,131

 

 

 

 

 

427,527

Total liabilities

 

 

 

 

 

 

 

 

626,143

 

 

 

 

 

588,297

Stockholders' equity (deficit)

 

 

 

 

 

$

 

 

(331

)

 

 

$

 

62,675

 

SOURCE Sonic Corp.

Contact:

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

###

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