Sonic Announces 6.1% Same-Store Sales Growth for Third Fiscal Quarter of 2015

OKLAHOMA CITY - June 22, 2015 - (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, 2015.

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

  • Net income per diluted share was $0.38 compared with net income per diluted share of $0.30 in the prior-year period; excluding tax adjustments of $1.1 million, or $0.02 per share in the third fiscal quarter of 2015, earnings per share would have been $0.36, an increase of 20% from the prior-year same period;
  • System same-store sales increased 6.1%, consisting of a 6.1% same-store sales increase at franchise drive-ins and an increase of 5.5% at company drive-ins; and
  • Company drive-in margins improved by 100 basis points.

"We are very pleased with our strong sales and financial performance driven by a healthy mix of traffic and check," said Cliff Hudson, Sonic Corp. CEO. "Our results are especially noteworthy given our strong results from the same quarter prior year. New product news in key categories, effective media and a layered promotional strategy are expected to continue to drive our sales in the near term. Technology initiatives designed to provide a more personalized and customized customer experience are also expected to complement our product and media initiatives and drive sales over the next several years."

The strategies noted above will continue to drive Sonic's multi-layered growth strategy which is comprised of initiatives to increase same-store sales, profits, royalty revenues and unit growth. Optimizing shareholder value by deploying free cash flow1  to invest in the brand, quarterly dividends and repurchase shares continues to be a key focus.

Same-Store Sales

For the third fiscal quarter ended May 31, 2015, system same-store sales increased 6.1%, which was comprised of a 6.1% same-store sales increase at franchise drive-ins and an increase of 5.5% at company drive-ins. Weather had a disproportionately adverse impact on company drive-in sales in the third fiscal quarter.

Financial Overview

For the third fiscal quarter of 2015, the company's net income increased to $20.4 million or $0.38 per diluted share compared with net income of $16.8 million or $0.30 per diluted share in the same period in the prior year. Excluding tax adjustments of $1.1 million or $0.02 per share in the third fiscal quarter of 2015, net income and net income per diluted share increased 15% and 20%, respectively.

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 that 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Three months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31, 2015

 

May 31, 2014

 

 

 

   

 

 

   

 

 

 

 

 

 

 

 

 

Net

   

Diluted

   

Net

  

Diluted

   

Net Income

 

Diluted EPS

 

 

 

 

Income

 

EPS

 

Income

 

EPS

 

$ Change

 

% Change

 

$ Change

 

% Change

Reported - GAAP

 

 

 

 $

20,442

 

 

$

0.38

 

 

$

16,776

 

$

0.30

 

$

3,666

 

22

%

 

$

0.08

 

27

%

Recognition of prior-period federal tax benefit

 

 

 

 

(1,722

)

 

 

(0.03

)

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Retroactive effect of federal tax law change

 

 

 

 

612

 

 

 

0.01

 

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

 

 

$

19,332

 

 

$

0.36

 

 

$

16,776

 

$

0.30

 

$

2,556

 

15

%

 

$

0.06

 

20

%

 

 

 

 

 

 

 

 

 

 

 

For the first nine months of fiscal 2015, net income totaled $38.2 million or $0.70 per diluted share compared with net income of $29.1 million or $0.51 per diluted share for the same period in 2014. Excluding the items outlined below, net income and net income per diluted share increased 27% and 34%, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

Nine months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31, 2015

 

May 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net

   

Diluted

   

Net

   

Diluted

   

Net Income

   

Diluted EPS

 

 

 

 

Income

 

EPS

 

Income

 

EPS

 

$ Change

 

% Change

 

$ Change

 

% Change

Reported - GAAP

 

 

 

$

38,189

 

 

$

0.70

 

 

$

29,091

 

 

$

0.51

 

 

$

9,098

 

31

%

 

$

0.19

 

37

%

Recognition of prior-period federal tax benefit

 

 

 

 

(1,722

)

 

 

(0.03

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Retroactive effect of federal tax law change

 

 

 

 

612

 

 

 

0.01

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Retroactive benefit of Work Opportunity Tax Credit and resolution of tax matters

 

 

 

 

(666

)

 

 

(0.01

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit from the IRS' acceptance of a federal tax method change

 

 

 

 

-

 

 

 

-

 

 

 

(484

)

 

 

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

 

 

$

36,413

 

 

$

0.67

 

 

$

28,607

 

 

$

0.50

 

 

$

7,806

 

27

%

 

$

0.17

 

34

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year 2015 Outlook

The company expects its initiatives to drive 27% to 29% 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 fourth fiscal quarter of 2015 anticipates the following elements:

  • Positive same-store sales in the mid-single digit range for the system;
  • 22 to 27 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 $20.5 million to $21 million, reflecting increased investment in human resources to support the brand initiatives described above;
  • Depreciation and amortization expense of approximately $11.5 million to $12 million;
  • Net interest expense of approximately $6 million to $6.5 million; and
  • An income tax rate of between 36.5% and 37%, reflecting the benefit of various ongoing tax credit programs.

The company anticipates the following elements for fiscal 2015:

  • Capital expenditures of $35 million to $40 million;
  • Free cash flow of $70 million to $75 million;
  • The completion of 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.

The declaration of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of the company's Board of Directors.

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 (800) 946-0782 or (719) 325-2168 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 5977007. The replay will be available until Monday, June 29, 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.

SONC-F

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

 

May 31,

 

May 31,

 

 

 

 

2015

   

2014

   

2015

   

2014

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

 

$

118,369

 

 

$

111,014

 

 

$

310,816

 

 

$

286,361

 

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties and fees

 

 

 

 

43,704

 

 

 

38,795

 

 

 

114,375

 

 

 

96,598

 

Lease revenue

 

 

 

 

1,569

 

 

 

1,081

 

 

 

3,613

 

 

 

2,682

 

Other

 

 

 

 

1,106

 

 

 

1,297

 

 

 

2,019

 

 

 

2,939

 

Total revenues

 

 

 

 

164,748

 

 

 

152,187

 

 

 

430,823

 

 

 

388,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

 

 

32,727

 

 

 

32,175

 

 

 

87,128

 

 

 

81,454

 

Payroll and other employee benefits

 

 

 

 

40,898

 

 

 

37,737

 

 

 

110,049

 

 

 

101,108

 

Other operating expenses, exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation and amortization included below

 

 

 

 

22,955

 

 

 

21,805

 

 

 

65,484

 

 

 

62,049

 

Total cost of Company Drive-In sales

 

 

 

 

96,580

 

 

 

91,717

 

 

 

262,661

 

 

 

244,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

 

 

20,699

 

 

 

17,639

 

 

 

57,625

 

 

 

50,530

 

Depreciation and amortization

 

 

 

 

11,435

 

 

 

11,022

 

 

 

34,634

 

 

 

31,087

 

Other operating (income) expense, net

 

 

 

 

(336

)

 

 

128

 

 

 

4

 

 

 

(37

)

Total costs and expenses

 

 

 

 

128,378

 

 

 

120,506

 

 

 

354,924

 

 

 

326,191

 

Income from operations

 

 

 

 

36,370

 

 

 

31,681

 

 

 

75,899

 

 

 

62,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

6,382

 

 

 

6,328

 

 

 

18,981

 

 

 

19,095

 

Interest income

 

 

 

 

(91

)

 

 

(112

)

 

 

(290

)

 

 

(373

)

Net interest expense

 

 

 

 

6,291

 

 

 

6,216

 

 

 

18,691

 

 

 

18,722

 

Income before income taxes

 

 

 

 

30,079

 

 

 

25,465

 

 

 

57,208

 

 

 

43,667

 

Provision for income taxes

 

 

 

 

9,637

 

 

 

8,689

 

 

 

19,019

 

 

 

14,576

 

Net income

 

 

 

$

20,442

 

 

$

16,776

 

 

$

38,189

 

 

$

29,091

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

 

 

$

0.39

 

 

$

0.31

 

 

$

0.72

 

 

$

0.52

 

Diluted income per share

 

 

 

$

0.38

 

 

$

0.30

 

 

$

0.70

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares

 

 

 

 

52,022

 

 

 

54,382

 

 

 

52,851

 

 

 

55,544

 

Weighted average diluted shares

 

 

 

 

53,391

 

 

 

55,753

 

 

 

54,293

 

 

 

57,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

 

May 31,

 

May 31,

 

 

 

 

2015

 

2014

 

2015

 

2014

Drive-Ins in Operation

 

 

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

 

392

 

 

388

 

 

391

 

 

396

 

Opened

 

 

 

2

 

 

1

 

 

3

 

 

1

 

Acquired from (sold to) franchisees

 

 

 

-

 

 

-

 

 

1

 

 

(7

)

Closed (net of re-openings)

 

 

 

-

 

 

-

 

 

(1

)

 

(1

)

Total at end of period

 

 

 

394

 

 

389

 

 

394

 

 

389

 

Franchise:

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

 

3,116

 

 

3,119

 

 

3,127

 

 

3,126

 

Opened

 

 

 

4

 

 

9

 

 

20

 

 

22

 

Acquired from (sold to) the company

 

 

 

-

 

 

-

 

 

(1

)

 

7

 

Closed (net of re-openings)

 

 

 

(2

)

 

(7

)

 

(28

)

 

(34

)

Total at end of period

 

 

 

3,118

 

 

3,121

 

 

3,118

 

 

3,121

 

System-wide:

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

 

3,508

 

 

3,507

 

 

3,518

 

 

3,522

 

Opened

 

 

 

6

 

 

10

 

 

23

 

 

23

 

Closed (net of re-openings)

 

 

 

(2

)

 

(7

)

 

(29

)

 

(35

)

Total at end of period

 

 

 

3,512

 

 

3,510

 

 

3,512

 

 

3,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

 

May 31,

 

May 31,

 

 

 

 

2015

    

2014

    

2015

    

2014

 

 

 

 

($ in thousands)

 

($ in thousands)

Sales Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

 

$

118,369

 

 

$

111,014

 

 

$

310,816

 

 

$

286,361

 

Average drive-in sales

 

 

 

 

301

 

 

 

286

 

 

 

797

 

 

 

738

 

Change in same-store sales

 

 

 

 

5.5

%

 

 

5.2

%

 

 

8.0

%

 

 

3.0

%

Franchised Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

 

$

1,065,109

 

 

$

995,259

 

 

$

2,803,391

 

 

$

2,560,933

 

Average drive-in sales

 

 

 

 

346

 

 

 

324

 

 

 

906

 

 

 

828

 

Change in same-store sales

 

 

 

 

6.1

%

 

 

5.3

%

 

 

8.3

%

 

 

3.2

%

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in total sales

 

 

 

 

7.0

%

 

 

5.8

%

 

 

9.4

%

 

 

3.4

%

Average drive-in sales

 

 

 

$

341

 

 

$

320

 

 

$

894

 

 

$

819

 

Change in same-store sales

 

 

 

 

6.1

%

 

 

5.3

%

 

 

8.3

%

 

 

3.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

 

2015

    

2014

    

2015

    

2014

 

 

 

 

(In thousands)

 

(In thousands)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

 

$

118,369

 

$

111,014

 

$

310,816

 

$

286,361

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties

 

 

 

 

43,541

 

 

38,519

 

 

112,553

 

 

95,807

Franchise fees

 

 

 

 

163

 

 

276

 

 

1,822

 

 

791

Lease revenue

 

 

 

 

1,569

 

 

1,081

 

 

3,613

 

 

2,682

Other

 

 

 

 

1,106

 

 

1,297

 

 

2,019

 

 

2,939

Total revenues

 

 

 

$

164,748

 

$

152,187

 

$

430,823

 

$

388,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

 

May 31,

 

May 31,

 

 

 

 

2015

 

2014

 

2015

 

2014

Margin Analysis (percentage of Company Drive-In sales)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

 

27.6

%

 

29.0

%

 

28.0

%

 

28.4

%

Payroll and employee benefits

 

 

 

34.6

 

 

34.0

 

 

35.4

 

 

35.3

 

Other operating expenses

 

 

 

19.4

 

 

19.6

 

 

21.1

 

 

21.7

 

Cost of Company Drive-In sales

 

 

 

81.6

%

 

82.6

%

 

84.5

%

 

85.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31,

 

August 31,

 

 

 

 

2015

    

2014

 

 

 

 

(In thousands)

Selected Balance Sheet Data

 

 

 

 

Cash and cash equivalents

 

 

 

$

22,922

 

$

35,694

Current assets

 

 

 

 

80,107

 

 

95,712

Property, equipment and capital leases, net

 

 

 

 

430,308

 

 

441,969

Total assets

 

 

 

$

622,985

 

$

650,972

 

 

 

 

 

 

 

 

 

Current liabilities, including capital lease obligations and

 

 

 

 

 

 

 

 

long-term debt due within one year

 

 

 

$

81,713

 

$

79,511

Obligations under capital leases due after one year

 

 

 

 

21,673

 

 

23,050

Long-term debt due after one year

 

 

 

 

431,182

 

 

427,527

Total liabilities

 

 

 

 

604,379

 

 

588,297

Stockholders' equity

 

 

 

$

18,606

 

$

62,675

 

 

 

 

 

 

 

 

 

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

SOURCE Sonic Corp.

Contact:

Claudia San Pedro
Sonic Corp.
Senior Vice President
Chief Financial Officer and Treasurer
(405) 225-4846

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