Sonic Same-Store Sales Grow 6.5% for the Quarter Ending February 29

Two Year Winter Quarter Cumulative Sales Growth Totals 18%

OKLAHOMA CITY - March 29, 2016 - (BUSINESS WIRE) - Sonic Corp. (NASDAQ:SONC), the nation's largest chain of drive-in restaurants, today announced results for its second fiscal quarter ended February 29, 2016.

Key highlights of the company's second quarter of fiscal year 2016 included:

  • Net income per diluted share increased 57% to $0.22 compared with $0.14 in the same period prior year; adjusted net income per diluted share increased 38% to $0.18 compared with adjusted net income per diluted share of $0.13 in the prior-year period;
  • System same-store sales increased 6.5%, consisting of a 6.5% same-store sales increase at franchise drive-ins and an increase of 6.3% at company drive-ins;
  • Company drive-in margins improved by 60 basis points;
  • Five new franchise drive-ins opened; and
  • The company purchased 0.9 million outstanding shares.

"Our business continues to perform at an exceptional level, generating 6.5% same-store sales growth for the system while lapping our strongest same-store sales comparison in ten years," said Cliff Hudson, Sonic Corp. CEO. "Continued strength in core menu items, combined with highly effective limited-time-offer and value-based promotions, allowed us to increase market share in a highly competitive environment. The combination of sales leverage and a favorable commodity cost environment helped to generate another quarter of solid margin improvement at the drive-in level.

"As we look to sustain our recent momentum, we continue to invest aggressively in our people and technology initiatives, which we believe will further differentiate the experience we provide to our consumers," continued Hudson. "And we are pleased to have repurchased 2.7 million shares in the first half of 2016, representing 5.2% of shares outstanding. We remain confident in the ability of our multi-layered growth strategy to increase EPS through same-store sales growth, improved margins, increased royalty revenues, accelerated new drive-in development and the deployment of free cash flow1."

Same-Store Sales

For the second fiscal quarter ended February 29, 2016, system same-store sales increased 6.5%, which was comprised of a 6.5% same-store sales increase at franchise drive-ins and an increase of 6.3% at company drive-ins.

Financial Overview

For the second fiscal quarter of 2016, the company's net income increased to $10.8 million or $0.22 per diluted share compared with net income of $7.7 million or $0.14 per diluted share in the same period in the prior year. Excluding the items outlined below, net income and net income per diluted share increased 29% and 38%, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 29, 2016

 

 

February 28, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

Diluted

 

 

Net

 

 

Diluted

 

 

Net Income

 

 

Diluted EPS

 

 

 

Income

 

 

EPS

 

 

Income

 

 

EPS

 

 

$ Change

 

 

% Change

 

 

$ Change

 

 

% Change

Reported - GAAP

 

 

$

10,819

 

 

 

$

0.22

 

 

 

$

7,662

 

 

 

$

0.14

 

 

 

$

3,157

 

 

41

%

 

 

$

0.08

 

 

57

%

After-tax gain on sale of real estate

 

 

 

(1,211

)

 

 

 

(0.03

)

 

 

 

-

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

(585

)

 

 

 

(0.01

)

 

 

 

(666

)

 

 

 

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

 

$

9,023

 

 

 

$

0.18

 

 

 

$

6,996

 

 

 

$

0.13

 

 

 

$

2,027

 

 

29

%

 

 

$

0.05

 

 

38

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the first six months of fiscal year 2016, net income totaled $23.3 million or $0.46 per diluted share compared with net income of $17.7 million or $0.32 per diluted share for the same period in 2015. Excluding the items outlined below, net income and net income per diluted share increased 26% and 35%, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

Six months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 29, 2016

 

 

February 28, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net

 

 

Diluted

 

 

Net

 

 

Diluted

 

 

Net Income

 

 

Diluted EPS

 

 

 

Income

 

 

EPS

 

 

Income

 

 

EPS

 

 

$ Change

 

 

% Change

 

 

$ Change

 

 

% Change

Reported - GAAP

 

 

$

23,277

 

 

$

0.46

 

 

$

17,747

 

 

$

0.32

 

 

$

5,530

 

 

31

%

 

 

$

0.14

 

 

44

%

After-tax gain on sale of real estate

 

 

 

(1,211)

 

 

 

(0.03)

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

(585)

 

 

 

(0.01)

 

 

 

(666)

 

 

 

(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

 

 

$

21,481

 

 

$

0.42

 

 

$

17,081

 

 

$

0.31

 

 

$

4,400

 

 

26

%

 

 

$

0.11

 

 

35

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year 2016 Outlook

While the macroeconomic environment may impact results, the company is revising its outlook for adjusted earnings per share growth for fiscal year 2016 from 16% to 20% to 20% to 25%. The outlook for fiscal 2016 anticipates the following elements:

  • 4% to 6% same-store sales growth for the system;
  • Royalty revenue growth from same-store sales improvements and new unit development;
  • 50 to 60 new franchise drive-in openings;
  • Drive-in-level margin improvement between 50 to 60 basis points, depending upon the degree of same-store sales growth at company drive-ins;
  • Selling, general and administrative expenses of approximately $84.0 million to $85.0 million reflecting increased investment in human resources and technology to support brand initiatives;
  • Depreciation and amortization expense of $45.0 million to $46.0 million as a result of capital investment in fiscal 2016;
  • Capital expenditures of $35 million to $40 million;
  • Free cash flow of approximately $75 million to $80 million;
  • An income tax rate between 36.0% to 37.0%;
  • The planned repurchase of $126 million of stock across the fiscal year; and
  • An expected quarterly cash dividend of $0.11 per share.

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

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 (888) 438-5448 or (719) 325-2491 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 8155461. The replay will be available until Tuesday, April 5, 2016. 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. For more than 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

 

 

Six months ended

 

 

 

February 29,

 

 

February 28,

 

 

February 29,

 

 

February 28,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

$

95,313

 

 

 

$

92,309

 

 

 

$

199,196

 

 

 

$

192,447

 

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties and fees

 

 

 

36,047

 

 

 

 

32,407

 

 

 

 

75,969

 

 

 

 

70,671

 

Lease revenue

 

 

 

1,399

 

 

 

 

979

 

 

 

 

2,991

 

 

 

 

2,044

 

Other

 

 

 

401

 

 

 

 

524

 

 

 

 

807

 

 

 

 

913

 

Total revenues

 

 

 

133,160

 

 

 

 

126,219

 

 

 

 

278,963

 

 

 

 

266,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

 

26,213

 

 

 

 

25,828

 

 

 

 

55,159

 

 

 

 

54,401

 

Payroll and other employee benefits

 

 

 

35,359

 

 

 

 

33,880

 

 

 

 

71,723

 

 

 

 

69,151

 

Other operating expenses, exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation and amortization included below

 

 

 

20,100

 

 

 

 

19,924

 

 

 

 

43,008

 

 

 

 

42,529

 

Total cost of Company Drive-In sales

 

 

 

81,672

 

 

 

 

79,632

 

 

 

 

169,890

 

 

 

 

166,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

 

20,785

 

 

 

 

18,138

 

 

 

 

41,725

 

 

 

 

36,926

 

Depreciation and amortization

 

 

 

11,057

 

 

 

 

11,539

 

 

 

 

22,056

 

 

 

 

23,199

 

Other operating (income) expense, net

 

 

 

(2,566

)

 

 

 

(81

)

 

 

 

(2,965

)

 

 

 

340

 

Total costs and expenses

 

 

 

110,948

 

 

 

 

109,228

 

 

 

 

230,706

 

 

 

 

226,546

 

Income from operations

 

 

 

22,212

 

 

 

 

16,991

 

 

 

 

48,257

 

 

 

 

39,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

6,467

 

 

 

 

6,318

 

 

 

 

12,689

 

 

 

 

12,599

 

Interest income

 

 

 

(105

)

 

 

 

(97

)

 

 

 

(205

)

 

 

 

(199

)

Net interest expense

 

 

 

6,362

 

 

 

 

6,221

 

 

 

 

12,484

 

 

 

 

12,400

 

Income before income taxes

 

 

 

15,850

 

 

 

 

10,770

 

 

 

 

35,773

 

 

 

 

27,129

 

Provision for income taxes

 

 

 

5,031

 

 

 

 

3,108

 

 

 

 

12,496

 

 

 

 

9,382

 

Net income

 

 

$

10,819

 

 

 

$

7,662

 

 

 

$

23,277

 

 

 

$

17,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

 

$

0.22

 

 

 

$

0.14

 

 

 

$

0.47

 

 

 

$

0.33

 

Diluted income per share

 

 

$

0.22

 

 

 

$

0.14

 

 

 

$

0.46

 

 

 

$

0.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares

 

 

 

48,977

 

 

 

 

53,171

 

 

 

 

49,599

 

 

 

 

53,226

 

Weighted average diluted shares

 

 

 

49,988

 

 

 

 

54,660

 

 

 

 

50,656

 

 

 

 

54,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

February 29,

 

 

February 28,

 

 

February 29,

 

 

February 28,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

Drive-Ins in Operation

 

 

 

 

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

382

 

 

 

389

 

 

 

387

 

 

 

391

 

Opened

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

Acquired from (sold to) franchisees

 

 

(7

)

 

 

3

 

 

 

(9

)

 

 

1

 

Closed (net of re-openings)

 

 

-

 

 

 

-

 

 

 

(3

)

 

 

(1

)

Total at end of period

 

 

375

 

 

 

392

 

 

 

375

 

 

 

392

 

Franchise:

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

3,147

 

 

 

3,128

 

 

 

3,139

 

 

 

3,127

 

Opened

 

 

5

 

 

 

4

 

 

 

18

 

 

 

16

 

Acquired from (sold to) the company

 

 

7

 

 

 

(3

)

 

 

9

 

 

 

(1

)

Closed (net of re-openings)

 

 

(6

)

 

 

(13

)

 

 

(13

)

 

 

(26

)

Total at end of period

 

 

3,153

 

 

 

3,116

 

 

 

3,153

 

 

 

3,116

 

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

Total at beginning of period

 

 

3,529

 

 

 

3,517

 

 

 

3,526

 

 

 

3,518

 

Opened

 

 

5

 

 

 

4

 

 

 

18

 

 

 

17

 

Closed (net of re-openings)

 

 

(6

)

 

 

(13

)

 

 

(16

)

 

 

(27

)

Total at end of period

 

 

3,528

 

 

 

3,508

 

 

 

3,528

 

 

 

3,508

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

February 29,

 

 

February 28,

 

 

February 29,

 

 

February 28,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

($ in thousands)

 

 

($ in thousands)

Sales Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

95,313

 

 

 

$

92,309

 

 

 

$

199,196

 

 

 

$

192,447

 

Average drive-in sales

 

 

253

 

 

 

 

237

 

 

 

 

522

 

 

 

 

496

 

Change in same-store sales

 

 

6.3

%

 

 

 

11.2

%

 

 

 

5.3

%

 

 

 

9.5

%

Franchised Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

886,313

 

 

 

$

818,601

 

 

 

$

1,854,828

 

 

 

$

1,732,254

 

Average drive-in sales

 

 

283

 

 

 

 

267

 

 

 

 

593

 

 

 

 

561

 

Change in same-store sales

 

 

6.5

%

 

 

 

11.5

%

 

 

 

5.9

%

 

 

 

9.8

%

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in total sales

 

 

7.8

%

 

 

 

12.8

%

 

 

 

6.7

%

 

 

 

10.9

%

Average drive-in sales

 

$

280

 

 

 

$

264

 

 

 

$

585

 

 

 

$

554

 

Change in same-store sales

 

 

6.5

%

 

 

 

11.5

%

 

 

 

5.9

%

 

 

 

9.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 29,

 

 

February 28,

 

 

February 29,

 

 

February 28,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(In thousands)

 

 

(In thousands)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

 

$

95,313

 

 

$

92,309

 

 

$

199,196

 

 

$

192,447

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties

 

 

 

35,807

 

 

 

32,236

 

 

 

75,269

 

 

 

69,012

Franchise fees

 

 

 

240

 

 

 

171

 

 

 

700

 

 

 

1,659

Lease revenue

 

 

 

1,399

 

 

 

979

 

 

 

2,991

 

 

 

2,044

Other

 

 

 

401

 

 

 

524

 

 

 

807

 

 

 

913

Total revenues

 

 

$

133,160

 

 

$

126,219

 

 

$

278,963

 

 

$

266,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Six months ended

 

 

 

February 29,

 

 

February 28,

 

 

February 29,

 

 

February 28,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

Margin Analysis (percentage of Company Drive-In sales)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

27.5

%

 

 

28.0

%

 

 

27.7

%

 

 

28.3

%

Payroll and employee benefits

 

 

37.1

 

 

 

36.7

 

 

 

36.0

 

 

 

35.9

 

Other operating expenses

 

 

21.1

 

 

 

21.6

 

 

 

21.6

 

 

 

22.1

 

Cost of Company Drive-In sales

 

 

85.7

%

 

 

86.3

%

 

 

85.3

%

 

 

86.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 29,

 

 

August 31,

 

 

 

2016

 

 

2015

 

 

 

(In thousands)

Selected Balance Sheet Data

 

 

 

Cash and cash equivalents

 

 

$

36,106

 

 

 

$

27,191

Current assets

 

 

 

85,024

 

 

 

 

85,438

Property, equipment and capital leases, net

 

 

 

411,226

 

 

 

 

421,406

Total assets

 

 

$

606,747

 

 

 

$

620,024

 

 

 

 

 

 

 

 

 

Current liabilities, including capital lease obligations and

 

 

 

 

 

 

 

 

long-term debt due within one year

 

 

$

69,484

 

 

 

$

87,821

Obligations under capital leases due after one year

 

 

 

19,493

 

 

 

 

20,763

Long-term debt due after one year

 

 

 

484,863

 

 

 

 

428,238

Total liabilities

 

 

 

639,967

 

 

 

 

602,591

Stockholders' equity (deficit)

 

 

$

(33,220

)

 

 

$

17,433

 

 

 

 

 

 

 

 

 

 

SOURCE Sonic Corp.

Contact:

Corey Horsch
Sonic Corp.
Vice President of Investor Relations and Treasurer
405-225-4800

###

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