Sonic Reports 25% Increase in Fourth Quarter Earnings Business Wire OKLAHOMA CITY -- October 16, 2012 Sonic Corp. (NASDAQ: SONC), the nation's largest chain of drive-in restaurants, today announced results for the fourth quarter and fiscal year ended August 31, 2012. Key highlights of the company's fourth quarter report included: *The company's net income per diluted share increased 25% to $0.25 compared with net income per diluted share of $0.20 in the fourth quarter of fiscal 2011; and *System-wide same-store sales increased 2.3% during the fourth quarter, with an increase of 4.3% at company drive-ins and 2.1% at franchise drive-ins. “We are pleased to conclude fiscal 2012 with solid same-store sales growth in the fourth quarter, resulting in increased franchising revenue and operating margins which combined with our share repurchase program, drove a 25% increase in earnings per share,” said Cliff Hudson, Chairman and Chief Executive Officer. “In fiscal 2013, we expect to build upon our fiscal 2012 initiatives with a continued focus on new and differentiated products combined with iconic creative and a layered day-part promotional strategy to drive consistent same-store sales growth. This in turn is expected to drive further margin expansion. In addition, with the strength and flexibility of our business model, we are able to generate sufficient free cash flow^1 to invest in our business, pay down debt and repurchase shares to enhance shareholder value. “Over the next two to three years, initiatives such as our new point-of-sale system and the new small building prototype will complement our same-store sales initiatives to increase sales and profits,” added Hudson. “We are confident our multi-layered growth strategy which incorporates same-store sales growth, leverage from higher sales, deployment of cash, increasing royalty revenue and new drive-in development will enable us to achieve double-digit earnings per share growth in the near and long term.” Financial Overview For the fourth fiscal quarter ended August 31, 2012, the company's net income totaled $14.5 million or $0.25 per diluted share compared with net income of $12.3 million or $0.20 per diluted share in the year-earlier quarter. For fiscal 2012, net income totaled $36.1 million or $0.60 per diluted share compared with net income of $32.6 million or $0.53 per diluted share, on an adjusted basis for the same period in 2011. 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. Fiscal Year Ended Fiscal Year Ended Year-Over-Year August 31, 2012 August, 31,2011 Percent Change Net Diluted Net Diluted Net Diluted Income EPS Income EPS Income EPS Reported – GAAP $ 36,085 $ 0.60 $ 19,225 $ 0.31 88 % 94 % After-tax net loss from early -- -- 14,439 0.24 extinguishment of debt Tax benefit from favorable -- -- (1,073 ) (0.02 ) tax settlement Adjusted - $ 36,085 $ 0.60 $ 32,591 $ 0.53 11 % 13 % Non-GAAP Same-Store Sales For the fourth fiscal quarter ended August 31, 2012, system-wide same-store sales increased 2.3%, which was comprised of a 4.3% increase at company drive-ins and a 2.1% increase at franchise drive-ins. For the 12 months ended August 31, 2012, system-wide same-store sales increased 2.2%, which was comprised of a 2.8% increase at company drive-ins and a 2.2% increase at franchise drive-ins. Development For fiscal 2012 there were 37 new drive-in openings including 36 new franchise drive-ins. Across the Sonic system, a total of 18 new drive-ins were opened in the fourth quarter of fiscal 2012, of which 17 were opened by franchisees, versus 17 new drive-in openings during the fourth quarter of fiscal 2011, of which 14 were franchise drive-ins. 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; *Slightly more new franchise drive-in openings than fiscal 2012; *Restaurant-level margins to improve between 50 to 100 basis points, depending upon the degree of same-store sales growth at company drive-ins; *Selling, general and administrative expenses of $68 million to $69 million; *Depreciation and amortization expense of $41 million to $42 million; *Net interest expense of approximately $29 million; *An income tax rate of between 38% and 38.5%, which may vary depending upon the reinstatement of employment tax credit programs; *Capital expenditures of $30 million to $40 million, which assumes the implementation of a new point-of-sale system in company drive-ins during calendar year 2013; and *Free cash flow of $45 million to $55 million. About Sonic Sonic, America's Drive-In, originally started as a hamburger and root beer stand in 1953 in Shawnee, Oklahoma called Top Hat Drive-In, and then changed its name to Sonic in 1959. The first drive-in to adopt the Sonic name is still serving customers in Stillwater, Oklahoma. Sonic has more than 3,500 drive-ins coast to coast, where approximately three million customers eat every day. For more information about Sonic Corp. and its subsidiaries, visit Sonic at www.sonicdrivein.com. 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 (888) 600-4883 or (913) 312-1298 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 4719115. The replay will be available until Tuesday, October 23, 2012. 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 will be available on the investor section of the company's website, www.sonicdrivein.com. 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 expense, less capital expenditures. SONIC CORP. Unaudited Supplemental Information (In thousands, except per share amounts) Fourth Quarter Ended Fiscal Year Ended August 31, August 31, 2012 2011 2012 2011 Statement of Operations Revenues: Company Drive-In sales $ 110,406 $ 113,366 $ 404,443 $ 410,820 Franchise Drive-Ins: Franchise royalties 36,009 35,477 125,989 124,127 Franchise fees 1,173 473 2,024 1,744 Lease revenue 1,970 1,676 6,575 6,023 Other 1,382 192 4,699 3,237 150,940 151,184 543,730 545,951 Costs and expenses: Company Drive-Ins: Food and packaging 30,764 31,957 113,775 115,516 Payroll and other 38,168 40,676 144,531 149,417 employee benefits Other operating expenses, exclusive of depreciation and amortization included 23,265 24,538 89,164 91,303 below 92,197 97,171 347,470 356,236 Selling, general and 16,721 16,165 65,173 64,943 administrative Depreciation and 10,650 10,419 41,914 41,225 amortization Provision for impairment 388 511 764 824 of long-lived assets 119,956 124,266 455,321 463,228 Other operating income (82 ) 330 531 585 (expense), net Income from operations 30,902 27,248 88,940 83,308 Interest expense 7,801 8,186 31,608 32,600 Interest income (153 ) (193 ) (630 ) (706 ) Net loss from early - 10 - 23,035 extinguishment of debt Net interest expense 7,648 8,003 30,978 54,929 Income before income 23,254 19,245 57,962 28,379 taxes Provision for income 8,752 6,959 21,877 9,154 taxes Net income $ 14,502 $ 12,286 $ 36,085 $ 19,225 Net income per share: Basic $ 0.25 $ 0.20 $ 0.60 $ 0.31 Diluted $ 0.25 $ 0.20 $ 0.60 $ 0.31 Weighted average shares used in calculation: Basic 58,103 61,954 60,078 61,781 Diluted 58,386 62,155 60,172 61,943 SONIC CORP. Unaudited Supplemental Information Fourth Quarter Ended Fiscal Year Ended August 31, August 31, 2012 2011 2012 2011 Drive-Ins in Operation Company: Total at beginning of period 409 445 446 455 Opened 1 3 1 3 Acquired from (sold to) - 1 (35 ) (5 ) franchisees Closed (net of re-openings) (1 ) (3 ) (3 ) (7 ) Total at end of period 409 446 409 446 Franchise: Total at beginning of period 3,141 3,114 3,115 3,117 Opened 17 14 36 40 Acquired from (sold to) the - (1 ) 35 5 company Closed (net of re-openings) (11 ) (12 ) (39 ) (47 ) Total at end of period 3,147 3,115 3,147 3,115 System-wide: Total at beginning of period 3,550 3,559 3,561 3,572 Opened 18 17 37 43 Closed (net of re-openings) (12 ) (15 ) (42 ) (54 ) Total at end of period 3,556 3,561 3,556 3,561 Fourth Quarter Ended Fiscal Year Ended August 31, August 31, 2012 2011 2012 2011 ($ in thousands) ($ in thousands) Sales Analysis Company drive-ins: Total sales $ 110,406 $ 113,366 $ 404,443 $ 410,820 Average drive-in 270 255 958 920 sales Change in 4.3 % 0.4 % 2.8 % 1.8 % same-store sales Franchised drive-ins: Total sales $ 946,330 $ 921,758 $ 3,386,218 $ 3,278,208 Average drive-in 301 296 1,081 1,054 sales Change in 2.1 % -0.6 % 2.2 % 0.4 % same-store sales System-wide: Change in total 2.1 % 0.9 % 2.7 % 1.9 % sales Average drive-in $ 297 $ 291 $ 1,066 $ 1,037 sales Change in 2.3 % -0.5 % 2.2 % 0.5 % same-store sales Note: Change in same-store sales based on restaurants open for a minimum of 15 months. SONIC CORP. Unaudited Supplemental Information Fourth Quarter Ended Fiscal Year Ended August 31, August 31, 2012 2011 2012 2011 Margin Analysis (percentage of Company Drive-In sales) Company Drive-Ins: Food and 27.9 % 28.2 % 28.1 % 28.1 % packaging Payroll and employee 34.6 % 35.9 % 35.7 % 36.4 % benefits Other operating 21.0 % 21.6 % 22.1 % 22.2 % expenses 83.5 % 85.7 % 85.9 % 86.7 % August 31, August 31, 2012 2011 Balance Sheet Data (In thousands) Cash and cash equivalents 52,647 29,509 Current assets 107,151 93,457 Property, equipment and 443,008 464,875 capital leases, net Total assets 680,760 679,742 Current liabilities, including capital lease 80,516 71,279 obligations and long-term debt due within one year Obligations under capital 27,377 30,302 leases due after one year Long-term debt due after one 466,613 481,835 year Total liabilities 621,513 628,046 Stockholders' equity 59,247 51,696 SONC-G Contact: Claudia San Pedro Vice President of Investor Relations and Treasurer 405-225-4846
Sonic Reports 25% Increase in Fourth Quarter Earnings
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