EX-99 2 sonc-20140623xex99.htm EX-99 20140531 Q3 Earning Release

Exhibit 99

 

Picture 4

 

 

Contact:

Claudia San Pedro

 

Vice President of Investor Relations,

 

Communications and Treasurer

 

(405) 225-4846

 

Sonic reports 15% Earnings PER SHARE Growth in THIRD fiscal quarter

System-wide Same-Store Sales Increased 5.3%

 

OKLAHOMA CITY (June 23, 2014) – Sonic Corp. (NASDAQ: SONC), the nations largest chain of drive-in restaurants, today announced results for the third fiscal quarter ended May 31, 2014.

 

Key highlights of the company’s third fiscal quarter included:

 

·

Net income per diluted share was $0.30 compared with net income per diluted share of $0.26 in the third fiscal quarter of 2013;

·

System-wide same-store sales increased 5.3%;

·

Company drive-in margins improved by 40 basis points;

·

Ten new drive-ins were opened; and

·

The company repurchased approximately $11 million of stock bringing total repurchases for the year to $69.4 million, representing more than 6% of its outstanding shares as of the beginning of the fiscal year.

 

“Same-store sales for the quarter were especially strong, driven by our innovative product news, layered day-part promotional strategy and increased media efficiency.  The multiple initiatives we have in place to increase sales, profits and new drive-in development are working together nicely to optimize shareholder value,”  said Clifford Hudson, Sonic Corp. CEO.   “We have implemented our new point-of-sale system in all of our company drive-ins and expect to have the new digital point-of-purchase technology implemented in all of our company drive-ins by the end of summer.  Our multi-year implementation of these systems in franchisee-owned drive-ins will begin this fall.  Going forward, these technology initiatives to improve operational efficiency and enhance customer engagement will be an important contributor to increased sales and profits for our entire system.

 

Hudson continued, “We are confident our multi-layered growth strategy, which incorporates same-store sales growth, leverage from higher sales, deployment of free cash flow, increasing royalty revenues and new drive-in development, will continue to result in double-digit earnings per share growth in the near and long term.”

 

Same-Store Sales 

For the third fiscal quarter ended May 31, 2014, system-wide same-store sales increased 5.3%, which was comprised of a 5.3% same-store sales increase at franchise drive-ins and an increase of 5.2% at company drive-ins. 

 

 


 

 

Financial Overview 

For the third fiscal quarter of 2014, the company’s net income increased to $16.8 million or $0.30 per diluted share, compared with net income of $14.8 million or $0.26 per diluted share in the same period in the prior year, resulting in earnings per share growth of 15%.

 

For the first nine months of fiscal 2014, net income totaled $29.1 million or $0.51 per diluted share compared with net income of $24.5 million or $0.43 per diluted share for the same period in fiscal 2013.  Excluding the items outlined below, net income and net income per diluted share would have both increased by 19%.

 

The following non-GAAP adjustments are intended to supplement the presentation of the companys 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

Nine months ended

 

 

 

 

 

 

 

 

 

 

 

May 31, 2014

 

May 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Net

 

Diluted

 

Net

 

Diluted

 

Net Income

 

Diluted EPS

 

Income

 

EPS

 

Income

 

EPS

 

$ Change

% Change

 

$ Change

% Change

Reported – GAAP

$

29,091 

 

$

0.51 

 

$

24,503 

 

$

0.43 

 

$

4,588 
19 

%

 

$

0.08 
19 

%

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

 

(484)

 

 

(0.01)

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

After-tax loss from early extinguishment of debt

 

 -

 

 

 -

 

 

315 

 

 

0.01 

 

 

 

 

 

 

 

 

 

 

Retroactive tax benefit of Work Opportunity Tax Credit ("WOTC") and resolution of tax matters

 

 -

 

 

 -

 

 

(743)

 

 

(0.02)

 

 

 

 

 

 

 

 

 

 

Adjusted - Non-GAAP

$

28,607 

 

$

0.50 

 

$

24,075 

 

$

0.42 

 

$

4,532 
19 

%

 

$

0.08 
19 

%

 

Development 

During the third fiscal quarter, nine new franchise drive-ins and one new company drive-in were opened versus five new franchise drive-in openings during the third fiscal quarter of 2013.  Fiscal year-to-date, 22 new franchise drive-ins have opened versus nine drive-ins in the first nine months of fiscal 2013.

 

Share Repurchase Update

The company continued to use its existing cash and free cash flow1 to repurchase shares.  In the third quarter the company repurchased $11 million of stock and fiscal year-to-date has purchased $69.4 million at an average price of $19.32 per share representing more than 6% of its outstanding shares.

 

Fiscal Year 2014 Outlook

The company expects its initiatives to drive 14% to 15% earnings per share growth in fiscal 2014 as compared to the adjusted non-GAAP earnings per share for fiscal 2013.  The macroeconomic environment and its impact on consumer confidence, in addition to the pacing of capital investments, may impact results.  The outlook for the fourth fiscal quarter of 2014 anticipates the following elements:

 

·

Positive same-store sales in the low single digit range for the system; 

·

15 to 20 new drive-in openings and fewer drive-in closings than in fiscal 2013;

·

Company drive-in margins improving between 75 to 125 basis points, depending upon the degree of same-store sales growth at company drive-ins and the level of commodity cost inflation over the summer months;

 

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

 

2

 


 

 

·

Selling, general and administrative expense of $17.5 million to $18.5 million;

·

Depreciation and amortization expense of $11 million to $11.5 million;

·

Net interest expense of approximately $6 million; and

·

An income tax rate between 36.5% to 37.5%.

 

In addition, the outlook for fiscal 2014 anticipates the following elements:

 

·

Capital expenditures of $75 million to $80 million for the fiscal year, which reflects implementation of a new point-of-sale system and digital point-of-purchase technology in company drive-ins;

·

Free cash flow of approximately $10 million to $15 million for the fiscal year; and

·

The repurchase of $80 million of stock across the fiscal year utilizing existing cash on hand and free cash flow.

 

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) 228-5293 or (913) 312-1447 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 6253335.  The replay will be available until Monday, June 30, 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 companys 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 60 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 Americas “#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 companys 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

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SONIC CORP.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

 

 

Three months ended

 

Nine months ended

 

 

May 31,

 

May 31,

 

 

2014

 

2013

 

2014

 

2013

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

$

111,014 

 

$

108,445 

 

$

286,361 

 

$

285,607 

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties and fees

 

 

38,795 

 

 

35,833 

 

 

96,598 

 

 

91,749 

Lease revenue

 

 

1,081 

 

 

1,089 

 

 

2,682 

 

 

3,524 

Other

 

 

1,297 

 

 

1,267 

 

 

2,939 

 

 

2,903 

Total revenues

 

 

152,187 

 

 

146,634 

 

 

388,580 

 

 

383,783 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

 

32,175 

 

 

30,776 

 

 

81,454 

 

 

80,954 

Payroll and other employee benefits

 

 

37,737 

 

 

37,924 

 

 

101,108 

 

 

102,837 

Other operating expenses, exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

depreciation and amortization included below

 

 

21,805 

 

 

21,356 

 

 

62,049 

 

 

62,143 

Total cost of Company Drive-In sales

 

 

91,717 

 

 

90,056 

 

 

244,611 

 

 

245,934 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

17,639 

 

 

16,943 

 

 

50,530 

 

 

48,540 

Depreciation and amortization

 

 

11,022 

 

 

9,783 

 

 

31,087 

 

 

30,447 

Other operating (income) expense, net

 

 

128 

 

 

(142)

 

 

(37)

 

 

(353)

Total costs and expenses

 

 

120,506 

 

 

116,640 

 

 

326,191 

 

 

324,568 

Income from operations

 

 

31,681 

 

 

29,994 

 

 

62,389 

 

 

59,215 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

6,328 

 

 

7,170 

 

 

19,095 

 

 

22,293 

Interest income

 

 

(112)

 

 

(153)

 

 

(373)

 

 

(462)

Loss from early extinguishment of debt

 

 

 -

 

 

 -

 

 

 -

 

 

492 

Net interest expense

 

 

6,216 

 

 

7,017 

 

 

18,722 

 

 

22,323 

Income before income taxes

 

 

25,465 

 

 

22,977 

 

 

43,667 

 

 

36,892 

Provision for income taxes

 

 

8,689 

 

 

8,184 

 

 

14,576 

 

 

12,389 

Net income

 

$

16,776 

 

$

14,793 

 

$

29,091 

 

$

24,503 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

 

$

0.31 

 

$

0.26 

 

$

0.52 

 

$

0.43 

Diluted income per share

 

$

0.30 

 

$

0.26 

 

$

0.51 

 

$

0.43 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares

 

 

54,382 

 

 

56,005 

 

 

55,544 

 

 

56,492 

Weighted average diluted shares

 

 

55,753 

 

 

56,845 

 

 

57,020 

 

 

57,118 

 

 

 

 

 

4


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

May 31,

 

May 31,

 

 

2014

 

2013

 

2014

 

2013

Drive-Ins in Operation

 

 

 

 

 

 

 

 

Company:

 

 

 

 

 

 

 

 

Total at beginning of period

 

388 

 

405 

 

396 

 

409 

Opened

 

 

 

 

Acquired from (sold to) franchisees

 

 -

 

 

(7)

 

Closed (net of re-openings)

 

 -

 

 -

 

(1)

 

(4)

Total at end of period

 

389 

 

407 

 

389 

 

407 

Franchise:

 

 

 

 

 

 

 

 

Total at beginning of period

 

3,119 

 

3,121 

 

3,126 

 

3,147 

Opened

 

 

 

22 

 

Acquired from (sold to) the company

 

 -

 

(1)

 

 

(1)

Closed (net of re-openings)

 

(7)

 

(6)

 

(34)

 

(36)

Total at end of period

 

3,121 

 

3,119 

 

3,121 

 

3,119 

System-wide:

 

 

 

 

 

 

 

 

Total at beginning of period

 

3,507 

 

3,526 

 

3,522 

 

3,556 

Opened

 

10 

 

 

23 

 

10 

Closed (net of re-openings)

 

(7)

 

(6)

 

(35)

 

(40)

Total at end of period

 

3,510 

 

3,526 

 

3,510 

 

3,526 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

May 31,

 

May 31,

 

 

2014

 

2013

 

2014

 

2013

 

 

($ in thousands)

 

($ in thousands)

Sales Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

111,014 

 

 

$

108,445 

 

 

$

286,361 

 

 

$

285,607 

 

Average drive-in sales

 

 

286 

 

 

 

267 

 

 

 

738 

 

 

 

704 

 

Change in same-store sales

 

 

5.2 

%

 

 

(1.1)

%

 

 

3.0 

%

 

 

1.5 

%

Franchised Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

$

995,259 

 

 

$

937,092 

 

 

$

2,560,933 

 

 

$

2,469,033 

 

Average drive-in sales

 

 

324 

 

 

 

306 

 

 

 

828 

 

 

 

798 

 

Change in same-store sales

 

 

5.3 

%

 

 

0.2 

%

 

 

3.2 

%

 

 

0.9 

%

System-wide:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in total sales

 

 

5.8 

%

 

 

0.1 

%

 

 

3.4 

%

 

 

1.0 

%

Average drive-in sales

 

$

320 

 

 

$

301 

 

 

$

819 

 

 

$

787 

 

Change in same-store sales

 

 

5.3 

%

 

 

0.1 

%

 

 

3.1 

%

 

 

0.9 

%

 

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

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SONIC CORP.

Unaudited Supplemental Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

May 31,

 

May 31,

 

 

2014

 

2013

 

2014

 

2013

Revenues (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-In sales

 

$

111,014 

 

$

108,445 

 

$

286,361 

 

$

285,607 

Franchise Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise royalties

 

 

38,519 

 

 

35,756 

 

 

95,807 

 

 

91,491 

Franchise fees

 

 

276 

 

 

77 

 

 

791 

 

 

258 

Lease revenue

 

 

1,081 

 

 

1,089 

 

 

2,682 

 

 

3,524 

Other

 

 

1,297 

 

 

1,267 

 

 

2,939 

 

 

2,903 

Total revenues

 

$

152,187 

 

$

146,634 

 

$

388,580 

 

$

383,783 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

May 31,

 

May 31,

 

 

2014

 

2013

 

2014

 

2013

Margin Analysis (percentage of Company Drive-In sales)

 

 

 

 

 

 

 

 

 

 

 

 

Company Drive-Ins:

 

 

 

 

 

 

 

 

 

 

 

 

Food and packaging

 

29.0 

%

 

28.4 

%

 

28.4 

%

 

28.3 

%

Payroll and employee benefits

 

34.0 

 

 

35.0 

 

 

35.3 

 

 

36.0 

 

Other operating expenses

 

19.6 

 

 

19.6 

 

 

21.7 

 

 

21.8 

 

Cost of Company Drive-In sales

 

82.6 

%

 

83.0 

%

 

85.4 

%

 

86.1 

%

 

 

 

 

 

 

 

 

 

 

 

 

May 31,

 

August 31,

 

 

2014

 

2013

Selected Balance Sheet Data

 

(In thousands)

Cash and cash equivalents

 

$

34,840 

 

$

77,896 

Current assets

 

 

99,135 

 

 

140,722 

Property, equipment and capital leases, net

 

 

428,432 

 

 

399,661 

Total assets

 

$

641,359 

 

$

660,794 

 

 

 

 

 

 

 

Current liabilities, including capital lease obligations and

 

 

 

 

 

 

long-term debt due within one year

 

$

71,937 

 

$

72,930 

Obligations under capital leases due after one year

 

 

23,676 

 

 

22,458 

Long-term debt due after one year

 

 

430,037 

 

 

437,380 

Total liabilities

 

 

583,822 

 

 

583,330 

Stockholders' equity

 

$

57,537 

 

$

77,464 

 

6