Delaware (State or other jurisdiction of incorporation or organization) | 73-1371046 (I.R.S. Employer Identification No.) | |
300 Johnny Bench Drive Oklahoma City, Oklahoma (Address of principal executive offices) | 73104 (Zip Code) |
Large accelerated filer ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ (Do not check if a smaller reporting company) | Smaller reporting company ☐ |
Emerging growth company ☐ |
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Item 1. | |||
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Item 1A. | |||
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Item 6. |
| February 28, 2018 | August 31, 2017 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 64,238 | $ | 22,340 | ||||
Restricted cash | 10,367 | 19,736 | ||||||
Accounts and notes receivable, net | 32,073 | 33,758 | ||||||
Prepaid expenses | 11,809 | 5,455 | ||||||
Other current assets | 3,523 | 7,895 | ||||||
Total current assets | 122,010 | 89,184 | ||||||
Noncurrent restricted cash | 8,729 | 42,120 | ||||||
Notes receivable, net | 14,128 | 9,801 | ||||||
Property, equipment and capital leases | 621,930 | 616,001 | ||||||
Less accumulated depreciation and amortization | (311,807 | ) | (303,621 | ) | ||||
Property, equipment and capital leases, net | 310,123 | 312,380 | ||||||
| ||||||||
Goodwill | 75,733 | 75,756 | ||||||
Debt origination costs, net | 1,407 | 2,439 | ||||||
Other assets, net | 29,406 | 30,064 | ||||||
Total assets | $ | 561,536 | $ | 561,744 | ||||
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LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 10,569 | $ | 9,213 | ||||
Franchisee deposits | 705 | 1,093 | ||||||
Accrued liabilities | 34,719 | 44,846 | ||||||
Current maturities of long-term debt and capital leases | 2,586 | 3,464 | ||||||
Total current liabilities | 48,579 | 58,616 | ||||||
Obligations under capital leases due after one year | 14,283 | 16,167 | ||||||
Long-term debt, net | 706,534 | 628,116 | ||||||
Deferred income taxes | 26,205 | 40,101 | ||||||
Other non-current liabilities | 18,670 | 20,502 | ||||||
Total non-current liabilities | 765,692 | 704,886 | ||||||
Stockholders’ deficit: | ||||||||
Preferred stock, par value $.01; 1,000 shares authorized; none outstanding | — | — | ||||||
Common stock, par value $.01; 245,000 shares authorized; 118,309 shares issued (118,309 shares issued at August 31, 2017) | 1,183 | 1,183 | ||||||
Paid-in capital | 235,088 | 236,895 | ||||||
Retained earnings | 952,708 | 934,017 | ||||||
Treasury stock, at cost; 80,638 shares (78,081 shares at August 31, 2017) | (1,441,714 | ) | (1,373,853 | ) | ||||
Total stockholders’ deficit | (252,735 | ) | (201,758 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 561,536 | $ | 561,744 |
| Three months ended February 28, | Six months ended February 28, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | ||||||||||||||||
Company Drive-In sales | $ | 53,090 | $ | 64,286 | $ | 115,630 | $ | 151,438 | ||||||||
Franchise Drive-Ins: | ||||||||||||||||
Franchise royalties and fees | 33,737 | 34,328 | 74,515 | 74,467 | ||||||||||||
Lease revenue | 1,401 | 1,675 | 3,085 | 3,056 | ||||||||||||
Other | (126 | ) | (131 | ) | 300 | 748 | ||||||||||
Total revenues | 88,102 | 100,158 | 193,530 | 229,709 | ||||||||||||
| ||||||||||||||||
Costs and expenses: | ||||||||||||||||
Company Drive-Ins: | ||||||||||||||||
Food and packaging | 14,601 | 17,616 | 32,314 | 41,732 | ||||||||||||
Payroll and other employee benefits | 21,083 | 25,332 | 43,857 | 57,098 | ||||||||||||
Other operating expenses, exclusive of depreciation and amortization included below | 11,370 | 14,278 | 24,949 | 33,704 | ||||||||||||
Total cost of Company Drive-In sales | 47,054 | 57,226 | 101,120 | 132,534 | ||||||||||||
| ||||||||||||||||
Selling, general and administrative | 16,846 | 18,296 | 36,615 | 38,050 | ||||||||||||
Depreciation and amortization | 9,560 | 9,734 | 18,926 | 20,011 | ||||||||||||
Other operating income, net | (272 | ) | (7,725 | ) | (493 | ) | (10,565 | ) | ||||||||
Total costs and expenses | 73,188 | 77,531 | 156,168 | 180,030 | ||||||||||||
Income from operations | 14,914 | 22,627 | 37,362 | 49,679 | ||||||||||||
| ||||||||||||||||
Interest expense | 8,138 | 7,227 | 15,813 | 14,416 | ||||||||||||
Interest income | (455 | ) | (262 | ) | (837 | ) | (756 | ) | ||||||||
Loss from debt transactions | 1,310 | — | 1,310 | — | ||||||||||||
Net interest expense | 8,993 | 6,965 | 16,286 | 13,660 | ||||||||||||
Income before income taxes | 5,921 | 15,662 | 21,076 | 36,019 | ||||||||||||
Provision for income taxes | (13,686 | ) | 4,699 | (9,961 | ) | 11,938 | ||||||||||
Net income | $ | 19,607 | $ | 10,963 | $ | 31,037 | $ | 24,081 | ||||||||
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Basic income per share | $ | 0.51 | $ | 0.25 | $ | 0.80 | $ | 0.54 | ||||||||
Diluted income per share | $ | 0.51 | $ | 0.25 | $ | 0.79 | $ | 0.53 | ||||||||
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Cash dividends declared per common share | $ | 0.16 | $ | 0.14 | $ | 0.32 | $ | 0.28 |
| Six months ended February 28, | |||||||
| 2018 | 2017 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 31,037 | $ | 24,081 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 18,926 | 20,011 | ||||||
Stock-based compensation expense | 2,071 | 1,802 | ||||||
Loss from debt transactions | 1,310 | — | ||||||
Provision (benefit) for deferred income taxes | (13,895 | ) | (355 | ) | ||||
Other | 691 | (9,617 | ) | |||||
Change in operating assets and liabilities: | ||||||||
(Increase) decrease in restricted cash | 10,072 | 7,159 | ||||||
(Increase) decrease in accounts receivable and other assets | 2,220 | 4,621 | ||||||
Increase (decrease) in accounts payable | 1,444 | (941 | ) | |||||
Increase (decrease) in accrued and other liabilities | (8,895 | ) | (15,605 | ) | ||||
Increase (decrease) in income taxes | (5,365 | ) | (3,581 | ) | ||||
Total adjustments | 8,579 | 3,494 | ||||||
Net cash provided by operating activities | 39,616 | 27,575 | ||||||
| ||||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (18,163 | ) | (27,772 | ) | ||||
Proceeds from sale of assets | 4,990 | 27,073 | ||||||
Proceeds from sale of investment in refranchised drive-in operations | — | 8,354 | ||||||
Issuance of notes receivable | (11,648 | ) | (944 | ) | ||||
Collections on notes receivable | 4,868 | 7,934 | ||||||
Other | 366 | 4,589 | ||||||
Net cash provided by (used in) investing activities | (19,587 | ) | 19,234 | |||||
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Cash flows from financing activities: | ||||||||
Purchases of treasury stock | (73,003 | ) | (97,318 | ) | ||||
Payment of dividends | (12,322 | ) | (12,431 | ) | ||||
Payments on debt | (171,000 | ) | (4,416 | ) | ||||
Proceeds from borrowings | 253,000 | 29,000 | ||||||
Restricted cash for securitization obligations | 32,688 | 332 | ||||||
Debt issuance costs and prepayment premiums | (5,116 | ) | (10 | ) | ||||
Proceeds from exercise of stock options | 1,635 | 1,792 | ||||||
Other | (4,013 | ) | (1,960 | ) | ||||
Net cash provided by (used in) financing activities | 21,869 | (85,011 | ) | |||||
| ||||||||
Net increase (decrease) in cash and cash equivalents | 41,898 | (38,202 | ) | |||||
Cash and cash equivalents at beginning of period | 22,340 | 72,092 | ||||||
Cash and cash equivalents at end of period | $ | 64,238 | $ | 33,890 | ||||
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Supplemental cash flow information | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 14,296 | $ | 13,410 | ||||
Income taxes (net of refunds) | 9,299 | 15,857 | ||||||
Non-cash investing and financing activities: | ||||||||
Net additions to capital lease obligations | $ | 97 | $ | 1,433 | ||||
Change in obligation to acquire treasury stock | (1,521 | ) | 215 | |||||
Stock options exercised by swap | 2,697 | — |
1. | Basis of Presentation |
2. | Earnings Per Share |
| Three months ended February 28, | Six months ended February 28, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 19,607 | $ | 10,963 | $ | 31,037 | $ | 24,081 | ||||||||
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Denominator: | ||||||||||||||||
Weighted average common shares outstanding– basic | 38,284 | 43,794 | 38,806 | 44,757 | ||||||||||||
Effect of dilutive employee stock options and unvested restricted stock units | 413 | 756 | 485 | 790 | ||||||||||||
Weighted average common shares outstanding – diluted | 38,697 | 44,550 | 39,291 | 45,547 | ||||||||||||
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Net income per common share – basic | $ | 0.51 | $ | 0.25 | $ | 0.80 | $ | 0.54 | ||||||||
Net income per common share – diluted | $ | 0.51 | $ | 0.25 | $ | 0.79 | $ | 0.53 | ||||||||
| ||||||||||||||||
Anti-dilutive securities excluded (1) | 1,417 | 1,100 | 1,352 | 961 |
(1) | Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive. |
3. | Share Repurchase Program |
4. | Income Taxes |
| Three months ended February 28, | Six months ended February 28, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
Provision for income taxes | $ | (13,686 | ) | $ | 4,699 | $ | (9,961 | ) | $ | 11,938 | ||||||
Effective income tax rate | (231.1 | )% | 30.0 | % | (47.3 | )% | 33.1 | % |
• | Effective January 1, 2018, the U.S. corporate federal statutory income tax rate was reduced from 35% to 21%. Because of our fiscal year end, the Company's statutory federal tax rate is 25.7% for fiscal year 2018 and 21% for fiscal year 2019 and thereafter. |
• | The Company remeasured its existing deferred tax assets and liabilities at the rate the Company expects to be in effect when those deferred taxes will be realized (either 25.7% if in 2018 or 21.0% thereafter). The Company recognized a discrete benefit from the deferred tax remeasurement of approximately $14.1 million in the second quarter of fiscal year 2018. |
Six months ended February 28, 2018 | Six months ended February 28, 2017 | ||||
U.S. federal statutory income tax rate | 25.7 | % | 35.0 | % | |
State income taxes, net of federal tax benefit | 3.9 | % | 2.9 | % | |
Federal tax benefit of statutory tax deduction | (1.5 | )% | (1.4 | )% | |
Employment related and other tax credits, net | (1.6 | )% | (1.7 | )% | |
Stock option excess tax benefit | (6.6 | )% | (2.1 | )% | |
Deferred tax revaluation | (67.0 | )% | — | % | |
Other | (0.2 | )% | 0.4 | % | |
Effective tax rate | (47.3 | )% | 33.1 | % |
5. | Accounts and Notes Receivable |
| February 28, 2018 | August 31, 2017 | ||||||
Current accounts and notes receivable: | ||||||||
Royalties and other trade receivables | $ | 15,591 | $ | 19,571 | ||||
Notes receivable from franchisees | 1,966 | 1,441 | ||||||
Receivables from system funds | 8,540 | 6,360 | ||||||
Other | 6,934 | 7,475 | ||||||
Accounts and notes receivable, gross | 33,031 | 34,847 | ||||||
Allowance for doubtful accounts and notes receivable | (958 | ) | (1,089 | ) | ||||
Current accounts and notes receivable, net | $ | 32,073 | $ | 33,758 | ||||
| ||||||||
Noncurrent notes receivable: | ||||||||
Receivables from franchisees | $ | 8,541 | $ | 6,810 | ||||
Receivables from system funds | 5,692 | 3,033 | ||||||
Allowance for doubtful notes receivable | (105 | ) | (42 | ) | ||||
Noncurrent notes receivable, net | $ | 14,128 | $ | 9,801 |
6. | Contingencies |
7. | Fair Value of Financial Instruments |
• | Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 valuations use inputs other than actively quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves observable at commonly quoted intervals and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. |
8. | Debt |
9. | Other Operating Income |
10. | Refranchising Initiative |
Three months ended February 28, 2017 | Six months ended February 28, 2017 | ||||||
Number of refranchised Company Drive-Ins | 54 | 110 | |||||
Proceeds from sales of Company Drive-Ins | $ | 11,086 | $ | 20,036 | |||
Assets sold, net of retained minority investment (1) | (3,277 | ) | (8,738 | ) | |||
Initial and subsequent lease payments for real estate option (2) | 414 | (3,396 | ) | ||||
Goodwill related to sales of Company Drive-Ins | (589 | ) | (966 | ) | |||
Deferred gain for real estate option (3) | (1,040 | ) | (1,040 | ) | |||
Gain (loss) on assets held for sale | 194 | (65 | ) | ||||
Refranchising initiative gains, net | $ | 6,788 | $ | 5,831 |
(1) | Net assets sold consisted primarily of equipment. |
(2) | During the first quarter of fiscal year 2017, as part of a 53 drive-in refranchising transaction, the Company entered into a direct financing lease which included an option for the franchisee to purchase the real estate within the next 24 months. In accordance with lease accounting requirements, because the exercise of this option could occur at any time within 24 months, the portion of the proceeds from the refranchising attributable to the fair value of the option was applied as the initial minimum lease payment for the real estate. The franchisee exercised the option in the last six months of fiscal year 2017. Until the option was fully exercised, the franchisee made monthly lease payments which were included in other operating income, net of sub-lease expense. |
(3) | The deferred gain of $1.0 million is recorded in other non-current liabilities as a result of a real estate purchase option extended to the franchisee in the second quarter of fiscal year 2017. The deferred gain will continue to be amortized into income through January 2020 when the option becomes exercisable. |
System Performance ($ in thousands) | ||||||||||||||||
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| Three months ended February 28, | Six months ended February 28, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Increase (decrease) in total sales | (1.8 | )% | (6.2 | )% | (0.9 | )% | (3.5 | )% | ||||||||
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System drive-ins in operation (1): | ||||||||||||||||
Total at beginning of period | 3,588 | 3,559 | 3,593 | 3,557 | ||||||||||||
Opened | 8 | 10 | 13 | 24 | ||||||||||||
Closed (net of re-openings) | (9 | ) | (7 | ) | (19 | ) | (19 | ) | ||||||||
Total at end of period | 3,587 | 3,562 | 3,587 | 3,562 | ||||||||||||
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Average sales per drive-in | $ | 255 | $ | 260 | $ | 554 | $ | 561 | ||||||||
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Change in same-store sales (2) | (2.9 | )% | (7.4 | )% | (2.2 | )% | (4.6 | )% |
(1) | Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines they are unlikely to reopen within a reasonable time. |
(2) | Represents percentage change for drive-ins open for a minimum of 15 months. |
Revenues ($ in thousands) | |||||||||||||||
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| Three months ended February 28, | Increase (Decrease) | Percent Increase (Decrease) | ||||||||||||
| 2018 | 2017 | |||||||||||||
Company Drive-In sales | $ | 53,090 | $ | 64,286 | $ | (11,196 | ) | (17.4 | )% | ||||||
Franchise Drive-Ins: | |||||||||||||||
Franchise royalties | 33,595 | 34,138 | (543 | ) | (1.6 | )% | |||||||||
Franchise fees | 142 | 190 | (48 | ) | (25.3 | )% | |||||||||
Lease revenue | 1,401 | 1,675 | (274 | ) | (16.4 | )% | |||||||||
Other | (126 | ) | (131 | ) | 5 | (3.8 | )% | ||||||||
Total revenues | $ | 88,102 | $ | 100,158 | $ | (12,056 | ) | (12.0 | )% |
| Six months ended February 28, | Increase (Decrease) | Percent Increase (Decrease) | ||||||||||||
| 2018 | 2017 | |||||||||||||
Company Drive-In sales | $ | 115,630 | $ | 151,438 | $ | (35,808 | ) | (23.6 | )% | ||||||
Franchise Drive-Ins: | |||||||||||||||
Franchise royalties | 74,222 | 74,021 | 201 | 0.3 | % | ||||||||||
Franchise fees | 293 | 446 | (153 | ) | (34.3 | )% | |||||||||
Lease revenue | 3,085 | 3,056 | 29 | 0.9 | % | ||||||||||
Other | 300 | 748 | (448 | ) | (59.9 | )% | |||||||||
Total revenues | $ | 193,530 | $ | 229,709 | $ | (36,179 | ) | (15.7 | )% |
Company Drive-In Sales ($ in thousands) | ||||||||||||||||
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| Three months ended February 28, | Six months ended February 28, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
Company Drive-In sales | $ | 53,090 | $ | 64,286 | $ | 115,630 | $ | 151,438 | ||||||||
Percentage increase (decrease) | (17.4 | )% | (32.6 | )% | (23.6 | )% | (24.0 | )% | ||||||||
| ||||||||||||||||
Company Drive-Ins in operation (1): | ||||||||||||||||
Total at beginning of period | 228 | 286 | 228 | 345 | ||||||||||||
Opened | — | 1 | — | 1 | ||||||||||||
Sold to franchisees | (6 | ) | (54 | ) | (6 | ) | (110 | ) | ||||||||
Closed (net of re-openings) | — | — | — | (3 | ) | |||||||||||
Total at end of period | 222 | 233 | 222 | 233 | ||||||||||||
| ||||||||||||||||
Average sales per Company Drive-In | $ | 234 | $ | 236 | $ | 508 | $ | 506 | ||||||||
| ||||||||||||||||
Change in same-store sales (2) | (3.7 | )% | (8.9 | )% | (3.4 | )% | (5.5 | )% |
(1) | Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines they are unlikely to reopen within a reasonable time. |
(2) | Represents percentage change for drive-ins open for a minimum of 15 months. |
Franchise Information ($ in thousands) | ||||||||||||||||
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| Three months ended February 28, | Six months ended February 28, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
Franchise Drive-In sales | $ | 851,183 | $ | 856,514 | $ | 1,848,318 | $ | 1,830,399 | ||||||||
Percentage increase | (0.6 | )% | (3.4 | )% | 1.0 | % | (1.3 | )% | ||||||||
| ||||||||||||||||
Franchise Drive-Ins in operation (1): | ||||||||||||||||
Total at beginning of period | 3,360 | 3,273 | 3,365 | 3,212 | ||||||||||||
Opened | 8 | 9 | 13 | 23 | ||||||||||||
Acquired from the company | 6 | 54 | 6 | 110 | ||||||||||||
Closed (net of re-openings) | (9 | ) | (7 | ) | (19 | ) | (16 | ) | ||||||||
Total at end of period | 3,365 | 3,329 | 3,365 | 3,329 | ||||||||||||
| ||||||||||||||||
Average sales per Franchise Drive-In | 256 | 262 | 557 | 566 | ||||||||||||
| ||||||||||||||||
Change in same-store sales (2) | (2.8 | )% | (7.3 | )% | (2.1 | )% | (4.5 | )% | ||||||||
| ||||||||||||||||
Franchising revenues (3) | $ | 35,138 | $ | 36,003 | $ | 77,600 | $ | 77,523 | ||||||||
Percentage increase | (2.4 | )% | (3.9 | )% | 0.1 | % | (1.8 | )% | ||||||||
| ||||||||||||||||
Effective royalty rate (4) | 3.95 | % | 3.99 | % | 4.02 | % | 4.04 | % |
(1) | Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines they are unlikely to reopen within a reasonable time. |
(2) | Represents percentage change for drive-ins open for a minimum of 15 months. |
(3) | Consists of revenues derived from franchising activities, including royalties, franchise fees and lease revenues. See Revenue Recognition Related to Franchise Fees and Royalties in the Critical Accounting Policies and Estimates section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 31, 2017. |
(4) | Represents franchise royalties as a percentage of Franchise Drive-In sales. |
Company Drive-In Margins | ||||||||
| ||||||||
| Three months ended February 28, | Percentage Points Increase (Decrease) | ||||||
| 2018 | 2017 | ||||||
Costs and expenses | ||||||||
Company Drive-Ins: | ||||||||
Food and packaging | 27.5 | % | 27.4 | % | 0.1 | |||
Payroll and other employee benefits | 39.7 | 39.4 | 0.3 | |||||
Other operating expenses | 21.4 | 22.2 | (0.8) | |||||
Cost of Company Drive-In sales | 88.6 | % | 89.0 | % | (0.4) |
| Six months ended February 28, | Percentage Points Increase (Decrease) | ||||||
| 2018 | 2017 | ||||||
Costs and expenses | ||||||||
Company Drive-Ins: | ||||||||
Food and packaging | 28.0 | % | 27.6 | % | 0.4 | |||
Payroll and other employee benefits | 37.9 | 37.7 | 0.2 | |||||
Other operating expenses | 21.6 | 22.2 | (0.6) | |||||
Cost of Company Drive-In sales | 87.5 | % | 87.5 | % | — |
| Three months ended February 28, 2018 | Three months ended February 28, 2017 | ||||||||||||||
| Net Income | Diluted EPS | Net Income | Diluted EPS | ||||||||||||
Reported – GAAP | $ | 19,607 | $ | 0.51 | $ | 10,963 | $ | 0.25 | ||||||||
Payment card breach expense (1) | 228 | 0.01 | — | — | ||||||||||||
Tax impact on payment card breach expense (2) | (67 | ) | 0.00 | — | — | |||||||||||
Loss from debt transactions (3) | 1,310 | 0.03 | — | — | ||||||||||||
Tax impact on debt transactions (2) | (384 | ) | (0.01 | ) | — | — | ||||||||||
Discrete impact of the Tax Cuts and Jobs Act | (14,120 | ) | (0.36 | ) | — | — | ||||||||||
Net gain on refranchising transactions (4) | — | — | (6,788 | ) | (0.15 | ) | ||||||||||
Tax impact on refranchising transactions (5) | — | — | 2,445 | 0.05 | ||||||||||||
Adjusted - Non-GAAP (6) | $ | 6,574 | $ | 0.17 | $ | 6,620 | $ | 0.15 |
(1) | Costs include legal fees, investigative fees and costs related to customer response. |
(2) | Tax impact during the period at a consolidated blended statutory tax rate of 29.3%. |
(3) | Includes a $0.7 million write-off of unamortized deferred loan fees related to the reduction of the 2016 Variable Funding Notes commitments, as well as a $0.4 million write-off of unamortized deferred loan fees related to the prepayment on its 2013 Fixed Rate Notes and 2016 Fixed Rate Notes. Additionally, as required by the terms of the 2016 Fixed Rate Notes, we paid a $0.2 million prepayment premium. |
(4) | During the second quarter of fiscal year 2017, we completed transactions to refranchise the operations of 54 company drive-ins. |
(5) | Tax impact during the period at an effective tax rate of 36.0%. |
(6) | Sum of per share data may not agree to the total amounts due to rounding. |
| Six months ended February 28, 2018 | Six months ended February 28, 2017 | ||||||||||||||
| Net Income | Diluted EPS | Net Income | Diluted EPS | ||||||||||||
Reported – GAAP | $ | 31,037 | $ | 0.79 | $ | 24,081 | $ | 0.53 | ||||||||
Payment card breach expense (1) | 870 | 0.02 | — | — | ||||||||||||
Tax impact on payment card breach expense (2) | (312 | ) | (0.01 | ) | — | — | ||||||||||
Loss from debt transactions (3) | 1,310 | 0.03 | — | — | ||||||||||||
Tax impact on debt transactions (4) | (384 | ) | (0.01 | ) | — | — | ||||||||||
Discrete impact of the Tax Cuts and Jobs Act | (14,120 | ) | (0.36 | ) | — | — | ||||||||||
Net gain on refranchising transactions (5) | — | — | (5,831 | ) | (0.13 | ) | ||||||||||
Tax impact on refranchising transactions (6) | — | — | 2,105 | 0.04 | ||||||||||||
Gain on sale of investment in refranchised drive-in operations (7) | — | — | (3,795 | ) | (0.08 | ) | ||||||||||
Tax impact on sale of investment in refranchised drive-in operations (8) | — | — | 1,350 | 0.03 | ||||||||||||
Adjusted - Non-GAAP (9) | $ | 18,401 | $ | 0.47 | $ | 17,910 | $ | 0.39 |
(1) | Costs include legal fees, investigative fees and costs related to customer response. |
(2) | Combined tax impact at consolidated blended statutory tax rates of 38.2% and 29.3% during the first and second quarters of fiscal year 2018, respectively. |
(3) | Includes a $0.7 million write-off of unamortized deferred loan fees related to the reduction of the 2016 Variable Funding Notes commitments, as well as a $0.4 million write-off of unamortized deferred loan fees related to the prepayment on its 2013 Fixed Rate Notes and 2016 Fixed Rate Notes. Additionally, as required by the terms of the 2016 Fixed Rate Notes, we paid a $0.2 million prepayment premium. |
(4) | Tax impact during the period at a consolidated blended statutory tax rate of 29.3%. |
(5) | During the first and second quarters of fiscal year 2017, we completed transactions to refranchise the operations of 110 company drive-ins. |
(6) | Combined tax impact at effective tax rates of 35.6% and 36.0% during the first and second quarters of fiscal year 2017, respectively. |
(7) | Gain on sale of investment in refranchised drive-ins is related to minority investments in franchise operations retained as part of a refranchising transaction that occurred in fiscal year 2009. |
(8) | Tax impact during the period at an adjusted effected tax rate of 35.6%. |
(9) | Sum of per share data may not agree to the total amounts due to rounding. |
Acquisition of real estate | $ | 7.6 | |
Brand technology investments | 6.2 | ||
Purchase and replacement of equipment and technology | 2.6 | ||
Rebuilds, relocations and remodels of existing drive-ins | 1.0 | ||
Newly constructed drive-ins leased or sold to franchisees | 0.8 | ||
Total investments in property and equipment | $ | 18.2 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value that May Yet Be Purchased Under the Program(1) | ||||||||||
December 1, 2017 through December 31, 2017 | 320 | $ | 27.84 | 320 | $ | 110,296 | ||||||||
January 1, 2018 through January 31, 2018 | 358 | 26.65 | 358 | 100,756 | ||||||||||
February 1, 2018 through February 28, 2018 | 494 | 24.75 | 494 | 88,519 | ||||||||||
Total | 1,172 | 1,172 |
(1) | In August 2017, the Company’s Board of Directors extended the Company’s share repurchase program, authorizing the Company to purchase up to $160.0 million of its outstanding shares of common stock through August 31, 2018. Share repurchases may be made from time to time in the open market or otherwise, including through an accelerated share repurchase program, under terms of a Rule 10b5-1 plan, in privately negotiated transactions or in round lot or block transactions. The share repurchase program may be extended, modified, suspended or discontinued at any time. Please refer to note 3 – Share Repurchase Program included in Part I, Item 1, “Financial Statements” in this Quarterly Report on Form 10-Q for additional information. |
| |
Exhibits. | |
Stock Option Award Agreement under Sonic Corp. 2006 Long-Term Incentive Plan | |
Director Stock Option Award Agreement under Sonic Corp. 2006 Long-Term Incentive Plan | |
Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14 | |
Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14 | |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
SONIC CORP. | ||
By: | /s/ Corey R. Horsch | |
Corey R. Horsch Vice President, Chief Financial Officer and Treasurer |
| |
10.01 | Stock Option Award Agreement under Sonic Corp. 2006 Long-Term Incentive Plan |
10.02 | Director Stock Option Award Agreement under Sonic Corp. 2006 Long-Term Incentive Plan |
31.01 | Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14 |
31.02 | Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14 |
32.01 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 |
32.02 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
1. | I have reviewed this quarterly report on Form 10-Q of Sonic Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
By: /s/ Clifford Hudson |
Clifford Hudson |
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Sonic Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
By: /s/ Corey R. Horsch |
Corey R. Horsch |
Chief Financial Officer |
|
|
By: /s/ Clifford Hudson |
Clifford Hudson |
Chief Executive Officer |
|
|
By: /s/ Corey R. Horsch |
Corey R. Horsch |
Chief Financial Officer |
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Document And Entity Information - shares |
6 Months Ended | |
---|---|---|
Feb. 28, 2018 |
Mar. 28, 2018 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | SONIC CORP. | |
Entity Central Index Key | 0000868611 | |
Current Fiscal Year End Date | --08-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Feb. 28, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 37,154,893 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Feb. 28, 2018 |
Aug. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 245,000,000 | 245,000,000 |
Common stock, issued (in shares) | 118,309,000 | 118,309,000 |
Treasury stock, shares (in shares) | 80,638,000 | 78,081,000 |
Condensed Consolidated Statements Of Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 28, 2018 |
Feb. 28, 2017 |
Feb. 28, 2018 |
Feb. 28, 2017 |
|
Revenues: | ||||
Company Drive-In sales | $ 53,090 | $ 64,286 | $ 115,630 | $ 151,438 |
Franchise Drive-Ins: | ||||
Franchise royalties and fees | 33,737 | 34,328 | 74,515 | 74,467 |
Lease revenue | 1,401 | 1,675 | 3,085 | 3,056 |
Other | (126) | (131) | 300 | 748 |
Total revenues | 88,102 | 100,158 | 193,530 | 229,709 |
Costs and expenses: | ||||
Food and packaging | 14,601 | 17,616 | 32,314 | 41,732 |
Payroll and other employee benefits | 21,083 | 25,332 | 43,857 | 57,098 |
Other operating expenses, exclusive of depreciation and amortization included below | 11,370 | 14,278 | 24,949 | 33,704 |
Total cost of Company Drive-In sales | 47,054 | 57,226 | 101,120 | 132,534 |
Selling, general and administrative | 16,846 | 18,296 | 36,615 | 38,050 |
Depreciation and amortization | 9,560 | 9,734 | 18,926 | 20,011 |
Other operating income, net | (272) | (7,725) | (493) | (10,565) |
Total costs and expenses | 73,188 | 77,531 | 156,168 | 180,030 |
Income from operations | 14,914 | 22,627 | 37,362 | 49,679 |
Interest expense | 8,138 | 7,227 | 15,813 | 14,416 |
Interest income | (455) | (262) | (837) | (756) |
Loss from debt transactions | 1,310 | 0 | 1,310 | 0 |
Net interest expense | 8,993 | 6,965 | 16,286 | 13,660 |
Income before income taxes | 5,921 | 15,662 | 21,076 | 36,019 |
Provision for income taxes | (13,686) | 4,699 | (9,961) | 11,938 |
Net income | $ 19,607 | $ 10,963 | $ 31,037 | $ 24,081 |
Basic income per share (usd per share) | $ 0.51 | $ 0.25 | $ 0.80 | $ 0.54 |
Diluted income per share (usd per share) | 0.51 | 0.25 | 0.79 | 0.53 |
Cash dividends declared per common share (usd per share) | $ 0.16 | $ 0.14 | $ 0.32 | $ 0.28 |
Basis Of Presentation |
6 Months Ended |
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Feb. 28, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis Of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements of Sonic Corp. (the “Company”). In the opinion of management, these financial statements reflect all adjustments of a normal recurring nature, including recurring accruals, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. In certain situations, recurring accruals, including franchise royalties, are based on more limited information at interim reporting dates than at the Company’s fiscal year end due to the abbreviated reporting period. Actual results may differ from these estimates. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended August 31, 2017, included in the Company’s Annual Report on Form 10-K. Interim results are not necessarily indicative of the results that may be expected for a full year or any other interim period. The second fiscal quarter is typically the most volatile for the Company due to seasonality and weather. Principles of Consolidation The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and a number of Company Drive-Ins in which a subsidiary has a controlling ownership interest. All intercompany accounts and transactions have been eliminated. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled for the transfer of promised goods or services to customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU will replace most of the existing revenue recognition requirements in U.S. GAAP when it becomes effective. Further, the FASB has issued clarifying guidance with ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing,” and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU No. 2016-08 provides guidance for evaluating when another party, along with the entity, is involved in providing a good or service to a customer. ASU No. 2016-10 clarifies assessing whether promises to transfer goods or services are distinct, and whether an entity's promise to grant a license provides a customer with a right to use or right to access the entity's intellectual property. ASU No. 2016-20 provides corrections or improvements to issues that affect narrow aspects of the guidance. The Company plans to adopt the standards in the first quarter of fiscal year 2019 using the cumulative effect transition method. The Company does not believe the new revenue recognition standard will impact the recognition of sales from Company Drive-Ins or the recognition of royalty fees from franchisees, nor will it have a material impact to the recognition of gift card breakage. The Company expects the pronouncement will impact the recognition of the initial franchise fee, which is currently recognized upon the opening of a Franchise Drive-In. The impact on these fees is not expected to be material to total revenue. The Company continues to evaluate the effect this pronouncement will have on principal versus agent considerations, other transactions, the financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The new standard, which replaces existing lease guidance, requires lessees to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Accounting guidance for lessors is largely unchanged. In January 2018, the FASB issued ASU No. 2018-01. ASU 2018-01 permits an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of 2016-02 and that were not accounted for as leases under previous lease guidance. The standard is effective for fiscal year 2020, with early application permitted. This standard requires adoption based upon a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with optional practical expedients. Based on a preliminary assessment, the Company expects that most of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a significant increase in the assets and liabilities on the consolidated balance sheet. The Company is continuing its assessment, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses.” The update was issued to provide more decision-useful information about the expected credit losses on financial instruments. The update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for fiscal year 2021, with early adoption permitted for fiscal years beginning after December 15, 2018. The update should be adopted using a modified-retrospective approach. The Company is currently evaluating the effect this update will have on its financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments.” The update is intended to reduce diversity in practice in how certain transactions are classified and will make eight targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. The update is effective for fiscal year 2019. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case the amendments will apply prospectively as of the earliest date practicable. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory," as part of its simplification initiatives. The update requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than deferring the recognition until the asset has been sold to an outside party as is required under current GAAP. The update is effective for fiscal year 2019. The new standard will require adoption on a modified retrospective basis through a cumulative-effect adjustment to retained earnings, and early adoption is permitted. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows - Restricted Cash." The update requires that restricted cash balances be included in the beginning and ending cash balance within the statement of cash flows. The update is effective for fiscal year 2019. The amendments should be adopted on a retrospective basis for each period presented, and early adoption is permitted. The adoption will increase the beginning and ending cash balance within the Company's statement of cash flows by its restricted cash balances and will require a new disclosure to reconcile the cash balances within the statement of cash flows to the balance sheets. The Company does not expect any other material impacts to its financial statements. In May 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation: Scope of Modification Accounting," which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The update is effective for fiscal year 2019. The update is to be adopted prospectively to an award modified on or after the adoption date. Early adoption is permitted. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. The Company has reviewed all other recently issued accounting pronouncements and concluded they are not applicable or not expected to be significant to our operations. |
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Earnings Per Share | Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share:
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Share Repurchase Program |
6 Months Ended |
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Feb. 28, 2018 | |
Equity [Abstract] | |
Share Repurchase Program | Share Repurchase Program During fiscal year 2017, approximately 6.7 million shares were repurchased under the Company's share repurchase program for a total cost of $172.9 million, resulting in an average price per share of $25.71. In August 2017, the Board of Directors approved an incremental $160.0 million share repurchase authorization of the Company's outstanding shares of common stock through August 31, 2018. During the first six months of fiscal year 2018, approximately 2.8 million shares were repurchased for a total cost of $71.5 million, resulting in an average price per share of $25.20. The total remaining authorized under the share repurchase program as of February 28, 2018 was $88.5 million. Share repurchases may be made from time to time in the open market or otherwise, including through an accelerated share repurchase program, under terms of a Rule 10b5-1 plan, in privately negotiated transactions or in round lot or block transactions. The share repurchase program may be extended, modified, suspended or discontinued at any time. |
Income Taxes |
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Income Taxes | Income Taxes The following table presents the Company’s provision for income taxes and effective income tax rate for the periods below:
The lower effective income tax rate during the second quarter and first six months of fiscal year 2018 was due primarily to the recognition of the impacts of the Tax Cuts and Jobs Act (“TCJA”) discussed below. On December 22, 2017, the TCJA was signed into law, significantly impacting several sections of the Internal Revenue Code. The most significant impacts on the Company for fiscal year 2018 include:
In December 2017, the SEC provided guidance allowing registrants to record provisional amounts, during a specified measurement period, when the necessary information is not available, prepared or analyzed in reasonable detail to account for the impact of the TCJA. Accordingly, we have reported the revaluation of our deferred tax assets and liabilities based on provisional amounts. Among the factors that could affect the accuracy of our provisional amounts is uncertainty about the statutory tax rate applicable to our deferred income tax assets and liabilities, since the actual rate will be dependent on the timing of realization or settlement of such assets and liabilities. At February 28, 2018, we estimated the dates when such realization or settlement would occur. The actual dates when such realization or settlement occurs may be significantly different from our estimates, which could result in the ultimate revaluation of our deferred income taxes to be different from our provisional amounts. In addition, there is uncertainty about the impact of expected Internal Revenue Service guidance intended to interpret the most complex provisions of the TCJA. The difference between our U.S. federal statutory income tax rate and our effective income tax rate for the six months ended February 28, 2018 and 2017 is summarized below:
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Accounts And Notes Receivable |
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Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts And Notes Receivable | Accounts and Notes Receivable Accounts and notes receivable consist of the following:
The Company’s receivables are primarily due from franchisees, all of whom are in the restaurant business. Substantially all of the notes receivable from franchisees are collateralized by real estate or equipment. The receivables from system funds represent transactions in the normal course of business. |
Contingencies |
6 Months Ended |
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Feb. 28, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Litigation As reported in the Annual Report on Form 10-K for the year ended August 31, 2017, the Company was named as a defendant in five purported class action complaints related to a payment card breach at certain Sonic Drive-Ins. The Company has since been named as a defendant in four additional purported class action complaints filed on October 9, 2017, in the United States District Court for the Northern District of Ohio, on November 3, 2017, in the United States District Court for the Northern District of Texas, on November 13, 2017, in the United States District Court for the District of Arizona, and on December 17, 2017, in the Northern District of Illinois. Each of these complaints asserted various claims related to the Company’s alleged failure to safeguard customer credit card information, and the plaintiffs sought monetary damages, injunctive and declaratory relief and attorneys’ fees and costs. The cases were centralized in the Northern District of Ohio for coordinated or consolidated pretrial proceedings, and a consolidated complaint was filed. The Company believes it has meritorious defenses to the litigation and intends to vigorously oppose the claims asserted in the complaint. We cannot reasonably estimate the range of potential losses that may be associated with the litigation because of the early stage of the lawsuit. We also cannot provide assurance we will not become subject to other inquiries or claims relating to the payment card breach in the future. Although we maintain cyber liability insurance, we currently believe it is possible the ultimate amount paid by us, if we are unsuccessful in defending the litigation, will be in excess of our cyber liability insurance coverage applicable to claims of this nature. We are unable to estimate the amount of any such excess. The Company is involved in various other legal proceedings and has certain unresolved claims pending. Based on the information currently available, management believes all such other claims currently pending are either covered by insurance or would not have a material adverse effect on the Company’s business or financial condition. Note Repurchase Agreement On December 20, 2013, the Company extended a note purchase agreement to a bank that serves to guarantee the repayment of a franchisee loan, with a term through 2018. In the event of default by the franchisee, the Company would purchase the franchisee loan from the bank, thereby becoming the note holder and providing an avenue of recourse with the franchisee. The Company recorded a liability for this guarantee which was based on the Company’s estimate of fair value. As of February 28, 2018, the balance of the franchisee’s loan was $5.4 million. Lease Commitments The Company has obligations under various operating lease agreements with third-party lessors related to the real estate for certain Company Drive-In operations that were sold to franchisees. Under these agreements, which expire through 2029, the Company remains secondarily liable for the lease payments for which it was responsible as the original lessee. As of February 28, 2018, the amount remaining under these guaranteed lease obligations totaled $15.3 million. At this time, the Company does not anticipate any material defaults under the foregoing leases; therefore, zero liability has been provided. |
Fair Value Of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||
Fair Value Of Financial Instruments | Fair Value of Financial Instruments The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. The Company has no financial liabilities that are required to be measured at fair value on a recurring basis. The Company categorizes its assets and liabilities recorded at fair value based on the following fair value hierarchy established by the FASB:
The Company’s cash equivalents, some of which are included in restricted cash, are carried at cost which approximates fair value and totaled $69.4 million at February 28, 2018 and $73.9 million at August 31, 2017. This fair value is estimated using Level 1 inputs. At February 28, 2018, the fair value of the Company’s Series 2018-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2018 Fixed Rate Notes”), the Series 2016-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2016 Fixed Rate Notes”) and the Series 2013-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2013 Fixed Rate Notes” and together with the 2018 Fixed Rate Notes and 2016 Fixed Rate Notes, the "Fixed Rate Notes") approximated the carrying value, including accrued interest, of $720.7 million. At August 31, 2017, the fair value of the Company's 2016 Fixed Rate Notes and 2013 Fixed Rate Notes approximated the carrying value, including accrued interest, of $578.2 million. At February 28, 2018, there was no balance on the Company's Series 2016-1 Senior Secured Variable Funding Notes, Class A-1 (the “2016 Variable Funding Notes” and, together with the Fixed Rate Notes, the “Notes”). At August 31, 2017 the fair value of the 2016 Variable Funding Notes approximated the carrying value of $60.1 million, including accrued interest. The fair value of the Notes is estimated using Level 2 inputs from market information available for public debt transactions for companies with ratings that are similar to the Company’s ratings and from information gathered from brokers who trade in the Company’s notes. |
Debt |
6 Months Ended |
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Feb. 28, 2018 | |
Debt Disclosure [Abstract] | |
Debt | Debt During the second quarter of fiscal year 2018, the Company made a pro rata prepayment of $28.0 million on its 2013 and 2016 Fixed Rate Notes. The prepayment was made at par, as allowed under the terms of the 2013 Fixed Rate Notes and 2016 Fixed Rate Notes. On February 1, 2018, various subsidiaries of the Company (the “Co-Issuers”) issued $170.0 million of 2018 Fixed Rate Notes in a private transaction which bears interest at 4.03% per annum. The 2018 Fixed Rate Notes have an expected life of seven years with an anticipated repayment date in February 2025. At February 28, 2018, the balance outstanding under the 2018 Fixed Rate Notes including accrued interest totaled $170.6 million and carried a weighted-average interest cost of 4.40%, including the effect of the loan origination costs described below. Sonic used a portion of the net proceeds from the issuance of the 2018 Fixed Rate Notes to pay down the outstanding portion of the 2016 Variable Funding Notes and to pay the costs associated with the securitized financing transaction. In conjunction with the issuance of the 2018 Fixed Rate Notes, the commitments under the 2016 Variable Funding Notes were reduced to $100.0 million. Loan origination costs associated with the Company’s 2018 Fixed Rate Notes totaled $5.0 million. Loan costs are amortized over each note’s expected life, and the unamortized balance related to the 2016 Variable Funding Notes and the Fixed Rate Notes is included in debt origination costs, net and long-term debt, net, respectively, on the condensed consolidated balance sheets. In connection with the 2018 transactions described above, the Company recognized a $1.3 million loss during the second quarter of fiscal year 2018. The loss consisted of a $0.7 million write-off of unamortized deferred debt origination costs related to the reduction of the 2016 Variable Funding Notes commitments, as well as a $0.4 million write-off of unamortized deferred debt origination costs related to the prepayment on its 2013 Fixed Rate Notes and 2016 Fixed Rate Notes. Additionally, as required by the terms of the 2016 Fixed Rate Notes, the Company paid a $0.2 million prepayment premium. While the 2018 Fixed Rate Notes have an expected life of seven years, they have a legal final maturity date of February 2048. The Company intends to repay or refinance the 2018 Fixed Rate Notes on or before the end of their respective expected life. In the event the 2018 Fixed Rate Notes are not paid in full by the end of their expected life, the Notes are subject to an upward adjustment in the annual interest rate of at least 5%. In addition, principal payments will accelerate by applying all of the royalties, lease revenues and other fees securing the debt, after deducting certain expenses, until the debt is paid in full. Also, any unfunded amount under the 2016 Variable Funding Notes will become unavailable. The Co-Issuers and Sonic Franchising LLC (the “Guarantor”) are existing special purpose, bankruptcy remote, indirect subsidiaries of Sonic Corp. that hold substantially all of Sonic’s franchising assets and real estate. As of February 28, 2018, assets for these combined indirect subsidiaries totaled $250.3 million, including receivables for royalties, certain Company and Franchise Drive-In real estate, intangible assets and restricted cash balances of $19.1 million. The Notes are secured by franchise fees, royalty payments and lease payments, and the repayment of the Notes is expected to be made solely from the income derived from the Co-Issuer’s assets. In addition, the Guarantor, a Sonic Corp. subsidiary that acts as a franchisor, has guaranteed the obligations of the Co-Issuers under the Notes and pledged substantially all of its assets to secure those obligations. Neither Sonic Corp., the ultimate parent of the Co-Issuers and the Guarantor, nor any other subsidiary of Sonic, guarantees or in any way is liable for the obligations of the Co-Issuers under the 2018 Fixed Rate Notes. The Company has, however, agreed to cause the performance of certain obligations of its subsidiaries, principally related to managing the assets included as collateral for the 2018 Fixed Rate Notes and certain indemnity obligations relating to the transfer of the collateral assets to the Co-Issuers. The 2018 Fixed Rate Notes are subject to a series of covenants and restrictions similar to the Company’s 2016 Fixed Rate Notes and customary for transactions of this type. If certain covenants or restrictions are not met, the Notes are subject to customary accelerated repayment events and events of default. Although management does not anticipate an event of default or any other event of noncompliance with the provisions of the debt, if such event occurred, the unpaid amounts outstanding could become immediately due and payable. |
Other Operating Income |
6 Months Ended |
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Feb. 28, 2018 | |
Other Income and Expenses [Abstract] | |
Other Operating Income | Other Operating Income During the first quarter of fiscal year 2017, the Company recorded a gain of $3.8 million on the sale of minority investments in franchise operations retained as part of a refranchising transaction that occurred in fiscal year 2009. The gain is reflected in other operating income, net, on the condensed consolidated statement of income. |
Refranchising Initiative |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Refranchising Initiative | Refranchising Initiative The Company completed a refranchising initiative in fiscal year 2017. During the first six months of fiscal year 2017, 110 Company Drive-Ins were refranchised, and the Company retained a non-controlling minority investment in most of the franchise operations. Income from minority investments is included in other revenue on the condensed consolidated statements of income. The gains and losses below are recorded in other operating income, net, on the condensed consolidated statement of income. The following is a summary of the pretax activity recorded as a result of the refranchising initiative (in thousands, except number of refranchised Company Drive-Ins):
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Basis Of Presentation (Policy) |
6 Months Ended |
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Feb. 28, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles Of Consolidation | Principles of Consolidation The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and a number of Company Drive-Ins in which a subsidiary has a controlling ownership interest. All intercompany accounts and transactions have been eliminated. |
New Accounting Pronouncements | Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled for the transfer of promised goods or services to customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The ASU will replace most of the existing revenue recognition requirements in U.S. GAAP when it becomes effective. Further, the FASB has issued clarifying guidance with ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing,” and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU No. 2016-08 provides guidance for evaluating when another party, along with the entity, is involved in providing a good or service to a customer. ASU No. 2016-10 clarifies assessing whether promises to transfer goods or services are distinct, and whether an entity's promise to grant a license provides a customer with a right to use or right to access the entity's intellectual property. ASU No. 2016-20 provides corrections or improvements to issues that affect narrow aspects of the guidance. The Company plans to adopt the standards in the first quarter of fiscal year 2019 using the cumulative effect transition method. The Company does not believe the new revenue recognition standard will impact the recognition of sales from Company Drive-Ins or the recognition of royalty fees from franchisees, nor will it have a material impact to the recognition of gift card breakage. The Company expects the pronouncement will impact the recognition of the initial franchise fee, which is currently recognized upon the opening of a Franchise Drive-In. The impact on these fees is not expected to be material to total revenue. The Company continues to evaluate the effect this pronouncement will have on principal versus agent considerations, other transactions, the financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The new standard, which replaces existing lease guidance, requires lessees to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Accounting guidance for lessors is largely unchanged. In January 2018, the FASB issued ASU No. 2018-01. ASU 2018-01 permits an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of 2016-02 and that were not accounted for as leases under previous lease guidance. The standard is effective for fiscal year 2020, with early application permitted. This standard requires adoption based upon a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with optional practical expedients. Based on a preliminary assessment, the Company expects that most of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a significant increase in the assets and liabilities on the consolidated balance sheet. The Company is continuing its assessment, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses.” The update was issued to provide more decision-useful information about the expected credit losses on financial instruments. The update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for fiscal year 2021, with early adoption permitted for fiscal years beginning after December 15, 2018. The update should be adopted using a modified-retrospective approach. The Company is currently evaluating the effect this update will have on its financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments.” The update is intended to reduce diversity in practice in how certain transactions are classified and will make eight targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. The update is effective for fiscal year 2019. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case the amendments will apply prospectively as of the earliest date practicable. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory," as part of its simplification initiatives. The update requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than deferring the recognition until the asset has been sold to an outside party as is required under current GAAP. The update is effective for fiscal year 2019. The new standard will require adoption on a modified retrospective basis through a cumulative-effect adjustment to retained earnings, and early adoption is permitted. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows - Restricted Cash." The update requires that restricted cash balances be included in the beginning and ending cash balance within the statement of cash flows. The update is effective for fiscal year 2019. The amendments should be adopted on a retrospective basis for each period presented, and early adoption is permitted. The adoption will increase the beginning and ending cash balance within the Company's statement of cash flows by its restricted cash balances and will require a new disclosure to reconcile the cash balances within the statement of cash flows to the balance sheets. The Company does not expect any other material impacts to its financial statements. In May 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation: Scope of Modification Accounting," which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The update is effective for fiscal year 2019. The update is to be adopted prospectively to an award modified on or after the adoption date. Early adoption is permitted. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its financial statements and related disclosures. The Company has reviewed all other recently issued accounting pronouncements and concluded they are not applicable or not expected to be significant to our operations. |
Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation Of Basic And Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share:
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Provision (Benefit) For Income Taxes And Effective Income Tax Rate | The following table presents the Company’s provision for income taxes and effective income tax rate for the periods below:
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Schedule of Effective Income Tax Rate Reconciliation | The difference between our U.S. federal statutory income tax rate and our effective income tax rate for the six months ended February 28, 2018 and 2017 is summarized below:
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Accounts And Notes Receivable (Tables) |
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Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Accounts And Notes Receivable | Accounts and notes receivable consist of the following:
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Refranchising Initiative (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the pretax activity recorded as a result of the refranchising initiative | The following is a summary of the pretax activity recorded as a result of the refranchising initiative (in thousands, except number of refranchised Company Drive-Ins):
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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Feb. 28, 2018 |
Feb. 28, 2017 |
Feb. 28, 2018 |
Feb. 28, 2017 |
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Earnings Per Share [Abstract] | ||||
Net income | $ 19,607 | $ 10,963 | $ 31,037 | $ 24,081 |
Weighted average common shares outstanding– basic (in shares) | 38,284 | 43,794 | 38,806 | 44,757 |
Effect of dilutive employee stock options and unvested restricted stock units (in shares) | 413 | 756 | 485 | 790 |
Weighted average common shares outstanding – diluted (in shares) | 38,697 | 44,550 | 39,291 | 45,547 |
Net income per common share – basic (usd per share) | $ 0.51 | $ 0.25 | $ 0.80 | $ 0.54 |
Net income per common share – diluted (usd per share) | $ 0.51 | $ 0.25 | $ 0.79 | $ 0.53 |
Anti-dilutive securities excluded (in shares) | 1,417 | 1,100 | 1,352 | 961 |
Share Repurchase Program (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
6 Months Ended | 12 Months Ended |
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Feb. 28, 2018 |
Aug. 31, 2017 |
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Equity [Abstract] | ||
Shares repurchase authorized amount | $ 160.0 | |
Shares acquired through stock repurchase program | 2.8 | 6.7 |
Purchase of treasury stock | $ 71.5 | $ 172.9 |
Weighted-average price per share | $ 25.20 | $ 25.71 |
Remaining amount authorized for repurchase through share repurchase program | $ 88.5 |
Income Taxes (Schedule Of Provision (Benefit) For Income Taxes And Effective Income Tax Rate) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Feb. 28, 2018 |
Feb. 28, 2017 |
Feb. 28, 2018 |
Feb. 28, 2017 |
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Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ (13,686) | $ 4,699 | $ (9,961) | $ 11,938 |
Effective income tax rate | (231.10%) | 30.00% | (47.30%) | 33.10% |
Income Taxes (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
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Feb. 28, 2018 |
Feb. 28, 2018 |
Feb. 28, 2017 |
Aug. 31, 2019 |
Aug. 31, 2018 |
|
Income Tax Contingency [Line Items] | |||||
U.S. federal statutory income tax rate | 25.70% | 35.00% | |||
Benefit from deferred tax remeasurement | $ 14.1 | ||||
Scenario, Forecast [Member] | |||||
Income Tax Contingency [Line Items] | |||||
U.S. federal statutory income tax rate | 21.00% | 25.70% |
Income Taxes Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 28, 2018 |
Feb. 28, 2017 |
Feb. 28, 2018 |
Feb. 28, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
U.S. federal statutory income tax rate | 25.70% | 35.00% | ||
State income taxes, net of federal tax benefit | 3.90% | 2.90% | ||
Federal tax benefit of statutory tax deduction | (1.50%) | (1.40%) | ||
Employment related and other tax credits, net | (1.60%) | (1.70%) | ||
Stock option excess tax benefit | (6.60%) | (2.10%) | ||
Deferred tax revaluation | (67.00%) | 0.00% | ||
Other | (0.20%) | 0.40% | ||
Effective tax rate | (231.10%) | 30.00% | (47.30%) | 33.10% |
Contingencies (Details) |
6 Months Ended |
---|---|
Feb. 28, 2018
USD ($)
| |
Note Repurchase Agreement [Member] | |
Loss Contingencies [Line Items] | |
Guarantor Obligations, Term | 2018 |
Guaranteed obligations | $ 5,400,000 |
Guarantee Operating Lease Obligations [Member] | |
Loss Contingencies [Line Items] | |
Guarantor Obligations, Term | 2029 |
Guaranteed obligations | $ 15,300,000 |
Guaranteed liability, carrying value | $ 0 |
Other Operating Income (Details) $ in Millions |
3 Months Ended |
---|---|
Nov. 30, 2016
USD ($)
| |
Other Income and Expenses [Abstract] | |
Gain on sale of investments in franchise operations | $ 3.8 |
Refranchising Initiative (Narrative) (Details) - franchise |
3 Months Ended | 6 Months Ended |
---|---|---|
Feb. 28, 2017 |
Feb. 28, 2017 |
|
Refranchising Initiative 2017 [Member] | ||
Franchisor Disclosure [Line Items] | ||
Refranchised company drive-ins | 54 | 110 |
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