Sonic Corp. (NASDAQ:SONC), the nation’s largest chain of
drive-in restaurants, today announced results for the third fiscal
quarter ended May 31, 2015.
Key highlights of the company’s third quarter of fiscal year
2015 included:
- Net income per diluted share was $0.38
compared with net income per diluted share of $0.30 in the
prior-year period; excluding tax adjustments of $1.1 million, or
$0.02 per share in the third fiscal quarter of 2015, earnings per
share would have been $0.36, an increase of 20% from the prior-year
same period;
- System same-store sales increased 6.1%,
consisting of a 6.1% same-store sales increase at franchise
drive-ins and an increase of 5.5% at company drive-ins; and
- Company drive-in margins improved by
100 basis points.
“We are very pleased with our strong sales and financial
performance driven by a healthy mix of traffic and check,” said
Cliff Hudson, Sonic Corp. CEO. “Our results are especially
noteworthy given our strong results from the same quarter prior
year. New product news in key categories, effective media and a
layered promotional strategy are expected to continue to drive our
sales in the near term. Technology initiatives designed to provide
a more personalized and customized customer experience are also
expected to complement our product and media initiatives and drive
sales over the next several years.”
The strategies noted above will continue to drive Sonic’s
multi-layered growth strategy which is comprised of initiatives to
increase same-store sales, profits, royalty revenues and unit
growth. Optimizing shareholder value by deploying free cash flow1
to invest in the brand, quarterly dividends and repurchase shares
continues to be a key focus.
Same-Store Sales
For the third fiscal quarter ended May 31, 2015, system
same-store sales increased 6.1%, which was comprised of a 6.1%
same-store sales increase at franchise drive-ins and an increase of
5.5% at company drive-ins. Weather had a disproportionately adverse
impact on company drive-in sales in the third fiscal quarter.
Financial Overview
For the third fiscal quarter of 2015, the company’s net income
increased to $20.4 million or $0.38 per diluted share compared with
net income of $16.8 million or $0.30 per diluted share in the same
period in the prior year. Excluding tax adjustments of $1.1 million
or $0.02 per share in the third fiscal quarter of 2015, net income
and net income per diluted share increased 15% and 20%,
respectively.
The following analysis of non-GAAP adjustments is intended to
supplement the presentation of the company’s financial results in
accordance with GAAP. The company believes that the presentation of
this analysis provides useful information to investors and
management regarding the underlying business trends and the
performance of the company’s ongoing operations and is helpful for
period-to-period and company-to-company comparisons, which
management believes will assist investors in analyzing the
financial results of the company and predicting future
performance.
Three months ended Three months ended May
31, 2015 May 31, 2014 Net Diluted
Net Diluted Net Income Diluted EPS
Income EPS Income EPS
$ Change
% Change
$ Change
% Change
Reported – GAAP $
20,442 $
0.38 $ 16,776 $ 0.30 $
3,666 22 % $ 0.08 27 % Recognition of prior-period federal tax
benefit
(1,722 ) (0.03 ) - -
Retroactive effect of federal tax law change
612
0.01 - -
Adjusted - Non-GAAP $
19,332 $
0.36 $ 16,776 $ 0.30 $ 2,556
15 % $ 0.06 20 %
For the first nine months of fiscal 2015, net income totaled
$38.2 million or $0.70 per diluted share compared with net income
of $29.1 million or $0.51 per diluted share for the same period in
2014. Excluding the items outlined below, net income and net income
per diluted share increased 27% and 34%, respectively.
Nine months ended Nine months ended May 31,
2015 May 31, 2014 Net Diluted Net
Diluted Net Income Diluted EPS Income
EPS Income EPS
$ Change
% Change
$ Change
% Change Reported – GAAP $
38,189 $
0.70 $
29,091 $ 0.51 $ 9,098 31 % $ 0.19 37 % Recognition of prior-period
federal tax benefit
(1,722 ) (0.03 ) -
- Retroactive effect of federal tax law change
612
0.01 - - Retroactive benefit of Work Opportunity Tax Credit
and resolution of tax matters
(666 ) (0.01
) - - Benefit from the IRS' acceptance of a federal tax
method change
- -
(484 ) (0.01 )
Adjusted - Non-GAAP $
36,413 $
0.67 $ 28,607 $ 0.50 $ 7,806 27 % $
0.17 34 %
Fiscal Year 2015 Outlook
The company expects its initiatives to drive 27% to 29% earnings
per share growth, on an adjusted basis, in fiscal 2015 as compared
to the adjusted non-GAAP earnings per share for fiscal 2014. The
macroeconomic environment may impact results. The outlook for the
fourth fiscal quarter of 2015 anticipates the following
elements:
- Positive same-store sales in the
mid-single digit range for the system;
- 22 to 27 new franchise drive-in
openings, resulting in net unit growth for the system;
- Drive-in-level margin improvement of
between 100 to 150 basis points, reflecting an improving outlook
for commodity cost inflation and leverage from company drive-in
same-store sales growth;
- Selling, general and administrative
expenses of $20.5 million to $21 million, reflecting increased
investment in human resources to support the brand initiatives
described above;
- Depreciation and amortization expense
of approximately $11.5 million to $12 million;
- Net interest expense of approximately
$6 million to $6.5 million; and
- An income tax rate of between 36.5% and
37%, reflecting the benefit of various ongoing tax credit
programs.
The company anticipates the following elements for fiscal
2015:
- Capital expenditures of $35 million to
$40 million;
- Free cash flow of $70 million to $75
million;
- The completion of the planned
repurchase of $105 million of stock; and
- A quarterly cash dividend of $0.09 per
share resulting in an estimated payout of $19 million.
The declaration of quarterly dividends and the establishment of
future record and payment dates are subject to the final
determination of the company's Board of Directors.
Earnings Conference Call
The company will host a conference call and online web simulcast
this afternoon beginning at 5:00 p.m. ET. The conference call can
be accessed live over the phone by dialing (800) 946-0782 or (719)
325-2168 for international callers. A replay will be available one
hour after the call and can be accessed by dialing (877) 870-5176
or (858) 384-5517 for international callers; the conference ID
is 5977007. The replay will be available until Monday, June 29,
2015. An online replay of the conference call will be available
approximately two hours after the conclusion of the live broadcast.
A link to this event may be found on the company's investor
relations website at http://ir.sonicdrivein.com/.
About Sonic
SONIC®, America’s Drive-In®, is the nation's largest drive-in
restaurant chain serving more than 3 million customers every day.
Nearly 90 percent of SONIC’s 3,500 drive-in locations are owned and
operated by local business men and women. Over the past 60 years,
SONIC has delighted guests with signature menu items, more than 1.3
million drink combinations and friendly service by iconic Carhops.
To learn more about Sonic Corp. (NASDAQ/NM: SONC), please
visit sonicdrivein.com or follow us on Facebook and
Twitter.
This press release contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements reflect management’s expectations regarding future
events and operating performance and speak only as of the date
hereof. These forward-looking statements involve a number of risks
and uncertainties. Factors that could cause actual results to
differ materially from those expressed in, or underlying, these
forward-looking statements are detailed in the company’s annual and
quarterly report filings with the Securities and Exchange
Commission. The company undertakes no obligation to publicly
release revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unforeseen events, except as required to be reported
under the rules and regulations of the Securities and Exchange
Commission.
The tables that follow provide information regarding the number
of company drive-ins, franchise drive-ins and system drive-ins in
operation as of the end of the periods indicated. In addition,
these tables provide information regarding franchise sales, system
growth in sales, and both franchise and system average drive-in
sales and change in same-store sales. System information includes
both company and franchise drive-in information, which we believe
is useful in analyzing the growth of our brand. While we do not
record franchise drive-in sales as revenues, we believe this
information is important in understanding our financial performance
since we calculate and record franchise royalties based on a
percentage of franchise sales. This information also is indicative
of the financial health of our franchisees.
SONC-F
SONIC CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In
thousands, except per share amounts) Three months
ended Nine months ended May 31, May 31,
2015 2014 2015 2014 Revenues: Company
Drive-In sales $
118,369 $ 111,014 $
310,816 $
286,361 Franchise Drive-Ins: Franchise royalties and fees
43,704 38,795
114,375 96,598 Lease revenue
1,569 1,081
3,613 2,682 Other
1,106
1,297
2,019 2,939
Total revenues
164,748 152,187
430,823 388,580
Costs and expenses: Company Drive-Ins: Food and packaging
32,727 32,175
87,128 81,454 Payroll and other
employee benefits
40,898 37,737
110,049 101,108 Other
operating expenses, exclusive of depreciation and amortization
included below
22,955 21,805
65,484 62,049 Total cost of
Company Drive-In sales
96,580 91,717
262,661 244,611
Selling, general and administrative
20,699 17,639
57,625 50,530 Depreciation and amortization
11,435
11,022
34,634 31,087 Other operating (income) expense, net
(336 ) 128
4
(37 ) Total costs and expenses
128,378
120,506
354,924
326,191 Income from operations
36,370 31,681
75,899 62,389 Interest expense
6,382 6,328
18,981 19,095 Interest income
(91 )
(112 )
(290 ) (373 ) Net
interest expense
6,291 6,216
18,691 18,722 Income before
income taxes
30,079 25,465
57,208 43,667 Provision
for income taxes
9,637 8,689
19,019 14,576 Net income $
20,442 $ 16,776 $
38,189 $
29,091 Basic income per share $
0.39 $
0.31 $
0.72 $ 0.52 Diluted income per
share $
0.38 $ 0.30 $
0.70 $
0.51 Weighted average basic shares
52,022 54,382
52,851
55,544 Weighted average diluted shares
53,391 55,753
54,293
57,020
SONIC CORP. Unaudited Supplemental
Information Three months ended Nine months
ended May 31, May 31, 2015 2014
2015 2014 Drive-Ins in Operation Company:
Total at beginning of period
392 388
391 396 Opened
2 1
3 1 Acquired from (sold to) franchisees
-
-
1 (7 ) Closed (net of re-openings)
- -
(1 ) (1 ) Total at end of period
394
389
394 389 Franchise: Total at
beginning of period
3,116 3,119
3,127 3,126 Opened
4 9
20 22 Acquired from (sold to) the company
- -
(1 ) 7 Closed (net of re-openings)
(2 ) (7 )
(28 ) (34 ) Total at end of
period
3,118 3,121
3,118 3,121
System-wide: Total at beginning of period
3,508 3,507
3,518 3,522 Opened
6 10
23 23 Closed (net of
re-openings)
(2 ) (7 )
(29 ) (35 )
Total at end of period
3,512 3,510
3,512 3,510
Three months ended Nine months ended
May 31, May 31, 2015 2014 2015
2014 ($ in thousands) ($ in thousands)
Sales Analysis
Company Drive-Ins: Total sales $
118,369 $ 111,014 $
310,816 $ 286,361 Average drive-in sales
301 286
797 738 Change in same-store sales
5.5 % 5.2 %
8.0 % 3.0 % Franchised Drive-Ins: Total sales $
1,065,109 $ 995,259 $
2,803,391 $ 2,560,933 Average
drive-in sales
346 324
906 828 Change in same-store
sales
6.1 % 5.3 %
8.3 % 3.2 % System-wide: Change in
total sales
7.0 % 5.8 %
9.4 % 3.4 % Average drive-in
sales $
341 $ 320 $
894 $ 819 Change in same-store
sales
6.1 % 5.3 %
8.3 % 3.1 %
Note: Change in same-store sales based on restaurants open for a
minimum of 15 months.
SONIC CORP.
Unaudited Supplemental Information Three months
ended Nine months ended May 31, May 31,
2015 2014 2015 2014 (In thousands) (In
thousands)
Revenues Company Drive-In sales $
118,369
$ 111,014 $
310,816 $ 286,361 Franchise Drive-Ins: Franchise
royalties
43,541 38,519
112,553 95,807 Franchise fees
163 276
1,822 791 Lease revenue
1,569 1,081
3,613 2,682 Other
1,106 1,297
2,019 2,939 Total revenues $
164,748 $ 152,187
$
430,823 $ 388,580
Three months ended Nine months ended
May 31, May 31, 2015 2014 2015
2014 Margin Analysis (percentage of Company Drive-In
sales) Company Drive-Ins: Food and packaging
27.6 % 29.0
%
28.0 % 28.4 % Payroll and employee benefits
34.6
34.0
35.4 35.3 Other operating expenses
19.4
19.6
21.1 21.7 Cost of Company Drive-In
sales
81.6 % 82.6 %
84.5 % 85.4 %
May 31, August 31, 2015
2014 (In thousands)
Selected Balance Sheet Data Cash
and cash equivalents $
22,922 $ 35,694 Current assets
80,107 95,712 Property, equipment and capital leases, net
430,308 441,969 Total assets $
622,985 $ 650,972
Current liabilities, including capital lease obligations and
long-term debt due within one year $
81,713 $ 79,511
Obligations under capital leases due after one year
21,673
23,050 Long-term debt due after one year
431,182 427,527
Total liabilities
604,379 588,297 Stockholders' equity $
18,606 $ 62,675
1 Free cash flow is defined as net income plus
depreciation, amortization and stock compensation expenses, less
capital expenditures.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150622006241/en/
Sonic Corp.Claudia San Pedro, (405) 225-4846Senior Vice
President, Chief Financial Officer and Treasurer
Sonic (NASDAQ:SONC)
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