The following excerpt is from the company's SEC filing.
OKLAHOMA CITY (October 24, 2016) – Sonic Corp. (NASDAQ: SONC), the nation’s largest chain of drive-in restaurants, today announced results for its fourth fiscal quarter and year ended August 31, 2016.
Key highlights of the company’s fourth quarter of fiscal year 2016 included:
Net income per diluted share increased 6% to $0.53 compared with $0.50 in the same period prior year; adjusted net income per diluted share increased 5% to $0.45 compared with adjusted net income per diluted share of $0.43 in the prior-year period;
System same-store sales decreased 2.0%, consisting of a 1.8% same-store sales decrease at franchise drive-ins and a decrease of 3.0% at company drive-ins;
Company drive-in margins contracted by 210 basis points;
Eighteen new franchise drive-ins opened;
The company commenced its refranchising initiative to move toward an approximately 95%-franchised system by the end of fiscal year 2017; and
The company purchased 1.3 million shares of its common stock.
Key highlights of the company’s fiscal year 2016 included:
Net income per diluted share was $1.29 compared with $1.20 in the prior year; adjusted net income per diluted share increased 17% to $1.29 compared with adjusted net income per diluted share of $1.10 in the prior
System same-store sales increased 2.6%, consisting of a 2.7% same-store sales increase at franchise drive-ins and an increase of 1.7% at company drive-ins;
Company drive-in margins contracted by 30 basis points;
net new drive-ins opened;
than 5.2 million shares
, representing approximately 10% of outstanding shares for the fiscal year
"We delivered good overall performance in fiscal 2016, including 2.6% system-wide same-store sales growth. Slowing consumer trends that began in April, however, persisted through the fourth quarter, resulting in lower-than-expected sales and profits in the fourth fiscal quarter,” said Cliff Hudson, Sonic Corp. CEO. “At the same time, we are pleased to see approximately 1% net unit growth for fiscal 2016
with 31 net
new units, sound progress towards our net unit growth goal of 2% to 3% by the end of the decade.
“While our unit growth, capital structure and refranchising initiatives are performing well, low commodity costs, resulting in an aggressive promotional and pricing environment, are expected to continue to pressure sales and earnings in fiscal year 2017, particularly in the first half of the year. We believe our current initiatives to deliver one of the most differentiated customer experiences will improve sales late in the fiscal year. This, combined with a more
highly franchised system, better company drive-in margins, penetration of
POPS units in 80% of our system, a strong development pipeline, and a significantly lower number of shares outstanding, provides a solid foundation for good sales and earnings growth over the next few years.”
For the fourth quarter ended August 31, 2016, system same-store sales decreased 2.0%, which was comprised of a 1.8% same-store sales decline at franchise drive-ins and a decline of 3.0% at company drive-ins.
For the fourth fiscal quarter of 2016, the company’s net income totaled $25.4 million or $0.53 per diluted share compared to net income of $26.3 million or $0.50 per diluted share in the same period of the prior year. Excluding the items outlined below, net income declined 6% and net income per diluted share increased 5%.
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.
(In thousands, except per share amounts)
Three months ended
August 31, 2015
Reported – GAAP
Gain on sale of Company Drive-Ins
Tax impact on Company Drive-Ins sale
FIN 48 release of income tax credits and deductions
Federal tax benefit of prior-year statutory tax deduction
Change in deferred tax valuation allowance
Adjusted - Non-GAAP
Tax impact during the period at an
effective tax rate of 32.6%
For fiscal year 2016, net income totaled $64.1 million or $1.29 per diluted share compared with net income of $64.5 million or $1.20 per diluted share for fiscal year 2015. Excluding the items outlined below, net income and net income per diluted share increased 8% and 17%, respectively.
Fiscal Year Ended
Loss from early extinguishment of debt
Tax impact on debt extinguishment
Gain on sale of real estate
Tax impact on real estate sale
Retroactive benefit of Work Opportunity Tax Credit and resolution of tax matters
Retroactive effect of federal tax law change
(1) Tax impact during the period at an
effective tax rate of 32.6%.
(2) Tax impact during the period at an effective tax rate of 34.6%.
(3) Tax impact during the period at an adjusted effective tax rate of 35.4%.
Fiscal Year 201
While the macroeconomic environment may impact results, the company expects adjusted earnings per share for fiscal year 2017 to be in the range of down 7% to flat
year over year
. The outlook for fiscal 2017 anticipates the following elements:
(2)% to 0% same-store sales for the system;
Royalty revenue growth from new unit development;
new franchise drive-in openings;
Drive-in-level margins of 16-17%, depending upon the timing of drive-in divestitures and the degree of same-store sales growth at company drive-ins;
Selling, general and administrative expenses of approximately $85.0 million to $86.0 million reflecting increased investment in human resources and technology to support brand initiatives;
Depreciation and amortization expense of $42.0 million to $44.0 million reflecting the divestiture of company drive-ins as previously announced;
Capital expenditures of $40 million to $45 million reflecting ongoing investment into the company’s technology initiatives;
Free cash flow
of approximately $60 million to $65 million;
An income tax rate between 35.0% to 36.0%;
The planned repurchase of at least $173 million of stock across the fiscal year, inclusive of refranchising proceeds; and
An expected quarterly cash dividend of $0.14 per share.
Earnings Conference Call
The company will host a conference call to review financial results at 5:00 PM ET this evening. The conference call can be accessed live over the phone by dialing
for international callers. A replay will be available one hour after the call and can be accessed by dialing
for international callers; the conference ID is
. The replay will be available until
2016. An online replay of the conference call will be available approximately two hours after the conclusion of the live broadcast. A
link to this event may be found on the company's investor relations website
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 more than 60 years, SONIC has delighted guests with signature menu items, more than 1.3 million drink combinations and friendly service by iconic Carhops. Since the 2009 launch of SONIC's Limeades for Learning philanthropic campaign in partnership with DonorsChoose.org, SONIC has donated more than $5 million to public school teachers nationwide to fund essential learning materials and innovative teaching resources to inspire creativity and learning in today's youth. To learn more about Sonic Corp. (NASDAQ/NM: SONC), please visit
and please visit or follow us on Facebook and Twitter. To learn more about SONIC's Limeades for Learning initiative, please visit
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.
Free cash flow is defined as net income plus depreciation, amortization and stock compensation expenses, less capital expenditures.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Company Drive-In sales
Franchise royalties and fees
Costs and expenses:
Food and packaging
Payroll and other employee benefits
Other operating expenses, exclusive of
depreciation and amortization included below
Total cost of Company Drive-In sales
Provision for impairment of long-lived assets
Other operating (income) expense, net
Total costs and expenses
Income from operations
Debt extinguishment costs
Net interest expense
Income before income taxes
Provision for income taxes
Basic income per share
Diluted income per share
Weighted average basic shares
Weighted average diluted shares
Unaudited Supplemental Information
Drive-Ins in Operation:
Total at beginning of period
Sold to franchisees
Closed (net of re-openings)
Total at end of period
Acquired from the company
($ in thousands)
Average drive-in sales
Change in same-store sales
Change in total sales
Note: Change in same
store sales based on restaurants open for a mini
um of 15 months.
Margin Analysis (percentage of Company Drive-In sales):
Payroll and employee benefits
Cost of Company Drive-In sales
Selected Balance Sheet Data:
Cash and cash equivalents
Property, equipment and capital leases, net
Current liabilities, including capital lease obligations and
long-term debt due within one year
Obligations under capital leases due after one year
Long-term debt due after one year
Stockholders' equity (deficit)
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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