Sonic: Vice President Of Investor Relations

The following excerpt is from the company's SEC filing.

and Treasurer

(405) 225-4800 


OKLAHOMA CITY (January 4, 2017) - Sonic Corp. (NASDAQ: SONC), the nation’s largest chain of drive-in restaurants, today announced results for its first fiscal quarter ended November 30, 2016.

Key highlights of the company’s first quarter of fiscal year 2017 included:

Net income per diluted share increased 17% to $0.28 compared with $0.24 in the same period of the prior year; adjusted net income per diluted share was flat versus the prior-year period at $0.24;

System same-store sales declined 2.0%, consisting of a 2.0% same-store sales decrease at franchise drive-ins and 2.4% decrease at company drive-ins;

Company drive-in margins declined by 150 basis points;

Fourteen new franchise drive-ins opened and 56 drive-ins were refranchised; and

The company repurchased 2.0 million outstanding shares.

"Our first quarter results reflect a sluggish consumer landscape and exceptionally strong prior-year performance," said Cliff Hudson, Sonic Corp. CEO. “Although the business faces even tougher sales and margin hurdles in the second fiscal quarter, we remain optimistic in our ability to show sequential same-store sales and profitability improvement beginning in the second half of fiscal 2017.

“Our unit growth, capital structure, refranchising and technology initiatives are performing well,” continued Hudson. “We refranchised 56 drive-ins during the quarter and remain confident that we will complete our targeted refranchising transactions prior to the end of the third fiscal quarter, leaving us with a more efficient, higher-margin portfolio of company-owned stores. We are also pleased to have repurchased 2 million shares in the first quarter of 2017, representing 4% of shares outstanding, while continuing to invest in the people, development and content that will drive our consumer-facing technology to the next level."

Same-Store Sales

For the first quarter ended November 30, 2016, system same-store sales decreased 2.0%, which was comprised of a 2.0% same-store sales decline at franchise drive-ins and a decline of 2.4% at company drive-ins.

Financial Overview

For the first fiscal quarter of 2017, the company’s net income totaled $13.1 million or $0.28 per diluted share compared to net income of $12.5 million or $0.24 per diluted share in the same period of the prior year. Excluding the items outlined below, net income declined 9% and net income per diluted share was flat.

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

November 30, 2016

November 30, 2015


Net Income

Diluted EPS

$ Change

% Change

Reported – GAAP



Loss on refranchising transactions

Tax impact on refranchising transactions

Gain on sale of investment in refranchised drive-in operations


Tax impact on sale of investment in refranchised drive-in operations

Adjusted - Non-GAAP



During the first quarter of fiscal year 2017, we completed two transactions to refranchise the operations of 56 Company Drive-Ins. Of the proceeds, $3.8 million represents the initial lease payment for a real estate purchase option that will be exercised or expire within 24 months, resulting in a loss on the transactions. Unless and until the option is exercised or expires, the franchisee will make monthly lease payments of $0.3 million through November 2017 and $0.1 million thereafter, through November 2018, which will be included in other operating income. Any lease payments received will be combined with the initial refranchising transaction above to quantify the net refranchising gain (loss) once the option is exercised or expires.

Tax impact during the period at an effective tax rate of 35.6%.

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. Income from minority investments is included in other revenue on the condensed consolidated statements of income.

Fiscal Year 2017


While the macroeconomic environment may impact results, the company continues to expect 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;

65 to 75 new franchise drive-in openings;

Drive-in-level margins of 16% to17%, 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 $84.0 million reflecting increased investment in human resources and technology to support brand initiatives;

Depreciation and amortization expense of $37.5 million to $38.5 million reflecting the divestiture of company drive-ins as previously announced;

Net interest expense of approximately $26.5 million to $27.5 million;

Capital expenditures of $40 million to $45 million reflecting ongoing investment into the company’s technology initiatives;

Free cash flow

of approximately $60 million;

An income tax rate between 35.0% to 36.0%; 

The planned use of the remaining $122 million share repurchase authorization 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 (888) 297-0353 or (719) 325-2410 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 2683899.  The replay will be available until Wednesday, January 11, 2017.  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

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 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, 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.

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

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.





Company Drive-In sales



Franchise Drive-Ins:

Franchise royalties and fees



Lease revenue

Total revenues



Costs and expenses:

Company Drive-Ins:

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







Other operating income, net


Total costs and expenses



Income from operations



Interest expense

Interest income

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)

Sales Analysis:

Total sales

Average drive-in sales

Change in same-store sales

Franchised Drive-Ins:



Change in total sales

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

(In thousands)



Franchise fees

Margin Analysis (percentage of Company Drive-In sales):

Payroll and employee benefits

Cost of Company Drive-In sales

August 31,

Selected Balance Sheet Data:

Cash and cash equivalents



Current assets



Property, equipment and capital leases, net



Total assets



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, net of debt issuance costs



Total liabilities



Stockholders' equity (deficit)



The above information was disclosed in a filing to the SEC. To see the filing, click here.

To receive a free e-mail notification whenever Sonic Corp. makes a similar move, sign up!

Auto Refresh