SONIC CORP - FORM 8-K - EX-99 - PRESS RELEASE, DATED OCTOBER 16, 2012

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8-K - FORM 8-K - SONIC CORP	d425261d8k.htm

Exhibit 99

LOGO


		Contact:		Claudia San Pedro
				Vice President of Investor Relations and Treasurer
				(405) 225-4846

SONIC REPORTS 25% INCREASE IN FOURTH QUARTER EARNINGS

OKLAHOMA CITY (October 16, 2012) – Sonic Corp. (NASDAQ: SONC), the nation’s largest chain of drive-in restaurants, today announced results for the fourth quarter and fiscal year ended August 31, 2012.

Key highlights of the company’s fourth quarter report included:

•

The company’s net income per diluted share increased 25% to $0.25 compared with net income per diluted share of $0.20 in the fourth quarter of fiscal 2011; and

•

System-wide same-store sales increased 2.3% during the fourth quarter, with an increase of 4.3% at company drive-ins and 2.1% at franchise drive-ins.

“We are pleased to conclude fiscal 2012 with solid same-store sales growth in the fourth quarter, resulting in increased franchising revenue and operating margins which combined with our share repurchase program, drove a 25% increase in earnings per share,” said Cliff Hudson, Chairman and Chief Executive Officer. “In fiscal 2013, we expect to build upon our fiscal 2012 initiatives with a continued focus on new and differentiated products combined with iconic creative and a layered day-part promotional strategy to drive consistent same-store sales growth. This in turn is expected to drive further margin expansion. In addition, with the strength and flexibility of our business model, we are able to generate sufficient free cash flow¹ to invest in our business, pay down debt and repurchase shares to enhance shareholder value.

“Over the next two to three years, initiatives such as our new point-of-sale system and the new small building prototype will complement our same-store sales initiatives to increase sales and profits,” added Hudson. “We are confident our multi-layered growth strategy which incorporates same-store sales growth, leverage from higher sales, deployment of cash, increasing royalty revenue and new drive-in development will enable us to achieve double-digit earnings per share growth in the near and long term.”

Financial Overview

For the fourth fiscal quarter ended August 31, 2012, the company’s net income totaled $14.5 million or $0.25 per diluted share compared with net income of $12.3 million or $0.20 per diluted share in the year-earlier quarter.

For fiscal 2012, net income totaled $36.1 million or $0.60 per diluted share compared with net income of $32.6 million or $0.53 per diluted share, on an adjusted basis for the same period in 2011.

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

The following non-GAAP adjustments are intended to supplement the presentation of the company’s financial results in accordance with GAAP. The company believes that the presentation of these items provides useful information to investors and management regarding the underlying business trends and the performance of the company’s ongoing operations and is helpful for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the financial results of the company and predicting future performance.


	Fiscal Year Ended				Fiscal Year Ended						Year-Over-Year
	August 31, 2012				August, 31,2011						Percent Change
	Net		Diluted		Net			Diluted			Net			Diluted
	Income		EPS		Income			EPS			Income			EPS
Reported – GAAP	$	36,085	$	0.60	$	19,225		$	0.31			88	%		94	%
After-tax net loss from early extinguishment of debt		—		—		14,439			0.24
Tax benefit from favorable tax settlement		—		—		(1,073	)		(0.02	)

Adjusted – Non-GAAP	$	36,085	$	0.60	$	32,591		$	0.53			11	%		13	%

Same-Store Sales

For the fourth fiscal quarter ended August 31, 2012, system-wide same-store sales increased 2.3%, which was comprised of a 4.3% increase at company drive-ins and a 2.1% increase at franchise drive-ins. For the 12 months ended August 31, 2012, system-wide same-store sales increased 2.2%, which was comprised of a 2.8% increase at company drive-ins and a 2.2% increase at franchise drive-ins.

Development

For fiscal 2012 there were 37 new drive-in openings including 36 new franchise drive-ins. Across the Sonic system, a total of 18 new drive-ins were opened in the fourth quarter of fiscal 2012, of which 17 were opened by franchisees, versus 17 new drive-in openings during the fourth quarter of fiscal 2011, of which 14 were franchise drive-ins.

Fiscal Year 2013 Outlook

The company expects its initiatives to drive sales improvements going forward. However, uncertainty with regard to the macroeconomic environment and its impact on consumer confidence may result in sales volatility. The outlook for fiscal 2013 anticipates the following elements:

•

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

•

Slightly more new franchise drive-in openings than fiscal 2012;

•

Restaurant-level margins to improve between 50 to 100 basis points, depending upon the degree of same-store sales growth at company drive-ins;

•

Selling, general and administrative expenses of $68 million to $69 million;

•

Depreciation and amortization expense of $41 million to $42 million;

•

Net interest expense of approximately $29 million;

•

An income tax rate of between 38% and 38.5%, which may vary depending upon the reinstatement of employment tax credit programs;

•

Capital expenditures of $30 million to $40 million, which assumes the implementation of a new point-of-sale system in company drive-ins during calendar year 2013; and

•

Free cash flow of $45 million to $55 million.

About Sonic

Sonic, America’s Drive-In, originally started as a hamburger and root beer stand in 1953 in Shawnee, Oklahoma called Top Hat Drive-In, and then changed its name to Sonic in 1959. The first drive-in to adopt the Sonic name is still serving customers in Stillwater, Oklahoma. Sonic has more than 3,500 drive-ins coast to coast, where approximately three million customers eat every day. For more information about Sonic Corp. and its subsidiaries, visit Sonic at www.sonicdrivein.com.

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 (888) 600-4883 or (913) 312-1298 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 4719115. The replay will be available until Tuesday, October 23, 2012. 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 will be available on the investor section of the company’s website, www.sonicdrivein.com.

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.

SONIC CORP.

Unaudited Supplemental Information

(In thousands, except per share amounts)


	Fourth Quarter Ended						Fiscal Year Ended
	August 31,						August 31,
	2012			2011			2012			2011
Statement of Operations
Revenues:
Company Drive-In sales	$	110,406		$	113,366		$	404,443		$	410,820
Franchise Drive-Ins:
Franchise royalties		36,009			35,477			125,989			124,127
Franchise fees		1,173			473			2,024			1,744
Lease revenue		1,970			1,676			6,575			6,023
Other		1,382			192			4,699			3,237

		150,940			151,184			543,730			545,951

Costs and expenses:
Company Drive-Ins:
Food and packaging		30,764			31,957			113,775			115,516
Payroll and other employee benefits		38,168			40,676			144,531			149,417
Other operating expenses, exclusive of depreciation and amortization included below		23,265			24,538			89,164			91,303

		92,197			97,171			347,470			356,236

Selling, general and administrative		16,721			16,165			65,173			64,943
Depreciation and amortization		10,650			10,419			41,914			41,225
Provision for impairment of long-lived assets		388			511			764			824

		119,956			124,266			455,321			463,228

Other operating income (expense), net		(82	)		330			531			585

Income from operations		30,902			27,248			88,940			83,308

Interest expense		7,801			8,186			31,608			32,600
Interest income		(153	)		(193	)		(630	)		(706	)
Net loss from early extinguishment of debt		—			10			—			23,035

Net interest expense		7,648			8,003			30,978			54,929

Income before income taxes		23,254			19,245			57,962			28,379
Provision for income taxes		8,752			6,959			21,877			9,154

Net income	$	14,502		$	12,286		$	36,085		$	19,225

Net income per share:
Basic	$	0.25		$	0.20		$	0.60		$	0.31

Diluted	$	0.25		$	0.20		$	0.60		$	0.31

Weighted average shares used in calculation:
Basic		58,103			61,954			60,078			61,781

Diluted		58,386			62,155			60,172			61,943

SONIC CORP.

Unaudited Supplemental Information


	Fourth Quarter Ended						Fiscal Year Ended
	August 31,						August 31,
	2012			2011			2012			2011
Drive-Ins in Operation
Company:
Total at beginning of period		409			445			446			455
Opened		1			3			1			3
Acquired from (sold to) franchisees		—			1			(35	)		(5	)
Closed (net of re-openings)		(1	)		(3	)		(3	)		(7	)

Total at end of period		409			446			409			446

Franchise:
Total at beginning of period		3,141			3,114			3,115			3,117
Opened		17			14			36			40
Acquired from (sold to) the company		—			(1	)		35			5
Closed (net of re-openings)		(11	)		(12	)		(39	)		(47	)

Total at end of period		3,147			3,115			3,147			3,115

System-wide:
Total at beginning of period		3,550			3,559			3,561			3,572
Opened		18			17			37			43
Closed (net of re-openings)		(12	)		(15	)		(42	)		(54	)

Total at end of period		3,556			3,561			3,556			3,561


	Fourth Quarter Ended						Fiscal Year Ended
	August 31,						August 31,
	2012			2011			2012			2011
	($ in thousands)						($ in thousands)
Sales Analysis
Company drive-ins:
Total sales	$	110,406		$	113,366		$	404,443		$	410,820
Average drive-in sales		270			255			958			920
Change in same-store sales		4.3	%		0.4	%		2.8	%		1.8	%
Franchised drive-ins:
Total sales	$	946,330		$	921,758		$	3,386,218		$	3,278,208
Average drive-in sales		301			296			1,081			1,054
Change in same-store sales		2.1	%		-0.6	%		2.2	%		0.4	%
System-wide:
Change in total sales		2.1	%		0.9	%		2.7	%		1.9	%
Average drive-in sales	$	297		$	291		$	1,066		$	1,037
Change in same-store sales		2.3	%		-0.5	%		2.2	%		0.5	%

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

SONIC CORP.

Unaudited Supplemental Information


	Fourth Quarter Ended						Fiscal Year Ended
	August 31,						August 31,
	2012			2011			2012			2011
Margin Analysis (percentage of Company
Drive-In sales)
Company Drive-Ins:
Food and packaging		27.9	%		28.2	%		28.1	%		28.1	%
Payroll and employee benefits		34.6	%		35.9	%		35.7	%		36.4	%
Other operating expenses		21.0	%		21.6	%		22.1	%		22.2	%

		83.5	%		85.7	%		85.9	%		86.7	%


	August 31,		August 31,
	2012		2011
	(In thousands)
Balance Sheet Data
Cash and cash equivalents		52,647		29,509
Current assets		107,151		93,457
Property, equipment and capital leases, net		443,008		464,875
Total assets		680,760		679,742

Current liabilities, including capital lease obligations and long-term debt due within one year		80,516		71,279
Obligations under capital leases due after one year		27,377		30,302
Long-term debt due after one year		466,613		481,835
Total liabilities		621,513		628,046
Stockholders’ equity		59,247		51,696

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