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Sonic Same-Store Sales Grow 6.5% for the Quarter

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Drmicrocap   Thursday, 03/31/16 12:46:05 PM
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Sonic Same-Store Sales Grow 6.5% for the Quarter Ending February 29
Two Year Winter Quarter Cumulative Sales Growth Totals 18%
Business Wire Sonic Corp.
March 29, 2016 4:05 PM
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OKLAHOMA CITY--(BUSINESS WIRE)--

Sonic Corp. (SONC), the nation’s largest chain of drive-in restaurants, today announced results for its second fiscal quarter ended February 29, 2016.

Key highlights of the company’s second quarter of fiscal year 2016 included:

Net income per diluted share increased 57% to $0.22 compared with $0.14 in the same period prior year; adjusted net income per diluted share increased 38% to $0.18 compared with adjusted net income per diluted share of $0.13 in the prior-year period;
System same-store sales increased 6.5%, consisting of a 6.5% same-store sales increase at franchise drive-ins and an increase of 6.3% at company drive-ins;
Company drive-in margins improved by 60 basis points;
Five new franchise drive-ins opened; and
The company purchased 0.9 million outstanding shares.
"Our business continues to perform at an exceptional level, generating 6.5% same-store sales growth for the system while lapping our strongest same-store sales comparison in ten years,” said Cliff Hudson, Sonic Corp. CEO. “Continued strength in core menu items, combined with highly effective limited-time-offer and value-based promotions, allowed us to increase market share in a highly competitive environment. The combination of sales leverage and a favorable commodity cost environment helped to generate another quarter of solid margin improvement at the drive-in level.

“As we look to sustain our recent momentum, we continue to invest aggressively in our people and technology initiatives, which we believe will further differentiate the experience we provide to our consumers," continued Hudson. "And we are pleased to have repurchased 2.7 million shares in the first half of 2016, representing 5.2% of shares outstanding. We remain confident in the ability of our multi-layered growth strategy to increase EPS through same-store sales growth, improved margins, increased royalty revenues, accelerated new drive-in development and the deployment of free cash flow1.”

Same-Store Sales

For the second fiscal quarter ended February 29, 2016, system same-store sales increased 6.5%, which was comprised of a 6.5% same-store sales increase at franchise drive-ins and an increase of 6.3% at company drive-ins.

Financial Overview

For the second fiscal quarter of 2016, the company’s net income increased to $10.8 million or $0.22 per diluted share compared with net income of $7.7 million or $0.14 per diluted share in the same period in the prior year. Excluding the items outlined below, net income and net income per diluted share increased 29% and 38%, 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
February 29, 2016 February 28, 2015
Net Diluted Net Diluted Net Income Diluted EPS
Income EPS Income EPS $ Change % Change $ Change % Change
Reported – GAAP $ 10,819 $ 0.22 $ 7,662 $ 0.14 $ 3,157 41 % $ 0.08 57 %
After-tax gain on sale of real estate (1,211 ) (0.03 ) - -
Retroactive benefit of Work Opportunity Tax Credit and resolution of tax matters (585 ) (0.01 ) (666 ) (0.01 )
Adjusted - Non-GAAP $ 9,023 $ 0.18 $ 6,996 $ 0.13 $ 2,027 29 % $ 0.05 38 %

For the first six months of fiscal year 2016, net income totaled $23.3 million or $0.46 per diluted share compared with net income of $17.7 million or $0.32 per diluted share for the same period in 2015. Excluding the items outlined below, net income and net income per diluted share increased 26% and 35%, respectively.


Six months ended Six months ended
February 29, 2016 February 28, 2015
Net Diluted Net Diluted Net Income Diluted EPS
Income EPS Income EPS $ Change % Change $ Change % Change
Reported – GAAP $ 23,277 $ 0.46 $ 17,747 $ 0.32 $ 5,530 31 % $ 0.14 44 %
After-tax gain on sale of real estate (1,211) (0.03) - -
Retroactive benefit of Work Opportunity Tax Credit and resolution of tax matters (585) (0.01) (666) (0.01)
Adjusted - Non-GAAP $ 21,481 $ 0.42 $ 17,081 $ 0.31 $ 4,400 26 % $ 0.11 35 %

Fiscal Year 2016 Outlook

While the macroeconomic environment may impact results, the company is revising its outlook for adjusted earnings per share growth for fiscal year 2016 from 16% to 20% to 20% to 25%. The outlook for fiscal 2016 anticipates the following elements:

4% to 6% same-store sales growth for the system;
Royalty revenue growth from same-store sales improvements and new unit development;
50 to 60 new franchise drive-in openings;
Drive-in-level margin improvement between 50 to 60 basis points, depending upon the degree of same-store sales growth at company drive-ins;
Selling, general and administrative expenses of approximately $84.0 million to $85.0 million reflecting increased investment in human resources and technology to support brand initiatives;
Depreciation and amortization expense of $45.0 million to $46.0 million as a result of capital investment in fiscal 2016;
Capital expenditures of $35 million to $40 million;
Free cash flow of approximately $75 million to $80 million;
An income tax rate between 36.0% to 37.0%;
The planned repurchase of $126 million of stock across the fiscal year; and
An expected quarterly cash dividend of $0.11 per share.
1 Free cash flow is defined as net income plus depreciation, amortization and stock compensation expenses, less capital expenditures.

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) 438-5448 or (719) 325-2491 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 8155461. The replay will be available until Tuesday, April 5, 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 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. For 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. 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 Six months ended
February 29, February 28, February 29, February 28,
2016 2015 2016 2015
Revenues:
Company Drive-In sales $ 95,313 $ 92,309 $ 199,196 $ 192,447
Franchise Drive-Ins:
Franchise royalties and fees 36,047 32,407 75,969 70,671
Lease revenue 1,399 979 2,991 2,044
Other 401 524 807 913
Total revenues 133,160 126,219 278,963 266,075

Costs and expenses:
Company Drive-Ins:
Food and packaging 26,213 25,828 55,159 54,401
Payroll and other employee benefits 35,359 33,880 71,723 69,151
Other operating expenses, exclusive of
depreciation and amortization included below 20,100 19,924 43,008 42,529
Total cost of Company Drive-In sales 81,672 79,632 169,890 166,081

Selling, general and administrative 20,785 18,138 41,725 36,926
Depreciation and amortization 11,057 11,539 22,056 23,199
Other operating (income) expense, net (2,566 ) (81 ) (2,965 ) 340
Total costs and expenses 110,948 109,228 230,706 226,546
Income from operations 22,212 16,991 48,257 39,529

Interest expense 6,467 6,318 12,689 12,599
Interest income (105 ) (97 ) (205 ) (199 )
Net interest expense 6,362 6,221 12,484 12,400
Income before income taxes 15,850 10,770 35,773 27,129
Provision for income taxes 5,031 3,108 12,496 9,382
Net income $ 10,819 $ 7,662 $ 23,277 $ 17,747

Basic income per share $ 0.22 $ 0.14 $ 0.47 $ 0.33
Diluted income per share $ 0.22 $ 0.14 $ 0.46 $ 0.32

Weighted average basic shares 48,977 53,171 49,599 53,226
Weighted average diluted shares 49,988 54,660 50,656 54,744



SONIC CORP.
Unaudited Supplemental Information

Three months ended Six months ended
February 29, February 28, February 29, February 28,
2016 2015 2016 2015
Drive-Ins in Operation
Company:
Total at beginning of period 382 389 387 391
Opened - - - 1
Acquired from (sold to) franchisees (7 ) 3 (9 ) 1
Closed (net of re-openings) - - (3 ) (1 )
Total at end of period 375 392 375 392
Franchise:
Total at beginning of period 3,147 3,128 3,139 3,127
Opened 5 4 18 16
Acquired from (sold to) the company 7 (3 ) 9 (1 )
Closed (net of re-openings) (6 ) (13 ) (13 ) (26 )
Total at end of period 3,153 3,116 3,153 3,116
System-wide:
Total at beginning of period 3,529 3,517 3,526 3,518
Opened 5 4 18 17
Closed (net of re-openings) (6 ) (13 ) (16 ) (27 )
Total at end of period 3,528 3,508 3,528 3,508


Three months ended Six months ended
February 29, February 28, February 29, February 28,
2016 2015 2016 2015
($ in thousands) ($ in thousands)
Sales Analysis
Company Drive-Ins:
Total sales $ 95,313 $ 92,309 $ 199,196 $ 192,447
Average drive-in sales 253 237 522 496
Change in same-store sales 6.3 % 11.2 % 5.3 % 9.5 %
Franchised Drive-Ins:
Total sales $ 886,313 $ 818,601 $ 1,854,828 $ 1,732,254
Average drive-in sales 283 267 593 561
Change in same-store sales 6.5 % 11.5 % 5.9 % 9.8 %
System-wide:
Change in total sales 7.8 % 12.8 % 6.7 % 10.9 %
Average drive-in sales $ 280 $ 264 $ 585 $ 554
Change in same-store sales 6.5 % 11.5 % 5.9 % 9.8 %

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


SONIC CORP.
Unaudited Supplemental Information

Three months ended Six months ended
February 29, February 28, February 29, February 28,
2016 2015 2016 2015
(In thousands) (In thousands)
Revenues
Company Drive-In sales $ 95,313 $ 92,309 $ 199,196 $ 192,447
Franchise Drive-Ins:
Franchise royalties 35,807 32,236 75,269 69,012
Franchise fees 240 171 700 1,659
Lease revenue 1,399 979 2,991 2,044
Other 401 524 807 913
Total revenues $ 133,160 $ 126,219 $ 278,963 $ 266,075


Three months ended Six months ended
February 29, February 28, February 29, February 28,
2016 2015 2016 2015
Margin Analysis (percentage of Company Drive-In sales)
Company Drive-Ins:
Food and packaging 27.5 % 28.0 % 27.7 % 28.3 %
Payroll and employee benefits 37.1 36.7 36.0 35.9
Other operating expenses 21.1 21.6 21.6 22.1
Cost of Company Drive-In sales 85.7 % 86.3 % 85.3 % 86.3 %


February 29, August 31,
2016 2015
(In thousands)
Selected Balance Sheet Data
Cash and cash equivalents $ 36,106 $ 27,191
Current assets 85,024 85,438
Property, equipment and capital leases, net 411,226 421,406
Total assets $ 606,747 $ 620,024

Current liabilities, including capital lease obligations and
long-term debt due within one year $ 69,484 $ 87,821
Obligations under capital leases due after one year 19,493 20,763
Long-term debt due after one year 484,863 428,238
Total liabilities 639,967 602,591
Stockholders' equity (deficit) $ (33,220 ) $ 17,433


View source version on businesswire.com: http://www.businesswire.com/news/home/20160329006484/en/

Contact:
Sonic Corp.
Corey Horsch, 405-225-4800
Vice President of Investor Relations and Treasurer

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