Sonic Reports Strong First Quarter of Fiscal 2014 Financial Results
Key highlights of the company's first fiscal quarter included:
-
The company's net income was
$0.14 per diluted share compared with net income per diluted share of$0.11 in the first quarter of fiscal 2013; -
Excluding the benefit from a favorable tax ruling detailed below, net
income per diluted share for the first quarter of fiscal 2014 was
$0.13 , an 18% increase in earnings per share on an adjusted basis compared to the same period prior year; - System-wide same-store sales increased 2.2% during the first fiscal quarter, consisting of a 2.3% same-store sales increase at franchise drive-ins and an increase of 1.9% at company drive-ins;
- Company drive-in margins improved by 80 basis points; and
-
The company purchased
$7.5 million of stock as part of a previously announced $40 million share repurchase program.
"Fiscal year 2014 is off to a solid start as we focus on key initiatives
such as increased media effectiveness, our innovative product pipeline
and layered day-part promotional strategy to drive same-store sales
growth and, in turn, margin improvement," said
"For the remainder of 2014 we will focus on our multi-layered growth strategy, which incorporates same-store sales growth, leverage from higher sales, deployment of free cash flow1, increasing royalty revenues and new drive-in development to build shareholder value. Over the next few years, we are implementing a number of technology initiatives such as a new digital point-of-purchase technology and a new point-of-sale system to drive improved sales and profits for our brand. We believe these initiatives will fuel our multi-layered growth strategy and will enable us to achieve double-digit earnings per share growth in the near and long term," concluded Mr. Hudson.
Same-Store Sales
For the first fiscal quarter ended
Financial Overview
For the first fiscal quarter ended
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.
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| Net | Diluted | Net | Diluted | Net Income | Diluted EPS | ||||||||||||||||||||
| Income | EPS | Income | EPS |
$ Change |
% Change |
$ Change |
% Change | ||||||||||||||||||
| Reported — GAAP | $ | 8,208 | $ | 0.14 | $ | 6,133 | $ | 0.11 | $ | 2,075 | 34 | % | $ | 0.03 | 27 | % | |||||||||
| Tax benefit from the IRS' acceptance of a federal tax method change | (484 | ) | (0.01 | ) | - | - | |||||||||||||||||||
| Adjusted - Non-GAAP | $ | 7,724 | $ | 0.13 | $ | 6,133 | $ | 0.11 | $ | 1,591 | 26 | % | $ | 0.02 | 18 | % | |||||||||
Development
During the first fiscal quarter, seven new franchise drive-ins were opened versus one new franchise drive-in opening during the first quarter of fiscal 2013.
Fiscal Year 2014 Outlook
The company expects its initiatives to drive 14% to 15% earnings per share growth in fiscal 2014 as compared to the adjusted non-GAAP earnings per share for fiscal 2013. The macroeconomic environment and its impact on consumer confidence, in addition to the pacing of capital investments, may impact results. The outlook for fiscal 2014 anticipates the following elements:
- Positive same-store sales in the low single digit range for the system;
- Company drive-ins expected to perform above the system average in the latter half of the fiscal year as new digital point-of-purchase technology and a new point-of-sale system are implemented;
- 40 to 50 new franchise drive-in openings and fewer drive-in closings than in fiscal 2013;
- Drive-in-level margins improving between 75 to 100 basis points, depending upon the degree of same-store sales growth at company drive-ins and the timing of implementation of the new point-of-sale system in company drive-ins;
-
Selling, general and administrative expenses of
$69 million to$70 million ; -
Depreciation and amortization expense of
$42 million to$42.5 million ; -
Net interest expense of approximately
$25 million ; - An income tax rate of between 36.5% to 37.5%, excluding the benefit from the federal tax method change;
-
Capital expenditures of
$65 million to$70 million , which assumes the implementation of a new point-of-sale system and digital point-of-purchase technology in company drive-ins during fiscal 2014 and construction of new and relocated drive-ins; -
Free cash flow of approximately
$15 million to$25 million ; and -
The repurchase of
$40 million of stock across the fiscal year utilizing existing cash and free cash flow.
Earnings Conference Call
The company will host a conference call and online web simulcast this
afternoon beginning at
About Sonic
SONIC®, America's Drive-In®, is the nation's largest chain of drive-in
restaurants with more than 3,500 drive-ins serving approximately 3
million customers every day. Over the past 60 years, SONIC has delighted
guests with signature menu items, more than 1 million drink
combinations, friendly service by iconic Carhops and ongoing support of
education through its award-winning Limeades for Learning® program.
SONIC received top honors as America's "#1 burger quick service
restaurant" in the 2013 Temkin Experience Ratings report. For more
information about
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
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
1 Free cash flow is defined as net income plus depreciation, amortization and stock compensation expenses, less capital expenditures.
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| UNAUDITED CONSOLIDATED STATEMENTS OF INCOME | ||||||||
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| 2013 | 2012 | |||||||
| Revenues: | ||||||||
| Company Drive-In sales | $ | 93,499 | $ | 93,456 | ||||
| Franchise Drive-Ins: | ||||||||
| Franchise royalties and fees | 31,221 | 29,920 | ||||||
| Lease revenue | 886 | 1,486 | ||||||
| Other | 1,046 | 1,146 | ||||||
| Total revenues | 126,652 | 126,008 | ||||||
| Costs and expenses: | ||||||||
| Company Drive-Ins: | ||||||||
| Food and packaging | 26,236 | 26,632 | ||||||
| Payroll and other employee benefits | 33,340 | 33,465 | ||||||
| Other operating expenses, exclusive of | ||||||||
| depreciation and amortization included below | 21,807 | 21,976 | ||||||
| Total cost of Company Drive-In sales | 81,383 | 82,073 | ||||||
| Selling, general and administrative | 17,005 | 16,130 | ||||||
| Depreciation and amortization | 10,034 | 10,595 | ||||||
| Other operating (income) expense, net | (129 | ) | 7 | |||||
| Total costs and expenses | 108,293 | 108,805 | ||||||
| Income from operations | 18,359 | 17,203 | ||||||
| Interest expense | 6,383 | 7,675 | ||||||
| Interest income | (117 | ) | (141 | ) | ||||
| Net interest expense | 6,266 | 7,534 | ||||||
| Income before income taxes | 12,093 | 9,669 | ||||||
| Provision for income taxes | 3,885 | 3,536 | ||||||
| Net income | $ | 8,208 | $ | 6,133 | ||||
| Basic income per share | $ | 0.15 | $ | 0.11 | ||||
| Diluted income per share | $ | 0.14 | $ | 0.11 | ||||
| Weighted average basic shares | 56,292 | 57,672 | ||||||
| Weighted average diluted shares | 57,897 | 58,085 | ||||||
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| Unaudited Supplemental Information | |||||||||
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| 2013 | 2012 | ||||||||
| Drive-Ins in Operation | |||||||||
| Company: | |||||||||
| Total at beginning of period | 396 | 409 | |||||||
| Opened | - | - | |||||||
| Sold to franchisees | (7 | ) | - | ||||||
| Closed (net of re-openings) | (1 | ) | - | ||||||
| Total at end of period | 388 | 409 | |||||||
| Franchise: | |||||||||
| Total at beginning of period | 3,126 | 3,147 | |||||||
| Opened | 7 | 1 | |||||||
| Acquired from the company | 7 | - | |||||||
| Closed (net of re-openings) | (11 | ) | (8 | ) | |||||
| Total at end of period | 3,129 | 3,140 | |||||||
| System-wide: | |||||||||
| Total at beginning of period | 3,522 | 3,556 | |||||||
| Opened | 7 | 1 | |||||||
| Closed (net of re-openings) | (12 | ) | (8 | ) | |||||
| Total at end of period | 3,517 | 3,549 | |||||||
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| 2013 | 2012 | ||||||||
| ($ in thousands) | |||||||||
| Sales Analysis | |||||||||
| Company Drive-Ins: | |||||||||
| Total sales | $ | 93,499 | $ | 93,456 | |||||
| Average drive-in sales | 239 | 230 | |||||||
| Change in same-store sales | 1.9 | % | 4.2 | % | |||||
| Franchised Drive-Ins: | |||||||||
| Total sales | $ | 829,995 | $ | 808,660 | |||||
| Average drive-in sales | 270 | 262 | |||||||
| Change in same-store sales | 2.3 | % | 2.9 | % | |||||
| System-wide: | |||||||||
| Change in total sales | 2.4 | % | 2.7 | % | |||||
| Average drive-in sales | $ | 266 | $ | 258 | |||||
| Change in same-store sales | 2.2 | % | 3.0 | % | |||||
Note: Change in same-store sales based on restaurants open for a minimum of 15 months.
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| Unaudited Supplemental Information | ||||||
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| 2013 | 2012 | |||||
| Revenues (in thousands) | ||||||
| Company Drive-In sales | $ | 93,499 | $ | 93,456 | ||
| Franchise Drive-Ins: | ||||||
| Franchise royalties | 30,912 | 29,914 | ||||
| Franchise fees | 309 | 6 | ||||
| Lease revenue | 886 | 1,486 | ||||
| Other | 1,046 | 1,146 | ||||
| Total revenues | $ | 126,652 | $ | 126,008 | ||
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| 2013 | 2012 | |||||
| Margin Analysis (percentage of Company Drive-In sales) | ||||||
| Company Drive-Ins: | ||||||
| Food and packaging | 28.1 | % | 28.5 | % | ||
| Payroll and employee benefits | 35.6 | 35.8 | ||||
| Other operating expenses | 23.3 | 23.5 | ||||
| Cost of Company Drive-In sales | 87.0 | % | 87.8 | % | ||
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| 2013 | 2013 | |||||
| Selected Balance Sheet Data | (In thousands) | |||||
| Cash and cash equivalents | $ | 95,893 | $ | 77,896 | ||
| Current assets | 140,717 | 140,722 | ||||
| Property, equipment and capital leases, net | 396,766 | 399,661 | ||||
| Total assets | $ | 656,581 | $ | 660,794 | ||
| Current liabilities, including capital lease obligations and | ||||||
| long-term debt due within one year | $ | 62,697 | $ | 72,930 | ||
| Obligations under capital leases due after one year | 21,473 | 22,458 | ||||
| Long-term debt due after one year | 434,932 | 437,380 | ||||
| Total liabilities | 571,258 | 583,330 | ||||
| Stockholders' equity | $ | 85,323 | $ | 77,464 | ||
Vice President of
Investor Relations,
Communications and Treasurer
Source:
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