Same-Store Sales Increase 11.5%
Sonic Corp. (NASDAQ:SONC), the nation’s largest chain of
drive-in restaurants, today announced results for the second fiscal
quarter ended February 28, 2015.
Key highlights of the company’s second quarter of fiscal year
2015 included:
- Net income per diluted share was $0.14
compared with net income per diluted share of $0.07 in the
prior-year period; excluding items outlined below, net income per
diluted share was $0.13 in the second fiscal quarter of 2015,
resulting in an 86% increase, on an adjusted basis;
- System same-store sales increased
11.5%, consisting of an 11.5% same-store sales increase at
franchise drive-ins and an increase of 11.2% at company
drive-ins;
- Company drive-in margins improved by
110 basis points; and
- The company repurchased $75 million of
stock through accelerated stock repurchase transactions
representing approximately 4% of its outstanding stock.
“Successful company initiatives combined with an improving macro
environment resulted in an exceptionally strong second fiscal
quarter with 11.5% same-store sales growth. We are particularly
pleased that traffic drove two-thirds of our same-store sales
increase,” said Cliff Hudson, Sonic Corp. CEO. “This increase is
primarily a result of growth in our core menu items and product
innovation, complemented by our national media strategy. As we move
into the second half of fiscal 2015 we expect our business momentum
to continue. In addition, we expect technology initiatives to
provide an additional layer of growth to build sales and profits
over the next several years.
“We also executed accelerated share repurchase agreements during
the second quarter to purchase $75 million of stock. Our fiscal
year-to-date share repurchases now total $95 million, representing
approximately 5% of our outstanding shares as of the beginning of
the fiscal year. Since our current repurchase program began in
fiscal 2012, we have repurchased nearly $242 million of stock
representing 23% of our outstanding shares. We have completed these
repurchases while strengthening our balance sheet, which reflects
the stability of our franchise business model.
"We will continue to 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. We
believe all of these initiatives will enable us to continue to
achieve double-digit earnings per share growth for the next several
years," concluded Mr. Hudson.
Same-Store Sales
For the second fiscal quarter ended February 28, 2015, system
same-store sales increased 11.5%, which was comprised of
an 11.5% same-store sales increase at franchise drive-ins and
an increase of 11.2% at company drive-ins.
Financial Overview
For the second fiscal quarter of 2015, the company’s net income
increased to $7.7 million or $0.14 per diluted share compared with
net income of $4.1 million or $0.07 per diluted share in the same
period in the prior year. Excluding a $0.7 million tax benefit
representing the retroactive reinstatement of the Work Opportunity
Tax Credit (WOTC) for fiscal 2014, earnings per share increased
86%.
The following non-GAAP adjustment is intended to supplement the
presentation of the company’s financial results in accordance with
GAAP. The company believes that the presentation of this item
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 28,
2015 February 28, 2014 Net
Diluted Net Diluted Net
Income Diluted EPS Income
EPS Income EPS $ Change
% Change $ Change % Change
Reported – GAAP $
7,662 $
0.14 $ 4,107 $ 0.07 $ 3,555
87 % $ 0.07 100 %
Retroactive tax benefit of WOTC
and resolution of tax matters
(666 ) (0.01 ) -
-
Adjusted - Non-GAAP
$
6,996 $
0.13 $ 4,107 $ 0.07 $ 2,889
70 % $ 0.06 86 %
For the first six months of fiscal 2015, net income totaled
$17.7 million or $0.32 per diluted share compared with net income
of $12.3 million or $0.21 per diluted share for the same period in
2014. Excluding the items outlined below, net income and net income
per diluted share increased 44% and 55%, respectively.
Six months ended
Six months ended February 28, 2015
February 28, 2014 Net Diluted
Net Diluted Net Income
Diluted EPS Income EPS
Income EPS $ Change %
Change $ Change % Change Reported –
GAAP $
17,747 $
0.32 $ 12,315 $ 0.21 $ 5,432 44 % $
0.11 52 %
Tax benefit from the IRS'
acceptance of a federal tax method
change
- - (484 ) (0.01 )
Retroactive tax benefit of WOTC
and resolution of tax matters
(666 ) (0.01 ) -
-
Adjusted - Non-GAAP $
17,081 $
0.31 $ 11,831 $ 0.20
$ 5,250 44 % $ 0.11 55 %
Fiscal Year 2015 Outlook
The company expects its initiatives to drive 25% to 27% earnings
per share growth, on an adjusted basis, in fiscal 2015 as compared
to the adjusted non-GAAP earnings per share for fiscal 2014. The
macroeconomic environment may impact results. The outlook for the
second half of fiscal 2015 anticipates the following elements:
- Positive same-store sales in the low to
mid-single digit range for the system for the third and fourth
fiscal quarters;
- Company drive-in same-store sales
growth expected to outperform franchisees as a result of the recent
implementation of new digital menu boards and point-of-sale
systems;
- Incremental royalty revenue growth from
same-store sales improvements, new unit development, and 900
drive-ins converting to a higher royalty rate structure at the
beginning of fiscal 2015;
- 34 to 44 new franchise drive-in
openings, resulting in net unit growth for the system;
- Drive-in-level margin improvement of
between 100 to 150 basis points, reflecting an improving outlook
for commodity cost inflation and leverage from company drive-in
same-store sales growth;
- Selling, general and administrative
expenses of $39.5 million to $40.5 million, reflecting increased
investment in human resources to support the brand initiatives
described above;
- Depreciation and amortization expense
of $23 million to $23.5 million;
- Net interest expense of $13 million to
$13.5 million; and
- An income tax rate of between 36% and
37%, reflecting the benefit of various ongoing tax credit
programs.
The company anticipates the following elements for fiscal
2015:
- Capital expenditures of $30 million to
$40 million;
- Free cash flow of $70 million to $80
million;
- The planned repurchase of $105 million
of stock; and
- A quarterly cash dividend of $0.09 per
share resulting in an estimated payout of $19 million.
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 (877) 340-7912 or (719)
325-4765 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 2813890. The replay will be available until Tuesday, March 31,
2015. 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. Over the past 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.
1 Free cash flow is defined as net income plus depreciation,
amortization and stock compensation expenses, less capital
expenditures.
SONC-F
SONIC CORP. UNAUDITED CONSOLIDATED STATEMENTS OF
INCOME (In thousands, except per share amounts)
Three months ended
Six months ended February 28, February
28, 2015 2014 2015
2014 Revenues: Company Drive-In sales $
92,309
$ 81,848 $
192,447 $ 175,347 Franchise Drive-Ins: Franchise
royalties and fees
32,407 26,582
70,671 57,803 Lease
revenue
979 715
2,044 1,601 Other
524
596
913 1,642
Total revenues
126,219 109,741
266,075 236,393
Costs and expenses: Company Drive-Ins: Food and packaging
25,828 23,043
54,401 49,279 Payroll and other
employee benefits
33,880 30,031
69,151 63,371 Other
operating expenses, exclusive of depreciation and amortization
included below
19,924 18,437
42,529 40,244 Total cost of
Company Drive-In sales
79,632 71,511
166,081 152,894
Selling, general and administrative
18,138 15,886
36,926 32,891 Depreciation and amortization
11,539
10,031
23,199 20,065 Other operating (income) expense, net
(81 ) (36 )
340
(165 ) Total costs and expenses
109,228
97,392
226,546 205,685
Income from operations
16,991 12,349
39,529
30,708 Interest expense
6,318 6,384
12,599
12,767 Interest income
(97 ) (144 )
(199 ) (261 ) Net interest expense
6,221 6,240
12,400
12,506 Income before income taxes
10,770 6,109
27,129 18,202 Provision for income taxes
3,108 2,002
9,382
5,887 Net income $
7,662 $ 4,107
$
17,747 $ 12,315 Basic income
per share $
0.14 $ 0.07 $
0.33 $
0.22 Diluted income per share $
0.14 $ 0.07
$
0.32 $ 0.21 Weighted average
basic shares
53,171 55,958
53,226 56,125 Weighted average
diluted shares
54,660 57,408
54,744 57,653
SONIC CORP. Unaudited Supplemental Information
Three months ended
Six months ended February 28,
February 28, 2015 2014
2015 2014 Drive-Ins in
Operation Company: Total at beginning of period
389 388
391 396 Opened
- -
1 - Acquired from (sold to)
franchisees
3 -
1 (7 ) Closed (net of re-openings)
- -
(1 ) (1 ) Total at end of
period
392 388
392 388
Franchise: Total at beginning of period
3,128 3,129
3,127 3,126 Opened
4 6
16 13 Acquired from
(sold to) the company
(3 ) -
(1 ) 7
Closed (net of re-openings)
(13 ) (16 )
(26
) (27 ) Total at end of period
3,116 3,119
3,116 3,119 System-wide: Total at
beginning of period
3,517 3,517
3,518 3,522 Opened
4 6
17 13 Closed (net of re-openings)
(13
) (16 )
(27 ) (28 ) Total at end of period
3,508 3,507
3,508 3,507
Three months
ended Six months ended February
28, February 28, 2015
2014 2015 2014 ($ in
thousands) ($ in thousands)
Sales Analysis Company
Drive-Ins: Total sales $
92,309 $ 81,848 $
192,447 $
175,347 Average drive-in sales
237 213
496 452 Change
in same-store sales
11.2 % 1.3 %
9.5 % 1.6 %
Franchised Drive-Ins: Total sales $
818,601 $ 725,270 $
1,732,254 $ 1,559,540 Average drive-in sales
267 235
561 502 Change in same-store sales
11.5 % 1.5 %
9.8 % 1.8 % System-wide: Change in total sales
12.8 %
0.8 %
10.9 % 1.5 % Average drive-in sales $
264 $ 234
$
554 $ 499 Change in same-store sales
11.5 % 1.4 %
9.8 % 1.8 %
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
28, February 28, 2015
2014 2015 2014 (In thousands) (In
thousands)
Revenues Company Drive-In sales $
92,309 $
81,848 $
192,447 $ 175,347 Franchise Drive-Ins: Franchise
royalties
32,236 26,376
69,012 57,288 Franchise fees
171 206
1,659 515 Lease revenue
979 715
2,044 1,601 Other
524 596
913 1,642 Total revenues $
126,219 $
109,741 $
266,075 $ 236,393
Three months
ended Six months ended February
28, February 28, 2015 2014
2015 2014 Margin Analysis (percentage of
Company Drive-In sales) Company Drive-Ins: Food and packaging
28.0 % 28.2 %
28.3 % 28.1 % Payroll and employee
benefits
36.7 36.7
35.9 36.1 Other operating expenses
21.6 22.5
22.1 23.0
Cost of Company Drive-In sales
86.3 % 87.4 %
86.3 % 87.2 %
February 28, August 31,
2015 2014 (In thousands)
Selected Balance Sheet
Data Cash and cash equivalents $
27,232 $ 35,694 Current
assets
78,720 95,712 Property, equipment and capital leases,
net
434,678 441,969 Total assets $
625,812 $ 650,972
Current liabilities, including capital lease obligations and
long-term debt due within one year $
64,975 $ 79,511
Obligations under capital leases due after one year
22,367
23,050 Long-term debt due after one year
471,131 427,527
Total liabilities
626,143 588,297 Stockholders' equity
(deficit) $
(331 ) $ 62,675
Sonic Corp.Claudia San Pedro, 405-225-4846Vice President of
Investor RelationsCommunications and Treasurer
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