SONC Sonic Corp. (delisted)

Sonic Corp. (NASDAQ:SONC), the nation’s largest chain of drive-in restaurants, today announced results for the third fiscal quarter ended May 31, 2015.

Key highlights of the company’s third quarter of fiscal year 2015 included:

• Net income per diluted share was $0.38 compared with net income per diluted share of $0.30 in the prior-year period; excluding tax adjustments of $1.1 million, or $0.02 per share in the third fiscal quarter of 2015, earnings per share would have been $0.36, an increase of 20% from the prior-year same period;
• System same-store sales increased 6.1%, consisting of a 6.1% same-store sales increase at franchise drive-ins and an increase of 5.5% at company drive-ins; and
• Company drive-in margins improved by 100 basis points.

“We are very pleased with our strong sales and financial performance driven by a healthy mix of traffic and check,” said Cliff Hudson, Sonic Corp. CEO. “Our results are especially noteworthy given our strong results from the same quarter prior year. New product news in key categories, effective media and a layered promotional strategy are expected to continue to drive our sales in the near term. Technology initiatives designed to provide a more personalized and customized customer experience are also expected to complement our product and media initiatives and drive sales over the next several years.”

The strategies noted above will continue to drive Sonic’s multi-layered growth strategy which is comprised of initiatives to increase same-store sales, profits, royalty revenues and unit growth. Optimizing shareholder value by deploying free cash flow1 to invest in the brand, quarterly dividends and repurchase shares continues to be a key focus.

Same-Store Sales

For the third fiscal quarter ended May 31, 2015, system same-store sales increased 6.1%, which was comprised of a 6.1% same-store sales increase at franchise drive-ins and an increase of 5.5% at company drive-ins. Weather had a disproportionately adverse impact on company drive-in sales in the third fiscal quarter.

Financial Overview

For the third fiscal quarter of 2015, the company’s net income increased to $20.4 million or $0.38 per diluted share compared with net income of $16.8 million or $0.30 per diluted share in the same period in the prior year. Excluding tax adjustments of $1.1 million or $0.02 per share in the third fiscal quarter of 2015, net income and net income per diluted share increased 15% and 20%, 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 May 31, 2015 May 31, 2014 Net Diluted Net Diluted Net Income Diluted EPS Income EPS Income EPS

$ Change

% Change

$ Change

% Change

Reported – GAAP $ 20,442 $ 0.38 $ 16,776 $ 0.30 $ 3,666 22 % $ 0.08 27 % Recognition of prior-period federal tax benefit (1,722 ) (0.03 ) - - Retroactive effect of federal tax law change   612     0.01     -   -                 Adjusted - Non-GAAP $ 19,332   $ 0.36   $ 16,776 $ 0.30 $ 2,556 15 % $ 0.06 20 %  

For the first nine months of fiscal 2015, net income totaled $38.2 million or $0.70 per diluted share compared with net income of $29.1 million or $0.51 per diluted share for the same period in 2014. Excluding the items outlined below, net income and net income per diluted share increased 27% and 34%, respectively.

                    Nine months ended Nine months ended May 31, 2015 May 31, 2014 Net Diluted Net Diluted Net Income Diluted EPS Income EPS Income EPS

$ Change

% Change

$ Change

% Change Reported – GAAP $ 38,189 $ 0.70 $ 29,091 $ 0.51 $ 9,098 31 % $ 0.19 37 % Recognition of prior-period federal tax benefit (1,722 ) (0.03 ) - - Retroactive effect of federal tax law change 612 0.01 - - Retroactive benefit of Work Opportunity Tax Credit and resolution of tax matters (666 ) (0.01 ) - - Benefit from the IRS' acceptance of a federal tax method change   -     -     (484 )   (0.01 )                 Adjusted - Non-GAAP $ 36,413   $ 0.67   $ 28,607   $ 0.50   $ 7,806 27 % $ 0.17 34 %  

Fiscal Year 2015 Outlook

The company expects its initiatives to drive 27% to 29% 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 fourth fiscal quarter of 2015 anticipates the following elements:

• Positive same-store sales in the mid-single digit range for the system;
• 22 to 27 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 $20.5 million to $21 million, reflecting increased investment in human resources to support the brand initiatives described above;
• Depreciation and amortization expense of approximately $11.5 million to $12 million;
• Net interest expense of approximately $6 million to $6.5 million; and
• An income tax rate of between 36.5% and 37%, reflecting the benefit of various ongoing tax credit programs.

The company anticipates the following elements for fiscal 2015:

• Capital expenditures of $35 million to $40 million;
• Free cash flow of $70 million to $75 million;
• The completion of 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.

The declaration of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of the company's Board of Directors.

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 (800) 946-0782 or (719) 325-2168 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 5977007. The replay will be available until Monday, June 29, 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.

SONC-F

              SONIC CORP. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)   Three months ended Nine months ended May 31, May 31, 2015 2014 2015 2014 Revenues: Company Drive-In sales $ 118,369 $ 111,014 $ 310,816 $ 286,361 Franchise Drive-Ins: Franchise royalties and fees 43,704 38,795 114,375 96,598 Lease revenue 1,569 1,081 3,613 2,682 Other   1,106     1,297     2,019     2,939   Total revenues 164,748 152,187 430,823 388,580   Costs and expenses: Company Drive-Ins: Food and packaging 32,727 32,175 87,128 81,454 Payroll and other employee benefits 40,898 37,737 110,049 101,108 Other operating expenses, exclusive of depreciation and amortization included below   22,955     21,805     65,484     62,049   Total cost of Company Drive-In sales 96,580 91,717 262,661 244,611   Selling, general and administrative 20,699 17,639 57,625 50,530 Depreciation and amortization 11,435 11,022 34,634 31,087 Other operating (income) expense, net   (336 )   128     4     (37 ) Total costs and expenses   128,378     120,506     354,924     326,191   Income from operations 36,370 31,681 75,899 62,389   Interest expense 6,382 6,328 18,981 19,095 Interest income   (91 )   (112 )   (290 )   (373 ) Net interest expense   6,291     6,216     18,691     18,722   Income before income taxes 30,079 25,465 57,208 43,667 Provision for income taxes   9,637     8,689     19,019     14,576   Net income $ 20,442   $ 16,776   $ 38,189   $ 29,091     Basic income per share $ 0.39   $ 0.31   $ 0.72   $ 0.52   Diluted income per share $ 0.38   $ 0.30   $ 0.70   $ 0.51     Weighted average basic shares   52,022     54,382     52,851     55,544   Weighted average diluted shares   53,391     55,753     54,293     57,020                   SONIC CORP. Unaudited Supplemental Information   Three months ended Nine months ended May 31, May 31, 2015 2014 2015 2014 Drive-Ins in Operation Company: Total at beginning of period 392 388 391 396 Opened 2 1 3 1 Acquired from (sold to) franchisees - - 1 (7 ) Closed (net of re-openings) -   -   (1 ) (1 ) Total at end of period 394   389   394   389   Franchise: Total at beginning of period 3,116 3,119 3,127 3,126 Opened 4 9 20 22 Acquired from (sold to) the company - - (1 ) 7 Closed (net of re-openings) (2 ) (7 ) (28 ) (34 ) Total at end of period 3,118   3,121   3,118   3,121   System-wide: Total at beginning of period 3,508 3,507 3,518 3,522 Opened 6 10 23 23 Closed (net of re-openings) (2 ) (7 ) (29 ) (35 ) Total at end of period 3,512   3,510   3,512   3,510                 Three months ended Nine months ended May 31, May 31, 2015 2014 2015 2014 ($ in thousands) ($ in thousands) Sales Analysis Company Drive-Ins: Total sales $ 118,369 $ 111,014 $ 310,816 $ 286,361 Average drive-in sales 301 286 797 738 Change in same-store sales 5.5 % 5.2 % 8.0 % 3.0 % Franchised Drive-Ins: Total sales $ 1,065,109 $ 995,259 $ 2,803,391 $ 2,560,933 Average drive-in sales 346 324 906 828 Change in same-store sales 6.1 % 5.3 % 8.3 % 3.2 % System-wide: Change in total sales 7.0 % 5.8 % 9.4 % 3.4 % Average drive-in sales $ 341 $ 320 $ 894 $ 819 Change in same-store sales 6.1 % 5.3 % 8.3 % 3.1 %  

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

            SONIC CORP. Unaudited Supplemental Information   Three months ended Nine months ended May 31, May 31, 2015 2014 2015 2014 (In thousands) (In thousands) Revenues Company Drive-In sales $ 118,369 $ 111,014 $ 310,816 $ 286,361 Franchise Drive-Ins: Franchise royalties 43,541 38,519 112,553 95,807 Franchise fees 163 276 1,822 791 Lease revenue 1,569 1,081 3,613 2,682 Other   1,106   1,297   2,019   2,939 Total revenues $ 164,748 $ 152,187 $ 430,823 $ 388,580               Three months ended Nine months ended May 31, May 31, 2015 2014 2015 2014 Margin Analysis (percentage of Company Drive-In sales) Company Drive-Ins: Food and packaging 27.6 % 29.0 % 28.0 % 28.4 % Payroll and employee benefits 34.6 34.0 35.4 35.3 Other operating expenses 19.4   19.6   21.1   21.7   Cost of Company Drive-In sales 81.6 % 82.6 % 84.5 % 85.4 %           May 31, August 31, 2015 2014 (In thousands) Selected Balance Sheet Data Cash and cash equivalents $ 22,922 $ 35,694 Current assets 80,107 95,712 Property, equipment and capital leases, net 430,308 441,969 Total assets $ 622,985 $ 650,972   Current liabilities, including capital lease obligations and long-term debt due within one year $ 81,713 $ 79,511 Obligations under capital leases due after one year 21,673 23,050 Long-term debt due after one year 431,182 427,527 Total liabilities 604,379 588,297 Stockholders' equity $ 18,606 $ 62,675  

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

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Sonic Corp.Claudia San Pedro, (405) 225-4846Senior Vice President, Chief Financial Officer and Treasurer