SONC Sonic Corp. (delisted)

41% Increase in Earnings Per Share for the Fiscal Year

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

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

• Net income per diluted share was $1.20 compared with net income per diluted share of $0.85 in fiscal 2014; excluding certain adjustments outlined below, net income per diluted share increased 31% to $1.10 compared with $0.84 in fiscal 2014;
• System same-store sales increased 7.3%, consisting of a 7.3% same-store sales increase at franchise drive-ins and an increase of 6.9% at company drive-ins;
• Company drive-in margins improved by 90 basis points;
• 41 new drive-ins were opened, and 30 drive-ins were rebuilt; and
• The company repurchased $124 million in stock representing 7.4% of the company’s outstanding shares as of the beginning of the fiscal year.

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

• Net income per diluted share was $0.50 compared with net income per diluted share of $0.34 in the prior-year period; excluding certain adjustments outlined below, net income per diluted share increased 26% to $0.43 compared with $0.34 in fiscal 2014;
• System same-store sales increased 4.9%, consisting of a 4.9% same-store sales increase at franchise drive-ins and an increase of 4.5% at company drive-ins;
• Company drive-in margins improved by 100 basis points; and
• 18 new drive-ins were opened.

“By every measure fiscal 2015 was a great year for our customers and franchisees. We completed our fifth consecutive fiscal year of positive same-store sales growth with a 7.3% system same-store sales increase for the year. Incremental profits for our franchisees were the highest since the onset of the Great Recession. These results drove a 31% increase in fiscal 2015 earnings per share, on an adjusted basis,” said Clifford Hudson, Sonic Corp. CEO. “Our strong financial performance has also been complemented by a disciplined approach to capital allocation. While we have invested in long-term initiatives to drive system sales performance, we have also returned substantial capital to shareholders. In fact, since 2011 we have returned a combined $289 million to shareholders via dividends and the repurchase of over 25% of our outstanding shares.

“Looking forward, we believe product innovation, combined with our promotional, media and technology initiatives, will continue to drive consistent positive same-store sales and EPS growth. Record unit volumes in existing and new drive-ins give us continued confidence in the growing strength of the Sonic brand,” concluded Hudson.

Same-Store Sales

For the fourth fiscal quarter ended August 31, 2015, system same-store sales increased 4.9%, which was comprised of a 4.9% same-store sales increase at franchise drive-ins and an increase of 4.5% at company drive-ins. For the 12 months ended August 31, 2015, system same-store sales increased 7.3%, including a 7.3% same-store sales increase at franchise drive-ins and a 6.9% increase at company drive-ins.

Financial Overview

For the fourth fiscal quarter of 2015, the company’s net income increased to $26.3 million or $0.50 per diluted share compared with net income of $18.8 million or $0.34 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 by 23% and 26%, 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 August 31, 2015 August 31, 2014 Net Diluted Net Diluted Net Income Diluted EPS Income EPS Income EPS $ Change   % Change $ Change   % Change Reported – GAAP $ 26,296 $ 0.50 $ 18,825 $ 0.34 $ 7,471 40 % $ 0.16 47 % Federal tax benefit of prior-year statutory tax deduction (1,477 ) (0.03 ) - - Change in deferred tax valuation allowance   (1,701 )   (0.04 )   -   -                     Adjusted - Non-GAAP $ 23,118   $ 0.43   $ 18,825 $ 0.34 $ 4,293   23 % $ 0.09   26 %

For fiscal 2015, net income totaled $64.5 million or $1.20 per diluted share compared with net income of $47.9 million or $0.85 per diluted share for fiscal 2014. Excluding the items outlined below, net income and net income per diluted share increased by 26% and 31%, respectively.

                  Fiscal year ended Fiscal year ended August 31, 2015 August 31, 2014 Net Diluted Net Diluted Net Income Diluted EPS Income EPS Income EPS $ Change   % Change $ Change   % Change Reported – GAAP $ 64,485 $ 1.20 $ 47,916 $ 0.85 $ 16,569 35 % $ 0.35 41 % Federal tax benefit of prior-year statutory tax deduction (3,199 ) (0.06 ) - - Change in deferred tax valuation allowance (1,701 ) (0.04 ) - - 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's acceptance of a federal tax method change   -     -     (484 )   (0.01 )                     Adjusted - Non-GAAP $ 59,531   $ 1.10   $ 47,432   $ 0.84   $ 12,099   26 % $ 0.26   31 %

Fiscal Year 2016 Outlook

While the macroeconomic environment may impact results, the company now expects its initiatives to drive 16% to 20% earnings per share growth for fiscal 2016 as compared to the previous outlook of 14% to 18% growth, reflecting higher share repurchase activity in the first half of the fiscal year. The outlook for fiscal 2016 anticipates the following elements:

• 2% to 4% 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 75 to 125 basis points, depending upon the degree of same-store sales growth at company drive-ins;
• Selling, general and administrative expenses of $81.5 million to $82.5 million reflecting increased investment in human resources to support brand initiatives;
• Depreciation and amortization expense of $45.5 million to $46.5 million as a result of capital investment in fiscal 2016;
• Net interest expense of $26.5 million to $27.5 million;
• Capital expenditures of $35 million to $40 million;
• Free cash flow1 of $70 million to $75 million;
• An income tax rate between 36.5% to 37.5%;
• The planned repurchase of $126 million of stock across the fiscal year, with a higher concentration of share repurchases in the first half of the fiscal year; and
• An expected quarterly cash dividend of $0.11 per share.

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) 455-2260 or (719) 325-2494 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 9318637. The replay will be available until Monday, October 26, 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 Fiscal year ended August 31, August 31, 2015 2014 2015 2014 Revenues: Company Drive-In sales $ 125,215 $ 119,002 $ 436,031 $ 405,363 Franchise Drive-Ins: Franchise royalties and fees 46,967 41,818 161,342 138,416 Lease revenue 1,970 1,609 5,583 4,291 Other   1,114     1,340     3,133     4,279   Total revenues 175,266 163,769 606,089 552,349   Costs and expenses: Company Drive-Ins: Food and packaging 34,573 34,871 121,701 116,325 Payroll and other employee benefits 41,752 38,831 151,801 139,939 Other operating expenses, exclusive of depreciation and amortization included below   24,952     23,796     90,436     85,845   Total cost of Company Drive-In sales 101,277 97,498 363,938 342,109   Selling, general and administrative 21,711 18,885 79,336 69,415 Depreciation and amortization 11,258 11,123 45,892 42,210 Provision for impairment of long-lived assets 1,393 85 1,440 114 Other operating income, net   (902 )   (110 )   (945 )   (176 ) Total costs and expenses   134,737     127,481     489,661     453,672   Income from operations 40,529 36,288 116,428 98,677   Interest expense 6,133 6,287 25,114 25,382 Interest income   (118 )   (96 )   (408 )   (469 ) Net interest expense   6,015     6,191     24,706     24,913   Income before income taxes 34,514 30,097 91,722 73,764 Provision for income taxes   8,218     11,272     27,237     25,848   Net income $ 26,296   $ 18,825   $ 64,485   $ 47,916     Basic income per share $ 0.51   $ 0.35   $ 1.23   $ 0.87   Diluted income per share $ 0.50   $ 0.34   $ 1.20   $ 0.85     Weighted average basic shares   51,736     54,022     52,572     55,164   Weighted average diluted shares   52,936     55,419     53,953     56,619             SONIC CORP. Unaudited Supplemental Information   Three months ended Fiscal year ended August 31, August 31, 2015 2014 2015 2014 Drive-Ins in Operation Company: Total at beginning of period 394 389 391 396 Opened - 2 3 3 Sold to franchisees (7 ) - (6 ) (7 ) Closed (net of re-openings) -   -   (1 ) (1 ) Total at end of period 387   391   387   391   Franchise: Total at beginning of period 3,118 3,121 3,127 3,126 Opened 18 15 38 37 Acquired from the company 7 - 6 7 Closed (net of re-openings) (4 ) (9 ) (32 ) (43 ) Total at end of period 3,139   3,127   3,139   3,127   System-wide: Total at beginning of period 3,512 3,510 3,518 3,522 Opened 18 17 41 40 Closed (net of re-openings) (4 ) (9 ) (33 ) (44 ) Total at end of period 3,526   3,518   3,526   3,518           Three months ended Fiscal year ended August 31, August 31, 2015 2014 2015 2014 ($ in thousands) ($ in thousands) Sales Analysis Company Drive-Ins: Total sales $ 125,215 $ 119,002 $ 436,031 $ 405,363 Average drive-in sales 319 305 1,116 1,043 Change in same-store sales 4.5 % 4.9 % 6.9 % 3.5 % Franchised Drive-Ins: Total sales $ 1,121,219 $ 1,058,640 $ 3,931,365 $ 3,627,395 Average drive-in sales 360 343 1,261 1,170 Change in same-store sales 4.9 % 4.5 % 7.3 % 3.5 % System-wide: Change in total sales 5.9 % 5.2 % 8.3 % 3.9 % Average drive-in sales $ 355 $ 338 $ 1,244 $ 1,153 Change in same-store sales 4.9 % 4.6 % 7.3 % 3.5 %

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

        SONIC CORP. Unaudited Supplemental Information   Three months ended Fiscal year ended August 31, August 31, 2015 2014 2015 2014 (In thousands) (In thousands) Revenues Company Drive-In sales $ 125,215 $ 119,002 $ 436,031 $ 405,363 Franchise Drive-Ins: Franchise royalties 46,259 41,317 158,813 137,125 Franchise fees 708 501 2,529 1,291 Lease revenue 1,970 1,609 5,583 4,291 Other   1,114   1,340   3,133   4,279 Total revenues $ 175,266 $ 163,769 $ 606,089 $ 552,349         Three months ended Fiscal year ended August 31, August 31, 2015 2014 2015 2014 Margin Analysis (percentage of Company Drive-In sales) Company Drive-Ins: Food and packaging 27.6 % 29.3 % 27.9 % 28.7 % Payroll and employee benefits 33.4 32.6 34.8 34.5 Other operating expenses 19.9   20.0   20.8   21.2   Cost of Company Drive-In sales 80.9 % 81.9 % 83.5 % 84.4 %     August 31, August 31, 2015 2014 (In thousands) Selected Balance Sheet Data Cash and cash equivalents $ 27,191 $ 35,694 Current assets 85,438 95,712 Property, equipment and capital leases, net 421,406 441,969 Total assets $ 620,024 $ 650,972   Current liabilities, including capital lease obligations and long-term debt due within one year $ 87,821 $ 79,511 Obligations under capital leases due after one year 20,763 23,050 Long-term debt due after one year 428,238 427,527 Total liabilities 602,591 588,297 Stockholders' equity $ 17,433 $ 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.Corey Horsch, (405) 225-4846Vice President of Investor Relationsand Treasurer