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, 2016.
Key highlights of the company’s fourth quarter of fiscal year
2016 included:
- Net income per diluted share increased
6% to $0.53 compared with $0.50 in the same period prior year;
adjusted net income per diluted share increased 5% to $0.45
compared with adjusted net income per diluted share of $0.43 in the
prior-year period;
- System same-store sales decreased 2.0%,
consisting of a 1.8% same-store sales decrease at franchise
drive-ins and a decrease of 3.0% at company drive-ins;
- Company drive-in margins contracted by
210 basis points;
- Eighteen new franchise drive-ins
opened;
- The company commenced its refranchising
initiative to move toward an approximately 95%-franchised system by
the end of fiscal year 2017; and
- The company purchased 1.3 million
shares of its common stock.
Key highlights of the company’s fiscal year 2016 included:
- Net income per diluted share was $1.29
compared with $1.20 in the prior year; adjusted net income per
diluted share increased 17% to $1.29 compared with adjusted net
income per diluted share of $1.10 in the prior year;
- System same-store sales increased 2.6%,
consisting of a 2.7% same-store sales increase at franchise
drive-ins and an increase of 1.7% at company drive-ins;
- Company drive-in margins contracted by
30 basis points;
- Thirty-one net new drive-ins
opened;
- The company purchased more than 5.2
million shares of its common stock, representing approximately 10%
of outstanding shares for the fiscal year.
“We delivered good overall performance in fiscal 2016, including
2.6% system-wide same-store sales growth. Slowing consumer trends
that began in April, however, persisted through the fourth quarter,
resulting in lower-than-expected sales and profits in the fourth
fiscal quarter,” said Cliff Hudson, Sonic Corp. CEO. “At the same
time, we are pleased to see approximately 1% net unit growth for
fiscal 2016 with 31 net new units, sound progress towards our net
unit growth goal of 2% to 3% by the end of the decade.
“While our unit growth, capital structure and refranchising
initiatives are performing well, low commodity costs, resulting in
an aggressive promotional and pricing environment, are expected to
continue to pressure sales and earnings in fiscal year 2017,
particularly in the first half of the year. We believe our current
initiatives to deliver one of the most differentiated customer
experiences will improve sales late in the fiscal year. This,
combined with a more-highly franchised system, better company
drive-in margins, penetration of digital POPS units in 80% of our
system, a strong development pipeline, and a significantly lower
number of shares outstanding, provides a solid foundation for good
sales and earnings growth over the next few years.”
Same-Store Sales
For the fourth quarter ended August 31, 2016, system same-store
sales decreased 2.0%, which was comprised of a 1.8% same-store
sales decline at franchise drive-ins and a decline of 3.0% at
company drive-ins.
Financial Overview
For the fourth fiscal quarter of 2016, the company’s net income
totaled $25.4 million or $0.53 per diluted share compared to
net income of $26.3 million or $0.50 per diluted share in the
same period of the prior year. Excluding the items outlined below,
net income declined 6% and net income per diluted share increased
5%.
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.
(In thousands, except per share
amounts)
Three months ended Three months ended
August 31, 2016 August 31, 2015 Net
Diluted Net Diluted Net Income
Diluted EPS Income EPS Income
EPS
$ Change
% Change
$ Change
% Change
Reported – GAAP $
25,437 $
0.53 $ 26,296 $ 0.50 $
(859 ) (3) % $ 0.03 6 % Gain on sale of Company Drive-Ins
(972 ) (0.02 ) - - Tax impact on
Company Drive-Ins sale (1)
317 0.00 - - FIN 48
release of income tax credits and deductions
(3,038 )
(0.06 ) - - 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 $
21,744 $
0.45 $ 23,118
$ 0.43 $ (1,374 ) (6) % $ 0.02 5 %
_________
(1) Tax impact during the period at an adjusted effective
tax rate of 32.6%
For fiscal year 2016, net income totaled $64.1 million or
$1.29 per diluted share compared with net income of
$64.5 million or $1.20 per diluted share for fiscal year 2015.
Excluding the items outlined below, net income and net income per
diluted share increased 8% and 17%, respectively.
(In thousands, except per share
amounts)
Fiscal Year Ended Fiscal Year Ended August
31, 2016 August 31, 2015 Net Diluted
Net Diluted Net Income Diluted EPS
Income EPS Income EPS
$ Change
% Change
$ Change
% Change
Reported – GAAP $
64,067 $
1.29 $ 64,485 $ 1.20 $
(418 )
(1)
% $ 0.09 8 % Gain on sale of Company Drive-Ins
(972 )
(0.02 ) - - Tax impact on Company Drive-Ins sale (1)
317 0.00 - - FIN 48 release of income tax credits and
deductions
(3,038 ) (0.06 ) - - Loss
from early extinguishment of debt
8,750 0.18 - - Tax
impact on debt extinguishment(2)
(3,027 )
(0.06 ) - - Gain on sale of real estate
(1,875
) (0.04 ) - - Tax impact on real estate sale
(3)
664 0.01 - - Retroactive benefit of Work
Opportunity Tax Credit and resolution of tax matters
(585
) (0.01 ) (666 ) (0.01 ) 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
Adjusted - Non-GAAP $
64,301
$
1.29 $ 59,531 $ 1.10 $ 4,770
8 % $ 0.19 17 %
_________
(1) Tax impact during the period at an adjusted effective
tax rate of 32.6%. (2) Tax impact during the period at an effective
tax rate of 34.6%. (3) Tax impact during the period at an adjusted
effective tax rate of 35.4%
Fiscal Year 2017 Outlook
While the macroeconomic environment may impact results, the
company expects adjusted earnings per share for fiscal year 2017 to
be in the range of down 7% to flat year over year. The outlook for
fiscal 2017 anticipates the following elements:
- (2)% to 0% same-store sales for the
system;
- Royalty revenue growth from new unit
development;
- 65 to 75 new franchise drive-in
openings;
- Drive-in-level margins of 16-17%,
depending upon the timing of drive-in divestitures and the degree
of same-store sales growth at company drive-ins;
- Selling, general and administrative
expenses of approximately $85.0 million to $86.0 million
reflecting increased investment in human resources and technology
to support brand initiatives;
- Depreciation and amortization expense
of $42.0 million to $44.0 million reflecting the divestiture of
company drive-ins as previously announced;
- Capital expenditures of $40 million to
$45 million reflecting ongoing investment into the company’s
technology initiatives;
- Free cash flow(1) of approximately $60
million to $65 million;
- An income tax rate between 35.0% to
36.0%;
- The planned repurchase of at least $173
million of stock across the fiscal year, inclusive of refranchising
proceeds; and
- An expected quarterly cash dividend of
$0.14 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 (877) 419-6590 or (719)
325-4786 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
5500371. The replay will be available until Monday,
October 31, 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. Over 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.
Since the 2009 launch of SONIC's Limeades for Learning
philanthropic campaign in partnership with DonorsChoose.org, SONIC
has donated more than $5 million to public school teachers
nationwide to fund essential learning materials and innovative
teaching resources to inspire creativity and learning in today's
youth. To learn more about Sonic Corp. (NASDAQ/NM: SONC), please
visit sonicdrivein.com and please visit or follow us on Facebook
and Twitter. To learn more about SONIC's Limeades for Learning
initiative, please visit Limeadesforlearning.com.
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, 2016 2015 2016 2015 Revenues:
Company Drive-In sales $
111,456 $ 125,215 $
425,795
$ 436,031 Franchise Drive-Ins: Franchise royalties and fees
47,663 46,967
170,319 161,342 Lease revenue
2,327 1,970
7,459 5,583 Other
672
1,114
2,747 3,133 Total revenues
162,118 175,266
606,320 606,089 Costs and
expenses: Company Drive-Ins: Food and packaging
30,888
34,573
118,136 121,701 Payroll and other employee benefits
38,625 41,752
150,260 151,801 Other operating
expenses, exclusive of depreciation and amortization included below
22,974 24,952
88,424
90,436 Total cost of Company Drive-In sales
92,487 101,277
356,820 363,938 Selling, general and administrative
19,748 21,711
82,089 79,336 Depreciation and
amortization
10,956 11,258
44,418 45,892 Provision
for impairment of long-lived assets
155 1,393
232
1,440 Other operating (income) expense, net
(1,543)
(902)
(4,691) (945) Total costs and
expenses
121,803 134,737
478,868
489,661 Income from operations
40,315 40,529
127,452 116,428 Interest expense
7,249 6,133
26,714 25,114 Interest income
(190) (118)
(516) (408) Debt extinguishment costs
-
-
8,750 - Net interest expense
7,059 6,015
34,948 24,706 Income
before income taxes
33,256 34,514
92,504 91,722
Provision for income taxes
7,819 8,218
28,437 27,237 Net income $
25,437 $ 26,296 $
64,067 $ 64,485 Basic income per share $
0.54
$ 0.51 $
1.32 $ 1.23 Diluted income per share $
0.53
$ 0.50 $
1.29 $ 1.20 Weighted average basic shares
47,237 51,736
48,703
52,572 Weighted average diluted shares
48,037
52,936
49,669 53,953
SONIC CORP. Unaudited
Supplemental Information Three months ended
Fiscal Year Ended August 31, August 31,
2016 2015 2016 2015 Drive-Ins in
Operation: Company: Total at beginning of period
375 394
387 391 Opened
1 -
1 3 Sold to franchisees
(29 ) (7 )
(38 ) (6 ) Closed (net of
re-openings)
(2 ) -
(5 ) (1 )
Total at end of period
345 387
345
387 Franchise: Total at beginning of period
3,168 3,118
3,139 3,127 Opened
18 18
52
38 Acquired from the company
29 7
38 6 Closed (net of
re-openings)
(3 ) (4 )
(17 ) (32 )
Total at end of period
3,212 3,139
3,212 3,139 System-wide: Total at beginning of
period
3,543 3,512
3,526 3,518 Opened
19 18
53 41 Closed (net of re-openings)
(5 ) (4 )
(22 ) (33 ) Total at end of period
3,557
3,526
3,557 3,526
Three months ended Fiscal Year
Ended August 31, August 31, 2016
2015 2016 2015 ($ in thousands) ($ in
thousands)
Sales Analysis: Company Drive-Ins: Total sales $
111,456 $ 125,215 $
425,795 $ 436,031 Average
drive-in sales
313 319
1,142 1,116 Change in
same-store sales
(3.0) % 4.5 %
1.7 % 6.9 % Franchised
Drive-Ins: Total sales $
1,125,655 $ 1,121,219 $
4,092,303 $ 3,931,365 Average drive-in sales
355 360
1,301 1,261 Change in same-store sales
(1.8) % 4.9 %
2.7 % 7.3 % System-wide: Change in total sales
(0.8)
% 5.9 %
3.5 % 8.3 % Average drive-in sales $
351 $
355 $
1,284 $ 1,244 Change in same-store sales
(2.0)
% 4.9 %
2.6 % 7.3 %
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, 2016 2015 2016 2015 (In
thousands) (In thousands)
Revenues: Company Drive-In sales $
111,456 $ 125,215 $
425,795 $ 436,031 Franchise
Drive-Ins: Franchise royalties
47,126 46,259
168,691
158,813 Franchise fees
537 708
1,628 2,529 Lease
revenue
2,327 1,970
7,459 5,583 Other
672 1,114
2,747 3,133 Total
revenues $
162,118 $ 175,266 $
606,320 $ 606,089
Three months ended Fiscal Year
Ended August 31, August 31, 2016
2015 2016 2015 Margin Analysis
(percentage of Company Drive-In sales): Company Drive-Ins: Food
and packaging
27.7 % 27.6 %
27.7 % 27.9 % Payroll and
employee benefits
34.7 33.4
35.3 34.8 Other operating
expenses
20.6 19.9
20.8 20.8
Cost of Company Drive-In sales
83.0 % 80.9 %
83.8 % 83.5 %
August 31,
August 31, 2016 2015 (In thousands)
Selected Balance Sheet Data: Cash and cash equivalents $
72,092 $ 27,191 Current assets
137,657 85,438
Property, equipment and capital leases, net
402,162 421,406
Total assets $
659,995 $ 620,024 Current liabilities,
including capital lease obligations and long-term debt due within
one year $
74,663 $ 87,821 Obligations under capital leases
due after one year
17,391 20,763 Long-term debt due after
one year
577,521 428,238 Total liabilities
735,638
602,591 Stockholders' equity (deficit) $
(75,643) $ 17,433
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161024006428/en/
Sonic Corp.Corey Horsch, (405) 225-4800Vice President of
Investor Relations and Treasurer
Sonic (NASDAQ:SONC)
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