Earnings

Sonic Reports Strong Earnings Growth for Third Quarter 2012

June 20, 2012   ·   0 Comments

OKLAHOMA CITY–(ww.hospitalitybusinessnews.com)–Sonic Corp.today announced results for its third fiscal quarter ended May 31, 2012. Key highlights of the company’s third quarter report included:

• The company’s net income per diluted share for the third quarter of fiscal 2012 was $0.24 compared with a net loss per diluted share of $0.08 for the third quarter of fiscal 2011; excluding debt extinguishment costs in the year-earlier quarter, net income per diluted share was $0.21;
• System-wide same-store sales increased 2.8% during the third quarter, with an increase of 3.7% at company drive-ins and a 2.7% increase at franchise drive-ins; and
• Restaurant-level operating margins improved 140 basis points to 17%.

“Strong third quarter sales were driven by a layered day-part promotional strategy anchored by an integrated creative campaign that showcased multiple existing and new products appealing across all day-parts. We believe this effective use of creative and day-part promotional strategy complements the company’s strong foundation of improved service, product quality and pricing and will help us achieve consistent, sustainable sales growth going forward,” said Clifford Hudson, Chairman and Chief Executive Officer. “We are working to increase shareholder value using a multi-layered growth strategy which incorporates sales growth, leverage from higher sales, use of cash, increasing royalty revenue and new drive-in development to achieve double digit earnings per share growth. We were very pleased that positive same-store sales in the third quarter fueled other layers in our multi-layered growth strategy including operating leverage and increased franchising revenue resulting in a 14% increase in earnings per share, on an adjusted basis.

“With respect to return on capital, we are pleased to report Sonic completed its $30 million share repurchase program in early June. Fiscal year to date, stock repurchases totaled approximately four million shares or over 6% of the stock that was outstanding as of the beginning of our fiscal year,” added Hudson. “Over the next two to three years we will continue to utilize the strength and flexibility of our business model to grow operating income and use our free cash flow⁽¹⁾ to opportunistically invest in our brand, repurchase stock and pay down debt. We expect each of the layers in our growth strategy to contribute to our ability to grow earnings per share at a rate in the low-to-mid teens in both the near term and longer term.”

Financial Overview

For the third fiscal quarter ended May 31, 2012, the company’s net income totaled $14.4 million or $0.24 per diluted share compared with a net loss of $4.7 million or $0.08 per diluted share in the year-earlier quarter, which reflected costs associated with the May 2011 refinancing of Sonic’s previously outstanding debt. Excluding the $17.8 million after-tax costs from the early extinguishment of debt in the quarter ended May 31, 2011, net income per diluted share was $0.21 for the third quarter of fiscal 2011.

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.

For the first nine months of fiscal 2012, net income on a year-to-date basis totaled $21.6 million or $0.36 per diluted share compared with net income of $6.9 million or $0.11 per diluted share for the same period in 2011. Excluding the items outlined below, net income and net income per diluted share increased 6% and 9%, respectively.

Same-Store Sales

For the third fiscal quarter ended May 31, 2012, system-wide same-store sales increased 2.8% versus 3.9% in the same quarter in the prior year. These sales reflected an increase of 3.7% at company drive-ins and a 2.7% increase at franchise drive-ins. For the first nine months of fiscal 2012, system-wide same-store sales increased 2.2% versus an increase of 0.9% in the first nine months of fiscal 2011. These sales reflected a 2.3% increase in same-store sales at co
mpany drive-ins and a 2.2% increase at franchise drive-ins.

Development

Across the Sonic system, seven new franchise drive-ins were opened in the third quarter of fiscal 2012 versus 12 new franchise drive-in openings during the third quarter of fiscal 2011. For the first nine months of fiscal 2012, 19 new franchise drive-ins were opened compared to 26 during the same period prior year.

Fourth Fiscal Quarter of 2012 Outlook

The company’s outlook anticipates the following elements:

• The opening of 15 to 20 new franchise drive-ins;
• Positive same-store sales in the low single digits, the extent of which will be dependent upon the degree of external economic challenges;
• Favorable restaurant-level margins;
• Selling, general and administrative expenses of $17 million to $18 million;
• Depreciation and amortization of $10.5 million to $11 million;
• Net interest expense of approximately $7.5 to $8 million;
• An income tax rate of between 37.5% and 38.5%, depending upon the reinstatement of employment tax credit programs; and
• Annual capital expenditures in the range of $20 million to $25 million.

By erichertha

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