Sonic Announces 6.1% Same-Store Sales Growth for Third Fiscal Quarter of 2015

OKLAHOMA CITY–(hospitalitybusinessnews.com)– Sonic Corp.  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.

Share Button
About the Author