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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sonic Corp. (delisted) | NASDAQ:SONC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 43.49 | 43.01 | 43.50 | 0 | 01:00:00 |
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Delaware
(State or other jurisdiction of
incorporation or organization)
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73-1371046
(I.R.S.
Employer Identification No.)
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300 Johnny Bench Drive
Oklahoma City, Oklahoma
(Address of
principal
executive
offices)
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73104
(Zip Code)
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Large accelerated filer ☒
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Accelerated filer ☐
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Non-accelerated filer ☐ (Do not check if a smaller reporting company)
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Smaller reporting company ☐
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Page
Number
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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February 28,
2017 |
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August 31,
2016 |
||||
ASSETS
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||||
Current assets:
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|||
Cash and cash equivalents
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$
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33,890
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$
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72,092
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Restricted cash
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8,397
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15,873
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Accounts and notes receivable, net
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28,064
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35,437
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|
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Current investment in direct financing lease
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16,001
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115
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Prepaid expenses and other current assets
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8,488
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14,140
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Total current assets
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94,840
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137,657
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Noncurrent restricted cash
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124
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140
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Investment in direct financing lease
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11,687
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9,859
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Notes receivable, net
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10,236
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12,562
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Property, equipment and capital leases
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701,609
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766,522
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Less accumulated depreciation and amortization
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(342,490
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)
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(374,142
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)
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Property, equipment and capital leases, net
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359,119
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392,380
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Goodwill
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75,763
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76,734
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Debt origination costs, net
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2,767
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3,093
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Other assets, net
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17,128
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16,236
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Total assets
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$
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571,664
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$
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648,661
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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Current liabilities:
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Accounts payable
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$
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12,896
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$
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14,372
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Franchisee deposits
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850
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720
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Accrued liabilities
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39,109
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51,913
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Income taxes payable
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—
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2,568
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Current maturities of long-term debt and capital leases
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3,826
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5,090
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Total current liabilities
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56,681
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74,663
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Obligations under capital leases due after one year
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16,270
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17,391
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Long-term debt, net
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593,147
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566,187
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Deferred income taxes
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42,500
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42,530
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Other non-current liabilities
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20,757
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23,533
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Total non-current liabilities
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672,674
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649,641
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Stockholders’ deficit:
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Preferred stock, par value $.01; 1,000 shares authorized; none outstanding
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—
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—
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Common stock, par value $.01; 245,000 shares authorized; 118,309 shares issued (118,309 shares issued at August 31, 2016)
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1,183
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1,183
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Paid-in capital
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235,230
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234,956
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Retained earnings
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906,065
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894,442
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Treasury stock, at cost; 75,182 shares (71,670 shares at August 31, 2016)
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(1,300,169
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)
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(1,206,224
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)
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Total stockholders’ deficit
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(157,691
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)
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(75,643
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)
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Total liabilities and stockholders’ deficit
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$
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571,664
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$
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648,661
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Three months ended
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Six months ended
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February 28, 2017
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February 29, 2016
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February 28, 2017
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February 29, 2016
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Revenues:
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Company Drive-In sales
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$
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64,286
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$
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95,313
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$
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151,438
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$
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199,196
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Franchise Drive-Ins:
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Franchise royalties and fees
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34,328
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36,047
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74,467
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75,969
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Lease revenue
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1,675
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1,399
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3,056
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2,991
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Other
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(131
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)
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401
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748
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807
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Total revenues
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100,158
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133,160
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229,709
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278,963
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Costs and expenses:
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Company Drive-Ins:
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Food and packaging
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17,616
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26,213
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41,732
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55,159
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Payroll and other employee benefits
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25,332
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35,359
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57,098
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71,723
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Other operating expenses, exclusive of depreciation and amortization included below
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14,278
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20,100
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33,704
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43,008
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Total cost of Company Drive-In sales
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57,226
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81,672
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132,534
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169,890
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Selling, general and administrative
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18,296
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20,785
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38,050
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41,725
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Depreciation and amortization
|
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9,734
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11,057
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20,011
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22,056
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|
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Other operating income, net
|
|
(7,725
|
)
|
|
(2,566
|
)
|
|
(10,565
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)
|
|
(2,965
|
)
|
||||
Total costs and expenses
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77,531
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|
110,948
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180,030
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230,706
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|
||||
Income from operations
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22,627
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22,212
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49,679
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48,257
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|
||||
Interest expense
|
|
7,227
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|
|
6,467
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|
|
14,416
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|
|
12,689
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|
||||
Interest income
|
|
(262
|
)
|
|
(105
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)
|
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(756
|
)
|
|
(205
|
)
|
||||
Net interest expense
|
|
6,965
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|
|
6,362
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|
|
13,660
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12,484
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||||||||
Income before income taxes
|
|
15,662
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|
|
15,850
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|
|
36,019
|
|
|
35,773
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|
||||
Provision for income taxes
|
|
4,699
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|
|
5,031
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|
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11,938
|
|
|
12,496
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|
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Net income
|
|
$
|
10,963
|
|
|
$
|
10,819
|
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$
|
24,081
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|
$
|
23,277
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|
||||
Basic income per share
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
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$
|
0.54
|
|
|
$
|
0.47
|
|
Diluted income per share
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
|
$
|
0.53
|
|
|
$
|
0.46
|
|
|
|
|
|
|
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|
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|
||||
Cash dividends declared per common share
|
|
$
|
0.14
|
|
|
$
|
0.11
|
|
|
$
|
0.28
|
|
|
$
|
0.22
|
|
|
|
Six months ended
|
||||||
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|
February 28, 2017
|
|
February 29, 2016
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
|
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Net income
|
|
$
|
24,081
|
|
|
$
|
23,277
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
20,011
|
|
|
22,056
|
|
||
Stock-based compensation expense
|
|
1,802
|
|
|
1,919
|
|
||
Other
|
|
(9,972
|
)
|
|
(3,408
|
)
|
||
(Increase) decrease in operating assets:
|
|
|
|
|
|
|
||
Restricted cash
|
|
7,159
|
|
|
4,787
|
|
||
Accounts receivable and other assets
|
|
4,621
|
|
|
2,514
|
|
||
Increase (decrease) in operating liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
(941
|
)
|
|
1,464
|
|
||
Accrued and other liabilities
|
|
(15,605
|
)
|
|
(9,932
|
)
|
||
Income taxes
|
|
(3,581
|
)
|
|
(3,919
|
)
|
||
Total adjustments
|
|
3,494
|
|
|
15,481
|
|
||
Net cash provided by operating activities
|
|
27,575
|
|
|
38,758
|
|
||
|
|
|
|
|
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Purchases of property and equipment
|
|
(27,772
|
)
|
|
(17,808
|
)
|
||
Proceeds from sale of assets
|
|
27,073
|
|
|
9,490
|
|
||
Proceeds from sale of investment in refranchised drive-in operations
|
|
8,354
|
|
|
—
|
|
||
Other
|
|
11,579
|
|
|
3,201
|
|
||
Net cash provided by (used in) investing activities
|
|
19,234
|
|
|
(5,117
|
)
|
||
|
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|
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Cash flows from financing activities:
|
|
|
|
|
|
|
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Payments on debt
|
|
(4,416
|
)
|
|
(59,397
|
)
|
||
Proceeds from borrowings
|
|
29,000
|
|
|
116,000
|
|
||
Purchases of treasury stock
|
|
(97,318
|
)
|
|
(74,326
|
)
|
||
Proceeds from exercise of stock options
|
|
1,792
|
|
|
3,754
|
|
||
Payment of dividends
|
|
(12,431
|
)
|
|
(10,852
|
)
|
||
Other
|
|
(1,638
|
)
|
|
95
|
|
||
Net cash used in financing activities
|
|
(85,011
|
)
|
|
(24,726
|
)
|
||
|
|
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents
|
|
(38,202
|
)
|
|
8,915
|
|
||
Cash and cash equivalents at beginning of period
|
|
72,092
|
|
|
27,191
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
33,890
|
|
|
$
|
36,106
|
|
|
|
|
|
|
|
|
||
Supplemental cash flow information
|
|
|
|
|
|
|
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Cash paid during the period for:
|
|
|
|
|
|
|
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Interest
|
|
$
|
13,410
|
|
|
$
|
11,831
|
|
Income taxes (net of refunds)
|
|
15,857
|
|
|
14,645
|
|
||
Non-cash investing and financing activities:
|
|
|
|
|
|
|
||
Additions to direct financing leases from property, equipment and capital leases
|
|
$
|
21,652
|
|
|
$
|
—
|
|
Net additions to capital lease obligations
|
|
1,433
|
|
|
645
|
|
||
Change in obligation to acquire treasury stock
|
|
215
|
|
|
(2,632
|
)
|
1.
|
Basis
of
Presentation
|
2.
|
Earnings Per Share
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
February 28, 2017
|
|
February 29, 2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
10,963
|
|
|
$
|
10,819
|
|
|
$
|
24,081
|
|
|
$
|
23,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding– basic
|
|
43,794
|
|
|
48,977
|
|
|
44,757
|
|
|
49,599
|
|
||||
Effect of dilutive employee stock options and unvested restricted stock units
|
|
756
|
|
|
1,011
|
|
|
790
|
|
|
1,057
|
|
||||
Weighted average common shares outstanding – diluted
|
|
44,550
|
|
|
49,988
|
|
|
45,547
|
|
|
50,656
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per common share – basic
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
|
$
|
0.54
|
|
|
$
|
0.47
|
|
Net income per common share – diluted
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
|
$
|
0.53
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Anti-dilutive securities excluded
(1)
|
|
1,100
|
|
|
552
|
|
|
961
|
|
|
482
|
|
(1)
|
Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive.
|
3.
|
Share Repurchase Program
|
4.
|
Income Taxes
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
February 28, 2017
|
|
February 29, 2016
|
||||||||
Provision for income taxes
|
|
$
|
4,699
|
|
|
$
|
5,031
|
|
|
$
|
11,938
|
|
|
$
|
12,496
|
|
Effective income tax rate
|
|
30.0
|
%
|
|
31.7
|
%
|
|
33.1
|
%
|
|
34.9
|
%
|
5.
|
Accounts and Notes Receivable
|
|
|
February 28,
2017 |
|
August 31,
2016 |
||||
Current Accounts and Notes Receivable:
|
|
|
|
|
||||
Royalties and other trade receivables
|
|
$
|
15,749
|
|
|
$
|
19,994
|
|
Notes receivable from franchisees
|
|
2,717
|
|
|
5,531
|
|
||
Receivables from system funds
|
|
2,458
|
|
|
4,372
|
|
||
Other
|
|
8,241
|
|
|
6,507
|
|
||
Accounts and notes receivable, gross
|
|
29,165
|
|
|
36,404
|
|
||
Allowance for doubtful accounts and notes receivable
|
|
(1,101
|
)
|
|
(967
|
)
|
||
Current accounts and notes receivable, net
|
|
$
|
28,064
|
|
|
$
|
35,437
|
|
|
|
|
|
|
|
|
||
Noncurrent Notes Receivable:
|
|
|
|
|
|
|
||
Receivables from franchisees
|
|
$
|
6,984
|
|
|
$
|
7,170
|
|
Receivables from system funds
|
|
3,305
|
|
|
5,466
|
|
||
Allowance for doubtful notes receivable
|
|
(53
|
)
|
|
(74
|
)
|
||
Noncurrent notes receivable, net
|
|
$
|
10,236
|
|
|
$
|
12,562
|
|
6.
|
Contingencies
|
7.
|
Fair Value of Financial Instruments
|
•
|
Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
•
|
Level 2 valuations use inputs other than actively quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves observable at commonly quoted intervals and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
•
|
Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
|
8.
|
Other Operating Income
|
9.
|
Refranchising Initiative
|
|
Three months ended
|
|
Six months ended
|
||||
|
February 28, 2017
|
|
February 28, 2017
|
||||
Number of refranchised Company Drive-Ins
|
54
|
|
|
110
|
|
||
|
|
|
|
||||
Proceeds from sales of Company Drive-Ins
|
$
|
11,086
|
|
|
$
|
20,036
|
|
|
|
|
|
||||
Assets sold, net of retained minority investment
(1)
|
(3,277
|
)
|
|
(8,738
|
)
|
||
Goodwill related to sales of Company Drive-Ins
|
(589
|
)
|
|
(966
|
)
|
||
Initial and subsequent lease payments for real estate option
(2)
|
414
|
|
|
(3,396
|
)
|
||
Deferred gain for real estate option
(3)
|
(1,040
|
)
|
|
(1,040
|
)
|
||
Gain (loss) on assets held for sale
|
194
|
|
|
(65
|
)
|
||
Refranchising initiative gains (losses), net
|
$
|
6,788
|
|
|
$
|
5,831
|
|
(1)
|
Net assets sold consisted primarily of equipment.
|
(2)
|
During the first quarter of fiscal year 2017, as part of a
53
drive-in refranchising transaction, the Company entered into a direct financing lease which includes an option for the franchisee to purchase the real estate within the next 24 months. In accordance with lease accounting requirements, since the exercise of this option can occur at any time within the next 24 months, the portion of the proceeds from the refranchising attributable to the fair value of the option represents the initial minimum lease payment for the real estate. Unless and until the option is exercised or expires, the franchisee will make monthly lease payments of
$0.3 million
through November 2017 and
$0.1 million
thereafter, through November 2018, which will be included in other operating income. We are including lease payments received, net of sub-lease expenses, to quantify the net refranchising gain (loss).
|
(3)
|
The deferred gain of
$1.0 million
is recorded in other non-current liabilities as a result of a real estate purchase option extended to the franchisee that will be exercised or expire between January 2020 and December 2023.
|
|
Refranchising Initiative
Fiscal Year 2016 |
||
Number of refranchised Company Drive-Ins
(1)
|
29
|
|
|
|
|
||
Proceeds from sales of Company Drive-Ins
|
$
|
3,568
|
|
|
|
||
Assets sold, net of retained minority investment
(2)
|
(2,402
|
)
|
|
Goodwill related to sales of Company Drive-Ins
|
(194
|
)
|
|
Refranchising initiative gains (losses), net
|
$
|
972
|
|
(1)
|
Company Drive-Ins refranchised as part of the refranchising initiative announced in June 2016.
|
(2)
|
Net assets sold consisted primarily of equipment.
|
|
|
February 28,
2017 |
|
August 31,
2016 |
||||
Minimum lease payments receivable
|
|
$
|
33,988
|
|
|
$
|
15,108
|
|
Less unearned income
|
|
(6,300
|
)
|
|
(5,134
|
)
|
||
Net investment in direct financing lease
|
|
27,688
|
|
|
9,974
|
|
||
Less amount due within one year
|
|
(16,001
|
)
|
|
(115
|
)
|
||
Amount due after one year
|
|
$
|
11,687
|
|
|
$
|
9,859
|
|
|
|
Direct Financing Lease
|
||
Years ended August 31:
|
|
|
||
2017
|
|
$
|
16,202
|
|
2018
|
|
1,048
|
|
|
2019
|
|
1,117
|
|
|
2020
|
|
1,230
|
|
|
2021
|
|
1,326
|
|
|
Thereafter
|
|
13,065
|
|
|
|
|
33,988
|
|
|
Less unearned income
|
|
(6,300
|
)
|
|
|
|
$
|
27,688
|
|
|
Three months ended
|
|
Six months ended
|
||||
|
February 28, 2017
|
|
February 28, 2017
|
||||
Number of refranchised Company Drive-Ins
|
54
|
|
|
110
|
|
||
|
|
|
|
||||
Proceeds from sales of Company Drive-Ins
|
$
|
11,086
|
|
|
$
|
20,036
|
|
|
|
|
|
||||
Assets sold, net of retained minority investment
(1)
|
(3,277
|
)
|
|
(8,738
|
)
|
||
Goodwill related to sales of Company Drive-Ins
|
(589
|
)
|
|
(966
|
)
|
||
Initial and subsequent lease payments for real estate option
(2)
|
414
|
|
|
(3,396
|
)
|
||
Deferred gain for real estate option
(3)
|
(1,040
|
)
|
|
(1,040
|
)
|
||
Gain (loss) on assets held for sale
|
194
|
|
|
(65
|
)
|
||
Refranchising initiative gains (losses), net
|
$
|
6,788
|
|
|
$
|
5,831
|
|
(1)
|
Net assets sold consisted primarily of equipment.
|
(2)
|
During the first quarter of fiscal year 2017, as part of a
53
drive-in refranchising transaction, the Company entered into a direct financing lease which includes an option for the franchisee to purchase the real estate within the next 24 months. In accordance with lease accounting requirements, since the exercise of this option can occur at any time within the next 24 months, the portion of the proceeds from the refranchising attributable to the fair value of the option represents the initial minimum lease payment for the real estate. Unless and until the option is exercised or expires, the franchisee will make monthly lease payments of
$0.3 million
through November 2017 and
$0.1 million
thereafter, through November 2018, which will be included in other operating income. We are including lease payments received, net of sub-lease expenses, to quantify the net refranchising gain (loss). We anticipate the franchisee will exercise the option within the next 12 months.
|
(3)
|
The deferred gain of
$1.0 million
is recorded in other non-current liabilities as a result of a real estate purchase option extended to the franchisee that will be exercised or expire between January 2020 and December 2023.
|
|
Refranchising Initiative
Fiscal Year 2016 |
||
Number of refranchised Company Drive-Ins
(1)
|
29
|
|
|
|
|
||
Proceeds from sales of Company Drive-Ins
|
$
|
3,568
|
|
|
|
||
Assets sold, net of retained minority investment
(2)
|
(2,402
|
)
|
|
Goodwill related to sales of Company Drive-Ins
|
(194
|
)
|
|
Refranchising initiative gains (losses), net
|
$
|
972
|
|
(1)
|
Company Drive-Ins refranchised as part of the refranchising initiative announced in June 2016.
|
(2)
|
Net assets sold consisted primarily of equipment.
|
Systemwide Performance
($ in thousands)
|
||||||||||||||||
|
|
|
|
|
||||||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
February 28, 2017
|
|
February 29, 2016
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Increase (decrease) in total sales
|
|
(6.2
|
)%
|
|
7.8
|
%
|
|
(3.5
|
)%
|
|
6.7
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Systemwide drive-ins in operation
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total at beginning of period
|
|
3,559
|
|
|
3,529
|
|
|
3,557
|
|
|
3,526
|
|
||||
Opened
|
|
10
|
|
|
5
|
|
|
24
|
|
|
18
|
|
||||
Closed (net of re-openings)
|
|
(7
|
)
|
|
(6
|
)
|
|
(19
|
)
|
|
(16
|
)
|
||||
Total at end of period
|
|
3,562
|
|
|
3,528
|
|
|
3,562
|
|
|
3,528
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Average sales per drive-in
|
|
$
|
260
|
|
|
$
|
280
|
|
|
$
|
561
|
|
|
$
|
585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in same-store sales
(2)
|
|
(7.4
|
)%
|
|
6.5
|
%
|
|
(4.6
|
)%
|
|
5.9
|
%
|
(1)
|
Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines that they are unlikely to reopen within a reasonable time.
|
(2)
|
Represents percentage change for drive-ins open for a minimum of 15 months.
|
Revenues
($ in thousands)
|
|||||||||||||||
|
|
|
|
|
|
|
|||||||||
|
|
Three months ended
|
|
Increase
(Decrease) |
|
Percent
Increase (Decrease) |
|||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
|
|||||||||
Company Drive-In sales
|
|
$
|
64,286
|
|
|
$
|
95,313
|
|
|
$
|
(31,027
|
)
|
|
(32.6
|
)%
|
Franchise Drive-Ins:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Franchise royalties
|
|
34,138
|
|
|
35,807
|
|
|
(1,669
|
)
|
|
(4.7
|
)%
|
|||
Franchise fees
|
|
190
|
|
|
240
|
|
|
(50
|
)
|
|
(20.8
|
)%
|
|||
Lease revenue
|
|
1,675
|
|
|
1,399
|
|
|
276
|
|
|
19.7
|
%
|
|||
Other
|
|
(131
|
)
|
|
401
|
|
|
(532
|
)
|
|
(132.7
|
)%
|
|||
Total revenues
|
|
$
|
100,158
|
|
|
$
|
133,160
|
|
|
$
|
(33,002
|
)
|
|
(24.8
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Six months ended
|
|
Increase
(Decrease) |
|
Percent
Increase (Decrease) |
|||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
|
|||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||
Company Drive-In sales
|
|
$
|
151,438
|
|
|
$
|
199,196
|
|
|
$
|
(47,758
|
)
|
|
(24.0
|
)%
|
Franchise Drive-Ins:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Franchise royalties
|
|
74,021
|
|
|
75,269
|
|
|
(1,248
|
)
|
|
(1.7
|
)%
|
|||
Franchise fees
|
|
446
|
|
|
700
|
|
|
(254
|
)
|
|
(36.3
|
)%
|
|||
Lease revenue
|
|
3,056
|
|
|
2,991
|
|
|
65
|
|
|
2.2
|
%
|
|||
Other
|
|
748
|
|
|
807
|
|
|
(59
|
)
|
|
(7.3
|
)%
|
|||
Total revenues
|
|
$
|
229,709
|
|
|
$
|
278,963
|
|
|
$
|
(49,254
|
)
|
|
(17.7
|
)%
|
Company Drive-In Sales
($ in thousands)
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
February 28, 2017
|
|
February 29, 2016
|
||||||||
Company Drive-In sales
|
|
$
|
64,286
|
|
|
$
|
95,313
|
|
|
$
|
151,438
|
|
|
$
|
199,196
|
|
Percentage increase (decrease)
|
|
(32.6
|
)%
|
|
3.3
|
%
|
|
(24.0
|
)%
|
|
3.5
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Company Drive-Ins in operation
(1)
:
|
|
|
|
|
|
|
|
|
||||||||
Total at beginning of period
|
|
286
|
|
|
382
|
|
|
345
|
|
|
387
|
|
||||
Opened
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Sold to franchisees
|
|
(54
|
)
|
|
(7
|
)
|
|
(110
|
)
|
|
(9
|
)
|
||||
Closed (net of re-openings)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
||||
Total at end of period
|
|
233
|
|
|
375
|
|
|
233
|
|
|
375
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Average sales per Company Drive-In
|
|
$
|
236
|
|
|
$
|
253
|
|
|
$
|
506
|
|
|
$
|
522
|
|
|
|
|
|
|
|
|
|
|
||||||||
Change in same-store sales
(2)
|
|
(8.9
|
)%
|
|
6.3
|
%
|
|
(5.5
|
)%
|
|
5.3
|
%
|
(1)
|
Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines that they are unlikely to reopen within a reasonable time.
|
(2)
|
Represents percentage change for drive-ins open for a minimum of 15 months.
|
Franchise Information
($ in thousands)
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
February 28, 2017
|
|
February 29, 2016
|
||||||||
Franchise Drive-In sales
|
|
$
|
856,514
|
|
|
$
|
886,313
|
|
|
$
|
1,830,399
|
|
|
$
|
1,854,828
|
|
Percentage increase
|
|
(3.4
|
)%
|
|
8.3
|
%
|
|
(1.3
|
)%
|
|
7.1
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Franchise Drive-Ins in operation
(1)
:
|
|
|
|
|
|
|
|
|
||||||||
Total at beginning of period
|
|
3,273
|
|
|
3,147
|
|
|
3,212
|
|
|
3,139
|
|
||||
Opened
|
|
9
|
|
|
5
|
|
|
23
|
|
|
18
|
|
||||
Acquired from the company
|
|
54
|
|
|
7
|
|
|
110
|
|
|
9
|
|
||||
Closed (net of re-openings)
|
|
(7
|
)
|
|
(6
|
)
|
|
(16
|
)
|
|
(13
|
)
|
||||
Total at end of period
|
|
3,329
|
|
|
3,153
|
|
|
3,329
|
|
|
3,153
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Average sales per Franchise Drive-In
|
|
262
|
|
|
283
|
|
|
566
|
|
|
593
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Change in same-store sales
(2)
|
|
(7.3
|
)%
|
|
6.5
|
%
|
|
(4.5
|
)%
|
|
5.9
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Franchising revenues
(3)
|
|
$
|
36,003
|
|
|
$
|
37,446
|
|
|
$
|
77,523
|
|
|
$
|
78,960
|
|
Percentage increase (decrease)
|
|
(3.9
|
)%
|
|
12.2
|
%
|
|
(1.8
|
)%
|
|
8.6
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Effective royalty rate
(4)
|
|
3.99
|
%
|
|
4.04
|
%
|
|
4.04
|
%
|
|
4.06
|
%
|
(1)
|
Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines that they are unlikely to reopen within a reasonable time.
|
(2)
|
Represents percentage change for drive-ins open for a minimum of 15 months.
|
(3)
|
Consists of revenues derived from franchising activities, including royalties, franchise fees and lease revenues. See
Revenue Recognition Related to Franchise Fees and Royalties
in the
Critical Accounting Policies and Estimates
section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended
August 31, 2016
.
|
(4)
|
Represents franchise royalties as a percentage of Franchise Drive-In sales.
|
Company Drive-In Margins
|
||||||||
|
|
|
|
|
||||
|
|
Three months ended
|
|
Percentage Points
Increase (Decrease) |
||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
|
|
Company Drive-Ins:
|
|
|
|
|
|
|
|
|
Food and packaging
|
|
27.4
|
%
|
|
27.5
|
%
|
|
(0.1)
|
Payroll and other employee benefits
|
|
39.4
|
|
|
37.1
|
|
|
2.3
|
Other operating expenses
|
|
22.2
|
|
|
21.1
|
|
|
1.1
|
Cost of Company Drive-In sales
|
|
89.0
|
%
|
|
85.7
|
%
|
|
3.3
|
|
|
|
|
|
|
|
||
|
|
Six months ended
|
|
Percentage Points
Increase (Decrease) |
||||
|
|
February 28, 2017
|
|
February 29, 2016
|
|
|||
Costs and expenses
|
|
|
|
|
|
|
|
|
Company Drive-Ins:
|
|
|
|
|
|
|
|
|
Food and packaging
|
|
27.6
|
%
|
|
27.7
|
%
|
|
(0.1)
|
Payroll and other employee benefits
|
|
37.7
|
|
|
36.0
|
|
|
1.7
|
Other operating expenses
|
|
22.2
|
|
|
21.6
|
|
|
0.6
|
Cost of Company Drive-In sales
|
|
87.5
|
%
|
|
85.3
|
%
|
|
2.2
|
|
|
Three months ended
|
||||||||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
||||||||||||
|
|
Net
Income |
|
Diluted
EPS |
|
Net
Income |
|
Diluted
EPS |
||||||||
Reported – GAAP
|
|
$
|
10,963
|
|
|
$
|
0.25
|
|
|
$
|
10,819
|
|
|
$
|
0.22
|
|
Net gain on refranchising transactions
(1)
|
|
(6,788
|
)
|
|
(0.15
|
)
|
|
—
|
|
|
—
|
|
||||
Tax impact on refranchising transactions
(2)
|
|
2,445
|
|
|
0.05
|
|
|
—
|
|
|
—
|
|
||||
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
|
)
|
||||
Adjusted - Non-GAAP
|
|
$
|
6,620
|
|
|
$
|
0.15
|
|
|
$
|
9,023
|
|
|
$
|
0.18
|
|
(1)
|
During the second quarter of fiscal year 2017, we completed transactions to refranchise the operations of 54 drive-ins, one of which resulted in a gain of $7.8 million and another in a loss of $1.4 million. The loss transaction included a deferred gain of $1.0 million, which is recorded in other non-current liabilities, as a result of a real estate purchase option extended to the franchisee that will be exercised or expire between January 2020 and December 2023. Additionally, we received net lease payments of $0.4 million related to the first quarter transaction detailed in footnote 1 to the table below.
|
(2)
|
Tax impact during the period at an adjusted effective tax rate of 36.0%.
|
(3)
|
Tax impact during the period at an adjusted effective tax rate of 35.4%.
|
|
|
Six months ended
|
||||||||||||||
|
|
February 28, 2017
|
|
February 29, 2016
|
||||||||||||
|
|
Net
Income |
|
Diluted
EPS |
|
Net
Income |
|
Diluted
EPS |
||||||||
Reported – GAAP
|
|
$
|
24,081
|
|
|
$
|
0.53
|
|
|
$
|
23,277
|
|
|
$
|
0.46
|
|
Net gain on refranchising transactions
(1)
|
|
(5,831
|
)
|
|
(0.13
|
)
|
|
—
|
|
|
—
|
|
||||
Tax impact on refranchising transactions
(2)
|
|
2,105
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
||||
Gain on sale of investment in refranchised drive-in operations
(3)
|
|
(3,795
|
)
|
|
(0.08
|
)
|
|
—
|
|
|
—
|
|
||||
Tax impact on sale of investment in refranchised drive-in operations
(4)
|
|
1,350
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
||||
Gain on sale of real estate
|
|
—
|
|
|
—
|
|
|
(1,875
|
)
|
|
(0.04
|
)
|
||||
Tax impact on real estate sale
(5)
|
|
—
|
|
|
—
|
|
|
664
|
|
|
0.01
|
|
||||
Retroactive benefit of Work Opportunity Tax Credit and resolution of tax matters
|
|
—
|
|
|
—
|
|
|
(585
|
)
|
|
(0.01
|
)
|
||||
Adjusted - Non-GAAP
|
|
$
|
17,910
|
|
|
$
|
0.39
|
|
|
$
|
21,481
|
|
|
$
|
0.42
|
|
(1)
|
During the first quarter of fiscal year 2017, we completed transactions to refranchise the operations of 56 Company Drive-Ins. Of the proceeds, $3.8 million represents the initial lease payment for a real estate purchase option that will be exercised or expire within 24 months, which resulted in a net loss of $1.0 million. Unless and until the option is exercised or expires, the franchisee will make monthly lease payments of $0.3 million through November 2017 and $0.1 million thereafter, through November 2018, which will be included in other operating income. We are including lease payments received, net of sub-lease expenses, to quantify the net refranchising gain (loss). Net payments received during the second quarter totaled $0.4 million. During the second quarter of fiscal year 2017, we completed transactions to refranchise the operations of 54 drive-ins, one of which resulted in a gain of $7.8 million and another in a loss of $1.4 million. The loss transaction also included a deferred gain of $1.0 million, which is recorded in other non-current liabilities, as a result of a real estate purchase option extended to the franchisee that will be exercised or expire between January 2020 and December 2023.
|
(2)
|
Combined tax impact at effective tax rates of 35.6% and 36.0% during the first and second quarters of fiscal year 2017, respectively.
|
(3)
|
Gain on sale of investment in refranchised drive-ins is related to minority investments in franchise operations retained as part of a refranchising transaction that occurred in fiscal year 2009. Income from minority investments is included in other revenue on the condensed consolidated statements of income.
|
(4)
|
Tax impact during the period at an adjusted effective tax rate of 35.6%.
|
(5)
|
Tax impact during the period at an adjusted effective tax rate of 35.4%.
|
Rebuilds, relocations and remodels of existing drive-ins
|
$
|
12.3
|
|
Brand technology investments
|
7.8
|
|
|
Newly constructed drive-ins leased or sold to franchisees
|
2.9
|
|
|
Newly constructed Company Drive-Ins
|
2.1
|
|
|
Purchase and replacement of equipment and technology
|
2.0
|
|
|
Total investments in property and equipment
|
$
|
27.1
|
|
Period
|
|
Total
Number of Shares Purchased |
|
Average
Price Paid per Share |
|
Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
Maximum Dollar
Value that May Yet Be Purchased Under the Program (1) |
||||||
December 1, 2016 through December 31, 2016
|
|
756
|
|
|
$
|
27.22
|
|
|
756
|
|
|
$
|
101,771
|
|
January 1, 2017 through January 31, 2017
|
|
584
|
|
|
26.26
|
|
|
584
|
|
|
86,447
|
|
||
February 1, 2017 through February 28, 2017
|
|
428
|
|
|
25.87
|
|
|
428
|
|
|
75,379
|
|
||
Total
|
|
1,768
|
|
|
|
|
|
1,768
|
|
|
|
|
(1)
|
In August 2015, the Company’s Board of Directors extended the Company’s share repurchase program, authorizing the Company to purchase up to $145.0 million of its outstanding shares of common stock through August 31, 2016. The Board of Directors further extended the share repurchase program effective May 2016, authorizing the purchase of up to an additional $155.0 million of our outstanding shares of common stock through August 31, 2017. In October 2016, the Board of Directors increased the authorization by $40.0 million. Share repurchases may be made from time to time in the open market or otherwise, including through an accelerated share repurchase program, under terms of a Rule 10b5-1 plan, in privately negotiated transactions or in round lot or block transactions. The share repurchase program may be extended, modified, suspended or discontinued at any time. Please refer to note 3 – Share Repurchase Program of the notes to the condensed consolidated financial statements for additional information.
|
|
|
SONIC CORP.
|
|
|
|
|
|
|
|
By:
|
By: /s/ Claudia S. San Pedro
|
|
|
Claudia S. San Pedro
Executive Vice President and
Chief Financial Officer
|
|
|
31.01
|
Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14
|
31.02
|
Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14
|
32.01
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
|
32.02
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
1 Year Sonic Chart |
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