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Sonic Corp. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: October 26, 2012 04:34PM
Sonic Corp. (SONC) filed Annual Report for the period ended 2012-08-31. Sonic Corporation has a market cap of $573.6 million; its shares were traded at around $10.03 with a P/E ratio of 16.2 and P/S ratio of 1.1. Sonic Corporation had an annual average earning growth of 10.6% over the past 10 years.
Highlight of Business Operations:Revenues decreased slightly to $543.7 million for fiscal year 2012 from $546.0 million for the same period last year, which was primarily related to a decline in revenues resulting from the refranchising of 34 Company Drive-Ins during the second fiscal quarter of 2012, mostly offset by an increase in same-store sales. Restaurant margins at Company Drive-Ins improved by 80 basis points during fiscal year 2012, reflecting the leverage of positive same-store sales as well as moderating commodity cost inflation. Net income and diluted earnings per share for fiscal year 2012 were $36.1 million and $0.60, respectively, as compared to net income of $19.2 million or $0.31 per diluted share for fiscal year 2011. Excluding an after-tax net loss of $14.4 million from the early extinguishment of debt during fiscal year 2011 and a $1.1 million tax benefit recognized during the first quarter of fiscal year 2011 relating to the favorable settlement of state tax matters, net income and diluted earnings per share for fiscal year 2012 increased 11% and 13%, respectively.
Same-store sales for Company Drive-Ins increased 2.8% for fiscal year 2012 and 1.8% for fiscal year 2011, an improving trend that we attribute to the initiatives we have implemented. In addition to the implementation of system-wide initiatives over the last few years, we have implemented a number of initiatives at Company Drive-Ins which have contributed to improved performance. These initiatives included restructuring our Company Drive-In operations to reduce excess management layers, revising the compensation program at the drive-in level, and implementing a customer service initiative to improve sales and profits. Company Drive-In sales decreased $6.4 million, or 1.6%, during fiscal year 2012 as compared to 2011. This decrease was primarily attributable to an $18.6 million reduction in sales from the refranchised drive-ins discussed earlier and a $2.3 million decrease related to drive-ins that were closed during or subsequent to fiscal year 2011 partially offset by a $11.0 million improvement in same-store sales and $3.5 million of incremental sales from new drive-in openings during fiscal year 2011.
For fiscal year 2011, Company Drive-In sales decreased $3.5 million, or 0.9%, as compared to 2010. This decrease was primarily attributable to a $7.2 million decrease in sales from the refranchising of 16 Company Drive-Ins in the second quarter of fiscal year 2010 and six drive-ins in fiscal year 2011 as well as a $4.4 million decrease related to drive-ins that were closed during or subsequent to fiscal year 2010. These decreases were partially offset by an $8.1 million increase from an improvement in same-store sales and, to a lesser extent, new drive-in openings during fiscal year 2011.
Same-store sales for Franchise Drive-Ins increased 2.2% for fiscal year 2012 and 0.4% for fiscal year 2011, an improving trend that we attribute to the initiatives we have implemented. Franchising revenues increased $2.7 million, or 2.0%, for fiscal year 2012 as compared to 2011. The increase in franchising revenues was primarily driven by a $1.9 million increase in franchise royalties. Same-store sales increases combined with incremental royalties from newly constructed and refranchised drive-ins resulted in an increase in royalties of $3.2 million, which was partially offset by a $1.3 million decrease from a lower effective royalty rate. The lower effective royalty rate is due to a temporary reduction in royalty rates from various development incentives and certain franchisee restructuring efforts. Franchisees opened 36 new drive-ins during fiscal year 2012 compared to 40 in the prior year. Franchisee investment in existing drive-ins continued during fiscal year 2012 and included the relocation or rebuilding of 17 drive-ins versus 11 in the prior year.
Franchising revenues were relatively flat in fiscal year 2011 decreasing by $0.1 million, or 0.1%, to $131.9 million as compared to $132.0 million for fiscal year 2010. Franchise royalties increased $1.7 million for fiscal year 2011, which was comprised of a $2.0 million increase from same-store sales and incremental royalties from newly constructed and refranchised drive-ins, partially offset by a $0.3 million decrease from a lower effective royalty rate. Franchise fees declined $1.0 million to $1.7 million in fiscal year 2011, which was primarily related to franchisees opening fewer drive-ins during the year as a result of the weaker overall business environment. Franchisees opened 40 new drive-ins during fiscal year 2011, down from 80 in 2010.
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