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Sonic Corp. Reports Operating Results (10-Q)

January 04, 2013 | About:
10qk

10qk

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Sonic Corp. (SONC) filed Quarterly Report for the period ended 2012-11-30.

Sonic Corporation has a market cap of $616.7 million; its shares were traded at around $10.71 with a P/E ratio of 16.9 and P/S ratio of 1.1. Sonic Corporation had an annual average earning growth of 8.3% over the past 10 years.

Highlight of Business Operations:

Sales momentum for the first quarter of fiscal year 2013 continued to improve from the prior year. System-wide same-store sales increased 3.0% during the first quarter of fiscal year 2013 as compared to an increase of 0.1% for the same period last year. Same-store sales at Company Drive-Ins increased 4.2% during the first quarter of fiscal year 2013 as compared to a decline of 0.1% for the same period last year. We believe the initiatives we have implemented over the last few years, including product quality improvements, a greater emphasis on personalized service and a tiered pricing strategy, have set a solid foundation for growth which is reflected in our operating results. We continue to focus on our innovative product pipeline as well as our day-part promotional strategy to drive same-store sales. We utilize a multi-layered growth strategy which incorporates same-store sales growth, operating leverage, deployment of cash, an ascending royalty rate and new drive-in development to achieve earnings growth. Positive system-wide same-store sales is the most important layer and drives operating leverage and increased operating cash flows.

Revenues decreased to $126.0 million for the first quarter of fiscal year 2013 from $128.3 million for the same period last year, which was primarily related to the refranchising of 34 Company Drive-Ins during the second fiscal quarter of 2012, partially offset by an increase in same-store sales. Restaurant margins at Company Drive-Ins improved by 80 basis points during the first quarter of fiscal year 2013, reflecting the leverage of positive same-store sales as well as moderating commodity cost inflation. First quarter results for fiscal year 2013 reflected net income of $6.1 million or $0.11 per diluted share, an increase of 12% and 22%, respectively, as compared to net income of $5.5 million or $0.09 per diluted share for the same period last year.

Same-store sales for Company Drive-Ins increased 4.2% for the first quarter of fiscal year 2013, as compared to a decline of 0.1% for the same period last year. Company Drive-In sales decreased $3.3 million, or 3.4%, during the first quarter of fiscal year 2013, as compared to the same period last year. This decrease was primarily attributable to a $6.7 million reduction in sales from the refranchised drive-ins discussed earlier and a $0.4 million decrease related to drive-ins that were closed during or subsequent to the first quarter of fiscal year 2012 partially offset by a $3.7 million improvement in same-store sales and $0.1 million of incremental sales from new drive-in openings during fiscal year 2012.

Same-store sales for Franchise Drive-Ins increased 2.9% for the first quarter of fiscal year 2013 as compared to 0.2% for the same period last year. Franchising revenues increased $1.0 million, or 3.4%, for the first quarter of fiscal year 2013 as compared to the same period in 2012, which was primarily driven by an increase in franchise royalties. The increase in franchise royalties and our effective royalty rate during the first quarter of fiscal year 2013 was largely attributable to an increase in same-store sales, partially offset by various development incentives and certain franchisee restructuring efforts. In addition, approximately $0.3 million of the increase in franchising revenues during the first quarter of fiscal year 2013 was attributable to incremental royalties from the refranchised drive-ins discussed earlier.

Restaurant-level margins improved by 80 basis points during the first quarter of fiscal year 2013 reflecting leverage from improved same-store sales and, to a lesser extent, the refranchising of 34 lower performing Company Drive-Ins during the second quarter of fiscal year 2012. Food and packaging costs improved by 10 basis points during the quarter, which was a result of a combination of a slowdown in commodity cost inflation and moderate price increases taken over the preceding twelve months. Payroll and other employee benefits as well as other operating expenses improved by a combined 70 basis points during the first quarter of fiscal year 2013 primarily from leveraging positive same-store sales.

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