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Sonic expects solid sales trends to continue into fiscal 2005
Company Expands Its Stock Repurchase Program.
August 18, 2004
OKLAHOMA CITY, Aug. 19 /PRNewswire-FirstCall/-- Sonic Corp. (NASDAQ:SONC) today commented on its outlook for continued strong trends in same-store sales and new drive-in growth for the fourth fiscal quarter ending August 31, 2004, and for the upcoming fiscal year. The company also announced that its Board of Directors has increased the company's current stock repurchase authorization to $60 million and has extended its term to December 31, 2005. Since March 1997, Sonic has expended $121.0 million for the repurchase of 15.0 million shares, including $3.1 million used thus far in fiscal 2004 to repurchase approximately 140 thousand shares. Commenting on the company's fourth quarter performance, Clifford Hudson, Chairman and Chief Executive Officer, said same-store sales at company-owned drive-ins have remained well above the company's targeted range of a 2% to 4% increase for the quarter. Also, he noted that Sonic expects to open approximately 185 to 190 new drive-ins during fiscal 2004, depending on how quickly disrupted electric power and basic services are restored in Florida and other areas affected by Hurricane Charley. These strong sales and development activities have helped offset continued pressure on food costs and the company's ongoing investment in its sales incentive bonus program at company-owned restaurants. As a result, Hudson said the company remains very comfortable with the analysts' mean earnings estimates of $0.33 per diluted share for the fourth quarter and $1.01 per diluted share for the full fiscal year. Sonic expects to report results for fiscal 2004 in mid-October. "The continued momentum we have seen in our business throughout fiscal 2004 has been very gratifying and reflects the strength of our brand, the growth of our chain, and the success of our sales-driving strategies," Hudson added. "These trends underscore a great conclusion to a very successful year and provide us with a solid start to the new fiscal year that begins on September 1st." Looking ahead, the company has targeted long-term earnings growth of at least 18%. Outlining Sonic's guidance for fiscal 2005, the company currently expects diluted earnings per share to be in the range of $1.18 to $1.19, based on the following assumptions: -- The company expects total revenue growth of between 12% and 14% for the year, with somewhat higher growth in the first three quarters as a result of its July 2004 acquisition of 22 franchise stores in Colorado. Factors expected to contribute to this revenue growth include: -- Same-store sales are expected to grow in the range of 2% to 4%, driven by ongoing new product news, continued penetration of non- traditional day parts, including the morning day part, and increased media expenditures. The company expects its total media expenditures to increase from approximately $110 million in fiscal 2004 to more than $120 million in fiscal 2005. In addition, the company plans to roughly double its media expenditures used for national cable advertising to approximately $60 million. -- Fiscal 2005 should be another record year for new drive-in development, as the company anticipates opening between 200 and 215 new restaurants (170 to 180 franchise stores and 30 to 35 company-owned stores) -- The company's franchising income, which includes both franchise fees and franchise royalties is expected to increase $8 to $9 million, reflecting the impact of additional drive-ins and higher volumes based on the company's unique ascending royalty rate. Since this incremental income has relatively less associated cost, it will once again be a major factor in driving the company's earnings in fiscal 2005. -- Restaurant-level margins are anticipated to be relatively flat during fiscal 2005 as the leverage of higher volumes is expected to benefit labor costs and other operating expenses. Food costs are expected to remain under pressure, particularly in the first half of the year. The company also plans to continue its sales incentive bonus program, implemented in September 2003, which it believes has been instrumental in the improved performance of company-owned drive-ins where same- store sales growth exceeded that of franchise drive-ins during the last three quarters of fiscal 2004. -- Sonic anticipates continued leverage from the bottom part of its income statement, with corporate overhead expenses growing in the 10% to 12% range and depreciation and amortization increasing 8% to 9%. -- Capital expenditures during fiscal 2005 are expected to be $60 to $70 million and include the cost of increased company drive-in development as well as increased expenditures for drive-in remodels, relocations, and new equipment.This press release contains forward-looking statements within the meaning of the federal securities laws. There are certain important factors that could cause actual results to differ materially from those anticipated by the statements made herein. Among the factors that could cause actual results to differ from predicted or expected results are: delays in opening new stores because of weather, strikes, local permitting or other reasons; increased competition; cost increases or shortages in raw food products; risks of and publicity surrounding foodborne illness; and the possibility of unforeseen events affecting the industry generally. The company undertakes no obligation to publicly release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.About Sonic Corp.Sonic Corp. franchises and operates the largest chain of drive-in restaurants in the United States. For more information about the company, visit Sonic's website at http://sonicdrivein.com/.Source:Sonic Corp.
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