| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the period ended November 30, 2002 | ||
| OR | ||
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from __________ to __________ |
| Commission File Number 0-18859 | ||
| SONIC CORP. |
||
| (Exact Name of Registrant as Specified in Its Charter) | ||
| Delaware |
73-1371046 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |
| 101 Park Avenue | ||
| Oklahoma City, Oklahoma |
73102 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant's Telephone Number, Including Area Code: (405) 280-7654
Indicate
by check mark whether the Registrant (1) has filed all reports required by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for the
shorter period that the Registrant has had to file the reports), and (2) has been subject
to the filing requirement for the past 90 days.
Yes X . No .
As of November 30, 2002, the Registrant had 38,860,668 shares of common stock issued and outstanding (excluding 9,632,411 shares of common stock held as treasury stock).
Item 1. Financial Statements
| ASSETS | (Unaudited) November 30, 2002 |
August 31, 2002 |
||||||
|---|---|---|---|---|---|---|---|---|
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,909 | $ | 8,951 | ||||
| Accounts and notes receivable, net | 12,192 | 13,755 | ||||||
| Other current assets | 7,099 | 7,267 | ||||||
| Total current assets | 23,200 | 29,973 | ||||||
| Property, equipment and capital leases | 414,926 | 406,799 | ||||||
| Less accumulated depreciation and amortization | (107,426 | ) | (101,513 | ) | ||||
| Property, equipment and capital leases, net | 307,500 | 305,286 | ||||||
| Goodwill, net | 47,004 | 46,826 | ||||||
| Trademarks, trade names and other intangible assets, net | 6,708 | 6,755 | ||||||
| Investment in deferred financing leases and noncurrent portion of | ||||||||
| notes receivable | 16,219 | 15,666 | ||||||
| Other assets, net | 777 | 850 | ||||||
| Intangibles and other assets, net | 70,708 | 70,097 | ||||||
| Total assets | $ | 401,408 | $ | 405,356 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
|---|---|---|---|---|---|---|---|---|
| Current liabilities: | ||||||||
| Accounts payable | $ | 5,450 | $ | 6,799 | ||||
| Deposits from franchisees | 1,311 | 1,015 | ||||||
| Accrued liabilities | 20,283 | 28,968 | ||||||
| Income taxes payable | 7,931 | 5,061 | ||||||
| Obligations under capital leases and long-term debt | ||||||||
| due within one year | 1,052 | 1,072 | ||||||
| Total current liabilities | 36,027 | 42,915 | ||||||
| Obligations under capital leases due after one year | 11,672 | 11,991 | ||||||
| Long-term debt due after one year | 121,057 | 109,250 | ||||||
| Other noncurrent liabilities | 10,815 | 10,530 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, par value $.01; 1,000,000 shares | ||||||||
| authorized; none outstanding | — | — | ||||||
| Common stock, par value $.01; 100,000,000 shares | ||||||||
| authorized; 48,493,079 shares issued (48,477,652 shares | ||||||||
| issued at August 31, 2002) | 485 | 485 | ||||||
| Paid-in capital | 86,842 | 86,563 | ||||||
| Retained earnings | 246,767 | 236,126 | ||||||
| 334,094 | 323,174 | |||||||
| Treasury stock, at cost; 9,632,411 common shares (8,736,701 | ||||||||
| shares at August 31, 2002) | (112,257 | ) | (92,504 | ) | ||||
| Total stockholders' equity | 221,837 | 230,670 | ||||||
| Total liabilities and stockholders' equity | $ | 401,408 | $ | 405,356 | ||||
See accompanying notes.
3
| (Unaudited) Three months ended November 30, |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2002 |
2001 |
|||||||
| Revenues: | ||||||||
| Company-owned restaurant sales | $ | 81,574 | $ | 71,721 | ||||
| Franchised restaurants: | ||||||||
| Franchise royalties | 14,960 | 13,774 | ||||||
| Franchise fees | 1,027 | 1,049 | ||||||
| Other | 1,024 | 785 | ||||||
| 98,585 | 87,329 | |||||||
| Costs and expenses: | ||||||||
| Company-owned restaurants: | ||||||||
| Food and packaging | 21,179 | 19,090 | ||||||
| Payroll and other employee benefits | 24,817 | 20,733 | ||||||
| Other operating expenses | 16,302 | 14,199 | ||||||
| 62,298 | 54,022 | |||||||
| Selling, general and administrative | 8,222 | 7,658 | ||||||
| Depreciation and amortization | 6,973 | 6,255 | ||||||
| Minority interest in earnings of restaurants | 2,575 | 2,598 | ||||||
| 80,068 | 70,533 | |||||||
| Income from operations | 18,517 | 16,796 | ||||||
| Interest expense | 1,847 | 1,827 | ||||||
| Interest income | (288 | ) | (258 | ) | ||||
| Net interest expense | 1,559 | 1,569 | ||||||
| Income before income taxes | 16,958 | 15,227 | ||||||
| Provision for income taxes | 6,317 | 5,672 | ||||||
| Net income | $ | 10,641 | $ | 9,555 | ||||
| Net income per share - basic | $ | .27 | $ | .24 | ||||
| Net income per share - diluted | $ | .26 | $ | .23 | ||||
See accompanying notes.
4
| (Unaudited) Three months ended November 30, |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2002 |
2001 |
|||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 10,641 | $ | 9,555 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| operating activities: | ||||||||
| Depreciation and amortization | 6,973 | 6,255 | ||||||
| Other | (886 | ) | (1,109 | ) | ||||
| Decrease in operating assets | 1,459 | 758 | ||||||
| (Decrease) increase in operating liabilities | (1,481 | ) | 7,789 | |||||
| Total adjustments | 6,065 | 13,693 | ||||||
| Net cash provided by operating activities | 16,706 | 23,248 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (9,972 | ) | (12,688 | ) | ||||
| Other | 979 | 504 | ||||||
| Net cash used in investing activities | (8,993 | ) | (12,184 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments on long-term debt | (36,139 | ) | (40,277 | ) | ||||
| Proceeds from long-term borrowings | 47,929 | 36,365 | ||||||
| Purchases of treasury stock | (24,596 | ) | (8,849 | ) | ||||
| Other | 51 | 566 | ||||||
| Net cash used in financing activities | (12,755 | ) | (12,195 | ) | ||||
| Net decrease in cash and cash equivalents | (5,042 | ) | (1,131 | ) | ||||
| Cash and cash equivalents at beginning of period | 8,951 | 6,971 | ||||||
| Cash and cash equivalents at end of period | $ | 3,909 | $ | 5,840 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Payment of obligation to acquire treasury stock accrued in fiscal 2002 | $ | 8,729 | — | |||||
| Noncash financing activities: | ||||||||
| Obligation to acquire treasury stock | $ | 3,886 | — | |||||
See accompanying notes.
5
The unaudited Condensed Consolidated Financial Statements include all adjustments, consisting of normal, recurring accruals which Sonic Corp. (the “Company”) considers necessary for a fair presentation of the financial position and the results of operations for the indicated periods. In certain situations, these accruals, including franchise royalties, are based on more limited information at interim reporting dates than at the Company’s fiscal year end due to the abbreviated reporting period. Actual results may differ from these estimates. The notes to the condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Form 10-K for the fiscal year ended August 31, 2002. The results of operations for the three months ended November 30, 2002, are not necessarily indicative of the results to be expected for the full year ending August 31, 2003.
During fiscal year 2002, the Company acquired 23 existing franchise restaurants located in the Wichita, Kansas market, from franchisees and other minority investors. The acquisitions were accounted for under the purchase method of accounting, with the results of operations of these restaurants included with that of the Company’s commencing April 1, 2002. See Note 1 of Notes to Consolidated Financial Statements in the Company’s Form 10-K for the fiscal year ended August 31, 2002, for more information regarding the acquisitions.
The Company is involved in various legal proceedings and has certain unresolved claims pending. The Company’s ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time. Management believes that all claims currently pending are either adequately covered by insurance or would not have a material adverse effect on the Company’s business or financial condition.