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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  
  For the quarterly period ended May 31, 2003  
     
  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 May 31, 2003, the Registrant had 38,980,339 shares of common stock issued and outstanding (excluding 9,963,932 shares of common stock held as treasury stock).

SONIC CORP.
Index

PART I.  FINANCIAL INFORMATION Page
Number
 
Item 1.   Financial Statements  
     
   Condensed Consolidated Balance Sheets at May 31, 2003 and August 31, 2002 3
     
   Condensed Consolidated Statements of Income for the three months and nine months ended May 31, 2003 and 2002 4
     
   Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 2003 and 2002 5
      
   Notes to Condensed Consolidated Financial Statements 6
     
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations9
     
Item 3.  Quantitative and Qualitative Disclosures About Market Risk16
     
Item 4.  Controls and Procedures16


PART II.   OTHER INFORMATION  
 
Item 1.   Legal Proceedings 16
    
Item 2.  Changes in Securities and Use of Proceeds 16
    
Item 3.  Defaults Upon Senior Securities 16
    
Item 4.  Submission of Matters to a Vote of Security Holders 16
    
Item 5.  Other Information 16
    
Item 6.  Exhibits and Reports on Form 8-K 17
    

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SONIC CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

ASSETS (Unaudited)
May 31,
2003
August 31,
2002
Current assets:              
     Cash and cash equivalents   $ 9,031   $ 8,951  
     Accounts and notes receivable, net    16,951    13,755  
     Other current assets    6,174    7,267  
         Total current assets    32,156    29,973  
             
Property, equipment and capital leases    456,181    406,799  
Less accumulated depreciation and amortization    (115,990 )  (101,513 )
     Property, equipment and capital leases, net    340,191    305,286  
             
Goodwill, net    75,507    46,826  
Trademarks, trade names and other intangible assets, net    6,592    6,755  
Investment in deferred financing leases and noncurrent portion of            
     notes receivable    17,394    15,666  
Other assets, net    618    850  
     Intangibles and other assets, net    100,111    70,097  
         Total assets   $ 472,458   $ 405,356  
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities:            
     Accounts payable   $ 6,644   $ 6,799  
     Deposits from franchisees    1,385    1,015  
     Accrued liabilities    22,473    28,968  
     Income taxes payable    6,080    5,061  
     Obligations under capital leases and long-term debt            
       due within one year    1,606    1,072  
         Total current liabilities    38,188    42,915  
             
Obligations under capital leases due after one year    25,972    11,991  
      Long-term debt due after one year    150,868    109,250  
      Other noncurrent liabilities    12,731    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; 48,944,271 shares issued (48,477,652 shares            
       issued at August 31, 2002)    490    485  
     Paid-in capital    92,325    86,563  
     Retained earnings    270,911    236,126  
     363,726    323,174  
     Treasury stock, at cost; 9,963,932 common shares (8,736,701            
       shares at August 31, 2002)    (119,027 )  (92,504 )
         Total stockholders' equity    244,699    230,670  
         Total liabilities and stockholders' equity   $ 472,458   $ 405,356  

See accompanying notes.

3

SONIC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

(Unaudited)
Three months ended
May 31, 		(Unaudited)
Nine months ended
May 31,
2003
 2002
 2003
 2002
Revenues:                        
   Company-owned restaurant sales   $ 102,214   $ 92,280   $ 258,616   $ 231,356  
   Franchised restaurants:                      
       Franchise royalties    18,582    16,816    47,275    43,219  
       Franchise fees    1,062    930    3,007    2,658  
   Other    747    1,265    2,644    2,963  
     122,605    111,291    311,542    280,196  
Cost and expenses:                      
   Company-owned restaurants:                      
       Food and packaging    25,963    23,594    67,112    60,770  
       Payroll and other employee benefits    29,709    25,839    77,431    66,575  
       Other operating expenses    17,664    15,539    49,602    43,484  
     73,336    64,972    194,145    170,829  
                       
   Selling, general and administrative    9,483    8,729    26,123    24,173  
   Depreciation and amortization    7,330    6,611    21,297    19,305  
   Minority interest in earnings of restaurants    5,251    5,106    9,943    9,817  
   Provision for impairment of long-lived assets    —    604    —    1,171  
     95,400    86,022    251,508    225,295  
Income from operations    27,205    25,269    60,034    54,901  
                       
Interest expense    1,770    1,807    5,474    5,398  
Interest income    (329 )  (271 )  (874 )  (776 )
Net interest expense    1,441    1,536    4,600    4,622  
Income before income taxes    25,764    23,733    55,434    50,279  
Provision for income taxes    9,597    8,841    20,649    18,729  
Net income   $ 16,167   $ 14,892   $ 34,785   $ 31,550  
   Net income per share - basic   $ .41   $ .37   $ .89   $ .79  
   Net income per share - diluted   $ .40   $ .35   $ .86   $ .75  

See accompanying notes.

4



SONIC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

(Unaudited)
Nine months ended
May 31,
2003
2002
Cash flows from operating activities:              
  Net income   $ 34,785   $ 31,550  
  Adjustments to reconcile net income to net cash provided by            
    operating activities:            
       Depreciation and amortization    21,297    19,305  
       Other    749    1,260  
       Increase in operating assets    (489 )  (503 )
       Increase in operating liabilities    1,372    7,787  
           Total adjustments    22,929    27,849  
           Net cash provided by operating activities    57,714    59,399  
             
Cash flows from investing activities:            
  Purchases of property and equipment    (39,533 )  (38,262 )
  Acquisition of businesses, net of cash received    (32,994 )  (20,475 )
  Other    3,571    2,774  
           Net cash used in investing activities    (68,956 )  (55,963 )
             
Cash flows from financing activities:            
  Payments on long-term debt    (111,586 )  (88,051 )
  Proceeds from long-term borrowings    153,158