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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, 2004  
     
  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.)
  300 Johnny Bench Drive
  Oklahoma City, Oklahoma
 73104
  (Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (405) 225-5000

        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, 2004, the Registrant had 59,591,971 shares of common stock issued and outstanding (excluding 14,959,145 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, 2004 and August 31, 2003 3
     
   Condensed Consolidated Statements of Income for the three months and nine months ended May 31, 2004 and 2003 4
     
   Condensed Consolidated Statements of Cash Flows for the nine months ended May 31,2004 and 2003 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 Risk20
     
Item 4.  Controls and Procedures20


PART II.   OTHER INFORMATION  
 
Item 1.   Legal Proceedings 20
    
Item 2.  Changes in Securities and Use of Proceeds 20
    
Item 3.  Defaults Upon Senior Securities 21
    
Item 4.  Submission of Matters to a Vote of Security Holders 21
    
Item 5.  Other Information 21
    
Item 6.  Exhibits and Reports on Form 8-K 21
    

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SONIC CORP.

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

ASSETS (Unaudited)
May 31,
2004
August 31,
2003
Current assets:               
     Cash and cash equivalents   $ 3,938   $ 13,210  
     Accounts and notes receivable, net     19,010    16,990  
     Other current assets     6,882    7,112  
              Total current assets     29,830    37,312  
              
Property, equipment and capital leases     493,950    467,477  
Less accumulated depreciation and amortization     (132,991 )  (121,926 )
     Property, equipment and capital leases, net     360,959    345,551  
              
Goodwill, net     76,261    77,551  
Trademarks, trade names and other intangible assets, net     6,461    6,481  
Investment in deferred financing leases and noncurrent portion of             
     notes receivable     15,951    16,473  
Other assets, net     2,341    2,751  
     Intangibles and other assets, net     101,014    103,256  
              Total assets   $ 491,803   $ 486,119  
              
LIABILITIES AND STOCKHOLDERS' EQUITY             
Current liabilities:             
     Accounts payable   $ 8,196   $ 6,939  
     Deposits from franchisees     2,353    2,060  
     Accrued liabilities     20,013    22,142  
     Income taxes payable     4,414    7,472  
     Obligations under capital leases and long-term debt             
          due within one year     1,921    1,574  
              Total current liabilities     36,897    40,187  
              
Obligations under capital leases due after one year     32,426    26,437  
Long-term debt due after one year     91,809    139,505  
Other noncurrent liabilities     15,091    14,592  
              
Stockholders' equity:             
     Preferred stock, par value $.01; 1,000,000 shares             
          authorized; none outstanding     –    –  
     Common stock, par value $.01; 100,000,000 shares             
          authorized; 74,551,116 shares issued (73,770,840 shares             
          issued at August 31, 2003)     745    738  
     Paid-in capital     104,091    95,300  
     Retained earnings     330,078    288,387  
      434,914    384,425  
     Treasury stock, at cost; 14,959,145 common shares (14,945,898             
          shares at August 31, 2003)     (119,334 )  (119,027 )
              Total stockholders' equity     315,580    265,398  
              Total liabilities and stockholders' equity   $ 491,803   $ 486,119  

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,
2004
2003
2004
2003
Revenues:                          
     Company-owned restaurant sales   $ 121,630   $ 102,214   $ 315,480   $ 258,616  
     Franchised restaurants:                        
          Franchise royalties     21,142    18,582     54,182    47,275  
          Franchise fees     1,370    1,062     3,237    3,007  
     Other     1,800    747     3,346    2,644  
      145,942    122,605     376,245    311,542  
Cost and expenses:                        
     Company-owned restaurants:                        
          Food and packaging     32,017    25,963     82,726    67,112  
          Payroll and other employee benefits     35,961    29,709     95,684    77,431  
          Minority interest in earnings of restaurants     6,195    5,251     13,609    9,943  
          Other operating expenses     21,550    17,664     59,876    49,602  
      95,723    78,587     251,895    204,088  
                         
     Selling, general and administrative     9,914    9,483     28,118    26,123  
     Depreciation and amortization     8,285    7,330     24,273    21,297  
     Provision for impairment of long-lived assets     –    –     675    –  
      113,922    95,400     304,961    251,508  
Income from operations     32,020    27,205     71,284    60,034  
                         
Interest expense     1,914    1,770     5,824    5,474  
Interest income     (328 )  (329 )   (980 )  (874 )
Net interest expense     1,586    1,441     4,844    4,600  
Income before income taxes     30,434    25,764     66,440    55,434  
Provision for income taxes     11,337    9,597     24,749    20,649  
Net income   $ 19,097   $ 16,167   $ 41,691   $ 34,785  
     Net income per share - basic   $ .32   $ .28   $ .70   $ .60  
                         
     Net income per share - diluted   $ .31   $ .27   $ .68   $ .57  

See accompanying notes.

4



SONIC CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

(Unaudited)
Nine months ended
May 31,
2004
2003
Cash flows from operating activities:               
    Net income   $ 41,691   $ 34,785  
    Adjustments to reconcile net income to net cash provided by             
       operating activities:             
          Depreciation and amortization     24,273    21,297  
          Other     3,406    749  
          Increase in operating assets     (1,247 )  (489 )
          Increase (decrease) in operating liabilities     (941 )  1,372  
             Total adjustments     25,491    22,929  
             Net cash provided by operating activities     67,182    57,714  
              
Cash flows from investing activities:             
    Purchases of property and equipment     (42,677 )  (39,533 )
    Acquisition of businesses, net of cash received     (1,398