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Sonic Earnings: Robust Revenue And Net Income Expansion, But A Lousy Balance Sheet

Jan. 07, 2015 2:24 PM ETSonic Corp. (SONC)2 Comments
William Bias profile picture
William Bias


  • Robust same store sales expansion contributed to revenue and net income expansion.
  • Franchisee royalties contributed the most to overall revenue gains.
  • The spread between operating income and interest expense is uncomfortably thin.

On Jan 6, drive-in restaurant chain Sonic (NASDAQ: NASDAQ:SONC) came out with its Q1 FY 2015 earnings announcement. The company performed well on the revenue and net income front. However, it still has room for improvement on the balance sheet aspect. Let's take a look to see what's going on with this company.

Robust increases in revenue and net income

Sonic saw its revenue and net income increase an incredible 10% and 23% respectively in the most recent quarter vs. the same time last year. Franchisees led the way growing their same store sales a robust 8.5% vs. 2.3% the same time last year. Franchisees also contributed $7 million, or 53.3%, of the overall revenue gain (see table below). Company stores saw same store sales increase 7.9% vs. 1.9% the same time last year. Location number remained even with the same time last year. However, it's good to see the company focusing on bringing customers through the doors of its established network of stores which can have a meaningful impact on a company's financials.

Sonic Sales Breakdown

3 Months Ended 11/30/14

3 Months Ended 11/30/13

Total Gain

% of Gain

Company Drive-In Sales





Franchise royalties and fees





Lease revenue










Total Revenues





Source: Company Earnings announcement

Revenue gains outpaced the gains in expenses which resulted in the robust expansion in net income. Moreover, interest expense declined 1.6% serving as a small contributor to the net income expansion.

Balance sheet still debt laden

Sonic's balance sheet remains debt laden. The company has reduced its long-term debt a meager 0.57% year over year. Currently Sonic's $425 million in long-term debt equates to an incredible 692% of stockholder's equity. Long-term debt creates interest which chokes

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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Comments (2)

30372955 profile picture
Thanks for the informative article. I was disappointed when our local Sonic closed. I'm glad to see you mention that their number of locations has stabilized. I noted a lot of closures 1-2 years ago when I was traveling.
Keith001 profile picture
i go to Sonic often.. good simple food and service,,,no complaints.
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