Sonic's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Sonic (SONC)

Q4 2011 Earnings Call

October 18, 2011 5:00 pm ET

Executives

J. Clifford Hudson - Chairman and Chief Executive Officer

Stephen C. Vaughan - Chief Financial Officer and Executive Vice President

W. Scott McLain - President and President of Sonic Industries Services Inc

Claudia San Pedro - Vice President of Investor Relations and Treasurer

Analysts

Keith Siegner - Crédit Suisse AG, Research Division

Peter Saleh - Telsey Advisory Group LLC

Nicole Miller Regan - Piper Jaffray Companies, Research Division

Jake R. Bartlett - Susquehanna Financial Group, LLLP, Research Division

John S. Glass - Morgan Stanley, Research Division

Sharon Zackfia - William Blair & Company L.L.C., Research Division

Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division

Brad Ludington - KeyBanc Capital Markets Inc., Research Division

Jeffrey Andrew Bernstein - Barclays Capital, Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Michael W. Gallo - CL King & Associates, Inc.

Will Slabaugh - Stephens Inc., Research Division

Matthew J. DiFrisco - Oppenheimer & Co. Inc., Research Division

Christopher T. O'Cull - SunTrust Robinson Humphrey, Inc., Research Division

Presentation

Operator

Hello. Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Sonic Corp. Fourth Quarter and Fiscal Year 2011 Earnings Conference Call. [Operator Instructions] .

As a reminder, today's call is being recorded. I would now like to turn the conference over to Ms. Claudia San Pedro, Vice President of Investor Relations and Treasurer. Please go ahead, Ms. San Pedro.

Claudia San Pedro

Good afternoon, everyone. We are pleased to host this conference call regarding results issued this afternoon for the fourth quarter of fiscal year 2011, which ended on August 31, 2011.

Before we begin, I would like to remind everyone that comments made during this conference call that are not based on historical facts are forward-looking statements. These statements are made in reliance on the Safe Harbor provisions of the Private Securities Litigation Reform Act 1995 and are subject to uncertainties and risks. It should be noted that the company's future results may differ materially from those anticipated and discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences have been described in the news release issued this afternoon, in the company's annual report on Form 10-K, quarterly reports on Form 10-Q and in other filings with the Securities and Exchange Commission. We refer you to these sources for more information.

Lastly, I would like to point out that remarks made during this conference call are based on time-sensitive information that is accurate only as of today's date, October 18, 2011. For this reason and as a matter of policy, Sonic limits the archived replay of this conference call webcast to a period of 30 days. This call is a property of Sonic Corp. Any distribution, transmission, broadcast or rebroadcast of this call in any form without the expressed written consent of the company is prohibited.

Finally, we have scheduled this call, which includes the Q&A portion, to last 1 hour. If we have not gotten to your question within that 1 hour time slot, please contact me at area code (405) 225-4846, and we'll make the appropriate arrangements to answer your question.

With those announcements, I'll turn the call over to Cliff Hudson, the company's Chairman and Chief Executive Officer.

J. Clifford Hudson

Thank you, Claudia, and good afternoon, everyone. We appreciate you joining us today for our conference call for our fiscal year-end and our fourth quarter -- fiscal quarter 2011.

So we're pleased to report that we ended the fiscal year with positive same-store sales, 1.8%, as you now know, for company drive-ins and 0.5% up for the systems. This represents a nice and even significant reversal of the trends when compared to our fiscal 2010 results. And while our fiscal fourth quarter was somewhat challenging, we continue to believe we're on the right track in the near-term and long-term perspective. We'll talk more about that today.

As many of you know, we put into place a number of new initiatives over the past couple of years, which we believe have strengthened our overall business and really set the foundation for sustained success. These initiatives, which have been focused on improved food and service, were designed in the first place to highlight the differentiated nature of Sonic brand and allow for improved performance in both favorable and challenging economic times from our viewpoint.

So while there's still a lot of room for improvement, we believe that the overall effect of these initiatives benefited our fiscal year 2011 results, evidenced by some of those things we've already talked about: positive same-store sales for the quarter; a 3% increase in the company drive-in average unit volumes; and a 10% increase in the company's adjusted earnings per share for the fiscal year.

So I want to talk a minute about the value equation that you have seen historically. It is the cornerstone, from our viewpoint, of our sales-driving initiatives that have been centered around improving this value equation for our customer. With the equation you see here, you know at this point that our focus has been on the numerator in the last year and more. This includes providing consistent and high-quality customer service experience with high-quality distinctive products.

We've focused -- we've been focused on these 2 areas of our business to varying degrees during the past 3 years, really, and we see the marked improvement in our customers' perceptions of our service, the value we offer and overall customer satisfaction. The progress really has been disproportionately led by our company drive-ins, which is something we would have hoped and expected because of the greater deterioration they'd experienced in the earlier part of the recession. So it's important because with improving company performance at drive-in sales -- company drive-in sales, we get the margins, that are really disproportionate, benefit for us in the near-term opportunity to positively impact growth and earnings for the company.

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