Sonic 2003 Annual Report Download - page 20

This annual report contains various “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements represent our expectations or belief concerning future events, including the following: any statements regarding
future sales or expenses, any statements regarding the continuation of historical trends, and any statements regarding the
sufficiency of our working capital and cash generated from operating and financing activities for our future liquidity and
capital resources needs. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and
similar expressions are intended to identify forward-looking statements. We caution that those statements are further
qualified by important economic and competitive factors that could cause actual results to differ materially from those in
the forward-looking statements, including, without limitation, risks of the restaurant industry, including risks of food-
borne illness, a highly competitive industry and the impact of changes in consumer spending patterns, consumer tastes,
local, regional and national economic conditions, weather, demographic trends, traffic patterns, employee availability and
cost increases. In addition, the opening and success of new restaurants will depend on various factors, including the
availability of suitable sites for new restaurants, the negotiation of acceptable lease or purchase terms for new locations,
permitting and regulatory compliance, our ability to manage the anticipated expansion and hire and train personnel, the
financial viability of our franchisees, particularly multi-unit operators, and general economic and business conditions.
Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and may
not be realized.
Results of Operations
Sonic derives its revenues primarily from company-owned restaurant sales and royalty payments from franchisees. We
also receive revenues from initial franchise fees, area development fees, and the selling and leasing of signs and, in limited
circumstances, real estate. In addition, Sonic owns and receives income from a minority interest in a few franchised
restaurants. Costs of company-owned restaurant sales and minority interest in earnings of restaurants relate directly to
company-owned restaurant sales. Other expenses, such as depreciation, amortization, and general and administrative
expenses, relate to both company-owned restaurant operations, as well as our franchising operations. Our revenues and
expenses are directly affected by the number and sales volumes of company-owned restaurants. Our revenues and, to a
lesser extent, expenses are also affected by the number and sales volumes of franchised restaurants. Initial franchise fees
and franchise royalties are directly affected by the number of franchised restaurant openings.
The following table sets forth the percentage relationship to total revenues, unless otherwise indicated, of certain
items included in Sonic’s statements of income. The table also sets forth certain restaurant data for the periods
indicated.
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Management’s Discussion and Analysis