Sonic 2004 Annual Report Download - page 15

added to revenue growth and have been accretive to earnings over time. Our acquisitions
are focused on higher volume stores with strong store-level management already in place.
In addition, in each case, the selling franchisee retained a significant drive-in base and is
growing with us in other areas. We continue to view these types of acquisitions of core-
market drive-ins with proven track records as a very good,lower-risk use of our capital and
they remain a very viable potential use of our excess cash flow in future years.
Results of Operations
Revenues.Total revenues increased 20.1% to $536.4 million in fiscal year 2004 from
$446.6 million during fiscal year 2003. The increase in revenues primarily relates to strong
sales growth for Partner Drive-Ins and, to a lesser extent, a rise in franchising income.
Revenues
Percent
Year Ended August 31, Increase/ Increase/
2004 2003 (Decrease) (Decrease)
(In thousands)
Revenues:
Partner Drive-In sales $ 449,585 $ 371,518 $ 78,067 21.0 %
Franchise revenues:
Franchise royalties 77,518 66,431 11,087 16.7
Franchise fees 4,958 4,674 284 6.1
Other 4,385 4,017 368 9.2
Total revenues $ 536,446 $ 446,640 $ 89,806 20.1
Percent
Year Ended August 31, Increase/ Increase/
2003 2002 (Decrease) (Decrease)
(In thousands)
Revenues:
Partner Drive-In sales $ 371,518 $ 330,707 $ 40,811 12.3 %
Franchise revenues:
Franchise royalties 66,431 61,392 5,039 8.2
Franchise fees 4,674 4,020 654 16.3
Other 4,017 4,043 (26) (0.6)
Total revenues $ 446,640 $ 400,162 $ 46,478 11.6
The following table reflects the growth in Partner Drive-In sales and changes in
comparable drive-in sales for Partner Drive-Ins. It also presents information about
average unit volumes and the number of Partner Drive-Ins, which is useful in analyzing
the growth of Partner Drive-In sales.
Partner Drive-In Sales
Year Ended August 31,
2004 2003 2002
($ in thousands)
Partner Drive-In sales $ 449,585 $ 371,518 $ 330,707
Percentage increase 21.0 % 12.3 % 23.6 %
Partner Drive-Ins in operation:
Total at beginning of period 497 452 393
Opened 21 35 40
Acquired from (sold to) franchisees, net 21 11 20
Closed –(1) (1)
Total at end of period 539 497 452
Average sales per Partner Drive-In $ 886 $ 799 $ 791
Percentage increase 10.9 % 1.0 % 2.5 %
Change in same-store sales – new method (1) 7.8 % (0.3)% 2.2 %
Change in same-store sales – prior method (2) 7.4 % 0.0 % 1.7 %
(1) Represents percentage change for drive-ins open for a minimum of 15 months.
(2) Represents percentage change for drive-ins open since the beginning of fiscal year 2003.
Partner Drive-In sales increased $78.1 million in fiscal year 2004, of which $49.5
million resulted from the net addition of 87 Partner Drive-Ins since the beginning of fiscal
year 2003 ($61.5 million from the addition of newly constructed and acquired drive-ins
less $12.0 million from drive-ins sold or closed during the period). Same-store sales
increases accounted for $28.6 million of the increase.
During fiscal year 2003, Partner Drive-In sales increased $40.8 million, of which $41.1
million resulted from the net addition of 104 Partner Drive-Ins during fiscal years 2002
and 2003 ($53.6 million from the addition of newly constructed and acquired drive-ins
less $12.5 million from drive-ins sold or closed during the period). The increase in Partner
Drive-In sales from the net addition of drive-ins was partially offset by slight sales
decreases in the amount of $.03 million by stores open the full reporting periods of fiscal
years 2003 and 2002.
During fiscal year 2004, same-store sales at Partner Drive-Ins exceeded the same-
store sales performance of Franchise Drive-Ins. The increase in average unit volume was
even stronger – growing 10.9% during the year as a result of the acquisition of higher
volume drive-ins in San Antonio and Colorado in May 2003 and July 2004, respectively, as
well as continued strong performance from new store openings.
Management's Discussion and Analysis of Financial Condition and Results of Operations
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